Textile business
Interview: Wilbur Ross
>> welcome back to the “world financial report.” the attorney general of ohio, jim petro, is accusing fannie mae of earnings manipulation and filed a securities fraud suit against the company as the department of housing and urban development releases a report saying fannie mae’s federal agency is divided using leaks to the media about the company for its own gain. the report says armando falcone, director of the office of federal enterprise housing oversight, redirected the agency toward a combative approach amid disclosure of accounting errors at fannie mae. the bush administration is pushing for stronger regulation of fannie mae and freddie mac. famed investor wig burr ross -- wilbur ross is bullish on textiles. carol massure spoke with wilbur ross about the textile business.
>> we have a joint venture in india in the denim area and a joint venture in turkey. we’re planning to announce within the next few weeks several more joint ventures in china.
>> will they be with publiclyoff owned―publicly-owned companies?
>> in general, the companies there are state owned at least partially.
>> you’re close to announcing something?
>> we’ve been out there for months and months. it takes a while because you have to be sure to get quotas for patent, you have to be sure you have a guaranteed source of electricity and water.
>> there are a lot of logistical issues and as you know, a lot of quotas, 2,500 on different textile products, specifically from china, set to expire next year. is your new venture dependent on the expiration of those quotas?
>> the quotas are expiring upon there undoubtedly will continue to be safeguard applications filed with our government because under the w.t.o. agreement with china, president bush has the ability to limit their growth from now through 2008. our best guess, though, is that the administration is very free trade oriented and probably won’t honor very many of the quota requests.
>> safe to say that your ventures in china are dependent on the quotas expiring, staying that way?
>> no, one of our ventures is to sell into the chinese market , independent of whether quotas to the u.s. come off or don’t. we would never make a business out there just based on one political decision.
>> we said in the lead to you, whether or not you become a free trader and you smiled. you used a similar tariff to boost the value of steel assets. some might call it hypocritical.
>> not really. in steel, president bush put on the tariffs temporarily for a one-year period specifically to give the industry a chance to restructure and as you know, we did a lot of restructuring there. we bought quite a few bankrupt companies, turned them around. they’re now the low-cost u.s. producers so it ratified the temporary protections the president put on.
>> they’re different from textiles?%
>> for 10 years people have known the quotas were due to come off. what’s shocking is that many people in the industry did nothing to get ready for that. very few of the companies we’re bidding on in china have any other american company bidding on them.
>> what are your expectations for the textile business, wilbur? are you expected to do with textiles what you with steel?
>> i certainly hope so.
>> but in terms of your plans?
>> we have made them low-cost producers here. we took about $40 million out of direct operating expenses, another $30 million out of the general and administrative expenses by combining and rationalizing the u.s. activity. they had been quite profitable in and of themselves so far.
>> i think there was concern among analysts, watching what you’re doing, that you couldn’t get the same cost savings you got in the steel industry as you could in the textile industry.
>> we did take costs out of those products, particularly the denim side, the home furnishing side, out oft jackard and dyeing and finishing. but we felt we would be international? in steel and in textiles that’s more than mandatory.
>> that was wilbur ross, chairman of the w.l. ross group, head of the international textile group, speaking with carol massar. intel may fail to deliver on c.e.o. craig barrett’s promise to make its communications division profitable next year. the unit that makes chips for cell phones widened its loss in the third quarter from the second. intel said in a regulatory filing that those results make it more challenging to be profitable in 2005. after $9 billion in acquisitions since 1999, the unit has yet to be the driver of sales growth mr. barrett anticipate. when we come back, the dollar has hit five record lows against the euro in the past two weeks. alan greenspan’s remarks didn’t help anything. the outlook for the dollar when we come back.
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welcome to “world financial report.” i’m bob bowden. mr. greenspan speaks and the markets fall.
>> given the signs of the u.s. current account deficit, a diminished appetite for adding to dollar balances must occur at some point.
>> the federal reserve chairman said investors may diversify into other currencies or demand higher u.s. interest rates. that, and spiking oil prices, weighed on the stock market . the dow fell for only the second time in seven sessions, down around 1% on the day. also, the s&p down around 1%. moving on, stocks were hit today by both the rising price of oil and comments from mr. greenspan. here’s a report from our julie hyman at the new york stock exchange.
>> the s&p 500 had its biggest drop in two months today while the dow had its biggest loss in about a month. the markets hit by two elements. the price of oil was higher today and we’ve seen the equity markets track closely to the price of oil, putting a damper across the board. one bright spot it did cause was in the oil group. we saw exxon-mobil, one of only two stocks gaining in the dow jones today. conocophillips, schlumberger and halliburton also benefitting from the rise in oil. putting negative pressure on the markets were the comments from alan greenspan, pressuring the dollar, as well, and raised concerns about foreign investment in u.s. assets, including stocks. because of that as well as comments from greenspan, we also saw financial stocks under pressure today on continuing concern that the fed will be relatively aggressive with its interest rate rise. citigroup leading the declines within that group. retailers not doing well today. nike declining today after it announced it was getting a new c.e.o., william perez, certainly the c.e.o. of s.c. johnson. phil knight will retire at the end of next month. other retailers declining after goldman sachs downgraded a number of them. the analyst believes the holiday season will be lackluster so we saw ann taylor, limited brands, talbot’s and urban outfitters lower today. another bright spot was unumprovident, shares soaring after the company settled with state and federal regulators that were investigating as to whether the company stopped paying benefits to clients, not related to eliot spitzer’s investigation of the insurance industry. i’m julie hyman, bloomberg news at the new york stock exchange.
>> crude oil surged 5.8% on friday. cold temperatures in europe may divert supplies there, and oil shipments from iraq were disrupted. checking oil at the close, $48.44. moving on to other commodity movers in the energy world, unleaded gas in new york delivery on the wholesale basis to $1.31 a gallon, heating oil up over 1.5%. shares of pfizer helped lead the broader market lower after a federal regulator questioned the safety risk of its painkiller bextra and products of our other drugmakers. while all of the companies, including astrazeneca and smithkline despite the claims of higher health risks, there is greater scrutiny.
>> investors are concerned scrutiny could lead to delays for new drugs and hurt profit. fifth third analyst believes drug stocks will continue to face pressure. “until the dogs are called off, it will be tough for this group,” he says. the latest safety questions come from a veteran food and drug administration official who has charged the agency with suppressing his research about vioxx. the merck painkiller has been recalled and linked to more than 27,000 heart attacks and deaths. the f.d.a.’s david graham told a senate panel that his agency should scrutinize astrazeneca’s cholesterol fighter crestor for its links to potentially fatal muscle fatigue. other concerns including abbott laboratories meridia with cardiovascular side effects, accutane can cause birth defects, pfizer’s painkiller carries risks similar to vioxx. such questions are likely to continue to overshadow the industry.
>> i think we’ll continue to see, for a while, concern over individual products. i would say look more to the facility stocks. look for some of the suppliers in the industry, companies like abbott laboratories, maybe select a drug or oregon―here or there.
>> while all five drugs have been deemed safe and effective according to the f.d.a., its officials also say a discussion of risks associated with astrazeneca’s crestor is underway. yet, the british drugmaker in a statement says they were assured today by the f.d.a. that there is no concern over crestor’s safety. take a look at the drug. astrazeneca’s a.d.r.’s fell more than 2%. as for glaxo’s drug, the agency has suggested prominent warnings be displayed.
>> june grasso has a report from the nasdaq marketsite in times square, new york.
>> all the economic groups at the nasdaq closed lower today but semiconductors began to lead the nasdaq lower even before the market opened this morning after goldman sachs downgraded the semiconductor space. goldman analyst said, “we expect the stocks to make new cycle lows driven by continued disappointing fundamentals.” he lowered the ratings on advanced micro devices, a.t.i. technologies. applied materials, world’s biggest maker of semiconductor equipment was reduced to underperform from in line. amazon.com dragged the nasdaq 100 lower. it dropped as bank of america rated the company sell in new coverage, with a price target of $26. analyst aaron rubinson wrote that the appropriate conclusion to draw is not that the amazon model doesn’t work, but rather that they don’t expect as much growth or operating leverage as the market expects. sirius satellite radio, after they hired mel karmazin as chief executive officer, the 10-year-old company’s market value rose to $7 billion from $6 billion. satellite radio, sirius satellite radio is the second largest pay radio company. it has never posted an annual profit in its 10 months. blockbuster has competition to buy hollywood entertainment. movie gallery has offered to buy hollywood entertainment, challenging bids from blockbuster and a los angeles byte buyout firm. if the deal closes, the combined company would be the second largest north american video rental company.
>> shares of mylan labs rallied after financier carl icahn offered to buy the generic drugmaker for $20 a share. the offer is a 17% premium to yesterday’s closing price. icahn is trying to block mylan’s plan to buy drugmaker king pharmaceuticals. when we return after the break, wilbur ross is expecting to do for textiles what he did with steel. we’ll hear from the famed financier.
