• The World Trade Organization (WTO) has published a new draft of plans for a global trade deal that will be discussed the next time world trade ministers meet, BBC News reported. Although the plan doesn’t change existing tariff or subsidy cuts, it does offer some compromises and clarifies some key “sticking points.” Negotiators hope to have a deal closed by the end of the year.

• Battered by increasing steel costs and dampened consumer demand due to high gas prices, Ford Motor Co. (F) announced yesterday (Thursday) that it would not be able to meet Chief Executive Officer Alan Mulally’s goal of returning to profitability by 2009, Bloomberg News reported. North American vehicle production will be cut throughout the rest of this year due to “the rapidly changing business environment in the [United States],” a company statement read.

• First-time jobless claims fell 9,000 to 365,000, from a revised 374,000 the previous week, the Labor Department announced yesterday (Thursday), Bloomberg News reported. The decline was unexpected and indicates that companies are responding to the current U.S. economic slowdown by curtailing hiring, while trying to maintain current employees.

• Hong Kong’s Hang Seng index hit a one-month closing low yesterday (Thursday) in reaction to the declines in the U.S. markets. Oil firms Sinopec Shanghai Petrochemical Co. (ADR: SHI) and PetroChina Co. Ltd. (ADR: PTR) also weighed on the index. “Weak U.S. stocks and Beijing’s denial on an imminent deregulation of oil product prices hurt market sentiment,” Kenny Tang, associate director at Tung Tai Securities, told Reuters.

• Bookseller Barnes & Noble Inc. (BKS) yesterday (Thursday) reported a loss of $2.2 million, or 4 cents per share, for its fiscal first quarter ended May 3, compared with a loss of $1.67 million, or 3 cents per share, for the same period in the prior year, Reuters reported. Barnes & Noble reduced its full-year outlook based on the difficult economic environment and announced it would consider “the feasibility of a transaction” with rival Borders Group Inc. (BGP).

• The American Petroleum Institute, the trade group for major oil and natural gas companies, spent nearly $1.3 million in the first quarter to lobby on fuel economy standards, appropriations bills, and other issues, the Associated Pressreported. The API also lobbied on various pieces of legislation dealing with oil taxes and fees, renewable fuel standards, climate change, offshore drilling and more, according to the form posted online April 21 by the House clerk’s office.

• Bill Miller, portfolio manager at Legg Mason Capital Management, has not signed on to the Yahoo! Inc. (YHOO) investor coup being led by Carl Icahn. However, in an interview at a New York conference Wednesday, Miller, whose fund controls a 5.4% stake in Yahoo, said he wants Microsoft Corp. (MSFT) to reopen talks to buy Yahoo outright and not simply forge a joint venture. “It is a strategic imperative for Microsoft to change its position,” Miller told Reuters after speaking at the hedge fund conference.

• The International Energy Agency announced yesterday (Thursday) that it is studying depletion rates at about 400 oil fields in its first-ever study of world oil supply. The Paris-based group said the study, to be released in November, was prompted by concern about the volatility of world oil markets and uncertainty about supply levels.

• The spinal-products unit of medical-device maker Medtronic Inc. (MDT) will pay $75 million to settle accusations that it defrauded Medicare by telling doctors to bill in-hospital stay – even when a cheaper outpatient visit would have done the job, The New York Times and The Associated Press both reported. Originally, the accusations had been leveled against Kyphon Inc., which Medtronic spent $4.2 billion to buy in November.

Source: Global Investing Roundups: Friday, May 23rd, 2008

More than 30 years after Japan’s only airliner program since World War II ended as a commercial failure, the country is making a multi-billion-dollar bet that it can succeed in the jetliner market.

Japan’s Mitsubishi Heavy Industries Ltd. (PINK: MHVYF) has unveiled a plan to develop a “regional” jetliner for use by airlines all around the world. The controversial project gained global credibility in recent weeks after analysts began to speculate that Toyota Motor Corp. (TM) – the world’s No. 1 automaker by sales – would join the development team. Toyota subsequently confirmed its involvement, announcing plans to take a 10% stake in the venture and injecting $67 million to help get the initiative off the ground. The Japanese government is backing the program.

It’s a big gamble for Mitsubishi and its partners: The regional airliner market is right now dominated by Bombardier Inc., of Canada, and Embraer (Empresa Brasileira de Aeronautica SA) (ERJ) of Brazil. And firms in both Russia and China – each with a major U.S. corporation as a partner and co-pilot – already have targeted this market, and have a solid head start on the Mitsubishi team.

Still, the potential payoff is hefty enough to warrant the risk. Such key global trends as rocketing fuel prices, soaring global travel, fast growth in Asia, Latin America and the Middle East, and ongoing problems with major air carriers across the world are stoking worldwide demand for efficient, economic regional jets. And that demand could persist until 2030, many experts predict.

“In terms of the macro picture, demand is there for this type of jet,” Mizuho Investors Securities Co. Ltd. senior analyst Yuichi Ishida told the Reuters news service. “Money-losing regional routes could turn profitable by using them. But the real question is whether there is room left in this market for Mitsubishi Heavy.”

To date, the so-called NAMC YS-11 – a turboprop airliner built by a Japanese consortium – is the only commercial aircraft made in Japan in the post-World War II era. The program was initiated by Japan’s Ministry of International Trade and Industry in 1954. The aircraft was rolled out in 1962 and production ended in 1974 – hardly qualifying it as a “success” from a financial standpoint.

Toyota’s Desire to Fly

Toyota said its motivation was primarily patriotic – the Mitsubishi jet is being backed by the Japanese government, which is searching for ways to for its smallish aerospace business to become more of a global player, especially after losing other industries to South Korea and China.

Toyota – which edged ahead of General Motors Corp. (GM) in the first quarter to become the world’s top-selling automaker – said it also would be looking for ways to adapt the technological know-how developed in its aerospace activities to its core automaking business. That’s not just an empty claim made to justify its diversification into the aerospace sector: The Mitsubishi MRJ70 (70 seat) and MRJ90 (90 seat) jetliners are to be the first regional jets to make extensive use of high-strength/lightweight “composite” materials, such as those found on the new 787 Dreamliner being developed by U.S. aerospace giant, The Boeing Co. (BA).

Although it hasn’t built a commerical aircraft in decades, it is an experienced subcontractor in that area, and is a veteran defense contracting firm. For example, Mitsubishi already is a key manuacturing partner on the long-range Boeing jet. And it has experience building such military aircraft as the F-1 fighter, T-2 trainer – both supersonic jets that the company built on its own – and the F-2 fighter, a Japanese-built version of the U.S. F-16 Fighting Falcon that was produced in partnership with Lockheed Martin Corp. (LMT)., the No. 1 U.S. defense contractor.

Toyota, too, has some experience, and already operates a small aerospace research team. Analysts say that venture could easily take flight and become a major business operation. That’s just what happened with Toyota’s robotics business, which started out as a fairly tiny research operation, but today is one of the company’s better-known businesses outside its core auto operation.

Honda Motor Co. (HMC), Toyota’s chief rival in Japan, already has expanded into the aircraft business; its futuristic seven-seater HondaJet light business jet has garnered heady praise for its advanced design and elegant lines. The company was supposed to start taking orders for the airplane sometime this month.
Toyota’s investment in the Mitsubishi jet is the largest of any company outside the Mitsubishi corporate network, or “keiretsu” of related companies. Other backers include domestic Japanese trading companies and the government-supported Development Bank of Japan. Foreign suppliers also will be involved.

To Market, To Market

Why is Mitsubishi – Japan’s largest producer of machinery – getting into the airliner business? In a word: Opportunity.

Over the next 20 years, Boeing itself is forecasting that air carriers worldwide will need to acquire 28,600 commercial aircraft of all types – with a potential value of $2.8 trillion. The Boeing forecast is generally viewed as the world’s best analysis of the future global market for commercial airliners and cargo aircraft.

The huge revenue potential in the global airliner market – combined with the low number of viable competitors and the high barriers faced by new potential entrants – is a big reason that Money Morning’s investment gurus have repeatedly mentioned Boeing as a promising global investment for years to come.
During that same 20-year stretch addressed by Boeing’s market forecast, China will have to buy 3,400 airliners, a requirement worth $340 billion. That will make China the fastest-growing airliner market in the world, and will also rank it as the biggest market outside the United States for new commercial airliners. In fact, if you average it out, from China alone you’re talking about sales of $17 billion a year for the next two decades.

This staggering shopping list will include the globetrotting tarmac queens being built by Boeing and European rival Airbus SAS.

But global forces also are revving up demand for regional jetliners, like those being dreamed up by Mitsubishi.

According to Mitsubishi, the world’s airlines will order 5,000 regional jets over the next two decades as global carriers seek out fuel-efficient airplanes for shorter routes and developing nations expand their airliner fleets to fuel economic growth.

That’s not an arbitrary figure, either: The company spent several years analyzing the market and projecting the potential demand for the jet, and designed the specifications specifically around its findings. The plane will be:

• Small, so it can fly out of regional airports.
• Made of lightweight composites to make it strong and fuel efficient.
• Fast (with cruisng and maximum speeds of between 0.78 and 0.82 times the speed of sound, according to published reports).
• Profitable to operate, carrying 70 to 90 passengers, depending upon the model.
• And with a good range – 920 nautical miles for the base model, although extended-range (1,400 nm) and long-range (1,960 nm) versions will be available.

“Mitsubishi Heavy has always been just a partner of Western aircraft makers,” Mitsubishi Heavy President Kazuo Tsukuda said at a news conference that talked up the company’s pet project. “Now we want to take advantage of changes in the marketplace such as high fuel costs and a greater need for environmentally friendly aircraft.”