06/03/2017 World Business Report

Now for the latest financial news, with Sally Bundock

A European car colossus in the making.

France's Peugeot Citroen is poised to buy General Motors' European

business, including the Opel and Vauxhall brands.

China's Premier cuts the economic growth target for this year.

We look at the risks to the world's second-largest economy.

Welcome to World Business Report, I'm Sally Bundock.

Also in the programme: Deutsche Bank plans to raise billions of euros

General Motors is set to announce a deal to sell Opel and Vauxhall

to PSA Group, the French company that owns Peugeot and Citroen.

Both companies are hosting a press conference in Paris

Buying GM's loss-making European operations will make PSA

the continent's second-biggest car maker, after Volkswagen and ahead

of French rival Renault, and it will be a giant.

Last year PSA and GM Europe sold a combined 4.3 million vehicles,

and posted revenues of 71.6 billion euro.

But the deal has already raised fears in the UK the jobs of 4,500

workers at Vauxhall's plants could be under threat.

In Germany, where two thirds of Opel's 38,000 staff are based,

the government has been seeking reassurances the jobs are safe.

Opel had hoped to return to profitability by 2016,

but the slide in the value of sterling following the EU

referendum last June contributed to its 257 million euro annual loss.

With me is Jom Holder, editorial director of Autocar.

Nice to see you. It is a very anticipated press conference. What

do you think they will tell us? I think we won't learn a great deal

this morning other than that the deal is going through. There is due

diligence to go through afterwards and the car industry is slow-moving

and making changes. There is no rush to change so they will play their

cards close to their chest. And they will probably have to for political

reasons. Where there will be job losses, in Germany, in an election

year, in the UK is extremely sensitive with Ford's news about

Bridgend last week emerging. What may happen to the various plants

around Europe? At around 20 plants potentially affected from the Opel

side, and even more from the PSA side. They are in a competitive

situation and both companies are underperforming. The factories are

not producing enough cars to be profitable on average so the obvious

way to start making profits is to start imposing cuts but these

factories work on seven to ten year cycles so the bosses of PSA can sit

back and see what assurances they are offered by various government

and what incentives they are offered in order to keep various factories

open. To what extent does Brexit play a part in this story? The fall

in the value of sterling has been a problem for European car makers.

Absolutely, PSA blamed it for the reason they fell into loss last year

and it is a problem because it brings uncertainty to the UK plants

that Vauxhall has. It could hinder freedom of movement and ring

fluctuations in currency, it could really undermine the certainty PSA

is looking for when it wants to commit to these factories. On the

plus side, from the point of view of PSA group and what it is doing, it

has seen an incredible turnaround in the last couple of years.

Absolutely, three years ago it was experiencing multibillion euro

losses. It had a new leader who was famed for being able to turn

companies around and he has done just that with PSA. He has made them

incredibly profitable, higher profit margins than even VW at the moment.

Also, GM prevented Vauxhall and Opel from selling in the United States.

That could be more in the future. It could unleash Opel in a way it has

never been unleashed. We have seen that before with great car

companies, big groups like Ford, when it controlled Jaguar, Land

Rover, Aston Martin, when it let them go, they all thrived. It could

be good on a global scale for Opel. Thank you very much for your time.

We expect a press release from PSA group in about 55 minutes time and

the press conference is later. We will keep you up-to-date with the

announcements come through. China's National People's Congress

convened this weekend in Beijing's Great

Hall of the People. The 3,000-strong event is staged

each year by the party, and is usually a forum

to rubber-stamp legislature But China's economy is in trouble,

and yesterday Premier Li Keqiang's annual report gave some clues

about the state of the economy in the year ahead, and there

are a lot of problems ahead. Economic growth is expected

to be unchanged from last That is one of the slowest growth

rates for more than a quarter This growth rate has complicated

Chinese government efforts to shift from an economic model based

on debt-fuelled investment and exports, towards

a consumer-driven one. The government also wants to trim

bloated state-owned government industries, while tackling

the slumping currency. And at the same time it needs

to halt the massive capital flight from Chinese enterprises seeking

better returns abroad, and also deal with fears

about a housing bubble Joining me now from Beijing

is Stephen McDonell. So the outlook for the economy has

been cut, but it is not a significant cut any means. 6.5%,

give us a sense of what people are saying about that. Well, therefore I

talk about the figures I suppose I should put a brief caveat on it that

some analysts think that you can't trust China's GDP figures at all

because in recent times we have seen provinces lying about their GDP

figures to either inflate the performance, they are supposedly

having, or to attract support from the Central government. But for the

purposes of this discussion let's just say that the figures are

ridgy-didge, as you might say in Australia, so 6.5% of GDP is down

from 6.7% achieved last year. But the Chinese government and Premier

Li Keqiang would say this is part of the plan, that we have to wean China

of this breakneck growth to achieve more sustainable, better growth into

the future. And you mentioned what they are trying to do. It is not to

rely so much on exports, in favour of domestic led consumption. Do not

rely so much on making shoes and things like that, and to get more

into hi-tech goods. What they would really like to do is to thrust China

into a world along the lines of the way South Korea did, or Taiwan did

in the past, to make this the next generator of... The new computers,

the new apps, the new hi-tech goods that the world is going to need. And

to do that, big changes are needed here. And is there any other key

elements that they have said so far, or revealed so far, that could

affect the Chinese economy in the coming year? Well, you also

mentioned the need to change SOEs and the role they are playing. It

has been a slow change there, because people who watch China will

know that steel, televisions, all these big industries, they are all

still controlled by state owned enterprises and some would say that

that is fine. It just depends what you want to achieve in your economy.

But there have been problems with, for example, they are trying to

crack down on what is called shadow banking because there is a big

problem with debt. Now, these SOEs that I mentioned get preferential

treatment in terms of loans from banks so smaller enterprises have

found it hard to get a loan so now they are trying to free up some of

the money needed for those businesses to get a loan, I guess to

take that money away from those SOEs. Thank you very much indeed.

In other news: Deutsche Bank will be offering new shares to raise

Germany's biggest bank plans to float part of its asset

management business, but will keep Postbank,

the retail banking business it had been expected to sell.

The shake-up follows huge losses and a $16 billion legal bill imposed

The US is suspending a fast-track service often used by technology

companies to recruit foreign skilled workers.

The H-1B visa is issued to tens of thousands of highly skilled

Currently, companies can pay extra to get the visas approved within 15

days, but starting in April, this process will be stopped

Looking briefly at markets, let's show you how things are faring in

Asia. The news coming from North Korea did hit sentiment, certainly

in Japan. We see the yen strengthening in response to North

Korea's launch of four ballistic missile this morning. Obviously any

sort of geopolitical risk causes people to pull out of anything they

feel is of risk so the yen is strengthening as a safe haven and

some stocks like financials and exporters losing ground in Tokyo.

That's it for me for the moment, I will see you soon for the News

review.