Germany wants to keep submarine maker in German hands

German Class 212A and 214 submarines were the first in the world to undertake long dives independent of external air sources.

The German government is pushing to prevent foreign investors buying a majority stake in submarine maker Howaldtswerke-Deutsche Werft (HDW), the Spiegel weekly reported on Sunday.

Representatives from the German economy ministry were in talks with two German companies that have expressed an interest in HDW, which is currently owned by steelmaker ThyssenKrupp, Spiegel said, without naming its sources.

Also involved in the talks is Abu Dhabi MAR, which owns interests in other European shipyards and which is eyeing a minority stake in HDW, Spiegel said.

HDW specalises in submarines powered by fuel cells and has supplied navies around the world, including Israel's. Because of the firm's sensitive area of business, a sale of the company would require government approval.

Thomas Kossendey, state secretary in the defence ministry, told an industry conference in September that Berlin wanted to ensure that the design and construction of military vessels "stayed in German hands."

27 Information Graphics detailing the Global Economic Crisis

27 Stunning Graphics to help explain the Global Economic Crisis...........Click on picture.

Economic Budget Savings: Maintenance Cuts

To help save money, IT groups are being asked to cut back -- in some cases, dramatically -- on their maintenance contracts with vendors. So instead of paying a premium for vendors to, say, fix any problems in key software and hardware within four hours, a 24-hour turnaround might have to suffice instead. Sometimes things stay broken until IT staffers can figure out the fixes themselves. And in the meantime, ITers involved say, they just hope that their business users will not notice any ill effects.

Jim Milde, executive vice president of global services for Boston-based IT services company Keane Inc., estimated that of his largest customers -- in pharmaceuticals, insurance, finance, government and transportation -- around 10% are cutting maintenance costs in various ways.

This trend is being seen in pockets all over the industry, IT staffers and industry analysts agree. But given the sensitivity of the issue, and often the politics involved, most ITers would speak about it only on the condition that they not be identified.

Why cut?

Lauren Whitehouse of Enterprise Strategy Group in Milford, Mass., said companies "have to do what they have to do" to get by today. By cutting or renegotiating maintenance pacts, companies trim costs so that they can perhaps avoid or reduce layoffs or still have money to spend on innovative new projects that will help grow the business when the economy does rebound, Whitehouse said.

Maintenance cuts 101

How to reduce your budget with a minimum of pain:

• Cut maintenance agreements for lesser-used applications, to impact fewer users.
• Instead of cutting maintenance completely, reduce the frequency of turnaround time -- from, say, four hours to 24 hours or even longer.
• Consider cutting weekend and late-night service levels.
• Talk to your vendors -- many are more willing than in the past to wheel and deal, rather than lose a contract completely.
• Prepare your end users for what they can expect with decreased maintenance, particularly with regard to timing and service levels.
• Do not touch anything considered critical or customer-facing; that's just asking for trouble.

"Hypothetically, 70% of your budget is for keeping the lights on and 30% is for moving the business forward" strategically in the future, she said. "So you look at the 70% to see what you can squeeze out there so you can keep the strategic stuff going."

For many clients, service-level cuts are "the last straw," Keane's Milde said. "We've seen clients go at rate reductions or cutting baseline support, but it's always with the caveat that they want to keep the trains running."

One IT staffer, a software engineer for a $1.5 billion Midwestern sporting goods manufacturer, said maintenance cuts came to his company after lots of other paring was done, including layoffs of about 20% of the IT staff.

What's being cut

In the past, the sporting-goods IT staffer said, a typical IT maintenance contract purchased by his company specified that if a piece of equipment failed, the vendor would have someone on site within four hours to replace or repair it, he said. "Now, our philosophy is that if it breaks, we'll just go to the store" and buy a replacement.

"As recently as two years ago, whenever you bought anything -- software or hardware -- whatever the maintenance agreement was, you bought it all," the engineer said. "That is totally seen as a luxury now that can no longer be afforded."

Savings can be substantial. The sporting-goods maker paid $30,000 for one application and another $16,000 for an annual maintenance agreement on the application, but now maintenance has been cut altogether. And, he said, "We're cutting those kinds of things across the board."

Another user, an IT manager in the financial services industry and a board member of The Computer Measurement Group, said that while maintenance cuts are being made at his firm, they are occurring only in less important areas -- in human-resources systems, for instance, or Internet access for employees.

One CIO, Jim Prevo of Green Mountain Coffee Roasters Inc. in Waterbury, Vt., said he's not cutting maintenance contracts at this point, but that he can see the wisdom in it as an approach for some.

"It could make sense," Prevo said in an e-mail reply to a query. In general, maintenance contracts "should be based on business requirements. If the cost of downtime is reduced due to business decline, then it might make sense to spend less for uptime. Also, if you drop second shift [work], for example, you wouldn't necessarily need certain coverage for that shift in terms of help desk or assurances the systems are all working at night."

Halfway measures

The sporting-goods firm has also cut maintenance contracts on the network side. In the past, two providers were paid to maintain network redundancy and zero tolerance for failure. That's been cut to one, and now the company accepts outages of up to four hours under the new, cheaper contract.

The sporting-goods maker also used to have a policy that when an IT manufacturer declared a product had reached the end of its life cycle, maintenance contracts might be continued until a replacement plan was created. "Now the plan is to just run it until it breaks," then decide whether to replace it, the engineer said.

Jack Santos, a CIO executive strategist with the Midvale, Utah-based Burton Group, said that he's not seeing a lot of his clients taking these actions yet. "That's more the exception than the rule" so far, Santos said. "That's not to say it's a bad idea."

He has, however, seen small to midsize firms reduce third-party help desk services for nights and weekends. "Often times employees aren't happy about it, but given the economic conditions if it's the difference between a workforce reduction and an inconvenience, they'll take the latter."

Where cuts are not being made

The only places where the sporting-goods firm avoided maintenance cuts altogether were in customer-facing applications, including customer Web portals, which generate revenue for the business. If the Web portals go down, "then our U.S. dealers can't order parts for our products," which cuts revenue, the engineer explained.

As for the financial-services firm, "if it's critical and customer-facing, even in these cost-cutting times, that will not be changed," the manager said. "Anytime you have any regulatory obligations, there is no way that you ... have that luxury to save money there."

In the non-critical areas, "maybe you can cut in areas such as turnaround time" for support and repairs, the financial-services manager said. "You can still look for cheaper solutions, but you'd look for them with a guarantee for the same level of service."

Pain points: Effects on the business

A network accelerator, which compresses traffic to get more speed over the network, recently broke at the sporting-goods firm. IT couldn't call the vendor to fix it, the engineer said, because there's no longer a maintenance contract on it. So his company began looking for a used replacement on eBay. "We lived without the extra speed while it was being replaced; everything just slowed down," he said. The device has since been replaced.

For their part, end users "were noticing the cuts," he said. "The network slowed down. . . and people don't like that." That caused new trouble tickets to be generated due to speed complaints, which overloaded the IT staff with even more work.

"They're generally OK when they're told it's going to hurt," he said of cuts and their effects on company workers. "Then when it hurts, they don't like it. We spent some time in meetings where we had to remind people that they agreed to this" when the cuts were looming. "Everyone wants a fuel-efficient car, but they still want it to go fast."

"Different groups [of users] inside a company might negotiate for different service levels, and the squeaky wheel gets the grease," consultant Whitehouse said. When IT services are shifted around due to budget and maintenance cuts, the users suffering the greatest cuts are the ones who are most unhappy and most vocal. "I'm sure this goes on on a regular basis," she said. "I think it's more pronounced this year because of the general cuts."

Green Mountain's Prevo pointed out that cutting back on maintenance in areas including security could make corporate IT systems more vulnerable in some cases.

Maintenance cuts can cause noticeable performance hits for users, Keane's Milde said. "Sometimes mistakes happen and sometimes balls are dropped. We definitely have had that happen at a couple of customer accounts," he explained. "It's fairly clear, it takes a certain amount of resources to support a certain number of applications."

In the end, maintenance cuts mean that end users will have to solve many of their own IT problems, including finding answers to questions online rather than dialing a help desk, Milde said.

Going forward

The engineer's guess is that in the future, killing maintenance on software won't happen as much inside his sporting-goods company. "Vendors have been lobbying us really hard" to reinstitute the maintenance contracts, "giving us discounts, and are starting to soften policies and prices to try to get us back." In the future, maintenance contracts will once again become the norm in his company as new gear is purchased, he believes. "For the old stuff that's already in place, [though,] I don't see it coming back."

At the same time, there's a bad precedent for IT departments in getting adequate performance out of a lowered budget, Whitehouse said. "Companies don't want to show they can do the same with less because they'll get less next year." The biggest risk is not ever getting back to the pre-cut levels.

Burton Group's Santos said he's also seen changes driven by the tough economy in server virtualization popularity, "since consolidation of servers directly impacts hardware maintenance costs, as well as floor space and energy costs. That has been a very positive trend."

Another thing Santos expects to see are on-the-fly price cuts for maintenance contracts as companies reduce workers and seek corresponding reductions in the IT licenses and services they are buying now. As workers are added again, contracts can quickly be readjusted upward to cover new users, he said.

Even with the dramatic cutbacks needed to cope with the economic climate, however, there might be a silver lining, Santos says.

Companies don't want to show they can do the same with less because they'll get less next year.

Lauren Whitehouse, consultant, the Enterprise Strategy Group

"Some companies are probably overcutting -- they're going to lose staff, they're going to lose the commitment from their vendors," Santos said. "There's no question about that. But I think the large majority are doing the right thing and doing what they should have been doing in the good times. From 2003 to 2006, when times were easier, they were not being as observant and conservative. They should have paid more attention."

Managing an Aging Workforce: How to Fight the Risks

The workforce is aging fast, and stakeholders — companies, governments, and others — have a narrow window of time to adapt.

So says the World Economic Forum, which Wednesday issued an 80-page report outlining strategic options to address how stakeholders can strengthen financial sustainability, quality of retirement, and health-care provisioning in a rapidly aging world.

The report emphasizes that companies and governments must work cooperatively for meaningful action to occur — a dubious scenario in today's light, with the two sides rarely in agreement on how health care and retirement should be paid for. For CFOs, however, the concern is whether retirement and health-care funding should be a priority right now.

After all, despite a tone of urgency in the report, it discusses demographic changes in terms of decades, not years. For example, it includes a chart showing that the percentage of gross domestic product devoted to retirement and health care will grow from 7% to 13% — between 2000 and 2050.

Indeed, even John Betts — a partner at consulting firm Mercer, a WEF member that helped create the document — concedes to CFO.com that any corporate actions to address the aging workforce won't necessarily bear fruit for some time. "There is an issue about hard-nosed CFOs saying, 'How's it going to affect my profits next year?'" he says. "Probably the answer at the moment is that, well, it won't."

That's the kind of attitude that must undergo a fundamental shift, the report argues — and not only because of the specter of runaway costs. Just as important, the WEF says, is an opportunity to counter the dour fact that many people will have to work later into life as retirement grows less financially attainable. The challenge will be to turn that reality into something very positive for the bottom line. "There is potential to create a 'new age of age,' in which growing old is no longer synonymous with declining health, [but rather] experience is valued as much as youth, the 'silver economy' is vibrant, and the 'wellderly' are active and valued in society."

That's an ambitious goal. But the report, which was two years in the making, has plenty of suggestions for how stakeholder can help facilitate the paradigm shift.

Be Well
Employers, for example, should put less focus on approaching health care tactically with programs that address health issues as they arise, and begin thinking strategically by promoting healthy behaviors. For example, they should provide practical incentives for employees to engage in physical activity, subsidize healthy eating options in workplace dining facilities and vending machines, and ensure that working practices and environments are conducive to long-term health.

Many employers, of course, have taken steps in those directions, although the report clearly implies that more should be done.

In any case, employers want to know what kind of return such investments will produce. In a Web conference yesterday, Mercer partner Christine Owen claimed that on average, wellness initiatives will produce an eventual return of at least three or four to one; that is, $3 to $4 worth of increased productivity and reduced health-care costs for each dollar spent. The return is even greater in emerging countries, where less-cynical employees with limited access to health care may be more willing to participate in wellness programs, she added.

Owen did not detail how that calculation was made. But she painted a grim picture of a future in which the health issues applicable to an older workforce have been dealt with inadequately. "Failure to address this issue sooner rather than later may mean that the gap [between health-care needs and provisions] becomes just too big to bridge," she said. "That could have as big an impact on the economy as the current economic crisis — and I can predict for certain that it will last a good deal longer."

Employers also can improve health care by supporting pay-for-performance programs for health-care providers and building quality measurement into health-plan contracts. They could even investigate the feasibility of extending coverage to include offshore providers, taking into account the risks of legal liability and employee attitudes, the WEF report says.

Into the Sunset
Companies also should step up their efforts on financial education and retirement-planning advice for workers, the report says. They should provide more and better education programs, targeted communications that take into account an individual employee's level of financial literacy, and access to cost-effective planning advice by selecting advisers or subsidizing the cost.

But while it's easy to understand how changing health-care behaviors could hit the bottom line, it's less clear how improved retirement planning would affect corporate performance. Traditionally a good pension plan was a key recruiting tool, but that purpose "is less compelling now than it was," says Betts.

That's because as the number of defined-benefit plans shrinks and existing ones increasingly become unavailable to new employees, younger workers' expectations have changed, he notes. They're more likely to be satisfied with a defined-contribution plan in which the employer merely matches some portion of their own contributions. That makes using pension plans to recruit new talent more difficult.

But Betts predicts that a new trend, in which a few countries have mandated minimum levels of employer retirement provisions, will spread. "Our feeling is that with the aging trend, you're going to see governments moving more into that mode," he says.

That should provide companies with a new incentive to make sure their investments in retirement programs are not wasted. "Calculations show that the outcome of a pension to an employee compared to the money put in can vary by a factor of at least two, depending on how it's been managed," says Betts. "Companies won't want to be hit with the issue of people saying, 'You gave me this pension and now I can't afford to retire.'"

To that end, companies should introduce automatic enrollment programs with higher default contribution rates and automatic increases with age, the WEF report says. It also suggests that companies provide more information to employees nearing retirement on reverse mortgages, which allow them to draw down the equity in their home without selling the real estate.

The report also offers ideas for how pension sponsors can improve their plans' performance. These include introducing target-date funds and appointing professional trustees to plan boards. And they should encourage fiduciaries to investigate the longevity-hedging products currently available for employer-sponsored plans, and facilitate the purchase of annuities by retiring employees.

Fujitsu Taking advantage of economic downturn

pa.press.net

Japanese firm Fujitsu is facing the threat of strikes over plans to close its main final salary pension scheme and impose a pay freeze.

The manufacturing workers' union Unite said, its members had indicated in a consultative ballot that they would be prepared to take industrial action.

The union could now move to a formal strike ballot after complaining that 4,000 workers in the firm's defined benefit pension plan were being hit by the plans.

Unite said if the proposal goes ahead, the company intends to dismiss employees after the end of the consultation period in September, and offer them employment on new contracts which are unchanged, except in relation to pensions.

The union estimates that the proposed pension scheme change would reduce the total pay package of each employee by at least 15%, and is the latest in a series of "attacks" on employee conditions at the company, including a pay freeze.

Last week Fujitsu announced proposals for 1,200 redundancies in the UK, amounting to 10% of its UK workforce.

Unite's national officer Peter Skyte said: "Fujitsu Services is not struggling or failing. It is a highly profitable and successful company but one which is seeking to take economic advantage of the recession to attack jobs, pay, pensions and conditions.

"Our members are insisting that the company should pay fairly and provide decent pensions for all its employees. Following the announcement of 1,200 redundancies, they are now calling for the issue of job cuts to be included in any ballot for formal industrial action.

"We are calling on the company to meet us to resolve these issues and avoid the risk of damaging industrial action."

Fujitsu employs around 12,500 people in the UK, with main sites at Bracknell, Stevenage, Manchester, Crewe, Belfast, Staines, Basingstoke, Wakefield, Sheffield, Solihull, Slough, Lewes, Warrington, Cardiff, Bristol, Newcastle and London.

Eurozone Says No to Fresh Stimulus

European Ministers reject U.S. calls for budget injection as "not to our liking."

Eurozone finance ministers yesterday rejected calls for increased economic stimulus measures, despite a worsening outlook for the EU economy. They also rejected any easing of the requirements for joining the Eurozone.

Speaking after a meeting of the Eurogroup, which brings together the finance ministers of the 16 Eurozone countries, Jean-Claude Juncker, the prime minister and finance minister of Luxembourg, said: "We don't feel we need to pile deficit on top of deficit and add further to our debt."

Juncker, who chairs the Eurogroup meetings, added: "We would not want to give the impression we are considering putting together other recovery packages."

His remarks followed comments from Larry Summers, director of the U.S. National Economic Council, in an interview with the Financial Times, that governments should pump more public money into their economies to fight the recession. "Recent American appeals" for a European budgetary effort are "not to our liking," Juncker said.

Juncker said ministers had rejected any relaxation of the criteria for joining the euro, including the length of time that countries have to spend in the European Exchange Rate Mechanism II. "There is no question of changing the criteria," Juncker said. "The credibility of monetary union is at stake," he added.

Both Juncker and Joaquín Almunia, the European commissioner for economic and monetary affairs, said that assessments of Europe's economic outlook are now worse than they were earlier this year. Juncker said that the recession is "certainly deeper than what we saw at the beginning of the 1990s." Almunia said that "the recovery will take longer than we were expecting a few months ago," and that he now expects a "gradual recovery" to start in 2010.