NAME

DATE
USAL – FACULTAD DE CS ECONÓMICAS
FINAL INGLÉS IV

A. Read the article and anxwer the following questions,

1. Why is Johnson & Johnson being sued?
2. Why is the company backing away from the deal?
3. What antecedent´s of ¨unhappy marriages¨ are mentioned?

B. Whiich sentence begins each paragraph?

1. Yet it is not certain that J&J will defeat Guidant's claim for “specific performance” of its promise to acquire
the firm
2. Everything is not lost for Guidant.
3. J&J has strong grounds for suspicion

Heartbroken?
Buy me, or I'll sue
LEFT standing alone at the altar, Guidant, a maker of required Tyson Foods to complete its agreed
medical devices, is pursuing its no-show groom the acquisition of IBP, a beef and pork processor. Leo
American way, by going to court. On November 7th it Strine, an influential Delaware judge, ruled that rather
filed a lawsuit against Johnson & Johnson (J&J), a huge than any material adverse changes, Tyson Foods had
drugs and consumer-goods firm, seeking to force it to simply been overcome by buyer's remorse at offering
complete its $25 billion purchase. The merger was too high a price. The merger went ahead, though it
announced last December, but J&J claims it is within its has not been a happy marriage.
rights to back away, evoking a “material adverse Given all the revelations at Guidant, it is hard to
change” clause in the merger contract which frees a imagine any judge finding that J&J is simply suffering
corporate groom from his obligations if, on closer from buyer's remorse, reckons Dale Oesterle, a law
inspection, his would-be bride turns out not to be the professor at Ohio State university. Rather than
innocent young thing she said she was. expecting to win, Guidant may have brought the case
_____________ In the past few months, Guidant has in a desperate bid to get J&J to return to the
been the subject of a series of unpleasant revelations. negotiating table instead of walking away. J&J might
Almost 200,000 of its pacemakers and 88,000 heart conclude that a firm prepared to sue to be bought is
defibrillators have been affected by safety warnings or not worth having at any price.
recalls. It emerged that Guidant had long failed to
notify doctors of the risks of one sort of defibrillator
short-circuiting. The Securities and Exchange
Commission has opened a formal inquiry into “product
disclosures and trading in Guidant stock”. Then on
November 3rd came the worst blow of all, a lawsuit
from corporate America's worst nightmare: Eliot
Spitzer, New York's attorney-general, alleges that
Guidant kept from the public a design flaw in one of its
defibrillators. Guidant's shares have fallen by over
20%, suggesting investors no longer expect the
merger to go ahead.
_______________. Under American law, the meaning of
“material adverse change” is determined deal by deal,
says George Sampas, a lawyer at Sullivan & Cromwell.
And although the relevant clause in this case looks
fairly standard and the case will be tried in New York,
unusually, under the terms of the merger agreement,
it will probably be decided according to Indiana state
law, in which there is little precedent. Much will depend
on whether the court thinks Guidant's problems are a
temporary blip or, as J&J argues, long-term and
fundamental.
_______________. They will hope that the court finds
similarities with a 2001 ruling in Delaware, which
C. Fill in the blanks with words from the box

Restructuring - project management – operations - competitive advantage

- development - change – outsourcing – organization - business objectives
– management

Nowadays, it is hard to imagine an ____________________ that is not engaged in some kind of

project activity. Over the past decade, organizations have been turning from____________________
to projects ____________________ as part of their ____________________strategy. The most successful
organizations employ____________________ as a strategic tool to drive change and achieve their
____________________. New product ____________________organizational ____________________ ,
____________________ , post-deal integration, ____________________ and policy implementation are
some of the initiatives, besides the traditional, but vital, systems development and
implementation, which today are being managed as projects.

D. Connect the sentences using a suitable relative pronoun. Indicate also if they can be ommited.

1. General Motors is America’s largest car maker. The firm plans to reduce 30,000 jobs
and slash the number of vehicles it produces.
2. Rick Wagoner said they will close nine production plants and three service centres. Mr Wagoner
is GM's chairman and chief executive.
3. GM has struggled with high health-care and commodities costs in the domestic market. It has
lost a significant part of their market share to foreign rivals there.

E. Will or going to?

1. The cost-cutting programme ____________________ (affect) thousands of dedicated GM
employees and families, as well as state and local governments," said Mr Wagoner. "We
_______________ (work) our hardest to mitigate that impact."
2. Next week Mr Wagoner ____________________ (meet) the United Auto Workers union.
He__________________ (inform) them of the job losses.
3. This move _________________ (bring) a "significant" charge to its accounts but
________________ (lead) to savings of $7 billion (£4.1 billion) a year by the end of 2006.

F. Gerund or Infinitive?
Confectionery giant Cadbury Schweppes has agreed _______________ (sell) its European soft
drinks business for 1.85bn euros ($2.2bn; £1.3bn) to Blackstone and Lion Capital.

Before _________________ (reach) an agreement, UK-based Cadbury will have to

_________________ (consult) with employee representatives in France, Germany and Belgium.

It first announced that it intended _________________ (sell off) its European drinks arm back in
September.

"After_________________ (complete) the deal, we will be able _________________ (focus) on our

faster growing confectionery and other beverage businesses."
G. Describing Trends: What has happened to GM´s shares over the last 13 years? Don´t forget to use
adjectives or adverbs, and expressions such as: to reach a peak, to fluctuate, to stand at, to level off, etc.
H. Reported Speech: The EU and the US are trying to restrain China's surging textile
exports. Report the views of a deputy manager of a factory in Shanghai on how
quotas from the EU and the US have affected their lives and business.

1. My factory specialises in producing trousers, shirts and jackets. We take orders from foreign
countries such as the US, France and Italy.

2. We employ 1500 people and have been known to produce hundreds of thousands of garments
in one month.

3. At the beginning of this year our business grew very quickly. But we had no warning from the
EU or the US about the limits.

4. Now everything is changing. The scale of production has drastically dropped.

5. Many skilled workers have left our factory. Before these limits, skilled workers were paid
about $240, a month.
6. Now, can they live with only $60? Will they go on working?

I. Writing You have contacted some potential investors to help you set up a business and you have been
asked to write a business plan. Don’t forget to include the details of the business, some personal
information, a description of the product or service and of its possible market, what kind of marketing or
advertising you intend to do, the location, premises and the staff required and your objectives.
NAME
DATE
USAL – FACULTAD DE CS ECONÓMICAS
FINAL INGLÉS IV

A. Read the article and anxwer the following questions,

1. Why isn´t classified advertising the profitable business it used to be?
2. What are search ads?
3. What are print publishers and newspaper groups doing to face this situation?

B. Whiat do these percentagess and figures represent?

1. 62%
2. 450m
3. 26%

Classified calamity
Small ads are flooding away from newspapers and onto
the internet
RUPERT MURDOCH once described them as the “rivers of gold”—the lucrative classified-advertising revenues that
flowed into big newspaper groups. But the golden rivers are being diverted online as the internet breaks the grip
that local and regional newspapers once held over their advertising markets.
Typically, a local newspaper would expect to get some 80% of its revenue from advertising, of which around two-
thirds would come from classifieds. But last year in the San Francisco Bay area, job ads worth some $60m were
lost from newspapers to the web, reckons Classified Intelligence, a consultancy. Emap, a British publisher, recently
gave warning of a 30% decline in recruitment ads in one of its titles, Nursing Times, following the launch of a free
website for jobs in Britain's National Health Service.
The internet has become the fastest-growing advertising medium. Online ad revenues reached $5.8 billion in the
first six months of this year in America, up 26% on the same period last year, according to a joint study by the
Interactive Advertising Bureau and PricewaterhouseCoopers. In Britain, online ad revenues surged by 62% in the
same period to almost £500m ($870m).
Search advertising—the small text-ads that appear alongside Google and Yahoo! searches—account for 40% of
the online ad market. Another 20% goes to display ads and 18% to classified advertising. But search advertising
can also work like a small ad and will increasingly challenge print classifieds as websites develop localised and
more elaborate services for online users.
Perhaps the most significant development came on November 16th, when Google started up a prototype service
called Google Base. It offers a searchable database of free listings, including small ads which can be narrowed
down to postal regions. Among its first offerings were used cars. In time, Google could challenge eBay, whose own
auction listings now work much like a giant classified website—especially with its “buy-it-now” options. But eBay
charges sellers. Even so, it sold more than 450m items in the three months to September 30th, for almost $11
billion.
In response, most print publishers are expanding online. Mr Murdoch is buying websites including Propertyfinder
and MySpace, a social-networking site. Newspaper groups have teamed up to jointly operate websites to
compete with Monster for recruitment ads. But the online operators are expanding too. eBay, for instance, is
building a global network of classified sites under the Kijiji brand. It also has a stake in the popular Craigslist which,
having soaked up so many listings around its San Francisco home, is now frightening other newspapers as it
expands its mostly-free ads service to other cities around the world.
C. Fill in the blanks with words from the box

expand - come together - small businesses - reach - Joint ventures -

industry - markets - share - partnership - strategic alliance

A joint venture or ________________________ is a form of ________________________ where

businesses ________________________ to ________________________ knowledge,
________________________ and profits. ________________________ can take on various forms.
Small companies can band together to take on the goliaths of their ________________________.
Big companies can form alliances with quicker and nimbler ________________________. And
small companies have the opportunity to forge strategic alliances with big name companies to
________________________ their geographic ________________________.

D. Connect the sentences using a suitable relative pronoun. Indicate also if they can be ommited.

a. In every introductory marketing course "Place" refers generally to distribution. Your customer
evaluates and ultimately receives your product or service there.
b. This may not matter much for some people. Their work is carried out virtually, or they run a
business that drop-ships from a third party,
c. This problem may not matter much for some people. It is critical for restaurants, retailers, and
even many service businesses

E. Will or going to?

1. Confectionery giant Cadbury Schweppes _______________________ (sell) its European soft drinks
business for 1.85bn euros ($2.2bn; £1.3bn) in the near future. It _______________ (be bought) by private
equity firms Blackstone and Lion Capital.

2. For the deal to be completed, UK-based Cadbury _____________ (have) to consult with employee
representatives in France, Germany and Belgium.

3. The price being paid by Blackstone and Lion Capital ________________ (be) towards the upper end of
analyst predictions.

4. Analysts warn the sale _________________ (weaken) Cadbury's, and that it _______________ (find)
itself an attractive takeover target for such US firms as Kraft Foods or Hershey.

F. Gerund or Infinitive?
It’s no use ___________________ (invest) on a company with such management problems. We
can’t afford ________________ (do) so right now.
On the other hand, we shouldn’t forget ________________ (analyze) the possible advantages of
the situation. I suggest _______________________ (offer) a lower price at the bid.
But after __________________ (make) an initial offering it would _______________ (be) very
difficult ____________________ (deal) with our shareholders if things don’t turn out well.
I think we mustn’t delay ________________ (reach) an agreement .___________________
(increase) __________________________ our market share in that way will provide us with a
significant competitive advantage.
G. Describing Trends: What has happened to the USA´S trade surplus with the world over the last five years
Don´t forget to use adjectives or adverbs, and expressions such as: to reach a peak, to fluctuate, to stand
at, to level off, etc.

H. Reported Speech:

1. Can the fight for the Aegis Group, a British advertising company, bring about an unlikely
partnership?
2. The French investor Vincent Bolloré has teamed up with Martin Sorrell, the chief executive of
the WPP Group, and the private equity group Hellman & Friedman to bid for Aegis.
3. Until now, Mr. Bolloré and Sir Martin had been rivals for Aegis.
4. The consortium is planning to take control of different parts of Aegis if the offer is successful.
5. WPP Group will offer £350 million ($600 million) in cash for Aegis's market research group,
Synovate,.
6. Mr. Bolloré, who already owns 25 percent of Aegis, would take control of the remainder of the
company.

I. Writing You have contacted some potential investors to help you set up a business and you have been
asked to write a business plan. Don’t forget to include the details of the business, some personal
information, a description of the product or service and of its possible market, what kind of marketing or
advertising you intend to do, the location, premises and the staff required and your objectives.
Heartbroken?
Buy me, or I'll sue
LEFT standing alone at the altar, Guidant, a maker of medical devices, is pursuing its no-show
groom the American way, by going to court. On November 7th it filed a lawsuit against Johnson &
Johnson (J&J), a huge drugs and consumer-goods firm, seeking to force it to complete its $25
billion purchase. The merger was announced last December, but J&J claims it is within its rights
to back away, evoking a “material adverse change” clause in the merger contract which frees a
corporate groom from his obligations if, on closer inspection, his would-be bride turns out not to
be the innocent young thing she said she was.
J&J has strong grounds for suspicion. In the past few months, Guidant has been the subject of a
series of unpleasant revelations. Almost 200,000 of its pacemakers and 88,000 heart
defibrillators have been affected by safety warnings or recalls. It emerged that Guidant had long
failed to notify doctors of the risks of one sort of defibrillator short-circuiting. The Securities and
Exchange Commission has opened a formal inquiry into “product disclosures and trading in
Guidant stock”. Then on November 3rd came the worst blow of all, a lawsuit from corporate
America's worst nightmare: Eliot Spitzer, New York's attorney-general, alleges that Guidant kept
from the public a design flaw in one of its defibrillators. Guidant's shares have fallen by over
20%, suggesting investors no longer expect the merger to go ahead.
Yet it is not certain that J&J will defeat Guidant's claim for “specific performance” of its promise to
acquire the firm. Under American law, the meaning of “material adverse change” is determined
deal by deal, says George Sampas, a lawyer at Sullivan & Cromwell. And although the relevant
clause in this case looks fairly standard and the case will be tried in New York, unusually, under
the terms of the merger agreement, it will probably be decided according to Indiana state law, in
which there is little precedent. Much will depend on whether the court thinks Guidant's problems
are a temporary blip or, as J&J argues, long-term and fundamental.
Guidant will hope that the court finds similarities with a 2001 ruling in Delaware, which required
Tyson Foods to complete its agreed acquisition of IBP, a beef and pork processor. Leo Strine, an
influential Delaware judge, ruled that rather than any material adverse changes, Tyson Foods had
simply been overcome by buyer's remorse at offering too high a price. The merger went ahead,
though it has not been a happy marriage.
Given all the revelations at Guidant, it is hard to imagine any judge finding that J&J is simply
suffering from buyer's remorse, reckons Dale Oesterle, a law professor at Ohio State university.
Rather than expecting to win, Guidant may have brought the case in a desperate bid to get J&J to
return to the negotiating table instead of walking away. J&J might conclude that a firm prepared
to sue to be bought is not worth having at any price.

Online advertising

Classified calamity
Small ads are flooding away from
newspapers and onto the internet

RUPERT MURDOCH once described them as the “rivers of gold”—the lucrative

classified-advertising revenues that flowed into big newspaper groups. But the golden
rivers are being diverted online as the internet breaks the grip that local and regional
newspapers once held over their advertising markets.
Typically, a local newspaper would expect to get some 80% of its revenue from
advertising, of which around two-thirds would come from classifieds. But last year in
the San Francisco Bay area, job ads worth some $60m were lost from newspapers to
the web, reckons Classified Intelligence, a consultancy. Emap, a British publisher,
recently gave warning of a 30% decline in recruitment ads in one of its titles, Nursing
Times, following the launch of a free website for jobs in Britain's National Health
Service.
The internet has become the fastest-growing advertising medium. Online ad revenues
reached $5.8 billion in the first six months of this year in America, up 26% on the same
period last year, according to a joint study by the Interactive Advertising Bureau and
PricewaterhouseCoopers. In Britain, online ad revenues surged by 62% in the same
period to almost £500m ($870m).
Search advertising—the small text-ads that appear alongside Google and Yahoo!
searches—account for 40% of the online ad market. Another 20% goes to display ads
and 18% to classified advertising. But search advertising can also work like a small ad
and will increasingly challenge print classifieds as websites develop localised and more
elaborate services for online users.
Perhaps the most significant development came on November 16th, when Google
started up a prototype service called Google Base. It offers a searchable database of
free listings, including small ads which can be narrowed down to postal regions. Among
its first offerings were used cars. In time, Google could challenge eBay, whose own
auction listings now work much like a giant classified website—especially with its “buy-
it-now” options. But eBay charges sellers. Even so, it sold more than 450m items in the
three months to September 30th, for almost $11 billion.
In response, most print publishers are expanding online. Mr Murdoch is buying websites
including Propertyfinder and MySpace, a social-networking site. Newspaper groups
have teamed up to jointly operate websites to compete with Monster for recruitment
ads. But the online operators are expanding too. eBay, for instance, is building a global
network of classified sites under the Kijiji brand. It also has a stake in the popular
Craigslist which, having soaked up so many listings around its San Francisco home, is
now frightening other newspapers as it expands its mostly-free ads service to other
cities around the world.

Takeover target?

Last month Cadbury warned that group-wide it was unlikely to meet its profit margin forecasts for
this year.

Analysts broadly welcomed the sale, but some said a streamlined Cadbury's, which intends to
keep its Dr Pepper and 7UP brands, may now find itself an attractive takeover target for such US
firms as Kraft Foods or Hershey.
"This is a good price, it is hard to fault the logic of this perfectly sensible deal," said analyst Richard
Workman at Oriel Securities
Suggest-begin- succeed
By
To insist on no use to
Promised
Attempt
Before
Agreed
After
Try
Enjoy
Intend

GM to shed 30,000 jobs

BY ANDREW ELLSON
General Motors, America’s largest car maker, is to shed 30,000 jobs and slash the number of vehicles it
produces by 1 million a year, as it moves to bring production in line with demand in its key north American
market.

The cost-cutting programme, which will see the closure of nine production plants and three service
centres, follows multi-billion dollar losses and widespread speculation that the embattled company
might be forced to file for chapter 11 bankruptcy.

The company said the move would bring a "significant" charge to its accounts but would lead to
savings of $7 billion (£4.1 billion) a year by the end of 2006.

Rick Wagoner, GM's chairman and chief executive, said he hoped to be able to achieve many of the
cuts through attrition and early retirement programs.

"These actions are necessary to get General Motors’ cost in line with our major global competitors,"
he said. "In short, they are an essential part of our plan to return our North American operations to
profitability as soon as possible," he added.

The plant closures and redundancies, which amount to almost 10 per cent of the company's entire
workforce, are in addition to the three assembly plants that the company has already closed or
stopped production at this year.

Mr Wagoner said GM has informed the United Auto Workers union of the job losses. "These are
difficult moves that will affect thousands of dedicated GM employees and families, as well as state
and local governments," he said. "We will work our hardest to mitigate that impact."

Analysts welcomed the move and GM’s shares gained more than 3 per cent on the news. Losses of
almost $4 billion this year and persistent rumours of bankruptcy have taken 40 per cent off the
company’s share price since January.

GM has been struggling with high health-care and commodities costs and the loss of domestic
market share to foreign rivals. This has left the company with too much production capacity and
forced it to offer massive discounts just to move its stock.

The company has also been hit by falling sales of its high-margin sports utility vehicles. The "gas
guzzlers" so detested by environmental campaigners have lost popularity in recent years as petrol
prices have moved consistently higher.

Another problem for GM is that its main but bankrupt parts supplier Delphi is battling with its unions
over redundancies. Analysts have warned that a strike at Delphi could shut down some GM plants
potentially costing the company billions of dollars a week.

 The collapse of Rover, the last British-owned, mass-production car maker, is set to cost the
taxpayer £231 million, it was revealed today.

The government said that retraining for former workers at the Birmingham car company had already
cost £50 million, while £6.5 million was spent to keep the company in operation for a week in April
while a buyer was sought.

About 6,000 jobs were lost when Rover ceased trading with debts of £1.4 billion, but it is believed
that more than half of its workers have found new jobs, and most of the others have enrolled on
training courses.
Trade and Industry minister Ian Pearson, MP for Dudley South, told the BBC: "£231 million is the
money allocated (but) it hasn't all been spent. Some is due to be spent over three years and some
is for wider projects in the supply chain."

If you've ever envisioned a European beach in summer, images of sexy, sleek and slender
Euro bodies will come to mind. That is, if you believe the images in ads for French perfumes,
Italian fashion and German cars running in the United States.

But you will be thunderstruck to learn that there's a whale in the surf.

You see, Europeans, smug lot that we are, used to snicker at America's
ongoing battle of the bulge, never dreaming that obesity would one day
raise its chubby cheeks on this side of the Atlantic.

But raise them it has. Across Europe, as many as 25 percent of women

and 20 percent of men are classified as obese. This compares favorably
with the 33 percent of adult Americans who are obese, but that's hardly
worth bragging about.

Okay, so our designer wardrobes are feeling increasingly pinched and

growing numbers of us can no longer make direct eye contact with our
toes. What's that got to do with advertising? As it turns out -- plenty.

In keeping with Europe's historic standing as the world's leading center

for fashion and design, European companies have traditionally
emphasized physical glamour and sexiness in their advertising.
Advertisers in every other region of the free world do the same, but none
perhaps have felt such intense cultural pressure to associate themselves
with classic good looks and beautifully sculpted bodies.

However, the rising prevalence within our union of multiple chins,

ballooning waistlines and sagging derrieres is beginning to affect
boardroom attitudes. Advertisers are not in the business of promoting
any particular societal viewpoint or cultural esthetic. Their goal is to
generate positive awareness of their brands and sell as much product as
possible.

Although they occasionally submit to being restricted by traditional

consumer expectations, their nature is to seize every opportunity to
break out and differentiate themselves from the pack.
A current French television ad for Mayonnaise Benedicta illustrates this.
It portrays a thief who pauses in the act of stealing the wheels off a
parked car to snack on the getables and dip he finds inside. The French
frequently depict their thieves as exhibiting a certain elegance and
physical attractiveness, but this character breaks the mold. He's not
suave; he's incredibly big and fat.

Similarly, DHL Courier Service ran a spot across Europe

last year featuring two fleshy old men bathing in a
lake. And, two years ago, in another pan-European
execution, Adecco, the employment services company,
portrayed a corpulent boss doing a strip tease on his
desk in front of a job applicant.

A number of advertisers in recent years have, in fact,

used physical unattractiveness as a central idea of
their ads. Diesel created a print and Internet campaign
in 2000 about a fictitious Florida fashion photographer,
Frank P. Stevenson, who looked like he'd been dragged out of a southern
bayou. Tele2, the European phone company, just ran a TV campaign
featuring a decidedly uncomely male suitor.

These and other examples point to the same conclusion: There is at the
very least a trend underway in European advertising toward casting
heavyset actors in roles that previously would have gone -- without a
moment's hesitation -- to people with perfect physical proportions.

Interestingly, in the process of breaking through the obesity barrier,

marketers seem to have concluded that a related advertising taboo
--general physical unattractiveness -- has also
become permissible. Heck, it's not only become
permissible. It's become desirable.

For one thing, since the advertisers continue for the

most part to emphasize physical beauty, the
introduction of the merely ordinary -- much less the
downright ugly -- is bound to draw attention.

There could be another factor at work here, as well.

Euro advertisers may well have stumbled collectively
onto an insight about how people watch programming that academics
are only now beginning to research. The Journal of Applied Psychology
reported recently on a scientific study conducted at Iowa State
University that showed television viewers were 67 percent more likely to
recall ads that appeared in boring shows than in shows that were sexy or
violent.
Part of the reason for this, the scientists theorize, is that sexy and violent
programs promote sexy and violent daydreams when the viewer is
supposed to be paying attention to the messages in the ads. Obviously,
advertising that places a heavy emphasis on sex could similarly
misdirect consumers' thoughts.

Further research will have to be done to validate the study's findings

before scientists can declare emphatically that sex doesn't sell. Yeah,
right. Let them conclude what they like. Personally, I've seen sex sell far
too many times to believe the contrary.

But at the very least, this research suggests there is a sound basis for
the use actors of average -- better yet, below average -- physical
attractiveness in ads. After all, the less viewer daydreaming, the better.

READING

At the vanguard of the re-ignited European creative scene, predicted soon to alight
European advertising, are car ads blazing a trail of unfettered, imaginative, fragrant ideas.

How many car ads have we seen in which the sole idea of the ad is that
the car looks great - and here's a helicopter shot of the model rounding a
hairpin turn on a remote mountain road to underline the point? It comes
as a nice surprise, then, that European automotive advertisers have
suddenly emerged as the producers of some of Europe's most
interesting, inventive and talked-about television commercials.

Take Cog, the recently-launched two-minute spot by Honda in the U.K.

for its Accord line of vehicles. This amazing visual treat -- it's essentially
an extended, domino-style chain reaction involving numerous Accord car
parts -- was done with no computer graphic imaging and required a
stunning 606 takes to complete. As a piece of brand communications,
the spot works wonderfully because it exudes creative passion, and that
passion becomes associated in the viewer's mind with Accord.
http://www.honda.co.uk/multimedia/index.html

Against this, the most talked about and much-loved car commercial
currently on Europe's televisions was shot in India and stars Indians. We
open on a dude who smashes and bashes his old local car into the shape
of a Pugeot 206 -- all to impress some beautiful dudettes.

In a different take on passion, BMW depicts lightning falling in love and

having a sensual experience with the new Z4. The spot, developed in
Germany, concludes with the Z4 breaking off the relationship and
outracing the lightning to get away.

Fiat portrays a more conventional relationship in a promo for Punto that

launched in Italy. The spot features a woman arguing heatedly with her
partner over the phone. Incensed at what she is hearing, she threatens
to go out with the next man she sees. Hilariously, her neighbor, who has
been overhearing the conversation, rushes from his apartment to be first
in view as she comes out her door.

Renault's most recent Spanish TV spot for its roomy, economical New
Kangoo likewise puts an emphasis on matters of the heart -- although in
this case the relationship is between father and son. The ad features a
boy informing his dad that his mom's new boyfriend has a cool car with
red leather seats.

"But I bet he can't carry a ton of lollipops in his car," remarks the dad.
Then, when the boy drops his lollipop onto the seat, the dad says
forgivingly, "Don't worry, they're not expensive leather."

In the latest ad about the fuel-efficient Audi, we see a city full of huge,
car-size fish instead of cars. Up drives an Audi, which passes a gas
station that's jammed with fish, guzzling down gas.

After decades of focusing the bulk of their communications efforts on me-too

campaigns emphasizing functionality and styling, European car companies are finally
starting to get it. 

Mitsubishi Motors Europe, a client of ours since late last year, has adopted the objective
that it will take ownership in the public's mind of a specific feeling -- the feeling of
excitement that comes from driving a stylish, well-built car. The company's recently-
introduced launch ad for its new Outlander is a first step in the creation of this new brand
image.

In the 45-second spot, a young woman in her Outlander picks up a young male hitchhiker
and then proceeds to take him on a thrilling drive through the city. With perfect calm, she
ascends a huge arching motorway, speeds back downhill and zips around tight corners.
Later, after he gets out of the car, the young man looks at his forearm and realizes his hair is
standing on end.

This spot is the center of an offbeat campaign that also includes a web experience:
http://www.drivealive.net

As this selection of recent commercials illustrates, European car advertisers are starting to
appreciate that their brands have the potential to connect with consumers on a multiplicity
of levels. Certainly, it is sometimes appropriate to focus communications on a product's
functional or aesthetic benefits. But as thinking, feeling humans, we are naturally open to
deeper, more complex forms of interaction, and we will almost always take advantage of
opportunities to experience those feeling and emotions we find rewarding.

What European car advertisers have realized is that they have the opportunity to be the
catalyst for such feelings, and that the rewards in terms of brand recall and brand loyalty
can be substantial. After decades of focusing the bulk of their communications efforts on
me-too campaigns emphasizing functionality and styling, European car companies are
inspiring us, and all other advertisers, with breakthrough communications.

If it ever was, advertising in 21st Century is no longer about badgering people about the
things advertisers think are important about their products.

Plain and simple, it's about talking to them about things that matter to them

If Coke and Pepsi and M&M's can do it, why can't beer? If Mitsubishi Motors can do it, why
not a good cold one? If the alcohol-pops brand eating away at the beer markets can do it,
why not a premium lager?

The answer is: Tradition. Namely, the beer brands of Europe remain
largely segmented in their regional roles and have yet to make the giant
leap to the pan-Euro hall-of-fame.

Surely, beer brands can succeed where soda pop brands have gone
before -- unifying diverse consumers with an idea, based on universal
human insights, behaviors and "moments."

Makes sense, no? Yes and no.

Yes, because this is a huge growth opportunity for the brand that
succeeds. But before we start partying, let's first take a pop quiz. The
category is European beer advertising.

First question: In which country are brewers most likely to use humor in
their commercials? If you guessed the U.K., you are correct. Reward
yourself with a pint of your favorite English bitter.
Next question: In which country are beer advertisers most likely to use
appeals based on tradition? The correct answer is Germany, famous for
its 1516 Beer Purity Law, which regulated the ingredients that could be
used in the making of the beverage. Pour yourself a Bavarian-style pils if
you guessed right.

Final quiz question: Name a country where beer ads frequently depict
users enjoying themselves with friends. While this is a familiar approach
in a number of European countries, you would certainly be correct if you
said the Netherlands. You would, however, be dead wrong if you said
France. Strict legislators there have outlawed alcoholic beverage ads on
television and restrict lifestyle-themed ads in all other media.

Did you answer correctly? No matter -- go ahead and quench your thirst
with a delicious Dutch bokbier. In fact, the more widely you sample the
beers of Europe and elsewhere around the globe, the better you'll be
able to appreciate the point I wish to make about beer advertising.

Unlike product categories that have standardized features and universal appeal, such as
household appliances or computers, beer is very much a culturally bound product. From the
way it is brewed to its appearance in a glass to the subtleties of its taste profile, every beer
is unique, and local cultures have historically held a preference for their own local brands.

But beyond local brand preferences -- don't faint now -- every single society also has a
unique set of shared attitudes towards beer drinking. That's right -- shared! This is where
the rubber meets the road for international beer advertisers. It is also why the market is
changing so fast. Perhaps more than the advertisers of any other major product type, beer
advertisers understand that local markets are best served by campaigns that reflect the local
mind-set.

For instance, a recent Stella Artois campaign in the U.K. pulled no punches in its efforts to
appeal to the British sense of humor. One of the spots, a true comic masterpiece, features a
man on his deathbed surrounded by relatives. As his dying wish, he asks for a Stella Artois,
and one of the relatives is dispatched to buy some. The man purchases the beer, but
succumbing to temptation, he drinks it on his return journey.

Arriving back, he hands his empty glass to the priest as they enter the sickroom, leaving the
impression with the dying man that the priest, not he, was the guilty party.

In Germany, Diebels is currently running a spot that underscores beer's positioning in that
country as a traditional beverage to be consumed on celebratory occasions. In the ad,
several people help a friend lug a sofa up a staircase to his apartment. It's a difficult job, but
they prevail. Afterwards, he pours them a round of beers and they kick back on the sofa to
drink and relax.

In Spain, where the theme of socialization is almost as common as it is in Holland, Amstel

Aguila has been airing a spot showing a groom dancing first with his bride and then with
his friends, one of whom is holding a beer. The ad tagline: 100 percent friendship.

Across the Atlantic, U.S. beer ads have more in common with British ads than they do with
beer ads found elsewhere in Europe. In both countries, brewers regularly use humor in their
campaigns and frequently stir in a dollop of sex to spice things up.

These days, the commoditzation of culture moves quickly. Beer must keep up with
alchohol-pops, which have shaven chunks off the beer market across Europe. Beer can do
this by inventing new products, but also by crafting stylin' advertising concepts across the
great expanse that is Europe. Beer is lifestyle, not hops and grain. Beer needs to locate
deeper universal aches or memories than those offered up by the local brew ads.

While spirits brands (that were almost down and out a decade ago) are growing based on
entertaining ads -- and "one solid voice" across the continent -- beer brands ferment in the
regionalism and passivity enforced by tradition; namely, by executing the same old beer tv
spots consumers have been seeing for decades:

Golden grain landscape, check.

Beer glass with nice head, check.

Pearls of sweat on glass, check.

Smiling face of happy consumer, check.

What's lacking in huge amounts in Europe is the understanding that beer is entertainment ...
and like the course of a dialogue in a bar, should be hilarious.

Just look what it did for beer brands in the USA.

Horse farts

VOCABULARY

Mergers & Acquisitions Advisory

A merger or acquisition can add considerable value to a business, but

making sure that each stage of the transaction process — from valuation
to negotiation and completion — is successful demands considerable
experience and expertise.

 Our services are designed to help our clients reach their strategic goals by
identifying and then implementing opportunities to merge with or acquire other
businesses.
 The global economy means that these opportunities can arise anywhere in the
world. Our global reach means that we can provide services on the ground wherever
they are needed.
 Many drivers can affect a deal; from regulatory restrictions to tax issues. As the
world's largest professional services organisation, we can call upon dedicated
specialists to address any specific challenges that may arise.

If this is your situation

 You are looking for opportunities to generate value by acquiring or merging with a
business that offers a good fit can arise anywhere around the globe.
 You need to dispose of an asset or division as part of a restructuring or a change in
strategic direction.
 You are looking for advice in privatisation.Governments around the world are
increasingly looking to the private sector for financing and expertise for the
operation of many businesses and services previously in the public sector.
 Your industry is consolidating due to globalisation and competition, and you are
looking for businesses that can offer you good strategic fit
 You are involved in the private equity industry and you need to execute a deal
quickly and efficiently

How PwC can help

 Our global network in combination with our deep industry expertise means that we
are in constant touch with the markets and can spot opportunities and assemble
teams to execute a deal as the need arises.
 We identify appropriate buyers and will implement a sale to generate the best price
for our client.
 We have acted in more privatisations than any other professional services
organisation and have dedicated specialists to advise clients on taking advantage of
privatisation opportunities.
 Our deep industry expertise means that we can help companies identify other
businesses that offer a good strategic fit and assist them with acquisitions, mergers
and alliances that allow them to maintain and build their competitive advantage
 We work closely with clients in private equity helping them to make acquisitions
and advising on disposals. The extent of our global reach and the depth of our
relationships mean that we can frequently spot opportunities for private equity
investment and assemble the teams they need on the ground.
Improving Performance and Managing Cost

Many managers dread the annual budgeting and strategic planning process. Some claim
that they prefer to do real work than spend time developing a plan few people will ever
follow. Yet, that sentiment is largely misplaced. In our experience working with clients in
the forest and paper sector over the past decade, we've found that over 3 percent of annual
revenue can be directly attributed to proper budgeting and planning.
Surprisingly, it is not always the quality of the strategic plan or the size of the budget that
matters. Rather, it is a company's ability to execute that really makes a difference. Are the
best people leading the critical functions? Are effective measures and processes in place to
check progress? Are the needs of the most profitable customers being met? Are the most
effective partnerships and the most efficient technologies in place?

How PwC can help you

If your company's performance is not what it should be, PwC can help. To
start, our Performance Management Audit (PMA) will measure the gap
between where you are and where you want to be. The PMA addresses
seven key categories: strategy/alignment; people/leadership/culture;
metrics; rigour/business processes; information enablers; external
environment (customers and suppliers); and communication. A final
report identifies gaps where a company might be losing value by not
executing to plan. Often the report uncovers project areas where the
company is not failing to focus sufficient effort or investment. The PMA
helps people throughout your company focus on maximizing profit and
minimizing cost.

Innovate and implement for better performance. Global flow of

information, technology, capital, goods, services and people has never
been greater. Unprecedented growth in the developing world, the
increased need for consistency, standards, controls, compliance and
governance and the cost, risk and management needs associated with
evolving supply chain issues, are just some of the challenges and
opportunities businesses face today. Improving performance has become
a persistent need for companies striving to remain competitive and
effective in this environment. Improving performance often begins by
asking questions such as the following:

 How can we get more value from our company's finance function?
 Does our finance function support our company's business operations?
 Does our company have the appropriate organisation in place to address compliance
requirements?
 What are the key risks faced by our company — and are we effectively managing
those risks?
  How do we know if our company has fully addressed its compliance requirements?
 How can we reduce our company's IT spending?
 How do we spend less time retrieving and reporting information?
 How can we identify the right areas of information security to invest in?
 How can our company control digital identities?

PricewaterhouseCoopers can help you with these questions. We help our clients attain
increased performance by improving the efficiency and effectiveness of key business
operations. In particular, we focus on Financial Effectiveness, IT Effectiveness and
Governance, Risk and Compliance business operations, including using key enablers such
as Change and Programme Effectiveness, Data Services and Technology, to offer a more
valuable service to our clients. We use our deep industry expertise and understanding to
ensure tailored solutions for our clients. With a network of over 8,600 Performance
Improvement professionals in more than 90 countries, we are able to provide in-depth local
expertise supported by an extensive global network.

Reporting Performance
Stake a claim to reporting excellence. Reporting corporate
performance in a way that complies with all the complex corporate
reporting regulations and laws of each country in which you operate has
never been easy. And now, new regulations and standards such as
Sarbanes-Oxley and IFRS have made the task even more challenging.
Meeting these new reporting standards will — at least over the short-
term — almost certainly add to your company's headaches. And here's
something else to consider: even with these new regulations in place,
shareholders may not be happy with how and what your company
reports.

It's no wonder. Burned by a string of corporate meltdowns, shareholders

today are on guard against reporting that may pass regulatory muster,
but fails to provide a fully transparent view of a company's health and
prospects. Increasingly, investors also want companies to report on a
broad set of non-financial measures, which, combined with financial
reporting, might provide a better basis for judging corporate
performance.

High quality corporate reporting is too important to be determined solely

by the shape of externally-imposed regulation. To stake its own claim to
reporting excellence and public trust — your company must foster a
culture that views reporting transparency as a worthy end in itself,
independent of rules and regulations. At PwC, we know what it takes to
meet both the high standards of today's regulatory reporting
requirements and the even higher expectations of your stakeholder
community. Wherever your company does business, we offer a wide
spectrum of services to ensure your corporate reporting is clear,
complete, and relevant. These services include:

 Compliance with regulations and laws

 Dealing with regulators
 International Financial Reporting Standards (IFRS) requirements
 Non-financial and sustainability reporting (Environmental, safety, and social
responsibility issues)
 Sarbanes-Oxley
 Transparency and increased disclosure
 Transaction accounting and reporting
 XBRL

Boosting Business Performance Through Programme

and Project Management: Part One

by Antonio Nieto-Rodriguez and Daniel Evrard

Nowadays, it is hard to imagine an organisation that is not engaged in some kind of project
activity. Over the past decade, organisations have been turning from operations to projects
management as part of their competitive advantage strategy. The most successful
organisations employ project management as a strategic tool to drive change and achieve
their business objectives. New product development, organisational change, restructuring,
post-deal integration, outsourcing and policy implementation are some of the initiatives,
besides the traditional, but vital, systems development and implementation, which today are
being managed as projects.

As part of their work for PricewaterhouseCoopers, Antonio Nieto-Rodriguez and Daniel

Evrard—from PwC's practice in Belgium—were often confronted with multiple cases of
project management in different types of organisations. Some of the organisations, which
had more than hundred projects and more than 1000 employees involved in project activity,
were delivering a significant percentage of their projects consistently better than others
(i.e., projects on time, within budget, to scope and delivering business benefits). Their
theoretical conclusion was that these organisations had a higher level of maturity and,
therefore, the organisation as a whole performed better.

However, Antonio and Daniel decided to validate this hypothesis, and, at the beginning of
2004, they conducted a survey to assess the current state of the level of project management
maturity within organisations. The resulting study—Boosting Business Performance
Through Programme and Project Management—was primarily carried out among top,
senior management and project-level managers. During early 2004, two hundred responses
were gathered from a balanced group of companies—of various sizes and from various
sectors, medium to small, and with differing business structures—from thirty different
countries across the globe.

In this, the first of a three-part series based on the results of that survey, our authors offer
both an introductory overview of the topic and the first of a number of key conclusions
regarding how companies can achieve better business performance. Here's what they have
to say.

One of the main goals of our survey, Boosting Business Performance

Through Programme and Project Management was to assess if today's
leading, and best-performing, organisations scored highly in terms of
project management maturity. In theory, the more mature an
organisation is, the better it should perform—maturity being regarded
for the purposes of this survey as the consistency with which an
organisation runs its business

VOCABULARY READING

Low-Budget High-Impact Marketing

Plan
The secret to creating a high-impact marketing plan is to optimize your limited
budget. A one-time radio ad blitz, glossy brochure, or flash-enabled website will
quickly erode your budget and derail your marketing plans. Use low-budget
marketing to get your message out to your customers on a regular basis, and
watch sales revenue grow.
There are several reasons why a low-budget marketing plan is a must for small
business in today's advertising bloated society:
 Expensive ad exposure does not necessarily translate to increased sales. Just
ask Super Bowl advertiser Pet.com, whose sock puppet commercial was a hit with
consumers, but left the company bankrupt. Every marketing dollar spent should
produce a good return in sales.
 Your target customers need to hear your marketing messages at least 7 times to
influence a buying decision.
Using marketing & sales strategies outside your budget, does not allow you to
repeat your message often enough to make an impact.
 Marketing impact can be greatly improved by using multiple marketing
channels. Prospects will likely become buyers if they: read about your company in
the newspaper, attend a seminar, take home a brochure, and visit your small
business website. The further you can "stretch your marketing dollars" to reach
your target market in multiple channels, the higher the impact of your marketing
message.
Low-Budget High-Impact Marketing Techniques
Get A Piggyback: Hitching a ride on the marketing of another company can save
your small business time and capital. When computer reseller franchise, Computer
Exchange, was looking for methods to reach price conscious consumers on a low
budget, the company followed Wal-Mart openings. Wal-Mart`s big budget
marketing department would carefully select the new store openings based on
demographics and other costly analysis. Cyber Exchange opened stores in the
vicinity of Wal-Mart saving real-estate selection costs and piggy backing on Wal-
Mart`s marketing plan.
Find The Right Target: A critical part of your marketing plan is targeting the right
customer. For a low-budget high-impact marketing plan to work, find customers
who are easy to identify and affordable to reach.
Forget the mass market and go for small niche markets. For example, local, large
breed dog enthusiasts can be reached by clubs, special shows, and targeted
publications. Reaching all dog owners will be ineffective because of limited
exposure combined with higher costs of marketing in mass publications.
Make Yourself News Worthy: A mention of your company in the right media can
help deliver your marketing message in a low cost manner. My local plumber has
mastered the art of self-promotion. When a child's red wagon was stolen, "Pete
The Plumber" showed up in his Super-Hero painted van to bring a brand new
wagon to the child. It was a good deed; resulting in plenty of media talk.
Form a Joint Venture: Joint ventures are too powerful for small business to
ignore. Forging an alliance with a group of small companies or a large corporation
can give your marketing plan the ultimate "bang for the buck." A joint venture will
lower your costs, enabling you to enter into new markets and create new
distribution opportunities.
Maximize Referrals: The most cost-effective method of reaching new customers
is by referrals from satisfied customers. A satisfied customer telling others about
your small business is more effective than any fancy ad campaign. Spend time to
get customer referrals on a weekly basis.
These are just a few of many tactics and strategies used by small business to
create a high-impact marketing plan on a low-budget. Marketing success comes
from creativity; not from having the biggest budget.

Boost Your Business Now With Joint

Ventures
Years ago, a husband & wife team, Jon and Leah Miner, partnered their small,
unknown company with the likes of 3M & Disney. These joint ventures created a
new technology of scratch & sniff stickers of Disney characters. The end result of
this partnership was the birth of a multi-million dollar business, Mello Smello. Learn
how joint ventures create big boosts in business.
What is a Joint Venture?
A joint venture or strategic alliance is a form of partnership where businesses come
together to share knowledge, markets, and profits. Joint ventures can take on
various forms. Small companies can band together to take on the goliaths of their
industry. Big companies can form alliances with quicker and nimbler small
businesses. And small companies have the opportunity to forge strategic alliances
with big name companies for expanded geographic reach.
According to Commonwealth Alliance Program (CAP), businesses anticipate
strategic alliances to account for 25% of all revenue by 2005, a total of 40 trillion
dollars.
No small business today can afford to ignore the rewards of joint venturing.
The Golden Rewards of Joint Ventures
 Shorten the Learning Curve: Building knowledge to expand into key markets,
develop new products, and improve productivity, can be time-consuming and
costly. Small businesses gain lead time, share expertise, and lower costs by
forming joint ventures.
 Enhance Company Credibility: All businesses especially start-ups struggle
with building acceptance within their market and customer base. A key alliance with
a larger known branded company can dramatically improve your credibility in the
eyes of your customers.
 Create New Profit Channels: Your business has limited resources and capital
for growth. By formulating a joint venture with a solid partner, your company
expands its sales force and distribution channel for low cost.
 Build Competitor Barriers: A strategic alliance with several key players can
erect impenetrable walls, keeping out competitors and maintaining high profit
margins. Once these ties are in place, it is difficult for competitors to unravel these
relationships.
Don't rush into a joint venture without understanding the key concepts of strategic
alliances and partnership ventures. Poorly executed and badly planned joint
ventures are doomed from the start. Learn the secrets of joint venturing.
4 Secrets of Successful Joint Ventures
Companies that build successful joint ventures follow the same systematic
process. Although the costs of forming alliances is inexpensive, the cost of not
planning out the partnership is far greater in lost profits and failed relations.
1. Set Clear Goals: Know from the beginning what you want to accomplish. Is it
reduced product costs, expanded sales, or market credibility? Your partners' goals
may be different but complementary to yours.
2. Find a Partner: The best partnership is based on a mutual win-win relationship.
Take the time to locate a company with an honest interest in joint ventures and a
similar corporate culture. If your small business is focused on long-term customer
relations and your strategic partner cares about gaining market share quickly, then
your two cultures may clash.
3. Plan the Venture: Map out your negotiation tactics and understand the legal
aspects of the deal. Keep win-win agreement in mind.
4. Manage the Relationship: Once a winning joint venture is formed the real work
takes place. A good alliance is like a marriage. It is built on communication, trust
and understanding.
Joint ventures and strategic alliances can be a positive outcome for all parties
involved. Take the time to understand the process and your small business will be
well positioned into the future.
Choosing a Location for Your
Business
There's more to consider than just cost
One of the basic concepts taught in almost every introductory marketing course is
The Four P's: Price, Product, Promotion and Place. "Place" refers generally to
distribution, i.e., where your customer evaluates and ultimately receives your
product or service. While this may not matter much for people who work virtually, or
who run a business that drop-ships from a third party, it's critical for restaurants,
retailers, and even many service businesses. Ironically, while "place" is often the
most permanent of the four P's, it's also often the most overlooked.
Location is about more than just choosing a building. Perhaps for you, opening
your business in your own town, or even your part of town, is a given. But consider
the big picture:
 State - Income taxes and sales taxes vary greatly from state to state, as do
regulatory requirements. Is the state you live in friendly to entrepreneurship?
To the specific type of business you want to run? Now might be the time to
consider a move if it isn't, or possibly to open your business in a nearby
state if you live near a state line. The Small Business Survival Index ranks the
various U.S. states on how friendly they are to small business.
 City - Rent and other costs, availability of labor, taxes, regulations and
government economic incentives can also vary greatly from city to city, even
within the same state. Or maybe a small town is the perfect spot for your
business. Entrepreneur Magazine publishes an annual list of the Best U.S.
Cities for Entrepreneurs
 Part of town - What kind of commute is involved? Is the part of town
consistent with the image for your business? Rent varies greatly according
to location.
 Location relative to streets, parking, and other businesses - Do you
need to be visible and/or easily accessible to pedestrian and automobile
traffic? Will being close to businesses that draw a similar clientele help your
business? For example, a sporting goods store or health food store might do
very well next to a gym.
 Type of location Do you need office space, retail or warehouse? Retail is
generally the most expensive of the three.

There are many factors to consider in choosing the location for your business.
While cost is obviously a major consideration, you must also think about your
various constituencies. Is your location important to...
 You? The space has to work for you, or it won't work. Remember, you're the
one has to work there every day.
 Your customers? It also has to work for your customers, or it won't work.
No customers = no business.
  Your employees? This issue may not be as critical at first, especially if you
don't have any employees yet. But the ability to attract and keep good
employees will be affected by your location.
 Strategic partners? While this may not seem like a big issue, the reality is
that strategic partnerships happen more easily when the partners are local
to each other. Why do you think that certain areas become hubs for certain
types of business, such as Silicon Valley for the tech industry?
 Potential investors or buyers? You may not even be thinking about that
yet, but potential investors looking at the long-term value of the business will
see location as an important factor.

Each of these groups has different concerns about the location:

 Cost - Most obviously, can you afford it? Also, though, consider whether
your customers and employees can afford it. For example, is there free
parking, or is it expensive? Will higher rent cause you to charge higher
prices to your customers? That's not necessarily a bad thing, but a factor to
consider. What about taxes? Income taxes and sales taxes vary greatly from
state to state, and if you buy your own property,
 Convenience - Is it easy to find? Is parking close by? Consider your clients.
If you're dealing with pregnant mothers and the elderly, they may have a
different concept of "convenient".
 Safety - This is an increasingly important issue for both customers and
employees. Is the parking close by? Well lit? Is there security on the
premises?
 Prestige - Would a downtown address add credibility? Will wealthy clients
favor a business in their own neighborhood? Some places even provide
virtual offices with prestigious addresses, such as Beverly Hills, Silicon
Valley, or Manhattan.
 Traffic - Retailers and restaurants love it, office workers don't.
 Facility requirements - Do you have any special needs, such as high
power consumption or specialized wiring? Do you need meeting space, but
only occasionally? You might consider a shared office suite (often called
executive suites) in that case.
 Zoning - Many cities have very strict zoning requirements. Make sure your
business is even allowed there before you sign the lease!

As you can see, a fully informed decision involves a fairly complex matrix of issues.
Determine your priorities, keep an open mind about your options, do your research,
and get ready to make one of the most important decisions about your business.

DESCRIBING GRAPHS

McDonald's Investors Are Overlooking European

Progress
Peter Kang, 11.18.05, 8:50 AM ET
 McDonald's

Tear Sheet Chart News

Bear Stearns maintained an "outperform" rating on McDonald's (nyse: MCD - news - people ) after a
meeting with the restaurant giant's European management team.

"Investors are impatient with Europe's pace of sales improvement, which compares poorly to the
hockey stick turn in the U.S. that began in the spring of 2003," wrote Bear Stearns analyst Joseph
Buckley, in a client note. "Investors seem disillusioned with Europe and we think the negative
perceptions are missing early signs of improvement."

The analyst noted positive results in France and Germany have been overshadowed by soft sales
and deteriorating profit margins in the United Kingdom. The three countries make up the bulk of
sales in Europe, McDonald's second-largest market after the U.S.

"Investor impatience seems to have turned into a large degree of skepticism that we view as
healthy for the stock because expectations seem low and signs of European progress are, in our
opinion, being overlooked," said Buckley. "McDonald's management sees Europe as improving and
positioned for higher growth in 2006."

Bear Stearns reiterated a $39 price target on McDonald's shares. "Our rating is premised on the
U.S. sustaining a high level of performance and gradual international improvement."

American Express Fundamentals 'Remain Very

Strong'
Maya Roney, 11.17.05, 8:58 AM ET

American Express

Tear Sheet Chart News

Robert Napoli of Piper Jaffray reiterated an "outperform" rating on American Express (nyse: AXP -
news - people ) but lowered estimates and the price target on the company after its chief executive
suggested that fourth-quarter earnings estimates on his company "are too high."

However, Napoli said, "We feel the fundamentals at American Express remain very strong,"

At a competitor's investor conference, Chief Executive Ken Chenault suggested that fourth-quarter
2005 estimates were too high and said to expect 16% year-over-year growth in marketing, in line
with the third quarter. Chenault also said to expect fourth-quarter charge-offs to be $200 million to
$275 million higher in the fourth quarter of 2005 versus the year-ago quarter due to the spike in
bankruptcies prior to the implementation of new legislation.

Napoli reduced fourth-quarter 2005 earnings-per-share estimates for American Express to 56 cents
from 68 cents. He lowered the fiscal 2006 estimate to earnings of $2.90 per share on revenue of
$3.897 billion, down from earnings of $3.02 per share on revenue of $4.011 billion. The analyst cut
American Express' price target to $58 from $60.

That sinking feeling

The world’s largest carmaker is at sea and floundering

FOR years General Motors (GM) was the undisputed titan of the world’s car industry,
effortlessly dominating everything. Now, to suppliers, employees and pensioners it
must seem less like a titan and more like the Titanic, holed below the water-line,
sinking slowly by the bow to the sound of loud shocks and bangs as bulkheads give
way, one after the other. The chief executive on the bridge, Rick Wagoner, can rush
around and bark orders, but to little effect.
On Monday November 21st, Mr Wagoner unveiled details of his plan to put GM back on
an even keel. The car giant is to shed 30,000 employees from its key North American
operations before 2008; and it will shut down 12 plants in an effort to cut production
capacity by another 1m vehicles, having already cut roughly that amount since 2002.
Most of the job cuts will have to come through voluntary departures and early
retirement to mollify the car giant’s unions, rather than through more radical surgery.
But at least GM stands to make some cost savings as it attempts to keep its finances
from sinking beyond salvageability.
At its peak in the early 1960s, GM controlled over half the American car market and set
the standards by which most of the world’s manufacturing industry was measured. But
it has been more than a generation since the firm’s dominance went unchallenged and,
despite billions of dollars invested in new factories and vehicles, it has suffered a
relentless decline in market share (see chart below). Earnings have plunged, especially
in its core North American market. The good ship GM scraped even more icebergs
lately, the most recent being an announcement that it would have to restate earnings
for 2001, due to improperly booked credits from suppliers.
Although this news is relatively minor (affecting a four-year-old financial report by only
$400m) it had the sound of another groaning bulkhead and made people nervous. After
the announcement, GM’s share price plunged, and late last week it hit an 18-year low,
though it has since recovered a bit. And for the first time since the carmaker’s last big
brush with disaster—in 1992, when the company came within 40 minutes of
bankruptcy—GM’s bonds are back in the junkyard. Analysts and observers are
muttering again about possible bankruptcy. So loud is the speculation, in fact, that Mr
Wagoner wrote to the company's 325,000 employees last week to deny that GM had
any intention of filing for Chapter 11 protection from its creditors.
Exactly how and why things have gone so wrong is a matter of debate. Certainly, the
situation was dire 13 years ago when a newly energised GM board flexed its muscle.
They turned to Jack Smith, who in turn signed on Mr Wagoner, then barely 40, as one of
his top lieutenants. The new management closed plants, cut the workforce, sold
lacklustre component operations and seemingly restored much of the company’s
former lustre. By the boom years of the mid-1990s, GM was again rolling up record
profits.
Yet, despite a few exceptional years, sales continued to decline. Critics, such as Dan
Gorrell of Strategic Visions, a Californian consulting firm, say GM concentrated more on
finance and marketing than designing and making cars. Indeed, after the company’s
annual meeting, Mr Wagoner conceded: “If we had a chance to rerun the last five
years, we probably would have done a little more thinking about making sure that each
product was distinctive and had a chance to be successful.”

GM paid a lot of attention to the development of its newest, full-sized sport-utility

vehicles (SUVs), which will arrive in the showrooms early in 2006. But even the
company’s bullish “car tsar”, the vice-chairman, Bob Lutz, admits that the potential
market for these vehicles has declined dramatically with higher oil prices.
Misreading the SUV market might be bad enough, but GM also played down the need
for a new generation of more fuel-efficient “crossover” vehicles. These are like SUVs,
but lighter. The company scored a hit with its first models, such as the Chevrolet
Equinox, but by the time the rest arrive Japanese competitors are likely to have taken
control of the segment. GM refused to believe there would be enough demand to justify
investment in petrol-electric hybrids. Yet again, it is now racing to catch up in a part of
the market where the Japanese overwhelmingly dominate.
But products are only part of the problem at GM. Mr Wagoner was able to put a positive
spin on GM’s bleak, third-quarter earnings report (losses are $3.8 billion so far this
year) by announcing that the United Auto Workers Union (UAW) would grant
unprecedented concessions, shaving $1 billion a year from the carmaker’s mounting
health-care bill. He has turned his attention to attacking so-called legacy costs. The
huge cutbacks of the 1990s saddled GM with nearly three retirees for every active
worker. The latest round of job cuts will only exacerbate this problem.
Then there is the worsening situation at Delphi. Made up of former GM parts
operations, the supplier is struggling to stay alive under Chapter 11. Its chief executive,
Steve Miller, has given warning that he may ask the bankruptcy court to overturn the
firm’s current labour contract. If that happens, Delphi’s well-paid American workers
could suddenly find themselves taking home a meagre $9 an hour. UAW leaders are
threatening to strike if Mr Miller goes ahead. A walkout could disrupt the entire motor
industry, but as Delphi’s biggest customer by far, GM would suffer the most.

Not everything has gone wrong on Mr Wagoner’s watch, of course. He has been
successful in expanding abroad. The company’s European operations are slowly
recovering and Brazil has bounced back. GM’s acquisition of South Korea’s Daewoo is
looking like a bargain and is doing exceptionally well. Then there is China, where Mr
Smith defied conventional wisdom at the time by being one of the first to open an
assembly plant. Mr Wagoner has since ramped up Chinese operations, lining up a string
of highly profitable joint-ventures and assembly operations. Ironically, it is the Buick
badge that has connected best with Chinese motorists, and soon the brand may sell
more cars in Asia than at home, where its staid image leaves many Americans cold.
Buick epitomises GM’s challenge as it seeks to improve its global operations while
reducing its dependence on America. One of Mr Wagoner’s first steps as chief executive
was to pull the plug on the ailing Oldsmobile division. He has repeatedly insisted that
he has no intention of scuttling any more of GM’s eight surviving car brands. But with
its market share only around 25%, it is becoming increasingly difficult to justify the
economics of feeding so many car divisions with truly new and exciting products.

The mystery passenger

As if Mr Wagoner did not have enough to worry about, there is Kirk Kerkorian. The
reclusive Las Vegas billionaire now owns 9.9% of GM, a stake which has so far lost him
a great deal of money, at least on paper. The octogenarian investor is “a difficult
taskmaster”, cautions Gerry Meyers, a former chief executive of American Motors and
now a professor at the University of Michigan. If things do not turn around, he expects
Mr Kerkorian “will make himself very visible”. Mr Kerkorian made that clear when he
once mounted an ultimately unsuccessful takeover bid for Chrysler. He is reportedly
angling for a seat on the GM board for one of his own lieutenants, Jerry York, a former
Chrysler executive.
Mr Wagoner has other schemes to revive GM apart from the factory cutbacks. He is
also planning to sell off a large stake in the company’s profitable finance subsidiary,
General Motors Acceptance Corp. Trying to predict his remaining options has become
something of a parlour game in Detroit circles. Some are betting that GM will end up
with no choice but to file for Chapter 11, now a popular move among American
companies saddled with burdensome debts and high labour costs. Others give warning
that such a move would simply alienate potential buyers of GM cars, making the
situation graver still. Consumers will worry about warranties and the resale value of
cars. What is clear is that GM’s options are steadily diminishing and its still sizeable
financial resources are being drained away at a frightening rate. At the current pace, it
may not have the momentum to reach a safe port.

READING

Still leaning, after all these

years
Applying the Toyota way to everything
from computers to air travel

The authors made their names in 1990 with “The Machine that Changed
the World”, arguably the best book written about the car industry. It was
a meticulous analysis of Toyota’s manufacturing system, which they
called “lean” because its core concept was that of eliminating fat and
waste, and drawing parts and materials through the process only as
needed (“just-in-time”) rather than working through piles of inventory.
Despite its focus on such down-to-earth details, it became a smash-hit
business book.
Since then Mr Jones and Mr Womack have been leaning all over the
place, founding a Lean Enterprise Academy in Wales and a Lean
Enterprise Institute in Massachusetts, and publishing a book on “Lean
Thinking”, about how all company activities could benefit from the
Toyota approach.
The focus of this book is on consumer experience and extends to service
industries such as air travel and car repair. The authors’ central
conundrum is that while companies have succeeded in giving the world
wonderful products—cars that are reliable and economical, marvellous
personal computers and other consumer electronics gadgets—buying
and dealing in these products is often a pain. Companies should pay
more attention to ensuring that their product or service is provided in a
way that better suits busy consumers.
At times the pair sound just like a couple of grumpy old men, but most
people will recognise the sorts of everyday frustrations against which
they rail. The custom-built, delivered-in-three-days computer that won’t
work with the printer; the car repairs that aren’t; the huge specialist out-
of-town retailer that does not actually have the very thing one drove all
that way to buy; the help desks and support centres that neither help
nor support, but just leave you on hold. So life’s a bitch, but what can
lean thinking do about it?
Companies should map out every step in the process of obtaining, using
and servicing their products in order to see how the value chain relates
to what is actually the customer’s experience. Thus the car-repair shops
could borrow assembly-line lessons from the lean car factory, and the
airlines could concentrate on the end-to-end customer experience of
queues, delays and more queues. Instead of hubs or 150-seat jets to
cities big enough to provide the passengers to fill them, there might be
more and more flights by tiny jets offering a simple service from a small
airport nearer the passenger’s home and destination. Indeed a couple of
companies in America are being set up to offer just such a service as
soon as a new generation of very light jet aircraft, enjoying the
economies of their larger brothers, becomes available.
But the trouble with all this emphasis on lean (be it in build-to-order cars
or computers, or local point-to-point air travel) is that it always sooner or
later bumps up against the inescapable benefits of scale. Mass
production may be evolving, but it still takes fewer planes to connect a
couple of dozen small markets if you fly passengers through a hub,
where flights can be consolidated to fill all the seats. A car paint shop
that can process 300,000 cars a year is always going to be more efficient
than a little one doing a tenth that number. Lean thinking is stimulating
and plainly rewarding, but too often it leans against the laws of
economics.

Business this week

Auto discounts
After reporting dismal sales figures for October and seeing its market
share in the United States and Europe slip even further, General
Motors began a new consumer discount plan on many of its models.
Ford, which faces similar problems, also announced a scheme. Both
carmakers (and DaimlerChrysler) offered huge discounts during the
summer that increased sales but hurt profit margins. See article
Peter Drucker, hailed as the world's most important thinker on
management and the role of corporations, died in California on
November 11th, at the age of 95. Mr Drucker, who left Austria in his
youth, was given the epithets of “guru” and “sage”, though he thought
of himself chiefly as a writer and teacher. See article
Koch Industries, a privately held conglomerate, agreed to buy
Georgia-Pacific, a paper and packaging company, for $13.2 billion
(including debt, the deal is worth $21 billion). The acquisition will create
America's biggest private company by revenues. See article
Johnson & Johnson and Guidant patched up their recent differences
and agreed to move ahead with their merger. J&J will now pay $21.5
billion for the maker of medical devices, $4 billion less than was agreed
last December. Since then, Guidant has seen a series of product recalls
and related investigations.

Hold the front page

Under pressure from unhappy shareholders, Knight Ridder confirmed it
was seeking advice on “strategic alternatives”, such as a possible sale of
the company. The publisher of 32 American city newspapers, including
the Miami Herald, is suffering, like other newspaper publishers, a
decrease in both circulation and advertising revenue. See article
Google unveiled a prototype of Google Base, its new search facility that
allows users to post their own information. Analysts viewed the move
both as a foray into the lucrative classified advertising market and as a
potential challenge to online auctioneers, such as eBay. See article
Vodafone's share price fell by almost 11% in London on November 15th
after the mobile-phone group said that fierce competition in Europe and
heavy investment in its struggling Japanese unit could hurt profit
margins over the next 18 months.
Telstra unveiled a A$10 billion ($7.3 billion) five-year strategic review
that includes up to 12,000 job cuts. Australia's largest telecoms firm has
seen revenue decline in its fixed-line services and is attempting to cut
costs ahead of the government's sale of its 52% stake.
Mixed results
The euro area's GDP grew by 0.6% in the third quarter compared with
the previous quarter. The figure was driven by a surge in German
exports, but the data revealed a patchy economic recovery in the
currency bloc. The European Commission forecast that growth would
accelerate in 2006 and 2007. But some countries' budget deficits will
stay above EU limits. See article

Seeing Europe the right way up

The euro area's economies are in better
shape than they look
GERMANS vote against economic reform; France's young unemployed
riot; and the European Central Bank (ECB) seems to be itching for an
excuse to raise interest rates and strangle the euro area's feeble
economic growth. For sceptics, nothing has changed: the single currency
zone's economies are a miserable sight and will remain so. But if they
took a careful look from another angle, they might see an altogether
happier picture.
At the very least, European economies are picking up speed. Figures
published this week showed that the euro area's GDP grew by 0.6% in
the third quarter (2.6% at an annual rate), the fastest for a year and a
half. Germany, France and Spain all managed 0.6% or better; Italy and
the Netherlands reported growth of only 0.3%.

By American standards this looks sluggish: America's GDP grew at an

annual rate of 3.8% in the same quarter. Even so, euro-area growth is
now above its supposed potential rate of around 1.8%. This is below the
American trend of perhaps 3% partly because of Europe's slower
productivity growth. The main reason, though, is that America's
population is increasing much faster than the euro zone's.
The composition of the whole zone's third-quarter growth is not yet
known, but Germany's official statisticians have ascribed almost all of
their country's GDP growth to net exports and investment. Economists at
HVB, a big German bank, reckon that private consumption probably
shrank for the third quarter running, for the first time on record.
Elsewhere, the pattern is reversed, with consumer spending contributing
far more and exports far less. The idea that growth in the euro zone
depends almost entirely on external demand, while domestic demand
stagnates, is a myth. Morgan Stanley calculates that for the zone as a
whole, net exports have contributed only 0.1% of the 1.9% average
growth in GDP since 1999.
Even in Germany there are now signs that domestic demand is stirring.
Bank lending to firms and households has started to rise after falling for
most of the past three years. The latest survey of business confidence
by Ifo, a Munich research institute, showed a strong uptick in retailing,
suggesting that consumers are opening their wallets. And throughout
the euro area, surveys of business and consumer confidence continued
to rise in October, which bodes well for the current quarter. The
Economist's most recent poll of forecasters still predicts average growth
in the zone of only 1.6% next year, but this could prove too pessimistic.
Whether the recovery lasts depends on the labour market. In Germany
intensive corporate restructuring has depressed jobs and wages for
several years. Only if more jobs are created will consumers spend more.
There are some hopeful signs. The euro area's unemployment rate has
fallen by more than expected in recent months, from 8.8% in April to
8.4% in September.
Several countries' jobless figures may be distorted by special
employment measures and changes in rules for claiming benefits, but
surveys point to an improvement in underlying conditions. This is the
result of various labour-market reforms as well as a cyclical upturn.
Though labour markets remain stiff, they are not as rigid as they were.
Indeed, the unemployment figures may understate the overall gains:
employment has risen by far more than unemployment has fallen as
reforms have dragged previously discouraged workers back into the
labour market.
Spain has enjoyed the fastest expansion in jobs, 4% a year since 2000.
And Italian employment has risen by an annual average of 1.4% in the
past six years. This partly reflects the emergence of workers from the
black economy into the official realm, but some of the increase is real,
thanks to new, more flexible types of job contract. Italy's jobless rate,
almost 12% in 1998, is now 7.7%. Germany is the only big euro-zone
country whose unemployment rate has not fallen in the past decade.
Germany's new grand coalition government has eschewed further
structural reform and is focusing instead on reducing the budget deficit.
It plans to lift the rate of value-added tax from 16% to 19%, but not until
2007 (see article). This could boost spending next year if it encourages
consumers to bring purchases forward—but clobber it when the tax
increase takes effect. Some economists also worry that the ECB will
throttle the euro area's recovery by raising interest rates too soon.
Comments after the central bank's policy meeting on November 3rd
suggest that rates could rise as early as the next one, on December 1st.
A quarter-point rise is unlikely to do much harm, however, because real
interest rates would still be negative.
Europe's surprising secret
Yes, yes, sceptics might say, but one quarter's decent growth and a few
reforms here and there don't alter the unprepossessing long-term
picture. In fact, Europe's performance has been better than the
conventional wisdom says. Although America has outpaced Europe this
year, over the past five years GDP per head, the best single measure of
economic performance, grew at an average rate of 1.4% in the euro
area, just behind America's 1.5%. Ah, but America is better at creating
jobs, isn't it? Actually, no. Employment has grown a tad faster in the euro
area than in America whether one looks at the past five years or the past
ten—a striking improvement on the decade to the mid-1990s (see
chart).

Since 1996 the proportion of the population of working age with jobs has
fallen from 73% to 71% in America; in the euro area it has risen from
59% to 65%. The fact that the euro area has achieved its growth without
enormous increases in its current-account and budget deficits might also
indicate that its record is more sustainable than America's.
This is not to say that everything is rosy in euroland. Far from it. Europe
has to cope with a shrinking workforce and an ageing population, as well
as fiercer global competition. Europe's markets will have to become
more flexible, its people will need to work for longer and its productivity
growth must improve. Yet, given that Europe's unhappy economies have
not been doing so badly compared with America's jollier one, the
rewards from further reform might be all the greater.

Nine Major Marketing Mistakes

Jack Trout, 10.24.05, 6:00 AM ET

In today's world, there's so much competition that if you make a mistake your competitors quickly
get your business. The chances of getting it back are very slim unless someone else makes a
mistake. Hoping competitors make mistakes is like running a race hoping the other racers fall down:
It just doesn't happen very often.

Here are the blunders that are the most prevalent in today's hyper-competitive world.

Me-Too

Many people believe that the basic issue in marketing is convincing prospects that you have a
better product or service. They say to themselves, "We might not be first, but we're going to be
better." That might be true, but if you're late, and you have to do battle with large, well-established
competitors, then your marketing strategy is probably faulty. Me-too just won't cut it.

What Are You Selling?

This may surprise you, but a good bit of my time over the years has been spent figuring out exactly
what it is that people are trying to sell. In other words, trying to capture the category in a simple,
understandable way. Companies, large and small, often have a very tough time describing their
product, especially if it's a new category and a new technology. Your biggest marketing successes
come with simple, but powerful explanations of what you're offering. Don't get cute or complex.

Truth Will Win Out

Not understanding that marketing is a battle of perceptions, is a simple truth that trips up thousands
of would-be entrepreneurs every year. Marketing people are preoccupied with doing research and
"getting the facts." They analyze the situation to make sure the truth is on their side. Then they sail
confidently into the marketing arena, secure in the knowledge that they have the best product and
that ultimately the best product will win.

It's an illusion. There is no objective reality. There are no facts. There are no best products. All that
exists in the world of marketing are perceptions in the minds of the customer or prospect. The
perception is the reality. Everything else is an illusion.

The Other Guy's Idea

It's bad enough to launch a me-too product, but equally problematic is a me-too idea. The reason is
that two companies cannot own the same concept in the prospect's mind. When a competitor owns
a word or position in the prospect's mind, it is futile to attempt to own the same word.

Volvo has pre-empted the concept of "safety." Many other automobile companies, including
Mercedes-Benz and General Motors (nyse: GM - news - people ) have tried to run marketing
campaigns based on safety. Yet no one except Volvo has succeeded in getting into the prospect's
mind with a safety message.

We're Very Successful

As I've written in the past, success often leads to arrogance and arrogance to failure. When people
become successful, they tend to become less objective. They often substitute their own judgment
for what the market wants.

As their successes mounted, companies like General Motors, Sears (nasdaq: SHLD - news - people
) and IBM (nyse: IBM - news - people ) became arrogant. They felt they could do anything they
wanted to in the marketplace. Success leads to trouble.

Everything For Everybody

When you try to be all things to all people, you inevitably wind up in trouble. Better advice comes
from one manager who said, "I'd rather be strong somewhere than weak everywhere." This kind of
"all things" thinking leads to what we call "line extension," or trying to use a successful brand to
mean more than it can in the mind. It's a very popular mistake.

Live By The Numbers

Big companies are in a bind. On the one hand, they have Wall Street staring at them asking, "How
much are your sales and profits going to grow next month, next quarter, next year?" On the other
hand, there are an endless number of competitors staring at them saying, "We're not going to let
you grow if we can help it."

So what happens? The CEO lies to Wall Street and then turns around to the marketing people and
tells them what is expected in terms of profit and growth. They in turn scramble back to their offices
and try to figure out how to make those unreasonable numbers. Brash predictions about earnings
growth often lead to missed targets, battered stock and even creative accounting. But worse than
that, it leads to bad decisions.

As panic sets in, what often happens is that they fall into the line extension, or the everything for
everybody trap. Rather than stay focused on being strong somewhere, to drive their numbers up
they opt for weak everywhere. Their only hope is that they will be promoted before it all hits the fan.

Not Attacking Yourself

Much has been written about the likes of Dell (nasdaq: DELL - news - people ), Xerox (nyse: XRX -
news - people ), AT&T (nyse: T - news - people ) and Kodak (nyse: EK - news - people ), and their
efforts to move from slow growth to high growth businesses. When this is exacerbated, companies
are faced with what have been called disruptive technologies. Dell facing the desktop computer
revolution. Xerox facing the surge in laser printing, and Kodak facing the digital camera.

Though difficult, a leader has no choice in this matter. They must find a way to move to that better
idea or technology, even if it threatens their base business. If they don't, their future will be in
question. Especially as that technology is improved and picks up momentum. The trick is how to do
it.

Not Being In Charge

When the CEO or very high level management doesn't take charge of strategy, things rarely go well.
In today's rough and tumble world, marketing strategy is too important to be left to middle level
management.

With more than 40 years of experience in advertising and marketing, Jack Trout is the author of
many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The
22 Immutable Laws of Marketing, Differentiate or Die, Big Brands, Big Trouble, A Genie's Wisdom
and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has
consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and
others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of
"Positioning" and other important concepts in marketing strategy

Putin Says Pacific Oil Link Is Opportunity for Japan

Nov. 21 (Bloomberg) -- Russian President Vladimir Putin said a planned crude oil pipeline to the Pacific
``opens large possibilities'' for Japan to help develop fields in the Russian Far East and Siberia.
The link will strengthen energy security in Asia and provide fresh stimulus to Russia's economy, Putin
told a Russian and Japanese economic forum today in Tokyo. In a meeting with Japanese Prime
Minister Junichiro Koizumi, the leaders reached agreement on long-term cooperation on energy,
according to a statement from Japan's Ministry of Foreign Affairs.

Putin wants Japan, the world's second-largest economy, to pump more money into the former Soviet
state's economy, where it trails European nations and the U.S. Japan, Asia's second- largest consumer
of oil, wants access to Russian oil to reduce its dependence on supplies from the Middle East.

``We're interested in more active inclusion of Japanese'' companies in developing natural resources,
Putin said at the two-day forum. ``Russia is ready to boost participation in such priority areas as the
fuel and energy complex.''

No Peace Treaty

A territorial dispute over four islands north of Japan has blocked the signing of a peace treaty between
the two countries 60 years after the end of World War II and has hindered Japanese investment in
Russia. Russia took possession of the islands, known by the Russians as part of the Kurils and in Japan
as the Northern Territories, at the end of the war. In September, Putin said Russia won't give up the
islands.

The absence of a peace treaty ``hampers, or in any case, it doesn't help'' economic ties, Putin said at
a joint press conference with Koizumi. ``It's important to find a solution.''

Japan, once a major trading partner of the Soviet Union, has fallen behind Germany, the U.K. and the
U.S. in developing business in Russia.

Japan's current investment in Russia doesn't match its possibilities, Putin said. The trade ``dynamic
isn't bad,'' he said, and may exceed $10 billion this year.

Mainland Russia

Japan had invested $727 million in mainland Russia through 2004, accounting for less than 1 percent
of the nation's total foreign investment, according to material distributed by the Kremlin ahead of
Putin's visit. That excludes Japanese investments in oil and gas projects on Russia's Sakhalin islands.

The Russian leader has said he would seek stronger economic and security ties with Japan as a path
to resolving the islands dispute. Japan has said joint development of oilfields in Russia could help
resolve the islands dispute. Russia now sells most of its oil in Europe, and is negotiating the route for
a pipeline to export Siberian oil.

OAO Transneft, Russia's state-controlled oil pipeline monopoly, plans to build the first leg of a pipeline
to Skovorodino, Russia, near the Chinese border. From there, oil would be shipped by rail to China or
the Pacific coast.

China, the world's second-biggest oil consumer, is lobbying Russia to extend the pipeline to Daqing in
China. Japan wants Russia to extend the pipeline to Perevoznaya on the Pacific coast, taking its total
length to 4,100 kilometers (2,563 miles).

Pipeline

Russia and Japan consider that the fast development in full of the pipeline along the route from Siberia
to Skovorodino and Perevoznaya answers the strategic interests of both sides, according to a
statement from the Russian government today.

After the completion of the first stage of construction, a significant amount of oil and/or oil products
will be shipped from Perevoznaya, the Russian government said. Russia will seek in the shortest time
possible to begin the realization of the second stage. The Japanese side welcomes this, according to
the statement.

Oil exports to the Pacific would rise to as much as 15 million tons a year if the pipeline is extended to
Perevoznaya, Hirofumi Katase, director of the petroleum and natural gas resource division in the trade
ministry, told reporters in Tokyo today.

By early 2006, the two nations aim to share the same understanding on the terms for a potential
agreement on the second phase of the project, Japan's foreign ministry said today in a separate
statement.

Russian Tax Cuts

Russia will pursue tax cuts and an improved tax structure for oil and gas that will provide selective
incentives for fields that are considered difficult to develop, Putin said today at the forum, attended by
about 200 executives and officials.

Russia's economy is ``stable in the medium- and long-term, creating a favorable investment climate
for domestic and foreign investors,'' Putin said.

Russia's tax structure has hindered Japanese investment, said Kunio Anzai, chairman of Tokyo Gas
Co., Japan's biggest natural gas distributor.

``The tax regime instability could lead some Japanese companies to take a passive position on
investment in Russia,'' Anzai said.

Japan hasn't suggested a specific project the two countries could work on toward solving the islands
issue, Japan's Foreign Minister Taro Aso said in an interview today in Tokyo.

`One Step Forward'

``One step forward may be to take a new approach with the suggestion of a project, in which we can
see tangible results in the improvement of the islanders' lives,'' Aso said. ``If such a project takes
place, mutual trust could grow between the two countries as something said becomes a reality. But
this isn't something that has been officially suggested'' to Russia, Aso said.

Car giant GM to cut 30,000 staff

GM has been hit by falling sales

US carmaker General Motors is to cut 30,000 jobs in North America under a

restructuring drive that aims to revive the company.

The automotive group, which is struggling to stem huge losses, will also close down
nine assembly, stamping and Powertrain engine-maker facilities.

The move along with other cutbacks should help reduce costs by $7bn a year by 2006 -
$1bn more than first planned.

GM has suffered falling sales, a drop in market share and high labour costs.

Hard times
The news comes just days after the company's shares hit 18-year lows amid fears of a
possible strike at its bankrupt parts supplier Delphi, which could shut down some GM
and Delphi sites.

Earlier this year, the firm had warned it would cut 25,000 jobs by 2008 mainly through
attrition or natural wastage.

The latest announcement represents an increase of 5,000 on that amount.

GM plants earmarked for closure under the plan are in Oklahoma, Michigan, Tennessee,
Georgia and Ontario in Canada while production will be cut back in Ohio and at GM's
second Canadian plant.

'Difficult decision'

"This has been a difficult period for all of us at GM but I'm confident that by working
together we can and will get through this," said Rick Wagoner, GM's chief executive.

"The decisions we are announcing today were very difficult to reach because of their
impact on our employees and the communities where we live and work.

"But these actions are necessary for GM to get its costs in line with our major global
competitors. In short, they are an essential part of our plan to return our North
American operations to profitability as soon as possible," he added.

The embattled carmaker has been hit by surging labour and raw materials costs as well
as rising competition from foreign rivals, a slump in demand for its sports utility
vehicles (SUVs) and overcapacity at its plants.

In October, the firm agreed a deal with unions that should help cut its annual
healthcare costs by $3bn.

To add to its woes, the firm warned earlier this month that it will have to restate its
2001 accounts after they were overstated by about $300m, while its accounts are also
being investigated by the US Securities and Exchange Commission.
Shares in GM shares were trading up 0.9% at $24.47 in Monday morning trade.

Cadbury sells European drinks arm

Confectionery giant Cadbury Schweppes has agreed to sell its European soft
drinks business for 1.85bn euros ($2.2bn; £1.3bn).

It is being bought by private equity firms Blackstone and Lion Capital.

Cadbury's European Beverages brands include Orangina, Oasis, Schweppes, La Casera

and TriNa.

For the deal to be completed, UK-based Cadbury will have to consult with employee
representatives in France, Germany and Belgium.

It first announced its intention to sell off its European drinks arm back in September.
'Refocus'

The price being paid by Blackstone and Lion Capital is towards the upper end of analyst
predictions.

Cadbury's European Beverages arm employs 3,000 people and has bottling plants in
Germany, Spain, Portugal and Belgium.

Around 85% of its sales are in France, Spain and Germany, with a small amount of
business in the UK.

Cadbury's sold the majority of its drinks business in the UK to Coca-Cola in 1999.

"I'm delighted that within such a short time we have achieved a firm offer for Europe
Beverages at a price which reflects the quality of its brands and the strength of its
management team." said Cadbury Schweppes chief executive Todd Stitzer.

"Following completion of a deal, we will be able to focus on our faster growing

confectionery and other beverage businesses."

Takeover target?

Last month Cadbury warned that group-wide it was unlikely to meet its profit margin
forecasts for this year.

Analysts broadly welcomed the sale, but some said a streamlined Cadbury's, which
keeps its Dr Pepper and 7UP brands, may now find itself an attractive takeover target
for such US firms as Kraft Foods or Hershey.
"This is a good price, it is hard to fault the logic of this perfectly sensible deal," said analyst Richard
Workman at Oriel Securities

Coke on the Rocks?

By Emil Petrie
BBC Money Programme

Coca-Cola, the world's biggest brand, is in trouble.

Mr Sexton has taken action to ban Coke at school

Its share price has halved over the last seven years as the company struggles to deal
with the growing trend for new, healthier drinks.
The company is under attack amid concerns about obesity and the effect fizzy soft
drinks are having on our health.

Mark Sexton, deputy head teacher at St Ilan School in Caerphilly, is someone Coca Cola
should be worried about.

He believes his students were downing far too much Coke for their own good.

"I'd say the pupils were drinking, on average, about three cans a days," he says.

"You'd be surprised at the number of pupils who were having cans at 7.30 or 8 o'clock
in the morning."

Poor concentration

That level of consumption could amount to more than one and a half times a child's
recommended daily sugar intake.

Not surprisingly, Mr Sexton thinks it's bad for their health and bad for their education.

"These drinks do induce some initial high levels of energy, which is sometimes
accompanied by hyper activity or poor behaviour.

"Then that's followed by a lull in energy levels, sometimes accompanied by poor

concentration in the afternoons".

Bans are spreading

Mr Sexton decided to act and joined the growing number of schools across Britain that
have removed Coca Cola's fizzy drinks from their vending machines.

The Torrente family from California would like to cut back on Coke

Now, the politicians are putting the boot in too.

Education Secretary Ruth Kelly and Scottish First Minister Jack McConnell have
announced plans for a country wide ban on school vending machines selling fizzy
drinks.

It's not just in Britain that Coca Cola is being kicked out of schools.

In Coke's own backyard, it's a similar story.

The Terminator - Arnold Schwarzenegger, now Governor of California - is also taking on
The Coca-Cola Company.

He's recently passed legislation to ban the sale of all carbonated soft drinks in schools
across California.

That's been welcomed by parents like Jeannie Torrente from Sacramento, who feels her
children should be encouraged to cut down on fizzy drinks.

"I'm really pleased; I think it's a great thing," she says.

"The world has been brought up on soda because we live in this fast paced world and I
think we all drink way too much soda."

Food and beverage company

That means the pressure is increasing on Coke to provide healthier alternatives to their
carbonated drinks products, if they want to continue selling in schools.

Analysts say Coke needs to move beyond its core product

Unlike their arch rival Pepsi, Coca-Cola has been slow in diversifying into healthier
products.

Now they are playing catch up, trying to get a firm foothold in the booming juice
market.

This summer they launched Minute Maid, which will compete directly with Pepsi's
market leading Tropicana.

"Pepsi has a better business model," according to Tom Pirko, drinks industry consultant
at BevMark.

"Pepsi has been more successful because it is a food and beverage company. Coca Cola
will eventually have to go there."

Fighting for its soul

Coke's sales are under threat in British universities too.

Students are threatening to boycott Coca-Cola because of allegations surrounding

some of their business operations in the third world.
 Falling foul of ethical principles is all too easy for food companies vying for consumer
visibility

Coke denies the allegations, but whatever they say, the adverse publicity and potential
loss of the student market is bad news for the company.

If that's not enough to take even more fizz out of Coke's sales, increasing concern
about American foreign policy is putting some consumers off buying US goods.

Instead they are opting for non-American drinks products.

Confronted with all these challenges, Coke is going through a high stakes game.

If they get it wrong, they risk losing out to their arch rival Pepsi, and becoming a "has-
been" in the booming beverage market.

Over the last few months they have met with some success, enjoying higher sales in
developing markets, but not enough to bring the share price up to even half what it
was in 1998.
Says Mr Pirko: "this is a company fighting for its soul".

VOC

All regulators approve AT&T deal

US regulators have cleared the planned acquisition by phone company SBC
Communications of its former parent AT&T for about $16bn (£9.3bn).

The last regulator to approve the merger was the California Public Utility Commission.

The deal can now be completed, 10 months after it was first announced.

The new company said it "will adopt AT&T as its name", as it is "inextricably linked to
the birth and growth of the communications industry".

Meaningful name

Support for the decision to ditch the SBC name in favour of The American Telephone
and Telegraph Corporation - AT&T for short - comes from a string of analysts quoted on
the SBC website.

"AT&T is a much stronger brand domestically and internationally," according to

Forrester Research analyst Lisa Pierce.

"AT&T is one of those rare companies where the letters actually mean something and
have some equity," said Denis Riney of marketing strategy consultants New York's
Prophet.
Two US federal agencies, 36 states and 14 international bodies have previously
approved the merger.
Saudi WTO membership approved
The World Trade Organization (WTO) has approved Saudi Arabia's application
for membership after 12 years of talks.

The world's largest oil exporter will become the 149th member of the WTO in 30 days'
time.

The country will need to adopt the entire body of WTO legislation, a process that
involves liberalisation of currently restricted sectors.

Saudi Arabia must open its long protected economy to the outside world, including
fellow WTO member Israel.
The accession will enhance the business environment in Saudi Arabia by adding
more transparency and predictability

Saudi Arabia's participation in the Arab League boycott of Israel will thus need to be
reviewed.

Some elements of the country's Islamic religious establishment have expressed

concern about the WTO membership.

But Saudi Arabia's commerce and industry minister Hashim Yamani said: "This is a high
point in the programme of economic and structural reform that Saudi Arabia undertook.

"The accession will further integrate Saudi Arabia's economy into the world economy. It
will also deepen the universality of the multilateral trading system."

"One more heavyweight around the table is good news," agreed WTO chief Pascal
Lamy.

"It's been a long process, and I firmly believe that it's good for Saudi Arabia, it's good
for the trading partners of Saudi Arabia, and it's good for the organisation."

Economic growth

Saudi Arabia's accession to the WTO should come in time for the country's participation
in December's ministerial meeting in Hong Kong, starting on 13 December.
The World Trade Organisation (WTO) is the judge and jury of global trade
disputes as well as the forum for negotiating trade deals

US and European Union trade representatives have warned that a deal will almost
certainly not be reached in Hong Kong after preliminary talks this week failed to make
any headway.

Saudi's stock market has risen steadily since entry negotiations ended successfully on
28 October, with investors expressing high hopes about the country's economic future
due to the benefits it should derive from WTO membership.
"The accession will enhance the business environment in Saudi Arabia by adding more
transparency and predictability," said Mr Yamani.
"This we expect to lead to more investment and job creation."
VOCABULARY

EU meets again as WTO talks loom

European Union trade ministers are due to meet on Monday ahead of a crucial
round of World Trade Organization (WTO) talks in Hong Kong next month.

The battle over cutting agricultural subsidies is threatening to derail the talks which
begin on 13 December.

The EU's latest offer to cut farm tariffs has been criticised by trade partners for not
going far enough.

An early deal to open up global trade barriers and help the world's poorest countries
now looks in jeopardy.

EU Trade Commissioner Peter Mandelson has stressed that the EU will stick to its
current offer on cuts to farm import tariffs and subsidies, while calling for moves by
others on manufactured goods and services.

Making it fair

But other countries want the EU to go further than its offer of a 46% cut in average
tariffs.

Mr Mandelson has already warned that a final deal might not be possible before the
end of the year after talks in London and Geneva earlier this month broke down.

World leaders are seeking a breakthrough in the World Trade Organization's (WTO) so-
called Doha round of talks.

These began in 2001 with the aim of working towards a system of trade rules that are
fairer to developing countries.

The final trade treaty, when completed, will be binding for all 148 WTO members, so
getting it right is crucial for all involved.

Previous trade meetings in Seattle and Cancun have been hit by violent clashes
between authorities and anti-globalisation protesters.

Late last week, thousands of protesters clashed with police at a summit of Pacific Rim
leaders in South Korea.

At the summit there were fresh calls for Europe to lift obstacles to global trade at talks
next month.
Participants identified Europe as the main obstacle though they avoided mentioning it
by name in their declaration.

TRENDS
Libyan entrepreneurs enjoy boom
Walking down Tripoli's long, bustling Gergaresh road, it is evident that since
Libya began efforts to open up its markets three years ago, this commercial
district has more private businesses with a wider selection of goods.

Traders point to the recent reform of custom tariffs as the most encouraging move so
far.

"It's a positive factor in the economy," says Husni Beigh.

His family-run trading and distribution company has seen a boost in trade since all
import duties were replaced with a 4% customs handling fee three months ago.

"It strengthened the purchasing power of the Libyan consumer and stabilised prices,"
he says.

The shrinking of the black market and transparency are other positive spin-offs of tariff
change.

"There are no more fakes coming in from right and left and... above all, it has created
less room for bribery because this unified regime does not allow people to play with
their invoices.

"The costs are now calculable and we know how much we owe the government," he
says.

Tomato paste anger

But the new customs duty has had both positive and negative effects on consumer
goods.

Prices of imports like juice, detergent and vehicles have gone down dramatically as
tariffs of up to 150% have been slashed to 4%.

However, dairy products, meat and raw materials, which used to be tariff free, are now
subject to the handling fee and their prices have gone up.

"Some prices have become less, but I tell you it there is a problem for some things,
especially with refrigerators and washing machines, the prices have become a little
more," a supermarket shopper says.

There is a feeling that the price cuts are benefiting the more well-off consumers, with
lower-income families begrudging paying more for food products - particularly for the
hugely popular canned tomato paste.

Trading hub

Scooter seller Salem Al-Gamoudi sees the tariff cuts on luxury goods as a positive
move, with his sales up already by more than 45%.

"We hope this will give a good encouragement to middle-class people who need
scooters to go out and buy them," he says.
Libyan Prime Minister Shukri Ghanem has said these economic reforms are positive
steps towards turning Libya into a regional trading hub like Dubai or Hong Kong.

But businessman Mr Beigh has mixed views on this and says other reforms like
liberalising the state-owned banking system is needed first.

"The potential is great but the chances of really becoming a hub are still quite remote...
The banks at present are not very helpful to the local businesses."

Businessmen also say state wages need to be increased to reflect the general rise in
the cost of living.
If these problems are not tackled in the long-run, it may stall the economic boom Tripoli's business
entrepreneurs are enjoying.

Boeing inks China and Dubai deals

The Emirates deal got the Dubai Air Show off to a flying start

Boeing has signed two massive deals to supply aircraft to Chinese firms and
to Dubai's Emirates Airlines.

China is buying seventy Boeing 737 aircraft - a $4bn (£2.32bn) deal that is said to be
the largest in Chinese aviation history.

And, as the Dubai Air Show opened on Sunday, Emirates ordered forty-two 777 jets in a
deal worth $9.7bn (£5.64bn).

The deal marks a major boost for Boeing in the Middle East, where it is competing
fiercely with Airbus.

Boeing's arch-rival responded with the signing of a $2.9bn contract with Kuwaiti leasing
firm Alafco for 12 A350 aircraft.

Kuwaiti no-frills carrier Jazeera Airways also announced it had signed up to buy six
Airbus A320s.

Booming market

Airbus and Boeing have been battling it out to win orders in the Middle East, a fast-
growing aviation market relatively unchallenged by rocketing fuel prices and terror
threats.
Airline Emirates had already purchased 45 Airbus superjumbo A380 aircraft - the single
largest customer for the new jet, which put in an appearance at the air show on
Saturday.

The airline hopes to make the Gulf a major regional transport hub as it positions itself
as a leading carrier on routes between Europe and Asia.

China's deal with Boeing was hailed as a promising sign for future co-operation
between China and the US by China's official news agency Xinhua.

The agreement was signed as President George W Bush visited Beijing.

China is forecast to need more than 3,000 new aircraft over the next 20 years.

Earlier this year, Boeing announced it was selling 60 of its 787 "Dreamliner" jets to
China for $7.2bn.

At the moment Boeing planes make up two-thirds of the country's present fleet, while
rival Airbus holds a 28% share.
China is expected to become the world's second-biggest aviation market over the next 20 years.

READING
Could you feel sorry for an ad man?
By Brendan O'Neill

As Hollywood writers and actors call for a crackdown on "stealth advertising"

in shows, the practice could soon be taking off in Britain. But with traditional
ad revenues in decline, what is the poor advertising executive to do?

Advertisers have always had a bit of a bad rap. Forty years ago Mick Jagger moaned
about them in the Rolling Stones' Satisfaction, taking fire at the men on TV who tell me
"how white my shirts can be". Corporate-bashing stand-up Bill Hicks said advertisers
were even lower than lawyers... "evil scumbags", no less. Recently, the government
dropped a big, fat hint that ad folk are partly responsible for obesity among the nation's
youth, and called on the trade to stop exploiting children's "credulity".

Now, advertising execs are under fire for "product placement" - the practice of
surreptitiously inserting a brand into the storyline of a film or TV show. Product
placement is big business, especially in the US. From big box office hits such as the last
James Bond effort Die Another Day - which promoted everything from BMW motorbikes
to Omega watches - to TV favourites such as Desperate Housewives - which recently
accepted cold hard cash to insert a Buick car into a storyline - products seem to be
popping up everywhere. One US reality show - The Contender - had a whopping 7,500
instances of product placement. Last week Hollywood actors' and writers' unions
banded together to protest against these "diabolical advertising fiends" who put
pressure on TV writers and producers to hawk their wares. "They'll stop at nothing to
insert their brand names into every TV plotline," said a spokesman for the Writers'
Guild of America. The WGA complains its members now have to spend as much time
"figuring out how we're going to embed that can of soda into the storyline" as they do
being properly creative. Product placement threatens to turn "our favourite TV shows
into cheesy infomercials", they argue. Paid product placement is currently outlawed on
British TV, though the broadcasting watchdog is weighing up the possibility of relaxing
the rules. It is severely restricted in other European states.

What's an ad man to do? If he makes old-fashioned ads that say "Buy this!" he's
accused of being an "evil scumbag" - and if he inserts products into a TV show he's a
"diabolical fiend".

Why do so many people seem so down on advertising? And if old-style ads continue to
lose their impact and new forms of product placement continue to be slated, will there
come a time when advertisers find it virtually impossible - or at least very difficult - to
promote their clients' stuff? Benjamin Webb, creative director of Intelligent PR, a media
relations company that represents clients from the fashion, art and consumer sectors,
can't see what all the product placement fuss is about. He says the practice is as "old
as cinema itself". "In fact, it can be traced beyond cinema to Victorian music halls and
vaudeville, where the stars of the age would wear items on stage that they would
subsequently endorse in advertisements. "It's just that nowadays, product placement
has increased in frequency, and is more sophisticated in application." Mr Webb recently
brokered a deal for a client's rugs to feature in the new Julian Fellowes film, Piccadilly
Jim. Context is all, he says. Get that right and there shouldn't be a problem.

"Complaints might be justified if the product placement was genuinely detracting from
the screenplay - if, for example, Elizabeth Bennett used the latest Nokia to call Mr
Darcy. "But as product placement tends to feature in and fund the most mainstream of
productions, it also tends to be self-regulating - in that it is only of value to the brand if
it appears in films which cater for the right market and if the brand is relatively
inconspicuous." Steve Read, managing director of 1st Place, which pro-actively
promotes various clients' brands to the UK TV and film industries, agrees.

"The key to the whole thing is context. "The problem with PP in the US is that it is
unregulated and it's eating up TV. But PP in the right context enhances a production -
because the programming becomes more realistic, with real products, and a company
gains because their products are shown in a positive light." Kalle Lasn, founder and
editor-in-chief of the magazine Adbusters, based in Vancouver, Canada, but with a
global readership, has a different take. Adbusters is anti-capitalist, environmentalist
and believes that commercial forces are running rampant on the High Street, on TV and
"just about everywhere else these days". Lasn supports the screen actors' and writers'
complaints about product placement. But, he says, given the omnipresence of
advertising forces today, their protest is "a mere fart in the ocean, if you will excuse the
expression". "The average North American brain is bombarded with 3,000 commercial
messages a day", he says. "And now we have messages implanted in our favourite TV
programmes too." Lasn thinks product placement is even more offensive than
traditional in-your-face advertising, because it is "clandestine". "Product placement is
now worked in at the scriptwriting stage. That makes it an even more invasive form of
advertising because it gets right into the story narrative. "That takes us into scary
times. We hardly ever have free time from corporation's messages." But Benjamin
Webb thinks there is something missing from this equation, and from much of the
criticism of product placement: the small fact that consumers can make up their own
minds. "The fundamental truth is that there exists free will on the part of people when
it comes to purchases", he says. "Product placement is not 'subliminal'. When people
decide to buy a product then it is due to a combination of factors, rather than one
fleeting appearance onscreen."
Perhaps it's time we stopped viewing advertisers as "evil scumbags" or "diabolical
fiends", and recognise that they're just doing a job - and that we, in our buying habits,
have the final say over whether or not they did a good job.

Wrap: Russia, Japan sign WTO,

energy, anti-terrorism documents
TOKYO, November 21 (RIA Novosti) - Russia and Japan signed a set of 18 documents following talks between
the Russian president and Japanese prime minister in Tokyo Monday.

The documents cover a wide range of issues, including cooperation on anti-terrorism efforts, energy, tourism
and law and order.

Vladimir Putin and Junichiro Koizumi signed a protocol concluding bilateral negotiations on Russia's accession
to the WTO. Russia still has to conclude bilateral talks on the WTO accession with seven countries, including
the United States, Canada, Switzerland and Australia.

The two leaders also signed an action plan on cooperation in the fight against terrorism.

"The sides deny any attempts to associate terrorism with any religion, nationality, race or culture and stress
the necessity for dialog and understanding between cultures and civilizations," the document said.

Russia and Japan have agreed to cooperate in the prevention of terrorist acts, to continue information sharing
on terrorist threats and to develop bilateral cooperation against terrorist financing, terrorism-related crimes
and on the extradition of those involved in terrorist activities.

Putin and Koizumi also signed a memorandum on measures to alleviate the impact of large-scale natural
disasters. Under the document, Russia and Japan would exchange information and experience in predicting
and dealing with the effects of large-scale disasters, including an early warning system for earthquakes and
tidal waves.

Both countries pledged to promote the creation of a global warning system, with joint access to information on
natural disasters in the Asia-Pacific region and other countries.

Russia and Japan signed cooperation agreements on the exploration and development of oil, natural gas and
coal deposits and their transportation and processing systems.

"The sides will consider attracting Japanese companies to participate in developing oil resources in Russia
together with Russian companies," the documents said.
Russia and Japan intend to ensure conditions to successfully implement the Sakhalin I and Sakhalin II
projects, as well as corresponding production sharing agreements.

"Particularly, liquefied natural gas supplies to Japan will begin under the Sakhalin II project, and by 2008, the
supplies will amount to one third of overall gas production," Putin said.

Under the framework agreement on cooperation in the natural gas sector, Russian energy giant Gazprom and
Japan's Agency for Natural Resources and Energy are expected to set up a committee to coordinate activities.
The agreement stipulates that the parties should look into the possibility of opening natural gas processing
and gas chemical facilities and launching the deliveries of Russian natural gas, oil and derivatives, including
GTL products, to Japan.

"The parties are studying the possibility of opening these facilities, which would use Japanese technology and
investment to be ensured by the agency," Gazprom said.

Russia and Japan also signed an inter-governmental memorandum on easing visa regulations. The
memorandum proposes measures to simplify the visa regime for businessmen providing multi-entry visas valid
up to three years, to ease visa regulations for tourists and journalists and to issue visas based on direct
applications by host organizations bypassing the requirement for official visa invitations. The countries may
also relax the procedures for applicants taking part in bilateral exchanges through educational, scientific,
cultural, youth and sports organizations.

Putin also said Russia and Japan were prepared to continue their dialog toward concluding a peace treaty that
would put a formal end to World War II. He said the process was "unlikely to be easy," but noted the
countries were ready to make compromises. Koizumi said Russia and Japan would work to end their
differences.

The treaty has not been signed because of a dispute centering around four of the Kuril Islands off Russia's far-
eastern coast. Relations between the two countries have been strained in recent years due to the argument
over the issue, as Japan claims sovereignty over the four islands, which became part of the Soviet Union after
World War II. The issue remains unresolved and has prevented the signing of a peace treaty to formally end
the state of war between the two countries.

Rival Ad Executives Are Said to

Join in an Effort to Buy Aegis
LONDON, Nov. 20 - The fight for a British advertising company, the Aegis
Group, has brought about an unlikely partnership.
The French investor Vincent Bolloré has teamed up with Martin Sorrell, the chief
executive of the WPP Group, and the private equity group Hellman & Friedman
to bid for Aegis, an executive involved in the negotiations said yesterday. Until
now, Mr. Bolloré and Sir Martin had been rivals for Aegis.
The consortium plans to take control of different parts of Aegis if the offer is
successful. WPP Group plans to offer £350 million ($600 million) in cash for
Aegis's market research group, Synovate, said the executive, who spoke on
condition of anonymity.
Mr. Bolloré, who already owns 25 percent of Aegis, would take control of the
remainder of the company, with a cash offer of 143 pence a share that values it
at about £1.6 billion ($2.75 billion), the executive said.
WPP would retain a minority interest in Aegis's media planning and buying
units, while Hellman & Friedman would provide equity and take a stake in the
company, the executive said.
A Hellman & Friedman spokesman had no comment. Neither a spokesman for
Mr. Bolloré nor a spokeswoman for WPP could be reached yesterday.
Aegis is one of the world's few remaining independent advertising firms, and its
media-buying business, Carat, is seen as particularly attractive because of its
strong presence in Europe.
WPP and Hellman & Friedman have been mulling a bid for Aegis in recent
weeks, at the same time that Mr. Bolloré has been rapidly increasing his stake
in the company in a possible bid for control.
If WPP attempted to buy Aegis alone, it might have trouble closing the deal
because industry regulators could rule that it would control too much of the
advertising business in some markets, analysts say.
Mr. Bolloré is now Aegis's largest shareholder. He and Sir Martin appeared to be
at odds as recently as last Thursday. Then Sir Martin publicly criticized Havas, a
rival advertising company where Mr. Bolloré serves as chairman, saying that
the company had taken on a worrisome level of financial risk in recent weeks.
Under British takeover rules, WPP faces a deadline of Friday to make an offer
for Aegis. Mr. Bolloré is trying to persuade the Aegis board to extend that
deadline so he can put together the consortium bid, the executive involved in
the talks said.
Despite the deadline, some analysts predicted it might be several months
before Aegis's fate was decided.

China trade surplus at new record

China's trade surplus jumped to a record $12bn (£7bn) in October, lifted by
Western retailers stocking up on products for Christmas trading.

The higher than expected surplus, the difference between what China exports and
imports, was sharply higher than a year ago, when it was the $7.1bn.

China's total surplus for the first 10 months of 2005 stands at $80.4bn compared with
$32bn in 2004 as a whole.

The US is now likely to repeat its claim that the yuan is undervalued.

Currency flexibility
Beijing kept the yuan tied to a fixed level against the dollar before allowing a limited
float in July.

Although China did increase the value of the yuan by 2.1% in July, Washington
maintains that it remains undervalued and thus gives Chinese exports an unfair
advantage.

Earlier this week, President George W Bush reiterated a long-standing request from the
US for Beijing to allow the yuan to float freely.

Ahead of his visit to Beijing at the end of next week, President Bush called for China to
introduce more currency flexibility to help cut the "bothersome" US deficit with China.

The US accounts for approximately one quarter of China's trade surplus.

China has long maintained that its eventual goal is currency liberalisation, but that this
would only take place when the time was right so as not to destabilise its fast-paced,
export-centred economy.

"How Chinese exports perform is largely driven by external demand rather than the
exchange rate," said Hong Kong-based HSBC economist Qu Hongbin.

"But if you have a big trade surplus it will give Western politicians an excuse or tool for
them to put pressure on the currency."

Global trade deal hopes dwindle

Hopes of a global trade deal are under threat after ministers failed to iron out
key differences ahead of a crucial World Trade Organization (WTO) meeting.

Talks between WTO officials in London and Geneva have ended in stalemate and now
December's talks on cutting barriers may have to be scaled back.

US trade chief Rob Portman expressed pessimism ahead of the Hong Kong talks.

"I'm sorry to report we have not been able to make the progress I would have liked to
have made," Mr Portman said.

"We've been able to bridge some differences but we have not been able to come up
with the formulas and modalities for the Hong Kong meeting."

His sentiment were echoed by EU Trade Commissioner Peter Mandelson who said the
talks had succeeded "not in narrowing differences but in defining them".

"The gap is significant."

Sticking points
WTO ministers have now downgraded their expectations of securing a major
breakthrough at the WTO summit in Hong Kong starting on 13 December.

If there is not a good deal on the table for developing countries then it is better for there to be no
deal at all

Peter Hardstaff
World Development Movement

They had hoped to approve a framework accord to reduce trade barriers, as demanded
in the Doha round of talks.

Now they predict that another conference would be called by March to make up lost
ground.

"This round does extend through 2006," said US Agriculture Secretary Mike Johanns.

"It would be a grave mistake to declare this round at an end at the Hong Kong
meeting," Mr Johanns said.

However, some progress was made this week when the US and China agreed a deal on
textile imports.

The deal follows months of wrangling over the soaring level of Chinese clothing imports
into the US. Earlier in the year, the EU and China agreed limits on textiles imports.

Building bridges

The international community had aimed to broker a free trade deal by the start of 2006
but reform of farm subsidies remains a major sticking point.

Developing countries such as Brazil and India argue that farm subsidies in wealthier
nations - the US and the EU in particular - depress global farm prices and prevent
farmers in poorer nations from prospering.

Poorer nations have dismissed trade offers from the US and EU as being insufficient,
with the EU coming in for particular criticism.

"As far as the European Union is concerned, I feel that we have done everything we
could reasonably be expected to do in agriculture to build bridges," said Peter
Mandleson.

Brazil has resisted stepping up talks on trade in products and services until the farm
question is settled.

"If there is not a good deal on the table for developing countries then it is better for
there to be no deal at all," said Peter Hardstaff of the World Development Movement.

US and China sign textiles deal

The US and China have signed a deal resolving their long-running trade
dispute over Chinese textile exports.

The US trade representative, Rob Portman, said the agreement was fair to both sides.
Chinese Commerce Minister Bo Xilai said China had hoped for more.

It follows a similar deal China signed earlier this year with Europe.

The dispute started in January when Chinese exports surged following the end of a
long-running global deal that set strict quotas on textile exports.

Good faith

Under the new agreement, exports of most Chinese clothing and textiles goods to the
US will be allowed to rise between 8% and 10% in 2006, by 12.5% in 2007, and by 15%
to 16% in 2008.

These are an increase on the temporary 7.5% limit the US imposed on China earlier this
year under World Trade Organisation safeguard rules to protect domestic industries.

Mr Portman said the deal, which followed talks over five months, had been achieved
through hard work and good faith.

"I believe the textile agreement shows our ability to resolve tough trade disputes in a
manner that benefits both countries," he added.

While Mr Bo initially called the deal a "win-win" situation, he then appeared to add that
he did not think the US had conceded enough.

China had initially sought for the limits to finish at the end of 2007 rather than the
agreed 2008.

'Far cry'

"I know that Mr Portman has shown some flexibility at the end of the day, but I don't
think that's enough," said Mr Bo.

"That's still a far cry from our original expectations."

TEXTILE DEAL: KEY ASPECTS

Lasting from 2006 to 2008
Quotas applying to 34 products such as shirts and bras
Exports to grow by a maximum of 10% in 2006, 12.5% in 2007 and 16% in 2008
The US to use restraint in limiting products not covered
Mechanisms in place to help China manage exports

The agreement comes ahead of a scheduled visit to Beijing by President George W

Bush later this month.
Chinese clothing and textile exports to the US rose by more than 50% in the first eight
months of this year to almost $17.7bn (£10bn), following the expiry of the Multi-Fibre
Agreement.

'Victory'

The agreement was hailed as a "victory" by US textile manufacturers which have

accused China of predatory pricing and other trade distorting practices.

The US industry will know with certainty that China will not be able to flood the US market

Jim Chesnutt, National Council of Textile Organisations

"This agreement is goods news for the US textile industry," said Jim Chesnutt, chairman
of the National Council of Textile Organisations.

"The US industry will know with certainty that China will not be able to flood the US
market during the next three years."

But the industry also called on the WTO to prevent China wiping out the rest of the
world's fabric and clothes production in a few years.

Industry leaders said the booming Asian country's "unfair trade practices" had not
completely gone away.

Meanwhile, Chinese textile experts said the agreement would only meet the industry's
minimum expectations on permitted sales.

"This is the most we can gain for our textile industry because a cloud is hanging over
our heads and this deal will avoid a sharp disruption in production," said Wen Jibin, an
analyst at Sanyi Securities.

Voices from China's textile firms

After a turbulent week for talks with the EU and the US aimed at restraining
China's surging textile exports, the BBC News website spoke to the deputy
manager of a factory in Shanghai, a garment worker in northern China and an
exporter based in Hong Kong.

They put forward their views on how quotas from the EU and the US have
affected their lives and livelihoods.

My factory specialises in producing trousers, shirts and jackets. We take orders from
foreign countries such as the US, France and Italy.

We employ 1500 people and have been known to produce hundreds of thousands of
garments in one month. At the beginning of this year our business grew very quickly.
But we had no warning from the EU or the US about the limits.

Now everything is changing. The scale of production has drastically dropped.

Many skilled workers have left our factory. Before these limits, skilled workers would get
about 2000 renminbi ($245, £150) a month. Now, they only get 500 or 600 renminbi.
People are no longer willing to work for that.

Our factory has also changed strategy. We are now exporting to places like South
Africa, Australia and South America.

We also intend to build factories in foreign countries like Jordan or South Africa. We
want to cut the material in China and do the final assembly and finishing in other
foreign countries.

There is no business. I see ghost factories

Mr Xia

In the second half of last year many new garment factories opened up. Suddenly,
they've all collapsed. There is no business. I see ghost factories. Some small factories
were dependent on foreign orders and exports. Without orders, even the bosses are
jobless.

I get a bit angry because many of our workers are skilled and they depend on this skill
to live. Many specialise in embroidery and heavily worked garments. Such specialism is
of no use to other industries, although some have found assembly work in electronic
companies.

Chinese companies should be strong because labour is comparatively cheap. But now
these people find themselves jobless.

The situation makes me very sad.

LI-YONG, FACTORY WORKER, NORTHERN CHINA

I am 30 years old but I have been working in textiles for eight years. For the last two
years I have been working at a factory that specialises in producing trousers and shirts.

My main skill is sewing and ironing the garments before they are sent out. I came from
the countryside, far away in Anhui province, to find work in the city.

City people don't like to work in garment factories so most of my co-workers are
migrants from rural areas.

I have felt the impact of quota reductions personally. The biggest effect is that my
salary is much lower because orders have gone down. This has meant that my living
standard has also declined.

This is very worrying because if I cannot earn more money I will have to leave this
company. I have a big family to feed. Most of the workers in this company have been
very worried about the situation and already over 100 workers have left.

HAVE YOUR SAY

 The dash to China for all manufactured goods has caused the UK to shrink its manufacturing
base

Stuart, Nottingham

If salaries continue to go down and people do not find work elsewhere, people will have
to go back to work in the countryside.

I appeal for this issue be resolved as soon as possible.

JAN ROSSEL, EXPORTER, HONG KONG

Garments from Bangladesh are quota and duty free

My company exports and manufactures garments from China. We subcontract factories

to make a variety of products such as linens, silks and t-shirts.

The factory owners I work with are scared.

They have high operational costs and a lot of people to pay. A lot of them are stuck
with fabric they can't start sewing because they can't ship it.

We expanded quickly over the last three years in preparation for a quota-free world.
We're a big production. Turnaround is three months from order to warehouse and we
can make up to 10,000 pieces in a particular style.

Chinese factories have just grown and grown. I've followed China's progress over the
last decade and seen huge difference in terms of infrastructure and government
attitudes.

But now, I hear rumours that as many as 10m people could be made jobless. All China
has done is gear up for quota-free status. Europe and the US have had years to prepare
for this. Nobody in Shanghai understands why they did not.

I am shifting focus to other markets. I'm doing business in quota-free Australia and
Canada. We will also have to move production to India, Thailand or Malaysia.

But these countries lack the specialist skills that China has and production is more
difficult to control.

China has serious advantages: cheap labour and the skill set to produce garments that
Europe simply cannot. A lot of the popular items we get orders for are complex and
heavily beaded, and the skills and fabrics simply don't exist in Europe. Nowhere is as
competitive for quality and price.
 China has serious advantages: cheap labour and the skill set to produce garments that Europe
simply cannot

Jan Rossel

Yet I don't think we are taking business away from Europe. It has an important niche in
making simple products that don't take a lot of handling as manpower is costly.

Bangladesh, which has cheap labour, makes similar garments and is quota and duty
free. If business was going to leave Europe, it would have gone to Bangladesh years
ago.

Changing tactics for China clothes firms

The Hongwha Clothing factory in North Shanghai is a small scale affair, and it
is just the size of business that's hurting most from tightening European
quotas.

At first there's little evidence of a problem. The fifty or so work benches are busily
working away, cutting, stitching and pressing a colourful mix of fabrics and leathers.

But on closer inspection, its easy to see the impact of the European restrictions. Plenty
of shirts and jackets are being made - but no trousers.

Trousers have already hit their EU quota limit, so Hongwha Clothing has switched to
alternatives.

But that is not a long-term option. Since the weekend more imports have been blocked,
as T-shirts, bras and blouses also reached their quotas.

The European Commission argues this is to protect garment manufacturers in countries

like Spain and Italy. Europe is being overwhelmed by a flood of clothing from eager
Chinese producers. Plans for free trade in clothing were abandoned and new import
limits introduced.

So far this year, China has exported £5bn ($8.9bn; 7.3 billion euros) of clothing to
Europe, equivalent to almost the whole amount exported in 2004.

Alternatives

Chinese producers have responded by switching to their home market - or letting staff
go. But they say banning Chinese exports won't solve the problems for European
manufacturers.

Across town, Steilman clothing is another company counting the cost of the export ban.

This German company sells clothes from Asia to Europe's biggest High Street stores
and has over £500,000 worth of stock stuck in European customs warehouses. But like
many suppliers, Steilman is adapting by switching production to other countries - none
of them in Europe.

"Vietnam is going back very strongly into the market, so too are Myanmar (Burma) and
Sri Lanka," says Wolfram Geuting, the company's managing director.

"We're not minimising imports to Europe, we're only minimising exports from China. All
my trousers are not produced in China anymore, but they're still produced in Asia.

"I won't give this work to a factory in Italy, Spain or Portugal. The work will stay in
Asia."

It's a view shared by the authorities here. The state media has focused on the cost of
the quota restrictions to European and American retailers - and their customers. Much
is made of the bargain-hungry Western shoppers and their demand for ever shrinking
price tags.

The European Commission is caught between its manufacturers who want to keep
China out, and its retailers who need China's low costs to survive in the razor-thin
margins of the fashion business.

Officials from Brussels plan to visit China in an attempt to ease the situation. They may
offer to bring forward next year's quota capacity to 2005.

But the official line from Beijing is that few other countries can compete with its low
costs or the scale of its production. European manufacturers, they say, are only
postponing the inevitable.
The 2006 Investment Guide
Love It Or Leave It
Andrew T. Gillies, 12.12.05

Our bullish and bearish stock pickers excelled in 2005. They look to repeat
with Freddie Mac, Syntroleum and 15 more for the year ahead.

Since the early 1980s we've marked the end of the calendar year by asking each of a group of
investment pros to name the one stock they think most likely to either outpace or trail the market
over the coming 12 months. Our panel of seers now numbers 17, with 12 bulls, 5 bears.

Both sets performed admirably in the year gone by. Long bets from the Love Only One class of
2005 rose an average 16% over the course of the contest versus 7% for the S&P 500. The shorts
ended a three-year streak of poor showings. Their picks declined 25% on average. In all, 12 of our
17 contestants earned our customary reward for beating the market, an invitation to return for 2006.
Eleven have accepted.

The blue ribbon for 2005's bulls went to B. Randolph Bateman, chief investment officer with
Huntington Bank. A year ago he saw a growth play in Cerner, a medical software company. The
stock traded for 28 times trailing earnings then. It closed the contest at 41 times a higher earnings
number.

For 2006 Bateman puts his chips on Mentor, a maker of medical devices ranging from saline breast
implants to catheters for urinary incontinence. Bateman finds the product mix well suited to aging
baby boomers, among a gaggle of other positives. "Good market share, strong balance sheet,
respect in the medical community and good distribution efforts," he says.

The best bear? Clarion Group'sMorton Cohen took that honor for the second year in a row. In
October 2004 he thought Travelzoo looked overpriced and vulnerable to competition in the online
travel business. The stock sank 73%.

Unfortunately for us, if not for him, Cohen has retired from the investment business. But his former
partner, Brian Chait, agreed to stand in. Chait, now proprietor of the BC Global Opportunities hedge
fund, enters this Love Only One season with a pan of Novavax. The Malvern, Pa. company sells
prescription drugs for women's health and also develops technology to deliver vaccines against
infectious disease.

Novavax traded below a dollar inAugust but jumped in price along with avian flu headlines. Chait
points to the company's quarterly losses, its $36 million in long-term debt and stiff competition in the
vaccine business. He says that selling by insiders doesn't improve the picture.

Overseas Shipholding Group is another candidate for decline, says Charles Hanlon, chief strategist
with Delta Global Advisors. Hanlon, the bears' runner-up last year on Annaly Mortgage
Management, thinks oil tanker stocks will take a hit from lower energy prices and slowing global
economic growth. Shares of Overseas Shipholding, he notes, have held up lately because many of
its ships are relatively new. "If the pricing environment becomes even more challenging," Hanlon
warns, "the age of a company's fleet will mean little."

The bulls' runner-up was Stephen Auth, chief investment officer for global equity at Federated
Investors. A year ago he spotted a bargain in McKesson, which jumped 70% during the last 12
months. He returns with Pfizer, whose shares have lost more than half their value since their high in
1999. Auth argues that the market has both underappreciated Pfizer's restructuring efforts and
overreacted to the potential loss of the company's Lipitor patent. He also believes Pfizer's new
cholesterol treatment, a blend of Lipitor and torcetrapib, will be a big seller.
In the longevity department we bid farewell to bull Richard E. Cripps, Legg Mason's chief market
strategist. Cripps had six years in the contest and narrowly missed a seventh with his pick of Intel.
Taking the mantle from him is Joseph Zock, president and portfolio manager at New York value
shop Capital Management Associates.

Zock, entering his fourth year of Love One action, speculates on a small cap: Syntroleum. The
Tulsa company shows latest-12-month revenue of only $7 million, but Zock sees a winner. He
especially admires Syntroleum's technology, which converts natural gas into liquids for refining into
fuel for combustion engines and fuel cells.

Now for the newbies. We welcome Brooke de Boutray of ZevenbergenCapital Investments, a

Seattle growth manager with $1.1 billion under management, as a new bull. De Boutray suggests
that Aquantive, which earned $31 million on sales of $282 million in the past 12 months, will ride the
tailwind of growth in digital advertising. Its Atlas unit, for example, develops software allowing
businesses to track which keywords on which search services yield the most new customers.

Robert Doll, chief investment officer of Merrill Lynch Investment Managers, oversees 155 funds and
$518 billion in assets. He offers Devon Energy, pointing out that 60% of the reserves of this energy
exploration company lie in natural gas. Doll also likes its exploration projects in Africa and the Gulf
of Mexico, as well as its management. "They've cleaned up the balance sheet and are credible," he
says.

David Goerz, chief investmentofficer at San Francisco's HighMarkCapital Management, tends to the
equity portion of HighMark's $18 billion portfolio, and he likes the look of RyderSystem. The truck-
leasing concern has a thriving supply-management business, he says, and its shares look cheap,
relative to the competition. The company is valued at only half its sales. Another plus: Hurricane
rebuilding in the Gulf Coast could boost business.

Arvind Sachdeva hails from Victory Capital Management, a Cleveland outfit with $56 billion in
assets. Sachdeva, who heads up Victory's activity in intrinsic value investing, goes long with
government-sponsored mortgage lenderFreddie Mac. He says negative investor sentiment has
pushed Freddie's stock into bargain territory. Sachdeva also expects the shares, now yielding 2.1%,
to get a dividend hike. And politics? "The regulatory cloud should begin to lift as we go into 2006,"
he says.

One other bear debuts. HarrietBaldwin is one of six analysts at Palladian Research, a New York
equity research boutique. Baldwin's specialty is industrial stocks; she cut her teeth in the area as an
analyst with Lehman Brothers and Deutsche Bank. For 2006 she predicts a capacity glut in the
printing business and that a tough ad market will hurt RR Donnelley, which prints periodicals,
catalogs and financial documents.

The Most Expensive Jeans

Forget the sheared mink, the diamond-encrusted wristwatch or the newest Louis Vuitton bag; the
latest luxury item comes in straight leg or boot cut, stonewashed or torn.

Jeans have come a long way from their working-class origins. No longer reserved for physical labor
or college campuses, today's haute dungarees are increasingly acceptable at dinner parties, the
office, all but the most formal occasions. Still, even though jeans can be found in the closets of both
billionaires and bikers, there can be a big difference in their price tags.

How much of a difference? While a pair of Levi's can be bought for less than $20 at Wal-Mart
Stores (nyse: WMT - news - people ), Guinness World Records cites the Gucci "Genius Jeans" as
the most expensive jeans in the world. A normal pair of Gucci jeans that had been distressed,
ripped and covered with African beads, when they debuted in October 1998 in Milan, were priced at
an astonishing $3,134. If you think that sounds like a lot of money, today, there are jeans for more
than double that amount.

While many women--and some men--are willing to pay as much as $145 without giving it a second
thought, increasingly, designer labels are offering jeans ranging from $300 to as much as $4,000.
For those who want exclusivity, there are custom couture jeans with prices that are even higher.
"For the most part our jeans are in the $150 to $225 range, but there are, in designer, some very
expensive jeans, and it's because they're highly embellished and have treatments that really bring
the price point up," says Colleen Sherin, fashion market director at retailer Saks Fifth Avenue
(nyse: SKS - news - people ).

Regardless of whether they are embellished or embroidered, covered with beads or precious gems,
to many people, even those who could easily afford it, the notion of paying thousands of dollars for
jeans--they are still jeans, after all--is ridiculous. For others, though, having a signature label in the
back is as much a status symbol as the hood ornament on a Mercedes. These are people who
"want the look of the moment, hot off the runway and regardless of the price," says Sherin.

So why expensive jeans, and why now? Marshal Cohen at NPD Group, a Port Washington, N.Y.-
based retail-industry consulting firm, says that not only have prices gone up but sales have too.
"This is a trend that has been hot for almost five years now, which in the fashion industry is very
rare. Denim has become not only a staple in the wardrobe, but it's become a premium product. It's
at an all-time high in price and in prestige. Until something really comes along that can take its
place, it's here to stay."

According to NPD, jeans that cost more than $100 make up only 1% of the $14 billion industry, but
it's a quickly rising business. In 2004, women's jeans sales were $7.4 billion, up 12% from $6.6
billion in 2003. At department stores such as Saks, the best-selling jeans are brands like Seven for
all Mankind, Citizens of Humanity, True Religion (nasdaq: TRLG - news - people ) and Hudson
jeans to name a few. It's in these lines that many companies such as apparel group Innovo
(nasdaq: INNO - news - people ) and Liz Claiborne (nyse: LIZ - news - people ) are making their
investments. These premium jeans didn't make our list of most expensive, but at prices ranging
from $150 to $225, they do cost more than anyone would have paid for Jordache or Calvin Klein
in the 1980s.

The most expensive jeans fall into the category of custom made or vintage. Levi Strauss & Co.
spent $46,532 buying a pair of its own jeans on an eBay (nasdaq: EBAY - news - people ) auction in
May 2001. The jeans were found in a Nevada mining town and date back to the 1880s. The
company has no plans to resell them, because Levi's says they are priceless and one of a kind. For
that reason, these and other "vintage" jeans were left off our list.

It is not just the age, the label or a flattering fit that drives up the price of today's most expensive
jeans. Much of the added cost comes from the decorations and fixtures, such as 14 karat gold or
silver rivets and diamond buttons. The jeans that top our list come from Escada's couture line. They
start at $7,500 and have no price cap. So far, the most expensive pair they have made cost $10,000
and were studded from top to bottom with Swarovski crystals.

Is this willingness to spend thousands on denim a sign of decadence or a relaxing of the barriers
between high fashion and comfortable clothes? Marshal Cohen of NPD says, "We've reached the
point in that, number one, denim is being viewed as an investment like jewelry and hand bags, and
that number two, like women with a shoe fetish, there are now women with a denim fetish.
Everyone, woman and man, is in the quest for the perfect jean and will be for a long time."