Connect with us

Business

Biden asks US Congress to block railroad strike that could ‘devastate economy’

Source image: https://www.theguardian.com/business/2022/nov/28/biden-us-congress-railroad-strike

Joe Biden called on Congress to intervene and block a railroad strike before next month’s deadline in the stalled contract talks, saying a strike would “devastate our economy”.

Biden’s move comes as business groups have warned that the looming strike would hit just before the holiday season and worsen the US’s inflation problems.

“Let me be clear: a rail shutdown would devastate our economy,” Biden said in a statement. “Without freight rail, many US industries would shut down.”

The strike comes after long-running negotiations reached an impasse and both sides agreed to a cooling-off period that ends next week.

Congress has the power to impose contract terms on the workers, but it’s not clear what lawmakers might include if they do. They could also force the negotiations to continue into the new year.

Both the unions and railroads have been lobbying Congress while contract talks continue. Four rail unions that represent more than half of the 115,000 workers in the industry have rejected the deals that Biden helped broker before the original strike deadline in September and are back at the table trying to work out new agreements. Eight other unions have approved their five-year deals with the railroads and are in the process of getting back pay for their workers for the 24% raises that are retroactive to 2020.

Last month the Biden administration said it was up to unions and the rail companies to reach an agreement. In his statement Biden said that as “a proud pro-labor president” he was reluctant to override the views of people who voted against the agreement. “But in this case – where the economic impact of a shutdown would hurt millions of other working people and families – I believe Congress must use its powers to adopt this deal.”

Biden’s remarks came after a coalition of more than 400 business groups sent a letter to congressional leaders on Monday urging them to step into the stalled talks because of fears about the devastating potential impact of a strike that could force many businesses to shut down if they cannot get the rail deliveries they need. Commuter railroads and Amtrak would also be affected in a strike because many of them use tracks owned by the freight railroads.

The business groups, led by the US Chamber of Commerce, the National Association of Manufacturers and the National Retail Federation, said even a short-term strike would have a tremendous impact and the economic pain would start to be felt even before the 9 December strike deadline. They said the railroads would stop hauling hazardous chemicals, fertilizers and perishable goods up to a week beforehand to keep those products from being stranded somewhere along the tracks.

“A potential rail strike only adds to the headwinds facing the US economy,” the businesses wrote. “A rail stoppage would immediately lead to supply shortages and higher prices. The cessation of Amtrak and commuter rail services would disrupt up to 7 million travelers a day. Many businesses would see their sales disrupted right in the middle of the critical holiday shopping season.”

On Monday, the Association of American Railroads (AAR) trade group praised Biden’s action. “No one benefits from a rail work stoppage – not our customers, not rail employees and not the American economy,” said the AAR’s president and chief executive, Ian Jefferies. “Now is the appropriate time for Congress to pass legislation to implement the agreements already ratified by eight of the 12 unions.”

The unions have asked the railroads to consider adding paid sick time to what they already offered to address some of the workers’ quality-of-life concerns. But so far, the railroads, which include Union Pacific, BNSF, Norfolk Southern, CSX and Kansas City Southern, have refused to consider that.

The railroads want any deal to closely follow the recommendations a Biden-appointed special board of arbitrators made this summer that called for the 24% raises and $5,000 in bonuses but did not resolve workers’ concerns about demanding schedules they say make it hard to take a day off and other working conditions.

The Associated Press contributed reporting

Source: https://www.theguardian.com/business/2022/nov/28/biden-us-congress-railroad-strike

Continue Reading

Business

‘Financial pariah’: Adani crisis grows with protests in India over fraud claims

The crisis engulfing beleaguered Indian conglomerate Adani Group is spilling into politics, with hundreds of members of India’s opposition parties taking to the streets to demand a probe into fraud claims that are weighing on the broader Indian market.

Adani has lost about US$115bn from its listed entities, representing well over half its value, in a fortnight of heavy selling sparked by allegations by US investor Hindenburg Research that the conglomerate is engaged in a “brazen stock manipulation and accounting fraud scheme”.

Adani, a ports-to-power conglomerate that owns the Carmichael coal and rail project in Queensland, has denied the allegations in a detailed 413-page response. It won a rare reprieve from the stock rout on Tuesday after it repaid more than US$1.1bn in loans earlier than expected, easing some concerns over its debt load.

Share prices of several of the group’s entities, including its flagship Adani Enterprises, rose in early trading in Mumbai on Tuesday, although overall losses are steep. The conglomerate is also due to report what will be closely watched financial results.

Now in its third week, the Adani crisis threatens to escalate further after both houses of India’s parliament adjourned on Monday for a third consecutive sitting day amid demands for the matter to be debated in parliament and a supreme court inquiry into the allegations. The prime minister, Narendra Modi, is seen as close to the conglomerate’s chairman, Gautam Adani, and his government has been accused of protecting the Adani Group from scrutiny.

“It is clear that the Modi government is running away,” Jairam Ramesh, the general secretary of the opposition Congress party, said.

Opposition members have protested across the country this week, including outside several offices of a state-owned insurer and bank, both of which have exposure to Adani group companies. On Monday, over 200 members of the Congress party were detained for staging protests in Assam.

Mark Humphery-Jenner, an associate professor of finance at the University of New South Wales, said while the decision by Adani to make early loan repayments assuages some concerns, investors remain sceptical of its worth.

“It does seem like the market isn’t really believing what Adani is trying to say,” Humphery-Jenner said.

“The market doesn’t believe that Adani is worth anywhere near what it was, or potentially what it is currently trading at.”

Along with the stock selloff, bonds issued by Adani companies are trading at distressed levels amid fear that it might not meet loan obligations.

“Adani is being treated as a financial pariah at the moment,” Humphery-Jenner said.

The plunging share prices and recent decision to abandon a share sale raises questions over where Adani will turn to raise capital and whether it will need to sell assets.

Adani has said it has an “impeccable track record” of servicing its debt.

The wealth of the company’s billionaire chairman has slid alongside the value of his companies. After sitting alongside Jeff Bezos and Bill Gates among the world’s richest just a couple of weeks ago, Adani has dropped out of the top 20, according to the Bloomberg billionaires index.

Continue Reading

Business

Fed says more interest rate rises needed to cool inflation

The Federal Reserve chair, Jerome Powell, has said that more interest rates rise will be needed to cool inflation and the red-hot US jobs market.

“We think we are going to need to do further rate increases,” Powell said on Tuesday at the Economic Club of Washington. “The labor market is extraordinarily strong.”

The Fed chair’s comments came hours ahead of Joe Biden’s State of Union address to Congress at which he is predicted to tout his administration’s economic record, including strong job growth.

The US added 517,000 new jobs in January – far higher than expected and a sign of the continuing strength of the jobs market. The report came two days after the Fed announced another quarter-point increase in its benchmark interest rate, its eighth consecutive rate increase as the central bank fights to tame inflation.

“The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector,” Powell said in Washington. “But it has a long way to go. These are the very early stages of disinflation.”

Reacting to the stronger-than-expected employment report, analysts now expect interest rates to rise above 5% to ease wage pressure in the labor market and begin to cool inflation to the Fed’s 2% target. In December inflation stood at 6.5%.

While some have begun to declare victory over inflation, Powell said last week that officials need “substantially more evidence” to be confident that inflation is heading downward.

“The reality is we’re going to react to the data,” Powell said on Tuesday. “So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in.”

Continue Reading

Business

Crisis at Adani Group intensifies as Indian activists stage protests

The crisis engulfing the Adani Group has intensified as hundreds of members of India’s opposition parties took to the streets to press for an investigation into allegations by a US short-seller against India’s second-biggest business group which triggered its market rout.

The Adani Group said on Monday that its major investors, known in India as “promoters”, had pledged to prepay $1.1bn (£916m) in share-backed loans due for repayment by September 2024. The repayments include shares in Adani’s ports business, Adani Green Energy and Adani Transmission.

Shares in Adani Port & Special Economic Zone jumped 9% after the announcement.

Members of the opposition Congress party have been urging the prime minister, Narendra Modi, to order an investigation into the Adani Group companies after a US-based short-selling firm, Hindenburg Research, accused them of various fraudulent practices. The Adani Group has denied any wrongdoing.

In Delhi, Congress party workers threw fake currency notes in the air and chanted slogans. Some burned a suitcase plastered with images of Modi and the Adani Group head, Gautam Adani. Some protesters scaled police barricades and were detained and taken away in police vans.

Opposition party workers in the financial capital, Mumbai, and the southern city of Chennai gathered outside the offices of a state-run bank and the country’s largest insurer, which are known to have investments in Adani shares.

So far, there is no sign the fracas is spreading across India’s financial sector and the protests are more a reflection of political theater rather than spontaneous public outrage. Lawmakers disrupted parliament for a third day on Monday as calls mounted for India’s market regulator to look into Hindenburg’s claims.

Adani and his companies have lost tens of billions of dollars as investors dumped their shares. Last week, the group cancelled a $2.5bn share offering, promising to provide refunds to investors.

The billionaire’s fortune had grown by more than 2,000% in recent years. Critics say he has benefited from strong relationships with Modi and his government, while others point out he also prospered under previous administrations.

“What action has been taken, if ever, to investigate the serious allegations made over the years against the Adani Group?” Jairam Ramesh, the Congress party’s general secretary, said in a statement issued over the weekend. “Is there any hope of a fair and impartial investigation under you?” he said in a reference to Modi.

Shares in Adani Enterprises, the group’s flagship, wobbled on Monday and were down 2.1% by mid-afternoon. Its market value has shrunk by more than 50% since the Hindenburg report. Stock in five other Adani listed companies fell by 5% to 10%.

The move to repay share-backed borrowing early addressed one of the key concerns raised by Hindenburg: heavy borrowing using group shares as collateral. Adani said the pledge by major shareholders to repay that debt was “in continuation of promoters’ assurance to prepay all share-backed financing”.

The wild swings in share prices have highlighted concerns over corporate governance, especially as the country tries to woo foreign investors.

On Saturday, the Securities and Exchange Board of India (SEBI) issued a rare statement seeking to calm investors.

“During the past week, unusual price movement in the stocks of a business conglomerate has been observed,” the market regulator said, without naming the Adani Group. It said mechanisms were in place to deal with volatility in specific stocks. The SEBI would examine any information before taking appropriate action, it said.

On Friday, the finance minister Nirmala Sitharaman dismissed concerns that the controversy would alarm global investors, saying India’s financial markets were “very well regulated”.

Adani built a fortune in trading and in coal mining and then branched into construction, power generation, operation of ports and airports, manufacturing defence equipment and running a media company.

Before the latest troubles, Bloomberg’s billionaire index listed Adani as Asia’s richest person and the world’s third wealthiest. Bloomberg’s rankings now put him at 21st wealthiest after his net worth sank to $59bn from $120bn.

Continue Reading

Trending