FT : VW faces looming deadline as potential costs of scandal mount

VW faces looming deadline as potential costs of scandal mount - FT - http://on.ft.com/22EMHmf

German carmaker is seeking to finalise an agreement with US regulator but scepticism remains

As Volkswagen scrambles to meet a deadline this week to finalise a fix for almost 600,000 cars in the US equipped with test-cheating software, many industry insiders are sceptical that an engineering solution is possible.

It has been seven months since Europe’s largest carmaker became engulfed in scandal after admitting equipping up to 11m diesel-powered cars worldwide with defeat devices that understated pollution in official tests.
The scandal was uncovered in the US, and it is here that VW is most at risk of big fines because of the country’s tough emissions limits. The German carmaker is seeking to finalise an agreement with regulators by Thursday over what to do with 584,000 VW cars that emit nitrogen oxides at up to 40 times above permitted levels.
US district judge Charles Breyer in San Francisco originally set March 24 as the deadline for VW to find a fix for the cars that was acceptable to the Environmental Protection Agency, the California Air Resources Board and the Department of Justice. Last month he extended the deadline to April 21, citing “engineering technicalities and other important issues”.
Another extension to the deadline for the VW fix from the US court may not help the company, as VW must by German law release by April 28 its delayed results for 2015.
That report is expected by analysts to include new provisions for the cost of the scandal, an update on dividends and a 2016 outlook — none of which may be possible if VW has not resolved the cost of the scandal in the US.
“[VW] are under the gun themselves, and not just from Judge Breyer,” says Stephen Reitman, analyst at Société Générale. “They need to quantify the liability in order to make provisions.”
VW has so far set aside €6.7bn to cover the cost of fixing the cars fitted with software-based defeat devices, but it is also likely to face billions of dollars in fines and class-action lawsuits.

UBS analysts estimate the scandal will cost VW about €38bn, including €10bn of civil penalties and €9bn of criminal fines. By contrast, Mr Reitman puts the total cost at under €20bn.
Investors are therefore hopeful that any agreement unveiled by VW and the regulators this week will remove much of the uncertainty about the full cost of the scandal to the carmaker.
VW and the regulators declined to comment on the state of their negotiations. One person familiar with the talks says, “The intensity of negotiations increased dramatically in the past week,” as the justice department, which in January launched a civil lawsuit against VW, has taken a leadership role.
Numerous analysts have concluded that an engineering fix is not feasible for most of the offending cars in the US, particularly the older models sold between 2009 and 2014.
“It’s not really an engineering problem now,” says Julie Boote, analyst at Pelham Smithers. “The issue is that there is no ‘perfect’ fix, otherwise VW would have been able to come up with it.”
The problem, she adds, is that efforts to reduce NOx emissions would mean retrofitting older VW cars with new, heavier components that would increase the weight of the car. That in turn would increase emissions of carbon dioxide and make the cars more expensive for owners to run.
Mr Reitman says a fix for VW’s older models in the US could cost more than $2,000 per vehicle and sacrifice performance and driveability.

If an engineering fix is not possible for all VW’s US cars affected by the scandal, analysts say there are two options.
First, environmental regulators could allow certain VW cars to remain on the road although they are polluting more than is permitted. In exchange, VW could pay a hefty fine and also pledge to invest more in electric car technology to mitigate the environmental damage.
Julie Domike, an environmental lawyer at Haynes Boone who previously worked at the EPA, says, “It is highly accepted within the EPA and in California to have the defendant find other ways to reduce NOx.” But, she acknowledges, that would do nothing for unhappy VW car owners.
The second option is for VW to buy back most, if not all, of the affected US cars.
Mr Reitman predicts that all the VW cars with first-generation EA189 2.0 litre diesel engines will have to be repurchased at roughly $12,000 each, or €3.5bn.
The remaining cars, he says, will only require minor hardware and software fixes that cost €45m.
VW is reluctant to offer a buyback, say analysts. Not only is it the most expensive option, but such a move could potentially serve as a precedent for millions of VW owners across the world to demand equal treatment.
Brussels has criticised VW for giving $1,000 vouchers to US customers and treating Europeans in an inferior way. VW responded by saying Europe “is not automatically comparable” with other markets.

Gerhard Wolf, analyst at Landesbank Baden-Württemberg, does not see the risk of a US buyback creating a precedent.
European emissions regulations are less strict, which explains why German regulators last December were able to approve changes to VW cars with defeat devices that involved only limited modifications.
“They don’t have a need to buy back in Europe,” says Mr Wolf. “They can fix it.”
Some analysts say the long delay in finding a solution for VW’s US cars is not just due to the more onerous emissions limits, but also the company’s underestimation of how big the scandal was.
When the EPA first revealed the affair in September, VW chief executive Martin Winterkorn apologised and then resigned within days. His successor Matthias Mueller took a trip in January to the US where he portrayed the scandal as a mere technical problem. “We didn’t lie,” he said, before backtracking.
“[VW] tried to sell [the affair] as a misunderstanding, while the Americans clearly saw it as fraud,” says Ms Boote. “The mood was that this isn’t a major issue. VW probably thought they would find a quick fix.”

NY Post : How Saudi Arabia dangerously undermines the United States

How Saudi Arabia dangerously undermines the United States

Iran is our external enemy of the moment. Saudi Arabia is our enduring internal enemy, already within our borders and permitted to poison American Muslims with its Wahhabi cult.

Oh, and Saudi Arabia’s also the spring from which the bloody waters of global jihad flowed.

Iran humiliates our sailors, but the Saudis are the spiritual jailers of hundreds of millions of Muslims, committed to intolerance, barbarity and preventing Muslims from joining the modern world. And we help.

Firm figures are elusive, but estimates are that the Saudis fund up to 80% of American mosques, at least in part. And their goal is the same here as it is elsewhere in the world where Islam must compete with other religions: to prevent Muslims from integrating into the host society.

The Saudis love having Muslims in America, since that stakes Islam’s claim, but it doesn’t want Muslims to become Americans and stray from the hate-riddled cult they’ve imposed upon a great religion.

The tragedy for the Arabs, especially, has been who got the oil wealth. It wasn’t the sophisticates of Beirut or even the religious scholars of Cairo, but Bedouins with a bitter view of faith. The Saudis and their fellow fanatics in the oil-rich Gulf states have used those riches to drag Muslims backward into the past and to spread violent jihad.

The best argument for alternative energy sources is to return the Saudis to their traditional powerlessness.

I’ve seen Saudi money at work in country after country, from Senegal to Kenya to Pakistan to Indonesia and beyond. Everywhere, their hirelings preach a stern and joyless world, along with the duty to carry out jihad (contrary to our president’s nonsense, jihad’s primary meaning is not “an inner struggle,” but expanding the reach of Islam by fire and sword).

Here’s one of the memories that haunt me. On Kenya’s old Swahili Coast, once the domain of Muslim slavers preying on black Africans, I visited a wretched Muslim slum where children, rather than learning useful skills in a state school, sat amid filth memorizing the Koran in a language they could not understand. According to locals, their parents had been bribed to take their children out of the state schools and put them in madrassas.

Naturally, educated Christians from the interior get the good jobs down on the coast. The Muslims rage at the injustice. The Christians reply, “You can’t all be mullahs — learn something!” And behold: The Saudi mission’s accomplished, the society divided.

The Saudis build Muslims mosques and madrassas but not hospitals and universities.
The basic fact our policy-makers need to grasp about the Saudis is that they couldn’t care less about the welfare of flesh-and-blood Muslims (they refuse to take in Syrian refugees but demand Europe do so). What the Saudis care about is Islam in the abstract. Countless Muslims can suffer to keep the faith pure.

The Saudis build Muslims mosques and madrassas but not hospitals and universities.

Another phenomenon I’ve witnessed is that the Saudis rush to plant mosques where there are few or no Muslims, or where the Wahhabi cult still hasn’t found roots. In Senegal, with its long tradition of humane Islam, religious scholars dismiss the Saudis as upstarts. Yet, money ultimately buys souls and the Saudis were opening mosques.

And jihadi violence is now an appealing brand.

In Mombasa, Kenya, you drive past miles of near-empty mosques. Pakistan has been utterly poisoned, with Wahhabism pushing back even the radical (but less well-funded) Deobandis, the region’s traditional Islamist hardliners.

Shamelessly, the Saudis “offered” to build 200 new mosques in Germany for the wave of migrants. That was too much even for the politically correct Germans, and Chancellor Angela Merkel’s deputy had as close to a public fit over the issue as toe-the-line Germans are permitted to do.

But our real problem is here and now, in the United States. Consider how idiotic we’ve been, allowing Saudis to fund hate mosques and madrassas, to provide Jew-baiting texts and to do their best to bully American Muslims into conformity with their misogynistic, 500-lashes worldview. Our leaders and legislators have betrayed our fellow citizens who happen to be Muslim, making it more difficult for them to integrate fully into our society.

In the long run, the Saudis will lose. The transformative genius of America will defeat the barbarism. But lives will be wrecked along the way and terror will remain our routine companion.

Why did we let this happen? Greed. Naivety. Political correctness. Inertia. For decades, the Saudis sent ambassadors who were “just like us,” drinking expensive scotch, partying hard, playing tennis with our own political royalty, and making sure that American corporations and key individuals made money. A lot of money.

But they weren’t just like us. First of all, few of us could afford the kind of scotch they drank. More important, they had a deep anti-American, anti-liberty, play-us-for-suckers agenda.

And we let the Saudis exert control over America’s Muslim communities through their surrogates. No restrictions beyond an occasional timid request to remove a textbook or pamphlet that went too far.

Think what we’re doing: The Saudis would never let us fund a church or synagogue in Saudi Arabia. There are none. And there won’t be any.

Wouldn’t it make sense for Congress to pass a law prohibiting foreign governments, religious establishments, charities and individuals from funding religious institutions here if their countries do not reciprocate and practice religious freedom? Isn’t that common sense? And simply fair?

Saudi money even buys our silence on terrorism.

Decades ago, the Saudi royal family realized it had a problem. Even its brutal practices weren’t strict enough for its home-grown zealots. So the king and his thousands of princes gave the budding terrorists money — and aimed them outside the kingdom.

Osama bin Laden was just one extremist of thousands. The 9/11 hijackers were overwhelmingly Saudi. The roots of the jihadi movements tearing apart the Middle East today all lie deep in Wahhabism.

Which brings us to 28 pages redacted from the 9/11 Commission’s report. Those pages allegedly document Saudi complicity. Our own government kept those revelations from the American people. Because, even after 9/11, the Saudis were “our friends.”

(We won’t even admit that the Saudi goal in the energy sector today is to break American fracking operations, let alone face the damage their zealotry has caused.)

There’s now a renewed push to have those 28 pages released. Washington voices “soberly” warn that it shouldn’t be done until after the president’s upcoming encounter with the Saudi king, if at all.

Do it now. Stop bowing. Face reality.

If we’re unlucky, we may end up fighting Iran, which remains in the grip of its own corrupt theocracy — although Iranian women can vote and drive cars, and young people are allowed to be young people at about the 1950s level. But if fortune smiles and, eventually, the Iranian hardliners go, we could rebuild a relationship with the Iranians, who are the heirs of a genuine, Persian civilization. Consider how successful and all-American Iranian-Americans have become.

War with Iran will remain a tragic possibility. But the Saudi war on our citizens, on mainstream Islam, and on civilization is a here-and-now reality.

WSJ : Greece’s Creditors Weigh Extra Austerity Measures to Break Deadlock

Greece’s Creditors Weigh Extra Austerity Measures to Break Deadlock

Bid to bridge differences between Europe and IMF that threaten to unravel Greek bailout

Greece’s creditors are considering seeking extra austerity measures that would be triggered if Athens misses its fiscal targets, in a bid to bridge differences between Europe and the International Monetary Fund and break a deadlock threatening to unravel the Greek bailout.

Under the proposal, say officials involved in the discussions, Greece would have to sign up to so-called contingency measures of up to about €3 billion, on top of the package of about €5 billion in tax increases and spending cuts Greece and its lenders are already negotiating.

The country would only have to implement the extra measures if falls short of targeted budget surpluses for coming years that were set out in last year’s bailout agreement, the officials say.

The idea, which has support from the eurozone’s dominant power Germany, hasn’t yet been agreed upon, and officials on the creditors’ side say it would be politically hard for Greece’s embattled government to swallow.

Creditors say the contingency-measures idea could finally overcome the monthslong disagreement between European institutions and the IMF about the outlook for Greece’s budget. That disunity has paralyzed talks about what Greece needs to do to secure a new IMF loan program and unlock rescue funding from Europe.

Without billions of euros in fresh bailout funds, Greece faces bankruptcy in July, when large debts fall due. Months of talks without agreement have stoked concern in Europe about another Greek debt drama this summer, reviving fears the country could tumble out of the eurozone.

A Greek government spokeswoman wasn’t immediately reachable for comment. Athens, however, has argued that imposing even-more austerity measures would go beyond what was agreed in the July 2015 bailout deal, according to people familiar with Athens’s thinking.

The deadlock among creditors since last fall stems from Germany’s insistence that Greece get no more money from the eurozone’s bailout fund until the IMF agrees to lend more money too. Since Greece’s bailout odyssey began in 2010, German Chancellor Angela Merkel has insisted IMF involvement is essential.

But the IMF is unconvinced by the math of the eurozone’s July 2015 bailout plan for Greece. The fund says it can’t resume lending to Greece unless there is a combination of a credible fiscal plan for Greece and debt relief from Europe.

The creditors and Greece agreeing on a fiscal plan would allow for the start of concrete talks on a second thorny issue: debt relief for Greece.

Germany is deeply reluctant to offer much debt relief, but tends to agree with the IMF about the weaknesses of Greece’s budget, rather than with the more upbeat assessments of the European Union’s executive arm, the Commission.

The Commission believes around €5 billion of austerity measures would be enough for Greece to hit a key target in the bailout plan: a primary budget surplus, meaning before interest payments, of 3.5% of gross domestic product.

But the IMF is more pessimistic about Greek growth and finances. It insists about €8 billion of savings are needed to hit the target. The European side’s proposed measures, the IMF thinks, would only get Greece to a primary surplus of 1.5% of GDP.

The IMF is also skeptical about the 3.5% goal, viewing it as unrealistic, given Greece’s depressed economy and its ruling left-wing Syriza party’s aversion to major spending cuts. But Germany insisted this week the 3.5% target in the bailout agreement can’t be changed.

So in recent days, European and IMF officials gathered in Washington for the IMF’s spring meeting have explored contingency measures as the way for the creditors to reconcile their clashing forecasts and present a united set of demands to Greece.

The IMF wants the contingency measures to consist of pension cuts and the scrapping of tax exemptions, rather than increases in tax rates, says a person familiar with the discussions. The IMF thinks the €5 billion package of measures that Greece and creditors were negotiating in Athens in recent weeks already relies too much on growth-stifling tax increases.

Greek Prime Minister Alexis Tsipras has found it particularly hard to sell at home the kind of measures the IMF wants. Proposals to cut pensions and end tax exemptions, such as for farmers who pay little income tax, have already led to a wave of street protests in Greece this year.

Germany backs contingency measures, say people familiar with the matter, provided that Greece passes them into law now, so that they are triggered automatically if needed. Nonbinding promises wouldn’t be enough for Berlin, which has little trust in Greek politicians’ desire to implement overhauls, says a senior European official.

Since Greece’s government is confident it doesn’t need extra austerity to hit the 3.5% target, it should have no problem with the contingency measures, since they won’t be needed if Athens is right, the European official said.

NYT : Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill

Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill

WASHINGTON — Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.

The administration, which argues that the legislation would put Americans at legal risk overseas, has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated. In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot.

“It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation.

President Obama will arrive in Riyadh on Wednesday for meetings with King Salman and other Saudi officials. It is unclear whether the dispute over the Sept. 11 legislation will be on the agenda for the talks.

A spokesman for the Saudi Embassy did not respond to a message seeking comment.

Saudi officials have long denied that the kingdom had any role in the Sept. 11 plot, and the 9/11 Commission found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.” But critics have noted that the commission’s narrow wording left open the possibility that less senior officials or parts of the Saudi government could have played a role. Suspicions have lingered, partly because of the conclusions of a 2002 congressional inquiry into the attacks that cited some evidence that Saudi officials living in the United States at the time had a hand in the plot.

Those conclusions, contained in 28 pages of the report, still have not been released publicly.

The dispute comes as bipartisan criticism is growing in Congress about Washington’s alliance with Saudi Arabia, for decades a crucial American ally in the Middle East and half of a partnership that once received little scrutiny from lawmakers. Last week, two senators introduced a resolution that would put restrictions on American arms sales to Saudi Arabia, which have expanded during the Obama administration.

Families of the Sept. 11 victims have used the courts to try to hold members of the Saudi royal family, Saudi banks and charities liable because of what the plaintiffs charged was Saudi financial support for terrorism. These efforts have largely been stymied, in part because of a 1976 law that gives foreign nations some immunity from lawsuits in American courts.

The Senate bill is intended to make clear that the immunity given to foreign nations under the law should not apply in cases where nations are found culpable for terrorist attacks that kill Americans on United States soil. If the bill were to pass both houses of Congress and be signed by the president, it could clear a path for the role of the Saudi government to be examined in the Sept. 11 lawsuits.

Obama administration officials counter that weakening the sovereign immunity provisions would put the American government, along with its citizens and corporations, in legal risk abroad because other nations might retaliate with their own legislation. Secretary of State John Kerry told a Senate panel in February that the bill, in its current form, would “expose the United States of America to lawsuits and take away our sovereign immunity and create a terrible precedent.”

The bill’s sponsors have said that the legislation is purposely drawn very narrowly — involving only attacks on American soil — to reduce the prospect that other nations might try to fight back.

In a closed-door briefing on Capitol Hill on March 4, Anne W. Patterson, an assistant secretary of state, and Andrew Exum, a top Pentagon official on Middle East policy, told staff members of the Senate Armed Services Committee that American troops and civilians could be in legal jeopardy if other nations decide to retaliate and strip Americans of immunity abroad. They also discussed the Saudi threats specifically, laying out the impacts if Saudi Arabia made good on its economic threats.

John Kirby, a State Department spokesman, said in a statement that the administration stands by the victims of terrorism, “especially those who suffered and sacrificed so much on 9/11.”

Edwin M. Truman, a fellow at the Peterson Institute for International Economics, said he thought the Saudis were most likely making an “empty threat.” Selling hundreds of billions of dollars in American assets would not only be technically difficult to pull off, he said, but would also very likely cause global market turmoil for which the Saudis would be blamed.

Moreover, he said, it could destabilize the American dollar — the currency to which the Saudi riyal is pegged.

“The only way they could punish us is by punishing themselves,” Mr. Truman said.

The bill is an anomaly in a Congress fractured by bitter partisanship, especially during an election year. It is sponsored by Senator John Cornyn, Republican of Texas, and Senator Chuck Schumer, Democrat of New York. It has the support of an unlikely coalition of liberal and conservative senators, including Al Franken, Democrat of Minnesota, and Ted Cruz, Republican of Texas. It passed through the Judiciary Committee in January without dissent.

“As our nation confronts new and expanding terror networks that are targeting our citizens, stopping the funding source for terrorists becomes even more important,” Mr. Cornyn said last month.

The alliance with Saudi Arabia has frayed in recent years as the White House has tried to thaw ties with Iran — Saudi Arabia’s bitter enemy— in the midst of recriminations between American and Saudi officials about the role that both countries should play in the stability of the Middle East.

But the administration has supported Saudi Arabia on other fronts, including providing the country with targeting intelligence and logistical support for its war in Yemen. The Saudi military is flying jets and dropping bombs it bought from the United States — part of the billions of dollars in arms deals that have been negotiated with Saudi Arabia and other Persian Gulf nations during the Obama administration.

The war has been a humanitarian disaster and fueled a resurgence of Al Qaeda in Yemen, leading to the resolution in Congress to put new restrictions on arms deals to the kingdom. Senator Christopher S. Murphy, Democrat of Connecticut, one of the resolution’s sponsors and a member of the Senate Foreign Relations Committee, said that Congress has been “feckless” in conducting oversight of arms sales, especially those destined for Saudi Arabia.

“My first desire is for our relationship with Saudi Arabia to come with a greater degree of conditionality than it currently does,” he said.

Barron's : Catching Publicis Groupe on the Rebound

Catching Publicis Groupe on the Rebound

The French ad giant got hammered after a merger with Omnicom cratered. But now it has all the pieces in place for shares to rise 30%.

Advertising giant Publicis Groupe lost ground to rivals after its aborted merger with Omnicom in 2014, but there are signs that the French company is shaping up and its stock could rebound.

Shares of Publicis (ticker: PUB.France) have carved out a 1.2% gain in 2016, while the Stoxx Europe 600 index has retreated about 6%. However, the stock is ahead by less than 2% over the past two years, trailing by some considerable distance a near-30% rise in the Stoxx Europe 600’s media subsector over that period.

It appears the selloff may have been overdone.

At Friday’s close of 62.10 euros ($70.15), Publicis trades for just 12.7 times estimated 2017 earnings, which looks modest compared with its competitors. WPP (WPP.UK) trades for 14.6 times next year’s projected earnings, and Interpublic Group (IPG) and Omnicom (OMC) boast multiples around 16.

Publicis has American depositary receipts listed in New York under the symbol PUBGY. On Friday, they were trading at $17.51. Four Publicis ADRs are equivalent to one ordinary share.

THERE ARE ONLY A HANDFUL of global players in the advertising industry. It isn’t a capital-intensive business, so free cash flow can be high. Last year, Publicis generated free cash flow of €1.10 billion, or roughly 8% of its market value of €13.82 billion.

That’s “very attractive,” says James Hunt, who manages the Tocqueville International Value Fund (TIVFX), which owns Publicis shares. Given the company’s net debt of just €1.87 billion at the end of 2015, he believes the company deserves to be valued at a ratio of enterprise value to earnings before interest, tax, depreciation, and amortization of 11 times, compared with the current multiple of nine.

There could be a few bumps in the near term—the loss last year of U.S. media accounts of Procter & Gamble (PG) and L’Oréal (OR.France) will hurt comparisons, for instance—but Hunt is invested for the long haul and reckons that Publicis could be worth €85 in a couple of years’ time, or about 37% above the recent price.

Paris-based Publicis, whose brands include ad agencies Publicis Worldwide, Leo Burnett, and Saatchi & Saatchi, as well as media agencies ZenithOptimedia and Starcom Mediavest, has struggled to deliver organic growth in recent years. In 2015, organic revenue growth was a tepid 1.5% despite a strong performance in North America, which accounts for more than half of sales.

A key motivation for the combination with Omnicom was to enable the two companies to better meet the challenge of digital advertisers like Alphabet ’s (GOOGL) Google, but the details of the $35 billion union proved too complex, and the deal unraveled.

Maurice Lévy, Publicis’ longtime CEO, didn’t dwell on the failure, and, in November of 2014, he snapped up Boston digital agency Sapient for $3.7 billion. But the deal-making was a distraction, and Publicis’ performance suffered.

In December, Publicis unveiled a restructuring. The company announced that it would abandon the traditional silo-type structure of communications groups in favor of a more integrated model focused on creative, media, digital, and health-care solutions. Critics say Publicis is simply creating new silos.

THE NEW STRUCTURE, the company says, is intended to serve clients more effectively, but it could also help Publicis tighten its grip on costs and act as a lever to push up its operating margin. Operating margin fell 80 basis points (0.8%), to 15.5%, last year due to the costs of consolidation and restructuring.

Lévy, 74, who is due to retire next year, says that Publicis is putting in place foundations that will allow the company “to fire on all cylinders in 2017.”

He anticipates that 2016 will be a year of transition with only modest growth but that the trifecta of the U.S. presidential election, the Summer Olympics, and the European soccer championships could show positive effects in the year’s second half.

Publicis is forecast to earn €998 million, or €4.56 a share, on revenue of €9.89 billion in 2016. Next year, it is expected to report €1.09 billion in net income, or €4.94 a share, on revenue of €10.26 billion. Last year, it earned net income of €901 million, or €4.39 a share, on €9.60 billion in revenue.

In the absence of major acquisitions, Publicis could look to return more cash to shareholders in future. Its shares offer a 2.6% dividend yield.

“This business isn’t broken,” says Pivotal Research Group senior analyst Brian Wieser. “People don’t realize how durable agencies are.” Given favorable long-term trends, he rates the stock Buy with a 2016 year-end price target of €72, or about 16% above the closing.

>>> Barrons WeekEnd: positive on Ford, GM, INTC, SEE, AJRD; cautious on TSLA

Barrons weekend: positive on Ford, GM, INTC, SEE, AJRD; cautious on TSLA 

Cover story: Though sales are booming for GM and F, shares are "in the breakdown lane"-perhaps because of worries about economic woes in China and rising levels of buyer incentives at rivals and subprime auto loans in the U.S.-but they offer generous dividends and a potential 25% upside during the next year. 

Features: 1) Positive on F: Under chief executive Mark Fields, automaker "is embracing the future with a passion" with such efforts as its Ford Smart Mobility subsidiary that will study new business opportunities and revenue streams from tech initiatives; 2) Cautious on TSLA: With the launch of its Model 3, Tesla is "walking a fine line in becoming a mass-market auto maker," given the range of delays and other problems it has faced with its earlier models; 3) Positive on INTC: "There's a risk that Intel could trim its financial guidance for this year, but also a likelihood that by year's end, it will return to sustainable growth for the first time in seven years"; 4) Positive on SEE: Chief executive Jerome Peribere led the company through a restructuring and rebranding campaign, and it has become "an innovative, savvy operator"; 5) Positive on AJRD: Shares of jet-propulsion-system manufacturer are down after it lost a $100M account from United Launch Alliance, but it has other potential growth streams and shares are likely worth twice their current price. Tech Trader: Positive on FB: Search giant joins a growing crowd of rivals, including MSFT, BIDU, AAPL, AMZN, and IBM, as it seeks to leverage machine learning, wherein computer systems observe human behavior and learn how to perform human-like functions.

Trader: Liz Ann Sonders, chief investment strategist at SCHW, says investors care more about figures that are better or worse than expected than about results that are absolutely good or bad; Cautious on AXP: Card company has the resources, ability, and determination to adapt to a changing market; doing so will take time-but the case for long-term upside is better than the case for downside; "When the sell-side analyst view on a stock is monolithic, whether bullish or bearish, it's typically dead wrong." Advisor Rankings: Barron's list of the Top 100 Financial Advisors is topped by Andy Chase, Gregory Vaughan, Brian Pfeifler, and Lyon Polk of Morgan Stanley Private Wealth Management, and Mark Curtis of Graystone Consulting at No. 5; Costs related to the newly passed fiduciary rules are likely to be expensive for the industry, and could force smaller broker-dealers to merge; Joe Montgomery of Wells Fargo Advisors discusses why retail investors should care about the management of pension funds, foundations, and other large investment pools. 

Profile: Michael Weilheimer, portfolio manager, Eaton Vance Income Fund of Boston, seeks to protect against downside while finding securities that offer upside even in volatile markets (top ten holdings: EV Cash Reserves Fund, Alphabet Holding, First Data, Laureate Education, Jaguar Holding II and Pharmaceutical Product Development, XPO Logistics, Alere Convertible, Reynolds Group Issuers, T-Mobile USA, MPH Acquisition Holding). 

Interview: Kristian Heugh, portfolio manager, Morgan Stanley Global Opportunity fund, works out of Hong Kong to be closer to investment opportunities in Asia (picks: XRS, Tencent, Naspers, ViroMed, Medy-Tox, Calbee, Hermes International, Burberry, FB). 

Follow-Up: Cautious on SRPT: Whether pharma company's shares go up or down could depend on an FDA advisory committee decision on April 25 related to its Duchenne muscular dystrophy drug, eteplirsen. 

European Trader: Positive on Publicis Groupe: Advertising major lost ground following a scuttled tie-up with OMC, but "there are signs the French company is shaping up and its stock could rebound." 

Asian Trader: Tokyo wants a weaker yen to spur exports and promote growth, but the Bank of Japan may have only one remedy: buy Japanese stocks to keep quantitative easing afloat and stimulate the Abenomics government-spending program. 

Emerging Markets: Based on the latest International Monetary Fund update, "the worst may be over for many emerging-market countries, but investors need to watch where they step in trying to avoid the many risks remaining." 

Commodities: Natural-gas futures "might look like a classic buy-low opportunity in a market about to rebalance, but it isn't-at least for now." 

Streetwise: Positive on ALK: Carrier's deal for VA makes sense in the long run, says Wolfe Research analyst Hunter Keay, because it faces growing competition from larger rivals such as DAL.

Reuters - Iran seeks EU leverage to get financial concessions from U.S.

Iran seeks EU leverage to get financial concessions from U.S.

Iran, seeking European leverage to secure better terms from the United States following last year's nuclear deal, asked the European Union to put pressure on Washington to let it into the global financial system.

In a visit to Tehran by a high-powered EU team in which both sides spoke of a significant expansion in economic and energy ties, Iran's Foreign Minister Mohammad Javad Zarif welcomed EU support for its bid to join the World Trade Organization and spoke of a "new beginning" in relations with Europe.

EU foreign policy Chief Federica Mogherini, whose team of seven commissioners was the biggest to visit Tehran in more than a decade, said it was in Europe's interest to make sure European banks felt confident to do business in Iran.

But she chided Tehran for holding ballistic missile tests despite last year's nuclear deal and said the EU would continue to stand firm on human rights violations in Iran.

Following last year's nuclear deal, world powers led by the United States and the EU lifted most sanctions on the long-isolated Islamic Republic in January in return for curbs on its nuclear program.

Despite the nuclear agreement, some U.S. sanctions remain and U.S. banks remain prohibited from doing business with Iran directly or indirectly because Washington still accuses Tehran of supporting terrorism and permitting human rights abuses.

Some European banks like France bank BNP Paribas or Germany’s Commerzbank AG, once hit by huge U.S. fines for sanctions busting, fear falling foul of the many other restrictions imposed by Washington that remain in force.

The White House said on Friday that the nuclear agreement did not include allowing it access to the global financial system.

"Iran and the EU will put pressure on the United States to facilitate the cooperation of non-American banks with Iran," Zarif said at a news conference in Tehran with Mogherini.

FT : Iran deploys army to bolster support for Syrian president

Iran deploys army to bolster support for Syrian president

Iran has deployed the regular army in its first overseas operation since the 1979 Revolution to bolster Syrian leader Bashar al-Assad amid fears in Tehran that Russia may agree to his removal.
Iran’s elite Revolutionary Guards have maintained a discreet presence in Syria since the civil war began five years ago. But reports of the deaths of Iranian commandos in Syria has shed light over a shift in the Islamic Republic’s policy.

Tehran has kept its army at home for decades and tried to keep conflict at bay through a strategy — manned and managed by the Guards — of fighting its regional rivals through proxies in Iraq, Syria and Lebanon. Syria is crucial to its success. It is on the ‘frontline’ with Israel and is an important bridge to Hizbollah, Iran’s Shia proxy force in Lebanon.
Tehran’s support of Syrian president, Bashar al-Assad, has been key to his survival in a five-year civil war that has left hundreds of thousands of people dead and about half of the population displaced.
Diplomats based in Damascus believe that Iran has boosted its military presence in Syria in an attempt to increase its influence amid an apparent rift between the Assad regime and its other patron, Russia, over how to handle peace talks. “They [the Iranians] saw it as an opportunity to move closer to the regime,” said one official.
Iran has vowed that it will not compromise on the fate of Mr Assad, and backs his offer to include opposition figures in a national unity government while ruling out a “transitional governing body with full executive powers” -- the formula agreed at talks in Geneva in 2012.
Iranian leaders are concerned that Moscow, which launched an air campaign in support of the Syrian regime last September, could side with Washington to push for the removal of Mr Assad. A partial pullback of Russian forces last month was widely interpreted by western and Iranian observers as a message to the Syrian president.
Ali Akbar Velayati, a senior adviser to Iran’s supreme leader Ayatollah Ali Khamenei, said last week that Iran would not accept any measure which would cut the Syrian president’s term, which is due to end in 2021. In comments which could be directed at Russia as well as the US, he said: “Americans say Bashar al-Assad should go but Assad should stay as the legal Syrian president until his term finishes. Any conditions for his departure are our red line.”

A conservative political analyst said the difference between Iran and Russia was not threatening their alliance — at least not yet. “We have not built our influence in the region to lose it easily to Moscow or anyone else,” he said. “At the end of the day, it was us who brought Russia to Syria to prevent the fall of Damascus and counterbalance US and Saudi policies.”
In the meantime, the high casualty rate among Revolutionary Guards — whose “military advisers” are reckoned by a western diplomat in Tehran to number fewer than 10,000 — has prompted Tehran to deploy its regular army to bolster Mr Assad’s forces in Syria.
Local media in Iran have named more than 150 Guards who died in more than a year of fighting in Syria. At least four army commandos were reported to have been killed over the past week, almost as soon as the news of their departure was released. Unofficial reports put the death toll much higher.
For the Islamic regime, it is a price worth paying. “Any undemocratic attempt to remove Assad will lead to a genocide of Alawites in Syria and decrease in Iran’s influence which we will not let happen no matter how much it is going to cost us,” said a conservative analyst in Tehran.