Ford to scale back China investments

This is an audio transcript of the FT News Briefing podcast episode: ‘Ford to scale back China investments’

Sonja Hutson
Good morning from the Financial Times. Today is Tuesday, May 16th, and this is your FT News Briefing.

[MUSIC PLAYING]

Ford’s EV business in China is losing its charge. Some prominent investors say companies’ share buybacks have gone too far. Plus, Greece is making an economic comeback, but not everyone’s better off. I’m Sonja Hutson, in for Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

US carmaker Ford plans to scale back future investments in China. Chief executive Jim Farley told the FT that there’s no guarantee western carmakers will win against Chinese electric vehicle rivals. Ford has seen its market share in China dropped by half over the past seven years. Ford isn’t the only carmaker up against cheaper or better Chinese EVs. But unlike Ford, Volkswagen plans to boost spending in the country to try and claw back market share.

[MUSIC PLAYING]

Share buybacks have grown to record levels. Last year, the world’s 1,200 biggest companies bought a collective $1.3tn of their own shares. That’s three times as much as a decade ago. It’s gotten to the point where some big investors like Fidelity and Federated Hermes are saying they’re concerned. Here’s the FT’s Arjun Neil Alim.

Arjun Neil Alim
Technically, buybacks are often done in order to reduce the number of shares in the market and so boost the price. But it’s sort of like what one person I spoke to compared it to gambling with the money. You’re never sure whether it actually will increase the price.

Sonja Hutson
So in addition to the uncertain benefits, there’s also criticism that share buybacks are just short-term moves to boost the stock price in a way that enriches management.

Arjun Neil Alim
I think that is one of the main concerns that the reason share buybacks are increasing is really to benefit the management of these companies, to try and boost the share price artificially. And it’s, they’re concerned that it’s a waste of money. One fund manager we speak to calls buybacks an environmental hazard, and he laments the fact that Europe is also seeing an increase in this trend. I think they’re worried that it’s pushing companies to spend money on something that isn’t investing in the future of the company, you know, investing in their hardware or investing in their people.

Sonja Hutson
Arjun Neil Alim is the FT’s asset management and wealth reporter.

[MUSIC PLAYING]

Greece has made a remarkable economic recovery. The country was the epicentre of the eurozone debt crisis more than a decade ago. Now, it’s boasting high growth and soon could see a critical boost to its international credit rating. But the quick turnaround has left some people behind. I’m joined now by the FT’s Eleni Varvitsioti. She’s our correspondent in Athens. Hi, Eleni.

Eleni Varvitsioti
Hi, Sonja.

Sonja Hutson
Eleni, what does it look like in Athens now versus what it looked like during the height of the crisis?

Eleni Varvitsioti
It’s a completely different image and sentiment, actually. Athens is really bustling, is full of tourists. The tourism season has expanded. In the past, you would see only tourists in the summer months. Now you have tourism all year round. There is a big boom in construction. People have been starting to renovate their houses. They’re turning them into Airbnbs. And there’s a great lack of working hands in construction, in tourism, in many industries, which show that there’s a boom going on.

Sonja Hutson
So during the crisis, Greece had to close some banks. It had to sign onto reform programs. I mean, things were bad. How did the country manage to reduce its debt so dramatically and turn things around? What’s behind the recovery?

Eleni Varvitsioti
Greece still has the highest debt ratio in the eurozone, but it has significantly reduced it in the past year. This has been aided by the high inflation, but also the reforms made by the government. Even though Greece’s numbers now look really good, growth is really high. We should not forget that Greece went through three austerity programs and that had left their mark on a country that now has one of the highest rates of relative poverty in the EU. Up until a few weeks ago, the minimum salary was lower than it was 12 years ago. So you can understand that more than a decade on from Greece’s default, workers remain far worse off.

Sonja Hutson
Is there a way to get people back on their feet without undoing all the work that’s been done through austerity measures?

Eleni Varvitsioti
The only ways to do it to increase growth, I mean, the more growth, the higher the growth is in the country, the more jobs are gonna be available, the higher the wages are gonna be. I think that’s the only way out.

Sonja Hutson
So the next big development would be if the global ratings agency decides to upgrade Greece’s rating from junk to investment grade. And this is really important because it affects Greece’s ability to borrow on global debt markets. There’s also an election coming up. What role will the election play in this decision?

Eleni Varvitsioti
Listen, all credit rating agencies before crisis in 2009 had Greece as an A country. They hadn’t foreseen the crisis that would follow. And I think now they’re extremely cautious in giving Greece back the investment grade. So what they’re doing is they’re waiting for the elections to be over. They don’t wanna leave any chance of political instability. And then they are willing, as they have signalled, to upgrade the country. On the 21st of May next Sunday, Greece is heading to the polls. Most probably in one form a government because the numbers are not gonna add up for a government to form. So Greece is gonna go on a second time, most probably to the polls on the 2nd of July. I guess the predictions are that after a government is formed, then the rating agencies are gonna consider its full upgrade.

Sonja Hutson
Eleni Varvitsioti is the FT’s Athens correspondent. Thanks, Eleni.

Eleni Varvitsioti
Thank you for having me, Sonja.

[MUSIC PLAYING]

Sonja Hutson
Before we go, British officials have been cracking down on unhealthy food. There’s a new rule banning large stores from putting items high in fat, salt or sugar, near checkouts and entrances. It doesn’t sound good for Krispy Kreme, since the US doughnut chain is planning to grow its sales in Britain. But Krispy Kreme CEO Mike Tattersfield told the FT that consumers can be trained to look for his doughnuts in other parts of the store. He also wasn’t too worried about competition from healthier alternatives. He told our correspondent, and I quote, “No disrespect to kale, but it’s just not that much fun to share.”

[MUSIC PLAYING]

You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

[MUSIC PLAYING]