The two carmakers are in talks about forming an alliance to develop engines and build vehicles together in Europe, a person familiar with the situation said yesterday. A deal between the two automakers could link the 11 factories of GM’s Opel unit with PSA’s 12 European manufacturing plants.

Some analysts, including Max Warburton at Sanford C. Bernstein in London, are skeptical that the alliance will make much difference in the companies’ outlooks.

“Two wrongs don’t make a right,” he said. “PSA and Opel can’t restructure independently. We see no reason why putting PSA and Opel together would speed up the process of plant closures, as both have excess capacity.”

The companies have failed to end losses in Europe after extensive cost-cutting programs in recent years. The prospects for a turnaround aren’t improving with auto demand in the region poised to drop for the fifth straight year in 2012 as the sovereign debt crisis unsettles consumers.

Political interference and strong unions have hampered both companies from shutting factories and laying off workers to rein in costs. PSA is projected to use just 62 percent of its European capacity this year, compared with 74 percent at Opel, according to LMC Automotive in Oxford, England.

Carmakers risk losses when they use less than 90 percent of their capacity, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen.

Cutting Investment

“We routinely talk with others in the industry, but have no comment beyond that,” Klaus-Peter Martin, a GM spokesman, said yesterday. Peugeot spokesman Jonathan Goodman reiterated comments from Feb. 21 that the carmaker was in discussions on possible partnerships, without saying with whom.

Peugeot, Europe’s second-largest carmaker, last week announced plans to reduce investments and marketing spending as part of a goal of saving 1 billion euros, an increase from a previous 800 million euros. The steeper cuts come after the car- making division lost 92 million euros in 2011. The Paris-based manufacturer also aims to sell 1.5 billion euros in assets to reduce debt, which widened to 3.4 billion euros last year.

General Motors is planning more cost cuts for its unprofitable European unit after the last turnaround plan failed to end losses. The Detroit-based automaker’s Europe business, which is chiefly Opel and its U.K. sister brand Vauxhall, lost $747 million last year before interest and tax.

Shrinking Share

While that’s an improvement from $1.95 billion lost in 2010, GM had planned to break even in the region until November, when it pulled back the forecast as the European outlook worsened.

GM’s restructuring of its European operations may cost at least $1 billion, the average estimate of three analysts surveyed by Bloomberg last week said.

The lack of distinctive models has eroded market share for the two groups. Peugeot’s share in Western Europe slumped to 12.6 percent in 2011 from 13.7 percent last year after its sales in the region fell 8.8 percent. Opel and Vauxhall’s share slipped to 7.3 percent from 7.4 percent. The GM brands controlled 12.6 percent of the market in 1993.

“From a U.K. perspective, Peugeot, Citroen and Vauxhall are probably the weakest major brands,” said Simon Empson, managing director of Broadspeed.com, a discount car website. “This is grasping at straws. What could you combine? They’re going after exactly the same customers.”

Potential Savings

Peugeot’s best-seller is the subcompact 207 line, which starts at 12,350 euros, and vies with Opel’s 11,825-euro Corsa. Opel’s 16,770-euro Astra compact, its top-seller, rivals Peugeot’s 17,050-euro 308 model.

Savings from a GM-Peugeot alliance may ultimately approach $2 billion and $3 billion for the Detroit automaker, according to an estimate by Morgan Stanley.

“Any restructuring of GM Europe would require cash resources from Detroit,” Adam Jonas, an analyst with Morgan Stanley, wrote as lead author in a note to investors. “We expect an alliance would help GM get more bang for its buck, and would not expect significant capital commitment over and above that required to initiate joint projects.”

GM could record savings by sharing vehicle platforms with Peugeot and tap into technology such as Peugeot’s diesel engines, Jonas wrote.

‘Who’s Going to Cut?’

The alliance possibilities cited by analysts are less far- reaching than the 1999 transaction in which Renault SA and Nissan Motor Co. bought stakes in each other. Robert Lutz, a former GM executive, said that year that Renault would be better off sinking $5.4 billion in the ocean rather than buying a stake in Nissan.

Lutz by 2005 had changed his mind, citing “the personality, drive, firm will and daring of Carlos Ghosn,” the CEO of both automakers.

The Renault-Nissan alliance is worldwide while a GM-Peugeot one would involve two money-losing European units.

“The problem of bringing together two generalists in the same region is who’s going to cut anything?” said Colin Couchman, a London-based analyst at IHS Automotive. “There’s massive crossover between the brands. They both have the same overcapacity problems and both have political interference.”

French Labor Minister Xavier Bertrand warned Peugeot Chief Executive Officer Philippe Varin against cutting jobs as a result of a deal with GM.

A deal would be good for Peugeot as long as it upholds “the long tradition of maintaining employment in France,” Bertrand said yesterday in an interview with the country’s Europe1 radio station. “It is evident that a group like PSA Peugeot, which has this tradition, has the responsibility of maintaining this tradition.”

French Elections

France’s government has taken an active role in protecting local jobs. President Nicolas Sarkozy, who’s running for re- election this year, summoned Varin on Nov. 17 to ask him to reconsider plans to cut as many as 6,800 jobs, including temporary staff employed by partners. The French carmaker last year distanced itself from a leaked proposal to close a French plant after the government described it as “unacceptable.”

German Chancellor Angela Merkel has also shielded German factories. She brokered the sale of Ruesselsheim, Germany-based Opel to protect jobs. The deal ultimately fell apart when GM backed out in November 2009 after exiting bankruptcy. A restructuring agreement stemming from then prohibits plant closures until 2014.

Backed by that agreement, Opel’s unions don’t feel threatened by a potential deal with Peugeot.

“It could be positive if we bring our respective strengths together,” said Rainer Einenkel, the head of the works council at Opel’s plant in Bochum, Germany. “I don’t see any competition with Peugeot because we build the more beautiful cars.”

The loss widened to 29.8 billion rupees ($606 million) in the fourth quarter, from 974.8 million rupees a year earlier, Ranbaxy said. Sales rose 79 percent to 37.4 billion rupees, helped partly by exclusive sales in the U.S. of generic Lipitor, which the Indian company began selling in November.

The December settlement relates to accusations by the U.S. Food and Drug Administration and the Department of Justice of manufacturing problems and fraudulent testing. The settlement and provision bring “greater predictability to our business in the U.S., one of our largest markets,” Chief Executive Officer Arun Sawhney said yesterday.

U.S. sales more than tripled to 19.7 billion rupees in the fourth quarter, the company said. Sales were largely boosted by the introduction of the generic Lipitor in partnership with Teva Pharmaceutical Industries Ltd. Under the terms of the deal, Petach Tikva, Israel-based Teva would get a share of the profits from the first six months of sales.

“The Lipitor numbers look pretty good, but the payment to Teva is very high,” Nitin Agarwal, a Mumbai-based analyst at IDFC Securities Ltd., said in a telephone interview.

Teva Payment

Ranbaxy didn’t disclose the amount paid to Teva citing agreement terms. Still, other operating expenses, which include profit-sharing related contractual payments, more than doubled to 14.4 billion rupees from a year earlier, it said.

Ranbaxy rose 0.4 percent to 440.30 rupees in Mumbai yesterday, while the benchmark Sensitive Index fell 0.4 percent.

The drugmaker expects to achieve $2.2 billion in revenue this year, without including any generic drug sales where it has exclusivity rights, it said in the statement.

“The guidance from the company is quite strong,” said Priti Arora, an analyst at Kotak Institutional Equities in Mumbai. “I think the figure is pretty ambitious and may be difficult to achieve,” she said.

The company is satisfied with the progress it’s making in resolving long standing issues with the U.S. regulators, Sawhney said in the statement. The FDA imposed a temporary ban on more than 30 generic drugs made at the Indian drugmaker’s Paonta Sahib and Dewas plants in September 2008, three months after Tokyo-based Daiichi Sankyo Co. agreed to buy a controlling stake.

A slump in the rupee increased Ranbaxy’s cost of hedging, a tool companies use to protect against price swings. The rupee dipped 7.7 percent against the dollar in the three months ended Dec. 30, and was the worst performer among major Asian currencies tracked by Bloomberg. Ranbaxy’s foreign-exchange losses related to derivatives totaled 8.4 billion rupees during the same period.

In November, Mario Monti, the former European Union official and academic, was tapped by Italy’s President to form a government after Silvio Berlusconi’s regime crumbled. At the time, heavily indebted Italy looked like the next domino to fall.

Under Monti as Prime Minister, Italy has done the unthinkable: regained investor confidence. His government has pushed through €20 billion ($26 billion) in austerity measures, and moved to deregulate services and reduce red tape. He’s pursuing plans to simplify the tax code and overhaul rigid labor rules. Helped by the European Central Bank’s liquidity injections into the euro area’s banks, Italy now enjoys lower borrowing costs: The yield on a 10-year bond has fallen by about 1.5 percentage points since Monti took office, easing fears the nation would struggle to pay its $2.5 trillion debt. Monti “has been a game-changer,” says Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.

Italy is hardly solved: Left-wing unions bitterly oppose Monti’s push to change labor laws, growth is almost nonexistent, and that debt isn’t going anywhere. Yet Monti is launching a new crusade: He wants Europe to stop focusing exclusively on austerity and cultivate growth as well. He’s not talking about growth inflated by stimulus packages and more borrowing, rather a program of deregulation that would unleash growth in Europe.

The region’s single market still has a surprising number of trade barriers. Among other measures, Monti would break up professional guilds, ease labor rules in the EU, and enforce antitrust laws more strictly. It’s hard to figure out how much growth such a policy would trigger. Angel Gurría, head of the Organization for Economic Co-operation and Development, said on Feb. 6 that Monti’s efforts in Italy, including deregulation and labor reforms, could boost Italy’s economy by 8 percent over the next decade.

Monti’s pro-growth argument has set him at odds with German Chancellor Angela Merkel and French President Nicolas Sarkozy. “Merkozy” has prescribed the bitter medicine of spending cuts and tax increases for Greece, Italy, and other ailing euro zone members. But Monti has the credibility to debate on equal footing. As EU competition commissioner in the 1990s, when Sarkozy and Merkel were still junior ministers, he slapped a record €497 billion fine on Microsoft (MSFT) for antitrust violations. Over the years he has repeatedly criticized France and Germany for being the first to violate EU budget rules in 2003. On Feb. 15, when the Greeks were being pushed for more concessions in bailout talks, Monti told reporters that Athens was under “excessive” strain from austerity measures that have kept Greece in recession. The same day he told the European Parliament that “resentments” building up in the EU risked breaking it apart. “There are no good guys and bad guys—we all need to feel jointly responsible.”

Hours before Europe’s leaders unveiled a bailout for Greece on Feb. 21, Monti announced that the leaders of 12 EU states had written to European Council President Herman Van Rompuy and European Commission President José Manuel Barroso, urging them “to answer the plea” of Europeans to help promote growth by eliminating rules that quash competition in key sectors such as financial services and energy. Italy’s Corriere della Sera claimed the letter was by Monti and U.K. Prime Minister David Cameron. “The letter pretty much reflects the punching line of Monti,” says Silvio Peruzzo, an economist at Royal Bank of Scotland (RBS). Merkel and Sarkozy didn’t sign.

While Merkel has praised Monti for “remarkable measures” in Italy, she has been less enthusiastic about his deregulation drive. “I’m still looking for what more we should do,” she told reporters in Berlin on Jan. 18. “When I have figured that out, I will tell you.” Monti’s “reasonable assertiveness” is turning into “self-confidence, which some people in Germany may feel is slightly misplaced,” says Christian Schulz, economist at Berenberg Bank. Still, Monti’s proposals have struck a chord. “Balanced economic growth is key to the survival of the single currency,” says Riccardo Barbieri, economist at Mizuho International in London. “If Italy makes further progress putting its house in order, Monti’s proposals will gain in influence.”

Apple is appealing a Chinese court ruling that the trademark belongs to a mainland unit of Proview International Holdings Ltd. At the time Apple says it bought those rights, the Shenzhen subsidiary was controlled by creditors including Bank of China Ltd. and China Minsheng Banking Corp., according to Proview founder Rowell Yang.

Losing its Feb. 29 appeal would open Apple to lawsuits seeking damages and enable a nationwide ban on iPad sales in the Cupertino, California-based company’s biggest market outside the U.S. The dispute revolves on whether Proview’s Taiwan unit, to which Apple paid 35,000 British pounds ($55,163) to use the iPad name in China, had the right to sell it or whether that rested with the Shenzhen unit and its creditors.

“Right now, the most valuable asset of Proview Group is the iPad trademark registration in China,” said Eugene Low, a trademark lawyer at Mayer Brown JSM in Hong Kong. “Assuming the creditors have control of the affairs of Proview Shenzhen, it might be in their best interest to get a settlement as quickly as possible to monetize the Proview assets.”

‘Not True’

After Proview Technology (Shenzhen) Co. defaulted on loans, the Shenzhen Intermediate People’s Court in March 2009 appointed Bank of China and Minsheng to lead a reorganization of the company, Yang, who remains chairman of the unit, said in a Feb. 21 interview.

“We can’t make any agreements without the creditors,” Yang said. “We are under the monitoring and control of the court.” Chinese court documents are not publicly available to verify the claim.

No one in Shenzhen, a city neighboring Hong Kong, knew the Taiwan unit signed away the China trademarks, Yang said.

Apple says that’s not true. Proview “refuses to honor their agreement with Apple in China,” said Carolyn Wu, a Beijing-based Apple spokeswoman. She declined to comment further, as the case is pending before the courts.

Proview’s wholly owned Shenzhen subsidiary obtained the iPad trademark in China in 2001, according to a Feb. 3, 2010, regulatory filing with the Hong Kong stock exchange.

The mark was obtained for a desktop terminal with touch- screen display called the Internet Personal Access Device, or iPad, that the company developed starting in 1998, Yang said.

Court Rejects

Apple sued Proview’s Shenzhen-based unit in 2010, claiming ownership of the iPad trademark in China on the basis of the December 2009 contract that the U.S. company says gave it global rights to the name, including in China. The Shenzhen Intermediate People’s Court rejected Apple’s claims on Nov. 17.

“If the plaintiff wants to buy trademarks from the defendant, it should do so according to China’s laws and regulations by signing contracts with the defendant,” the judgment said.

The court said the purchase agreement was signed in the name of Proview’s Taipei-based subsidiary, Proview Electronics Co., which failed to demonstrate that the transfer was approved by the Shenzhen unit that owned the mark.

Apple appealed to the Higher People’s Court of Guangdong, said Ma Dongxiao, a lawyer representing Proview at Grandall Law Firm in Beijing. Hearings begin Feb. 29.

London Link

Proview “hasn’t yet decided the final claim amount” it will seek from Apple, the company’s lawyer, Roger Xie, said last week. A 10 billion-yuan ($1.6 billion) sum cited by China’s state-run Xinhua News Agency in December was “preliminary,” he said.

Apple bought Proview’s trademarks through a U.K.-based unit called IP Application Development Ltd., or IPADL. Haydn Wood, who signed the agreement with Proview Electronics on behalf of IPADL, declined to comment on the agreement or lawsuits when contacted by Bloomberg News.

Sales of iPads reached 32 million worldwide last year, earning revenue of $20.4 billion. At $480 billion, Apple’s market capitalization surpasses the $454 billion value of all of Mexico’s listed companies, data compiled by Bloomberg show.

Apple has itself to blame for failing to properly secure rights for the China market, said Ray Mai, the Shanghai-based lawyer who represented Proview in the 2009 talks with IPADL.

Apple Rush

“At that time, Proview was not in good condition,” said Mai, whose signature is on the sales agreement. “On one side is this nearly bankrupt company, on the other is one of the strongest companies in the world. When we signed, Apple dispatched a lot of famous lawyers in front of me, very big law firms.”

Mai was outside counsel for Proview at the time and no longer represents the company, he said in a Feb. 17 phone interview. A copy of a business card from 2009 with Mai’s name on it described him as “director and lawyer” of Proview Technology (Shenzhen)’s legal department.

Apple was rushing to obtain trademark rights for the iPad name so it could roll out the product, Yang said. Then-Chief Executive Officer Steve Jobs announced the iPad on Jan. 27, 2010, more than a month after the Proview contract was signed Dec. 23. Apple didn’t grasp the nature of the relationship between the Shenzhen trademark holder, its banks and the courts, Yang said.

“The banks controlled Proview Shenzhen from March 2009,” Yang said. “We needed bank approval for any sale of assets.”

Bank of China is still a Proview creditor, according to the Shenzhen-based press officer of the nation’s fourth-largest lender by market value, who declined to be identified citing company policy. An official at Minsheng Bank, who also declined to be identified, confirmed creditors control Proview’s Shenzhen assets. The banks declined to comment on the Apple case.

Rise, Fall

The Proview Group was founded by Yang in Taiwan in 1989 as a maker of televisions and computer displays, and went public eight years later in Hong Kong.

By September 1999, it was among the world’s 10 biggest makers of computer monitors and planned to reach the top five “in the near future,” its annual report for that year shows. Sales expanded 10-fold from HK$1.77 billion ($228 million) in 1997 to HK$17.4 billion in 2008, when the U.S. subprime mortgage crisis expanded into a global slowdown.

Proview’s sales plunged 74 percent to HK$4.46 billion in 2009, when it lost HK$2.91 billion. As falling sales eroded cash flow, Proview units defaulted on payments to suppliers and creditors, the company said in its annual report that year.

Delisting Move

“The Shenzhen factory, the group’s primary manufacturing base, could only continue its operation with the assistance of the municipal government and the Bank of China and other creditor banks,” it said.

The company last published results in March 2010, for the six months ended Dec. 31, 2009. It had a loss of HK$755.8 million and a deficit attributable to equity holders of HK$2.37 billion. Bank borrowings stood at HK$1.8 billion.

Proview’s Hong Kong shares have been suspended since Aug. 2, 2010. The Hong Kong stock exchange on Dec. 30 gave Proview a third and final warning that it would be removed from the bourse by June 29 if it failed to publish results and demonstrate sufficient working capital for 12 months.

On Dec. 2, Proview announced it had struck an agreement with investor Rally Praise Ltd. to restructure the company and raise capital. No record of a company with that name could be found using Internet and registry searches.

Export Threat

Meantime, Proview is taking the fight to Apple. The company filed complaints to more than 40 local branches of the Administration for Industry and Commerce, according to Proview lawyer Ma. Court actions have been lodged in Shanghai, Shenzhen and Huizhou, he said.

Pudong District Court in Shanghai today rejected Proview’s application for an injunction against sales of iPads in the city to allow the Guangdong court to rule on who owns the trademark. Proview will appeal, Xie said.

Apple’s Wu said she didn’t immediately have information available on the case.

The decision of the Guangdong Higher People’s Court will likely be final, said He Fang, an intellectual property lawyer at Rouse & Co. International in Shanghai. In exceptional cases, litigants who lose a second decision can refer their cases to the Supreme People’s Court, the nation’s highest, He said.

Proview has also applied to the Customs Bureau to block exports as well as imports of iPads, it said last week.

“China’s Customs Bureau has powers not just on imports, but on exports, too, making it different from other countries,” He said. “Most of Apple’s iPads are manufactured in China, so if the Customs Bureau imposes restrictions on exports, then it becomes a global issue for Apple.”

–Edmond Lococo and Mark Lee, with assistance from Stephanie Tong in Hong Kong, Jun Luo in Shanghai, Beth Mellor in London and Adam Satariano in San Francisco. Editors: Ben Richardson, Michael Tighe

The protracted global financial crisis has led to a wide-ranging search for culprits, including blind regulators, greedy speculators, Chinese dumping, and a global market economy that lacks both a social and time horizon. But could it be that deeply rooted misbehavior in trading and board rooms can be explained by “animal spirits,” or what Keynes called a spontaneous urge to action—albeit in the wrong direction? Could it be that male domination of market finance results in excessive speculation and risk-taking at the expense of global stability? Testosterone, rather than neurons, may push male egos into ever-more-complex speculative bets, a gambling binge made possible by advanced technology, mathematical techniques, and globalization.

It’s well established that male managers tend to focus on fast, short-term abstractions, while females place more importance on the long-term social and ethical dimensions of management. Research by Carol Gilligan illustrates that women have a different kind of moral voice than men—a voice of connection and caring vs. the male belief in abstract justice. A recent study at the University of Chicago Booth School of Business shows that gender differences in financial risk aversion have a biological basis and affect economic behavior.

Women also remain underrepresented in leadership positions. A 2010 European Commission study noted that none of the governors of European Union central banks were women and that 82 percent of the key decision-making positions were filled by men. Among the largest companies listed on European stock exchanges, only 11 percent of board memberships are filled by females. (The only exception is Norway, where 42 percent of board members tallied by the EC were women, largely due to a 2006 quota imposed to force equality.) And on the Financial Times‘s 2010 and 2011 lists of the top 50 women in world business, fewer than 20 percent worked in the financial services sector.

A few noteworthy exceptions spring to mind, including Anna Botin at Banco Santander (STD), Christine Lagarde at the IMF, and Wu Yi, China’s highly respected former Vice-Prime Minister of Finance. But the overwhelming and disturbing truth is that global finance is both male-dominated and sick. Perhaps it’s time to turn “the old boy’s club” inside out and select women to direct the financial sector. It could make for softer landings. The German Family Minister has proposed a quota of 30 percent women for higher-level management positions (to overcome the pitiful 3.7 percent placement of women in top German management positions today). A 51 percent quota in the financial sector might be a more appropriate target. Like most “peripheral” European countries, France is light years behind, as regards gender equality.

All in all, a two-fold rebalancing is urgently needed. First, the academic world must put greater emphasis on grasping the institutional and structural dimensions of the financial markets, instead of continuing to teach Pavlovian finance based on obsolete technical tools. (This requires putting such subjects as compliance, regulation and law, financial crisis analysis, economic intelligence, psychology, and ethics on the front burner). Second, a gender rebalancing in business might well result in better risk management and lower volatility. The sustainability of market finance would improve. And a better work ambiance in the office would be an additional benefit.

Brazilian contractors teamed up with companies in Argentina, France and South Africa to bid 24.5 billion reais ($14 billion) yesterday for leases to Sao Paulo’s Guarulhos international airport and two other facilities. The auction marked an about-face for President Dilma Rousseff’s Workers’ Party, which abandoned its opposition to private investment in the country’s airports as Brazil struggles to upgrade aging terminals in time for the 2014 World Cup.

Shares in the only listed company among the winners, TPI – Triunfo Participacoes e Investimentos, fell as investors saw the premium it offered to pay as too high, while the leaders of two losing consortiums rose. Groups including Flughafen Zuerich AG, Fraport AG Frankfurt Airport Services Worldwide and operators of London’s Heathrow and Singapore’s airport were also outbid.

“They certainly overpaid, particularly for Guarulhos, well beyond what can be considered fair value,” Daniela Bretthauer, an equities analyst with Raymond James, said by telephone from Sao Paulo.

Rousseff’s government was seeking to raise a minimum of 5.5 billion reais from the auction for the rights to operate the three airports that last year accounted for about a third of Brazil’s 179 million passengers last year and 57 percent of its air cargo.

Political Pressure

Investimentos e Participacoes em Infra-Estrutura SA teamed up with Airports Co. South Africa to bid 16.2 billion reais for a 20-year lease of Guarulhos. That’s almost 4 billion reais more than the second-highest bid by a group that included Fraport, operator of Frankfurt’s airport, the world’s ninth busiest, according to the Montreal-based Airport Council International.

The dominance in the Invepar consortium of employee pension funds linked to state-run companies also raises concern over potential government meddling in the airport’s management, said Mauro Rochlin, professor of economics at the IBMEC business school in Rio de Janeiro.

Rousseff has vowed to keep a safe distance from the airports’ management, and yesterday’s auction was Brazil’s boldest attempt at privatization since the 1990s, when it sold off roads and utilities that suffered from decades of underinvestment. Still, the state will maintain a 49 percent stake in each consortium and via loans from state development bank BNDES will fund much of the improvements.

“The question is how much political pressure the new operators will face,” Rochlin said by telephone.

High Premiums

Sao Paulo-based Engevix Engenharia SA and Corporacion America, which operates Argentina’s airports, offered the biggest premium — more than seven times the 582 million reais minimum bid — to run the airport in the capital Brasilia for 25 years. The two companies are building an airport near the northeastern city of Natal after winning last year Brazil’s first attempt to attract private investors to the industry.

Shares in Triunfo, which together with Paris-based Egis Avia offered 3.8 billion reais to run Viracopos near Sao Paulo for 30 years, fell 3.3 percent yesterday. In contrast, losing bidders CCR SA and Obrascon Huarte Lain Brasil SA, both of them Sao Paulo-based builders, rose 2.5 percent and 5.3 percent respectively as the benchmark Bovespa index remained flat.

“It removed a heavy weight off the stocks,” Victor Mizusaki, a transportation equities analyst at UBS AG in Sao Paulo, said about the losing bidders. “The market was worried about what would be the returns if they had won.”

Losing Bidders

Madrid-based Ferrovial SA, which owns the company operating Heathrow, and Changi Airport Group, which manages Singapore’s main airport as well as projects in China and Europe, made losing bids through eight other groups.

Company spokesmen from Invepar, Engevix and Triunfo declined to comment when contacted by Bloomberg News, while Johannesburg-based ACSA didn’t respond to messages seeking comment. Egis Avia couldn’t be reached after market hours.

Investments in Brazil’s aging airports have struggled to keep pace with air travel that has doubled in the past decade as incomes in Latin America’s biggest economy have risen. Last year, as the world’s fifth-biggest country by land mass trailed only the U.S. and China in volume of domestic air travel, 1 of 20 flights were canceled compared with 1 in 50 in the U.S.

To put an end to crowded hallways and busted escalators, the winning operators are required to invest a total of 16.1 billion reais in the three airports, including building a new terminal in Guarulhos to handle 7 million passengers a year. The government is also weighing the possibility of leasing Rio de Janeiro’s international airport and other travel hubs expected to see a surge in traffic.

“Today’s auction was an important first step but still insufficient,” Robson Andrade, head of the National Industry Confederation, said in a telephone interview from Sao Paulo. “More needs to be done to stimulate private sector participation. There are many airports that require heavy investments.”

–With assistance from Adriana Brasileiro in Rio de Janeiro, Andre Soliani in Brasilia, Andres Martinez in Johannesburg and Tais Fuoco and Ney Hayashi Cruz in Sao Paulo. Editors: Joshua Goodman, Adriana Arai

To contact the reporters on this story: Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net; Jose Sergio Osse in Sao Paulo at josse1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

The generals were scheduled to meet as early as yesterday with senators including Carl Levin, a Michigan Democrat who heads the Senate Armed Services Committee, John McCain of Arizona, the top Republican on the panel, and Joseph Lieberman, a Connecticut independent. All three lawmakers said that the Egyptian delegation canceled at the last minute.

“I assume they were called home because it got too hot” with the charges announced against the Americans, Lieberman, a senior member of the armed services panel, said in an interview today.

Calls and e-mails to the Egyptian embassy weren’t immediately returned.

Obama administration officials and lawmakers have criticized Egypt’s plans to prosecute 43 people associated with non-governmental organizations. State Department spokesman Victoria Nuland said today that the group includes 16 Americans, about half of them no longer in Egypt.

The dispute has strained ties between the U.S. and Egyptian military leaders over the pace of the country’s transition to democracy and raised questions about the future of U.S. aid to Egypt.

‘Prohibited by Law’

Sam LaHood, who works for the International Republican Institute, and Julie Hughes, the Egypt country director for the National Democratic Institute, are among those who face prosecution, Judge Ashraf el-Ashmawy told reporters in Cairo yesterday. He said the groups are accused of “accepting funds and benefits from an international organization” to pursue an activity “prohibited by law” and carrying out “political training programs.”

The Washington-based groups are close to Republicans and Democrats in Congress. LaHood is the son of U.S. Transportation Secretary Ray LaHood, a former Republican House member.

McCain said in a Jan. 26 statement that he was watching “with growing alarm and outrage how the Egyptian government is treating U.S. non-governmental organizations that are working peacefully and transparently to support civil society in Egypt.”

Aid to Army

U.S. aid to Egypt, linked to a 1979 peace treaty with Israel, has averaged about $2 billion a year since then, according to the Congressional Research Service, the nonpartisan research arm of Congress. Most of the aid goes to Egypt’s army.

President Barack Obama must certify to Congress that Egypt is making progress toward democracy for the aid to continue. Levin said today that Obama shouldn’t certify that Egypt is making such progress.

“It is kind of hard to have a normal relationship with the country when we’ve got so many Americans tied up in our embassy,” Levin said in an interview today, referring to an undisclosed number of those facing charges who have sought the safety of the diplomatic compound.

McCain said it is necessary to have “every aspect of our relationship with Egypt examined” until the Americans are removed from any indictment and allowed to leave.

Potential Consequences

White House spokesman Jay Carney today reiterated the administration’s “grave concern” about the crackdown and said that concern is being discussed “with all levels of the Egyptian government.”

Egypt’s action could have consequences that “could potentially affect our relationship and could potentially affect the aid that we provide,” he told reporters without elaborating.

On Feb. 2 and Feb. 3, the generals met with State Department officials, including Assistant Secretary for Near East Affairs Jeffrey Feltman and Assistant Secretary for Political-Military Affairs Andrew Shapiro.

The visits were part of a regular dialogue between the U.S. and Egypt on security assistance, Mark Toner, a State Department spokesman, said on Feb. 3. He said issues related to NGOs were discussed. The Egyptian delegation also met last week with Defense Department officials and with members of Obama’s national security team. The Egyptians visited the U.S. Central Command at MacDill Air Force Base near Tampa, Florida.

Pentagon officials have said the dispute over the organizations should be resolved without jettisoning the U.S. relationship with Egypt.

Calling the General

“The bottom line is that the United States believes this issue needs to be resolved very quickly,” George Little, a Pentagon spokesman, told reporters yesterday.

Defense Secretary Leon Panetta has twice called Egyptian Field Marshal Mohamed Hussein Tantawi, the head of Egypt’s interim ruling body, to discuss the dispute, especially restrictions preventing the Americans involved from leaving the country.

Panetta said he told Tantawi: “Our ability to maintain that relationship is being impacted by how this matter is being handled, and so for that reason urged him to do everything in his power to try to allow these individuals the opportunity to be able to leave the country.”

Tantawi indicated he would “try to help,” Panetta told reporters traveling with him in Europe last week.

“He obviously has to deal now with the parliament, he has to deal with what is an independent judiciary,” Panetta said. “And I said, ‘Welcome to democracy, because I have the same responsibility to deal with the Congress, and they’re concerned about this issue.’”

–With assistance from Viola Gienger and Nicole Gaouette in Washington, Abdel Latif Wahba and Mariam Fam in Cairo and Dahlia Kholaif in Kuwait. Editors: Terry Atlas, Robin Meszoly

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

Feb. 7 (Bloomberg) — Syrian President Bashar al-Assad has turned to his father’s playbook as he seeks to end an uprising that threatens his family’s 40-year reign.

The government’s increasing brutality is reminiscent of 1982 when Hafez al-Assad crushed a rebellion in the city of Hama, killing thousands. Assad is using tanks and artillery in cities where protesters are calling for the end of his rule. At least 174 people were killed on Feb. 4, said the U.K.-based Syrian Observatory for Human Rights, making it one of the deadliest days in the 11-month revolt.

“Assad turned the barrels of his guns on his people in Syria, just like his father,” Turkish Prime Minister Recep Tayyip Erdogan, a former ally of the Syrian leader, said in televised comments today. “We told you to show the public that you’re different than your father. Bashar, you reap what you sow.” President Barack Obama also drew attention to the parallel last week.

Diplomatic efforts to stem the bloodshed broke down Feb. 4, when Russia and China vetoed a United Nations Security Council resolution by western and Arab countries to facilitate a political transition. The prospect of civil war is growing, as Al Arabiya reported defecting Syrian army units are taking tanks with them.

‘Dead-End Street’

Obama has dismissed the idea of using a foreign military force to end the conflict that the UN estimates has already killed more than 5,400 people. Syrian forces yesterday killed 98 people in the central city of Homs, continuing an assault that started last weekend, Al Jazeera reported, citing activists. The nationwide toll yesterday was 128, Al Jazeera said.

“It’s very important for us to resolve this without recourse to outside military intervention, and I think that’s possible,” Obama said yesterday on NBC’s Today program.

Turkey is using “all diplomatic channels” to work with the international community and initiate new measures to stand by the Syrian opposition and stop Assad’s deadly crackdown, Erdogan said. “I’m calling on Assad to remind him one more time that he is traveling down a dead-end street.”

Images aired by Al Arabiya yesterday showed civilians in Homs fleeing as gunfire echoed through empty streets and smoldering buildings damaged by shelling. The army also shelled Idlib in the north and Zabadani near the Lebanese border.

The Syrian Free Army, a group of soldiers who defected to the opposition, will stage a retaliatory counter attack in the province of Homs, Aref al-Hmoud, a leader of the force, told BBC’s Arabic television service by telephone from Hatay, Turkey.

‘Father’s Playbook’

Assad “is returning to his father’s playbook because he still has Russian cover at the UN,” Andrew J. Tabler, a fellow at the Washington Institute for Near East Policy, said in response to e-mailed questions. “The struggle will now head toward civil war and outside powers will bet on various sides.”

The current president’s father encircled Hama, a city known for its wooden waterwheels, with tanks and artillery and then bombed residential neighborhoods known to support the Sunni Muslim rebellion. As many as 10,000 people died, according to estimates cited by groups including Human Rights Watch.

The daily death toll in Syria has exceeded 60 at least three times this year, about twice the average of 34 in 2011, according to the Syrian Observatory. The total figure includes women and children, and many of those who died were killed and tortured by Shabeeha, the Syrian term for thugs associated with the regime, activists say.

Foreign Provocateurs

The veto by Russia was its second attempt to block efforts at the UN to hold Assad accountable. Syria’s government has blamed “terrorists” and foreign provocateurs for fomenting the protests.

Syria was an ally of the Soviet Union, receiving weapons and financial support for the Arab standoff with Israel, for two decades after Hafez al-Assad took over the presidency following a 1970 coup. Russia still sells Syria weapons and has its only military base outside the former Soviet Union in the Syrian port of Tartus.

Russia’s Foreign Minister Sergei Lavrov and the head of its Foreign Intelligence Service, Mikhail Fradkov, travelled to Damascus today to meet Assad. After the meeting, Lavrov said Assad was committed to ending all violence and asked Russia to broker talks with opposition groups.

“It’s clear that the efforts to end the violence must be accompanied with the initiation of a dialogue among all political forces,” Lavrov said. “Today we received confirmation of the Syrian president’s readiness to cooperate on this.”

Russian Initiative

Gulf Arab countries decided to expel Syrian ambassadors from their capitals and withdraw their own envoys from Syria. The six-member Gulf Cooperation Council — comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – - said today it will meet next week “to take decisive action.”

Syria may have reached a “point of no return,” Saudi billionaire Prince Alwaleed bin Talal, said in an interview airing today on public television’s “Charlie Rose” program.

“This is an old regime, using the same old tactics, and it just isn’t going to work, said Theodore Karasik, director of research at the Dubai-based Institute for Near East and Gulf Military Analysis. “They think they can get away with it, and I don’t think they are going to be able to.”

–With assistance from Mourad Haroutunian in Riyadh, Ilya Arkhipov in Moscow, Caroline Alexander in London, Nicole Gaouette in Washington, Emre Peker in Ankara and Patrick Donahue in Berlin. Editors: Louis Meixler, Terry Atlas, Andrew J. Barden, Ben Holland, Karl Maier.

To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

Net income fell to 393 million Swiss francs ($427 million) from 1.66 billion francs in the year-earlier period, the Zurich- based bank said in a statement today. Earnings missed the 721 million-franc average estimate of eight analysts surveyed by Bloomberg over the past four weeks.

Chief Executive Officer Sergio Ermotti, who took over from Oswald Gruebel following the discovery of a $2.3 billion loss from unauthorized trading in September, is shrinking the investment bank as stricter capital requirements and the European sovereign debt crisis erode profitability. The bank said concerns about the crisis and the global economic outlook are “likely” to weigh on revenues this quarter as well.

“They basically gave a profit warning for the first quarter,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, who has a “reduce” rating on UBS. “I don’t see how the bank can come out of the strategic dilemma of not having enough revenues to sustain staff at the investment bank.”

Cash Dividend

UBS fell as much as 2.7 percent, and was 18 centimes, or 1.4 percent, lower at 13.03 francs by 2:51 p.m. in Zurich, trimming its gain this year to 17 percent. That compares with an 18 percent increase in the 43-company Bloomberg Europe Banks and Financial Services Index in 2012 and a 13 percent gain at Credit Suisse Group AG.

UBS reiterated plans for a dividend of 10 centimes a share for 2011, its first cash payout since 2006.

Pretax profit at the wealth management unit rose 2 percent to 471 million francs from a year earlier, while wealth management Americas swung to a profit of 114 million francs from a loss of 32 million francs. The two units reported net new money of 5 billion francs for the quarter. Earnings at the retail and corporate unit gained 6.5 percent to 412 million francs, while asset management posted a 20 percent decline in profit to 118 million francs. The investment bank had a pretax loss of 256 million francs.

“Traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the investment bank,” Ermotti and Chairman Kaspar Villiger said in a letter to shareholders today.

Deutsche Bank

Revenue at the investment bank slumped 36 percent to 1.8 billion francs from the year-earlier period, while operating expenses declined 4.4 percent to 1.99 billion francs.

Deutsche Bank AG, Germany’s biggest bank, last week said fourth-quarter profit dropped 76 percent as its investment bank posted a 422 million-euro ($554 million) pretax loss. Credit Suisse, which reports earnings on Feb. 9, may say profit fell 53 percent to 396 million francs in the quarter, according to the mean estimate of nine analysts surveyed by Bloomberg, who also forecast a loss at the securities unit.

UBS intends to reduce risk-weighted assets at the investment bank, run by 44-year-old Carsten Kengeter, by 145 billion francs from 300 billion francs by 2016, under Basel III rules. The company reduced risk-weighted assets by about 20 billion francs in the fourth quarter, while the investment bank cut assets by about 26 billion francs, it said.

Management Change

The bank lowered its profitability target in November to a return on equity of between 12 percent and 17 percent starting in 2013, compared with a previous goal of 15 percent to 20 percent. UBS’s return on equity in 2011 was 8.6 percent.

The shift in strategy coincides with another round of management upheaval at UBS, which was ravaged by more than $57 billion of credit-related losses during the financial crisis of 2008. Ermotti, 51, who joined UBS in April, became CEO after the departure of Gruebel, 68. Villiger, 71, is leaving in 2012, a year earlier than planned, to make way for former Bundesbank President Axel Weber, 54, in the chairman role.

Since Ermotti took over, the co-heads of the equities unit, Francois Gouws and Yassine Bouhara, left, as did Chief Risk Officer Maureen Miskovic, who was at UBS for less than a year.

Kweku Adoboli, the former employee accused of causing the trading loss, pleaded not guilty to fraud and false accounting last week and was denied bail while he awaits a trial in early September. The U.K. and Swiss finance regulators also said last week that they have begun formal enforcement actions against UBS over the risk-management processes at its investment bank.

Bonuses Slashed

UBS cut the 2011 bonus pool, including pay deferred into future years, by 40 percent to 2.57 billion francs from 4.25 billion francs for 2010, the bank said. About 707 million francs of the pool is earmarked to be deferred.

Variable compensation at the investment bank is being reduced 60 percent, Chief Financial Officer Tom Naratil said. Investment-banking chief Kengeter volunteered to waive any variable pay entitlement, according to Ermotti.

UBS announced plans last year to cut about 3,500 jobs to help reduce annual costs by 2 billion francs by the end of 2013. That program is “on track,” Ermotti said today. UBS would trim costs further if market conditions don’t improve, he said.

“We must focus on strategic changes which go to the heart of our organizational design and structure,” Ermotti said at a press conference in Zurich. “Consistently improving efficiency has to become part of our corporate DNA. And we are working on the next phase, which will reshape our cost base in the years to come.”

UBS’s outlook is “realistic” rather than “negative,” Ermotti said, and the bank is prepared to take advantage of the situation should markets improve.

–Editors: Frank Connelly, Dylan Griffiths

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Glencore, which has 34 percent of Xstrata, offered 2.8 new shares for each Xstrata share in an agreed all-share “merger of equals,” the companies said in a joint statement today. Xstrata Chief Executive Officer Mick Davis, 53, will take the position of CEO of the combined group while Glencore CEO Ivan Glasenberg, 55, will be deputy CEO and president.

Approval for the plan would create a entity with 2012 sales of $209 billion, the companies said, combining Glencore’s global trading network for energy, metals and farming products with the Zug, Switzerland-based coal, copper and zinc mine operator. The deal has prompted speculation of further mining takeovers as Glasenberg and Davis set up company to challenge BHP Billiton Ltd. and Rio Tinto Group.

“This looks like it’s going to be a comprehensive new business model,” said Ian Kramer, director of energy and natural resources at KPMG. “I would not be surprised at all if you see this new giant coming in and sweeping up” other companies, Kramer said in an interview at the Mining Indaba in Cape Town.

Xstrata shareholders other than Baar, Switzerland-based Glencore will hold 45 percent in the combined entity, to be known as Glencore Xstrata International Plc, the companies said. The merger values each Xstrata share at 1,290.10 pence and the company at about 39.1 billion pounds.

Premium for Xstrata

The price is a premium of about 15.2 percent to Xstrata’s Feb. 1 share price and 27.9 percent to the average in the previous three months. Xstrata Chief Financial Officer Trevor Reid will fill the role for the new company, Glencore CFO Steven Kalmin his deputy.

The combination forms a $90 billion natural resources group, full integrated from mining, processing, storage, freight and logistics to marketing and sales, the companies said.

Glencore was founded in 1974 as Marc Rich & Co. by the former fugitive U.S. financier. The company, which changed its name in 1994 after management bought out Rich, ended more than three decades of operating as a closely held partnership with its $10 billion initial public offering in May.

The copper-to-cotton trader owns mines, plants, ports and warehouses and employs 2,800 people at marketing units in 40 nations and about 54,800 at industrial units in more than 30 countries. Its oil shipping fleet comprises 203 vessels, according to a 2010 sustainability report that describes Glencore as among the world’s leading suppliers of sugar.

Swiss Roots

Xstrata was founded as Sudelektra AG in 1926. The Swiss infrastructure investment company was renamed Xstrata in 1999, and Davis became CEO in 2001.

Since then, Davis has overseen its growth from a company with 2,500 staff and a market value of $500 million to one with 70,000 employees in 20 countries and a value of $58 billion. It is the fourth-biggest copper producer and mines more zinc ore than any other.

The combined business would operate mines from Australia to Zambia and be the world’s biggest producer of zinc, lead and thermal coal and a top-five supplier of copper and nickel, according to UBS.

Mining Deals

The premium on the deal compares with the 23 percent average premium paid in 2011 mining deals, according to data compiled by Bloomberg.

Rising commodity demand from developing nations and the deteriorating quality of mineral reserves is spurring producers to combine and boost efficiency. Global mining deals swelled to $98 billion last year, the highest level since 2007, from $76 billion in 2010, according to data compiled by Bloomberg.

Mining companies may spend $134 billion developing assets this year, up 23 percent from 2010, according to a report last month by Citigroup.

The combination would reunite two groups that separated a decade ago when Xstrata bought Glencore’s Australian and South African coal mines for $2.5 billion and went public in London. It would also unite their two South African CEOs in Davis and Glasenberg, Glencore’s largest shareholder with a 15.7 percent stake.

‘Aggressive’ on Mergers

Glasenberg said in August that Glencore is “aggressively” seeking mergers and acquisitions as market valuations slide. The former coal trader is also an Australian national and is that country’s second-richest person, with an estimated net worth of $7.2 billion, Forbes Magazine said last week. Gina Rinehart, the Australian mining heiress and media investor, is the richest, valued at $18 billion.

Glencore is working with Citigroup Inc. and Morgan Stanley as financial advisers, while Xstrata has hired Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Nomura Bank International Plc.

The mining industry’s biggest takeover to date is Rio Tinto’s 2007 acquisition of Alcan Inc. for $38 billion. BHP, the largest mining company, withdrew from what would have been the world’s biggest mining deal, a $66 billion offer for Rio, in 2008. BHP has a market value of about 130 billion pounds. while Rio is valued at 77.6 billion pounds.

Combined, Xstrata and Glencore would report net income of about $11.2 billion in 2012, Credit Suisse Group AG said in October. Glencore had first-half profit of $2.5 billion, up 68 percent on a year earlier. It may post adjusted net income of $4.4 billion for 2011, according to the average estimate of 15 analysts surveyed by Bloomberg. It’s due to report earnings on March 5.

–Editors: John Viljoen, Stephen Cunningham

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net