Nissan’s board met Monday but failed to pick a new chairman to replace Carlos Ghosn, who was arrested last month on charges of violating financial regulations, saying more discussion was needed.

 

Nissan Motor Co. Chief Executive Hiroto Saikawa told reporters that the board approved a special committee of outsiders to strengthen governance at the company. A date for the selection of a chairman was not decided.

 

“We plan to be cautious in this process, and I do not plan to rush this,” Saikawa said.

 

The recommendations for beefing up governance are due in March, and Saikawa said he was willing to wait until then to choose a chairman.

 

The board meeting came amid an unfolding scandal that threatens the Japanese automaker’s two-decade alliance with Renault SA of France and its global brand, and highlights shoddy governance at the manufacturer of the Leaf electric car.

 

Ghosn and another board member Greg Kelly were formally charged last week with falsifying financial reports in underreporting Ghosn’s income by about 5 billion yen ($44 million) from 2011 to 2015. They were arrested Nov. 19 by Tokyo prosecutors and remain in detention.

 

A source close to Ghosn’s family says Ghosn is innocent, as the alleged income was never decided upon or paid. Aubrey Harwell, the U.S. lawyer for Kelly, an American, says he is innocent, and that Nissan insiders and outside experts had advised him that the financial reporting was proper.

 

The chairman must be selected from among the board members. Three outside board members — race-car driver Keiko Ihara, Masakazu Toyoda, an academic, and Jean-Baptiste Duzan, formerly of Renault — are making that decision.

 

The special committee for governance includes the three outside board members and four other outsiders, including former judge Seiichiro Nishioka.

 

One candidate for chairman is Saikawa, who was hand-picked by Ghosn to succeed him as chief executive. He has denounced Ghosn and Kelly as the “masterminds” in a scheme to falsify income reports and abuse company money and assets.

 

Renault has kept Ghosn as chief executive and chairman, saying its investigation has not found wrongdoing in the awarding of Ghosn’s compensation.

 

Nissan Motor Co.’s allegations also include million-dollar homes in several nations, including France, Japan, Brazil, Lebanon and the Netherlands, purchased by Nissan or a subsidiary and used by Ghosn.

 

Wrangling over a home in Rio de Janeiro has developed into a court battle in Brazil, with Nissan seeking to block Ghosn’s family from retrieving items.

 

Ghosn was born in Brazil of Lebanese ancestry and holds French citizenship. He was sent in by Renault in 1999 to turn around Nissan from the brink of bankruptcy.

 

It’s unclear when Ghosn and Kelly may be released, with Tokyo prosecutors saying they are a flight risk.

 

 

 
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The United States said on Monday that China’s “unfair competitive practices” were harming foreign companies and workers in a way that violates World Trade Organization (WTO) rules, but vowed to lead reform efforts.

U.S. trade ambassador Dennis Shea drew fire from Chinese envoy Zhang Xiangchen who said the Trump administration’s tariffs on steel and aluminum products allowed protectionism under the guise of dubious national security concerns.

The heated words, in texts seen by Reuters, were exchanged at the start of a closed-door review of U.S. trade policies, held every two years at the WTO, which continues on Wednesday.

Shea expressed concern about the WTO dispute settlement system having “strayed far from the system agreed to by members” and said that the Appellate Body had overreached in some legal interpretations.

Zhang countered that by blocking the selection of judges, Washington was putting the system into paralysis.

To force reform at the WTO, Trump’s team has refused to allow new appointments to the Appellate Body, the world’s top trade court, a process which requires consensus among member states. As a result, the court is running out of judges, and will be unable to issue binding rulings in disputes.

Shea described the U.S. economy as “one of the most open and competitive economies in the world,” with among the lowest tariffs globally, rejecting criticism by some of the U.S. approach as “unilateralist and protectionist.”

China has pursued “non-market industrial policies and other unfair competitive practices” aimed at supporting its domestic industries while restricting or discriminating against foreign companies and their goods and services, he said.

“The WTO is not well equipped to handle the fundamental challenge posed by China, which continues to embrace a state-led, mercantilist approach to the economy and trade,” Shea said.

He did not refer to the dispute on steel or automobiles which brought the two powers to the brink of a major trade war but defended the U.S. “Section 301” investigation that found in March that Chinese practices related to technology transfer, intellectual property and innovation were discriminatory.

On Section 301, Zhang said the U.S. measures vastly increased tariffs, “bringing back to life the ghost of unilateralism that has been dormant for decades.”

Shea said the United States was committed to working with like-minded members to address concerns on the functioning of the WTO.  “Reforms are necessary for the continued viability of the institution,” he said.

Zhang echoed his call, but said: “If the roof of this building is leaking, we should work together to fix it, rather than dismantling it and exposing all of us to rains and storms.”
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A group of young female business owners in Guinea Bissau have banded together to learn more about the business world and increase sales. A year later, their efforts appear to be paying off. Ricci Shryock reports from the west African nation.
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Homeowners appear to have learned the lesson of the Great Recession about not taking on too much debt. There is some concern that Corporate America didn’t get the message.

 

For much of the past decade, companies have borrowed at super-low interest rates and used the money to buy back stock, acquire other businesses and refinance old debt. The vast majority of companies are paying their bills on time, thanks in large part to profits that have surged since the economy emerged from the Great Recession nine and a half years ago.

 

But with interest rates rising and U.S. economic growth expected to slow next year, worries are building from Washington to Wall Street that corporate debt is approaching potentially dangerous levels. U.S. corporate debt has grown by nearly two-thirds since 2008 to more than $9 trillion and, along with government debt, has ballooned much faster than other parts of the bond market. Investors are most concerned about companies at the weaker end of the financial-strength scale _ those considered most likely to default or to get downgraded to “junk” status should a recession hit.

 

“I’ve been more worried about the bond market than the equity market,” said Kirk Hartman, global chief investment officer at Wells Fargo Asset Management. “I think at some point, all the leverage in the system is going to rear its ugly head.”

 

Consider General Electric, which said in early October it would record a big charge related to its struggling power unit, one that ended up totaling $22 billion. Both Moody’s and Standard & Poor’s subsequently downgraded GE’s credit rating to three notches above “speculative” grade, which indicates a higher risk of default.

 

GE, with about $115 billion in total borrowings, is part of a growing group of companies concentrated at the lower end of investment-grade. Other high-profile names in this area within a few notches of junk grade include General Motors and Verizon Communications. They make up nearly 45 percent of the Bloomberg Barclays Credit index, more than quadruple their proportion during the early 1970s.

 

Credit-rating agencies say downgrades for GE, GM or Verizon aren’t imminent. But the concern for them, and broadly for this swelling group of businesses, is if profits start falling or the economy hits a recession.

 

If those companies do drop below investment grade, they’d be what investors call “fallen angels,” and they can trigger waves of selling. Many mutual funds and other investors are required to own only high-quality, investment-grade bonds — so they would have to sell any bonds that get cut to junk.

 

The forced selling would lead to a drop in bond prices, which could result in higher borrowing costs for companies, which hurts their ability to repay their debts, which could lead to even more selling.

 

Even the chairman of the Federal Reserve has taken notice of the rise in corporate debt. Jerome Powell said in a recent speech that business borrowing usually rises when the economy is growing. But he said it’s concerning that, over the last year, the companies increasing their borrowing the most are those already with high debt and interest burdens.

 

To be sure, many bond fund managers say companies were smart to borrow hefty sums at low rates. And at the moment, there are no outward signs of danger. The default rate for junk-rated corporate bonds was 2.6 percent last month, which is lower than the historical average, and S&P Global Fixed Income Research expects it to fall in upcoming months.

 

Even if the economy does fall into a recession, fund managers say losses won’t be to the same scale as 2008 when the financial crisis sent the S&P 500 to a drop of nearly 37 percent and the most popular category of bond funds to an average loss of 4.7 percent.

 

In his speech, Powell said he doesn’t see the weaker parts of the corporate debt market undermining the financial system in the event of an economic downturn, at least “for now.”

 

Other investors see the market’s growing worries as premature. Companies are still making record profits, which allow them to repay their debts, and consumer confidence is still high.

 

“There is a story out there that there’s a recession coming very soon, and you had better head for the hills,” said Warren Pierson, deputy chief investment officer at Baird Advisors. “We think that’s a pretty early call. We don’t see recession on the horizon.”

 

That’s why he and Mary Ellen Stanek, who run bond mutual funds at Baird, haven’t given up on corporate bonds, even if they’ve moderated how much they own.

 

But critics see some echoes of the financial crisis in today’s loosening lending standards. Consider leveraged loans, a section of the market that makes loans to companies with lots of debt or relatively weak finances. These loans have been popular with investors in recent years because they often have what are called floating rates, so they pay more in interest when rates are rising.

 

Paul Massaro, portfolio manager for floating-rate strategies at T. Rowe Price, says he’s still positive about this market in general. But his team of analysts has been finding more warning flags in offerings, where the terms of the deal may be overly friendly to borrowers and allow them to amass more debt than they should.

 

It’s gotten to the point where Massaro is participating in about 15 percent of all offerings today, down from 30 percent a few years ago.

 

Investors have largely been willing to stomach higher risk because they’ve been starved for income following years of very low interest rates.

 

As a result, some bonds that by many accounts look like risky junk bonds are trading at prices and yields that should be reserved for higher-quality bonds, say Tom McCauley and Yoav Sharon, who run the $976.3 million Driehaus Active Income fund. To take advantage, they’re increasingly “shorting” corporate bonds, which are trades that pay off if the bonds’ prices fall.

 

They recently began shorting bonds of a packaged goods company with a “BBB” rating that borrowed to help pay for a large acquisition, for example. A “BBB” rating is at the lower end of investment grade, and a drop to “BB” would send it into junk status.

 

With so much debt, McCauley and Sharon believe that it’s at risk of getting downgraded to junk and is not paying enough in yield to compensate for its risk.

 

“As we get into the later stages of the cycle, the sins of the early stages of the cycle tend to start showing up,” said Sharon. “We think that’s where we are today.”

 
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After two weeks of bruising negotiations, officials from almost 200 countries agreed Saturday on universal, transparent rules that will govern efforts to cut emissions and curb global warming. Fierce disagreements on two other climate issues were kicked down the road for a year to help bridge a chasm of opinions on the best solutions. 

 

The deal agreed upon at U.N. climate talks in Poland enables countries to put into action the principles in the 2015 Paris climate accord.

 

“Through this package, you have made a thousand little steps forward together,” said Michal Kurtyka, a senior Polish official chairing the talks. 

 

He said while each individual country would likely find some parts of the agreement it didn’t like, efforts had been made to balance the interests of all parties. 

 

“We will all have to give in order to gain,” he said. “We will all have to be courageous to look into the future and make yet another step for the sake of humanity.” 

 

The talks in Poland took place against a backdrop of growing concern among scientists that global warming on Earth is proceeding faster than governments are responding to it. Last month, a study found that global warming will worsen disasters such as the deadly California wildfires and the powerful hurricanes that have hit the United States this year. 

Overhaul of global economy

 

And a recent report by the Intergovernmental Panel on Climate Change, or IPCC, concluded that while it’s possible to cap global warming at 1.5 degrees Celsius (2.7 degrees Fahrenheit) by the end of the century compared with pre-industrial times, this would require a dramatic overhaul of the global economy, including a shift away from fossil fuels. 

 

Alarmed by efforts to include this in the final text of the meeting, oil-exporting nations the United States, Russia, Saudi Arabia and Kuwait blocked an endorsement of the IPCC report midway through this month’s talks in Katowice. That prompted an uproar from vulnerable countries like small island nations and environmental groups.  

The final text at the U.N. talks omits a previous reference to specific reductions in greenhouse gas emissions by 2030, and merely welcomes the “timely completion” of the IPCC report, not its conclusions. 

 

Last-minute snags forced negotiators in Katowice to go into extra time, after Friday’s scheduled end of the conference had passed without a deal. 

 

One major sticking point was how to create a functioning market in carbon credits. Economists believe that an international trading system could be an effective way to drive down greenhouse gas emissions and raise large amounts of money for measures to curb global warming. 

 

But Brazil wanted to keep the piles of carbon credits it had amassed under an old system that developed countries say wasn’t credible or transparent. 

Push from U.S. 

 

Among those that pushed back hardest was the United States, despite President Donald Trump’s decision to pull out of the Paris climate accord and promote the use of coal. 

 

“Overall, the U.S. role here has been somewhat schizophrenic — pushing coal and dissing science on the one hand, but also working hard in the room for strong transparency rules,” said Elliot Diringer of the Center for Climate and Energy Solutions, a Washington think tank. 

 

When it came to closing potential loopholes that could allow countries to dodge their commitments to cut emissions, “the U.S. pushed harder than nearly anyone else for transparency rules that put all countries under the same system, and it’s largely succeeded.”  

“Transparency is vital to U.S. interests,” added Nathaniel Keohane, a climate policy expert at the Environmental Defense Fund. He noted that the breakthrough in the 2015 Paris talks happened only after the U.S. and China agreed on a common framework for transparency. 

 

“In Katowice, the U.S. negotiators have played a central role in the talks, helping to broker an outcome that is true to the Paris vision of a common transparency framework for all countries that also provides flexibility for those that need it,” said Keohane, calling the agreement “a vital step forward in realizing the promise of the Paris accord.” 

 

Among the key achievements in Katowice was an agreement on how countries should report their greenhouses gas emissions and the efforts they’re taking to reduce them. Poor countries also secured assurances on getting financial support to help them cut emissions, adapt to inevitable changes such as sea level rises and pay for damages that have already happened. 

Some not hearing alarms

 

“The majority of the rulebook for the Paris Agreement has been created, which is something to be thankful for,” said Mohamed Adow, a climate policy expert at Christian Aid. “But the fact countries had to be dragged kicking and screaming to the finish line shows that some nations have not woken up to the urgent call of the IPCC report” on the dire consequences of global warming. 

 

But a central feature of the Paris Agreement — the idea that countries will ratchet up their efforts to fight global warming over time — still needs to be proved effective, he said. 

 

“To bend the emissions curve, we now need all countries to deliver these revised plans at the special U.N. secretary-general summit in 2019. It’s vital that they do so,” Adow said. 

 

In the end, a decision on the mechanics of an emissions trading system was postponed to next year’s meeting. Countries also agreed to consider the issue of raising ambitions at a U.N. summit in New York next September. 

 

Speaking hours before the final gavel, Canada’s Environment Minister Catherine McKenna suggested there was no alternative to such meetings if countries want to tackle global problems, especially at a time when multilateral diplomacy is under pressure from nationalism. 

 

“The world has changed, the political landscape has changed,” she told The Associated Press. “Still, you’re seeing here that we’re able to make progress, we’re able to discuss the issues, we’re able to come to solutions.”  
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