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These are stories Report on Business is following Friday, July 17, 2013.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Potential impact on Windsor
Detroit's historic plunge into bankruptcy should have little impact on its Canadian neighbour, economists and politicians say, though it could hurt how potential investors view the region.

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Detroit-area businesses rushed to stand behind the once-mighty city late yesterday after its emergency manager, Kevyn Orr, got the go-ahead from Michigan Governor Rick Snyder to file for the biggest municipal bankruptcy in U.S. history.

The great unknown, of course, is how a court-supervised restructuring could affect everything from city services to taxes and levies.

The natural question for Canadians is how the bankruptcy filing could affect Windsor, Ont., and the auto industry, which is so linked to U.S. operations.

"Perhaps the biggest negative for Windsor is just the perception of the region from the Detroit bankruptcy – colouring the view of potential investors," said chief economist Douglas Porter of BMO Nesbitt Burns.

Beyond that, he said, the impact should be minimal.

"It's not as if the city of Windsor was relying heavily on tourist visitors from the city of Detroit in recent years," Mr. Porter said.

"The local auto industry is driven by how auto sales do across North America, and they have been steadily improving," he added.

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"Tourism is driven partly by the Canadian dollar, which has been a big drag, as has the U.S. passport requirement (dissuades some Americans from visiting)," said Mr. Porter, who has roots in Windsor and knows the city well (and points out that he was raised a Tigers fan).

"They still get some visitors from the suburbs of Detroit, which won't be directly affected by this. Bottom line: The economy of the city of Detroit has been a mess (a disaster?) for years, so another step down won't make that much difference to Windsor. It's not good news, but it's not an insurmountable development."

By perception, the fear would be industry, small businesses and others choosing not to invest in the area.

Windsor's Mayor Eddie Francis is also concerned about the perception. But the reality is something different as both cities restructured years ago, he said.

Their nightmare began around 2006 so the "vital linkages" between the two, in terms of tourism, arts, culture and industry, underwent a wrenching restructuring much earlier and are now in far better shape.

Now, he stressed, it's a municipal government restructuring.

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"Will it impact Windsor?" Mr. Francis said of the Detroit bankruptcy.

"I think the perception may," he said in an interview. "However, the reality won't."

For example, the Windsor casino at one point drew some 80 per cent of its clientele from the United States, with 20 per cent from Canada. Now, it's about 50-50, he said, adding that the attraction has expanded to entertainment and conventions.

The height, when Windsor brought in some 9 million visitors a year, was before the 9-11 terrorist attacks, the SARS outbreak and the appreciation of the Canadian dollar.

In its latest outlook for Windsor, the Conference Board of Canada forecast economic growth of 1.5 per cent this year and 2 per cent in 2014. It also projects an elevated jobless rate through to at least 2017. Last year, according to Statistics Canada, Windsor's jobless rate of 9.8 per cent was the highest among the country's major cities.

"Although economic growth in the Windsor census metropolitan area has been muted in recent years, it is still a vast improvement over the economic climate in the last half the 2000s," the Conference Board said.

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Construction and manufacturing are playing key roles in Windsor's recovery, the latter accounting for one in every five jobs. Factory output expanded by more than 4 per cent in each of 2010, 2011 and 2012, creating some 1,300 jobs.

"Not surprisingly, the improvement in Windsor's manufacturing sector has coincided with a recovery in U.S. vehicle sales, which collapsed after the 2008 financial crisis," the Conference Board said.

"But an improving U.S. economy, cheap credit, and an aging fleet have fuelled rising sales south of the border. Demand for full-size pickup trucks has also strengthened, thanks to a rebound in home construction. In the past three years, U.S. vehicle sales have increased by 11.1 per cent per year."

Alan Arcand, principle economist with the Conference Board, agreed the impact on Windsor should be marginal. More important, he said, is the general health of the auto industry, which has been expanding over the past three yars.

The Big Three auto makers that made Detroit what it was in its heady days all pledged support after the city collapsed under the weight of $18-billion (U.S.) in debt, General Motors Co. saying it expects no impact on its operations or its outlook.

The industry has rebounded nicely from the depths of the financial crisis and recession, when GM and Chrysler sank into bankruptcy protection, requiring aid from U.S. and Canadian governments.

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"A healthy auto industry will play a part in Detroit's comeback story and GM is doing its part," the auto maker said.

Chrysler Group said it is committed "to playing a positive role" in the city's comeback, while Ford Motor Co. said it is optimistic that government leaders can succeed in a restructuring.

Ford's optimism aside, the bankruptcy is expected to be messy, coming after a failure by Mr. Orr to strike deals with stakeholders such as creditors, and it could take a few years to work through the system.

Other businesses also rallied behind the city they call home, the Detroit Regional Chamber calling the filing a "bold step" necessary to "finally" dealing with the municipality's problems.

"The private sector is thriving and businesses continue to invest in Detroit," said the group's president, Sandy Baruah.

"Addressing Detroit's financial instability is the final barrier to robust growth."

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China unveils rate reforms
China has unveiled an aggressive move to loosen its control of the country's financial system, allow commercial banks more leeway over interest rates.

"This is a significant development for China's financial sector in the direction of having interest rates determined by market forces rather than government fiat," said Mark Williams, chief Asia economist at Capital Economics in London, though he added the immediate ramifications will be limited.

The People's Bank of China said it would end controls on bank lending rates beginning tomorrow. Before now, the commercial banks could lend money at 70 per cent or more of the central bank's key rate.

That will still apply to mortgages, however, while the ceiling is also being removed where rural credit co-operatives are concerned.

"In principle, the change could lower borrowing costs, in particular by allowing banks to offer better rates to more creditworthy borrowers," said Mr. Williams.

"In practice, the immediate difference will be small," he added in a report.

"The rapid growth of the corporate bond market has provided an alternative source of credit for larger firms in recent years. For those that do borrow from banks, only 11 per cent of loans in the first quarter were priced below the benchmark rate. This implies that competition between banks is unlikely to drive rates significantly lower."

Apple buys Locationary
Apple Inc. has made a rare acquisition of a Canadian company, buying a Toronto-based location data firm, The Globe and Mail's Omar El Akkad reports.

Apple has acquired startup Locationary, which specializes in highly specific location data that can be incorporated into enterprise IT systems and web publishing platforms. For example, the company collects information such as business opening hours, availability of parking and wi-fi access, which can then be overlaid on the business' location in a digital map.

The purchase price has not been revealed, but according to a source familiar with the negotiations leading up to the deal, Apple paid "multiple tens of millions of dollars" to buy the Canadian company.

Inflation edges up
Not that this would surprise anyone with a car, but gas prices helped push up Canada's inflation rate to 1.2 per cent in June from 0.7 per cent a month earlier.

Higher prices for cars and trucks also played a role, Statistics Canada said today.

Gas prices had been easing, but in June were up by 4.6 per cent from a year earlier, while the cost of autos rose 2 per cent.

On a month-to-month and seasonally adjusted basis, consumer prices rose 0.3 per cent in June from May.

So-called core prices, which strip out volatile items and help guide the Bank of Canada, rose 1.3 per cent on an annual basis and 0.2 per cent on a monthly basis, following the annual reading of 1.1 per cent in May.

All in all, there's nothing in today's report that would knock the Bank of Canada off course, which is no course at all, though it's more irritation for motorists.

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