Financial life in a big town

WASHINGTON — The post office will run out of money this year unless it gets help, Postmaster General John Potter told Congress on Wednesday as he sought permission to cut delivery to five days a week.

"We are facing losses of historic proportion. Our situation is critical," Potter told a House panel.

The agency lost $2.8 billion last year and is looking at more losses this year. Reducing mail delivery from six days to five days a week could save $3.5 billion annually, Potter said.

Potter also urged changes in how the post office prepays for retiree health care to cut its annual costs by $2 billion.

If the Postal Service does run out of money, the lingering question, Potter told the House Oversight post office subcommittee, is which bills will be paid and which will not. Ensuring the payment of workers’ salaries comes first, he said, but other bills may have to wait.

Potter first raised the possibility of delivery cutbacks in January, but the idea has not been warmly received.

"With the Postal Service facing budget shortfalls, the subcommittee will consider a number of options to restore financial stability and examine ways for the Postal Service to continue to operate without cutting services," subcommittee Chairman Stephen F. Lynch, D-Mass., said.

Lynch said the financial stability of the Postal Service is "critical to the American expectation of affordable six-day mail delivery no fax payday loan."

Even if the agency succeeds in reaching its planned cuts of $5.9 billion, there could still be a $6 billion deficit in 2010, Potter said.

"Without a change we will exhaust our cash resources," he said. "We can no longer afford business as usual."

Asked whether layoffs would occur, Potter said it is possible but he hopes avoidable.

Last week, the post office said it planned to offer early retirement to 150,000 workers and is eliminating 1,400 management positions and closing six of its 80 district offices.

Dan Blair, head of the independent Postal Regulatory Commission, noted that Congress could consider appropriating money to help the post office.

The agency does not receive a taxpayer subsidy for its operations, although Congress subsidizes overseas voting and free mail for the blind.

William Young, president of the National Association of Letter Carriers, stressed in his testimony that the agency is not seeking a bailout, "but we are here to ask the Congress for help."

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If you still haven’t gotten that TV converter box, good news.

With the June 12 deadline for the nationwide conversion to digital TV fast approaching, the TV Converter Box Coupon Program has begun to accept replacement requests from those whose coupons expired without being redeemed.

All coupon requests are now being processed as they come in, with a maximum nine business day turnaround time.

"With the backlog of applications now eliminated, consumers can apply for coupons and get assistance right away, allowing them to continue to receive important local television news and emergency information by purchasing a converter box at a reduced cost,” Anna Gomez, acting administrator of the National Telecommunications and Information Administration (NTIA), said in a press release.

In January, the coupon program ran out of funding, and incoming coupon requests were placed on a waiting list payday advance. The American Recovery and Reinvestment Act provided NTIA $650 million to issue at least 12.25 million more coupons.

Consumers can apply for replacement coupons by visiting www.DTV2009.gov, calling 1-888-388-2009, mailing an application to P.O. Box 2000, Portland, OR 97208, or faxing an application to 1-877-388-4632. Those who are deaf or hard of hearing can call 1-877-530-2634 (TTY).

Applications are being processed on a first-come, first-served basis while supplies last. The coupons may not be used as a rebate and must be presented to the retailer at the time of purchase.

The Federal Communications Commission announced that of the nation's nearly 1,800 full-power televisions stations, 641 (36 percent) have already terminated their analog signals.

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Walgreen Co posted a better-than-expected quarterly profit on Monday as the drugstore chain controlled costs even as consumers cut back on discretionary buying.

Walgreen has cut about 1,000 jobs at its headquarters and other non-store locations and has more effectively managed its employees’ hours to rein in salary costs. It has also reduced the number of 24-hour pharmacies and taken other steps as it tries to save $1 billion per year by fiscal 2011.

“They did a really nice job controlling growth in (selling, general and administrative) costs,” Morningstar Senior Analyst Mitch Corwin said.

He noted that the slowing growth in costs comes as Walgreen is “in transition” as it restructures in the face of a recessionary economy.

“They are going to emerge from this downturn a better firm” with improved margins and market share and a strong balance sheet, Corwin said. Morningstar gives Walgreen its top “five-star” rating and has a fair-value estimate of $38 a share.

Walgreen’s shares jumped more than 10 percent in morning trading.

Walgreen also said it filled 4 percent more prescriptions in the quarter than a year ago, while retail competitors filled 1 percent fewer prescriptions.

Walgreen earned $640 million, or 65 cents per share, in the fiscal second quarter that ended February 28, compared with a profit of $686 million, or 69 cents per share, a year earlier no fax payday loans.

The company is a few months into a major overhaul that includes job cuts, store remodeling and moving some pharmacy work to centralized locations to cut costs.

Excluding items related to that restructuring, Walgreen earned 69 cents per share, compared with the average analyst estimate of 66 cents per share, according to Reuters Estimates.

Sales rose 7 percent to $16.5 billion, while sales at stores open at least a year rose 1.3 percent. Sales and earnings were both hurt because 2009 had one less day than 2008, which was a leap year.

Walgreen also spent more on promotions to encourage customers to buy nonprescription items.

In the past, drugstores could typically charge more than chains such as Wal-Mart Stores Inc because customers were looking more for convenience, not value. Now Walgreen and its rivals are selling their own lower-priced brands and putting more items on sale to keep shoppers coming back during the recession.

Walgreen is promoting paper towels, tissues, food and other items in new advertising, touting itself as a place to shop for “Affordable Essentials.”

The company took 6 cents per share in charges for its “Rewiring for Growth” restructuring program during the quarter, and saw 2 cents per share in cost savings. 

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DETROIT — A public tiff between Italian automaker Fiat SpA and Chrysler LLC apparently ended Friday when Chrysler rescinded a statement on its website that Fiat would be responsible for part of Chrysler’s debt if the two companies join forces.

Chrysler, in a Web video on Thursday explaining why an alliance for the two companies would be good for Chrysler and the country, said Fiat would be responsible for 35 percent of what Chrysler owed to the U.S. government.

But Fiat on Friday denied that it would be responsible for any of Chrysler’s debt.

The two companies are talking about an alliance in which Fiat would take a 35 percent stake in Chrysler in exchange for Fiat’s small-car technology.

Chrysler, in a statement issued Friday, reversed the claim and said Fiat would become an equity holder.

"To clarify, this does not mean Fiat would assume responsibility for any of Chrysler LLC’s debt," the statement said.

Fiat Group said Friday that it "intends to make absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness to Chrysler payday loans."

The Chrysler video featured CEO Robert Nardelli saying that the company can be viable on its own, but a deal with Fiat would enhance that viability.

Fiat is discussing trading its small-car and small-engine technology for a 35 percent stake in Chrysler in a noncash deal. The deal would help Chrysler bring badly needed small cars to its showrooms while helping Fiat re-enter the American market with the Alfa Romeo brand and the update of the iconic Fiat 500.

In the video, Chrysler said an alliance with Fiat would help it leapfrog five or six years ahead in development of fuel-efficient and clean-air technology.

Any deal with Fiat is contingent upon the company gaining U.S. government approval of its viability plan and the release of additional government loan money to Chrysler.
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Eastern Europe’s key central banks will cut interest rates to record lows this year, opting to counter the deepest recession since the fall of communism instead of defending weak currencies, Bloomberg surveys show.

Poland’s benchmark rate will fall to 3 percent by year-end from 4 percent, according to forecasts gathered by Bloomberg. The Czech key rate will drop to 1.5 percent from 1.75 percent and Hungary’s will fall to 7 percent, from 9.5 percent.

Banks in Poland, Hungary, the Czech Republic and Romania are being forced to tear up monetary policy rulebooks as the worst economic decline since the end of communist rule engulfs the region. They have to balance between economies buckling under the weight of the crisis and currencies plunging as investors flee emerging markets.

“You’ve got to ask yourself in the current climate whether or not the conventional response of hiking interest rates is going to achieve anything,” said Neil Shearing, an economist at Capital Economics in London. “Interest rates are not what’s driving currencies at the moment. It’s all about fear and panic. They can’t afford not to cut rates at this stage.”

Regional central bankers are meeting in Budapest today to discuss “matters of mutual interest.” Czech, Hungarian and Polish monetary policy makers will make rate decisions next week, with Romania following on March 31.

Worst Performers

The region’s currencies are among the worst performers in the past six months. Of 26 emerging-market currencies tracked by Bloomberg, the Polish zloty has tumbled the most, losing 28 percent against the euro. In third place is the Hungarian forint, which has dropped 20 percent. The Romanian leu has weakened 16 percent and the Czech koruna 11 percent.

The zloty fell to 4.6638 against the euro at 9:02 a.m. in Warsaw, from 4.6311 yesterday, and the forint dropped 0.8 percent, to 304.20 versus the single currency. The leu was little moved at 4.3098 per euro, while the koruna traded 0.4 percent weaker, at 26.976.

While declining currencies make policy makers unable to match the scale of easing at central banks such as the Federal Reserve or the Bank of Japan, eastern European rates are set drop through this year, Bloomberg’s surveys of economists and strategists show. Polish rates may fall as soon as next week, while Hungarian and Czech borrowing costs will probably remain unchanged this month, according to the surveys.

Rate reductions loom as the deepening global crisis cripples the region’s economies, forcing plant closures and driving up unemployment. Falling tax revenue threatens to inflate budget deficits and may throw euro-adoption plans off- track.

‘Pretty Aggressive’

“The economic outlook is supportive of a pretty aggressive easing story,” said Michal Dybula, a Warsaw-based emerging Europe economist at BNP Paribas SA us fast cash. “Policy makers in central and eastern Europe need to reassess the business cycles for these economies. They are way behind the curve in the sense of how bad the real economies are.”

The region faces a recession this year as export demand collapses, the International Monetary Fund said in January, forecasting a 0.4 percent contraction. Companies from the local units of General Electric Co. and KBC Groep NV to Telekomunikacja Polska SA are curtailing production or cutting jobs.

The IMF, which has bailed out Latvia, Hungary, Serbia, Ukraine and Belarus, and is in talks with Romania, warned on Jan. 28 that bank losses may widen as “shocks are transmitted between mature and emerging-market banking systems.”

In the short term, the region’s policy makers will proceed gradually, with an eye on the currency markets, economists said. Of the four central banks due to set rates before the end of the month, only Poland is predicted to lower its rate, by a quarter percentage point, to 3.75 percent, 11 economists forecast unanimously.

‘Endanger’ Targets

“Should the exchange-rate weakness become sustained, it would endanger reaching the inflation target,” the Magyar Nemzeti Bank said in a statement on March 8, a day after the forint fell to a record low against the euro.

Hungary’s central bank will leave its rate unchanged at 9.5 percent and its Czech and Romanian counterparts will hold them at 1.75 percent and 10 percent respectively, the surveys show.

The Czech central bank’s mid-point inflation target is 3 percent this year and 2 percent next year. The annual rate was 2 percent in February. In Hungary, the rate fell to 3 percent for the same month, meeting the policy makers’ target for the first time in almost three years.

Poland’s annual inflation rate was 3.3 percent last month, having returned to the central bank’s target range of between 1.5 percent and 3.5 percent in December after exceeding it for a year.

Raising rates is no longer an efficient way of fighting currency weakness, economists said.

Currencies are “an obstacle in the short term because if they cut rates they can aggravate the sell-off and they also need to consider volatility and the psychology of markets,” said Zsolt Papp, an economist at KBC Groep NV in London. “In the longer term, they have no other choice but to cut rates. If they can’t bring rates down to acceptable levels, recessions may last longer.”

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With New York and Chicago under its belt, Toronto's Porter Airlines is now planning to take its swank version of air travel to . . . Thunder Bay?

The two-year-old airline, known for its supple leather seats and free airport lounge espresso drinks, said today it will begin flights from Toronto's City Centre Airport to Thunder Bay International Airport on June 26.

Porter plans to offer three daily roundtrip flights per week and two daily roundtrip flights on Saturdays and Sundays.

"We're excited about offering Thunder Bay service right to downtown Toronto for the first time," said Robert Deluce, the founder and chief executive of Porter, in a statement.

"Our focus on service-oriented, stress-free flying is what Porter is known for and is something that Thunder Bay will welcome and appreciate."

Porter's target customers have traditionally been time-pressed business travellers who are looking to avoid the hassle of flying in and of Toronto's Pearson International Airport, located in Mississauga.

The airline currently flies from Toronto's island airport to Ottawa, Montreal, Halifax and Quebec City in Canada, with seasonal service to Mt. Tremblant.

Porter also flies to New York via Newark Liberty International Airport and last year added Chicago to its rapidly expanding network fast payday loan.

While Thunder Bay may seem like an odd choice, Brad Cicero, a spokesperson for Porter, said the airline expects "significant business traffic" on the route stemming from Thunder Bay's mining, government and healthcare industries.

"It's a different type of destination . . but it's served at an appropriate level based on the traffic and has always been an important part of the broader network plan."

Ed Schmidtke, the manager of business development for Thunder Bay International Airports Authority, said in a statement that Toronto is the single largest destination for air travellers from Thunder Bay.

Launched in 2006 amid a storm of local controversy over the "commercialization" of the city's waterfront, Porter is continuing to implement its aggressive growth plans despite a weak economy that has several other airlines scaling back their operations.

Deluce told the Star earlier this year that Porter is scheduled to take delivery of 10 more Bombardier-built Q-400 turboprops by the end of the year, bringing its total fleet size to 18.

He said the extra aircraft would be used to add more flights on existing routes and open up new destinations in Canada and the United States.

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China’s government holds the key to recovery in Japan’s economy and stock market, said Nobuyuki Saji, chief economist and strategist at Mitsubishi UFJ Securities Co.

Japan’s gross national product shrank last quarter at the fastest pace since 1974 and may contract at a similar rate in the current period, if China’s stimulus measures don’t spur demand for the nation’s goods, said Saji, who was named Japan’s best economist in 2008 by Institutional Investor magazine and Nihon Keizai Shimbun Inc. The Nikkei 225 Average dropped to 7,054.98 on March 10, its lowest level since October 1982.

China’s Shanghai Composite Index is the world’s best performer with an 18 percent gain and the country’s economy grew 6.8 percent last quarter, according to Bloomberg data. While the expansion was the slowest in seven years, it is the only growth story among Japan’s three largest trading partners. The other two, the U.S. and Europe, are in recession.

“If China’s economy worsens and its domestic demand remains low, support for Japanese stocks will evaporate,” Saji said.

Japan’s annualized 12.1 percent contraction last quarter was the steepest decline among Group of Seven Nations. The Nikkei 225 Average has fallen 12 percent this year and the Topix has dropped 13 percent, making them the two worst performers among Asian benchmark indexes, Bloomberg data show.

“We cannot be optimistic,” said Saji credit scores. “GDP figures show Japan is the nation most affected by the world economy and this vulnerability shifted foreign investors’ views on Japanese stocks.”

Rising Inventories

China, Japan’s second biggest trading partner, is spending 4 trillion yuan ($585 billion) to bolster its economy, the world’s third largest. Whether that commitment will succeed may be evident as early as the end of this month or April, as recent indications are mixed, Saji said.

Rising inventories of steel products and iron ore are a sign China’s recovery will be slow, Saji said. Since Feb. 13, which marked about a 12-month low, iron ore stockpiles have risen 4 percent to 60.6 million tons and an adjustment may be needed next month, he said.

“An increase in the amount of new loans would be a positive indication that funds are flowing to public works projects,” said Saji. In February, China’s banks issued 1,070 billion yuan worth of new loans after offering a record 1,620 billion in January.

Even if China’s economy revives, Japan may not benefit as it has in the past five years, Saji said.

Japan’s share of China’s imports dropped the past two years to 13.3 percent in 2008 from 14.6 percent in 2006, according to Daiichi-Life Research Institute.

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Well, that didn’t take long.

Less than a month after the $787 billion economic recovery package became law, Democratic leaders started talking this week about the possible need for more stimulus.

We can’t say we weren’t warned. In the two months before the stimulus bill was enacted, economists’ estimates for how much money would be needed to boost the economy were growing by the week as conditions deteriorated quickly.

By the time Congress passed its bill, some were saying it wouldn’t be sufficient to address the estimated $2 trillion decline in the country’s output this year and next.

But a package larger than $800 billion wouldn’t have flown politically. And some argue there isn’t $787 billion worth of actual stimulus in the package. The biggest example is the $70 billion provision to provide one year of protection from the Alternative Minimum Tax for middle- and upper-middle-income families.

"The provision would provide virtually no economic stimulus. Because the patch is perennially extended, it would have no effect on behavior in 2009," the Tax Policy Center concluded. "Almost 80% of the benefits would go to the richest 20% of households, who would be least likely to spend the additional funds and generate demand."

Since President Obama signed the bill on Feb. 17, the government reported that 651,000 jobs were lost in the month of February, pushing the unemployment rate to its highest level in 25 years. Forecasters expect the rate to be at or near 9% by year’s end.

"I think there are at least even odds that a third round of stimulus will be needed," Mark Zandi, chief economist of Moody’s Economy.com, told CNNMoney.com. "The $787 billion was too small when enacted and the economic outlook has continued to erode since then."

After meeting with Zandi and other economists on Tuesday, House Speaker Nancy Pelosi, D-Calif., told reporters, "we have to keep the door open and see how this goes."

On Thursday, Pelosi indicated that a stimulus package isn’t likely in the very near future. "I don’t think you ever close the door to being prepared for what eventuality may come, but … it’s just not something that right now is in the cards."

Zandi’s recommendation: "Ideally, this next round of stimulus would be in place by early 2010 payday loans guaranteed no fax."

Leading House Republicans have begun to characterize the possibility of another stimulus package as proof that the one passed in February isn’t working. "Now if it didn’t work the first time why would it work the second time?" Rep. Paul Ryan, R-Wisc., told reporters.

But economists and Democrats say that it’s much too soon to tell.

"It takes a number of months to get out in the field and get moving … [But] that doesn’t mean that we shouldn’t be thinking and preparing options for the time when it may become necessary," House Appropriations Committee Chairman David Obey, D-Wisc., said Wednesday, according to Congress Daily.

Deficit effects shouldn’t be top concern

Of course, the backdrop to all the debates over how much money should be injected to stabilize the financial system and the economy is the country’s growing debt levels, since all the money for stimulus is borrowed.

As things stand now, the administration estimates that the deficit for fiscal year 2009 will reach $1.75 trillion, or 12.3% of gross domestic product. That’s a record in dollar terms and is the highest as a share of GDP since World War II.

Many economists believe the risks to the deficit could be far greater if the government isn’t aggressive enough.

"The risks are all on the side of underreacting and not on the side of overreacting," said Rebecca Blank, a senior fellow at the Brookings Institution, after the meeting between economists and House Democratic leaders on Tuesday.

Indeed, even before the $787 billion package was passed, the position of the Committee for a Responsible Federal Budget was to "err on the side of too much in deficits, just do it carefully," said Mark Goldwein, a policy analyst at the committee.

"If you’re going to do another stimulus package, don’t use it as a venue for pet projects or for what was thrown out of the other package because it wasn’t seen as stimulative," Goldwein said.

Of course, the success of any stimulus will depend in great part on the success the Obama administration has in stabilizing the banking sector. There, too, many experts are calling for substantially more money to be injected. 

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Tarlton Corp. will work as a joint venture partner in building a new military personnel records cener in north St. Louis County for the National Archives and Record Administration .

The St. Louis-based contracting and construction management firm was named as a subcontractor on the project in early 2008, but its role expanded in the last few weeks bad credit payday loans. The lead general contractor is no longer on the project, Tarlton said. The company will work with Atlanta-based Hardin Construction on the project.

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A Lenexa company that makes children’s and dolls’ clothing and accessories has declared Chapter 11 bankruptcy with debts of $7.4 million owed to 100 to 199 creditors.

Strasburg-Jarvis Inc., which does business as Strasburg Children, declared assets of $9.18 million. It owes $5.42 million to secured creditors and $1.96 million to unsecured creditors with nonpriority claims.

The company filed for Chapter 11 protection on Wednesday in U.S. Bankruptcy Court for the District of Kansas.

The company is mostly owned by 11 local investors, including President Terry Jarvis of Leawood, whose trust owns 34.2 percent of the company, according to court documents. Many of the largest unsecured creditors are shareholders who loaned money to the company quick payday loan.

The company’s revenue has slipped in recent years. Strasburg-Jarvis reported revenue of $27.3 million in 2008, down 7 percent from $29.3 million in 2007. Through the beginning of March, revenue was $3.55 million.

The Strasburg-Jarvis board decided Feb. 26 that the company should file for Chapter 11 bankruptcy, based on talk about the company’s financial condition and its inability to pay its debts when they came due.

The company’s attorney couldn’t immediately be reached for comment.

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