Financial life in a big town

Chrysler and its union have broken historical pattern bargaining in the auto industry with a tentative deal for deep worker concessions to help keep the teetering company alive here.

In around-the-clock, high-stakes bargaining, negotiators agreed on a deal Friday night for much more concessions than what workers accepted at General Motors, another reeling automaker, last month.

Ken Lewenza, president of the Canadian Auto Workers, also revealed if Chrysler slips into bankruptcy court protection in the U.S. and Canada, operations here would not be liquidated and remain among the company’s “good” operating assets. Workers would also not face further concessions if there is a bankruptcy, he said.

Lewenza, who described the negotiations as "torturous and unfair," said the deal would lead to about $240 million in annual savings for the company but not reduce wages and pensions.

“We will live to fight for another day,” he said.

He also disclosed that the company and the CAW will work to develop a retiree health care trust fund which will eventually transfer responsibility of costs to the union. It would be similar in concept to a U.S. plan at Chrysler.

The union would not disclose how much the savings represent in so-called "all in" labour costs but officials said privately the concessions meet company demands of reducing expenses by $19 an hour.

Among the concessions beyond an earlier deal at GM, Chrysler workers will lose semi-private hospital coverage, tuition programs, Christmas bonuses, savings on vehicle purchases, some drug dispensing fee protection and partial pay during layoffs.

The union also agreed to reduce relief time in plants, allow more flexibility in use of part-time workers and transfer to a new manufacturing system if Chrysler merges with Fiat SpA of Italy.

"We are extremely grateful to the CAW leadership and to its hard-working members for their openness in this challenging environment to create a new strategy that will lead this company on a path to success. We also want to recognize the Canadian Federal and Ontario governments for their energy and efforts in helping to move this great company forward," said Chrysler president Tom LaSorda.

Chrysler workers, who earn an average of $35 an hour, will vote on the deal this weekend and the union said it will negotiate similar concessions at GM and Ford in Canada

Chrysler and its U.S. parent must submit restructuring plans to governments in both countries by a deadline next Thursday to receive billions of dollars in loans.

Those plans must contain concessions from numerous stakeholders including bondholders, suppliers, dealers and workers. Chrysler is seeking about $2.9 billion and has already received $750 million.

In addition, Chrysler must complete a merger with Fiat. Fiat has also demanded concessions by stakeholders in both countries.

If the plans don’t get government approval, Chrysler will likely slip into bankruptcy in one or both countries.

That would allow Chrysler to reorganize its operations under protection from creditors and emerge as a stronger company. But some parts of the company would likely be sold.

Bankruptcy could also further erode consumer confidence at a time when industry sales are at 30-year lows in the U.S. and sliding here.

In Canada, the federal government pressured the CAW to break a decades-old practice of pattern bargaining where the union traditionally negotiated a contract with one of the big three North American-based auto makers and forced the other two companies to accept it or face a strike.

That would allow the union to negotiate the same improvements for workers at all three companies and not give one of them a competitive edge payday loan lender.

The union initially resisted breaking the pattern deal at GM which will reduce labour costs by about $7.25 an hour by 2012 if the company gets government aid. GM is seeking between $6 billion and $7 billion here.

But Chrysler said it needed cuts in labour costs totalling $19 an hour to compete with Toyota and Honda in Canada.

In the U.S, parent Chrysler LLC and Treasury Department officials are still driving for deals to keep the automaker out of court.

The Treasury Department is also working on a Chapter 11 bankruptcy filing for Chrysler LLC that could come as early as next week.

The department has an agreement in principle with the United Auto Workers union, whose members’ pensions and retiree health-care benefits would be protected as a condition of a bankruptcy filing., according to some reports.

Fiat could also complete its merger with Chrysler while the company is under bankruptcy protection in both countries. A merger is a condition for government aid in both countries.

The federal and Ontario governments had set a "deadline" for reaching a tentative deal on concessions at midnight on Wednesday but talks dragged on the health care trust issue.

Chrysler had sought cuts in health-care benefits, shift premiums, life insurance and child care that would trim labour costs by more than $8 an hour. In earlier negotiations, the union has rejected most of those proposals.

If there is a bankruptcy, a question remains about what happens to Chrysler’s lenders, who hold $6.9 billion (U.S.) in company debt.

The U.S. Treasury is also working with GM to prepare a possible bankruptcy case. Some industry watchers have questioned whether the Treasury’s actions to prepare a bankruptcy case is an attempt to put more pressure on lenders.

While Chrysler faces an April 30 deadline from the U.S. and Canadian governments, GM doesn’t need to submit a plan until June 1.

Under the most probable scenario, the U.S. Treasury will provide the financing Chrysler needs to operate while under bankruptcy protection. Ottawa will also likely provide aid if the company operates under court protection here.

Earlier Friday, Premier Dalton McGuinty sounded a bittersweet note about the worker concessions by expressing concern that they could spread to union members in other sectors.

“We’ve always proceeded under the assumption that you would do better than your dad and your kids would do better than you - each succeeding generation would enjoy a higher standing of living and a better quality of life,” said McGuinty.

“That’s been the great Canadian dream … and there’s been a reset right now. I have not given up on that dream and I don’t think Ontarians should either.

“I think what it means is these wages will be reset and that will serve as a new foundation, a new base, and then working together we can make sure that we drive up our productivity, drive up the value added dimension of the work that we do so that we can resume the progress that we continue to make.”

McGuinty noted he has also written to Prime Minister Stephen Harper to request a national summit on pension reform in the wake of some of the concerns about the serious shortfalls of pension plans at GM and Chrysler.

With files from Robert Benzie

Source

Toyota Motor Corp said on Thursday its group-wide sales fell 27 percent to 1.767 million vehicles in the first quarter of 2009, keeping it ahead of Volkswagen AG as the world’s top-selling carmaker.

Toyota was expected to be in a tight race with the German automaker in the January-March quarter, when the Japanese giant suffered double-digit percentage drops in its three biggest markets of the United States, Japan and China.

For the parent company only, which excludes trucks and cars sold by subsidiaries Hino Motors Ltd and Daihatsu Motor Co, Toyota sales fell 28 percent to 1.53 million vehicles.

Volkswagen delivered 1.4 million vehicles during the quarter, down 11 percent, which increased its share of the global passenger car market by 130 basis points to 11.0 percent, the automaker said. The tally does not include sales at Porsche, which owns 51 percent of Volkswagen.

The gap in group-wide sales between Toyota and Volkswagen shrank to 363,000 vehicles in the January-March quarter from 840,000 a year earlier online payday loan.

The German automaker, with nine brands including Audi, Skoda and Seat, is aiming to surpass Toyota and General Motors Corp as the world’s No.1 seller by 2018.

Toyota is suffering from collapsing demand in its two biggest markets — the United States and Japan — while Volkswagen enjoys growth in its main markets of China, Germany and Brazil, where state-backed incentives are driving sales.

Toyota’s sales may be boosted, however, by an incentive Japan is expected to launch this month for older cars to be scrapped and replaced with new ones in a program styled after Germany’s stimulus.

The United States is mulling a similar scheme.

(Reporting by Chang-Ran Kim; Editing by Michael Watson)

Read more

A coalition of labour and seniors' organizations called on the Ontario and federal governments Monday to protect pensions in the face of the economic crisis.

"We're asking the provincial government and the federal government to prioritize the need to guarantee pensions," said Ken Lewenza, president of the Canadian Auto Workers union.

The coalition was formed after Ontario Premier Dalton McGuinty said earlier this month that the province's pension guarantee fund isn't even close to large enough to cover workers if a large company like General Motors (NYSE: GM) were to go out of business.

Lewenza said all retirees' pensions should be protected by government so seniors aren't forced to bear the brunt of recessions, and called on the province to implement the recommendations of a government-commissioned report on pension reform as soon as possible.

The Arthurs Report, released late last year, recommended that the province enhance its pension guarantee fund and appointment a full-time pension advocate, among other things.

"The provincial government called for the commission, the provincial government talked about the role of government in advancing the causes of seniors, and the recommendations in the Arthurs Report shouldn't be sitting collecting dust somewhere," Lewenza said.

Pension funds, both public and private, took a beating when financial markets collapsed late last year, leaving many companies unable to top them up to the level required by law.

The Ontario government has a provincial safety net in case a company fails and isn't able to support its retirees, but McGuinty said the corporate-supported fund currently has about $100 million in it and "comes nowhere near meeting any liabilities quick faxless payday loan."

Morris Jesion, executive director of the Ontario Society of Senior Citizens' Organizations, emphasized that the financial crisis is not the fault of retirees, and they shouldn't have to shoulder a disproportionate amount of the burden because the province's pension guarantee fund is underfunded.

"The government cannot now abandon their promise during an economic crisis when retirees need it most," Jesion said.

"We are not asking for charity, this is money we invested," added the organization's vice-chair, Amy Nelson.

Many private pension plans are underfunded and companies are under pressure to make up huge shortfalls through special payments.

Several federally regulated Canadian companies have been lobbying Ottawa to change the regulations to give them a longer period to top up their plans.

In his economic statement last fall, federal Finance Minister Jim Flaherty said the government would extend the repayment period to 10 years from the current five, and many provinces, including Ontario, are looking at following suit.

Lewenza said the issue affects all seniors and Canada's pension system needs to be overhauled.

The coalition will hold a rally at Queen's Park on Thursday to call for stronger pension protection from government and corporations.

Source

Gasoline prices are expected to rise just modestly this summer — and remain far below last year’s levels — as the recession continues to put a lid on energy demand.

Regular gasoline in the Midwest will average $2.21 a gallon from April through September, according to the Energy Information Administration’s annual fuels forecast for the six-month summer driving season. That’s 30 cents more than the year-to-date average; but it’s a bargain compared with last summer’s $3.77.

If accurate, the forecast means filling up a Toyota Camry would cost about $30 less than it did last summer. The owner of a Ford F-150 pickup would pay $40 less.

The primary reason for the drop: Cheaper crude oil — the principal feedstock for gasoline.

The price of benchmark West Texas Intermediate crude oil is expected to average about $53 a barrel in 2009, which is about half of last year’s average oil price and just a fraction of the record $147-a-barrel seen last July.

Tuesday’s average retail gas price was $1.94 a gallon in the city of St. Louis and surrounding Missouri counties, according to AAA. In the Metro East, where taxes are higher, the average is $2.09.

Prices have been rising slowly since the beginning of the year, tracking the slow increase in crude oil. But analysts don’t see a return to $4 gas anytime soon.

"Based on everything we’re looking at now, odds are that gasoline prices will be at best marginally higher than they are now," said Bill O’Grady, Chief Market Strategist at Confluence Investment Management LLC in Webster Groves.

Crude oil inventories are unusually high for this time of year, and gasoline supplies are ample given projections for demand fast cash advance. Just as importantly, only about 80 percent of the nation’s refining capacity is being used, so there’s still ample cushion should unplanned outages occur, O’Grady said.

The EIA, the statistical arm of the U.S. Energy Department, estimates oil consumption will decline 2.2 percent this year because of the recession. That’s on top of last year’s 6.1 percent drop thanks in part to a deteriorating economy that eroded demand in the fall.

Demand for gasoline is expected to rise slightly during the summer driving season compared with last year when soaring pump prices and hurricane-related distribution problems led to a steep decline in fuel use.

Prices of crude oil and gasoline could climb more quickly than forecast if stimulative programs put in place in the U.S. and elsewhere revive the global economy more quickly than anticipated, the EIA said.

Even if that happens, it’s uncertain how quickly gasoline consumption would rebound.

A survey of AAA members in January showed that 36 percent planned to make fewer driving trips this year, compared with just 14 percent who planned more trips, said Mike Right, a AAA Missouri spokesman.

The Federal Highway Administration reported last month that Americans traveled 7 billion fewer vehicle-miles in January compared with a year earlier, despite lower gas prices.

"I think that we’ve seen some major shifts in personal diving habits brought on by the high cost of gasoline and the general state of the economy," Right said.

Source

Satyam Computer Services Ltd, the company snared in India’s biggest corporate scandal, is set to announce a winning bidder for a controlling stake, and its shares jumped to a two-month high in anticipation on Monday.

The government-appointed board started a meeting at 9.00 a.m. (11:30 p.m. EDT) in Mumbai to receive bids and is expected to unveil the buyer for a 51 percent stake in the outsourcing company later in the day.

Indian engineering and construction firm Larsen & Toubro, which owns 12 percent stake in Satyam, has submitted a bid for the outsourcing firm, a company official who did not want to be identified told Reuters.

Separately, television channels reported mid-sized IT services firm Tech Mahindra and U.S.-based outsourcing firm Cognizant Technology Solutions had also submitted their bids for Satyam.

Ahead of the announcement of a new owner, shares in Satyam rose as much as 16 percent to 54.90 rupees, their highest since February 4 and valuing the firm at around $740 million, compared to about $7 billion last May.

For a graphic on Satyam’s share price in recent months and major developments since the fraud was revealed, see:

http://graphics.thomsonreuters.com/apr09/IN_STYM0409.jpg

Shares in L&T, which is seen as a front-runner by many analysts as it is the largest shareholder in Satyam, were down nearly 4 percent at 796 rupees and Tech Mahindra was down 2.3 percent at 312 loan until payday.70 rupees in a slightly positive Mumbai market .BSESN.

Analysts have said Satyam looks attractive due to its long list of marquee clients and after the plunge in its market value caused by the $1 billion-plus fraud.

However, they are unsure how to value the company due to uncertainty about its accounts and legal liabilities arising from lawsuits filed in the United States by its shareholders.

SURVIVAL

Three months ago, Satyam’s founder and chairman shocked investors by saying profits had been overstated for years, and put in doubt the survival of the company once ranked as India’s fourth-largest software services exporter.

The government quickly stepped in and sacked the board to limit damage to India’s once-shining IT services sector.

The winning bidder would buy a 31 percent stake in the company through a preferential allotment of new shares, and then make a public offer to buy 20 percent more, as required by Indian law.

If the investor did not have a 51 percent stake after the open offer, it has the option of increasing its stake through a further preferential allotment of shares, Satyam said last month.

In October, Satyam had said it had around 53,000 employees and more than 600 clients including General Electric, Cisco Systems and Qantas Airways. 

Read more

Pulte Homes Inc. is buying Centex Corp. for $1.3 billion in stock in a deal that will create the nation’s largest homebuilder and could spark further consolidation in an industry that is suffering the worst real estate recession in a generation.

The transaction will combine Pulte’s strength in active-adult and retirement housing with Centex’s hefty market share of first-time home buyers. The acquisition also will give Pulte tracts of land in Texas and the Carolinas, two of the most resilient markets, and a presence in 29 states and Washington, D.C.

The new company, which will include the Del Webb, DiVosta and Fox & Jacobs brands, will keep the Pulte name and headquarters in Bloomfield Hills, Mich. There will be an unspecified number of job cuts.

"It allows us to not only survive, but thrive," said Richard Dugas Jr., Pulte’s president and CEO, who will retain those titles over the combined enterprise.

Faced with a 75 percent slide in new home sales from the peak in mid-2005, home builders have slashed construction and prices but have been slow to join forces. Wednesday’s deal touched off investors speculation that other homebuilders with battered stock prices may be easy targets.

The combined company will have twice the revenue of its next largest rival, D instant credit report.R. Horton Inc. Pulte and Centex pulled in a total of $11.61 billion in the last twelve months, compared to D.R. Horton’s $5.82 billion.

The behemoth will be better poised to take advantage of the market recovery, which executives said is just beginning. On Wednesday, new data showed loan applications to purchase a home rose 11 percent last week. And new home sales climbed almost 5 percent from January to February, providing hope that the sales may have reached a bottom.

Integrating Centex’s operations will save Pulte $350 million a year. The new company will have $1.8 billion in debt and cash reserves totaling $3.4 billion. The company will pay off $1 billion in debt by the end of the year.

Pulte is offering Centex shareholders 0.975 shares of its common stock for each share of Centex that they own. The transaction is valued at $10.50 per Centex share based on Pulte’s Tuesday closing stock price of $10.77. That represents a 38 percent premium to Centex’s closing price of $7.62 Tuesday.

Pulte stockholders will own 68 percent of the combined business, and Centex shareholders will own the remaining 32 percent.

Source

The U.S. Treasury Department plans to extend the Troubled Asset Relief Program to certain life insurers, The Wall Street Journal reported on Tuesday, citing people familiar with the matter.

The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift, the Journal reported on its website.

Several life insurers have applied, including Prudential Financial Inc, Hartford Financial Services Group Inc and Lincoln National Corp, the Journal reported.

No decisions have been made yet about which applications will be approved, sources told the Journal.

Sources told Reuters in February that the Treasury was likely to approve insurers for TARP funds online instant cash advance.

In recent months, some insurance companies have received approval to acquire banks, paving the way for them to participate in the government’s $250 billion capital injection program, which is part of the larger bailout fund.

In January, bank regulators approved applications from Hartford and Lincoln to become savings and loan holding companies, which is needed for them to be considered for federal funds.

Representatives from Hartford, Prudential and Lincoln were not immediately available for comment.

(Reporting by Anupreeta Das; Editing by Carol Bishopric)

Read more

Shares of HSBC jumped more than 4 percent on Monday to five-week highs after its massive rights issue received a robust response from investors.

By 11:30 p.m. EDT, the stock was up 3.4 percent at HK$51.15, after earlier rising to HK$51.70 — its highest level since it announced the cash call on March 2. HSBC shares have soared 62 percent from the 14-year lows of HK$30.55 hit four weeks ago.

“The markedly improved global investor sentiment post-G20 and the slew of strong U.S. data in recent days have helped HSBC to a great extent,” said Alex Tang, research director at Core Pacific-Yamaichi International. Tang called the response to HSBC’s cash call “excellent.”

HSBC investors bought 96.6 percent of the shares offered in its record $18.9 billion rights issue, Europe’s biggest bank said on Sunday. Demand in Hong Kong — where HSBC is a market darling and referred to as “big elephant” — was 98.2 percent.

HSBC said it had sold 4.89 billion shares to existing shareholders and expects to sell the 172.7 million shares not taken up — or the “rump” — on Monday health insurance companies.

The stock underperformed the broad market in early trading in Hong Kong as the bank unloaded some of the unsubscribed rights shares, which were priced at a deeply discounted HK$28, two brokers said. More than 842 million HSBC shares had changed hands in the first hour of trading on Monday.

HSBC’s shares are expected to come under some selling pressure when the new shares begin trading on Thursday.

Brokerage house CLSA said it maintained its negative view on HSBC, attributing the recent share surge to a short squeeze in global bank stocks as opposed to a fundamental improvement in the U.S. or UK economy.

“The stock is trading at 1.1 times price-to-tangible-book versus 0.6 times for the U.S. banks and 0.3 times for the UK banks,” Daniel Tabbush, an analyst with CLSA, said on Friday.

(Reporting by Parvathy Ullatil; Editing by Muralikumar Anantharaman)

Read more

The number of people filing initial claims for unemployment benefits unexpectedly rose last week, while those filing continuing claims hit an all-time high for the 10th straight week, according to a government report released Thursday.

In the week ended March 28, a total of 669,000 people filed initial jobless claims, up 12,000 from the previous week’s upwardly revised figure of 657,000, the Labor Department reported.

It was the largest weekly increase since October 1982, and it surprised economists surveyed by Briefing.com, who had forecast initial claims to decline to 650,000.

The number of people continuing to file for jobless benefits rose 161,000 to 5.7 million in the week ended March 21, the latest week for which data was available. It was the highest number since the government began keeping records in 1967, and the 10th consecutive week that continuing claims rose to a record high.

The increasing number of people continuing to file for unemployment benefits suggests that Americans are struggling to re-enter the workforce.

The 4-week moving average for weekly filings, which smoothes out volatile peaks and troughs, was 656,750, up 6,500 from the previous week’s revised average car insurance quotes.

Earlier this month, initial claims and the 4-week moving average had declined slightly, raising some hopes that the labor market was stabilizing. Given last week’s increase, however, that seems improbable, according to Andrew Gledhill, an economists at Moody’s Economy.com.

"This increase is definitely bad news," Gledhill said. "This is the worst labor market downturn at least since the 1980s, and I don’t expect it to subside soon," he said.

The report comes one day before the government’s closely watched monthly jobs report. The Labor Department is expected to report Friday that the economy shed 658,000 jobs in March, more than the 651,000 reported for February, according to a consensus estimate of economists complied by Briefing.com. The unemployment rate is forecasted to rise to 8.5% from 8.1%. 

Source

WASHINGTON–An index that tracks signed contracts to purchase previously occupied homes rose in February from a record low a month earlier as buyers took advantage of deeply discounted prices and low interest rates.

The National Association of Realtors said Wednesday said its seasonally adjusted index of pending sales for previously occupied homes rose 2.1 per cent – in line with expectations – to 82.1 in February from January's record low of 80.4.

Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.

Because of falling home prices and mortgage rates, homeownership is more affordable than it's been since at least 1970, the trade group said.

Hopes have been growing that home sales, while still severly depressed, may be finally showing signs of life. Sales of existing home sales rose 5.1 per cent in February, the largest increase in nearly six years.

Prices, however, are expected to keep falling for at least another year business cards. Tens of thousands of homes are tied up in the foreclosure process and not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.

The Realtors estimate that 45 per cent of existing home sales are now foreclosures and other distressed properties.

Many in the real estate industry are counting on an $8,000 tax credit for first-time homebuyers as their best hope for boosting flagging sales. That incentive was included in the economic stimulus package signed by President Barack Obama earlier this year.

"We expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory," Lawrence Yun, the trade group's chief economist, said in a statement. "Under these conditions, we should see price stabilization in most markets by the end of the year.''

Source