Financial life in a big town

In the largely unregulated world of extended auto-service contracts, there’s one bedrock consumer safeguard: Customers canceling those vehicle-protection plans are refunded for the coverage they don’t use.

In most states, including Missouri and Illinois, it’s the law.

Yet St. Louis area companies have found a way around this rule by selling a different type of vehicle protection — warranties tied to oil additives, transmission fluids and other products that promise to keep cars running longer.

Here’s how the product warranties work: Consumers are sold an automotive additive — a bottle of liquid, or some tablets. Companies selling the additive say that if the product fails to prevent a breakdown, the warranty on the additive will cover repair bills — or at least some portion of them.

With traditional auto service contracts, the consumer is purchasing a promise that the seller will cover repair bills. The difference? First, with the additive, the consumer is buying a product, not a contract. Second, the consumer is entitled to a refund if a service contract is canceled early. That’s not the case with a product warranty.

And many consumers don’t understand that difference.

"I didn’t know I was buying any $2,000 bottle of additive," said Jeanette Franklin, of Houston, Texas, who bought a product warranty from Wentzville-based US Fidelis in November. "If they told me that’s what it was, I never would have bought it."

Franklin’s complaint is consistent with many that the St. Louis Better Business Bureau has received. The BBB has shared more than 80 complaints involving additives with the Post-Dispatch.

But the companies say they’re helping consumers by offering vehicle-protection plans for older, high-mileage vehicles.

US Fidelis Chief Executive Chris Riley said in a statement that the product warranties help consumers keep their vehicles on the road longer: "Customers who have purchased this product have had more than $5 million in product warranty claims paid," he said.

The company would not answer questions about its product warranties that were

e-mailed to a spokesman.

An attorney for St. Louis-based National Dealers Warranty said the company trained sales agents to be honest about some drawbacks of product warranties, including the fact that they can’t be refunded. Other firms did not return calls seeking comment for this story.

Thousands of consumers have complained to the BBB about auto-protection plans sold by St. Louis companies. Its crusade against the service-contract industry has focused on allegations of telemarketing abuses, deceptive direct-mail literature and high-pressure sales tactics. BBB officials said they knew little about the product-warranty side of the industry until asked about it by a reporter.

As a result, the BBB hasn’t specifically tracked whether consumers’ complaints were over a service contract or product warranty.

Critics — including some inside the industry — say the marketing of these product warranties confuses many consumers, leaving them trapped in coverage they no longer want. The warranted additives also allow service-contract brokers to sell in California, where they’re otherwise prohibited from doing business.

Franklin said she believed the two bottles of AutoLifeXtend oil and transmission additive were product samples, or maybe a thank-you gift from US Fidelis for buying a service contract. She said the company told her to activate her coverage by using the products, which she did.

She discovered just how much her protection plan differed from a service contract when she called the company on Aug. 18 to cancel the $2,060 purchase, which was to be financed over 24 months.

Franklin said the company initially wouldn’t refund any of the $800 she had paid because she had used the product as instructed. In other words, US Fidelis couldn’t give her a refund because she couldn’t return the additives. Days later, the company refunded $375 after Franklin threatened to contact the Texas attorney general, she said.

With service contracts, cancellations are common. Sometimes customers are dissatisfied; often they cancel only because they’ve sold their vehicle or the cars have broken beyond repair used car loans. Depending on how much of the service contracts they’ve used, these consumers can qualify for refunds of several hundred dollars.

With the product warranties, they’re generally entitled to nothing.

Mary Lobdell, an assistant attorney general in Washington state, is spearheading a 43-state investigation into the service-contract industry. She wouldn’t say whether product warranties were part of that investigation, but she said many of those protection plans were "grossly misrepresented" to the point that "consumers truly don’t understand what they’re buying."

Larry Hecker heads the Vehicle Protection Association, a trade group for companies that sell auto-service contracts. He said the product warranties were sold primarily to avoid California regulations that allow only auto dealers to sell service contracts.

Hecker acknowledged that the widespread sale of no-refund warranties could be problematic for an industry struggling to get past allegations that it frequently takes advantage of consumers.

"We haven’t addressed (product warranties) yet, but I’m sure we will down the road," he said, adding that it will probably be discussed by industry leaders when they meet for an annual conference next month in Orlando, Fla.

One industry veteran who plans to attend that meeting is Bill Rosenbach, who once ran a subsidiary of Wentzville-based US Fidelis and now works as a consultant for companies that sell both service contracts and product warranties.

Rosenbach said the quality of the additives and the warranties tied to them varied considerably from company to company.

Some of the additives may be beneficial to vehicles, but most don’t have any significant impact on how a car runs, he said.

Michael Carter, the general counsel for St. Peters-based National Dealers Warranty, says the additive that company sells — dubbed "The Choice" — improves auto longevity by lowering vehicles’ operating temperature. Carter said consumers typically needed to use the product only once to be covered by the warranty.

Carter said product warranties could be a good buy for consumers who didn’t qualify for traditional service contracts because their vehicles were too old or their mileage was too high. He defended the non-refundable nature of the coverage, but he said the company could make exceptions. National Dealers Warranty, he said, will "err to the side of good faith and good will" in some cases.

For companies such as US Fidelis and National Dealers Warranty, product warranties offer at least one big advantage over traditional service contracts.

"There’s a lot more profit," said Rosenbach, of Lincoln, Neb. "But the worst part about product warranties is consumers think they’re getting a service contract."

Many consumers have complained to the BBB that they couldn’t get a refund because they used the product. But others complained about the reverse: They didn’t use the product — either because they believed it unnecessary and threw it away, or their mechanics advised against using it — and later found out this was grounds for denying any claims made on the warranties.

The 10 St. Louis area businesses named in those BBB complaints include some of the country’s biggest service-contract brokers, including US Fidelis; National Dealers Warranty; Dealers Warranty, of St. Charles, which does business as Mogi; Carhill Enterprises, of St. Louis, which does business as Consumer Protection Services; and TXEN Partners, of St. Louis, which does business as Protection Direct.

Several of those firms sell product warranties tied to additives made by Dura Lube, which also sells its additive products directly, through its website, for as little as $11.99.

In 2000, the company that made Dura Lube paid $2 million to settle a Federal Trade Commission lawsuit alleging that claims about the product’s effectiveness were misleading and unsubstantiated. Dura Lube did not return calls seeking comment.

Source

Next up for Missouri Baptist Medical Center’s 30-year development plan is Board of Aldermen consideration of the hospital’s proposal to add patient towers, a parking garage and other facilities.

By a unanimous voice vote Wednesday night, the Planning and Zoning Commission backed the plan.

Commission approval came despite misgivings by some people who live near the hospital. They told commissioners they are leery of a plan to put a walking trail through eight acres of woods Missouri Baptist owns next to their homes just south of the main hospital grounds. A perceived lack of security was among the issues raised.

Hospital officials said the trail is part of their intent to preserve green space at the edges of the medical center’s property while concentrating buildings in the middle of the 65-acre site.

A seven-story patient tower and a parking garage are part of Missouri Baptist’s first phase of a three-phase plan. Later phases, looking out past 2020, include plans for a pair of nine-story buildings.

Source

Like many of his competitors, Hummer dealer Jim Lynch is fighting for survival.

Unlike the rest of them, Lynch reached for a gun. Lots of them, actually.

Faced with declining sales and an uncertain future, his Chesterfield dealership has expanded in a direction that’s drawing national attention. It’s what happens when you replace some of those pricey Hummers with dozens of Glocks, Sig Sauers, Colts, Berettas and Brownings.

For Lynch, those guns are the solution to a problem that’s been hounding him for months.

"We’ve got a beautiful building with a big mortgage," Lynch said. "The Hummers weren’t going to cover it."

In the good old days — way back in 2005 — Lynch’s dealership could sell 70 Hummers during a strong month. But high gas prices, a sour economy and the auto industry’s ongoing struggles have wreaked havoc. These days, he’s happy to watch 10 of the gas-guzzling sport utility vehicles leave the lot. But the money he pockets selling guns makes up for the profit on about 15 Hummers.

But why guns? Why not flowers? Or lawn mowers? Or jewelry?

That’s easy. The people who like Hummers also tend to like guns. They’re like Matt Massa of St. Louis, who dropped by the dealership Tuesday to have a look around.

"I work outdoors. I shoot outdoors. I hunt outdoors," said Massa, who, by the way, also drives a Hummer.

Lynch’s dealership, which made the change in mid-July, isn’t the first to link guns to automobiles. A dealer in Kansas City, for example, grabbed headlines recently with his offer to include an AK-47 rifle with every pickup sold this month.

But Lynch may very well be the first dealer in the U.S. to turn part of his business over to the gun trade.

A spokesman for the National Auto Dealers Association said he hadn’t heard of anything similar. More common are dealerships that offer things likes restaurants, spa facilities and driving ranges.

For Lynch, this may be just the beginning of the transformation.

Four of his sales offices have been cleaned out and turned into shotgun and rifle displays. Floor space once set aside for a massive Hummer now provides counter space to show off the shop’s handguns. He hired a Glock sales representative to help run the operation.

Later, they may expand the outdoor offerings to include things like kayaks, canoes and archery supplies. And he’s pushing to build a shooting range on the 60-acre off-road course behind the dealership.

It’s almost as if Lynch is planning for a day when he’s no longer a Hummer dealer. It’s hardly far-fetched, considering what’s happened to dealers here and across the nation who have lost their franchise agreements. Hummer’s own fate is unclear, with General Motors attempting to sell the brand to China’s Sichuan Tengzhong Heavy Industrial Machinery Co. in a deal that could close next month.

Diversification just makes sense, said Michael Lowenbaum, a St. Louis attorney who represents dozens of auto dealers in the region.

Dealers who have lost their franchises this year are scrambling to stay in business. Many are turning to the used car business or focusing on service and repairs. Some are looking into new products, including scooters and battery-powered cars.

For now, though, few have ventured outside of their automobile comfort zone. "But give it a couple months," Lowenbaum said. "It’s all still so new."

Not everyone, however, is thrilled with Lynch’s sudden change of direction.

Hummer spokesman Nick Richards said the dealership never asked to make the change — a violation of its sales and service agreement, which requires the automaker’s approval of any new line of business on the property. Richards would not say where the automaker stands on the gun sales. But he said they would try to find a solution that works both for Lynch and Hummer.

"You let one go off and do whatever — regardless of how it fits with the brand — and you potentially open the floodgates," Richards said. "Who knows what the next dealer will want to do?"

If Hummer and GM do balk at Lynch’s diversification, that won’t be a huge surprise to Scott Testa, a marketing professor at Cabrini College in Philadelphia.

It would be in line, he said, with the unimaginative way the U.S. auto industry operates.

"That’s how these car companies got themselves into this mess," Testa said. "You’d think they would be very open-minded. But that’s not always the case."

It’s an issue that’s certain to be watched by locals like Eric Schnellmann of Wildwood.

He’s not the typical Lynch customer. He doesn’t own a Hummer. And he doesn’t buy guns.

Yet there he was late Tuesday morning, strolling through the dealership marveling at the assortment of handguns, rifles and shotguns. He was just happy, he said, to see the dealership try something different.

He said it might actually give people a reason to drive to the western edge of St. Louis County, especially if the dealership succeeds in its efforts to open the shooting range.

"The area needs another thing to do," Schnellmann said. "What else are we going to do? Open up another Putt-Putt golf course?"

Source

House prices in St. Louis fell faster in June than in the nation as a whole, according to data released Monday by a California-based tracking agency.

Prices fell in metro St. Louis by 11.3 percent in the 12 months ending in June, according to an index created by First American CoreLogic, compared with 7.8 percent nationwide.

That’s also steeper than the 9.9 percent figure First American recorded for St. Louis in May, a sign that house prices here have not yet hit bottom.

St. Louis fared better than markets in Florida, California and Nevada that have lost nearly 30 percent of their value. But it has fallen more sharply than cities in Texas, the Northeast and Rocky Mountains.
Tim Logan

Source

OTTAWA – Rising prices drove retail sales up one per cent in June, to $34.4 billion.

Statistics Canada reports gasoline was the driving force behind most prices, as retail sales in volume terms increased 0.4 per cent.

The agency says retail sales have risen in five of the last six months, following large drops at the end of 2008.

Sales rose in six of eight retail trade sectors in June.

The automotive sector was the largest contributor to overall growth, with a 2.1 per cent sales gain.

A 4.7 per cent rise in sales at gasoline stations was the main contributor to June's increase in the automotive sector, with higher gas prices driving the advance.

Source

Other drivers give Roxanne White the thumbs up when they meet her red-jewel tint LT2 Chevrolet Camaro on the road. "Nice car," they coo.

White, a 39-year-old mother of two, says she gets this every five minutes or so.

People come unbidden to her house door in Sudbury and ask to see the latest version of the iconic muscle car. She gladly complies.

"It’s gorgeous," she says. "It’s sexy and fast. I certainly get the looks."

White isn’t the only woman in her 30s, 40s or even older who is wheeling around the streets in General Motors’ hot sports car.

The Camaro has become a good- news event for embattled GM, selling so briskly that the company has stepped up its production in Oshawa.

J.D. Power and Associates, a leading research firm, said statistics show the average age of a driver of the 2010 Camaro is 43 – and women now account for almost one in five sales.

Although precise historical data isn’t available, those demographics are clearly a far cry from one or two generations ago when guys under 30 fuelled by testosterone almost exclusively occupied the controls of muscle cars.

A spokesperson for Chrysler Canada said the company’s statistics show the average age of those buying the new version of the Dodge Challenger sports car is now 50.

Analysts and Camaro watchers attribute the changes in the user profiles to several factors, including price, comfort, history and choice.

Furthermore, women are finding their presence at the wheel gives the car more sex appeal for men. That’s a little bit of twist on the past perception that males drove Camaros as a magnet to attract women.

"I have had people say the car’s hot, but it’s the woman inside who makes the car hotter," said White.

"Can a woman attract guys driving a Camaro? I know so," said Girija Siva Deonarain, who is married and has been waiting for her new model since March.

Camaro sticker prices, including taxes, are in the range of $40,000 to $45,000 for the six cylinder LT model and eight-cylinder SS version.

That makes affordability an issue for drivers in their mid-20s, in comparison to one or two generations ago when that age bracket could more easily handle the price range of a Camaro Z28 or Berlinetta, according to analysts.

These days older drivers, who have more money, can ante up to purchase a car that they missed out on when they were younger free credit report instantly.

Gary Kilbride, vice-president of the Ontario Camaro Club, added that in the model’s heyday during the 1960s and 1970s, it didn’t have a lot of competition in the showrooms beyond, perhaps, the Ford Mustang, Dodge Challenger and Dodge Charger. "There’s a lot more competition and choice in the market for young people now," he said. "In the ’60s, it was essentially the (Detroit) Big Three and the odd British car out there."

White says today’s Camaros are intrinsically more appealing to women. Whereas the car once favoured men who liked to drive fast and hard, the current models are more attentive to interior comfort and handling, she noted.

"Everything is in the right spot and it’s more comfortable for me," she said. "I like a sports car but it has to be classy, too. That’s the way it looks now."

"It’s also easier to handle," added Siva Deonarain of Stouffville.

Kilbride agreed women are no longer fighting the wheel and the car "works" for them.

"Chevrolet has done a great job on styling and comfort," he said. "You’re also getting good fuel economy with still lots of power."

Siva Deonarain, 28, said she has driven other sports cars and sport utility vehicles. But the Camaro, which originally hit the market to great fanfare in 1966 as a 1967 model, attracted her a long time ago and her interest never died, even when the Camaro itself did in 2002 (its resurrection occurred last year).

"Now I am at an age where I can afford it," she said.

She also noted that cultural changes in society make it more acceptable now for a woman to drive a muscle car.

"That car will be my baby," she joked. "I don’t know now if I will have kids."

Meanwhile, GM Canada describes interest in the car as "overwhelming."

The company has an order bank of 19,000 waiting for production, and to meet its quotas, has added overtime at the new Oshawa flexible manufacturing plant until at least the end of October.

Source

OTTAWA – Export Development Canada is becoming the leading backer behind a $1-billion fund to extend credit to struggling Canadian companies.

The Crown corporation has put up $450 million and Toronto-based Brookfield Asset Management Inc. (TSX: BAM.A) another $100 million into the fund that the two parties expect will grow to $1 billion.

Initial investors also include the Canadian Imperial Bank of Commerce and Sun Life Financial Inc.

Credit conditions have been easing in Canada in the past few months, but the July survey of senior fund managers by the Bank of Canada found conditions remained tighter than normal.

In a joint statement, the EDC and Brookfield said the fund would provide debtor-in-possession loans to companies needing protection from creditors while undergoing restructuring or reorganization free car insurance quotes.

"This fund will help Canadian companies gain access to credit during restructuring, when it's most needed," said EDC chief executive Eric Siegel in a statement.

"This new partnership with Brookfield enables us to further assist even more Canadian companies during the current downturn."

Brookfield managing partner Joe Freedman said the available financing will help "viable enterprises emerge from the current recession in a strong competitive position."

Source

Kenneth Feinberg, the Obama administration’s pay czar, said on Sunday he has broad and “binding” authority over executive compensation, including the ability to “claw back” money already paid, and he is weighing how and whether to use that power.

Feinberg told Reuters that Citigroup Inc included the contract of energy trader Andrew Hall in submissions due Friday by seven major companies still locked in the federal government’s TARP Program.

Feinberg said he hasn’t looked at Hall’s contract, which reports have said could pay him as much as $100 million this year.

“Whether I have jurisdiction to decide his compensation or not, we will take a look and decide over the next few weeks,” Feinberg said after speaking at a public forum in Martha’s Vineyard, Massachusetts, part of a newsmaker series hosted by the Martha’s Vineyard Times newspaper.

Feinberg has been consulting with seven companies that have yet to pay back money they borrowed from the government, including Citi, American International Group Inc, Bank of America Corp, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc.

Those companies faced a deadline of Friday of submitted proposals to Feinberg for their top 25 employees.

Feinberg said on Sunday that decisions he makes will be “binding,” but the law limits his power over contracts signed before February 11, 2009 paydayloan.

He also said he has the authority to use a “clawback” provision to go after compensation for executives from any company that received money from the U.S. Treasury’s Troubled Asset Relief Progr.am (TARP).

“I have the discretion, conferred upon by Congress, to attempt to recover compensation that has already been paid to executives not only in these companies, but in any company that received federal assistance,” Feinberg said during his remarks.

Asked by Reuters if he could use that ability to target a firm like Goldman Sachs Group Inc, which paid back $10 billion in bailout money, Feinberg said: “Anything is possible under the law.”

“I can claw back, but we haven’t focused on that at all,” he said.

“TOUGH DISAGREEMENTS”

Feinberg said he has been advising the seven firms under his jurisdiction on a daily basis, characterizing the meetings as “very amicable.”

“There have been some tough disagreements, but everyone is trying to get to an end place in compensation that makes sense in a post-TARP world,” Feinberg said.

Citigroup, in particular, has concerns about pay restrictions causing its top employees to leave, Feinberg said. 

Read more

Canadian existing home sales set a record for July, up 18.2 per cent from the same time last year according to figures released today.

A total of 50,270 homes exchanged hands last month, breaking the previous record set in July of 2007 when the market was at its peak, according to the Canadian Real Estate Association.

Year over year gains in Toronto (up 28 per cent), Calgary (up 22 per cent) and Montreal (up 19 per cent) helped set the record. Vancouver was the stand out, however, with a 90 per cent year over year gain.

Prices nationally are up 7.6 per cent from a year ago to $326,832.

However, only seven markets in Canada posted new average price records. This suggests that a strong rebound in sales activity in the more expensive cities in Canada is skewing national prices upward payday loan lenders.

The trend toward fewer listings is also having an impact. For the seventh month in a row, listings were down. This time by 13 per cent in July as buyers have fewer inventory to choose from.

Nationally, there were 4.4 months of inventory last month, well below the recessionary peak of 12.8 months in January of this year.

"Home sales through the MLS systems in July provide clear evidence that sentiment about making major purchases continues to improve," said CREA Chief Economist Gregory Klump. "These trends are supporting average prices."

Source

Kohl’s Corp issued a disappointing outlook for the rest of 2009 on Thursday, citing higher costs from opening new stores and persistently frugal shoppers, and shares fell 1 percent.

The department store operator’s tepid outlook overshadowed a slightly better-than-expected quarterly profit.

Kohl’s said last year that it would take over 31 of the bankrupt Mervyn’s locations. It is reopening several of those stores throughout 2009, adding to costs for the period.

For the third and fourth quarters, Kohl’s forecast earnings below analysts’ estimates, as selling, general and administrative costs are expected to rise 3 to 4 percent.

Kohl’s also expects the sales environment to remain rough as it heads into the holiday sales season, as shoppers favor deep discounts and essential items in the recession.

“We would expect the second half of this year to continue to be a fight for market share,” Chief Executive Kevin Mansell said in a conference call.

Kohl’s expects to earn 40 cents to 44 cents a share in the current third quarter. Analysts on average, expected 47 cents, according to Reuters Estimates.

For the fourth quarter, it expects to earn 99 cents to $1 personal loans.06 a share, while analysts were expecting $1.13.

Menomonee Falls, Wisconsin-based Kohl’s also sees comparable-store sales falling 3 percent to 5 percent and total sales ranging between a fall of 1 percent and a rise of 1 percent in both periods.

SECOND QUARTER EXCEEDS ESTIMATES

Net profit fell to $229 million, or 75 cents a share, in the second quarter ended August 1 from $236 million, or 77 cents a share, a year earlier.

Analysts had expected a profit of 74 cents a share, Reuters Estimates showed.

Net sales rose 2.2 percent to $3.8 billion.

“Sales for the first half of 2009 exceeded our plans and indicated market share gains across most merchandise areas and regions,” Mansell said in a statement.

Earlier this month, Kohl’s posted a 0.4 percent increase in July sales at stores open at least one year, citing strong demand for footwear, home goods and accessories.

The company, which opened 19 stores in its first two quarters, expects to open an additional 37 later this year. 

Read more