Financial life in a big town

Ford Motor reported a $3 billion quarterly operating loss on Friday and said it would reduce staff and capital spending in order to preserve its dwindling cash.

Ford said it would cut salaried employment costs by 10% - reducing compensation of its white collar workers by eliminating merit pay, bonuses and the company’s matching contributions to their retirement accounts.

But even with those savings, the company said it’s likely to lay off more salaried staffers. It also said hourly staff - mostly factory workers covered by union contracts - would be reduced by an additional 2,600 through a voluntary buyout package.

The company, which earlier this year sold brands such as Jaguar and Land Rover, said it would continue to look to sell assets.

Ford Chief Executive Alan Mulally warned that while the company is confident that it is taking the right steps to respond to the downturn, it does not see a quick turnaround in demand for autos in either North America or Europe.

"We believe the downturn in industry volume will be broader, deeper and longer than previously expected," he said during a conference call. Sales volume isn’t expected to improve until 2010, he said.

Ford’s loss came to $1.31 a share, excluding special items, far worse than the penny a share loss it reported on that basis a year earlier. Analysts surveyed by earnings tracker Thomson Reuters had forecast a loss of 93 cents a share.

The company had a one-time gain of $2.2 billion, related to the accounting of its retiree health care expenses. With that gain, it reported a net loss of $129 million, or 6 cents a share, an improvement from the $380 million, or 19 cents a share, it lost on that basis a year earlier.

While the company did not give any specific guidance on results going forward, Chief Financial Officer Lewis Booth said the current quarter could see a larger increase in losses than seen in the third quarter.

But the operating losses continued to burn through the company’s cash position, leaving with its auto operations with only $18.9 billion in cash on hand at the end of the quarter, down $6.3 billion from the start of the quarter.

Concern has been growing that the nation’s automakers could run out of cash as soon as next year due to rising losses and high borrowing costs faced by the companies. Ford had been considered to be in the best cash position of the three U.S.-based automakers.

Ford, which saw the volume of its U.S. vehicle sales plunge 25% in the quarter, reported that overall revenue tumbled by $9 billion in the quarter to $32.1 billion. High gasoline prices at the start of the quarter, followed by tight credit, increased job losses and record lows for consumer confidence late in the quarter combined to keep potential auto buyers on the sidelines.

The company disclosed that its fourth-quarter vehicle production would be cut by an additional 40,000 from previous plans. That will leave its quarterly production target at 430,000, down roughly a third from year-ago levels.

Ford said it will move ahead with product development plans for most vehicles, especially for smaller, more fuel efficient vehicles cash advance loans. But it plans to reduce spending on the development of large vehicles and will delay other unspecified vehicles "that will be deferred until industry volumes recover."

Ford also announced it would seek to raise additional cash by using equity-for-debt swaps. But the company’s stock has already lost about three-quarters of its value in the last 12 months. Automotive investor Kirk Kerkorian, who invested just over $1 billion in Ford shares earlier this year, has started selling that stake at a large loss and has said he may get out of the company’s stock altogether.

Ford (F, Fortune 500) is not the only automaker seeing trouble. Rival General Motors (GM, Fortune 500) is forecast to report a jump in losses in the quarter later in the day Friday. On Thursday, Japanese rival Toyota Motor (TM), which is poised to see its first annual decline in U.S. auto sales, slashed its earnings outlook for its current fiscal year.

The chief executives of GM, Ford and privately-held Chrysler LLC, as well as the president of the United Auto Workers union, met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Thursday to seek support for a wide-ranging bailout package for the industry. Both leaders voiced support for additional help for the sector following their meetings.

Mulally said he was encouraged by the discussions with members of Congress, but added that Ford isn’t counting on additional federal help because it can’t be sure of what will be approved. He also disclosed that Ford is also talking to governments in other countries where it has operations as well.

Ford would be willing to discuss granting stock or stock warrants to the U.S. government in return for getting help, Mulally said. No details of such an equity stake in the automaker had been discussed, he added.

Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers’ balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.

The discussions also touched upon allowing the automakers to tap into the $700 billion bailout of Wall Street firms and the nation’s banks that was passed by Congress last month. Treasury has so far rejected auto-industry inquiries about accessing that pool of money.

The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress, as part of energy legislation, to help automakers convert to making more fuel-efficient vehicles in an effort to meet the demands of car buyers and new federal rules.

Ford shares were up 1% in mid-morning trading Friday following the report. 

Source

Sprint Nextel says it swung to a third-quarter loss as it continued to hemorrhage customers.

The nation’s third-largest wireless provider said Friday it lost $326 million, or 11 cents per share, during the three months ending Sept. 30. That contrasts with a profit of $64 million, or 2 cents per share, a year ago.

Excluding one-time items, the Overland Park, Kan.-based company says it would have broken even during the quarter.

Thomson Reuters says analysts it surveyed expected a profit of 3 cents per share american cash advance.

Sprint Nextel (S, Fortune 500) says revenue fell 12% to $8.81 billion. That’s below the $8.85 billion expected by analysts.

The company says it lost 1.3 million customers during the quarter. 

Source

British bank Barclays Plc is raising 7.3 billion pounds ($12.1 billion) from investors from Qatar, Abu Dhabi and elsewhere to allow it to avoid taking UK government rescue cash, it said Friday.

The fundraising is being made through a range of complex capital instruments, which could see Middle East investors owning about one-third of the bank.

An issue of reserve capital instruments (RCIs) will pay annual interest of 14 percent until June 2019. Warrants representing billions more pounds could also be issued.

Britain’s second biggest bank is raising up to 3.5 billion pounds from Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi’s royal family. That could give him a 16.3 percent stake in the bank.

Barclays shares initially jumped after the news as investors welcomed the bank’s ability to raise cash in tough markets and an adequate trading update, but later eased back. At 0930 GMT they were unchanged at 205-1/4 pence after touching 228p.

The bank said group profit in the first nine months of this year was “slightly ahead” of the same level a year earlier.

It took a net writedown of 129 million pounds from credit market writedowns for the third quarter, but said 1 billion pounds of gains on debt it carries were reversed in October.

Barclays is raising up to 2 billion pounds from Qatar Holding and 300 million from Challenger, an investment vehicle of a member of Qatar’s royal family freecreditreport. That could leave Qatar Holding a 12.7 percent stake and Challenger with 2.8 percent.

Barclays’ investor base has been transformed in the past two years, as it has raised funds from investors in China, Singapore and Japan as well as the Middle East and the bank expects to benefit commercially from the links as well as getting cash.

“There has been a significant shift in the availability of capital and economic power in the world over the last five years and we’re ensuring we’re aligned with those changes,” said John Varley, Barclays chief executive.

AVOIDING TAXPAYER CASH

The bank is seeking to raise up to a further 1.5 billion pounds from the sale of MCNs (mandatorily convertible notes) with existing and other investors.

Asked on a conference call whether Barclays has enough capital to avoid more fundraising, Varley said: “Yes, we have what we need.”

Barclays earlier this month turned down an offer of government funds under Britain’s 400 billion bailout package and said it would raise capital privately.

Rivals Royal Bank of Scotland, Lloyds TSB and HBOS have agreed to take up to 37 billion pounds of taxpayers’ funds to help rebuild balance sheets hit by the credit crisis and prepare for possible recession. 

Read more

Even as markets plunge amid a crisis of confidence, Wall Street officials argued on Tuesday that the world’s financial institutions need a new and different kind of regulation, rather than more of it.

As the securities industry’s reputation sank to new lows, nearly a thousand Wall Streeters braved rain and plunging bank stocks to attend the Securities Industry and Financial Markets Association’s annual meeting. Officials ranging from New York Mayor Michael Bloomberg and former SEC Chairman Harvey Pitt called for streamlined regulation and a system that can better handle the market’s dramatic changes of the past decade.

“Our regulatory system is sometimes called a patchwork. It seems there are more holes than patches,” said Blythe Masters, global head of commodities at JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and SIFMA’s new chairwoman.

Among other proposals, Masters said SIFMA would encourage the consolidation of two federal bank regulators –Office of Thrift Supervision and Office of the Comptroller of the Currency — as well as a merger of the Securities and Exchange Commission and the Commodities Futures Trading Commission.

Masters also took issue with supervision from 50 states and warned against individual states weighing in on a part of the market she knows well, credit default swaps.

“We have to avoid redundancy and burdensome regulation,” she said. “State regulation is not appropriate and it will add to complexity and risk.”

The recent settlement of Lehman Brothers CDS transactions showed that these structured securities do not need new layers of regulation one hour cash loan.

Masters observed that insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) collapsed despite the oversight of dozens of state and federal bodies.

SIFMA does seek, however, the establishment of a new, federal-level regulator for insurance companies.

That said, Masters acknowledged that Wall Street has a ways to go to restore the public’s trust. “It’s safe to say our industry’s image is at an all-time low.”

BAD REPUTATION

Harvey Pitt, who served a brief and stormy term as SEC chairman, said the U.S. market regulatory system “is terribly broken.” He blamed a lack of transparency and information.

“One thing is clear within firms and externally: no one knew just how leveraged these firms were,” Pitt said, observing that CEOs announced write-downs within weeks of denying they had an exposure problem.

Though there is plenty of debate over how the U.S. financial industry should be regulated, most speakers agreed the current system of multiple state and federal agencies failed to prevent the current crisis.

Mary Schapiro, chief executive of the brokerage industry-owned regulator FINRA, said she favors a “twin peaks” model, comprised of two regulators. One would be financial markets stability regulator, with broad enforcement powers, and the other a business practices watchdog. 

Read more

CARACAS–Venezuela's economy minister expects OPEC to agree to cut oil supply at an emergency meeting next week to stem crashing world prices by bringing supply and demand into better balance.

The minister, Ali Rodriguez, who is a former OPEC president and a longtime advocate of Venezuela's hawkish stance to bolster prices, reinforced the emerging position among the organization's members that supply will be reduced Oct. 24.

"It is likely there will be a cut" at the meeting, he said in an interview broadcast on state television late Friday.

OPEC's president has said a cut is likely and Qatar's oil minister has said it could be about 1 million barrels a day from an organization that supplies the world with about a third of its oil supply no checking account payday advance.

Oil prices have plunged in recent weeks as a global credit crunch has spurred fears of recessions worldwide that would slash demand for oil. Prices lapped up at $150 a barrel in July but have fallen to less than half that this week.

Leftist Venezuelan President Hugo Chavez depends on oil revenue to sustain his high spending on the majority poor of his nation. If oil stays at its current levels for long, he likely will have to use other sources of income – such as loans or savings funds – to keep programs of food subsidies and free health clinics.

Source

Diversified electronics maker Samsung Electronics Co Ltd said it is re-entering the U.S. computer market with a range of branded products that build on its component supply strengths.

The Korean-based company will introduce on Tuesday new ultralight notebooks designed to appeal to potential buyers of Apple Inc’s ground-breaking MacBook Air and smaller “netbook” models from the likes of Asustek Computer.

Breaking into the crowded U.S. market involves taking share from more established players. The Korean electronics maker sees other Asian brand-name players as vulnerable, especially Toshiba Corp, Sony Corp and Lenovo.

Samsung is also coming out with models aimed at business professionals and the market for bulkier laptops known as “desktop replacements,” a Samsung executive said.

Like Apple’s Air, Samsung’s X-Series premium lightweight notebooks come with options for either a hard drive or solid state memory no teletrek payday advance. But Samsung’s X360 is priced at $2,499 and carries 128 gigabytes of flash memory, twice the 64 gigabytes that comes with the Apple Air selling for $2,598.

“These products really go after Apple and Sony. This is the MacBook Air killer,” Bret Berg, the senior product manager for Samsung’s U.S. computer division, said in an interview.

The X360 weighs 2.8 pounds and has an ultra-thin, tapered wedge design with a magnesium allow chassis, an aluminum top and a “pebble”-style keyboard.

Samsung’s hard-drive version, the X460, starts at $1,899 for a 160-gigabyte hard drive, twice the capacity of Apple’s existing MacBook Air model that is priced at $1,799 for an 80-gigabyte drive. The X460 weighs just under 4.2 pounds. 

Read more

Britain will inject up to 50 billion pounds ($87.2 billion) of government money into the country’s banks as part of a multibillion pound package to shore up the financial system.

After frantic overnight talks that followed dramatic falls in the share prices of some of Britain’s biggest banks, Finance Minister Alistair Darling rushed out measures Wednesday he said would help boost lending and restore confidence.

“This is beginning a process of un-bunging a big problem where banks won’t lend to each other for long periods,” Darling said.

Under the plans, Britain will inject new capital into the banks in the form of preference shares or similar instruments, and make available at least 200 billion pounds of liquidity in a bid to free up lending in the banking system.

The decision follows days of crippling pressure on British banks, some of which have lost nearly half their value on the stock market amid investor fears they could collapse if they are not handed a massive liquidity lifeline (pay day loan).

HBOS, which last month agreed to be taken over by rival Lloyds in a government-brokered deal, welcomed the plan.

“The government’s announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system.

“HBOS believes that this initiative is very much in the interests of its shareholders and customers.” 

Read more

The worldwide credit crunch has sideswiped the blockbuster corporate partnership between the companies of auto-parts tycoon Frank Stronach and Russian billionaire Oleg Deripaska.

Russian Machines, which Deripaska controls, revealed yesterday it had relinquished its big stake and accompanying boardroom clout in Magna to lenders who financed his $1.54 billion (U.S.) investment last year.

Basic Element, Deripaska’s investment company, said in a statement it had decided to "terminate the participation of Russian Machines as a shareholder in Magna International due to the current global financial crisis."

Industry and financial sources say many Russian companies that have spent heavily abroad in recent years now face serious squeezes because refinancing debt has become much more expensive in view of credit woes rocking the world’s financial systems.

"It’s clear he (Deripaska) was forced to sell," said one analyst who requested anonymity.

Basic Element didn’t identify any creditors. But in filings at the time of the purchase of the 20 million Magna A shares, it named BNP Paribas SA, a major bank in France, as a top lender.

Speculation swirled yesterday that institutional investors would snap up many shares because they consider Magna undervalued at current prices.

Magna’s A shares plunged $8.23 or 16 per cent at one point in trading on the Toronto Exchange after the early morning announcement, but they recovered later and closed the day at $46.32, down $2.92, or about 6 per cent. The company, which is feeling the impact of the turmoil in the North American auto industry, has lost more than half of its market value in the past year.

In disclosing the exit of Russian Machines, Magna added that the Deripaska firm will no longer be an indirect shareholder in Stronach’s lucrative European consulting company. In a side deal last year, Russian Machines invested $150 million for a 50 per cent stake in Stronach & Co. which entitled it to millions of dollars in annual consulting fees from Magna (quick payday loans).

Magna co-chief executive officer Siegfried Wolf said the company still has a good working relationship with Deripaska, Russian Machines and subsidiary GAZ Group, Russia’s second biggest auto company.

"We believe that the Russian market still holds significant opportunities for us and intend to continue to pursue joint opportunities …," Wolf said in a statement.

Tracy Fuerst, Magna’s director of corporate communications and media relations, also noted that the decision did not reflect any disagreement between Magna and the Russian interests.

"It had nothing to do with the relationships we have with Oleg, Basic Element or Russian Machines," Fuerst said.

She also said Magna’s ownership will revert to previous percentages, whereby a Stronach family trust will indirectly control the holding company that has two-thirds of the parts maker’s voting shares.

In May 2007, Magna announced that Russian Machines would buy the big stake in exchange for six of 14 seats and 42 per cent of the holding company that would control Magna.

It also meant that the Stronach trust would reduce its level of control in the new venture.

A small group of senior managers would hold the remaining interest plus two seats.

The new company would control 68 per cent of Magna although it held only 16 per cent of the equity.

Magna’s senior managers said the arrangement would bolster the company’s fortunes in Russia and other nearby countries, where emerging middle classes are increasing demand for autos.

Shareholders approved the deal a few months later although there was significant opposition.

Some minority investors, including the Ontario Teachers’ Pension Plan Board, argued there was little consideration for shareholders who held most of Magna’s equity.

Sourse

General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) shares fell as much as 10 percent on Thursday, touching a new 5-1/2-year low, as its sale of $15 billion in new stock to investors including Warren Buffett failed to soothe Wall Street worries.

GE shares have tumbled about 40 percent this year as the global credit crunch has taken a heavy toll on its hefty finance arm and the company warned that 2008 profit could drop 12 percent.

The U.S. conglomerate sold $3 billion in preferred stock at $22.25 per share to Buffett’s Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz)(BRKb.N: Quote, Profile, Research, Stock Buzz) on Wednesday, and another 548 million common shares at the same price to other investors on Thursday.

GE said the new capital will help improve its liquidity and provide the option to make acquisitions at a time of market turmoil.

The U.S. Senate approved a $700 billion financial bailout package on Wednesday, and the U.S no checking account payday advance. House of Representatives is scheduled to vote on the plan on Friday.

The rescue plan is intended to reinvigorate credit markets and frozen interbank lending, stabilize battered risky assets, including stocks, and ease corporate lending.

Because of the breadth and depth of its operations, which stretch around the world and include jet engines to electricity-generating turbines to lending to the NBC television network, GE is regarded as an economic bellwether.

“The fact that GE needs to go out and sell shares at $22.25 is not particularly good news,” said Michael Church, financial analyst and portfolio manager at Church Capital Management, a Pennsylvania-based company that oversees $2 billion in investments and holds GE shares. 

Read more

NEW YORK–A closely watched index released yesterday showed home prices tumbling by the sharpest annual rate ever in July, and though the monthly rate of decline is slowing, there is no turnaround in sight.

The Standard & Poor’s/Case-Shiller 20-city housing index fell a record 16.3 per cent in July from the year-ago month, the largest drop since its inception in 2000. The 10-city index plunged 17.5 per cent, its biggest decline in its 21 year history.

Prices in the 20-city index have plummeted nearly 20 per cent since peaking in July 2006. The 10-city index has fallen more than 21 per cent since its peak in June 2006.

No city in the 20-city index saw annual price gains in July – for the fourth straight month.

However, the pace of monthly declines is slowing. Between May and July, for example, home prices fell at a cumulative rate of 2.2 per cent – less than half the cumulative rate experienced between February and April.

But there’s "no evidence of a bottom," said David M. Blitzer, chair of the index committee at S&P.

Las Vegas prices plunged the most at nearly 30 per cent, with Phoenix diving 29 per cent and Miami off 28 per cent faxless cash advance. Prices in the seven cities in the Sunbelt all fell between 20 per cent and 30 per cent from a year ago.

Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June.

Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.

Last week, the National Association of Realtors said the median sales price of an existing home fell 9.5 per cent to $203,100 (U.S.) last month, the largest annual price decline on records dating to 1999. The median price of a new home fell 5.5 per cent to $221,900 in August, the commerce department also said last week.

The Case-Shiller numbers have yet to reflect the effects of the recent turmoil in the financial industry.

Mortgage rates have been on a roller-coaster and analysts said the confidence of homebuyers has been eroded by market losses and the government’s stalled Wall Street bailout.

Associated Press

Source