Archive for June 2nd, 2009

UK consumer optimism ‘increases’
UK consumers were more optimistic last month about the future than they had been for six months, according to the Nationwide Consumer Confidence index.The index hit 53 in May, up from a reading of 51 the month before and the highest reading since November. Despite the improved outlook for the future, consumers remained pessimistic about the current situation. “It is likely that confidence will remain fragile,” said Nationwide’s chief economist Martin Gahbauer. “While some reports suggest tentative signs of a slowing in the pace of economic decline, it is important to remember that a number of sectors are continuing to contract and any recovery is likely to be sluggish,” said Mr Gahbauer. “What is clear from our findings is that while consumers remain pessimistic about the present situation, they appear to be much more confident about the future than they were at the beginning of the year,” he added. But there is still much uncertainty around the length of the recession, with analysts predicting that the economy will contract for some time, albeit at a slower pace. The two-point jump in Nationwide’s consumer confidence index in May followed an eight-point increase the month before. However, regarding the present situation, only 6% of respondents said they thought the economy was in good shape, while 77% thought it was not. The UK economy shrank 1.9% in the first three months of this year, the biggest contraction in three decades.
Source:BBC

Network Rail’s punctuality rises
British railway infrastructure operator Network Rail has said its punctuality figures have hit a record high.It said that 90.6% of trains arrived on time in the year to the end of March, which was the best since records began in 1992. Network Rail also said that it made a full year pre-tax profit of 1.5bn, up from 1bn the previous year. Its profits are regulated by the Office of Rail Regulation (ORR) and will be reinvested in the railway system. There has been some recent debate about whether Network Rail bosses should receive bonuses. Its chief executive Iain Coucher has decided to give up his annual bonus this year, although he will still receive his long-term performance bonus. Other executives there may still receive bonuses, although no details of those are expected until the publication of Network Rail’s annual report at the end of the month. Trains are considered to have arrived on time if they are within five minutes of their scheduled time on commuter routes and within 10 minutes on longer routes.
Source:BBC

Australia able to avoid recession
The Australian economy has unexpectedly avoided falling into recession after its economy grew by 0.4% in the first three months of 2009.Increased exports and consumer spending helped the economy to rebound from the 0.5% contraction recorded between October and December last year. Australian Prime Minister Kevin Rudd said the country was now the only advanced economy not in recession. An economy is said to be in recession after two straight quarters of decline. Stimulus movesTo help avoid the country falling in recession, the Australian central bank cut interest rates to a 45-year low of 3.25% in February. The government also introduced a number of multi-billion dollar stimulus packages, including increased infrastructure spending and cash handouts to most Australians since the end of last year to lift consumer spending. Despite the economic growth in the first quarter of the year, Mr Rudd said Australia remained at risk of recession. “We’re not out of the woods yet, we’ve got a long way to go,” he said.
Source:BBC

Hummer to be sold to Chinese firm
General Motors is to sell its Hummer brand to China’s Sichuan Tengzhong Heavy Industrial Machinery for an undisclosed amount.It is part of GM’s plan to reinvent itself by concentrating on fewer brands following Monday’s bankruptcy filing. GM says it hopes the deal will save about 3,000 jobs in the US. Hummer will remain based in the US. Tengzhong specialises in making equipment for the road, construction and energy industries. It is based in China’s Sichuan province. Hummers were originally built as military off-road vehicles by a company called AM General. GM bought the Hummer brand in 1999. Its sales have suffered as the gas-guzzling performance and military image have become less popular. When it began the sale process a year ago, GM had hoped to make more than 500m (302m), but analysts say that it is likely to have made about 100m from the sale.
Source:BBC

(breakingviews.com) — Has the Federal Reserve been reading too many fairy tales?Judging by the latest tweaks the U.S. regulator has made to the criteria banks must meet before they can repay capital injected by the Troubled Asset Relief Program, the Fed seems fixated on the Princess and the Pea: no matter how much cushioning it heaps onto bank balance sheets, it still feels the discomfort of potential losses.Of course, there’s much to be said for having a proactive regulator keeping its eye on all the downside risks. But policy contradictions appear to be piling up at the Fed.Demanding that healthy banks like JPMorgan (JPM, Fortune 500) prove they can sell equity before allowing them to offload their TARP funds looks odd enough: the New York-based bank easily passed the Fed’s stress tests, and the 5 billion that regulators told it to raise does little to bolster its already very solid capital ratios.Now Morgan Stanley (MS, Fortune 500) has been told to raise an additional 2.2 billion. Granted, the Wall Street firm didn’t fare as well in the stress test. But it took its medicine immediately, raising 4.6 billion the day after stress test results were made public. That not only proved the bank could tap public equity markets — it was more than double what it needed.That makes it appear there is little justification for forcing Morgan Stanley to go back to the trough. Unless the Fed is somehow tacitly admitting the stress tests weren’t up to snuff, this extra bout of stock-selling only serves to dilute Morgan Stanley’s shareholders unnecessarily.Even more puzzling, the Fed doesn’t appear to be compelling Goldman Sachs (GS, Fortune 500) to raise more capital. Sure, Goldman shouldn’t need to — it passed the stress tests and raised 5 billion of new equity in April. But giving one solid firm a pass while conscripting others seems illogical. At least the princess in the fairy tale was consistent.

Source:CNN

NEW YORK: By the time General Motors filed for bankruptcy protection Monday, few in the auto industry doubted that’s where the troubled automaker belonged. Whether GM’s plan for a quick trip through bankruptcy will be enough to turn around the company is still up for debate. GM (GMGMQ) will use the bankruptcy process to eliminate 27 billion in debt held by bondholders. Instead, those bondholders will get stock in a reorganized company, as will a union-controlled trust fund that will take stock rather than the 20 billion in cash it had been owed to pay future retiree health care costs. Those 650,000 retirees will have their coverage reduced.GM will also use bankruptcy to close more than a dozen factories, drop four of its U.S. brands and shut down up to 40% of its network of 6,000 dealerships.These are hardly the first set of steep cuts at GM, which has already shed about half of its U.S. work force so far this decade. But experts think more work may need to be done to get GM back on track after decades of market share declines and years of financial losses. 0:00
/02:48GM CEO: We will get through this”The changes we’ve seen up to this point have been evolutionary. This will be far more revolutionary,” said Tom Libby, president of the Society of Automotive Analysts. “Are they where they need to be on dealers, on brands? No. But they made a major step.”Libby said GM’s labor costs are now essentially equal to those of non-union plants operated by its Asian rivals. That’s never been the case until now.David Cole, chairman of the Center for Automotive Research, said GM should now be able to break even with industrywide U.S. sales of about 10 million, just a bit better than current sales levels. “These sales are now down to Depression volumes,” he said. “With break even down at that level, they’ll become very profitable, very soon.”Still, some serious challenges remain that can keep GM from becoming profitable in a timely fashion.The company will continue to pay its active hourly workers the same wages and benefits as guaranteed in the latest UAW contract. GM will also hold onto two large underfunded pension funds, meaning it likely will be obligated to make additional contributions to those funds in the future.In addition, GM will be hanging on to many of its less successful dealers until late next year. Even many of the plants slated for closure won’t shut down until the end of 2010.Skeptics say GM needed to make deeper cutsMany bankruptcy and turnaround efforts argue the automaker should have taken a more aggressive cost-cutting stance in bankruptcy. GM could have asked the court to void the labor contract in order to cut the pay and benefits of hourly workers and slash its network of dealerships immediately.”It looks more like business as usual than real cost cutting,” said Richard Tilton, an analyst with credit research firm Covenant Review.Tilton said GM should be able to emerge from bankruptcy quickly, as is planned. But he said it will still find itself in a difficult competitive position in a very weak market for auto sales overall, neither of which point to long-term success. He’s also worried that, despite vows from the Obama administration and GM officials to the contrary, more federal help will be required to get GM through this current downturn.”Their real problem is not how deep their pockets are or the government’s pockets. It’s the American public’s pockets. No one is buying cars right now.”May auto sales were better than expected for GM and the industry overall, although sales were still well below year-ago levels.Jeffrey Manning, a managing director at investment banking firm Trenwith Securities, which specializes in bankruptcy and restructuring, said he’s worried about both GM and Chrysler agreeing to keep their underfunded pension plans in place in order to get the United Auto Workers union to agree to the bankruptcy plan. Many companies use bankruptcy to get out from pension obligations.GM’s pension plans face a deficit of between 12 billion and 13 billion, he estimates. “You’ve left these anchors on both businesses,” he said. Pushing off financial problems further down the road “is how they got into trouble in the first place” he said.Troy Clarke, president of GM’s North American operations, said the company didn’t have the option to push for every possible cost reduction because it needed to have a quick bankruptcy process that had the support of the union and other stakeholders in the company.”The need for speed drove the thought process, not just how far you can go,” he told a group of reporters in a conference call Monday. Many experts also contended that the Treasury Department would not have been willing to fund a war with the union, workers and retirees. And with the current credit crunch drying up funding typically used by bankrupt companies, the government was the only source for the 50 billion that GM needed to fund its reorganization. Will GM start making cars people want?Beyond the difficulty of cutting costs, the biggest problem according to many experts is that GM’s long-term decline in market share may be irreversible.”The fundamental question is whether the demand for their product is going to change as part of this process,” said Manning. “I don’t think it will.”Even CEO Fritz Henderson conceded Monday that no automaker has achieved a turnaround in its fortunes without improving demand for its cars and trucks. He insisted that GM’s vehicle pipeline is strong and will get stronger as the company puts its financial problems behind it.But others expressed doubts about GM’s competitive position, especially with the federal government raising fuel economy standards. GM lags behind its Asian competitors in the production of fuel-efficient vehicles.”There’s too much competition and I don’t know if they’re ready for this brave new world of 35 mpg,” said Stephen Spivey, senior auto analyst for business consultant Frost & Sullivan “Toyota and Honda are already.”But Spivey doesn’t have a lot of suggestions for what GM could have done differently in its bankruptcy filing. “All the steps they took needed to be taken a while back,” he said. “There were no good options for them to take today.”

NEW YORK (Reuters) — American International Group Inc. has reached a deal to sell two New York buildings, including its downtown Manhattan headquarters, a source familiar with the matter said Tuesday.The buildings being sold are located at 70 Pine Street and 72 Wall Street in New York, the source said. The source declined to name the buyer or the value of the deal.Occupants of the Pine Street office are likely to stay there through the end of 2010, while those at the Wall Street location will be there through the end of this year, the source said.0:00
/4:26AIG could not failOver time, AIG employees will be relocated to other locations, including offices at 180 Maiden Lane in New York, the source said.AIG declined to comment. The source did not want to be identified because the deal is not public yet.

Source:CNN

SEATTLE (Reuters) — Microsoft Corp. said Tuesday its new Windows 7 operating system will be generally available on Oct. 22, well ahead of its original schedule and in time for the holiday shopping season.The new operating system, which will replace the unpopular Vista, was originally planned for roll-out at the beginning of next year, but Microsoft confirmed last month that it would hit the market in time for the year’s busiest shopping period.0:00
/2:56Anything but VistaThe world’s largest software company said it will send Windows 7 code to PC makers to load onto new machines — known in the industry as “‘release to manufacturing”‘ — around the end of July.By Oct. 22, people will be able to buy new computers with Windows 7 installed, or pick up the software off the shelf to install on their old computers.Microsoft (MSFT, Fortune 500) confirmed that it will run a program whereby people who buy a PC before Oct. 22 can upgrade to Windows 7, but it has not yet released details.

Source:CNN

NEW YORK: As health insurers prepare to kick off their annual meeting, analysts expect answers on how to reduce health care costs and give customers more access.The American Health Insurance Plans’ (AHIP) three-day conference, starting Wednesday in San Diego, is expected to include more than 2,000 attendees from commercial insurers, employers, state and federal government, medical groups and hospitals.”There’s been quite a lot of turmoil in the health care world. Everyone’s walking on eggshells,” said Richard Kipp, principal with health care consulting firm Milliman. “Consumers are wondering how all this will affect their health coverage.”As the Obama administration’s push to overhaul the health care system gains momentum, Kipp said the industry needs to be responsive. He and others outlined five top industry issues that directly affect consumers.Costs: Even though most Americans — about 177 million — are covered by employer-provided health insurance, they face a “double whammy” increase in their share of health care costs.”If consumers were paying 10% of their insurance premiums, they are now paying 15% because employers are trying to bring down their own business expenses,” said Kipp.”So that’s a 50% increase in the out-of-pocket costs.At the same time, the cost of health plans is also rising, and more employers are passing those increases to their workers as well.Access: Any health care system revamp must include a solution for providing insurance for 47 million “uninsured” Americans.”The basic issue for insurers is how do they bring the costs down low enough to make it readily available to the uninsured,” said Kipp.”The uninsured is a tricky bucket. It includes people who can afford but don’t buy insurance it, or younger people who are taking the risk of not buying insurance,” he said.It also includes people who have medical problems but can’t afford coverage, get rejected by insurers, or get priced out after insurers learn about a precondition. “In other words, people who really need insurance the most can’t afford it,” Kipp said. Still others believe any fundamental reform to health care has to be driven by insurers changing their business model.Len Nichols, health economist with public policy institute New American Foundation, wants insurers to “guarantee issue of coverage,” which means everyone can buy health insurance for a standard price, regardless of cost or health condition.Price transparency: Kipp said insurers have to better educate consumers about their health insurance options and prices. “Price transparency is one of the difficult challenges for insurers,” he said.Health care prices — both physician fees and medical procedure prices — have been cloaked in mystery for decades .Consumers are partly at fault. “When you are sick and in front of a doctor, the last thing you think about is asking how much the treatment is going to cost you,” he said.But pricing transparency will help consumers better manage their health care expenses, Kipp said. Large insurers such as Aetna (AET, Fortune 500) and United Healthcare (UNH, Fortune 500) are already experimenting with providing their customers pricing information for doctors’ fees and cost of some treatments.On Monday, AHIP hinted at providing greater price transparency. The trade group said it is advocating that each state provide a list of all insurance plans available to individuals. “There would be comparative information in a common format on benefits, price and quality features to enable individuals to comparatively shop for coverage and determine whether they are eligible for subsidies,” AHIP said in a statement.Individual responsibility: More employers are providing wellness incentives such as subsidized gym membership and discounts on premiums if workers try to stay healthy.”We’ve heard that two-thirds of employers have wellness programs offered through insurers,” said Sandy Lutz, director of the Health Research Institute of PricewaterhouseCoopers.”But we’re also hearing that the government needs to do more around wellness,” she said. “This is becoming a big issues especially since (President) Obama has talked so much about it.”Senate leaders are debating a tax on carbonated soft drinks as a way to pay for health care reform with the added benefit of discouraging unhealthy eating habits.Role of technology: Use of health care technology will give broader access to consumers without raising costs, said Lutz. “The industry needs to embrace technology and also figure out how to pay for it.”Also, President Obama has set a five-year deadline for all Americans to have electronic medical records, saying digital records will save billions by cutting waste and eliminating repeated tests and errors. Public plans: Perhaps the most controversial proposal tied to health care reform, Obama backs public insurance plans as an alternative to commercial plans, intended to offer coverage to those who currently can’t afford insurance.Commercial insurers worry that they won’t be able to compete against subsidized rates offered by public plans. Nichols said one way to even the playing field is to have public plan premiums based on market prices rather than government-subsidized prices similar to Medicare. For his part, Kipp said he’s not comfortable with the idea of the government directly weighing into the health insurance market. “I am hoping that it will get tested in a few markets first rather than being implemented as a salvation plan that disrupts the entire market,” he said.

Source:CNN

NEW YORK: NCR Corp., a leading provider of ATMs, will relocate its corporate headquarters to Georgia, the company said Tuesday. The Dayton, Ohio-based company will also build a manufacturing plant in the southern state. NCR expects the move, which begins in July, to create 2,000 additional jobs in Georgia, including about 1,250 jobs in Duluth, Ga., where it’s retail line of business is already based. The company said it will begin recruiting immediately to fill roughly 870 jobs at a new facility in Columbus, Ga., where it will manufacture “advanced ATMs.” Some employees will remain in Dayton, but the company’s former headquarters will be sold, a NCR spokesman said. “The decision to consolidate functions in Georgia and build a technology focused corporate headquarters campus is right in line with our business strategy to drive growth,” said Bill Nuti, NCR’s chairman and chief executive, in a statement.NCR will invest 30 million in the project, and the annual payroll for the new jobs is expected to top 150 million, according to a statement from the office of Georgia’s Gov. Sonny Perdue.The City of Columbus will use federal stimulus money to purchase a building for the plant, NCR said. The city will then lease the property to the company. “Georgia is truly a one stop shop as a headquarters location for a worldwide leader such as NCR,” Perdue said in a statement. NCR’s decision to relocate to the greater Atlanta area reflects the “business assets” available in the region, according to Sam Williams, president of the Metro Atlanta Chamber.”NCR joins other corporate giants who have relocated headquarters here such as UPS (UPS, Fortune 500), Georgia-Pacific, Newell-Rubbermaid (NWL, Fortune 500) and GE Energy,” Williams said in a statement. The region is home to an international airport, cutting-edge research universities, a diverse and educated workforce as well as an excellent quality of life, he added. Said Williams: “Atlanta and Georgia continue to provide the business assets companies need to succeed in a global business environment.”

Source:CNN