Personal Finance and Investment News

Whole house water filters

2010-09-09T21:09:00.002-05:00

Installing a whole house water filter system can solve a range of problems affecting your water quality.

But maybe you don't want to go all out for a whole house water filter just yet.

Don't worry, start out small, like a countertop water filter, or a faucet water filter.
This way you can try before you buy and see if a whole house water purifier could be in your future plans.

Have your water tested as soon as possible to see if your water is harmful to your health.
(read more)

Symptoms of Mesothelioma

2010-09-08T23:12:00.001-05:00

Asbestos exposure at work is linked to about 70 percent to 80 percent
of all cause of mesothelioma lung cancer.

Working with asbestos and inhaling or swallowing asbestos particles is the main cause of mesothelioma and a noncancerous, chronic lung condition called asbestosis.

There are no early symptoms of mesothelioma cancer.
Symptoms of mesothelioma may not appear until 12 to 50 years after exposure to asbestos.

Personal Finance

2009-08-29T08:48:00.003-05:00

Jobs

2009-08-29T08:48:00.001-05:00

Personal Finance

2009-08-29T08:46:00.000-05:00

Welcome

2009-08-28T23:02:00.000-05:00

Welcome

2009-08-16T17:57:00.000-05:00

Welcome

2009-08-15T10:28:00.003-05:00

U.S. post office considers closing 1,000 branches

2009-08-03T22:46:00.002-05:00

Visit msnbc.com for Breaking News, World News, and News about the Economy

Cash For Clunkers

Visit msnbc.com for Breaking News, World News, and News about the Economy

Unemployed alum sues school

Visit msnbc.com for Breaking News, World News, and News about the Economy

Putting out fires without planning for future

Imagine reaching retirement age and preparing to leave your job for good only to find your spouse expected to work a few years longer to support the lifestyle you've both become accustomed to.
Read More

Cutting back? You may find cash in your closet

You can make some money from stuff you overbought during the boom
Read More

Tips on saving money

A few tips on saving money, particularly for young adults, based on advice from financial experts:
Read More

Pennsylvania withholds July pay

2009-07-18T14:41:00.004-05:00

State freezes workers' pay for July as budget impasse continues. Two other states have yet to approve budgets, while California closes in on deal to close $26 billion deficit.
Read More

My unemployment benefits ran out
These 5 have been unemployed so long enough they exhausted their unemployment insurance - just like half a million Americans about to face the same fate. How did it happen, and how do they cope without a weekly check?
Read More

Out of work, out of benefits, out of luck
By August, 65% of all filers for unemployment insurance will have run out of their standard 26 weeks. And that's just the beginning.
Read More

Dragged into a bankruptcy that isn't yours
When a franchise company goes bankrupt, independent operators face a tsunami of legal tangles and marketing challenges.
Read More

Four more banks bite the dust
Two in California , one in Georgia and one in South Dakota - these FDIC closures bring the total number of failed banks in 2009 to 57.
Read More

Check out these sites

Make Money Like Professionals Do! Use 100% Automatic Signals.
Click Here!

The Blog Mastermind Coaching Program Led By Six-figure Yaro Starak Teaches You How To Set Up And Profit From A Successful Blog. Start Making Money From Blogs By Following This Step-by-step, Weekly Coaching Program.
Click Here!

Wealth And Money Online Shows You The Path To Success! Valuable For Anyone Who Wants To Make Money From Home. Unlimited Tools And Resources At Your Fingertips: Audio's, Videos, Books, 'The Expert Interview' Series,Articles By The Experts Plus Much More!
Click Here!

Make Money Like Google. Earn High Payouts With A Very High Converting Product Achieving Exceptional Results. The Recession Buster Affiliate Program! High Demand, Quality System Very Easy Sell. Not Just Information You Get Two Marketing Platforms Thrown In.
Click Here!

New Personal Development Program Pays 50% On All Upsells And Continuity Commission - Get Paid For Lifetime! Salescopy With Proven Sales Conversion. Easy Money For Affiliates. Register Free & Get Affiliate Promo Tools:
Click Here!

Unique Sportsbook Investing Program - 99% Win Rate Membership System!
Click Here!

A Complete Personal Money Management System Membership Site. You Have Got To See All Of The Benefits Of Membership To Budget Stretcher Premium To Believe It.
Click Here!

Find out how people like Tim Weems are generating hundreds or even THOUSANDS of ultra-targeted visitors each week to their business or product from the world's top search engines, without paying anything for advertising, and earning commissions and bonus cash totally passively to help grow their business -- just by using this totally free system! Click Here!

Don't let the Recession keep you lonely and blue.
Check out these interesting sites!
Are You Recession Proof?

Imagine A World Where You Can
Attract The Women You Truly Desire
Through Your Computer!
More?

Start Meeting, Flirting, and SEDUCING
more Sexy, Attractive, Younger Women Right Now!
More?

300 Creative and Inexpensive Date Ideas
For Singles or Married Couples
More?

Go From TOTALLY CONFUSED About Men,
To Knowing How To Melt His Heart
More?

Create a Lasting and Fulfilling Relationship
With the Kind of Person You've Always Wanted
More?

Everything You Need To Know About
Calling And Emailing The Man You Are Dating
More?

The 1st And Only Step-By-Step Dating And Seduction
Guide On The Internet Written For Men...By A Woman!
More?

Beyond Hypnosis And Seduction Lies The Secret
To Getting Everything You Want...From Anyone, Any Time
More?

YES! You CAN Be a Powerful, Bewitching Enchantress...
And You'll Be ADMIRED and DESIRED!
More?

Big banks to stop cashing California IOUs

2009-07-09T23:00:00.002-05:00

Residents will have fewer places to cash in IOUs after large banks stop redeeming them Friday. SEC warns potential buyers and sellers of possible scams.
Read More

Stimulus not enough to juice consumers
Weakness in retail sales shows Americans still not shopping freely. Economists say trend is a problem for now but could help economy in the long run.
Read More

Higher minimum wage coming soon
Federal wage floor will rise to $7.25 an hour on July 24. Hike will be felt in 29 states. Can the job market handle it?
Read More

Recession: I'm lovin' it!
From a half-price deck to spending time with the kids to traveling around the country in pursuit of the best party, these people are making the most of the downturn. Read More

Personal Finance

China on the march, again
Now it's the consumers, not the exporters, that are powering the mighty economic engine. Here's how investors can play the trend.
Read More

Get ready for an Asian spending wave
Money's stock strategist thinks this region of savers could soon become one of spenders. Here's what it means for you.
Read More

How does your net worth stack up?
Comparing your assets and liabilities on a regular basis is a good exercise. Here are a few tips to help you get started.
Read More

Small Business

An Internet for rural India
One intrepid entrepreneur battles brigands and bureaucrats to bring e-governance to India's 700 million rural poor.
Read More

America's 100 fastest growing small public companies
These fast movers are defying the downturn to grow profits and reward investors.
Read More

Reinventing the condom - for women
After two decades of patiently laying groundwork, Female Health is finally poised to profit from its life-saving but hard-to-sell creation.
Read More

Health care reform: What small business wants
Insurance costs are killing small firms -- but many entrepreneurs are ideologically opposed to government-backed health coverage.
Read more

How We Got Started
Natori's booming nightgown biz
Josie Natori went from designing sleepwear to managing a brand of home, fragrance and ready-to-wear lines. Watch Video

Check out these sites

Make Money Like Professionals Do! Use 100% Automatic Signals.
Click Here!

The Blog Mastermind Coaching Program Led By Six-figure Yaro Starak Teaches You How To Set Up And Profit From A Successful Blog. Start Making Money From Blogs By Following This Step-by-step, Weekly Coaching Program.
Click Here!

Wealth And Money Online Shows You The Path To Success! Valuable For Anyone Who Wants To Make Money From Home. Unlimited Tools And Resources At Your Fingertips: Audio's, Videos, Books, 'The Expert Interview' Series,Articles By The Experts Plus Much More!
Click Here!

Make Money Like Google. Earn High Payouts With A Very High Converting Product Achieving Exceptional Results. The Recession Buster Affiliate Program! High Demand, Quality System Very Easy Sell. Not Just Information You Get Two Marketing Platforms Thrown In.
Click Here!

New Personal Development Program Pays 50% On All Upsells And Continuity Commission - Get Paid For Lifetime! Salescopy With Proven Sales Conversion. Easy Money For Affiliates. Register Free & Get Affiliate Promo Tools:
Click Here!

Unique Sportsbook Investing Program - 99% Win Rate Membership System!
Click Here!

A Complete Personal Money Management System Membership Site. You Have Got To See All Of The Benefits Of Membership To Budget Stretcher Premium To Believe It.
Click Here!

Find out how people like Tim Weems are generating hundreds or even THOUSANDS of ultra-targeted visitors each week to their business or product from the world's top search engines, without paying anything for advertising, and earning commissions and bonus cash totally passively to help grow their business -- just by using this totally free system! Click Here!

Higher minimum wage coming soon

2009-07-06T20:41:00.009-05:00

Federal wage floor will rise to $7.25 an hour on July 24. Hike will be felt in 29 states. Can the job market handle it?
Read More

Recession: I'm lovin' it!
From a half-price deck to spending time with the kids to traveling around the country in pursuit of the best party, these people are making the most of the downturn. Read More

New GM, old faces
NEW YORK (CNNMoney.com) -- General Motors CEO Fritz Henderson has argued this week that a bankruptcy court needs to approve plans to create a new GM, one unburdened by many of the contracts and liabilities of the past.
But there are many auto industry experts who question whether Henderson, who has worked at GM ever since graduating from business school 25 years ago, is the right man to bring about a necessary change at the company. Read More

Michigan to California: Send us your prisoners
Financially strapped states consider a 'mutually beneficial' deal.
Michigan has to close prisons to save money. California's are bursting at the seams.
Read More

Gas prices strain struggling households
The recent spike in gasoline prices comes at a particularly unfortunate time -- many Americans are still reeling from the economic downturn. Here is how some people have responded to the return of pain at the pump. Read more

Mortgage due, severance pay is running out
Raul Camejo had always been in high demand as an internal auditor - until just before he was laid off earlier this year, when calls from recruiters suddenly dried up. Read More

Personal Finance

How does your net worth stack up?
Comparing your assets and liabilities on a regular basis is a good exercise. Here are a few tips to help you get started.
Read More

3 ways to dodge rising fees
To offset their losses, banks, credit card companies and mutual funds are charging you more. Here's what you can do to soften the blow. Read more

Visa's surprising resilience
Many analysts say the credit card company has gotten a bad rap just by association, but its stock carries on. Read more

The trouble with annuities
Fixed annuities promise tax-deferred growth at guaranteed rates. But the shelter they offer can end up a trap. Read more

Coming out of retirement at 62
Robert Bertrand thought he had planned his retirement perfectly. Now he is suddenly back hunting in a market that has little interest in older workers, no matter how experienced they are. Read more

Do the right thing in a recession
In a tough economy you may face some hard decisions when it comes to money and your relationships with family and friends. Our ethics experts weigh in on how to handle some particularly thorny dilemmas. Read more

Find a job in a tough economy
Three out-of-work professionals get makeovers from a team of four top career experts. Result: One master plan for each, full of smart strategies to find a job in a tough market. Their advice can boost your prospects too.
Read more

Small Business

Health care reform: What small business wants
Insurance costs are killing small firms -- but many entrepreneurs are ideologically opposed to government-backed health coverage.
Read more

How We Got Started
Natori's booming nightgown biz
Josie Natori went from designing sleepwear to managing a brand of home, fragrance and ready-to-wear lines. Watch Video

Business owners cut to the bone
Recent surveys indicate that business owners are still sacrificing staff, benefits, and personal savings to keep their doors open.
Read more

Getting small biz contracts to small businesses
Big businesses gobble up procurement deals that should go to smaller firms. A proposed new law aims to change that.
Read more

Tweeting for profit
Smart entrepreneurs are now doing deals in 140 characters or less on Twitter.
Read more

Emergency small business loans to the rescue
The Small Business Administration says its new loan program is off to a promising start. Small businesses owners disagree. Read more

No more free labor!
When John Trupiano and I co-founded our software company Smartlogic Solutions in 2005, we were college students who knew a lot about writing code but nothing about running a tech consulting business. Read more

Check out these sites

Make Money Like Professionals Do! Use 100% Automatic Signals.
Click Here!

The Blog Mastermind Coaching Program Led By Six-figure Yaro Starak Teaches You How To Set Up And Profit From A Successful Blog. Start Making Money From Blogs By Following This Step-by-step, Weekly Coaching Program.
Click Here!

Wealth And Money Online Shows You The Path To Success! Valuable For Anyone Who Wants To Make Money From Home. Unlimited Tools And Resources At Your Fingertips: Audio's, Videos, Books, 'The Expert Interview' Series,Articles By The Experts Plus Much More!
Click Here!

Make Money Like Google. Earn High Payouts With A Very High Converting Product Achieving Exceptional Results. The Recession Buster Affiliate Program! High Demand, Quality System Very Easy Sell. Not Just Information You Get Two Marketing Platforms Thrown In.
Click Here!

New Personal Development Program Pays 50% On All Upsells And Continuity Commission - Get Paid For Lifetime! Salescopy With Proven Sales Conversion. Easy Money For Affiliates. Register Free & Get Affiliate Promo Tools:
Click Here!

Unique Sportsbook Investing Program - 99% Win Rate Membership System!
Click Here!

A Complete Personal Money Management System Membership Site. You Have Got To See All Of The Benefits Of Membership To Budget Stretcher Premium To Believe It.
Click Here!

Find out how people like Tim Weems are generating hundreds or even THOUSANDS of ultra-targeted visitors each week to their business or product from the world's top search engines, without paying anything for advertising, and earning commissions and bonus cash totally passively to help grow their business -- just by using this totally free system! Click Here!

New GM, old faces

2009-07-01T22:22:00.002-05:00

NEW YORK (CNNMoney.com) -- General Motors CEO Fritz Henderson has argued this week that a bankruptcy court needs to approve plans to create a new GM, one unburdened by many of the contracts and liabilities of the past.
But there are many auto industry experts who question whether Henderson, who has worked at GM ever since graduating from business school 25 years ago, is the right man to bring about a necessary change at the company. Read More

Weak auto sales continue into June
Most major automakers report disappointing sales in June despite some glimmers of hope; Ford one of few to beat expectations. Read More

Gas prices hold steady as July 4 nears
Despite travelers taking to the road for vacations and the Independence Day weekend coming up, gasoline prices in the United States are unchanged from two weeks ago, according to a survey published Sunday. Read More

Michigan to California: Send us your prisoners
Financially strapped states consider a 'mutually beneficial' deal.
Michigan has to close prisons to save money. California's are bursting at the seams.
Read More

Gas prices strain struggling households
The recent spike in gasoline prices comes at a particularly unfortunate time -- many Americans are still reeling from the economic downturn. Here is how some people have responded to the return of pain at the pump. Read more

Higher gas prices to hit July 4 travel
AAA says fewer Americans will travel 50 miles or more during the holiday weekend.
Read more

Mortgage due, severance pay is running out
Raul Camejo had always been in high demand as an internal auditor - until just before he was laid off earlier this year, when calls from recruiters suddenly dried up. Read more

Personal Finance

3 ways to dodge rising fees
To offset their losses, banks, credit card companies and mutual funds are charging you more. Here's what you can do to soften the blow. Read more

Visa's surprising resilience
Many analysts say the credit card company has gotten a bad rap just by association, but its stock carries on. Read more

The trouble with annuities
Fixed annuities promise tax-deferred growth at guaranteed rates. But the shelter they offer can end up a trap. Read more

How does your net worth stack up?
Comparing your assets and liabilities on a regular basis is a good exercise. Here are a few tips to help you get started.
Read more

Coming out of retirement at 62
Robert Bertrand thought he had planned his retirement perfectly. Now he is suddenly back hunting in a market that has little interest in older workers, no matter how experienced they are. Read more

Do the right thing in a recession
In a tough economy you may face some hard decisions when it comes to money and your relationships with family and friends. Our ethics experts weigh in on how to handle some particularly thorny dilemmas. Read more

Find a job in a tough economy
Three out-of-work professionals get makeovers from a team of four top career experts. Result: One master plan for each, full of smart strategies to find a job in a tough market. Their advice can boost your prospects too.
Read more

Small Business

Business owners cut to the bone
Recent surveys indicate that business owners are still sacrificing staff, benefits, and personal savings to keep their doors open.
Read more

Getting small biz contracts to small businesses
Big businesses gobble up procurement deals that should go to smaller firms. A proposed new law aims to change that.
Read more

Tweeting for profit
Smart entrepreneurs are now doing deals in 140 characters or less on Twitter.
Read more

Emergency small business loans to the rescue
The Small Business Administration says its new loan program is off to a promising start. Small businesses owners disagree. Read more

No more free labor!
When John Trupiano and I co-founded our software company Smartlogic Solutions in 2005, we were college students who knew a lot about writing code but nothing about running a tech consulting business. Read more

Gas prices hold steady as July 4 nears

2009-06-29T21:46:00.006-05:00

Despite travelers taking to the road for vacations and the Independence Day weekend coming up, gasoline prices in the United States are unchanged from two weeks ago, according to a survey published Sunday. Read More

Michigan to California: Send us your prisoners
Financially strapped states consider a 'mutually beneficial' deal.
Michigan has to close prisons to save money. California's are bursting at the seams.
Read More

Gas prices strain struggling households
The recent spike in gasoline prices comes at a particularly unfortunate time -- many Americans are still reeling from the economic downturn. Here is how some people have responded to the return of pain at the pump. Read more

Buffett: economy has 'no bounce'
The legendary investor says it will take time for the U.S. economy to recover but hints that the worst is over. Read more

New home sales fall unexpectedly
Sales ticked down 0.6% last month, down 32.8% from last year. Read more

Durable orders in surprise gain
Long-lasting manufactured goods orders increase 1.8% in May, third advance in past 4 months. Read more

Higher gas prices to hit July 4 travel
AAA says fewer Americans will travel 50 miles or more during the holiday weekend.
Read more

Mortgage due, severance pay is running out
Raul Camejo had always been in high demand as an internal auditor - until just before he was laid off earlier this year, when calls from recruiters suddenly dried up. Read more

Personal Finance

Obama’s automatic IRA
Just about all parents tell the same war stories from childhood: “When I was your age, I had to walk two miles – in 3 feet of snow — to get to school.” Or, “When I was your age, we had only one TV in the house.” But pretty soon, parents may add this one, too: “When I was your age, I didn’t have an IRA.” Read more

Coming out of retirement at 62
Robert Bertrand thought he had planned his retirement perfectly. Now he is suddenly back hunting in a market that has little interest in older workers, no matter how experienced they are. Read more

Do the right thing in a recession
In a tough economy you may face some hard decisions when it comes to money and your relationships with family and friends. Our ethics experts weigh in on how to handle some particularly thorny dilemmas. Read more

Find a job in a tough economy
Three out-of-work professionals get makeovers from a team of four top career experts. Result: One master plan for each, full of smart strategies to find a job in a tough market. Their advice can boost your prospects too.
Read more

Support your struggling grads
Kids having trouble paying back student loans? Help out without shelling out
Read more

Can't afford health care? Barter for it
In these cash-strapped times, bartering is gaining popularity - even for dental surgery and prescription drugs.
Read more

One man against inflation
Money manager Van Hoisington says unemployment and debt will make rising prices a non-issue. Read more

3 ways consumers waste money
Horror stories of $2,000 phone bills are rare, but thousands -- even millions -- of people could be wasting money on outdated telephone services.
Read more

Drowning in student loan debt?
Starting next week, there will be a new student-loan refinancing program targeting grads with large student loan debt and low incomes. Read more

Buying your own health insurance
47 million Americans go without health insurance. Here is your guide to buying insurance on the private market. Read more

Bank smart
Find the best checking and savings deals for your cash - without getting socked by unnecessary fees. Read more

Control your debt
You have to know when to hold it and when to fold it. Make your credit work for you.
Read more

Invest in mutual funds
It's a money jungle out there, but you can create a simple portfolio that cuts through the weeds. Read more

Save for college
Start early and keep at it. You'll give your children more choices and make it easier on your wallet. Read more

Small Business

Emergency small business loans to the rescue
The Small Business Administration says its new loan program is off to a promising start. Small businesses owners disagree. Read more

A matchmaking jukebox
A startup helps lovelorn singles by moving the online dating platform into bars.
Read more

Analytics 101: Valuable insights from cheap tools
Savvy entrepreneurs are turning to inexpensive data-mining software to refine their Web sites and boost profits. Read more

No power outlet? No problem
You're stuck on the tarmac. Again. For hours. But while your fellow passengers fume and flip through SkyMall catalogues after their media players run out of juice, you're still multitasking: listening to Marketplace podcasts. Read more

No more free labor!
When John Trupiano and I co-founded our software company Smartlogic Solutions in 2005, we were college students who knew a lot about writing code but nothing about running a tech consulting business. Read more

Party down
A Texas hospitality company considers where to invest and where to cut back to weather the recession. Read more

Are You Recession Proof?

2009-06-25T20:24:00.001-05:00

Economy

Gas prices strain struggling households
The recent spike in gasoline prices comes at a particularly unfortunate time -- many Americans are still reeling from the economic downturn. Here is how some people have responded to the return of pain at the pump. Read more

Buffett: economy has 'no bounce'
The legendary investor says it will take time for the U.S. economy to recover but hints that the worst is over. Read more

New home sales fall unexpectedly
Sales ticked down 0.6% last month, down 32.8% from last year. Read more

Durable orders in surprise gain
Long-lasting manufactured goods orders increase 1.8% in May, third advance in past 4 months. Read more

Higher gas prices to hit July 4 travel
AAA says fewer Americans will travel 50 miles or more during the holiday weekend.
Read more

Mortgage due, severance pay is running out
Raul Camejo had always been in high demand as an internal auditor - until just before he was laid off earlier this year, when calls from recruiters suddenly dried up. Read more

Personal Finance

Obama’s automatic IRA
Just about all parents tell the same war stories from childhood: “When I was your age, I had to walk two miles – in 3 feet of snow — to get to school.” Or, “When I was your age, we had only one TV in the house.” But pretty soon, parents may add this one, too: “When I was your age, I didn’t have an IRA.” Read more

Coming out of retirement at 62
Robert Bertrand thought he had planned his retirement perfectly. Now he is suddenly back hunting in a market that has little interest in older workers, no matter how experienced they are. Read more

Do the right thing in a recession
In a tough economy you may face some hard decisions when it comes to money and your relationships with family and friends. Our ethics experts weigh in on how to handle some particularly thorny dilemmas. Read more

Find a job in a tough economy
Three out-of-work professionals get makeovers from a team of four top career experts. Result: One master plan for each, full of smart strategies to find a job in a tough market. Their advice can boost your prospects too.
Read more

Support your struggling grads
Kids having trouble paying back student loans? Help out without shelling out
Read more

Can't afford health care? Barter for it
In these cash-strapped times, bartering is gaining popularity - even for dental surgery and prescription drugs.
Read more

One man against inflation
Money manager Van Hoisington says unemployment and debt will make rising prices a non-issue. Read more

3 ways consumers waste money
Horror stories of $2,000 phone bills are rare, but thousands -- even millions -- of people could be wasting money on outdated telephone services.
Read more

Drowning in student loan debt?
Starting next week, there will be a new student-loan refinancing program targeting grads with large student loan debt and low incomes. Read more

Buying your own health insurance
47 million Americans go without health insurance. Here is your guide to buying insurance on the private market. Read more

Bank smart
Find the best checking and savings deals for your cash - without getting socked by unnecessary fees. Read more

Control your debt
You have to know when to hold it and when to fold it. Make your credit work for you.
Read more

Invest in mutual funds
It's a money jungle out there, but you can create a simple portfolio that cuts through the weeds. Read more

Save for college
Start early and keep at it. You'll give your children more choices and make it easier on your wallet. Read more

Small Business

Emergency small business loans to the rescue
The Small Business Administration says its new loan program is off to a promising start. Small businesses owners disagree. Read more

A matchmaking jukebox
A startup helps lovelorn singles by moving the online dating platform into bars.
Read more

Analytics 101: Valuable insights from cheap tools
Savvy entrepreneurs are turning to inexpensive data-mining software to refine their Web sites and boost profits. Read more

No power outlet? No problem
You're stuck on the tarmac. Again. For hours. But while your fellow passengers fume and flip through SkyMall catalogues after their media players run out of juice, you're still multitasking: listening to Marketplace podcasts. Read more

No more free labor!
When John Trupiano and I co-founded our software company Smartlogic Solutions in 2005, we were college students who knew a lot about writing code but nothing about running a tech consulting business. Read more

Party down
A Texas hospitality company considers where to invest and where to cut back to weather the recession. Read more

2009-06-24T20:32:00.003-05:00

Economy

Buffett: economy has 'no bounce'
The legendary investor says it will take time for the U.S. economy to recover but hints that the worst is over. Read more

New home sales fall unexpectedly
Sales ticked down 0.6% last month, down 32.8% from last year. Read more

Durable orders in surprise gain
Long-lasting manufactured goods orders increase 1.8% in May, third advance in past 4 months. Read more

Higher gas prices to hit July 4 travel
AAA says fewer Americans will travel 50 miles or more during the holiday weekend.
Read more

Mortgage due, severance pay is running out
Raul Camejo had always been in high demand as an internal auditor - until just before he was laid off earlier this year, when calls from recruiters suddenly dried up. Read more

Personal Finance

Do the right thing in a recession
In a tough economy you may face some hard decisions when it comes to money and your relationships with family and friends. Our ethics experts weigh in on how to handle some particularly thorny dilemmas. Read more

Find a job in a tough economy
Three out-of-work professionals get makeovers from a team of four top career experts. Result: One master plan for each, full of smart strategies to find a job in a tough market. Their advice can boost your prospects too.
Read more

Support your struggling grads
Kids having trouble paying back student loans? Help out without shelling out
Read more

Can't afford health care? Barter for it
In these cash-strapped times, bartering is gaining popularity - even for dental surgery and prescription drugs.
Read more

One man against inflation
Money manager Van Hoisington says unemployment and debt will make rising prices a non-issue. Read more

3 ways consumers waste money
Horror stories of $2,000 phone bills are rare, but thousands -- even millions -- of people could be wasting money on outdated telephone services.
Read more

Drowning in student loan debt?
Starting next week, there will be a new student-loan refinancing program targeting grads with large student loan debt and low incomes. Read more

Buying your own health insurance
47 million Americans go without health insurance. Here is your guide to buying insurance on the private market. Read more

Bank smart
Find the best checking and savings deals for your cash - without getting socked by unnecessary fees. Read more

Control your debt
You have to know when to hold it and when to fold it. Make your credit work for you.
Read more

Invest in mutual funds
It's a money jungle out there, but you can create a simple portfolio that cuts through the weeds. Read more

Save for college
Start early and keep at it. You'll give your children more choices and make it easier on your wallet. Read more

Small Business

Emergency small business loans to the rescue
The Small Business Administration says its new loan program is off to a promising start. Small businesses owners disagree. Read more

A matchmaking jukebox
A startup helps lovelorn singles by moving the online dating platform into bars.
Read more

Analytics 101: Valuable insights from cheap tools
Savvy entrepreneurs are turning to inexpensive data-mining software to refine their Web sites and boost profits. Read more

No power outlet? No problem
You're stuck on the tarmac. Again. For hours. But while your fellow passengers fume and flip through SkyMall catalogues after their media players run out of juice, you're still multitasking: listening to Marketplace podcasts. Read more

No more free labor!
When John Trupiano and I co-founded our software company Smartlogic Solutions in 2005, we were college students who knew a lot about writing code but nothing about running a tech consulting business. Read more

Party down
A Texas hospitality company considers where to invest and where to cut back to weather the recession. Read more

Stay-at-home mom, six-figure salary

2009-06-23T21:26:00.004-05:00

When job openings are few and far between, some are finding the best road to employment is starting their own business.
By Jessica Dickler

NEW YORK (CNNMoney.com) -- Desperate for a job? How does CEO with a six-figure salary and flexible hours sound?

With fewer jobs available and more people feeling shut out of the labor market, many would-be 9-5ers chose to go out on their own.

Challenging economic times can encourage entrepreneurial capitalism, according to a recent study by the Ewing Marion Kauffman Foundation. More than half, or 51%, of the companies on the Fortune 500 list this year began during a recession or bear market or both, according to the study.

And while it may be difficult to get off the ground, some start-ups are flourishing in the current economic climate.

Julie Trade became her own boss after her husband was laid off in 2007. With a background in marketing, the former stay-at-home mom, 40, launched her own marketing communications business from a spare bedroom in Scottsdale, Ariz., drafting advertising and press materials for her clients.

Since her husband struggled for nearly a year to find another full-time job and they had a young baby, "I figured the best solution was to work from home."

Trade thought she could earn a little extra cash for the family while her husband searched for a new job. But as the recession worsened, her business began to take off.

"I thought I'd get a couple of clients to make ends meet while he was looking for work," she said. "But what happened was my business kind of went crazy."

Trade got up to speed on email and IM and learned about new marketing techniques, such as search engine optimization.

"I started to think about ways I could offer a variety of services, learn new technologies," she said. "I found ways to make myself appear larger than just a stay-at-home mom in a back bedroom."

Soon she was writing press releases and ads for established companies including British Telecom and Argent Software. "Companies that I never thought in a million years would need my services suddenly did. I was a cost effective source," she explained.

Now Trade logs 40 hours a week, mostly between the hours of 4:00 a.m. and 8:00 a.m. plus evenings and weekends, while her sons, ages 2 and 5, are asleep. "During the day I'm still a stay-at-home mom," Trade said.

That's a stay-at-home mom with a six-figure salary.

Trade estimates that she now makes twice what she did when she was working full-time before having children.

Stepping out on your own
The worst job market in 26 years may be the perfect time to start a business, according to Tim Kane, a senior fellow in Research and Policy at the Kauffman Foundation.

"It's very easy to waste half a year on a job search," he said. "Whether it's a good time to start a business depends on your personal situation. It's a great time if you've always wanted to start a company and you are stuck in a job search."

Because of the increased flexibility in terms of scheduling and location, working for yourself is a particularly "viable option for women who want to work and raise kids," according to Victoria Colligan co-author of "Ladies Who Launch: Embracing Entrepreneurship and Creativity as a Lifestyle."

Thanks to tools like social media and email marketing, entrepreneurs can build relationships online and reach many prospective contacts and clients.

But before venturing out on your own, Colligan suggests "side launching" for starters. If you are already employed, "don't quit your day job," she said.

Last year Fresia Rodriguez, 32, side-launched Kingley&Posh, a plus-sized women's fashion label while she was still employed as a magazine journalist in D.C.

Rodriguez says the business is forecasting a profit after the fall season. The first collection, due this fall, will be represented in about a dozen boutiques nationwide.

"When you start a business it always takes longer than you think to become profitable," Colligan said. "Plan for at least 12-18 months for laying that foundation."

Also, be prepared for the hefty start up costs that are often required to get a business off the ground -- although marketing businesses like Trade's generally have lower overhead and less risk, she said.

For those with greater initial costs and little funding, consider creative ways to finance your venture, Colligan suggested. "People will work with you in exchange for revenue sharing, partnerships, bartering and trade."

Rodriguez, for example, offered up her writing skills in exchange for accounting services. She also negotiated for a custom Web site and printing services.

"Creativity is at an all-time high," Colligan said. When it comes to the traditional rules of starting a business, "people are willing to think out of the box."

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Has Government Crossed the Line?

2009-06-22T20:32:00.002-05:00

From bank bailouts to auto bailouts to executive pay, business is increasingly nervous about the heavy hand of the Obama Administration
By Theo Francis

It remains an open question whether the much-heralded "green shoots" truly signal a turn toward a U.S. economic recovery. What's clearer is that the business backlash against government is well under way.

Not so long ago, business and policymakers alike were calling for Uncle Sam to step in and stop the bleeding—in the financial sector, at the automakers, in the housing and job markets. Most of the sniping that occurred came as various government figures criticized one another for doing too little. Now, however, the grousing is shifting to arguments that the government is overstepping that subjective line between helpful intervention and harmful meddling, including in areas where business only recently welcomed Uncle Sam's dollars.

"They're making business decisions in a way that is political," John A. Allison IV, chairman of BB&T Bank (BBT), told BusinessWeek at a Beltway gala on June 11. BB&T was cleared this past week to return $3.1 billion in federal bailout money. "Where does it stop? The people making the decisions don't have the knowledge of the industries, of the institutions, to make good business decisions."

Go-Go Government Intervention
Certainly, last week brought plenty of revelations about the government's role as an activist investor, both now and at the height of the crisis. The Treasury unveiled broad principles for executive compensation and backed legislation to give the Securities & Exchange Commission and shareholders more say in how compensation policy is shaped; it also appointed a "pay czar" to police compensation at the seven companies that have received repeated federal aid.

The Food & Drug Administration got the go-ahead to regulate tobacco as a drug. The Supreme Court stood aside, letting the Obama Administration's plan for Fiat (FIA.MI) to acquire Chrysler go through, despite arguments by some creditors that it stood on end the usual bankruptcy process. And the Administration's role became clearer in everything from picking board members and top executives to "changing the culture" of also-bankrupt General Motors.

On Capitol Hill, indignant lawmakers listened as Bank of America (BAC) CEO Kenneth Lewis described the pressure he felt late last year at the hands of Fed Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson to go consummate the acquisition of an ever-shakier Merrill Lynch.

"Campaign for Free Enterprise"
So perhaps it should come as no surprise that the U.S. Chamber of Commerce—perhaps the business lobby's most persistent voice against government regulation—picked this week to launch its "Campaign for Free Enterprise." Declaring that "capitalism is at a crossroads," Chamber officials called the effort to "defend and advance America's free enterprise values in the face of rapid government growth and attacks by anti-business activists…one of the most important and necessary initiatives in [the Chamber's] nearly 100-year history." Two days later, the Chamber sent an open letter to Senator John Thune (R-S.D.) supporting a "transparent exit strategy to ensure the timely withdrawal of the federal government from these most extreme and unusual forms of intervention."

The Republican Party of Florida put it a little more bluntly, headlining its criticism of the Obama Administration's forays into business (and some other issues) "Back in the USSR" and decrying that the Administration has more czars—over health care, autos, executive pay, and more—than did three centuries of Romanov rule. (Never mind that some of the U.S. czars date to GOP Administrations or that the Romanovs and the Union of Soviet Socialist Republics didn't exactly overlap.)

The Administration's approach has real dangers. Attempting to reorganize and tinker with the culture of a giant corporation like GM is risky in the best of times. Taxpayers may find themselves hopelessly entangled in lost corporate causes, with billions of loans never returned. Companies that are shackled with pay restrictions may lose top talent to those that aren't. Countless historical examples show the potential for unintended consequences from well-intended policies. (Just one example: the costly distortions in employee titles and pursuit of tax loopholes that followed imposition of government wage and price controls.)

Business Used to Want Federal Assistance
Of course, business was happy to get federal funds when they were being doled out by the fistful over the past eight months. The Chamber, for example, lauded Congress for the original $700 billion financial-system bailout; pushed for aid to the automakers; sought borrowing assistance for the nuclear, coal, and other industries; and called for stimulus spending and subsidies for transportation, broadband, housing, auto sales, and small business, as well as exporters.

And while Florida state GOP chief Jim Greer criticized the stimulus bill as laden with pork-barrel spending while it was being hammered out, he also made sure to praise its "important funding for certain essential services" and pushed to "ensure that Florida receives its full share and is able to use any federal economic stimulus dollars coming to our state."

Some lawmakers, too, are now calling for the government to back off where they once demanded more involvement. As The Washington Post's Steve Pearlstein points out, for example, Senator Bob Corker (R-Tenn.) criticized last fall's plan to aid automakers because it didn't demand enough from the companies in the way of restructuring. But more recently, Corker is pushing legislation to force the auto companies to reimburse dealers whom they want to restructure out of existence.

Time for a Backlash
Regardless of where you stand on the political spectrum, you could view this shift as a good sign, a return to something approaching normalcy. With a full-blown crisis raging, after all, it's politically awkward to stand in the way entirely, says Julian E. Zelizer, a political historian with Princeton University's Woodrow Wilson School of Public Affairs. "When everyone's losing their savings, it's hard for business to say the government shouldn't do anything," he says. "Now, there's some sense of calm for business to be more critical again."

Similarly, the President's political opponents have an easier time making hay out of what is, after all, a core issue to the GOP. Especially with cultural issues like gay marriage and abortion apparently lacking the traction they once had, "this is an issue Republicans have been able to do well with in the past," Zelizer says.

At the same time, the increasingly vocal backlash also illustrates a classic corporate dynamic—albeit with some unusual twists—says Heather Elms, an American University associate professor of international business. Ordinarily, she notes, corporate management is paid to use its discretion in balancing the interests of various stakeholders—shareholders, bondholders, employees, and government, among others. "To some extent, the crises at these companies are evidence that they weren't doing a very good job, so you have all these stakeholders stepping in and saying no, this is how you do it," Elms says. "Now the government is saying we want some strings attached to that, and the managers are saying we don't want you to mess around with our discretion."

Government Is Different
Of course, the government isn't like other stakeholders. While shareholders, employees, and customers can only vote with their feet, the government can force many of the changes it wants, as it did by statute when it came to limiting pay at banks taking federal aid, and with its deep pockets at the automakers, who might not have found bankruptcy financing elsewhere. Moreover, markets are flexible and can adjust fairly quickly, but statutes tend to linger.

"There's an inevitability that things aren't going to work out exactly the way they were intended," Elms adds. "People tend to ascribe great powers of thought and reasoning to executives and politicians, but they're exploring here, they're experimenting, and none of them knows exactly what to do."

New GM cars coming, bankruptcy or not

2009-06-19T19:06:00.009-05:00

Chapter 11 isn't stopping General Motors from launching a summertime product assault.

Performance car No. 1: Chevrolet Camaro

Roll-out: Now
Price: $22,245 - $33,430
Fuel economy: 18 city, 29 hwy with V6

Yes, General Motors is in bankruptcy court with lawyers picking the fat off its bones, but regardless of that, the automaker is aggressively pushing five new vehicles to market.

These will join the two new cars that GM delivered to showrooms just before its Chapter 11 filing.

When this is all over, the new leaner GM will emerge from bankruptcy with some nice new cars.

For a company that's supposed to be concentrating on fuel economy, the Camaro muscle car might seem like the wrong choice for a leading role.

But with an optional V6 that gets 29 mpg on the highway, the Camaro just hitting the streets now does offer decent fuel economy. Much more importantly though, buyers are lining up for a GM car that doesn't need rebates to sell.

Camaro buyers shouldn't be disappointed. With either the V8 or V6 engine, performance is powerful and sophisticated. Both versions come with six-speed manual or automatic transmissions.

While the Camaro's interior makes voluminous use of hard plastics, the sort of stuff GM has long been criticized for, the artful design more than makes up for that.

Performance car No. 2: Pontiac Solstice Coupe

Roll-out: Now
Price: $26,895
Fuel economy: 19 city, 29 hwy

GM announced in late April that it would kill off Pontiac by the end of next year. At least it's going to go out looking good.

The Pontiac Solstice coupe will probably be the last new Pontiac model to ever hit the market. It's a hard-top version of the convertible Solstice that hit the market in 2005.

Fortunately, GM's designers didn't just drop a top onto the Solstice's cabin. Instead, the Solstice Coupe's flowing roofline gives the car a whole new look. The Coupe does have a removable roof section just over the seats to offer a bit of that convertible feel.

GM will only make about 1,100 of these cars, so expect them to be hard to find and, if you get one, take good care of it.

Small crossover No. 1: Chevrolet Equinox

Roll-out: June
Price: $23,185
Fuel economy: 22 city, 32 hwy with 4-cyl.

"SUV" has become a naughty word, but Americans are still buying them, especially smaller, more fuel-efficient car-based crossover SUVs.

To meet that need, Chevrolet is rolling out a new, redesigned Equinox. Buyers will be able to choose either a 2.4-liter 4-cylinder or 3.0-liter 6-cylinder engine

With the 4-cylinder engine, the Equinox will get 32 mpg on the highway. That's 4 mpg better than a Toyota Rav-4 and 5 mpg better than a Honda CR-V.

Another pleasant surprise: the starting price for the new Equinox will actually be slightly lower than today's version.

Small crossover No. 2: GMC Terrain

Roll-out: August
Price: Not announced
Fuel economy: 22 city, 32 hwy with 4-cyl.

The Terrain is GMC's version of the new Chevrolet Equinox. The basic idea was to create a small crossover that appeals to people who want a look that GM calls "tailored toughness." Looking it over, we might suggest a different tailor but, hopefully, buyers will like what they see on the showroom floor.

The Terrain's attractive interior, which will be bathed in warm red light, will be much less controversial than its outside. Both the Equinox and Terrain retain the handy back-and-forth sliding rear seat, allowing owners to easily trade legroom for cargo space.

Even though Americans still want their SUV's, fuel economy is a bigger deal now, so the Terrain offers an "Eco" mode button that trades a measure of performance for better mileage.

Mid-sized car: Buick LaCrosse

Roll-out: June
Price: $27,835
Fuel economy: Not yet announced

GM knows which side of the world Buick's bread is buttered on, so this car was partly designed in China. In this country, Buick's image has been damaged by decades of wallowing road sofas. In China, though, Buick is one of the country's top-selling brands, retaining a luster few see here.

Improved quality -- Buick topped this year's J.D. Power vehicle dependability survey - and sharp looking new models like the Enclave crossover have given Buick a brighter looking future in this country, too.

The new LaCrosse, an entirely new car that replaces "just OK" current LaCrosse, should help move Buick forward some more. The outside looks much sharper and, inside, there's cool blue ambient lighting throughout and richer looking materials and design.

Buyers can chose between more efficient or more powerful V6 engines and an optional "intelligent" all wheel drive system.

Small crossover No. 3: Cadillac SRX

Roll-out: August
Price: $34,155
Fuel economy: Not yet announced

This time, Cadillac gets smaller. The new SRX is much smaller than the current version. With just two rows of seats and a lower price it's now a direct competitor to the Lexus RX 350.

The SRX will be available with either a 3.0-liter 265-horsepower V6 or a turbocharged 300-horsepower 2.8-liter V6. A new advanced all-wheel-drive system automatically shifts power front to back and side-to-side in the rear as needed.

The new SRX will have a handsome interior design similar to that of the Cadillac CTS, including the nifty pop-up touch screen for navigation. It will also have the same pause-and-play radio feature that lets you stop a radio show and restart it when you want.

Wagon: Cadillac CTS Sport Wagon

Roll-out: August
Price: Not yet announced
Fuel economy: 18 city, 26 hwy

Introducing a new station wagon in the wagon-phobic U.S. is a calculated risk for GM. Even the ultra-cool Dodge Magnum wagon from Chrysler couldn't find enough market here to hang on.

The CTS does look very slick, with a roof that tapers nicely down to that sharp Caddy back. And the new roof actually gives this CTS a little more rear headroom. Beyond that, the CTS Sport Wagon differs from the CTS sedan only in its body shape. Not that that's a bad thing. The CTS is arguably GM's best product after the Corvette.

Ford's bumpy road ahead

2009-06-17T21:25:00.003-05:00

As GM and Chrysler fell into bankruptcy, Ford was the strongest U.S. automaker by default. But its competitive position is about to change.

By Chris Isidore

NEW YORK (CNNMoney.com) -- For much of the last year, Ford Motor has been the strongest U.S.-based automaker.

But with Chrysler already out of bankruptcy and General Motors possibly six weeks away from its own exit from bankruptcy, Ford could soon find itself in the weakest position of the traditional Big Three.

The problem for Ford is that its strength was only relative to the greater problems at GM and Chrysler. Ford built its cash reserves not through profits, but by mortgaging most of the company's assets before the credit crisis of 2008 cut off funding for the other automakers.

That pile of cash gave Ford (F, Fortune 500) the ability to ride out the sharp plunge in auto sales without turning to the government for help -- at least so far. But it also left Ford with about $32 billion in debt on its books at the end of the first quarter.

With GM (GMGMQ) and Chrysler using the bankruptcy process to shed much of their own debt cheaply and quickly, Ford has gone from the automaker with the most cash on hand to the one with the most debt on its books.

GM will have only about $17 billion in debt if it can follow its planned emergence from bankruptcy. Chrysler left bankruptcy with about $11 billion in debt, and a new partner, Italian automaker Fiat, it did not have previously have.

Ford also hasn't been able to cut its manufacturing capacity or its bloated dealership network as Chrysler and GM through bankruptcy reorganization.

Ford officials insist the company remains in a strong competitive position against its Big Three rivals -- despite all the help they got from the government and the bankruptcy courts.

"We don't know what the implications are going to be, but one thing's for sure: I like our position," said Ford Chairman Bill Ford at a conference in Detroit Monday.

But others worry that Ford's debt level could soon become the same kind of burden that plagued GM and Chrysler before their bankruptcy filings.

"It's a huge issue," said David Cole, chairman of the Center for Automotive Research, a Michigan think tank. "GM and Chrysler are showing how you can do things in bankruptcy you can't get close to outside of bankruptcy."

Other auto industry experts say that even if Ford can manage its debt level, it will soon find itself in need of a bailout or possibly bankruptcy if auto sales don't start to rebound in the next year.

"Leverage is a concern, but it's not the primary concern. The greater concerns are low sales and underused capacity," said Gregg Lemos-Stein, credit analyst with ratings agency Standard & Poor's, which rates Ford's corporate credit as CCC+, deep into so-called "junk bond" status.

Lemos-Stein said while the company still has a better cash position than its rivals, "they don't have an indefinite supply of cash, especially since we expect the outflows of cash to continue."

Still, some experts believe Ford's future looks brighter than its rivals because it has a better lineup of vehicles in the showroom and its pipeline. While GM is busy shedding weaker brands and Chrysler is shifting away from trucks towards smaller cars, Ford has already adapted to changing demands from customers.

"They've managed their product portfolio pretty well. That's very important," said Tom Libby, president of the Society of Automotive Analysts.

Libby said that product development at GM and Chrysler took a hit as the companies rushed to slash costs in recent months. That could leave Ford with newer, more attractive products for at least a few years.

"They are not being forced to make changes at gunpoint," added Subroto Banerjee, a partner at business research firm Frost & Sullivan. "They've done it very smartly, without all the problems and distractions of the process at GM and Chrysler."

Libby conceded that some of the market share gains Ford has achieved in recent months came because buyers were worried about the future prospects at GM and Chrysler.

If those concerns are now put to bed by those companies' quick trips through bankruptcy, Ford will lose a marketing advantage it once had.

And all three Detroit rivals face the problems that brought the U.S. industry to its current crisis -- a weak economy, an historic plunge in auto sales and a decades-long trend of losing market share to importers like Toyota Motor (TM) and Honda (HMC).

So even if Ford is still stronger than GM or Chrysler, it may not be strong enough to buck those three powerful headwinds.

Chrysler set to reopen most plants

Production at 7 of 11 assembly lines will restart later this month, sending most employees back to work for the first time since Chrysler filed for bankruptcy.
By Chris Isidore

NEW YORK (CNNMoney.com) -- Chrysler announced plans to reopen 7 of its 11 assembly lines later this month for the first time since the day after the company filed for bankruptcy in April.

The company said two plants in Michigan, one in St. Louis and one in Toledo will reopen during the week of June 29. Two factories in Ontario, Canada will also reopen as well as one in Mexico.

The seven plants make a variety of Chrysler vehicles, including the Dodge Grand Caravan, Jeep Wrangler and the Chrysler Town & Country.

In addition, the company is reopening several factories that make powertrains, axles and other components used by the assembly plants. Chrysler's parts distribution centers, which supply parts to both plants and dealerships, will also reopen.

Three assembly lines -- one in Illinois, one in Detroit and another in Mexico -- will remain shut for the time being. Those plants employ about 5,000 workers between them.

All told, Chrysler currently has about 38,000 production workers in the U.S., both hourly and salaried, and employs another 9,000 in Canada and 5,000 in Mexico. So most of Chrysler's workforce will be returning to their jobs later this month.

But virtually all of Chrysler's plants are due to shutdown again for normal summer retooling, which will take place during the weeks of July 13 and 20.

And four of the company's 30 plants are slated to close permanently by next year as Chrysler makes permanent reductions in its capacity. Chrysler has said one of those plants scheduled to close, the one in St. Louis, could be shut down as soon as this September.

Chrysler filed for bankruptcy on April 30 and halted most operations a day later as it sought to reorganize its operations, complete a combination with Italian automaker Fiat, and work through an excess inventory of vehicles. The bankruptcy court approved its deal with Fiat last week.

So far, the only assembly line that has been restarted was the Conner Avenue Assembly Plant in Detroit, where 115 people make the Dodge Viper niche muscle car. Chrysler is looking to sell that facility.

An auto startup in Louisiana - What the heck?

V-Vehicles, founded by former Oracle executive and funded in part by T. Boone Pickens, will build cars at former headlight plant bringing jobs to small Louisiana town.
By Peter Valdes-Dapena

NEW YORK (CNNMoney.com) -- A largely unknown car company is planning to open its first factory in what used be a headlight plant in a small town in northern Louisiana, state officials announced on Wednesday.

Louisiana economic development officials are enthusiastic about the endeavor which they say will create thousands of jobs. But for now, executives with California-based V-Vehicles, which has backing from activist billionaire T. Boone Pickens and the venture capital firm Kleiner Perkins Caufield & Byers, are not saying exactly what type of vehicle the company plans to build.

Pickens has been active in promoting natural gas for use in automobiles, but it isn't clear what form of energy will fuel these cars.

An auto industry startup. The company was founded in 2006 by former Oracle executive Frank Varasano who has spent 26 years working for the consulting firm Booz Allen Hamilton where he led the firm's engineering and manufacturing practice, according to the Louisiana economic development council's Website.

"He watched, we all watched, as the auto industry stumbled," said V-Vehicles spokesman Joe Fisher of V-Vehicles founder Verasano. "He thought he could do something to fix it."

Fisher said Varasano came up with a plan to build a profitable auto company and presented his plan to executives at Kleiner Perkins.

Fisher declined to say what was unique about V-Vehicles' business model, citing the competitive nature of the businesses.

Fisher also declined to provide details about the vehicle the company intends to produce at the site. A Website about the venture hosted by the Louisiana Economic Development council showed only a round headlight in one photo and, in other, one corner of a clay mock-up of a car.

Design of the cars is being led by former Mazda designer Tom Motano, who is credited with designing the Mazda MX-5 and RX-7 sports cars

Big jobs boost for Louisiana. The plans were revealed in Louisiana, by the state's economic development council on Wednesday.

"Today, we are here to announce that through quick, aggressive action to pursue a transformative opportunity, we have a chance here in Louisiana to reenergize the entire U.S. auto industry," Louisiana governor Bobby Jindal said in a prepared statement.

V-Vehicles plans to retool the former Guide Corp. headlamp factory in Monroe, La., according to the announcement.

The plant will employ approximately 1,400 people and will create another 1,800 jobs outside the factory, according to the state. The project involves a capital investment of at least $248 million, according to the announcement

Full production of the vehicles is scheduled to begin in early 2011, Fisher said.

GM sells Saab to Koenigsegg Automotive

2009-06-16T21:29:00.000-05:00

GM Europe reaches agreement to sell the unit to Sweden's Koenigsegg.

STOCKHOLM (Reuters) -- General Motors Europe said on Tuesday a preliminary agreement has been reached to sell the company's money-losing Swedish unit Saab to local sportscar maker Koenigsegg.

Koenigsegg, a small firm with just 45 staff that makes only a handful of high performance cars a year, came out of nowhere to emerge as a front-runner to buy Saab.

The deal would see Saab, which was put up for sale earlier this year, emerge from two decades under the umbrella of its U.S. parent which filed for bankruptcy earlier this month.

Sale terms were not disclosed but the agreement includes expected financing to be guaranteed by Sweden.

"The sale, expected to close by the end of the third quarter of this year, includes an expected $600 million funding commitment from the European Investment Bank (EIB) guaranteed by the Swedish government," GM Europe said in a statement on its website.

But the Swedish government, which has been wary of making a commitment on loan guarantees, said the issue of financing support was not yet resolved.

"We do not yet know if Koenigsegg group will need loan guarantees or not," Joran Hagglund, state secretary for Sweden's industry ministry, told Reuters.

Savaged by downturn
Saab Automobile had been in talks with two or three bidders in recent weeks.

Koenigsegg, founded 15 years ago by Christian von Koenigsegg, was until recently seen as an unlikely suitor. Analysts say it's unclear whether Koenigsegg has the expertise to run a larger company such as Saab or whether the two operations make a good fit.

Saab's sales comprised just over 1% of GM (GMGMQ)'s total sales volume last year. It has been hit hard by the economic downturn that has savaged sales on both sides of the Atlantic.

The company, one of Sweden's best-known brands, has said it needs $1 billion of financing to help it overhaul production and launch new models while absorbing expected losses of about $382 million this year.

The Saab Automobile/IF Metal workers' union welcomed the news.

"We're not negative to this. We think it is good that this finally got its solution," union representative Paul Akerlund told Reuters.

The union, and residents of Saab headquarters Trollhattan, in southwest Sweden, have been anxious to see a deal reached as Saab is the town's main employer.

Plaintiffs with pending lawsuits against GM and Chrysler are getting abandoned in bankruptcy process, lawyers say.

By Aaron Smith

NEW YORK (CNNMoney.com) -- As Chrysler morphs into a new company and as General Motors moves ahead with its bankruptcy process, injured plaintiffs are getting left behind.

Hundreds of plaintiffs have pending lawsuits against the automakers that are worth nearly $2 billion. They blame automotive defaults for their injuries, which in many cases are severe and crippling.

But their lawyers have doubts as to whether they'll ever see any money because the plaintiffs are considered unsecured creditors in the bankruptcies. Therefore, they're at the bottom of the repayment pool - if there's even money left.

"We want all the people who have suffered injury, who have a lawsuit, to have their day in court," said Larry Coben, chairman of the Committee of Consumer Victims of General Motors and founder of law firm Coben & Associates in Scottsdale, Ariz. "[They] shouldn't be lost in the shuffle here."

Coben, and his colleague Barry Bressler, are among a team of lawyers representing 170 injured plaintiffs in the bankruptcy proceeding who have sued Chrysler for claims worth $600 million and 300 injured plaintiffs who sued GM for claims worth $1.25 billion.

Bressler, a partner with the Philadelphia firm Schnader, Harrison, Segal & Lewis, has a client who was a passenger in a GM vehicle and was paralyzed when it crashed, allegedly because of a faulty seatbelt.

"The seatbelt snapped and broke her neck and she's now quadriplegic," said Bressler. Bressler said that some of his clients are too disabled to care for themselves and they shouldn't be abandoned by the bankruptcy court. "It's really a shame what's happening to these folks," he said.

Still, they know they could face a tough fight if anything is to be learned from Chrysler's bankruptcy.

The Chrysler case
Bankruptcy Court Judge Arthur Gonzalez approved the transfer of Chrysler's best-performing assets, including factories and dealership contracts, to the newly formed Chrysler Group LLC. Some factories, dealerships and creditors were left behind in the bankruptcy process, including pension funds from Indiana teachers and state police, as well as a "Major Moves" construction fund.

Indiana Treasurer Richard Mourdock appealed -- first to the Court of Appeals, 2nd Circuit, and then to the U.S. Supreme Court -- that the pension funds, as secured creditors, should have higher status than unsecured creditors.

But the Supreme Court gave the Chrysler bankruptcy a green light; Mourdock's appeal succeeded only in delaying the process by a few days.

That does not bode well for the injured plaintiffs, whose open lawsuits against Chrysler are unsecured, meaning that they have lower priority than the Indiana pension funds.

"If you have a judgment or a settlement you move to the front of the line," said Chrysler spokesman Mike Palese to CNNMoney.com. "But the filing of a liability lawsuit is not proof that there is a default with the vehicle."

Injured plaintiffs can try to lay claim to the Chrysler assets left behind in the bankruptcy process, but there won't be much left, according to Bressler.

"There are probably going to be some assets left in old Chrysler and some claims to be decided," said Bressler. "[But] when you get all done liquidating that, you're probably no more than half a cent on the dollar, and more likely zero."

Coben is concerned about the future impact because, he said, plaintiffs injured by defects in Chrysler vehicles made before the bankruptcy won't be able to sue the new Chrysler.

"If you're driving down the road and the wheel falls off and you roll over and get paralyzed from the neck down, they'll replace your wheel [because it's covered by warranty], but you can't sue them for your injury," he said.

As a result, Coben said he will argue for "successor liability" in the GM case, where the open claims would be carried over to a newly formed company.

"We're trying to get those folks who are representing GM, and that really means the Treasury, to allow successor liability for GM," he said. "If we can't do that, we will certainly file objections to the proposed sale. You shouldn't be allowed to do away with successor liability."

But Coben admitted it's a long shot, unless he can convince the Treasury to intervene.

"Treasury was not involved in this decision, which the company made consistent with conventional bankruptcy practice," said Treasury spokeswoman Meg Reilly in an e-mail. "While unfortunate, the outcome would have been far worse had the government not intervened in the restructuring and Chrysler had liquidated."

But the prospects are much better for injured plaintiffs who have settled on a case. If the judge has awarded them damages prior to the bankruptcy filing, then they should still be able to receive their payments, according to GM spokesman Tom Wilkinson.

"Anything that is settled prior to the bankruptcy filing is settled," said Wilkinson.

Chrysler restarts with the Viper

The factory that makes the Dodge Viper sports car is the first to reopen after bankruptcy.
By Peter Valdes-Dapena

NEW YORK (CNNMoney.com) -- Chrysler will soon be making cars again.

Chrysler Group announced Monday that it is restarting a factory, after shutting down all of its manufacturing for nearly seven weeks following the bankruptcy of Chrysler LLC. Chrysler Group is the new company that emerged last week with most of Chrysler's assets and a new ownership structure.

The first plant to reopen is the one that makes the Dodge Viper sports car.

The Viper has a 600 horsepower V-10 engine and a price tag that starts at about $90,000. The Viper was introduced in the 1999 model year, and only 25,000 have been sold since then.

The Conner Avenue Assembly Plant in Detroit that makes the car employs 115 people.

Chrysler LLC had announced last year that it intended to sell off the Viper brand. The high-performance, 10-cylinder sports car sells in low numbers. Ultimately, Chrysler said it had not received any bids that met its requirements.

Chrysler's other plants remain idle.

"At this time, we cannot give exact timing in regards to the start of production at our other manufacturing facilities," Chrysler Group said in a statement.

The Viper brand and the plant that makes the car, the Conner Avenue assembly plant in Detroit, were taken over by the "new" Chrysler that emerged last week from bankruptcy.

The Chrysler Group is owned by a combination of the Italian automaker Fiat, the United States government, the United Auto Workers union's retiree trust and the Canadian and Ontario governments.

Showdown over auto dealer cuts

2009-06-12T21:19:00.004-05:00

Auto dealers say closing facilities will not save automakers much money, but GM and Chrysler say closures are crucial to survival.
By David Goldman

Steve Biegler added a black armband to the Chrysler sign outside his South Dakota dealership, one of more than 700 slated to lose its franchise.

Chrysler Dealers: Who's getting shut down

NEW YORK (CNNMoney.com) -- These are hard times for car dealers. Across the nation, General Motors and Chrysler dealerships are pulling down their big roadside signs and closing their doors.

The companies say they have no choice but to cut the cord and save money. The dealers, who say they are being scapegoated for the epic problems at GM and Chrysler, are hopping mad.

So are lawmakers.

On Friday, top executives of General Motors and Chrysler as well as several dealers appeared at a congressional hearing. It marked the second Capitol Hill hearing on the issue this week.

Fritz Henderson, chief executive of General Motors (GMGMQ), and Jim Press, deputy CEO of Chrysler, testified along with six GM and Chrysler dealership owners and a dealer representative at a House Energy Committee hearing.

Chrysler closed 789 dealerships, or 25% of its more than 3,150 operations nationwide, this week. GM is set to cut roughly 2,500, or 40% of its 6,300 dealerships, by the end of the year.

Closing auto dealerships is a difficult and emotional decision, as hundreds of thousands of jobs could be at stake. Lawmakers spoke about the human element of dealership closings in their congressional districts.

"Mr. Henderson and Mr. Press, your corporations were built on the backs of people you see in this room," said Rep. Bruce Braley, D-Iowa. "Each of you owe them and the taxpayers of this country a detailed of reasoning of your business decisions."

Both Henderson and Press nodded in affirmation of Braley's statement.

The dealers and John McEleney, chairman of the National Automobile Dealers Association, argued that closing dealerships does not affect the automakers' bottom lines. Dealers are independently owned and operated, and do not receive significant administrative support from manufacturers, they said. Furthermore, many of the dealerships set for termination are profitable.

"Everyone agrees that both Chrysler and GM need to decrease costs and increase revenue to survive, but eliminating dealerships does neither," said McEleney, in testimony. "The manufacturer's costs do not vary whether there are 6,000 dealers or 3,000 dealers."

The dealership owners agreed. "Our dealerships do not cost auto manufacturers a penny," said Alan Spitzer, who owns Spitzer Automotive Group of Elyria, Ohio, which has seven dealerships that are slated to be shut down by GM and Chrysler. "All products and services, which Chrysler and GM provide to a dealership, are charged back to the dealership at a profit. If we lose money it comes out of our pocket, period."

Lawmakers also fumed that Chrysler dealerships did not have the ability to appeal. GM dealerships can appeal, and Henderson said the company has removed 45 of the franchises from the termination list for various reasons.

Henderson confirmed that three dealerships in Massachusetts were taken off the list after Rep. Barney Frank, D-Mass., persuaded GM to keep them open.

Automakers face scrutiny regarding the dealers they are keeping as well. Texas Attorney General Greg Abbott announced Friday afternoon that his office will file an objection against GM, charging that the company's restructuring plan violates the rights of dealers under Texas law.

Abbott said the plan limits dealers' ability to market other brands and choose their locations.

Painful, but necessary
The automakers and the White House, however, believe the decision will help save even more jobs.

"This has been the most difficult business action I have personally ever had to take," said Press. "But the optimization of Chrysler's dealer restructuring plan was necessary to save the company."

Press said that for the most part Chrysler has cut the least profitable businesses, but those that are profitable likely won't be moneymakers under the company's new sales structure.

The company wants to sell Chryslers, Jeeps and Dodges at each of its dealers so it can save money by discontinuing similar minivans, crossover SUVs or cars that appeared in multiple brands. Press said the so-called sister vehicles cost Chrysler $350 million per model, but the bigger problem was that the company competed with itself -- "one of the biggest reasons why the company went into bankruptcy."

Press said 555 of the dealerships that could not accommodate selling all three brands were terminated.

In addition, Press noted that many of the dealerships that it ended relationships with are making the vast majority of their money off of used cars anyway and will be successful independent of a relationship with Chrysler.

For GM's part, Henderson said closing dealerships will save the company $2.5 billion a year, or more than $1 million per dealership, as GM eliminates many direct support programs such as dealer incentives, as well as market and advertising support. A GM spokeswoman said that the dealerships that will be kept open will be more profitable, and therefore need fewer incentives and support from the manufacturer.

But he said that more important than cost savings was making its dealerships more efficient and competitive. GM's dealerships grew too quickly and began to compete with one another, Henderson said. That led to rundown facilities and the loss of top-tier sales staff.

"GM's success over the long haul ... will depend in no small part on a healthy, strong and profitable dealer network that can provide the industry's best customer service and enhance the image of our four remaining brands," he said. "Dealers who underperform simply cannot provide these benefits to our customers," he said.

Henderson said the dealership closings will save more than 200,000 jobs at GM's remaining dealerships.

"GM's remaining dealerships will be better positioned to keep their current GM customers, while aggressively marketing to take sales from competitors," Henderson added.

The Obama administration supports the automakers plan, too.

The Treasury Department's Auto Task Force told GM and Chrysler to be "more aggressive" with its dealership cuts, task force member Ron Bloom told the Senate Banking Committee on Wednesday. He said the task force has avoided issuing specific decisions about dealers, but noted that the closings were necessary to help the companies rebound.

Chrysler's next fear: High gas prices

2009-06-11T21:48:00.002-05:00

With Fiat's fuel-efficient cars more than a year away from helping Chrysler, the company prays rising gas prices won't kill its bread-and-butter truck and SUV sales.
By Peter Valdes-Dapena

NEW YORK (CNNMoney.com) -- In the auto business, timing really is everything.

Even as Chrysler embarks on its path to resurgence, its short-term survival is threatened by rising gas prices and a product line still dominated by trucks and SUVs.

Fiat of Italy, stands ready to assist with its fuel-efficient small cars. But those won't be ready for at least a year.

That means Chrysler has to hope that gas prices don't spike this summer.

"If gas prices continue to go up, the challenge for Chrysler becomes greater and greater," said Tom Libby, president of the Society of Automotive Analysts.

Chrysler's best stuff is still its biggest stuff. Its most well-regarded vehicles are the new Dodge Ram pick-up, the Dodge Challenger muscle car and the Chrysler 300C, a V8-powered sedan -- not the type of vehicles consumers flock to when gas prices are high.

This problem is not specific to Chrysler. All domestic manufacturers face challenges when gas prices go up. Import carmakers have been focused on selling small cars more than the SUV-loving U.S. carmakers.

When consumers shift to smaller cars that command lower prices and deliver slimmer profits American automakers struggle to compete.

Last summer, as gas prices rose toward $4 a gallon, sales of the Chrysler 300 dropped more than 40% from the year before. Sales of the Dodge Durango and Chrysler Aspen full-size SUVs also plummeted. Chrysler eventually took the big SUVs out of production altogether as inventories backed up.

Sales of GM (GMGMQ) and Ford's (F, Fortune 500) big trucks dropped, too, but at least they had some decent small, fuel efficient cars to offer shoppers. Market share of the Ford Focus and Chevrolet Cobalt held tight as sales of compact car sales took off.

Chrysler's smaller cars couldn't stand up to the competition: the Dodge Caliber enjoyed market share spike at first, but it soon faded and went back to losing share, as it had been before, even while gas prices stayed high.

"GM has more products in the pipeline and, right now, they have more competitive products in key segments," said Libby.

Since last year, GM's Chevrolet Malibu mid-size sedan has gained market share against its foreign competitors in spite of the crisis gripping the automaker and the industry. Ford has made even more headway with its new Fusion sedan, more than doubling its share of the market since the beginning of 2008.

Chrysler's Sebring sedan, meanwhile, has gone from about 5.5% of the mid-size car market at the start of 2008 to just 1.4% today.

Besides mid-size sedans and small cars, small crossover SUVs have become a key segment as consumers look to save gas while still getting SUV functionality. Ford already has the popular Ford Escape and Mercury Mariner in that segment, which also includes the Honda CR-V and Toyota Rav4.

GM will introduce three new small crossover vehicles in the next few weeks: The redesigned Chevrolet Equinox, the GMC Terrain and a new Cadillac SRX.

Meanwhile, Chrysler offers the Dodge Nitro. While it may look like a crossover SUV, it's actually a truck-based SUV based on the Jeep Liberty. It rides rougher than a real crossover SUV and its fuel economy is 25% worse than that of a V6-powered Ford Escape. Also, the Nitro isn't even available with a 4-cylinder engine, which Ford's Escape offers.

"If the Nitro were a good small SUV, or if they had a family sedan that was anywhere close to the Malibu, they wouldn't be where they are today," said Jake Fisher, a senior automotive engineer for Consumer Reports magazine.

Chrysler's recently redesigned Dodge Ram truck is very good, he said, but that just continues Chrysler's traditional reliance on big trucks.

Chrysler does have the Journey, a mid-size crossover SUV with an available third row of seats. While it doesn't match up to what many competitors offer, Fisher said, the Journey is decent. It gives the carmaker something with which to compete in that segment.

He contrasts that to the small Caliber which is essentially a small SUV playing the role of a compact car. In fact, Chrysler markets the nearly identical Jeep Compass as a small crossover SUV.

"Since Chrysler lost the Neon and went with the Caliber, they essentially don't have a small car at all," he said.

Fortunately for Chrysler, the current rise in gas prices doesn't signal a run-up like last summer's unprecedented rise, said Jeff Schuster, executive director of forecasting for J.D. Power and Associates.

"If you look historically at the summer rise, the levels we're at right now are very similar to that," he said.

Gas prices will start creating a real problem for Chrysler Group if they begin approaching the $4.00 a gallon mark, Schuster said. That's what started a panic shift in the market last year as consumers began a sudden rush to small cars.

Chrysler admits that it's hoping gas prices don't spike too high.

"None of us wants to see $4.50 a gallon gas," Chrysler spokesman Scott Brown said. Any carmaker would say the same thing, though, he noted.

In the meantime, Brown said, having the company's best product be a large pick-up isn't such a bad thing. Americans still like big trucks and they remain profitable vehicles. "If we had to have one thing to hang our hats on, I think we'd want it to be the Ram," he said.

Supreme Court clears way for Chrysler

2009-06-10T08:26:00.002-05:00

One day after intervention, the high Court decides not to hear case from Indiana pension funds.

NEW YORK (CNNMoney.com) -- The U.S. Supreme Court on Tuesday cleared the way for the sale of Chrysler to a consortium led by Italian automaker Fiat.

On Monday, the Court had delayed the sale pending review of the merits of a case brought by the Indiana state pension funds, which argued that they and other lenders deserved better treatment by the bankruptcy court.

Chrysler's asset sale was approved by a bankruptcy judge on May 31, just hours before the bankruptcy filing of General Motors (GMGMQ).

The bankruptcy judge overseeing the Chrysler case had given approval for the company's most valuable assets, such as plants, dealerships and contracts, to become part of a new company in which Fiat would hold a significant stake.

Chrysler said in a prepared statement that the transaction is now expected to close "very shortly."

"Chrysler LLC thanks the Courts for their expeditious work throughout this process," the company said.

Indiana Treasurer Richard Mourdock had appealed the ruling of a federal bankruptcy court. Mourdock made his appeal on behalf of three pension funds -- for Indiana teachers and state police, as well as a "Major Moves" construction fund. The funds hold about $42 million, or less than 1%, of Chrysler's $6.9 billion debt.

"I am disappointed to have learned that the U.S. Supreme Court has lifted the stay in the Chrysler bankruptcy case," Mourdock said in a statement released late Tuesday. "I have fought for Indiana's retired teachers, retired state policemen, and Hoosier taxpayers. I have no regret for having done so and for having carried this case to the door step of the nation's highest court."

If the Chrysler deal goes through, Chrysler would sell its best assets -- including its best-performing factories and dealerships -- to a newly formed entity called the Chrysler Group.

The Chrysler Group would be controlled primarily by a United Auto Workers union trust, which will own a majority stake of 55%. Fiat will own 20% initially. Minority stakes would go to governments: 8% for the United States and 2% for Canada. Fiat's stake will increase to 35% if it reaches certain goals.

Chrysler would leave behind the assets that it doesn't want, including eight factories and franchise agreements with 789 dealerships, placing thousands of jobs in jeopardy.

To keep the company afloat, Chrysler received $4 billion from the Treasury Department in December and $4 billion more this year. But after many of the company's creditors rejected a debt-for-equity swap to help the company restructure, the Obama administration forced the automaker to seek Chapter 11 bankruptcy protection.

"We are delighted that the Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker," the White House said in a statement issued after the Supreme Court order.

Close call
If the Supreme Court had agreed to take the case, it would have jeopardized the sale to Fiat and risked Chrysler's ability to restart operations. Chrysler shut most of its operations a few days after its bankruptcy filing and has said that its factories would remain closed until it completed a deal with Fiat.

Filings from the company suggest that Chrysler's distribution centers are already close to running out of parts needed by dealerships to perform regular maintenance on Chrysler, Dodge and Jeep vehicles.

In addition, it is estimated that Chrysler is losing $100 million for each additional day it has to spend in bankruptcy.

The U.S. Treasury has ruled that Chrysler is no longer viable as a standalone company and that it needs a partner to receive additional federal dollars it needs to continue to operate.

Former Chrysler President Tom LaSorda testified in bankruptcy court last month that the company sought combinations with all of the major global automakers and that Fiat was the only one interested in pursuing a deal.

The merits of the case
The backdrop for the case by the Indiana pension funds is this: When a company goes bankrupt and must be liquidated, the secured creditors must be paid off completely before any of the unsecured creditors can recover a dime. ("Tough legal questions")

The Indiana funds claim that the government-sponsored sale effectively gives unsecured creditors -- the UAW -- a recovery before secured creditors -- the pension funds -- have been fully paid, violating the fundamental rules of bankruptcy and amounting to an unconstitutional taking of their property.

Since there are $6.9 billion in bonds outstanding, the resulting payoffs to secured bondholders will be about 29 cents on the dollar. In fact, the Indiana funds are getting close to 72 cents on their dollar, according to Chrysler's opposition papers, in that they purchased their face-value $42 million worth of bonds at a distressed price of just $17 million, and stand to recover $12.2 million of that under the planned sale. An attorney for the Indiana funds did not immediately return an e-mail seeking comment.

Edward Morrison, a bankruptcy law professor at Columbia Law School, said in an e-mail to Fortune that the New Chrysler appears to be paying a reasonable price for the Old Chrysler's assets.

"This would have been a very different case if there were proof that the sale price is artificially low [and, therefore] . . . that the government is diverting wealth from the senior bondholders to the workers. But there's not enough proof here. No other bidders showed up at the auction," wrote Morrison.

In fact, according to bankruptcy judge Arthur J. Gonzalez, who oversaw the Chrysler bankruptcy and held a three-day hearing on the sale in late May, the value of Chrysler's assets in liquidation would have only come to about $800 million, rather than the $2 billion in going-concern value that they're fetching in the sale. Accordingly, secured creditors, including the Indiana pension plans, are doing better in the sale than they could have done otherwise.

High court puts Chrysler sale on hold

2009-06-08T20:52:00.001-05:00

Supreme Court issues a stay of the sale of Chrysler to the Italian automaker, delaying Chrysler's exit from bankruptcy.

By Chris Isidore

NEW YORK (CNNMoney.com) -- The Supreme Court threw a wrench into the plans to have a quick bankruptcy process at Chrysler LLC, delaying the company's combination with Italian automaker Fiat.

The bankruptcy judge overseeing the Chrysler case had given approval for the company's most valuable assets, such as plants, dealerships and contracts, to become part of a new company in which Fiat would hold a significant stake.

Supreme Court Justice Ruth Bader Ginsburg, in an order issued late Monday, granted a request for a delay of that approval sought by Indiana state pension funds, which had argued that they and other lenders deserved better treatment by the bankruptcy court.

No reason for the delay was given in the order, and there were no details about how quickly the issue could be resolved by the nation's highest court.

The Treasury Department said in a statement that "we understand this to be an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay."

Chrysler said it had no comment about the Supreme Court's ruling. Fiat could not immediately be reached for comment.

Thomas Goldstein, a partner at law firm Akin, Gump, Strauss, Hauer & Feld and the founder of Scotusblog.com, which tracks Supreme Court cases, said Ginsburg's decision gives the court more time to consider arguments being made by the two sides. Without the order, a lower-court stay would have expired at 4 p.m. Monday.

"All you can say with confidence is that they're taking a hard look at it, which isn't shocking" he said. "This is just an opportunity to think it through before they allow the irreversible sale to go forward."

Goldstein said he expects the court will decide within a day or two to take up the case or let the bankruptcy court's decision allowing the sale to take effect.

If the court decides to hear the case, it can act very quickly and will likely need to since Fiat has given Chrysler a deadline of June 15 to close the deal.

The Obama administration has stated that Chrysler is no longer viable as a standalone company and that it must join with Fiat in order to justify additional federal tax dollars needed to keep the company alive.

Chrysler's top executives have argued in court filings that a long delay in approving a deal with Fiat could kill the company by forcing its suppliers to go out of business and leaving dealers without the parts they need to repair Chrysler vehicles on the road.

But Indiana state Treasurer Richard Mourdock told CNNMoney.com Monday morning that it was important to protect secured lenders, including three of his state's public employee pension funds, which have a priority in bankruptcy cases to recover debts owed to them.

The three Indiana funds loaned $42 million to Chrysler and would recover only 29 cents on the dollar under the proposed Fiat-Chrysler deal.

Mourdock also argued that the Treasury Department should not have been allowed to use money in the Troubled Asset Relief Program, or TARP, to help Chrysler and General Motors (GMGMQ) reorganize.

But in a filing Monday U.S. Solicitor General Elena Kagan, arguing for the administration, said the losses to the Indiana pension funds "cannot outweigh" the potential broader problems a collapse of Chrysler would present.

"As an economic matter ... blocking the transaction would undoubtedly have grave consequences," Kagan wrote. "Even if the stay were continued for a short time and Fiat did not withdraw from the transaction, the consequences of delay for both Chrysler and the United States government would far outweigh any benefit to applicants."

Kagan cited estimates that Chrysler is losing $100 million per day.

One auto industry consultant, who spoke on condition that his name not be used, said that if the case drags on for even a few weeks and Chrysler is unable to restart its plants by the end of the month as planned, it could spell doom for Chrysler.

The consultant said such a delay could cause widespread bankruptcies among its suppliers. But the consultant added that Chrysler could get additional government money to sweeten its offer to creditors in order to ensure that a deal goes through -- even if the Supreme Court decides to hear the case.

Decision could have implications for GM
Some bankruptcy and auto industry experts said Monday that the Supreme Court action could cause problems for General Motors' own bankruptcy case.

GM filed for bankruptcy on June 1 and also planned to have a quick trip through bankruptcy court.

"The GM reorganization is now in serious trouble," said Jerry Reisman, a Long Island bankruptcy lawyer. "If the Chrysler creditors win this case, the GM lenders are going to smell blood and try to do the same thing."

GM spokesman Greg Martin, when asked by CNN if similar lawsuits could hinder its bankruptcy plans, said the company was "surprised" by the ruling, but added that "absent additional information from the Court to better understand the reason for the stay, I'm not sure we have enough to comment on."

But Jeremy Anwyl, CEO of auto research firm Edmunds.com, said GM and Treasury might not have been as willing to use bankruptcy as a way to reorganize the company if they had known the Supreme Court might slow the process.

On the day of GM's bankruptcy filing, President Obama pointed out how quickly the Chrysler bankruptcy case was moving along as proof that GM would be in and out of court within 90 days.

"As George W. Bush learned from his 'Mission Accomplished' debacle, there's always a danger in declaring victory prematurely," Anwyl said.

Recovery reality check: Not so fast...

2009-06-06T11:12:00.002-05:00

The May jobs report was better than expected and is further proof that the worst of the economy is over. Still, that doesn't mean a massive recovery is imminent.

By Paul R. La Monica

NEW YORK (CNNMoney.com) -- The May jobs report, which showed the lowest level of cuts since September, sent stocks slightly higher Friday on more hopes that the economy may soon be on the upswing.

It's encouraging though that investors didn't treat the news as a reason for yet another euphoric rally. This jobs report was not an excuse for that. Hip hip hooray for the diminishing rate of decline?

Yes, it is starting to look like the worst is over. And if that's true it is great news. But don't mistake what might be the initial sprouting of those proverbial economic green shoots for some genetically engineered frankenfood.

Let's put things in perspective. Employers still cut 345,000 jobs last month.

In case that didn't sink in, I'll repeat it. Employers still cut 345,000 jobs last month. That's a big number. But in some of the media's coverage of the jobs report, journalists had the unmitigated gall to say that only 345,000 jobs were lost.

Only? It is downright insulting to the average American to use such a modifier.

Yes, the job market is a lagging indicator. That means it may be the last part of the economy to recover.

But with unemployment now at a 26-year high, it's hard to imagine how there can be a robust rebound until companies actually feel comfortable to start hiring again. Still, some analysts have declared in reports I've read this morning that the jobs report is proof that we've reached an end to the recession.

Really? That's premature. All that the May jobs report confirms is what we've known since March, that the economy is not in as bad shape is it was a few months ago and is not going to get as bad as the overly pessimistic Depression II scaremongers thought it would get.

That doesn't mean the economy is now clicking again.

"There are reasons for some optimism. But we're still going down," said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida in Orlando. "It just feels like an economic parachute has been deployed and we're falling at a slower pace. That's good news but it's not justification to declare the recession's over."

Q,R,S,T...
Many economists like to use letters of the alphabet to describe what the economy does coming out of a recession.

Along those lines, the big debate now seems to be whether this will be a V-shaped recovery -- i.e. the bounceback is as sharp as the decline was -- or a U-shaped recovery, meaning that the economy bounces on the bottom for a while before heading back up.

But neither of those letters seem apt. Scott Armiger, a portfolio manager with Christiana Bank & Trust, in Greenville, Del., said he'd use the twenty-third letter of the alphabet instead of the tweny-first or twenty-second to describe the recovery.

"I'm confident the economy will recover. But it will be W-shaped with lots of fits and starts," he said.

Snaith also thinks that people are fooling themselves if they think that the economy will bounce back quickly. Instead of using a letter to describe the economy, he said a recovery will look more like a gravy boat.

By that he means that the climb back up will not be steep, but long and slanted like a gravy boat's spout. "The recovery is not going to be as sharp as the decline was," Snaith said.

So why are investors suddenly so willing to declare the glass is half-full instead of half-empty?

Less bad doesn't necessarily equal good
Barry Ritholtz, CEO and director of equity research at Fusion IQ, said he thinks Wall Street's recent enthusiasm is more due to the fact that people are no longer pricing in another Depression as opposed to legitimate belief that the recession is over.

"We've gone from thinking it's a 100-year flood to this now being a regular run of the mill recession," he said. "The economy still stinks but it's better than the past two quarters."

Armiger adds that he thinks 2009 is a year of economic healing and that a true recovery won't begin until the middle of next year. So he's not buying into the broad market rally just yet.

"The market has come too far too fast from the March lows. We've had almost three to four years worth of normal returns in three months," he said.

Instead, Armiger said it's still time to look at more defensive stocks, such as consumer staples firms. As long as people are still losing jobs -- even if the pace of the losses is slowing -- Armiger said consumers are going to focus more on buying what they need and not necessarily what they want.

For that reason, he said some of his top holdings are in more stodgy consumer companies such as Wal-Mart Stores (WMT, Fortune 500), PepsiCo (PEP, Fortune 500), Procter & Gamble (PG, Fortune 500) and Colgate-Palmolive (CL, Fortune 500).

Now this may seem overly gloomy. But it's not a case of being pessimistic as opposed to optimistic. It's just realistic.

The economy does appear to be getting better, but a lot of that could be due to massive amounts of liquidity injected into it during the past year or so. Government assistance can't go on forever. And stimulus creates its own risks, namely inflation.

"If the government wasn't propping things up, the numbers would be much worse. The economy is still very fragile," Ritholtz said.

Add all that up and it means that hopes for a massive recovery appear misguided.

"The labor market will be ugly scar to remind us of what we've been through and it will take years to fade away," Snaith said. "Companies are going to be cautious coming out of this and won't be in a rush to hire."

Can a government of politicians keep politics out of GM?

2009-06-04T18:59:00.001-05:00

By David Lightman

WASHINGTON — The federal government, in a nearly unprecedented move, now has a stake in running General Motors, and that means politics is likely to creep into a lot of big decisions, despite President Barack Obama's vow that Washington won't get heavily involved.

Congress, however, with most members facing re-election next year, has veto power over almost any decision, either by pressuring policymakers at hearings or by pushing legislation. Members have shown in recent months they're willing to do both.

"They definitely will use the bully pulpit to raise questions," said Ben Kleinerman, an assistant professor of constitutional democracy at Michigan State University, though because the process is more deliberate and complicated, the legislative path could prove more difficult.

Even now, that pulpit is moving into place. On Wednesday, the Senate Commerce Committee plans a hearing featuring the heads of GM and Chrysler, as well as car dealers from the home states of the panel's two leading members. The dealers are expected to urge lawmakers to provide government help to dispose of thousands of unsold cars and trucks.

That hearing is only the opening gun because dealers are just one of the powerful players in this complex political drama.

Politicians are hearing from union and non-union workers frightened of losing theirs jobs, health care and pensions. Congress wants to reassure consumers concerned about their warranties, and hopes to ensure that taxpayers don't get socked for billions more in corporate rescue dollars.

Looming over all this are the 2010 congressional elections, when all 435 House of Representatives seats and 36 Senate seats — 18 now held by Republicans and 18 by Democrats — will be at stake.

"If this seems to be going badly and hurting states like Michigan, it could be very, very tough for the president and Democrats next year," said Douglas Koopman, a professor of political science at Calvin College in Grand Rapids, Mich.

Obama said Monday that he wants the government to be a muted partner in helping the bankrupt GM restructure itself.

"The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions," he said. "When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision."

Members of Congress Monday weren't talking about specific restrictions, but said they'll be watching GM and Chrysler closely.

Sen. Debbie Stabenow, D-Mich., urged a recommitment to "a strong manufacturing strategy that will rebuild the middle class." Sen. Sherrod Brown, D-Ohio, warned, "If taxpayers commit more resources to GM, they deserve to know those funds will be used to build cars at home rather than abroad."

Also, he said, communities in Ohio "deserve to know why certain plants are being closed while others will remain open. . . . We need a coordinated federal response that invests in these workers and their communities.

Not surprisingly, there also was a fiercely partisan dimension to the political reaction.

Democrats were generally supportive, while some Republicans think Obama is giving them fresh ammunition to charge that he's leading the country down a socialist path and spending taxpayers' dollars recklessly.

"Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability?" asked a skeptical Ohio Rep. John Boehner, the House Republican leader.

All these opinions are likely to get an airing over and over again on Capitol Hill in the coming months.

First up at Wednesday's hearing are Fritz Henderson, GM's chief executive; James Press, Chrysler's president; John McEleney, the National Automobile Dealers Association chairman and auto dealers Peter Lopez of Spencer, W. Va., and Russell Whatley of Mineral Wells, Texas.

West Virginia is the home state of committee chairman Sen. Jay Rockefeller, a Democrat. Texas is the home of Sen. Kay Bailey Hutchison, the top Republican on the panel.

Chrysler dealers want some help in disposing of inventory, and GM and Chrysler dealers want "sunlight," said Bailey Wood, spokesman for the dealers association. "Who's requiring these closings?" he asked. "Who's behind this and why?''

Many GM retirees are just happy to keep pensions
By Scott Nishmura

General Motors' retirees expect to lose dental and vision coverage in July and will have higher health-care co-payments, but they're happy to hear that their pensions will remain part of the new General Motors once it emerges from bankruptcy.

"Assuming the new company does good, then everything should be fine," said Lonnie Morgan, chairman of the United Auto Workers Local 276 Retired Workers Chapter and former union president at GM's Arlington, Texas, plant.

The federal Pension Benefit Guaranty Corp., which guarantees pensions up to certain limits, noted Monday that GM and the U.S. government intend for the automaker's pension to stay with GM — and not be jettisoned.

"The PBGC will work with all parties to achieve that outcome, which would be in the best interests of GM's more than 670,000 pension plan participants and the pension insurance program," the agency said in a statement.

Morgan, 67, said that "under the circumstances, we came out pretty well" in a concessions agreement ratified last week by union members. Retirees are covered by it, but don't get a vote.

"It used to be we'd go to the bargaining table, and usually what we asked is what we got. Now it's what we're giving away," said Morgan, who retired in 2002 and, five days later, went to work for Lynn Smith Chevrolet in Burleson, where he is the public relations and marketing director.

A UAW trust is taking over GM's retiree health-care costs, removing those obligations from the company's books. In return, the trust gets 17.5 percent of the new GM and an opportunity to buy another 2.5 percent later at a discounted price.

Among other things, the new UAW deal cuts off coverage for retirees' erectile dysfunction drugs, except for certain cases involving high blood pressure. And it no longer covers acid-reducing drugs in most cases for retirees.

GM gives tough love to its dealers

2009-06-03T23:18:00.003-05:00

General Motors offers money to dealers who are getting cut, but places more stringent demands on those who will stay.

By Peter Valdes-Dapena

NEW YORK (CNNMoney.com) -- After announcing it will cut thousands of its car dealers, General Motors is asking its remaining retailers to sign more demanding contracts in what one auto dealer group calls "a gun-to-the-head" scenario.

GM's (GMGMQ) remaining dealers have been presented with new agreements asking them to stop selling other brands of cars in the same showroom, meet higher sales goals, upgrade and even relocate their dealerships.

"I've been a dealer for 36 years and it's a very unilateral and onerous agreement," said John McEleney, president of the National Automobile Dealers Association.

McEleney has several GM franchises in Clinton, Iowa, and is of one of 3,600 GM dealers that won't be forced to close following the automaker's bankruptcy.

Shape up or ship out: The actual sales targets aren't defined in the agreement and GM retains the right to change the goals at any time. Under the agreement, failure to meet a target could be sufficient grounds for GM to pull the contract.

"If they want to close a dealer, they can raise that number to unattainable level," McEleney said.

A GM spokesman insisted that, while that is theoretically possible, it's not the automaker's intent.

Auto dealerships are independent businesses that are, ordinarily, protected by strong state franchise laws that restrict what automakers can demand of them and do to them.

Bankruptcy rules can override those laws, though, giving an automaker the ability to quickly back out of a dealership franchise agreements. That gives GM unusual powers for the next few months.

"With this bankruptcy process we have the leverage to move quickly," said Mark LaNeve, GM's vice president of sales.

A new landscape after bankruptcy: Once all the agreements have been signed and GM has made all the changes it wants, a process that is expected to take about 18 months, GM will be 90% of the way to the dealer network it would have wanted if it could have designed one from scratch, LaNeve said.

"We're getting done what would have taken us the next 15 years," LaNeve said.

GM dealers also must sign away their right to object to any dealership moves the automaker wants to make. In many states, said LaNeve, dealers can formally object to a nearby dealer being moved even a short distance if they feel it might hurt their own business.

"We don't want to put up with a myriad of protest rights to do that," LaNeve said.

GM dealers have little recourse, said McEleney. So far, he said, lawyers have told him the agreements are likely to hold up in court.

Short-term pain, long-term health? Not all dealers are objecting to the new requirements. The demands are being made uniformly of all dealers and, ultimately, will result in a stronger dealership network said an executive with a large dealership group. The executive asked not be named since his opinion goes against that of some fellow dealers.

"The ones that are complaining are complaining because they have to act like an organized, functioning unit," he said.

Departing dealers are actually being treated much better than those that will stay on, said McEleney

For the dealerships GM is dropping, the automaker is offering up to $1 million to pay for continuing operations until the franchise agreement runs out in October, 2011, according to a source who has seen several of the letters. GM also said it would buy back remaining inventory after the October, 2010 deadline

"In fairness, I think the wind-down makes much more sense," McEleney said. "It's reasonable and much more compassionate."

In contrast, when Chrysler LLC told 789 dealers last month it was ending their business relationship, those dealers were given only about a month to sell off their inventory. Chrysler also said it would not buy back the inventory that was left after the June 9 deadline.

The goal for GM is to trim the number of its dealers in densely populated metro areas where it no longer has the market share to support them all. At the same time, GM wants to maintain dealerships in rural areas where competition from Asian automakers is scarce.

A GM spokesman insisted these new agreements would not be used to punish or close down dealers. The carmaker simply wants them to be better dealers.

"When we are done with all this, these will all be dealers we dearly need," said GM's Peter Ternes.

In Senate hearings on Chrysler and GM dealership cuts held Tuesday, GM chief executive Fritz Henderson said the automaker had scheduled a meeting for Friday with NADA to disuss the "most objectionable parts of that agreement."

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Why low oil prices now may mean higher oil prices later

2009-06-02T22:34:00.001-05:00

By Kevin G. Hall

WASHINGTON — What until recently was a steep drop in global crude oil prices has sparked delays and cancellations of major energy projects across the globe. Experts fear that this pullback could provoke costly supply shortages just over the horizon.

"Energy investment worldwide is plunging in the face of a tougher financing environment, weakening final demand for energy and falling cash flows," the Paris-based International Energy Agency warned in a report late last month.

The IEA also warned that investment is being curtailed both on the supply side and the demand side, meaning that spending is falling on both drilling of oil and gas wells and on expansion of refineries, pipelines and power stations.

In the short term, falling prices are a boon to consumers. Experts, however, warn of problems if the U.S. economy — the world's largest oil consumer — returns to normalcy and the global economy resumes its torrid pace of growth.

If the ability to find and produce more oil is put on hold and the global economy roars back to life, last year's record oil prices could seem tame. Today's pullback in prices may be setting the stage for tomorrow's shortages.

One of the world's leading voices on energy trends, IHS Cambridge Energy Research Associates, reached a similar conclusion in a private report titled "The Long Aftershock."

CERA researchers believe that deferred or canceled projects will prevent 7.6 million barrels a day of expected oil growth from coming onto world markets in 2014.

"CERA estimates that 52 percent of the potential net growth in liquids production capacity from 2009 to 2014 is at risk of deferment or cancellation because of poor project economics or investor cash flow difficulties," CERA's report said.

The energy research group thinks that the projected additional new oil production capacity of 14.5 million barrels a day coming online through 2014 will be cut in half unless there's a sudden spurt in demand. This reduced production could spark supply shortages and price spikes.

"That's clearly something we should pay attention to," said John Felmy, the chief economist for the American Petroleum Institute, the trade group for oil producers.

The potential shortages, he said, argue for expanded offshore drilling to ensure future supplies.

Few markets are as volatile as oil. Over a period of 12 months, contracts for future delivery of oil soared from $70 a barrel to a record $147 a barrel in July. Then they collapsed over the next four months to less than $40. During the past month, oil prices have come roaring back to near $70 a barrel, even as inventories hover at record highs and demand remains at 10-year lows.

Before the big run-up in prices, deepwater drilling in the Gulf of Mexico and complex refining of western Canada's oil sands needed oil prices of $40 a barrel to break even. But as prices soared, so did production costs, and that break-even point stands somewhere between $60 and $80 a barrel.

In today's volatile price environment, projects are being put on hold or are being killed altogether.

"There are long-term projects, and you have to be confident about the price to make the investments," said oil historian Daniel Yergin, CERA's chairman, in an interview. "You've seen the oil sands are a very important and secure source of supply to the United States. And 70 percent of the projects from last summer have now been postponed."

Much of CERA's projected investment drop-off involves the oil sands region, where oil is literally boiled out of tar-like deposits. Canada is the largest oil exporter to the U.S. market, and much of it comes from the oil sands. Canada's daily production average for the oil sands this year is projected to be 1.3 million barrels.

However, warned the IEA report, falling prices and slumping demand have led to the suspension or cancellation of oil sands projects that collectively amount to 1.7 million barrels a day of lost production. Investment totaling more than $150 million has been curtailed, and these projects can't be profitable unless crude oil sells for $75 a barrel or more.

On a global scale, oil prices had risen for an unprecedented seven consecutive years as a growing world economy thirsted for oil and gasoline. Projects were planned across the globe to match growing demand and rising prices.

Then came September, when the near-crash of the U.S. financial system brought a global recession. Oil prices fell so far that large producers can no longer finance new projects out of their cash flow, the IEA's report said. Many are borrowing at a premium because of the global credit crunch and have scaled back or delayed projects.

For state-owned oil companies, such as those in Mexico and Venezuela, falling prices have meant more of their earnings are being diverted to social programs and there's less money to find, produce or refine more oil.

The IEA, in its recent report, asked, "Are we heading for a mid-term supply crunch?" The answer is still uncertain, the report's authors said.

"The outlook for spare crude oil production and refining capacity in the longer term hinges on how quickly demand recovers once the global economy is back on the road to recovery, how much further investment is scaled back in coming months and how quickly investment rebounds in the coming years," the IEA said. "The faster the rebound in demand, the more likely it is that capacity will be squeezed in the medium term," and the greater likelihood of high prices because of tight supplies.

The timing would be awful. Few economists believe the U.S. economy will return to sustainable growth before the end of 2010, and by 2011 the benefits of federal stimulus spending will wear off. An oil supply crunch that triggers high prices could kill recovery on the vine.

"Although it will take time for these changes to have an impact on total global oil supply, that impact could prove to be significant in three to five years," CERA's report concluded. "Slower growth in oil production capacity over the next five years could lead to the next period of rising oil prices, but much depends on the recovery of world oil demand."

Stocks Climb on Rebound Hopes

2009-06-01T17:06:00.005-05:00

With General Motors Corp. (GM) departing the Dow Jones industrial average Monday after its bankruptcy filing, the stock market decided to hold an Irish wake for the automaker. The Dow jumped over 2.5% Monday, with other major indexes following suit, after manufacturing reports in the U.S., Europe, and Asia supported investors' hopes for a global economic rebound.

The market may be showing some relief that GM finally filed for bankruptcy and may now be forced to make some hard business decisions, says Action Economics.

On Monday, the 30-stock Dow Jones industrial average finished higher by 221.11 points, or 2.60%, at 8,721.44. The broad Standard & Poor's 500 index gained 23.73 points, or 2.58%, to 942.87. The tech-heavy Nasdaq composite index rose 54.35 points, or 3.06%, to 1,828.68.

Despite occurring on relatively light volume, Monday's rally sent the Nasdaq to its highest close since November.

Crude oil spiked to above $68 per barrel, with shares of Exxon Mobil (XOM), Chervron (CVX), and other energy names moving higher.

Meanwhile, Treasuries plunged, the dollar index flattened, and gold lost ground.

GM filed for Chapter 11 bankruptcy protection Monday. The company said it has reached agreements with the U.S. Treasury and government of Canada and Ontario to accelerate its reinvention and create a "New GM" positioned for a profitable, self-sustaining and competitive future.

With the bankruptcy filing, the automaker has been dropped from the Dow Jones industrial average, ending an 83-year run. On Monday, Dow Jones & Co. announced Monday that Cisco Syestems (CSCO) would replace GM in the stock market benchmark. Also, Citigroup (C) is being removed from the average, to be replaced by Travelers Cos. (TRV).

Meanwhile, AFP reported that a U.S. bankruptcy judge has approved the sale of distressed U.S. automaker Chrysler to Fiat, saying this was the only way to save the company and paving the way for its rebirth. "The sale motion is granted in its entirety and entry into and performance under and in respect of the purchase agreement and the sale transaction is approved," judge Arthur Gonzalez wrote in his ruling. He added that despite extensive efforts over the last two years to seek various alliances for Chrysler, the Fiat transaction was "the only option that is currently viable."

Prudential Financial (PRU) announced that it has commenced a public offering of $1.25 billion of its common stock. The company said underwriters will have a 30-day option to purchase up to an additional 15% of the offered amount of common stock from Prudential.

Elan Corp. (ELN) shares were seen higher on talk the company may sell a stake to Bristol-Myers Squibb (BMY), says S&P MarketScope.

American Water Works (AWK) announced an offering of 26 million shares of stock. The company says it plans to use the proceeds of the sale to reduce its short-term debt.

U.S. construction spending rose 0.8% in April, contrary to expectations (the median forecast was for -1.5%) from a revised 0.4% in March (was 0.3%). Private residential spending picked up steam, rising 0.7% after a 3.6% March decline, although all of the improvement was due to an 8.9% surge in home improvement spending. Indeed, private single family spending fell 6.7% while private multi-family spending declined 2.6%. Meanwhile, total private spending rose 1.4% following a 0.2% increase in March. Public spending fell 0.6% after a 1.0% March increase.

The U.S. Institute for Supply Management manufacturing index rose to 42.8 in May, beating expectations (median 42.0) from 40.1 in April, extending the rebound from the 32.9 trough seen in December. New orders jumped to an expansionary reading at 51.1 from 47.2. Production also jumped, reaching 46.0 from 40.4. And prices paid spiked to 43.5 from 32.0. More downbeat, employment dipped to 34.3 from 34.4. And inventories continued to be cut at 32.9, versus 33.6.

"Overall, the data adds to evidence of economic recovery, supporting rotation into equity and commodity markets," says Action Economics.

Personal income rose 0.5% in April, while spending dropped 0.1%. Along with the drop in tax revenue, the income increase led to a 1.1% jump in personal income, and a rise in the saving rate to 5.7% from 4.5% in March. The income rise was unexpected; markets had anticipated a 0.2% drop. The decline in spending was near market expectations of a 0.2% decline. Wages were flat in April, but transfer payments jumped 2.3% and rents rose 3.1%.

Increases in unemployment benefits and Social Security and health care led the transfer rise; much was apparently the result of the extension of health care benefits under the stimulus plan, and rebates to Social Security recipients were included in these transfers, according to S&P Economics.

"[T]he level of disposable income is a bit higher than we expected at this point, which should be good news for consumer spending and the economy," says S&P Economics

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Autoworkers swallow a bitter pill

2009-05-29T20:02:00.002-05:00

As union workers are forced to make big sacrifices, a tough job that used to promise security and the American dream becomes a lot less appealing.

By Peter Valdes-Dapena

NEW YORK (CNNMoney.com) -- There was a time, not very long ago, when getting a job on the production line at a big automaker meant an instant ticket to the American dream, even for someone with little formal education. Not anymore.

"The minute you signed the paper, you were instantly vaulted into the middle class," said Mike Smith, director of Wayne State University's Walter P. Reuther Library in Detroit, named for the founder of the United Auto Workers, the union that represents auto workers.

A shrinking paycheck. As the auto industry undergoes a sea change, the government has demanded that Chrysler and General Motors (GM, Fortune 500) bring their labor costs in line with foreign competitors operating non-union factories in the U.S.

Today, an entry-level autoworker in a "non-core" position will make $14 an hour, compared to the $28-an-hour "base rate" others make, according to a summary of Chrysler's contract agreement.

Workers' benefits have also taken a hit.

"Workers coming in will have good benefits and a good wages but not necessarily what they were 20 or 30 years ago," said Smith.

Anemic health care. New UAW employees will pay a much larger portion of their health care expenses and once they retire, carmakers won't pay for it, according to information from the Center for Automotive Research.

Fewer medical procedures and drugs will be covered and, under new agreements, Chrysler and GM retireees won't have dental and vision care covered.

Eroding unemployment benefits. As GM and Chrysler restructure, the UAW has agreed to give up salary protections that had cushioned laid off autoworkers.

These protections had allowed factory workers to get their full pay, or close to it, even after they had been laid off. Workers could stay in the so-called "jobs bank," with pay, until they'd either returned to work or turned down job offers from the automaker.

Under new deals with GM and Chrysler, factory workers will receive much less money when they're laid off. Senior workers will only be protected for up to one year, according to a summary of recent UAW contract changes.

Roots of the union. The UAW was started in the 1930's and, at first, was aimed at improving working conditions and curbing abuses on the factory floor, Smith said.

Before an auto workers' union even existed, Ford Motor Co. (F, Fortune 500) unilaterally decided to begin paying its factory workers $5 a day starting in 1914, more than double the prevailing wage at the time, according to the book "Wheels for the World," by Douglas Brinkley.

The reason Ford agreed to pay that high wage was that workers wouldn't stay on the lines very long otherwise. Every year, automakers had to hire and train many times the number of workers they actually needed to staff production lines, as workers quit or simply stopped coming to work.

The work was mind-numbing at best, deadly at worst, especially at Ford which pioneered the use of assembly lines.

"In 1916, Highland Park might have a few deaths, a few hundred limbs lost," said Smith, talking about Ford Motor Co.'s first big, automated factory.

Still, potential workers flocked to Detroit to work in Ford's plants looking for those big paychecks. Those who were accepted were subjected to strict background checks and agreed to have their homes routinely inspected by Ford staffers to be sure they were living decent, clean lives.

Although Henry Ford bitterly resisted unionization when the time came, the $5 day offered a preview of what was to come. Ford wages eventually slipped back into line with the rest of the industry while workers demanded safer working conditions.

The UAW's heyday. As the economy improved and auto sales picked up following World War II, unions demanded a bigger share of the boom.

"The kind of benefits we take for granted today, like health care and pensions, that stuff came up in the 1950's," said Smith.

Automakers had another reason, besides union demands, to provide these benefits, said Nelson Lichtenstein, Center for the Study of Work, Labor, and Democracy at the University of California, Santa Barbara.

"They wanted to generate loyalty and collaboration with the company," he said.

Union leaders were actually pushing for government sponsored health care plans and better social security retirement benefits, he said, and saw corporate largesse as the less desirable alternative.

The downside of good benefits. As American automakers' market share shrank, those benefits became very costly. Ultimately, automakers ended up paying far more for retirees than for current workers.

GM, for instance, pays benefits to about 650,000 retirees and surviving family members while it has about 70,750 current employees, including both union and non-union workers.

Since these carmakers have been producing cars in the United States much longer than their Japanese rivals, they also have an older workforce. Older workers generate higher health care costs, said Smith.

It has been estimated that health care costs add about $1,500 to the cost of each car produced.

"The number of workers under the GM [union] contract today is 50,000 to 60,000 workers," he said. "That's way down from the 400,000 that it was in the 1970's."

Today, Lichtenstein said, many Americans feel that autoworkers are only getting what they have coming to them: wages and benefits befitting those with blue-collar jobs.

But in the past, autoworkers' good wages and benefits set the standard that Americans could rise above, with education and hard work, Lichtenstein said. As workers at automakers and suppliers are forced to accept less, it ultimately takes our standards down as a nation.

"You want those parts workers to make more because that sets our de facto wage floor," he said.

Checking for check scams

2009-05-28T21:09:00.003-05:00

By Scott Spoerry
WASHINGTON (CNN) -- Thousands of Americans learn a painful lesson in banking every day: Waiting for a check to clear and then getting access to the money from a bank doesn't mean the check has really cleared.

Take Harry Smith of New York, who responded to an ad on Craigslist.com for an office assistant. A woman e-mailed him and said her British company was starting to sell its product in the United States, but was having trouble with dealing with checks from customers. She needed someone to collect the checks and then send the money to her company.

It was a commission job -- deposit the checks, wait for the funds to become available at his bank, then send cash to her, minus 10% for Smith.

After Smith checked out what seemed like a legitimate company on the Internet, he started receiving checks totaling several thousand dollars and deposited them in his account. When his bank released the funds, he sent cash to an address outside the country.

But after a few weeks, his bank notified him the checks he had deposited had actually been returned, and that he owed the bank all the money he had withdrawn.

Smith has not heard from his business partner since and doesn't even know who she really is. He still owes his bank money, is unemployed and doesn't know what action the bank might take against him.

What happened to Smith is one example of a wide range of fake check scams carried out in the United States every year. A Consumer Federation of America survey estimates that 1.3 million Americans have been the victim of a fake check scam, with an average loss of $3,000 to $4,000 per consumer.

How they try to get you: The most common scams are fake sweepstakes or lotteries, phony government sponsored grants, and fraudulent work-at-home opportunities, the survey says. The scams follow the pattern of the so-called Nigerian Internet scams, which often involve accepting transfers of money that become obviously phony when it's too late.

On Wednesday, the Consumer Federation launched a campaign to combat check scams. Many consumers don't know they are responsible if they deposit a bad check, said Susan Grant, the federation's director of consumer protection. She said its survey shows an alarming level of misinformation among consumers. And the problem includes money orders and cashier's checks.

The survey shows 59% of respondents in the survey incorrectly thought that, when you deposit a check or money order, your bank confirms it is good before allowing you to withdraw the money. That number goes up to 70% among adults age 18 to 24. More than 40% of those surveyed also incorrectly think that the person who gave you the bad check must pay back the bank.

American consumers are mostly unfamiliar with the time needed to process checks and money orders, say consumer watchdogs. Government banking rules mandate that money from deposits become available within one to five days.

However, it can take weeks, especially with foreign checks or money orders, for the originating institutions to get the checks or money orders back and determine that they are counterfeit. When that happens, scam victims are in for a rude surprise.

Publishers Clearing House, which runs legitimate sweepstakes, warns consumers that scammers might claim that you are being given an advance on a prize, but that some fee, tax or other payment needs to be sent before you get the jackpot. That's the heart of the scam, and it's something that a real sweepstakes will never ask for, say legitimate companies.

On the rise: Consumer protection groups, state attorneys general, the Federal Trade Commission and government bank regulators warn consumers that the number of fake checks, money orders and even cashier's checks being used to scam victims is increasing.

The bottom line: "There's no legitimate reason why anyone who wants to give you a check or money order for something would ever ask you to send money anywhere in return. It's as simple as that," said Grant of the Consumer Federation of America.

Smith said he suspected that his part-time job was not on the up and up, but didn't know about fake check scams. He's not sure how he will pay back his bank, but hopes his story will help keep other people from becoming victims.

The Consumer Federation of America's tips against fake check scams:

-- Never agree to pay to claim a prize.

-- Never agree to pay for grants from the government or foundations.

-- Never agree to cash checks and send the money somewhere as part of a job working from home.

-- Never agree to wire money to anyone you have not met in person and known for a long time.

-- If it seems suspicious, consult your state or local consumer protection agency, the Federal Trade Commission, the U.S. Postal Inspection Service or another trusted source.

-- Remember that there is no legitimate reason why anyone who wants to give you a check or money order would ask you to send money anywhere in return.

Protect Yourself From Being Scammed

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If economy is healing, why is the dollar falling?

2009-05-27T18:36:00.001-05:00

NEW YORK - The U.S. dollar spiked when the economic crisis was peaking, and it's falling now that a recovery's in sight. What gives?

The relationship between the country's economy and its currency, it turns out, is more complicated now than ever as the government assumes a larger role in propping up the financial system and encouraging economic growth.

Here are some questions and answers about why the dollar has weakened, how much farther it could fall, and what it means for the average American.

Q: How much has the U.S. dollar dropped?

A: It's moved differently versus different currencies. But the U.S. Dollar Index, which measures the dollar against a bunch of other major currencies, is down about 10 percent from early March — when the stock market hit a 12-year low.

The currencies the U.S. dollar has fallen against include the euro, the Australian dollar, the Canadian dollar, the British pound and the Mexican peso. That means visiting Australia, Canada, Mexico and most of Europe will be a bit more expensive now for American travelers than earlier this year.

The U.S. dollar index is still up, though, from a year ago.

Q: Why is the dollar retreating?

A: It's partly because the U.S. economy is weak. Usually, a currency is regarded as a barometer of a country's economic conditions, or standard of living. But even more so, the dollar is falling due to the nation's growing debt.

The dollar actually gained in value versus rival currencies when jitters about the U.S. economy were peaking in the six months leading up to March. That's because investors were even more worried about other countries' economies, which tend to lag the United States.

But as the months wore on and the Treasury Department continued to issue record amounts of government bonds into the market to finance its stimulus and bailout packages, the dollar has become less and less attractive to investors. The U.S. budget is expected to hit a record high of $1.84 trillion this year.

A poor economy and high debt weaken a country's currency because investors decide that they're better off buying bonds, stocks and other assets in countries with stronger economies and more stable debt. Stronger countries' assets — and, thus, the currencies those countries use to value their assets — are more likely to rise in value, and their debt is less likely to default.

The dollar took an especially hard hit last week, after Standard & Poor's said Great Britain's swelling debt might force the credit agency to lower that country's credit rating. The agency's warning raised worries among investors that the United States might see its own credit rating lowered.

Q: What would if mean for the U.S. economy if the country lost its triple-A rating?

A: Interest rates would rise for debt ranging from Treasury bills, bonds and notes — investments in U.S. debt — to mortgages and car loans. Basically, it would be harder for the nation to raise money to pay for its economic recovery plans, and it would weigh down already debt-laden borrowers with even more debt. And it could make investors more nervous, too, causing markets to become more volatile.

Q: How probable is a rating downgrade for the United States?

A: It depends who you ask.

Many analysts, including Harris Private Bank chief investment officer Jack A. Ablin, say it's unlikely. The United States has always had a triple-A rating, the highest possible, which means there's very little chance the country will default on its debt. Moody's, which said Wednesday its triple-A rating on the U.S. government was stable, has been rating the country's debt at triple-A since 1917. The Great Depression didn't even prompt a downgrade.

But more and more respected investors, notably bond fund manager Bill Gross, are starting to say that the United States' rating is vulnerable.

Not even Moody's senior credit analyst Steven Hess would rule out a downgrade. He said Wednesday that if the government's debt ratios — the amount of debt relative to the amount of economic activity in the country — keep climbing even after the recession is over, the credit agency will have to revisit its rating.

Q: What are the chances of a sharp dollar plunge?

A: The financial crisis has taught us to never say never. But it's important to remember that currency values are all relative. The dollar doesn't just fall in a vacuum; it falls versus the euro, the pound, the yen, or other currencies. As bad as the U.S. economy is right now, many other major economies, particularly in Europe, are much worse off.

Ablin likened the dollar maintaining its value to a camper escaping a bear: "We don't need to outrun the bear — we just need to outrun the other campers."

And so far, the United States hasn't run into any problems issuing debt. That suggests investors around the world still have confidence in the currency and the country's ability to pay back its debts.

Q: Why would a dollar decline be so bad, anyway?

A: Actually, to the government, a moderate dollar decline isn't scary at all. A weaker dollar appears to be what the Federal Reserve was aiming for when it slashed interest rates, said Axel Merk, chief investment officer of Merk Mutual Funds.

A devalued dollar is cited by many economists as the big reason the United States was able to recover from the Great Depression in the 1930s.

The U.S. economy also benefited from a relatively weak dollar in recent years. Why? A weak dollar makes U.S. goods cheaper to consumers in foreign countries, which helps U.S. companies sell more stuff.

But a precipitous drop in the dollar would be detrimental. Not only would it signal severe instability in the U.S. economy, but it could have negative implications for the stock market and the government's efforts to fix the financial system.

Financial analyst Richard Bove at Rochdale Securities noted that in the unlikely event of a significant plunge in the dollar, banks and the stock market could return to crisis mode. That's because bank stocks are valued in dollars, and so are the investments the government has made in banks.

Oil hits 6-month high above $62

2009-05-26T19:39:00.003-05:00

By Catherine Clifford

NEW YORK (CNNMoney.com) -- Oil prices rebounded Tuesday to their highest level this year as a triple-digit rally on Wall Street pulled crude off its earlier lows.

Violence in oil-rich Nigeria cut off supply pipelines, contributing to the price lift. At OPEC's upcoming meeting, investors expect the organization will leave production quotas unchanged.

Light, sweet crude for July delivery rose 78 cents, or 1.3%, to settle at $62.45 a barrel Tuesday.

That's the highest settle price since Nov. 5, and the fourth day in a row that oil has settled above $60.

Oil reached as low as $59.53 earlier in the session.

The New York Mercantile Exchange was closed Monday in observance of Memorial day, but oil continued to trade electronically.

Wall Street rally: Oil prices have been taking their cue from the stock market in recent months. Those who see stocks as a measure of overall confidence in the economy believe rising equities will mean healthier demand for oil.

On Tuesday, Wall Street posted strong gains, with the Dow Jones Industrial Average surging more than 200 points on the back of a better-than-expected consumer confidence report.

Meanwhile, movements in the dollar also tracked with oil's price jumps. Early in the Tuesday session, the dollar was gaining handily against other major currencies, as investors poured funds into the traditional safe haven.

But by midway through the afternoon, the dollar had given up some of its earlier advantage, as investors moved funds back to stocks.

Nigeria: The Movement for the Emancipation of the Niger Delta (MEND) said Monday that it had destroyed several major oil pipelines.

The militants said they "put out of operation" a Chevron facility. The group wants Nigeria's oil wealth to be distributed more evenly, with less profit going to politicians they consider corrupt. The supply disruptions boosted the price of oil.

OPEC: The Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - is scheduled to meet Thursday in Vienna.

The group will discuss crude oil production levels. When OPEC reduces production quotas for its member nations, global supply tightens and prices rise.

Starting late last year, OPEC announced reductions of 4.2 million barrels a day, and member nations have cut back. Crude hit a record of $147 a barrel last July, but the global recession pulled crude prices down to just shy of $34 a barrel in December.

Oil prices have been hovering around $60 a barrel in recent sessions, a level that analysts say is a good place for oil to stay for now. In OPEC's coming meeting, the oil market is largely expecting OPEC to hold its production levels steady.

OPEC could be scorned for pushing oil prices too high in the current economic climate. Higher oil prices would pose an additional speed bump for the economy as it tries to recover from recession, and in turn could further diminish demand for energy. A healthier economy demands more oil.

An OPEC cut "would certainly retard any sort of global economic recovery and would therefore extend, or even accelerate, the pace of demand destruction for oil," said Stephen Schork, publisher of industry newsletter The Schork Report, in his daily note.

Price at the pump continues to rise: Even as oil prices fell sharply Tuesday, gas prices continue to march higher. Retail gas prices have climbed for 28 consecutive days, putting pressure on the those travelers who hit the road for Memorial Day.

The national average price for a gallon of regular unleaded gasoline increased to $2.425, up 1 tenth of a cent from the previous day's price of $2.424, according to a daily survey by motorist group AAA.

In the last 28 days, the average price of gas has jumped 37.7 cents or 18.4%. The average price of a gallon of gas is still down $1.68 or 41% from the record high price of $4.114 that AAA reported on July 17, 2008.

Summer travel tips
By Gerri Willis, CNN personal finance editor

NEW YORK (CNNMoney.com) -- More Americans are expected to travel by car this holiday season - an estimated 2.5% more than last year or 27 million people. And, even though gas has jumped by 30 cents a gallon over the past month, it's still far below last summer's $4 a gallon price levels.

Given the fact that prices have been rising at a rate of a penny, to a penny and a half, each day for the last few days, we could see prices in the range of $2.40 that's according to AAA.

The good news - AAA isn't expecting gas prices to rise too much more. Certainly nowhere near last year's levels of more than $4 a gallon. AAA national spokesman Troy Green said he would be surprised if prices hit $3 a gallon this summer because the recession is constraining demand.

Remember, prices usually go up over holidays and during the summer - the question is just by how much.

To find price averages in your area, go to fuelgaugereport.com.Gasbuddy.com and mobgas.com will text message you with the lowest prices in your area so you can compare prices from the road.

There are a lot of great Web sites to inform you about travel conditions - to avoid traffic jams and congestion.

First off, AAA.com will generate a free trip tik (click on "trip tik planner"); travel directions will show you the typical bottlenecks on your route. Using its "route modification tool," you can design a route around the mess.

Check out the Federal Highway Administration's Web site, fhwa.dot.gov, to find out conditions along your route, including commuter forecasts and where the tie ups are. At the site you can also hook up to live traffic cams to see what's going on.

Finally, to get an estimate of your total gas costs on your trip, go to gasprices.mapquest.com, and click on the gas price calculator. (You'll need to know your car's fuel efficiency.)

And a few tips to save money while on the road:

Switch to synthetic motor oil, if you aren't already using it. It costs a little more but it makes your engine more efficient and you'll use less gas.

Also, check your gas cap. About 17% of cars on the road have caps that are damaged or loose, or even missing. That causes gas to vaporize - some 147 million gallons of gas are estimated to be lost into thin air each year.

Finally, you can always book a train. Amtrak is reducing fares for Northeast corridor travels for the summer!

I found my job on Twitter

2009-05-25T20:24:00.005-05:00

Forget the classifieds, these days unemployed workers are finding more job opportunities through social networking sites.

By Jessica Dickler

NEW YORK (CNNMoney.com) -- In today's tough job market, it's critical to stand out. So how to make sure your application gets noticed: A flawless cover letter? Killer résumé? Glowing reference from the CEO?

Not even. In the worst job market in 25 years, building an online presence is crucial to getting a job. Who you connect to, "follow" and "friend" can be just as important as conventional tools like résumés.

"Not only are employers looking for better candidates, but ones that are well versed in social media and seeking out opportunities," said social media expert and president of Affect Strategies Sandra Fathi. "These mediums are here to stay and also a great way to differentiate yourself."

Not only are valuable connections forged with potential employers and colleagues on sites like Facebook, Myspace, Twitter and LinkedIn, but openings are also posted there, sometimes in lieu of job boards.

Making the right connections
LinkedIn, which has over 40 million users, is geared specifically toward professional networking. Expansive networks are built by posting a profile which acts as an online résumé, making connections and getting references from your connections that potential employers can view.

For Barbara Maldonado, LinkedIn was the gateway to a great opportunity. Maldonado, 32, participated in a professional group on the site for "Innovative Marketing, PR, Sales, Word-of-Mouth & Buzz Innovators." Another member of the group posted a question and liked Maldonado's response. From then on they kept in contact.

"When I updated my status that I had been laid off, he referred me for a position that was open at his company, which is where I work now," she said of her current marketing position at the firm in a suburb of Chicago. "Without actively participating in that discussion, I would not have made the contact for the job."

Barbara Maldonado, here with her nephew, was referred for a job by a contact on LinkedIn.

Other sites like Twitter and Facebook, while popular among teens and young adults, have also been embraced by professional communities. Friends on Facebook typically share status updates, pictures and video. Twitter limits exchanges between people, also known as followers, to messages of only 140 characters.

If it weren't for Jen Harris' followers on Twitter, she would not have been notified of another job opportunity, only moments after getting laid off from Idaho-based MPC computers in October.

As Harris packed up her desk she sent out a tweet that read: "just been laid off from MPC."

"By the time I left the parking lot, I had a job offer from a friend that had a Web development company in town," she said.

Jen Harris found a job through Twitter, moments after being laid off in October

First dibs on job openings
But job seekers don't have to rely solely on others for information about possible job openings. There are a variety of services associated with social networking sites to help too, like TweetMyJobs, which sends out automatic updates of new openings in a specific field and region sent to your cell phone or by Twitter.

If you fan a company on Facebook or follow internal hiring managers on Twitter, you might be the first to find out about job openings at the employer of your choice.

When the Minneapolis office of Weber Shandwick was looking to hire a junior Web developer, the digital strategy manager, Greg Swan, sent a 136-character tweet to over 2,000 followers which read: "Weber Shandwick Minneapolis looking for mid-level html developer and PSD slicer. Plus you get to work with me. DM or @ me for more info."

Doug Hamlin, 23, landed the job after responding with his résumé and information.

Doug Hamlin was hired after responding to a job posting sent out in a tweet.

Bernstein runs an IT talent agency based in Los Angeles and says he uses social networking exclusively to find candidates for technical jobs.

"Social network is going to take over job boards," he said. The greatest advantage to Facebook, Twitter, Myspace and LinkedIn is that job candidates and employers can meet through people. Those connections make it easier to break the ice, he said.

Too much information
But for job seekers, there can also be a downside to that type of access. "It does open up a more 360 degree view," Fathi cautioned.

A prospective employer may see your friends, your pictures and your personal information, "so you can't have drunken pictures of yourself in Cancun," she said.

For starters, Fathi recommends cleaning up your online image. Job seekers should do a Google search on their own name to get a sense of what information is out there.

Because of their popularity, social networking sites will generally pop up first. But make sure the privacy settings are activated so that a potential employer can only access the content that is appropriate.

If a Google search returns no results at all, that means that you don't have an online presence, which is also a bad thing.

Fathi recommends that job seekers immediately create a LinkedIn profile, a Facebook page, join Twitter and any relevant professional networks or communities in your field.

"Even adding your name to a directory or commenting on a high profile blog can create new content for a prospect employer to find when searching for information on you," she said.

Unemployment Up in 44 States

2009-05-22T19:24:00.001-05:00

Layoffs may be slowing, but the recession continues to devastate the job market, and the unemployment rate is likely to hit 10% by yearend
By Moira Herbst

Forty-four states lost jobs in April as the recession continued to hit hard, the Labor Dept. reported on May 22.

Michigan's April jobless rate was the highest in the country, reaching 12.9%, followed by Oregon at 12%, South Carolina at 11.5%, Rhode Island at 11.1%, and California at 11%. California led in the total number of jobs lost with 63,700, followed by 39,500 in Texas, 38,400 in Michigan, and 25,200 in Ohio. These states faced heavy layoffs in manufacturing, construction, and retail.

More than 271,000 workers were let go in April's cuts, more than double the total from April 2008. Since the start of the recession in December 2007, the U.S. has lost a net total of 5.7 million jobs. The nationwide unemployment rate as of April was 8.9%, up from 8.5% in March.

Waiting for Recovery Signs
Nationally, the pace of job losses slowed in April for the third consecutive month, leading to muted optimism among some economists and a stock market rally. But even as layoffs slow—indicating employers have cut too close to the bone to eliminate more positions—the nationwide unemployment rate is expected to reach at least 10% by the end of the year. Employers won't begin hiring again until there are clearer signs of recovery and they feel confident enough to invest in capital spending, say economists.

The May 22 jobs report showed that some states maintained remarkably lower unemployment rates than the national average. North Dakota again registered the lowest unemployment rate in the U.S. at 4%, followed by Nebraska at 4.4%, Wyoming at 4.5%, and South Dakota at 4.8%.

Some states actually added jobs, representing the few other bright spots in the report. Arkansas and Montana tied for the biggest over-the-month job gains, at 1,500 each. They were followed by Florida, which saw an increase of 1,300 positions.

Still, nearly 6.7 million people in the U.S. are receiving state unemployment benefits, the federal government reported—the highest in more than four decades. The rush to collect has sapped the unemployment funds of California, New York, and other states, forcing them to take federal money to continue paying benefits.

Jobs: What a Rebound Will Look Like
(Look for growth in business investment, temp hiring, and car and home sales. Here's what to watch for and why)
By Moira Herbst

You know the economy is in trouble when 539,000 jobs lost in a month is cause for celebration. Muted optimism was in the air on May 8, as the U.S. Labor Dept. reported that job losses slowed for a third straight month, even as the unemployment rate rose to 8.9%. Investors took that and other relatively positive reports and pushed stock prices up 2% on Friday.

In fact, most economists expect the unemployment rate to keep climbing, with the more pessimistic ones heralding a peak of 11%. That's because unemployment is a lagging economic indicator, which means the jobs market won't change course until a broader economic recovery is well under way. So if slowing job losses aren't the right place to watch for signs of an employment rebound, what signs should we be examining? Economists use a range of leading indicators, whose message is still sobering: Don't expect substantial jobs growth for at least another year.

One of those leading indicators is business spending and investment; when businesses start adding capacity, they signal they're ready to start hiring. Nigel Gault, chief economist for forecasting firm IHS Global Insight, suggests looking for businesses to increase orders for capital equipment. These data are important because they indicate companies are able to start investing and have more confidence in the future business outlook.

Business Investment Is Key
Rajeev Dhawan, director of Georgia State University's Robinson College of Business, says the government's durable orders statistics—out each month from the Commerce Dept.—don't offer an accurate picture of business spending. It's better, he says, to look at quarterly gross domestic product numbers because they include business purchases of both equipment and software. That picture has not been pretty in the last two quarters. "[Business] investment has been falling at a rate of 30% over the last six months," says Dhawan. "We can't even think about job growth until it starts to rise again."

Another sign that the unemployment rate is reversing course will be perhaps more visible to consumers: rising consumer spending. Dhawan says that if car sales—which are down to 9.1 million units per month—rise to 10 million units for each of three months and continue to rise, a recovery could be on its way. Another sign to look for is a sustained rise in new-home sales, which would indicate that consumers have both money to invest and confidence in the housing market. At 356,000, sales of new one-family houses in March 2009 were 0.6% below February's rate and 30.6% below the March 2008 rate, the Housing & Urban Development Dept. reported last month.

Even if unemployment is a lagging indicator, pieces of the Labor Dept.'s monthly jobs report can provide hints about the direction of the labor market, says Mark Zandi, chief economist and co-founder of Moody's Economy.com (MCO). He says it's important to look at hours worked per week, for example. (This and other April jobs data are contained in the Bureau of Labor Statistics' monthly Employment Situation report. It's a good sign when employers have raised the number of hours worked and a negative one if they've reduced them. Hours worked reached a record low in March, at 33.2 hours per week, and remained there in April—not a good sign. However, the manufacturing workweek increased by 0.2 hours, to 39.6, while factory overtime rose by 0.1 hours, to 2.7 hours.

Temp Hiring Will Lead the Way
Another place to look in the monthly jobs report is in the category of temporary work, because when employers start building capacity, they tend to hire temps first. In April there were 63,000 temp jobs lost, an improvement from monthly losses throughout the first quarter. Those numbers don't make a big difference in the aggregate, but they are small steps in the right direction, says Zandi. "It's a bad [jobs] report, but not as bad as expected," he explains. "It's the first time this year we're seeing any brighter hues."

But Gault and other economists point to worrying signs about consumer incomes: Hourly wages in the jobs report rose only 0.1% in April. "Combined with the heavy loss of jobs, [that] signals a continuing decline in overall wage and salary incomes, which is bad news for purchasing power," says Gault.

Long-term employment could also prove a drag on consumer spending, which in turn could delay the jobs recovery. In April, 27% of the unemployed were out of work for more than six months, surpassing the previous recession peak of 19.8%, in November 1982. The long-term unemployed could reach 30% of all jobless workers by 2010, according to a report released on May 6 by the National Employment Law Project and the Institute for Research on Labor & Employment.

Of course, while some economic indicators lead others, each feeds back into and affects others. "Consumer spending will come back only if jobs come back," says Dhawan. "I don't see any decent job growth until the end of 2010."

The incredible shrinking dollar

2009-05-21T20:57:00.003-05:00

By Paul R. La Monica, CNNMoney.com editor at large.

NEW YORK (CNNMoney.com) -- The U.S. dollar has taken a beating in the past few months even as stocks have soared and investors have come to expect an economic recovery sooner rather than later.

The euro hit a 5-month high against the greenback on Wednesday while the British pound rallied to its highest level against the dollar since November. The dollar has also been weakening against the yen as of late.

It's an interesting phenomenon that, at first blush, might not make sense. The stronger the rally in stocks and the more that people talk about a potential end to the recession, the more ground the dollar...loses against other currencies?

But this does make sense. Despite the many problems facing the U.S. economy, traders had flocked to the dollar because of its relative safety. As bad as the U.S. economy was, it appeared that Europe's was in even worse shape.

Plus, there's the notion that since the U.S. led the rest of the world into this global economic crisis, it was likely that it would also be the first country to emerge from the recession.

Now that there are more signs that this is coming to fruition, investors have embraced stocks again. The dollar is no longer viewed as a place for jittery investors to park cash.

"The dollar is under pressure. As the economic situation in the U.S. seems to be stabilizing, the dollar is losing some of its safe haven demand. It's on weak footing," said Brian Dolan, chief currency strategist for FOREX.com, online currency trading site. So if the dollar deteriorates further, how will that impact the economy going forward?

The downside of a weaker greenback

The bad news is that a weaker dollar could lead to a continued surge in commodity prices, most notably oil. The weakening greenback has played a small role in leading crude prices back above $60 since oil is traded in dollars.

If oil prices stabilize around this level, it may not necessarily spell an end to economic recovery hopes. But if the dollar dips even more and oil prices skyrocket as a result, that has the potential to hit consumers hard. Nobody wants a return to last summer's record high gas prices of more than $4 a gallon.

"If the dollar were to continue to weaken and energy prices move much higher, it acts like a tax on the consumer," said John Derrick Director of research U.S. Global Investors Inc., money management firm based in San Antonio.

A much weaker dollar would also make the cost of other imported goods more expensive and diminish the buying power of anything purchased abroad. That's also not in the best interest of consumers.

Some benefits from the dollar's decline

But a shrinking dollar is not all bad news. Many big multinational companies based in the U.S. could benefit from further declines in the greenback since it would boost the value of their international sales and profits once translated back to dollars.

While that may seem like nothing more than a mere accounting trick, the importance of improving results for blue chip companies can't be overlooked.

With that in mind, an analyst at Deutsche Bank upgraded shares of McDonald's (MCD, Fortune 500) on Wednesday and cited easing currency pressures, i.e. a weaker dollar, as one of the reasons he's more optimistic about Mickey D's outlook.

Other big multinationals such as Procter & Gamble (PG, Fortune 500), Johnson & Johnson (JNJ, Fortune 500)and Coca-Cola (KO, Fortune 500) have been moving higher as the dollar has weakened and have also been upgraded by analysts.

Let's face it: We need American icons like these companies to bounce back. The only way for the market rally to have legs is for large, well-known firms to get back on solid footing.

Even though it's tempting to say that what happens on Wall Street doesn't affect you on Main Street, nothing could be further from the truth.

An improving stock market should eventually lead to higher levels of consumer confidence and, more importantly consumer spending. What's more, it's no coincidence that major companies issued massive layoffs falling steep plunges in profits and their stock prices. The job losses should abate and companies will start hiring again once their bottom lines improve.

Now of course, a weaker dollar is not a complete panacea for the U.S. economy's woes. Dolan points out that multinationals will probably report some favorable impact from currency fluctuations in the second quarter, but that will be partly offset by the fact that demand abroad is likely to remain weak due to the worldwide economic slump.

Derrick adds that some investors are likely to dismiss any profit gains from a falling dollar as transitory.

Still, there are clearly pros and cons to a weaker dollar. Everybody is hopeful that the U.S. economy is finally close to hitting bottom, and one sign that the recovery could be for real is if investors continue to sell the dollar and embrace riskier assets.

But one unfortunate side effect of a recovery is that the dollar could get dragged down further and spark more worries about inflation down the road.

Big changes in store for US credit cardholders

2009-05-20T21:08:00.002-05:00

By ANNE FLAHERTY

WASHINGTON

Every American with a credit card will see sweeping changes in the market, with limits on sudden hikes in interest rates that drive consumers deeper into debt. Even cardholders who pay off their balance each month may face new annual fees or lose out on lucrative rewards programs.

Congress wrapped up the legislation Wednesday and sent it to President Barack Obama, who plans to sign it on Friday. The bill will revolutionize the market by restricting when and how a card company can raise an individual's interest rate, who can receive a card and how much time people are given to pay their bill.

In general, the new rules -- which go into effect in nine months -- will protect debt-ridden consumers from many of the surprise charges common in the industry, such as over-the-limit fees and costs for paying a bill by phone.

"This cements a victory for every American consumer who has ever suffered at the hands of the credit card industry," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.

But there will be losers too.

Banks, which oppose the legislation, will need to make up the cost somewhere, and cardholders who pay off their balance in full each month could see new annual fees and lucrative rewards programs canceled. Credit could become harder to come by too.

Some of the changes, including a requirement that cardholders receive 45-days notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve. The legislation would put these changes into law and go farther in restricting when and how banks charge people and who could get a card.

For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

The House passed the reform bill by a 361-64 vote on Wednesday. The Senate had voted, 90-5, for the measure on Tuesday.

Consumer advocates say it's up to the banks to decide what happens next.

Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group, said companies already offering transparent pricing won't have to drastically change how they do business. Lenders could probably cover costs with small annual fees in the $15-$20 range or increase upfront interest rates, he said.

"Nothing requires pricing to go up and benefits to go down," Bourke said. "The only thing that is required is that the price offered actually reflects the cost of using the card."

Regardless of how banks respond to the bill, it's passage this week reflects both America's addiction to debt and easy credit's contribution to the economic downturn.

Last year, the Nilson Report estimated that more than 700 million credit cards were in circulation in the United States. That's more than two cards for every man, woman and child.

What's more is that many cardholders are carrying hefty balances. According to the Federal Reserve, the nation is some $2.5 trillion in debt, excluding home mortgages.

Lawmakers supporting the bill say legislation is necessary to stop a vicious cycle: A cardholder falls behind on one bill and watches helplessly as the rate spikes on their existing balance. Buried in interest fees and other charges, they spend less, which hurts local businesses.

Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.

The practice of charging higher rates and fees to cardholders with risky credit was devised as a means to protect lenders against the risk of default while keeping costs low for consumers who paid their bill on time, said Edward Yingling, president and CEO of the American Bankers Association, which lobbied against the legislation.

Yingling says the new rules will limit the card companies' ability to price according to risk.

"Less credit will be available generally, which means some consumers and small businesses will not be able to obtain credit cards at all, particularly younger people and start-up small businesses," Yingling said.

Dodd, who championed the bill, said this argument is absurd and "a little like Chicken Little."

Flooded with complaints by constituents who say they are victims of abusive practices by the card companies, the Senate fast-tracked Dodd's bill and only five senators voted against it.

Two of the opposing senators -- GOP Sen. John Thune and Democratic Sen. Tim Johnson -- were from South Dakota, where thousands of jobs depend on the industry. Thune estimated up to 5,000 workers in the state would lose their jobs as a result of the changes.

Included in the bill is an unrelated measure by Sen. Tom Coburn, R-Okla., that would allow people to bring loaded guns into national parks and wildlife refuges.

The House approved that provision separately on Wednesday by a 279-147 vote.

U.S. credit card firms seek to limit crackdown
By Karey Wutkowski and Juan Lagorio

WASHINGTON/NEW YORK (Reuters) - U.S. credit card companies are expected to use a White House meeting to put their best foot forward, despite an avalanche of negative publicity, aiming to blunt a congressional push for tougher regulations.

Fees and interest rates will be topics at the meeting set for Thursday between 14 credit card company executives, President Barack Obama, National Economic Council Director Lawrence Summers, and other government officials.

Executives from Bank of America Corp (BAC.N), American Express Co (AXP.N), Citigroup Inc (C.N), Wells Fargo & Co (WFC.N), JPMorgan Chase & Co (JPM.N), Capital One Financial Corp (COF.N), MasterCard Inc (MA.N) and Visa Inc (V.N) are expected to be at the meeting.

White House spokesman Robert Gibbs said on Monday the discussion will include the transparency of the credit card companies' lending practices, and the interest rates and fees they charge.

"The president believes that we can increase transparency involved, cut down on these deceptive practices, and ensure that any system that is involving fees is done in a way that is fair," Gibbs said.

Lenders are expected to argue that they are asking customers to contact them if they lose their jobs or feel under financial stress to try to renegotiate the credit card debt -- even by suspending fees or interest rates.

Scott Valentin, an analyst at Friedman, Billings, Ramsey, said credit card companies could also eliminate some late payments, or over-limit fees, to please Washington.

"The card companies are sensitive to what is going on around them, and public perception, and the government actions that are being contemplated, and are trying to put on a good face," he said.

Credit card issuers have received over $120 billion in taxpayer funds since October, money the government has asked them to use to expand lending.

But with U.S. credit card defaults at record highs, lenders are trying to protect themselves by tightening credit limits and closing accounts, actions that have infuriated lawmakers, consumers, and even triggered a New York state attorney general inquiry.

"Some of the very banks we rescued compound the hardships of ordinary Americans with unfair fees and interest charges," said Senator Carl Levin, a Michigan Democrat who has co-authored credit card legislation.

Citigroup Chief Financial Officer Ned Kelly said in a conference call Friday with analysts to discuss the bank's quarterly results that the credit card business has shifted from growth to risk management.

He added that higher prices on credit cards helped the bank, one of the largest U.S. credit card issuers, to cushion its losses.

In some cases, public anger has forced banks to withdraw fee hikes. JPMorgan stopped charging a new monthly fee to cardholders and agreed to refund the money collected, while Bank of America suspended a planned increase in some fees.

Senate OKs bill to rein in credit card practices

2009-05-19T23:09:00.003-05:00

By ANNE FLAHERTY

WASHINGTON
The Senate voted overwhelmingly on Tuesday to rein in credit card rate increases and excessive fees, hoping to give voters some breathing room amid a recession that has left hundreds of thousands of Americans jobless or facing foreclosure.

The House was on track to pass the measure as early as Wednesday, paving the way for President Barack Obama to see the bill on his desk by week's end.

"This is a victory for every American consumer who has ever suffered at the hands of a credit card company," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee. The bill passed the Senate 90-5.

If enacted into law as expected, the credit card industry would have nine months to change the way it does business: Lenders would have to post their credit card agreements on the Internet and let customers pay their bills online or by phone without an added fee. They'd also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.

Some of these changes are already on track to take effect in July 2010, under new rules being imposed by the Federal Reserve. But the Senate bill would put these changes into law and go further in restricting the types of bank fees and who can get a card.

For example, the Senate bill requires those under 21 who seek a credit card to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

Bankers warned the measure would restrict credit at a time when Americans need it most. They defended their existing interest rates and fees on grounds that their business -- lending money to consumers with no collateral and little more than a promise to pay it back -- is very risky.

"What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky," said Edward Yingling, president and CEO of the American Bankers Association.

"It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate," Yingling added.

Voting against the Senate measure were GOP Sens. Lamar Alexander of Tennessee, Robert Bennett of Utah, Jon Kyl of Arizona and John Thune of South Dakota, as well as Democratic Sen. Tim Johnson of South Dakota.

But other senators didn't want to face voters in the 2010 election without proof that they are listening to constituents crushed by foreclosure rates and joblessness. Recent reports show that the number of foreclosures jumped 32 percent in April compared with the same month last year, while the jobless rate that month rose to 8.9 percent.

The legislation would not cap interest rates as some lawmakers had hoped. It also wouldn't prevent lenders from finding new ways to drain customers' bank accounts or keep consumers from spending money they don't have.

But it would give spenders more flexibility and outlaw many of the surprise costs associated with credit cards at a time when money is tight in most households. For example, under the bill, a cardholder would have to opt to be allowed to go over a credit limit. If customers don't agree and the bank authorizes a charge that would push them over their limit, the lender couldn't levy an over-limit fee.

Another boon for consumers is limiting a practice known as "universal default," when a lender sharply increases a cardholder's interest rate on an existing balance because the customer is late paying that bill or other, unrelated bills. Under the new legislation, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance.

Even then, the credit card company would be required to restore the previous, lower rate after six months if the cardholder pays the minimum balance on time.

House Democratic leaders said they planned to move quickly. Last month, the House approved, by 357-70, a similar credit card bill by Rep. Carolyn Maloney, D-N.Y.

Complicating the issue somewhat was a measure added to the Senate bill that would allow people to carry loaded guns in national parks and wildlife refuges. That provision, sponsored by Sen. Tom Coburn, R-Okla., passed, 67-29.

House Democratic Leader Steny Hoyer, D-Md., told reporters on Tuesday that the House might vote separately on the gun proposal so as not to bog down the credit card overhaul.

If the two bills are passed separately as expected, they would be rejoined before being sent to the president as a single bill, said Hoyer, D-Md.

Credit-Card Rage
By Jessica Silver-Greenberg

David Giantomasi says he vigilantly paid his credit-card bills each month. Even if he could only make the minimum payment, he made sure to get all his monthly payments squared away. So he was shocked when the interest rate on his Chase credit card suddenly jumped to 19.99% from 7.99%. When Giantomasi called the card issuer to demand an explanation, he was enraged. He was told that overall turmoil in the credit markets meant higher rates for a number of customers.

Chase won't comment on individual cardholder accounts. "I felt completely helpless," Giantomasi recalls. "These credit-card companies are beyond the law and should be more tightly regulated."

Giantomasi isn't alone in his desire to see the credit-card industry reined in. Lured by bank come-ons that sold a debt-fueled lifestyle of lavish vacations, sumptuous restaurant meals, and carefree shopping sprees, consumers piled up unprecedented debt during the credit boom: Consumer credit-card debt has skyrocketed to almost $1 trillion, double what it was in 1996. Unpaid credit-card debt is on the rise, too, up 22% in June from a year earlier, according to reports by the major credit-card issuers, American Express (AXP), Bank of America (BAC), Capital One Financial (COF), JPMorgan Chase (JPM), Citigroup (C), and Discover (DFS). But when the housing bubble popped and the economy slammed on its brakes, suddenly many free-spending consumers were left holding the bag.

Now those same cardholders are rushing in to support rule changes proposed by the Federal Reserve Board back in May, to limit unfair or deceptive credit-card practices

New Rules on Rates
The proposed rules, which could be implemented as early as yearend, would represent the first time in over 20 years that a government agency has recommended banning certain credit-card industry practices. Regulation has been left largely to the card issuers, and the Fed and other banking regulators tended to stick to forcing card companies to disclose terms and conditions clearly to customers.

Under the proposed rules, though, banks would no longer be able to hike up interest rates on existing debt, as Giantomasi experienced. Card companies would have to split required monthly payments evenly between the high- and low-rate balances on a card. (Currently, card companies allocate payments to the lowest interest-rate balance first, which leaves a lot of cardholders unable to make a dent in balances at higher interest rates. That's a recipe for rapidly accruing interest and a feeling of helplessness about managing debt, say cardholders.) And consumers would get a longer grace period before they're slammed with penalty fees.

Many consumers say it's about time. The rules were proposed just as the U.S. economy started to tank, when many card holders were falling further behind on their payments at the same time home equity lines of credit were drying up and jobs were disappearing. Regulatory agencies came under fire to act, and Senator Carl Levin (D-Mich.) held hearings this spring to examine card company billing practices.

The proposed regulations generated more than 56,000 comments from individuals, banks, credit unions, and industry associations. That's a record number of submissions, says the Fed, beating the previous record of 45,000 submissions for a proposal that would have let financial firms assume the role of real estate brokers

Venting Rage
"Something needs to be changed to keep credit-card companies from taking advantage of people," consumer Paul Wolcott posted to the Fed comment board. Another cardholder, Cleve Prince, wrote that his credit-card debt drove him to the brink: "Credit-card companies had increased my interest rates on each one of my cards so that my only recourse was to file for bankruptcy."

Consumer advocacy organizations encouraged their members to use the public comment period as a forum to air their grievances and push for change. Consumers Union, a nonprofit consumer-rights organization, encouraged its members to write in. The group set a goal of generating 10,000 comments. "Look how many people agree," says Mark Hickney, a small business owner from Dallas.

Of course, not everyone agrees. The five largest credit-card issuing banks say that as much as consumer may enjoy lashing out, they're likely to regret the end result of the rule changes. The new regulations will curtail their ability to "price for risk," the banks say: By being able to change the rates they charge cardholders based on payment history, outstanding debt, and credit score, banks can price in the risk that each individual consumer won't be able to pay off his debt. The alternative is to cut back on low-interest offers for all cardholders, the banks say.

Banks Call Rules Misguided
"We have very real concerns that the proposal will result in higher costs for cardholders across the board," says Peter Garuccio, a spokesman for the American Bankers Assn. (ABA). If the Fed rules rob them of the right to price for risk, all consumers will suffer with higher rates overall and worse teaser rates.

In a response posted to the Fed's Web site, Bank of America, the nation's largest credit-card issuing company, summarized the industry's attitude toward the new rules: "We believe the practices the agencies are mandating are far from ideal, from the perspective of consumers, banks, and the financial system as a whole." Bank representatives held a series of private meetings with the Fed and the ABA. According to notes from the meeting on the Fed site, industry officials reiterated that risk-based pricing actually keeps rates down overall for the majority of consumers.

Consumer groups counter that the rule changes are fairly minor compared with the reforms they would like to see.

Once the 75-day comment period ends, the Fed will decide what rules to approve. Sandra F. Braunstein, who heads the Fed's consumer and community affairs division, told congressional lawmakers in April that she thought the proposal would be hammered out and finalized by the end of the year.

American Express says it will eliminate 4,000 jobs

2009-05-19T09:23:00.000-05:00

NEW YORK

American Express said Monday it is eliminating about 4,000 jobs as part of a plan to slash another $800 million in costs for the remainder of the year.

The layoffs represent about 6 percent of the New York-based credit card issuer's current global work force.

Many of the affected workers were notified in recent days and the remainder will be notified in coming weeks, said company spokeswoman Joanna Lambert.

Lambert could not specify how many U.S. workers would be laid off, but said the cuts will be across the board.

The newest plan follows $1.8 billion in cost cuts -- including 7,000 layoffs -- announced in October of last year. The company also suspended management-level salary increases and instituted a hiring freeze at the time.

As part of the newest cost-cutting plan, American Express also plans to scale back investment spending and make further cuts to operating costs, including professional services and travel.

"While we have remained solidly profitable at a time when some parts of the card industry were incurring substantial losses, we continue to be very cautious about the economic outlook and are therefore moving forward with additional reengineering efforts to help further reduce our operating costs," said Kenneth I. Chenault, chairman and chief executive officer in a release.

The 4,000 layoffs will result in a restructuring charge of about $180 million to $250 million in the second quarter, American Express said.

The deep cost cutting shows even a company like American Express, which prides itself on catering to a more affluent clientele, is not immune to the pullback in consumer spending.

The company's customers are more heavily concentrated in California and Florida, where the slumping housing market is taking a toll. American Express also has a higher percentage of small-business customers, and small businesses tend to miss payments more than individuals, executives have said.

American Express first announced its plan to embark on the additional cuts last month when it reported its first-quarter results. For the first three months of the year, the company's profit fell 63 percent. It marked the sixth-straight quarter of profit declines.

Shares of American Express rose $1.90 to $26.13 during the regular session, then fell 5 cents during after hours trading.

The credit card company everybody hates

Facing soaring losses, small business credit card lender Advanta is shutting down accounts and tells investors it will try to wait out the downturn.
By Colin Barr
NEW YORK (Fortune) -- The credit card business has grown so wretched that one major issuer is clipping its customers' cards and giving its investors a haircut.

Advanta (ADVNA), the nation's No. 14 card issuer and a top lender to small businesses, said last week it will shut down its card business to stem losses. The move is a momentous one, because credit cards bring in nearly all Advanta's revenue.

The company will close customer accounts next month, leaving a million borrowers looking for credit at a time when lenders are pulling back. And Advanta's small-business customers aren't the only ones in limbo: So are the investors whose bond purchases financed Advanta's expansion over the past decade.

The firm says notes due to mature next month won't be repaid in full on schedule. Advanta is offering to buy some bondholders out at a roughly 30% discount.

The news comes as Advanta, which last month reported a $76 million first-quarter loss, struggles to stanch the bleeding as more customers fall behind on payments.

"The stress rises as you get more delinquencies," said Steven Mann, a professor at the University of South Carolina's Moore School of Business. "Then you see these companies start to break the glass in case of fire."

Shallow pockets?
Delinquencies, measuring accounts a month or more past due, hit 11.5% in April, Advanta said -- down slightly from its March level, but more than double the year-ago tally.

Advanta isn't the only bank struggling to deal with late payments. Delinquencies have risen sharply at bigger issuers as well, ranging from Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Citigroup (C, Fortune 500) to Capital One and American Express.

But those companies are much bigger and have deeper pockets, after years of consolidation at the top of the U.S. banking industry.

BofA, JPMorgan and Citi -- the three big diversified issuers - together accounted for more than half of 2008 U.S. credit card lending. Advanta sold most of its consumer credit card portfolio to Fleet Financial in 1997. Fleet was later acquired by BofA.

What's more, none of the bigger issuers has posted numbers as dire as Advanta's. Capital One (COF, Fortune 500) and American Express (AXP, Fortune 500) both passed the government's stress tests without having to raise new capital.

Advanta may have made its problems worse by jacking up some customers' interest rates, prompting them to cancel.

John Dykstra, a computer consultant in Kenmore, Wash., was spending between $2,000 and $3,000 a month on an Advanta rewards card before the company gave notice in August of a plan to boost his rate to 26% from 8%.

"It just ticked me off that they would triple my rate," he said. "It seems like they made some bad business choices."

Cutting its losses
The latest steps Advanta has proposed aren't ones credit card issuers take lightly. Closing accounts makes outstanding balances harder to collect and eliminates income from the fees issuers charge merchants.

"Advanta's stated intention to terminate cardholders' charging privileges is likely to cause an acceleration of losses measured as a percentage of the pool, as the trust portfolio reduces in size due to charge-offs and payments," analysts at Moody's wrote Friday in downgrading 23 classes of Advanta credit card-backed securities.

The Moody analysts added they expect charge-offs to increase to a range of between 40% and 50%, from 17.3% in March.

In turn, investors in the securities issued by the credit card trust can expect smaller payouts, as the trust unwinds in a process known as early amortization. Advanta plans to offer to buy back $1.4 billion in outstanding bonds issued by the credit card trust, at between 65 and 75 cents on the dollar.

Advanta says that rate is in line with the recent trading in the Advanta Business Card Master Trust Class A senior notes, but investors aren't likely to look fondly on the decision.

Indeed, Advanta spent months claiming it wouldn't come to this. The company said in January that "early amortization for our business credit card master trust is avoidable and the company does not expect it to occur."

But credit card defaults continued to surge, prompting Advanta to shift its focus to cutting its losses. Under the new approach, the company said last week, Advanta "will be free to do new business in the future to the extent it chooses, but it does not expect to do so in a significant way until implementation of the plan is well under way."

'Everybody hates them'
Though all the credit card-issuing banks are dealing with rising delinquencies, Advanta is the first in recent years to allow outside investors to take losses on its credit card-backed securities.

This spring, both Bank of America and Citigroup bought bonds from their credit card securitization trusts to make sure bondholders wouldn't suffer losses even if the downturn steepens. In those moves, BofA contributed $6 billion and Citi $3 billion to cushion against future losses that could threaten the trusts' income streams.

The bigger problem for major issuers stems from their own poor behavior during the boom, said Myron Glucksman, a structured finance consultant.

He said the public has grown exasperated with huge rate increases, excessive fees and unclear disclosure.

That's why the Federal Reserve last year proposed new limits on fees and other restrictions, in a move that is to take effect next year. And that's why Congress is currently considering a credit card bill that would further restrict the banks' leeway to change pricing -- not to mention where you can carry a gun.

"There has to be some understanding that the industry has made a mistake," said Glucksman, who was a managing director in Citi's corporate and investment bank and owns Citi shares. "They're facing a situation where not only are delinquencies rising, but everybody hates them."

A Chrysler Owner's Guide to Dealership Closings

2009-05-18T10:56:00.003-05:00

Where will you service your Chrysler when the local dealership closes? Answers to that and other questions facing owners and buyers
By Kimberly S. Johnson,

So your local Chrysler dealer is slated to close, and a nearby General Motors (GM) dealer could get the ax, too. What happens if you need service on your car?

It's a natural question in the changing automotive landscape, as those two U.S. automakers attempt to restructure in and out of bankruptcy court. In bankruptcy court filings, Chrysler said May 14 it would shutter 789 of its dealerships—about 25% of them—across the country. GM dealers are awaiting word on which 1,100 of them will not see their contracts renewed when they expire at the end of September 2010.

If you live in a major metropolitan area, you could simply drive to another dealership to get your car serviced, even if it is a few extra miles away. However, you might have some difficulties if you live in a rural town or in an area where there are no other dealerships.

Here are some questions and answers on how the Chrysler dealership closings may affect car owners and buyers.

Is my Chrysler warranty still in effect?

Yes. Your vehicle is still covered under whatever bumper-to-bumper and powertrain warranty you received when the car was purchased.

Chrysler Vice-President Steven Landry said the company will be notifying the 3.5 million customers who bought their vehicles from the affected dealerships where they'll need to go now to service their vehicles. They hope to do this by early June.

Will another dealer honor my warranty?
Your warranty will be honored by another certified Chrysler dealer. It won't be honored by another automaker's dealership. And Chrysler said it will not pay its closing dealerships for repair work done under warranty after June 9.

Regardless of my warranty status, can I go to another automaker's dealer to get my car serviced or repaired?

That depends. If you can, you'll have to pay for it.

While almost any service department can do routine vehicle maintenance, such as tire rotations and oil changes, complex repairs might be a challenge, particularly with problems that are detected by running an electronic diagnostic test on the vehicle.

"When it comes to diagnostic equipment and specific tools, our dealers would not be set up to handle that," said Honda Motor America spokesman Ed Miller.

However, at Bob Maxey Ford in Detroit, service manager Wayne Dallwein says he has a diagnostic tool that allows mechanics to test any automaker's vehicle. He said not all dealerships have that kind of equipment, but many independent mechanics do.

"People need to find out from their closest dealer if they have the tools and technology and the expertise to work on your Chrysler," he said. "Go in and see what their capabilities are. You want to establish a relationship with a new dealership before your car needs a repair."

Is this a good time to buy a new Chrysler? Will closing dealers have a fire sale?
Perhaps. But while "everything must go," the dealers still need to make money.

Chrysler already has some of the most generous incentives in the industry. According to Edmunds.com, a site that offers information to car shoppers, Chrysler offered $4,383 in incentives per vehicle in April, down from $4,889 in March but up from $3,795 in April 2008.

Cook Chevrolet in Craig, Colo., which also sells Chryslers, was notified Thursday that its agreement to sell Chrysler's Jeep vehicles had been discontinued. Scott Cook, who owns the business with his father, said the dealership has about 18 Jeeps to sell or move to other area Chrysler dealerships.

Cook said he hasn't decided whether to hold a fire sale. Either way, he said he'll explain the warranty situation to potential buyers.

"We'll disclose there's a strong possibility that we wouldn't be able to do warranty work here, but area Chrysler dealerships can do the work," he said.

Readers Comments

Bill Odum
May 18, 2009 12:37 AM GMT
It would take savvy intervention by someone in the government to bring the auto manufacturers and parts supply people together to set up all brand Ford, GM and Chrysler maintenance shops. All the components are there cars, parts, mechanics, empty dealerships. What is needed is management that thinks different. And that is probably in very short supply!

Leanne McElligott
May 17, 2009 4:29 AM GMT
The Chrysler dealership my Jeep Liberty is at tells me their owner will not cover any large warranty repair because they do not know if corporate will actually pay them. Corporate tells me they cannot force a dealership to do the warranty repair work. I have two more years of payments on this car, have been sharing a car w/ my husband for 6 months now & am now stuck in the middle. Noone is taking the blame. They are blaming each other and NOT repairing my car (which is still under warranty). The Attornet Generals offcie has had no luck nor has any state rep., the BBB or the sonsumer protection agency that I tried. HELP! What should I do?? Leanne

billd
May 17, 2009 2:04 AM GMT
Chrysler products are about to experience incredible depreciation. When Oldsmobile tanked, I bought my daughter a used, 3 year old Alero with 40K miles on it for just $5K. But I can still get parts for it. Chrysler, now bankrupt will soon face a big problem supplying unique parts. When that word spreads, nobody will want to buy a Chrysler product.

hotty
May 16, 2009 5:06 PM GMT
this is what happens when we sell out to other countrys and we lose jobs and the only jobs are service jobs left for us to do and now we cant buy cars etc on the wages for service jobs . we need to get it together before we become a 3rd world country

carguy
May 16, 2009 2:06 PM GMT
And Interconnect: what on earth are you talking about? The only dealerships Chrysler is closing are in the US. The only GM dealerships closing are in the US and Canada. This has nothing to do with their global operations (which GM is still break-even or somewhat profitable on, depending on the region). And BTW, there is risk with any support contract: if the vendor isn't there to support you, you get no support. There's little you can do in that regard, and as these events show, even the biggest can fall.

carguy
May 16, 2009 2:03 PM GMT
This article is misleading in one way: many non-manufacturer mechanics (including at dealerships for other makes) can (and do) perform warranty work, and will be reimbursed by the manufacturer. There is paperwork involved, and you'll have to pick ones that have the diagnostics gear, but they are out there. While it is usually simpler for someone to go to a dealer, the manufacturer's dealers aren't your only choice for warranty work.

Interconnect
May 16, 2009 7:53 AM GMT
World's biggest declaration of Chapter 11, liquidation happened in the US. Consumers world wide trusted GM, Chrysler, and major US brands, from decades of faith in the brand in valuable asset, that makes their lives better and going. What will happen to the owner of a Chevy Joy, or Jeep in countries with only one or two dealerships, and if they close down. The onus is with the companies and the warranties, support, parts are the responsibility of these poor, innocent who has taken the trust of their parents to their children. The US banks should make sure Made in US is good for all who invested in it.

It's Official: Chrysler To Close 789 Dealers

2009-05-15T08:05:00.003-05:00

by: David Kiley
Nearly 800 Chrysler dealers across the country got pink-slips today, unceremoniously delivered by United Parcel Service. In almost every state in the union, cities, small towns and remote hamlets, the auto company told 789 dealers, a number of whom have had dealerships in their families for generations, that they are out of the Chrysler business.

Usually, it is very difficult to terminate a dealer franchise agreement. But because Chrysler is operating in Chapter 11 bankruptcy proceedings, it is much easier—legally if not emotionally.

The cut adds up to 25% of Chrysler’s dealer network. Four million customers who have bought and serviced their cars at those dealerships are affected and are being contacted by mail.

The number of dealers Chrysler is cutting is more than Saturn or Lexus has in total. The automaker, which is in process of merging with Italian automaker Fiat, had a high of about 6,500 dealers in the mid 1960s. Before this cut, it had 3181.

Chrysler is trimming its dealer network to lower its own distribution costs, as well as make the remaining dealers more profitable. Perusing the list of dealers, a large number sell only Dodge Trucks, or have Jeep-only franchises that have been acquired and stuck on to showrooms that carry brands that compete against Chrysler on the whole.

Indeed, many dealers, especially in rural areas, have out-of-date facilities and a hodgepodge of brands, such as a Jeep showroom stuck in with Ford-Lincoln-Mercury, or GMC-Buick-Pontiac. Steven Landry, Chrysler’s executive vice president of sales, said that 345 of the targeted dealers, or 44 percent, are paired with a “competitive franchise that’s stronger than ours.”

Other cuts have been made in economically beleaguered areas like Las Vegas, Detroit, and Ft. Lauderdale, sapped by falling house prices and foreclosures. Dealerships being cut in Troy and Birmingham, Michigan, barely 15-minute drives from Chrysler’s headquarters in Auburn Hills, MI.

The reason for culling the dealer list is obvious—there’s a lot of inefficiency in the current system. Chrysler has said that 25 percent of its U.S. dealers account for half of the company’s sales.

AutoNation, the world’s largest auto retailer, is shutting seven Chrysler dealerships. Commenting on the consolidation plan, Mike Jackson, Chairman and Chief Executive Officer, said, “We believe Chrysler’s consolidation plan is a difficult but positive step forward for Chrysler and the automotive retail industry. Dealer consolidation is a necessary measure in today’s automotive industry and will strengthen America’s dealer network and improve dealer profitability over the long term.”

A total of 658 of the rejected dealers, or 83 percent, already sell more used vehicles than new. But a dealer that loses its new-car business can get starved of new customers, as well as energy in the community. “You don’t make as much profit on new cars as you do on used or in the service department, but it’s kind of the blood flow through an operation,” says Earl Hesterberg, CEO of Group 1 Automotive, a company that owns numerous dealerships including some that sell Chryslers.

Local communities who are losing dealerships will clearly see a rise in unemployment. Sales tax is often cited as another area of loss, but this is actually not an overall risk. “Dealerships may be going away, but customers are not. In other words, when a dealership closes, its customer may buy a competitive product, or buy from another Chrysler dealership. The sales tax is still being paid. The risk for communities is that the tax may shift to a different town,” explained Edmunds.com CEO Jeremy Anwyl.

Another mistaken belief is that car companies will somehow save a significant amount of money by having fewer dealerships. In truth, there are only minor savings gained by cutting the regional staff required to serve a smaller dealer body.

The real motivation in cutting dealerships is to improve the profitability of the dealer. Stronger dealers can invest in better facilities and be generally more effective in their marketing. Indeed, Sageworks Inc. reports that profit per employee in privately owned dealerships has plummeted. As sales decreased so rapidly last year, profits decreased at an even faster rate. That’s due to the high fixed-cost environment that dealers operate in. Dealership profits fell from $4,985.57 per employee in 2007 to a scant $133.02 per employee in 2008. As a result, unprofitable dealerships began closing over the last year on their own. But Chrysler’s bankruptcy, and the possible bankruptcy of General Motors, is speeding that process.

GM is facing a May 30 deadline to square away a reorganization plan that will meet White House demands. If it cannot get bond holders to accept much less than they are owed, and union workers to accept big concessions, it also will reorganize under Chapter 11 and cut more than 2,000 dealers.

View the list of Dealers closing here.

5 Ways to Recession Proof Your Job

1. Be Informed
Don’t let your company’s financial status be a mystery to you. Trickle down communication doesn’t always convey the most accurate information or the most current. Familiarize yourself with trade publications, blogs and online resources specific to your industry. You may learn that industry insiders are speculating that your company will have layoffs soon. But you may also learn that a certain project is getting lots of buzz. By staying on top of the game, you may be able to position yourself onto the buzz project and avoid a layoff. At the very least, you may have time to prepare and the layoff won’t be a surprise.

2. Network
Networking isn’t only for the unemployed or sales people. Many professionals actively employed are always building their contacts. The idea behind this is by building relationships with people in your industry, you’ll be better positioned when you do need (or want) a job. There are lots of ways to do this. Join professional organizations geared toward your industry. Join LinkedIn. The thing with networking is you must take a proactive approach. The contacts won’t come to you. You must go to them.

3. Make Yourself More Valuable
You need to find ways to set yourself apart from Joe Coworker. See if your industry has any special certifications that you can do to give you more knowledge in your field. If not, take a class at a local community college that would give you more experience or specialization. The benefit of this is two-fold. It shows you are passionate about your career and it makes you more knowledgeable in your field.

4. Go Above and Beyond
Sure, everyone has duties that they must get done. But do those and then some. Volunteer for special projects. Look around and find a way your company can cut costs without cutting quality. Be inventive. Also, be sure your boss and their boss know about. Don’t do it silently but don’t be obnoxious about it.

5. Maintain a Positive Attitude
Yes, it’s scary. Sure you want to talk about the possibility of getting laid off with your coworkers. But a positive attitude goes a long way. Lay offs are bad for employee morale. Poor morale negatively impacts work ethic. By keeping a positive attitude and applying that in your work, you show management that despite the downturn, you are still committed to your job and the company.

These tips are by no means a guarantee but they won’t hurt and can really help. Plus, be sure to always keep your resume up-to-date and the names of a few good headhunters handy

Failure: A Bankrupt Idea

2009-05-14T09:42:00.002-05:00

Why the bankruptcy process that sorted out the mess when companies failed no longer works
By Peter Coy

Failure can be a beautiful thing. Maybe not if you work for General Motors (GM), which seems to be stumbling toward bankruptcy. But for the U.S. economy as a whole, the swift and clean disposition of weak companies is an essential part of the formula for getting growth back on track.

However, for this cleansing to occur, the U.S. needs a well-functioning Chapter 11, the part of the U.S. Bankruptcy Code that determines whether failed businesses can be revived, in full or in part, or need to be dismantled. Last year, 30,000 troubled businesses took the Chapter 11 route, and the number should soar this year as the recession grinds on.

Lately, though, this crucial tool for coping with failure has…failed. Some weak, mismanaged companies are being propped up longer than they should because they're considered too big to fail. Meanwhile, potentially viable companies are being thrown too quickly onto the refuse heap, victims of misguided changes in bankruptcy law and financing practices. Perhaps most worrisome, derivatives—those complicated securities that helped cause the financial crisis—are giving some banks and other creditors the perverse incentive to kill companies that ordinarily they would want to save. The implications: more job losses than necessary, coupled with a slower recovery and a less vibrant economy.

The failure of failure became starkly evident last year when Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke stood by as Lehman Brothers went bankrupt. Although they said afterward that they lacked the authority to save the investment bank, the truth is that many people at the time thought letting Lehman go into Chapter 11 bankruptcy was the right thing to do. In theory, the Bankruptcy Code had all the tools to allow a bankruptcy judge to sort out the bank's affairs cleanly and fairly. Meanwhile, a signal would be sent to other financial institutions that they would pay a heavy price for mismanagement.

The result of letting Lehman's bankruptcy play out, as everyone knows, was a spasm in the global financial system that helped trigger the first worldwide recession since World War II. Banks around the world refused to do business with Lehman or each other because they didn't know who was exposed to losses—and couldn't wait for a drawn-out bankruptcy proceeding to find out. Changing course abruptly, the government stepped in to stop American International Group (AIG) from going into bankruptcy and to prevent any further failures at "too-big-to-fail" institutions.

If 2008 highlighted the flaws in dealing as financial firms failed, 2009 seems to be showing that resolving the affairs of troubled nonfinancial companies can be nearly as difficult. The problem is finding the appropriate balance between the needs of creditors and what's good for employees, suppliers, and the rest of the economy. Chapter 11 accomplishes this by giving companies breathing room to cut a deal with the people to whom they owe money. First dibs on a company's assets are supposed go to secured creditors: those who were pledged certain assets, such as buildings or machinery, as collateral for the loans they made. Common shareholders are last in line and usually get nothing. Bankruptcy judges, who must approve any settlement, have a certain amount of latitude to produce a workable solution.

The Last Chapter?
The concept is elegant. Elizabeth Warren of Harvard University and Jay Lawrence Westbrook of the University of Texas wrote in the Michigan Law Review this February that Chapter 11 deserves a prominent place "in the pantheon of extraordinary laws that have shaped the American economy and society and then echoed throughout the world."

These days, though, no one seems to trust the results of a straightforward bankruptcy. The crises at Chrysler and General Motors have turned into high-stakes games of chicken between secured creditors and labor unions. President Barack Obama himself leaned heavily on Chrysler's secured creditors to back down from their claims about the sacredness of their contracts, a clear indication that his Administration has no confidence in the bankruptcy courts to achieve the correct result on their own. GM Chief Financial Officer Ray G. Young told reporters and analysts on May 7 that he wants to keep the automaker out of bankruptcy, or at least make its stay in Chapter 11 as brief as possible. He predicted that entering bankruptcy would hurt GM's sales. "Once you start losing revenues, you get yourself into a vicious cycle from which you cannot recover," he said.

Young's concern is legitimate. Advocates for creditors and debtors agree that companies that enter Chapter 11 are less likely to emerge intact than they were years ago. The high-water mark for debtor protection was the passage of a sweeping bankruptcy reform in 1978. But those protections were eroded by amendments in 1984 and 2005, says Brad Eric Scheler, chairman of the bankruptcy and restructuring department at the law firm of Fried, Frank, Harris, Shriver & Jacobson. Many companies invited trouble by pledging nearly all of their assets for loans, giving them no flexibility when things went wrong.

Chapter 11 gives debtors time to work out their problems by freezing creditors' efforts to collect on their claims. But over time, Congress has allowed more of debtors' assets to be grabbed at the outset of a case. That helps explains the death spiral of Circuit City Stores, which couldn't raise funds to go on after suppliers seized most of its inventory. Harvey R. Miller, a veteran bankruptcy attorney at Weil, Gotshal & Manges, testified in March at a congressional hearing on the Circuit City case that Chapter 11 "has been seriously impaired and may no longer be an effective process to preserve jobs through the rehabilitation and reorganization of distressed businesses."

Meanwhile, creditors are finding more loopholes, such as figuring out how to structure loans so they get preferred treatment in a bankruptcy. The trick is to make the loans look like derivatives, which have priority payment under the Bankruptcy Code. The special treatment for derivatives was granted in stages over the past decade or so at the request of big banks, which said that the global derivatives market would cease to function if traders could not be assured that people on the other side of trades would perform reliably. Spying an opportunity, "lawyers are out trying to figure out how to turn every kind of transaction into one of those" favored derivatives, says Lynn M. LoPucki, a University of California at Los Angeles Law School professor.

The newest and possibly scariest twist in the failure game is the confusion caused by a type of derivative called a credit default swap. Suppose a creditor is owed money by a troubled business. It's only natural for the creditor to buy a credit default swap, which is a type of insurance that pays off if the business misses an interest payment on its bonds or hits some other negative trigger.

Here's the problem: A creditor that buys credit default swaps on a company may no longer care whether it stays in business or not. Henry T.C. Hu, a University of Texas at Austin School of Law professor, calls this the "empty creditor" problem, and says it "undermines the corporate governance and debt governance mechanisms of our capitalist system." For example, Goldman Sachs (GS) had a variety of financial entanglements with AIG before the insurance giant went under. Because Goldman hedged against that exposure by purchasing credit default swaps on AIG, Hu argues that Goldman, though a creditor on paper, had a weakened economic interest in propping up AIG.

A Bankrupt System
The bankruptcy system's defects will become more apparent in coming months because many companies that survived the first 17 months of this recession are finally exhausting their reserves, often at the moment they need to roll over expiring debt. The number of bankruptcy court filings involving business debts rose 54% last year, according to federal court data. They're likely to climb sharply again this year. Standard & Poor's predicts that the junk-bond default rate will double, to more than 14%, over the coming year vs. the past year, making it the highest since record keeping began in 1981.

The government can step in to save high-profile companies, but that's not necessarily a good thing, MIT economist Simon Johnson wrote recently on his Baseline Scenario blog. Johnson fears that the big banks he calls "zombie oligarchs" that have received federal support will become even more insulated from failure, adding, "you won't see a great deal of innovation, investment, and growth coming from these survivors."

Below the top tier, the risk is that many companies that aren't bailed out will survive—but just barely, dragging along more debt than they can reasonably carry. Weak companies can't borrow for new projects because potential lenders reasonably worry that their fresh funds will be diverted to pay off old debts. If this happens, investment will remain depressed, holding back economic growth and gains in productivity.

Economists and lawyers have proposed potential answers for the bankruptcy system, ranging from minor tweaks to blowing it up. Representative Steve Cohen (D-Tenn.), chairman of the House Judiciary's subcommittee that oversees the Bankruptcy Code, told BusinessWeek on May 13 that he intends to introduce legislation this summer to reverse amendments he regards as too favorable to creditors. Creditor groups are bound to resist. Imminent changes, whether for better or worse, are likely to be minor. For now, we're stuck with a system that isn't doing enough to help us get out of this mess.

Recession Hits Social Security Projections

2009-05-13T09:34:00.004-05:00

By Phil Mintz

Doomsday for Social Security and Medicare has come a little closer, thanks to the deep recession. The costs of administering Social Security are now expected to exceed tax revenues in 2016, a year earlier than expected, and the trust funds for the program are now projected to run out in 2037, four years earlier than envisioned a year ago. The $468 billion Medicare program is in worse shape, with the Hospital Insurance trust fund now projected to be exhausted in 2017, two years earlier than a year ago.

The new projections were issued in the annual reports of the Social Security and Medicare trustees, issued on May 12. The revised Social Security projections are mainly due to the effects of the economic downturn and changes in longevity assumptions, while the changes in the Medicare outlook are due to lower payroll taxes because of the downturn.

According to the Social Security trustees, under middle-range assumptions, Social Security program costs will increase more rapidly than tax revenues between about 2012 and 2030 because Baby Boom generation retirees will outpace new additions to the labor force. After 2030, "increases in life expectancy and the continued relatively low fertility rates experienced since the Baby Boom will generally cause Social Security system costs to increase relative to tax income, but more slowly."

Growing Gap
The report said that annual costs of the Social Security program will exceed tax income starting in 2016. After that, "the annual gap will be covered with cash from redemptions of special obligations of the Treasury that make up the trust fund assets until these assets are exhausted in 2037," the trustees said.

The Medicare trustees said the Hospital Insurance trust fund "does not meet the short-range test of financial adequacy. Although the short-range financial status of the HI trust fund has not been considered satisfactory since 2003, the outlook has further deteriorated as a result of the current economic recession."

A separate Medicare trust fund for physician coverage and prescription drug coverage is in better shape, the trustees said, because the funding provisions are reset each year to match expected costs.

Putting Social Security and Medicare on firmer footing has long been a mantra of Washington politicians, but the mechanics of bringing about changes to the system have proved to be a daunting political challenge. During the campaign, President Obama proposed an increase in payroll taxes on annual income over $250,000 to improve Social Security's financial position. He opposed increasing the age at which Social Security benefits may be collected, another commonly cited fix for the program.

Banking on Reform
The White House is banking on a comprehensive plan to reduce health-care costs to rein in the growth of Medicare costs. Treasury Secretary Timothy Geithner, the head of the trustees group, said the new reports were a reminder that "the longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be."

"The Medicare Trustees Report makes clear today there is no more important long-term fiscal policy measure than gaining control of the growth of Medicare costs by delivering health-care services more efficiently," Geithner said in a news release. "These savings can only be achieved in the context of a larger effort to control health-care costs and improve quality more generally."

Once Medicare is brought under control, Obama plans to attack Social Security, Geithner said. "This President will work to build a bipartisan consensus to ensure the long-term solvency of Social Security," he said. "The President explicitly rejects the notion that Social Security is an untouchable politically and instead believes there is opportunity for a new consensus on Social Security reform."

GOP Attacks Spending
Republicans seized on the report to attack Obama's spending plans. "The Social Security and Medicare trustees' report confirms what we already knew: Our nation cannot afford to continue this reckless borrowing-and-spending spree," said House GOP leader John Boehner (R-Ohio).

Senator Charles Grassley (R-Iowa), the ranking Republican on the Finance Committee, criticized Obama's plans for expanding health-care coverage. "Instead of getting existing public programs in order right now, some are saying we should create a new government-run health insurance plan. When we can't afford the public health plan we have already, does it make sense to add more?"

At the end of 2008, almost 51 million people were receiving Social Security benefits, including 35 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers, the trustees said. Total benefits paid in 2008 were $615 billion. Total income was $805 billion, and assets held in special issue U.S. Treasury securities grew to $2.4 trillion.

In 2008, 45.2 million people were covered by Medicare: 37.8 million age 65 and older, and 7.4 million disabled.

Why Are Oil Prices Rising?
Posted by: Steve LeVine

Many are asking the question about oil prices: Is this deja vu all over again? Didn’t we just go through a several-year run-up in prices based largely not on fundamentals, but on traders bidding them up, ultimately to $147 a barrel? Only then to see them plunge to $32 a barrel?

If one puts stock in the plunge, then there appears to be air in the run-up today to a six-month-high of $60 a barrel. How much is anyone’s guess. The other day, one exceedingly smart oil analyst privately put it in the range of $5 to $10 a barrel.

Here is the case for a price bubble: Oil inventories are at a 19-year high; the U.S. alone has some 1 billion barrels sitting in storage tanks, according to Mark Williams at the Associated Press. Demand for oil is set to fall to its lowest level in five years, says the U.S. Energy Information Administration.

The opposite case goes as follow: The market is factoring in expected inflation because of global deficit spending; Chinese investment spending is reviving. Over at Alaron, Phil Flynn says these are also genuine “fundamentals.”

Regardless, there always seems to be reason offered up to trust in a price run-up. After all, markets are all about emotions, as Robert Shiller notes. Yet, there are still sober voices. In my view, the Financial Times’ Chris Flood delivers it straight: Prices are rising because of various types of trading gambles. Flood quotes Mike Wittner, a senior oil analyst at Société Générale saying the following: “Recent price strength is not based on fundamentals, but on financial flows.”

Over at the Oil Drum, Rune Likvern says up to 3 million barrels a day of oil is being bought purely for storage, including on the sea. But he predicts that such purchases – which help to prop up prices – will decline because storage is becoming harder and harder to find; when they do, Likvern says, prices will fall substantially.

It’s a fool’s game to predict oil prices. That doesn’t stop a lot of people, of course, especially the traders.

GM CEO says tasks are large to avoid bankruptcy

2009-05-12T08:47:00.004-05:00

By TOM KRISHER

DETROIT

Bankruptcy protection for the nation's biggest automaker is becoming more probable with a deadline just over two weeks away, the company's top executive told reporters Monday.

General Motors Corp. CEO Fritz Henderson is still holding out hope that the company can restructure without court protection, but he says the tasks to complete before a June 1 government-imposed deadline are large.

The automaker, Henderson said, is looking at its operations country-by-country to determine where it might have file for bankruptcy, but he says a U.S. bankruptcy doesn't necessarily mean that GM would file in other locations.

"Certainly the task that we have in front of us is large," Henderson said during a conference call to update the company's restructuring efforts. "There is still an opportunity and still a chance for it to be done outside of a court process."

GM shares fell 13 cents, or 8.1 percent, to $1.48 in midday trading.

General Motors has received $15.4 billion in federal loans, and the government deadline to restructure or seek Chapter 11 protection is just over two weeks away. But the company must reach concessionary agreements with unions, persuade thousands of bondholders to exchange $27 billion in debt for 10 percent of GM's stock, cut thousands of dealers, close plants and lay off more salaried workers.

Under Chapter 11 reorganization, a company can stay in operation under court protection while sheds debts and unprofitable assets to emerge in a stronger financial position.

Also Monday, Henderson left open the possibility that GM would move its corporate headquarters out of Detroit. The company, he said, is looking at everything within its business.

"It's not like we have that queued up at the top of our list," he said, adding that GM has a large number of people in Detroit and is proud to be here.

He would not comment about reports about Fiat Group SpA's interest in getting 80 percent of GM's European Opel operations, saying that any structure must address the needs of both partners.

Henderson said GM has an urgent need for funding from the German government, so any partner for its European operations would have to be suitable to the government.

"We have a need for funding, actually, in our European business, that's important and urgent and the German government hasn't indicated an interest in running our business," Henderson said. "We're going to make sure that any partner we pick in this business is going to be suitable for them, so that if we need their support, we obviously want them to find any partner to be reasonable and acceptable.

Henderson cast doubt on reports that GM may sell its Latin American operations, saying they have consistently brought great returns to the company.

"This is a business that we know and like very much," he said.

GM is still in the process of negotiating with the United Auto Workers about six factories that intends to close, Henderson said, and it is negotiating with both the UAW and Canadian Auto Workers about concessions.

The company also plans to notify dealers later this week about its plans to reduce their ranks by about 2,600 by 2010. The company has 6,246 dealerships, many of which are not profitable because of lower sales volumes.

Henderson said GM has said the number of parties interested in its Hummer brand has dropped to two from three, and he expects a decision by the end of May. For GM's Swedish Saab unit, there are a number of interested parties, he said, adding that a resolution will take a month or two.

Negotiations are still under way to sell the Saturn distribution network, but GM would be open to selling factories to make the products if someone were interested, Henderson said.

"To date, haven't seen any specific proposals in that regard, but this is something we would be open to," he said.

GM cannot modify its stock exchange offer to bondholders because the company has been told by the Treasury Department that it cannot go above 10 percent of the company's equity, Henderson said.

A committee representing the bondholders has counteroffered seeking a 58 percent ownership stake.

"The guidance given to us by Treasury when we launched the bond exchange remains in effect today, and there's really no changes from that," Henderson said. "So we don't have any plan to make modifications at this point."

The deadline for the bond exchange is May 26.

But Eric Siegert, a financial adviser to the ad hoc committee of GM's bondholders, said Monday that informal discussions continued but there was "room for compromise on both sides."

Siegert said in an interview the bondholders' committee was willing to examine alternatives to the proposal, including different treatment for the United Auto Workers and the bondholders.

"We're not set in stone on anything and we're willing to explore a number of possibilities," Siegert said.

Under a capital structure proposed by GM but still under negotiation, the U.S. government would get 50 percent of the company for its loans. GM has said it will need another $2.6 billion in May and $9 billion more for the remainder of the year.

A UAW-run trust that will take over retiree health care costs starting next year, would get 39 percent of the stock in exchange for half of the $20 billion the company owes the trust.

Current holders of roughly 611 million shares to stock would get 1 percent with a 100-for-1 reverse split, and GM would issue 62 billion new shares. That's about 100 times more shares than the company currently has outstanding.

Immigration Amid a Recession

2009-05-11T08:52:00.004-05:00

By Moira Herbst
As unemployment rises and the economy sinks further into recession, an old debate has become new again: the question of immigrants' impact on the U.S. economy. On one hand, the chorus of calls to restrict immigration is getting louder. Many U.S. workers are fearful of losing their jobs and want to ensure that the domestic workforce gets priority for new positions, especially for those created by the taxpayer-funded economic stimulus plan. On the other hand, tech, health-care, and other companies warn that tightening restrictions on immigrants will hinder, not help, the economic recovery.

Enter President Barack Obama. Despite his long to-do list, he says he wants to act on comprehensive immigration reform this year, and is expected to address the issue publicly this month. Like the 2007 bill that ultimately failed in the Senate, a new proposal is expected to include a path to citizenship for the estimated 12 million undocumented workers in the U.S. But Obama Administration officials say the plan would not add new workers to the American workforce.

H-1B Quotas Are Unlikely to Increase
That would disappoint employers in sectors such as health care, farming, and technology, who say they're in need of workers despite rising unemployment. Hospitals and other health groups say there's a critical shortage of nurses in the U.S., while farmers say they can't find enough workers to help milk cows, pick fruit, and harvest vegetables. In technology, companies like Microsoft (MSFT), Google (GOOG), and Oracle (ORCL) say they need more workers from overseas for jobs in software design and engineering. They have lobbied to increase the number of temporary visas for skilled workers, called H-1Bs, from its current annual limit of 85,000.

Worker groups counter that if employers boost wages, they'll find plenty of U.S. workers to fill open positions. With unemployment on the rise and potentially headed for double digits, it's unlikely employers can win more temporary work visas. "It will be impossible to push a large-scale temporary worker program," says Alexander Aleinikoff, dean of the Georgetown University Law Center and a member of the Obama team's immigration task force.

Competitors or Colleagues?
At the heart of the debate about immigration is the question of whether immigrants are complementing or replacing American workers. If they complement U.S. workers—because they possess rare abilities or will do jobs natives won't—they make a net contribution to the U.S. economy and even help create jobs. But if they replace native workers with similar skills, U.S. workers can be displaced and wages dampened, reducing the spending power of at least some populations.

Of course, what impact immigrants have ultimately depends on what laws are in place and how they're enforced. Some economists say that given the state of the economy, lawmakers should focus on inviting in more highly skilled, high-wage workers in certain professions on a permanent basis, thereby filling labor needs while increasing the tax base and encouraging home and car purchases. They also argue that legitimizing the status of the 12 million undocumented workers will level the playing field both for U.S. workers competing with them and for employers who compete against rivals that use cheaper, undocumented labor.

Globalization's Losers …
But immigration can also displace U.S. workers and dampen wages in certain industries and demographic groups. An April 2009 report written by Prasanna Tambe of New York University's Stern School of Business and Lorin Hitt of the Wharton School at the University of Pennsylvania estimates that H-1B admissions at the current levels are associated with a 5% to 6% drop in wages for computer programmers and systems analysts over time. "In this paper, we simply sought to dispel the myth that globalization generates no losers. … Globalization does appear to have a negative wage effect on workers in some occupations," wrote Tambe and Hitt in the paper, which reflects the research findings by Harvard economist George Borjas. (Tambe and Hitt declined to comment on the paper until after the academic peer review process.)

Similarly, wages can be pushed down in certain low-skill jobs if the supply of workers rises significantly through immigration. And immigration can allow employers and government to avoid the hard work of improving the skills of the existing domestic workforce. "The more we are able to solve skills shortages by importing workers from other countries, the fewer incentives we have to improve the schooling and educational training opportunities for our domestic and more disadvantaged populations," says Gerald Jaynes, professor of economics Yale University. "In fact, there's almost no incentive."

… And Winners
Academics aren't in agreement on the issue. Amar Bhide, a professor of economics at Columbia University, calls studies like Tambe and Hitt's "junk science" propagated by "techno-nationalists." Bhide argues that immigrants have a negligible impact on wages. Instead, immigration performs a critical role in what he calls a "venturesome economy," in which immigrants most often complement native workers and add to the growth and dynamism of an economy.

Immigrants themselves may offer the strongest evidence of the positive effects. Take Jennifer Gould Keil, Canadian-born author of the nonfiction book Vodka, Tears, and Lenin's Angel, for example. Already an established writer, she obtained her visa in 2001 to stay in the U.S. to further develop her craft. Now a columnist for the New York Post—and a permanent resident since marrying an American—Gould Keil says she is grateful for the opportunities afforded her, which in turn benefit the country. "[The visa] allowed me to come here, make a living, and contribute," she says. At the same time, "Immigration is a valuable source of brain power to the U.S.," she says. "Without it, the country wouldn't grow and prosper."

Freshen Up Your Interview Skills

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3 steps to financial security: Save, save, save

2009-05-08T08:26:00.005-05:00

By Walter Updegrave

Walter Updegrave is a senior editor with Money Magazine and is the author of "How to Retire Rich in a Totally Changed World: Why You're Not in Kansas Anymore" (Three Rivers Press 2005).

Question:What percentage of income should someone save in order to be considered financially responsible? I'm wary of spending now because of the bad economy, but I don't know how much I should be saving on a monthly basis. --Lionel, San Diego, Calif.

Answer:I guess there's nothing like the combination of a market meltdown, housing crash and a recession to get people into to a saving frame of mind.

Whether it's someone who wants to know the true meaning of living within your means or a reader looking for timely and practical advice on how best to use his tax refund, I've been getting more and more questions suggesting that people are increasingly eager to save and, like you, become more financially responsible.

That said, there's still plenty of room for improvement on the savings front. For example, yesterday's quarterly GDP release from the Bureau of Economic Analysis also shows that the U.S. personal savings rate climbed to 4.2% in the first quarter of this year. That's a nice increase from the 3.2% at the end of last year and a major improvement from the negative 0.7% rate back in early 2005. But it's still below the double-digit savings rates of the mid-1980s.

And when it comes to socking away bucks for retirement, the National Foundation for Credit Counseling's 2009 financial literacy survey also shows we're not exactly knocking ourselves out. About a third of those polled said they put away nada for retirement, another third save 1% to 10% and just under a quarter save more than 10%. (The rest said they didn't know how much they set aside or refused to answer.)

So how much should you be saving each month to be leading a financially responsible life?

Well, as much as I'd like to be able to tell you to save 10%, 15% or whatever and you'll be fine, it's impossible for me to do that without knowing a whole lot more about you. The percentage of income that's appropriate for you will depend on your income, age, the amount of money you've already saved, your employment prospects and, most important, how much you're willing to forego immediate gratification for current and future financial security.

I can, however, give you a few tips on how to become a more responsible saver. And once you get started, you can then settle on a regular savings routine that suits your circumstances.

Start by building an emergency fund.The single most important reason to save is so you have at least some protection against life's little (or not so little) setbacks. I'm talking about everything from a job loss to a leaking roof or broken-down car to a kids' orthodontia bills. Basically, all the "non-recurring" expenses that still seem to occur often enough to wreak havoc with your budget.

Ideally, you should have three to six months' worth of living expenses in this fund. And to assure this dough will be there when you need it, you should keep this money in a savings account, short-term CDs or a high-quality money-market fund. For federally insured banks paying the most competitive yields, visit bankrate.com.

Develop a retirement savings regimen.Once you've established your emergency fund, your next priority is to begin saving regularly for retirement. Again, I can't give a magic number, but several tools can help you come up with a reasonable amount. For a quick estimate, go to our How Much You Need To Save Tool.

If you can't handle the figure the tool recommends, save what you can and increase the percentage slowly, maybe bumping it up a percentage point each year or increasing it with each pay raise until you get to the right level.

Once you've signed up for your 401(k) or are saving regularly in other accounts, you can periodically check out a more sophisticated calculator, such as our Retirement Planner, to review your savings strategy and possibly tweak it.

Look for additional ways to save.Even after you've got your emergency fund and retirement covered, you're probably going to want to save occasionally for other goals, say, a down payment for a house or car or college costs for kids. Coming up with extra savings when you're already regularly contributing to a 401(k) or other retirement accounts can be tough. But if you're serious, there are ways to do it.

One is to try a few techniques that effectively allow you to "fool" yourself into saving more. Another is to specifically target big-ticket items in your budget for downsizing, since that's where you'll likely find the largest potential for saving.

One final note: Don't let easy excuses prevent you from saving to your full potential. When people without savings were asked by pollsters working for the National Foundation for Credit Counseling why they didn't save, the number one reason offered (by 59% of respondents) was that they had a limited income.

Hey, guess what? We've all got limited incomes. But unless you're among that unfortunate group of people whose incomes are so low that they can barely squeak by, there's always some spending that can be pared back at least a bit to put away a few bucks for the future.

Getting Your Financial Priorities in Order

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Is the bad economy affecting your health?

2009-05-07T07:58:00.004-05:00

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Get hired! 6 secrets to acing the interview
By Bill McGowan

As the founder of Clarity Media Group, I've spent years media training a wide variety of clients, many times specifically prepping them for TODAY interviews. These clients include former American Idol winners, NFL quarterbacks and Fortune 100 CEOs. But lately, I have discovered that more and more of the growing ranks of unemployed are not only seeking jobs, but seeking our services as well, in an effort to enhance their performance in crucial job interviews.

If you want to stand out as a distinctive candidate, and raise your interviewing game from good to great — which could mean the difference between getting the job and not — you need to keep some tips in mind:

Maintain eye contact
Good meaningful handshake and eye contact upon entering the room. Don't be in a hurry to look away. You need to convey that you've been looking forward to meeting the interviewer.

Sustained eye contact also diminishes when you're hit with a challenging question, forcing you into a topic area that makes you feel uncomfortable — like the circumstances surrounding leaving a previous job. Looking up to the ceiling or down at the floor will send a loud signal that you're not eager to talk about this subject. Candidates also get fidgety in their chair or start brushing their hair back off their face. Try to avoid all those little ticks.

Slow down
Slow your speaking pace down, especially in the first five minutes when you're likely to be most nervous. Anxiety makes pace naturally accelerate and makes it more likely you'll stumble over our words.

Don't be uncomfortable with silence. If you need to take a thoughtful beat or two before beginning your answer, it's far better than using filler words ("um," "you know," "like,") to buy yourself some time. Also, brevity is good. The longer you speak, the more you're likely you are to make a mistake and say something you wish you hadn't.

Be confident
Go into the interview thinking that you're there to offer the company your experience and your expertise that will ultimately help them meet their goals. You are not going in asking them to do you a favor by hiring you.

Be specific
Generic adjectives that you think describe you (e.g. hard working, resourceful) are not enough. Tell real stories from your previous jobs that explain how you put your resourcefulness into practice.

Don't merely give a verbal account of your previous work history as if you're narrating your resume. Allude to some quality or skill that each job helped you develop.

Be prepared
Always be prepared to answer the cliche questions: "What's your biggest weakness?" or "What's the biggest mistake you ever made?" Never admit to anything that had negative ramifications for a previous employer.

Even though the question is designed to get you to be negative about yourself, you must drive to the positive. Try something like: “At times I've tended to be so focused on having the work meet very high standards that sometimes I haven't delegated as much as I could have. But over the past couple of years I've really come to appreciate how satisfying it can be to trust the people around me and give them the opportunity to shine.”

Other questions you must have prepared answers for: "What makes you distinctive?" "Why do you want to work for us?" "What do you know about our company?"

You must go in with not only well-thought-through answers and specific anecdotes, but questions for the interviewer as well. Turning down the offer to inquire about them communicates a number of bad things: It makes them think you didn’t research the company enough to formulate an insightful question, and that you just can’t wait to get out of there. It also indicates that you don’t envision yourself getting the job, because if you had confidence that this was going to be offered to you, you would probably have a number of areas you would want to get details on.

Sell yourself
Most people fear that showing belief in themselves and offering an appropriate amount of self promotion will come across cocky. Better to come off self assured than not confident.

Answering Your Money Questions

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Oil prices jump to new high for the year

2009-05-06T10:00:00.003-05:00

By DIRK LAMMERS

Oil prices hit a new high for the year Wednesday ahead of a government report on the levels of crude in storage that have neared 19-year highs recently.

Benchmark crude for June delivery rose $1.42 cents to $55.26 a barrel on the New York Mercantile Exchange, levels not seen since November.

Weekly inventory data from the Energy Information Administration is due later Wednesday morning, but an overnight report from the American Petroleum Institute showed a 1-million-barrel slip in crude oil stocks and a 2.9-million-barrel drop in gas supplies.

"A sign that demand is improving perhaps? Or maybe those refiners are still indifferent to increasing supply," Phil Flynn, an analyst at Alaron Trading Corp., wrote in a morning note. "It was probably a little of both."

Meanwhile, the national retail average price for a gallon jumped more than 3 cents overnight to $2.11 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 7 cents a gallon below what it was a month ago, but $1.50 below its year-ago price.

Analysts expect the EIA to report a build of 2.2 million barrels of oil for the week ended May 1, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Crude stocks rose 4.1 million barrels last week and are at "the highest level of inventory since the month following Saddam's August 1990 invasion of Kuwait," analyst and trader Stephen Schork wrote in his daily report.

On Tuesday, Fed Chairman Ben Bernanke gave his most optimistic prediction yet about the end of the U.S. recession, saying he expects the economy to start growing again this year.

Bernanke cited firmer home sales, a revival in consumer spending and some improvement in lending conditions for banks, businesses and individual borrowers.

U.S. bank stress test results set for release on Thursday and April unemployment figures due out Friday should provide more insight into the state of the economy and the odds that energy prices will increase.

Oil has traded near $50 a barrel for more than a month after dropping from a record $147 last July and rising from below $35 in February.

In other Nymex trading, gasoline for June delivery rose 3.9 cents to $1.611 a gallon and heating oil gained about 3 cents to $1.456 a gallon. Natural gas for June delivery was up 15.4 cents to $3.769 per 1,000 cubic feet.

In London, Brent prices rose $1.11 to $55.23 a barrel on the ICE Futures exchange.

Associated Press Writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore and Pan Pylas in London contributed to this report.

Ford invests $550M to bring new Focus to market

The Associated Press

Ford Motor Co. says it will spend $550 million to convert its old Michigan Truck Plant into a facility that will build small compact modern cars.

The retooled facility, which once built sport utility vehicles like the Lincoln Navigator, will now build Ford's next-generation Focus, expected to roll off the line next year.

The plant will also build a new battery-electric version of the Focus for the North American market.

The struggling automaker says roughly 3,200 jobs will be created in Michigan because of the plant conversion.

Ford says it will also consolidate operations at its Wayne Assembly plant and transform two other truck and SUV plants as part of the retooling.

Atchison plant to close in July

A Florida-based maker of promotional products will close its Atchison, Kan., plant, eliminating 88 jobs.

BIC Graphic USA said the closing will be completed by July 10. All full-time employees will receive severance packages, according to the company.

Based in Clearwater, Fla., BIC Graphic acquired the Kansas plant in 2007, when it was known as Atchison Products. The Atchison plant makes customized garment bags, padfolios and can coolers.

The company is considering a proposal by the Atchison employees to continue operating under a subcontracting agreement. A decision will be made by May 15, according to BIC Graphic.

Schwarzenegger says it's time to study legalizing pot

By Kevin Yamamura

SACRAMENTO — As California struggles to find cash, Gov. Arnold Schwarzenegger said Tuesday it's time to study whether to legalize and tax marijuana for recreational use.

The Republican governor did not support legalization – and the federal government still bans marijuana use – but advocates hailed the fact that Schwarzenegger endorsed studying a once-taboo political subject.

"Well, I think it's not time for (legalization), but I think it's time for a debate," Schwarzenegger said. "I think all of those ideas of creating extra revenues, I'm always for an open debate on it. And I think we ought to study very carefully what other countries are doing that have legalized marijuana and other drugs, what effect did it have on those countries?"

Schwarzenegger was at a fire safety event in Davis when he answered a question about a recent Field Poll showing 56 percent of registered voters support legalizing and taxing marijuana to raise revenue for cash-strapped California. Voters in 1996 authorized marijuana for medical purposes.

Assemblyman Tom Ammiano, D-San Francisco, has written legislation to allow the legal sale of marijuana to adults 21 years and older for recreational use. His Assembly Bill 390 would charge cannabis wholesalers initial and annual flat fees, while retailers would pay $50 per ounce to the state.

The proposal would ban cannabis near schools and prohibit smoking marijuana in public places.

Marijuana legalization would raise an estimated $1.34 billion annually in tax revenue, according to a February estimate by the Board of Equalization. That amount could be offset by a reduction in cigarette or alcohol sales if consumers use marijuana as a substitute.

Kat's Money Matters: Lemonade stand economics

2009-05-05T09:31:00.005-05:00

Charge overhead for kids’ lemonade stand? Absolutely!

Recently, CommunityAmerica sponsored a scholarship program for middle school students who completed an essay addressing the current financial crisis and offering their ideas for overcoming these challenges. Turns out we can learn a lot from this generation.

Abbey, the winning student for Jackson County, discussed the lemonade stand the kids in her neighborhood host every summer and lessons her parents helped her learn.

During the day, the kids got hungry and ordered a pizza delivered to the stand, and they each ate two pieces.

Then Abbey said something that caught our attention: “We started dividing out the profits after paying my mom back for the sugar and Kool-Aid, then the pizza, then divided what was left among the neighbor kids. There wasn’t much left!”

Abbey’s parents charged the kids for sugar, lemons and lunch?

While some might think that’s over the top, that simple act helped the kids understand the concept of overhead and the costs of running a business. A simple, real-life financial literacy lesson — the kind that leaves an indelible impression that lasts a lifetime. Rewards have costs, and kids learn quickly when even a portion has to come from their own savings.

What else did the kids learn? Abbey says they will be bringing sandwiches and snacks from home for this year’s lemonade stand – increasing their net profit by at least $12! Financial prudence from sixth graders is music to my ears, and gives great hope to how future generations will break the cycle of debt.

A great site for parents is the Sesame Workshop,
which has tools to help parents learn how to transform everyday observances and happenings into learning opportunities. And for more information about starting your own lemonade stand check out Alex’s Lemonade Stand Foundation, which provides a meaningful, fun and safe way to make a difference in the lives of others. Holding your own Alex's Lemonade Stand is easy and fun. It’s also an inspiring way for caring people of all ages to support a cause dedicated to helping children everywhere.

What are the “lemonade stand moments” in your life? In other words, what moment stands out that helped shape your financial future growing up? How have you transformed everyday life into learning opportunities for your child?

Share your memories or good tips, and let’s help the next generation turn lemons into lemonade — and learn life lessons, at little cost, in the process!

Kat Hnatyshyn (pronounced nuh-tish-un) is a branch manager with CommunityAmerica Credit Union. Her blog appears every Tuesday in Dollars & Sense.

A Financial Wake-Up Call for Parents

With all the sobering financial hullaballoo over the past year, it's no wonder that college students and other young adults are feeling the pain too.

Many are buckling under the strain of living beyond their means, borrowing to the max on credit cards and not saving a dime. Research has shown that poor money management spills over into illness, depression and other problems.

Against this backdrop, University of Arizona researchers have been trying to determine some of the factors that lead individuals toward healthier personal finances. Some early results of the university's study were released Monday.

Among the preliminary findings: "Parents have more influence over their children's financial knowledge, attitudes and behaviors than work experience and high school financial education combined."

The study, partly supported by the National Endowment for Financial Education, also found that young people with experience in the workplace developed "more positive financial attitudes and behaviors and were better off than their non-working peers."

Makes sense to me, since young adults tend to be more responsible when their money is on the line rather than mom and dads'. In other words, when their skin is in the game, teens and college students tend to watch their pennies more carefully.

The findings released Monday are part of an ongoing research project at the U of A as researchers follow more than 2,000 young people through their emerging adult years, ages 18 to 25.

Ultimately, the researchers hope to delve more deeply into how socio-demographic issues and other society trends affect financial behavior.

Why does this matter? In the words of the researchers, "earlier research links poor financial decision-making to lower academic achievement, lower-quality relationships and decreased physical and mental health."

Working Moms Tell What They Need

If time is money, then lots of working mothers are feeling poor.

According to a survey, keyed to Mother's Day by CareerBuilder.com, about one-third of moms who work outside the home are working longer hours this year than last.

About one in seven say they regularly bring work home. And one in five say they are spending just about two hours a day with their children. Almost that many say they've taken a second job in order to make ends meet.

Wanting more time takes precedence over wanting more money, even though tight finances are the reason why many of them are working.

Perhaps most concerning in the poll was the high admission of burnout -- by one-third of the respondents.

In a year of cutbacks and layoffs, it's not always possible to craft a "flexible" job, but career advisors suggest that it's never wrong to suggest alternatives to your boss. Workers that are too tired or too torn in different directions aren't likely to pull their weight at work or be the kind of parent they want to be at home, either.

Fiat CEO aiming to create global auto powerhouse

2009-05-04T08:20:00.001-05:00

By NICOLE WINFIELD and TOM KRISHER

ROME
Fiat Group SpA will be on the path to becoming a global automotive powerhouse if Chief Executive Sergio Marchionne has his way.

Marchionne is set to meet Monday in Berlin with German economic and foreign ministers to discuss Fiat's offer for General Motors Europe's German unit, Opel.

Fiat confirmed Sunday that it is in talks to buy most of General Motors Corp.'s European operations. It also said it is evaluating the possible spinoff of its auto business to form the core of a new company.

GM has been trying to find investors for its noncore and unprofitable assets to help stave off collapse. Germany is keen to safeguard the future of Adam Opel GmbH, a core part of GM's European operations, which employs about 25,000 people at four plants in Germany.

Fiat Group Automobiles includes the Fiat, Alfa Romeo and Ferrari brands. In addition, Fiat is in the process of acquiring U.S. automaker Chrysler LLC without putting up any cash.

Marchionne was quoted in the Financial Times on Monday as saying of his company's plan: "From an engineering and industrial point of view, this is a marriage made in heaven."

The new auto company, which according to Fiat would have $105 billion in annual revenue, would put the Italian automaker in markets where it has little or no presence, including North America, traditionally the largest market in the world.

"They're going to be a global powerhouse, I guess. Who would have thought?" asked Erich Merkle, an independent auto industry analyst in Grand Rapids, Mich. "They seem to be on a buying binge right now, looking for cheap and distressed assets like Chrysler and Opel."

Fiat is not Opel's only suitor, however. Last week, Canadian car parts maker Magna International Inc. presented German Economy Minister Karl-Theodor zu Guttenberg with what the minister called a "rough concept for a commitment with Opel."

The German government has said it doesn't foresee giving direct state aid but could help an Opel investor with loan guarantees.

The Chrysler deal, which must still be approved by a U.S. bankruptcy court, would be in exchange for giving Chrysler access to Fiat's small-car and engine technology. Chrysler cars and trucks also would be sold by Fiat through its global distribution network.

The deals would make Fiat a big global player, but that might not be the best thing for the Italian automaker, which might be overreaching with the acquisitions, said Merkle.

"This is a lot to take on, quite honestly," Merkle said. "When you start looking at Chrysler, it'll make them a very large automaker, but we've seen that large isn't necessarily indicative of success."

It will take years, Merkle said, for Fiat to gain any synergies by globalizing design, engineering and manufacturing operations with Chrysler and the GM units.

GM Europe also includes the British company Vauxhall and the Swedish carmaker Saab. Saab may not be included in the deal, however. The company is being reorganized under Swedish law and is likely to be separated from the rest of GM's European operations.

Saab declined to comment on whether Fiat was one of the roughly 10 bidders who have expressed serious interest in the Swedish brand.

Saab spokeswoman Gunilla Gustavs said the sales process is continuing according to plan and that a deal is expected to be signed before the end of June.

"We are now entering a process where we are narrowing down the number of interested bidders. There are around 10 who are more serious, with whom we have held deeper talks and shared more information," she said.

GM also makes and sells small Chevrolet-badged cars in Europe that are designed in South Korea by the company's Daewoo unit, and it's unlikely to sell that because that would be GM's only remaining foothold in Europe, Merkle said.

General Motors has been trying to find investors for its noncore and unprofitable assets as part of a restructuring in which it has received $15.4 billion in aid from the U.S. government to avert collapse.

Opel has said it needs $4.3 billion to get through the economic crisis. The German government has said it doesn't foresee giving direct state aid. Chancellor Angela Merkel has suggested the government could help an Opel investor with loan guarantees.

Fiat said that over the next few weeks, Marchionne will be looking "to assess the viability of a merger of the activities of Fiat Group Automobiles (including the interest in Chrysler) and General Motors Europe into a new company."

"As part of this process, the group would evaluate several corporate structures, including the potential spinoff of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe."

In an interview Sunday with Corriere della Sera, Fiat Chairman Luca Cordero di Montezemolo called GM's Opel an "ideal partner" and a possible takeover by Fiat an "extraordinary opportunity."

Fiat, meanwhile, has pressed ahead with a takeover of Chrysler. Chrysler is seeking to sell substantially all of its assets to Fiat, but must gain approval from a New York bankruptcy court.

In addition to Fiat Group Automobiles, the Fiat Group also includes its agricultural vehicles branch CNH and its Iveco trucking unit, as well as a media arm.

------

AP Auto Writer Tom Krisher in Detroit, Geir Moulson in Berlin and Associated Press reporter Colleen Barry contributed to this report.

Recession reveals how closely U.S. and China are linked economically

2009-05-01T09:17:00.002-05:00

By SCOTT CANON
The Kansas City Star

The warehouse at Top Innovations on Troost Avenue is stocked from ceiling to floor with boxes of infomercial wonders of steam.

Gadgets for cleaning and shining and making wrinkles disappear just like that. And each shiny metal and plastic gadget is made in China.

Company president Benny Lee’s trip to five Chinese cities last month revealed the recession on full display. Half-empty hotels. Shuttered factories. An exodus of workers from coastal manufacturing hubs.

“You can feel it,” he said. “They have too much of everything” — raw materials, production capacity, people seeking wages — “and having too much of something is usually a problem.”

The old cliche: When the U.S. economy catches cold, the rest of the world comes down with pneumonia.

The wheezing from America and China — the world’s largest economy and its largest work force, respectively — shows just how contagious globalization has made our economic ills:

•Low mortgage rates here are possible in part because China still buys U.S. debt.

•As construction faltered across the United States and the rest of world, Chinese steel exports were halved.

•China Southern Airlines delayed taking two 777 freighters, so Boeing Co. may not get its money until next year.

•The last quarter of 2008, worst ever for U.S. toy sales, hurt deeply in China, where 4,000 toy plants are closed.

•Beijing’s purchases of U.S. Treasuries give Washington the cash for its expensive economic Band-Aids — which could make America a healthy buyer of Chinese goods again.

“The idea that global economies are somehow immune from what’s going in other parts of the world — that’s over,” said Gus Faucher at Moody’s Economy.com

2 percent off
Yet the nations’ symptoms of economic flu are not the same.

Start with growth. China’s market socialism has sprouted like kudzu since the late 1970s, with gross domestic product rising annually by 9 percent or more for decades running.

But the U.S. real estate bubble burst and Wall Street buckled, and the West’s seemingly infinite consumption that powered China’s growth became painfully finite.

“They took a very major hit,” said Robert Weil, author of “Red Cat, White Cat: China and the Contradictions of ‘Market Socialism.’ ”

“They had counted on growth to absorb the new labor coming into the workplace. Then the growth went away.”

China’s GDP for the last six months is estimated at 6 percent. In the United States, 2 percent would be good news, but China is another matter. It needs it at 8 percent just to stay even with the work force.

So more than 20 million workers have been laid off in the past year — compared with 5 million in the United States.

Some results: wages driven down again and unrest in some cities, but a new competitiveness for factory orders.

Beijing was shocked in February when its exports fell 25.7 percent from a year ago.

As a result, the Chinese seem eager to deal, Lee said, promising firm prices — almost unheard of a couple of years ago.

Xikar, a Kansas City firm that buys lighters from a Chinese factory, says the same.

“Now we’ve seen the speed and the flexibility, their response to changes, get much better,” said co-founder Kurt Van Keppel. “All of a sudden, we’re very important to them.”

Savings vs. stimulus
In Beijing, as in Washington, the government has ordered up an economic stimulus package.

Prime Minister Wen Jiabao, sounding like Mao Zedong channeling Franklin Roosevelt, said: “Confidence is more important than gold or money.”

Announced in December, a $586 billion, two-year stimulus package for roads, railways, the power grid and such is to keep Chinese workers busy.

Beijing will invest some of its vast surpluses in a fledgling government health-care system — to try to free up savings as much as offer a social service.

Most Chinese limp by without any health insurance or retirement plans. So they squirrel away money for later needs.

Households there save from a third to half of their annual earnings. (Until recently, U.S. savings rates were near zero.)

“You can’t suddenly get people to change their spending habits,” said Rajan Menon, a professor at Lehigh University. “That’s why they needed the stimulus package.”

Finger-pointing
Former Treasury secretary Henry Paulson in part blamed the crisis on the Chinese savings mania, saying it drove down global interest rates and led to investors searching for better-yielding but riskier places to park their wealth.

U.S. leaders also have long pointed to China’s artificially cheap yuan and lopsided trade balance. Even as Americans bought less in March and exports to these shores fell 12.6 percent, China still posted a $10.2 billion monthly surplus.

On the other hand, Beijing accuses America’s aggressive capitalism for the global credit mess. It feels burned by seemingly safe but now shrunken assets on Wall Street and in mortgage giant Fannie Mae.

Last month, Wen publicly called for assurance against U.S. deficits-driven inflation in the future: “To be honest, I am a little bit worried.”

Some economists fear what would happen if China backed away from U.S. securities. Washington would have to tempt other buyers with higher interest rates, and inflation could run wild.

Others discount that threat, saying Uncle Sam is simply too large a creditor to tamper with.

Said Weil: “They need us, too. We’re their best customer.”

New jobless claims unexpectedly drop to 631K

2009-04-30T08:20:00.001-05:00

By JEANNINE AVERSA

WASHINGTON

The number of newly laid-off workers signing up for unemployment benefits dropped unexpectedly last week, while people continuing to draw aid neared 6.3 million, setting a record for the 13th straight week.

The Labor Department said Thursday that new applications for unemployment insurance fell to a seasonally adjusted 631,000 last week. That was down from the prior week's 645,000, which was revised slightly higher from the government's initial estimate.

Economists expected a small increase in new claims.

The four-week moving average of initial jobless claims, which smooths out volatility, dropped last week to 637,250, the lowest level since late February and a decrease of about 20,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.

Still, the number of people continuing to draw unemployment benefits jumped to more than 6.27 million, the highest on records dating back to 1967 and steeper than economists expected.

New filings -- as opposed to those who remain on the unemployment compensation rolls -- are closely tracked by economists for clues about the future direction of the economy. Analysts want to see a sustained decline in new applications as a sign of improved conditions.

Although last week's drop in new claims was welcome, the level remains elevated and signals a troubled jobs market. The labor market usually doesn't recover until well after a recession has ended. That's because companies won't want to ramp up hiring until they feel certain any recovery has staying power.

The record number of continued claims suggests that many laid-off workers are having trouble finding new jobs.

As a proportion of the work force, the total jobless benefit rolls are the highest since late December 1982. The continuing claims data lag initial claims data by a week.

Besides the continued claims, the report said there were 2.4 million people receiving benefits, as of April 11, under an extended unemployment compensation program enacted by Congress last year. That provides an additional 20 to 33 weeks on top of the 26 weeks typically provided by states.

Workers and companies have been hard hit by the recession, which began in December 2007. It has snatched 5.1 million jobs and pushed the unemployment rate to a quarter-century high of 8.5 percent. It is expected to top 10 percent by early next year before it starts to slowly drift downward.

Companies have laid off workers and resorted to other cost-saving measures to survive the recession, which has eaten into sales and profits.

More job losses were announced this week. Textron Inc. said it will expand layoffs, eliminating 8,300 jobs, or 20 percent, of its global work force as the recession weakens demand for corporate planes. The maker of Cessna planes, Bell helicopters and turf-maintenance equipment earlier this year said it would reduce its work force by 6,200 jobs, or 15 percent, mostly at Wichita, Kansas-based Cessna.

Elsewhere, General Motors Corp. laid out a massive restructuring plan that includes cutting 21,000 U.S. factory jobs by next year. Clear Channel Communications Inc., the largest owner of U.S. radio stations, said it's cutting 590 jobs in its second round of mass layoffs this year. And bearings and specialty steels maker Timken Co. indicated it will cut about 4,000 more jobs by the end of this year after earlier suggesting about 3,000 jobs already had been targeted.

Still, many analysts predict the recession is easing in the current quarter.

The economy is still expected to shrink from April to June, but not nearly as much as it has been. In the first quarter of this year, the economy tumbled at an annualized 6.1 percent drop. That followed a 6.3 percent annualized decline in the final quarter of last year.

Another report showed that the recession is making employers more frugal when it comes to workers' compensation packages. U.S. workers' wages and benefits inched up just 0.3 percent in the first quarter of this year, the smallest gain on records dating back to 1982, the department said.

Among the states, California saw the largest increase in claims with 8,535 for the week ending April 18, which it attributed to more layoffs in the construction and service industries, according to the Labor Department. The next largest increases were in New York, Connecticut, Georgia and North Carolina.

Pennsylvania saw the largest drop in claims with 7,799, which it said was due to fewer layoffs in the construction, service and transportation industries. The next biggest declines were in Florida, Illinois, Ohio and Washington.

Chrysler, Fiat: Back from the Brink?

2009-04-29T08:15:00.004-05:00

By David Kiley

Italian automaker Fiat (FIA.MI) moved much closer to a deal with Chrysler on Apr. 28 that will blend the two companies' operations and likely keep Chrysler out of bankruptcy court.

The breakthrough came when a committee representing bank and private equity lenders that hold 75% of Chrysler's $6.9 billion in debt agreed with the White House auto industry task force and Chrysler owner Cerberus Capital Partners to take just $2 billion of what it's owed, along with 5% of the company's equity.

The automaker is still not safe from Chapter 11, though. A group of smaller banks that collectively hold 25% of the debt also need to be brought into line. The White House is looking for at least 90% participation by the lending banks before providing more government financing that will keep the automaker out of bankruptcy. Unless the White House extends its deadline, the wooing process needs to conclude by Apr. 30.

One executive working with the debt holders says that smaller banks are complaining that the big banks, who were recipients of Troubled Asset Relief Program (TARP) bailout funds, succumbed to political pressure, striking a weaker deal than what they had been negotiating for.

Better Terms for the UAW?
On Mar. 30, President Obama said his task force concluded that Chrysler could not continue as an independent entity, and that the U.S. Treasury would not extend any more loans to Chrysler past that Apr. 30 deadline unless it struck a deal with another automaker, its unions, and lenders, and showed financial viability.

Debt holders have been complaining that the United Auto Workers were getting much better terms from the White House, and they have been holding out for a better deal. On Sunday, the UAW struck an agreement that gives the union's Voluntary Employee Benefit Assn. (VEBA) health-care trust fund $4.5 billion in Chrysler stock, or about 55% of the fund's total financial backing. A VEBA representative will also hold a seat on Chrysler's board of directors.

A Treasury official indicated that the ongoing negotiations definitely boosted the odds in favor of Chrysler steering clear of bankruptcy court. "The agreement from Chrysler's principal banks is an exceptional accomplishment in line with the President's firm commitment that all stakeholders sacrifice to make this deal succeed," the official said.

While Obama Administration officials have talked tough about forcing both Chrysler and General Motors (GM) into bankruptcy in the last month, there is also a desire to avoid it. "Actual Chapter 11 brings a lot of unknowns for how the consumer will react," says independent marketing consultant Dennis Keene. "Especially now, having hit what we think is the bottom of sales and consumer confidence, Chapter 11 would be a setback for everyone."

Benefits Lost
The UAW has agreed to cuts in wages, overtime pay opportunities, vacation days, and to the elimination of the so-called Jobs Bank, which continued to pay workers after they were terminated. Retirees will also lose their dental and vision insurance coverage. UAW President Ron Gettelfinger couldn't be reached for comment on Apr. 28. But in a letter to members he said, "We fought to maintain our wages, our health care, and our jobs. … In the face of adversity, we secured new product guarantees, and we negotiated new opportunities for UAW involvement in future business decisions."

Part of the agreements call for Fiat to build a small car in the U.S. with union workers. They also specify engines that will be made available to Chrysler and built in the U.S., assuring that some future Chrysler models will continue to be built domestically.

"The UAW is under a great deal of pressure, but the deal they struck was very necessary," said Canadian Auto Workers President Ken Lewenza. The CAW cut a deal with Chrysler last weekend. "The unions have done a great deal to make this deal happen."

Envisioning a New Chrysler
What Chrysler looks like after Fiat begins retooling the company remains to be seen. The Jeep brand is widely considered to be the most valuable asset. Part of the plan calls for Fiat to distribute Jeep models through its European and South American network, which could quickly enhance the company's sales.

The two companies also have been exploring whether they can take some existing Fiat vehicles and rapidly modify them to be sold as Dodges and Chryslers in the U.S.

Of course, all those plans depend on Chrysler, its banks, and the White House crossing the finish line.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.

UAW Goes From Rivetheads to Owners in Detroit

2009-04-28T06:49:00.001-05:00

Posted by: David Kiley

In cutting major concession deals with General Motors and Chrysler this week, the United Auto Workers are walking a whole new line as it goes from being just a labor union to owners of the companies its members work for.

A deal struck with General Motors exchanges debt owed to the union for 39% of the troubled automaker. A separate deal with Chrysler will give the 74-year old labor organization 55% of the privately held Chrysler.

In both companies, the union will have board representatives. It will, as such, have a say in hiring the next CEOs of the automakers, product decisions and compensation. GM Fred “Fritz” Henderson and whoever the incoming CEO of Chrysler will be if the company is saved from liquidation, will be effectively working for the union membership.

As the union has been a frequent critic of the disparity between compensation for C-suite managers and factory floor workers, it will be interesting to see what levels of compensation the union board members vote for.

The union will in fact own more of GM and Chrysler than the Ford family owns of Ford Motor Co. It will own larger stakes in GM and Chrysler than billionaire financier Kirk Kerkorian was able to accumulate in his runs at both companies in the last 12 years.

Union members can pretty much burn those picket signs they threaten to drag out every few years when contracts get re-negotiated. Threatening a strike at a GM or Chrysler facility, or even a parts plant that supplies one of the automakers, would be shooting themselves in both feet as long as they hold such large stakes in the companies.

Ford remains the only U.S. automaker that has neither taken U.S. Treasury loans, nor had to give the union equity in the company; though that could change by year-end because of an agreement struck with the union last month that gives the automaker the option of paying billions in future health-care obligations to the union in Ford stock instead of cash.

According to the agreement struck with Chrysler, which is expected to be ratified by members this week, Chrysler will issue a $4.59 billion note to a health-care trust fund that the union will manage for retired workers. Chrysler will pay $300 million in cash into the trust fund in 2010 and 2011, and increasing amounts up to $823 million in the years 2019 to 2023.

Daimler AG, which still retains 19.9% of Chrysler, left over from its purchase of Chrysler in 1998, agreed Monday to give up that equity and pay up to $600 million into the automaker’s pension fund.

In order to satisfy the White House’s conditions for getting an additional $6 billion in loans, on top of the $4.5 billion it has already received, Chrysler still has to strike a substantial deal with banks and private equity funds holding $6.9 billion in debt secured by Chrysler’s hard assets like its Jeep business, real estate, factories, etc.

Those negotiations have made little progress, and banks have objected to the UAW getting so much equity in the company. The White House wants the banks to accept no more than $1.5 billion, and 5%-10% equity in the company.

In the Chrysler deal, the union is losing cost-of-living adjustments to pay, and accepting stiffer limits on over-time pay and a reduction in paid holidays. For all practical purposes, union pay and benefits are practically the same now as non-union workers employed by Toyota and Honda in the U.S.

As union members, such cuts and concessions are painful. But to owners of the companies now, it makes Chrysler, and GM, more globally competitive as long as they stay in business.

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Four Days of Crunch Time for Chrysler

2009-04-27T08:35:00.002-05:00

Negotiations among Cerberus Capital, the White House, and banks heat up as the automaker reaches an agreement with the United Auto Workers

By David Kiley

As the days dwindle down to Chrysler's Apr. 30 deadline to show the federal government it has a new plan for financial viability—or face bankruptcy re-organization—the automaker made great strides over the weekend by striking deals with the Canadian Auto Workers and United Auto Workers that will satisfy the White House auto industry task force.

But there has been less movement between Chrysler and its banks that hold $6.9 billion of the automaker's debt. The White House is looking for the lenders to take between $1 billion and $1.5 billion, write down the rest, and perhaps accept between a 5% and 10% equity stake. The banks have been looking for more like $4.5 billion and a 40% stake.

That gap led one executive briefed on Chrysler's negotiations to speculate there was still a 50% likelihood the automaker would face reorganization under Chapter 11 bankruptcy after the White House's deadline passes. If Chrysler can't make a deal with its banks by then, the White House has said it will not lend the automaker any more money. It has already lent Chrysler $4.5 billion since December to continue operating. Without additional government loans, Chrysler will be out of working capital and would be forced to file for bankruptcy.

White House senior economic adviser Larry Summers said on Fox News Sunday that the Obama administration was still hopeful that the parties could come to agreements before the deadline and avert bankruptcy, which could seriously impair consumer confidence in Chrysler's products. "There are some issues that have been worked out and some issues that remain to be worked out," Summers said.

The deal with the UAW—which shaves $100 per car in labor costs and gives the union an equity stake in Chrysler in exchange for cutting in half the $8 billion Chrysler owes the UAW for future health-care benefits—is significant. The union and secured lenders had been holding out on reaching an agreement because neither wanted to let the other get a better deal. Bankers in particular had complained that the union was being offered 50% of what they are owed, while the lenders were expected to take 30 cents on the dollar or less.

Fiat's $10 billion in technology
Sitting on the sidelines is Italian automaker Fiat (FIA.MI), which is ready to infuse Chrysler with roughly $10 billion in technology—vehicles and engines that Chrysler can adapt to sell as Chryslers, Jeeps, and Dodges—but no cash. If the White House signs off on whatever agreement the automaker can reach with the banks and unions this week, it promises to lend Chrysler $6 billion more, and the alliance with Fiat, which expects to get 20% equity, would kick in.

But because the banks are so far from agreeing, and the White House is loath to see Chrysler slip into an abyss of liquidation, sources close to the negotiations say to watch for the Obama Administration to find a third solution: providing Chrysler with some capital to emerge from bankruptcy, rather than liquidate the company.

The wild card in that plan is how a judge would treat the banks whose loans are secured by hard assets. Traditionally, those debt holders get the best treatment in a Chapter 11 proceeding. But a judge has a lot of discretion.

Offers and counteroffers are flying
If assets such as Jeep are auctioned off to settle the banks' debts, there may not be much of a company left for Fiat to partner with unless it shapes a new Chrysler out of the scraps and rubble of the company in a liquidation process.

Offers and counteroffers between the White House and the banks to save Chrysler in some form will be flying back and forth over the next four days.

The White House is determined to save jobs at Chrysler and at auto supplier companies that could fall into bankruptcy should Chrysler go under. Unless they are propped up, failure for those suppliers could seriously impact General Motors (GM), as well as Ford (F) and several foreign automakers that manufacture in the U.S.

The last thing the White House wants to see is a Chrysler bankruptcy trigger a domino effect that could put Ford—which hasn't taken any government loans and is poised to prosper in the next few years—into bankruptcy. GM faces its own deadline at the end of May to cut enough costs to qualify for more taxpayer loans or face bankruptcy.

Buy frozen! 6 ways to save at the supermarket

2009-04-24T06:55:00.004-05:00

by Phil Lempert

Fresh is not necessarily always better than frozen, says supermarket guru Phil Lempert

Everyone loves to save money, and since the average American goes grocery shopping a little more than twice a week, there is no better place to start looking for those extra dollars.

You already know that you should have a list prepared before you head to the store (those shoppers save an estimated 25 percent on their shopping bill by eliminating impulse purchases) and bring those coupons (which now have an average face value of almost a dollar), but what you may not know is that WHERE in the store you shop may also make a difference.

Today every retailer seems to be selling groceries, and why not? We buy foodstuffs more often than any other category of goods and therefore so is the likelihood of us visiting a particular store more often. And when we are there … if the merchandising is doing its job, we will buy more items than we planned to and that leads to extra profits for the store. As a result, there is a battle going on between warehouse clubs, supercenters, drug chains and our traditional supermarkets to entice us to their stores and purchase our groceries at their check stand.
So here’s a few tips that can turn your next shopping trip into a windfall!

Frozen produce vs. fresh
When produce like berries (blueberries and strawberries) are out of season, you can save a lot of money going to the frozen food case. For example, when blueberries are out of season, they are flown in from thousands of miles away and picked before they are ripe to not get blemished while traveling; on top of that they can cost $5 for just a half a pint. To get better taste, nutrition and value, try the berries in the frozen foods case. They can cost you less than half the price of fresh. This also holds true for veggies such as broccoli, green beans, edamame, corn, etc.

Frozen fish vs. seafood counter
The fish in the frozen aisle is cheaper than the ones that “seem” to be fresh on the seafood counter and most of the time is better in taste and texture for you. If you read the labeling carefully at the seafood counter, most of the time it says "previously frozen shrimp" or whatever it may be. The seafood counter seafood is frozen more than once on the way to the counter as opposed to the frozen packaged fish which has only been frozen once.

Dairy case cheese vs. cheese table
Natural cheeses are regulated by federal law, no matter what brand you buy. So whether it’s from the dairy case or from the fancy cheese table, it's pretty much the same exact cheddar. It's just the packaging you are paying for.

Pasta sauce vs. canned tomatoes
Any brand of high quality pasta sauce is about $7-plus and has sugars or high fructose corn syrup, tomato paste and water in its ingredients. If you buy canned tomatoes (namely Hunt's because they are grown and packed in California instead of other places with safety issues), you're buying cheaper, fresher tomatoes that actually taste better and are 100 percent tomatoes. The downfall here is that you'll have to blend your own flavoring in to make your sauce; but for me, that is a good thing.

Canned pasta vs. fresh pasta
With canned Chef Boyardee ravioli, you think you're getting preservatives and things that are bad for you. Not really ... most of the canned foods like Chef Boyardee are now prepared with real foods and ingredients and have healthy options. Compare the canned goods to fresh refrigerated pasta and sauce; you'll saving a lot of money and won’t have to worry about an expiration date.

Organic milk vs. store brand
Most store brands, as you know, are a whole lot cheaper than name brands. But remember that something specific like Oreo cookies won't taste the same if you buy a store brand because of secret recipes. However, most main staples in the kitchen like milk, butter, egss, sugar and flour are identical. Most store brands milk today is BST (bovine somatotropin, or bovine growth hormone)-free, so you can easily save 20 percent on switching from the organic milk brand to the store brand.

For more money saving tips, visit Phil’s Web site
www.supermarketguru.com.

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Surviving a layoff

2009-04-23T08:14:00.005-05:00

After being laid off, Carl Clay was lucky enough to find a new position. Just one problem: It ends in 10 months.

By Paul Keegan, Money Magazine contributing writer

Money Magazine) -- Last fall Carl and Brenda Clay thought they had their financial life under control. After years of struggling to support themselves while Carl got a Ph.D. in molecular medicine, they were finally earning enough to start paying down student loans and credit card debt and saving in earnest for retirement.

Carl, 36, made $135,000 a year, plus bonuses, as medical director for a pharmaceutical communications firm. Brenda, 37, chipped in another $14,000 as a teacher's aide. And the couple had more than they'd hoped for: three beautiful kids; a lovely split-level home in Wilmington, Del., with a recently renovated kitchen; two new cars; and three cats, a dog, and a turtle named Snickers.

But a few days after Christmas, Carl was called in by human resources: His company was downsizing. He was being laid off. "I was stunned," he says. Despite the economy, the firm had seemed to be doing well.

When he told Brenda, she tried to be optimistic. And when he gathered Eric, 11, Hannah, 9, and Mark, 8, the next morning to explain why he was still home in his slippers, Mark hugged him. "It's okay, Daddy," he said. "You'll find another job."

Two months later, however, Carl had few leads and no offers. The pharmaceutical industry was suffering - and so was he. With no emergency savings, the Clays had burned through Carl's two weeks of severance. His unemployment benefits and Brenda's salary were hardly enough to get by on; they were buying groceries on credit.

Just as Carl felt at his personal nadir, the phone rang. It was a temp firm calling about a résumé he'd sent to pharmaceutical giant Astra-Zeneca: Would Carl be interested in a 10-month contract job directing clinical trial publications for close to his old salary of $135,000 a year?

"I was thrilled," he says.

Then he read the fine print: He'd technically be an employee of a temp firm, Yoh Staffing, which offers no 401(k) plan, no bonuses, and no vacation (besides six paid holidays). He'd have to pay for his own health insurance. And, of course, if his contract wasn't renewed, he'd be back in the same boat in 10 months.

Still, Carl felt he had no other choice. He took the job.

In this economy he's probably not the only one who's been forced into temporary work: The number of un employed people who've accepted short-term assignments is up 73% over the past year, reports the Bureau of Labor Statistics.

Trading full-time staff for freelancers and contractors lets businesses cut the cost of benefits and payroll taxes. It also gives companies the flexibility to adjust headcount according to economic demands, says James Ziegler of Solo W-2, which provides services for independent professionals.

A few months into his new job, Carl likes the work he's doing. But he can't help feeling unsettled. He's full of questions: How can I get hired? How do I budget knowing my salary might again disappear? What about saving for retirement? The following answers should help him - and you, if you end up in the same predicament.

Network on the job
Carl has long wanted to work for AstraZeneca; now he has a golden opportunity to make an impression from the inside. He'll need to show his bosses he's not just a gun for hire focused on a single project but someone who can advance the mission of the company, says New York career coach Win Sheffield. He should offer to take on tough projects, pipe up at meetings with smart ideas, suggest solutions, and get friendly with office "influencers."

Sheffield also recommends networking in the office to find out if hiring temps is an experiment or the norm. If it's the former, full-time positions may come back when the economy does. He should ask for a quarterly review to make sure he's on track and let those in a position to hire know he's interested. If it's the norm, he should find out which jobs in which divisions are salaried, then make contacts in those areas who can notify him of open spots.

One thing Carl should be aware of as he pursues a permanent post: Per his contract, he can't come on staff at AstraZeneca for 90 days after his completion date without written consent from Yoh. (Staffing firms use such breaks to renew contracts year after year and protect themselves from losing talent to client companies.) This clause means that if Carl were lucky enough to get a real job with AstraZeneca, he could lose a paycheck for three months. That's a possibility he'll need to plan for.

Budget for a new reality
On paper, the Clays' income will be roughly the same as it was before Carl was laid off. But that doesn't mean they can just resume their old lifestyle. That paycheck comes with an expiration date, after which there may not be another equally well-paying job to be found.

Also, they now have new expenses, such as Carl's health insurance. Fortunately taxes are taken out of Carl's check; some contractors, known as 1099 employees (for the tax form), need to save for Uncle Sam as well.

"Temporary employees really need to scrub their budgets to find places to save," says McLean, Va., financial planner Everette Orr. The Clays might use a free budgeting site such as Mint.com or Quicken-Online.com to see where their money is going and how they can reduce expenses.

A top priority will be finding ways to build emergency savings. Contract workers need 12 months of living expenses banked, says Orr. Even if Carl gets a job with AstraZeneca, he'd need three months' expenses by January to cover that 90-day furlough.

The Clays' $4,000-a-month debt obligations - from their mortgage, kitchen reno, school loans, cars, and credit cards - eat up half their take-home pay, so they won't be able to build that kind of safety net quickly. But refinancing (see "Three Fast Fixes") may free up a chunk of cash.

Replace lost benefits
As a salaried worker, Carl had a lot of perks he'll miss out on as a contractor. Chief among them: subsidized health insurance and a 401(k) with employer match.

Brenda and the kids currently get insurance via her teaching job, but Carl can't join the plan, as he's been offered group coverage by the staffing agency. Luckily, those plans are a decent option: Though the firm doesn't help pay, the rates are good - $100 to $450 a month.

As for retirement, the options depend on how your income is reported to the IRS. W-2 workers such as Carl are technically considered employees. Thus, for tax-advantaged savings, they have merely the choice of a Roth IRA (which phases out at $166,000 in modified adjusted gross income for couples) or a traditional IRA (no income limit if neither you nor your spouse has a retirement plan at work). In either, you can save only $5,000 yearly, or $6,000 if you're 50 or older.

Because he has to focus on his emergency fund, it's unlikely that Carl will be able to save for retirement this year. But if he renews his contract next year and has sufficient emergency savings by then, he should open a Roth at that time, says Reston, Va., financial planner Frank Boucher. "He can take the payout tax-free when he retires, and since he's only 36, the money has a long time to grow."

Workers receiving 1099 income are considered self-employed and can therefore stash away a lot more. They can choose between an individual 401(k), with a $49,000 yearly contribution limit, and a SEPIRA, which allows contributions up to 18.6% of net profits, also maxing out at $49,000.

Keep up the hunt
Carl has called off his job search to focus on his new gig. But since his contract allows either side to terminate for any reason, he should keep looking for a position that pays as well but includes benefits, says Sheffield.

Benefits are worth a lot in terms of compensation - plus his family may need them, since Brenda isn't guaranteed a teaching job in the fall. And since Carl isn't guaranteed work at AstraZeneca either, he needs an all-fronts attack.

In the meantime, however, Carl is starting to appreciate the advantages of contract work. No more late nights at the office, for example. For now, that means extra time with his kids, but he may begin looking for freelance medical writing to help build that emergency fund.

"I'm still ambitious - I'd like to be president of a company someday," he says. "But right now it feels pretty great to go bike riding with my daughter and play Guitar Hero with my son."

Some job seekers may need extreme makeover

2009-04-22T08:15:00.003-05:00

By Eve Tahmincioglu
msnbc.com contributor

Forget the flip-flops — in a tough economy, sloppy grooming won't cut it

Stephen Staffieri of New York always considered himself pretty stylish, but he started to wonder about his look after several job interviews led nowhere.

Out of work since he was laid off in August from his job as a campus recruiter for JPMorgan, Staffieri, 28, knew he had the credentials to find another position in human resources. But something seemed to be holding him back.

He sought advice from David A. McKnight, an image consultant he met through a mutual friend. Staffieri’s appearance is now more polished — and his confidence level has exploded.

Sloppy attire and a lack of grooming are just not going to cut it in this economy, human resource managers say, no matter what the industry. So you may have to turn up the style-o-meter. Hiring managers already are noticing that a growing number of job seekers seem to be dressing for success.

Staffieri's image tweaks included tailoring his suit so it fit properly; getting rid of the cloth messenger bag he slung over his shoulder and replacing it with a briefcase; exchanging his comfortable shoes for a shiny, leather pair; and combing his hair to the side instead of the middle to mask his receding hairline.

“I feel like a million dollars,” he said, adding that he’s now doing better in interviews.

Many employers around the country are inundated with qualified and overqualified applicants for every job they need to fill, which means they can be pickier than ever. And I don’t mean just choosy when it comes to job qualifications.

“They have to stand out from the rest, in the right way,” said Chris Cappas, vice president of employment and training for Harrah’s Las Vegas region. That means no halter tops or flip-flops, even if you're just coming in to fill out an application. “The competition is fierce.”

Appearance can separate you from the pack, said John Haynes, human resource director for Johnson Controls Inc. in Capital Heights, Md. “It can (even) help you lose an opportunity if you don’t present well.”

Fierce competition
Miller Canning learned that lesson after she was laid off from her job doing Web strategy for a homebuilder 18 months ago. For the first time in her technology career, she had trouble finding a new gig.

“I was stunned I wasn’t getting any offers,” she recalled. “My resume is robust.”

Canning, 51, who lived in Washington and recently relocated to Charlotte, N.C., looked in the mirror.

She had been letting her hair go gray and was used to the casual dress in the technology industry. In interviews, she usually wore casual trousers and a shirt, sometimes a denim jacket.

She decided it was time for an image overhaul. She dyed her hair, bought a killer brown wrap dress and beefed up her accessories.

Her reinvented look paid off. She landed a job in e-commerce with home improvement company Lowe’s and started work on April 13.

“Competition is just so fierce right now,” she said. “You need any edge that you can get.”

I know, it’s disheartening to hear that you won’t be judged solely on experience and background but also by the way you look.

Unfortunately, that’s just part of human nature, and the tough economy is only making image more important, said David Sarwer, associate professor of psychology for the Center for Human Appearance at the University of Pennsylvania School of Medicine.

“For hiring managers, it’s clearly a buyer’s market,” he said. “They can be more selective ... not only hold out for the most qualified but the person who’s the most physically attractive.”

That doesn't mean you have to take drastic measures to improve your appearance. With so much hype about plastic surgery and job seeking lately, the reality is that the number of people choosing to go under the knife is actually on the decline.

What hiring managers say they are looking for is not someone who has skin that’s as taut as a piano string but someone who looks put together and professional.

Job seekers may even want to consider dropping a few pounds.

Weight Watchers has seen an influx of unemployed people signing up recently, said Aransas Thomas, who leads classes in New York.

“I see people coming in who are feeling crummy about themselves because they’re out of work, and most have a reduction in confidence,” she added.

The key, she said, is feeling better about you — both internally and externally.

Sadly, bias against overweight people is a reality in the workplace.

“It appears being overweight can work against you, particularly women. Being obese works against both men and women,” said Patricia Roehling, professor of psychology at Hope College in Holland, Mich., who has studied the impact of weight among managers in corporate America.

Alas, there are no federal laws and few state laws that protect individuals who are discriminated against based on their weight or their lack of attractiveness.

And attractiveness is subjective, said David Grinberg, a spokesman for the Equal Employment Opportunity Commission. “Some hiring officials may interpret such a directive to mean targeting or excluding workers based on traits related to race, national origin, religion, gender, age or because someone has a disability.” Which is, of course, illegal discrimination.

Reinventing your look
Looking fit also seems to be a selling point. Bob S., 47, a former Google manager from Saratoga, Calif., has been looking for an IT management job since June. To help in his job search, he dropped 35 pounds, thanks to bicycling; colored his hair; started wearing contacts to interviews; and now keeps his eyebrows trimmed. (He did not want his full name used for fear of affecting his job search.)

“All these feel vain, but maybe they'll help,” he said.

It’s not easy for everyone to update their look or lose weight on their own. You may want to enlist the help of a fitness trainer, a stylish friend or even invest some money on a style consultant.

McKnight, who helped revamp Staffieri’s image, has gotten so much interest from unemployed New Yorkers that he started a new service for the jobless. He offers a $300, three-hour makeover package, compared to the $150 an hour he usually charges.

For those who want to go it alone, Dallas-based image consultant Kimberly Bohanon offers some simple style tips to help spruce up your look:

If you haven’t updated your wardrobe in several years, invest in some new clothes. Buy quality pieces that are interchangeable.
Your clothing should fit you well. If you are successful at finding ready-to-wear items off the rack, count yourself lucky. Often, minor alterations are needed in order to achieve optimum fit.
Well-manicured hands and regularly trimmed hair are a must. If you haven’t updated your hairstyle in many years, it’s time to consider making some changes.
Wrinkled or stained clothing look highly unprofessional.
For many, shoes are a go-to accessory that add class and give insight to one’s personality.
Oh, the shoes. They can mean more than you think.

Dawn Gum, managing partner at Interior Architecture & Design in Research Triangle Park, N.C., recalls interviewing an entry-level applicant who had a great portfolio. She also had on a great pair of pea-green pumps with brown leather detailing.

“She got the job, and we've joked with her ever since that we hired her because of her shoes,” she said.

Eve Tahmincioglu writes the weekly "Your Career" column for msnbc.com and chronicles workplace issues in her blog, CareerDiva.net.

They're hiring!

2009-04-21T08:22:00.002-05:00

By Christopher Tkaczyk
As many big companies are announcing mass layoffs, these Fortune 100 employers have at least 150 openings as of mid-April.

Wal-Mart Stores

Headquarters: Bentonville, AR

Number of job openings: Thousands

What they're looking for: To staff new locations, Wal-Mart is hiring store managers, human resource managers, pharmacists, customer service associates and cashiers, among others.

Hewlett-Packard

Headquarters: Palo Alto, CA

Number of job openings: 150*

What they're looking for: HP is hiring in several areas of its businesses, including information technology, human resources, research and development, marketing, finance and administrative.

Bank of America Corp.

Headquarters: Charlotte, NC

Number of job openings: 1,860

What they're looking for: Positions are available in several areas including consumer banking, small business banking, credit cards, home loans, global banking, wealth management, technology, human resources, finance, communications, marketing and administration.

State Farm Insurance Cos.

Headquarters: Bloomington, IL

Number of job openings: 800+

What they're looking for: State Farm Insurance is hiring new insurance agents. There are positions in a variety of areas including claims and underwriting, finance, accounting and legal. The company aims to add 800 to 1000 new agent positions across the country, specifically in the Northeast, Texas and California.

WellPoint

Headquarters: Indianapolis, IN

Number of job openings: 1,225

What they're looking for: WellPoint is hiring health outreach specialists, nurse case managers, accountants, actuaries, claims representatives, customer care representatives, enrollment and billing representatives, account managers, marketing managers, business analysts and sales assistants.

Boeing

Headquarters: Chicago, IL

Number of job openings: 2,400

What they're looking for: Positions are available in various areas such as engineering, finance, communications, contracts, intellectual property, information systems, program and project management, operations, quality, marketing, supplier management and supplier quality, legal, business development and some administrative and support positions.

Microsoft

Headquarters: Redmond, WA

Number of job openings: 630*

What they're looking for: Positions are available in marketing, software development, customer service, information technology, operations, program management, small and medium business sales, software testing, administrative services, operations, user assistance and education, game design, content publishing, marketing communications, legal and finance.

MetLife

Headquarters: New York, NY

Number of job openings: 1,000+

What they're looking for: MetLife is hiring in the areas of information technology, human resources, finance, operations, call center, administration and sales (including individual policies, group, home loans - mortgage and reverse mortgages).

United Parcel Service

Headquarters: Atlanta, GA

Number of job openings: 3,070

What they're looking for: UPS is hiring part-time package handlers, mechanics, warehouse personnel, sales representatives and information technology professionals.

Medco Health Solutions

Headquarters: Franklin Lakes, NJ

Number of job openings: 300+

What they're looking for: There is selective hiring companywide. One division in particular, Liberty Medical, which serves the needs of patients with diabetes, is hiring for a number of customer service positions.

Lowe's

Headquarters: Mooresville, NC

Number of job openings: 7,900

What they're looking for: A variety of jobs are available in corporate, stores and distribution centers. Positions range from seasonal employees in Lowe's stores, to team members in regional distribution centers, to miscellaneous positions in the corporate office.

Time Warner

Headquarters: New York, NY

Number of job openings: 480

What they're looking for: Openings posted online include positions in creative, editorial, marketing, media, finance, accounting, graphics design, animation, new media, ad sales, film/television production and programming, administrative, information technology services and online.

Sears Holdings

Headquarters: Hoffman Estates, IL

Number of job openings: 500+

What they're looking for: Sears is hiring in information technology, eCommerce, finance, audit, marketing, brand management, merchandising and distribution. Positions are also available for associates, store managers and in-home technicians.

Supervalu

Headquarters: Eden Prairie, MN

Number of job openings: 180+

What they're looking for: Corporate positions are available in various departments including advertising, marketing, retail operations, merchandising and finance. In addition, there are open positions in retail stores and supply chain services.

Johnson Controls

Headquarters: Milwaukee, WI

Number of job openings: 750

What they're looking for: Most of the openings are positions related to energy efficiency.

GMAC

Headquarters: Detroit, MI

Number of job openings: 750

What they're looking for: Positions include project managers, mortgage loan officers, underwriters, servicing call center representatives and loan loss mitigators. Additional openings are available in information technology, finance, compliance, risk and treasury.

Comcast

Headquarters: Philadelphia, PA

Number of job openings: 1,000

What they're looking for: Comcast is hiring primarily in call center operations, field operations, warehousing and sales.

Northrop Grumman

Headquarters: Los Angeles, CA

Number of job openings: 3,700

What they're looking for: Openings include positions in information technology, engineering, production/manufacturing, supply chain management, program management, product development and administration (including human resources and finance).

Coca-Cola

Headquarters: Atlanta, GA

Number of job openings: 160

What they're looking for: Coca-Cola is hiring for a variety of different functions on many levels including finance, bottling, retail operations, production and customer service, delivery and food chemistry.

New York Life Insurance

Headquarters: New York, NY

Number of job openings: 3,640

What they're looking for: Positions are available in accounting, actuarial, auditing, customer support, information technology, investment management, legal, life insurance and annuity products, product development and strategy, sales and underwriting.

Aetna

Headquarters: Hartford, CT

Number of job openings: 550

What they're looking for: The majority of openings are in customer service, claims and health care, including nurses.

Motorola

Headquarters: Schaumburg, IL

Number of job openings: 520

What they're looking for: Openings are in engineering, sales, finance, marketing and project management.

Abbott Laboratories

Headquarters: Abbott Park, IL

Number of job openings: 260*

What they're looking for: Abbott is hiring in sales, legal, information technology, administrative, engineering, clinical research, manufacturing, quality assurance and accounting.

General Dynamics

Headquarters: Falls Church, VA

Number of job openings: 2,365

What they're looking for: General Dynamics is hiring in many areas, but most job opportunities are in technology and manufacturing fields, and include administrative, engineering, design and development and production and installation positions.

Prudential Financial

Headquarters: Newark, NJ

Number of job openings: 235

What they're looking for: Most openings are in financial, actuarial, market research and analysis, operations and administrative.

Humana

Headquarters: Louisville, KY

Number of job openings: 265*

What they're looking for: Humana has openings in sales, nursing, actuarial, finance, project management, information technology, pharmacy, medical, health, insurance, administrative, compliance, communications and legal.

Liberty Mutual Insurance Group

Headquarters: Boston, MA

Number of job openings: 500+

What they're looking for: Positions are available in finance, nursing, legal, claims and sales.

HCA

Headquarters: Nashville, TN

Number of job openings: 9,000

What they're looking for: HCA is hiring registered nurses, licensed practical nurses, clinical technicians and patient care support workers.

Bank of America returns to profitability

2009-04-20T07:57:00.008-05:00

A quarter after losing $1.8 billion, banking giant reports profit of $4.2 billion, topping Wall Street estimates; but stock falls on warning of weak credit quality.
By David Ellis, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Bank of America surprised Wall Street Monday, reporting a first quarter profit of $4.2 billion -- well ahead of expectations. But the stock fell in pre-market trading as the bank warned of "deteriorating credit quality."

On a per share basis, the company said it earned 44 cents during the quarter. A year ago, the bank reported a profit of $1.21 billion, of 23 cents a share.

The results were much better than analysts' expectations of a profit of $615 million, or 4 cents a share, according to Thomson Reuters.

Last quarter, the Charlotte, N.C.-based bank suffered one of its worst periods in recent memory, logging a $1.79 billion loss.

At that time, the company revealed it needed an additional $20 billion in government funds to help absorb last fall's purchase of Merrill Lynch. Including that round of capital, Bank of America has received $45 billion in government assistance since the onset of the financial crisis last fall.

Ken Lewis, Bank of America's chairman and CEO, praised the company's latest results, citing contributions provided by Merrill and its other major purchase last year -- Countrywide Financial.

The purchase of the California-based mortgage lender helped Bank of America capitalize on the latest surge in mortgage lending and refinancing activity, the company said.

The bank added that Merrill Lynch contributed to earnings in a number of units, including Bank of America's wealth management and trading divisions.

Adjustments on some of Merrill Lynch's debt also helped Bank of America book a gain of $2.2 billion in net interest income during the quarter.

Also helping the company was a $1.9 billion pre-tax gain on the sale of part of its stake in China Construction Bank. Bank of America said it continued to own roughly 17% of the Chinese lender's common shares.

But Lewis cited growing credit problems at the bank, specifically the firm's consumer-related loan portfolios, as more and more Americans found themselves out of work or filing for bankruptcy.

Bank of America's credit card division, for example, swung to a net loss of $1.8 billion during the quarter, hurt by rising credit costs. The bank also added $6.4 billion to its loan loss reserves in the quarter.

Lewis added that the very issue of loan quality would be among the biggest issues facing the company going forward.

"We understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment," Lewis said in a statement.

The company, however, maintained that it continued to extend credit during the first three months of the year. Many banks have been criticized for not using the billions of dollars in government assistance they've received for new loans.

During the quarter, Bank of America said it funded $85 billion in first mortgages, although 75% of that amount was for refinancing as opposed to home purchases

Bank of America also took pains to point out that it was working to help stem the tide of foreclosures across the country, saying it modified nearly 119,000 loans during the quarter.

Bank of America (BAC, Fortune 500) shares fell nearly 9% in pre-market trading Monday.

Bank of America is the latest big bank to report surprisingly strong numbers this quarter.

Over the past two weeks, rivals Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and even Citigroup (C, Fortune 500), which like Bank of America has received $45 billion in government assistance, have all delivered earnings that exceeded Wall Street's expectations

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10 free or cheap ways to keep kids entertained

2009-04-17T08:31:00.003-05:00

By Laura T. Coffey

Make the old new again, get ’em outside and learn lessons from your mom

The economy’s in the toilet. The job market’s lousy. But you know what can sting even more? The specter of having to say no to many of the requests your child makes because money is so tight.

I’m not talking about excessive requests or spoiled-brat requests. I’m talking about reasonable requests involving stuff or activities that are just plain fun. Having to say no again and again can be downright painful.

Take heart, though: There are plenty of tricks for helping your kids have fun and get at least some of what they want without completely busting your budget. It just requires some forethought and creativity.

What’s more, crazy times like these give many parents ample opportunities to pass along valuable money lessons to their kids.

“I think it’s really important to teach children how to set priorities and set goals,” said Susan Beacham, a former private banker who founded Money Savvy Generation, a company in Lake Bluff, Ill., that teaches personal-finance concepts to children and parents. “It’s a precursor to teaching them that there’s a lot they can do with money, and spending is not all they have to do with money.”

Bearing that in mind, the following tips can help you keep your kids wealthy in the fun department, no matter how the economy is faring.

1. WWMD: What would Mom do?
Beacham pointed out that our moms didn’t have access to DVDs, Xboxes, Game Boys and iPhones when we were little. Heck, many of our mothers didn’t even have access to a second car. So how in the heck did they keep us entertained?

“Your mom probably went to the park with you, went on walks with you, read books with you, told you to go outside and come back later,” Beacham said. “I know the world has changed, I know it’s a scarier place, but is it so scary that your kid can’t ever go out and play with a neighbor kid?”

Beacham said reflecting on the activities our moms did with us can yield all sorts of ideas for stuff we can do with our kids — stuff that costs little or nothing. Can you cook together? Head out to the library together? Play board games or cards together?

2. It’s OK to let children entertain themselves.
These days many kids grow accustomed to a frantic, highly structured pace at a very young age. But sometimes it really is OK — even beneficial — for them to entertain themselves all on their own in ways that aren’t hyper-stimulated and super-regimented.

Again, take a lesson from the “What would Mom do?” school of thought. I remember plenty of times where my mom would encourage me to read, draw or listen to my records. (That’s right ... I said records!) A friend of mine who is the mother of four grown children told me that one of her funniest memories as a mom stemmed from a moment when her daughter was bored out of her wits and pestering her for something to do. “I told her to go write an opera — and she did! She made it very dramatic, and she performed it for me when she was done. It was a scream!”

3. Stockpile ammunition for future use.
Beacham noted that many parents feel subtle or not-so-subtle pressure to invite lots of kids to their children’s birthday parties. This phenomenon can lead to an overwhelming stash of gifts for a little kid. “OK, so here’s what you do,” Beacham said. “You let him open them, and then you put half of them or two-thirds of them away and re-gift them later. They’ll completely forget 10 minutes after the party how much they received. They’ll be pleased just with what’s in front of them. Keep some in reserve and pull them out later when you really need them.”

4. Make the old new again.
In a similar-yet-different vein, here’s another suggestion from Beacham that I think borders on genius: Take toys that have been all played out by your kids and tape them up in a box (or two or three). Label each box with a date and just a few words that merely hint at the contents without giving them away. Store the boxes in a basement or garage or crawl space — ideally for several months.

Then when your kids start clamoring for something new to play with, coordinate a scavenger hunt. “Take ’em down to the basement and say, ‘OK, pick one.’ They’ll be thrilled. And this is nice because it teaches them that things have value in the long term, not just the short term. I promise you they’ll replay with those toys as much as they did the first time.”

5. Have your child compile a wish list.
So there you are, in a store with a child who’s about to MELT DOWN if he or she doesn’t get that certain toy. The situation is tense. You know you shouldn’t spend the money on that item right now, but you also want to avoid a tantrum. Beacham offered this trick, which really can work once you get this system up and running: “Tell your child, ‘OK, add this to your list.’ ”

Your mutual understanding with your child can be that the list will be consulted for any and all special gift-giving opportunities. If he or she really wants something, it just has to go on the list and it will be taken seriously. “If they’re too young to write down what they want, they can draw it so they’ll remember it. Post the list if you want. Share the list with grandparents. Ask children to keep the list up to date and put a line through things they’re no longer interested in. It will help them understand how to prioritize .... And when gift-giving time rolls around, it will be appalling to you to see how many things on that list they no longer care about.”

6. Get support from grandparents, aunts and uncles.
The more people who adore your children and want to be involved in their lives, the better. If you have close family members who know you’re going through a tough time financially, ask them to help you grant wishes that are beyond your budget. “Just ask anyone who’s on the bench in your child’s life to help in specific ways,” Beacham said. “They’ll want to do it.”

7. Barter, swap, wheel and deal.
The amount of barely used toys and kids’ clothes and books that can be picked up at garage sales and via a wide variety of Web sites is shocking. You really don’t have to pay top dollar for a lot of the stuff your kid might want. Just head out to garage sales in nice suburban neighborhoods on almost any Saturday morning, and your haul can be phenomenal.

You also can swap toys and other items on
SwapThing.com and you find all sorts of items through
Craigslist,
The Freecycle Network,
Sharing is Giving,
Free Cycle America,
Reuse It Network, and
Free Sharing.
If you do nab any used toys or gear, check for recalls through the U.S. Consumer Product Safety Commission by calling 1-800-638-2772 or visiting their web site.

8. Become an expert on all the free kids’ activities in your area.
If you just don’t have time to do this kind of legwork, turn to a friend and fellow mom who does. Public libraries always have activities for kids that are completely free, and most museums offer free or greatly reduced admission on one day of the week or month. Some kindergarten teachers also can be fantastic resources in this department, Beacham noted, so be sure to ask them whether they know of any fun free stuff to do. And don’t forget the power of the Internet. A quick online search for the name of your city along with the words “free kids’ activities” can do wonders. Some Web sites are dedicated to highlighting free or dirt-cheap activities for parents in certain cities; Red Tricycle, for instance, provides lists of such options in the Seattle, San Francisco and San Diego areas.

9. Help your child establish a ‘coupon fund.’
Here’s a deal you can cut with your kid: If he or she finds coupons for items you buy as a family and clips enough of them that you manage to save $10 on groceries, you can promise to share $5 of that savings with your child. Then your child can save up that coupon money and put it toward something he or she has been wanting. “So they tell you they want a video game. You can say, ‘Use your coupon money. How much do you have saved up now?’ ” Beacham suggested.

10. Get outside.
So long as the weather is tolerable out there, your kids could benefit immensely from getting some fresh air. Maybe you don’t have the time, energy or resources to organize a big camping trip right now — but could your kids camp in the backyard on a Saturday night? Could you even help them roast some marshmallows out there without burning the house down? Other ideas: Are there any beaches, beautiful parks or nifty points of interest in your area where you could let your kids run around, burn some energy and get some exercise? If you already have bikes, could you go biking together on a day off for no money at all? (Just carry some snacks or sandwiches with you in a backpack!) By doing something along these lines where you live, your kids will have loads of fun, and you’ll feel better too.