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Showing posts with label United State (USA). Show all posts
Showing posts with label United State (USA). Show all posts
Saturday, August 21, 2010
"Humankind cannot bear very much reality" TS Eliot, 4 Quartets, 1936
Who now remembers the stock market rally that followed 1929's initial collapse? By November 1929, the US Dow Jones Index had fallen to 195 from its September high of 386. But by April it had rallied 52% to 297.
At the time, this seemed as sensational as the Dow's recent rally, which took it up 74% from March 2009's low of 6469, to peak a year later at 11258. And it occurred without any co-ordinated G-20 stimulus packages around the world. It just happened.
But when the famous English poet (and former bank clerk) TS Eliot published in 1936 the first part of his major work 'The Four Quartets', quoted above, his tone reflects the weariness of the subsequent Downtrend, not the euphoria felt during the Rebound.
The chart above captures the textbook path of a major financial crisis, as first described by Merrill Lynch's guru, Bob Farrell. There is an initial Sharp Decline, as seen this time from September 2008. Then there is a Rebound. And finally, the Drawn-out Downtrend.
The chart also adds the 'Paradigm of Loss' model developed by famous psychologist Elizabeth Kübler-Ross. As first noted by the Financial Timeslast year, her model is potentially an excellent guide to the stages through which the current Crisis will likely pass.
The FT suggested that the world was slowly moving from Denial into Anger. Clearly some policy makers, and many bankers, still remain in the Denial phase. But the rise of the Tea Party protest movement in the USA, as well as the riots in Greece and elsewhere, supports the FT's argument.
This emphasises that after 2 years, we are still towards the beginning of the Crisis. Only a relatively few consumers or companies have moved towards the Bargaining phase, to focus on saving rather than borrowing. Most are convinced any cutbacks will impact others, and not themselves.
Equally, we are nowhere near the Depression and Acceptance stages, which would indicate that the world was getting ready to move on to accept the world in its post-Crisis form.
The blog hopes that its analysis is wrong, and that in a year's time it will be able to eat humble pie and admit it was too pessimistic. But if it was still running a major chemical business, it would by now have ensured that a detailed contingency plan was ready, in case its fears come true.
Posted by Paul Hodges on August 16, 2010 6:49 AM
Baby-Boomers cut spending, start saving
Consumer spending is 70% of US GDP. And because US GDP is so large, this means the US consumer is 17% of global GDP. This is the same as the combined GDP of China and Japan, who rank 2 and 3 after the USA.
So a change in US consumer spending matters. And it particularly matters to the chemical industry, as our products are focused on consumer needs. Thus the blog is taking very seriously indeed comments from major US consumer companies, who suggest we can no longer rely on the "shop-till-you-drop American consumer" to support global demand. For example:
• Wal-Mart, the world's leading retailer, has seen its US same store sales drop for the last 5 quarters. This has not happened before. Wal-Mart also warned they expect consumers to "remain cautious about spending".
• Target, the leading discount store, confirmed the blog's view thatMarch was the peak of the cycle, with CEO Gregg Steinhafel saying "its clear Q2 marked a change in trend. GDP growth softened considerably, and our sales trends levelled off as well".
• Procter & Gamble, the world's largest consumer products company, gave the same message. "Consumers day-to-day spending reflects an entrenched frugality that often means leaving P&G's relatively inexpensive products on the shelf."
• Target, the leading discount store, confirmed the blog's view thatMarch was the peak of the cycle, with CEO Gregg Steinhafel saying "its clear Q2 marked a change in trend. GDP growth softened considerably, and our sales trends levelled off as well".
• Procter & Gamble, the world's largest consumer products company, gave the same message. "Consumers day-to-day spending reflects an entrenched frugality that often means leaving P&G's relatively inexpensive products on the shelf."
This is serious stuff. And it links with major demographic changes taking place in the USA. The boom in chemical demand over the past 40 years is closely tied to demand from the 'baby boomer" generation (born between 1946 - 1964). They now own 80% of all US personal financial assets and are responsible for over 50% of discretionary spending power.
But they are getting closer to retirement, with a median age of 54 years. And so their need for 'new things' is reducing, as is their ability to afford them. Equally, as the above chart from thechartstore.com shows, their savings rate is starting to shoot up. They were let down by the stock market after the dot-com boom; then the housing market disappointed.
So now we seem to be seeing the start of a generational switch from spending to saving in the world's most important market. From close to zero, the savings rate has already jumped to 6%, as baby-boomers worry about how to afford their retirement, especially as they can expect to live longer than any generation in history.
Of course, if stock market and housing prices began to recover, then this trend might reverse again. But there is clearly a danger of a vicious circle developing, where fear replaces greed as the prime driver in financial markets, and drives a growing demand for yield.
The back-to-school season, now underway in the USA, is the second most important shopping period of the year. It will therefore be even more critical than usual for those wishing to forecast chemical demand.
If Wal-Mart, Target and P&G are right, then the US economy could easily see US GDP growth of below 2% in Q4.
This would not be good news for everyone in the chemical industry, dependent on the US consumer to drive future demand.
Posted by Paul Hodges on August 21, 2010 8:20 AM
Wednesday, September 09, 2009
Current Accident-Reporting Rules Sufficient - US Chem Industry
WASHINGTON (ICIS news)--US chemical industry officials on Tuesday urged a federal safety agency to make use of existing national accident reporting requirements instead of imposing a new and duplicative layer of regulations covering serious plant site accidents.
The Chemical Safety and Hazard Investigation Board (CSB) provided stakeholder comments regarding its plans to issue formal regulations to ensure that the board is notified quickly of any serious chemicals-related explosion or other accident that may warrant an investigation by the CSB.
The board issued a formal notice of proposed rulemaking on 25 June and invited comment from industry and the general public.
CSB has been under pressure from Congress and the Department of Homeland Security (DHS) to implement an accident reporting requirement as stipulated by the Clean Air Act amendments of 1990.
The board is charged by Congress to investigate chemical sector accident resulting in any fatalities, serious injury or substantial property damage.
CSB has long maintained that it does not need a formal reporting process, saying that it receives adequate and timely notice of significant chemical accidents through the news media and other federal agencies.
However, in issuing its 25 June rulemaking proposal, the board acknowledged that it has a statutory obligation to implement a formal reporting procedure that would require notice to the CSB by companies or site operators as soon as a serious accident occurred.
The American Chemistry Council (ACC) said that the board can fulfil its legal requirement by establishing formal reporting relationships with other federal agencies that already receive real-time accident notifications from the industry.
The council in particular cited the longstanding federal requirement for industry reports of accidents, spills or other releases of hazardous substances to the National Response Center (NRC), a 24-hour, nation-wide reporting operation that has been maintained by the US Coast Guard since 1974.
The NRC collects real-time reports from chemical firms and other companies required under a variety of federal environmental laws and regulations.
According to its website, the centre currently collects and relays accident information for and to numerous federal agencies - including the Environmental Protection Agency (EPA), the Nuclear Regulatory Commission, the Department of Energy (DOE), the Federal Bureau of Investigation (FBI), the Department of Defense (DOD) and the Federal Railroad Administration (FRA).
However, there apparently is no formal relationship between the NRC and the CSB by which the centre can collect accident information on behalf of the board and relay that real-time data to the CSB.
The council cautioned that if the CSB were to develop and implement a separate reporting structure and requirement, it could cause confusion and perhaps undermine existing industry and government programmes “to provide timely emergency management and response”.
The National Petrochemical & Refiners Association (NPRA) echoed that recommendation, saying in its comments to the board that “reporting beyond what is currently done would not necessarily improve the current process”.
Instead, the NPRA said, a new CSB reporting mandate “could in fact create confusion and diversion during a critical emergency response”.
The Chemical Safety and Hazard Investigation Board (CSB) provided stakeholder comments regarding its plans to issue formal regulations to ensure that the board is notified quickly of any serious chemicals-related explosion or other accident that may warrant an investigation by the CSB.
The board issued a formal notice of proposed rulemaking on 25 June and invited comment from industry and the general public.
CSB has been under pressure from Congress and the Department of Homeland Security (DHS) to implement an accident reporting requirement as stipulated by the Clean Air Act amendments of 1990.
The board is charged by Congress to investigate chemical sector accident resulting in any fatalities, serious injury or substantial property damage.
CSB has long maintained that it does not need a formal reporting process, saying that it receives adequate and timely notice of significant chemical accidents through the news media and other federal agencies.
However, in issuing its 25 June rulemaking proposal, the board acknowledged that it has a statutory obligation to implement a formal reporting procedure that would require notice to the CSB by companies or site operators as soon as a serious accident occurred.
The American Chemistry Council (ACC) said that the board can fulfil its legal requirement by establishing formal reporting relationships with other federal agencies that already receive real-time accident notifications from the industry.
The council in particular cited the longstanding federal requirement for industry reports of accidents, spills or other releases of hazardous substances to the National Response Center (NRC), a 24-hour, nation-wide reporting operation that has been maintained by the US Coast Guard since 1974.
The NRC collects real-time reports from chemical firms and other companies required under a variety of federal environmental laws and regulations.
According to its website, the centre currently collects and relays accident information for and to numerous federal agencies - including the Environmental Protection Agency (EPA), the Nuclear Regulatory Commission, the Department of Energy (DOE), the Federal Bureau of Investigation (FBI), the Department of Defense (DOD) and the Federal Railroad Administration (FRA).
However, there apparently is no formal relationship between the NRC and the CSB by which the centre can collect accident information on behalf of the board and relay that real-time data to the CSB.
The council cautioned that if the CSB were to develop and implement a separate reporting structure and requirement, it could cause confusion and perhaps undermine existing industry and government programmes “to provide timely emergency management and response”.
The National Petrochemical & Refiners Association (NPRA) echoed that recommendation, saying in its comments to the board that “reporting beyond what is currently done would not necessarily improve the current process”.
Instead, the NPRA said, a new CSB reporting mandate “could in fact create confusion and diversion during a critical emergency response”.
The board is expected to issue a proposed reporting rule by the end of this year and, following another period of public comment, implement a final reporting mechanism in early 2010.
quoted from: ICIS.com
Read more...Monday, August 31, 2009
US Inherently Safer Technology Mandate Seen as Unlikely
WASHINGTON (ICIS news)--US chemical sector officials are increasingly confident that an inherently safer technology (IST) mandate will be stripped from new antiterrorism legislation pending in Congress, sources said on Friday.
New and permanent legislation designed to replace the existing but temporary Chemical Facility Anti-Terrorism Standards (CFATS) has been approved by a key House committee.
That measure, HR-2868, “The Chemical Facility Antiterrorism Act of 2009”, does include an IST mandate, giving the Department of Homeland Security (DHS) authority to order changes in a chemical plant’s storage capacities, feedstocks, processes or products if deemed necessary to deter a potential terrorist attack.
However, that provision likely will not survive in a final bill, said Jim Cooper, vice president for petrochemicals at the National Petrochemical & Refiners Association (NPRA).
Cooper noted that two top Homeland Security Department officials in the Obama administration have spoken against an IST mandate and the White House has pointedly declined to endorse the House bill.
“If they thought the pending bill was what they wanted, they would have endorsed it,” Cooper said, referring to Obama administration officials.
In addition, the Obama administration does support language in the DHS appropriation bills already approved by both the House and Senate that extends the existing regulations for another year. The existing rules would otherwise expire on 30 September.
“The fact that the administration wants to give CFATS another year of operational life we see as indication from Obama that an IST mandate is not the right type of method to ensure facility security,” Cooper said.
Scott Jensen, a spokesman at the American Chemistry Council (ACC), also said he sees strong signals from the department and the White House that they prefer the existing site security measures.
“You can just go back and look at the DHS testimony to the House Homeland Security Committee earlier this year, and it is clear that the administration sees substantial progress with the current law and they want to continue to implement the programme without major changes,” Jensen said.
The House and Senate are expected to convene a conference committee in September to shape a final DHS appropriations bill, with the one-year CFATS extension intact, and send it on to the White House for final action by the president.
With the existing regulations safely extended into late 2010 and with major legislative issues such as health care and climate change crowding the congressional calendar, action on a new chemical facility security bill is likely to be postponed to next year, Cooper said.
New and permanent legislation designed to replace the existing but temporary Chemical Facility Anti-Terrorism Standards (CFATS) has been approved by a key House committee.
That measure, HR-2868, “The Chemical Facility Antiterrorism Act of 2009”, does include an IST mandate, giving the Department of Homeland Security (DHS) authority to order changes in a chemical plant’s storage capacities, feedstocks, processes or products if deemed necessary to deter a potential terrorist attack.
However, that provision likely will not survive in a final bill, said Jim Cooper, vice president for petrochemicals at the National Petrochemical & Refiners Association (NPRA).
Cooper noted that two top Homeland Security Department officials in the Obama administration have spoken against an IST mandate and the White House has pointedly declined to endorse the House bill.
“If they thought the pending bill was what they wanted, they would have endorsed it,” Cooper said, referring to Obama administration officials.
In addition, the Obama administration does support language in the DHS appropriation bills already approved by both the House and Senate that extends the existing regulations for another year. The existing rules would otherwise expire on 30 September.
“The fact that the administration wants to give CFATS another year of operational life we see as indication from Obama that an IST mandate is not the right type of method to ensure facility security,” Cooper said.
Scott Jensen, a spokesman at the American Chemistry Council (ACC), also said he sees strong signals from the department and the White House that they prefer the existing site security measures.
“You can just go back and look at the DHS testimony to the House Homeland Security Committee earlier this year, and it is clear that the administration sees substantial progress with the current law and they want to continue to implement the programme without major changes,” Jensen said.
The House and Senate are expected to convene a conference committee in September to shape a final DHS appropriations bill, with the one-year CFATS extension intact, and send it on to the White House for final action by the president.
With the existing regulations safely extended into late 2010 and with major legislative issues such as health care and climate change crowding the congressional calendar, action on a new chemical facility security bill is likely to be postponed to next year, Cooper said.
quoted from: ICIS.com
Read more...Friday, July 31, 2009
US Economy Likely to Contract in Second Quarter
WASHINGTON - President Barack Obama said Thursday that despite signs of a US economic recovery, figures will likely show gross domestic product contracting in the second quarter of 2009.
“I suspect that GDP numbers will still show that the economy contracted in the second quarter, that job loss is still a huge problem,” Obama said.
His comments come ahead of the publication on Friday of results offering a snapshot of how the world’s largest economy fared between April and June.
Many hope those figures will point to the end of an 18-month crippling recession, after desperately gloomy figures in the previous two quarters.
Figures from the Bureau of Economic Analysis showed the economy shrank 5.5 percent in the first quarter, after a 6.3 percent slide in the fourth quarter of 2008.
Obama, echoing the expectations of forecasters who see growth resuming in the second half of 2009, sounded an optimistic tone about the economy.
“We have seen a significant slowing down of the contraction over the last several months,” Obama said, pointing to a slowing of job and output losses, and an easing of credit markets.
“All of that is a sign that we have stepped away from the precipice.”
“We were in a position where we could have gone into a great depression. I think those fears have abated.”
“I suspect that GDP numbers will still show that the economy contracted in the second quarter, that job loss is still a huge problem,” Obama said.
His comments come ahead of the publication on Friday of results offering a snapshot of how the world’s largest economy fared between April and June.
Many hope those figures will point to the end of an 18-month crippling recession, after desperately gloomy figures in the previous two quarters.
Figures from the Bureau of Economic Analysis showed the economy shrank 5.5 percent in the first quarter, after a 6.3 percent slide in the fourth quarter of 2008.
Obama, echoing the expectations of forecasters who see growth resuming in the second half of 2009, sounded an optimistic tone about the economy.
“We have seen a significant slowing down of the contraction over the last several months,” Obama said, pointing to a slowing of job and output losses, and an easing of credit markets.
“All of that is a sign that we have stepped away from the precipice.”
“We were in a position where we could have gone into a great depression. I think those fears have abated.”
quoted from: Khaleej Times
Read more...US Dow Beats Q2 Forecasts on Stabilising Economy, Cost Cuts
HOUSTON (ICIS news)--Dow Chemical beat analyst forecasts for second-quarter performance behind stabilising economic conditions, continued aggressive cost-cutting and a transition to specialty chemicals and away from basic chemicals, the US major said on Thursday.
While the company posted a net loss of $435m (€309m) due to charges related to its acquisition of Rohm and Haas, its earnings per share, excluding items, were 5 cents. Analysts expected a loss of 5-9 cents/share.
“We are seeing clear signs that stabilisation is occurring,” CEO Andrew Liveris said on a conference call. “We’re seeing operating rate improvements because of sequential volume improvements, especially in the emerging world.”
Dow cited particularly strong growth in the Asia Pacific region, and said it had seen evidence that China’s massive fiscal stimulus was yielding dividends.
In particular, Dow said its electronic and specialty materials segment was very strong in Asia, with year-over-year volumes actually increasing in June.
The company also cited volume recovery within coatings and basic plastics.
However, it said the economic rebound in the US and Europe would continue to be slow, with high unemployment figures limiting consumer spending.
As such, the company said its second-quarter operating rate was at about 75%, with overall demand still below last year and excess capacity remaining.
That 75% figure is roughly equivalent to October 2008, and a 30 percentage point improvement from December.
Overall, volumes increased 5% from the first quarter, Dow said, marking the first time since the 2008 second quarter it had posted a sequential volume gain.
The company said it also outperformed expectations because of cost-cutting measures. Dow has already achieved $573m, or about 70%, of its 12-month cost synergy run rate target of $780m for its 1 April acquisition of Rohm and Haas.
Likewise, Dow also said it had agreed the sale of its stakes in the Optimal olefins, glycols and chemicals joint ventures to Malaysia’s Petronas for $660m. The joint venture is held through Dow’s Union Carbide subsidiary.
That sale should be complete in the third quarter, Dow said.
That marks the fourth divestiture Dow has agreed to this year. Other divestments include Morton Salt, the company’s TRN refinery, and its calcium chloride business, which closed in the second quarter, Dow said.
The divestments are part of a long-term plan to raise $23bn-26bn in asset sales to help pay down the company’s debt. Dow said it remains on track to reach its goal of $4bn in asset sales for 2009.
In addition, Dow said its selling, general and administrative expenses (SG&A) were down $150m year over year, and it was more than halfway to its target of 8,000 job cuts.
Dow also said it would continue to lower its manufacturing footprint, reducing ethylene production by 30% on the US Gulf and eliminating purchases of ethylene from the merchant market.
Moreover, Dow said it had shut down 1m tonnes of chlorine/caustic soda capacity in North America since 2007, and was spinning its styrenics and aromatics businesses into a separate company in an attempt to prepare them for sale.
Those actions are part of the company’s long-term plan to reduce its exposure to basic chemicals.
“As we create our new portfolio, we believe we will continue to surprise to the upside on our results,” Liveris said.
Liveris said volumes gained momentum throughout the second quarter, peaking in June. However, he cautioned that July figures were not at June levels, due largely to European vacations.
Liveris said the company’s operating plan did not count on any material improvement in market conditions for the remainder of 2009, due to the general economic uncertainty.
Dow shares surged to $21.76 in mid-day trading on the New York Stock Exchange, up $1.49, or 7.4%.
While the company posted a net loss of $435m (€309m) due to charges related to its acquisition of Rohm and Haas, its earnings per share, excluding items, were 5 cents. Analysts expected a loss of 5-9 cents/share.
“We are seeing clear signs that stabilisation is occurring,” CEO Andrew Liveris said on a conference call. “We’re seeing operating rate improvements because of sequential volume improvements, especially in the emerging world.”
Dow cited particularly strong growth in the Asia Pacific region, and said it had seen evidence that China’s massive fiscal stimulus was yielding dividends.
In particular, Dow said its electronic and specialty materials segment was very strong in Asia, with year-over-year volumes actually increasing in June.
The company also cited volume recovery within coatings and basic plastics.
However, it said the economic rebound in the US and Europe would continue to be slow, with high unemployment figures limiting consumer spending.
As such, the company said its second-quarter operating rate was at about 75%, with overall demand still below last year and excess capacity remaining.
That 75% figure is roughly equivalent to October 2008, and a 30 percentage point improvement from December.
Overall, volumes increased 5% from the first quarter, Dow said, marking the first time since the 2008 second quarter it had posted a sequential volume gain.
The company said it also outperformed expectations because of cost-cutting measures. Dow has already achieved $573m, or about 70%, of its 12-month cost synergy run rate target of $780m for its 1 April acquisition of Rohm and Haas.
Likewise, Dow also said it had agreed the sale of its stakes in the Optimal olefins, glycols and chemicals joint ventures to Malaysia’s Petronas for $660m. The joint venture is held through Dow’s Union Carbide subsidiary.
That sale should be complete in the third quarter, Dow said.
That marks the fourth divestiture Dow has agreed to this year. Other divestments include Morton Salt, the company’s TRN refinery, and its calcium chloride business, which closed in the second quarter, Dow said.
The divestments are part of a long-term plan to raise $23bn-26bn in asset sales to help pay down the company’s debt. Dow said it remains on track to reach its goal of $4bn in asset sales for 2009.
In addition, Dow said its selling, general and administrative expenses (SG&A) were down $150m year over year, and it was more than halfway to its target of 8,000 job cuts.
Dow also said it would continue to lower its manufacturing footprint, reducing ethylene production by 30% on the US Gulf and eliminating purchases of ethylene from the merchant market.
Moreover, Dow said it had shut down 1m tonnes of chlorine/caustic soda capacity in North America since 2007, and was spinning its styrenics and aromatics businesses into a separate company in an attempt to prepare them for sale.
Those actions are part of the company’s long-term plan to reduce its exposure to basic chemicals.
“As we create our new portfolio, we believe we will continue to surprise to the upside on our results,” Liveris said.
Liveris said volumes gained momentum throughout the second quarter, peaking in June. However, he cautioned that July figures were not at June levels, due largely to European vacations.
Liveris said the company’s operating plan did not count on any material improvement in market conditions for the remainder of 2009, due to the general economic uncertainty.
Dow shares surged to $21.76 in mid-day trading on the New York Stock Exchange, up $1.49, or 7.4%.
quoted from: ICIS.COM
Read more...Wednesday, July 22, 2009
Creditors Oppose Executive Bonuses for Bankrupt Lyondell
HOUSTON (ICIS news)--Creditors protested a multi-million dollar bonus package proposal for Lyondell Chemical executives that was originally scheduled to be heard on Tuesday by a US bankruptcy court.
The hearing has been moved to 11 August.
A creditors' committee wants the bonuses withheld from five officers - the potential defendants in a lawsuit that it plans to file in bankruptcy court. Those officers could earn millions under the bonus plan, the committee alleged.
The officers include Alan Bigman, Edward Dineen, Bart de Jong, James Bayer and Michael Mulrooney. The committee accused them of driving Lyondell into bankruptcy by pursuing a merger with Basell.
As such, the five should not receive bonuses, the committee said in an objection to the bonus package.
"These defendants previously received millions of dollars in connection with the merger that was the cause of these bankruptcy proceedings and ruinous to unsecured creditors," the committee said.
The committee alleged that the merger earned Dineen $8.1m (€5.7m), de Jong $5.1m and Bayer $4.6m.
"The conduct of these defendants in approving the merger and merger-related-subsidiary guarantees contributed to [Lyondell's] insolvency, undercapitalisation and inability to pay debts when due," the committee said.
The committee limited its bonus objection to the five officers.
Lyondell said it would not comment beyond the filings it made in bankruptcy court.
In its court filing, Lyondell proposed four different bonus packages.
One, which includes the contested bonuses, is capped at $45m and would target 325 senior officers and managers. Senior officers could receive at least 120% of their monthly salary if the company achieves a target of $175m/month in earnings before taxes, interest, depreciation, amortisation and restructuring costs (EBITDAR).
Managers would receive 12.5-60%, depending on their rank and if they work in the US, Lyondell said.
A retention bonus-plan capped at $15m would go towards 350 non-executive employees, whom Lyondell deemed to have critical, irreplaceable skills.
A third $1m discretionary bonus-plan would be a modified version of the programme that Lyondell already had before the bankruptcy, the company said. The discretionary bonuses are capped at $10,000/employee.
A hardship plan would go to retirees and their dependents who are struggling under dire financial pressure, Lyondell said.
Members of this fourth group could get up to $40,000 each, Lyondell said. However, they must have potential claims of at least $5,000.
Lyondell expects to spend $2m on the hardship plan.
Lyondell said the bonus packages would would help the company maintain focus, morale and loyalty - all critical for emerging from bankruptcy protection.
The bonuses would also discourage Lyondell employees from accepting positions at the company's competitors, it said.
In particular, the executive bonus plan - capped at $45m - would place the company's compensation plan among the 25th percentile of the market, Lyondell said. Without the bonuses, executive compensation would remain well below market rates.
The hearing has been moved to 11 August.
A creditors' committee wants the bonuses withheld from five officers - the potential defendants in a lawsuit that it plans to file in bankruptcy court. Those officers could earn millions under the bonus plan, the committee alleged.
The officers include Alan Bigman, Edward Dineen, Bart de Jong, James Bayer and Michael Mulrooney. The committee accused them of driving Lyondell into bankruptcy by pursuing a merger with Basell.
As such, the five should not receive bonuses, the committee said in an objection to the bonus package.
"These defendants previously received millions of dollars in connection with the merger that was the cause of these bankruptcy proceedings and ruinous to unsecured creditors," the committee said.
The committee alleged that the merger earned Dineen $8.1m (€5.7m), de Jong $5.1m and Bayer $4.6m.
"The conduct of these defendants in approving the merger and merger-related-subsidiary guarantees contributed to [Lyondell's] insolvency, undercapitalisation and inability to pay debts when due," the committee said.
The committee limited its bonus objection to the five officers.
Lyondell said it would not comment beyond the filings it made in bankruptcy court.
In its court filing, Lyondell proposed four different bonus packages.
One, which includes the contested bonuses, is capped at $45m and would target 325 senior officers and managers. Senior officers could receive at least 120% of their monthly salary if the company achieves a target of $175m/month in earnings before taxes, interest, depreciation, amortisation and restructuring costs (EBITDAR).
Managers would receive 12.5-60%, depending on their rank and if they work in the US, Lyondell said.
A retention bonus-plan capped at $15m would go towards 350 non-executive employees, whom Lyondell deemed to have critical, irreplaceable skills.
A third $1m discretionary bonus-plan would be a modified version of the programme that Lyondell already had before the bankruptcy, the company said. The discretionary bonuses are capped at $10,000/employee.
A hardship plan would go to retirees and their dependents who are struggling under dire financial pressure, Lyondell said.
Members of this fourth group could get up to $40,000 each, Lyondell said. However, they must have potential claims of at least $5,000.
Lyondell expects to spend $2m on the hardship plan.
Lyondell said the bonus packages would would help the company maintain focus, morale and loyalty - all critical for emerging from bankruptcy protection.
The bonuses would also discourage Lyondell employees from accepting positions at the company's competitors, it said.
In particular, the executive bonus plan - capped at $45m - would place the company's compensation plan among the 25th percentile of the market, Lyondell said. Without the bonuses, executive compensation would remain well below market rates.
quoted from: ICIS.com
Read more...Tuesday, June 30, 2009
US Chemical Plants Still Targets of Interest for Terrorists
BALTIMORE, Maryland (ICIS news)--US chemical plants remain targets of interest to foreign and domestic terrorists seeking a dramatic attack that could cause mass casualties and major economic impact, a top US government analyst said on Monday.
Dan Cooler, a senior analyst in the office of intelligence and analysis at the Department of Homeland Security (DHS), told a chemical sector audience that the nation’s process industry “remains vulnerable to terrorist attacks, and that is an unacceptable level of risk”.
Speaking at the 2009 Chemical Security Summit (CSS), Cooler said that while the department and other US intelligence agencies know of no specific terrorist threat to chemical facilities, “we know that the chemical sector is of interest to Al Qaeda and other terrorist groups because we have seen those interests expressed in documents we have seized overseas”.
“Terrorists are interested in any potential target that could, if attacked, produce visually dramatic results, broad economic impact and mass casualties,” Cooler said.
“An attack on a major US chemical facility, especially one in a high-density population area, would meet all of those terrorist goals,” Cooler said.
He said his department is concerned that the type of attacks successfully conducted by Al Qaeda and others in Pakistan, Afghanistan, Iraq, Somalia, Ethiopia, Libya and Morocco might be employed by home-grown terrorist cells in the US and that foreign terrorists might successfully infiltrate the US.
The trend seen in terrorist attacks overseas would likely be repeated in any attempt on a US chemical facility, he said. Those recent overseas attacks typically have involved an initial blast created by a truck-borne bomb that has penetrated an outer perimeter, followed by an infantry attack by terrorists armed with assault rifles, hand grenades and other explosives.
Cooler lauded the US chemicals sector for the level of cooperation it has shown in working with his department to improve security at what are considered plants or facilities at high risk for terrorist attack.
However, he said more work remains to be done to further protect US chemical facilities from terrorist attack.
“While we have no known threat to the US chemicals sector, the potential consequences of such an attack are unacceptable,” Cooler said.
“There remains a level of vulnerability that represents an unacceptable level of risk,” he said.
He said the department also remains concerned about possible theft or diversion of bulk chemicals that could be weaponised by terrorists for an attack.
“We remain concerned about diversion threats,” Cooler said. “It has not happened yet, but it is something that keeps us up at night.”
The Department of Homeland Security is responsible for enforcing the existing Chemical Facility Anti-Terrorism Standards (CFATS), which give the department authority over security measures at some 7,000 US chemical sites deemed to be at high risk for terrorist attack. Congress is considering tougher site security legislation for 2010.
Cooler spoke at the opening session of the three-day Chemical Security Summit, which is co-sponsored by the department and the Society of Chemical Manufacturers and Affiliates (SOCMA).
Dan Cooler, a senior analyst in the office of intelligence and analysis at the Department of Homeland Security (DHS), told a chemical sector audience that the nation’s process industry “remains vulnerable to terrorist attacks, and that is an unacceptable level of risk”.
Speaking at the 2009 Chemical Security Summit (CSS), Cooler said that while the department and other US intelligence agencies know of no specific terrorist threat to chemical facilities, “we know that the chemical sector is of interest to Al Qaeda and other terrorist groups because we have seen those interests expressed in documents we have seized overseas”.
“Terrorists are interested in any potential target that could, if attacked, produce visually dramatic results, broad economic impact and mass casualties,” Cooler said.
“An attack on a major US chemical facility, especially one in a high-density population area, would meet all of those terrorist goals,” Cooler said.
He said his department is concerned that the type of attacks successfully conducted by Al Qaeda and others in Pakistan, Afghanistan, Iraq, Somalia, Ethiopia, Libya and Morocco might be employed by home-grown terrorist cells in the US and that foreign terrorists might successfully infiltrate the US.
The trend seen in terrorist attacks overseas would likely be repeated in any attempt on a US chemical facility, he said. Those recent overseas attacks typically have involved an initial blast created by a truck-borne bomb that has penetrated an outer perimeter, followed by an infantry attack by terrorists armed with assault rifles, hand grenades and other explosives.
Cooler lauded the US chemicals sector for the level of cooperation it has shown in working with his department to improve security at what are considered plants or facilities at high risk for terrorist attack.
However, he said more work remains to be done to further protect US chemical facilities from terrorist attack.
“While we have no known threat to the US chemicals sector, the potential consequences of such an attack are unacceptable,” Cooler said.
“There remains a level of vulnerability that represents an unacceptable level of risk,” he said.
He said the department also remains concerned about possible theft or diversion of bulk chemicals that could be weaponised by terrorists for an attack.
“We remain concerned about diversion threats,” Cooler said. “It has not happened yet, but it is something that keeps us up at night.”
The Department of Homeland Security is responsible for enforcing the existing Chemical Facility Anti-Terrorism Standards (CFATS), which give the department authority over security measures at some 7,000 US chemical sites deemed to be at high risk for terrorist attack. Congress is considering tougher site security legislation for 2010.
Cooler spoke at the opening session of the three-day Chemical Security Summit, which is co-sponsored by the department and the Society of Chemical Manufacturers and Affiliates (SOCMA).
quoted from: ICIS
Read more...Wednesday, June 24, 2009
Selling More When Everyone Else is Selling Less
As American automakers struggle for survival, South Korea’s Hyundai Motor appears to be gaining on the pack with bold marketing and broad-based initiatives to improve quality
The company made a splash earlier this year when it unveiled its Hyundai Assurance programme allowing customers to return a car if they lost a job. Competing automakers and other types of businesses soon followed with similar promises.
Years earlier, however, Hyundai had already begun to invest in new models and quality programmes that have put the company on solid footing to profit from the current chaos in the global auto industry, according to Wharton faculty.
“There’s a sense that what Hyundai is doing on many fronts is working in terms of actually gaining some advantage during the crisis,” says Wharton management professor John Paul MacDuffie, who specialises in the automotive industry and is co-director of the International Motor Vehicle Programme.
In 2008 — a brutal year for the auto business — Hyundai’s global unit sales rose 2 per cent, lifting revenues by 5 per cent. In the first three months of this year, the company’s global market share rose to 4.7 per cent, compared to 4 per cent a year earlier.
MacDuffie says Hyundai first made a name for itself in the United States in the late 1980s when it exported the low-cost Excel to the American market. The car was popular at first, but soon earned a reputation for developing rust and other quality problems. “Sales dropped and it left reputational damage in consumers’ minds,” according to MacDuffie. In the 1990s, Hyundai attempted to introduce a range of high-priced vehicles into the US market, but MacDuffie says the company was “haunted” by its reputation: “Quality has always been Hyundai’s Achilles heel in... the US.”
It was another economic crisis — the 1997 Asian financial collapse — that sowed the seeds for Hyundai’s recent success, according to MacDuffie. He notes that during that global economic slump, the South Korean currency fell sharply. As a result, Hyundai’s competitor Daewoo went into bankruptcy and Hyundai was able to acquire another Korean automaker, Kia Motors. Surviving consolidation in its home market, Hyundai emerged from the crisis with new strength to address its problems.
Risky Moves
Beginning in 2001, MacDuffie says, Hyundai launched a major push to upgrade quality with a daily focus on improvement through new processes at its manufacturing plants, and from better design and engineering. At the same time, to help overcome its reputation for poor quality, the company announced a 10-year, 100,000-mile warranty. The Hyundai programme was far more comforting than the industry’s standard three-year, 30,000-mile warranty, and essentially guaranteed the car for its entire expected working life.
“It was risky, but a powerful impetus to improve quality,” says MacDuffie. “They pulled it off and it helped them make a major jump forward.” This year, Hyundai’s Genesis was named 2009 Car of the Year by independent automotive journalists at the North American International Auto Show in Detroit.
Meanwhile, as it was working to improve quality, the company also was expanding in Europe, the United States and in developing markets. MacDuffie notes that the Hyundai Sonata was selected to be the official taxicab during the Beijing Olympics and the company has been more successful than some of its Japanese competitors in gaining market share in India and China. “That’s another risky, big bet that has paid off well for them,” he says.
In January, Hyundai grabbed attention in the United States as consumers were reeling from the collapse in housing and stock market prices and growing fears of unemployment, by offering to take back a car that is financed or leased by a worker who subsequently loses a job. When it was introduced, the Hyundai Assurance programme was seen as more than just a marketing campaign, but also as psychological affirmation that the economy was not going to collapse entirely.
“What they are doing is empathising with the plight of people who are struggling,” says Wharton marketing professor David J. Reibstein. He observes that the Assurance programme is similar to the warranty that Hyundai used to build confidence among consumers. “There might be hesitancy to buy because people don’t know if they will be employed, but this provides the safety net which allows them to say, ‘I can still afford to be in the market.’ Clearly, the market needed some stimulation and Hyundai was able to provide that stimulation.”
Analysts proclaimed the programme a success when Hyundai reported US sales were up 14 per cent in January compared to the same month a year earlier, while the entire US auto market fell 37 per cent.
Reibstein says the offer was a groundbreaking concept, which was later adopted by other companies. The idea might be used successfully in other industries to inspire confidence among consumers, he adds. Big-ticket durables would likely benefit the most, although he says the idea might also succeed in real estate. Pfizer has a similar programme assuring the users of its products that they will be able to continue to receive medication if they lose their jobs. “It won’t work with every product,” explains Reibstein. “It’s got to be a product with greater risk. What this strategy does is reduce the risk to the customer.”
John Zhang, another Wharton marketing professor, agrees the programme was a good move by Hyundai. He adds that the company’s US customers, who tend to buy cars at lower price points, may be more affected by the recession than other carmakers’ customers. “Economic uncertainty and layoff threats will certainly make customers think twice before they purchase a new car,” he says. “Hyundai’s offer will convince those on the fence to jump over now.”
In addition, the programme is likely to generate strong goodwill toward the company. “Hyundai scores a huge publicity point, by being compassionate towards (those who are) down and beaten,” according to Zhang.
In another surprising marketing move, the company last month offered to send buyers of some Hyundai models up to $333 a month for six months. The catch: The deal applies only to cars on which Hyundai is offering rebates. Buyers may opt for either the rebate or the monthly check (not both), and the value of the two offers is about equal. But such programmes tend to generate consumer buzz.
Wharton management professor Lawrence G. Hrebiniak says Hyundai’s success is the result of a cohesive strategy clearly designed to differentiate the firm from its competitors, combined with a willingness to make substantial investments to carry out the plan.
Hrebiniak adds that the company is now taking a lead in endorsing new, tougher environmental standards for the industry: It has promised to meet new federal energy standards requiring that cars get 35 miles per gallon of gasoline five years ahead of the 2020 deadline. “Something like that is just one more part of differentiation strategy — to say, ‘We’re cool. We’re high quality people,’” says Hrebiniak. “It’s all on TV. They won Car of the Year. They are the first mover in helping people in trouble get over the hump and now they are a leader when it comes to the environment.”
Hyundai is not afraid to spend money to reap benefits down the line, Hrebiniak notes. “Here’s a company that no one really knew about other than it was a South Korean company that made cheap cars. They’re biting the bullet and investing a lot in research and development and advertising while also improving quality, and letting people know that they will be there for them if they need help.”
The Chairman: A Revered Convict
MacDuffie says the Hyundai’s ability to take bold actions may lie in its structure as a family-run company that is dominated by its chairman, Chung Mong-koo. Hyundai Corporation, the automaker’s former parent company, was founded by Chung’s father in 1947. By the time the automotive business, Hyundai Motor Company, was founded in 1967, the corporation had grown into a chaebol — or jaebeol, a conglomerate that benefits from government ties. “Chung is viewed as all powerful, and for him to drive top-down initiatives around quality would no doubt get the attention and responsiveness of everybody in the company,” says MacDuffie. Even after he was arrested in a corruption scandal in 2006, Chung remained in control of the company, according to press reports, using a telephone from his jail cell. He was serving a three-year suspended sentence when he was pardoned by South Korea’s president, Lee Myung-ba, in 2008.
“Within the company, he remained admired and revered,” says MacDuffie. “In the larger population, my sense is that many admire these larger-than-life figures who have driven so much of Korea’s economic growth, and some feel the government is overzealous in prosecuting them.”
He adds that Hyundai’s governance structure is geared toward innovation and improvement, even including members of its parts supply organisation, known as Hyundai Mobius, in the highest levels of the corporation. Many of Hyundai’s top leaders have come through the supplier network. “It seems clear that in an era when a lot more design is done by suppliers, the very close relationship between Mobius and Hyundai Motor has helped Hyundai to have effective designs and good quality,” says MacDuffie.
MacDuffie points out that Hyundai’s attitude was captured in a speech delivered by John Krafcik, CEO of Hyundai Motor America, at the Chicago Auto Show in February. Krafcik called out his peers for their grudging response to environmental and safety concerns, corrupt business practices, outlandish compensation and long-time reliance on government assistance. He compared the experience of a customer entering an auto showroom to going to the dentist.
“While no other industrial sector has a greater impact on the health of our economy, there is no other business with a bigger perception problem. Let’s face it — our reputation as an industry is horrible,” Krafcik said. “In the US, we are viewed for the most part as a slow, dim-witted industry that is typically unresponsive to consumer and environmental needs. If that weren’t bad enough, our executives are criticised for lavish compensation, abundant perks and unnecessary entitlements.
“We need to work more consistently as an industry to change those negative perceptions,” he continued. “By taking personal responsibility for our shortcomings, rather than ignoring them, we gain back our credibility.”
Hrebiniak notes that it is hard to say whether Hyundai’s current strategy will be profitable in the long run. “They may be spending more than they are reaping now, but that could be part of the strategy — to incur costs and hope it all comes together not only in sales and market share, but also in terms of profitability,” he says. “They are spending money to make money. I give them credit.”
Zhang agrees that Hyundai is steadily gaining approval in markets around the world. “This is an unassuming, late-coming company that is consciously trying harder to please customers than anyone else in the marketplace,” he says. “When you try harder, sooner or later, you get noticed. Hyundai will soon, if not already, become a force to be reckoned with for the US and Japanese manufacturers because it gives the most bang for customers’ money.”
The company made a splash earlier this year when it unveiled its Hyundai Assurance programme allowing customers to return a car if they lost a job. Competing automakers and other types of businesses soon followed with similar promises.
Years earlier, however, Hyundai had already begun to invest in new models and quality programmes that have put the company on solid footing to profit from the current chaos in the global auto industry, according to Wharton faculty.
“There’s a sense that what Hyundai is doing on many fronts is working in terms of actually gaining some advantage during the crisis,” says Wharton management professor John Paul MacDuffie, who specialises in the automotive industry and is co-director of the International Motor Vehicle Programme.
In 2008 — a brutal year for the auto business — Hyundai’s global unit sales rose 2 per cent, lifting revenues by 5 per cent. In the first three months of this year, the company’s global market share rose to 4.7 per cent, compared to 4 per cent a year earlier.
MacDuffie says Hyundai first made a name for itself in the United States in the late 1980s when it exported the low-cost Excel to the American market. The car was popular at first, but soon earned a reputation for developing rust and other quality problems. “Sales dropped and it left reputational damage in consumers’ minds,” according to MacDuffie. In the 1990s, Hyundai attempted to introduce a range of high-priced vehicles into the US market, but MacDuffie says the company was “haunted” by its reputation: “Quality has always been Hyundai’s Achilles heel in... the US.”
It was another economic crisis — the 1997 Asian financial collapse — that sowed the seeds for Hyundai’s recent success, according to MacDuffie. He notes that during that global economic slump, the South Korean currency fell sharply. As a result, Hyundai’s competitor Daewoo went into bankruptcy and Hyundai was able to acquire another Korean automaker, Kia Motors. Surviving consolidation in its home market, Hyundai emerged from the crisis with new strength to address its problems.
Risky Moves
Beginning in 2001, MacDuffie says, Hyundai launched a major push to upgrade quality with a daily focus on improvement through new processes at its manufacturing plants, and from better design and engineering. At the same time, to help overcome its reputation for poor quality, the company announced a 10-year, 100,000-mile warranty. The Hyundai programme was far more comforting than the industry’s standard three-year, 30,000-mile warranty, and essentially guaranteed the car for its entire expected working life.
“It was risky, but a powerful impetus to improve quality,” says MacDuffie. “They pulled it off and it helped them make a major jump forward.” This year, Hyundai’s Genesis was named 2009 Car of the Year by independent automotive journalists at the North American International Auto Show in Detroit.
Meanwhile, as it was working to improve quality, the company also was expanding in Europe, the United States and in developing markets. MacDuffie notes that the Hyundai Sonata was selected to be the official taxicab during the Beijing Olympics and the company has been more successful than some of its Japanese competitors in gaining market share in India and China. “That’s another risky, big bet that has paid off well for them,” he says.
In January, Hyundai grabbed attention in the United States as consumers were reeling from the collapse in housing and stock market prices and growing fears of unemployment, by offering to take back a car that is financed or leased by a worker who subsequently loses a job. When it was introduced, the Hyundai Assurance programme was seen as more than just a marketing campaign, but also as psychological affirmation that the economy was not going to collapse entirely.
“What they are doing is empathising with the plight of people who are struggling,” says Wharton marketing professor David J. Reibstein. He observes that the Assurance programme is similar to the warranty that Hyundai used to build confidence among consumers. “There might be hesitancy to buy because people don’t know if they will be employed, but this provides the safety net which allows them to say, ‘I can still afford to be in the market.’ Clearly, the market needed some stimulation and Hyundai was able to provide that stimulation.”
Analysts proclaimed the programme a success when Hyundai reported US sales were up 14 per cent in January compared to the same month a year earlier, while the entire US auto market fell 37 per cent.
Reibstein says the offer was a groundbreaking concept, which was later adopted by other companies. The idea might be used successfully in other industries to inspire confidence among consumers, he adds. Big-ticket durables would likely benefit the most, although he says the idea might also succeed in real estate. Pfizer has a similar programme assuring the users of its products that they will be able to continue to receive medication if they lose their jobs. “It won’t work with every product,” explains Reibstein. “It’s got to be a product with greater risk. What this strategy does is reduce the risk to the customer.”
John Zhang, another Wharton marketing professor, agrees the programme was a good move by Hyundai. He adds that the company’s US customers, who tend to buy cars at lower price points, may be more affected by the recession than other carmakers’ customers. “Economic uncertainty and layoff threats will certainly make customers think twice before they purchase a new car,” he says. “Hyundai’s offer will convince those on the fence to jump over now.”
In addition, the programme is likely to generate strong goodwill toward the company. “Hyundai scores a huge publicity point, by being compassionate towards (those who are) down and beaten,” according to Zhang.
In another surprising marketing move, the company last month offered to send buyers of some Hyundai models up to $333 a month for six months. The catch: The deal applies only to cars on which Hyundai is offering rebates. Buyers may opt for either the rebate or the monthly check (not both), and the value of the two offers is about equal. But such programmes tend to generate consumer buzz.
Wharton management professor Lawrence G. Hrebiniak says Hyundai’s success is the result of a cohesive strategy clearly designed to differentiate the firm from its competitors, combined with a willingness to make substantial investments to carry out the plan.
Hrebiniak adds that the company is now taking a lead in endorsing new, tougher environmental standards for the industry: It has promised to meet new federal energy standards requiring that cars get 35 miles per gallon of gasoline five years ahead of the 2020 deadline. “Something like that is just one more part of differentiation strategy — to say, ‘We’re cool. We’re high quality people,’” says Hrebiniak. “It’s all on TV. They won Car of the Year. They are the first mover in helping people in trouble get over the hump and now they are a leader when it comes to the environment.”
Hyundai is not afraid to spend money to reap benefits down the line, Hrebiniak notes. “Here’s a company that no one really knew about other than it was a South Korean company that made cheap cars. They’re biting the bullet and investing a lot in research and development and advertising while also improving quality, and letting people know that they will be there for them if they need help.”
The Chairman: A Revered Convict
MacDuffie says the Hyundai’s ability to take bold actions may lie in its structure as a family-run company that is dominated by its chairman, Chung Mong-koo. Hyundai Corporation, the automaker’s former parent company, was founded by Chung’s father in 1947. By the time the automotive business, Hyundai Motor Company, was founded in 1967, the corporation had grown into a chaebol — or jaebeol, a conglomerate that benefits from government ties. “Chung is viewed as all powerful, and for him to drive top-down initiatives around quality would no doubt get the attention and responsiveness of everybody in the company,” says MacDuffie. Even after he was arrested in a corruption scandal in 2006, Chung remained in control of the company, according to press reports, using a telephone from his jail cell. He was serving a three-year suspended sentence when he was pardoned by South Korea’s president, Lee Myung-ba, in 2008.
“Within the company, he remained admired and revered,” says MacDuffie. “In the larger population, my sense is that many admire these larger-than-life figures who have driven so much of Korea’s economic growth, and some feel the government is overzealous in prosecuting them.”
He adds that Hyundai’s governance structure is geared toward innovation and improvement, even including members of its parts supply organisation, known as Hyundai Mobius, in the highest levels of the corporation. Many of Hyundai’s top leaders have come through the supplier network. “It seems clear that in an era when a lot more design is done by suppliers, the very close relationship between Mobius and Hyundai Motor has helped Hyundai to have effective designs and good quality,” says MacDuffie.
MacDuffie points out that Hyundai’s attitude was captured in a speech delivered by John Krafcik, CEO of Hyundai Motor America, at the Chicago Auto Show in February. Krafcik called out his peers for their grudging response to environmental and safety concerns, corrupt business practices, outlandish compensation and long-time reliance on government assistance. He compared the experience of a customer entering an auto showroom to going to the dentist.
“While no other industrial sector has a greater impact on the health of our economy, there is no other business with a bigger perception problem. Let’s face it — our reputation as an industry is horrible,” Krafcik said. “In the US, we are viewed for the most part as a slow, dim-witted industry that is typically unresponsive to consumer and environmental needs. If that weren’t bad enough, our executives are criticised for lavish compensation, abundant perks and unnecessary entitlements.
“We need to work more consistently as an industry to change those negative perceptions,” he continued. “By taking personal responsibility for our shortcomings, rather than ignoring them, we gain back our credibility.”
Hrebiniak notes that it is hard to say whether Hyundai’s current strategy will be profitable in the long run. “They may be spending more than they are reaping now, but that could be part of the strategy — to incur costs and hope it all comes together not only in sales and market share, but also in terms of profitability,” he says. “They are spending money to make money. I give them credit.”
Zhang agrees that Hyundai is steadily gaining approval in markets around the world. “This is an unassuming, late-coming company that is consciously trying harder to please customers than anyone else in the marketplace,” he says. “When you try harder, sooner or later, you get noticed. Hyundai will soon, if not already, become a force to be reckoned with for the US and Japanese manufacturers because it gives the most bang for customers’ money.”
quoted from: Khaleej Times
Read more...Saturday, June 20, 2009
US Jobless Benefit Rolls Drop Sharply to Nearly 6.7M
WASHINGTON — The total number of people on the unemployment insurance rolls dropped for the first time since early January, the government said Thursday, while new claims for benefits rose slightly.
The Labor Department said the total unemployment insurance rolls fell by 148,000 to 6.69 million in the week ending June 6, the largest drop in more than seven years.
The drop also breaks a string of 21 straight increases in continuing claims, the last 19 of which were records. A dip in continuing claims several weeks ago was later revised higher.
Initial claims rose by 3,000 to a seasonally adjusted 608,000 in the week ending June 13, above analysts’ expectations. The four-week average, which smooths fluctuations, fell by 7,000 to 615,750. Continuing claims data lags initial claims by one week.
The four-week average is at its lowest level since mid-February, further evidence that the pace of job cuts is slowing.
In another encouraging sign, the Conference Board on Tuesday said its index of leading economic indicators rose for the second consecutive month in May after seven straight declines. The index rose 1.2 percent last month and by the same in amount in the six-month period ending in May, the first time that measure has grown since April 2007.
The employment report shows that job losses are easing after companies made deep cuts earlier this year. But it’s not clear whether recipients of unemployment insurance are finding new jobs or simply using up all their benefits, which typically last 26 weeks.
“It is unlikely that new hiring has picked up in any meaningful fashion,” Joshua Shapiro, chief economist with MFR Inc., a consulting firm, wrote in a note to clients. “More probable is that long-term unemployed are starting to fall off the rolls.”
On the leading indicators, Conference Board economist Ken Goldstein said if those trends continue, a “slow recovery” should start before the end of the year, but he cautioned that the job market will take longer to rebound.
The drop in continuing jobless claims likely reflects the decline in first-time claims, meaning that fewer people are joining the rolls.
“Continuing claims ... ought to be falling now given that initial claims peaked more than two months ago,” Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a note to clients.
The drop could also signal a slowing in the rise of the unemployment rate, economists said, which reached a 25-year high of 9.4 percent in May. Many economists forecast the rate could reach 10 percent by the end of the year.
Still, millions of Americans are receiving unemployment compensation under an emergency federal program authorized by Congress last summer and extended by the Obama administration’s stimulus package.
About 2.4 million people received benefits under that program in the week ending May 30, an increase of more than 102,000 from the previous week. That’s in addition to the 6.7 million people receiving benefits under the 26-week program typically provided by states.
Economists are closely watching the level of first-time claims for signs the economy will recover by mid-summer, as many analysts predict.
Consumers and businesses have cut back on spending in response to the bursting of the housing bubble and the financial crisis, sending the economy into the longest recession since World War II.
Companies have cut a net total of 6 million jobs since the downturn began in December 2007, in an effort to reduce costs.
Still, job cuts are slowing. The Labor Department said employers eliminated 345,000 positions in May, about half the monthly average of jobs lost in the first quarter.
The Labor Department said the total unemployment insurance rolls fell by 148,000 to 6.69 million in the week ending June 6, the largest drop in more than seven years.
The drop also breaks a string of 21 straight increases in continuing claims, the last 19 of which were records. A dip in continuing claims several weeks ago was later revised higher.
Initial claims rose by 3,000 to a seasonally adjusted 608,000 in the week ending June 13, above analysts’ expectations. The four-week average, which smooths fluctuations, fell by 7,000 to 615,750. Continuing claims data lags initial claims by one week.
The four-week average is at its lowest level since mid-February, further evidence that the pace of job cuts is slowing.
In another encouraging sign, the Conference Board on Tuesday said its index of leading economic indicators rose for the second consecutive month in May after seven straight declines. The index rose 1.2 percent last month and by the same in amount in the six-month period ending in May, the first time that measure has grown since April 2007.
The employment report shows that job losses are easing after companies made deep cuts earlier this year. But it’s not clear whether recipients of unemployment insurance are finding new jobs or simply using up all their benefits, which typically last 26 weeks.
“It is unlikely that new hiring has picked up in any meaningful fashion,” Joshua Shapiro, chief economist with MFR Inc., a consulting firm, wrote in a note to clients. “More probable is that long-term unemployed are starting to fall off the rolls.”
On the leading indicators, Conference Board economist Ken Goldstein said if those trends continue, a “slow recovery” should start before the end of the year, but he cautioned that the job market will take longer to rebound.
The drop in continuing jobless claims likely reflects the decline in first-time claims, meaning that fewer people are joining the rolls.
“Continuing claims ... ought to be falling now given that initial claims peaked more than two months ago,” Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a note to clients.
The drop could also signal a slowing in the rise of the unemployment rate, economists said, which reached a 25-year high of 9.4 percent in May. Many economists forecast the rate could reach 10 percent by the end of the year.
Still, millions of Americans are receiving unemployment compensation under an emergency federal program authorized by Congress last summer and extended by the Obama administration’s stimulus package.
About 2.4 million people received benefits under that program in the week ending May 30, an increase of more than 102,000 from the previous week. That’s in addition to the 6.7 million people receiving benefits under the 26-week program typically provided by states.
Economists are closely watching the level of first-time claims for signs the economy will recover by mid-summer, as many analysts predict.
Consumers and businesses have cut back on spending in response to the bursting of the housing bubble and the financial crisis, sending the economy into the longest recession since World War II.
Companies have cut a net total of 6 million jobs since the downturn began in December 2007, in an effort to reduce costs.
Still, job cuts are slowing. The Labor Department said employers eliminated 345,000 positions in May, about half the monthly average of jobs lost in the first quarter.
quoted from: Khaleej Times
Read more...Wednesday, June 17, 2009
High-End Swedish Carmaker to Buy GM's Saab
General Motors announced yesterday that it is selling Saab to the Swedish sports car manufacturer Koenigsegg -- the fourth brand to split from the firm and wind up in the arms of a company with little experience as a mass-market automaker.
The sale, scheduled to close in the third quarter of this year, is contingent on a $600 million funding commitment from the European Investment Bank guaranteed by the Swedish government. GM and Koenigsegg, which is leading a group of investors, did not release any other financial details. But Saab has said it needs $1 billion to get through the economic downturn.
"This is yet another significant step in the reinvention of GM and its European operations," GM Europe president Carl-Peter Forster said in a statement. "Closing this deal represents the best chance for Saab to emerge a stronger company."
The deal comes as the automotive industry suffers one of its biggest slumps. It is not just giants such as GM that are struggling; so are the suppliers that depend on them. The Obama administration pushed GM and Chrysler in bankruptcy to help the companies shed debt and cut costs, but government officials have made it increasingly clear that there are limits to its assistance. Yesterday the Treasury Department rejected a request from auto parts suppliers for up to $10 billion in additional federal loans and said it would continue to monitor the situation.
The downturn has forced GM, Ford and others to shed poor-performing brands to focus on ones that might be more profitable. The castoffs are being snatched up by new entrants, who see opportunities in the automakers' stumbles.
Early this month, GM agreed to sell Saturn to the Penske Automotive Group, which operates 310 automobile dealerships. GM also made a deal to turn over its other European operations, British Vauxhall and German Opel, to Canadian parts maker Magna International and the Russian state-owned bank Sberbank. And the automaker has a memorandum of understanding with Sichuan Tengzhong Heavy Industrial Machinery, a Chinese engineering company, to buy Hummer.
Economies of scale are critical to the auto industry, and some of the upstarts hope to form ties with existing manufacturers who will take over production duties, said Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide.
For instance, Penske is already seeking a foreign manufacturer to build new cars for the Saturn distribution network.
"We're going to see some very innovative business solutions to get product to customers in different forms and different methods," Robinet said. "This is not your grandfather's automotive industry any longer."
In the past, this failure to achieve mass production mired small auto start-ups. While the DeLorean DMC-12, with its stainless steel gull-wing doors, was immortalized in the blockbuster "Back to the Future" trilogy, the DeLorean Motor Co. was short-lived. Preston Tucker's 1948 Tucker Sedan, a torpedo-like futuristic "car of tomorrow," was met with wild acclaim, but he only made 51 cars before his company folded.
Even Chrysler, which also entered bankruptcy protection, suffered from not expanding outside North America, Robinet said.
"To be just dependent on one market, one segment, is very dangerous, as we've seen with our friends in Auburn Hills," where Chrysler is headquartered, he said.
The sale, scheduled to close in the third quarter of this year, is contingent on a $600 million funding commitment from the European Investment Bank guaranteed by the Swedish government. GM and Koenigsegg, which is leading a group of investors, did not release any other financial details. But Saab has said it needs $1 billion to get through the economic downturn.
"This is yet another significant step in the reinvention of GM and its European operations," GM Europe president Carl-Peter Forster said in a statement. "Closing this deal represents the best chance for Saab to emerge a stronger company."
The deal comes as the automotive industry suffers one of its biggest slumps. It is not just giants such as GM that are struggling; so are the suppliers that depend on them. The Obama administration pushed GM and Chrysler in bankruptcy to help the companies shed debt and cut costs, but government officials have made it increasingly clear that there are limits to its assistance. Yesterday the Treasury Department rejected a request from auto parts suppliers for up to $10 billion in additional federal loans and said it would continue to monitor the situation.
The downturn has forced GM, Ford and others to shed poor-performing brands to focus on ones that might be more profitable. The castoffs are being snatched up by new entrants, who see opportunities in the automakers' stumbles.
Early this month, GM agreed to sell Saturn to the Penske Automotive Group, which operates 310 automobile dealerships. GM also made a deal to turn over its other European operations, British Vauxhall and German Opel, to Canadian parts maker Magna International and the Russian state-owned bank Sberbank. And the automaker has a memorandum of understanding with Sichuan Tengzhong Heavy Industrial Machinery, a Chinese engineering company, to buy Hummer.
Economies of scale are critical to the auto industry, and some of the upstarts hope to form ties with existing manufacturers who will take over production duties, said Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide.
For instance, Penske is already seeking a foreign manufacturer to build new cars for the Saturn distribution network.
"We're going to see some very innovative business solutions to get product to customers in different forms and different methods," Robinet said. "This is not your grandfather's automotive industry any longer."
In the past, this failure to achieve mass production mired small auto start-ups. While the DeLorean DMC-12, with its stainless steel gull-wing doors, was immortalized in the blockbuster "Back to the Future" trilogy, the DeLorean Motor Co. was short-lived. Preston Tucker's 1948 Tucker Sedan, a torpedo-like futuristic "car of tomorrow," was met with wild acclaim, but he only made 51 cars before his company folded.
Even Chrysler, which also entered bankruptcy protection, suffered from not expanding outside North America, Robinet said.
"To be just dependent on one market, one segment, is very dangerous, as we've seen with our friends in Auburn Hills," where Chrysler is headquartered, he said.
Saab faces the same problem. The brand has a loyal customer base, but it sold only about 93,000 cars last year.
Similarly Koenigsegg, a private company based in Angelholm, Sweden, is a small operation. With just 45 employees, it produces a limited number of luxury, high-performance "super sports cars" -- priced around $1 million -- a year.
Saab plans to manufacture the next generation of 9-5 models at its plant in Trollhattan, Sweden. GM will continue to provide Saab with "architecture and powertrain technology during a defined period of time," the company said. GM and Koenigsegg will provide "additional support" to fund Saab's operations and products, some of which are in the final stages of development.
GM bought a 50 percent stake in Saab for $600 million in 1990. In 2000, it purchased the remaining shares for $125 million.
But the Detroit automaker hasn't been the best steward, analysts said. GM had grown too big to watch over its multiple brands. The character that had made Saab such a popular niche was replaced with "warmed-over Opel products," said Ed Kim, director of industry analysis at AutoPacific.
"It's always been a brand that had potential, but was really continually ignored by General Motors," Kim said.
Looking to sell Saab, GM filed to reorganize the brand under Swedish law in February. Recently it was given an extension until August to restructure and find a new owner.
In a statement, Jan Ake Jonsson, Saab's managing director, said the agreement was "great news for Saab's current and future customers, dealers, suppliers and employees around the globe."
By Kendra Marr
Washington Post Staff Writer
Wednesday, June 17, 2009
Quoted from: Washington Post
U.S. Soy, Corn Up 1 pct as Dollar Rally Fades
PARIS/SINGAPORE - Chicago soybean and corn futures rose about 1 percent on Tuesday, recovering some of their biggest single-day losses in months in the previous session, as a weaker dollar prompted renewed buying.
Wheat futures in Chicago similarly bounced, pulling Euronext wheat in their wake, after losing ground on Monday on the dollar and ample global supplies of the grain.
The dollar fell broadly after traders took comments from Russia that the world needs new reserve currencies as a signal it may be looking to cut the share of U.S. assets in its currency portfolio.
The easing dollar also supported gains for crude oil, which influences grains because of their use in making biofuels.
A weak dollar makes U.S. commodities cheaper for operators holding other currencies and is often taken as a buying signal, while a dollar rise tends to trigger selling of commodities.
“It’s still the dollar that’s setting the tone,” one European trader said.
A surge in the dollar, coupled with better weather prospects in the U.S. Midwest, sent front-month soybeans tumbling 3.9 percent on Monday, the biggest one-day drop in four months, and corn down 4.6 percent, the largest fall in five months.
The heavy losses on the Chicago Board of Trade followed big gains in recent weeks that took grains to multi-month highs.
“We paid for an excessive rise with an exaggerated fall,” another European trader said.
Weather still a factor in n. hemisphere
Chicago Board of Trade July soybeans were up 1.42 percent to $12.14 a bushel by 1116 GMT, with operators pointing to continuing support from tight old-crop supplies. July corn rose 0.99 percent to $4.10 a bushel.
On wheat markets, CBOT July wheat rose 1.09 percent to $5.81-1/2, while benchmark November wheat on Euronext added 1.03 percent to 147.50 euros a tonne, pulling away from a support zone at 143-144 euros tested on Monday.
While exchange rates have dominated commodities this week, operators said weather conditions remained a focus for the grain markets as northern hemisphere crops approach harvest time.
Forecasts that the heart of the U.S. crop belt will warm up this week, giving young plants a much-needed boost after a wet spring, contributed to Monday’s slide in corn and soybeans.
Some traders said weather would remain a wild card right up until the harvests, whereas others argued the risk of a major weather incident was falling as the season advanced.
In the southern hemisphere, major wheat exporter Australia is on track to produce the biggest crop in five years.
The Australian Bureau of Agricultural and Resource Economics (ABARE) said output may rise 2.7 percent to 21.97 million tonnes this year as improved yields offset marginally lower planting.
Wheat futures in Chicago similarly bounced, pulling Euronext wheat in their wake, after losing ground on Monday on the dollar and ample global supplies of the grain.
The dollar fell broadly after traders took comments from Russia that the world needs new reserve currencies as a signal it may be looking to cut the share of U.S. assets in its currency portfolio.
The easing dollar also supported gains for crude oil, which influences grains because of their use in making biofuels.
A weak dollar makes U.S. commodities cheaper for operators holding other currencies and is often taken as a buying signal, while a dollar rise tends to trigger selling of commodities.
“It’s still the dollar that’s setting the tone,” one European trader said.
A surge in the dollar, coupled with better weather prospects in the U.S. Midwest, sent front-month soybeans tumbling 3.9 percent on Monday, the biggest one-day drop in four months, and corn down 4.6 percent, the largest fall in five months.
The heavy losses on the Chicago Board of Trade followed big gains in recent weeks that took grains to multi-month highs.
“We paid for an excessive rise with an exaggerated fall,” another European trader said.
Weather still a factor in n. hemisphere
Chicago Board of Trade July soybeans were up 1.42 percent to $12.14 a bushel by 1116 GMT, with operators pointing to continuing support from tight old-crop supplies. July corn rose 0.99 percent to $4.10 a bushel.
On wheat markets, CBOT July wheat rose 1.09 percent to $5.81-1/2, while benchmark November wheat on Euronext added 1.03 percent to 147.50 euros a tonne, pulling away from a support zone at 143-144 euros tested on Monday.
While exchange rates have dominated commodities this week, operators said weather conditions remained a focus for the grain markets as northern hemisphere crops approach harvest time.
Forecasts that the heart of the U.S. crop belt will warm up this week, giving young plants a much-needed boost after a wet spring, contributed to Monday’s slide in corn and soybeans.
Some traders said weather would remain a wild card right up until the harvests, whereas others argued the risk of a major weather incident was falling as the season advanced.
In the southern hemisphere, major wheat exporter Australia is on track to produce the biggest crop in five years.
The Australian Bureau of Agricultural and Resource Economics (ABARE) said output may rise 2.7 percent to 21.97 million tonnes this year as improved yields offset marginally lower planting.
quoted from: Khaleej Times
Read more...Monday, June 15, 2009
Higher Rates, Oil Prices Threaten US Recovery
WASHINGTON - Rising bond yields are taking a toll on home mortgage and corporate lending rates and together with jumping oil prices are threatening the expected recovery from prolonged recession.
Just as the US economy is on track to bottom out soon, long-term interest rates — reflected by Treasury bonds — and oil prices have jumped to eight-month highs, neutralizing the impact of government stimulus programs, analysts say.
While the short-term federal fund rate — the interest which banks charge one another on overnight loans — remains at virtually zero, 10-year bond yields have risen above four percent and 30-year bond yield to nearly five percent last week, the highest levels since October.
“The yield curve steepening could potentially crimp whatever nascent strength there may be in the global recovery,” warned Carl Weinberg, chief economist of High Frequency Economics.
Bond yields have also jumped in Germany, Britain, Japan and Canada, fueled by fears that aggressive monetary stimulus and government borrowing in a bid to avert a deflationary spiral could fuel an eventual surge in inflation.
“If you believe, as we do, that this economic downturn is hardly over, then higher long-term interest rates will only make the ongoing recession deeper and longer,” Weinberg warned.
US officials say the rising bond yields and the falling “safe-haven” dollar reflect increasing confidence of investors, who they say are rediscovering their appetite for risk as the prolonged recession showed signs of easing.
But they also underscore fears of inflation following the US Federal Reserve’s actions to flood the system with money to prime the economy which has officially contracted since December 2007, said analysts and traders.
The market is also concerned over a ballooning budget deficit and national debt, factors that have also taken a toll on the greenback.
The bigger concern, especially within President Barack Obama’s administration, is that home mortgage rates, which normally track bond rates, have shot up to levels that could threaten key programs encouraging people to refinance their homes.
Rates on 30-year fixed-rate mortgages have crept back to nearly 6.0 percent, up from 5.0 percent two weeks ago, shaking the fragile housing market, the epicenter of global financial turmoil.
“This threatens housing, which must stabilize before the rest of the economy can start to fully heal,” said Linda Duessel of Federated Investors.
The upward pressure on home mortgages “makes it all the more difficult for qualified potential homebuyers to finance purchases, even with lower home prices and the 8,000-dollar tax credit to first-time buyers,” said Frederic Dickson, chief market strategist of DA Davidson & Co.
The rising rates “may also be placing some modest valuation pressure on the stock market” and “more pressure on the US deficit as it will cost more to fund government programs,” he said.
With borrowing costs, including mortgage rates, increasing sharply in the past six weeks and with product prices generally flat or falling, and housing prices still under downward pressure, “this is an effective tightening in monetary policy at a critical phase of the business cycle,” said Brian Bethune, chief US financial economist at IHS Global Insight.
The yield on the 10-year Treasury bond eased on Friday to 3.788 percent and that on the 30-year bond declined to 4.633 percent after the government auctioned off 65 billion dollars’ worth of debt in the week.
Oil futures prices which climbed above 73 dollars last week for the first time since October are adding to doubts to recovery hopes.
“Energy expenses have skyrocketed — gasoline prices are up about 50 percent since late December. The increase in gasoline costs is negating much of the tax cuts that came as part of the stimulus bill,” said Joel Naroff, chief economist at Naroff Economic Advisors.
Rising oil prices essentially act as a “direct, broad-based tax” that impedes consumer spending on other items, said Dickson.
“This could slow or delay the economic recovery in spite of federal economic stimulus spending,” he said, warning it could “add a growing dimension of pain to many American families.”
Just as the US economy is on track to bottom out soon, long-term interest rates — reflected by Treasury bonds — and oil prices have jumped to eight-month highs, neutralizing the impact of government stimulus programs, analysts say.
While the short-term federal fund rate — the interest which banks charge one another on overnight loans — remains at virtually zero, 10-year bond yields have risen above four percent and 30-year bond yield to nearly five percent last week, the highest levels since October.
“The yield curve steepening could potentially crimp whatever nascent strength there may be in the global recovery,” warned Carl Weinberg, chief economist of High Frequency Economics.
Bond yields have also jumped in Germany, Britain, Japan and Canada, fueled by fears that aggressive monetary stimulus and government borrowing in a bid to avert a deflationary spiral could fuel an eventual surge in inflation.
“If you believe, as we do, that this economic downturn is hardly over, then higher long-term interest rates will only make the ongoing recession deeper and longer,” Weinberg warned.
US officials say the rising bond yields and the falling “safe-haven” dollar reflect increasing confidence of investors, who they say are rediscovering their appetite for risk as the prolonged recession showed signs of easing.
But they also underscore fears of inflation following the US Federal Reserve’s actions to flood the system with money to prime the economy which has officially contracted since December 2007, said analysts and traders.
The market is also concerned over a ballooning budget deficit and national debt, factors that have also taken a toll on the greenback.
The bigger concern, especially within President Barack Obama’s administration, is that home mortgage rates, which normally track bond rates, have shot up to levels that could threaten key programs encouraging people to refinance their homes.
Rates on 30-year fixed-rate mortgages have crept back to nearly 6.0 percent, up from 5.0 percent two weeks ago, shaking the fragile housing market, the epicenter of global financial turmoil.
“This threatens housing, which must stabilize before the rest of the economy can start to fully heal,” said Linda Duessel of Federated Investors.
The upward pressure on home mortgages “makes it all the more difficult for qualified potential homebuyers to finance purchases, even with lower home prices and the 8,000-dollar tax credit to first-time buyers,” said Frederic Dickson, chief market strategist of DA Davidson & Co.
The rising rates “may also be placing some modest valuation pressure on the stock market” and “more pressure on the US deficit as it will cost more to fund government programs,” he said.
With borrowing costs, including mortgage rates, increasing sharply in the past six weeks and with product prices generally flat or falling, and housing prices still under downward pressure, “this is an effective tightening in monetary policy at a critical phase of the business cycle,” said Brian Bethune, chief US financial economist at IHS Global Insight.
The yield on the 10-year Treasury bond eased on Friday to 3.788 percent and that on the 30-year bond declined to 4.633 percent after the government auctioned off 65 billion dollars’ worth of debt in the week.
Oil futures prices which climbed above 73 dollars last week for the first time since October are adding to doubts to recovery hopes.
“Energy expenses have skyrocketed — gasoline prices are up about 50 percent since late December. The increase in gasoline costs is negating much of the tax cuts that came as part of the stimulus bill,” said Joel Naroff, chief economist at Naroff Economic Advisors.
Rising oil prices essentially act as a “direct, broad-based tax” that impedes consumer spending on other items, said Dickson.
“This could slow or delay the economic recovery in spite of federal economic stimulus spending,” he said, warning it could “add a growing dimension of pain to many American families.”
quoted from: Khaleej Times
Read more...Tuesday, June 02, 2009
General Motors Files for Bankruptcy; Chrysler Sale Backed
NEW YORK - Storied carmaker General Motors filed for bankruptcy Monday, becoming the largest-ever US manufacturer to enter the court process and marking the latest dark chapter for the struggling US auto industry.
The carmaker goes into an uncertain bankruptcy with the backing of the US government, its chief labour union and the majority of its creditors. But many smaller investors feel they are getting a poor deal and have promised to fight GM’s reorganization plans in court.
GM filed the papers electronically in the Southern District of New York’s bankruptcy court, setting the stage for an unprecedented government takeover of the largest US car manufacturer in exchange for billions of dollars more in emergency funds.
“We are going to do it once and do it right,” GM chief executive Fritz Henderson said in a statement. “The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business.”
The same New York court on Monday paved the way for GM’s smaller rival Chrysler to exit bankruptcy, just one month after it sought the court’s protection.
In a major step, the judge approved the sale of Chrysler’s best assets into a new company controlled by Italian carmaker Fiat. The White House has said Chrysler’s experience should give GM some hope for its own journey.
“Only a month ago, (Chrysler’s) very future was in doubt,” US President Barack Obama said in a statement. “Now, as a result of a substantial commitment by the US government, and tough sacrifices from all stakeholders involved, Chrysler has a new lease on life.”
The Obama administration is convinced that GM can exit the court process within 2-3 months as a smaller, largely debt-free company, according to senior officials who briefed on the plans Sunday night.
The White House in a statement said Monday would be another “historic day” for the century-old manufacturer that marks “the end of an old General Motors, and the beginning of a new one.”
Struck by a deep US recession that has nearly halved its car sales, GM was left no other option as a government-imposed deadline to prove its viability was to expire Monday.
GM intends to use the courts to settle about 27 billion dollars in debt owed to creditors and sell its best assets into a new company, leaving behind iconic brands Pontiac, Saturn, Hummer and Saab.
The company will also cut ties with one-fifth of its North American dealerships, eliminate more than 30,000 jobs and close 14 production plants.
GM’s non-US operations are not part of the bankruptcy filing. Its European subsidiaries Vauxhall and Opel are in the process of being sold off to Canadian-Austrian auto parts manufacturer Magna and a Russian partner, with the aid of the German government.
The so-called “new” GM will still be effectively nationalized until the company can survive without the government’s help. The White House will help replace a majority of the company’s board of directors, though senior administration officials insisted they had no interest in running GM’s “day-to-day operations.”
The Obama administration will control about 60 per cent of the company in return for another 30 billion dollars in emergency cash. That is on top of 20 billion dollars plugged into the struggling firm since December.
Canada’s government will contribute another 10 billion dollars and take a 12-per-cent stake. The company’s existing shareholders have been virtually wiped out and GM was pulled from the Dow Jones Industrial Average on Monday.
Thomas Donohue, president of the US Chamber of Commerce, said he would be watching just how much the US and Canadian governments seek to exercise control over GM’s future decisions.
“Our biggest concern with the restructuring plan ... is the potential for governments and unions to influence production, product, workforce and management decisions in ways that could jeopardize the automakers’ chances for survival,” Donohue said.
GM said Sunday that about 54 per cent of its bondholders have already backed the plan, after the US Treasury Department offered the group a sweetened deal. The creditors will start with a 10-per-cent stake in the “new” GM, but have the option to take up to 15 per cent more in future.
The United Auto Workers (UAW) union has backed a new labour contract that brings workers’ wages and benefits down to the level of foreign manufacturers operating in the United States. A union healthcare trust, owed 20 billion dollars, will also get a 17.5-per- cent stake in the reorganized firm.
But a number of investors believe the UAW was unfairly favoured over smaller bondholders’ claims, and have vowed to try to block the deal in court.
“No one seems to have the best interests of small bondholders at heart,” said Jim Martin, who helped organize a group called Main Street Bondholders.
GM has named Al Koch, a managing director at the firm AlixPartners LLP, as its chief restructuring officer during the bankruptcy process, the Wall Street Journal reported. Koch oversaw the bankruptcy of KMart Corporation.
The carmaker goes into an uncertain bankruptcy with the backing of the US government, its chief labour union and the majority of its creditors. But many smaller investors feel they are getting a poor deal and have promised to fight GM’s reorganization plans in court.
GM filed the papers electronically in the Southern District of New York’s bankruptcy court, setting the stage for an unprecedented government takeover of the largest US car manufacturer in exchange for billions of dollars more in emergency funds.
“We are going to do it once and do it right,” GM chief executive Fritz Henderson said in a statement. “The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business.”
The same New York court on Monday paved the way for GM’s smaller rival Chrysler to exit bankruptcy, just one month after it sought the court’s protection.
In a major step, the judge approved the sale of Chrysler’s best assets into a new company controlled by Italian carmaker Fiat. The White House has said Chrysler’s experience should give GM some hope for its own journey.
“Only a month ago, (Chrysler’s) very future was in doubt,” US President Barack Obama said in a statement. “Now, as a result of a substantial commitment by the US government, and tough sacrifices from all stakeholders involved, Chrysler has a new lease on life.”
The Obama administration is convinced that GM can exit the court process within 2-3 months as a smaller, largely debt-free company, according to senior officials who briefed on the plans Sunday night.
The White House in a statement said Monday would be another “historic day” for the century-old manufacturer that marks “the end of an old General Motors, and the beginning of a new one.”
Struck by a deep US recession that has nearly halved its car sales, GM was left no other option as a government-imposed deadline to prove its viability was to expire Monday.
GM intends to use the courts to settle about 27 billion dollars in debt owed to creditors and sell its best assets into a new company, leaving behind iconic brands Pontiac, Saturn, Hummer and Saab.
The company will also cut ties with one-fifth of its North American dealerships, eliminate more than 30,000 jobs and close 14 production plants.
GM’s non-US operations are not part of the bankruptcy filing. Its European subsidiaries Vauxhall and Opel are in the process of being sold off to Canadian-Austrian auto parts manufacturer Magna and a Russian partner, with the aid of the German government.
The so-called “new” GM will still be effectively nationalized until the company can survive without the government’s help. The White House will help replace a majority of the company’s board of directors, though senior administration officials insisted they had no interest in running GM’s “day-to-day operations.”
The Obama administration will control about 60 per cent of the company in return for another 30 billion dollars in emergency cash. That is on top of 20 billion dollars plugged into the struggling firm since December.
Canada’s government will contribute another 10 billion dollars and take a 12-per-cent stake. The company’s existing shareholders have been virtually wiped out and GM was pulled from the Dow Jones Industrial Average on Monday.
Thomas Donohue, president of the US Chamber of Commerce, said he would be watching just how much the US and Canadian governments seek to exercise control over GM’s future decisions.
“Our biggest concern with the restructuring plan ... is the potential for governments and unions to influence production, product, workforce and management decisions in ways that could jeopardize the automakers’ chances for survival,” Donohue said.
GM said Sunday that about 54 per cent of its bondholders have already backed the plan, after the US Treasury Department offered the group a sweetened deal. The creditors will start with a 10-per-cent stake in the “new” GM, but have the option to take up to 15 per cent more in future.
The United Auto Workers (UAW) union has backed a new labour contract that brings workers’ wages and benefits down to the level of foreign manufacturers operating in the United States. A union healthcare trust, owed 20 billion dollars, will also get a 17.5-per- cent stake in the reorganized firm.
But a number of investors believe the UAW was unfairly favoured over smaller bondholders’ claims, and have vowed to try to block the deal in court.
“No one seems to have the best interests of small bondholders at heart,” said Jim Martin, who helped organize a group called Main Street Bondholders.
GM has named Al Koch, a managing director at the firm AlixPartners LLP, as its chief restructuring officer during the bankruptcy process, the Wall Street Journal reported. Koch oversaw the bankruptcy of KMart Corporation.
quoted from: Khaleej Times
Read more...Thursday, May 28, 2009
GM Bankruptcy 'Inevitable'
General Motors, the US car manufacturer, is facing bankruptcy after creditors rejected a proposal to swap $27bn in debt for 10 per cent of the company's stock.
The struggling firm has until June 1 to complete a government-ordered restructuring that includes debt reduction, labour cost cuts and plant closures.
The Obama administration has said it would only provide more funds if 90 per cent of the bondholders, as well as unionised workers, agreed to concessions that substantially reduced GM's costs.
General Motors said on Wednesday that "substantially less" than the 90 per cent threshold had been reached and that none of the exchange offers would be accepted.
The US automobile industry has been hit hard by a slump in sales amid a US recession and a global financial crisis and Chrysler, another of the so-called big three Detroit-based vehicle manufacturers, has already entered bankruptcy proceedings.
The company told Al Jazeera on Wednesday it now has $185bn in liabilities it will seek to shed through bankruptcy.
The US government is likely to become the majority shareholder in the company after it enters bankruptcy, reports said.
The Canadian government and the United Auto Workers union are also set to own smaller shares in the firm, according to reports.
Workers hit hard
John Pottow, a professor at the University of Michigan who specialises in bankruptcy, said GM evading bankruptcy now is almost impossible.
"They said no. That's it. They tried. That's why they're going to have to file for bankruptcy," he said.
Al Jazeera's Rob Reynolds in Washington said that current and former workers were likely to bear the brunt of the costs of GM restructuring as medical benefits were cut and that sales were likely to be hit further by bankruptcy proceedings.
Tens of thousands of workers have already been sacked by GM in recent months.
Fears are also growing over the future of GM's European subsidiaries, which include Opel and Vauxhall, which also employ of tens of thousands of staff.
GM's board has approved a plan to place Opel and Vauxhall under a separate holding company in an attempt to keep them safe from bankruptcy while it assesses bids for the firm.
The struggling firm has until June 1 to complete a government-ordered restructuring that includes debt reduction, labour cost cuts and plant closures.
The Obama administration has said it would only provide more funds if 90 per cent of the bondholders, as well as unionised workers, agreed to concessions that substantially reduced GM's costs.
General Motors said on Wednesday that "substantially less" than the 90 per cent threshold had been reached and that none of the exchange offers would be accepted.
The US automobile industry has been hit hard by a slump in sales amid a US recession and a global financial crisis and Chrysler, another of the so-called big three Detroit-based vehicle manufacturers, has already entered bankruptcy proceedings.
The company told Al Jazeera on Wednesday it now has $185bn in liabilities it will seek to shed through bankruptcy.
The US government is likely to become the majority shareholder in the company after it enters bankruptcy, reports said.
The Canadian government and the United Auto Workers union are also set to own smaller shares in the firm, according to reports.
Workers hit hard
John Pottow, a professor at the University of Michigan who specialises in bankruptcy, said GM evading bankruptcy now is almost impossible.
"They said no. That's it. They tried. That's why they're going to have to file for bankruptcy," he said.
Al Jazeera's Rob Reynolds in Washington said that current and former workers were likely to bear the brunt of the costs of GM restructuring as medical benefits were cut and that sales were likely to be hit further by bankruptcy proceedings.
Tens of thousands of workers have already been sacked by GM in recent months.
Fears are also growing over the future of GM's European subsidiaries, which include Opel and Vauxhall, which also employ of tens of thousands of staff.
GM's board has approved a plan to place Opel and Vauxhall under a separate holding company in an attempt to keep them safe from bankruptcy while it assesses bids for the firm.
quoted from: Al Jazeera.Net
Read more...Friday, May 15, 2009
US Chemical Output Cuts Reduce Only Some Q1 Inventories
HOUSTON (ICIS news)--Dramatic cutbacks in US chemical production since the third quarter of 2008 have only partly offset declining demand, with some sectors still building inventories in the first quarter, according to industry data issued on Thursday.
The first-quarter data compiled by the National Petrochemical & Refiners Association (NPRA) is based on voluntary reports from chemical companies, and the industry association does not include data if the reporting pool is too small to preserve anonymity.
The most significant gap between production and inventories appears to be in benzene, with output down 11% from the fourth quarter to an estimated 301.6m gal (1.14bn litres) – continuing a trend that has been evident since the start of 2008.
Despite the steady drop in supply, the data – based on input from 29 companies – showed US benzene stocks swelled to 136.3m gal in the first quarter, up 21% from the fourth quarter and the highest total in more than two years.
The build-up in benzene inventories also occurred despite some recovery in downstream aromatics production.
Styrene output rose to 2.035bn lb (923,000 tonnes) in the first quarter, up 12% from a low point of 1.821bn lb in the fourth quarter. Styrene production in the latest quarter was still running 29% below year-earlier levels, though.
Paraxylene (PX) also showed up as a brighter spot for chemical producers.
The NPRA did not include running tallies on production, but the data showed inventories were at 422.6m lb at the end of the first quarter, down by 21% from 535.4m lb in the fourth quarter and down 44% from 750.6m lb a year earlier.
US PX demand slumped in late 2008, but has since recovered in part due to rising demand in Asia, where prices have hit a nine-month high.
Improved Asian demand also appeared to be a factor in a bounce in US monoethylene glycol (MEG) production.
MEG output in the first quarter was 725m lb, up 7.4% from 675m lb in the fourth quarter but still down 41% from 1.230bn lb a year earlier, NPRA said.
In olefins, the picture was mixed, with ethylene production picking up after a steep fall over the previous two quarters, while propylene and butadiene (BD) output continued to slide.
US ethylene producers had shut several crackers in the fourth quarter and reduced operating rates as demand plunged.
But the advantage of cheaper natural gas-based feedstocks helped improve margins sufficiently to get some crackers restarted.
US natural gas prices have hit seven-year lows this year as the economic downturn sharply reduced industrial demand, tilting producers further toward lighter feedstocks.
Ethylene production in January-March was 10.91bn lb, up by 2% compared with 10.70bn lb in the fourth quarter. But output was still down by 19% from 13.53bn lb one year earlier, according to the NPRA figures.
US crackers were estimated to have run at an average operating rate of around 70% in the first quarter, up from 68% in the fourth quarter but down from an estimated 85% in the same period of 2008.
Output of propylene was 7.22bn lb, down by 7.4% from 7.80 lb in the fourth quarter and down 17% from 8.67bn lb one year earlier.
BD production in the first quarter was 634m lb, down 21% from 806m lb in the fourth quarter and down 38% from 1.03bn lb a year earlier.
The data showed that the production cutbacks in olefins in the fourth quarter had succeeded in reducing first-quarter inventories.
US ethylene inventories were at 771m lb, down by 29% from the fourth quarter, but still up by 0.3% from a year earlier.
Propylene stocks fell to 1.57bn lb, down by 15% from the fourth quarter, but up by 31% from a year before.
BD inventories were 182m lb, down by 26% from the fourth quarter but up by 32% year on year.
The first-quarter data compiled by the National Petrochemical & Refiners Association (NPRA) is based on voluntary reports from chemical companies, and the industry association does not include data if the reporting pool is too small to preserve anonymity.
The most significant gap between production and inventories appears to be in benzene, with output down 11% from the fourth quarter to an estimated 301.6m gal (1.14bn litres) – continuing a trend that has been evident since the start of 2008.
Despite the steady drop in supply, the data – based on input from 29 companies – showed US benzene stocks swelled to 136.3m gal in the first quarter, up 21% from the fourth quarter and the highest total in more than two years.
The build-up in benzene inventories also occurred despite some recovery in downstream aromatics production.
Styrene output rose to 2.035bn lb (923,000 tonnes) in the first quarter, up 12% from a low point of 1.821bn lb in the fourth quarter. Styrene production in the latest quarter was still running 29% below year-earlier levels, though.
Paraxylene (PX) also showed up as a brighter spot for chemical producers.
The NPRA did not include running tallies on production, but the data showed inventories were at 422.6m lb at the end of the first quarter, down by 21% from 535.4m lb in the fourth quarter and down 44% from 750.6m lb a year earlier.
US PX demand slumped in late 2008, but has since recovered in part due to rising demand in Asia, where prices have hit a nine-month high.
Improved Asian demand also appeared to be a factor in a bounce in US monoethylene glycol (MEG) production.
MEG output in the first quarter was 725m lb, up 7.4% from 675m lb in the fourth quarter but still down 41% from 1.230bn lb a year earlier, NPRA said.
In olefins, the picture was mixed, with ethylene production picking up after a steep fall over the previous two quarters, while propylene and butadiene (BD) output continued to slide.
US ethylene producers had shut several crackers in the fourth quarter and reduced operating rates as demand plunged.
But the advantage of cheaper natural gas-based feedstocks helped improve margins sufficiently to get some crackers restarted.
US natural gas prices have hit seven-year lows this year as the economic downturn sharply reduced industrial demand, tilting producers further toward lighter feedstocks.
Ethylene production in January-March was 10.91bn lb, up by 2% compared with 10.70bn lb in the fourth quarter. But output was still down by 19% from 13.53bn lb one year earlier, according to the NPRA figures.
US crackers were estimated to have run at an average operating rate of around 70% in the first quarter, up from 68% in the fourth quarter but down from an estimated 85% in the same period of 2008.
Output of propylene was 7.22bn lb, down by 7.4% from 7.80 lb in the fourth quarter and down 17% from 8.67bn lb one year earlier.
BD production in the first quarter was 634m lb, down 21% from 806m lb in the fourth quarter and down 38% from 1.03bn lb a year earlier.
The data showed that the production cutbacks in olefins in the fourth quarter had succeeded in reducing first-quarter inventories.
US ethylene inventories were at 771m lb, down by 29% from the fourth quarter, but still up by 0.3% from a year earlier.
Propylene stocks fell to 1.57bn lb, down by 15% from the fourth quarter, but up by 31% from a year before.
BD inventories were 182m lb, down by 26% from the fourth quarter but up by 32% year on year.
quoted from: www.ICIS.com
Read more...Monday, May 11, 2009
Chem Demand to Benefit from Stimulus Measures - US Huntsman
HOUSTON (ICIS news)--Global chemical industry market indicators showed slight improvement throughout the first quarter due largely to government stimulus packages, providing optimism that the worst of the current market could be over, US chemicals producer Huntsman said on Friday.
“March was a stronger month than January or February,” CEO Peter Huntsman said during an earnings conference call. “The industry appears to have stabilised, and we’re beginning to see some signs of recovery, particularly in China where customers have finished destocking.”
Huntsman posted a net loss of $290m (€217.5m) in the 2009 first quarter, down from a $7m gain in the same period last year due to lower demand across businesses, the company said.
Group sales dropped 33% year on year to $1.69bn, compared with $2.54bn in the first quarter of 2008.
Huntsman's chief executive credited China’s economic stimulus programme with a broad recovery in Asian demand, and said it gave the company optimism that the US economy would also rebound as projects funded through the US stimulus bill roll in over the next several months.
He expressed particular optimism on the future of global demand for methyl di-p-phenylene isocyanate (MDI), which he anticipated increasing due to stimulus spending in China and the US related to energy conservation and green energy projects. MDI is unique in its ability to fill some of those applications, he said.
MDI is a critical component of the company’s polyurethanes segment, which is the largest of its divisions. The segment’s sales dropped 40% in the first quarter, to $600m from $1bn in the prior-year period, as MDI volumes decreased due to the worldwide economic slowdown.
Moreover, MDI selling prices declined as well due to competitive pressures, lower raw material costs and the strength of the US dollar, the company said.
That more than offset increased volumes for propylene oxide (PO) and methyl tertiary butyl ether (MTBE), which had stronger demand in the quarter. As such, the segment recorded an 80% slump in earnings before interest, tax, depreciation and amortisation (EBITDA) to $27m.
Orders in the polyurethanes segment were up marginally across the board in April, Peter Huntsman said.
However, Peter Huntsman cautioned that the company would only be “aggressive” in its polyurethane operating rates in Asia, where demand has shown some signs of recovery. Elsewhere, operating rates would remain at only about 50%, he said.
The company’s performance products division - its second largest segment - showed the least decline, with sales falling 21%, to $500m from $631m. This was due to “continued robust demand” from agricultural chemical products, as well as stable demand for personal care items, Peter Huntsman said.
Huntsman’s advanced materials, textile effects and pigments segments had sales fall by 32%, 37%, and 31%, respectively, all attributable to the global economic slowdown, the company said.
“We’re not waiting for the economy to kick in and improve our earnings,” Peter Huntsman said. “We’re still cutting inventories and costs where we can. We are ahead of our planned $150m cost reduction plan.”
On 17 April, Huntsman said it had obtained a credit agreement waiver with the lenders of a $650m credit facility, providing the company with more liquidity.
The company did not give any specific earnings or sales forecasts for the rest of 2009.
“March was a stronger month than January or February,” CEO Peter Huntsman said during an earnings conference call. “The industry appears to have stabilised, and we’re beginning to see some signs of recovery, particularly in China where customers have finished destocking.”
Huntsman posted a net loss of $290m (€217.5m) in the 2009 first quarter, down from a $7m gain in the same period last year due to lower demand across businesses, the company said.
Group sales dropped 33% year on year to $1.69bn, compared with $2.54bn in the first quarter of 2008.
Huntsman's chief executive credited China’s economic stimulus programme with a broad recovery in Asian demand, and said it gave the company optimism that the US economy would also rebound as projects funded through the US stimulus bill roll in over the next several months.
He expressed particular optimism on the future of global demand for methyl di-p-phenylene isocyanate (MDI), which he anticipated increasing due to stimulus spending in China and the US related to energy conservation and green energy projects. MDI is unique in its ability to fill some of those applications, he said.
MDI is a critical component of the company’s polyurethanes segment, which is the largest of its divisions. The segment’s sales dropped 40% in the first quarter, to $600m from $1bn in the prior-year period, as MDI volumes decreased due to the worldwide economic slowdown.
Moreover, MDI selling prices declined as well due to competitive pressures, lower raw material costs and the strength of the US dollar, the company said.
That more than offset increased volumes for propylene oxide (PO) and methyl tertiary butyl ether (MTBE), which had stronger demand in the quarter. As such, the segment recorded an 80% slump in earnings before interest, tax, depreciation and amortisation (EBITDA) to $27m.
Orders in the polyurethanes segment were up marginally across the board in April, Peter Huntsman said.
However, Peter Huntsman cautioned that the company would only be “aggressive” in its polyurethane operating rates in Asia, where demand has shown some signs of recovery. Elsewhere, operating rates would remain at only about 50%, he said.
The company’s performance products division - its second largest segment - showed the least decline, with sales falling 21%, to $500m from $631m. This was due to “continued robust demand” from agricultural chemical products, as well as stable demand for personal care items, Peter Huntsman said.
Huntsman’s advanced materials, textile effects and pigments segments had sales fall by 32%, 37%, and 31%, respectively, all attributable to the global economic slowdown, the company said.
“We’re not waiting for the economy to kick in and improve our earnings,” Peter Huntsman said. “We’re still cutting inventories and costs where we can. We are ahead of our planned $150m cost reduction plan.”
On 17 April, Huntsman said it had obtained a credit agreement waiver with the lenders of a $650m credit facility, providing the company with more liquidity.
The company did not give any specific earnings or sales forecasts for the rest of 2009.
quoted from: www.ICIS.com
Read more...Thursday, May 07, 2009
LyondellBasell Restructuring to Continue Under New jv
HOUSTON (ICIS news)--LyondellBasell would carry on its restructuring process under US bankruptcy protection despite changes in the ownership of the company, corporate parent Access Industries said on Wednesday.
Access Industries has entered into an agreement with Germany’s ProChemie Holding to form a joint venture (jv) - to be named ProChemie GmbH - that will control LyondellBasell.
The joint venture will be equally owned by Access Industries and ProChemie Holding.
“The members of the new joint venture will both support LyondellBasell’s restructuring process and seek to identify and pursue global business opportunities,” Access said in a statement.
LyondellBasell's US operations filed for bankruptcy protection on 6 January in the US. The holding company followed with its own US filing for bankruptcy protection.
The company plans to emerge from bankruptcy by the end of 2009.
The change in ownership provides Access Industries with the flexibility to participate in the restructuring of LyondellBasell in ways that are tax neutral for the chemical company, Access said.
Access Industries said it would contribute its equity ownership in LyondellBasell in exchange for a 50% interest in ProChemie GmbH.
The initial assets in the joint venture will comprise Access’ equity in LyondellBasell and assets currently owned by ProChemie Holding, an Access Industries spokesperson said.
No further financial details were available. ProChemie could not be reached for comment.
Access Industries has already filed documents in Europe notifying regulators of its intent to change the ownership structure of LyondellBasell, a LyondellBasell spokesperson in Houston said.
The spokesperson said the ownership change would have no impact on LyondellBasell’s day-to-day operations.
Access Industries has entered into an agreement with Germany’s ProChemie Holding to form a joint venture (jv) - to be named ProChemie GmbH - that will control LyondellBasell.
The joint venture will be equally owned by Access Industries and ProChemie Holding.
“The members of the new joint venture will both support LyondellBasell’s restructuring process and seek to identify and pursue global business opportunities,” Access said in a statement.
LyondellBasell's US operations filed for bankruptcy protection on 6 January in the US. The holding company followed with its own US filing for bankruptcy protection.
The company plans to emerge from bankruptcy by the end of 2009.
The change in ownership provides Access Industries with the flexibility to participate in the restructuring of LyondellBasell in ways that are tax neutral for the chemical company, Access said.
Access Industries said it would contribute its equity ownership in LyondellBasell in exchange for a 50% interest in ProChemie GmbH.
The initial assets in the joint venture will comprise Access’ equity in LyondellBasell and assets currently owned by ProChemie Holding, an Access Industries spokesperson said.
No further financial details were available. ProChemie could not be reached for comment.
Access Industries has already filed documents in Europe notifying regulators of its intent to change the ownership structure of LyondellBasell, a LyondellBasell spokesperson in Houston said.
The spokesperson said the ownership change would have no impact on LyondellBasell’s day-to-day operations.
quoted from: www.ICIS.com
Read more...Monday, May 04, 2009
Chrysler 'to File for Bankruptcy'
Chrysler, the ailing US auto giant, is to declare bankruptcy after last ditch talks with creditors failed, government officials have said.
The firm had been given until midnight local time (04:00 GMT) on Thursday to put deals in place with labour unions, creditors and Italian automaker Fiat or face bankruptcy.
It reportedly managed to secure deals with unions and with Italian automaker Fiat. However, there were reports some of its creditors - several hedge funds - were holding out for a better deal from the US government.
Barack Obama, the US president, is to hold a news conference in Washington DC on the struggling US auto industry at noon local time (16:00 GMT) on Thursday.
Chrysler will continue to operate and still plans to sign the agreement with Fiat, officials said.
The bankruptcy projection would give the firm time to rearrange its finances under court supervision and offer it protection from creditors.
Government aid
Obama's auto task force in March rejected Chrysler's restructuring proposals and gave it 30 days to come up with an alternative, including the link with Fiat.
Chrysler is one of the so-called Big Three auto firms in the US alongside General Motors (GM) and Ford.
Both Chrysler and GM had asked for a combined $21.6bn in financial aid from the US government on top of the $17.4bn in emergency loans approved in December.
GM still has another 30 days to develop further restructuring plans while Ford has said it has enough money to survive the economic downturn without government aid.
GM has already announced earlier this month that it was to slash a further 21,000 jobs and close plants and dealerships, while Rick Wagoner, its chief executive, was ousted by the Obama administration in March.
All three auto firms have faced criticism for failing to restructure their firms adequately as the US slid into recession and for not responding to consumer demand for more fuel efficient vehicles.
The firm had been given until midnight local time (04:00 GMT) on Thursday to put deals in place with labour unions, creditors and Italian automaker Fiat or face bankruptcy.
It reportedly managed to secure deals with unions and with Italian automaker Fiat. However, there were reports some of its creditors - several hedge funds - were holding out for a better deal from the US government.
Barack Obama, the US president, is to hold a news conference in Washington DC on the struggling US auto industry at noon local time (16:00 GMT) on Thursday.
Chrysler will continue to operate and still plans to sign the agreement with Fiat, officials said.
The bankruptcy projection would give the firm time to rearrange its finances under court supervision and offer it protection from creditors.
Government aid
Obama's auto task force in March rejected Chrysler's restructuring proposals and gave it 30 days to come up with an alternative, including the link with Fiat.
Chrysler is one of the so-called Big Three auto firms in the US alongside General Motors (GM) and Ford.
Both Chrysler and GM had asked for a combined $21.6bn in financial aid from the US government on top of the $17.4bn in emergency loans approved in December.
GM still has another 30 days to develop further restructuring plans while Ford has said it has enough money to survive the economic downturn without government aid.
GM has already announced earlier this month that it was to slash a further 21,000 jobs and close plants and dealerships, while Rick Wagoner, its chief executive, was ousted by the Obama administration in March.
All three auto firms have faced criticism for failing to restructure their firms adequately as the US slid into recession and for not responding to consumer demand for more fuel efficient vehicles.
quoted from: Aljazeera.Net
Read more...Dow Would Sell AgroSciences as Last Resort – Analyst
NEW YORK (ICIS news)--US major Dow Chemical would likely sell its Dow AgroSciences business only as a last resort or if it were offered a full valuation, Wall Street analysts said on Friday.
“We view the sale of the agricultural operations in whole or in part as about the last step that Dow would take,” said JPMorgan analyst Jeffrey Zekauskas in a research note.
“The whole point of the Rohm and Haas acquisition was to increase the specialty character of the company,” he added.
Divesting Dow AgroSciences would simply amount to exchanging one specialty business for another, Zekauskas said.
“Should Dow be unable to sell various commodity plastics, adhesives and latex assets, in our opinion, it would then look toward the sale of the agricultural asset as something of a last resort,” Zekauskas said.
Dow, which acquired US specialty chemical giant Rohm and Haas in April for around $19bn (€14bn), is seeking asset sales to pay down massive debt taken on to complete the deal, including a $12.5bn bridge loan.
Chairman and CEO Andrew Liveris said in a conference call that the company is considering options for Dow AgroSciences, including a sale, an initial public offering (IPO) or a joint venture.
“This business is strategic to Dow. But ... we have launched a rigorous evaluation process underway here as well, as we continue to assist the right strategic outcome for this business,” he said on the call.
“We suspect that Dow will only let this business go if a full valuation is offered,” said BB&T Capital Markets analyst Frank Mitsch.
Credit Suisse analyst John McNulty estimates the potential value of Dow AgroSciences, plus other non-strategic stand-alone businesses for sale such as Rohm and Haas’ powder coatings unit, at over $15bn.
Liveris valued the non-strategic stand-alone businesses at $2bn-3bn.
Dow AgroSciences has been the star performer in the company’s portfolio. The unit’s first-quarter operating profits rose by 2% to a record $338m on 10% higher sales of $1.45bn, while all other Dow segments posted profit declines or losses.
Including Dow AgroSciences, the total value of potential divestitures for Dow is $25bn, according to Liveris.
“Any question of Dow falling into financial distress was mitigated, as even half that target would eliminate the bridge loan,” said Citigroup analyst PJ Juvekar.
Dow continues to talk with its Kuwaiti partners, despite the collapse late last year of the K-Dow commodity chemical joint venture deal that would have given Dow $7.5bn in cash.
“While outreach and dialogue continues with Kuwaiti partners, there are other parallel negotiations that are ongoing with two other state-owned resource owners, on an equivalent basis for the similar scope of the original K-Dow venture,” Liveris said.
The negotiations could lead to a deal valued at $4bn-6bn, he added.
Dow is also seeking to divest aromatic and derivatives assets, including styrene-butadiene rubber (SBR) and SB latex, with a value of $1bn-2bn, said Liveris.
Previously announced potential divestments include Dow’s stake in the TRN Belgian refinery venture, equity stakes in olefin derivatives businesses in Southeast Asia and its calcium chloride business.
“We view the sale of the agricultural operations in whole or in part as about the last step that Dow would take,” said JPMorgan analyst Jeffrey Zekauskas in a research note.
“The whole point of the Rohm and Haas acquisition was to increase the specialty character of the company,” he added.
Divesting Dow AgroSciences would simply amount to exchanging one specialty business for another, Zekauskas said.
“Should Dow be unable to sell various commodity plastics, adhesives and latex assets, in our opinion, it would then look toward the sale of the agricultural asset as something of a last resort,” Zekauskas said.
Dow, which acquired US specialty chemical giant Rohm and Haas in April for around $19bn (€14bn), is seeking asset sales to pay down massive debt taken on to complete the deal, including a $12.5bn bridge loan.
Chairman and CEO Andrew Liveris said in a conference call that the company is considering options for Dow AgroSciences, including a sale, an initial public offering (IPO) or a joint venture.
“This business is strategic to Dow. But ... we have launched a rigorous evaluation process underway here as well, as we continue to assist the right strategic outcome for this business,” he said on the call.
“We suspect that Dow will only let this business go if a full valuation is offered,” said BB&T Capital Markets analyst Frank Mitsch.
Credit Suisse analyst John McNulty estimates the potential value of Dow AgroSciences, plus other non-strategic stand-alone businesses for sale such as Rohm and Haas’ powder coatings unit, at over $15bn.
Liveris valued the non-strategic stand-alone businesses at $2bn-3bn.
Dow AgroSciences has been the star performer in the company’s portfolio. The unit’s first-quarter operating profits rose by 2% to a record $338m on 10% higher sales of $1.45bn, while all other Dow segments posted profit declines or losses.
Including Dow AgroSciences, the total value of potential divestitures for Dow is $25bn, according to Liveris.
“Any question of Dow falling into financial distress was mitigated, as even half that target would eliminate the bridge loan,” said Citigroup analyst PJ Juvekar.
Dow continues to talk with its Kuwaiti partners, despite the collapse late last year of the K-Dow commodity chemical joint venture deal that would have given Dow $7.5bn in cash.
“While outreach and dialogue continues with Kuwaiti partners, there are other parallel negotiations that are ongoing with two other state-owned resource owners, on an equivalent basis for the similar scope of the original K-Dow venture,” Liveris said.
The negotiations could lead to a deal valued at $4bn-6bn, he added.
Dow is also seeking to divest aromatic and derivatives assets, including styrene-butadiene rubber (SBR) and SB latex, with a value of $1bn-2bn, said Liveris.
Previously announced potential divestments include Dow’s stake in the TRN Belgian refinery venture, equity stakes in olefin derivatives businesses in Southeast Asia and its calcium chloride business.
quoted from: www.ICIS.com
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