Actual finance blog

French carmaker Renault on Thursday posted a worse-than-expected loss on for the first half in line with results at its European rivals as auto sales fell sharply but it said the outlook is stabilizing.

In Japan two second tier automakers, Mazda Motor Corp and Mitsubishi Motors Corp, also posted losses for a third straight quarter but kept their annual forecasts unchanged, relying on cost cuts to offset the weak demand.

Automakers have seen sales crumble in the past 12 months due to global economic downturn and tight credit markets that have already driven U.S. rivals General Motors and Chrysler to bankruptcy and restructuring. [nCARS1]

Renault, which has a 44 percent stake in Japanese carmaker Nissan Motor Co, expects the world automotive market to fall 12 percent in 2009 compared with last year to over 57 million units.

Automakers are squeezing costs to reduce losses as production capacity remains severely underused, but they mostly foresee an improvement in output on a quarterly basis for the rest of the year as they bring inventory under control.

“The business environment is still uncertain,” Mazda Chief Financial Officer Kiyoshi Ozaki told a news conference.

In Europe, Renault, which ranked as about the 10th largest car maker in the world by the end of the first half, expects Europe’s car market to finish the year with an 8 percent decline, after a 13.7 percent fall in the first six months.

Renault itself is showing “resilience,” Chief Executive Carlos Ghosn said, adding the group was preparing for the post-crisis period with zero emission vehicles, expansion of its entry-level range and a move to expand synergies with alliance partner Nissan color business cards.

The group said that despite the effects of incentive schemes to scrap older cars in major European markets, Europe made up half the total revenue decline. Group revenues fell 23.7 percent to 15.99 billion euros ($22.5 billion) in the period.

Governments around the world have introduced stimulus measures to revive the sector which is also racing to reposition itself for more ecologically-minded buyers with hybrid cars and electric vehicles.

“The product mix has been pulled downwards,” Renault said. Smaller, cheaper models are eligible for government scrapping schemes, under which drivers are paid cash bonuses to trade in old cars for newer, greener ones.

Renault posted a group operating loss of 946 million euros for the first half, against an operating income of 845 million euros in the same period a year earlier.

Ghosn, who is also CEO of its Japanese alliance partner Nissan, said earlier in July that he expected 2010 to be “as difficult as 2009″ as the auto industry crisis continues.

French carmaker PSA Peugeot-Citroen on Wednesday posted a first half loss and said it did not see a recovery in Europe starting before the end of 2010 but said it saw good potential from the Chinese and Brazilian markets.

French car parts maker Valeo on Wednesday posted lower sales and a 54 million euros second-quarter net loss but forecast a rebound in automobile production in the third quarter. 

Read more

More than 90 percent of St. Louis area businesses plan to either hire new workers or maintain current employment levels during the next 12 months.

At the same time, there is genuine concern among employers that a shortage of skilled workers and training programs may hamper hiring across the region as St. Louis emerges from the recession.

The findings are contained in the "State of St. Louis Workforce Report," a survey of 1,537 employers and 447 dislocated workers that state and local officials say provides a much-needed glimpse at regional, postrecession employment.

"This is the tip of the iceberg; it gives us a beginning picture of what we need to look for," said Michael Holmes, executive director of the St. Louis Agency on Training and Employment.

Much of the data he relies on, Holmes said, predate the recession.

The survey’s researchers determined that employers used several alternatives to layoffs to weather the downturn, including reducing the hours of existing employees, freezing payroll, payroll reductions and suspension of subsidies for retirement benefits.

Meanwhile, of the employers surveyed, 23 percent said they would increase employment over the next year. Sixty-eight percent plan to maintain current payroll levels and 9 percent expect to decrease their work force.

Holmes, along with representatives of the St. Louis County Career Center and St. Louis Community College will officially release the report Thursday.

In it, 30 percent of the area’s employers blame the economy for reductions in payroll.

But 23 percent of employers cited a lack of skilled workers and inadequate training programs as a "barrier" to new hiring. And that has grabbed the attention of officials.

"It’s important to remember that the skill gaps that existed before the downturn continue," said Roderick Nunn, vice chancellor for work force development at St. Louis Community College.

To improve opportunities for finding new and better jobs, the report says the growth industries in the next year will be educational services, health care, retail and manufacturing. That, the report says, is where job-hunters need to get training immediate payday loans online.

"The key challenge is recalibrating business and education and supply and demand for what employers need in very specific terms," said Dick Fleming, president and CEO of the St. Louis Regional Chamber and Growth Association.

Gene Gorden, executive director of the St. Louis County Workforce Development Career Centers, also stressed the importance of training in clean energy, information technology and biotechnology.

"The training institutions have to be in tune and listening to those businesses," Gorden said.

Another question that needs to be addressed, said Holmes, is determining whether the responsibility for retraining lies with the public sector, the private sector or a combination.

On the flip side, the survey looks at some of the obstacles that prevent displaced workers from learning new job skills.

Chief among those are time and money: Unemployed workers need to find jobs now to support their families, rather than invest time in retraining. And even if they could afford the time, they might not have the money.

Programs that prepare workers for a transition into expanding health care fields, the report pointed out, are examples of training regimens demanding commitments of extended time and money.

The survey’s interviews with unemployed workers at career centers on both the Missouri and Illinois sides of the Mississippi River revealed a detailed portrait of the 128,000 area residents the Bureau of Labor Statistics estimates were out of a job in May. (June statistics will be released on Wednesday.)

The report found 53 percent of the region’s jobless are male and 47 percent female.

Nearly half, 48 percent, said they had been out of work for more than six months.

A third have a high school diploma and another 25 percent had completed some college.

Fleming noted that no economic sector has evaded damage during the downturn.

Therein, he said, lies the report’s real value.

Source

FENTON – Emotions ranged from anger to sadness Friday as more than 1,000 people protested the closure of the Chrysler local assembly plants and the general loss of manufacturing jobs in the United States.

Organizers held the rally on the front lawn of the Chrysler plants in Fenton that once employed as many as 6,000 people. The last Dodge Ram pickup built at the north plant rolled off the assembly line July 2, eight months after the adjacent south plant produced its final minivan. Chrysler plans to sell off the shuttered plants.

The north plant closure stung local workers even more because Chrysler received a multibillion-dollar bailout package from the U.S. government.

Politicians "must get it through their damn heads that they are destroying the American way of life," said Don Ackermann, president of United Auto Workers Union local 136, the union that represents employees at the north plant.

Chrysler continues to build minivans at a plant in Windsor, Ontario, while it consolidated Ram pickup production to assembly plants in Warren, Mich., and Saltillo, Mexico.

As part of the rally, attendees marched onto the overpass just east of the plant that crosses Interstate 44. Traffic slowed for several minutes as drivers observed the mass of people on the overpass, which was temporarily closed to traffic. Organizers obtained a permit for the closure.

There were at least a handful of workers who were too emotional about losing their jobs to show up, said Vet Goods, an electrician from University City. Goods said she has been a member of the International Brotherhood of Electrical Workers for 26 years and has been called in to help update the plant several times paydayloans.

"It hurts them to even come out here," she said of friends who worked at the plant. "They gave blood, sweat and tears for 20 and 30 years. They don’t even want to come past here because there’s a spiritual and emotional connection with what they gave to produce this product."

With Chrysler uninterested in keeping the Fenton plants open, local politicians are now focusing on how to use the site for other manufacturing businesses.

Mark Horne is a Chrysler worker ready to start a new chapter in his life.

Horne was a toolmaker at the north plant until he was laid off and in January accepted a buyout. He wrote letters to U.S. Sen. Claire McCaskill and other politicians appealing to save jobs at the plant before he decided to use federal money to pursue an associate’s degree in computer-aided drafting and engineering.

Still, Horn showed up at the rally, hoping that Friday’s demonstration will pressure politicians to find a way to create jobs at the Fenton site.

"I wrote a letter … but unless you do it en masse, I don’t really think it makes much difference," Horne said. "I think, in the end, there will be something back in these plants."

Source

IBM on Wednesday announced it was stepping up its partnership with Juniper Networks Inc, but said it was also boosting ties with other equipment vendors including Cisco Systems Inc, playing down suggestions it was aiming to keep an increasingly competitive Cisco at bay.

International Business Machines Corp said it had agreed with Juniper on an original equipment manufacturing (OEM) partnership, under which IBM would rebrand Juniper’s switches and routers as its own and sell them as part of its family of products.

IBM said the move was aimed at providing its customers, in particular corporate data centers dealing with increasingly high-volume network traffic, with a wider range of server, data storage, and networking equipment to choose from.

“Most of our customers want choice. They want best of breed,” said Jim Comfort, vice-president of IBM’s enterprise initiatives.

Juniper executives said the deal would help expand its distribution.

IBM said it saw partnerships as a way of helping it become a one-stop shop for a diverse set of products, making it easier for customers to buy and manage their data center equipment.

Some analysts, however, have said IBM is trying to expand relationships outside its long-standing partnership with top network equipment manufacturer Cisco, which recently announced it was entering the server market — a move seen as a direct challenge to IBM and Hewlett-Packard Co.

IBM, which sells computer servers and software and technology services including outsourcing and automation, already helps to sell products made by Juniper, and Cisco, under resale partnerships.

An OEM deal provides a further incentive for IBM salesmen to promote Juniper products, and analysts have said that could be a way of retaliating against Cisco’s encroachment into IBM’s server space quick cash.

IBM, however, played down the rivalry and said it was bolstering its partnership with Cisco. IBM said it planned to resell Cisco’s new storage switches using fiber channel over ethernet (FCoE), an emerging technology that improves network speeds, when the products are launched in September.

IBM said it was also expanding its partnership with Brocade Communications Systems Inc, a much smaller rival to Cisco, to resell its FCoE switches.

“It’s not in response to anything that any one partner did,” Comfort said. “It’s our recognition of the need in the data center for a much more integrated and automated environment. This is about IBM’s agenda in the data center and how we want to leverage our partner relationships.”

Analysts said the expansion of various partnerships showed that while IBM was seeking to expand ties with Juniper and Brocade for diversity, it needed to remain friendly with Cisco.

Since many customers used a combination of products from both Cisco and IBM, it was too risky for IBM and Cisco not to ensure their products worked together seamlessly, they said.

“No doubt, they are going to be competing. But at the same time, they are ultimately trying to deliver value to customers,” said Seamus Crehan, a vice-president at research firm Dell’Oro Group.

“Cisco is a dominant player in ethernet switching and they have a very strong position in data center networking. So for IBM to offer their customers choice, they have to include Cisco.”

(Reporting by Ritsuko Ando, Editing by Chris Lewis)

Read more

California Governor Arnold Schwarzenegger and top lawmakers agreed on Monday to close a $26.3 billion deficit in the state’s budget in a deal that includes $15.5 billion in spending cuts, they said.

The government of the most populous U.S. state, also the world’s eighth-largest economy, began its fiscal year on July 1 facing the massive shortfall due to a plunge in revenues caused by the recession and rising unemployment.

Schwarzenegger, a Republican, said during a news conference the budget would be balanced through deep spending cuts and borrowing and shifting of state funds but without raising taxes.

“All around I think it is a really great, great accomplishment,” said the former Hollywood action star, noting the closing rounds of budget talks, which dragged on for weeks, had been like a suspense movie.

The Legislature’s top Democrats and Republicans said they would brief rank-and-file lawmakers on the agreement in the hope of holding votes in the Democratic-controlled state Assembly and Senate on Thursday.

Democratic leaders acknowledged the agreement contained painful spending cuts in popular programs, the result of mounting financial woes for the state’s government since 2007.

Public schools, colleges and universities would lose $9 billion in funding, prisons more than $1 billion and cities and counties roughly $4 billion. Many state employees would have to take three furlough days each month through June 2010, which amounts to a roughly 14 percent pay cut low rate car insurance.

“There isn’t a whole lot of good news in this budget,” said Senate President Darrell Steinberg.

STATE’S ECONOMIC WOES

The state’s revenues have been sliding amid the lengthy housing slump, the mortgage crisis and credit crunch, turmoil on Wall Street, the recession and rising unemployment.

State officials reported on Friday that California’s jobless rate in June was unchanged from May at 11.6 percent, its highest level in modern state records, and up from 7.1 percent a year earlier.

Double-digit unemployment is striking hard at the money the state collects in personal income taxes, its biggest revenue source. Those revenues are suffering their worst decline since the Great Depression.

Consumers have also been sharply reining in their spending, resulting in a drop in revenues from retail sales taxes.

Wall Street has grown increasingly nervous about California’s finances and has the state government on notice to expect higher borrowing costs as it prepares to sell short-term debt after Schwarzenegger signs the budget into law.

In the spending plan, the governor and lawmakers included an $875 million reserve to help ease concerns at credit rating agencies. 

Read more

The great crash of 2008 turned Wall Street into a financial disaster zone, as big firms tumbled and employees by the thousands found themselves out of work.

But when the going got tough, Ron Kruszewski went shopping.

Kruszewski is chief executive of Stifel Financial, parent of the Stifel Nicolaus & Co. brokerage. The firm, based in downtown St. Louis, is on a growth spurt at a time when much of the industry is shriveling up, selling out or dying off. The misery of its rivals gave Stifel a chance to pick up people and businesses on the cheap.

In May, Stifel picked up 320 stockbrokers and 54 offices from the struggling Swiss-based giant UBS. Last fall, it bought 23 offices in Ohio and Pennsylvania and hired 75 brokers from Butler Wick & Co. Last month, it hired Victor Nesi, Merrill Lynch’s former head of investment banking for the Americas.

Those moves continue a four-year run of acquisitions that is turning Stifel from an obscure Midwestern brokerage to a firm with national name recognition. Revenue more than tripled in four years to about $889 million.

"His target is pretty obvious — to become one of the big boys," said Juli Niemann, a Stifel analyst in the 1990s who now works at Smith Moore & Co.

Stifel was in the right place at the right moment, analysts say. It avoided bad investments that crippled Merrill Lynch, Wachovia and Citigroup and toppled Bear Stearns, AIG and Lehman Brothers.

When other firms held fire sales, and employees fled for the exits, Stifel’s Kruszewski was standing by with a checkbook.

"I don’t spend a lot of time trying to read the future," says Kruszewski. "I spend time reacting to what comes my way."

Stifel’s stock is up 42 percent since the recession began in December 2007. That’s the sharpest advance among 17 other large and mid-sized publicly traded investment firms.

While Stifel’s stock is up, its profits are down by 8 percent in the first quarter to $13.2 million. Investors seem to be betting that Stifel will come back stronger than the pack when good times finally return.

"Oh, it’s definitely a buy," says Michael Flanagan, an independent brokerage industry analyst in Philadelphia, who says he has no business connections with Stifel.

"Stifel since 2004 has been the best in class."

BOND CONTROVERSY

There have been boos mixed with the applause for Stifel. Much of the booing comes from Missouri Secretary of State Robin Carnahan, the state’s main securities regulator. She blasts the company for refusing to immediately buy back $180 million in "auction rate" securities sold to small investors as a low-risk place to stash cash.

Those investments have been frozen since the auction rate market collapsed in February 2008.

A buyback would stick Stifel with bonds that can’t be sold except at a steep loss. The company says it plans to buy back the bonds over three years, which might be time enough to find a market for them. Carnahan calls that plan "drawn-out and inadequate."

While Carnahan and auction-rate customers complain, financial industry analysts are cheering.

They say Stifel sidestepped the mistakes that brought down the giants. It largely stayed out of the mortgage meltdown, but its saving grace was that it avoided heavy debt.

Wall Street investment firms inflated their balance sheets with borrowed money in the good years. Then, they made big bets on mortgage securities and other risky investments. When the economy slumped and the housing market crashed, those securities plummeted in value and big firms drowned in their debt.

Stifel has an assets-to-equity ratio of 3 no fax payday loans.2, compared with 30 at some larger firms before the crash.

"You have to credit Stifel management with using the most powerful word in business, which is ‘no,’" says Joe Stieven, who worked as a banking analyst for Stifel for 21 years before quitting to start his own firm. "They were disciplined enough to say no when others were jumping off the cliff."

Stifel’s growth began before the recession. In 2005, it bought Legg Mason Capital Markets from Citigroup. The firm, based in Baltimore, quadrupled Stifel’s investment-banking business and gave it a bigger presence in capital markets.

Retail brokerage — Stifel’s traditional bread and butter — dropped from three-quarters to about half of the company’s revenue.

Legg Mason also brought a big stock research operation, which Stifel lacked. The company now has 61 analysts, and Stifel analysts started popping up on CNBC and in the financial press.

STAYING LOCAL

After the Legg Mason purchase, Stifel had as many employees in Baltimore as in its St. Louis hometown. But Stifel opted not to move the headquarters from downtown St. Louis, where it’s been since 1890.

"St. Louis has a natural talent pool of people who know the business," says Kruszewski.

That stems from the large number of brokerage firms operating here, including two big national full-service firms in Edward Jones and Wells Fargo Advisors and national discount broker Scottrade. All those experienced people give brokerage firms a reason to stick around.

Stifel now has 900 employees in St. Louis, up from 480 in 2005.

"I don’t think I have the right to move a St. Louis institution somewhere else," said Kruszewski.

Stifel still plans to move to Ballpark Village, which is now an empty lot next to Busch Stadium. Despite repeated delays, Kruszewski is convinced the project will be built. "If we can’t get it built, we ought to push the city into the Mississippi and let it float to Memphis," he jokes.

Stifel held on to 320 of the 340 UBS brokers at offices it acquired. That 6 percent loss is below the 8 to 12 percent loss common in takeovers.

"They are able to hire excellent people off Wall Street. They come from firms that essentially imploded through the steroid of leverage," says analyst Stieven.

In 2007, Stifel bought tiny FirstService Bank in Crestwood. Stifel probably didn’t need a bank; brokerage houses had been getting along without them for decades.

But many banks were buying brokerage houses in an effort to become a one-stop shop for customers seeking investments, credit cards, bank accounts and loans. They have had only limited success at cross selling, but they keep trying.

"My competition thought they’d sell out to a bank," Kruszewski said. "I thought, ‘Why not buy a bank?’"

Meanwhile, Kruszewski says, he will continue to avoid heavy risk. For instance, he won’t set dollar goals for his employees out of worry that they will take too many chances.

"Once you set quantitative goals in financial services, you’re in trouble," he says.

By keeping the firm healthy, Kruszewski said, he will be ready when opportunity arrives, wherever it happens to come from.

"We’ll be a bigger, more influential firm in the market place," he predicts.

"How we’ll get there, I have not a clue."

Source

British Airways unveiled a $1 billion fundraising aimed at securing its future, including $540 million in bank loans that had been earmarked for its pension funds as a safety net against the airline going bust.

The cash removes any immediate threat to the struggling carrier as it endures one of the aviation sector’s worst ever downturns coupled with competition from budget carriers, chief executive Willie Walsh told reporters on Friday.

BA shares were up 3.7 percent at 137 pence at 1105 GMT (7:05 a.m. EDT), having fallen nearly 70 percent in value over the past year.

The company, with pension liabilities estimated at over 3 billion pounds ($4.9 billion), said pension fund trustees had agreed the best way to prevent BA going to the wall was for bank guarantees provided in 2006 to be handed back.

These guarantees were accessible by the trustees only in the event of the airline’s insolvency.

BA also said it planned to raise 300 million pounds through a convertible bond issue, boosting its balance sheet by a total of about 600 million pounds. The airline also unveiled a first-quarter loss of around 100 million pounds.

SURVIVAL

“This ensures that in all but the most extraordinary circumstances BA will emerge from the downturn intact, and without issuing too many shares (via a rights issue),” Evolution analyst Nick Cunningham said. “It is a very good compromise.”

David Cumming, head of UK equities at BA shareholder Standard Life Investments said the fundraising would be well received by investors, but must be followed up by continued cost discipline payday loans.

“It was important to do the funding. Now, if it keeps costs under control things will improve,” he told BBC radio.

Walsh said BA was now “one of the strongest airlines in terms of cash. Our trading position is difficult, but we have taken action ahead of competitors. The situation has now improved for (pension scheme) members”.

Global sales of lucrative business class fares, which account for about 25 percent of airline revenues, fell 23.6 percent in May, the International Air Transport Association said on Thursday, underscoring the severity of the aviation sector slump.

BA has responded to the downturn by slashing costs, and is negotiating changes in pay and working conditions that could lead to thousands of job cuts.

BA also said on Friday it expected an operating loss of 100 million pounds for the three months ending June 30, on revenues of 1.98 billion pounds. It said the loss, which compares with an operating profit of 35 million pounds a year ago, was “slightly better than market expectation”.

BA’s convertible bond issue was fully taken up by investors, sources told Reuters. The notes fall due in 2014 and will be convertible into 15-20 percent of the airline’s shares. 

Read more

Hotelier Marriott International reported a lower second-quarter profit on Thursday, hurt by a sharp decline in revenue per available room.

The Bethesda, Maryland-based company posted net income of $37 million, or 10 cents per share, down from $153 million, or 41 cents per share, a year earlier.

Excluding restructuring costs and other items, earnings were 23 cents per share.

Revenue fell to $2 health insurance companies.6 billion from $3.2 billion.

The company, which operates the Ritz Carlton, Renaissance and Marriott chains, said it could not provide its typical outlook, given the global economic climate.

(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn)

Read more

Bank of America Corp is mounting a campaign to rehire several of the more than three dozen senior Merrill Lynch & Co investment bankers who quit after the firms merged, Bloomberg reported, citing people familiar with the efforts.

Those approached in recent weeks include Samuel Chapin, a Merrill vice chairman who left in April and who was part of a group of senior bankers who focused on maintaining relationships with large corporate clients, the news agency said fast cash.

Bank of America could not be immediately reached for comment by Reuters.

(Reporting by Hezron Selvi in Bangalore; editing by John Stonestreet)

Read more

Goldman Sachs Group Inc executives sold almost $700 million worth of stock since the collapse of rival Lehman Brothers last year, the Financial Times said on Monday.

The newspaper said that most of the stock sales took place while the biggest U.S. investment bank was bailed out by the government with $10 billion of taxpayer money, according to filings with the Securities and Exchange Commission.

A Goldman Sachs spokeswoman declined to comment.

Goldman executives sold stock worth $691 million between September 2008 and April 2009, more than the $438 million in stock sold between September 2007 and April 2008, when the average share price was substantially higher, the Financial Times said.

The stock sales peaked between December and February, when Goldman Sachs’ shares traded near record lows, the newspaper said.

After Lehman Brothers collapse froze financial markets, Goldman Sachs was forced to convert into a bank holding company to have access to government funding, and received $10 billion of taxpayer money cash advance online.

The bank also reported its first quarterly loss since going public in 1999. However, Goldman has managed to sidestep the worst of the financial crisis, which has caught rivals with much higher losses and massive asset writedowns.

Last month, the bank repaid the government the bailout funds, along with other big banks.

Analysts expect Goldman Sachs will report strong quarterly earnings on Tuesday, boosted by sold trading income and improving equity underwriting markets.

(Reporting by Juan Lagorio; Editing by Bernard Orr)

Read more