GM asks EU for more restructuring cash November 24, 2009
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Weeks after killing a deal to sell its Europe-based Opel unit, GM has asked EU leaders to help pay $5 billion in restructuring costs to turn its European division around.
A GM flag blows in front of the Opel plant in Bochum, Germany. The automaker backed out of a deal to sell its European operations earlier this month.(Martin Meissner/Associated Press)
General Motors’ need to bear restructuring costs in the United States and Canada would make it “quite difficult” for the automaker to cover European funding alone, said Nick Reilly, the CEO of GM’s Adam Opel GmbH and Vauxhall units.
“We are looking for support of any government that feels willing to be able to provide us some financing support in the medium term,” he told reporters after meeting officials from European Union nations where GM makes cars. “We have indicated that we will provide some of the funding.”
But at the talks in Brussels, European leaders were cool to the idea of even considering individual negotiations and vowed to avoid them before a Dec. 4 meeting where they will co-ordinate their response to the restructuring plans GM will unveil later this week.
Germany’s deputy economy minister Jochen Homann said there was a commitment from all countries not to make any promises before GM puts forward the restructuring plan.
Kris Peeters, the head of Belgium’s Flanders region, said he expects the company to send that plan to governments at the end of this week and that “there will be until the meeting next week, no further individual meetings with GM.”
The amount each government might offer has no bearing on where and how many jobs GM might cut, Reilly insisted, because “the plan that we have is already in existence.”
‘People at the plants will be the first to hear ‘—GM European head Nick Reilly
The gamesmanship comes after Germany earlier this year drew fire for offering a large bridge loan and loan guarantees if GM Europe sold the majority of its struggling European business to Canadian car parts maker Magna International Inc. and Russian lender Sberbank.
Earlier this month, GM ruffled feathers of its own when its board backed out of that deal, but Belgium and others were angered by reports that Magna won German backing in the first place because they had promised to save jobs in Germany and cut posts elsewhere, even at more efficient plants in Poland or Belgium.
GM’s decision to ditch the Magna sale and hang on to the units has reawakened those fears — and caused officials to call in EU regulators as referees at the Monday meeting to discuss GM’s restructuring.
Tense negotiations
Reilly refused to give details of the plan to cut some 20 to 25 per cent of the company’s car-making capacity before worker representatives have been consulted.
“People at the plants will be the first to hear it,” he said.
EU commissioners said in a statement they agree any financial support to GM would not be linked to where it made investments on job cuts. They also said state aid had to facilitate car makers’ efforts to adapt production to falling demand.
Ahead of the Monday talks, Germany and Belgium rushed to the moral high ground by claiming that they did not want to join a subsidy race or see any state payments to the company linked to guarantees that it would keep jobs.
Britain and Poland have indicated that they are ready to support Opel operations in their countries — but have not said how much they might give. Spain says any support it gives would have to be agreed to by the company and its workers.
Germany appears reluctant to offer GM the $6.7 billion US loan it had promised Magna and has yet to pledge the company any more money.
German Foreign Minister Guido Westerwelle said Monday that GM should focus on protecting jobs and must repay any German loans “to the euro and cent” because the money “belongs to taxpayers and not GM.”
With files from The Associated Press
GM’s Saab sale falls through November 24, 2009
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GM’s plan to sell its Saab division appears dead after a Swedish specialty automaker backed out of a deal to buy the unit.
A Swedish group has backed out of buying Saab, putting the Swedish carmaker’s future in doubt.(Hector Mata/Associated Press)
The future of the troubled brand was cast into doubt Tuesday after General Motors Co. said Koenigsegg Group AB had decided to end the deal announced in June because it had trouble arranging financing.
Financial details of the planned Saab acquisition have never been disclosed, but Koenigsegg said in August it lacked about $417 million US to conclude the transaction.
GM tried to unload the Swedish brand as it restructured under Chapter 11 bankruptcy protection earlier this year.
The apparent death of the Saab deal comes on the heels of GM’s shocking decision earlier this month to back out of a proposal to sell its European Opel and Vauxhall operations to a consortium led by Canada’s Magna International Inc.
The Detroit automaker came under fire for backing out of that sale after European governments had arranged millions in bridge financing and concessions.
And in September, a deal that would have seen auto dealer and former racer Roger Penske buy GM’s Saturn brand fell through.
GM chief executive Fritz Henderson said the automaker is disappointed in the Saab decision and will take several days to figure out what to do.
Financing problems
A person briefed on the deal said Tuesday that Koenigsegg informed GM of the decision Monday, and Saab’s future is now unclear. GM’s board will have to decide the company’s next move, said the person, who asked not to be identified.
Koenigsegg Group, a tiny maker of high-priced exotic sports cars, stated Tuesday that it came to the “painful and difficult conclusion” that it couldn’t complete the deal.
“The time factor has always been critical for our strategy to breathe new air into the company,” it said. “Unfortunately delays in the completion of the deal have resulted in risks and uncertainties that stop us from carrying out the business plan.”
U.S. economy starts to grow November 24, 2009
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The U.S. economy grew 2.8 per cent in the three months ending in September, the Commerce Department reported Tuesday.
That was a revision from the government’s earlier estimate that the gross domestic product —the value of all goods and services produced in the U.S.— grew by 3.5 per cent.
U.S. economic growth is still not expected to be strong enough to drive down high unemployment rates.(Paul Sakuma/Associated Press)
The report shows the economy grew for the first time after a record four quarters of contraction.
But economists and officials with the U.S. Federal Reserve say growth is not expected to be strong enough to drive down unemployment quickly. It’s now at 10.2 per cent, only the second time since the Second World War that the American jobless rate has risen above 10 per cent.
Much of the growth reflected massive government stimulus to encourage spending on homes and cars.
Spending on homes and other residential projects soared at an annualized pace of 19.5 per cent last quarter. Sales of durable goods — such as large appliances and cars — rose 20.1 per cent.
Overall consumer spending, a major part of the economy, grew 2.9 per cent last quarter.
Whether that will continue after the government spending abates isn’t clear.
U.S. President Barack Obama recently warned that the economy could suffer a “double dip” and return to contraction. The chairman of the Federal Reserve, Ben Bernanke, has said he doesn’t think that will happen. But last week Bernanke warned the recovery was threatened by “important headwinds,” such as tight credit and a weak job market that will make consumers cautious in their spending.
The GDP report showed companies cut back spending on commercial construction by 15.1 per cent and trimmed inventories by $133.4 billion last quarter.
However, after-tax profits soared 13.4 per cent after only a 0.9 per cent rise in the second quarter.
Paul Ferley, assistant chief economist at RBC Economics Research, said in a commentary the report “is indicative of an only modest recovery in economic activity.”
While the jump in corporate profits is “encouraging,” he said, “there remains some uncertainty as to whether it reflects aggressive cost cutting or widening margins.”
Another widely followed report released Tuesday showed the rate of home price increases in 20 major U.S. cities slowed in September.
The Standard & Poor’s/Case-Shiller home price index rose 0.3 per cent over the month to 146.51. That’s its fifth consecutive monthly increase but a dip from August’s 1.2 per cent rise. The index is now up more than three per cent from its bottom in May, but still 30 per cent below its peak in April 2006.
With files from The Associated Press
Ciena winning bidder for Nortel businesses November 23, 2009
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Ciena Corp. is the winning bidder for Nortel Networks’ optical networking and carrier ethernet businesses.
Ciena’s bid was worth $769 million US, about $248 million more than it initially bid in October.
The Maryland-based company emerged on top after a three-day auction in New York that began Friday. It beat out much larger telecom equipment maker Nokia Siemens.
Gary Smith, Ciena’s president and chief executive officer, said the acquisition of Ottawa-based Nortel would accelerate the company’s growth strategy.
Nokia Siemens outbid
“By combining these assets with Ciena’s existing resources, our collective customer base will be able to rely on one of the largest and most innovative companies strategically focused on converged ethernet networking,” Smith added in a statement.
Ciena will pay $530 million US in cash plus $239 million US principal amount of convertible notes due June 2017 to acquire the Nortel unit.
Nortel said it was pleased with the deal, particularly with Ciena’s commitment to retaining most of its employees.
“Ciena’s commitment to the future of our product platforms, customers and employees represents an exceptionally positive outcome to a challenging journey that started over a year ago,” said Philippe Morin, president of Nortel’s Metro Ethernet Networks.
“Uniting our two optical businesses is a game-changing event for the optical industry, creating a leader that has the end-to-end portfolio, industry innovation leadership, and significant global customer base to succeed in today’s highly competitive market,” Morin said.
The sale is subject to court approvals on either side of the border, which Nortel will seek at a joint hearing Dec. 2.
Nortel said it hopes to close the sale in the first quarter of 2010.
Rival bidder Nokia Siemens put out a statement Monday confirming it did not submit the highest bid. It said further bidding “could not be financially justified.”
Ciena announced Monday morning that a minimum of 2,000 Nortel employees will receive offers of employment.
That represents more than 85 per cent of the employees at Nortel’s global optical networking and carrier ethernet businesses.
The Canadian Press, 2009
Greenback continues to lose ground November 23, 2009
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The U.S. dollar continued its slide Monday and gold touched another record high.
The greenback started falling after Federal Reserve official James Bullard said the central bank should continue to buy mortgage-backed securities after the program is supposed to expire in March. That would continue to keep interest rates low.
Gold was closing in on $1,200 an ounce Monday.(CBC)
The U.S. dollar traded lower against six other major currencies. The Canadian dollar rose 1.22 cents to 94.70 cents US in morning trade.
Commodities ? which are priced in U.S. dollars? also moved higher.
Commodities were also boosted by improved hopes of economic recovery on word of an increase in existing U.S. homes sales. Purchases rose 10.1 per cent in October to a 6.1-million annual rate ? the highest level since February 2007 ? partly because of a tax credit aimed at first-time buyers, according to the National Association of Realtors. The median sales price decreased 7.1 per cent.
Gold soared to a record.
December bullion futures gained $24.40 during the morning to reach $1,171.20 an ounce in New York. The metal was helped, too, by word from Russia’s central bank that it increased its gold holdings last month by half a million ounces to 19.5 million ounces.
Crude oil ?Canada’s largest export? rose with the December contract adding $1.97 to trade at $79.44 a barrel on the New York Mercantile Exchange.
The move up in commodities helped the Toronto stock market, with its many mining and energy stocks. The S&P/TSX composite index gained 130.6 points to 11,709.9 in morning trade.
Husky finds another 60M barrels offshore November 23, 2009
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Calgary-based Husky Energy has found more oil in the White Rose field off Newfoundland, the company announced Monday.
It made the find in the North Amethyst area, about 315 kilometres east of St John’s.
Husky Energy 3-month chart
Husky said the oil-bearing zone is 55 meters thick and appears to hold 60 million barrels of easy-to-refine crude.
“These results are very exciting and suggest that significant additional potential exists within the White Rose area,” said CEO John Lau in a release. “This potential will be further evaluated in our ongoing program of development drilling and near field exploration,” he said.
The company also announced it had acquired drilling rights on land adjacent to its holdings in North Amethyst.
Husky shares rights in the White Rose field with Suncor Energy, also of Calgary.
Husky’s shares rose 19 cents to $28.34 during midday trading Monday on the Toronto Stock Exchange.
Canada Post struggles to innovate November 22, 2009
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Postal worker Jean-Marc Saucier empties a mailbox in Lachute, Que. Despite the boom in Christmas demand, postal systems worldwide have been hit hard by the recession.(Paul Chiasson/Canadian Press)
Christmas is often a busy time for Canada Post, but the season is especially key this year as the company struggles to make up for dwindling demand in the face of a devastating global economic slowdown.
The U.S. Postal Service announced Monday that it lost $3.8 billion US this fiscal year that just ended and is looking at drastic changes to turn its business around.
Canada Post’s situation is not nearly as dire. The company took in $7.7 billion Cdn in revenue in the last fiscal year, an increase of $255 million, or three per cent, from the previous year.
Canada Post actually made $90 million in profit, although this was before the full brunt of the recession was felt. A lot has changed since the fiscal year ended Dec. 31, 2008.
The agency moved 11.8 billion pieces of mail last year. That’s still a fairly robust figure, but it’s been falling by a few percentage points a year for several years.
Santa Claus, also known as Patrick Farmer, has some mail to read at Santa Claus House in North Pole, Alaska.(Sam Harrel/Associated Press)
The advent of email took a major dent out of the post office’s former raison d’être: first-class mail. First-class mail is anything you put a stamp on and address yourself. Second- and third-class mailings are usually flyers and offers from businesses ? junk mail, as it’s come to be known.
It’s less lucrative, but as letters to grandma and birthday cards are replaced with the quick email, direct advertising is making up more of Canada Post’s revenues. And tough economic times have seen businesses cut back on mailings. Advertising mailings are down 12 per cent so far this year, says Jacques Côté, the Canada Post COO.
If you’ve noticed a lot less credit card offers coming in the mail, it’s because advertising from U.S. banks and financial institutions in particular is down, Côté said.
“We anticipated that we’re going to see some decline, so we had a fairly aggressive cost reduction this year ? and we’re in fact going to be able to report another profit, despite the decline ? in volume for 2009,” Côté said.
Exacerbating the pinch on revenues is that the carrier must deliver to more and more places ? some 200,000 new homes are built every year, and with each comes a new address that needs mail delivery.
“Every day we travel ? the equivalent of going 11 times around the planet,” Côté said.
To boost its bottom line, Canada Post is looking to reinvent itself. It has already experimented getting into banking, as many European mail carriers already do. But the company hasn’t found the right formula to make it work in Canada yet, Côté admits.
“We find it’s a puzzling market opportunity,” he said. “A lot of posts are running it successfully, but we have not yet found the magic silver bullet to make money at it.”
The union representing postal workers also sees the writing on the wall. Denis Lemelin, president of the Canadian Union of Postal Workers, agrees Canada Post needs to diversify ? and not just into financial services. He suggests offering hunting licences and passport processing, especially in remote and rural areas.
“It’s a brand, Canada Post is a brand, so with that it’s possible to be the most important corporation to deliver postal service and all other services linked with that,” Lemelin said.
The 10-billion-barrel battle November 22, 2009
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Henry Lyatsky is a man on a mission.
The Calgary-based oil industry consultant is on a one-man campaign to lift the moratorium on offshore oil drilling on Canada?s West Coast.
While his message gets a sympathetic ear in his hometown, the centre of Canada?s oil industry, his mission is more of an uphill battle in British Columbia.
Henry Lyatsky, a Calgary-based oil and mining industry consultant, says the ’silent majority’ in B.C. wants a moratorium on offshore oil exploration lifted. (CBC)
At stake are 9.8 billion barrels of oil ? enough to supply all of Canada?s domestic needs for four years ? and one of the most picturesque and rugged seascapes in the world. The oil is concentrated in the Queen Charlotte basin between northern Vancouver Island and Haida Gwaii, also known as the Queen Charlotte Islands.
Along with an estimated 40 trillion cubic feet of natural gas, it could exceed Newfoundland?s offshore reserves. Both Chevron and Royal Dutch Shell drilled test wells in the area before the ban was imposed but have not released their results.
Standing in the way is the moratorium on tanker traffic B.C. imposed in 1971 and the ban on exploration Ottawa imposed a year later. Provincial efforts in the 1980s to lift the federal ban foundered in 1989 along with the Exxon Valdez, which spilled 40 million litres of crude oil off the coast of Alaska.
In a commentary in the Oil and Gas Journal, Lyatsky argues the majority of residents in B.C. want the jobs and wealth that would come from development, but they have been drowned out by environmentalists.
?The revenues are huge for the province,? Lyatsky told CBC News. ?Look at Newfoundland: They got rich off of offshore oil and look at the number of jobs that get created.?
A view of sunset from Anthony Island at the southern tip of Haida Gwaii.(Chuck Stoody/Canadian Press)
Oonagh O?Connor of the Living Oceans Society takes issue with that.
?It has to be a very silent majority,? she said, given that thousands of people took part in federal hearings from 2003 to 2004 on whether to lift the moratorium and 75 per cent supported keeping it in place. All of the First Nations representatives who took part also opposed lifting the ban.
Still, in a province where the forestry industry is struggling, the unemployment rate is 8.3 per cent, and the provincial government raised $2.66 billion on the sale of onshore oil and gas exploration rights in 2008, the argument is getting some traction.
Offshore fields are much bigger, as are the resulting royalties to governments.
?The public seems to be on side, but the support for exploration is diffuse around the province,? Lyatsky said. ?The opposition to exploration is in the minority but it?s concentrated, it?s vocal, and it?s committed, so it?s very forceful. What we need to do is to energize our own supporters, who are many, and simply overcome that opposition by the weight of democratic numbers.?
Blair Lekstrom, B.C.’s minister of energy, agrees with Lyatsky that the silent majority in B.C. supports lifting the moratorium. Lekstrom’s government wants exploration to proceed but, he adds, “unless it can be done in an environmentally responsible and scientifically sound manner, then we wouldn’t proceed.”
The worst oil spill in U.S. history leaked 40 million litres of crude into Alaska’s Prince William Sound from the Exxon Valdez in March 1989. (Jack Smith/Associated Press)
Work with Ottawa is continuing, but “the reality is, this really is in the federal hands,” Lekstrom said, adding “there is a challenge at this point,” an apparent reference to the Conservative minority government’s unwillingness to risk swing ridings in the province.
The federal department told CBC News it has no plans to lift the ban at this time.
Lyatsky wants the oil industry ? investors, companies, professional associations and consultants ? to mobilize opinion.
His timing might be problematic.
An earthquake measuring 6.6 shook the southern tip of Haida Gwaii on Nov. 17.
And on the other side of the Pacific, Australia recently set up a commission to investigate the country?s third-worst oil spill, when as much as 30,000 barrels leaked into the Timor Sea off the country?s northwestern coast. The spill was the first accident among 1,500 wells drilled in Australian waters since 1984, but it continued from Aug. 21 to Nov. 3 and was marked by a fire that burned for two days, destroying the rig.
The West Atlas rig leaked oil for 10 weeks this fall into the Timor Sea 250 kilometres northwest of Australia.(AP Photo/PTTEP Australasia)
That?s troubling for O?Connor, especially from her perspective from the Living Oceans Society?s headquarters in the tiny fishing village of Sointula on the northern end of Vancouver Island.
?When the moratorium was put in place in 1972, it was done so because of concerns about the environment,? she said. ?Now we know way more about the impacts of the offshore oil-and-gas industry on the environment. We know that despite modern technology, spills continue to happen.?
Lyatsky says all the objections to offshore drilling are overrated and have been already been answered through extensive experience elsewhere in the world.
O?Connor doubts that.
?When you live here,? she said, ?and you depend on the coast, these concerns aren?t overrated. They are really important.?
Lyatsky believes his view will prevail.
?I would say it?s in our own hands,” he said. “The chances are pretty good if we make the effort to push things forward. Nothing will happen if we do nothing. It can be done. I?m certain it can be done.?
Ottawa will stay course on stimulus: Flaherty November 22, 2009
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Rather than turning off the stimulus taps or pouring more fuel on the economic fire, Ottawa will stand pat with the $61 billion in stimulus spending announced in January, Finance Minister Jim Flaherty said Friday.
Finance Minister Jim Flaherty says temporary stimulus measures announced last January in his budget will end as planned by the end of the next fiscal year.(Blair Gable/Reuters)
“Budget 2010 will be year two of our two-year economic action plan. We will not undertake major new spending initiatives,” he told a business audience at the Empire Club in Toronto.
Flaherty emphasized that Canadians shouldn’t expect emergency stimulus measures to become permanent policy.
He said the temporary stimulus measures announced last January in his budget will end as planned by the end of the next fiscal year.
“Our focus will not be on new initiatives or added stimulus. Our focus will be on following through in getting the measures already announced out the door and into the economy. We will stay on course,” he said.
Approximately 90 per cent of this year’s portion of Ottawa’s stimulus spending program was committed as of September, with 7,500 infrastructure projects identified and more than 4,000 already underway, Flaherty said.
However, he said, economic recovery has been “tentative” so far with “no evidence of firm growth.”
As the global economy shows signs of a recovery, some have suggested policy leaders need to consider withdrawing the unprecedented levels of stimulus they injected, or face rampant inflation.
Flaherty’s message, of ensuring existing funds make it out the door while showing restraint with regards to future spending, struck the right tone with some economists.
“The recovery is very fragile and we haven’t even seen a recovery in private investment yet. That’s why public-sector investment through infrastructure spending is so important,” said Glen Hodgson, chief economist with the Conference Board of Canada. “It’s too early to talk about withdrawing stimulus.”
No tax hikes, Flaherty vows
The government is forecasting a deficit of roughly $56 billion for the current fiscal year. About half of that, some $28 billion, consists of one-time stimulus and support to the automotive industry as well as temporary measures taken to increase benefits for unemployed workers and freeze EI premiums for individuals and businesses, Flaherty said Friday.
Although he was careful to allow the government wiggle room to alter course as events warrant, he was unequivocal on two points: the current government has no plans to raise taxes to balance the budget, nor will it cut transfers to pay off the deficit.
Transfers to provinces and individuals takes up some $100 billion of the government’s approximately $200-billion annual budget.
“If we have to restrain growth when the time comes, we will find that restraint in the remaining $100 billion of federal program spending that is projected to grow at 3.3 per cent a year,” Flaherty said.
Only when a “firm” economic recovery has taken hold will the government move to balance its budget, Flaherty added. The finance minister has said previously that stimulus spending and lower tax revenues will result in five years of budget deficits.
“Act in haste and one risks precipitating another economic slowdown. Wait too long and the result could be chronic deficits Canadians worked too hard to abolish ? the kind of structural deficits that other nations are dealing with right now,” he said.
Flaherty was smart to safeguard transfer payments, as the Chrétien government’s move to cut transfer payments was hugely unpopular in the 1990’s, Hodgson said.
“Even thinking about transfers to other levels of government is very, very difficult,” he said.
(With files from Canadian Press) (more…)
Agrium extends CF offer November 20, 2009
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Calgary-based Agrium Inc. isn’t giving up on its bid to become the world’s No. 2 publicly-traded maker of nitrogen fertilizers.
It announced Thursday it is again extending the deadline in its 10-month-long takeover bid for CF Industries Holdings of Deerfield, Ill.
Agrium CEO Michael Wilson addresses shareholders at the company’s annual meeting in Calgary in May 2008. Wilson says CF shareholders clearly like Agrium’s offer.(Jeff McIntosh/Canadian Press)
The fertilizer producer and farm supplies retailer will accept shares until Dec.18.
Agrium also said CF shareholders have so far pledged to sell 62 per cent of its stock in response to its offer. Agrium’s hostile bid is for $45 US a share plus one Agrium share for a total value of $1.5 billion.
Agrium earlier this month increased its offer by $5 a share, saying that was its “best and final.”
“We are pleased that once again, CF stockholders have strongly supported our offer. CF stockholders have sent a clear and unambiguous message to CF’s board that they want this deal with Agrium,” Agrium CEO Mike Wilson said in a release.
CF, a nitrogen and phosphate producer, has made its own hostile bid for U.S. rival Terra Industries Inc. Shareholders of Terra will vote Friday on whether to elect three directors who have the backing of CF or candidates recommended by Terra’s existing board.
CF is incorporated in Delaware, where the law prevents a hostile bidder from buying more than 15 per cent of its shares without the approval of the board.
Agrium threatens legal action
Agrium has said it is considering a lawsuit or trying to elect its own slate to the CF board at its next annual meeting if the board ignores the latest tender results.
Either Agrium or CF stand to become the the second-largest publicly-listed maker of nitrogen fertilizers in the world if one of the bids succeeds.
