Tuesday PM December 2nd, 2008

Big Three automakers travel to Capitol Hill…British Airways in talks with Qantas Airways about potential merger…WNBA champion Houston Comets to disband because new owners can’t be found…

Ford will tell Congress that it plans to return to a pretax profit or break even in 2011 when its CEO appears before two legislative committees this week. Also, CEO Alan Mulally said he’ll work for $1 per year if the automaker has to take any government loan money. The plans Ford submitted to Congress also say the company will cancel all management employees’ 2009 bonuses and will not pay any merit increases for its North American salaried employees next year. Mulally said Ford will emphasize its cost cutting efforts with the United Auto Workers and will give much more detail to Congress than it did during a visit earlier this month. The company also will accelerate plans to roll out electric cars. Mulally says Ford has said it has enough cash to make it through 2009 and may not need government help. The company also said it will sell its five corporate aircraft. The CEOs of all three Detroit automakers were harshly criticized during Congressional hearings last month for flying to Washington in separate corporate jets while seeking loan money. The three CEOs are scheduled to appear before Congressional committees Thursday and Friday to seek a total of $25 billion in government loans.

Chrysler President and Vice Chairman Jim Press isn’t giving details of the business plan that will be presented to Congress, but he says it will tackle product mix, vehicle pricing and quality and fiscal responsibility. Speaking in Baltimore, Press added that all players, including banks and labor, have agreed to “all the concessions that are necessary.” He says the economic costs of a failure of the auto industry would be much greater than the cost of the bridge loan Chrysler is seeking from the federal government. Press appeared at a town hall meeting in Baltimore as part of a tour to gather ideas before heading to Washington. He said his campaign was about preserving America’s manufacturing base, of which the auto industry is the key segment.

A General Motors spokesman says Chief Executive Rick Wagoner will travel to Washington, D.C., by car instead of flying a commercial airline or corporate jet. Spokesman Tony Cervone says Wagoner will drive in a Chevrolet Malibu hybrid sedan when he makes the 520-mile trek from Detroit to Capitol Hill. Ford CEO Alan Mulally also is driving from Detroit for a second appearance before two legislative committees to seek $25 billion in government loans. Chrysler CEO Robert Nardelli will not travel by corporate jet. A spokeswoman says his travel plans will remain secret for security reasons.

The mayor of Lansing, Michigan, says the auto industry is indispensable to America’s national security and the government must save it. Lansing Mayor Virg Bernero tells “The Early Show” on CBS that if the auto industry is allowed to “fall by the wayside,” the U.S. would have to rely on other nations like China, Japan and South Korea to make guns and tanks in a new war scenario. Bernero says America has been “the arsenal of democracy.” The mayor went on to say that auto industry executives are “certainly very hopeful” that they’ll get a better reception this time around in Congress. He also says the companies do not oppose “some conditions and some strings” to any such loan package.

The crisis in the U.S. auto industry is bringing local leaders of the United Auto Workers together to talk about ways to help their employers get government loans. A person familiar with the matter says the union leaders will discuss the possibility of restructuring the union-administered health care fund so that the automakers can delay payments to the multibillion-dollar account. Another possibility is the potential elimination of the jobs bank, in which laid-off workers keep receiving most of their pay. Presidents from union locals for GM, Ford and Chrysler will attend the meeting, according to an e-mail obtained by the Associated Press. Members of the committee that negotiated contracts with automakers last year will also attend.

Facing severe cutbacks in state services, the nation’s governors have asked for at least $40 billion to help pay for health care for the poor and disabled. They made their case at a bipartisan meeting with President-elect Barack Obama in Philadelphia at historic Congress Hall. Republican and Democratic governors sat at desks in the hall, with no separation by party, and gave Democrats Obama and Vice President-elect Joe Biden a standing ovation. Obama told the governors that he wants their advice in designing a package to help their hard-hit states. He vowed to “put tax cuts into the pockets of hard-pressed middle class families in your states.” The governors, including Rick Perry, are also pressing for as much as $136 billion of infrastructure projects like road and bridge repairs. The requests come as Congress and Obama prepare economic recovery legislation that Obama hopes to sign immediately upon taking office. For states, the recession has meant big reductions in tax revenues. Some 43 of the 50 states have budget deficits. Since virtually every state is required to have a balanced budget, governors have been forced to cut services, lay off workers and consider tax increases.

British Airways says it is in talks with Australian airline Qantas Airways about a potential merger. In a statement released in response to speculation, BA says that it is exploring a potential merger “via a dual-listed company structure.” The two airlines are already partners in the OneWorld Global Alliance, which brings together ten of the world’s carriers including Japan Airlines. BA adds that there is no guarantee a deal will be reached and that it will make further announcements when appropriate.

A Continental Airlines executive says the Houston-based airline is “comfortable” with the level of U.S. bookings in December. But Continental Treasurer Gerry Laderman says he’s seeing softer revenue trends in first- and business-class on international flights. Laderman says average occupancy on U.S. flights this month would be flat to slightly higher than a year ago. He credits a reduction in capacity and the late date of Thanksgiving this year, which pushed some return flights into December. On international routes, he says Continental was seeing “softness” in yields on seats in first- and business-class. Yield is the revenue airlines get per seat for each mile flown. Laderman declined to offer a forecast for 2009 in his remarks to a Credit Suisse investor conference in New York. Continental reported that average occupancy or load factor in November fell to 77.8 per cent in November. That’s down 2.6 percentage points from a year earlier for the nation’s fourth-largest airline. Traffic fell 10.7 per cent and capacity was 7.8 per cent lower than a year ago. Those figures excluded Continental Express.

The CEO of Southwest Airlines said travel demand slumped in November and the carrier won’t expand its fleet next year. Chairman and CEO Gary Kelly also said Dallas-based Southwest plans to cut capacity early next year, although not quite as sharply as the airline previously thought. Kelly says they’re concerned about the economy. Southwest earlier reported that the number of paying passengers in November fell nearly 11 per cent from a year ago. Its supply of seats stayed about the same. The airline carried about 6.5 million passengers last month. Kelly, speaking to a Credit Suisse investor conference in New York, said Southwest plans to take delivery of 13 new Boeing 737 jets next year. Southwest already planned to retire three and now must “manage” ten others — Kelly didn’t specify what it would do with the planes — to keep the fleet at its current size.

The Houston Comets, a franchise that won the first four WNBA championships, is disbanding. The league-owned team will be shut down because new owners couldn’t be found. WNBA President Donna Orender told the Associated Press in a telephone interview “you have to build on strength. My outlook is to build on the fact that the league has great momentum and in Houston we didn’t have the enough runway to get a deal done in time for the 2009 season. So right now we have to move on.” The WNBA says the move will result in the loss of 37 jobs. Houston television station KRIV was the first to report that the team was disbanding. Orender says a dispersal draft for Houston players will be December 8th. Orender did not rule out a WNBA team returning to Houston. Orender says there is no indication that any of the league’s other 13 franchises are in any trouble.

The head of OPEC says he hopes oil-producing nations like Russia will join the organization, or at least agree to output cuts to help spark a rally in prices. Chakib Khelil, who is also Algeria’s oil minister, says oil producers such as Russia, Norway and Mexico should “express their solidarity” with OPEC, either by joining the cartel or by following its reductions of output quotas. His comments came as oil prices fell to a three-year low below $48 a barrel, despite an announcement by the Organization of Petroleum Exporting Countries this weekend that it planned to reduce production to sustain prices. Russian officials say they are preparing a cooperation agreement with OPEC that could be examined at the cartel’s meeting this month in Algeria.

The EU’s trade chief says she will travel to Washington early next year to press U.S. lawmakers to approve a new global trade deal. Catherine Ashton says countries are hoping to reach a new deal this month at World Trade Organization talks in Geneva after previous discussions collapsed in July. She says WTO chief Pascal Lamy has met with members of President-elect Barack Obama’s team to help ensure the new U.S. administration supports global trade talks. Ashton says she will try to U.S. economy. Ashton did not say when she might travel to Washington.

European Union finance ministers have been working on a plan to pump $252 billion into the EU economy in the next two years. The 27-country EU fell into recession in the third quarter. The ministers ruled out a cut in sales taxes. Great Britain, which does not use the euro, has cut its value-added sales tax from 17.5 per cent to match the rest of the EU, which has a 15 per cent VAT.

The percentage of people who were delinquent on their credit card payments rose in the third quarter from the same time last year, while average debt per borrower jumped 7.7 per cent. That’s according to credit reporting agency Transunion. For the quarter ended September 30th, 1.09 per cent of credit card holders were delinquent at least 90 days on one or more of their cards. That compares with 1.03 per cent for the third quarter of 2007, and an increase from 1.04 per cent in the second quarter of 2008. Ezra Becker, principal consultant in Transunion’s Financial Services Group, says the rise in delinquencies in the third quarter reflects cyclical trends that show late payments tend to rise in the late summer months. He says the year-over-year gain is yet another indicator of the difficult economy. But he says it also shows that more than 98 per cent of people are paying their credit card bills on time.

Newspapers continue to suffer declines in ad revenue. According to the Newspaper Association of America, U.S. newspaper advertising revenue collapsed by nearly $2 billion, or 18 per cent, in the third quarter. It says even online ad revenue made a small u-turn for the second quarter in a row. The year-on-year quarterly percentage decline is the worst since since the NAA has been keeping such records and represents an increasingly rapid deceleration that began in the third quarter of 2006, when total ad spending dropped 1.5 per cent. The figures, updated on the day before Thanksgiving, show total ad spending at newspapers fell 18.1 per cent to $8.94 billion, down from $10.92 billion in the third quarter last year. The last time total quarterly ad spending fell below $9 billion was in the first quarter of 1996.

The Federal Reserve is extending the life of key programs aimed at busting through credit clogs and restoring stability to financial markets. The Fed says the programs, originally slated to last through January 30th, will be extended through April 30th. The Fed’s emergency lending facility for investment firms is covered by the decision. Another program that lets financial institutions temporarily swap risky investments, such as shunned mortgages, for super-safe treasury securities also is covered.

The Bush administration is asking the Supreme Court to allow the nation’s older power plants to draw in billions of gallons of water for cooling without installing technology that would best protect fish and aquatic organisms. In arguments, lawyers for the government and electricity producers urged the justices to overturn a lower court ruling that says the government cannot not pit the cost of upgrading 554 power plants against the benefits of protecting fish and aquatic organisms. Environmentalists want the decision to be upheld. The case grew out of an EPA decision to not require older power plants to install the fish-saving technology because it was too expensive.

Blockbuster will start selling concert tickets at about 500 of its video rental stores. The announcement by the Dallas-based video rental and retail giant bolsters its effort to create a one-stop shop for entertainment. Under a three-year deal, Blockbuster stores will become the primary brick-and-mortar sales outlet next month for music concerts staged by promoter Live Nation in the United States. Blockbuster will supplant a hodgepodge of department stores, supermarkets and other retailers that Live Nation had been relying upon as part of an unraveling partnership with Ticketmaster Entertainment. Beverly Hills-based Live Nation is breaking from Ticketmaster to build its own ticketing channel. Ticketmaster will continue to handle some of Live Nation’s sales until contracts covering several concert venues expire.


There’s not much besides bad news in the latest auto sales figures, as consumer concern about the slumping economy continues. Some analysts had expected buyers would be drawn to showrooms by incentive packages and the huge drop in gasoline prices. General Motors and Ford each reported double-digit plunges in November. GM dropped 41 per cent, including a 44 per cent drop in demand for cars and a 39 per cent decrease in the sale of light trucks. Ford sales dropped 31 per cent, and a company official said he expects the industry to post year-over-year sales declines until at least the second half of next year. Their two main overseas rivals also suffered lower sales figures last month. Toyota’s tumbled 34 per cent, while Honda’s fell 32 per cent.


Ed Mayberry

Ed Mayberry

News Anchor

Ed Mayberry has worked in radio since 1971, with much of his early career as a rock’n’roll disc jockey. He worked as part of a morning show team on album rock station KLBJ-FM, and later co-hosted a morning show at adult rock station KGSR, both in Austin. Ed also conducted...

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