LyondellBasell has filed for bankruptcy protection because of plunging sales and massive debts, as well as volatility in raw material costs. The Chapter 11 filing was made in U.S. Bankruptcy Court in the Southern District of New York. It includes Houston-based Lyondell Chemical, 79 other U.S. affiliates and one German holding company. The firm will continue running during the restructuring. LyondellBasell, created when Dutch chemical company Basell International Holdings acquired Lyondell Chemical in a $12.7 billion deal, employs 4,500 in the Houston area. There are nine Houston-area manufacturing facilities and a data center in The Woodlands.
The LyondellBasell complex in Channelview says operating conditions have made it necessary to flare at this time. The flaring was visible from throughout Harris County this morning. Flaring is a controlled burning for safety measures at a chemical facility.
The president of Alcoa says his company had to act quickly and decisively because “these are extraordinary times.” The aluminum producer is cutting 13,500 jobs — roughly 13 per cent of its global work force — by the end of the year because of a struggling world economy. The world’s third-largest aluminum maker is also freezing salaries and hiring. These latest moves follow cost-saving measures unveiled last fall, when the Pittsburgh-based company announced a 52 per cent decline in third-quarter earnings and curtailed a Texas smelter in Round Rock. The Pittsburgh-based aluminum giant also says 1,700 contractor jobs will be cut. Other cost reductions include the planned sale of four business units and a global salary and hiring freeze. As a result of its actions, Alcoa expects total fourth-quarter charges of between $900 million and $950 million. The company plans to report quarterly results January 12th. Alcoa says the moves are expected to save the company about $450 million annually, before taxes. Alcoa employs at least 94,000 people in 34 countries.
Houston is one of two Texas cities reporting the biggest gains in private sector employment, according to the U.S. Bureau of Labor Statistics. Houston added 42,400 jobs between November 2007 and November 2008. Dallas-Fort Worth added 35,100 jobs in the same year-long period. Only a fifth of the nation’s 100 largest cities managed to add jobs at all—in fact, 78 had losses. Austin is tenth on the bureau’s list, adding 6,200 jobs.
Texas oil billionaire T. Boone Pickens brought his “Pickens Plan” to Rice University’s Baker Institute for Public Policy. He’s calling for reducing the country’s dependence on imported oil by investing in wind and natural gas.
“I proposed to the transition team with Obama—and I’ve had some input into this thing—look, first let’s go with that the federal government, on all future vehicles, that we will use domestic fuel only, on the federal vehicles. That’s a leadership point. And so, the technology’s well-known, there. There are eight-and-a-half million vehicles on the world today on natural gas, but only 142,000 of them in the United States.”
Pickens says 22 per cent of electrical needs could be generated through wind, and the displaced natural gas would be used for transportation fuel.
“It’s cheaper—one mcf of natural gas is equivalent of eight gallons of gasoline. What’s eight gallons worth—15 dollars? What’s one mcf of natural gas worth—six? How could we be so lucky as to have an abundance of something that’s 60 per cent cleaner than diesel. It’s ours, it’s cheaper, it’s available to us, and it can be accomplished.”
Pickens says the U.S. uses about a fourth of the oil produced, but imports about 70 per cent.
Most small business owners are working harder to overcome the downturn in the economy, according to the third annual Staples Small Business Survey. Some 62 per cent say they eat and work at the same time, with one in five replacing breakfast with “deskfast” to maximize time. But 73 per cent of those surveyed expect the economy will get worse before it gets better. The survey shows 69 per cent are constantly trying new things to stimulate their business. The Internet poll received responses from more tan 300 businesses, with 50 per cent saying they’re reducing their own compensation and 38 per cent reducing business travel.
Congressional estimators are projecting an unparalleled budget deficit of $1.2 trillion for the 2009 budget year. A top Congressional aide briefed on the estimate says the Congressional Budget Office also sees a $703 billion deficit for 2010. The dismal figures come a day after President-elect Barack Obama warned of trillion-dollar deficits for years to come. CBO’s figures don’t account for the huge economic stimulus bill that Obama is expected to propose soon to try to jolt the economy. Obama officials say the stimulus measure will blend tax cuts with big new spending programs and could cost up to $775 billion over the next few years. Obama says spiraling entitlement spending will be a central part of the discussion on controlling the federal deficit in the future. Obama told reporters that the key will be to get the deficit to a “manageable level” in the medium and long term. Obama says by February, he expects a plan to emerge on how to deal with entitlement spending, waste in government and other factors, as well as some “specific outlines” on how to control the deficit. For budget-conscious lawmakers, Obama is offering a spoonful of sugar with his $775 billion dose of economic stimulus — the promise of fiscal discipline in the future. Obama is eager to sign the stimulus quickly after taking office, to yank the economy out of its downward spiral. But the price tag is jarring to some. In comments that soothed some wary lawmakers, he promised to bring responsibility and accountability to Washington, calling the need for budget reform “an absolute necessity.”
House Speaker Nancy Pelosi is warning fellow Democrats that failure to pass massive economic recovery legislation by mid-February would lead to more job losses and economic pain. Pelosi was stressing the infrastructure and energy components of the stimulus package in remarks to the House Democratic Steering and Policy Committee. Congress and President-elect Obama have begun working on legislation that includes new spending and tax cuts expected to cost nearly $800 billion over two years. In remarks prepared for delivery, Pelosi says that focusing on the price tag alone ignores the cost of inaction and “the real payoff” — job creation — and more income for the government down the road.
Treasury Secretary Henry Paulson says allowing mortgage giants Fannie Mae and Freddie Mac to return to their old operating ways is not an option. Paulson says Congress and the next administration must decide the proper role government should play in supporting home ownership in light of the severe economic costs imposed on the nation from the bursting of the housing bubble. The government in September took control of Fannie and Freddie, placing them in conservatorship. Paulson offered thoughts on a variety of possible solutions on what should follow the conservatorship but did not endorse any particular approach.
Fewer people are diving into the refinancing pool, sending mortgage applications tumbling last week. The Mortgage Bankers Association says its application index fell 8.2 per cent for the week ended last Friday after applications surged last month to the highest level since July 2003. Roughly 80 per cent of applications came from borrowers seeking to refinance home loans at lower rates compared with almost 93 per cent the previous week. Refinance volume declined by 12.3 per cent, while purchase volume rose 7.3 per cent.
Defense Secretary Robert Gates is estimating that military operations in Iraq and Afghanistan will cost almost $136 billion. The cost is for the fiscal year that began October 1st and presumes that operations will continue at their current pace. Gates told top lawmakers in a New Year’s Eve letter that the Pentagon would need nearly $70 billion more to supplement the $66 billion approved last year. He also points out that estimate is his “personal assessment and does not reflect the position of the Bush administration or the incoming Obama administration.” The estimate would also cover other elements of the global war on terror. Gates says an official request for war funding is coming after a review by the Obama administration.
The European Union says Russia and Ukraine will accept using international monitors to verify the transit of natural gas from Russia through Ukraine’s pipelines. European Commission President Jose Manuel Barroso says telephone talks with Russian Prime Minister Vladimir Putin and his Ukraine counterpart Yulia Tymoshenko yielded the assurances that the use of monitors would be key to get the gas pumping again into the European Union. Russia shut off all its gas supplies to Europe through Ukraine on January 1st in a pricing dispute. About 80 per cent of Russian gas to Europe is shipped via Ukraine. Other smaller pipelines run through Belarus and Turkey.
The Bush administration says it won’t finish new vehicle fuel-efficiency rules, leaving the issue to the incoming Obama administration. The Transportation Department said that the recent financial problems of automakers will require the next administration “to conduct a thorough review of matters affecting the industry.” In April, the current administration said the next generation of new cars and trucks should be required to meet a fleet average of 31.6 miles per gallon by 2015. The proposal was part of a new energy law that requires new cars and trucks to meet 35 mpg by 2020—a 40 per cent increase. The regulations would cost the companies tens of billions of dollars at a time when General Motors and ,STRONG>Chrysler are struggling to survive and have received a federal bailout.
Analysts say the same cheap oil that’s providing relief to drivers and businesses now is setting the stage for another price spike, perhaps as soon as next year. It could bring back painful memories of last summer’s $4-a-gallon gas. The oil industry is scaling back on exploration and production because some projects don’t make economic sense when energy prices are low. And crude is already harder to find because more nations that own oil companies are blocking outside access to their oil fields. Analysts say when the world emerges from the recession and starts to burn more fuel again, the combination of higher demand and lower supply suggests that prices will almost certainly shoot higher. Some analysts say oil could eventually eclipse $150 a barrel and possibly hit $200. In such a scenario, gasoline would easily cost more than the record high of $4.11 a gallon set last summer. Oil has been trading at about $50 a barrel.
Citgo, the Venezuelan government’s U.S.-based oil subsidiary, is reversing course and will continue shipments of heating oil to poor families in the United States. Joseph Kennedy, head of the Boston-based nonprofit which distributes the fuel, said Venezuelan President Hugo Chavez intervened directly. Citgo Petroleum CEO Alejandro Granado made the announcement Wednesday in Boston, saying Citgo had found a way to continue paying for oil shipments. The announcement comes two days after Kennedy said Citgo was suspending fuel assistance, citing falling oil prices and the world economic crisis. Chavez provides fuel for 200,000 households in 23 states under the program that has come under fire in the U.S. Critics say the program is a ploy by Chavez to undermine the Bush administration.
Shoppers have been getting spoiled by those 75-percent-off sale signs. Merchants may have a hard time moving prices higher again as they begin to focus on spring merchandise. Anxieties about how rampant discounts have affected shoppers’ psyches and stores’ profits are running high ahead of expected dismal December sales figures Thursday. The holiday season is anticipated to be the worst in decades. Already, retailers including Bebe Stores and J.Crew Group are cutting prices on selected spring styles to lure sale-savvy shoppers. The International Council of Shopping Centers says many retailers are expected to report sales declines of more than ten per cent for December at established stores. The overall December tally is expected to fall one per cent compared to the same month last year, meaning the combined November-December period is likely to drop by as much as two per cent. That would be the weakest holiday season since at least 1969, when the index began.
Texas universities are calculating how many millions of dollars their endowments have lost in the recent stock market plunge. They’re also making plans for how to deal with the drop. Officials at the private Texas Christian and Southern Methodist Universities say they’re already planning spending cuts. But public universities say they’re waiting to see how much money they get from the legislature before deciding on cuts. TCU’s faced with a $100 million loss from its endowment, so officials there are asking departments to trim eight to ten per cent of their budgets for next school year and are imposing a hiring freeze. SMU’s just starting work on its 2009-10 budget, but officials there say departments would be asked to hold spending at this year’s level and to prepare for undetermined campus-wide spending cuts. The University of North Texas took the hardest endowment hit with a drop in value of more than 25 per cent. UNT officials have a preliminary plan that, if approved, would create a sliding scale for reducing payouts from the endowment to protect its core worth.
The Federal Reserve is allowing more companies to take part in a program aimed at bolstering the money market mutual fund industry. The Fed says newly eligible participants now include a range of money market investors, rather than just money market funds. The Fed’s program, called the money market investor funding facility, is used to support a private-sector initiative designed to provide liquidity, or cash, to the money market industry. The Fed backs purchases of short-term debt, including certificates of deposit and commercial paper that expire in three months or less, from money market mutual funds.
Last year was a relatively good one for Broadway. An industry trade association says overall Broadway grosses and attendance in 2008 were a bit higher than the box-office take and attendance of the previous year. The 2008 gross was more than $940 million, according to figures released by the Broadway League. Attendance topped 12.32 million. In 2007, the box-office take was $938 million and attendance 12.29 million, both figures affected by a 19-day stagehands strike during the lucrative Thanksgiving holiday period. Broadway’s Christmas-New Year’s holiday grosses were also up, jumping from more than $49 million during the two-week period in 2007 to nearly $51 million in 2008.