The Bush administration has come to the rescue of the troubled U.S. auto industry, offering $17.4 billion in loans in exchange for concessions from carmakers and their workers. President George W. Bush says letting the automakers collapse is "not a responsible course of action." He says the rescue plan will require "meaningful concessions" from the auto companies and others, including labor unions and suppliers. The companies, he says, "must understand what is at stake, and make the hard decisions necessary to reform." Bush said he ordinarily would let the companies go bankrupt, concluding it's the "price that failed companies must pay." But, he says, "these are not ordinary circumstances." He says letting the industry collapse, amid a financial crisis and a recession, would be irresponsible. He says there's "too great a risk" that a bankruptcy filing would lead to a "disorderly liquidation of American auto companies" and send the economy into a "deeper and longer recession."
President-elect Barack Obama is praising President Bush's decision to offer more than $17 billion in rescue loans for the deeply troubled auto industry. Obama called it "a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers." In a statement, Obama said U.S. automakers now must work with labor, dealers, creditors and suppliers "to make the hard choices necessary to achieve long-term viability."
General Motors CEO Rick Wagoner says the automaker has significant work ahead after receiving a government bailout, but he is confident GM will work with stakeholders to make the company viable. Wagoner said at a news conference that the federal loans are a blueprint for the century-old automaker's next 100 years. He said there are big steps to take but they are not impossible as the company tries to prove to the government it is viable by March 31st. Wagoner says the company will reinvent itself and lead an economic recovery in America. The Bush administration allocated $9.4 billion going for GM this month and next.
The head of Chrysler is thanking the Bush administration for help during the company's cash crisis. CEO Bob Nardelli says the infusion of capital will boost Chrysler in the short-term and help it eventually return to profitability. The plan includes making available about $4 billion to Chrysler in the coming weeks. Auto workers are hailing the plan, with one worker calling it a nice Christmas present.
In a further sign of worldwide woes enveloping the auto industry, Toyota's mainstay vehicle operations are likely to post their first ever loss for the fiscal year that ends in March. That word from both Kyodo News and Japan's top business daily. Toyota makes the popular Camry sedan and Prius gas-electric hybrid and has never reported a full fiscal year loss since it first began disclosing figures in 1941. Until recently, Japanese automakers had avoided the serious problems plaguing their American rivals but they, too, are now being hammered by plunging sales, including in the key U.S. market.
Treasury Secretary Henry Paulson says Congress will need to release the last half of the $700 billion rescue fund because the first $350 billion has been committed. Paulson says the use of the rescue fund to provide loans to the auto industry along with a string of other rescue efforts means that the administration has now basically allocated the first half of the largest government bailout program in history. He says he is confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation have the resources to address a significant market event if one should occur before Congress approves the use of the second half of the rescue fund.
About 75 per cent of Houston board members and executives surveyed recently by KPMG believe it may be 18 months before the economy starts to recover. KPMG's Bud Giesinger said the results came from a roundtable of about 50 board members and company executives.
"Comprised mainly of board members and C-level executives—primarily energy companies—but 75 per cent of those felt that the economic downturn that we're experiencing would last at least for 18 months and many of them felt for over two years. And there's an urgency in a lot of the discussions we had that people don't see this as a six-month issue or even a three-month issue, but it is something that they want their management teams—and management also has taken a responsibility to address these situations immediately."
Executives identify reduced sales growth and liquidity and access to capital as big problems. Giesinger says companies are reassessing their risk profiles.
"That's a great point that came out loud and clear at our recent share forum at the audit committee institute. It was that they're asking their management teams to stress-test their companies and check the business model in a period of lower commodity prices and lower sales, and does the balance sheet hold up in those types of environments. So it is something that on the forefront of all the directors' minds."
Thirty per cent of respondents were only somewhat confident that management has a good understanding of the company's current risk profile.
Enron investors will start receiving their share of $7.2 billion recovered in settlements with former lenders, auditors and directors. The University of California is starting distribution of almost $5 billion to about 200,000 investors with buyers of Enron's common stock receiving about 20 per cent of their allowed losses. The university was lead plaintiff for Enron investors against the company's accountants, lawyers, bankers and senior executives. Enron collapsed into bankruptcy seven years ago.
Caterpillar is moving one of its primary global assembly, test and paint facilities to Texas. Governor Rick Perry says the move will create more then 1,400 jobs. Texas is investing $10 million through the Texas Enterprise Fun as a deal-closer. The facility will be built in Seguin. Texas was in competition with South Carolina and Mexico for the plant.
The state unemployment rate edged up in November. But the Texas Workforce Commission says the state saw hints of economic recovery from Hurricane Ike with a slight increase in the number of jobs. The monthly jobs report the agency says unemployment rose to 5.7 per cent in November from 5.6 per cent the month before. At the same time, the agency says the state added 7,300 nonagricultural jobs. In September, the state saw its first net job loss in more than a year. The Beaumont-Port Arthur area had the state's second-biggest monthly drop in unemployment, from 8.2 per cent to 7.8 per cent. Commission Chairman Tom Pauken says that shows "that those adversely affected by the impact of Hurricane Ike are getting back to work." The November unemployment rate is up sharply over the year-ago period, when it was 4.2 per cent. The national unemployment rate climbed to 6.7 per cent in November. It was 4.7 per cent a year ago. Houston's rate increased to 5.5 from last month's reading of 5.4 per cent. Leisure and hospitality added 4,300 jobs in November for an industry gain of 38,000 jobs in the past year. Education and health services grew by 2,100 jobs last month. The biggest job losses came in manufacturing, which dropped 2,200 positions. Information lost 1,000 jobs. The number of initial unemployment claims eased in November to 89,769 from 110,370 in October, when the number also doubled from a month earlier. Unemployment rates are adjusted for seasonal trends in hiring and firing, which most economists believe gives a better picture of the job market. Without the seasonal adjustment, the Texas unemployment rate rose to 5.6 per cent in November from 5.4 per cent in October. Midland had the lowest non-seasonally adjusted unemployment rate at 3.3 per cent. The McAllen area had the highest at 8.2 per cent.
American Airlines and the union representing its flight attendants are turning to Uncle Sam for help in negotiations on a new labor contract. The Association of Professional Flight Attendants says progress has been made on minor issues since talks started in May, but that it's seeking mediation after learning of American's final offer to ground workers, who are conducting separate talks with the airline. Union president Laura Glading says the flight attendants, who accepted pay cuts in 2003, won't accept further concessions. While federal law makes it hard for airline unions to strike, Glading vows her 18,000-plus members are "ready and willing to take all necessary steps to win a fair agreement."
Sirius XM Radio says by year's end, it will have trimmed 22 per cent of its work force. The satellite radio provider is trying to cut costs enough to stay on track to post an adjusted profit next year, despite slumping car sales. The company will have cut 458 people from its staff, going down to 1,600 from the 2,058 it employed before its July acquisition of XM satellite radio holdings. Sirius Chief Executive Mel Karmazin notes that November car sales fell 37 per cent, the weakest results in nearly three decades. Sirius sells its service through cars pre-installed with its radios and individual subscriptions.
Polaroid and its subsidiaries have filed for Chapter 11 bankruptcy protection. In a statement, Concord, Massachusetts-based Polaroid says today's filing in U.S. bankruptcy court in Minnesota and an ongoing financial restructuring plan are the result of allegations of fraud at its parent company, Petters Group Worldwide. Minnetonka-based Petters Group has owned Polaroid since 2005. Polaroid and its officers are not part of the fraud investigation. But in a statement, Polaroid says the allegations have "compromised" the company's financial condition. Polaroid says the move will not impact day-to-day operations for employees, customers, retailers or suppliers.
A Delaware bankruptcy judge has authorized KB Toys to begin going-out-of-business sales. Judge Kevin Carey granted the company's request at a hearing after attorneys said they have resolved several concerns of landlords and creditors. The Pittsfield, Massachusetts, company plans to start liquidation sales Friday, with a targeted end date of February 9th. A consultant working with the company told the court that the remaining shopping days between now and Christmas will be critical to the going-out-of-business sales.
President-elect Barack Obama is naming Republican Representative Ray LaHood of Illinois to be Transportation Secretary. Obama is nominating California Representative Hilda Solis to be Labor Secretary. Former Dallas Mayor Ron Kirk is Obama's choice to be U.S. trade representative. Obama is nominating Karen Mills to head the Small Business Administration.
Houston-based Noble Corporation is relocating its corporate headquarters to Switzerland. The oilfield services company is now incorporated in the Cayman Islands, with offices in Sugar Land. Transocean recently completed the process of changing its incorporation to Switzerland.
Rural bankers are blaming national economic problems, export declines and a weaker farm sector for problems showing up in the midwest and plains states. The survey's Rural Mainstreet Index is up only slightly this month from November's record low of 22.1. By contrast, a year ago, the index stood at 54.3, which was above the 50-point mark considered growth-neutral. Creighton University economist Ernie Goss, who co-created the bankers survey, says farmland price growth has moved into negative territory for a second straight month as commodity prices tumble. The survey's confidence index, which reflects expectations for the economy six months from now, remains in a trough for a fourth straight month. The December figure was 15.6, compared with November's record low of 13.0. The 11 states in the survey are Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming.
At least 36,000 children living in the areas affected by Hurricane Ike may not have health coverage next year because their families haven't re-enrolled them in government health insurance programs for 2009. A spokeswoman for the Texas Health and Human Services Commission, Stephanie Goodman, says more than half of the 72,000 children statewide who didn't re-enroll in Medicaid are from the Houston and Beaumont areas--both hit by Hurricane Ike. She tells the Houston Chronicle her agency is investigating why many families didn't return application renewal forms which were mailed to their homes. Children will have coverage through the end of the year as agency workers call families to find out why they did not submit applications. Medicaid coverage applies to children whose families are at federal poverty levels, meaning a family of three would earn no more than $17,600. CHIP coverage is available for a similar family earning up to twice that amount. Ike blasted ashore near Galveston on September 13th, flattening buildings and killing at least 37 people in Texas.
Egypt's communications ministry says Internet cables in the Mediterranean Sea have been cut, causing massive Internet outages. The ministry says three Internet cables running through the Mediterranean were cut Friday morning. Throughout the country the Internet is almost completely down or working sporadically. The ministry says it will take "several days" for cables to be repaired and is trying to switch Egypt's Internet to an alternative route. It's the second large-scale Internet outage in Egypt this year. Undersea cables were also damaged in January, causing outages in the Mideast and India. Yemen and Sudan were also having phone and Internet difficulties Friday, but it was unclear if it was connected to the outage.
The number of rigs actively exploring for oil and natural gas in the United States dropped by 26 this week to 1,764. Houston-based Baker Hughes reports that of the rigs running nationwide, 1,366 were exploring for natural gas and 387 for oil. A total of 11 were listed as miscellaneous. A year ago, the rig count stood at 1,809. Texas lost four rigs. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.