2009年2月19日星期四

Chinese auto maker plans to take on giants with electric cars

SHENZHEN, China (AFP) — From its headquarters in south China, BYD Auto is pursuing a project of staggering ambition: To be in the lead as the world's cars free themselves from their century-old dependence on petrol.
The company, which was founded just 14 years ago and found success making batteries, has unveiled a series of slick electric and plug-in hybrids as it prepares to enter the US and European markets in 2011.
"In the next five to 10 years we will see big changes. Electrification will happen much sooner than people expect," said Henry Z. Li, BYD's soft-spoken general manager for auto exports, in an interview.
Whether he is right has implications not just for those who have put money in the company -- such as celebrity investor Warren Buffett -- but for the planet, with China now the top greenhouse gas emitter according to some counts.
The vision at BYD, or Build Your Dreams, is that of a future where electric cars fill the roads and quick-charge stations are as readily available as petrol stations today.
This dream remains a long way off, with big cost and technological barriers ahead.
Only next month will it start delivering the F3DM -- DM stands for "dual mode" -- which can go 100 kilometres (63 miles) on its battery, or 580 kilometres (360 miles) in hybrid mode with gasoline.
The model's initial appeal will be to corporate clients that can afford to buy a small fleet of hybrids and set up special facilities for recharging.
For the private Chinese consumer, the case for a hybrid is less obvious, and in order for this market to take off, it is important to build up a critical mass of vehicles that makes charging stations commercially viable.
BYD is in talks with utilities such as State Grid Corporation of China, and they are "interested", said Li, 40.
"It's a positive cycle. More electric cars, more charging stations. It's no use asking which comes first, the chicken or the egg. We have to put something out there first," he said.
It may seem like a huge leap to go from carving out a niche in China's embryonic market to aggressively expanding abroad and taking on the likes of General Motors, Chrysler and Ford, which also are exploring electric vehicles.
Some rivals duly voiced skepticism after BYD Chairman Wang Chuanfu told participants at last month's auto show in Detroit that he planned to kick off sales in the United States and Europe in just two years.
The company's relative lack of experience, having been in the auto business only since 2003, may be a disadvantage but its unique history could nevertheless put it in pole position, argued Jia Xinguang, an independent auto researcher based in Beijing.
"BYD has experience in making batteries. It's number two in the world for rechargeable batteries. It's got a technological advantage," he said.
Other companies have tried electric cars before -- and failed. But times have changed, observers said.
"The technology has advanced significantly since the electric vehicles of the 1990s," said John Patten, an expert on alternative fuel cars at Western Michigan University.
"The political climate is also much more receptive, and is in fact pushing this type of technology, which is environmentally beneficial, so people and politicians don't have to be sold on the benefits."
This goes for China too, where BYD just got a boost from the government in the form of a policy package to help the auto industry through the global economic crisis.
While details are still pending, the company is likely to benefit from a subsidy for clean vehicles, which could cut the 150,000-yuan (21,900-dollar) price tag for the F3DM, which is almost double the petrol-powered equivalent.
"It's difficult for people to accept this high premium. That's why government incentives are important," said Li.
The company got a different boost in September when Buffett's MidAmerican Energy Holdings said it had agreed to buy 10 percent in BYD Co., the parent of BYD Auto.
"It was a signal to the public that Warren Buffett recognised the battery technology and our future directions. He's a long-term investor," said Li.
Until recently, BYD was operating against the backdrop of rapidly rising crude prices. Now oil is plunging, but the company sees it as only a minor bump in the road.
"In the short term perhaps oil prices are up and down, but in the mid-term, long-term it has to go up, because it's a limited resource. We're looking more long-term, not just one to two years," said Li.

Sector roundup: Auto parts retailers, oil cos

Among the sector activity stories for Thursday, Feb. 19, from AP Financial News:
NEW YORK (AP) - Shares of several auto parts retailers rose Thursday on better-than-expected earnings reports from Advance Auto Parts (nyse: AAP - news - people ) Inc. and O'Reilly Automotive Inc. (nasdaq: ORLY - news - people )
NEW YORK (AP) - Shares of oil companies lifted on Thursday as crude oil prices jumped on a report signaling an inventory decline.
NEW YORK (AP) - Airline stocks wavered Thursday amid a downturn in the broader market, as oil prices jumped on a government report that said oil reserves fell unexpectedly last week.

Driving Fell, U.S. Auto Dealers Closed at Record Rates in 2008

U.S. motorists reduced driving by the most in 66 years in 2008 and auto dealerships closed in record numbers, reflecting a deepening recession that’s causing consumers to pull back.
Vehicle-miles traveled last year fell by 107.9 billion, or 3.6 percent, the Federal Highway Administration said in a report today. The Detroit-based consultant Urban Science said 881 dealers closed, with most coming in the fourth quarter.
The figures illustrate the toll on companies such as automaker General Motors Corp. and hotel-chain Marriott International Inc. from the falloff in household spending, which accounts for about 70 percent of the economy. The deterioration in miles began in November 2007, a month before the start of the current economic slump.
“Recession and the worst job losses in a generation have turned anything on wheels into road kill,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Americans are sticking closer to home and saving not spending, which is just the sort of consumer behavior that can turn a recession into a depression.”
Vehicle-miles traveled fell in December by 3.8 billion, or 1.6 percent, from the same month a year earlier, the 14th straight drop, the government said. The U.S. began collecting the data in 1942.
The cumulative driving decline for the 14 months was 115 billion vehicle miles, more than double a drop during the 1970s, the Federal Highway Administration said. During that period, the U.S. faced oil embargoes and soaring gasoline prices.
Driving slipped in four of five regions in December, led by a 4.8 percent drop in the West, which includes California. Miles in the Northeast rose 0.5 percent, the first increase for any region since April.
No Turnaround Soon
The increase is unlikely to be an early sign of an economic turnaround, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
Driving to and from jobs “lags a little bit behind because if firms see demand picking up, the first thing they’ll do is increase the hours of people already working before hiring new people,” he said.
The economy will contract 2 percent this year, the biggest U.S. economic decline since 1946, according to the median of 50 projections in a Bloomberg survey of economists taken Feb. 2 to Feb. 10. Even as President Barack Obama aims to save or create more than 3 million jobs with a stimulus plan, economists foresee an unemployment rate exceeding 8 percent through next year.
Economic Forecast
Further shrinking in the economy may dim prospects for GM and Chrysler LLC, which are seeking additional loans from the government.
GM, which has received $13.4 billion in aid, said this week it needs as much as $16.6 billion more, including $2 billion next month to keep operating. Chrysler LLC, which has gotten $4 billion, said it needs $5 billion more.
U.S. auto sales plunged 18 percent last year. The decline in auto dealerships was the biggest in annual recordkeeping that began in 1991, Urban Science said.
“We’ll see even more contraction in the next several years as the Detroit Three strategically rethink their retail counts,” John Frith, vice president of Urban Science, said in a statement.
Hotels are also feeling the pinch. Marriott, the biggest U.S. hotel chain, reported an unexpected fourth-quarter loss last week and forecast more weakness for the travel industry in 2009.

Driving Fell, U.S. Auto Dealers Closed at Record Rates in 2008

U.S. motorists reduced driving by the most in 66 years in 2008 and auto dealerships closed in record numbers, reflecting a deepening recession that’s causing consumers to pull back.
Vehicle-miles traveled last year fell by 107.9 billion, or 3.6 percent, the Federal Highway Administration said in a report today. The Detroit-based consultant Urban Science said 881 dealers closed, with most coming in the fourth quarter.
The figures illustrate the toll on companies such as automaker General Motors Corp. and hotel-chain Marriott International Inc. from the falloff in household spending, which accounts for about 70 percent of the economy. The deterioration in miles began in November 2007, a month before the start of the current economic slump.
“Recession and the worst job losses in a generation have turned anything on wheels into road kill,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Americans are sticking closer to home and saving not spending, which is just the sort of consumer behavior that can turn a recession into a depression.”
Vehicle-miles traveled fell in December by 3.8 billion, or 1.6 percent, from the same month a year earlier, the 14th straight drop, the government said. The U.S. began collecting the data in 1942.
The cumulative driving decline for the 14 months was 115 billion vehicle miles, more than double a drop during the 1970s, the Federal Highway Administration said. During that period, the U.S. faced oil embargoes and soaring gasoline prices.
Driving slipped in four of five regions in December, led by a 4.8 percent drop in the West, which includes California. Miles in the Northeast rose 0.5 percent, the first increase for any region since April.
No Turnaround Soon
The increase is unlikely to be an early sign of an economic turnaround, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
Driving to and from jobs “lags a little bit behind because if firms see demand picking up, the first thing they’ll do is increase the hours of people already working before hiring new people,” he said.
The economy will contract 2 percent this year, the biggest U.S. economic decline since 1946, according to the median of 50 projections in a Bloomberg survey of economists taken Feb. 2 to Feb. 10. Even as President Barack Obama aims to save or create more than 3 million jobs with a stimulus plan, economists foresee an unemployment rate exceeding 8 percent through next year.
Economic Forecast
Further shrinking in the economy may dim prospects for GM and Chrysler LLC, which are seeking additional loans from the government.
GM, which has received $13.4 billion in aid, said this week it needs as much as $16.6 billion more, including $2 billion next month to keep operating. Chrysler LLC, which has gotten $4 billion, said it needs $5 billion more.
U.S. auto sales plunged 18 percent last year. The decline in auto dealerships was the biggest in annual recordkeeping that began in 1991, Urban Science said.
“We’ll see even more contraction in the next several years as the Detroit Three strategically rethink their retail counts,” John Frith, vice president of Urban Science, said in a statement.
Hotels are also feeling the pinch. Marriott, the biggest U.S. hotel chain, reported an unexpected fourth-quarter loss last week and forecast more weakness for the travel industry in 2009.

2009年2月17日星期二

Anglo's SAfrica coal mine halts output after death

Anglo American Plc's (AAL.L) South African coal unit said on Tuesday it had shut a coal mine for one day after a worker died at the facility, but could not immediately quantify the lost output.
Anglo's Johannesburg-based spokesman, Pranill Ramchander, confirmed reports by the Solidarity trade union that the worker died in hospital after being hit by a vehicle on Monday at Anglo's Goedehoop coal mine in Witbank, east of Johannesburg.
The Department of Minerals and Energy (DME) and the mine's management were conducting investigations into the cause of the accident, Ramchander and the union said.
"I can confirm we had a fatality," Ramchander said. "We had to shut the mine down today (Tuesday), but we will resume production tomorrow. I can't immediately quantify how much output is likely to be lost."
Coal is ranked as the third most dangerous mining sector in South Africa after gold and platinum, Solidarity said, quoting figures supplied by the DME.
The DME has been routinely closing down mines on a temporary basis after a fatality, to put pressure on mining companies to improve safety.
A recent report showed that mines in South Africa, the world's top source of platinum and a major producer of gold, have a "disappointing" level of safety compliance.
The long-awaited safety audit on 355 mines nationwide revealed that mine safety compliance was at 66 percent, and the country's parliament has made amendments to laws that govern mines to introduce stricter safety measures and bigger fines to negligent mine managers. The amendments are yet to be signed into law. [ID:nL278055]

Company says Montana coal plant moving forward

An Australian company proposing a coal-to-liquids plant on a Montana Indian reservation said Tuesday that the project is moving forward despite the shrinking economy and low energy prices.
Australian-American Energy Co. also said the weekend death of Crow tribal Chairman Carl Venne, who was instrumental in the original deal, will not scuttle the project.
Company vice president Kenneth Roberts said the downturn in oil prices to less than $40 a barrel is not going to delay the $7-billion project, he said, even though the plant won't break even if oil prices are below $75 to $80 a barrel.
"We are not going to let any short-term setback, be it from the economic situation or otherwise, slow us down," Roberts told Gov. Brian Schweitzer in the Tuesday meeting. "The point is, we have a long-term view."
Roberts said the company has set up offices on the reservation and expects to have a site for the coal mine and factory within two years. The project is expected to turn the reservation's sizable coal reserves into 50,000 barrels a day of diesel and other fuels.
Another company from Australia, Ambre Energy recently announced its intentions to build a separate $375 million coal plant in southeastern Montana to produce high-efficiency coal and synthetic crude oil.

GM Seeks Up to $16.6 Billion More in Aid, Plans 47,000 Job Cuts

General Motors Corp. said it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid to date, and must get some of the cash next month to survive. GM plans 47,000 more job cuts worldwide this year.
Chrysler LLC, propped up like GM with federal assistance, said it’s seeking $5 billion more from the government and will shed 3,000 more positions.
The automakers met a deadline today to report progress in revamping their operations with $17.4 billion in loans granted so far. Along with Ford Motor Co., they got a boost when the United Auto Workers said it reached tentative agreements to help trim labor expenses.
GM’s retrenchment includes closing an additional 5 U.S. plants by 2012. GM said it examined three bankruptcy scenarios, with price tags of as much as $100 billion, and that all were less-favorable options than a rescue.
GM said it needs at least $9.1 billion more in aid, or as much as $16.6 billion should the economy worsen. The biggest U.S. automaker has received $13.4 billion since December and, along with Chrysler, must show by March 31 how it will return to profit or risk having the U.S. Treasury Department recall the loans.
Production of Saturn cars would stop in 2011, if the brand hasn’t been sold, GM said. Should dealers or other investors present a proposal, GM “would be open” to a spinoff or sale of the unit, according to the Detroit-based automaker’s viability plan.
Chrysler’s Needs
Chrysler said it needs an additional $5 billion March 31 after receiving an initial installment of $4 billion. The new job cuts at the third-largest U.S. automaker would be in addition to 32,000 shed through the end of last year.
House Speaker Nancy Pelosi said she hopes the plans lead to “the transformation of our domestic automobile industry.”
President Barack Obama’s administration will determine whether the shared sacrifices required will bring about “reasonably restructured corporations,” Pelosi, a California Democrat, added in a statement.
Earlier, White House press secretary Robert Gibbs said a restructuring through bankruptcy for GM and Chrysler can’t be ruled out, while adding the industry is “tremendously important” to the economy.
“I wouldn’t preclude policy choices, particularly since we haven’t seen details,” Gibbs told reporters traveling with the president to Colorado. The auto companies “represent a huge part of our manufacturing base, and to have a strong and viable auto industry is tremendously important for the future.”
Rebuffing Bankruptcy
GM and Chrysler rebuffed that idea again today.
“All research indicates bankruptcy would have a dramatic impact on GM sales and revenue,” GM said in its 117-page plan, citing a study that concluded 80 percent of consumers wouldn’t buy a car from a bankrupt company. “A restructuring process outside of bankruptcy is highly preferable,” GM’s report said.
Bankruptcy “would create unbearable stress not only for our suppliers, but also the suppliers of other automakers,” Chrysler Chief Executive Officer Robert Nardelli in a briefing with reporters. “It would have a cataclysmic effect on the entire auto industry.”
Liquidating the Auburn Hills, Michigan-based automaker might cost 2 million to 3 million jobs, according to Chrysler’s plan.
GM fell 3.7 percent to $2.10 at 4:51 p.m. after regular New York Stock Exchange composite trading. Earlier, the shares sank 32 cents, or 13 percent, to $2.18, extending their decline over the past year to 92 percent. Chrysler is controlled by Cerberus Capital Management LP.
Talks With UAW
To meet loan requirements, GM and Chrysler have been trying to persuade the UAW to accept equity instead of cash for half of next year’s scheduled payments into union-run retiree health- care funds.
Discussions are continuing over how the companies will finance those trusts, the UAW said in an e-mailed statement announcing the preliminary agreement on other contract terms. Lower-cost labor contracts would help GM, Chrysler and Ford trim expenses amid the worst U.S. auto market since the early 1980s.
Chrysler President Tom LaSorda said the labor savings are enough to keep the federal loans.
The accord lowers labor costs to “competitive parity” with expenses at the U.S. factories of overseas automakers, Joe Hinrichs, Ford’s group vice president for manufacturing and labor affairs, said in a statement.
GM also is required by the government to cut two-thirds of its $27.5 billion in unsecured public debt to $9.2 billion, and the company has been in talks with bondholders.
GM’s 8.375 percent bonds due in July 2033 slid 0.63 cent to 15.13 cents on the dollar, yielding 55.1 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

2009年2月16日星期一

GM talks progress, board reviews plan

General Motors Corp and the United Auto Workers union made progress in concession talks and bondholders offered proposals to slash GM's debt on Monday, a day before the automaker must detail a new survival plan.
GM is seeking concessions from the UAW and creditors under the terms of its $13.4-billion federal bailout and faces a Tuesday deadline to submit a restructuring plan to U.S. officials showing how it can cut costs and pay back the loans.
GM was not expected to reach detailed agreements by the deadline but talks with both key groups made progress in the final day, people briefed on the discussions said.
In preparation for the submission of the plan, GM's board convened via a conference call on Monday to review a draft of the document, a person familiar with the matter said.
Facing the same Tuesday deadline, GM's smaller rival Chrysler LLC was locked in nonstop negotiations with the UAW that were making progress after stalling out over the weekend, people briefed on those parallel talks said.
In a potential breakthrough, representatives of GM bondholders outlined proposals on how to swap some $28 billion in debt for equity in a document submitted to the automaker, according to a person with knowledge of those talks.
GM has not accepted those proposals which were designed to discourage bondholders from dropping out of the deal in order to maximize its chances for success, the person said.
The debt swap is a crucial element in the restructuring plan for GM, which has received $9.4 billion in government aid and has been pledged $4 billion more by Tuesday. [nN16324404]
Without a framework deal on how to cut GM's crippling debt load, analysts have said the Obama administration would confront a political and economic dilemma in the coming days.
A bankruptcy for GM could cost tens of thousands of jobs and topple suppliers and dealers just as the White House is focused on trying to pull the economy from a deeper recession
But expanded aid could cost taxpayers billions of dollars more and risk a stronger bailout backlash by voters.
U.S. Rep. Thaddeus McCotter, a Michigan Republican, told Reuters progress in GM's talks with its bondholders appeared to have spurred progress in its talks with the UAW, which is also being pressed to forgive debt.
"They will get this done," said McCotter, who sits on the House Financial Services Committee that heard testimony from automakers as part of the bailout debate."
U.S. Rep. Sander Levin, a Michigan Democrat, said the automakers remained focused on "how to make this work without bankruptcy."
"We've looked at it hard and my personal opinion is bankruptcy would be a failure," Levin told Reuters.
The UAW and GM declined to comment on the state of the negotiations which were playing out just blocks from GM's Detroit headquarters.
'SCORCHED EARTH'
Even before GM's plan was finished, the automaker's European labor unions predicted it was doomed. European labor leaders urged a spin-off of the Opel and Vauxhall brands rather than the deep cost cutting they said GM was seeking under the plan, internally dubbed GM's "Renaissance" project.
"The implementation of the 'Renaissance' project in Europe will ultimately lead to a collapse of Opel/Vauxhall," the statement said. "This means scorched earth will be left in Europe with major conflicts all the way to the end." [nLG698215]
The signs of progress in the GM talks came after the White House announced that a task force would review the plan. That group will be headed by U.S. Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers.
In addition, Ron Bloom, a restructuring expert who has advised the United Steelworkers, was also named as an adviser to the Treasury on the crisis. Bloom is considered an expert on the retiree health care issues central to the UAW-GM talks.
GM and the UAW agreed to create a retiree health-care fund as part of their landmark 2007 labor agreement. But the steep slide in auto sales in 2008 overwhelmed GM's attempts to raise cash, leaving it unable to fund its commitment.
Now the UAW is owed roughly $20 billion and faces pressure to take half of that in equity. That would give the UAW a significant stake in GM, and union officials have said they could seek a board seat.
The stakes are high for the UAW, which saw its active membership drop below 500,000 last year for the first time since 1941.
GM's bondholders are being pressured to cut $28 billion in unsecured debt by two-thirds although some have challenged that proposed payout ratio.
Analysts believe more federal funding will be needed. GM had originally asked for $18 billion -- suggesting they still have an immediate need for another $5 billion.
Brad Coulter, director of the Detroit-based turnaround firm Okeefe & Associates, said the final price tag for a GM bailout could approach $50 billion if the market remains depressed.
Chrysler, controlled by private equity firm Cerberus Capital Management LP, has been granted $3 billion and is seeking an additional $4 billion in aid.

GM talks progress, board reviews plan

General Motors Corp and the United Auto Workers union made progress in concession talks and bondholders offered proposals to slash GM's debt on Monday, a day before the automaker must detail a new survival plan.
GM is seeking concessions from the UAW and creditors under the terms of its $13.4-billion federal bailout and faces a Tuesday deadline to submit a restructuring plan to U.S. officials showing how it can cut costs and pay back the loans.
GM was not expected to reach detailed agreements by the deadline but talks with both key groups made progress in the final day, people briefed on the discussions said.
In preparation for the submission of the plan, GM's board convened via a conference call on Monday to review a draft of the document, a person familiar with the matter said.
Facing the same Tuesday deadline, GM's smaller rival Chrysler LLC was locked in nonstop negotiations with the UAW that were making progress after stalling out over the weekend, people briefed on those parallel talks said.
In a potential breakthrough, representatives of GM bondholders outlined proposals on how to swap some $28 billion in debt for equity in a document submitted to the automaker, according to a person with knowledge of those talks.
GM has not accepted those proposals which were designed to discourage bondholders from dropping out of the deal in order to maximize its chances for success, the person said.
The debt swap is a crucial element in the restructuring plan for GM, which has received $9.4 billion in government aid and has been pledged $4 billion more by Tuesday. [nN16324404]
Without a framework deal on how to cut GM's crippling debt load, analysts have said the Obama administration would confront a political and economic dilemma in the coming days.
A bankruptcy for GM could cost tens of thousands of jobs and topple suppliers and dealers just as the White House is focused on trying to pull the economy from a deeper recession
But expanded aid could cost taxpayers billions of dollars more and risk a stronger bailout backlash by voters.
U.S. Rep. Thaddeus McCotter, a Michigan Republican, told Reuters progress in GM's talks with its bondholders appeared to have spurred progress in its talks with the UAW, which is also being pressed to forgive debt.
"They will get this done," said McCotter, who sits on the House Financial Services Committee that heard testimony from automakers as part of the bailout debate."
U.S. Rep. Sander Levin, a Michigan Democrat, said the automakers remained focused on "how to make this work without bankruptcy."
"We've looked at it hard and my personal opinion is bankruptcy would be a failure," Levin told Reuters.
The UAW and GM declined to comment on the state of the negotiations which were playing out just blocks from GM's Detroit headquarters.
'SCORCHED EARTH'
Even before GM's plan was finished, the automaker's European labor unions predicted it was doomed. European labor leaders urged a spin-off of the Opel and Vauxhall brands rather than the deep cost cutting they said GM was seeking under the plan, internally dubbed GM's "Renaissance" project.
"The implementation of the 'Renaissance' project in Europe will ultimately lead to a collapse of Opel/Vauxhall," the statement said. "This means scorched earth will be left in Europe with major conflicts all the way to the end." [nLG698215]
The signs of progress in the GM talks came after the White House announced that a task force would review the plan. That group will be headed by U.S. Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers.
In addition, Ron Bloom, a restructuring expert who has advised the United Steelworkers, was also named as an adviser to the Treasury on the crisis. Bloom is considered an expert on the retiree health care issues central to the UAW-GM talks.
GM and the UAW agreed to create a retiree health-care fund as part of their landmark 2007 labor agreement. But the steep slide in auto sales in 2008 overwhelmed GM's attempts to raise cash, leaving it unable to fund its commitment.
Now the UAW is owed roughly $20 billion and faces pressure to take half of that in equity. That would give the UAW a significant stake in GM, and union officials have said they could seek a board seat.
The stakes are high for the UAW, which saw its active membership drop below 500,000 last year for the first time since 1941.
GM's bondholders are being pressured to cut $28 billion in unsecured debt by two-thirds although some have challenged that proposed payout ratio.
Analysts believe more federal funding will be needed. GM had originally asked for $18 billion -- suggesting they still have an immediate need for another $5 billion.
Brad Coulter, director of the Detroit-based turnaround firm Okeefe & Associates, said the final price tag for a GM bailout could approach $50 billion if the market remains depressed.
Chrysler, controlled by private equity firm Cerberus Capital Management LP, has been granted $3 billion and is seeking an additional $4 billion in aid.

4 questions for GM and Chrysler

General Motors and Chrysler LLC will present their latest plans to the federal government Tuesday about how they will survive for the long-term.
The two companies have already received approval for $17.4 billion in loans from the government, money that most experts believe has kept the struggling automakers from bankruptcy.
If GM and Chrysler do not prove to the government that they can be viable in the future, the loans could be recalled. With that in mind, here is what people should be paying close attention to in the plans.
What concessions did they win from the UAW and creditors? GM (GM, Fortune 500) and Chrysler are required to include details of deals they reached with their unions and their creditors to further cut costs.
So far, the two companies have reached agreements with the United Auto Workers on some issues, such as the elimination of the so-called "jobs bank," which gives laid-off autoworkers the right to near full pay for the life of the contract. GM and Chrysler also announced new buyout offers to further cut their hourly work force.
But there have yet to be any details on bigger cost-saving deals, such as how to fund union-controlled trusts that cover tens of billions of dollars in future retiree health care costs. The fund was created as part of the 2007 labor deal between the UAW and Detroit's Big Three automakers.
The expectation was that the United Auto Workers union would agree to accept equity in GM and Chrysler for half of the assets to be placed in those funds. But the UAW walked away from the negotiating table late last week, reportedly when GM asked the union to take even more of its depressed stock.
There has also been little indication so far that debt holders have agreed to swap debt for equity in the companies. The loans call for the automakers to shed two-thirds of their unsecured debt.
While Chrysler has little unsecured debt, it is widely believed to be trying to reach deals with holders of its secured debt. GM is struggling under $35 billion of unsecured debt.
What other costs can GM and Chrysler cut? GM could announce a decision to discontinue several brands, such as Hummer, Saturn, Saab and even Pontiac. In December, when GM first asked Congress for financial assistance, the company said these brands were on the bubble.
GM also said in December that it may cut in the number of U.S. factories from 47 to 38 over the next four years. So a more detailed time table for those closings could be announced Tuesday.
Chrysler could also announce additional plant closing plans, as it discusses various options to partner with overseas automakers such as Nissan (NSANY) and Fiat.
The Wall Street Journal reported Saturday that GM also layout a bankruptcy option in its plan -- even though the company has repeatedly said it did not believe such a plan was workable.
According to the report, the government would provide so-called "debtor in possession" financing to fund GM's operations during a court supervised reorganization. The company would not comment on the report.
But a source familiar with GM's plans said that while the bankruptcy option will be discussed, GM will argue that the government financing needed to keep the company alive during bankruptcy would be many times greater than what it would cost to keep out of bankruptcy.
And that leads to the next question.
How much more money will GM and Chrysler ask for? In December, GM said it needed $18 billion to make it to 2010. Chrysler was asking for $7 billion.
But when Congress failed to pass the Detroit bailout, the Bush administration stepped in with stopgap loans of $13.4 billion for GM and $4 billion for Chrysler.
The companies would clearly like the full amount of money they asked for in December, given the weakening sales environment. The question is whether they will want more money on top of that.
Several experts believe it will take a lot more than $34 billion - a number that includes a $9 billion line of credit that Ford Motor (F, Fortune 500) requested in case conditions in the auto market deteriorated even more than expected - to save the U.S. automakers.
Mark Zandi, chief economist of Moody's Economy.com, testified before Congress in December that it would cost between $75 billion and $125 billion to bailout the Big Three.
What are their current sales forecasts? GM and Chrysler both gave 2009 sales forecasts in December that seemed grim at the time. But now, they appear to be optimistic.
GM's baseline forecast was for a seasonally adjusted annual sales rate, or SAAR, of about 11 million vehicles in the first quarter, on its way to 2009 industrywide sales just under 12 million. It forecast that sales would rebound to just under 15 million cars and light trucks by 2012.
But January sales were below a 10 million SAAR for the first time since 1982, and the early take on February sales show little improvement. GM announced in January it is now working with the assumption that full-year sales this year will be just over 10 million vehicles.
Chrysler's plans called for a more conservative 11.1 million SAAR in 2009. But its vice chairman Jim Press said earlier this month that industrywide sales may stay near 10 million for the next four years.
The terrible December and January sales have led to losses and production cuts even at formerly profitable Asian automakers such as Toyota Motor (TM) and Nissan. Nissan has announced 20,000 staff cuts worldwide. Toyota has stopped work on a nearly complete Mississippi plant that had been set to make a hybrid Prius on U.S. soil for the first time.
The weaker forecasts from these companies only raise more red flags for the U.S. automakers. Most experts believe it is impossible for GM and Chrysler to return to profitability if annual vehicle sales remain below 10 million for the foreseeable future. That means the price tag of a Detroit bailout is likely to climb much higher.

2009年2月13日星期五

AUTOSHOW-Drawing in buyers or exhibitors a challenge

Auto shows have been around more than 100 years but as money gets tighter for consumers and car companies, show organizers are finding they have to compete harder for the attention of both.
Some automakers pulled out of the North American International Auto Show in Detroit in January, including Nissan (7201.T: Quote, Profile, Research), Mitsubishi (7211.T: Quote, Profile, Research) and Suzuki (7269.T: Quote, Profile, Research), and public attendance there fell for a sixth straight year to 650,000.
Displays were less elaborate and the media days, known for starlets, pop star sound bites and stunts ranging from cars crashing through windows to cattle drives, were more subdued.
The Chicago Auto Show, which opens on Friday, has not announced visitor numbers since 2000, when it said it attracted more than 1.2 million people. But it says attendance fell 3 percent last year, the first decline this decade.
To attract automakers, the Chicago show has set up a basic stage with lighting and sound systems that car companies can rent to hold press briefings and introduce new models.
"The days of overindulgent press conferences are a thing of the past, and this is one way to help manufacturers and the show," said Jerry Cizek, president of the Chicago Automobile Trade Association, the dealer group that sponsors the show.
"Manufacturers want return on investment," he said.
Hyundai Motor America (005380.KS: Quote, Profile, Research) used the show's central stage, and John Krafcik, acting president and chief executive of Hyundai Motor America, estimated it cost $25,000 while a "typical auto show runs $500,000" to stage a similar event.
"This is a smart way to do it. We share resources and still get our message across," Krafcik said.
Analysts and auto executives generally do not expect auto sales -- now at a 27-year low due to the recession and credit crunch -- to pick up until the second half of 2009. But Krafcik said auto shows still have value since they expose the brand.
"People who could buy a car are so worried about losing their jobs that about half have taken themselves out of the market," Krafcik said. "They'll still go to auto shows, and we want to be there."
"You can shop online for clothes too, and when they don't fit you send them back. You can't do that with a car," Cizek said. "I wouldn't buy a car before I made sure that my family fits in it."
But with joblessness soaring, adding to an economic malaise that has put car shopping on the back burner, the Chicago show is cutting costs for consumers and automakers alike.
Visitors may see regular prices cut up to 50 percent on some comfort foods like pizza, pork sandwiches and hot dogs.
If they get bored with the cars, they can try the simulated helicopter ride at the U.S. Army display or test their skills on one of the driving simulators that dot the show floor.
"Even if they aren't in the market, you can see the new technology, what's changed on the cars and keep up to date for when they are in the market," Cizek said.

Auto suppliers see tough times ahead

French tire manufacturer Michelin posted a drop in net profit but said it would benefit from lower raw material prices in 2009, while the net loss at parts supplier Valeo widened and it saw a tough year.
The results came amid new talk of consolidation in the auto parts sector and after overnight news of further North American cutbacks by world No. 1 automaker Toyota Motor Co and data showing European new car registrations dropped by more than a quarter last month..
Michelin Chief Executive Michel Rollier told a news conference on Friday he saw the first half of 2009 being "very difficult," in line with the second half of last year.
The group booked a 227 million euro ($293 million) charge in its 2008 accounts after it was forced to cut production in line with falling demand for cars.
But Michelin said raw material price decreases, as well as the price increases it implemented in 2008, would boost its profitability in 2009.
Valeo scrapped its dividend on Friday after posting a 207 million euro net loss and said it did not see the car industry crisis ending before 2011.
The groups' results were the latest in a wave of bad news for French auto industry players, which posted disappointing results as the car industry found itself in the full grip of an unprecedented, credit crunch-sparked sales crisis.
The depth of the slump was also reflected in the latest figures from European auto industry association ACEA which showed new car registrations dropped 27 percent in January in what was a dismal month for all carmakers in the region
We're driving in the fog, on black ice, with our foot off the accelerator," Valeo CEO Thierry Morin told a news conference. His salary will be cut to 1.1 million euros from more than 1.5 million, due to the crisis and after some criticism.
Michelin stock was 3.29 percent higher at 1220 GMT (7:20 a.m. EST), outperforming a 1.19 percent gain on the Dow Jones auto index. France's benchmark CAC 40 index was 2.35 percent firmer.
"Michelin is focused on improving its profitability and preserving its financial position," Merrill Lynch analyst Thomas Besson said in a note.
"Profitability should be supported by the full-year combined effect of the price increases passed in 2008 and the decline in raw materials prices, in particular for natural rubber and oil derivatives."
CRISIS CONSOLIDATION
As the likelihood of sector consolidation linked to the crisis was brought into focus with the news that China's Chery Automobile had approached several European brands, Michelin and Valeo both said they would watch developments closely.
Rollier said Michelin "would not be absent from the debate" on consolidation. But he declined to be drawn on whether the company was in discussions over a potential purchase of German rival Continental's tire division.
Valeo's Morin, meanwhile, said the group was not set on external growth, but added that he saw a "significant" need for consolidation in the sector.
"If at a certain moment we realize that certain equipment makers in difficulty had interesting skills, of course we will go and knock on their door," Morin saidUnder this scenario Morin could envisage calling on the government fund set up to help suppliers. The group said this morning its liquidity was intact at the end of 2008 and it had 1.2 billion euros in confirmed credit lines from major banks.
Michelin and Valeo said on Friday they would work together on the development of systems for electric and hybrid vehicles.
Renault on Thursday dropped its once sacrosanct 2009 targets after its 2008 net profit plunged.
PSA Peugeot Citroen said earlier this week it expected to remain in the red until 2010. And parts supplier Faurecia launched a 450 million euro capital increase on Tuesday after posting a widening net loss.
Elsewhere, German automotive parts supplier Leoni said it does not rule out a loss for 2009 though its chief executive told Reuters he was "not too pessimistic" for the current year.
The string of weak results followed an announcement by French President Nicolas Sarkozy of a massive state aid package, with controversial strings attached, for the struggling auto sector.
The EU on Friday outlined its possible concerns about the state support as Jean-Claude Juncker, chairman of euro zone finance ministers, warned France and Italy over protectionism.
Officials in Germany meanwhile were meeting on Friday to discuss General Motors' struggling Opel unit.

US auto suppliers make formal request for govt aid

U.S. auto suppliers of Friday submitted a request to the U.S. Treasury to secure emergency funding to avoid a wave of bankruptcies and a deeper crisis in the auto industry.
The request, which was submitted by two industry groups, outlined three proposals for financial relief for parts suppliers to the U.S. government.
The proposals say the government could guarantee supplier receivables from U.S. automakers, accelerate payment terms or guarantee commercial loans to part companies.
The document was submitted to the U.S. Treasury by Motor & Equipment Manufacturers Association and its affiliate, the Original Equipment Suppliers Association
The requests come as General Motors Corp (GM.N: Quote, Profile, Research) and Chrysler LLC race to meet a Feb. 17 deadline to show U.S. officials they can be made viable after receiving $17.4 billion in aid.
Bob McKenna, president of the Motor & Equipment Manufacturers Association, which represents some 400 suppliers, warned that without government action, auto suppliers will be forced to shutter facilities or close entire operations in March and April.
"This would devastate the domestic auto industry and deepen the economic crisis," he said in a statement.
Auto parts suppliers have come under intense pressure from tight credit conditions and from plant shutdowns by major automakers at the end of last year and the beginning of 2009.
Projections from parts suppliers show payments to the companies are on track to drop to just $2 billion to $3 billion in March because of the near total shutdown in auto production at the start of the year, according to MEMA data. Suppliers had been receiving between $8 billion and $9 billion per month.

2009年2月11日星期三

France says auto bail-out not protectionist

PARIS (AFP) — France on Wednesday fiercely defended its plan to pump almost nine billion euros into its struggling carmakers after EU countries labeled it protectionist and called a crisis summit.
President Nicolas Sarkozy announced plans to lend PSA Peugeot Citroen and Renault three billion euros (3.9 billion dollars) each on top of other measures in exchange for a promise not to shut French plants or sack French workers.
Speaking in Kuwait City during a tour of Gulf states, Sarkozy said the plan had "nothing to do with protectionism" and that other European governments were welcome to put up funds to keep French plants in their markets.
"One million cars were built elsewhere than in France in three years," Sarkozy told a news conference. "It is my responsibility to keep jobs in France."
The European Commission, which has yet to give the loan its approval, warned on Tuesday that the plan might break European Union laws against protectionism, amid sniping from the Czech Republic, Slovakia and German industry.
The Czech presidency of the European Union has called for a summit at the end of the month to encourage leaders to "say a clear 'no' to protectionism".
France's Prime Minister Francois Fillon heads to Brussels on Thursday to sell the deal to the chairman of the European Commission, Manuel Barroso.
Aides to Finance Minister Christine Lagarde said she would invite her new German counterpart Karl-Theodor zu Guttenberg to Paris to reassure him that the French measures "were not inspired by protectionism."
Minister for European affairs Bruno Le Maire joined the chorus, saying the bailout plan was "not protectionism, it's the defence of our industry and the defence of our jobs."
Le Maire told France Info radio the plan did not break the rules of the EU internal market and added that "if the market had worked as well as it should then it would have provided the liquidity that Peugeot and Renault needed."
Motor manufacturing is a pillar of French industry, directly employing one in 10 members of the workforce, but the sector has been hard hit by the global economic crisis and the collapse of consumer credit.
France's biggest carmaker Peugeot-Citroen said Wednesday it had lost 343 million euros in 2008 -- having made 885 million in profit the previous year -- and forecast that the European market for new cars would shrink by another 20 percent in 2009.
The firm plans to cut its workforce at European plants by 11,000, mainly through voluntary redundancies, between 6,000 and 7,000 of them in France.
Paris sees Renault and Peugeot as national champions, although they only produce around 40 percent of their vehicles at home, running major plants in Spain, Italy, Romania, Portugal, Slovakia and the Czech Republic.
Job losses will further anger Prague and Bratislava and the German industrial federation BDI has also said it is "highly alarmed."
In total Sarkozy proposes six billion euros in five-year loans, two billion more for Renault and Peugeot's financial arms, 600 million for suppliers and around 220 million in grants for motorists who replace older cars.
France's plan can only go ahead if the European Commission approves it, and its spokesman on competition issues has already expressed concerns.
"We have certain concerns," Jonathan Todd told reporters on Tuesday. "The commission is going to look very closely at the French plan.
"If there is an additional condition like keeping a production plant in France, that would make the aid illegal," he warned.

NZ's Steel and Tube H1 profit more than doubles

New Zealand's Steel & Tube Ltd. (STU.NZ) on Thursday reported a 143 percent rise in first-half net profit due to higher steel prices.
The company, half-owned by Australia's OneSteel Ltd. (OST.AX), made a net profit of NZ$20.8 million ($10.9 million) in the six months to Dec. 31, compared with NZ$8.6 million a year earlier.
Steel & Tube said it had benefited from strong global demand for steel products earlier in 2008, but demand had noticeably slowed towards the end of the year.
It said the outlook for 2009 was for a tough environment, which will substantially hit second half earnings.
It was untraded, but closed on Wednesday at NZ$2.95.
It declared an increased dividend of 10 cents a share from 9 cents a share last year.
In October last year Onesteel abandoned a NZ$175 million bid to buy the remainder of Steel and Tube's shares, saying market volatility had made the transaction too risky. ($1=NZ$1.91)

ArcelorMittal Posts $2.63 Billion Loss on Steel Slump

ArcelorMittal, the world’s biggest steelmaker, posted an unexpected fourth-quarter loss after taking one-off charges of $4.4 billion that included writedowns on inventories and raw-material contracts.
The net loss was $2.63 billion, compared with net income of $2.44 billion a year earlier, the Luxembourg-based company said today in a statement. The median forecast of four analysts surveyed by Bloomberg News was for profit of $560 million. The annual dividend was cut to 75 cents a share, from $1.50.
Plunging demand is spurring steelmakers around the world to reduce production and payrolls. ArcelorMittal said in November it aimed to cut output by more than 30 percent and eliminate as many as 9,000 jobs. Nippon Steel Co., Asia’s biggest producer of the metal, said last month it probably would lower output twice as much as predicted in November.
“The first positive signs are coming out of China,” Chief Financial Officer Aditya Mittal said today in a conference call. “Demand and prices are improving in China.”
Arcelor rose 60 cents, or 3 percent, to 20.55 euros as of 9:02 a.m. in Amsterdam trading. The stock has declined 56 percent in the past 12 months, giving the company a market value of 29.8 billion euros ($38.5 billion).
The operating climate is likely to remain “challenging” and first-quarter earnings before interest, taxes, depreciation and amortization will be about $1 billion, the company forecast. Ebitda in the first quarter of 2008 was 4.85 billion euros.
‘Difficult’ Outlook
“The outlook for 2009 still looks difficult,” Nick Hatch, an analyst at ING Bank NV in London who has a “sell” recommendation the shares, wrote in a note. “We see little here to change our view on the stock.”
The steelmaker counts automakers and construction companies, both of which have been hit by the global economic slowdown, among its customers. Chief Executive Officer Lakshmi Mittal, 58, formed the company in 2006 when his Mittal Steel Co. bought Arcelor SA for $38.3 billion.
Job cuts may exceed the 9,000 announced last year, Aditya Mittal said. Of the charges for the fourth quarter, $900 million related to job losses, he said.
World crude steel production fell 24 percent from a year earlier in December as a slump in output accelerated, the World Steel Association said Jan. 22. The price of European hot-rolled coil steel, a benchmark product used in cars and construction, declined 43 percent in the fourth quarter to 425 euros a metric ton, according to data supplied by Metal Bulletin.
Auto sales were the weakest since 1981 in the U.S. last month and also slowed across Europe, Russia and China.
ArcelorMittal’s fourth-quarter shipments of steel in the fourth quarter declined 39 percent to 17.1 million tons. Sales slid 21 percent to $22.1 billion. The loss per share was $1.93, from a profit of $1.71 a year earlier.

2009年2月10日星期二

AIG in talks to sell auto unit to Zurich: source

American International Group (AIG.N) is in advanced talks to sell its U.S. auto insurance unit to Swiss insurer Zurich Financial Services AG (ZURN.VX), a source familiar with the matter said on Tuesday.
The auto insurance business is expected to fetch around $2 billion, the source said.
The auto insurance business is part of AIG's U.S. personal lines unit, which includes selling products to high net-worth individuals through its AIG Private Client division. AIG Chief Executive Edward Liddy has said that the private client division is not being sold.
The unit being sold includes the 21st Century Insurance Group business, which AIG took over in 2007 when it bought out the minority stakeholders for $811 million.
AIG and Zurich both declined to comment.
Zurich, the fourth-largest European insurer, has said it was on the lookout for deals that will bolster its North American personal lines and global life insurance businesses.
AIG, once the world's biggest insurer by market value, averted bankruptcy in September with an $85 billion federal bailout. The rescue later swelled to about $150 billion.
On October 3, the insurer said it planned to keep its U.S. property-casualty, foreign general insurance businesses and an ownership interest in its foreign life operations but sell the remainder.
Since then, the insurer has announced the sale of some businesses, including the sale of HSB Group to German reinsurer Munich Re (MUVGn.DE) for $742 million and its Canadian life insurance unit to Bank of Montreal (BMO.TO) for about C$375 million.
AIG shares closed down 12 cents at 92 cents on the New York Stock Exchange on Tuesday.

French Auto-Industry Aid Plan Problematic, Sweden’s Borg Says

French aid to the auto industry came under fresh criticism as Sweden’s finance minister said a plan to provide loans at a preferred rate to France’s biggest carmakers likely will disrupt competition in the European Union.
“It is problematic of course for Sweden,” Swedish Finance Minister Anders Borg said today in Brussels where he is attending monthly meeting of EU finance chiefs. “We have an automotive industry that is strong. We try to deal with it in a fair way that is also strengthening competition, and I think everybody should do that.”
French President Nicolas Sarkozy said yesterday that PSA Peugeot Citroen and Renault SA will each get a five-year loan of 3 billion euros ($3.9 billion) at a 6 percent rate from the government after they promised to not shut plants and fire workers in France. Renault Trucks, which is owned by Volvo AB of Sweden, and some other automakers will also receive 500 million euros in loans, he said.
With the region trying to prevent a surge in protectionism, Sarkozy’s efforts to keep car production in France as the global economic slump and tighter credit conditions hurt auto sales across the world has already drawn criticism from the Czech Republic, which the French president singled out last week.
“Creating a plant in the Czech Republic to sell cars in France isn’t justified,” Sarkozy said in a broadcast interview on Feb. 5. “I want to stop relocation abroad” and return jobs to France “if possible.” Paris-based Peugeot, France’s largest carmaker, began making small cars in the Czech Republic in 2005 at a factory jointly owned with Toyota Motor Corp.
French Market
“I do not understand the argument that it is unjustifiable to manufacture cars for the French market in the Czech Republic,” Czech Prime Minister Mirek Topolanek said in response to Sarkozy’s comments. The Czech leader, whose government took over the six-month rotating presidency of the EU from France at the start of the year, said the attitude in Paris threatens the Lisbon Treaty, which the Czechs have yet to ratify.
Sarkozy is trying to save jobs in France, Europe’s third- largest economy, where unemployment has reached a two-year high as it is enters its first recession in 16 years.
Production of cars and parts in France fell 38.7 percent in the fourth quarter from a year earlier, a government report showed today, as carmakers as well as their suppliers shut some factories temporarily to face the slump. In Sweden, production of motor vehicles plunged 41.3 percent in December from a year earlier, the statistics office said.
Production Cost
Renault has said the production cost of a subcompact is 1,400 euros higher in France than in nearby economies where wages are lower, with social security and local taxes accounting for more than two-thirds of the gap.
France granted a first package of aid to its auto industry in December, including a 1,000 euro sales incentive for households who buy a new car and scrap an old one, and 1 billion euros in low-interest loans to the car-financing arms of Peugeot and Renault. It also set up a fund owned by the government, Renault and Peugeot, which will invest in auto-parts makers based in France.
In Italy, the government on Feb. 6 announced a 2 billion- euro stimulus package to help auto producers and suppliers. The German government said in January it would boost auto demand with a 1.5 billion-euro program, including an incentive of 2,500 euros when consumers scrap a car older than nine years.
Sweden’s government in December unveiled a 28 billion-krona ($3.5 billion) support package for Volvo Cars and Saab Automobile that aims to push development of fuel-efficient vehicles and ease the manufacturers’ access to funding. The plan provides Sweden’s carmakers with a 5 billion-krona rescue loan, additional funding for research and development as well as credit guarantees.

China becomes biggest auto market

China has leapfrogged the US to become the world's largest auto market, according to monthly figures from the Chinese state media.
In January 735,000 cars were sold in China said state TV, quoting the deputy director of the China Association of Automobile Manufacturers, Dong Yong.
Last week, preliminary estimates from US market research firm Autodata said 656,976 cars were sold in the US.
Analysts say this is an anomaly as the new lunar year boosts sales in China.
Meanwhile, the US traditionally sees a post-Christmas decline in sales.
Analysts predict that the US will remain the world's biggest market for the full year.
Several also point out that the figures indicate the deterioration of the auto market in the US, rather than any particular increase in Chinese demand.
"More than 80% to 90% of US car purchases were made on credit," said Global Insight analyst, John Zeng.
"Once the [US] financial system got into trouble, the sales model supported by the financial system collapsed."

2009年2月9日星期一

Auto parts suppliers are seeking federal aid

U.S. auto parts suppliers are working with the Treasury Department and the Federal Reserve to develop a lean-heavy federal aid program that could help them survive the worst industry downturn they have ever faced. The federal assistance could be as high as $20.5 billion, says Robert E. McKenna president and CEO of the Motor & Equipment Manufacturers Association, which represents 700 auto parts suppliers.
Auto parts suppliers are facing first-quarter North American production cuts of more than 40%, according to an economic analysis by Global Insight of Waltham, Mass. Without aid, many more part suppliers are in danger of filing for bankruptcy protection such the 40 major suppliers who filed for Chapter 11 reorganization in 2008.
MEMA and the Original Equipment Suppliers Association put out a press statement last Friday that they are exploring options to address the immediate cash needs and longer term viability of the motor vehicle parts supplier industry. McKenna tells Purchasing.com in an interview today that the associations “have been in active communication with the U.S. Department of the Treasury, members of Congress and the Obama administration to address the financial urgency faced by suppliers” but no formal request has been submitted.
The federal government has pledged $24.9 billion to General Motors, Chrysler and their captive finance companies. Another $25 billion has been kept for supplier and automaker plant retooling and committed funding to free up credit for consumer loans, including those to vehicle buyers. “Still, somewhere between one quarter and one third of the auto parts suppliers are in financial jeopardy,” McKenna says. “We are trying to develop financial assistance in a very complicated environment,” he says, “because there are lots of pieces to the financial puzzle that have to come together.”
MEMA estimates that because of assembly cutbacks the Detroit 3 (GM, Chrysler and Ford) will spend this quarter as little as half the normal $15 billion in monthly purchasing for parts--“and that has created problems for parts makers with their bank covenants, lending and credit requirements, and guaranteeing of receivables,” McKenna says.

G.M. in Talks to Buy Back Delphi Plants

General Motors is in talks to reacquire parts of Delphi, the auto parts supplier it spun off a decade ago that is now in bankruptcy, a person with knowledge of the talks told DealBook.
The talks, which began in December, are meant to help G.M. in its own restructuring.
Under the terms of the proposal, G.M. would take back several Delphi plants that produce parts only for the struggling automaker, this person said. The two companies had previously worked out an agreement under which G.M. would essentially subsidize those operations, giving Delphi cash as it worked its way through bankruptcy.
The news was first reported by The Wall Street Journal on Monday.
Such a move by G.M. could help net it more money from the federal government.
But several challenges remain, including negotiations over price — Delphi has asked for about $2 billion, while G.M. would seek to pay a minimal amount because of its previous agreements — and with Delphi’s creditors.
The move would be similar to what Ford did with Visteon, the auto parts supplier it spun off around the same time that G.M. split off Delphi. In 2005, Ford bought back several parts facilities from Visteon.

Brazil January Auto Sales Fall 8% as Economy Stalls

Brazil’s vehicle sales fell last month from a year earlier as rising borrowing costs and job cuts prompted by the global economic slowdown damped sales for a fourth month. Shares of auto-parts makers fell.
Sales of new cars, trucks and buses fell to 197,500 in January, an 8.1 percent slide from a year earlier, Brazil’s automakers association, known as Anfavea, said in Sao Paulo today. From December, new registrations rose 1.5 percent while vehicle production jumped 93 percent. Output fell 27 percent in the 12 months through January.
Latin America’s largest economy stalled in the fourth quarter of 2008 as the global financial crisis began to undercut consumer demand and commodity prices fell. Brazilian companies eliminated jobs at a record pace and industrial output declined the most in 17 years in December.
“There is clearly a deceleration, and it’s a strong one,” said Leticia Costa, president of the Brazilian unit of consulting firm Booz Allen Hamilton Inc., in an interview from Sao Paulo. “Credit conditions have improved, but not to the levels prior to the sales slowdown.”
Yields on interest rate futures rose and the real gained while shares of auto parts makers fell in Sao Paulo trading.
Economists covering Brazil lowered their 2009 economic growth forecast to 1.7 percent, from 1.8 percent the week before, according to the weekly central bank survey of about 100 institutions taken Feb. 6 and published today.
Lower Growth
Brazilian President Luiz Inacio Lula da Silva said on Feb. 3 that he couldn’t rule out a contraction of the country’s economy this year, without elaborating on scale of the possible decline. The auto industry accounts for about 5 percent of Brazil’s gross domestic product.
Policy makers last month lowered Brazil’s benchmark interest rate by a full percentage point, the first cut in 16 months and the biggest in five years. Economists covering the Brazilian economy expect another reduction at the March 10-11 meeting, to 12 percent from 12.75 percent.
Consumers, worried about job and salary cuts, reduced purchases of durable goods such as home appliances, computers, building materials and cars.
Sales, Shares
A broader measure of retail sales that includes construction goods, vehicles and motorbikes declined 4.1 percent in November from a year earlier, according to the national statistic agency.
Vehicle sales figures pushed down shares of auto-parts makers in Sao Paulo trading. Randon Participacoes SA fell as much as 2 percent before paring declines to trade down 1.3 percent to 5.92 reais at 11:14 a.m. New York time. Iochpe Maxion SA dropped 2.3 percent to 9.48 reais and Marcopolo SA fell 1.9 percent to 3.09 reais.
The decline in vehicle exports mirrors the slide experienced by other Brazilian industries.
Brazil had its first monthly trade deficit in almost eight years in January as exports plunged by a record amount on falling prices for the country’s commodities.
Exports fell 29 percent to $9.8 billion last month, the biggest month-over-month drop since 1991, the Trade Ministry said on Feb. 2.
“What we’re seeing in the global economy is serious,” said Tereza Fernandez, a consultant at Sao Paulo-based MB Associados. “Companies no longer need to boost capacity and I wouldn’t be surprised if they dismiss more workers.”
Vehicle exports in January fell 61 percent on year to 22,600 units from 57,187, and 48 percent from the 43,580 units in December.
Investment, Outlook
In September, Anfavea forecast automakers would spend about $18 billion in the 2009-2012 period to add plants, expand production lines and release new models.
The spending was aimed at boosting output capacity to 6 million units a year by 2013 from less than 4 million units last year, Anfavea said.
Automakers fired 1,900 workers in January, the third straight month of job cuts following two years of increasing headcount and new production shifts.
Vehicle sales and output, rising at record pace last year through September, lost steam in the end of 2008 as the global credit crunch made loans costlier and harder to obtain, damping demand for durable goods such as autos and computers.
The yield on Brazil’s overnight futures contract for January 2010 delivery rose to 11.12 percent from 11 percent on Feb. 6. The real gained to 2.2349 per U.S. dollar from 2.2435 on Feb. 6.

2009年2月8日星期日

Nevada Copper-Drilling Expands the North Deposit With Significant Copper Intercepts

Nevada Copper Corp. (TSX: NCU) ("Nevada Copper") recent drill results continue to confirm continuity and expand copper mineralization in the open pit North Deposit, at its 100% owned Pumpkin Hollow Copper Development Property located in Nevada.
Follow-up step-out drilling of previous drill hole NC08-20 (236 meters at 1.03% copper) has been extremely successful in extending mineralization along the southern boundary of the North Deposit. NC08-40 was drilled 60 meters to the south and intersected several large mineralized zones including: 68.3 meters (216.5 ft) averaging 0.63% copper and 82.9 meters (272.0 ft) averaging 0.58% copper. Additionally NC08-41 drilled 60 meters east of NC08-20 intersected 192 meters (629 ft) of mineralization greater than 0.3% copper including: 62.8 meters (206.0 ft) averaging 0.65% copper and 59.4 meters (195 ft) averaging 0.67% copper.
Mineralization also remains open on the eastern boundary of the North Deposit. Drill hole NC08-35, drilled as a step-out, intersected 50.8 meters (166.5 ft), averaging 0.45% copper. NC08-35 and previously drilled NC08-12 continue to show that the additional drilling to the East has been successful in expanding mineralization. Drill hole NC08-30 drilled as an infill hole, intersected 75.6 meters (248.0 ft), 43.3 meters true thickness, averaging 0.96% copper. The drill hole as expected confirmed the down-dip continuity of mineralization.

Inside autos: Brighton dealers noted for service

Ford Motor Co. recently honored the owners of Brighton Ford Mercury for their community service.
At a ceremony in New Orleans Jan. 23, held prior to the National Automobile Dealers Association's annual convention, Ford held its ninth annual Salute to Dealers where it honored six of the company's "very best corporate citizens."
Brothers Todd and Scott Spitler of Brighton Ford Mercury were honored for their help with the Brighton Bulldogs, five local elementary schools and elsewhere in the community.
Coming up: Ford is to show several vehicles at Chicago Auto Show, including a high-performance version of the Taurus.
Fleet sales off by 41,000 in January Last month, Chrysler LLC sold 41,000 fewer fleet vehicles, as demand for rental cars fell and as the automaker tried to cut sales of fleet vehicles, which tend to be unprofitable.
Chrysler sold only 9,000 fleet vehicles in January, a drop of more than 80% compared with last year. The decline in fleet sales ballooned the company's overall January sales decline to 55%, Chrysler said last week.
"We're really focusing much more on retail customers and not focusing on volume for vanity," said Chrysler Vice Chairman Jim Press, during a conference call with analysts and journalists on Tuesday.
But January's fleet sales were unusually low as demand for fleet vehicles fell at a time of further job losses and deterioration in the U.S. economy.
Into the future, fleet sales should be higher than the 9,000 Chrysler sold last month. The company expects monthly fleet sales to settle at about 20,000 vehicles.
Coming up: Look for Chrysler in coverage of the Chicago Auto Show's media days on Feb. 11 and 12.
Canadian sales decline 46.6%General Motors Corp.'s sales in Canada dropped 46.6% last month compared with a year ago, the automaker said last week.
GM dealers sold 14,254 vehicles in January in Canada.
"January sales continued to reflect the overall Canadian market challenges seen at the end of 2008," Marc Comeau, GM of Canada's vice president of sales, service and marketing, said in a statement.
"GM's product lineup of new, affordable, fuel-efficient vehicles is well positioned to respond to improving consumer credit and confidence we hope and expect to see in the months ahead as government stimulus efforts and other factors start to take hold in Canada."

Rio Says Director Leng Resigns, Won’t Become Chairman

Rio Tinto Group, the world’s third- largest mining company, said director Jim Leng quit and will no longer become chairman as announced less than a month ago.
Current Chairman Paul Skinner agreed to remain in the role until mid-2009, London-based Rio said today in a statement to the Australian stock exchange. No reason for Leng’s departure was given.
Rio Tinto, struggling under $38.9 billion of debt after acquiring Alcan Inc. in 2007, is seeking to complete $10 billion in asset sales this year to repay loans. Leng, 61, deputy chairman of Tata Steel Ltd. and chairman of the Indian company’s European unit, was announced as Skinner’s successor on Jan. 14.
The process to appoint a new chairman has started and is expected to be completed by mid-2009, Rio said.
Rio, traded in Australia and the U.K., gained 6.5 percent to 19.57 pounds in London on Feb. 6. It dropped 1.4 percent the same day in Sydney.

2009年2月6日星期五

India Bucks Auto Trend as Rate Cuts Spur Suzuki Sales

After six months of deliberating whether to buy a car, Mumbai real-estate agent Abraham Mathew took out a 300,000 rupee ($6,200) loan to buy a Suzuki Motor Corp. sedan. The clincher: a 20 percent drop in interest rates.
“I can afford to pay my monthly installments more comfortably now,” Mathew, 45, said. He’ll pay 11.75 percent on the loan, down from the 15 percent banks demanded in September.
The easier credit led Suzuki to record sales in India, its biggest market, and may help revive auto demand in the world’s second-fastest growing major economy. That contrasts with plummeting sales in Suzuki’s home market of Japan and in the U.S., where the global recession drove industrywide sales in January to the lowest level since 1981.
“Things are going to be much better as the worst sales we saw in November and December won’t be repeated,” said Jayesh Shroff, who helps manage $1.5 billion in equities at SBI Asset Management Co. in Mumbai. “Reduction in rates will give more confidence to banks as the ability of the borrower to repay is better.”
The Reserve Bank of India has reversed four years of monetary tightening and last month asked banks to reduce rates to improve credit flow frozen after the September collapse of Lehman Brothers Holdings Inc. At least 80 percent of cars sold in India are bought on credit, according to Suzuki.
India’s Growth
India’s economic growth will slow to 7 percent this year, the smallest increase in six years. Exporters have said they may shed as many as 10 million jobs by the end of next month. And by historical standards, rates in India are still high. The State Bank of India, the nation’s largest, charges its best customers 12.25 percent interest compared with 10.25 percent in 2004.
Still, Maruti Suzuki India Ltd., Suzuki’s local unit, sold 71,779 vehicles last month, the highest since it began selling cars 25 years ago. Sales in December were 56,293 and in November 52,711.
Demand in India will help the carmaker be profitable for the current fiscal year in contrast to Mazda Motor Corp. and Fuji Heavy Fuji Heavy Industries Ltd., both of which have forecast losses for this year. The other two carmakers don’t have any production in India.
Suzuki’s shares rose 4 percent to 1,419 yen in Tokyo today after gaining as much as 7 percent earlier. Maruti Suzuki gained 0.1 percent to 577.7 rupees at the close in Mumbai.
Passenger Vehicle
January local passenger vehicle sales at Tata Motors Ltd., the third-largest carmaker in India, were the most since May and demand will grow this quarter, said Managing Director Ravi Kant.
At least eight new models and variants have entered India in the past five months to lure buyers.
“More confidence is coming to customers now,” said Rajeev Kapoor, chief executive officer of Fiat SpA’s India venture with Tata. “Car sales should pick up from here, although not very dramatically.”
That’s in contrast to the 37 percent plunge in industrywide deliveries in the U.S., the world’s largest auto market, as the recession ravaged demand. The annualized sales rate is the lowest since June 1982, according to Woodcliff Lake, New Jersey- based Autodata.
In Japan, January sales dropped the most in 34 years. The country is headed for its worst postwar recession as factory output slumped an unprecedented 9.6 percent in December and unemployment surged.
Toyota, Honda
Toyota, the world’s largest automaker, and its Japanese rivals including Honda Motor Co., Mitsubishi Motors Corp. have slashed output and reduced workforce as demand weakens worldwide. Sales in China, the world’s second-largest vehicle market, may slow to 5 percent this year, the weakest pace since 1998, according to the China Association of Automobile Manufacturers.
Not all carmakers are optimistic about India. Honda, Japan’s second-largest carmaker, last year postponed the opening of a new factory in India citing a slowdown. Hyundai Motor Co., South Korea’s largest automaker, said in December it will cut temporary staff in India and may reduce production this year.
Renault SA, France’s second-biggest carmaker, still has no firm date for the opening of its first assembly line at the plant it’s building with Japanese partner Nissan Motor Co., sales chief Patrick Blain said. Plans for a line devoted to just Renault models remain “frozen.”
Production Cut
Toyota will keep a 30 percent production cut in India until February, Press Trust of India reported Jan. 28, citing the local venture’s Managing Director Hiroshi Nakagawa.
“I don’t think one can deduce the worst is over,” said Arvind Saxena, senior vice president of Hyundai’s India unit. “Finance remains the single biggest factor affecting sales.”
Some carmakers are still expanding. Volkswagen AG, GM, Ford Motor Co. and other carmakers plan to spend a combined $6 billion by 2012 to raise production in India.
The Indian government is also trying to spur growth with an economic stimulus plan that includes $4 billion of spending to build new roads and ports. The government also reduced fuel prices in January for the second time in less than two months, helping boost auto demand. With banks more willing to loan, buyers like Mathew, are more confident to shop.
“My overall business is not doing well, but the rates have come down, so it helps me,” he said.
His beige-colored Swift DZire arrives next week.

Big Drop in European Steel Demand

Eurofer, the European confederation of iron and steel industries, said Thursday (5 January) it is bracing itself for a fall in demand for steel in the range of 15 percent for 2009.
"The EU steel market is severely impacted by the recession and will be facing an unprecedented downturn this year," said the confederation in a statement.
The drop in car production is the main factor in the reduced demand for steel the confederation said, but the downturn in the construction, steel tube and engineering sectors will also have significant negative impacts.
"Apparent consumption will drop by 29 percent year-on-year in the first quarter and by a further 23 percent in the second quarter," Eurofer said, with decline slowing somewhat in the second half of 2009 as the market corrects itself.
Bruno Bolfo, chairman and owner of Duferco, the world's biggest steel trading company told the Financial Times over the weekend that any steel company expecting an upturn in the sector in late-2009 was deluding itself.
"The official line from the big companies is that a mild recovery of sorts could start in the second half. Of course, they have to say this – but really there's not much hope. An upturn so soon is just not on the cards," he told the newspaper.
Mr Bolfo continued that any pick-up in global steel demand in 2010 would be "small stuff."
Eurofer also warned that pressure from steel imports would remain high "because of the much stronger sacrifice the domestic producers are making in order to enable the market to reach a new equilibrium."
The European steel industry is the largest in the world with a turnover of €160bn and direct employment of 430 thousand people producing over 200 million tons of steel a year, 15 percent of the global output.
Faced with the current crisis, large steelmakers across the globe such as world leader ArcelorMittal (MT) have announced job cuts and reduced hour working weeks to combat the fall in demand.
Despite the problems faced by the sector, the commission said on Thursday that it is considering starting anti-trust procedures against a number of unnamed steel companies on grounds they acted as a cartel.
The companies received notification from the commission last October and the commission is now considering their responses.
If found guilty, the companies could be fined up to 10 percent of their yearly turnover.
Across the Atlantic, US senators will Friday (6 February) resume the debate on the proposed $900bn stimulus plan whose Buy American article, excluding EU steel, appears to have been softened.

Nanjing Iron, Chinese Steelmakers Gain on Demand

Nanjing Iron & Steel Co. rose to a more than five-month high in Shanghai trading, leading a rally in Chinese steelmakers, on speculation demand for the construction material will increase.
Nanjing Iron, based in China’s eastern Jiangsu province, climbed 3.1 percent to 3.94 yuan, the highest close since Sept. 22. Gansu Jiu Steel Group Hongxing Iron & Steel Co. jumped 9.8 percent to 6.85 yuan, the second-biggest percentage gain on the CSI 300 Index. Baoshan Iron & Steel Co., the largest Chinese steelmaker, added 1.1 percent to 5.66 yuan.
The Purchasing Managers’ Index in China rose to 45.3 in January from 41.2 a month earlier, suggesting a bottom in manufacturing. Steel and cement are among industries aided by a 4 trillion-yuan ($586 billion) stimulus package aimed at averting recession in the world’s third-largest economy.
“The worst is probably over,” Ma Keming, an analyst at Huatai Securities Co., said by telephone. “The PMI and rebound in steel prices are tentative signs that demand for steel is increasing.”
The benchmark Shanghai Composite Index fell 0.5 percent to 2,098.02.

2009年2月5日星期四

steel balance

The steel industry has come through a quarter that saw the profits of almost all the majors fall by about 50 per cent, and that of one disappear altogether. This may mark the low water point, for the worst seems to be over, as steel prices have recovered in the past few weeks. While a full recovery, however defined, is a long way off, the industry can now look forward to more normal times—even though most forecasts for the world economy talk of a slow recovery after a poor 2009. The improved climate for steel is in part influenced by the news from China, which is by far the world’s largest producer as well as consumer. As the Chinese economy has slowed, the Chinese steel industry has cut back production, and therefore no exports are taking place. India’s production-demand equation is also in broad balance, and so therefore is that of the rest of the world. What this has meant is that hot rolled coils now sell at a price that gives a reasonable return to the efficient producers. Admittedly, there are reports even now of headcount cuts and production rollbacks by steel producers in some countries, but that does not reflect the over-all situation. The production cutbacks announced last year could therefore be a thing of the past. Demand restoration will be slow, given the global economic outlook, and therefore no one should expect a robust upswing in prices, although the drawdown of inventories has been more or less completed. Prices currently are around 50 per cent lower than their (abnormal) peak last year, and are unlikely to see much of an uptrend any time soon. The benchmark hot rolled coils are moving at $500 per tonne, compared to $1,200 at the peak of the commodity bull run last year. Steel producers,bottom lines could get some more relief as new raw material contract prices will kick in from April, for these should give substantial relief to manufacturers. In the last quarter, they were hit hard by the double-whammy of collapsing prices for finished products even as raw material costs remained high because of long-term purchase contracts.
Improved margins, when they come, will allow Indian manufacturers to revive their investment plans. The Jindals have already announced that they will be taking a fresh look at their investments, and this is likely to affect their large greenfield project at Salboni, in West Bengal. Other project promoters, who have been waiting for land and/or iron ore commitments, are not pushing on those fronts any more. For there to be a sufficient revival of demand, and for large investors to embark on new projects, one key issue is financing (and not just for the steel industry). But the global financial sector is still in a mess, and Indian banks cannot take up the slack completely—as the evidence this financial year has shown. A full-scale revival of the steel industry will be the harbinger of a global economic revival, and that in everyone’s opinion is still well beyond the horizon. So it is something to be grateful for that, while there may no joy yet in the steel industry’s numbers, at least the pain has gone.

LME registers Evraz as approved steel brand

Russian steelmaker Evraz (HK1q.L: Quote, Profile, Research) became the first major steelmaker to register for the LME's approved steel brands, allowing the delivery of its products against the exchange's billet contracts.
"We approved it (Evraz) yesterday," a spokeswoman at the London Metal Exchange said on Thursday. Evraz also confirmed the approval, without giving further information.
According to the LME's web site, steel can only be used to satisfy an outstanding contract if the billet is from an authorised brand listed producer.
Most steel majors in the $800 billion industry have not welcomed steel futures contracts around the world, arguing that futures would distort already volatile steel prices. Most interest so far has been from the mini-mills.
Evraz's move was welcomed by steel traders who use the LME contracts.
"It is a very important indication that major steel firms, beside mini-mills, are getting involved with the billet contract," said Abe Ulusal, steel futures broker at Mitsui Bussan Commodities.
The LME has nearly 40 approved brands in steel billet listed for its Mediterranean and Far East contracts, where the turnover had reached 1 million tonnes in mid-December 2008.Russian steelmaker, Severstal (CHMK.MM: Quote, Profile, Research), was the first major producer to publicly support the contract, saying it could be beneficial for the industry.
But Severstal said it did not plan to use the contracts, joining the world's biggest steelmaker ArcelorMittal (ISPA.AS: Quote, Profile, Research), which has turned its back on the LME's Mediterranean and Far East contracts.
Germany's biggest steelmaker Thyssenkrupp (TKAG.DE: Quote, Profile, Research) said it used the contracts as a trial, but that did not change its official stance of opposing the futures.
The LME release obtained by Reuters showed almost 12 million tonnes of Evraz's steel products in four different plants were registered as approved brand.
The company produced 17.7 million tonnes of crude steel in 2008 while the merchant trade stands around 35 million tonnes annually.

Eurofer says EU steel faces unprecedented downturn

The European Union steel market is facing "an unprecedented downturn" this year, with no respite seen until 2010, European steel confederation Eurofer said on Thursday.
"The significant deterioration in economic fundamentals since autumn 2008 is fully reflected in the outlook for the EU steel using industries," a Eurofer statement said.
The EU's 27 member countries produced some 200 million tonnes of crude steel in 2008, according to figures from Worldsteel, making up for nearly 15 percent of the global crude steel output, which stands at 1.33 billion tonnes.
"Apparent consumption will drop by 29 percent year-on-year in the first quarter and by a further 23 percent in the second quarter," Eurofer said.
Global demand for steel has plummeted since the financial crisis ripped into the real economy with the automotive and construction industries badly hit by the worst economic downturn since World War Two.
"Particularly the automotive sector is badly affected by the recession, but also construction, steel tubes and the engineering sectors cannot escape a sharply downward trend," Eurofer said.
Steelmakers across the globe such as ArcelorMittal (ISPA.AS) and Russia's Severstal (CHMF.MM) have announced sharp output cuts since last September. For a factbox on output cutbacks by major steel companies
Eurofer expects some improvement in the market, once the destocking process comes to an end.
"Most sectors will see a mild improvement in 2010," Eurofer said

2009年2月4日星期三

Southern Copper Rises as Citigroup Lifts Forecasts

Southern Copper Corp. rose the most in two weeks after Citigroup Inc. boosted its 2009 and 2010 profit forecasts for the world’s seventh-largest copper producer, citing the company’s efforts in cutting costs.
Southern Copper climbed 4.6 percent to $14.93 in New York trading for the biggest gain since Jan. 21. Grupo Mexico SAB, which owns 75 percent of Southern Copper, jumped 9.6 percent to 8.71 pesos in Mexico City trading.
“Southern Copper’s board has taken proactive steps to manage for cash -- a wise move, in our view,” Citigroup analyst Alexander Hacking wrote in a note to clients today. “Growth capex is suspended with a sharp dividend cut. The company is sitting on a comfortable $800 million cash balance.”
Hacking raised his 2009 earnings forecast for Southern Copper to 21 cents per share from a previous estimate of a 21- cent loss. He also boosted his 2010 profit estimate to 59 cents from 29 cents per share.
Southern Copper on Jan. 30 posted its first quarterly loss in at least a decade and halted spending on mine expansion as metal prices plunged. The net loss of $124.7 million, or 14 cents a share, compares with a profit of $310.9 million, or 35 cents, a year earlier.
Plans Postponed
The mining company said it halted or is reviewing all its investments, including development of its new Tia Maria copper mine in Peru and expansion projects at its Peruvian Cuajone and Toquepala mines. The company said it postponed plans to build the El Arco copper mine in Mexico and the Los Chancas mine in Peru.
The company also said it will cut its regular quarterly cash dividend to 11.7 cents a share. The dividend will be payable on March 30 to shareholders of record on March 11.
“We like Southern Copper’s long-life, low-cost assets and strong balance sheet,” Hacking wrote. He reiterated his “hold” rating on the stock.
Separately, Southern today agreed to buy Frontera Copper Corp., a Canadian mining exploration company, for about C$42 million ($34.2 million). Southern Copper offered to acquire 100 percent of the company for 65 Canadian cents a share, Toronto- based Frontera said today in a statement.

US copper rises to 1-week high on China buys, data

Copper rose to a one-week high in New York futures trade on Wednesday after reports of increased Chinese buying and upbeat data from China and the United States helped extend a two-day rally in the metal.
For detailed report on global copper markets, click on [MET/L]
Copper for March delivery HGH9 rose 0.90 cent to settle at $1.5310 a lb on the New York Mercantile Exchange's COMEX division.
Session range from $1.5030 to $1.5695, a high dating back to Jan. 27.
Potential double bottom forming in benchmark March copper contract, with neckline at $1.60. A breach of that level (on a settlement basis) would confirm the pattern and open the way for the target just above $1.81 - Citigroup's CitiFX.
COMEX estimated volume at 16,525 lots by 1 p.m. EST (1800 GMT). Final volume on Tuesday hit 17,883 lots.
Open interest declined by 1,285 lots to 87,299 contracts open as of Feb. 3.
Copper buoyed by reports China has started buying copper from domestic bonded warehouses and overseas markets in a move to gradually triple its state reserves to about 1 million tonnes. [nSHA29168]
China is the world's largest copper consumer, accounting for nearly 25 percent of global demand.
Improved Chinese manufacturing data coupled with a surge in bank lending raised speculation that the world's third largest economy may soon be on the road to recovery. [ID:nSP241879]
Less severe contraction in U.S. private sector jobs and in the services sector added to the red metal's positive tone.
The Institute for Supply Management said its non-manufacturing index came in at 42.9 in January compared with 40.1 in December. [ID:nN04508901]
Copper up on follow-through momentum from data on Tuesday showing a 6.3 percent rebound in U.S. pending home sales during the month of December. [ID:nN03281919]
Copper may retrace a part of its short-term rally this week in response to a weaker jobs number on Friday - traders.
U.S. non-farm payrolls are estimated to have shed more than half a million jobs in January. [ID:nN04455795]
Uncertain demand outlook stemming from rising warehouse stockpiles in London to further cap red metal's upside price potential - analysts.
London Metal Exchange warehouse stocks added another 4,650 tonnes on Wednesday, bringing total inventory levels to 499,950 tonnes, their highest since November 2003.
* COMEX copper stocks decreased by 350 short tons to 40,905 short tons as of Tuesday.Chile's Escondida, the world's largest copper mine, said on Tuesday 2008 copper output fell 15.43 percent due to lower ore grades and maintenance work on a grinding mill. [ID:nN03545909]
South Korea said it would raise its base metals reserves by 37 percent in 2009 ahead of potentially higher demand later in the year when the economy is expected to recover. [ID:nSEO201089]
Mexico's mining union, which has led an 18-month-long strike at one of the country's largest copper pits, said it negotiated a wage deal with Goldcorp on Tuesday. [ID:nN03321967]
London Metal Exchange copper for three months delivery MCU3 closed up $45 at $3,415 a tonne.Range from $3,332 to $3,472.

US Auto Suppliers Seek $25.5Bn In Federal Aid

DETROIT -(Dow Jones)- U.S. auto suppliers are seeking $25.5 billion in federal aid as falling sales and production cuts push more towards the brink of bankruptcy.
Suppliers have been pressing their case with the U.S. Treasury in recent weeks in the wake of the nearly $22 billion in aid already granted to General Motors Corp. (GM), Chrysler LLC (C.XX) and their finance arms.
The 11-page request, representing 400 suppliers, was submitted to the Treasury this week by the Motor & Equipment Manufacturers Association, or MEMA. The association declined comment.
"Without immediate assistance to suppliers, the country will face massive job losses and the eventual breakdown of the entire automotive sector in the United States," according to a copy obtained by Dow Jones Newswires.
Suppliers account for more than three-quarters of auto sector employment in the U.S., according to a Chicago Federal Reserve study, with staffing estimated at around 600,000 across the industry.
The suppliers want $7 billion to create a "quick pay program" in which auto makers could pay suppliers within 10 days of receiving product instead of the traditional 45-55 days.
A survey of suppliers by the Original Equipment Manufacturers' Association last month said average accounts receivable widened to 51 days in January.
Suppliers are also seeking $10.5 billion to guarantee receivables of suppliers whose customers have received federal loans, including GM and Chrysler.
A guarantee would allow for a pool of federal funds to provide a backstop for commercial lending losses on loans to suppliers.
U.S. light-vehicle sales fell to an annualized 9.57 million in January, and some OEMA members warn they could fall as low as 7 million if the recession persists, though most industry estimates are around 10 million.
OEMA members are working at 60% utilization rates, according to the January survey.
"More than 40 major suppliers filed for Chapter 11 restructuring in 2008, and industry surveys indicate that approximately one-third of all suppliers are in imminent financial distress, with another one-third indicating that they will be in distress during the first quarter of 2009," according to the request.
"Without immediate assistance to suppliers, the country will be faced with faltering vehicle manufacturers, massive job losses and the eventual breakdown of this country's largest manufacturing sector."
A further $8 billion is being sought in direct access to federal loans.
A major bankruptcy by a supplier could force the closure of automotive assembly plants across the country since many parts arrive at assembly plants just hours before they are needed on the assembly line.
Such companies as American Axle & Manufacturing Holdings Corp. (AXL), ArvinMeritor Inc. (ARM), Lear Corp. (LEA) and Visteon Corp. (VC) have taken major financial hits as auto makers cut production in the wake of slumping sales both here and around the world.
Most of those production cuts were made with little warning, intensifying the financial pressure as suppliers scramble to cut workers and stop lines.

2009年2月3日星期二

Deripaska Says ‘Happy Times’ Are Over for Aluminum Companies

Feb. 2 (Bloomberg) -- Oleg Deripaska, the biggest shareholder of the world’s largest aluminum producer, said he expects “no more happy times” in the industry as the sluggish global economy saps demand.
Deripaska, whose stake in United Co. Rusal makes him Russia’s richest man, predicted aluminum will average $1,600 per ton in the next seven years, compared with a current level of $1,349. Rusal Chairman Viktor Vekselberg, in contrast, has said he’s “100 percent sure” the price will reach $2,000 a ton this year. The metal traded at a record of $3,380.15 on July 11, 2008.
“We will see a completely different landscape in the metals industry that will stay for the next seven to 10 years,” Deripaska, Rusal’s chief executive, told reporters in Davos, Switzerland Jan. 31, where he attended the World Economic Forum. “What’s important at the moment for the metals and mining industry is to really stop hoping and prepare for the worst,”
Global demand for aluminum will fall by almost a quarter, to 28 million tons this year, from about 36.5 million tons in 2008, said Deripaska. Producers including Alcoa Inc. and Rio Tinto Group have announced output cuts. The global economy will show little or now growth this year, the International Monetary Fund predicted on Jan. 28.
“There is enormous oversupply,” said Deripaska, 41. “There will be shut downs, and companies will have to make decisions about what capacity should be cut. In my view, there will be fewer countries in the world producing the metal.”
Russia
More metals will be sold under long-term contracts, and less on the spot market, he said.
“The model of vertically integrated companies will be seriously examined, which most likely will lead to a considerable disintegration of downstream capacity,” Deripaska said.
Russia, the world’s biggest supplier of aluminum, natural gas and nickel, faces rising unemployment as plunging commodity prices reduce export earnings. Russia has pledged more than $200 billion to battle its worst financial crisis since 1998, including $50 billion for companies that have debts with lenders abroad, among them Rusal.
Moscow-based Rusal used its 25 percent stake in OAO GMK Norilsk Nickel, the world’s biggest nickel and palladium producer, as collateral for a $4.5 billion loan from Russian state bank Vnesheconombank.
Rusal may pay back its bank loans through a convertible bond issue, Deripaska said. There is no talk of the bank getting a stake in Rusal, he said.
‘Exchange of Ideas’
Russia’s economy, which expanded by an average 7.1 percent a year since 2001, will contract by 0.2 percent this year, the government says.
Deripaska and billionaire investors Vladimir Potanin and Alisher Usmanov last month proposed the government prepare plans to create a consolidated mining company. The merged entity would get access to state funds to repay debt. Deripaska and Usmanov urged the government to become a shareholder in the new company, which would be formed around Norilsk. Deripaska didn’t include Rusal in his merger proposal.
“There is just an exchange of ideas,” he said yesterday. “It should be a real company, not a mass grave.”
He reiterated that Rusal won’t take part in the holding as it needs to restructure its debt, which Vekselberg puts at $16.3 billion.
“I cannot see the synergy,” Deripaska said. “It is as if you crossbreed a chicken and a duck. What do you expect it will do? Fly or perhaps swim?”
Deripaska also said that an initial public offering of Rusal shares is still “on the agenda.” He didn’t comment on the possibility of a private placement of shares in Rusal.
Deripaska was ranked by Forbes as the wealthiest Russian in April 2008.