Chrysler Chief Executive Bob Nardelli on Monday said the struggling automaker had begun talks with the United Auto Workers and was working to win concessions from the union, key suppliers and creditors.
Nardelli also said in an email to Chrysler employees that he had meet over the weekend at the automaker’s Auburn Hills, Michigan headquarters with Fiat CEO Sergio Marchionne.
The meeting came less than a week after Marchionne agreed to swap access to Fiat’s small-car platforms and development expertise for a 35-percent stake in Chrysler.
“This was a very positive meeting,” Nardelli said. “This potential alliance would give us access to substantially all Fiat group vehicle platforms, which would complement our current product lineup with fuel-efficient, environmentally friendly small cars and powertrain technology.”
Chrysler, which is owned by Cerberus Capital Management, has been given $4 billion in emergency loans from the U.S. government and has asked for another $3 billion in order to ride out a steep decline in U.S. auto sales.
As a condition for its federal bailout, Chrysler and its larger rival General Motors Corp () have until February 17 to detail a turnaround plan intended to make them viable through cost-saving deals with the UAW and creditors.
“Progress is being made in our discussions with every constituent group, and we’re especially pleased with the cooperative and productive discussions taking place,” Nardelli said in his email to employees.
Although GM has been active in briefing financial analysts on its progress in preparing a restructuring plan in recent days, privately Chrysler had kept a lower profile instant payday loan.
Nardelli said Chrysler representatives had begun talks with the UAW and praised union leadership for giving up a contract provision known as the “jobs bank” that had guaranteed wages for auto workers even after their jobs had been eliminated.
TURNING UAW INTO A SHAREHOLDER
Chrysler, Nardelli said, is seeking to contribute stock in a restructured company to a UAW-affiliated health care fund instead of cash, a concession GM also is seeking.
UAW President Ron Gettelfinger has spoken against those terms, which would shift more risk and potentially higher costs to blue-collar retirees.
Nardelli also said Chrysler’s remaining white-collar workers would share in the sacrifice. Salary merit increases and matching payments into 401(k) retirement funds have been suspended, he said.
Nardelli also said “key executives” had signed waivers prohibiting them from being paid bonuses or severance payments known as “golden parachutes.”
The issue is a sensitive one for Nardelli, who was named to the Chrysler top job by Cerberus immediately after it bought an 80.1-percent stake in the automaker from Germany’s Daimler AG () in 2007. The choice was notable in part because of the controversy surrounding Nardelli’s $210 million severance package from his prior post as the head of Home Depot.
Fraud-hit Satyam Computer Services Ltd () is close to securing funding to pay salaries and other bills, its new board said on Friday, and Larsen & Toubro raised its stake in the outsourcing firm to 12 percent as a rival potential suitor emerged.
The government-appointed board said customer confidence was returning, and it had narrowed candidates for chief executive and chief financial officer to a shortlist of three.
It said it planned to announce before January 28 details of funding to tide it over until the end of March.
“There is a pronounced shift in customer attitudes — from being alarmed in the initial days, it has changed to a sense of cautious optimism,” board member Kiran Karnik said in the statement.
The board, appointed by the government in the wake of India’s biggest corporate scandal, is set to meet again on Monday and Tuesday.
As the board met, potential suitors circled Satyam, which has been struggling for survival since January 7 when founder Ramalinga Raju resigned as chairman and said profits had been overstated for years and $1 billion in cash on the books did not exist.
BUYING INTEREST
Larsen & Toubro (), India’s leading engineering and construction firm, raised its stake in Satyam () to 12 percent from 4 percent on Friday to protect its interest, CFO Y.M. Deosthalee told Reuters.
“There is a lot of corporate activity going on payday loans for bad credit. We want to make sure our interests are covered,” he said.
U.S.-listed outsourcing services provider iGate Corp () also expressed interest in buying Satyam, whose clients include Nestle () and General Electric (), and was in touch with private equity firms to fund a possible deal.
“We would be interested in buying Satyam, assuming we can figure out what their liabilities are,” iGate’s chief executive Phaneesh Murthy told Reuters, adding he would be deterred if liabilities exceeded $1.25 billion.
Satyam shares rose nearly a third on Friday and was the top traded stock on the National Stock Exchange and Bombay Stock Exchange, with about 47 percent of its outstanding shares traded.
Satyam shares traded between 29.30 rupees and 39.30 rupees on the Bombay Stock Exchange before ending at 38.85 rupees, compared with a close of 179.10 rupees on January 6, the day before Raju’s revelations, and a 2008 high of 544 rupees.
Satyam’s board said there has been no material impact from losing customers so far, and said receivables had been robust.
But Infotech Enterprises (), a mid-sized Indian outsourcing firm, said some Satyam customers, who it did not name, had approached it. Last week, Tata Consultancy Services () said some Satyam customers had approached it.
Fraud-hit Satyam Computer Services Ltd said on Monday a U.S.-based client had cancelled its contract, dealing a blow to the embattled Indian outsourcer caught in the country’s biggest corporate scandal.
State Farm Insurance Co has terminated its contract, a Satyam spokeswoman said, confirming a report in India’s Mint newspaper on Monday, but she declined to give details of the contract.
"While we are disappointed in State Farm’s decision to discontinue services, our executives are reaching out to clients around the world, and at this point, well over 90% of our clients have committed to continuing with Satyam," she said.
A tech sector analyst with a Mumbai brokerage firm said State Farm was one of the top 10 clients for Satyam, who together accounted for a third of the outsourcing firm’s revenue in the July-September quarter last year.
The analyst, who asked not to be named as he was not allowed to speak to the media, said he was briefed about Satyam’s top clients and their revenue contribution a few months back by the company’s management.
Satyam, India’s No. 4 software services exporter, was plunged into crisis after founder Ramalinga Raju resigned as chairman earlier this month, revealing profits had been falsified for years and $1 billion of cash on the books did not exist.
Some of other Satyam’s clients might cancel orders, wary of business risks in the fraud-hit company, analysts said.
"Any customer dealing with Satyam at this point in time will be concerned with what is happening at the company now," said R.K. Gupta, managing director at Taurus Asset Management.
A government-appointed board at Satyam said on Saturday it was talking to banks about funding, saying all efforts were being made to ensure staff salaries were paid on time.
The board, which also discussed scheduling of vendor payments, said it had received expressions of support from clients. It said it was still looking for a new chief executive and chief financial officer for the outsourcing firm low fee payday advance.
Shares in Satyam (SAY), which have tumbled about 85% since the scandal broke, ended up 4.1% at 25.45 rupees in a Mumbai market that edged up 0.1%.
The Economic Times newspaper said on Monday Satyam’s new board was looking to appoint up to three investment banks to explore the possibility of finding a buyer.
But analysts said finding a buyer for Satyam, which specializes in business software, would be difficult until the extent of the fraud was detected and measures to streamline operations were taken. "A buyer will have to take the responsibility for the company, and I don’t think any one will take a shot in the dark before the accounts are restated and the legal issues are resolved," said Kevin Trindade, an analyst with KR Choksey Shares and Securities.
The former chairman, managing director and chief financial officer of Satyam were moved to police custody on Sunday after spending nearly a week in jail. Under custody, the accused are held in a police lock-up to help investigators with interrogation. The former executives are expected to stay in police custody until Wednesday.
An application against the former executives being held in jail has been deferred to Thursday, Raju’s lawyer Bharat Kumar told Reuters. He did not give any reason for the postponement from Monday.
Maytas Infra Ltd, in which Raju and his family hold a 36% stake, said on Monday its chief executive had resigned. Maytas is Satyam spelt backwards.
In December, Satyam announced plans to buy Maytas Infra and Maytas Properties, a deal which was hastily abandoned in the face of a shareholder revolt. In his Jan. 7 resignation letter, Raju said the deal was his last attempt to resolve the problem of fictitious assets on the Satyam balance sheet.
World oil demand will contract more than expected this year and the weakening economy may further erode consumption, OPEC said on Thursday, building a case for additional supply cuts.
In a monthly report, OPEC said it expected demand to fall by 180,000 barrels per day (bpd) in 2009, 30,000 bpd more than its previous forecast. Oil use is declining this year and in 2008, the first drop in more than 20 years.
"The considerable uncertainty about the course of the recovery implies the potential for further deterioration in world oil demand growth this year," said the report, which is written by OPEC economists.
The revision comes in response to mounting evidence that the world economy is far weaker than previously thought, undermining oil demand and prices. Oil has slid to around $38 a barrel from a record high of $147.27 struck in July.
Still, OPEC’s prediction of falling demand is less severe than that of the U.S. government’s Energy Information Administration, which on Tuesday said consumption would drop by 810,000 bpd in 2009.
OPEC has agreed at meetings since September to cut its oil output by 4.2 million bpd, equal to 5% of daily world demand, to combat the slump. It will take time for the measures to have an impact, the report said.
"However, it is essential that crude oil prices return to levels sufficient to encourage timely and adequate investment to meet the expected future demand growth," it added.
Oil was trading slightly lower after the report was released online payday loans. U.S. crude was down 4 cents at $37.24 as of 1252 GMT.
With the latest revision, the Organization of the Petroleum Exporting Countries has slashed its 2009 demand forecast by more than 1 million bpd since its first prediction in June 2008.
Some in the 12-member group, which pumps two in every five barrels of oil, say they are going even further than the agreed supply curbs.
Saudi Arabian oil minister, Ali al-Naimi, confirmed on Tuesday that the world’s top exporter was pumping 8 million bpd, in line with its OPEC target, from Jan. 1 and would reduce production further in February.
Other members, such as Venezuela and Qatar, have said this week that OPEC may decide to reduce supply further. Its oil ministers are next scheduled to meet to set policy on March 15.
In the report, OPEC slightly lowered its prediction for supply from producers outside the group.
Non-OPEC countries are expected to pump 51.15 million bpd in 2009, up 580,000 bpd from last year and down 70,000 bpd from the previous forecast.
OPEC forecast demand for its crude oil would average 29.48 million bpd in 2009, down 1.4 million bpd from 2008.
That compares with production, plus that of Indonesia which left OPEC at the end of 2008, of 30.3 million bpd in December, down 830,000 bpd from November as supply curbs take effect.
The U.S. trade deficit shrank nearly 29 percent in November, the largest amount in 12 years, as weak consumer demand and plummeting oil prices caused imports to sink by a record amount.
The $40.4 billion trade gap was the lowest since November 2003, the Commerce Department said in its monthly report on Tuesday, and another sign of how the global financial crisis has damaged world commerce.
Both U.S. imports and exports declined for the fourth consecutive month after hitting record peaks in July.
“It really says the wolf is at the door. Americans aren’t buying anything,” said Ed Gresser, director of the Progressive Policy Institute’s trade office. “The problem isn’t competition, but lack of demand for anybody’s product.”
The much smaller-than-expected deficit could trim slightly estimates of how much the U.S. economy contracted in the fourth quarter of 2008, analysts said.
But with the report showing consumer demand falling sharply at home and abroad, it is hard to call it good news, said Nigel Gault, chief U.S. economist with Global Insight in Lexington, Massachusetts.
“It is slim comfort that the U.S. cut its demand for imports more rapidly than the rest of the world cut its demand for U.S. exports. That might cushion the U.S. downturn a little, but it is not a route to recovery,” Gault said.
U.S. stocks were little changed on Tuesday, but supported by the hope Congress would quickly release a remaining $350 billion in rescue funds to help stabilize credit markets paydayloans.
The dollar extended gains against the euro on the trade data and also rose against the yen.
U.S. imports in November fell a record 12 percent to $183.2 billion, as the global financial crisis scared businesses and consumers into cutting their spending.
U.S. exports fell 5.8 percent in November to $142.8 billion. Total U.S. goods exports were the lowest since June 2007, while auto and auto part exports were the lowest since October 2006.
Imports of both capital and consumers goods were the lowest since mid-2006, while auto and auto part imports fell to levels not seen since August 2003.
The average price for imported oil plunged a record $25.30 per barrel in November as recession fears deepened. Along with the drop in prices to $66.72 a barrel, the average daily volume of U.S. oil imports fell 1.7 million barrels.
Oil prices have continued to fall since November, suggesting even smaller trade gaps in the months ahead.
“The beauty part is that the trade deficit will shrink as much in the next couple of months because oil prices fell at a pretty constant rate,” said Christopher Low, chief economist at FTN Financial in New York.
An annual 3% raise used to be considered stingy. Now, some employees will be happy if their salary doesn’t go down in the coming year.
It’s not just Citigroup executives that are seeing their compensation cut. More companies are considering salary reductions as a way of cutting costs amid an ongoing recession.
"Companies are looking for ways to keep their business intact without hurting customer service or quality," according to John Dooney, manager of employment and HR strategy for The Society for Human Resource Management (SHRM). "This is a potential option."
In the last 12 months, 5% of businesses reduced salaries, according to a recent survey by SHRM. Other cost-cutting measures included reducing work hours or benefit offerings, early retirement options and salary freezes.
In the months ahead, many more employers will consider salary reductions of 10% to 20% as a way of trimming costs in turbulent times, according to Jo Prabhu, CEO of staffing firm International Services Group.
"Companies have to cut costs. If they don’t do that they’ll go out of business," Prabhu said. "Both the employer and the employee have to accept it as a fact of life."
For workers though, a salary reduction is a hard pill to swallow, even in a recession.
The No. 1 concern for 69% of American workers is keeping their job, yet only 17% would be willing to take a pay cut to keep their job, according to Adecco USA Workplace Insights survey.
A married mother of two, Tiffany Mason, 37, was working for an airline as a recruiter in Orlando when her employer announced paycuts across the board.
Even though "it was a job I truly, truly loved, at the time I just couldn’t take that cut," Mason explained, "I was already living paycheck to paycheck fast cash."
Mason decided to quit and now works as a recruiter for a small information technology firm. She says the job is relatively stable but, because of the current climate, she fears for the future.
"I am scared," she said, "I hustle everyday to think of ways to save the next penny."
Michelle Schahn, 37, said that when her husband Steve’s salary was cut 20% last year, it meant that the stay-at-home mother of four had to go back to work.
"It’s really frustrating when you work very hard to make it on one income and then you suddenly can’t," she said.
Even though she says that his job as a project manager at a concrete and masonry company is secure, and her part-time employment as an office manager helps makes ends meet, the Schahn family still had to cut back a lot.
"We’re making it work, but it’s really difficult," she said.
Employers share that sentiment, said Bernadette Kenny, chief career officer of placement agency Adecco Group North America.
"The first thing every employee should know is that organizations don’t like to do this," she said.
"This kind of approach of attempting to retain employees as opposed to layoffs is a new phenomenon," Kenny said. "Organizations appreciate the talent that they have and are doing everything they can to retain that talent."
Are you unemployed and using unconventional methods to find work? Tell us about it, and you could be included in an upcoming story.
On a Wednesday afternoon in late December, the average wait to sell clothing at Buffalo Exchange, a Manhattan consignment shop, was about 25 minutes. Beyond the front counter, where the consignors sought pocket cash and tax deductions, nearly a dozen shoppers squeezed themselves between overstuffed racks in the 450-square-foot space, seeking bargains amid used designer jeans and last season’s cashmere sweaters.
"You should see this place on weekends," said the store’s assistant manager. "The lines get to be at least 10 people deep."
The month-old shop, which already possesses the slight musty smell typical to thrift stores, is the first Manhattan location for Buffalo, a Tucson-based secondhand-clothes retail chain with 34 stores across the nation. The new store’s crowds are indicative of both Buffalo Exchange’s continuing success - the privately held company says it has $50 million in annual revenue and is concluding its third consecutive year of sales growth - and also of the resale market’s overall performance. Secondhand shops are a bright spot in today’s downtrodden retail industry.
"We do real well in economic downturns," said Kerstin Block, 66, who founded Buffalo 34 years ago with her husband. "I think that people are more willing to sell their clothes when the economy’s bad, and they’re more likely to shop in used-goods stores. It’s less expensive."
In what’s supposed to be the busiest time of year for department stores and retailers, the National Retail Federation reports that clothing stores’ sales are down more than 7% over the previous year. ShopperTrak, a research firm that charts foot traffic at the nation’s malls, says that holiday crowds are down by about 10% since last year and that overall sales this season will only increase by about 0.1%.
"People can’t afford to buy as much these days at the regular retail channels," said Jeff Van Sinderen, a senior retail analyst at B. Riley, a Los Angeles research and investment firm. "Consumers are looking for extreme values."
As a result, sales are flourishing at secondhand shops as a new echelon of shoppers finds its way into resale stores. Of the store owners who responded to a recent survey from the National Association of Resale and Thrift Shops (NARTs), 74% said that September and October sales increased over the prior year, by an average of 35%. Goodwill Industries, a nonprofit that operates 2,200 thrift stories, says that same-store revenue have increased by an average of 7% compared to last year. The Salvation Army, with 1,370 nonprofit secondhand shops nationwide, also reports significant gains.
"We’re up about 20 to 25% over last year," says Major George Hood, the national community relations secretary for the Salvation Army. "Yet despite the strong sales trend, folks aren’t donating as much stuff - rather than donate to charity, they’re selling elsewhere, turning their things into cash in their pockets no fax cash advances."
Customers selling to Buffalo Exchange, which caters to twentysomethings in hip, urban neighborhoods, get the most cash for American Apparel (APP) t-shirts, cashmere cardigans, and neo-preppy button downs. Escada tops and St. Johns jackets are selling well this season at secondhand shop Act II in Newport News, Va. Closer to Hollywood, Twice the Style, based in Orange County, Calif., recently sold a Bottega Veneta purse for $1,600 - about $900 less than what it went for when it was new in the fall.
"Folks are looking at their closets as a source of revenue," said Liz Pierce, a senior analyst with Roth Capital Partners, an investment bank in Newport Beach, Calif. "So you’re probably seeing better product at these places."
While an increase in used designer goods has helped resale stores draw more middle-class shoppers, so have rising concerns about the environment - the stigma once placed on used clothing is fading.
"I’d say our biggest driver of business these days has been the urge for folks to be green," says Buffalo’s Block. The items that Buffalo won’t buy from sellers - tattered clothing or pieces that have gone out of style - get donated to local charities. Buffalo recently started donating used fur items to animal shelters, where they’re used as bedding.
Also helping the secondhand stores: Consumers are developing an aversion to luxury goods. "Shoppers today aren’t so much into conspicuous consumption," says Adele Meyer, executive director of NARTs. "They have a need to fill, and they’re looking at our industry to do it."
Roth Capital’s Pierce, whose hairdresser recently advised her to check out a secondhand shop for holiday dresses ("that would have never happened a year ago," she says), notes that people "are buying high-low all the time. At malls you always see folks with Neiman Marcus bags and Forever 21 bags."
In the meantime, consignment shop owners may be the only retailers who won’t mind a long recession. Kerstin Block, who founded her company during a weak economy in 1974, will celebrate her 35th year in business next year by opening three new Buffalo stores, one in Baltimore, Boston, and Seattle.
Other shop owners are a bit more cautious. "We’re just hoping that when the economy gets better, people will stick with us," says Shannon Barisoff, owner of Twice the Style. "It’s sort of a circle of life."
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