business news 2

Japan economy shudders after shocks, BOJ pumps cash

2011-03-14T11:10:00.000-07:00

TOKYO (Reuters) - Japan's central bank on Monday rushed to bolster markets in the wake of the country's worst disaster since World War Two and although the authorities said it was too early to put a figure on the damage, critics said a stronger initial response had been needed.
Markets swooned at the shock of an 8.9 magnitude earthquake and
a tsunami that may have killed more than 10,000 and has left millions of people without power, water or homes. The Nikkei average closed 6.18 percent lower on Monday.
At the same time, engineers were battling to prevent a nuclear meltdown at the Fukushima Daiichi complex owned by Tokyo Electric Power Co (TEPCO), where three reactors threatened to overheat in the worst atomic power accident since Chernobyl in 1986.
Investment bank Credit Suisse put economic losses from the quake at no less than $171 billion, although Finance Minister Yoshihiko Noda said it was too early to put together a firm figure to compile a supplementary budget.
Japan's central bank doubled its asset buying scheme to 10 trillion yen ($122 billion) and held interest rates at 0-0.1 percent after it earlier said it would pump a record 15 trillion yen into the banking system, though some economists said it could have done more.
A swathe of high profile Japanese manufacturers, including Sony Corp, Toyota Motor Co and Panasonic have shuttered production lines, with restart efforts hampered by quake aftershocks.
About a fifth of the country's nuclear power generation capacity has been shut down by the disaster. Thermal plants also shut down, forcing the world's third-biggest economy to instigate rolling blackouts to conserve energy.
"The tremors will likely continue for one to two months, experts say, and are continuing now, so there's an immense amount of uncertainty and unclear points." said Masayuki Kubota, a senior fund manager at Daiwa SB Investments.
Economists said that the triple blow of quake, tsunami and nuclear accident is set to damage the already struggling economy harder and longer that initially expected.
Analysts have grown increasingly cautious about forecasting a quick economic rebound similar to that after the Kobe earthquake in 1995, thanks in part to Japan's indebtedness which at twice the size of gross domestic product means the government has less room for maneuver.
Some say a recession is possible.
"Power supply is a critical factor," said Michala Marcussen, head of global economics at Societe Generale. "If power production output is damaged in a sustainable fashion, that could have a durable impact on the economy.
MONUMENTAL TASK
TEPCO, the biggest power company in Japan, said on Sunday rolling blackouts would affect 3 million customers, including large factories and buildings from Monday onwards. It aims to end the blackouts by the end of April.
Policymakers face a monumental task reviving the economy, not only because of the scale of the disaster but because of their limited options.
After the Kobe earthquake, the government adopted an extra budget worth around 3 trillion yen.
"This time, the government can't afford to spend as much as after the 1995 quake given Japan's dire fiscal situation," said Takuji Okubo, chief economist at Societe General in Tokyo, who reckons a more realistic figure to expect is 1 trillion yen.
The Bank of Japan (BOJ) had little room to move on rates, thanks to the legacy of the global financial crisis and years of economic stagnation, in stark contrast to New Zealand, where the central bank last week slashed interest rates by half a percentage point to 2.5 percent to support an economy hit by a 6.3 magnitude earthquake on February 22.
"My initial impression is that the BOJ could have done more. Its traditionally reserved stance on policy easing remains in place even after the massive earthquake," said Masamichi Adachi, senior economist at JPMorgan Securities Japan.
"The BOJ also kept its economic assessment unchanged. The bank thus seems to be not fully taking account of strong uncertainty shrouding Japan."
STOCK SHOCK
The benchmark Nikkei stock average fell on concerns about rolling power blackouts hit the value of auto and electronics firms and the yen slid against the dollar.
Electronics giant Sony, maker of the Playstation gaming console, dropped 9.1 percent by the close of trade. The firm has suspended production at eight plants. Carmaker Nissan Motor Corp fell more than 9.5 percent after it shut down all four of its auto assembly plants in Japan.
"It will take quite some time until investors' confidence in Japanese manufacturers returns. When we look back at the Kobe earthquake, it took about a week to get an overall picture of magnitude of the damage," said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.
The prospects of a massive recovery effort boosted contractor companies. Kajima Corp jumped more than 22 percent and Hazama Homes more than 19 percent.
The market impact of the disaster will be felt far beyond Japan.
Companies that trade with Japan face a loss of business and worries that governments will look at nuclear power less favorably. On Wall Street, S&P 500 futures were down 0.3 percent on Monday.
Almost 2 million households are without power in the freezing north and about 1.4 million lack running water.
Kyodo news agency said 80,000 people have been evacuated from a 20-km (13 mile) radius around the stricken Fukushima nuclear plant, adding to 450,000 evacuees from the quake and tsunami.
An explosion rocked the number 3 reactor on Monday although Jiji news agency said the core container was intact. TEPCO shares were untraded as sell orders outnumbered bids 200 times.
The complex was rocked by a first explosion on Saturday, which blew the roof off a reactor building. The government had said further blasts would not necessarily damage the reactor vessels.
TEPCO said on Monday it had reported a rise in radiation levels at the complex to the government.
Authorities had been pouring sea water to keep the fuel rods in the reactors cool. Nuclear experts said it was probably the first time in the industry's 57-year history that sea water has been used in this way, a sign of how close Japan may be to a major accident.
"Injection of sea water into a core is an extreme measure," Mark Hibbs of the Carnegie Endowment for International Peace. "This is not according to the book."
($1 = 81.915 Japanese Yen)

Canada Q4 industrial capacity use disappoints

2011-03-14T11:08:00.001-07:00

OTTAWA (Reuters) - Canada's fourth-quarter industrial capacity use came in at an unexpectedly low 76.4 percent on Monday, adding to a series of soft data that has taken pressure off the Bank of Canada to raise interest rates.
Another indicator closely watched by the central bank, the ratio of household credit market debt to personal disposable income, fell to 146.75 percent from a downwardly
revised 146.87 percent, as income gains outstripped debt growth.
The industrial capacity use rate marked the sixth straight quarterly rise, but the rate of increase is falling and the statistic remained well below the historical range of 80 to 90 percent that was seen in the two decades before 2008.
The market had expected the rate to hit 79.0 percent but Statistics Canada revised the series downward. The third quarter was revised down to 76.2 percent from 78.1 percent initially.
The figure is one measure of whether inflationary pressures are building, and the market is increasingly skeptical that the Bank of Canada will soon resume its interest rate hikes.
The yields on overnight index swaps, which trade based on expectations of moves in the bank's policy rate, show the market pricing in a 99 percent probability that the bank will keep its key rate at 1 percent on April 12. The market has not fully priced in a rate hike before the bank's September 7 decision date.
Traders had already scaled back the odds of a near-term rate hike on Friday after a report showed Canada's economy delivered lackluster job growth in February.
Canada's currency hit a session low against the U.S. dollar immediately after Monday's data. The Canadian dollar recovered slightly to C$0.9743 to the U.S. dollar, or $1.0264, by mid-morning.

TSX extends fall as fears mount over Japan

2011-03-14T11:07:00.002-07:00

TORONTO (Reuters) - Toronto's main stock index extended losses sharply on Monday morning, as worries about the impact of Japan's devastating earthquake and tsunami mounted.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 157.29 points, or
1.15 percent, at 13,516.96.

Teck cuts coal sales forecast; shares fall

2011-03-14T11:07:00.000-07:00

TORONTO (Reuters) - Teck Resources (TCKb.TO: Quote) trimmed its first-quarter coal sales forecast on Monday, citing rail traffic disruptions and adverse weather, sending shares down 4 percent in early trade in New York.
The diversified Canadian miner said it now expects coal sales of 4.6 million to 4.9 million tonnes for
the quarter. That compares with an average of 5.3 million tonnes of sales in the first quarter of each of the past six years.
In January, Vancouver-based Teck had already warned that first-quarter coal sales would be hurt by logistics-related issues. At the time, Teck forecast first-quarter coal sales of 5 million to 5.5 million tonnes.
The company is one of the world's top exporters of metallurgical coal, which is used to make steel. It said it is too early to assess any impact from last week's earthquake in Japan.
Shares of Teck fell 4 percent to $50.37 in early trade in New York, and dropped 3.6 percent to C$49.12 in Toronto.
WEATHER ISSUES
Teck said sales in the first-quarter have been affected by unusually difficult winter weather conditions, which have caused higher than normal rail delays due to avalanches, as well as an unusual number of locomotive power failures.
The conditions have also forced rail operators to restrict train lengths, the company said.
The company said operations at its port facilities have also been affected by problems including high winds and mechanical failures.
Teck said it is working closely with its rail and port service providers to address these issues and to implement measures intended to enhance rail and port performance.
The company said it expects performance to improve in the second quarter, assuming more normal weather conditions. Teck has so far not altered its full-year coal sales forecast of between 24.5 million and 25.5 million tonnes.
Teck said the ongoing strike at its Elkview mine in southeastern British Columbia has not reduced sales much as it is still able to ship coal from inventories at the mine.
However, the company did note that slower railcar loading times at Elkview have affected rail cycle times. The company and the union representing workers at the site commenced mediation on March 12 to try to reach agreement on a new labor contract.
(Reporting by Euan Rocha; Editing by Lisa Von Ahn and Peter Galloway)

Ontario Teachers Pension Plan shops Leafs, Raptors

2011-03-14T11:06:00.001-07:00

TORONTO (Reuters) - The Ontario Teachers' Pension Plan (OTTP), one of Canada's largest, is shopping around its 66 percent stake in Maple Leaf Sports and Entertainment, the owner of the Toronto Maple Leafs hockey team and the Toronto Raptors basketball team.
"The Ontario Teachers' Pension Plan today stated that it will explore the possibility of selling its 66 percent majority share of Maple Leaf Sports and Entertainment and will
be making no further comment on the matter," the pension fund administrators said over the weekend.
That is a radical change in tone from statements in December that it was not in talks, nor was it anxious to sell the stake in MLSE, which also includes the Toronto Marlies of the American Hockey League and Toronto FC of North America's Major League Soccer.
In December the Toronto Star newspaper reported that Rogers Communications, Canada's biggest wireless company and which also owns cable-TV, media and sports businesses, was in talks to buy the stake in MLSE for C$1.3 billion ($1.3 billion).
The Globe and Mail newspaper on Monday reported that the Teachers' Pension Plan was asking about C$1.5 billion for the stake these days.
Citing high ranking sources at Rogers, the newspaper also said that Rogers has "very little" interest in putting in a bid.
(Reporting by Pav Jordan, editing by Dave Zimmerman)

Quake selloff wipes $287 billion off Tokyo stock market

2011-03-14T11:05:00.001-07:00

TOKYO (Reuters) - A massive selloff on the Tokyo Stock Exchange wiped out some 23.5 trillion yen ($287 billion) from the market's value on Monday with investors dumping stocks as the country recoiled from a devastating earthquake and struggled to avert nuclear disaster.
The selloff triggered record volumes and slashed the market's value
to roughly 289 trillion yen.
The Nikkei average tumbled 6.2 percent, its biggest decline in a single day since October 2008, and more than 4.88 billion shares changed hands on the exchange's first section, the highest number since World War 2.
Volume was pushed up by window-dressing selling by domestic institutional investors for the March 31 financial year-end and by domestic investment trusts and anxious retail buyers, while long-term foreign players who have piled into Japanese shares since November also rushed for the exit, market players said.
"It's the end of the business year for Japanese institutions. They've been net sellers of Tokyo stocks anyway, and in March they traditionally lock in profits for the year, so much of today's selling pressure likely came from them," said Mitsuhsige Akino, a fund manager at Ichiyoshi Investment Management.
"On the other hand, foreigners had bought over 2.75 trillion yen worth of Japan stocks since November, pushing the Nikkei several percent higher, so no wonder they tried to trim their losses or lock in as much profit as possible today, and that bolstered trading volume" said Akino.
Fears of more quake aftershocks and further repercussions from damaged nuclear reactors were cited as the most important factors behind the sell-off.
"Domestic investment trusts and funds are dumping everything today. Sell orders for tens of billions of yen were detected," said an equities trader at a Japanese domestic institutional investor, who declined to be quoted by name.
Individual investors, who often trade in smaller stocks on the TSE's Mothers section for startups, likely sold even more aggressively then the big players on the Nikkei, traders said.
The Mothers market tumbled 17.2 percent, with social networking site Mixi Inc. and Japan's third-biggest airline Skymark Airlines Inc both down around 18 percent. ($1 = 81.915 Yen)
(Reporting by Antoni Slodkowski and Hideyuki Sano; Editing by Michael Watson)

Texas added 44,100 jobs in January, but unemployment rate was flat

2011-03-11T07:29:00.000-08:00

The Texas job market got off to a positive start for the year, as employers added 44,100 jobs in January, the most since May of last year, the Texas Workforce Commission said Thursday.

The state unemployment rate remained at 8.3 percent, unchanged from the previous month. The national average was 9 percent in January, and it edged down to 8.9 percent last month.

January was the fourth straight month Texas added jobs.

The gains came in nearly all major employment categories.

“I was very encouraged by this report,” said Waco economist Ray Perryman. “The broad-based nature of the comeback was also a positive sign.”

Texas gained 15,800 jobs in trade, transportation and utilities, a category that includes the retail business. Other employment categories with expanding payrolls included education and health services, with 7,600 positions; government, with 5,500; and construction, with 3,700

The lone major category to show a monthly decline was leisure and hospitality, which shed 3,800 jobs.

The Dallas-Fort Worth area picked up 6,200 jobs in January. The region’s unemployment rate was 8.5 percent.
Factories and energy

Dana Johnson, chief economist of Comerica Inc., the Dallas-based financial services company, pointed to manufacturing and energy as significant engines of economic growth in Texas. The state gained 5,600 manufacturing jobs in January, plus 4,000 in mining and logging, which includes oil and gas extraction.

“Manufacturing and energy are basically the two sectors that are leading the way for Texas,” he said. “I don’t think there’s much doubt that Texas will look a little stronger than the rest of the country.”
The larger issue is whether the national economy as a whole continues to recover, Johnson said. While he and most analysts expect the economy to register healthy growth this year, there are several sources of potential weakness.
Johnson said oil prices could hurt the economy if they rise well beyond their current levels.
“Certainly, there’s a threat from the oil situation that could really hurt consumer spending,” he said.
National figures
Nationally, payrolls expanded in 35 states and in Washington, D.C., in January, while they shrank in 15 states, the U.S. Bureau of Labor Statistics said Thursday.
Texas added more jobs than any other state in the first month of the year, followed by Michigan with 39,700 jobs.
In percentage terms, Vermont led the nation with a 1.8 percent increase in January, followed by Maine with 1.2 percent, and Idaho and Michigan, which both reported a 1 percent gain. Texas’ January job gain amounted to a 0.4 percent increase.
Nevada, at 14.2 percent, continued to register the highest jobless rate among the 50 states. California had the second-highest rate, at 12.4 percent, followed by Florida, at 11.9 percent.
The Texas Workforce Commission also released revised 2010 jobs data on Thursday. The state gained nearly 236,000 jobs between December 2009 and December 2010, according to seasonally adjusted data. That was slightly higher than the preliminary figure of almost 231,000 released in January.
According to nonseasonally adjusted data, the state had nearly 212,000 more jobs in December 2010 than it did in the same month the prior year.
In 2009, when the severe recession slammed the state, Texas lost more than 365,000 jobs, according to revised data released Thursday.

Shoppers shake off high gasoline costs in February

2011-03-11T07:25:00.000-08:00

(Reuters) - Retail sales posted their largest gain in four months in February as shoppers stepped up purchases of autos, clothes and other goods even as they spent more for gasoline.

Friday's report from the Commerce Department pointed to strong consumer spending and acceleration in economic growth in the first quarter.

Total retail sales rose 1.0 percent, the Commerce Department said on Friday, the largest gain since October and the eighth straight monthly advance. The rise was in line with economists' expectations.

January sales were revised up to a 0.7 percent increase from a previously reported 0.3 percent gain. Compared to February last, sales were up 8.9 percent.

"Consumer spending is still expanding at a healthy pace. Some of the strength we saw during the holidays continued into this year. That bodes well for the economy remaining on track for recovery," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis.

Excluding autos, sales rose 0.7 percent last month after gaining 0.6 percent in January.
U.S. stock index futures briefly turned positive on the
data, while Treasury debt prices fell. The dollar held gains against the euro.
Consumers last month overcame a 3.7 percent increase in gasoline prices to spend on a range of goods, including autos, whose sales rose 2.3 percent after rising 1.2 percent in January. Receipts at gasoline stations increased 1.4 percent after rising 1.3 percent in January. Excluding gasoline, sales rose 0.9 percent after rising 0.6 percent in January.
"Retail spending has mostly been accelerating among people with sufficient income for discretionary spending so they are not as affected by higher gasoline prices as people with more limited incomes," said Jerry Webman, chief economist at OppenheimerFunds in New York.
Unrest in the Middle East and North Africa has pushed Brent crude oil prices above $100 a barrel, raising concerns that high gasoline prices could eat into consumer pocketbooks already strained by high unemployment.
The Energy Information Administration said this week households would pay an average of $700 more for gasoline this year than in 2010.
The Federal Reserve is likely to nod to the rise in energy costs in a statement after a meeting on Tuesday, but analysts think the U.S. central bank will not see a grave enough threat to either growth or inflation to alter its policy course.
Outside autos and gasoline, consumers also spent on clothing, lifting sales 0.8 percent. Receipts at sporting goods, hobby, book and music stores increased 1.3 percent, while sales at building materials and garden equipment suppliers were up 0.6 percent.
So-called core retail sales -- which exclude autos, gasoline and building materials -- rose 0.6 percent after a 0.7 percent gain in January.
Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Spending, which accounts for 70 percent of U.S. economic activity, grew at a 4.1 percent annual rate in the fourth quarter, the fastest in more than four years.

OIL FUTURES:Nymex Crude Tumbles As Massive Quake Hits Japan

2011-03-11T07:23:00.000-08:00

NEW YORK (Dow Jones)--Crude futures fell sharply Friday after a massive earthquake in Japan, the world's third-largest oil consumer, though traders kept watch for any news of spreading unrest in the Middle East and North Africa.
Light, sweet crude for April delivery recently traded $2.92, or 2.8%, lower at $99.78 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $2.40 lower at $113.03 a barrel.

Oil prices weakened as markets assessed the damage to Japan's refinery capacity and the impact on overall crude demand, as aftershocks from an 8.9-magnitude earthquake

Japan Issues Emergency at Nuclear Plant

2011-03-11T07:20:00.000-08:00

TOKYO—The Japanese government issued an official emergency at one of the country's nuclear plants Friday after a massive earthquake automatically shut down its reactors and caused problems with its cooling system, but said there are currently no reports of radiation leakage.

"There are no reports of leakage from any nuclear power plants at the moment and no signs of any leakage," Chief Cabinet Secretary Yukio Edano said Friday. As a result of the state of emergency, the government will set up a special emergency task force to deal with the situation.

As a precaution, the government ordered nearly 2,000 people living within three kilometers, or nearly two miles, of the Fukushima Daiichi nuclear power plant to evacuate Friday night.

At Tokyo Electric Power's Fukushima Daiichi plant, three reactors shut down automatically as designed after a magnitude 8.9 earthquake struck off the northeast of Japan on Friday afternoon. The quake also caused diesel-powered generators used to cool the reactors to stop operating, leaving the utility company with a shortage of coolant to bring the reactors to a safe temperature.

Meanwhile, the three reactors at Tohoku Electric Power Co.'s Onagawa plant in Miyagi, near the epicenter of the quake, also shut down automatically. A few hours later, the company said that it observed smoke coming from the building housing the No. 1 reactor at the plant. The company said it is still checking the safety of the reactor, but said there has been no reported leakage of radioactive substances.
French nuclear engineering group Areva said it hasn't been informed of any impact on its installations in the country. The company operates a joint venture with Mitsubishi Heavy Industries Ltd. and Mitsubishi Corp. specialized in nuclear fuel called MNF, as well as a zirconium making plant, Cezus, which is a fully owned unit of Areva.
All other Japanese power companies operating nuclear power plants in the country said their facilities are operating normally.
Tokyo Electric filed a report after the shutdown with central and local government authorities. Such reports are filed when there are possibilities of radioactive leakage that may force evacuation of residents, or other emergencies, such as a loss of coolant needed to cool reactors.
Three reactors, with a combined generation capacities of 2.03 million kilowatts, are part of the Fukushima Daiichi nuclear plant, located on the Pacific coast in Fukushima prefecture north of Tokyo. The plant's three other reactors weren't operating at the time of the earthquake due to a routine checkup.
Tokyo Electric is the operator of Japan's largest nuclear power plant, known as Kashiwazaki-Kariwa, which was shut down for an extended period after a 2007 earthquake that devastated Niigata prefecture on the Sea of Japan coast. The loss of its generation capacity sent Tepco scurrying to boost generation at its thermal power plants. High costs of purchasing fuel oil hurt the company's earnings sharply. It also raised questions about building large nuclear power plants in earth-quake prone areas of the country. That plant wasn't affected by the latest quake.

Huge Waves Head Toward Hawaii and California

2011-03-11T07:13:00.000-08:00

SAN FRANCISCO — A tsunami emanating from the massive earthquake that hit Japan was roaring toward the United States on Friday morning, with huge waves expected to hit Hawaii and California.
Coastal evacuations were ordered in Hawaii, and tsunami warnings were issued along the West Coast, from central California to Alaska. A tsunami warning directs residents of low-lying regions to move inland and to higher ground.
Officials in Southern California closed beaches as a precaution, prohibiting swimming, surfing and fishing off the coast. Experts said that they did not expect flooding and did not call for mandatory evacuations. But they warned that there could be large waves and unusual changes in the currents for several hours. Several schools in the beach areas also planned to
close Friday.
Waves were projected to arrive at the Northern California coast at about 7:15 a.m. local time, and hit the San Francisco Bay Area at about 8 a.m., the National Weather Service said.
Surges could reach three to seven feet along the California, Oregon and Washington coasts. Southern California is expected to be hit by three-foot waves, the authorities said.
“A tsunami was generated and is expected to cause damage to the Northern California coast,” the National Weather Service said in an advisory. “Persons at the coast should be alert to instructions from local emergency officials.”
A lower-level tsunami advisory has been issued for the coast of Southern California.
Waves started hitting the Hawaiian islands early Friday, but were small. Because there is a tsunami risk for many hours after a large earthquake, residents there remained on alert.
In a White House statement, President Obama, who was born in Hawaii, said: “We are asking all our citizens in the affected region to listen to their state and local officials.”

House Republicans to push series of energy bills

2011-03-11T00:57:00.000-08:00

(Reuters) - Republicans in the House of Representatives said on Thursday they would seek to combat oil and gasoline prices with a series of bills this year aimed at spurring domestic energy production.

For years, Republicans have urged an "all-of-the-above" approach to easing U.S. dependence on foreign oil by fostering more development of domestic oil, natural gas and nuclear power. They also have said that alternative energy sources should be part of the mix.

"The average price for a gallon of gas is on its way to $4," House Speaker

John Boehner told reporters, complaining that Obama administration energy policies will push gasoline prices higher by regulating carbon dioxide emissions.
"Republicans have a plan to help lower gas prices and create new jobs," he added.
Democrats shot back that Boehner was ignoring Mideast turmoil, including strife in oil-producing Libya, in their rush to blame the Obama administration for rising gasoline prices.
"When it comes to high oil prices, this is about OPEC, not Obama," said Representative Ed Markey. He also noted that domestic oil production last year, with Obama in the White House, was the highest since 2003.
Many of the ideas Republicans were touting on Thursday have been hashed around for years on Capitol Hill and some of them have been advocated by Democrats in Congress as well.

Instead of pushing ahead with a comprehensive energy bill, as House Democrats attempted over the past two years with failed climate control legislation, Boehner talked about "bite-size chunks" that could be accomplished more easily.

"Why wouldn't we have a bill to encourage vehicles to use natural gas and do it by itself," Boehner asked, using the same formula for separate legislation to encourage more oil and gas exploration in the United States and feeding royalties from such projects "to support more green energy."

Boehner also included a nuclear energy bill in the list.

House Natural Resources Committee Chairman Doc Hastings said his panel would focus on "the most immediate solutions" to rising energy prices be restarting oil and gas leases in the Gulf of Mexico following a moratorium that stemmed from the BP disaster there nearly a year ago.

"There were active leases prior to the moratorium. There's no reason why those leases now should not be executed," Hastings said.

U.S. retail gasoline prices have been on the rise as world oil prices have increased sharply, with a barrel of crude now topping $100 a barrel.

House Energy and Commerce Committee Chairman Fred Upton said he would focus on ways to streamline the licensing and construction timelines for new nuclear reactors.

"By lowering the number of years, we lower the costs," he said.

Global Markets: Asia stocks drop after big quake hits Japan

2011-03-11T00:52:00.000-08:00

(Reuters) - Asian shares dropped after a massive earthquake hit Japan, including the capital Tokyo, darkening an already bleak mood caused by weak economic data and unrest in Saudi Arabia.

The quake struck just before the close of Tokyo stock trading. Japan's Nikkei average .N225 closed at an intraday and five-week low, down 1.7 percent on the day.

The Hong Kong's Hang Seng share index .HSI was down 1.8 percent, and Nikkei futures in Singapore tumbled more than 3 percent. At 6:50 a.m. GMT, Nikkei June futures were down 2.8 percent at 10,075.

The magnitude 8.9 quake shook buildings in Tokyo, causing "many injuries" and

triggered a four-meter (13-ft) tsunami, NHK television and witnesses reported.

The yen extended losses against the dollar after the quake, falling to 83.29 yen to the dollar compared with 82.80 before it struck.

Brent crude held near $115 per barrel as investors monitored developments in the Middle East. Forces loyal to Libyan leader Muammar Gaddafi battled rebels at an oil port, while Saudi police fired in the air to disperse protesting Shi'ites.

Oil prices are up by a quarter this year, with most of the gains coming since the Libyan crisis erupted.

While oil prices around this level posed no substantial threats to the world economy or financial markets, the risk that prices may rise to damaging levels has risen substantially, Barclays Capital strategists said.

Chinese inflation in February remained close to 5 percent, suggesting tighter monetary policy may be needed, adding to the uncertainty.

Key stock indexes in Australia .AXJO and South Korea .KS11 closed down more than 1 percent each. The broader Asian market outside Japan was down 1.4 percent, extending its drop by more than 3 percent for the week as fresh outbreaks of violence in the Middle East kept markets on edge.

Weak U.S. economic data spurred some profit taking in shares in developed markets which have enjoyed a handsome run this year, though some bargain buying checked losses.

RISK REDUCTION

Overnight, a weak Wall Street which ended down nearly 2 percent. The S&P 500 .SPX is up by a third since last July. .N

"It is another day of reducing risk across the portfolio. We have had it one way for too long and with big issues hitting, everyone is running to the exit at the same time," Chris Weston, an institutional dealer at IG Markets said.

In credit markets, sovereign credit default swap spreads pushed wider, reflecting the general risk aversion sentiment.
Shanghai copper rebounded but was on track to post its biggest weekly loss since May 2010 while London futures were looking at their worst week since last June, dragged by worries of high oil prices hurting the global economy. <MET/L>

The yield on benchmark 10-year notes slipped to 3.36 percent, down from 3.56 percent hit earlier this month. <US/>

In currency markets, the euro stayed weak after having suffered its biggest one-day fall against the dollar in a month, and further losses may loom if a euro zone summit fails to soothe market nerves on sovereign debt.

Any disappointment could heap more pressure on the single currency, which slid to one-week lows near $1.3770 overnight. It last traded at $1.3810.

Sony promotes Hirai as possible successor to CEO

2011-03-11T00:45:00.000-08:00

(Reuters) - Sony Corp is promoting Kazuo Hirai as the head of its consumer products unit, the company's biggest division, and CEO Howard Stringer said Hirai was in the lead to be his successor.

Welsh-born Stringer, 69, who serves as the company's chairman, chief executive and president, will retain his current positions, Sony said in announcing a realignment of the business.

"It's a sign that Sony has exited the crisis mode that it's been in since the Lehman shock. It can now move on from talk of restructuring to growth," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd.

Sony has been mulling a potential successor for Stringer, the first non-Japanese to run the consumer electronics company, who is expected to step down in 2013. In January he denied he was a candidate for the chairmanship of the

BBC.

"The board and I have talked about succession planning and this is the first step.We have not made a final decision," Stringer told a news conference Thursday.
"This is an opportunity for the board to watch Hirai san and judge his performance. There may be other candidates, but he has a leadership position," Stringer said.
Hirai, 50, currently runs the firm's network products and services division, which includes Sony's games business as well as newer ventures such as music and movie streaming services.
"In his current role, Mr. Hirai has successfully led the turnaround of the games business," Sony said in a statement.
Under Stringer, Sony has slashed jobs and sold off factories to improve margins but analysts have said it will take more than streamlining to help Sony catch up with rivals including Apple Inc,, Nintendo and Samsung Electronics.
Sony also announced Thursday that it would realign its business into two core groups, one covering consumer products and services and accounting for 60 percent of the company's turnover, to be led by Hirai.
The other division, covering business to business areas such as semiconductors, batteries and other key components, will be led by Hiroshi Yoshioka.
"Yoshioka san has an opportunity to make a lot of money in his group, so the race isn't over," Stringer said.
Sony shares shed 0.9 percent in a broader market down 1.5 percent.
Hirai, who will become executive deputy president on April 1, is a fluent English speaker known for his presentation skills, which were on display at the unveiling of Sony's new handheld games device at a splashy Tokyo ceremony in January.
Operating profit more than doubled in his network products and services division in October-December last year, but was outweighed by losses on TVs, resulting in a fall in Sony's overall profit.
Stringer took over as chairman and CEO of Sony in 2005, and added the role of president in 2009.

Saudi braces for protests amid sweeping Arab unrest

2011-03-11T00:41:00.002-08:00

RIYADH — Oil kingpin Saudi Arabia braced Friday for protests calling for political and economic reforms a day after police shot and wounded three protesters in the eastern province.
Online activists using the Facebook and Twitter have called for a "Day of Rage" and a "Saudi March 11 revolution" demanding fully elected parliament and ruler in this Islamic conservative monarchy where the Shura (consultative) Council is fully appointed.
Security was strongly beefed up in the capital Riyadh in the early hours of Friday.
Dozens of police cars filled the strategic Olaya commercial centre in the Riyadh, which was hit by a blinding dust storm overnight, where the protesters are supposed
to congregate.
Police patrols stood guard on the sides of the main roads of King Fahad and Olaya main street where security forces set up a checkpoint and were checking the identities of motorists.
The activists are also demanding an independent judiciary, the abolition of the secret service police, the release of all political prisoners and guarantees of freedom of expression, according to the activists website.
On the economic front, they are demanding a fixed minimum wage of 10,000 riyals ($2,667) and finding jobs for Saudis in a country where the unemployment rate is 10.5 percent and soars to around 30 percent in the 20-29 age group, according to official figures.
On his return from surgery in the United States last month, King Abdullah had decreed massive benefits to Saudis estimated at more than $30 billion, which included housing services and unemployment benefits.
The activists have urged Saudis to demonstrate in large numbers soon after the Muslim Friday prayers around 1000 GMT in most of Saudi cities including Riyadh, Jeddah in the west and Dammam in the oil-rich east.
The Gulf Civil Society Forum, a liberal pan-Gulf group, expected a low turnout because the call came from London-based Saudi dissidents who do not have a large following in the kingdom.
Other Facebook youth activists have called for nationwide protests on March 20.
Saudi security forces shot and wounded three Shiite protesters in Al-Qateef in the eastern province on Thursday while dispersing a protest calling for the release of nine Shiite prisoners who have been in jail for 14 years without trial, a witness told AFP.
Following the incident, the United States said it would closely monitor unrest in Saudi Arabia, the world's biggest oil exporter, and restated its support for universal values.
The Saudi interior ministry had earlier issued a stern reminder that any demonstration was illegal and warned activists that the security forces had been authorised to crack down on any protests.
The kingdom's top clerics have also condemned as un-Islamic calls for demonstrations and petitions saying "reform and advice do not take place through demonstrations and methods that fan sedition."
Political parties are banned in Saudi Arabia, which controls a quarter of the world's oil reserves.
Saudi Foreign Minister Prince Saud al-Faisal said on Monday the kingdom "completely rejects any intervention in its internal affairs," and warned it will "chop off the fingers," of those trying to meddle in Saudi affairs.
"Dialogue is the best way for citizens to gain their rights," he said.
Rights groups Human Rights Watch and Amnesty International have called on Riyadh for a relaxation of the protest ban, insisting it was "obliged under international law to allow peaceful protests to take place."
Traders were anxiously watching developments in the kingdom, but US experts have said that Riyadh seems unlikely to catch the contagion of Arab revolutions sweeping other parts of the Middle East.
Benchmark crude prices dipped below the $102 level in Asian trade Friday after easing off two-year highs.
New York's main contract, light sweet crude for April delivery, fell 97 cents to $101.73 per barrel in the afternoon.
Brent North Sea crude for April dipped 39 cents to $115.04.

Stubborn China inflation sticks at 4.9%

2011-03-11T00:41:00.000-08:00

Inflationary pressures in China persisted in February, with consumer prices rising 4.9 per cent from a year earlier and producer prices rising 7.2 per cent, the fastest increase since October 2008.
Politically sensitive food prices, which have a disproportionate impact on low-income households, accelerated to 11 per cent in February from a year earlier, up from 10.3 per cent in January.
Inflationary pressures in China persisted in February, with consumer prices rising 4.9 per cent from a year earlier and producer prices rising 7.2 per cent, the fastest increase since October 2008.
Politically sensitive food prices, which have a disproportionate impact on low-income households, accelerated to 11 per cent in February from a year earlier, up from 10.3
per cent in January.

But China’s central bank governor expressed confidence that Beijing would be able to rein in prices and keep the annual consumer inflation rate below the government’s target of 4 per cent for the whole year.
“We have many effective tools to deal with inflation at our disposal, including interest rates,” Zhou Xiaochuan, governor of the People’s Bank of China said at a news conference during China’s annual parliamentary session. “Although the [consumer price index] figures for December, January and February are high, inflationary expectations are relatively stable at present.”
He said appreciation of the Rmb would not play a big role in the central bank’s efforts to control inflation and China will maintain a “stable” exchange rate, a reference to the central bank’s regular interventions in the market to avoid faster appreciation.
Mr Zhou also cautioned that February’s inflation figure was likely distorted by the effect of the Chinese New Year holiday last month, which typically leads to higher prices, especially for food.
One major area of concern for China’s leaders will be data that show real estate fixed asset investment accelerated in the first two months of the year, despite expectations that government measures to clamp down on the sector would slow property construction.
For the two months real estate construction increased 35 per cent from the same period a year earlier, higher than the 33 per cent for all of 2010 and a big jump from December’s year-on-year growth of 24 per cent.
Last year’s growth in construction was already much higher than the historical average in China and has led to concerns that overbuilding could lead to a serious correction in the property market which would have a ripple effect across China’s economy.
The government’s statistics bureau publicly revealed for the first time on Friday that its fixed asset investment figures do not include low-income housing investment.
The government has announced plans to spend $197bn to build 10m units of low-income housing this year, even as a huge wave of newly constructed residential property starts to come onto the market.
“Most developers are still optimistic about market outlook, and a significant surge in housing supply is coming,” said Du Jinsong, an analyst at Credit Suisse. “We believe this data shows that oversupply situation may become even more severe.”

Sheen Sues Warner Bros.

2011-03-11T00:35:00.000-08:00

Actor Claims Studio, Co-Creator Conspired Against Him, Made Him Scapegoat
In the first move of what could be a long legal battle, Charlie Sheen has sued Warner Bros. and "Two and a Half Men" co-creator Chuck Lorre for $100 million plus punitive damages over his termination on the hit television show.
Mr. Sheen, who was fired from TV's most popular sitcom on Monday after a series of public outbursts and a history of drug abuse and arrests, filed a lawsuit in Los Angeles Superior Court demanding that he, the cast and the crew be paid for the show's canceled episodes, among other damages.
The suit alleges that Mr. Lorre fired him because he wanted to work on other shows and because he disliked Mr. Sheen. "Since Lorre has a better deal and stands to
make even more money on his other current shows," Mr. Sheen's lawyer, Marty Singer, wrote in the suit. "Lorre has been motivated in part by his own self interest and conflict of interest to make his other shows flourish at the expense of the Series and because of his animus toward Mr. Sheen."
The suit also argues that Warner Bros., a unit of Time Warner Inc. that produces "Two and a Half Men," and Mr. Lorre "conspired" against Mr. Sheen, weaving an intricate "public relations fiction" in order to turn him into a public "scapegoat."
A spokesman for Warner Bros. declined to comment on the suit.
"The allegations in the complaint against Mr. Lorre are as recklessly false and unwarranted as Mr. Sheen's rantings in the media," said Mr. Lorre's attorney, Howard Weitzman. "These accusations are simply imaginary. This lawsuit is about a fantasy "lottery" pay-day for Charlie Sheen. Chuck Lorre's concern has been and continues to be about Mr. Sheen's health."
Warner Bros. on Monday cited Mr. Sheen's behavior in terminating his contract. The studio said the actor had committed felony offenses involving "moral turpitude." "Your client has been engaged in dangerously self-destructive conduct and appears to be very ill," Warner Bros. said in a letter to Mr. Sheen's lawyer.
The studio also gave what it said were multiple reasons why it is entitled to terminate Mr. Sheen's contract. It said it could do so, with written notice, as a result of "uncured incapacity." It also said that Mr. Sheen's flurry of media appearances, in which he has launched personal attacks against Mr. Lorre and criticized Warner Bros., violated part of his contract related to publicity.
Mr. Sheen's suit said that Warner Bros. was "quite happy" to employ him and even negotiate new deals with him for future seasons of "Men" while he was in rehab and facing a potential felony conviction, but terminated his contract only when Mr. Sheen had "been provoked into criticizing Lorre."
"Warner Bros. even stated that it would not object to Mr. Sheen entering a guilty plea and having a convicted felon as its Monday night star, so long as it would not unnecessarily interfere with the production schedule," the suit says. "None of this resulted in Warner Bros. suspending Mr. Sheen. What did?"
The suit alleges that the studio's firing of the actor, even for those circumstances, would be in violation of provisions of federal and California labor law.
The suit also states that Mr. Sheen is pursuing claims "for the benefit of the entire cast and crew to get paid for the balance of the season's 24 episodes."
The show aired on CBS Corp.'s namesake network.
A Warner Bros. spokesman said that no one from the show's crew has filed a lawsuit or is a party to Mr. Sheen's suit.
Mr. Sheen is paid about $2 million an episode for "Men," including his share of "back-end" profit like syndication, according to people familiar with the matter. The suit also states that Mr. Sheen's most recent contract entitles him to payments for episodes, whether or not the series films, through late 2011.
The lawsuit opens by criticizing Mr. Lorre in terms echoing some of the public statements Mr. Sheen has made in his TV and radio appearances in recent weeks. "Defendant Chuck Lorre, one of the richest men in television who is worth millions of dollars, believes himself to be so wealthy and powerful that he can unilaterally decide to take money away from the dedicated cast and crew ... in order to serve his own ego and self-interest, and make the star of the Series the scapegoat for Lorre's own conduct."
Warner Bros. and CBS Corp., which airs the show, haven't yet said whether they will bring "Men" back into production without Mr. Sheen.

Mortgage Rates Mostly Unchanged; 30-Year Fixed at 4.88% -Freddie

2011-03-11T00:28:00.002-08:00

Mortgage rates were mostly unchanged the latest week, with the average rate on 30-year fixed-rate mortgages edging slightly upward, according to Freddie Mac's (FMCC) weekly survey of mortgage rates.
Rates had risen earlier this year, hitting their highest level since April last month. They had slumped most of last year as Treasurys had declined amid economic uncertainty. The rates generally track the yields, which move inversely to Treasury prices.
"Interest rates for 30-year fixed-rate mortgages have averaged at or below 5% in every week but one this year, contributing to record home affordability," said Freddie
Chief Economist Frank Nothaft.
The 30-year fixed-rate mortgage averaged 4.88% for the week ended Thursday, up slightly from the prior week's 4.87% average but down from 4.95% a year ago. Rates on 15-year fixed-rate mortgages were 4.15%, flat with the week earlier and down from a year-earlier 4.32%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.73%, up from the prior week's 3.72% but down from 4.05% a year earlier. One-year Treasury-indexed ARMs were 3.21%, down from 3.23% and 4.22%, respectively.
To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point, the five-year adjustable required an average 0.6 point and the one-year required an average 0.5 point. A point is 1% of the mortgage amount, charged as prepaid interest.

American Airlines again bumps up airfares

2011-03-11T00:28:00.000-08:00

American Airlines has bumped up domestic fares by $10 per round trip, which could trigger the seventh fare increase this year by U.S. airlines.
American made the price change Wednesday. It also raised round-trip fares to Canada and Hawaii by $20.
It's uncertain whether other major airlines will follow American's lead going into the weekend. Carriers have been boosting fares in lockstep this year to try to keep pace with the rising cost of jet fuel. Occasionally, a price increase has been abandoned when other carriers haven't matched.
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Most recent fare increases have stuck, however, and the rapidly rising cost of airline tickets mirrors 2008, the last time oil prices soared above $100 a barrel, says Rick Seaney of FareCompare.com, who closely monitors ticket prices.
"Airlines who finally started making a profit late last year
have little choice but to pass on fuel costs to consumers in the short term," says Seaney, who expects airlines to try to boost fares weekly through April.
Demand for air travel is high, airline analysts say, as more corporate fliers return to the skies and leisure travelers plan trips for spring break, spring holidays and summer vacation.
"Consumers have a higher threshold of pain for pricier tickets today as the economy recuperates than they did in March of 2008 as a global economic meltdown was afoot," Seaney says.
But Matthew Jacob, senior airline analyst at ITG Investment Research, says that while the rising cost of fuel may be making airlines more aggressive in raising prices, their goal is always to charge as much as they can for seats on their planes.
"It's not just because oil prices are high that they're focusing on getting the highest airfares they can," he says. "This is a business that has always had very dynamic pricing. You can book a flight now and pay a different price than someone who booked it yesterday and more than someone who books it tomorrow."
The same rising oil costs that are denting the airline industry could also force some people to put off travel and stay put.
"One thing that could be a speed bump to raising airfares further is if consumer travelers start to see their income pinched by ... higher gasoline prices," Jacob says. "Higher oil prices may make the airlines more aggressive, but fliers are not necessarily going to be willing to pay a higher airfare."

Nervous Asian markets fall further

2011-03-11T00:24:00.001-08:00

HONG KONG — Asian stock markets slipped further on Friday after sharp falls on Wall Street and higher-than-expected Chinese inflation data, even as oil prices eased back.
In the afternoon, a major Japanese earthquake caused the yen to fall sharply against the US dollar.
Tokyo's Nikkei ended the session down 1.72 percent, or 179.95 points, at 10,254.43, while Sydney fell 1.17 percent, or 54.90 points, to 4,644.80.
Hong Kong was down 0.60 percent in the afternoon, while the Shanghai Composite Index was off by 0.15 percent.
The falls came after steep losses on Thursday, when Shanghai lost 1.50 percent, and on Wall Street, where the Dow, Nasdaq and S&P 500 indexes all ended down more than 1.8 percent.

Markets were nervous not only about the intensifying conflict in Libya, but also about unrest in OPEC oil linchpin Saudi Arabia, where activists were calling for a "Day of Rage" on Friday.
Also hitting sentiment was the worsening European debt crisis and, closer to home, Chinese data that showed inflation hit 4.9 percent in February, raising expectations of yet another interest rate hike. The latter prospect sent Chinese banking stocks tumbling.
"The recent Middle East unrest is spreading to Saudi Arabia, triggering fears in the financial market across the globe," Kim Joong-Won, an analyst at HMC Investment Securities in Seoul, told Dow Jones Newswires.
In Beijing, central bank chief Zhou Xiaochuan said interest rates remained an important policy tool in fighting surging prices -- following three rate hikes since October.
Alistair Thornton, an analyst at IHS Global Insight, commented: "We believe inflationary pressure will remain quite high over the next couple of months. More tightening measures are in the pipeline."
Meanwhile oil prices actually eased somewhat due to Europe's debt troubles -- amplified by a downgrade of Spain by ratings agency Moody's -- and due to data showing that China experienced a rare trade deficit in February.
Both factors suggested the possibility of slower activity in the eurozone and economic powerhouse China.
"Overnight there has been very mixed news on the global economic front that put downward pressure on oil," said Victor Shum, senior principal for Purvin and Gertz international energy consultants in Singapore.
Benchmark crude prices dipped below $102 in Asian trade after easing off two-year highs.
New York's main contract, light sweet crude for April delivery, fell 97 cents to $101.73 per barrel in the afternoon.
Brent North Sea crude for April dipped 39 cents to $115.04.
The euro rebounded against the dollar, having plunged earlier following the Spanish ratings downgrade.
The single European currency fetched $1.3819 in Tokyo afternoon trading, compared to $1.3794 in New York late Thursday.
The yen fell to 83.30 against the dollar from 82.91 within minutes of Japan's earthquake, which was measured at 8.8 by US geologists, caused extensive damage and unleashed a tsunami warning for Japan, Russia and the Mariana Islands.
Gold opened at $1,414.00-$1,415.00 an ounce in Hong Kong, down from its Thursday close of $1,427.00-$1,428.00.
In other markets:
-- Taipei fell 0.87 percent, or 75.08 points, to 8,567.82.
Taiwan Semiconductor Manufacturing Co fell 0.71 percent to Tw$70.0, while Hon Hai was 0.44 percent lower at Tw$113.0.
-- Manila fell 0.90 percent, or 35.59 points, to 3,924.35.
Aboitiz Equity Ventures fell 1.89 percent to 41.40 pesos, Aboitiz Power slipped 0.16 percent to 30.80 pesos, Metropolitan Bank dropped 0.48 percent to 62.85 pesos and Philippine Long Distance Telephone plunged 3.68 percent to 2,200 pesos.
-- Wellington fell 0.69 percent, or 23.39 points, to 3,382.84.
Insurance company and fund manager Tower fell 4.1 percent to NZ$1.86 after it announced its costs related to the Christchurch earthquake were expected to reach NZ$15 million-NZ$20 million ($11 million-$15 million). Retailer Warehouse rose 2.1 percent to NZ$3.45 after better-than-expected first half results.

Couple Bilked BofA-Led Lender Group of $130 Million, U.S. Says

2011-03-11T00:23:00.000-08:00

March 11 (Bloomberg) -- A California couple was charged by the U.S. with defrauding an eight-bank lending group led by Bank of America Corp. of about $130 million by exaggerating the financial status of their decorating business.

Thomas Chia Fu, 61, and his wife, Cheri L. Shyu, 48, were arrested at their Newport Coast home by federal authorities, according to an e-mailed statement yesterday by U.S. Attorney Andre Birotte Jr. in Los Angeles. They were indicted on nine counts of bank fraud and face as long as 30 years in prison if convicted, prosecutors said in the statement.

The couple imported home-decorating items from China and obtained a $130 million revolving line of credit from the banks, according to the indictment. They borrowed against the

credit line by exaggerating the in-transit inventory and accounts receivable for their company, Anaheim, California-based Galleria USA Inc., according to the filing.

“Had Bank of America and other banks known the true facts, they would not have continued the revolving line of credit and loaned additional funds,” according to the filing.

Dave Wiechert, a lawyer for Shyu, and Steve Katzman, a lawyer for Fu, didn’t return calls seeking comment.

The Fus submitted their allegedly false reports from June 2008 through March 2009, prosecutors said. Bank of America became the lead bank in the lending group around May 2008, and the fraud continued through August 2009, the U.S. said.

Credit Crisis

That spans the height of the credit crisis, when banks were increasing their scrutiny of loans amid a surge in mortgage defaults. Bank of America took $45 billion in U.S. rescue funds. The bank agreed to purchase Merrill Lynch in September 2008 for $50 billion in stock, months after buying Countrywide Financial Corp.

“This is an ongoing investigation so we can’t provide any further details,” Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said in an e-mailed statement. “We have been cooperating with authorities on this matter and continue to do so. In fact the bank is a victim of this fraud.”

The case is U.S. v. Fu, U.S. District Court, Central District of California.

--With assistance from Hugh Son in New York. Editors: Michael Hytha, Peter Blumberg

Tom Walsh: New CFO must steer GM away from bad habits

2011-03-11T00:22:00.001-08:00

Let's take Chris Liddell at his word about why he's leaving General Motors after just 15 months on the job as chief financial officer.
But then let's watch closely how the new CFO, 38-year-old Dan Ammann, deals with mounting concern that GM has relaxed its financial discipline recently by reverting to the old habit of splurging on rebates and cut-rate leases to peddle its cars and trucks.
Liddell rattled off a list of major accomplishments Thursday during his short stint in Detroit:
• Four straight profitable quarters in a weak 2010 auto market.
• Slashing GM's debt from $15.8 billion to $4.6 billion.
• Launching a successful public offering of GM stock last November.
• Removing the stain of so-called material weakness in GM's
financial record-keeping.
Not bad for a year's work. And while Liddell always said the primary attraction of joining GM was to help rebuild an iconic global company, it was also assumed that he'd like to run the joint someday as CEO.
When Ed Whitacre stepped aside as CEO last August, though, the GM board chose Dan Akerson to replace him. So once Liddell checked off the IPO and a few other things from his near-term to-do list -- and realized Akerson would be CEO for another two or three years -- he decided to move on.
Incentives at issue
Despite the good stuff that happened on Liddell's watch as CFO, Ammann takes over at a precarious time.
GM's stock price is slipping, as fuel prices rise and competitors and some industry analysts question the wisdom of GM's aggressive use of incentives to boost sales and market share.
While rebates and cut-rate financing have long been part of the auto industry marketing mix, GM, Ford and Chrysler relied much more heavily than their foreign-owned competitors did on such fire-sale tactics in the years leading up to the financial crisis in 2008. The result was lower profit margins and tarnished brands.
After the GM and Chrysler bankruptcies in 2009, the Detroit Three curtailed incentives. Profits improved, pushing Ford stock up from its early-2009 lows and helping GM launch its IPO at $33 per share.
But suddenly, just as GM convinced investors its fiscal house was in order and launched the IPO, it cranked up incentives.
In November, GM spent close to the industry average on incentives -- but by February, incentives were exceeding $3,800 per vehicle, more than $1,000 above the average of GM's competitors.
The aggressive tactics boosted GM's U.S. market share from 19.3% in November to 20.8% in February. "But the question is, at what cost?" asked Jessica Caldwell, senior analyst for Edmunds.com.
Competitors squealed and Wall Street analysts fretted about whether GM might be crimping its own profits -- and those of the whole industry.
Part of a CFO's job is to keep pricing at profitable levels even as the zealous sales staff tries to reel in every buyer. The whole industry will be watching as Ammann steps into his new gig.

Wal-Mart to Break Ground on Small Stores Next Week in Arkansas

2011-03-11T00:21:00.001-08:00

Wal-Mart Stores Inc. (WMT) will next week start building its first Express stores, a format less than a tenth the size of an average supercenter, according to building permits obtained by Bloomberg News.
The world’s largest retailer will begin construction March 16 on a 14,400-square-foot store in Gentry, Arkansas, a town of 3,158 about 20 miles (32 kilometers) southwest of the company’s Bentonville headquarters, according to the permits.
While Wal-Mart has kept details of the new stores a closely guarded secret, Steve Restivo, a company spokesman, confirmed the location of the store openings and
the timing in an e-mail. Work on similar stores in nearby Prairie Grove and Gravette will also start over the next two weeks, said town officials. The new stores will feature a pharmacy and groceries section.
“Wal-Mart’s U.S. store fleet is designed for yesterday’s retail wars,” Craig Johnson, president of Customer Growth Partners in New Canaan, Connecticut, said in an interview. “If they want to capture their rightful share of today’s shopping trips they have to have a smaller format. God bless supercenters, but they are not designed to get in and out of within five minutes.”
Chief Executive Officer Mike Duke is seeking new avenues for growth in the U.S. as comparable-store sales in Wal-Mart’s namesake stores have fallen for seven straight quarters. The retailer plans to open as many as 40 smaller units this year in rural and urban areas, and executives said last month that the first Express store would open as early as May.
‘Thousands of Opportunities’
U.S. chief Bill Simon has said that “there are hundreds, if not thousands of opportunities in the U.S.” for stores smaller than the retailer’s supercenters, which accounted for 76 percent of Wal-Mart’s U.S. locations as of Jan. 31.
The Express stores, concrete square boxes with metal roofs, will cost $1.2 million to build and sit on lots just under 5 acres, according to building permits filed in Gentry and Prairie Grove, which has a population of 4,380. The stores will have 75 parking spaces, a pharmacy and three or four checkout counters, said Jackie Baker, Prairie Grove’s building and planning director.
Wal-Mart supercenters average 185,000 square feet with about 142,000 items, according to the company website. Supercenters typically have as many as 800 parking spaces, according to research from UBS AG.
Dozen Aisles
Sections for fresh produce, refrigerated foods and frozen items will go down one side and along the back of the Express store, Baker said in an interview. The store will have about a dozen aisles, according to Gentry city superintendent David McNair.
It’s not clear from the planning materials how much of the product assortment will be groceries compared with general merchandise. Groceries accounted for 51 percent of Wal-Mart’s $258 billion in sales in the U.S. in fiscal 2010, according to company filings.
McNair said that when he first saw the layout earlier this year, Wal-Mart’s sponsorship of the project was not disclosed, with the plans calling the project simply a “Retail Store.”
“I only learned two weeks ago that it was Wal-Mart,” McNair said in an interview. “People said it may be a Target, or Wal-Mart, or Walgreen’s. Everyone had their own pet theory.”
Wal-Mart has tried smaller stores before. In 1998, the company launched Neighborhood Market, a 42,000-square-foot food- and-drugstore combination that did not deliver the return on investment provided by its supercenters, according to Maggie Gilliam, president of retail consulting firm Gilliam & Co.
Greatest Retail Concept
“Large stores are inherently more profitable than small ones,” said Gilliam, who is based in New York. “The supercenter is one of the greatest retail concepts ever created by mankind.”
In 2008, Wal-Mart rolled out the Marketside concept in Arizona, stores of 15,000 square feet that focused on fresh food and prepared meals. In 2009, the company converted two Neighborhood Market stores in Houston and Phoenix into Hispanic- themed grocery stores called Supermercado de Walmart, offering sweet breads and fresh corn tortillas.
As of Jan. 31, Wal-Mart had two Supermercados, four Marketside stores and 182 Neighborhood Markets. Internationally, Wal-Mart operates a broad range of smaller stores, particularly in Latin America. Simon has said that Wal-Mart’s smaller U.S. stores will draw upon what the retailer has learned abroad.
Wal-Mart rose 60 cents to $52.67 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 2.6 percent over the past 12 months.

Stocks fall sharply as economy looks less sure-footed

2011-03-11T00:20:00.001-08:00

NEW YORK — Stocks tumbled, giving the Dow Jones industrial average its biggest drop since August, as increases in jobless claims and the trade deficit and a slowdown in China’s export growth spurred concern the economy may falter.
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Caterpillar Inc. and United Technologies Corp. slumped at least 2.4 percent, pacing declines among industrial companies.
Exxon Mobil Corp. and Chevron Corp. dropped at least 3 percent as crude oil declined a third day amid investor concern that demand for fuel will
slow.
General Motors Co. decreased 2.6 percent after the largest US automaker said chief financial officer Chris Liddell will leave the company next month.
The Standard & Poor’s 500 index fell 1.9 percent to 1,295.11. The Dow slid 228.41 points, or 1.9 percent, to 11,984.68, its biggest drop since Aug. 11.
European shares tumbled as Spain’s credit rating was cut by Moody’s Investors Service. Oil pared an earlier drop, falling 1.6 percent to $102.76 a barrel, as the Associated Press reported that Saudi Arabian police had opened fire at a protest rally.
“On top of claims popping back up,’’ said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, “there’s worsening in the trade deficit at a time when the emerging world is slowing down and the Middle East crisis creates an unpredictable environment for oil.
“To make matters worse, Spain gets downgraded, which is an indication that the European crisis may be far from being put to bed.’’
The S&P 500 has fallen 3.6 percent from this year’s highest level, on Feb. 18, as oil surged amid unrest in Libya and the Middle East. The benchmark for US equities has rallied 91 percent from its bear-market low on March 9, 2009, amid government stimulus measures and as corporate earnings beat analysts’ estimates for eight straight quarters.
The index traded near its average price from the past 50 days, according to data compiled by Bloomberg. The S&P 500 has not closed below that threshold, a level watched by analysts who make forecasts based on chart patterns, since Sept. 1.
“Since the 50-day moving average is used by certain momentum-based traders, it would imply lower prices’’ if the index falls below, said Arthur Huprich, an analyst with Raymond James & Associates. Losses may accelerate should the S&P 500 fall below the Feb. 24 intraday low of 1,294.26, he said.
Earlier losses in US futures also came yesterday as China reported an unexpected $7.3 billion trade deficit, the biggest in seven years, buttressing its case against US arguments for faster gains in the yuan.
European shares fell as Spain’s rating was cut to Aa2 by Moody’s, which said the cost of shoring up banks will eclipse government estimates.
“There’s just a lot going on,’’ said Tommy Huie, chief investment officer of M&I Investment Management in Milwaukee. “I don’t think anyone is willing to commit large positions at this point. Investors will take a wait-and-see approach over the next week or two to rethink their strategy until things settle down.’’

AOL cuts jobs following HuffPo acquisition

2011-03-10T13:26:00.001-08:00

Web portal says layoffs amount to about 900 workers in U.S., India

SAN FRANCISCO (MarketWatch) — AOL Inc. began layoffs Thursday that will involve a little more than 900 workers — amounting to about 20% of its workforce — as the company continues to transition into an online media business.
A spokesman for AOL /quotes/comstock/13*!aol/quotes/nls/aol (AOL 18.92, -0.11, -0.58%) confirmed the layoffs on Thursday morning, which were originally reported late Wednesday on the All Things Digital blog owned by The Wall Street Journal.
The job cuts will involve about 200 workers at
the company’s media and technology operations in the U.S., and about 700 workers in India who were mostly involved in support work. The spokesman said a portion of these workers — about 300 — will transition to third-party companies that will continue to provide support services to AOL.
The move comes just days after AOL completed its $315 million acquisition of the Huffington Post, an online news site that will become the core of the combined company’s effort to transform into an online news and content outlet. None of the layoffs are coming out of the Huffington Post group, the company said.
On a day of broad losses in the technology sector, shares of AOL were down more than 1% to $19.11 by late afternoon trading.
The stock is down roughly 19% for the year to date.
AOL, which has been in a continuous process of transforming itself into an online media firm, while weaning itself from the Internet access business that defined it in the 1990s, signaled after announcing its purchase of Huffington Post in February that more restructuring was on the way.
David Joyce, an analyst who covers AOL for Miller Tabak + Co. LLC, said the job cuts coupled with the additional advertising revenue expected to result from the Huffington Post acquisition are a sign that AOL is turning a corner, following a relatively rough ride since being spun out of former parent Time Warner Inc. /quotes/comstock/13*!twx/quotes/nls/twx (TWX 35.69, -0.61, -1.67%) at the end of 2009.
“They are replacing unprofitable websites with new acquisitions, shutting some services, and it’s all aimed toward regaining profitability,” Joyce said.
Joyce raised his rating on AOL shares to Buy from Neutral on Thursday, with a price target of $25.
AOL has shuttered a number of properties deemed money losers, while outsourcing its health, sports and real estate content to partners.
When AOL acquired Huffington Post, it named co-founder Arianna Huffington president of Huffington Post Media Group, which encompasses a collection of AOL content sources.
AOL Chief Financial Officer Arthur Minson said during a conference call after the Huffington Post deal was announced that he expects the media outfit to “do over $50 million in revenue” in 2011, and to be on pace to pull in $100 million in revenue annually within the next year, at a roughly 30% margin.
AOL has also sought to develop new online media models independent of Huffington Post, such as the Seed content platform and Patch hyper-local news sites based in mid-sized cities across the U.S.
Yet AOL is still relying on the dwindling cushion of revenue provided by its access business, a legacy from a different era.
In its fourth quarter ended in December, AOL reported that subscription revenue fell 23% to $235.9 million, out of $596 million in total revenue in the period. Meanwhile advertising revenue slipped nearly 30% in the quarter, as the company shed operations in France and Germany and sold messaging service ICQ.
AOL is also facing significant competition in the online media market.
Yahoo Inc. /quotes/comstock/15*!yhoo/quotes/nls/yhoo (YHOO 17.06, -0.59, -3.34%) has sought to expand its online content and display advertising businesses, and purchased Associated Content to help push it further in that direction last year. Meanwhile, Demand Media Inc. /quotes/comstock/13*!dmd/quotes/nls/dmd (DMD 22.62, -0.39, -1.70%) , which went public in earlier this year, has also been developing new online content and advertising models.
AOL’s Minson, during the conference call in February, signaled that the company management team is approaching its transformation with a certain sense of urgency. “As you’ve heard us say, AOL is not a one-year turnaround story,” Minson said, “but we did not come here for it to take five years.”