(AFP)--Italian auto maker Fiat SpA (F.MI) has raised its offer for troubled German rival Adam Opel AG to EUR1 billion, a labor leader told AFP Monday.
"Fiat has raised its offer a little to EUR1 billion," Rainer Einenkel, head of the Opel works committee at Opel's factory in Bochum in west Germany, said.
Another German union leader, Armin Schild, had said previously that the offer was worth less than EUR750 million.
But Einenkel, who works at the Opel plant in western Bochum, said one billion wasn't enough, noting that Opel needed EUR3.3 billion to keep running and develop further.
Fiat has not yet unveiled a true "financial plan and production plan," he added.
Read more here
Monday, May 4, 2009
Sunday, May 3, 2009
Colleges Flunk Economics Test as Harvard Model Destroys Budgets
(Bloomberg) -- On a Thursday morning in March, the $32 million School of Management building at Simmons College in Boston is all but deserted. Three students lounge in armchairs facing floor-to-ceiling windows that look over the quad with its winding walkways and greening lawn; another makes photocopies.
“This building is always empty,” says Raya Alazzouni, a sophomore from Saudi Arabia who’s studying graphic design and taking courses in the management school.
Simmons, home to 4,700 students, opened the 66,500-square- foot (6,200-square-meter) center in January, two months before the U.S. stock market hit its lowest point in 12 years. Even before the ribbon cutting, enrollment in the management school had been dropping.
Now, the vacant halls are reminders of the new math confounding U.S. colleges. Students, pummeled by scarce loans and savings plans that have fallen as much as 40 percent, are heading for less expensive schools. The perks designed to lure them during boom times -- from hot tubs to dorm-suite kitchenettes, to in-room cable TV -- are crushing universities with debt. Even projects like Simmons’s “green” management building, with its rain-absorbing roof patio and toilets with two flushing modes, can turn into burdens as schools struggle with rising expenses, plummeting endowments and needier applicants.
‘Spending Binge’
“The spending binge by colleges and universities was part of the same trend that created the bubble in the rest of the economy,” says Ronald Ehrenberg, an economics professor at Cornell University in Ithaca, New York, and author of “Tuition Rising: Why College Costs So Much” (Harvard University Press, 2000). “Now we’re seeing it burst.”
From Harvard University to California’s 3 million-student community college network, the American system of higher education is in turmoil. The economic crash is upending each step in the equation that families use to determine where students will spend four of their most formative -- and expensive -- years. Today is the deadline that most schools set to receive a decision from accepted applicants.
Independent colleges that lack a national name or must-have majors are hardest hit. Many gorged on debt for construction, technology and creature comforts. Now, as endowments tumble and bills mount, they’re struggling to attract cash-strapped families who are navigating their own financial woes.
Shutter Their Doors
Such mid-tier institutions may be forced to change what they do to survive. In the best case, they’ll merge with bigger schools, sell themselves to for-profit organizations or offer vocational training that elite colleges eschew, says Sandy Baum, a senior policy analyst at the College Board. In the worst case, they’ll shutter their doors for good.
Standard & Poor’s predicts bankruptcies will rise from the typical one or two schools that fold each year.
“Small colleges with no reputation could go out of business,” Baum says. “They’re very tuition-driven, so if they can’t get tuition revenues, they’ll be in really bad shape.”
College of Santa Fe, a private liberal arts institution, is one casualty. On March 24, the 1,900-student school in New Mexico announced it was closing. The reasons: It couldn’t pay its $30 million in debt, and talks to join with New Mexico Highlands University, a state school, broke down.
Richard Kneedler, a former president of Franklin & Marshall College, a Lancaster, Pennsylvania-based college founded in 1787 with financial support from Benjamin Franklin, says many small schools face the same predicament.
Read more here
“This building is always empty,” says Raya Alazzouni, a sophomore from Saudi Arabia who’s studying graphic design and taking courses in the management school.
Simmons, home to 4,700 students, opened the 66,500-square- foot (6,200-square-meter) center in January, two months before the U.S. stock market hit its lowest point in 12 years. Even before the ribbon cutting, enrollment in the management school had been dropping.
Now, the vacant halls are reminders of the new math confounding U.S. colleges. Students, pummeled by scarce loans and savings plans that have fallen as much as 40 percent, are heading for less expensive schools. The perks designed to lure them during boom times -- from hot tubs to dorm-suite kitchenettes, to in-room cable TV -- are crushing universities with debt. Even projects like Simmons’s “green” management building, with its rain-absorbing roof patio and toilets with two flushing modes, can turn into burdens as schools struggle with rising expenses, plummeting endowments and needier applicants.
‘Spending Binge’
“The spending binge by colleges and universities was part of the same trend that created the bubble in the rest of the economy,” says Ronald Ehrenberg, an economics professor at Cornell University in Ithaca, New York, and author of “Tuition Rising: Why College Costs So Much” (Harvard University Press, 2000). “Now we’re seeing it burst.”
From Harvard University to California’s 3 million-student community college network, the American system of higher education is in turmoil. The economic crash is upending each step in the equation that families use to determine where students will spend four of their most formative -- and expensive -- years. Today is the deadline that most schools set to receive a decision from accepted applicants.
Independent colleges that lack a national name or must-have majors are hardest hit. Many gorged on debt for construction, technology and creature comforts. Now, as endowments tumble and bills mount, they’re struggling to attract cash-strapped families who are navigating their own financial woes.
Shutter Their Doors
Such mid-tier institutions may be forced to change what they do to survive. In the best case, they’ll merge with bigger schools, sell themselves to for-profit organizations or offer vocational training that elite colleges eschew, says Sandy Baum, a senior policy analyst at the College Board. In the worst case, they’ll shutter their doors for good.
Standard & Poor’s predicts bankruptcies will rise from the typical one or two schools that fold each year.
“Small colleges with no reputation could go out of business,” Baum says. “They’re very tuition-driven, so if they can’t get tuition revenues, they’ll be in really bad shape.”
College of Santa Fe, a private liberal arts institution, is one casualty. On March 24, the 1,900-student school in New Mexico announced it was closing. The reasons: It couldn’t pay its $30 million in debt, and talks to join with New Mexico Highlands University, a state school, broke down.
Richard Kneedler, a former president of Franklin & Marshall College, a Lancaster, Pennsylvania-based college founded in 1787 with financial support from Benjamin Franklin, says many small schools face the same predicament.
Read more here
Tuesday, April 28, 2009
The new China rules for investing
(Fortune) -- It feels nothing like 2007 these days, except in one respect: Chinese stocks are outperforming again. The MSCI China Index, which tracks stocks traded in Hong Kong, has climbed 67% since late October (the S&P 500 has risen 2% in that time).
Analysts are debating whether or not the rally - which has slowed in recent weeks - will persist. Morgan Stanley strategist Jerry Lou warned investors last week that Chinese stocks were overvalued, writing in a note, "Although we now envision a marginally less severe earnings recession in 2009...the market has rallied ahead of fundamentals." Meanwhile, Goldman Sach's Hong Kong strategist, Timothy Moe, raised his forecasts for two Chinese stock indexes on Monday.
"People are worried that these stocks have run up too far," says Hong Hao, an analyst at Brean, Murray, Carret & Co. "But we're still talking about extremely low valuation multiples." The price to earnings ratio of the MSCI China index is currently 12 - three points higher than it was last fall, but twenty points lower than it was in late 2007.
Like U.S. companies, Chinese businesses are reporting underwhelming (although less dismal) earnings. Telecom China Mobile's 5% profit growth last quarter fell below analyst estimates, and state-owned carrier Air China's earnings declined 6%. But while the U.S. market has received little support from its sagging economy, China's economic data has perked up.
"Just about every indicator in China suggests that things have been looking up for months," says Larry Kantor, the head of research at Barclays Capital. "If I had to pinpoint a bottom, I'd say it happened in November or December."
Last fall, the Chinese market was stuck in a rut - stocks sank 60% from August through October, and the country' once-unstoppable gross domestic product growth began to peter out. When American investors' emerging market funds plummeted, they learned that China's export-driven economy was far from decoupled from the U.S.
Read more here
Analysts are debating whether or not the rally - which has slowed in recent weeks - will persist. Morgan Stanley strategist Jerry Lou warned investors last week that Chinese stocks were overvalued, writing in a note, "Although we now envision a marginally less severe earnings recession in 2009...the market has rallied ahead of fundamentals." Meanwhile, Goldman Sach's Hong Kong strategist, Timothy Moe, raised his forecasts for two Chinese stock indexes on Monday.
"People are worried that these stocks have run up too far," says Hong Hao, an analyst at Brean, Murray, Carret & Co. "But we're still talking about extremely low valuation multiples." The price to earnings ratio of the MSCI China index is currently 12 - three points higher than it was last fall, but twenty points lower than it was in late 2007.
Like U.S. companies, Chinese businesses are reporting underwhelming (although less dismal) earnings. Telecom China Mobile's 5% profit growth last quarter fell below analyst estimates, and state-owned carrier Air China's earnings declined 6%. But while the U.S. market has received little support from its sagging economy, China's economic data has perked up.
"Just about every indicator in China suggests that things have been looking up for months," says Larry Kantor, the head of research at Barclays Capital. "If I had to pinpoint a bottom, I'd say it happened in November or December."
Last fall, the Chinese market was stuck in a rut - stocks sank 60% from August through October, and the country' once-unstoppable gross domestic product growth began to peter out. When American investors' emerging market funds plummeted, they learned that China's export-driven economy was far from decoupled from the U.S.
Read more here
Monday, April 27, 2009
Bair Looks Beyond Stress Tests, Seeks End to ‘Too Big to Fail’
(Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair, looking beyond stress tests that will determine the health of the top 19 U.S. banks, said her agency should have the authority to close even the biggest lenders.
The “too-big-to-fail concept” should be “tossed into the dustbin,” and the FDIC should have the power to close “systemically important” financial firms, Bair said in a New York speech yesterday. “Given our many years of experience resolving banks and closing them, we’re well-suited to run a new resolution program,” she said.
Analysts are recalibrating their estimates of the results of the federal bank examinations after the government announced the test methodology last week. Lenders were given preliminary results on April 24 and have time to discuss them with regulators before the full readings are released on May 4.
“If the FDIC had the authority to close down non-banks as they’ve been able to close down banks, the cost to the taxpayer would have been much less,” said Sung Won-Sohn, former chief economist at Wells Fargo & Co. who is now a professor of economics and finance at California State University Channel Islands in Camarillo. “With the authority she’s talking about, the government could take preemptive action.”
U.S. regulators have provided more than $90 billion to Citigroup Inc. and Bank of America Corp., given more than $180 billion in loans to American International Group Inc. and established debt-guarantee programs. The FDIC wound down 29 failed banks and thrifts this year.
‘Unnecessary’
Analysts including Richard Bove of Rochdale Securities say the stress tests aren’t useful.
“This test still strikes me as being unnecessary, dangerous, and poorly conceived,” Bove wrote in an April 25 note to clients. “My fear is that this program will not only fail to raise more capital, but it will force banks to contract.”
Regions Financial Corp., the Alabama bank that has accepted $3.5 billion in U.S. assistance, declined 12 percent in New York trading yesterday as analysts said regulators may push the company to raise more capital to offset mounting losses.
The bank “probably has been told to raise additional equity capital with $7 billion to $8 billion of projected 2009- 2010 losses vs. $4 billion to $5 billion of pretax, pre- provision income,” analyst Jeff Davis of Howe Barnes Hoefer & Arnett Inc. said in a report yesterday.
Read more here
The “too-big-to-fail concept” should be “tossed into the dustbin,” and the FDIC should have the power to close “systemically important” financial firms, Bair said in a New York speech yesterday. “Given our many years of experience resolving banks and closing them, we’re well-suited to run a new resolution program,” she said.
Analysts are recalibrating their estimates of the results of the federal bank examinations after the government announced the test methodology last week. Lenders were given preliminary results on April 24 and have time to discuss them with regulators before the full readings are released on May 4.
“If the FDIC had the authority to close down non-banks as they’ve been able to close down banks, the cost to the taxpayer would have been much less,” said Sung Won-Sohn, former chief economist at Wells Fargo & Co. who is now a professor of economics and finance at California State University Channel Islands in Camarillo. “With the authority she’s talking about, the government could take preemptive action.”
U.S. regulators have provided more than $90 billion to Citigroup Inc. and Bank of America Corp., given more than $180 billion in loans to American International Group Inc. and established debt-guarantee programs. The FDIC wound down 29 failed banks and thrifts this year.
‘Unnecessary’
Analysts including Richard Bove of Rochdale Securities say the stress tests aren’t useful.
“This test still strikes me as being unnecessary, dangerous, and poorly conceived,” Bove wrote in an April 25 note to clients. “My fear is that this program will not only fail to raise more capital, but it will force banks to contract.”
Regions Financial Corp., the Alabama bank that has accepted $3.5 billion in U.S. assistance, declined 12 percent in New York trading yesterday as analysts said regulators may push the company to raise more capital to offset mounting losses.
The bank “probably has been told to raise additional equity capital with $7 billion to $8 billion of projected 2009- 2010 losses vs. $4 billion to $5 billion of pretax, pre- provision income,” analyst Jeff Davis of Howe Barnes Hoefer & Arnett Inc. said in a report yesterday.
Read more here
Thursday, April 23, 2009
Easing bottleneck shifts the bet on oil futures
(MarketWatch) - The fast-shrinking price gap between crude-oil futures for prompt delivery and crude destined for delivery months down the road is backfiring on investors who bet big that the gap would widen.
At the same time, the trend is playing nicely into the hands of investors in oil exchange-traded funds, who stand to benefit from the loss of a somewhat obscure hidden cost along the lengthy supply chain.
That cost loops back to Cushing, Oklahoma, the delivery point for light sweet crude contracts traded on the New York Mercantile Exchange. As a weak economy slowed demand for oil, crude supplies backed up at Cushing, with sellers wanting to hold barrels in anticipation of a price rebound. This, in turn, put further pressure on near-term prices as storage became a problem.
Late last year, this situation resulted in the January crude contract trading at a $8.49 discount to crude for delivery in February, a record between two successive months' contracts, and a situation known among futures traders as contango. The discount was so steep it got the label "super contango." See related story.
Demand for storage prompted oil supertankers around the world to drop anchor and become floating oil storage tanks.
But since December the contango gap has dropped sharply to less than $2, as Midwest refiners slowly shipped oil stored at Cushing to their refineries.
That drop has been a blow to the mostly institutional investors who took part in these complex trades, betting that the gap would stay wide. But for individual investors, who tend to simply bet on the direction of a single-month contract, the drop in the price gap has brought some relief from a so-called "roll-yield" cost that hits exchange-traded funds.
This cost, which is caused when ETFs that hold the front-month oil contract move their holdings into the next month contract, can penalize holders of funds like the United States Oil Fund , the biggest oil ETF.
The narrowing of contango will help reduce this cost, the fund says.
That relief may soon disappear, however. As summer driving season approaches, analysts expect contango to change course again, although not to approach its earlier record.
"You really have demand destruction now," said Tariq Zahir, managing member of New York-based trading firm Tyche Capital Advisors. Weak demand is pressuring the price of the front-month contract, he said.
"But you get a little bit support [in the following months] with the hurricane season coming up, and of course the driving season coming up, that can keep the price further out high," he added.
Zahir said he is betting on a wider contango going into summer. But he said he isn't trading the front-month contract because of "higher volatility," instead choosing to enter a contango trade between the July and August contracts.
As of Thursday's close, contango between the front-month June contract and July contract stood at $1.45 a barrel, while contango between the July and August contract stood at $1.26.
On Thursday oil ended up 77 cents, or 1.6%, to $49.62 a barrel. Front-month contracts have gained 11% so far this year
Read more here
At the same time, the trend is playing nicely into the hands of investors in oil exchange-traded funds, who stand to benefit from the loss of a somewhat obscure hidden cost along the lengthy supply chain.
That cost loops back to Cushing, Oklahoma, the delivery point for light sweet crude contracts traded on the New York Mercantile Exchange. As a weak economy slowed demand for oil, crude supplies backed up at Cushing, with sellers wanting to hold barrels in anticipation of a price rebound. This, in turn, put further pressure on near-term prices as storage became a problem.
Late last year, this situation resulted in the January crude contract trading at a $8.49 discount to crude for delivery in February, a record between two successive months' contracts, and a situation known among futures traders as contango. The discount was so steep it got the label "super contango." See related story.
Demand for storage prompted oil supertankers around the world to drop anchor and become floating oil storage tanks.
But since December the contango gap has dropped sharply to less than $2, as Midwest refiners slowly shipped oil stored at Cushing to their refineries.
That drop has been a blow to the mostly institutional investors who took part in these complex trades, betting that the gap would stay wide. But for individual investors, who tend to simply bet on the direction of a single-month contract, the drop in the price gap has brought some relief from a so-called "roll-yield" cost that hits exchange-traded funds.
This cost, which is caused when ETFs that hold the front-month oil contract move their holdings into the next month contract, can penalize holders of funds like the United States Oil Fund , the biggest oil ETF.
The narrowing of contango will help reduce this cost, the fund says.
That relief may soon disappear, however. As summer driving season approaches, analysts expect contango to change course again, although not to approach its earlier record.
"You really have demand destruction now," said Tariq Zahir, managing member of New York-based trading firm Tyche Capital Advisors. Weak demand is pressuring the price of the front-month contract, he said.
"But you get a little bit support [in the following months] with the hurricane season coming up, and of course the driving season coming up, that can keep the price further out high," he added.
Zahir said he is betting on a wider contango going into summer. But he said he isn't trading the front-month contract because of "higher volatility," instead choosing to enter a contango trade between the July and August contracts.
As of Thursday's close, contango between the front-month June contract and July contract stood at $1.45 a barrel, while contango between the July and August contract stood at $1.26.
On Thursday oil ended up 77 cents, or 1.6%, to $49.62 a barrel. Front-month contracts have gained 11% so far this year
Read more here
Wednesday, April 22, 2009
Li Scraps Bid to Buy Out PCCW After Hong Kong Court Blocks Deal
(Bloomberg) -- PCCW Ltd. Chairman Richard Li abandoned his $2.1 billion bid to buy out Hong Kong’s biggest phone company after the city’s Court of Appeal blocked the deal, prompting the stock’s biggest decline in more than eight years.
Li and co-bidder China United Network Communications Group Corp. will not extend the offer beyond the original deadline of today, PCCW said in a statement to the city’s stock exchange. The shares, which resumed trading after being suspended since April 16, plunged 14 percent to HK$3.54 as of 10:01 a.m., the biggest decline since September 2000.
The Court of Appeal yesterday overturned a lower-court verdict on April 6, blocking Li’s five-month effort to buy the city’s biggest phone company. The ruling may prevent Li, who has tried to reduce his PCCW stake three times in the past three years, from taking over the company for at least 12 months.
“Regulations prohibit another bid for a year,” Anand Ramachandran, an analyst at Citigroup Inc., wrote in a report today. “An aborted stake sale process has proven other acquirers are not willing to pay what shareholders desire.” Citigroup downgraded the stock to “sell” from “hold” and cut the share- price estimate 27 percent to HK$3.
Li, the 42-year-old son of Hong Kong’s richest man, and co- bidder China United, which is the second-biggest shareholder in the phone company, offered to pay HK$4.50 a share to take over the company.
PCCW will continue with the planned payment of a special dividend of HK$1.30 per share and will resume its regular payout policy, the company said in the statement.
Read more here
Li and co-bidder China United Network Communications Group Corp. will not extend the offer beyond the original deadline of today, PCCW said in a statement to the city’s stock exchange. The shares, which resumed trading after being suspended since April 16, plunged 14 percent to HK$3.54 as of 10:01 a.m., the biggest decline since September 2000.
The Court of Appeal yesterday overturned a lower-court verdict on April 6, blocking Li’s five-month effort to buy the city’s biggest phone company. The ruling may prevent Li, who has tried to reduce his PCCW stake three times in the past three years, from taking over the company for at least 12 months.
“Regulations prohibit another bid for a year,” Anand Ramachandran, an analyst at Citigroup Inc., wrote in a report today. “An aborted stake sale process has proven other acquirers are not willing to pay what shareholders desire.” Citigroup downgraded the stock to “sell” from “hold” and cut the share- price estimate 27 percent to HK$3.
Li, the 42-year-old son of Hong Kong’s richest man, and co- bidder China United, which is the second-biggest shareholder in the phone company, offered to pay HK$4.50 a share to take over the company.
PCCW will continue with the planned payment of a special dividend of HK$1.30 per share and will resume its regular payout policy, the company said in the statement.
Read more here
Monday, April 20, 2009
DRDGold less risky by Sept '09
DRDGold is ramping up gold output from surface and underground operations as it looks for project-level acquisitions to grow the company, an issue further down on its list of priorities.
"We are not a one big-deal company. If something is for sale that fits a profile of making money or is close to making money that is not ultra-deep, or a company killer, like we used to own at Buffelsfontein, we would look at buying it," said DRDGold CEO Niel Pretorius.
"We would look to grow our production by way of small, intelligent acquisitions, maybe at project level and not so much at corporate level," he told Miningmx in a recent interview.
However, acquisitions are not top of mind at the moment, with management preferring to focus on bringing its Ergo surface treatment operation into steady state production from September, keeping output disruptions at its Crown and City Deep operations at a minimum and working on ramping up tonnages from its Blyvoor mine.
DRDGold's output is drawn equally from surface and tailings operations. That will change when Ergo hits its stride, with two-thirds of the group's gold coming from a cheaper, safer surface project.
Ergo is forecast to produce 75 000 ounces/year at $550/oz. Crown produced 87 400 oz in financial 2008, at a cost of $553/oz.
"A larger percentage of ounces coming in below $600/oz will soften the impact of those months when underground costs spiral," Pretorius said. "Not only that, but having more surface ounces significantly de-risks the company."
Management wants infrastructure in place to pump material from its Crown and City Deep projects once the deposition sites they are using are full.
"What we want to look at once we achieve steady state production is how quickly we can link Central Rand to the far East Rand in order to perpetuate life of Crown and City Deep," Pretorius said.
"We are in the hands of the contractor there and it depends how nervous they get. We've enough time to finish Top Star, but that might change tomorrow," he said.
"We have enough deposition space on the East Rand to provide for Ergo and Central Rand. I want to get running sooner rather than later on linking Central Rand to Ergo, because I don't want to see an interruption to any of our production."
Read more here
"We are not a one big-deal company. If something is for sale that fits a profile of making money or is close to making money that is not ultra-deep, or a company killer, like we used to own at Buffelsfontein, we would look at buying it," said DRDGold CEO Niel Pretorius.
"We would look to grow our production by way of small, intelligent acquisitions, maybe at project level and not so much at corporate level," he told Miningmx in a recent interview.
However, acquisitions are not top of mind at the moment, with management preferring to focus on bringing its Ergo surface treatment operation into steady state production from September, keeping output disruptions at its Crown and City Deep operations at a minimum and working on ramping up tonnages from its Blyvoor mine.
DRDGold's output is drawn equally from surface and tailings operations. That will change when Ergo hits its stride, with two-thirds of the group's gold coming from a cheaper, safer surface project.
Ergo is forecast to produce 75 000 ounces/year at $550/oz. Crown produced 87 400 oz in financial 2008, at a cost of $553/oz.
"A larger percentage of ounces coming in below $600/oz will soften the impact of those months when underground costs spiral," Pretorius said. "Not only that, but having more surface ounces significantly de-risks the company."
Management wants infrastructure in place to pump material from its Crown and City Deep projects once the deposition sites they are using are full.
"What we want to look at once we achieve steady state production is how quickly we can link Central Rand to the far East Rand in order to perpetuate life of Crown and City Deep," Pretorius said.
"We are in the hands of the contractor there and it depends how nervous they get. We've enough time to finish Top Star, but that might change tomorrow," he said.
"We have enough deposition space on the East Rand to provide for Ergo and Central Rand. I want to get running sooner rather than later on linking Central Rand to Ergo, because I don't want to see an interruption to any of our production."
Read more here
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