Wednesday, October 21, 2009

Obama to Offer Banks Capital for More Small Businesses Lending

By Rebecca Christie and Hans Nichols

Oct. 21 (Bloomberg) -- President Barack Obama plans to announce new measures to open up credit for small businesses, including capital injections for community banks to spur lending, the administration said. Community banks with less than $1 billion in assets will be eligible for lower-cost capital if they submit a small business lending plan and document their lending in quarterly reports, according to a White House fact sheet. If approved by regulators, these banks would pay the government an initial 3 percent dividend on the injection, instead of the previous 5 percent rate. Obama also will seek legislation raising the limits for Small Business Administration loans from $2 million to $5 million and as much as $5.5 million for manufacturing. The president will visit a small business in Maryland this afternoon to make the announcement, White House press secretary Robert Gibbs said. The Treasury Department will work with banks to develop program terms, including ways they could replace older, and more expensive, infusions from the Troubled Asset Relief Program. The Treasury also is looking at ways to expand its Community Development Financial Institutions program to promote small business lending, according to the administration statement. Some credit unions also will be eligible for capital assistance under the administration’s new plan, the first time those institutions have had access to the bank rescue funds, according to the fact sheet. Credit unions that qualify as community development financial institutions will be able to apply for capital injections in the form of subordinated debt.

Conference of Regulators

In addition, Obama will call for Treasury Secretary Timothy Geithner and SBA administrator Karen Mills “to convene a conference of regulators, congressional leaders and small business owners to establish further steps the government can take to help small businesses achieve greater access to capital,” Gibbs said this morning. Senate Democrats are pushing for more aid to small businesses to counter the perception that the administration is focusing on big banks. The announcement comes seven months after the Treasury’s March announcement of a $15 billion program to purchase pools of SBA loans, which so far has not been implemented. “We see continued evidence that Wall Street has been stabilized, but to date it seems that Main Street continues to struggle to create new jobs,” Senator Mark Warner, a Virginia Democrat on the banking committee, wrote in a letter to Obama yesterday that was signed by 30 other lawmakers. Co-signers include Senate Banking Committee Chairman Christopher Dodd of Connecticut.

New TARP Program

The lawmakers called on Obama to redirect bank rescue funds for community lending by creating a new program within the $700 billion TARP. The program suggests using federal financing to anchor a $40 billion pool to support new lending, accompanied by as much as $10 billion in private investment.

Gibbs said “Geithner’s announcement of TARP programs that had been set up for larger banks and were used also for the auto industry will begin to wind down.” Obama’s announcement today won’t dissuade Warner from pushing for further assistance to small businesses to make it easier for them to hire, aides said. “We certainly intend to continue working on this issue,” spokesman Kevin Hall said. Some Republican lawmakers argued that Obama’s small- business initiative won’t make a difference if Congress places new tax burdens on companies by enacting health-care legislation.

Pink Slip

“The president offering bailout funds to small businesses while pushing a government takeover of health care is like getting a Christmas bonus right before you get a pink slip,” said Indiana Representative Mike Pence, chairman of the House Republican Conference. House Republican Leader John Boehner said lower taxes and other policies to help small businesses invest in equipment and jobs are needed to restart the economy. “Until we get the small businesses working again, we are not going to get the economy working again,” he said. Uncertainty about more expenses contained in health-care and energy legislation is causing small business owners “to sit on their hands,” he said.

Fiat 3Q Trading Pft Down 62%, Write-Offs Seen

By Gilles Castonguay (Wall Street Journal)


MILAN (Dow Jones)--Italian auto maker Fiat SpA (F.MI) Wednesday posted a 62% drop in quarterly trading profit as the recession hit its sales hard, and it spoke of possible write-downs due to its partnership with Chrysler Group LLC. The warning is one of the first signs that its holding in the U.S. car maker, brokered by the U.S. government earlier this year, could weigh on its earnings even though Fiat had vowed it would not cost it any money.

"This is a sign that it might have an impact on its P&L," one London analyst said on condition of anonymity. In June, Fiat took a 20% stake and full management control of Chrysler. Fiat said it was reviewing the carrying value of some investments in platforms and architectures, especially in its cars, as it aligned its business with that of the U.S. company. "The group may revisit the future viability of some of its past investments, necessitating the write-off, as unusual items, of these legacy investments," it said. "They will not have a cash impact."

Fiat Chief Executive Sergio Marchionne declined to elaborate on a conference call with analysts ahead of the Nov. 4 presentation of his plan to revive Chrysler. UBS analyst Philippe Houchois said it likely meant ditching old platforms at the cost of hundreds of millions of euros. For the third quarter, Fiat's net profit tumbled 95% to EUR25 million, as revenue fell 16% to EUR12 billion. Its closely-watched trading profit - operating profit excluding exceptional items - totaled EUR308 million, ahead of analysts' expectations of EUR260 million, according to a Fiat poll.

"Aggressive cost containment actions helped mitigate the effect of revenue declines and pushed trading margins up to 2.6% (against 2.4% in the second quarter)," Fiat said in a statement. Like other car makers, the Turin-based maker of Fiat, Alfa Romeo and Lancia cars has suspended some production at its factories, cut costs and reduced cash burn in the face of the downturn. Fiat confirmed its 2009 targets, including a group trading profit exceeding EUR1 billion and a net industrial debt of less than EUR5 billion. Marchionne told analysts he expected Fiat to produce a trading profit of EUR1.5 billion in 2010 on a 2%-3% rise in sales as long as the government in its home market of Italy extended its scrapping scheme in some form beyond the Dec. 31 deadline.

Fiat and other manufacturers have had a fillip over the summer and autumn with demand for their cars being bolstered by government schemes across Europe to encourage the scrapping of old cars and the purchase of new, less polluting ones. Industry experts fear demand will fall once more when the scrapping schemes end. As for its Iveco truck and CNH (CNH) agriculture and construction equipment units, Fiat said it expected them to keep facing depressed demand for the whole year. Fiat shares ended 2.05% down at EUR11 in Milan, following the whole European auto sector lower following the publication of lower sales figures by France's PSA Peugeot-Citroen (UG.FR) earlier Wednesday. One Milan analyst cited profit-taking after a surge in Fiat's stock ahead of its results as well as speculation on the extent of the write-offs.

Wednesday, October 7, 2009

Alcoa Posts Surprise Profit on Cost Cuts

By KATHY SHWIFF (Wall Street Journal)

Alcoa Inc. posted a third-quarter profit–after three quarterly losses in a row–surprising Wall Street, which had expected another loss, and getting the third-quarter earnings season off to a good start. Chief Executive Klaus Kleinfeld said cost-cutting and other steps the aluminum giant took earlier this year had a strong effect on the cash position and profit. "Despite unfavorable currency and energy headwinds, our performance this quarter indicates that Alcoa is weathering the economic storm and is in excellent shape to benefit when the market recovers," he added. Alcoa, the first blue-chip company to release quarterly results, said it sees signs that key markets are stabilizing and predicted global aluminum consumption would increase 11% in the second half of 2009. The company has cut output and costs during a brutal period for the aluminum industry, saving $1.61 billion in procurement costs and $375 million in overhead so far this year. Reductions in working capital generated $780 million in cash. Alcoa said it finished the quarter with $1.1 billion of cash on hand, up 29% from the end of the second quarter.

The company also has been investing in areas expected to recover early from the economic downturn, ranging from a construction-products factory in Russia to a small fasteners business in Morocco to sections of the oil-and-gas industry. Alcoa reported a profit of $77 million, or 8 cents a share, down from a year-earlier profit of $268 million, or 33 cents a share. The latest results included 3 cents a share in restructuring and other charges. Prior-year results included a 4-cent charge related to the curtailment of a smelter in Texas. Excluding items, earnings were 4 cents a share in the latest period. Revenue dropped 34% to $4.62 billion. Analysts' estimates were for a loss of 9 cents a share on revenue of $4.55 billion, according to a poll by Thomson Reuters. Alcoa's average realized aluminum price during the third quarter was $1,972 a metric ton, up 18% from the previous quarter. Shipments declined 8.3%. The company posted profits in all segments of its business, except primary metals. Alcoa's shares closed Wednesday up 2.2% at $14.20; trading was halted after hours. The stock, which has been rising recently on optimism about its results, has almost tripled from a 21-year low in March but is still down one-quarter from a year ago.

Russia lauds birthday strongman Putin

By Anna Smolchenko (AFP)

MOSCOW — An ode was published in his honour. A painting was given to him by the president. A novelist wished him a long life. And the Orthodox Church praised him for his tact. There was no shortage of leading Russians Wednesday queuing up to congratulate their favourite politician Vladimir Putin on his 57th birthday, with his critics still sidelined after 10 years in power. "Fifty-seven years is an average age," mused leading novelist Valentin Rasputin at a meeting Putin attended with some of Russia's best known writers.

"Today people live for a long time and statesmen -- the more they work... the more energies remain for the rest of the life," Rasputin was quoted as saying by Russia's official news agency ITAR-TASS. "God willing you manage the same. We wish everything goes well for you. And what is well? That means well for the country, well for us." Analysts say Putin, who served eight years as Russia's second post-Soviet president and has now settled comfortably into the role of prime minister, remains Russia's favourite politician. He is keeping the world in suspense over whether he is plotting a return to the Kremlin but if he wins the 2012 polls he is likely to stay in power for another 12 years, until he turns 72.

A Russian newspaper, the Nezavisimaya Gazeta, carried an ode in honour of Putin on its front page that stepped a fine line between eulogy and irony. "I congratulate you, comrade Putin/ And may God give you another 120 years," it said. Patriarch Kirill, head of the Russian Orthodox Church, extolled what he described as Putin's openness, wisdom and tact.

"With inherent tact you persistently defend the interests of the state, confirming the authority of power far outside the country's borders," he said in a statement posted on the Church's website. Putin's protege and now president, Dmitry Medvedev, also took the time to meet with Putin and presented him with a painting, the Russian television said. Earlier Wednesday, Putin met with some of Russia's leading writers at the Pushkin Art Museum in Moscow, pledging more financial aide for them in an apparent attempt to win the intellectuals' support. But several top writers, including author Dmitry Bykov and prize-winning novelist Lyudmila Ulitskaya, said they had declined invitations to meet Putin.

"I am not attending," Ulitskaya told AFP.

"I am leaving today on my holidays and I bought my tickets in advance," she added without giving further details. Later Wednesday, Bykov attended an event to mark the memory of Anna Politkovskaya, an anti-Kremlin journalist killed three years ago. Neither the Kremlin nor Putin made any statements regarding her unsolved murder in 2006.
Bykov told Moscow Echo radio that he would have considered attending, but Putin's birthday was a bad choice for the event.

"The fact it's on his birthday turns it into protocol. My upbringing does not allow me to see someone on his birthday and then talk about problems with him, to express criticism." Putin's spokesman Dmitry Peskov confirmed that several writers were unable to come but denied this was because of any objections towards the prime minister. Putin loses no opportunity to stress that he is in good physical health -- be it by posturing with a naked torso in the Russian wilderness or diving to the bottom of the world's deepest lake. Moskovsky Komsomolets, a newspaper seen as being close to the Kremlin, said Medvedev's main problem was the elite didn't consider him to be a decision maker. "At a time when the president makes his speeches, the prime minister makes all the real decisions," it said. "That's the main internal political challenge faced today by Dmitry Medvedev."

Dell to lay off 905 in plant closure

By David Goldman, staff writer

NEW YORK ( -- Computer maker Dell announced on Wednesday that it will close a plant in Winston-Salem, N.C., and will cut 905 jobs as a result. Dell said that 600 plant workers will be laid off in November, and the remaining 305 employees will be cut by January 2010, when the plant is scheduled to close. The cuts represent about 1% of the company's 76,000 employees. "This is a difficult decision, especially for our North Carolina colleagues, but a necessary one for Dell customers and our company," said Frank Miller, vice president of Dell, in a statement. "The efforts of our team members there have been significant and we're committed to helping them through their transition."

The Winston-Salem plant was used to make desktop computers. The company said the plant closing is part of a larger effort to simplify Dell's operations and improve its efficiency. Dell began cutting back staff and closing plants in January. In late September, Dell bought tech services provider Perot Systems (PER) for $3.9 billion as part of an effort to seek an additional source of revenue. Until the Perot deal, Dell has strictly been a hardware company, selling PCs and servers to its customers. But businesses have relied less on hardware recently, buying fewer computers and outsourcing their servers during the recent economic recession. Consumers also made fewer desktop and laptop purchases during the downturn. That cut into Dell's sales and profit in recent quarters and sent the stock down to an 11-year low in March before rebounding in recent months. Shares of Dell (DELL, Fortune 500) fell more than 1% in afternoon trading.