Merrill Lynch & Co Inc (MER.N) is
setting up a group to get rid of troubled or underperforming
assets and named U.S. fixed income sales head Doug Mallach its
head, according to an internal memo.
The group will help the brokerage figure out what to do
with assets such as collateralized debt obligations that have
been hammered by the subprime mortgage crisis. Mallach is
putting together a team to figure out whether to sell,
restructure, or hold onto these assets, a person briefed in the
Merrill Lynch has been battered by the widening credit
crisis, having written down more than $30 billion of assets
since the middle of last year.
That is why the bank is generally looking to slim down its
trillion dollars of assets and raise capital. The investment
bank is shrinking its mortgage and structured finance business,
selling off assets that trade infrequently and reducing certain
kinds of trading activity.
"We ... have to be better at using our balance sheet," said
John Thain, chief executive, on a conference call in January.
Regulators and investors globally are pushing banks to shed
assets and raise capital to reduce leverage, or debt levels
relative to assets.
In addition to assets such as CDOs, Mallach will deal with
assets that do not meet Merrill Lynch's performance hurdles.
The precise size of assets that Mallach -- a 17-year
Merrill veteran -- will manage is not clear. The bank had more
than $6.6 billion of net exposure to asset-backed CDOs as of
Mallach's group will focus on assets in the fixed income,
currencies and commodities business, where he was previously
head of the sales for the Americas.
Other banks have taken steps to separate underperforming
assets from the rest of their balance sheet. Citigroup Inc
(C.N) in November said Richard Stuckey, who helped stabilize
hedge fund Long-Term Capital Management, was going to fix its
troubled subprime mortgage portfolio.
(Reporting by Dan Wilchins; Editing by Andre Grenon)
Workers at American Axle &
Manufacturing Holdings Inc (AXL.N) on Thursday ratified a
contract that cuts wages and costs, ending an 87-day-strike
with a vote by the auto supplier's main Detroit plant to back
The vote by United Auto Workers Local 235, which represents
about 1,900 of 3,650 American Axle's unionized workers, removed
a major source of uncertainty for General Motors Corp, (GM.N)
the supplier's largest customer.
Other UAW locals in Three Rivers, Michigan, and in New York
had already voted overwhelmingly to ratify the four-year
contract this week.
The vote at UAW Local 235 was seen as the biggest hurdle
for the proposed contract because of opposition from workers at
the Detroit plant frustrated that union negotiators had not
turned back more of the company's demands for concessions.
UAW officials said the contract had been supported by 1,172
votes cast in favor of ratification at the Detroit plant out of
a total of 1,314 votes deemed valid.
The UAW said the contract was ratified by a margin of 78
percent of the overall votes cast at five U.S. plants,
including three facilities that will now be closed.
Some workers at the company's flagship Detroit gear and
axle plant could return to work next week after the U.S.
holiday, for Memorial Day on Monday, UAW officials said.
Despite the contract's tough terms, including a cut in
wages by over a third, many American Axle workers said they
were concerned that the weak U.S. economy and slumping truck
sales would undermine any attempt to win more.
"I think a lot of people feared this is what they had to
do," said Dana Edwards, UAW Local 235 shop chairman after the
ratification result was announced.
Senior UAW officials had offered only a grudging
endorsement of the contract while telling workers it
represented the best deal that could be won.
"Our members have had to make some tough decisions for
themselves and their families and have done so with careful
deliberation," UAW President Ron Gettelfinger said in a
American Axle said the union had told it that the contract
had been ratified. Spokeswoman Renee Rogers said the company
would have no further comment on Thursday night.
Separately, a union official said American Axle projects
total costs of about $398 million to buy out retiring workers
and provide "buydowns" in exchange for the lower wages for
those who remain.
Detroit-based American Axle has not detailed financial
projections based on the contract, the key issue for Wall
Street analysts. Their forecasts have been based on information
provided by the union.
American Axle told union negotiators during talks that it
expected to cut its hourly work force by about 2,000 jobs
through layoffs or buyouts. More than 900 of those cuts would
come from its Detroit gear and axle plant.
GM, which remains American Axle's largest customer, pledged
$200 million to fund buyouts and buydowns at American Axle, a
total that would represent roughly half of the supplier's total
cost, according to the estimate provided to the UAW.
GM also kicked in $18 million in the final hours of
contract talks between American Axle and the union in order to
bring the two sides to an agreement. That portion of the GM
funding is earmarked for supplemental unemployment insurance
benefits, the union has said.
The end to the strike is a welcome development for GM,
which had at least partly shut down about 30 plants because of
shortages of axles and related components.
The two sides reached agreement last Friday on a four-year
contract that includes plant closings and wage cuts across the
board. Worker buyouts, retirements and cash buydowns were
included to soften the blow.
The national agreement cuts hourly pay to a range of $10 to
$26 and provides payments of up to $105,000 over three years
for workers who stay. Some holidays would be eliminated, the
most senior workers would lose one week's vacation and there
would be reductions in shift premiums among other cuts.
The striking facilities represent American Axle's original
plants acquired from GM at its founding 14 years ago. GM
accounts for about 80 percent of the supplier's revenue.
Shares of American Axle have dropped about 15 percent since
the close of trade on Friday, just before the contract deal was
announced. The stock remains up 3 percent this year.
(Writing by Kevin Krolicki; Editing by Lincoln Feast)
Singapore's export-reliant economy grew slower than estimated in the first quarter as demand weakened due to a slowdown in the United States and other key markets, the government said Friday.
Gross domestic product (GDP) expanded 6.7 percent in the March quarter from the previous year, falling short of the government's preliminary estimate of 7.2 percent, the trade ministry said.
The government cut its export growth forecast for the year to 2-4 percent from 4-6 percent amid the economic slowdown in the United States, Europe and Japan, but stuck to its full-year GDP growth estimate of 4-6 percent.
"The downside risk of a deeper-than-expected US recession due to financial market turbulence or sharp declines in asset values remains on the horizon but has lessened slightly in the wake of recent strong actions taken by the Federal Reserve to restore market confidence," the ministry said.
It said rising prices remained a major concern, and raised its inflation forecast to 5-6 percent this year from 4.5-5.5 percent due to the increasing costs of food and fuel.