Archive for December, 2008

Canada unveils plan to help auto industry (Reuters)

Saturday, December 20th, 2008 | Finance News

TORONTO (Reuters) –
Canada will follow the United States by providing C$4 billion ($3.3 billion) in emergency loans to the Canadian arms of Detroit's ailing automakers to keep them operating while they restructure their businesses, Prime Minister Stephen Harper said on Saturday.

The package, announced by Harper and Ontario Premier Dalton McGuinty, comes a day after the White House unveiled a $17.4 billion package to shore up Detroit's auto industry.

Harper also announced two new federal measures to support the overall industry -- one to benefit automotive suppliers and a second to help consumers get credit to buy cars.

"There are literally across the country hundreds of thousands if not millions of potentially affected families by the distress of this industry," Harper said at a joint news conference.

"And we are obviously making sure at this Christmas time that, within the confines of our responsibility for taxpayer money, that we are also going to look after their interest."

A collapse of the Detroit Three automakers would put nearly 600,000 Canadians out of work within five years, most of them in Ontario, according to a recent report by provincial advisory panel.

Under the plan, the federal government will provide C$2.7 billion in short-term loans and Ontario C$1.3 billion.

General Motors of Canada Ltd is eligible for loans of up to $C3 billion and Chrysler Canada Inc for up to C$1 billion. The Canadian arm of Ford Motor has not asked for immediate assistance, the Industry Ministry said.

Harper said the governments were attempting to attach some liens and secure some assets of the car companies "but I will not fool you -- there is obviously some money at risk here."

He said the aid reflected Canada's 20 percent share of North American production capacity. But at $3.3 billion, the Canadian package actually represents one-sixth, or 16 percent, of the $20.7 billion in North American aid announced over the past two days.

FAILURE IS NOT AN OPTION

Harper said Canada would not allow a restructuring of the industry on U.S. terms in a way that might cause the relocation of Canadian facilities to the United States.

He said the Bush administration and the incoming Obama team have made it clear they would not let the companies fail.

"We may well have much smaller companies but they will not fail in my judgment," Harper said. "The question then for Canada is to ensure that as they are restructured that we retain our market share."

Harper said the aid to automotive suppliers would come in the form of additional accounts-receivable insurance coverage through the federal Export Development Corp.

The federal government also will create a new facility to support access to credit for consumers. Details were not immediately available.

"We don't want a package that simply helps the Detroit Three and therefore has the effect of ... subsidizing those who are struggling while penalizing those who have made good business decisions," Harper said in explaining why the package included help for suppliers and consumers.

It was apparent any deal would need some concessions from the Canadian Auto Workers. Harper said all stakeholders would have to help in the restructuring.

After the announcement, the CAW said it was willing to work with industry to protect jobs. Even so, it said the crisis was not caused by compensation for North American autoworkers but by the overall troubles in the economy.

McGuinty, the Ontario premier, said Asian automakers, which have facilities in Canada, backed the aid package. He said that if the one of the Big Three companies fail, the entire industry, including the Asian-based companies, would suffer because of the integration of the North American industry.

A recent study commissioned by the Ontario Manufacturing Council warned that a collapse of the Detroit Three would ripple through the entire economy, hitting creditors, suppliers, parts manufacturers and dealerships.

Harper is a Conservative who generally opposes state intervention in the economy but he said on Thursday that the government would end a 12-year string of budget surpluses and inject C$20 billion to C$30 billion of stimulus into the economy next fiscal year.

Interest on the short-term loans to the automakers will be set at 300 basis points above LIBOR, the federal government said in a release. The closing date is December 29.

($1=$1.20 Canadian)

(Additional reporting by Randall Palmer)

Source

Retailers pushing holiday sales as storm looms (Reuters)

Saturday, December 20th, 2008 | Finance News

SAN FRANCISCO (Reuters) –
Retailers opened their doors early to recession-weary shoppers on Saturday in a final, frenzied push to save holiday sales with the added disruption of a winter storm heading for the country's Midwest and Northeast.

The National Retail Federation predicted that two-thirds of Americans still had holiday shopping left to do but foul weather kept many close to home in some parts of the country on Friday. Freezing rain and snow were expected for several regions through the weekend.

The storms hit at the worst possible time for U.S. store chains, which are trying to salvage the critical holiday shopping season amid a flagging economy and lure consumers with last-minute deals before Christmas next week.

Many shoppers have said they are giving fewer gifts and looking only for marked-down merchandise, grim news for retailers who may see their weakest holiday season since the early 1990s.

"It's bad news," said Scott Bernhardt, chief operating officer of national weather forecasting service Planalytics, speaking of Friday's storm and another to hit later on Saturday.

"Today is the day -- it's going to count more than ever because you're not getting Sunday," Bernhardt said. "That first storm really shocked people and when the weatherman says it's going to snow on Sunday it will keep people away."

The inclement weather put extra pressure on retailers to ring up sales on "Super Saturday," the final Saturday before Christmas.

But in many areas around the country, shoppers were slow to rouse, retail watchers said, and store traffic only gained momentum later in the day, despite some stores like Macy's opening its doors at 6 a.m.

EASY SHOPPING

"The shoppers are just not rushed, they're not panicked," said NPD Group retail analyst Marshal Cohen, who has been visiting malls in the New York region. "The consumer is saying, 'I'll shop in the odd hours. I don't have to be the first one in the stores.'"

The less-than-frenzied atmosphere sat well with Larry DaVanzo, 52, who was in a Gap Inc Old Navy store in downtown San Francisco -- where the weather was cold but sunny -- buying presents for his nieces and nephews.

"It's been super so far," said DaVanzo, calling himself a holiday shopping procrastinator. "Easy in, easy out. Great deals."

Susan Strong, 53, who was shopping at Macy's, said she was surprised to see a nearly empty store in the morning hours, despite items, including Christmas cards, at 60 percent off.

"I think maybe today they thought they'd get last minute people in," she said of the store. "But the (retailers') sales might not be as good as they expected."

Macy's posted a sign at its downtown San Francisco store saying that morning specials advertised to expire at 1 p.m. would be extended until 3 p.m.

"Super Saturday" usually ranks just behind "Black Friday" as the single-largest holiday sales day. Black Friday fell on November 28 this year, the day after U.S. Thanksgiving.

Still, fewer shoppers in stores could be a serious blow to store chains, who may be forced to further mark down merchandise. Prices have been reduced so much that profit margins will take a steep hit, experts predict.

"We'll see an awful lot of merchandise moved out but not a lot of dollars and that means retailers will still be behind the eight ball," said Cohen.

Carrie Grant, shopping in downtown Chicago, where the weather was to worsen by evening, was carrying a shopping bag full of gifts for her new nephew.

"The stores were crowded," she said, adding that many people appeared to be "looking but not buying."

Rhonda Showman, 59, who was visiting San Francisco from Phoenix, said she was taking advantage of the discounts, shopping at Ross Stores Inc and department stores.

"My gosh, everywhere you go, there are sales, sales, sales," she said.

The weekend before Christmas typically accounts for some 11.5 percent of holiday sales, according to ShopperTrak, which monitors shoppers at more than 50,000 retail locations.

(Additional reporting by Mark Weinraub in Chicago)

Source

Canada unveils C$4 billion plan to help auto industry (Reuters)

Saturday, December 20th, 2008 | Finance News

TORONTO (Reuters) –
Canada will follow the United States by providing C$4 billion ($3.3 billion) in emergency loans to the Canadian arms of Detroit's ailing automakers to keep them operating while they restructure their businesses, Prime Minister Stephen Harper said on Saturday.

The package, announced by Harper and Ontario Premier Dalton McGuinty, comes a day after the White House unveiled a $17.4 billion package to shore up Detroit's auto industry.

Harper also announced two new federal measures to support the overall industry -- one to benefit automotive suppliers and a second to help consumers get credit to buy cars.

"There are literally across the country hundreds of thousands if not millions of potentially affected families by the distress of this industry," Harper said at a joint news conference.

"And we are obviously making sure at this Christmas time that, within the confines of our responsibility for taxpayer money, that we are also going to look after their interest."

A collapse of the Detroit Three automakers would put nearly 600,000 Canadians out of work within five years, most of them in Ontario, according to a recent report by provincial advisory panel.

Under the plan, the federal government will provide C$2.7 billion in short-term loans and Ontario C$1.3 billion.

General Motors of Canada Ltd is eligible for loans of up to $C3 billion and Chrysler Canada Inc for up to C$1 billion. The Canadian arm of Ford Motor has not asked for immediate assistance, the Industry Ministry said.

Harper said the governments were attempting to attach some liens and secure some assets of the car companies "but I will not fool you -- there is obviously some money at risk here."

He said the aid reflected Canada's 20 percent share of North American production capacity. But at $3.3 billion, the Canadian package actually represents one-sixth, or 16 percent, of the $20.7 billion in North American aid announced over the past two days.

FAILURE IS NOT AN OPTION

Harper said Canada would not allow a restructuring of the industry on U.S. terms in a way that might cause the relocation of Canadian facilities to the United States.

He said the Bush administration and the incoming Obama team have made it clear they would not let the companies fail.

"We may well have much smaller companies but they will not fail in my judgment," Harper said. "The question then for Canada is to ensure that as they are restructured that we retain our market share."

Harper said the aid to automotive suppliers would come in the form of additional accounts-receivable insurance coverage through the federal Export Development Corp.

The federal government also will create a new facility to support access to credit for consumers. Details were not immediately available.

"We don't want a package that simply helps the Detroit Three and therefore has the effect of ... subsidizing those who are struggling while penalizing those who have made good business decisions," Harper said in explaining why the package included help for suppliers and consumers.

It was apparent any deal would need some concessions from the Canadian Auto Workers. Harper said all stakeholders would have to help in the restructuring.

After the announcement, the CAW said it was willing to work with industry to protect jobs. Even so, it said the crisis was not caused by compensation for North American autoworkers but by the overall troubles in the economy.

McGuinty, the Ontario premier, said Asian automakers, which have facilities in Canada, backed the aid package. He said that if the one of the Big Three companies fail, the entire industry, including the Asian-based companies, would suffer because of the integration of the North American industry.

A recent study commissioned by the Ontario Manufacturing Council warned that a collapse of the Detroit Three would ripple through the entire economy, hitting creditors, suppliers, parts manufacturers and dealerships.

Harper is a Conservative who generally opposes state intervention in the economy but he said on Thursday that the government would end a 12-year string of budget surpluses and inject C$20 billion to C$30 billion of stimulus into the economy next fiscal year.

Interest on the short-term loans to the automakers will be set at 300 basis points above LIBOR, the federal government said in a release. The closing date is December 29.

($1=$1.20 Canadian)

(Additional reporting by Randall Palmer)

Source