Archive for January, 2009

Online retail growth seen slowing to 11 percent in 2009 (Reuters)

Thursday, January 29th, 2009 | Finance News

E-commerce will slow this year to a growth rate of 11 percent as consumers cut back sharply on spending, according to research data released on Thursday.

Forrester Research projected the total to be spent online in 2009 at $156 billion, up from $141 billion last year, with growth slowing from 13 percent in 2008 and 18 percent the prior year.

Last year in January, Forrester projected that 2009 online sales would increase by 15 percent.

"The reason is obvious: falling consumer confidence due to the recession," wrote Forrester analyst Sucharita Mulpuru in the report, which will be released in its entirety on Monday as part of a five-year forecast.

Online auctioneer and retailer eBay Inc (EBAY.O) declined last week to provide a forecast for the full year, given the uncertain environment, but a quarterly view fell short of Wall Street expectations.

Some analysts warn that a forecast from rival Inc (AMZN.O), due to release earnings later Thursday, could also be worse than expected.

Still, the online sector continues to grow as more shoppers head online for convenience and the ability to compare bargains.

"Even as companies continue to struggle, the important take-away is that the Web is continuing to grow," Mulpuru said. "It's taking wallet share away from the rest of the retail world."

Mulpuru pointed to brick-and-mortar companies like Best Buy Co Inc (BBY.N) and Macy's Inc (M.N) whose online sales continue to grow despite weaker store sales.

"That's pretty standard that the web divisions of all of these companies are faring much better than the rest of the business. Those are the ones grabbing disproportionate market share," she said. "A lot of that is happening at the expense of smaller players who are not as branded or not as trustworthy or not as easy to find online."

(Reporting by Alexandria Sage; Editing by Phil Berlowitz)


Ford posts record loss, draws $10 billion in credit (Reuters)

Thursday, January 29th, 2009 | Finance News

DETROIT (Reuters) –
Ford Motor Co reported a record $14.6 billion full-year loss on Thursday but said it would have the cash to survive the worst downturn in auto sales in decades without a U.S. government bailout.

Ford plans to cut some 2,500 white-collar jobs and draw down its remaining credit line after burning through $5.5 billion of cash as global auto sales plunged.

The automaker posted a deeper-than-expected $5.9 billion fourth quarter net loss. Ford has reported net losses totaling nearly $30 billion over the past three years.

For the year, Ford burned through $21 billion but said it expected that it would be able to better conserve cash in 2009 if U.S. sales stabilize in the second half as it expects.

The No. 2 U.S. automaker also said it would draw down $10.1 billion remaining on its credit line and defer $2 billion in payments pledged to a trust aligned with the United Auto Workers to add to its cash position in the first quarter.

"We took this action because of our growing concerns about the instability of the capital markets," Ford Chief Executive Alan Mulally told analysts in a conference call.

Ford shares were down 3 percent in afternoon trade.

Analysts lauded Ford under Mulally with having the foresight to borrow heavily in 2006, before credit markets shut down and auto sales plunged in 2008.

"They're doing what they can to take costs out but the other side of the equation -- sales -- has got to recover," said Erich Merkle, an independent auto analyst.

Ford's captive credit arm, Ford Motor Credit, said it would cut 1,200 jobs, or 20 percent of its staff. For its auto operations, Ford said it had almost completed 1,300 white-collar job cuts that it began in November.

Ford said the UAW had also agreed to suspend its jobs bank, dropping a program that had guaranteed nearly full wages and benefits for workers after their jobs were eliminated. Ford had about 1,500 UAW workers in its jobs bank at the end of 2008.

Suspending the jobs bank had been a condition imposed by the federal government for the $17.4 billion bailout of Ford's rivals General Motors Corp and Chrysler. GM and Chrysler both had previously announced an end to the program.

Overall, Ford cut its North American auto workforce by 5,000 jobs in the fourth quarter to 75,200, most of that in its hourly workforce. The Ford Credit, and salaried job cuts will be reflected in 2009 results.


"I think it's by far the most volatile period we've ever seen," Chief Financial Officer Lewis Booth told reporters. "We're not seeing any signs of recovery yet."

Still, Booth said Ford was expecting some recovery in the U.S. market in the second half of the year and he expected it would be the first region to show signs of a rebound.

Ford's net loss widened to $5.88 billion, or $2.46 per share, in the quarter, from $2.8 billion, or $1.33 per share, a year earlier.

Ford Motor Credit, traditionally a source of profit, slipped to a $372 million quarterly loss on credit-related charges, derivatives losses and lower loan volumes.

Volvo, a the Swedish luxury brand Ford is looking to sell, posted a forth-quarter loss of $736 million on a pre-tax basis, down from a break-even position a year earlier. Ford offered no details on the sale process.

Executives said the Volvo review would take some time and the brand's management is focused on fixing the business.

Ford ended 2008 with $13.4 billion cash. It said it would receive the $10.1 billion from its line of credit on February 3.

Ford has asked for a $9 billion line of credit from the U.S. government as insurance against a worsening in the global economy. It also expects to receive $5 billion of direct loans from a U.S. program to support improved fuel economy.

Industry-wide U.S. auto sales fell 18 percent in 2008 and are expected to fall for a fourth consecutive year in 2009, ratcheting up pressure on automakers in the world's largest and most profitable market.

Ford remains more optimistic than most industry forecasts for 2009, even though it cut its industry-wide U.S. sales forecast to a range of 11.5 million to 12.5 million units including medium and heavy trucks from the range it used in Congressional testimony last year.

The automaker trimmed its first quarter production plan by 30,000 units in North America to 400,000 units, a cut that will add to the considerable pressure on its supply base.

Ford does not contemplate a cash injection for former parts unit Visteon Corp, whose stock has fallen to 16 cents per share.

(Additional reporting by Kevin Krolicki and Poornima Gupta; Editing by Derek Caney)


3M profit falls, shares rise on 2009 hopes (Reuters)

Thursday, January 29th, 2009 | Finance News

NEW YORK (Reuters) –
3M Co (MMM.N) said on Thursday that fourth-quarter profit and sales fell due to the economic downturn, but the company's stock rose 3 percent on hopes that the industrial manufacturer is well-positioned for growth in the latter half of 2009.

The St. Paul, Minnesota, company is a bellwether of the U.S. economy because of its geographic reach and broad lineup of products including everything from Scotch tape to optical films for liquid crystal displays,

3M said quarterly earnings fell to $536 million, or 77 cents per share, compared with $851 million, or $1.17 per share, a year earlier.

Excluding restructuring expenses and other special items, however, profit was 97 cents per share, beating analysts' expectations of 93 cents, according to Reuters Estimates.

CEO George Buckley told analysts on a conference call that the first quarter of 2009 would be the hardest of this recession for 3M, that sales should recover a little in the second quarter and that the third quarter should produce economic growth and "gathering momentum" into the fourth.

3M forecast 2009 earnings of $4.30 to $4.70 per share, down from a previous range of $4.50 to $4.95, based on an assumption that organic sales volume would fall 5 percent to 9 percent.

Sales fell 11.2 percent to $5.5 billion.

"If you look near-term there's a lot of headwinds facing the company, said Morningstar analyst Adam Fleck, citing foreign exchange risk and weak customer demand. "But if you look past that, the company's pristine balance sheet and their cost-control actions are going to spring-load them for demand when it does return."

In response to lower demand, the company said it would reduce capital expenditures by 30 percent. Restructuring actions should save the company at least $235 million in 2009 while the deferral of merit pay increases will save it over $100 million.

3M also announced a halt to further share repurchases and had already said it had cut 2,300 jobs in the fourth quarter, a number the company bumped up to 2,400 during its conference call.

"Cutting capex is a big cost savings, so is deferring merit-pay increases," Fleck said. "That puts the company into position to be leaner and meaner when it does rebound. The long-term story is still intact."

At Wednesday's close, the shares were down about 33 percent from their 12-month high of $83.22 in April, slightly less steep than the 36 percent decline in the Dow Jones industrial average.

3M shares were up $1.55 or 2.8 percent at $56.97 on the New York Stock Exchange near midday on Thursday, off an earlier high at $57.71. The Dow Jones industrial average, of which 3M is a component, was down 1.6 percent.

(Reporting by Helen Chernikoff; Editing by John Wallace, Lisa Von Ahn and Matthew Lewis)