Archive for March, 2009

HP says pondering Google’s Android (Reuters)

Tuesday, March 31st, 2009 | Finance News

SAN FRANCISCO (Reuters) –
Hewlett-Packard Co is studying uses for Google Inc's Android operating system, but the world's top PC maker stopped short of saying it had decided to adopt the fledgling software in its products.

The free, open-source Android operating system is now used on smartphones but is being designed to support all kinds of devices. Many analysts view the Android as a viable platform for netbooks, the low-cost, stripped-down laptops that have become one of the hottest PC segments.

Any move by Android into the PC space would be a direct challenge to Microsoft and its dominant Windows operating system.

Many in the industry, including Microsoft itself, are anticipating the release of laptops running Android, although no PC maker has yet publicly committed to it.

An HP spokeswoman said only that company was studying Android to "understand all of the OS choices in the marketplace that might be used by our competitors, or that might possibly be of value to our customers too."

"We want to assess the capabilities that Android might present for the computer and communications industries."

The Wall Street Journal, citing sources, reported HP is testing Android for a possible netbook. HP currently sells netbooks that run both Windows XP and the open-source Linux operating system.

Microsoft's Vista operating system is too bulky to run on many netbooks, so the software giant made its older XP OS available on the devices, where it is now the dominant platform.

Microsoft will sell a version of its forthcoming Windows 7 operating system specially tailored for netbooks. In January, the software developer partly blamed netbooks for weaker-than-expected quarterly profits. Analysts say the company makes only half as much on its netbook software as it does for a standard notebook.

Android is used on smartphones like HTC Corp's G1. Chipmaker Freescale, which recently began making chips for netbooks, plans to expand its offering to include chipsets for Android.

Analysts estimate that global shipments of netbooks will be between 20 million and 30 million units in 2009.

Shares of Palo Alto, California-based HP closed down 6 cents at $32.06 on the New York Stock Exchange.

(Reporting by Gabriel Madway; editing by Carol Bishopric)

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GM sees bankruptcy risk (Reuters)

Tuesday, March 31st, 2009 | Finance News

WASHINGTON/DETROIT (Reuters) –
General Motors warned on Tuesday there was a rising chance it could file for bankruptcy by June as Fiat and Chrysler executives met in a race to complete a tie-up the U.S. government has said Chrysler needs to survive.

GM shares tumbled 28 percent, its bonds fell and the cost to insure its debt rose, as the markets began to price in a bankruptcy that could wipe out stock holders and force deep losses on other creditors, even under the quick and "surgical" process described earlier by U.S. officials.

GM and Ford Motor Co, which has not sought a bailout, announced incentives to woo recession-wary customers by covering some car payments for customers who lose their jobs.

U.S. auto sales for March are expected to have fallen 40 percent from a year ago when sales data is released on Wednesday.

In Detroit, GM and Chrysler began work to implement the tough restructuring dictated by the Obama administration as a condition for providing more taxpayer funds to the struggling automakers.

Fiat Chief Executive Sergio Marchionne flew to Detroit for talks with Chrysler's labor unions and creditors after President Barack Obama gave the companies 30 days to set up a partnership to save the ailing car group.

Advisers to both GM and Chrysler have also been working in parallel to prepare for potential bankruptcy filings that would aim to preserve the best elements of the struggling companies while slashing debt and cutting pension and health care costs.

BANKRUPTCY OPTIONS

One possible plan under discussion for GM would quickly form a new company representing the automaker's best assets while its laggard brands and money-losing assets would remain under bankruptcy protection, a person familiar with the strategy told Reuters.

GM stock has lost almost half its value since Monday when Obama outlined policies sharply limiting taxpayer funds for automakers that many had expected him to rescue.

Chief Executive Fritz Henderson -- installed in the job on Monday in a shake-up that included the GM board -- said the top U.S. automaker would have to close more plants and shed more factory jobs than it planned just a month ago.

"We need to go deeper and we need to go faster," Henderson told a news conference at GM's Detroit headquarters.

His predecessor, Rick Wagoner, was forced out by the Obama administration, which gave GM 60 days to reach deeper concessions with bondholders and the United Auto Workers union. The U.S. Treasury would finance a court-supervised bankruptcy for GM if the process failed to deliver enough savings.

"By no later than June 1, if we're not able to accomplish this outside bankruptcy, we'll be in bankruptcy. It's pretty clear. The government was unequivocal," Henderson said.

'PENNIES ON THE DOLLAR'

Bondholders, a key constituency in the GM restructuring, said they were braced for a reduced offer of "pennies on the dollar" for about $28 billion in GM debt.

GM last week had offered bondholders about $6.5 billion in cash and new debt -- equal to a combined 24 cents on the dollar -- in addition to a 90-percent stake in the new company, a person with knowledge of the terms sheet told Reuters.

The $13.4-billion emergency loan for GM approved by the Bush administration in late December had offered bondholders a payout of 33 cents on the dollar in equity, terms that they had rejected.

GM's 8.375-percent bonds due 2033 were trading on Tuesday at 12.75 cents on the dollar, according to MarketAxess.

"Bondholders have to understand that they have to come to the table. So far they've held back. There's no holding back anymore. In bankruptcy, they'd likely come away with nothing," said Representative Sander Levin, a Democrat from Michigan.

Standard & Poor's on Tuesday cut its ratings on Fiat to "junk" status and said it may cut them again, citing weak liquidity and upcoming debt maturities.

Fiat investors have worried that the company could end up contributing cash or debt guarantees to the Chrysler partnership at a time when its own finances are strained.

Chrysler, privately held by Cerberus Capital Management, has been surviving on a $4 billion emergency loan from the U.S. government.

Fiat has agreed to contribute access to its small-car technology and vehicle platforms to Chrysler in exchange for a stake in the U.S. automaker that would start at 20 percent.

"We do not expect Fiat to commit any significant funds to support Chrysler following the U.S. government's most recent analysis of Chrysler's financial needs to survive," S&P said in a statement. "Still, we expect more details in the coming weeks on the proposed Chrysler-Fiat alliance."

LOSE THE JOB, KEEP THE CAR

GM and Ford said they would cover some car loan payments for customers who lose their jobs, an offer aimed at consumers sidelined by the recession and worried about job security.

GM said it would cover nine payments, up to $500 per month, if GM car buyers lost their income. Ford will cover payments for up to a year if customers lose their jobs.

Both programs, being offered in addition to zero-percent financing, come at a time when U.S. auto sales are at their lowest levels in nearly three decades.

South Korea's Hyundai Motor Co has outperformed rivals in the slumping U.S. market after launching a program in January that allows laid-off workers to return cars they financed.

Hyundai's sales rose 5 percent in the first two months of the year while overall U.S. sales tumbled 39 percent.

(Additional reporting by John Crawley, Emily Chasan, Walden Siew and David Bailey)

(Editing by Patrick Fitzgibbons and Tim Dobbyn)

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Auditor: Bailed-out banks use aid differently (AP)

Tuesday, March 31st, 2009 | Finance News

WASHINGTON – Banks that have received federal aid are using the money as they see fit, in some cases providing new loans to customers, retiring debt or buying mortgage-backed securities, a chief investigator told Congress on Tuesday.

The answer is the first of its kind since the government launched its Troubled Asset Relief Program, a $700 billion program aimed at thawing frozen credit lines by injecting banks with money. So far, the government has disbursed some $300 billion to the banks and committed to spending billions more, but has not required banks to say how they planned to use the money or track its expenditures.

Treasury officials worried extensive reporting requirements would be too cumbersome or even impossible to enforce. And when nearly two-dozen banks were asked by The Associated Press in December to provide answers, none gave specifics.

Neil Barofsky, who audits TARP spending as special inspector general for the program, said Tuesday that every one of the 364 financial institutions surveyed by his office were able to give at least some details on how the money was being used.

While some responses were general, others provided "granular detail" of their spending, including the identification of specific loans made possible with TARP dollars, Barofsky told the Senate Finance Committee.

Barofsky said a more detailed analysis of the survey will be completed by summer.

"One thing is clear: complaints that it was impractical, impossible or a waste of time to require banks to detail how they were using TARP funds was unfounded," he said.

The government's handling of the money has ignited populist anger and even attracted the scrutiny of filmmaker Michael Moore, who attended Tuesday's hearing. Moore is making a documentary on the financial crisis.

Barofsky's testimony came as the Government Accountability Office, the investigative arm of Congress, released its own assessment of the bailout program, also calling on the Treasury Department to increase transparency and oversight.

The job of managing the $700 bailout program is currently being performed by Treasury's Neel Kashkari. Treasury declined the panel's invitation to have him testify.

In a letter to GAO, Kashkari called the recommendations a "thoughtful step forward." He also noted that Treasury had taken steps in recent weeks to improve transparency and oversight of the administration's economic plan, including hiring more staff and setting up a Web site to aid public communication.

Still, lawmakers said they were frustrated with the freedom banks have been given through TARP and related programs, which Barofsky estimated puts some $2.9 trillion in taxpayer money at risk.

"This is a huge, unprecedented financial commitment," said Sen. Max Baucus, D-Mont., the committee's chairman. "It strains the comprehension of taxpayers and policymakers alike."

The issue of accountability took a new turn this month, when insurance giant American International Group Inc., paid out $165 million in employee bonuses after having been promised $182 billion in government aid to keep the company afloat. Lawmakers have proposed legislation to try to recoup the money and regulate future compensation packages for financial executives.

Lawmakers also have questioned AIG's willingness to pay off its trading partners in full using taxpayer dollars.

Barofsky said his office is investigating the issue, including who approved the payments.

Gene Dodaro, the acting head of GAO, told the committee that his staff could do more to increase transparency of the federal aid programs if it could legally demand information directly from banks that receive federal aid.

Dodaro said Congress also should give the GAO the power to investigate the Federal Reserve's activities. Its operations are mostly shielded from auditors under banking laws intended to protect the political independence of the Fed.

Lawmakers signaled a willingness to increase GAO's powers to follow the money trail wherever it goes. Baucus and Sen. Chuck Grassley of Iowa, the top Republican on the Finance Committee, have introduced legislation that would give GAO access to financial records and other information of banks participating in the aid program.

"I start with the premise that the public's business ought to be public, and the expenditure of this money I've put in the category of public," said Grassley.

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Government Accountability Office: http://www.gao.gov

Treasury Department Web site on economic plan: http://financialstability.gov

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