Archive for April, 2009

Global slump hurst UPS profit, shares fall (Reuters)

Thursday, April 23rd, 2009 | Finance News

CHICAGO (Reuters) –
United Parcel Service Inc (UPS.N) reported a lower-than-expected profit and gave an outlook below analysts' views as the global economic downturn has caused fewer packages to be shipped, sending its shares down as much as 7.5 percent.

The U.S. economic bellwether warned that its second-quarter outlook would likely fall below analysts' expectations and said that while the economic recovery could begin as soon as the end of this year, it would more likely come in 2010.

"The results are miserable, but we expected misery," said Edward Jones analyst Dan Ortwerth. "And all bets are off as to when that misery will end."

The world's largest package delivery company reported first-quarter net income of $401 million, or 40 cents a share, compared with $906 million, or 87 cents a share, a year earlier.

Excluding an impairment charge for the early retirement of the company's fleet of DC-8 jets, UPS earned 52 cents per share in the quarter. Analysts on average had expected earnings of 56 cents a share, according to Reuters Estimates.

Atlanta-based UPS said first-quarter revenue fell to $10.94 billion from $12.68 billion. Analysts had expected $11.42 billion.

But Ortwerth said UPS's healthy cash position of $4.3 billion and cash flow of $1.9 billion at the end of the first quarter are strengths he is stressing to his clients.

The decision by UPS to retire its DC-8 fleet was a sign of how robust and flexible the company is, he added.

"This is a very strong company," he said. "And in a storm that's what you want -- a company that's able to ride out the storm."

LOOKING ABROAD

UPS said that despite a decrease in revenue for its international package business, the operating margin for this business was 13.1 percent, which analysts said was a solid number especially given the global downturn.

"International packages are really saving the bacon (for UPS)," said Keith Schoonmaker, an analyst at Morningstar. "The margins on international packages are higher than for U.S. domestic packages and it's impressive that they have managed to maintain a healthy margin in that business."

Like Memphis-based rival FedEx Corp (FDX.N), UPS has seen its overall business hit by the global recession. Last month, FedEx reported a 75 percent decrease in quarterly net profit.

Both companies are considered bellwethers because people ship more packages in a boom, but shipments wane when the economy cools.

Recovery may not come as soon as many have hoped.

"Economic indicators tell us recovery in the United States might begin late this year, but more likely not until 2010," Chief Financial Officer Kurt Kuehn said in a statement. "So we expect the second quarter will be another difficult one."

The company said it expects to earn 45 to 55 cents per share for the period. Analysts on average had forecast 65 cents.

On a conference call with analysts, Kuehn said the company had managed to capture more than half of Deutsche Post AG (DPWGn.DE) unit DHL's U.S. domestic business in revenue terms during the first quarter.

DHL pulled out of the U.S. domestic market at the end of January with the loss of 9,500 jobs. The company blamed the decision on the recession and a failure to manage the task of taking on UPS and FedEx in their home market.

UPS had been in negotiations with DHL to take over its U.S. services and some airlift operations, but the two companies said last week that those talks had been called off.

CFO Kuehn told Reuters after the call that while UPS is uncertain on when the U.S. economy will recover, "we don't think it's going to get much worse."

He added that the company expects to keep taking market share, in particular in its international package business.

UPS shares were down 2.5 percent, or $1.35, at $53.40 in afternoon dealings on the New York Stock Exchange. Earlier they had fallen as low as $50.63.

(Reporting by Nick Carey, editing by Gerald E. McCormick and Maureen Bavdek)

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Cuomo questions TARP, pressure on BofA’s Lewis (Reuters)

Thursday, April 23rd, 2009 | Finance News

NEW YORK (Reuters) –
An investigation of Bank of America Corp revealed facts that raise questions about the transparency of the U.S. government program to help banks in the financial crisis, New York's top legal officer said in a letter made public on Thursday.

The letter, to senior members of congressional panels and the head of the U.S. Securities and Exchange Commission, also said former Treasury Secretary Henry Paulson and Federal Reserve Bank Chairman Ben Bernanke pressured Bank of America CEO Kenneth Lewis not to pull out of a merger with troubled Merrill Lynch & Co.

New York Attorney General Andrew Cuomo also released details of testimony by Lewis to his office in February, which stemmed from a probe into the circumstances of $3.6 billion of bonuses paid to Merrill executives before the completion of the Bank of America takeover in January.

"We have uncovered facts that raise questions about the transparency of the TARP (Troubled Asset Relief Program) as well as about corporate governance and disclosure practices at Bank of America," Cuomo wrote in the letter, dated Thursday.

The Wall Street Journal reported on Thursday that Lewis testified that Bernanke and Paulson told him the acquisition of Merrill needed to go through and that failure would "impose a big risk to the financial system" of the United States.

The newspaper said Lewis also testified that Paulson and Bernanke pressured him to keep quiet about losses at Merrill.

A government source said on Thursday the Federal Reserve gave no advice to Bank of America or Lewis on any questions of disclosure.

(Reporting by Jonathan Stempel and Grant McCool; editing by John Wallace)

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Fiat could play role in both GM and Chrysler deals (Reuters)

Thursday, April 23rd, 2009 | Finance News

HANOVER, Germany/DETROIT (Reuters) –
General Motors moved closer to selling a majority stake in Opel, while the deadline for Chrysler to find a partner entered its final days, and Japan's Toyota kept its top global ranking even after reporting a 27 percent drop in sales.

Separately, No. 1 U.S. automotive dealership AutoNation (AN.N) posted results that beat Wall Street's estimates but said its quarterly profit fell nearly 32 percent on continued weak U.S. demand for vehicles.

Auto parts maker Robert Bosch, the world's biggest car parts supplier by sales, also said it would slash jobs this year in Germany and abroad, and rival Continental AG (CONG.DE) prepared to tighten its belt.

GM (GM.N) faces a June 1 deadline from the Obama administration to restructure its operations or face bankruptcy. GM needs to sell a big stake in Opel to get $4.3 billion in loan guarantees from the German government to rescue its troubled unit.

Italy's Fiat SpA (FIA.MI), which reported a first-quarter loss, reiterated its desire to complete an alliance with Chrysler LLC, majority owned by Cerberus Capital Management (CBS.UL), and emerged with other parties as a potential buyer for Opel.

Armin Schild, who represents labor union IG Metall on the Opel supervisory board, told Reuters that Fiat was in talks with GM to buy a controlling interest in Opel.

Earlier on Thursday, German magazine Spiegel Online had said that Fiat would sign a letter of intent next Tuesday, citing people close to the negotiations.

Fiat Chief Executive Sergio Marchionne said there had not been direct talks with Opel and there was nothing to announce regarding a deal.

INTERESTED PARTIES

A spokesman for Opel reiterated that the company was in talks with several interested parties, declining to identify them. Schild said IG Metall strictly opposed such a deal.

Two sources close to the situation told Reuters that Fiat and Canadian automotive supplier Magna Steyr (MGa.TO) were both interested in taking a stake in Opel unit but a deal was not imminent. Magna declined to comment.

In its statement on quarterly results, Fiat said it would keep pursuing its strategy of targeted alliances while conducting talks with Chrysler.

If Fiat fails to clinch a deal with Chrysler, some analysts have said it could turn to GM to gain the scale it needs to survive the worst industry crisis in decades.

But it remains to be seen how it would finance such a deal because Fiat already faces doubts about its ability to pay off debt due this year.

GM Chief Executive Fritz Henderson has said the car maker had "reached out" to more than six potential buyers, many of whom were financial investors.

But private equity firms are giving Opel the cold shoulder, leaving sovereign wealth funds from the Gulf or Asia as the most interested private investors, managers at buyout firms have told Reuters.

TIME TICKING DOWN

The U.S. government deadline for Chrysler to reach an alliance deal with Fiat entered its final week on Thursday with talks intensifying.

Late Wednesday, sources with direct knowledge of the discussions said the U.S. Treasury had offered Chrysler lenders $1.5 billion of first-lien debt and a 5 percent equity stake in a restructured company in exchange for about $7 billion of debt they now hold.

The Chrysler lending group had sought $4.5 billion of first-lien debt and a 40 percent stake in the restructured automaker, sources have said.

Most analysts expect the Chrysler-Fiat talks to go right down to the deadline. A Fiat spokesman said that the talks were "completely open" and the automaker had no timetable for reaching an agreement.

U.S. dealers planned to meet later on Thursday with the Obama administration's autos task force to review GM and Chrysler restructuring.

Political allies of the two companies met with senior White House officials on Wednesday where the two groups exchanged views on bankruptcy and Chrysler's chances for an alliance, according to a statement from Democratic lawmakers who attended.

In Toronto on Thursday, the Canadian Auto Workers said it was too soon to know if it will reach a last-minute cost savings deal with Chrysler, but it was pushing hard to get it done.

In Japan, Toyota Motor Corp (7203.T) said its group-wide sales fell 27 percent to 1.7 million vehicles in the first quarter of 2009, but the number still kept it ahead of Volkswagen AG (VOWG.DE) as the world's top-selling carmaker.

The gap in group-wide sales between Toyota and Volkswagen shrank to 363,000 vehicles in the January-March quarter from 840,000 a year earlier.

Volkswagen AG Chief Executive Martin Winterkorn, meanwhile, hailed cooperation with majority owner Porsche (PSHG_p.DE) and reiterated he expected a group profit in 2009 despite a car market slump.

Hyundai Motor Co (005380.KS), South Korea's top automaker, reported a smaller-than-expected 43 percent fall in quarterly net profit as a weak won cushioned it from higher marketing costs and drop in sales.

(Additional reporting by Gilles Castonguay in Milan, Madeline Chambers in Berlin, Angelika Gruber in Frankfurt, Christian Gutlederer in Vienna, Jan Schwartz in Hamburg, Chang-Ran Kim in Tokyo, Cheon Jong-woo in Seoul and Jui Chakravorty Das in New York; Editing by Patrick Fitzgibbons and Brian Moss)

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