Archive for May, 2009

GM bondholders near deadline to accept new offer (Reuters)

Saturday, May 30th, 2009 | Finance News

DETROIT (Reuters) –
General Motors Corp will find out on Saturday if investors holding $27 billion in the automaker's bonds will accept an exchange offer as it races to tie up loose ends before a bankruptcy filing next week.

Success of the new debt-to-equity swap would help in reducing GM's creditor list and ensure that the embattled automaker's time in U.S. bankruptcy court is short.

Bondholders have until 5 p.m. EDT on Saturday to register their support for the deal, which would give them up to 25 percent of a reorganized GM. That offer, however, could be canceled if too few bondholders sign on in support.

The new, sweetened deal for the bondholders -- a 10 percent stake in the reorganized GM and warrants for another 15 percent stake -- already has the support of investors representing at least 35 percent of GM's bonds.

"The warrants and the improved capital structure make for an improved recovery for bondholders," Barclays Capital analyst Brian Johnson said. "In terms of the bankruptcy process, we expect the likely bondholder assent to smooth the process."

Under the new offer, bondholders have a recovery of around 9 cents on the dollar, up from an estimate of zero to 5 cents under the previous offer, Johnson said.

GM bondholders last week rejected a proposal that would have given them a 10 percent stake in a reorganized GM.

The automaker on Friday got a boost when the United Auto Workers union (UAW) overwhelmingly ratified a new cost-cutting labor agreement with GM, clearing a major hurdle in the automaker's restructuring efforts.

GM is expected to file for Chapter 11 protection on Monday and President Barack Obama will likely discuss the next steps in its reorganization at that time.


In late March, the Obama administration put the automaker on 60-day notice to restructure the company and clinch concessionary deals with its union and bondholders even as it pumped $19.4 billion in emergency funds to keep the company afloat.

The White House said on Friday that rival Chrysler's bankruptcy proceedings demonstrate the possibility of an orderly restructuring of a major U.S. carmaker and could be a model for GM.

Expectations that the automaker would file under Chapter 11 of the U.S. bankruptcy code rose after GM said Chief Executive Fritz Henderson would host a news conference Monday in New York.

A bankruptcy filing by GM would rank as the third-largest bankruptcy in U.S. history and one of the largest and most complex manufacturing bankruptcies.

GM's bankruptcy is likely to hurt the entire industry -- including rival Ford Motor Co and suppliers, many of whom are already struggling to survive as GM's purchasing budget runs to about $94 billion annually.

"The real question is what's going to happen to the supply base now," Dennis Virag, president of Michigan-based Automotive Consulting Group, said.

A filing by GM could also hurt U.S. consumer confidence, which has been ticking up in the past few months, he added.

GM has struggled in recent years to compete, hurt by its truck and SUV-dominated vehicle line-up and a deep plunge in U.S. vehicle demand.

The automaker has lost $82 billion in the past four years even as it continued to cut excess production capacity, jobs and dispose of assets, including brands.

Since 2000, GM has slashed over 100,000 jobs in the United States and plans to cut another 19,000 U.S. jobs by 2012 to bring total U.S. employment to about 72,500.

(Reporting by Poornima Gupta; Editing by Eric Beech and Patrick Fitzgibbons)


Retail giant Wal-Mart opens in India (AFP)

Saturday, May 30th, 2009 | Finance News

The world's number one retailer Wal-Mart opened its first sales venture in India on Saturday as part of an ambitious plan to establish a foothold in the country's vast consumer market.

The US discount chain has teamed up with Bharti Enterprises, parent of India's biggest mobile firm Bharti Airtel, in a wholesale joint venture to be called Best Price Modern Wholesale.

"We have put in a lot of planning and preparation over the past 12 months and are delighted all the hard work will now bear fruit as we open the doors of our first cash-and-carry store in India," said Wal-Mart India head Raj Jain.

The opening of Wal-Mart's first "big box" outlet in Amritsar city in the wheat-bowl northern state of Punjab, is a high-stakes one for the US retailer, which has been expanding internationally to grow its revenues.

"India is first of all a country with close to 1.2 billion people and a strongly growing economy which is driven by personal consumption," said Jain.

"There's a need to start out on a learning curve with the Indian consumer and this is the first significant step in that direction," he said.

The Best Price Modern Wholesale will offer 6,000 food and non-food items at "competitive wholesale prices," a Wal-Mart statement said.

Best Price will not be open to retail shoppers but will serve small stores, fruit and vegetable sellers, restaurants, hotels and other business outlets.

Under India's tight foreign investment rules, no overseas chains are permitted in the retail sector -- except for single-brand outlets such as Nokia or Reebok -- to protect local retail players.

Foreign groups such as Wal-Mart can only be wholesalers and must partner with domestic companies to enter the retail market, valued at 400 billion dollars and forecast to grow rapidly in the coming years.


Germany agrees deal with Magna, GM to save Opel (Reuters)

Saturday, May 30th, 2009 | Finance News

BERLIN (Reuters) –
Germany reached a landmark deal with Canadian auto parts group Magna, General Motors and governments to save carmaker Opel from the imminent bankruptcy of its U.S. parent, German leaders said on Saturday.

Finance Minister Peer Steinbrueck told journalists waiting outside Chancellor Angela Merkel's offices during the six-hour meeting that a comprehensive deal had been agreed.

"I can tell you that a deal has been reached," Steinbrueck said shortly after 2 a.m. He added that the deal included bridge financing for Opel worth 1.5 billion euros ($2.1 billion) and a trustee model for the German carmaker.

Siegfried Wolf, the co-chief executive of Magna, cautioned there were still details to be ironed out.

"In five weeks' time we should have the formal signing of the contract," he said.

Hesse state premier Roland Koch said, for example, the state assemblies in both Hesse and North Rhine-Westphalia -- two of four states with Opel plants -- would still have to endorse it. He said he hoped that could be completed by Sunday.

Leaders of all four states have endorsed the deal.

Metalworkers' union IG Metall also backed the accord.

"It is good that the state has finally cleared things up. It was high time," said Oliver Burkhard, head of the union in North Rhine-Westphalia.

"Now we can look ahead. Now the real work begins. The only thing that is certain is that Opel will keep going."

Steinbrueck said U.S. Treasury representatives at the meeting had also endorsed the agreement.

Economy Minister Karl-Theodor zu Guttenberg renewed his reservations about risks involved with the rescue but added there would also have been risks if Opel declared bankruptcy.

Magna and Opel had presented their plan to senior German officials and representatives of the U.S. Treasury to win their support and ensure the release of the financing that Opel desperately needs to survive over the coming months.

An agreement between GM and Magna is a first step toward securing the future of Ruesselsheim-based Opel, which has been under GM's control for the past 80 years and traces its roots in Germany back to the 19th century.

"I think this is the start of a new future for Opel, for the workers, the company and the brand," GM Europe head Carl-Peter Forster told journalists. He added, however, that there would still be some hard negotiations on the fine-print ahead.

The German government has been scrambling to safeguard Opel's future before GM files for bankruptcy, a step which is expected to come by Monday.

A first round of talks in Berlin collapsed amid mutual recriminations on Thursday morning, prompting the German government to set a new round of negotiations for Friday.

Italian carmaker Fiat, Magna's main rival in the battle for Opel, pulled out of talks, leaving the door open for Magna, a company that was started by Austrian emigre Frank Stronach in a Toronto garage nearly half a century ago.

Magna plans to use Opel to push into Russia, Europe's fastest-growing car market before the economic crisis hit.

The company, which has 70,000 employees in 25 countries, supplies components and systems to many of the world's leading carmakers, including fuel tanks and radiator grilles for the Mercedes-Benz C-Class and fuel filters for the BMW X3.


Speaking to reporters in Montreal, Fiat Chief Executive Sergio Marchionne had earlier appeared to concede defeat to Magna, saying his focus was on the company's deal with Chrysler.

"If the Opel transaction is not available to Fiat, life will move on," he said.

A stumbling block had been U.S. Treasury opposition to German demands that Opel assets be temporarily placed in a trust to protect them from GM creditors. Germany will now release the bridge financing to tide Opel over until a merger is completed.

Based in Ruesselsheim near Frankfurt, Opel employs 25,000 staff in four German plants.

It is part of a GM Europe operation that employs more than 50,000, with car manufacturing plants in Spain, Poland, Belgium and Britain, where Opel cars are sold under the Vauxhall brand, as well as engine and parts sites such as Aspern near Vienna.

Like its parent GM, Opel has suffered acutely from the worldwide economic slowdown. Its fate is being followed closely in Germany, where the auto industry remains a potent symbol of the country's post-war recovery and export-driven economy.

Merkel faces an election in September and was keen to ensure a deal that would avert large job losses.

(Additional reporting by Christiaan Hetzner in Frankfurt, John McCrank in Montreal, Ian Simpson in Milan; Tom Kaeckenhoff in Duesseldorf; Writing by Erik Kirschbaum and Noah Barkin; Editing by Dhara Ranasinghe)