business

* Dollar hits 3-month high vs yen of 94.94

* Euro falls vs dollar after Trichet, Fitch comments

(Recasts, updates prices, adds comment)

By Nick Olivari

NEW YORK, Feb 23 (Reuters) - The dollar rose to a near-three month high against the yen on Monday as the Japanese currency fell broadly on expectations the U.S. government could take a large stake in U.S. lender Citigroup, but stop short of nationalization.

The Wall Street Journal reported earlier in the global session that the U.S. government would take a 40 percent stake in Citigroup by converting preferred stock into common stock [ID:nHKG310337].

This eased fears the U.S. government will completely nationalize large U.S. banks while bolstering optimism it will stay more proactive in stemming a recession than other nations. The dollar and yen had been seen as the two safe haven currencies, but Monday's news made the dollar more attractive.

The Treasury Department, Federal Reserve and three other federal agencies said in a joint statement they will initiate a program on Wednesday to assess large U.S. banks' capital needs and determine whether a bigger buffer is warranted. [IO:nWEQ000701].

The U.S. agencies insisted they did not want to nationalize banks as investors fretted over how struggling firms will cope with rising recession-driven losses. The euro surrendered early gains against the dollar after European Central Bank president Jean-Claude Trichet said the euro-zone financial system is under severe strain and Fitch voiced concern about Austria's AAA rating. For details, see [ID:nLN456587] and [ID:nLN487356].

"The constant intervention is worrisome but a necessary step to take at this part in the financial crisis," said Andrew Bekoff, Chief Investment Officer, LPB Capital LLC, a Doylestown, Pennsylvania-based wealth management firm. "The dollar is nearing a retest of its November highs."

Midway through the New York session, the dollar was up 1.6 percent at 94.63 yen , less than half a yen from the near three-month high of 94.94 yen touched earlier in the session, according to Reuters data.

The euro rose 0.9 percent to 120.52 yen after earlier touching a one-month high of 121.91 yen.

The yen fell 1.1 percent against the Canadian dollar , 0.9 percent against the Swiss franc and 2.7 percent against the pound , according to Reuters data.

EURO/DOLLAR CUTS GAINS

The euro erased early gains against the dollar, last trading down 0.9 percent at $1.2729 , nearer the session low of $1.2714 than the earlier 12-day peak of $1.2991.

Analysts said Trichet's comments brought back into focus the economic and banking woes in the euro zone, while the Fitch comments highlighted the problems facing some of the countries on the region's periphery.

"I was surprised how strong the euro was right at the start of the European session on the Citigroup news. This is potentially just based on reports so far," said Chris Turner, head of forex strategy at ING in London. Traders said investors were wary of more bad news emerging about the euro-zone economy, with the closely watched Ifo index on the German economic climate due on Tuesday.

Analysts also noted disappointment that the weekend's meeting of European leaders, who were crafting a joint approach to an April G20 meeting, failed to yield any concrete agreement on ways to deal with the recession [ID:nLM126747].

"There was disappointment that the main focus of the G20 meeting was on financial market regulation, which is not the most important problem at a time of global recession," said Commerzbank head of FX research Ulrich Leuchtmann in Frankfurt. (Additional reporting by Jessica Mortimer in London, Editing by Chizu Nomiyama)

source : Reuters UK

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By EDMUND L. ANDREWS

The Obama administration put the nation’s biggest banks on notice Monday that the government could become their biggest shareholder if regulators decide they are not strong enough to weather a deeper-than-expected downturn in the economy.In an unexpectedly assertive joint statement, the Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might end up demanding a direct ownership stake in major banks after they undergo a tough evaluation of their strength, which is to begin shortly.

“The capital needs of major U.S. banking institutions will be evaluated under a more challenging economic environment,” the administration said. “Should that assessment indicate that an additional capital buffer is warranted,” it continued, the banks could be required to give the government a right to acquire common shares, with voting rights.

The statement came as federal regulators confirmed that they were in discussions with Citigroup over precisely that kind of swap. Citigroup, which has received $45 billion in direct assistance and given the Treasury nonvoting preferred shares that pay a guaranteed dividend — is negotiating to swap the preferred shares for common shares that would give the government a stake as high as 40 percent.

Administration officials said Citigroup had initiated the talks with federal regulators, and the new statement stopped well short of declaring that regulators were ready to partly or wholly “nationalize” any major banks.

On Wall Street, most major bank shares were higher in noon trading, while the overall market was down more than 1.5 percent.

The administration said its “strong presumption” was that “banks should remain in private hands.”

But the statement also officially amounted to a road map under which the federal government could, if it wanted to, demand a major and possibly a controlling stake in systemically important banks like Citigroup and Bank of America.

The 20 biggest banks will be required to undergo a new “stress test,” starting Wednesday, which is intended to determine whether each bank has enough capital to survive if the economy spirals down even more than most forecasters already expect.

Treasury officials plan to introduce details of the stress test on Wednesday, and it is expected to take several weeks to complete.

If a bank comes up short, Treasury officials said on Monday, the government will require it to raise more capital. If the bank cannot get that money from private sources, the government will demand that the bank swap out the government’s existing, nonvoting preferred shares — issued during the first phase of the Treasury’s $700 billion financial bailout program last September — and replace them with new preferred shares that are convertible to common stock with voting rights.

The requirements will apply both to banks that receive additional money in the months ahead and to banks that have already received money.

In the case of Citigroup, the negotiations do not involve any additional infusions of taxpayer money. Rather, the negotiations are aimed at strengthening Citigroup’s capital position by replacing preferred shares, which resemble debt more than equity, with common shares.

Acquiring common stock would give the government more control, but expose it to more risk. Armed with voting shares, government officials would have more power to oust existing management and change the company’s strategy. But the Treasury would also lose its claim to dividend payments, which in Citigroup’s case amount to more than $2.25 billion a year.

source : The New York Times

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By Emily Kaiser

WASHINGTON (Reuters) - U.S. regulators promised on Monday to prop up struggling banks if needed and said lenders should remain in private hands, even as a source said Citigroup was in talks to give the government a greater stake.

In Europe, the French government said it was pumping extra cash into two mutually owned banks, and the central European central banks took the unprecedented step of talking up the region's currencies.

U.S. stocks, which started higher on the Citigroup talk, turned lower on fears that the bank stabilization plan would not be enough to keep the economy from sliding into a deeper hole. U.S. government bond prices were little changed and the dollar gained against a basket of currencies as investors scrounged for safety.

Amid worries that the United States may still have to nationalize some of its banks, the Treasury Department, Federal Reserve and three other federal agencies said they will start assessing large U.S. banks' capital needs on Wednesday to determine whether a bigger buffer is warranted.

The money could come from the private sector or the government in the form of preferred shares that convert into common stock over time as needed to ensure banks have enough resources to withstand deepening credit losses.

"Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands," the agencies said.

Healthy banks are vital to stemming recession. While some economists have argued that nationalizing weaker institutions would be the fastest way to revive lending, many investors -- particularly in the United States -- worry that government intervention would have a chilling effect on business.

"If the government tells the bank that they need more capital, it's highly unlikely any 'private' source would step up due to the stigma," said Andrew Busch, global foreign exchange strategist with BMO Capital Markets in Chicago."This means that the government's designation could signal a further death spiral for the bank's common stock shareholders," he said.

Citigroup, whose stock has been pounded by fears that the government may seize the bank and wipe out shareholders, was in talks to give the government a larger stake, a person familiar with the matter told Reuters.

The idea under consideration would involve converting a big chunk of the $45 billion (31 billion pounds) in preferred shares the government bought last year into common stock, putting as much as 40 percent of Citigroup into public hands.

The British government announced a similar move last month, saying it would convert preferred shares in Royal Bank of Scotland, which is expected to announce more restructuring this week.

France on Monday also reached out to its lenders, pledging up to 5 billion euros (4 billion pounds) in additional aid for Banque Populaire and Groupe Caisse d'Epargne.

The two mutual banks are expected to detail a merger this week and the new aid could give the government a stake of up to 20 percent in what is set to be France's second-biggest retail bank behind Credit Agricole.

LOSSES MOUNT

Banks around the world have already reported hundreds of billions of dollars in losses and write-downs as defaults spike on mortgages, credit cards, corporate debt and a host of other loans. Investors worry that losses will intensify as the economy weakens, and banks may lack sufficient resources to withstand any further deterioration.

Tighter credit conditions have constrained consumer and business spending, and contributed to a steep decline in global trade. Dresdner Kleinwort economists think corporate bankruptcies worldwide will rise by at least 20 percent this year, after a 14 percent increase in 2008. In the auto industry, one of the hardest hit by the credit contraction and consumer spending slump, Ford reached a tentative agreement with the United Auto Workers union on changes to a retiree health care trust, becoming the first Detroit automaker to secure union concessions on the key issue.

European Central Bank President Jean-Claude Trichet said on Monday that the financial crisis was spilling over into the wider economy and that the euro zone's financial system is under "severe strain.

Joaquin Almunia, the EU's economic chief, said on Monday that the European Union could have to bail out a member state in financial trouble but such a move was unlikely, especially among countries in the euro zone.

European Union leaders at a weekend summit in Berlin backed a doubling of funds for the International Monetary Fund, which has spent billions of dollars in recent months shoring up economies in eastern Europe and elsewhere.

Latvia's government collapsed on Friday and the currencies of countries such as Poland, the Czech Republic and Hungary have come under severe pressure, hitting millions of citizens who have borrowed in foreign currencies such as the euro.

Emerging European Union central banks coordinated to prop up their currencies on Monday, with Czech central bank Governor Zdenek Tuma saying they had agreed that recent falls were overplayed.

In Asia, Japan's biggest brokerage Nomura Holdings Inc said it planned to raise 302 billion yen ($3.3 billion) by selling new shares to boost its capital.

Japan's second-largest bank Mizuho Financial Group said it would issue $850 million in preferred securities to replenish capital erased by a sliding stock market and economy.

Japan also saw its biggest bankruptcy of the year measured by debt as SFCG, a lender to smaller companies, failed with debts of $3.6 billion.

source : Reuters UK

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By Dawn McCarty and Erik Larson

Feb. 23 (Bloomberg) -- Ritz Camera Centers Inc., the largest camera-store chain in the U.S., filed for bankruptcy protection, blaming the deepening U.S. recession and the consumer transition to digital photography.

The 91-year-old company, which had sales of almost $1 billion in 2008, has both assets and debt of less than $500 million, according to Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Ritz sought court permission to tap a new $85 million loan from existing secured lenders.

Ritz has about 800 locations in more than 40 states, including the Ritz Camera chain, Wolf Camera, Kits Cameras, Inkley’s and the Camera Shops. The Beltsville, Maryland-based company suffered from a drop in photo printing, as well as slumping sales at its 130 Boater’s World Marine Centers, which were hurt by last year’s record oil prices, court papers show.

The advent of digital photography, which ended “enormous profits” from photo finishing, “proved too much of a burden, coupled with the losses experienced by the Boater’s World business,” Marc Weinsweig, the closely held company’s chief restructuring officer, said in court papers.

Ritz’s debt includes $47.7 million on a secured revolving credit agreement and $13.1 million owing on subordinated debentures, court papers show. Including letters of credit, the bank debt increases to $54.5 million. Wachovia Bank NA is the agent for the lenders.

Boater’s World

Ritz officials sought to diversify their business by launching Boater’s World, a boating-and-fishing supply retailer, in 1987. The stores are located from Maine to Florida and also in Texas, California, Oklahoma, Tennessee and Nevada, according to the unit’s Web site. The rise in fuel prices helped lead to a “sharp” drop in sales at the unit’s stores, Weinsweig said in the filing.

Ritz in 2001 acquired Wolf Camera, the second-largest U.S. camera-store chain with 500 locations in 20 states, for about $85 million. Wolf filed a liquidating Chapter 11 plan that paid the secured bank lender about 50 cents on the dollar, while unsecured creditors received nothing for their $100 million in claims.

Ritz’s 30 largest unsecured creditors without collateral backing their claims are owed about $65.6 million, court papers show. The two biggest unsecured creditors are Nikon Inc., owed $26.6 million, and Canon USA Inc., owed $13.7 million. Ritz owes another $8.4 million to Fuji Photo Film USA Inc., whose affiliate invested about $197 million in Ritz between 1996 and 2001, according to court papers.

Benjamin Ritz opened his first portrait studio in 1918 on the boardwalk in Atlantic City, New Jersey. Twenty years later, Benjamin’s younger brother, Edward, opened their first photo processing lab in Washington and later expanded to Baltimore. The company’s wider expansion began in 1969 under Edward’s son, David.

source : Bloomberg

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US Airways Group Inc. will resume serving free soda and other nonalcoholic drinks Sunday, the airline’s CEO said in an e-mail to employees.

The move reverses a six-month policy that charged passengers in coach $2 per drink on domestic flights. First-class and international passengers received free drinks.

Passengers will be offered free soda, juice, tea, water and coffee in flight. Beer, wine, and cocktails will still be available for purchase for $7.

“We know customers don’t buy an airline ticket based on whether or not they will get a free soda onboard, but with US Airways being the only large network carrier to charge for drinks, we are at a disadvantage,” Chief Executive Doug Parker said in an e-mail to employees.

The carrier will still charge for checking baggage, blankets and pillows, a move the carrier says will generate $400 million to $500 million this year. Parker didn’t say how much the airline garnered from charging for drinks.

Parker said the airline’s policy of charging for nonalcoholic drinks detracted from the airline’s improvements in on-time performance and baggage handling.

But he said the recession has sparked a need for the airline to try programs that include charging for individual items.

“Moving to an a la carte model has helped us build an airline that can withstand the uncontrollable factors that influence our industry and we need to keep trying new programs, like a-la-carte pricing,” Parker said. “Frankly, it would have been a bigger risk for us not to have tried charging for drinks because innovation and a new business model are desperately needed.”

source : Business journal

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By Alexandra Twin

Stocks tumbled Monday afternoon as investors continued to worry that the government's efforts to slow the recession won't be sufficient.

The Dow Jones industrial average (INDU) lost 140 points, or 1.9%, with roughly 2-1/2 hours left in the session. The Dow ended the last session at the lowest point since Oct. 9, 2002, at the bottom of the last bear market.

Should it close where it stood at 1:30 p.m. ET, the Dow would be at an 11-year low.

The S&P 500 (SPX) index lost 16 points, or 2.1%. The index ended the previous session at the lowest point since Nov. 20, seen by some as the low of the current bear market.

Should it close where it stood at 1:30 p.m. ET, the S&P 500 would also be at an 11-year low.

The Nasdaq composite (COMP) lost 34 points, or 2.4%. The tech-fueled index has done better than the rest of the market and remains above its January lows.

Stocks had gained in the early going on enthusiasm that the government may boost its stake in Citigroup, briefly assuaging fears that the troubled bank would have to be nationalized.

But any early advance petered out, as the worries of the last few weeks returned.

"There is just nobody who wants to buy right now," said Ron Kiddoo, chief investment officer at Cozad Asset Management.

"The news was a little bit upbeat overnight when it looked like Citigroup might find some stability, but now the skepticism is back," he added. "I think we need to hear some optimistic talk from our leaders and soon."

Financials: Stocks have tumbled over the last two weeks on worries that the government won't be able to slow the recession, despite announcing a series of programs. On Friday, stocks slipped on worries that Citigroup and Bank of America might have to be taken over by the government altogether.

Some of those worries were tempered Monday on reports that the government is looking to boost its stake in Citigroup (C, Fortune 500), something that would fall short of full nationalization but would enable it to avoid bankruptcy. Should Citigroup be fully nationalized by the federal government or forced to declare bankruptcy, that would wipe out all shareholder value. Citi shares gained 10%.

Separately, Treasury said in a joint statement with other departments that the government is ready to give more money to banks if they need it. The Capital Assistance Program begins Wednesday.

The program, previously announced by Treasury Secretary Timothy Geithner, involves giving banks "stress tests" to determine how they are doing and whether they need more money.

Company news: Meanwhile, the Treasury is also considering its options as General Motors (GM, Fortune 500) and Chrysler continue to flounder, despite having received billions in federal aid. According to a Wall Street Journal report Monday, the administration believes the possibility of Chapter 11 bankruptcy filings by the two companies must be seriously considered. GM shares gained 5%.

Fellow automaker, Ford Motor (F, Fortune 500) has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 10%.

A variety of big tech stocks slumped, including Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500) and Dell (DELL, Fortune 500).

Yahoo (YHOO, Fortune 500) could announce a major management reorganization as early as Wednesday, although more likely next week, according to a published report Monday. Yahoo shares declined modestly.

Market breadth was negative. On the New York Stock Exchange, losers beat winners four to one on volume of 740 million shares. On the Nasdaq, decliners topped advancers by more than two to one on volume of 1.01 billion shares.

Economists: A leading group of economists expect a deeper recession in the first half of the year followed by a modest recovery in the second half and a bigger recovery in 2010.

Reports are due later this week on housing, manufacturing and gross domestic product growth.

Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.80% from 2.79% Friday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, most Asian markets ended mixed, while European shares fell in afternoon trading.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for April delivery fell $1.19 to $38.34 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $5.20 to $997 an ounce.

source : CNNmoney.com

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By Jasmin Melvin

WASHINGTON (Reuters) - An accounting error reportedly led Microsoft Corp to notify some laid off employees last week that they would need to give back part of their severance pay.

The world's largest software maker laid off 1,400 workers last month, the first of 5,000 jobs the company plans to cut over the next 18 months.

The error is believed to have overpaid some former employees and underpaid others. Those that were overpaid were sent letters requesting them to refund the company by sending a check or money order.

"An inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft," a letter obtained by the blog TechCrunch reads. "We ask that you repay the overpayment and sincerely apologize for any inconvenience to you."

A Microsoft spokesperson confirmed that such letters were sent, but would not comment on how many former employees were affected or how much the total overpayment amounted to, according to CNN.

source : Reuters

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By LOUISE STORY

John A. Thain, the former chief of Merrill Lynch, faced six hours of questioning last week with the attorney general of New York.But it was not enough.

Attorney General Andrew M. Cuomo filed a motion on Monday asking that Mr. Thain return and provide more details about the bonuses that were given out on eve of Merrill’s merger with Bank of America. The attorney general says in the motion that Mr. Thain, in complying with a subpoena, did not answer all of Mr. Cuomo’s questions.

The motion, filed in the Supreme Court of New York, coincides with the start of a week in which two of Bank of America’s top executives will meet with Mr. Cuomo. On Monday, the bank’s chief administrative officer, J. Steele Alphin, will answer questions, and later this week, the bank’s chief executive, Kenneth D. Lewis, will do so.

A spokesman for Mr. Thain said that Bank of America had directed Mr. Thain not to discuss specific bonus details. But, the spokesman added that Mr. Thain was continuing to cooperate fully with the attorney general’s office.

The attorney general’s investigation has focused on some $3.6 billion in bonuses that Merrill paid at the end of last year. Merrill, struggling to survive, agreed to be acquired by Bank of America in September, but the merger did not close until year-end, and in the months before the merger closed, Merrill’s business deteriorated, resulting in a $15.3 billion post-tax loss in the fourth quarter.

Neither company disclosed Merrill’s problems before the merger closed, and Mr. Cuomo’s office is expected to broaden his inquiry beyond Merrill’s bonuses into disclosure issues involving the transaction. The loss, which Mr. Lewis called a surprise, prompted Bank of America to seek a second round of taxpayer money.

Some details about the loss emerged in the motion filed on Monday. Merrill and Bank of America were $7 billion off in their estimates of Merrill’s pretax loss in the fourth quarter, Mr. Thain told the attorney general’s office. It was using those incorrect estimates on Dec. 8 when Merrill set its bonus pool, the filing says. Normally, companies do not make bonus payments until after they close the books for a year — which Merrill did not do until Dec. 31.

Mr. Thain, when asked if the worsened results would have lowered bonuses, avoided answering the question last week, according to a partial transcript of his session with Mr. Cuomo’s office.

Mr. Thain said that Merrill as a routine matter did not disclose projections, even as conditions worsen, as they did in December, according to the court filing.

“I don’t think it’s necessarily the case that we can predict what was going to happen between Dec. 8 and Dec. 31,” Mr. Thain said at the session. “Bonuses were determined based upon the performance and the retention of the people, and there is nothing that happened in the world or economy that would make you say that those were not the right thing to do for the retention and the reward of the people who were performing.”

Mr. Thain also declined to discuss specific bonuses, telling the attorney general’s office that Bank of America had asked him not to.

Mr. Thain told Mr. Cuomo’s office that he met with Andrea Smith, a manager in human resources for Bank of America, just after the bonus pool was set on Dec. 8. The two compared bonus awards line by line and Ms. Smith objected to some. In response, Mr. Thain lowered those bonuses, according to the motion. Ms. Smith also detailed what types of employees at were paid at Bank of America, like employees in human resources, risk and public relations, to give Mr. Thain an idea of what to pay Merrill employees in those roles, Mr. Thain said, according to the transcript.

Mr. Thain would not name the people whose bonuses were lowered, and that is why the attorney general is asking him to reappear. Mr. Thain’s lawyer said that the bank had instructed Mr. Thain not to discuss compensation paid to specific employees, beyond the top five executives at Merrill, whose compensation is publicly disclosed.

The transcript provided a glimpse at the tone of the questioning in Mr. Thain’s session last Thursday.

“I feel bad for you because you’re getting caught in between this,” said Benjamin Lawsky , the deputy counselor and special assistant to the executive division in the attorney general’s office, in the session. “We’re going to end up back here doing this all over again.”

source : The New york Times

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By Binyamin Appelbaum

The largest U.S. banks reduced the availability of money for consumers and businesses during the final months of 2008 even as the government invested tens of billions of dollars to help them make new loans, according to data released yesterday by the Treasury Department.

The banks that got the most government money, Bank of America and Citigroup, led the retreat. Mortgage loan originations by the two companies in December fell $3.6 billion, or 15 percent, compared with October. New lending commitments to commercial and industrial customers dropped by $2.4 billion, or 11 percent. And the companies reduced the collective spending limit of their credit card holders by $45 billion, about 2 percent.

But the overall decline in lending was modest as some large banks even posted small increases. The data underscores that banks are responsible for only a small part of the overall decline in lending, which is mostly the result of the collapse of rival industries such as mortgage lenders, small-business lenders and Wall Street, which before the crisis collectively provided more than twice as much financing as banks.

Treasury released lending data for the last three months of the year from the 20 largest banks that got taxpayer money as part of the government's financial rescue program. The data is part of a broader effort to increase transparency and accountability. Treasury chose to focus on the largest banks, which together got more than $206 billion, or more than two-thirds of the amount invested so far, rather than requiring reports from all of the more than 350 banks that got money.

Treasury officials urged caution in drawing conclusions from the decline in lending. They argued that much of the decline is the result of a recession that has reduced customer demand and diminished the creditworthiness of many borrowers. Furthermore, they say, the proper baseline for measuring the government's investments is how much lending would have declined without public aid, something it described as impossible to determine.Still, Treasury issued an analysis with the data that reiterated the judgment of senior officials that the investments are working.

Lending "levels would likely have been lower had Treasury not taken actions to stabilize the financial system," the analysis said.

Representatives of the banking industry also viewed the findings as a favorable report card, noting that lending increased across the board from November to December.

"In the wake of the financial crisis, our banks are lending," said Steve Bartlett, chief executive of the Financial Services Roundtable.

But the December numbers remained generally below October levels, a trend that is likely to fuel renewed demands from members of Congress and consumer advocates that the banks must take new steps to increase lending.

The data present a complicated picture for each bank. For example, most companies reported that outstanding credit card balances increased as customers took advantage of borrowing limits. Companies also continued to issue large numbers of new cards. But at the same time, most credit card lenders sharply reduced the amount that their cardholders are allowed to borrow. The combination reflects a short-term increase in lending but a long-term decrease in the availability of loans.

Citigroup, for example, reported that outstanding credit card balances grew by about $800 million, but it reduced total available credit by almost $37 billion.

Similarly, many banks increased lending in selected areas. Citigroup, which has a relatively modest business in lending to commercial and industrial companies, increased its volume of new loans by about $2 billion in December. Bank of America said it was making more auto loans, which it attributed to the struggles of the financing arms of the major car companies.

source: The washington post

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By Bettina Wassener, Jack Healy and Matthew Saltmarsh

Stock markets in Asia on Wednesday continued a slide that began in the United States and Europe amid renewed concerns over the effectiveness of the U.S. efforts to shore up the economy, although falls were more muted.

The declines come amid continued concerns that Asian economies, once thought relatively immune to the global crisis that began as U.S. mortgage-related problems in 2007, have now been fully caught up in a global economic crisis that is set to worsen before stimulus measures can begin to take effect.

With demand in Europe and the United States withering, Asian exports have been severely hit, sharply slowing overall growth rates in the region's once booming economies.

The Nikkei 225 index in Japan was down 1.35 percent by midday. On Tuesday, the index had fallen by a similar amount, showing only a muted reaction to news that the Japanese finance minister, Shoichi Nakagawa, was resigning.

The Hang Seng index in Hong Kong and the Kospi in South Korea were both down around 1.5 percent by midday on Wednesday, while the key indexes in Singapore and Taiwan eased 0.5 percent."With the continuing slump in export-led growth in the region, and exports likely to remain negative for a considerable time, it's difficult to get optimistic," said Stephen Davies, chief executive of Javelin Wealth Management in Singapore. "Investors are continuing to do what they have been since the second half of last year – staying on the sidelines. And who can blame them."

The past two months have brought a steady stream of data showing the impact of the global crisis on Asia was more severe than expected, and economists broadly agree that the picture is set to become worse before any improvement can take root.

Hopes that the new government in the United States would be able to bring a swift turnaround have dissipated as "optimism has become overcome by reality again," Davies said.

He said the market reaction to the Obama administration's "so far vague proposals for the banking sector has been naïve, given the that the issues they are grappling with are so enormous that they cannot be solved overnight."

Earlier, worries about the deteriorating financial situation in countries like Romania and Hungary led to a huge sell-off on Tuesday that began in Europe and crashed ashore on Wall Street.

Every sector sank, with financial stocks leading the way and energy companies falling on tumbling oil prices. Rattled investors rushed to buy safer investments like gold and Treasury debt.

The losses on Wall Street were part of a global wave of selling that highlighted fears about how banks, automakers — entire countries — will fare in a deepening global downturn.

The news helped send the Dow Jones industrial average to nearly the same low that it hit amid the credit crisis last fall. The Dow fell 297.81 points, or 3.8 percent, to 7,552.60, which was almost the same as the 7,552.29 close for the Dow on Nov. 20.

On Tuesday, losses in General Motors, Bank of America and American Express dragged the blue chips lower. The only Dow stock in positive territory was Wal-Mart, which rose after reporting better-than-expected profits.

The broader Standard & Poor's 500-stock index slid 37.67 points, or 4.6 percent, to 789.17, dropping below what analysts said was an important trading threshold of 800. The S&P's drop of 4.56 percent was only the 16th biggest percentage drop in the last year, highlighting the pounding that stocks have taken in recent months.

The Nasdaq fell 63.70 points, or 4.2 percent, to 1470.66.

Moody's Investor Services warned of "hard landings" for Eastern European countries that had grown rapidly in recent years as they embraced American-style capitalism, becoming fertile ground for West European banks and investors. Moody's warning underscored the volatility in the banking sector, particularly for banks that operate in Eastern European countries like Hungary, Croatia, Romania and Bulgaria.

"Eastern Europe fed from the global tidal wave of liquidity and easy money," said Nick Chamie, head of emerging-markets research at RBC Capital Markets in Toronto. "They will now see significant collateral damage — a major contraction in growth, and the financial system will continue to implode. You'll probably see some of the fixed exchange rates broken."

In addition, Chamie said, there was likely to be a significant rise in unemployment, accompanying social tension and perhaps even a reconsideration of the benefits of integration with the European Union for populations in the East.

The gyrations in stocks came on a day when President Barack Obama signed the $787 billion economic stimulus bill. Despite the size and scope of the package, some investors have said it may not be enough to right the economy."Nobody believes it's going get better yet," said Howard Silverblatt, senior index analyst at Standard & Poor's.

Shares of General Motors, which were more than $25 last February, fell nearly 13 percent, to $2.18, as GM and Chrysler submitted major reorganization plans to the U.S. government. Shares of the Ford Motor Company, which has not received any bailout funds, were down 4 percent, to $1.69. Chrysler is not publicly traded.

Analysts said the markets would continue to lurch as long as the banking system remained on life support. Although Tuesday's drop was stark, there have been 15 other trading days since September when the S&P has posted bigger losses.

"Without any further concrete details, the market's really left to wonder," said Ryan Larson, head equity trader at Voyageur Asset Management.

Crude oil fell $2.58 to settle at $34.93 a barrel, and Exxon Mobil, Chevron and Total skidded as consumers and industries continued to scale back their demand for oil and gasoline.

Also on Tuesday, the Treasury Department released data from the 20 largest banks that accepted government money showing modest declines in lending during the fourth quarter of 2008. New loans made to commercial real estate developers saw a big pullback, with the typical bank reporting a 19 percent drop amid weak demand. Residential mortgage balances declined about 1 percent during the same period.

Credit card balances, on average, increased about 2 percent. But the biggest card issuers reported "more marked" decreases in both total credit extended to cardholders. Many big lenders, it seems, are continuing to cut back on untapped lines of credit.

Corporate loan balances also fell slightly in the fourth quarter, even though reports were mixed. Banks reporting declines said that fewer small-business customers were seeking new loans; many had trouble accessing short-term funds amid troubles in the commercial paper market.

In a sign of further deterioration in the industrial sector, a gauge of manufacturing fell precipitously in February. The Empire State Manufacturing Survey, which is calculated by the Federal Reserve Bank of New York, fell to a new low of negative 34.7 in February, from negative 22.2 in January.

"Robust export demand had been the main support for U.S. manufacturing for many months," Joshua Shapiro, chief United States economist at MFR, wrote in a note. "Now, with economic activity weakening sharply around the world, exports are dropping like a stone."

source : Herald tribune

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By Shani Raja

Asian stocks dropped for a third day, driving Japan’s Topix index toward the lowest close in 25 years, as the deepening global recession hurts corporate earnings and demand for commodities.

Westpac Banking Corp., Australia’s biggest lender by market value, slipped 2.6 percent as a fivefold surge in bad-debt charges dragged quarterly profit lower. BHP Billiton Ltd., the world’s largest mining company, lost 4.3 percent in Sydney after metal and oil prices declined. Sony Corp., which gets a quarter of its sales from the U.S., fell 3.1 percent after manufacturing in New York shrank at the fastest pace on record.

“I’d be very surprised if profit numbers didn’t keep on coming down,” said San Francisco-based Robert Horrocks, who helps manage $4.7 billion including Asian equities at Matthews International Capital Management LLC. “You’re seeing the ripples from the credit shock, where the medium-term effect on demand is a chronic problem that governments are trying to combat.”

The MSCI Asia Pacific Index declined 0.9 percent to 78 as of 11:53 a.m. in Tokyo, set to close at the lowest level since Nov. 24. Finance and commodity shares were the biggest drag on the gauge, which has lost 13 percent this year. The measure tumbled by a record 43 percent in 2008, as the credit crisis dragged the world’s biggest economies into recession.

Japan’s Topix lost 1 percent to 749.04 and earlier sank to as low as 744.37, which would be the lowest close since January 1984. Hong Kong’s Hang Seng Index dropped 1.3 percent, while Australia’s S&P/ASX 200 Index fell 2.6 percent.

Government Action

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. The gauge slumped 4.6 percent yesterday as U.S. President Barack Obama signed a $787 billion stimulus bill into law. After U.S. markets closed, General Motors Corp. said it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid to date it needs to survive.

Governments and central banks have been cutting interest rates and introducing spending packages to reverse the worst global slump since World War II. International Monetary Fund Managing Director Dominique Strauss-Kahn said last week that he expects more countries to apply to the IMF for aid.

The Japanese government, which yesterday appointed Kaoru Yosano as its new finance minister, said two days ago that gross domestic product contracted 12.7 percent in the fourth quarter, the most since the 1974 oil shock. The Federal Reserve Bank of New York’s general economic index sank to the lowest level since records began in 2001, according to a report yesterday.

A gauge of finance companies on the MSCI index dropped 1.4 percent. The finance measure is the second-worst performer in the past 12 months of 10 industry groups as the credit crisis caused losses at institutions worldwide to swell to more than $1 trillion.

‘Volatile’ Conditions

Westpac Banking Corp. declined 2.6 percent to A$16.34 after profit fell 2 percent in the three months to Dec. 31 as bad debts outweighed increased fee income from last year’s purchase of St. George Bank Ltd.

“With global economic conditions continuing to be volatile, operating conditions will remain difficult,” Chief Executive Officer Gail Kelly, said in a statement.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, fell 2 percent to 442 yen. Sony Financial Holdings, which cut its profit forecast last week, lost 6.7 percent to 256,000 yen.

The Markit iTraxx Japan index of credit-default swaps, which measures the cost of protecting investors in Japanese corporate bonds from default, rose to a record today, Barclays Capital prices show.

BHP fell 4.3 percent to A$30.36 in Sydney. Rio Tinto Group, the world’s third-largest mining company, dropped 2.4 percent to A$47.86.

Slowing Global Demand

Concern the global economic slump will deepen drove down commodity prices. Crude oil tumbled 6.9 percent to settle at $34.93 a barrel in New York, the steepest drop since Jan. 27. Copper futures slumped 7.2 percent, the most since Oct. 30.

Sony lost 3.1 percent to 1,608 yen on concern global demand for its televisions and video-game consoles will slow further. The company reported a 95 percent plunge in third-quarter profit on Jan. 29. Canon Inc., the world’s biggest digital-camera maker, slid 2.3 percent to 2,310 yen.

“There are looming prospects that corporate earnings will deteriorate even further,” Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. “We’re getting ever closer to historic lows, and that weighs on investor sentiment as well.”

source: Bloomberg

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By Steven Mufson

Only one thing lies at the end of the pothole-strewn road for America's automobile industry: smaller companies making fewer cars with fewer workers and dealers.Getting there will be a hair-raising ride -- for workers, dealers, investors and taxpayers. Yesterday, General Motors and Chrysler beseeched Washington to give them massive new infusions of financial aid in an effort to avert bankruptcy, which they say would depress sales even more than they have been depressed by the slumping economy. But whether the restructuring process the ailing giants undertake is called bankruptcy may be largely a matter of semantics.

"I don't know what you're going to call it, but they're going to go through bankruptcy, whether outside the bankruptcy system or with the benefit of the courts," said Maryann Keller, who has written about the U.S. auto industry for three decades. "At the end of day, the United Autoworkers are going to have to take a haircut, creditors are going to take a huge haircut and equity is gone. What will effectively happen is exactly the same as bankruptcy."

Financial experts close to the Obama administration say that any financial aid given to the ailing U.S. automakers will come fully loaded with wrenching restructuring plans.

"I think the new administration's hope is that we come to a thoughtful and sensible outcome. Walking away and saying 'Let the private market figure it out' is not either politically or economically the right outcome," said one financial expert who has talked with administration members and spoke on condition of anonymity because he is not authorized to speak on their behalf. "But I also don't think giving money without being sure of a better outcome is right, either."Among the most nettlesome stakeholders are dealers, who are protected by a variety of state laws and franchise agreements that usually can be broken only in bankruptcy court. One way or the other, the dealers are bound to suffer as brands die off. Stephen Girsky, a former Morgan Stanley analyst who now works for the private-equity and consulting firm Centerbridge Partners, has said that U.S. carmakers should close 70 percent of their dealerships, far more than GM recently set as its restructuring goal.

Even these restructuring plans are no guarantee that the onetime automobile behemoths will make money, analysts said. The current credit crunch will pass eventually, but the loose lending that spurred sales in recent years will probably not return. And high federal fuel-efficiency standards and California's proposed limits on greenhouse emissions from tailpipes will require changes in engines.

As it is, GM has been steadily losing market share for decades. Its profits in the early part of the decade were inflated by a mortgage business it owned. Profits overseas disguised weakness in the United States for years, and now those markets are weakening. Plans for a new plug-in hybrid vehicle, championed by members of Congress as the car of the future, come equipped with new uncertainties. It will have a tiny production run and a large, expensive battery that many analysts say will make it a sure money-loser.

"GM has been dying for 30 years. We're only now writing the obit," said Keller, who 20 years ago wrote "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors."

Chrysler, on the other hand, is still suffering the after-effects of its broken marriage to Daimler. After the German automaker acquired Chrysler in 1998, it all but eliminated Chrysler's ability to design and engineer new cars in an effort to cut duplicative costs. Then Daimler sold the company to the private-equity firm Cerberus. Chrysler now has primarily two valuable vehicles, the Chrysler minivan and Jeep; the Dodge pickup truck is also popular in some areas of the country. It has touted a proposed affiliation with Italy's Fiat as a way to introduce new small-car models in the United States, though the two have yet to finalize a partnership.

"We believe Chrysler will be viable and will play a vital role in supporting the American economy and in providing American jobs," Chrysler chief executive Robert L. Nardelli said yesterday.

But Keller said: "Chrysler's the harder one. When the Germans took the last flight to Stuttgart, they didn't leave a lot of infrastructure in Chrysler to enable Chrysler to be self-sufficient in designing vehicles." She added, "In GM, you at least have a company that has resources, that has talent, that has technology and assets that are important and a scale that frankly enable it to emerge from this process as a healthier company. GM at end of the day can conceive, engineer and assemble a car. Those skills have been lost in Chrysler because they were drained out of the company during the 10 years Daimler owned it."

One measurement of pessimism about the fate of leading brand names is the Automotive Lease Guide's estimate of their residual values after 36 months. This week, the guide slashed its estimates on Dodge, Jeep, Saturn, Saab and Hummer by four to nine percentage points because of uncertainty about their future. That would deliver another blow to sales by making it more expensive for consumers to lease new vehicles. Last month, 3.3 percent of Chrysler's new-vehicle sales were leases, down from 24.7 percent in January 2008, according to Power Information Network. GM leases also fell sharply.

Even the Detroit companies' rivals are sympathetic to their plight. "All of us, not just Americans but Europeans, are running through the same stuff, and Japanese are, too," said Bill Reinert, national manager of Toyota's advanced-technology group in the United States. He predicted "smaller, leaner organizations" that will "need to look at product planning and whether it is in line with where the public is going from an economic and environmental point of view."

But Reinert said that simply shrinking auto companies isn't enough. Big companies benefit from economies of scale, so smaller companies will have to be more nimble. He said that "in the end . . . what you'll see is a much more competitive market and two models of automobiles: one as an appliance for people who don't care about cars, and the next as a social icon much like the iPhone and iPod." And because of new climate regulations, he added, automakers will have to "do that within an ever smaller carbon footprint."

That's more than Reinert had to worry about when he started working at age 17 in the same Ford plant where his father worked, making models of yesteryear: Fairlane, Comet, Maverick. He worked there before going to serve in the Vietnam War and again when he came back.

Now the auto industry is stuck in its own quagmire. Toyota is suffering from big losses and plunging sales. But Reinert is not ready to say that the Detroit three will fail to transform themselves into viable companies. "Never underestimate your competition," he said. But he added: "I'm not saying it's going to be easy. Or pretty."

source : The Washington post

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Postmaster General John E. Potter has come under criticism for his total 2008 compensation of nearly $800,000, but the agency's board of governors says the pay is less than what leaders of several other independent government agencies receive.
And the amount is far below that given to CEOs in the private sector, even though compensation and benefit packages for postal service officers are required by law to be comparable to those given to private-sector employees doing similar work, the board of governors says.

"That's a difficult standard to achieve given the compensation restraints within the federal sector," said Carolyn Lewis Gallagher, the chairman of the agency's board of governors.

She added that the postal service, with $75 billion in revenues and nearly 700,000 employees, compares with Fortune 100 companies.

Potter received a salary of $263,575 in 2008. His total compensation of nearly $800,000 included deferred earnings toward his retirement plan.

Compensation and benefit packages for officers of the postal service are governed by Congress and not funded by taxpayers.

Gallagher said effective compensation was necessary for effective managers.

"Even in these difficult times, the postmaster general continues to exhibit visionary leadership, effecting billions of dollars in cost reductions," she said.

Critics have tried to paint Potter's compensation as excessive, given that he had recently appeared before Congress warning that, with a $2.8 billion loss in 2008, the postal service may need to reduce its congressionally mandated six-days-a-week delivery schedule. iReport.com: Mail five days a week?

"Apparently compensating executives well is still a possibility at the post office," Pete Sepp of the National Taxpayers Union told CNN on Tuesday. "And despite all the delivery problems they may have, despite the deficits they may have, executive compensation is still nice, fat and round."Other independent government agencies pay their executives much more, however.

Richard Syron, former Freddie Mac CEO, had a compensation package of $3.4 million and reportedly took home much more in cash, stocks and other compensation before he was fired in September, according to Forbes magazine. Daniel Mudd, former CEO of Fannie Mae, had a total compensation package of $8.79 million before he, too, was fired that month, according to Forbes.

Frederick Smith, the long-time CEO of delivery giant FedEx, had a total compensation package of $32.21 million, Forbes said.

Fannie Mae and FedEx are among Forbes' top 100 firms.

A new postal law in 2006, Gallagher said, gave the postal service more flexibility to devise a compensation plan that didn't focus on salary. As a result, she said, the agency adjusted salaries and benefits packages, including performance-based initiatives, that became effective in 2008.

Potter saw his civil service pension fund rise by $381,496 in 2008, and he received a $135,041 incentive pay that will be deferred to his retirement, according to a filing released December 10.

Civil service pension rules are applied to all federal employees to calculate compensation, postal service spokesman Gerald McKiernan said. The calculation is based on salary and years of service, he said.

Sepp compared Potter's earnings to "Detroit auto executives flying to Washington in a fancy jet to ask for tax dollars" and said he "would not be surprised" if the postal service asked for a Wall Street-like bailout.

Automakers General Motors and Chrysler on Tuesday asked Congress for another $21.6 billion to keep them out of bankruptcy. They plan to cut 50,000 jobs between them by the end of the year.

source : CNN.com

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By MIGUEL HELFT

A small Web site operator filed an antitrust suit against Google on Tuesday, accusing it of unfairly manipulating its advertising system to harm a potential competitor.TradeComet.com, which operates a site called SourceTool.com, a vertical search engine for those seeking business products and services, accused Google of raising the advertising rates it charged the company after it realized that SourceTool was a potential competitor.

TradeComet also said that Google entered into an anticompetitive agreement with Business.com, a SourceTool rival, which despite having a similar business model was offered more favorable advertising terms.

“Google understood the threat that vertical search engines posed to its business model,” said Jonathan Kanter, a partner in Cadwalader Wickersham & Taft.

Mr. Kanter’s firm represents Microsoft in antitrust matters. Mr. Kanter said Microsoft “has no involvement in this matter at all.” Google said it had not reviewed the complaint in detail. “But as we have consistently made clear, the advertising market in which Google operates is highly competitive and advertisers have a huge range of choices,” said Andrew Pederson, a Google spokesman.

Ben Hanna, a vice president for marketing at Business.com, said his company had no special relationship with Google.

TradeComet said that Google initially welcomed SourceTool, which bought ads on Google to drive traffic to its site.

That traffic grew quickly, reaching 650,000 visitors a day. By the following year, however, Google increased the prices that SourceTool had to bid for its ads by as much as 10,000 percent, the company charged.

Google uses a proprietary algorithm to assign “quality scores” to advertisers’ sites, using measures like the apparent usefulness of the sites. Advertisers with low scores have to pay more for their ads, and many advertisers have complained that Google can use the system to manipulate prices.

Last year, SourceTool urged the Justice Department to block a proposed search advertising partnership between Google and Yahoo. Its story became the subject of a column in The New York Times.

After the Justice Department notified Google and Yahoo that it planned to file suit to block the agreement, Google abandoned the partnership.

Legal experts said that the lawsuit appeared to be fallout from the Justice Department review of the partnership, which concluded that Google’s market share in search advertising amounted to a monopoly. But they were split on the merits of the case.

“I do believe that this properly alleges harm to competition, not just harm to one plaintiff,” said Samuel Miller, a partner at Sidley Austin in San Francisco.

But EricMr. Goldman, a law professor at Santa Clara University, cast a skeptical eye on TradeComet’s accusations , noting that courts had dismissed a similar antitrust case against Google. “We’ve heard all these arguments before and they haven’t gotten much traction,” Mr. Goldman said.

source : The new york times

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By MICHELINE MAYNARD

The brand that was once hailed as an important part of the future of General Motors now will be part of its past.G.M. said Tuesday that it would phase out its Saturn brand by 2012. It does not plan to develop any more new vehicles for Saturn, which began 19 years ago as an effort to attract owners of small Japanese cars.

G.M. also said it was considering its options for the Pontiac division. The Pontiac name, part of the car business since 1932, could remain on some models, but may no longer be a separate division. G.M. said Pontiac would be a “focused brand” with fewer models.

The disclosures by G.M., contained in a viability plan submitted to the government, means that G.M. plans to cut its brands in half, to four: Chevrolet, Cadillac, Buick and GMC.

It said last fall that it would try to find buyers for Hummer and Saab. On Tuesday, it said it would decide on Hummer’s fate by March 31.

But is four the right number?

After all, most of its big competitors, including Toyota, Honda and Chrysler, build their businesses around three brands or fewer in the United States. Ford is moving to shed its foreign brands and plans to focus primarily on three — Ford, Lincoln and Mercury.

“A volume brand and a premium brand can get the job done. Toyota has proven that,” said Karl Brauer, editor in chief of Edmunds.com, a Web site that offers car-buying advice. “Cadillac, Chevy, done.”

The more brands a carmaker has, the more it must spread money around to develop vehicles and market them.

As a result, “every brand suffers,” said A. Andrew Shapiro, a managing partner with the Casesa Shapiro Group. “No particular brand or brands can achieve the share of voice that they need.”

Its extensive brand lineup has long been G.M.’s primary weapon. Founded in 1908 by William C. Durant, who brought together a collection of car companies, G.M. made the concept of “a car for every purse and purpose” its strategy during the 1920s for retaining buyers from their first car to their last.

Brands were a crucial element in G.M.’s effort to thwart Ford, then the country’s biggest car company, whose founder joked that buyers could have any color they wanted, as long as it was black.

G.M.’s strategy paid off during its best years, when it controlled more than half the American car market. But it held only 22 percent of United States auto sales last year, with more than half of its share coming from a single division, Chevrolet.

G.M. found out last decade just how expensive it could be to unwind a brand. It spent more than $1 billion to buy out dealers at Oldsmobile, which built its last cars in 2004.

Rick Wagoner, G.M.’s chief executive, said the automaker had set aside money to buy out dealers, but declined to specify a figure. “We have reserves in our plan to facilitate that,” he said.

He cited the economic downturn as the reason G.M. was phasing out Saturn. “Frankly, the opportunity for any brand, and for our volume as a whole, just looks radically different,” he said. “It is unfortunate and it seems like a cruel twist of fate at a time when Saturn is loaded up with a fantastic product portfolio.”

In a letter sent Tuesday to Saturn dealers, G.M. said it would entertain a plan from Saturn dealers or other investors for a spinoff of the division to keep it operating. It said it would provide information to potential investors.

But it warned a spinoff would be “a difficult and complex task, and some of the issues that must be resolved include product sourcing, capitalization and financing issues,” G.M. said in the letter signed by Mark LeNeve, a G.M. vice president for North American sales, and Jill Lajdziak, the general manager of Saturn.

When Saturn was started in 1990, as a “different kind of car, a different kind of car company” aimed at owners of small Hondas and Toyotas, its small cars were immediate hits. But G.M. executives decided in the mid-1990s that they needed to support G.M.’s other brands over Saturn, which by then had cost $5 billion.

G.M. did not add any new vehicles to the Saturn lineup for five years, despite pleas from dealers for bigger vehicles. Earlier this decade, G.M. decided to start selling vehicles from its Opel division, with some design changes, as Saturns in the United States.

Saturn sold 188,004 vehicles in 2008, down 21.7 percent from the previous year. Its best-selling vehicle was the Saturn Vue, a small sport utility vehicle.

Strict franchise laws protect dealers across the country from seeing their operations shut down without advance notice.

G.M. dealers said they were led to believe that the company was committed to the division.

“G.M. is picking on Saturn,” said Sherrill Freeborough, who owns Saturn dealerships in Grand Ledge and Okemos, Mich. “I want G.M. to be successful but I don’t think that always happens the other way around.”

In 1992, when G.M. began discussing the end of Oldsmobile, the division sold 412,000 vehicles. Except for Chevrolet, none of G.M.’s current brands sold that many vehicles last year.

Mr. Shapiro, the analyst, said G.M. should have rethought its divisions in the 1980s, when a number of new brands appeared in the United States, including Acura, Lexus and Infiniti, the Japanese luxury brands, and the Korean makers Hyundai and Kia.

“There were always good short-term reasons for not doing something,” Mr. Shapiro said.

Ed Dena, a Pontiac dealer in Dinuba, Calif., said he would eventually have to focus on his other G.M. brands, including Chevrolet, Buick and GMC. “Of course we’re sad because Pontiac is an icon,” he said. “But right now, in this industry, nothing is a shock anymore.”

source : The New york times

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By Pascal Fletcher

Allen Stanford, the high-flying Texas billionaire with a Caribbean knighthood and a penchant for publicity and cricket, has been brought down to earth with a thud by U.S. fraud charges against him and his companies.

In a self-congratulatory posting on the Stanford Group's website, its founder and chairman credits his grandfather with giving him "the inspiration to dream" and "an unwavering desire to build a business that is second to none." He speaks of "a passion for service and the values that hold us together".

On Tuesday, as U.S. marshals swooped down on Stanford's U.S. headquarters in Houston, federal authorities charged the flamboyant 58-year-old moustachioed financier and three of his companies with a "massive ongoing fraud."

Accusing him of far less altruistic aspirations than those trumpeted on his website, the U.S. Securities and Exchange Commission alleged Stanford and two fellow executives fraudulently sold $8 billion in high-yield certificates of deposit.

The SEC said they and the bank reported "improbable" high returns and gave "false" assurances to investors.

The SEC's revelation that Stanford's business empire -- stretching from the Caribbean island of Antigua to Houston, Miami and Caracas -- was exposed to losses from the alleged Ponzi scheme run by financier Bernard Madoff completes the picture of a finance king who somehow lost his Midas touch along the way.

Before the SEC civil charges were announced, Stanford dismissed the U.S. federal probe as "routine" and triggered by complaints from disgruntled former employees. He said his company was fully compliant with all U.S. regulations and that he would "fight with every breath to continue to uphold our good name."

Only months ago, Stanford, known as "Sir Allen" in Antigua whose authorities knighted him in 2006, was providing fodder for the British tabloids by flying in by helicopter to bankroll international cricket matches in a blaze of publicity.

Now he is out of sight, as his harassed staff in plush company offices from Memphis to Atlanta fend off queries from panicked investors and posses of probing journalists.

CARIBBEAN POTENTATE

Once described as "haughty, arrogant and obnoxious" by Antiguan Prime Minister Baldwin Spencer, Stanford, America's 205th richest man according to Forbes magazine, has often walked a fine line between critics and admirers in a business and sporting empire that reaches well beyond Texas to Europe and across the Caribbean.

Spencer said at the weekend he feared the Stanford scandal would hurt the image of the tiny Caribbean state of Antigua and Barbuda, which has undergone scrutiny in the past for alleged money laundering by Ukrainian and Russian Mafia bankers.

But many local islanders expressed support for the country's biggest investor. "He is the best investor to come into the Caribbean, not only Antigua, but the region," said islander Julian Exeter. "He puts food in the mouth of everyone in Antigua and money in their pocket," he said.

Friends say the financier is as genial as he is thick-skinned.

"Allen enjoys life and is the kind of person that doesn't worry about what other people think," said David LeBoeuf, a Texan who went to school with Stanford. "Larger than life is one way to describe him, but he's also an extremely talented, unique and hard-working individual," he said.
A fifth-generation Texan, Stanford made his first fortune in Houston, snapping up distressed real estate in the early 1980s before inheriting the insurance and real-estate company his grandfather founded in 1932.

Forbes put his personal wealth at $2.2 billion last year and said his list of wealth-management clients includes pro golfer Vijay Singh. He credits his recent success in part to avoiding investments in subprime mortgages that snowballed into a global financial crisis.

Asked by CNBC television in September if it's fun being a billionaire, he smiled and replied, "Yes, yes, yes. I have to say it is fun being a billionaire. But it's hard work."

With dual U.S. and Antiguan-Barbudan citizenship, Stanford has homes sprinkled across the region -- from Antigua to St. Croix in the U.S. Virgin Islands to Miami.

A generous patron of several sports, Stanford financed a $1 million-per-player Twenty20 tournament in November in which his "Stanford Superstars" side of West Indian cricketers became instant millionaires when they beat England's team at his Stanford Cricket Ground in Antigua.

But now, after the SEC charges, the England and West Indies cricket boards have suspended negotiations on future projects with him.

In recent months, he has let staff go in Antigua, closing a cricket office there. There has been a variety of reasons for the cutbacks -- from bad press to the global financial crisis.

Back in the United States, he stirred controversy by claiming family ties to Leland Stanford, who founded Stanford University in the 1890s. The university says there is no genealogical connection between the two and sued Stanford Group in October for infringing on its trademark.

source : reuters

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By JUDY DEMPSEY

A new dividing line is settling across central Europe with economic repercussions that are already painful and could potentially be disastrous.

Rather than being based on ideology, the division this time is based on countries that use the euro and those that do not.

Only two out of 10 of the newest Eastern European members of the European Union, Slovakia and Slovenia, are members of the 16-nation euro zone. And the other eight countries are desperate for help as their companies and economies are buffeted by currency fluctuations and declines.

The European Central Bank, which oversees the euro, puts money into the system by lending against collateral, and since the beginning of the current economic crisis, this practice has expanded vastly.

While euro zone members have priority, such lending also has become broader. British banks have benefited through their euro zone subsidiaries, and the central bank has even provided loans to central banks in Poland and Hungary.

What the central bank has not done for the new members yet to adopt the euro is to provide temporary currency swaps — along the lines of what the Federal Reserve did for Brazil, Mexico, Singapore and South Korea last October to enable those countries to convert their currencies more easily to dollars.

And the central bank does not accept as collateral the bonds issued in zlotys, forints or the other local currencies in Eastern Europe.

“This has made it unattractive for euro-area financial institutions to hold noneuro government bonds, thus contributing to their sell-off,” said Zsolt Darvas, a visiting fellow at Breugel, an independent economics research group in Brussels.

The global financial crisis was slow to reach this part of Europe because its banks had few troubled assets. But when the collapse of Lehman Brothers last September sent new shock waves through the global banking system, Eastern Europe and other emerging markets were no longer spared.

Hungary and Latvia were particularly vulnerable; Hungary because of its deep exposure to foreign lending, and Latvia because of its shaky banking system and overextended consumers. When foreign currency financing dried up, the domestic interbank money markets stumbled and currencies came under pressure. Both countries were rescued by the International Monetary Fund and the European Union, with a heavy price attached in the form of government spending cuts.

Political and psychological factors also make attracting funds more difficult outside the euro zone, said Vasily Astrov, an economist at the Vienna Institute for International Economic Studies.

“Investors have become risk averse, at least with regard to financial markets,” he said. “They are opting for countries which hold the major currencies.”

The extraordinary pace with which currencies have declined has only aggravated such problems. In Poland, the zloty has fallen in value by 50 percent against the euro.

In theory, that should help exporters. But Aleksander Drzewiecki, chairman of the House of Skills, a consulting company, said many export-driven companies depend on imports in the first place. “The turbulence with the exchange rate is horrible,” he said. “We have no idea where we stand.”

Poland, with almost 40 million people, is the biggest of the new member states. It lost an opportunity right after joining to quickly prepare to adopt the euro. The nationalist-conservative government then, led by Lech Kaczynski, was intensely skeptical toward the euro and resistant to abandoning the zloty.

The new center-right government, led by Donald Tusk, which took office in late 2007, is more “euro friendly,” Mr. Astrov said. But its target entry date of 2012 is now called into question by the economic turmoil.

Elsewhere in Eastern Europe, the Czech Republic is keeping its options about joining the euro zone open, although it would need support from President Vaclav Klaus, a euro skeptic.

The Baltic states would like to join as quickly as possible, but their economies are contracting so much that it would be impossible to meet the criteria, which, among other things, stipulates that budget deficits should be below 3 percent of gross domestic product.

Without its subsidiary in Germany, things could be a lot worse for Ergis-Eurofilms, the biggest manufacturer of plastic films and laminates in Poland, which last year had revenue of 150 million euros ($189 million at current exchange rates) and a profit of about 10 million euros.

By contrast, Fiam, a family-owned company in Slovakia that specializes in recycling plastic materials, has its subsidiaries outside the euro zone, in Hungary, Poland and the Czech Republic. As a result, Fiam has been protected from currency fluctuations in its home market, which has adopted the euro, but faces havoc when selling eastward.

“Leaving aside the fact that many economies are all in recession, there is predictability inside the euro zone because there are no currency fluctuations,” said Ivan Saro, the company’s chief financial officer, whose father started the business in 1988.

Andreas Tostmann, chairman of the board of Volkswagen’s subsidiary Skoda in Slovakia, said the elimination of exchange rates meant “higher stability in planning and not least, the simplification of transactions inside the VW Group.”

But VW, similar to Fiam, has markets outside the euro zone area, where its products become more expensive. “It is a nightmare,” Mr. Saro said.

The fluctuations have motivated the company to try to sell more to the euro zone area.

But Mr. Saro is still facing problems with tight credit. The banks, he said, are stricter in granting loans and customers are paying late.

“We get paid but we don’t know when,” he said. “The point is that having adopted the euro, it is some kind of guarantee. But don’t ask me to look beyond the short term. These times are just too crazy.”

source : The New york times

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By NANCY BENAC

More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package coming out of Congress.
Millions more could be kept from slipping into poverty by the economic lifeline.
People who get food stamps — 30 million and growing — will get more.
People drawing unemployment checks — 4.8 million and growing — would get an extra $25 and keep those checks coming longer. People who get Supplemental Security Income — 7 million poor Americans who are elderly, blind or disabled — would get one-time extra payments of $250.
Many low-income Americans also are likely to benefit from a trifecta of tax credits: expansions to the existing Child Tax Credit and Earned Income Tax Credit and a new refundable tax credit for workers. Taken together, the three credits are expected to keep more than 2 million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.
The package also includes a $3 billion emergency fund to provide temporary assistance to needy families.
There are other, more indirect ways that the stimulus package is likely to benefit poor people.
For example, cash-strapped states will get an infusion of $87 billion for Medicaid, the government health program for poor people, and that should help them avoid cutting off benefits to the needy.
Sharon Parrott, a senior analyst at the Center for Budget and Policy Priorities, said that while the benefits provided under the stimulus program are short-term, they could have a lasting impact on families by helping them maintain stable housing and avoid disruptions in schooling.
Opponents of the stimulus bill are skeptical that the expanded benefits will ever be allowed to expire and question whether they’re warranted in the first place.

source : chron.com

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by :Tina Wang

Toyota Motor's incoming president, Akio Toyoda, has promised to make aggressive changes. They're already happening.
The Japanese automaker will try to buy out American workers for the first time as it cuts production, and will slash compensation for North American executives. But it seems no matter what it does, Toyota will simply not make money until at least 2010.
Facing its first-ever full-year loss, of around $5 billion, Toyota (nyse: TM - news - people ) is operating in crisis mode, conserving cash and hunkering down to ride out a deepening demand slump. Toyota said Thursday it will make buyout offers to about 18,000 workers at three U.S. assembly plants and three U.S. auto parts factories, cut salaries of its North American executives by 5% and eliminate their bonuses, and further slash output at U.S. plants.
Toyota will idle some U.S. factories for two to eight days, starting in April, based on inventory levels, and reduce the number of work hours at some plants. The changes will affect the automaker's assembly plants in Indiana, Kentucky, Mississippi and Texas and auto parts factories in Alabama, Missouri and West Virginia.
The company doesn't expect a large number of workers to accept the buyout offer given the poor state of the economy, so most of the savings likely will come from the reduction of compensation and work hours.
“If no one decides to leave, that is fine by Toyota,” said Toyota spokesman Paul Nolasco, who added that Toyota has no target for how many employees will exit.
The moves are part of Toyota's effort to save 800 billion yen ($8.8 billion) for the fiscal year ending March, through reduction of fixed costs by 500 billion yen ($5.5 billion) and savings of 300 billion yen ($3.3 billion) from lower input costs.

source : Forbes.com

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By Nandini Sukumar

London Stock Exchange Group Plc named Xavier Rolet to succeed Clara Furse as chief executive officer, bringing an end to her eight-year reign at Europe’s oldest independent bourse.
Rolet, 49, who was head of Lehman Brothers Holdings Inc. in France until Nomura Holdings Inc. bought its European investment bank last year, will join the board on March 16, the exchange said in a Regulatory News Service statement today. He ran equity trading at Goldman Sachs Group Inc., European equities at Credit Suisse First Boston and Dresdner Kleinwort Benson before joining Lehman in 2000. He will start as CEO on May 20.
Under Furse, LSE’s first female CEO, the bourse fought off five takeover offers in two years and bought the operator of the Milan stock exchange in 2007. While LSE has remained independent, rivals including Euronext NV, Deutsche Boerse AG and Nasdaq OMX Group Inc. have forged alliances, adding to the range of products they offer and giving them greater size. LSE’s shares lost 74 percent last year on concern falling stock prices and competition from electronic exchanges will erode earnings.
“He’s a very smart and capable man and has a good track record,” said Bruce Weber, professor of finance at the London Business School. “He’s been a customer and probably knows the good side and bad side of the exchange as well as anyone. He sees it from the customer perspective and not the old stock exchange monopoly perspective.”
Rolet agreed to give a lecture to Weber’s students last year on how trading desks work and the way they coordinate with exchanges. He was educated at France’s Ecole Superieure de Commerce and has a masters in business administration from Columbia University.
Lisbon-Dakar Rally
Rolet, who took part in the Lisbon-Dakar Rally in 2007 to raise money for Medecins Sans Frontieres, faces a barrage of new rivals including so-called multilateral trading facilities Turquoise and Chi-X Europe Ltd., which are backed by investment banks, and European ventures of Bats Trading Inc. and Nasdaq OMX. The new entrants have taken about a quarter of LSE’s business by offering cheaper trading and clearing of stocks listed on its markets and faster trades.
“Going forward the LSE faces headwinds in equity trading,” said Dirk Hoffmann-Becking, exchange analyst at Sanford C. Bernstein & Co., in a Jan. 22 note to investors. “Low market caps, slowing trading velocity, market share erosion, pricing pressure, a slow IPO market, and weakening demand for market information.”
The exchange, which started in 1698 when a group of brokers met in Jonathan’s Coffee House to trade stocks and commodities, hired Furse, 51, in 2001 after shareholders forced Gavin Casey to resign following a failed attempt to merge with Frankfurt- based Deutsche Boerse.

source : Bloomberg

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By NICK WINGFIELD

Microsoft Corp. said it hired a former Wal-Mart Stores Inc. executive to help the company open its own retail stores, a strategy shift that borrows from the playbook of rival Apple Inc.
The Redmond, Wash., company said it hired David Porter, most recently the head of world-wide product distribution at DreamWorks Animation SKG, as corporate vice president of retail stores for Microsoft.
In a statement, Microsoft said the first priority of Mr. Porter, who is also a 25-year veteran of Wal-Mart, will be to define where to place the Microsoft stores and when to open them. A Microsoft spokesman said the company's current plans are for a "small number" of stores.
It remains to be seen whether the effort can add some pizzazz to Microsoft's unfashionable image, which Apple has sought to reinforce with ads that mock its competitor. Mr. Porter, in a statement, said there are "tremendous opportunities" for Microsoft to create a "world-class shopping experience" for the company's customers.
"The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy," Microsoft said in a statement.
The move is a sign of the deeper role consumer-technology companies are playing in the retail business, despite the many risks of straying from their traditional businesses of making hardware and software. Apple, of Cupertino, Calif., encountered widespread skepticism when it first began opening its own retail stores in 2001.
Eight years later, though, Apple's chain of more than 200 stores around the world are widely credited with helping the company boost sales of its Mac, iPod and iPhone product lines. The Apple stores, with their eye-catching architecture, highly-trained sales staff and "genius bars" that provide technical support, gave Apple a way to showcase its products in an environment where they weren't lumped in with a gamut of other electronics items. Sony Corp. and Bose Corp. also operate their own stores.
At the same time, some large electronics retailers have fallen on hard times amidst the weakening economy. CompUSA Inc. last year closed most of its retail stores, while Circuit City Stores Inc. is in the process of shutting down all of its stores and laying off more than 30,000 employees.
Microsoft has long flirted with the idea of doing its own store, even as it has tested ways that retail partners can better sell Microsoft products. In a 20,000-square-foot warehouse near its campus in the suburbs of Seattle, Microsoft has tested various retail concepts, complete with shelves displaying Xbox games and big computer monitors with touch-sensitive screens.
Key details about Microsoft's retail plans still need to be worked out, though. Microsoft said the stores could feature a range of products from personal computers running its Windows operating system to cellphones running the company's Windows Mobile operating system to its Xbox videogame console.
One of Mr. Porter's tasks will be to figure out whether to actually sell computers rather than merely show off their features. Any decision that favored some PC makers and left others off store shelves could anger some hardware partners.
Stephen Baker, an analyst at NPD Group Inc., which tracks retailers, said Apple doesn't face the dilemmas Microsoft will in the retail business because Apple makes the hardware and software for its products. "That's going to be a big challenge for Microsoft," Mr. Baker said.
A spokeswoman for Hewlett-Packard Co., one of Microsoft's biggest hardware partners in the PC business, declined to comment on Microsoft's retail strategy. Spokesmen for Dell Inc. didn't respond to requests for comment.
Microsoft's store plans could also irk existing retail partners like Best Buy Co., on whom Microsoft is especially dependent for sales to consumers. Best Buy representatives didn't return calls requesting comment. Microsoft said it will share the lessons it learns from its own stores with other retailers.
The failures of other stores opened by technology companies will loom over Microsoft as it launches its stores. In 2004, computer maker Gateway Inc. shuttered a network of more than 188 company-owned retail stores after weak sales. Microsoft itself operated a Microsoft store inside a movie-theater complex in San Francisco beginning in 1999, but two years later shut down the store -- which showcased, but didn't sell, Microsoft products.

source : The wallstreet journal

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By Alana Semuels

Continuing its retreat from traditional media, Google Inc. is bowing out of the radio advertising business. It plans to keep trying to sell ads for streaming audio on the Web.
The cutback reflects a general belt-tightening at the Internet giant, which is trying to curb its big spending by shutting down businesses that aren't working.
"While we've devoted substantial resources to developing these products and learned a lot along the way, we haven't had the impact we hoped for," Susan Wojcicki, vice president of product management, wrote in a post on the company’s blog. About 40 employees will lose their jobs.
Google launched its radio efforts when it bought DMarc Broadcasting Inc., a Newport Beach company with radio advertising technology. The 2006 deal was initially valued at as much as $1.1 billion but ended up costing less because DMarc failed to hit performance goals.
The Google Audio Ads and Radio Automation programs sought to create new revenue streams for broadcast radio and to streamline the process of buying and selling radio advertising.
"It's just not making them enough money for the cost," said Greg Sterling, an analyst at Sterling Market Intelligence. "It speaks to the weakness of the medium itself."
What's more, he said, the recent cutbacks suggest Google's efforts to become a multiplatform media company are dormant. In January, it killed its Print Ads program for newspapers, ended uploads to Google Video and closed its mobile social-networking service Dodgeball.
But Sterling said Google's media "will probably resurface in a less ambitious form when the economy revives."

source : Los Angleles times

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Japan's Nikkei average fell 1.6 percent on Monday as Hitachi Ltd (6501.T) plunged after it warned of a record $7.8 billion loss amid a deepening global recession, while a string of others with grim earnings outlooks also tumbled.

Panasonic Corp (6752.T) slid after news that it was set to book an annual $3.9 billion net loss, while Mizuho Financial Group (8411.T) sank after booking a $1.6 billion quarterly loss and further slashing its full-year forecast. [ID:nT305489] [ID:nT202016]

Major Japanese companies now expect to see a 62 pct tumble in net profit in the year ending in March from a year earlier, according the latest data from Thomson Reuters. That compared with a 38 percent decline forecast just a few weeks ago.

"This year the situation surrounding corporate earnings has continued to deteriorate every day and that has been worse than market expectations," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.

"But the market as a whole seems to have factored in the dismal earnings trend on Friday and this morning as most major companies have finished reporting results."

He said the market's focus will once again shift to the U.S. government's economic steps and currency moves from corporate earnings announcements.

The benchmark Nikkei .N225 declined 125.90 points to 7,868.15, after falling more than 2 percent earlier.

It extended Friday's loss of 3.1 percent. In the month of January, it lost 9.8 percent -- its worst month since October, when it fell 24 percent. The broader Topix shed 2 percent to 778.44.

The dismal outlook for many companies was underlined by data showing the U.S. economy shrank 3.8 percent in the fourth quarter, its fastest pace in 27 years, though analysts had predicted an even steeper fall.

U.S. President Barack Obama, under pressure to move swiftly to get his nearly $900 billion economic recovery plan through Congress by mid-February, called Congressional leaders to a meeting on Monday to drive home his message of urgency. [ID:nN01420749]

"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans," said Yutaka Miura, senior technical analyst at Shinko Securities.

HITACHI TUMBLES

Shares of Hitachi Ltd (6501.T) plunged 15.7 percent to 248 yen after the company warned of a record annual loss, which would be the worst ever by a Japanese manufacturer, due to weak sales, a firmer yen and costs to restructure its sprawling operations. [ID:nT249327]

Panasonic lost 3.2 percent to 1,064 yen after a source, who spoke on condition of anonymity because the information is not yet public, confirmed a report by the Yomiuri newspaper that Panasonic was facing an annual loss of 350 billion yen.

The loss would be Panasonic's biggest in six years.

Fujifilm Holdings Corp (4901.T) dropped 8.2 percent to 1,841 yen after the maker of digital cameras and electronics devices slashed its full-year profit outlook, hurt by a sharp fall in demand for flat panel display parts and mobile phone handset lens units.The broader Topix shed 2 percent to 778.44.

The dismal outlook for many companies was underlined by data showing the U.S. economy shrank 3.8 percent in the fourth quarter, its fastest pace in 27 years, though analysts had predicted an even steeper fall.

U.S. President Barack Obama, under pressure to move swiftly to get his nearly $900 billion economic recovery plan through Congress by mid-February, called Congressional leaders to a meeting on Monday to drive home his message of urgency. [ID:nN01420749]

"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans," said Yutaka Miura, senior technical analyst at Shinko Securities.

HITACHI TUMBLES

Shares of Hitachi Ltd (6501.T) plunged 15.7 percent to 248 yen after the company warned of a record annual loss, which would be the worst ever by a Japanese manufacturer, due to weak sales, a firmer yen and costs to restructure its sprawling operations. [ID:nT249327]

Panasonic lost 3.2 percent to 1,064 yen after a source, who spoke on condition of anonymity because the information is not yet public, confirmed a report by the Yomiuri newspaper that Panasonic was facing an annual loss of 350 billion yen.

The loss would be Panasonic's biggest in six years.

Fujifilm Holdings Corp (4901.T) dropped 8.2 percent to 1,841 yen after the maker of digital cameras and electronics devices slashed its full-year profit outlook, hurt by a sharp fall in demand for flat panel display parts and mobile phone handset lens units.The broader Topix shed 2 percent to 778.44.

The dismal outlook for many companies was underlined by data showing the U.S. economy shrank 3.8 percent in the fourth quarter, its fastest pace in 27 years, though analysts had predicted an even steeper fall.

U.S. President Barack Obama, under pressure to move swiftly to get his nearly $900 billion economic recovery plan through Congress by mid-February, called Congressional leaders to a meeting on Monday to drive home his message of urgency. [ID:nN01420749]

"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans," said Yutaka Miura, senior technical analyst at Shinko Securities.

HITACHI TUMBLES

Shares of Hitachi Ltd (6501.T) plunged 15.7 percent to 248 yen after the company warned of a record annual loss, which would be the worst ever by a Japanese manufacturer, due to weak sales, a firmer yen and costs to restructure its sprawling operations. [ID:nT249327]

Panasonic lost 3.2 percent to 1,064 yen after a source, who spoke on condition of anonymity because the information is not yet public, confirmed a report by the Yomiuri newspaper that Panasonic was facing an annual loss of 350 billion yen.

The loss would be Panasonic's biggest in six years.

Fujifilm Holdings Corp (4901.T) dropped 8.2 percent to 1,841 yen after the maker of digital cameras and electronics devices slashed its full-year profit outlook, hurt by a sharp fall in demand for flat panel display parts and mobile phone handset lens units.Worries that a U.S. 'bad bank' to soak up bad assets may not be set up pressured U.S. banks and pushed their Japanese peers lower.

Mizuho sank 5.7 percent to 214 yen, while Japan's top bank Mitsubishi UFJ Financial Group (8306.T) shed 4.9 percent to 485 yen.

But Daiichi Sankyo (4568.T) bucked the trend, rising 2.2 percent to 2,085 yen after U.S. regulatory staff on Friday recommended approval its anti-clotting drug prasugrel that it has jointly developed with Eli Lilly and Co (LLY.N). (Reporting by Aiko Hayashi; Editing by Edwina Gibbs)

source : Reuters UK 

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