On Wednesday, AirTran Holdings asked for temporary wage concessions from all of its employees, TradeTheNews reported. AirTran will ask all workers to accept pay cuts between 5% and 13%, and officers will take a 15% cut, effective in August, for six months.Wage Pressures Are Negative
AirTran has expended $450.0 million in wages in the past year, trimming costs through its workforce, as well as reevaluating its route structure to add capacity in markets where it sees demand and cutting capacity in markets that could not support scheduled routes.
And AirTran was not the only carrier to seek out salary sacrifices from its workforce.
In May, Japan Airlines JAL, Asia"s biggest airline by revenue, said it planned a 5% salary and benefit cut for most of its employees as a means to lowering annual personnel costs by $96.4 million (10.0 billion yen).
A Japan Airlines spokesperson, Atsushi Abe, said the airline was in talks with labor unions and aimed to implement the cuts beginning in October. The cuts will be part of its ongoing overhaul of cost structure to tackle soaring fuel prices and other pressure on its earnings.
October 9, 2009Georgia: State Tax Collections Drop Sharply
ALBANY -- Sales-tax collections for counties and the state dropped 8.3 percent in the third quarter, a troubling sign for governments already struggling with higher costs and declining revenue.
The figures from July through September continue a precipitous drop in sales-tax revenue for governments and an indication that the economy is still struggling. It"s the fourth consecutive quarter of sales-tax declines for the state.
What"s also troubling, government officials said, is that they hoped the third quarter would have marked improvement, particularly because of the popularity of the federal Cash for Clunkers program and back-to-school retail sales.
The third-quarter drop, though, was pronounced in some counties compared to the same period last year. The lower sales-tax revenue has been a major factor in the state"s $3 billion mid-year budget gap, which Gov. David Paterson is trying to close with the Legislature.
October 9, 2009The clear reason why is people are unemployed and broke.
ATLANTA (AP) Georgia tax collections dropped by about 16 percent in September over the same month last year, continuing a trend set in the first two months of the fiscal year, Gov. Sonny Perdue announced Thursday.
Net revenue collections for September were about $1.3 billion, compared to about $1.6 billion in September 2008. Three months into fiscal year 2010, revenues are down about 14 percent compared to the first three months of last fiscal year.
"There"s still some weakness in the economy, which results in lower tax collections, both in sales tax and income tax, and that"s really affecting us," said Perdue spokesman Bert Brantley.
But Brantley acknowledged that September"s revenue drop, which was as steep as the month before, can"t be explained away by lingering refund checks from the last fiscal year.
"There"s not as clear of a reason why" for the drop in September, he said.
October 10, 2009At some point sales tax revenue will stop falling. However, the rebound that that states are expecting will not materialize.
State sales tax collections fell 12.5 percent last month, the eighth drop in a row.
Comptroller Susan Combs said Friday that the trend is likely to continue through the end of the year.
October 7, 2009It may be "dire" and "severe" but it"s going to get more dire and more severe.
Tax collections will run about 7.1 percent lower than predicted last spring, new projections show, which means steep cuts to state spending are in Iowa�s near future.
A three-member panel of experts called the Revenue Estimating Conference predicts state revenue this budget year will be $5.438 billion.
That�s $414.9 million less than predicted in March.
�It�s dire. It�s severe. It�s probably the worst I�ve seen,� said REC member Holly Lyons. The recession has shrunk state revenues across the country.
Today�s news is that plunging tax revenues have knocked the state budget severely out of balance, just three months into the budget year.
Sales-tax collections for the Miller Park stadium [Milwaukee Brewer"s Baseball] district plummeted 29% in August compared with the same period last year and are now running 10.4% behind a year ago.People have finally had enough of overpriced hot-dogs, snacks, and beer at baseball parks. Sounds like a good thing to me.
Since 1996, the 0.1% Miller Park stadium tax has been a steady performer, generating millions of dollars to pay off the construction and financing of the Milwaukee Brewers" ballpark. The tax is collected from vendors in Milwaukee, Racine, Waukesha, Washington and Ozaukee counties, sent to the state Department of Revenue for processing, and then distributed to the stadium district.
But the Great Recession has had a dramatic impact; only $1.96 million was distributed to the district in August, far below what had been forecast.
October 10, 2009The odds this is a "one time event" are approximately zero.
California Governor Arnold Schwarzenegger will know within a month whether a $1.1 billion drop in revenue collections is part of a growing budget shortfall or an isolated event, his budget spokesman said.
Revenue in the three months ended Sept. 30 was 5.3 percent less than assumed in the $85 billion annual budget, state controller John Chiang reported yesterday. Income tax receipts led the gap, as unemployment reached 12.2 percent in August.
�The culprit here appears to be estimated quarterly personal income tax statements,� H.D. Palmer, the governor�s budget spokesman, said yesterday. �The numbers are cause for concern, but the issue now for us is to determine if this is a one-time event or whether it has more long-term implications.�
The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.
October 9, 2009Reason for hope? Pray tell what reason for hope is there?
Receipts to the state General Fund dropped 9.8 percent in September, compared to September 2008, the Office of State Budget Director reported Friday.
�There"s some reason for hope that we"ll see it balance out later this fiscal year, but it"s a dim prospect for the next budget cycle,� said Rep. Rick Rand, the Bedford Democrat who is chairman of the House budget committee.
Sen. Bob Leeper, an independent from Paducah who is Rand�s counterpart in the Senate, said �the outlook is grim. But we"ve been preparing for it and preparing our constituents for a difficult time ahead.�
If revenue doesn"t meet expectations, spending must be cut or other adjustments will have to be made.
�Tax collections have been weak in the major sources of revenue that support the operations of government,� State Budget Director Mary Lassiter said in the report. �Sales and use taxes and income taxes comprise nearly 75 percent of our General Fund tax revenues and have been declining for an extended period of time.�
October 9, 2009Ding Ding Ding We Have A Winner
Indiana"s state tax collections are continuing to take a dive, prompting Gov. Mitch Daniels to warn Thursday that budget cuts that could include schools and employee layoffs might be needed soon.
Revenue for September was $166 million short of a May forecast that lawmakers and Daniels used to put together a new two-year budget that took effect July 1. Tax collections are down by $254 million for the first three months of this fiscal year � 8 percent less than forecast and 14 percent less than the state took in for the same period a year ago.
"Today is not a day to remove any option except we are not going to raise taxes on people who are strapped as it is," he said. "The job of keeping Indiana above water and solvent while other states are not are not getting any easier."
"It is now very clear that the methods that have been used here, and in other states for that matter, are simply out of date," Daniels said.
"My suspicion is a big part of the difference is that Americans, including Hoosiers, have shifted in their consumption patterns. They are saving more and spending less, and I believe that isn"t a very temporary phenomenon. I think that is going to continue."
General Motors is preparing a fresh barrage of discounts and other promotions to coax Americans into buying more cars after an upcoming US government decision on further financial aid to the Detroit motor industry.GM"s viability plan sounds much like its old plan: sell cars below cost to meet production goals.
The incentives will be designed to counter a slump in sales and GM�s market share, amid signs on both sides of the Atlantic that its financial woes are beginning to drive away customers.
GM�s share of US light vehicle sales sank to 18.3 per cent last month from 19.5 per cent in January and an average of 22.6 per cent in the final two months of 2008. The company�s viability plan is based on a 20 per cent share.
Toyota Motor Corp., the world�s largest automaker, may cut the price of its Prius gasoline- electric hybrid car in Japan to match Honda Motor Co.�s Insight.Let"s do the math.
Toyota spokesman Yuta Kaga declined to confirm or deny a Nikkei newspaper report today that said the starting price of the Prius will be cut to 1.89 million yen ($19,250) from 2.33 million yen. The Insight hybrid, which went on sale in Japan last month, starts at 1.89 million yen.
Toyota later this year plans to introduce a revamped Prius with higher mileage and more power than the current model and the Insight. Both automakers are betting on fuel-efficient models as governments worldwide tighten emission standards.
The Prius accounted for half of all gasoline-electric models sold in the U.S., the world�s biggest auto market, last year. The price reduction would apply to the current Prius model.
Retailers, who begrudgingly went along when food makers pushed up prices to recoup record-high costs, are flexing newfound muscle and demanding price cuts to match the recent steep retreat in ingredient costs.Price wars: It"s a good thing. And for those wanting to buy a car, my advice remains to wait. This is just the start of inventory clearing price wars.
Food makers are resisting, saying the uncertain economy and volatile costs make price cuts unwise. But retailers aren"t backing down.
Consumers � who responded to the higher prices by favoring grocers" in-house products over national brands and by shopping more at discounters � may end up with fewer choices all around.
"We don"t have to carry three brands," Costco Wholesale Corp."s Chief Financial Officer Richard Galanti told investors earlier this month. "We can choose between brands that are going to be more aggressive, that help us help our members."
Costco has been lowering its prices, Galanti said, and is prepared to sacrifice profit margins and cut national brands that won"t negotiate on pricing � if that"s what it takes to drive sales.
"We are not the only ones out there pressuring manufacturers," he said.
Steven Burd, president of grocery chain Safeway Inc., recently told investors that it has gotten some vendors to roll back their prices. Like many retailers, it is finding its new strength in its in-house brands, including Safeway Select, O organics and Primo Taglio deli products.
"We"re going to chew them up on corporate brands," Burd said of food makers that don"t lower prices. "And we"re just going to keep driving corporate brands."
Some 64 percent of shoppers in 2008 said they often or always buy a store brand rather than a national one, according to the Food Marketing Institute, an industry trade group. That"s up from 59 percent the prior year.
Kroger Co., owner of Ralphs, Fred Meyer, Food 4 Less and other chains in 31 states, saw sales of its in-house brands hit a record 27 percent of total sales in the most recent quarter.
Companies go bankrupt when they:
(1) Borrow more than they should; and
(2) Have to pay their creditors more and more interest to loan them money.
Borrowing Too Much
Everyone knows that the U.S. has borrowed too much. As of a year ago, the financial obligations of the U.S. were some $56 trillion dollars. That number has gone way up since then.Higher and Higher Interest Rates
America is already paying more to borrow money.What happens if the requests begin to strain the credit line of the world"s most creditworthy borrower, the U.S. government itself? Unthinkable?In other words, buyers of U.S. treasury bonds are demanding a lot of interest to make long-term loans to Uncle Sam.
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"Near-term pressures on Treasury finances are much more intense than we had thought," Goldman Sachs economists commented when the government announced its borrowing projections last week.It may finally be catching up with Uncle Sam. That"s what the yield curve may be whispering. But some economists are too deaf, or dumb, to get it.
***
The Treasury yield curve -- from two to 10 years, which is how the bond market tracks it -- has rarely been steeper.
The steepening of the Treasury yield curve has been accompanied by an increase in the cost of insuring against default by the U.S. Treasury. It may come as a shock, but there are credit-default swaps on the U.S. government and they have become more expensive -- in tandem with an increase in the spread between two- and 10-year notes.Like every company which borrowed too much and then got destroyed by higher and higher borrowing costs, America is following the recipe for bankruptcy.
***
Charts of the yield curve and the spread on U.S. Treasury CDS paint a dramatic picture. Both the yield spread and the cost of insuring debt moved up sharply together starting in September. . . . Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. . . . All of which suggests America"s credit line has its limits.
