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.
***
"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.
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Recently, CNBC"s Maria Bartiromo hosted a debate on Closing Bell between Thomas Russo of Gardner, Russo and Gardner and Hake Capital Management"s Mark Hake.
Hake says BRK is overvalued. Russo says buy Berkshire instead of trying to invest "alongside" Buffett by replicating his portfolio.
Here"s the video clip:
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Europe, and much of the world, awaits the coming of Obama, and a political dawn to sweep away the long night of the Bush era. Of course, it may only be a matter of time before Republicans start accusing Obama of being, `too French."
The Fact Sheet from the U.S. Treasury states:
The purchases are intended to be residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans. The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets.
The feisty congressman from Texas, whose insurgent "Ron Paul Revolution" presidential campaign rankled Republican leaders last year, now has the GOP House leadership on his side -- backing a measure that generated paltry support when he first introduced it 26 years ago.DeMint amendment to audit the Federal Reserve blocked by Senate Leadership
Paul, as of Tuesday, has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010.
The bill would call for the comptroller general in the Government Accountability Office to audit the Fed and report those findings to Congress. The GAO"s ability to conduct such audits now is severely restricted.
A slew of top Republicans are backing the bill, as are many Democrats.
"Ron Paul has the right idea on this," said Sen. Jim DeMint, R-S.C., who supports similar legislation in the Senate. "I"m just hoping we can get a clear audit. ... We need to know what they"re up to."
Unfortunately for Paul, the bill appears to be idling in the House Financial Services Committee, which is chaired by Barney Frank, D-Mass. The bill has been sitting there, gathering co-sponsors, since Paul introduced it in late February.
Calls to Frank"s office were not returned.
Paul acknowledged that his bill hasn"t advanced but said Frank has "promised" him he will deal with his bill and is willing to give it a hearing. Paul said it"s easily got the "momentum" to pass the full House.
A representative with the Federal Reserve could not be reached for comment. DeMint told FOX News last week that the measure would have a good chance of passing the Senate if supporters can push Paul"s to a vote, which he said would be successful, in the House.
"The whole process is unconstitutional. There is no legal authority to operate such a monetary system," Paul said in February, in a statement calling for Washington to "end the Fed."
Mish: How does inflation start and end?It is pure speculation now (corporate buybacks, leveraged buyouts, collapsing volatilities) along with foreign central bank asset buying that is driving stocks higher. None of it is getting into the average guy"s pocket and none of it has anything to do with the real economy. Meanwhile real wages are falling, home prices are collapsing, and if I am correct job growth is about ready to fall off the cliff in a second wave down of reduced corporate spending. That combination will increase foreclosures, defaults, and bankruptcies (the latter of which obviously destroys credit).
Kasriel: Inflation starts with expansion of money and credit.
Inflation ends when the central bank is no longer able or willing to extend credit and/or when consumers and businesses are no longer willing to borrow because further expansion and /or speculation no longer makes any economic sense.
Conceding unemployment will get worse before it shrinks, President Barack Obama on Tuesday unveiled a $12 billion plan to help community colleges prepare millions of people for a new generation of jobs. Challenging critics, he said he welcomed the task of turning around the economy.Question of the Day
"The hard truth is that some of the jobs that have been lost in the auto industry and elsewhere won"t be coming back," Obama said. "They are the casualties of a changing economy."
To that end, he proposed an "American Graduation Initiative" to bolster the two-year community college field that serves millions of students as a launching point for careers or a step toward expanded higher education. The idea is to train people for jobs, such as those expected in the clean energy industry, when the economy turns around and begins to create jobs again instead of shedding them.
Under the plan, competitive grants would be offered to schools to try new programs or expand training and counseling.
The White House says the cost would be $12 billion over 10 years; Obama says it would be paid for by ending wasteful subsidies to banks and private lenders of student loans.
Meanwhile, former Federal Reserve Chairman Alan Greenspan told Republican senators on Tuesday at their private weekly luncheon at the Capitol that the government"s $1 trillion deficit was the single biggest hurdle to economic recovery.
U.S. officials are weighing a plan to let borrowers who have fallen behind on mortgage payments avoid eviction by renting their home instead, sources familiar with the administration"s thinking said on Tuesday.Obama Says New Jobs Will Require Training
Under one idea being discussed, delinquent homeowners would surrender ownership of their homes, but would continue to live in the property for several years, the sources told Reuters.
A U.S. Treasury spokeswoman said late on Tuesday that "we are constantly reviewing new ways to help struggling homeowners and stabilize the housing market. This is just one idea among many that has been considered, but no decisions are imminent on the matter."
Officials have been frustrated as red tape and rising interest rates have slowed a housing rescue plan announced in February that was meant to refinance the mortgages of 5 million borrowers and lower monthly payments for 4 million more.
Since one in five homeowners owe more than their property is worth, they have little cushion if they lose their job or face another crisis, said Jay Brinkmann, the chief economist for the Mortgage Bankers Association.
"Foreclosure is a double trigger -- does someone have a job and do they owe more than a home is worth?" Brinkmann asked.
President Barack Obama says lost auto industry jobs in states such as Michigan will not come back and new jobs will require greater training and post-high school education to achieve a higher skilled work force.Federal Job-Training Programs Have Record Of Failure
Under Obama"s college initiative, schools could qualify for "challenge grants" so they"ll have money to try new programs, or expand training and counseling. Dropout rates would be addressed by designing programs to help students who want to earn an associate"s degree or transfer to a four-year institution do so.
Money would be spent to renovate outdated facilities or build new ones, and to develop online courses and make them freely available to students and others who want to use them.
The total federal cost is $12 billion over a decade. Of that, $9 billion would go toward challenge grants and addressing dropout rates. Half a billion, or $500 million, would go toward online education. The remaining $2.5 billion would be used to spark $10 billion in renovation and construction nationwide, said James Kvaal, an Obama economic policy adviser.
The history of federally funded job-training programs strongly suggests that [the Workforce Investment Act] WIA will not substantially raise participants" incomes. Similar programs funded under the Job Training Partnership Act (JTPA) of 1982 were found to be largely ineffective.Job Retraining Cannot Possibly Work
Three types of JTPA activities were evaluated: classroom training, on-the-job training and job-search assistance, and "other services" tailored to participants on the basis of their age.
Over several decades, Congress has "reformed" federal job-training programs numerous times. Each of these reforms promised to fix federal job-training programs--to no effect.
According to Professor Gordon Lafer at the University of Oregon Labor Education and Research Center, "As successive generations of job training programs fail to produce the hoped-for results, policy makers have cycled through a stock repertoire of procedural fixes that promise to solve the problem."
For WIA, these procedural fixes fall under the mantra of "increased flexibility" and "One-Stop Career Centers." However, none of these fixes are likely to improve the effectiveness of job-training programs. Professor Lafer reasonably concludes that the "lesson of the National JTPA Study is that there is no managerial fix which can create dramatically more effective training programs."
The dismal failure of federal job-training programs should lead Congress to abolish WIA--along with other federal jobs-training programs.
General Motors Corp., racing to meet U.S. conditions to keep $13.4 billion in government loans, will include pay cuts for salaried employees in a restructuring plan to be submitted Feb. 17, people familiar with the plan said.In related news, GM, Chrysler May Face Bankruptcy to Protect U.S. Debt.
The pay cuts will be in addition to firings of thousands of salaried workers required to cut expenses as the largest U.S.- based automaker tries to win concessions from bondholders, labor unions and dealers, the people said, who asked not to be identified because the plans haven�t been announced.
General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.Other Pay Cuts
U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury�s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
If federal officials fail to get a consensual agreement to change their position regarding repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called �debtor in possession� or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.
�They are negotiating to see if they can reach an agreement,� said Workman, a bankruptcy lawyer based in Washington. �If not, they are saying �We are pretty darn sure that a bankruptcy judge will allow us�� to be first in line for repayment.
As it stands, the government loans fall below existing debt secured by most assets for Auburn Hills, Michigan-based Chrysler and Detroit-based GM. Prior lenders have first position on some assets. The government has first position on assets not already pledged.
Arizona"s public universities on Tuesday unveiled their offers to make cuts in their budgets this year, saying they would strip thousands of employees of weeks of pay and eliminate jobs and some programs. ...On February 6, 2009 Contemporary Media employees take pay cut
[T]he proposal would require employees, including tenured professors, to take time off as unpaid leave. ... ASU"s portion of the proposed $100 million cut is $45.3 million. Much of it would come from employees, who could lose 12% percent of their remaining pay before July.
Employees at Contemporary Media Inc., publisher of The Memphis Flyer , Memphis magazine, Memphis Parent and Memphis Business Quarterly , have taken pay cuts of at least 4 percent, with some taking pay cuts as high as 8 percent.Those salary cuts span many industries. We have not seen broad based wages cuts like this since the great depression. Expect to see a lot more in the weeks ahead. This is deflation in action.
The company�s 401(k) matching program was also suspended. The cuts will last at least until the end of June.
Conservative columnist David Brooks envisions very tough times ahead for conservatives. On "Face the Nation" this morning, Brooks says the conservative movement has "no leaders," is in a "world of pain," and lacks a "coherent belief system." Watch a clip from the show (via ThinkProgress).
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By Jack Kaskey and Jef Feeley
March 10 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, will use asset sales, job cuts and new debt to try to maintain investment-grade credit ratings after paying what some investors are calling a �rich� price for Rohm & Haas Co.
Dow plans to raise about $4 billion from selling assets, including at least $1.5 billion from Rohm & Haas�s Morton Salt unit, Dow Chief Executive Officer Andrew Liveris said yesterday. The company will issue $4.3 billion of debt and cut costs by $400 million more than previously estimated, partly by eliminating an additional 3,500 jobs, mostly at Rohm & Haas, Liveris said.
Liveris sought new terms for the buyout after a joint venture with Kuwait collapsed, depriving Dow of $9 billion and prompting debt downgrades. Rohm & Haas investors will get $78 a share as originally agreed, and the two largest shareholders get equity that cuts Dow�s cash cost by as much as $3 billion and contributes to a 7.8 percent higher deal price of $16.5 billion.
�There are still concerns about the financial viability of Dow, and the fact they still agreed to pay $78 a share to the individual shareholders was a bit of a disappointment,� said Gene Pisasale, who helps manage $13 billion, including Dow shares, at PNC Capital in Baltimore. �That is a pretty rich price.�
Dow refused to complete the all-cash purchase as planned in January, saying the combined company wouldn�t be viable because of slumping chemical demand and increased debt. The companies reached the accord after the start of a trial in Georgetown, Delaware, was delayed for settlement talks.
Dow, based in Midland, Michigan, fell 45 cents, or 7.1 percent, to $5.88 in trading after the official close of the New York Stock Exchange. Philadelphia-based Rohm & Haas rose $3.42, or 4.6 percent, to $77.42.
�Favorable Resolution�
�This is a favorable resolution for Rohm & Haas because the shareholders are getting exactly what they were promised,� said Dmitry Silversteyn, an analyst at Longbow Research in Independence, Ohio.
Under the revised accord, which is set to close on April 1, Dow will pay a so-called ticking fee of $100 million a month from Jan. 10 to closing, contributing to the higher deal price, Chief Financial Officer Geoffery Merszei said yesterday.
The Haas family trusts and Paulson Co., the largest shareholders will exchange some of their stock for $2.5 billion in preferred Dow shares, and the Haas family may take an additional $500 million in equity at Dow�s discretion, the company said.
Interest payments on the preferred shares will reduce annual earnings by as much as 20 cents a share compared with debt financing, Merszei said.
Bridge Loan
Dow will need to draw only $9.5 billion of a $12.5 billion bridge loan to finance the deal because of the latest equity investments, Merszei said. In addition, Dow has a $3 billion equity investment from Warren Buffett�s Berkshire Hathaway Inc. and a $1 billion investment by the Kuwait Investment Authority.
By June, the issuance of long term debt will help cut the bridge loan to $4 billion, and asset sales will help Dow repay the entire amount within a year, Merszei said.
Standard & Poor�s said March 6 that Dow�s corporate credit and senior unsecured debt ratings of BBB, two levels above junk, may be lowered if the merger closed on the original terms or if the company was found liable for a large legal judgment.
Dow has six bidders for Morton Salt, the biggest U.S. salt producer, and the unit will be sold soon after the merger is complete, Liveris said. Selling stakes in a Dutch oil-refining business and in southeast Asia olefins ventures will raise about $1.5 billion, Liveris said. Other businesses worth about $1 billion will be sold, he said.
Job Cuts
Dow plans to save $1.3 billion by combining purchasing operations, sharing services and closing duplicate plants and research facilities, Liveris said. The latest job cuts bring the total at both companies to 10,000, he said. The combined company will spend $1.6 billion a year on research, among the biggest budgets in the industry, he said.
Acquiring Rohm & Haas was a key part of Liveris�s effort to transform Dow from a commodity producer into a maker of specialty products, such as material for electronics and paints, that command higher profit margins.
�This deal is strategic and it positions Dow for the future,� Liveris said. �We are back in control of our own destiny.�
Dow is pursuing more than $2.5 billion in restitution through arbitration from Kuwait�s Petroleum Industries Co. for backing out of an agreement to buy a 50 percent stake in the basic plastics unit, the world�s largest maker of polyethylene plastic. Dow isn�t aggressively pursuing damages against the nation in case it wants to restart the aborted K-Dow joint venture, he said.
Other state-owned petroleum companies also are interested in buying the plastics stake, Liveris said.
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By Erik Holm and Andrew Frye
Oct. 1 (Bloomberg) -- Billionaire Warren Buffett, the world"s preeminent stock picker, said the U.S. economy is ``flat on the floor"" after a cardiac arrest as companies struggle to secure funding and unemployment increases.
``In my adult lifetime I don"t think I"ve ever seen people as fearful, economically, as they are now,"" Buffett said today in an interview with Charlie Rose to be broadcast tonight on PBS. ``The economy is going to be getting worse for a while.""
The biggest housing slump since the Depression has spurred a wave of defaults and a yearlong contraction in global credit markets, squeezing companies" capacity for investment. Buffett"s Berkshire Hathaway Inc., based in Omaha, Nebraska, agreed in the past two weeks to buy $8 billion in preferred shares from General Electric Co. and Goldman Sachs Group Inc. to help the companies fund their businesses.
The credit freeze is ``sucking blood"" from the U.S. economy, Buffett said.
The bankruptcy of Lehman Brothers Holdings Inc. and Washington Mutual Inc., and the emergency sales of Merrill Lynch & Co. and Wachovia Corp. fueled fears about the vulnerability of firms that rely on capital markets for short-term funding.
Buffett is taking advantage of fragile stock markets, the lack of available credit and his own reputation as a picker of successful companies to extract outsized payments for Berkshire"s cash and endorsement. He has told shareholders that his strategy is to be ``greedy when others are fearful.""
`Seizing Opportunity"
``He"s seizing the opportunity,"" said Tom Kersting, an analyst for Edward Jones & Co in St. Louis. ``His philosophy is always to keep some powder dry. That allows him to take advantage of the current turmoil we"re in and take advantage when others can"t.""
For both Goldman and GE, Buffett"s endorsement comes with a cost. Both companies agreed to pay Berkshire a 10 percent dividend on his preferred shares, and each gave him warrants to buy their common stock at any point in the next five years at a price that"s a discount to where it"s currently trading.
Led by a big drop in auto production, U.S. industrial output plunged 1.1% in August, the biggest drop since Hurricane Katrina three years ago, the Federal Reserve reported Monday.Statistical Release
The decline was much worse than the 0.3% decline expected by economists surveyed by MarketWatch. Output in the previous four months was also revised down by a total of half a percentage point.
Industrial production has now fallen 1.5% in the past year and 2% since its peak in January. Industrial production is one of four major indicators used to judge whether the economy is in a recession.
Capacity utilization -- a key gauge of inflationary pressures stemming from industrial bottlenecks -- dropped by a full percentage point to 78.7%, the lowest in nearly four years. Capacity utilization in manufacturing fell to 76.6%, about three percentage points below its long-run average and also the lowest in four years.
In August, total vehicle assemblies dropped to an 8.19 million annual rate, down 24% from the 2007 average. For light trucks, assemblies dropped 41% below last year"s average.
Twelfth Bough
General Motors Corp., surviving with federal loans, said its February U.S. sales plummeted 53 percent as the recession pushed industrywide purchases toward the lowest in almost three decades.Seeking To Shed Hummer, Saab, Saturn
Industry sales at last month�s levels make it more challenging for Detroit-based GM and Chrysler LLC to become profitable and pay back $17.4 billion in U.S. loans. President Barack Obama�s auto task force may approve as much as $21.6 billion more aid for the two automakers and support for the thousands of companies that supply car manufacturers with parts.
GM�s February sales of cars and light trucks fell to 126,170 from 268,737 a year earlier, the automaker said in a statement. That included declines of 69 percent for Hummer, 59 percent for Saab and 57 percent for Saturn, three units the company is seeking to shed.
At Ford, sales of cars and light trucks dropped to 99,050 from 192,178, according to a statement from the Dearborn, Michigan-based company. The sales were hurt by a 55 percent decline to 23,614 for its F-Series pickup trucks. Sales for the Volvo unit, which Ford wants to sell, were also down 55 percent.
Toyota reported a decline to 109,583 from 182,169. Sales for the Toyota City, Japan-based company were dragged down by declines of 60 percent for its Tundra large pickup and 51 percent for the Yaris small car.
Honda said deliveries fell to 71,575 from 115,397, and Nissan said its sales fell to 54,249 from 86,219.
Volkswagen AG said February sales for its namesake brand declined 18 percent to 13,660. Daimler AG said sales of its Mercedes-Benz and Smart vehicles fell 21 percent to 15,614. Bayersiche Motoren Werke AG�s U.S. sales were down 35 percent to 15,805.
Hyundai Motor Co., South Korea�s largest automaker, said it sold 30,621 vehicles last month, a 1.5 percent decline from a year earlier. In January, Seoul-based Hyundai was the sole major automaker to post a gain in U.S. sales.
