Unemployment would be above 14 percent in Pennsylvania and approaching 16 percent nationally if not for the American Recovery and Reinvestment Act and other federal action taken in the wake of the recession, according to a new report released by the Keystone Research Center Thursday.
But still more needs to be done, said the Harrisburg-based think tank in its annual “State of Working Pennsylvania” report.
"Our economy is a product of conscious policy choices," Mark Price, labor economist for the center, said. "Federal policy stopped the economic free fall. And policy choices at the national and state level will powerfully shape the future health of the economy for middle-class families."
Actions taken by the Federal Reserve, Bush and Obama administrations, and Congress have all helped curb unemployment, Price said. Early last year, before passage of the federal Recovery Act, Pennsylvania was losing nearly 30,000 jobs each month. The state by contrast has added 64,000 jobs during the first half of this year. Pennsylvania also benefited from Congress’ recent extension of federal Medicaid assistance to states and additional school funding to preserve teacher jobs, which kept the state from losing as many as 12,000 more jobs.
But Pennsylvania needs to add about 300,000 jobs to replace those lost since the recession began. The state’s unemployment rate, which as of July was 9.3 percent, is expected to be at 7.2 percent in 2014 — a full seven years after the recession began. The state’s job deficit and a deficit in the buying power of the middle class are both greater threats than closing the federal deficit, according to Stephen Herzenberg, center economist and executive director.
"The federal deficit is the wrong enemy," Herzenberg said. "Our economy will recover only when we put Americans back to work and pay them a fair wage."
Several recommendations were made in the report, including: Extending resources for Pennsylvania’s Way to Work Program set to expire Sept. 30, access to capital for small business, extension of unemployment insurance benefits as long as unemployment remains so high that it is impossible for many jobless workers to find jobs and allowing the Bush tax cuts to expire and repurposing the funds to other areas to create jobs.
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Attorneys general in 17 states are demanding that craigslist remove its adult services section to make sure prostitution and child trafficking ads don't appear.
A joint letter from AGs in Arkansas, Connecticut, Idaho, Illinois, Iowa, Kansas, Maryland, Michigan, Missouri, Montana, New Hampshire, Ohio, Rhode Island, South Carolina, Tennessee, Texas and Virginia. said that even though the San Francisco-based company would lose revenue, no amount of money "can justify the scourge of illegal prostitution and the suffering of the women and children who will continue to be victimized, in the market and trafficking provided by Craigslist."
In November craigslist added protections that include making posters provide a legitimate phone number and pay a fee to post in the erotic services portion of the site high risk personal loans.
Craigslist has already been subpoenaed by Connecticut Attorney General Richard Blumenthal, who wants proof that it is taking action to stop prostitution ads.
In a posting on its site, craigslist CEO Jim Buckmaster wrote that the company is "working intensively … with experts and thought leaders at leading nonprofits and among law enforcement on further substantive measures we can take."
The post says that craigslist "is committed to being socially responsible, and when it comes to adult services ads, that includes aggressively combating violent crime and human rights violations, including human trafficking and the exploitation of minors."
Please remember that a payday loan is a rather expensive line of credit. Much like taking something to the pawn shop.
Despite a very vocal group of detractors, the vast majority of iPhone users love AT&T.
That’s the key finding in a survey released this week by Yankee Group, which reports that 73% of iPhone users are very satisfied with AT&T’s service. That rating compares favorably to how non-iPhone smartphone users feel about AT&T, and even to how non-iPhone users feel about other wireless providers.
The satisfaction rate of AT&T subscribers as a whole is 68%, and only 69% of smartphone users say they are satisfied with their mobile provider, Yankee Group found.
The results are surprising, given the pounding AT&T has taken in the media and on the blogosphere about its service-related issues with the iPhone. On CNNMoney’s recent stories "AT&T and Apple’s marriage made in hell," and "AT&T: The most hated company in iPhone land," reader comments were overwhelmingly negative toward the wireless network.
AT&T’s recent iPad-related security glitch and mishandling of the iPhone 4 launch likely didn’t do much to help its reputation. Plus, iPhone owners pay AT&T nearly $12 a month more for service than the average smartphone user.
Tech analysts like to point out the ways in which AT&T is a drag on the iPhone. Gartner Research Director Carolina Milanesi said last month that AT&T’s network has "limited the iPhone experience." And Drake Johnstone, an analyst with Davenport & Co., forecasted that poor experiences with AT&T would drive as many as 40% of iPhone customers to Verizon once that network gets the iPhone.
So what explains Yankee Group’s conclusion that iPhone users’ love AT&T?
"Consumers transfer the high gloss of their Apple iPhone experience to AT&T," says Carl Howe, Yankee Group analyst and author of the study. "The iPhone creates a halo effect that rubs off."
In other words, iPhone customers’ praise for their network may be a result of the famous "reality distortion field" that surrounds Apple (AAPL, Fortune 500) CEO Steve Jobs and his company’s products.
But AT&T says its network really isn’t as bad as many people think Online payday loans. It’s a perception problem, not a service problem, in the company’s eyes.
"There’s a gap between what people hear about us and what their experience is with us. We think that gap is beginning to close," says Mark Siegel, an AT&T spokesman. "It doesn’t mean we’re perfect; we still have work to do. But that’s no surprise to us, because we have a great network."
AT&T’s ‘problem’ that everyone wants
Meanwhile, AT&T (T, Fortune 500) continues to reap the rewards of being the country’s exclusive iPhone provider.
Despite heavy data demands that drive up AT&T’s cost of servicing each customer, users still make the wireless company $50 more per customer each year than other providers get from their smartphone subscribers, according to Yankee Group. That’s because a higher percentage of iPhone customers buy pricey, top-tier service plans to satisfy their mobile download demands.
The iPhone will be worth $1.8 billion in sales to AT&T this year, and will generate $9 billion in revenue for the provider over the next five years, the study estimates. Yankee Group says that’s $750 million more each year than AT&T would be taking in if it had a different flagship smartphone.
The iPhone is also the gift that keeps on giving: 77% of iPhone owners say they’ll buy another iPhone, compared to 20% of smartphone customers who say they’ll buy an Android phone. (See correction below)
"Our analysis explains why AT&T has bent over backward to keep its exclusive distribution deal with Apple as long as possible," Howe says. "Verizon has been regretting turning away Apple for the last three years."
Brown & Brown Inc. bought the Meridian Group of New York Inc. and Eberhart & Co. Insurors Inc. late Friday for undisclosed terms.
Meridian Group, with annual revenue of $1.3 million, provides life, health and other employee benefits products and services to individuals, businesses, public entities, nonprofit organizations, unions and associations throughout New York state.
Meridian Group’s staff will combine its operations into Brown & Brown of New York’s Rome, N.Y., office.
Eberhart & Co. Insurors — doing business as Eberhart Co. of Roswell, Ga payday loans., with revenue of $1 million — will join Brown & Brown Insurance of Georgia’s existing office in Duluth. Eberhart Co. has served business and individual insurance needs in the Atlanta metropolitan area since 1969.
Daytona Beach-based Brown & Brown Inc. (NYSE: BRO) and its subsidiaries offer insurance and re-insurance products and services, as well as risk management, third party administration, managed health care, and Medicare set-aside services and programs.
Spirit Airlines and its striking pilots agreed to meet with mediators today, the union said, signaling a potential thaw that would be welcomed by the thousands of customers holding tickets on the grounded airline.
Sean Creed, head of the pilots union at Spirit, said the National Mediation Board has asked both sides to meet in Fort Lauderdale, Fla. However, union officials said the strike would continue until they approve any deal.
Spirit said it wouldn’t fly until Thursday at the earliest, forcing its roughly 16,000 daily passengers to get where they were going by rental car or an expensive walk-up fare on another airline. Spirit carries just 1 percent of the nation’s air traffic, but those travelers have been 100 percent grounded by the pilots’ walkout.
Spirit aircraft have not flown since pilots walked out Saturday in a pay dispute. Just a few days before the strike, the airline was saying it would fly through it. That didn’t happen. It has said it would try to get passengers onto flights on other airlines payday loans for bad credit. Spirit spokeswoman Misty Pinson declined to say Monday how many passengers had gotten seats on other carriers with Spirit’s help.
Spirit has said its last offer would have raised pilots’ pay by 29 percent over five years, although pilots would have to work more to get that money. Pilots have been negotiating for more than three years, and they have said the proposed raise works out to less than 4 percent per year.
Pilots have said their pay should be similar to that of pilots at other discount airlines such as JetBlue Airways and AirTran Airways, a unit of AirTran Holdings Inc. The company has said those airlines are much bigger than Spirit.
Privately held Spirit is based in Miramar, Fla., and ended 2009 with $139.5 million in cash and short-term investments, according to filings with the government.
ST. LOUIS — A Budweiser Clydesdale clopped into a packed gymnasium at a San Diego naval hospital last December and was greeted by 300 people — injured servicemen and women surrounded by their families and hospital staff. It was a "wounded warriors" holiday party. The Clydesdale was a hit. People posed for photos with the horse. Children rushed to pet it.
"Cost numbers never came up," said Riley Nelson, athletics coordinator for Naval Base San Diego. With a shoestring budget, he was relieved Anheuser-Busch paid for the Clydesdale.
But it could be the last time the wounded warriors — or other small charitable events and nonprofits — can afford a Clydesdale visit.
Earlier this month, Anheuser-Busch quietly started charging a $2,000-per-day fee for public appearances by its Budweiser Clydesdales, ending the decades-long practice of the brewer absorbing almost all of the cost of showcasing its iconic horses before adoring crowds.
A-B described it as asking for "increased participation" to offset the $8,000 per day it costs to have a hitch team on the road. Previously, beer wholesalers and event organizers were expected to chip in only for stabling and feed costs, which were typically nominal.
The Clydesdales are considered corporate ambassadors so revered they have evolved into almost symbols of America; appearing, for example, in two presidential inaugural parades. The horses make more than 900 appearances at 200 different events each year. Hitch teams, consisting of eight horses pulling the red Budweiser beer cart, travel the country for months at a time. The horses march in parades. They visit festivals. They attend rodeos and air shows.
Keith Levy, A-B marketing vice president, said the new fee should not reduce the number of events for the Clydesdales because demand for the horses far outstrips the supply of available dates. "They’ll still be extremely visible, as visible as they ever were," he said.
Levy declined to provide the annual budget of the Clydesdale program but said the fee was not aimed at generating revenue. He pointed out that the brewer still pays the bulk of the cost and that "the value (of an appearance) exceeds the cost of showcasing them," even with the new fee.
But that price is still too high for small events like wounded warriors, Nelson said.
"It probably would be something we wouldn’t do," he said. The Clydesdale visit "is nice, but $2,000 is a lot of money."
The Clydesdales also could be missing from next year’s St. Patrick’s Parade in Atlanta. Nancy Logue, president of the nonprofit that organizes the 128-year-old event, said she was delighted to have a hitch team in last month’s parade. The nonprofit and a local beer distributor divided the cost of paying for stable space, feed and overnight security for the horses. But Logue said she doubted the Clydesdales would be back next year due to the new fee.
"In this economy, it’s tough," Logue said.
But Old Town entertainment complex in Kissimmee, Fla., said it likely would pony up the money to have the horses return again after their last visit in January.
"We love them. It’s definitely something we would consider," special event manager Tracy Parkinson said. "The Clydesdales are very, very popular."
Handling of the brewer’s 250 Clydesdales is a sensitive issue for Anheuser-Busch, especially since it became the U.S. subsidiary of Belgium-based InBev in 2008. The official merger agreement specifically requires the combined company — renowned for tough cost-cutting — to continue to support the Clydesdales operations. After all, the horses have been a part of company lore since 1933, when a team of Clydesdales were used to deliver the first post-Prohibition beer brewed in St. Louis.
A-B has made some changes to its Clydesdale program since the merger. Last year, it closed its Clydesdale breeding center in California and opened a massive new breeding farm in Boonville, Mo., with its own veterinary lab, 34 stalls and state-of-the-art equipment. While the farm is closed to the public, A-B will open the adjacent Warm Springs Ranch for tours on April 30.
A-B also has consolidated hitch teams spread across the country to just three locations: Boonville, St. Louis and Merrimack, N.H.
Earlier this year, A-B ran into some public grief for its initial decision not to include a Clydesdales commercial among its Super Bowl TV ads. The brewer changed its mind.
The decision to charge for Clydesdale appearances presents a difficult calculation for A-B, said Derek Rucker, marketing professor at Northwestern University’s Kellogg School of Management. The fee is a way to curb costs — a fee that the consumer is not likely to know anything about.
But there is a risk.
"Where it could become a problem is if (the decision to charge a fee) becomes strongly associated with the brand," Rucker said.
Beer industry consultant Tom Pirko said he agreed with the decision to charge for the Clydesdales. He said the brewer should even consider a fee on its now-free brewery tours. Value is reinforced if people pay for it.
"They are more appreciated if they are not free," Pirko said.
But not all Clydesdale visits face the $2,000 fee. Levy said A-B would continue to cover the cost of supplying hitch teams to major events such as the baseball All-Star Game.
And that includes the Budweiser Clydesdales scheduled to parade around Busch Stadium today before the Cardinals home opener. A-B plans to pick up the tab for the appearance.
Taiwan and Thailand exited recession last quarter and Malaysia probably followed, as Asian economies lead the global recovery.
Taiwanese gross domestic product rose 9.2 percent in the fourth quarter from a year earlier and the Thai economy expanded 5.8 percent, according to reports today. Malaysian figures for the three months to Dec. 31, due for release on Feb. 24, may show GDP increased 3.4 percent last quarter, according to the median estimate of 14 economists surveyed by Bloomberg News.
Asian economies are paving the way for a global recovery from the worst worldwide recession since the Great Depression after central banks in the region slashed interest rates to record lows and governments increased spending by more than $1 trillion. The strength of Asia’s rebound has seen policy makers lead the way in withdrawing stimulus.
“Asia’s recovery is at least two quarters ahead of the U.S. and monetary authorities have been contemplating exit strategies for some time,” said David Carbon, head of economic and currency research at DBS Group Holdings Ltd. in Singapore. “With higher U.S. rates on the cards, Asia’s central banks can pursue their exit strategies with less to fear on the inflow and currency front.”
Policy makers in China, India and Vietnam are tightening monetary conditions amid signs that accelerating growth is fueling inflation and may led to asset bubbles. The U.S. Federal Reserve, which increased its discount rate by a quarter point to 0.75 percent on Feb. 18, has left its benchmark policy rate unchanged for more than a year.
Rising Demand
Asian stocks jumped by the most since November on speculation Federal Reserve Chairman Ben S. Bernanke will say in a report due to be released this week that U.S. interest rates will be kept low to spur economic growth. The MSCI Asia Pacific Index gained 2.4 percent to 118.14 as of 2 p.m. in Tokyo, the biggest increase since Nov. 30.
The emergence of the world economy from the global recession is encouraging companies in Asia to boost production and hire more workers. Singapore last week raised its economic growth forecast for 2010, predicting an expansion of as much as 6.5 percent this year.
Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., the world’s largest makers of custom chips, are boosting capital spending this year after fourth- quarter profits beat analysts’ estimates.
‘Very, Very Strong’
Demand has been “very, very strong” in the computer, automotive and consumer electronics sectors over the past few quarters, Richard Han, chief executive officer of Hana Microelectronics Pcl, said in an interview with Bloomberg Television in Bangkok today. Hana makes parts for computers and mobile phones including Apple Inc.’s iPhone.
Taiwan’s fourth-quarter economic growth was the strongest since June 2004 and Thailand’s increase in GDP was the most in seven quarters.
China’s central bank on Feb. 12 ordered lenders to set aside larger reserves, aiming to rein in credit growth after banks extended 19 percent of this year’s 7.5 trillion yuan ($1.1 trillion) lending target in January and property prices climbed the most in 21 months. Goldman Sachs Group Inc. expects the Chinese economy will expand 11.4 percent this year.
Reserve Bank of India Governor Duvvuri Subbarao on Jan. 29 increased the cash reserve ratio to 5.75 percent from 5 percent, exceeding the median forecast for a half-point move in a Bloomberg News survey of economists. India is due to release GDP data for the December quarter on Feb. 26, along with the budget for the next fiscal year.
Emerging Asia
India’s $1.2 trillion economy may grow 7.2 percent in the current fiscal year through March, accelerating for the first time since 2007, the statistics office said Feb. 8.
“We expect GDP growth in emerging Asia to stay strong in coming quarters,” said Kevin Grice, an economist at Capital Economics Ltd. in London. “The most trade-dependent economies will eventually see slower GDP growth later this year and in 2011 as the global upswing loses momentum. But Asia’s rebound will not come to a complete halt and growth, by some distance, will stay higher than in any other part of the world.”
WASHINGTON – House Democrats headed into the final stretch on a long-awaited Wall Street regulation bill Friday after fending off an effort to kill a proposed U.S. consumer agency that is a central feature of the legislation.
The sweeping regulatory overhaul aims to address the myriad conditions that led to last year's financial crisis.
Test votes during two days of debate indicate that Democratic support for the underlying legislation will hold in final passage.
Before the final vote Friday, House members rejected by a vote 223-208 an amendment that would have killed a proposed Consumer Financial Protection Agency. The agency would consolidate consumer lending regulations and enforcement that is now split among several banking regulators.
A bipartisan coalition had proposed keeping the consumer powers within each regulator and creating an oversight council. The U.S. Chamber of Commerce lobbied heavily to kill the agency and ran national television ads against it. Consumer groups said it was essential to the overall regulatory package.
In a separate vote Friday, Democratic leaders failed to revive legislation that would let bankruptcy judges rewrite mortgages to lower homeowners' monthly payments. The measure was rejected by a 241-188 .
The House previously passed bankruptcy-mortgage legislation, but it failed in the Senate.
Democrats hoped that by inserting the provision in the regulatory legislation they would have had another opportunity to make it law. Aiding homeowners through bankruptcy had been a key feature of President Barack Obama's foreclosure fighting proposal, but the president did not push for it.
Banks and credit unions have lobbied against the bankruptcy measure. They say it would force a flood of bankruptcy filings and ultimately drive up mortgage rates paperless payday loans.
Late Thursday, scores of Democrats voted with Republicans on amendments that eroded the reach of proposed regulations on complex derivatives trades.
Democratic attempts to toughen the legislation failed.
Though not major setbacks, the votes illustrated the difficulties facing House Financial Services Chairman Barney Frank and the Obama administration as they seek to pass the most ambitious rewrite of financial regulations since the New Deal of the 1930s.
The Chamber has been an aggressive opponent of the legislation, running television ads against the proposed consumer agency and pressuring lawmakers to vote to eliminate it and to ease the derivatives regulations.
The legislation still imposes restrictions on derivatives, aiming to prevent manipulation and bring transparency to a $600 trillion global market. An amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, exempted businesses that trade in derivatives, not as financial speculators, but to hedge against market fluctuations such as currency rates or gasoline prices. The amendment also provided an exception for businesses that are considered too small to be a risk to the financial system.
A Democratic effort to make more companies subject to derivatives regulation failed 279-150.
For Democrats, the votes split along turf lines. All but a few of the Democrats on the House Agriculture Committee voted for the broader exception. The Agriculture Committee oversees commodities trading and had recommended less restrictive derivatives rules, but the final bill did not include them.
The stock advance has hit some resistance in the last two weeks and it’s only going to get tougher as the third quarter reporting period gets underway.
Since hitting rally highs nearly two weeks ago, the broad S&P 500 index has lost 4.3% as investors have sorted through a spate of manufacturing, consumer and jobs reports that have missed forecasts.
The standout was Friday’s September jobs report, which showed the unemployment rate spiked to 9.8%, a new 26-year high. On top of that, employers cut a whopping 263,000 jobs from their payrolls during the month.
But the stock market’s decline over the last two weeks was pretty minimal, considering the nearly seven-month run up that propelled the S&P 500 by 51.2%.
That rally was driven by extraordinary amounts of monetary and fiscal stimulus and a spate of "less bad" news as the economy moved from recession to stabilization to the start of a recovery.
But lately there’s been a change, with the trend going from ‘less bad’ to ‘less better’ economic news, said Karl Mills, president and chief investment officer at Jurika Mills & Keifer. "The market is trying to understand that switch."
Although he says the recent trend doesn’t undermine signs of a recovery, it does indicate that the road ahead is a lot more twisty than the stock market rally would imply.
Investors are now moving into a sorting period, he said, where they are separating the wheat from the chaff, in terms of good and bad assets. He said that the period of more speculative, so-called lower quality names leading the rally will end as higher quality names start to take over.
"We are moving into a new phase, from collapsing to rebounding to recalibrating," he said.
Financial results: The week ahead is pretty mild in terms of economic reports, with a reading on the services sector of the economy and Treasury’s $60 billion in debt auctions the big standouts.
But it also brings the start of the third-quarter reporting period, albeit a very small start, with only one notable company due to report.
Dow component Alcoa (AA, Fortune 500) is the unofficial start to the quarterly reporting period, as per usual. The aluminum maker is expected to report a loss of 12 cents per share versus a profit of 37 cents a year ago.
The weakness in Alcoa is indicative of a materials sector that is expected to take it on the chin in the third quarter. The sector is expected to see earnings fall 68% from a year ago, followed by energy, down 64% from a year ago. Financials, by default, are expected to show the best results, as the companies bounce off dismal results accrued in the third quarter of 2008. Financials are expected to post earnings growth of 59%.
Overall, "we’re looking for another down quarter, the ninth in a row and the longest streak since we began calculating the growth over a decade ago," said John Butters, senior research analyst at Thomson Reuters.
Overall S&P 500 profits are expected to have dropped 24.8% from a year ago, he said.
On the docket
Monday: The Institute for Supply Management (ISM)’s services sector index is due shortly after the start of trading. Last week, the ISM’s manufacturing index showed a surprise decline that rattled investors. The services sector report is expected to show growth, rising to 50 from 48.4.
Treasury is auctioning $30 billion in six-month bills and $30 billion in three-month bills, with results due in the early afternoon. Wall Street will be looking to see what kind of demand the auctions draw, particularly from international investors, as the government seeks to fund trillions in economic stimulus projects.
Federal Reserve Vice Chairman William C. Dudley is due to speak.
Tuesday: The World Business Forum runs Tuesday and Wednesday in New York, with participants including Bill Clinton, T. Boone Pickens, Jack Welch, George Lucas and Paul Krugman.
The IMF and World Bank Group annual meeting in Istanbul runs through Wednesday.
Wednesday: August consumer credit, the September Treasury budget and the weekly oil inventories report are all due throughout the session.
Thursday: The weekly initial claims report from the Labor Department is due before the start of trading. No analyst estimates were available as of Friday.
Wholesale inventories are expected to have fallen 1% in August, after declining 1.4% in the previous month. The Commerce Department report is due shortly after the start of trading.
Federal Reserve Chairman Ben Bernanke is due to speak on the Fed’s balance sheet.
Also Thursday, Federal Reserve Governor Daniel K. Tarullo is due to speak.
Friday: The August trade balance is due before the start of trading. The trade gap is expected to have widened to $32.9 billion from $32 billion.
Federal Reserve Governor Donald L. Kohn is due to speak.
The bond market closes early ahead of the Columbus Day holiday.
General Motors was set to end months of suspense over the fate of its Opel unit on Thursday, and announce whether it plans to sell the European automaker to one of two rival bidders.
GM said in a statement its board had taken a decision on Opel after a two-day meeting.
A Sky News report, citing unnamed sources, said GM had decided to keep the Ruesselsheim-based automaker it first took control of some 80 years ago, but two bankers close to the negotiations played down that report.
A source in Berlin said senior members of the German government, including Chancellor Angela Merkel, had not been informed of GM’s decision as of Thursday morning.
Separate sources familiar with the proceedings told Reuters after the board meeting that GM had dispatched its chief Opel negotiator John Smith to Berlin, where he was expected to brief the trust supervising Opel and German government officials before a news conference scheduled around 10 a.m. ET.
The trust was set up in May to keep Opel from being swept into GM’s bankruptcy and has the final say on who buys the company. It comprises two representatives each from GM and Germany, as well as an independent chairman who is supposed to act as an arbiter between the two sides.
Politically charged
"General Motors’ board of directors approved a course of action for its Opel subsidiary and will be communicating its recommendation to the German government, other European governments, both bidders, employees and the Opel trust board over the next 24 hours," GM said.
It was not immediately clear what action the GM board had chosen after spending the past month weighing the merits of selling its European unit against the cost of keeping it.
The decision is being closely watched in Germany, where Opel employs roughly half of its 50,000 European workers at four plants making everything from three-door Corsa subcompacts to Zafira vans.
The automaker has two factories that produce automobiles under the Vauxhall badge as well as major sites in Belgium, Poland and Spain free credit score online.
Chancellor Angela Merkel, facing an election on Sept. 27, has thrown her weight behind Canadian auto parts group Magna’s bid for Opel, promising 4.5 billion euros ($6.6 billion) in government guarantees if GM opts for the Russian-backed offer.
Berlin believes the Magna bid guarantees the brightest long-term future for Opel, which traces its roots in Germany back to the 19th century.
Opel workers are preparing mass protests if GM fails to pick Magna, a labor leader said. "We will then tomorrow with many thousands of people go to Eisenach … and will symbolically protect the factory from access with a chain of people," Klaus Franz said on German television station ZDF.
But GM management has said a rival bid by Brussels-listed RHJ International, which Berlin is refusing to help finance, would be easier to implement.
Some elements within the board are known to have favored keeping Opel instead of selling it to either bidder, but all three options carry risks for GM, which is struggling to turn itself around under U.S. government majority ownership.
Magna wants to use plant capacity at Opel by tapping into its expertise in contract manufacturing and building rival models for outside automakers. It forecasts high growth rates, particularly in Russia, home of its consortium partners Sberbank and GAZ.
Under its proposed plan, Magna and Sberbank would each own 27.5% of the company, while Opel employees would hold 10% and GM the remaining 35%. Some 10,000 European jobs would be cut, 25% of those in Germany.
RHJ plans to take a majority stake in Opel and shrink production to return the company to profit. It plans about the same number of job cuts as Magna and would be expected to sell its holding in the company at some point in the future, possibly even back to GM.
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