Toyota’s pain is its rivals’ gain.
All major automakers but Toyota reported higher U.S. sales in February, and most took customers from their powerful Japanese competitor, which has been struggling with a series of massive safety recalls.
Toyota Motor Corp. said its U.S. sales fell 9 percent last month, while Ford, GM, Nissan, Honda and Hyundai all reported double-digit growth compared with February 2009, at the depth of the recession.
The gains may have been even higher without the blizzards that paralyzed the East Coast.
Other winners included Kia Motors Corp. and Subaru. Even struggling Chrysler Group LLC saw improvement. Toyota, by contrast, suspended sales of eight popular models in late January. And it spent last week answering questions from Congress about its safety record.
"We feel we’re getting our fair share of the Toyota business," said Susan Docherty, vice president of marketing at GM, whose sales rose nearly 12 percent.
February was the first full month since Toyota’s decision Jan. 26 to halt sales of some of its vehicles in the U.S. because of safety concerns. Those vehicles went on sale again as dealers repaired them, but Toyota’s image suffered.
Ford Motor Co. posted a 43 percent jump in February U.S. auto sales and outsold General Motors Co. for the first time in nearly a dozen years as it grabbed customers from struggling Toyota. Ford sold 334 more cars than GM in the U free credit report online.S. for the first time since August 1998, when GM was in the midst of a strike.
Most automakers reported that sales to rental car companies and other fleet buyers also were strong as companies began buying again after cutbacks last year. Fleet sales generally mean lower profits to automakers than sales to individuals.
Chrysler, for example, said sales rose half a percent, its first year-over-year monthly increase since December 2007. Car sales rose 38 percent, but truck sales dived 28 percent.
Hyundai Motor Co. said its sales rose 11 percent, driven by sales of the new Tucson small SUV. The company’s redesigned Sonata midsize car saw sales rise 58 percent.
The industry was expecting to see gains over February 2009, which was one of the weakest months in a very depressed year. Sales over President’s Day weekend — which traditionally kicks off the spring selling season — were robust, according to automotive website Edmunds.com.
Still, winter storms at the beginning and end of the month hurt sales on the East Coast and in the Midwest.
"Three and a half feet of snow on these cars," Docherty said. "It took our dealers a bit of time to get all that snow off here and get the customers back into the showrooms."
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The fat cats were supposed to get their comeuppance.
After Wall Street’s most prominent firms — by their own admission — helped cause the 2008 financial meltdown and got bailed out by the government, they were supposed to stop handing out million-dollar bonuses to employees. No one was supposed to get seven- and eight-figure rewards, not after the Great Recession left one in 10 Americans unemployed. Not after President Barack Obama — who on Thursday called such pay "obscene" — had promised to clamp down on lavish bonuses.
It turns out little actually changed.
Americans will see that starting Friday when JPMorgan Chase & Co. releases its 2009 financial results. The other big banks will follow. The messages will be the same: Compensation is at near-record levels.
The form of the pay is changing. Instead of cash, bonuses will be paid mostly in stock that can’t be redeemed for years. But the numbers are still staggering. Together, the six biggest U.S. banks are on pace to pay $150 billion in 2009, slightly less than the record $164 billion in 2007 before the crisis, according to New York state comptroller’s office.
How this happened is complicated. It involves a remarkable turnaround by the banks, but one fueled by the bailout. It shows the power of the financial lobby. And it highlights the age-old debate about how much U.S. companies need to pay to retain talented bankers and traders.
Scott Talbott of the Financial Services Roundtable says keeping those workers from going to overseas firms is critical. "The market will find a way to pay these people what they’re worth," says Talbott, chief lobbyist for the group representing some of the largest financial firms.
But Douglas Elliott, a fellow at the Brookings Institution and a former banker, thinks "The way the public sees it is that we wrote a $700 billion check to the banks, and they got to burn through it as they pleased."
THE BAILOUT
The government played a big role in the bonanza by bailing the banks out. In the days after the meltdown, banks were given access to cheap government loans and other federal subsidies. Because the banks weren’t required to put it toward lending, they could use it as they pleased.
Many bet on risky securities that paid off when the markets surged. The result: big profits and big bonuses. Profit at Goldman Sachs nearly doubled to $8.4 billion in the first nine months of 2009 from the previous year, and analysts expect its full-year profits to top $10 billion.
Goldman set aside $16.71 billion from January through September for compensation, including salaries, bonuses and associated costs. That puts it on pace to meet the record $20.2 billion in compensation costs it had for all of 2007.
Should Goldman’s annual compensation go that high, it works out to $600,000 each for its 31,700 employees. It won’t be distributed like that, of course. The best performers and executives stand to earn millions.
The nation’s biggest banks all took money from the Troubled Asset Relief Program. Some needed it; others were pressured by federal officials to take it. Regardless, the banks weren’t restricted in how to spend it. They faced limits on compensation, but that lasted for only as long as they held the funds, which gave them incentive to pay the TARP back quickly. In total, banks took $245 billion and have paid back $162 billion.
LOBBYING MACHINE
Bonus outrage and the momentum to do something about it peaked last February, when crippled insurer American International Group Inc. moved to pay $165 million in bonuses to hundreds of employees in the same financial unit that brought down the company. Treasury Secretary Timothy Geithner called Wall Street pay "out of whack."
The fact it didn’t happen speaks to the industry’s powerful lobbying machine. In the past decade, no industry has spent more lobbying dollars than Wall Street and its offshoots. From 1998 to 2009, the FIRE lobby — or finance, insurance, real estate — spent $3.8 billion, according to the Center for Responsive Politics. By comparison, the energy and defense industries spent $2.6 billion and $1.08 billion, respectively.
Meanwhile, Wall Street’s generosity to political candidates ramped up even as the industry began careening. Financial firms contributed a record $476 million in the last election cycle. That’s more than double the No. 2 donor, the health care industry, which gave $166 million, even as Congress began to debate landmark health care legislation.
WHAT’S NEXT
Washington is scrambling to get something done to temper the populist anger. The financial lobby still could block those efforts.
The Obama administration is proposing a 10-year tax on the largest banks to cover a projected $117 billion shortfall in the bailout fund.
The Fed is reviewing a plan that would give it more oversight on compensation by reviewing pay practices at thousands of banks. The central bank would be able to veto pay plans if it found them to encourage excessive risk-taking by executives, traders or loan officers.
The Federal Deposit Insurance Corp., which regulates most of the nation’s banks, is seeking input on a plan that would tie fees that banks pay for deposit insurance to how much a company’s compensation plan encourages workers to take risks in order to achieve higher returns.
A few in Congress want to go further. Rep. Dennis Kucinich, D-Ohio, introduced legislation Tuesday to impose a 75 percent bonus tax.
"What you’re seeing is a public-be-damned attitude from the banks," he said. "They’re rolling in dough while the taxpayer has to sacrifice.
Burlington Coat Factory will set up shop in the former Mervyn’s store in Elk Grove in the spring, Elk Grove Economic Development Corp. officials said Friday.
The New Jersey-based chain of 414 discount department stores opened a new store last March in a former Target store at County Fair Fashion Mall in Woodland.
The Elk Grove store will be located in the Marketplace 99 shopping center at Bond Road and Highway 99 and will employ about 70 people payday loans guaranteed no fax.
Burlington Coat Factory entered this market in 2001 with a store in south Sacramento on Florin Road.
Burlington Coat Factory also has a store in Citrus Heights, located in a former Furniture World.
Consumer outrage about AT&T’s 3G service for iPhones is boiling over, but the dropped calls and spotty service reflect a greater lack of foresight in the wireless industry.
Analysts say AT&T’s problems would have happened on any network that carried Apple’s (AAPL, Fortune 500) iPhone because of the overwhelming amount of data downloaded by iPhone users. Over the past three years, AT&T’s data traffic increased 5,000% because of the iPhone.
"The challenges that AT&T has are being faced by a lot of operators around the world: Very rapidly growing usage coupled with dense populations," said Daniel Hays, wireless expert and partner at consultancy PRTM. "Would it have been different on Verizon? Probably not."
AT&T accurately states that it has the nation’s fastest 3G network but it "probably bit off more than it could chew," said Doug Helmreich, program director at consultancy CFI Group. "Now some of their customers are paying the price."
IPhone users in New York and San Francisco in particular have been up in arms about frequent service interruptions. Earlier this month, AT&T’s head of mobility, Ralph de la Vega, admitted at an investors’ conference that the company’s service in those two cities was "below our standards."
It’s not just New York and San Francisco iPhone users who are grumbling. An annual Consumer Reports study recently rated AT&T (T, Fortune 500) the worst in customer satisfaction in 19 cities across the country. (Rival Verizon Wireless rated No. 1 in the study.)
In nearly three-quarters of the surveyed areas, AT&T was rated lowest for availability of service, frequency of dropped calls and quality of voice service.
Verizon vs. AT&T
Verizon (VZ, Fortune 500) has had a field day at AT&T’s expense.
"There’s a map for that" commercials have poked fun at AT&T’s smaller 3G footprint. And that has helped Verizon take market share, according to Piper Jaffray.
But studies show that AT&T’s network is actually faster than Verizon’s, and Verizon’s ad campaign may be a bit misleading.
Four recent independent studies from wireless industry analysis firms Global Wireless Solutions and Root Wireless, investment bank Piper Jaffray and tech blog Gizmodo all concluded that AT&T’s 3G network was the fastest in the United States.
"We drove millions of miles across the country, and our data support AT&T’s claim that it has the fastest 3G data network," said Global Wireless CEO Paul Carter.
The map that Verizon shows in its ads is correct, but AT&T’s 3G network still covers nearly 80% of the U.S. population, said Carter. And AT&T’s non-3G coverage is also broader than its 3G network.
With that kind of pedigree, analysts say AT&T was likely the best-equipped network to handle the iPhone.
"For Verizon … we still wonder if the network has the capacity and backhaul to support a device with an adoption curve of the iPhone," said Piper Jaffray analyst Chris Larsen in a client note.
Perception vs. reality
AT&T admits that it has had problems keeping up with the data demands of iPhone users, which has prompted the company to accelerate scheduled improvements in its network.
"There’s more work to be done and a sense of urgency to do it, but we feel like we’re on the right track with our investments," said Fletcher Cook, spokesman for AT&T.
In the next few years, AT&T said it would double its network speed, and Cook said AT&T has already improved overall network quality by 25%. The company has also deployed more than 20,000 Wi-Fi hotspots across the country, which it says may help alleviate stress on its 3G network.
PRTM’s Hays applauded the Wi-Fi solution and AT&T’s dedication to improving its network, calling them "critical levers in addressing AT&T’s network performance issues." He expects AT&T to go even further, perhaps by integrating tiered data plans that would force iPhone users to pay for the data they download.
Still, perception has hurt AT&T.
AT&T’s network is the No. 1 hangup for people who are in the market for an iPhone, according to a CFI Group study. The company’s woes have even become the butt of jokes on late-night TV.
"It was reported this week that Google would soon launch its own cell phone as a challenge to the iPhone," said "Saturday Night Live’s" Seth Meyers on Dec. 19. "Also a challenge to the iPhone? Making phone calls."
The building frustrations led some angry consumers to take matters into their own hands. "Operation Chokehold," which took place on Dec. 18, was an attempt to overload AT&T’s network by running data-intensive apps to try and send a message that consumers "are sick of their substandard network." The ploy failed.
"Unfortunately for AT&T, when it comes to network quality, perception is reality and right now Verizon has a more positive public perception," said Larsen. "If AT&T can continue to show improvement in network throughput, it may blunt some of the impact."
Nortel Networks Corp. pensioners reacted with disgust on Friday to reports of new lavish bonuses for the company’s top executives.
It was yet another blow to Nortel’s distressed pensioners, retirees and long-term disabled former employees, who have dealt with financial uncertainty since the former Canadian tech darling declared bankruptcy in January.
“It seems so aberrant, in terms of the executive of the company awarding themselves really, really rich pay raises for doing the job of taking the company apart,” said Tony Marsh, who retired from Nortel in 2000 after 30 years.
“Those of us who built the company up, into arguably the world’s No. 1 telecom company, could never have dreamed of such riches,” Marsh added.
An internal Nortel file “outlines a new compensation scheme for 72 Nortel executives that will see them get a total of $7.5 million U.S. on top of their current salaries in 2009,” according to CBC News.
The company has argued that bonuses are necessary to keep executives aboard what is essentially a sinking ship following Nortel’s filing for bankruptcy protection and the subsequent selling off of the company’s assets.
Nortel would not comment on details of the plan. It issued a statement saying: “As Nortel works through the highly complex tasks of this restructuring, it is critical to have the right specialist resources in place … Any steps taken around these individuals has been within the context of a previously approved compensation plan, taken in consultation with the creditor committees, external legal counsel and the Canadian Monitor.”
Earlier, former CEO Mike Zafirovski claimed $12.3 million (U.S.) for back pay and bonuses. In March, some 100 executives were awarded $45 million in retention bonuses.
The company’s divisions are being auctioned off in a process dragged out by bankruptcy court approvals. Retirees are worried that when Nortel’s various global divisions are entirely sold off, they will be stuck with even less than they are now, which is not much, Marsh said.
The Federal Reserve should keep alive its asset purchase programs beyond the first quarter of 2010 to give policy-makers more flexibility if the economy took another turn for the worse, a senior Fed official said on Sunday.
“I would just like to keep them active at a very low level. It would give the Fed the option to react if the economy weakened,” St. Louis Federal Reserve bank James Bullard told reporters after his speech at an event organized by Princeton University students in New York.
“When you are trying to think how the economy might evolve, it could be that the economy comes in very strong … or it could go the other way payday loan. There is a lot of uncertainty. I’d hate to get the feeling that the Fed is saying our work is done. We need a policy that can react either way,” Bullard said.
The Federal Reserve cut interest rates to near zero last December and has kept them there since. At its last policy-setting meeting the central bank reiterated its pledge to keep interest rates “extraordinarily low” for an “extended period”.
Bullard said it could be helpful to have a discussion on what the term “extended period” means.
Treasury prices were lifted Tuesday as investors pulled back on the previous day’s gains on Wall Street, spurring demand for perceived safe haven assets.
"Bonds are trading on some weakness in the equity market today," said Bill Larkin, portfolio manager at Cabot Money Management.
Stocks fell from their highest level in 13 months on Tuesday as investors reacted to a stronger dollar. The greenback, which is also perceived as a safer investment, rebounded from 15-month lows Tuesday.
Going forward, Larkin said prices of longer-dated treasuries will turn lower and prices for short term bonds will rise as the Federal Reserve holds interest rates near zero.
"That market will start to anticipate higher future inflation," Larkin said. "Because the Fed is on the sidelines, there is more embedded risk that inflation will become a problem for longer-dated securities."
Investors are keeping a close eye on the Fed for any indication of when it will raise interest rates loan till payday.
"The Fed’s change from the current liquidity to tightening monetary policy and raising interest rates without choking the economic growth will be just as challenging as it was getting the economy going again," he said. "And the market will be focus on that change."
Bond prices. The benchmark 10-year note was up 3/32 to 10-14/32, and its yield fell to 3.33% from 3.34% late Monday. Bond prices and yields move in opposite directions.
The 30-year bond rose 17/32 to 102-6/32, and its yield eased to 4.25%.
The 2-year note edged higher to 100-15/32. Its yield fell to .77%.
The yield on the 3-month bill .07%
Gold slipped on Thursday, retreating from a record high it hit last session as disappointment over the metal’s failure to breach $1,100 an ounce prompted investors to cash in some gains.
Gold’s strength despite a relatively firm dollar this week suggests that bullion could be driven by other factors, such as renewed interest among central banks and inflation worries.
“The gold market has de-coupled itself from the dollar for the time being,” said George Nickas, commodities broker at FC Stone.
On Tuesday, gold rallied $30 in the face of a broadly higher dollar, largely driven by improved sentiment after India’s purchase of 200 tons of bullion from the International Monetary Fund.
Yet, analysts warned of possible short-term pullbacks in overbought market conditions.
“The market has run out of steam as we end the week. This market has to do some backing and filling to justify at these levels,” Nickas said.
Spot gold was at $1,088.95 an ounce at 2:08 p.m. EST (1908 GMT), against $1,092.35 late in New York on Wednesday, when the precious metal hit a record high of $1,097.25 an ounce.
U.S. December gold settled up $2 at $1,089.30 an ounce on the COMEX division of the New York Mercantile Exchange payday loans for bad credit.
Further gains were capped after the metal failed to decisively break above $1,100 an ounce.
“The fact that we didn’t manage to go through $1,100 might lead some investors to reconsider their positioning in the sector,” said Commerzbank analyst Eugen Weinberg.
“Should the dollar become stronger over the coming days I would expect to see more profit taking,” he added. “I think… we will see a prolonged correction, because the trend of the last few weeks is becoming a bit too pronounced.”
Friday’s U.S. October non-farm payrolls data could give a clear direction to the dollar and set the tone for the gold market.
CENBANKS EYED
Speculation continued over the prospect of further central bank gold acquisitions, after India’s purchase of 200 tons of bullion from the International Monetary Fund on Monday. The report helped push gold to record highs.
Sri Lanka’s central bank said it had been buying gold for the last five or six months as it diversifies its reserves amid volatile markets.
When it comes to figuring out what has caused the country’s record accumulation of debt, just about every politician in Washington has a theory.
The theories usually boil down to this: The other guy did it. The other party’s White House. A previous Congress. You get the picture.
In reality, growing the deficit has been very much a bipartisan effort. Members of Congress from both parties and presidents past and present have all contributed to the problem.
And it is a problem. By 2019 the total debt accrued over the past several decades is on track to approach an unhealthy 82% of gross domestic product. That’s one reason why those who own U.S. debt and credit ratings agencies will be looking for lawmakers to put together a plausible deficit-reduction plan in the next few years. (Clock is ticking on debt ceiling.)
But if Congress and the president are going to stick to it, they better curb the budget trickery. Here are 5 common tricks that undermine fiscal responsibility.
Great idea! Let’s ignore it.
The trick: Bypass rule to rein in spending and then overturn it
In 1997, Congress passed a provision that aimed to limit overall Medicare spending. When spending exceeds a certain target, an automatic reduction in physicians’ reimbursement fees kicks in — unless lawmakers act to block the reduction.
And they do, almost every time a cut to doctors is in the offing.
They usually don’t bother to cut spending or raise revenue elsewhere to make up for it. And when they do, they aren’t exactly realistic about it.
Four years ago, they decided to pay for rescinding a cut by promising to cut rates even more steeply in the future, said Donald Marron, an acting director of the Congressional Budget Office during the last Bush Administration.
Well, welcome to the future. Those steeper rate cuts aren’t flying either. Lawmakers now want to pass a permanent "fix" so that physician payment rates don’t drop. The estimated cost of doing so: $247 billion over 10 years.
The proposal was voted down last week in part because there were no provisions in the bill to pay for the cost. But don’t expect that to be the end of it.
How about a quickie?
The trick: Enact a one-year "fix" that really fixes nothing
Few lawmakers want to see physician rates cut. They need physicians’ support for health reform and there is concern that more physicians would refuse to treat Medicare patients if their rates are cut further.
So lawmakers may just pass another one-year fix to prevent near-term cuts, just like they’ve done in years past.
The one-year "fix" for perennial issues makes the cost of what Congress is doing look less expensive because well, it’s only for one year, right?
The classic example is how Congress deals with the pernicious Alternative Minimum Tax. Without congressional action, an increasing number of middle class families will have to pay the tax, originally created to extract tax payments from the wealthy.
So every year Congress enacts a "patch" to protect those middle-class families. Those one-year patches have recently cost in the neighborhood of $70 billion. A permanent patch, which President Obama has called for, would cost at least $448 billion over 10 years, according to the Congressional Budget Office.
Let’s play make-believe
The trick: Count on future taxes everyone knows will never be collected
The AMT patches are not paid for through reduced spending or increased revenue elsewhere bad credit payday loans.
The argument is that the AMT was never supposed to hit so many people and generate so much revenue. So why pay for the loss of revenue that was never supposed to be collected in the first place?
It’s a good theory. The problem is that Congress, in deciding which policies to pursue, uses budget and deficit projections that assume the AMT will raise lots and lots of revenue.
As a result that phantom AMT revenue makes the deficit look better than it is.
While the estimated cost of permanently patching the AMT is $448 billion, the real price goes up by hundreds of billions if it’s done in conjunction with extending the 2001 and 2003 tax cuts. And odds are high they will be extended.
This is just temporary. Honest.
The trick: Call a tax cut or spending hike temporary
Like the one-year fix, implementing a "temporary" tax cut or spending increase often disguises the true cost, since there will be pressure to make the measure permanent — or to "temporarily" renew it every year.
"There’s a ton of effort to get things into law because once there, they’re hard to get rid of," said Marron, who is now a visiting professor at the Georgetown Public Policy Institute.
The 2001 and 2003 Bush tax cuts are a good example.
No one really expected the cuts to expire, even though they’re slated to do so by 2011. In fact, President Obama has called for them to be made permanent for the majority of Americans. The cost: $2.3 trillion in forgone revenue over the next 10 years.
We’ll pay for everything … except some things
The trick: Promise to pay for some tax cuts and not others
In a speech this week, Christina Romer, head of Obama’s Council of Economic Advisers, pointed to research that found nearly half of the long-run fiscal shortfalls is due to the policies that cut taxes and increased spending under the Bush administration.
"Obviously, we can’t go back eight years and make more responsible choices," she said.
Well, yes, the past is past.
But what about future choices? Obama has promised to pay for any new tax cuts or spending increases he proposes. Yet he is not calling on Congress to pay for his $2.3 trillion proposal to extend the Bush tax cuts.
By not doing so, he joins a not-so-select club of politicians, according to Diane Rogers, chief economist at the deficit watchdog group Concord Coalition.
"[T]he clever idea to hide the permanent costs of spending or tax cuts by making them temporary, and then later extending them while refusing to pay for the costs of extending them … is something government policymakers have been practicing in a bipartisan manner for awhile," Rogers wrote in her blog EconomistMom.com.
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The U.S. unemployment rate may rise above 10 percent as employers cut payrolls further, Federal Reserve Bank of St. Louis President James Bullard said.
“Unemployment is leveling off but we still may be headed toward double digits,” Bullard told reporters today after a speech in St. Louis. The rate was 9.8 percent in September, the highest since 1983.
“Labor markets are very weak,” Bullard said. “It is disturbing, and I find it upsetting that we are still losing jobs payday loan company. We would like to see nonfarm payrolls turn positive before the end of the year. I don’t know if we will get there or not.”
The economy lost 263,000 jobs in September, more than economists forecast. September’s losses brought total job reductions since the recession began in December 2007 to 7.2 million, the biggest decline since the Great Depression.
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