Billionaire financier Kirk Kerkorian announced Monday that he’s offering $170 million for 20 million shares of Ford Motor Co., which - combined with the 100 million shares he purchased earlier this month - would boost his stake in the automaker above 5%.
Shares of Ford (F, Fortune 500) soared 55 cents, or 7.3%, to $8.05 in pre-market trading on news of the offer.
Kerkorian’s investment firm, Tracinda Corp., announced the $8.50-a-share offer for Ford shares in a statement.
The price represents a 13.3% premium over Friday’s closing price of $7.50. The 20 million shares would represent just under a 1% stake in Ford on top of the 4.7% stake Tracinda - whose sole shareholder is Kerkorian - said it now owns.
Investors need to disclose when they purchase more than 5% of a publicly traded company, meaning Kerkorian could not have added many additional shares to his current stake without a public filing.
Ford issued a statement in which CEO Alan Mulally said he welcomes confidence in the company and the progress it is making in its transformation plan. Since 2005, the company’s cost-cutting efforts have tried to stem losses in Ford’s core North America operations.
Tracinda said it has been buying shares since April 2, when shares were trading at between $5.93 and $6.33 a share. It said the average price for the 100 million shares was $6.91.
Shares of Ford jumped after the company reported a surprise $100 million first-quarter net income last week. Shares climbed as high as $8.79 in trading Thursday, before retreating to $8.40 at the close. It gave up much of that gain Friday.
Kerkorian’s statement said he was making the offer because of his confidence that the company will see continued improvement in its financial results under the leadership of Mulally.
"Tracinda has been following Ford closely since the company released its fourth-quarter 2007 results which indicated that Ford’s management was starting to achieve highly meaningful traction in its turnaround efforts," the statement said. "Last week, this was reinforced by Ford’s first-quarter 2008 results, achieved despite the difficult U.S. economic environment."
Despite the improvement and the better-than-expected results, Ford has continued to lose money in its core North American auto operations.
Ford has closed numerous plants in recent years and plans to close more in an effort to bring capacity more in line with reduced demand cashadvance. It also has offered all 55,000 of its hourly workers buyouts and early retirement packages, hoping to replace them with lower-paid workers with less expensive benefit packages - an option it won in a labor deal struck last year with the United Auto Workers union.
Ford lost its long-held position as the nation’s No. 2 automaker to Japanese rival Toyota Motor (TM) last year as its U.S. sales fell nearly 12%. Part of its lost U.S. market share came from a deliberate decision to cut back on less profitable fleet sales to businesses such as auto rental companies.
But Ford was also hurt by a 13% drop in sales of the F-Series pickup truck, the nation’s best selling vehicle. A favorite of contractor, pickup sales were hurt by the downturn in the housing market.
In the first quarter, Ford’s sales were down another 9% from a year earlier and early readings on April sales suggest it will see another sharp downturn this month due to the slowing U.S. economy and tighter credit for potential car buyers. But the weak sales are now more of an industrywide problems.
Kerkorian made a similar tender offer to buy shares of General Motors Corp. (GM, Fortune 500) back in 2005, and he pushed the company toward a number of steps, including a cut in its dividend to preserve cash and a cut in executive and director pay in order to win concessions from unions.
But he was unsuccessful in his efforts to push GM to combine with the alliance between French automaker Renault and Japanese automaker Nissan. He eventually sold his stake in GM in 2006, giving him a slight trading loss on his investment, but a narrow profit when considering dividends.
He also was once the largest individual shareholder of Chrysler until its purchase by German automaker Daimler Benz in 1998. When Daimler put Chrysler up for sale in 2007, he announced a $4.5 billion offer for that company, only to lose out to private equity firm Cerberus Capital Management.
You may think your job is safe. But you still may not be spared the pain resulting from the weak labor market.
The loss of nearly a quarter-million jobs so far this year and a jump in the unemployment rate means the debate over whether there is a recession is pretty much over.
"There is a recession. The question now is how deep and how long," said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. And he thinks the economy could get worse.
Here’s a look at how a deteriorating job market could lead to a worse recession than many are predicting.
Less money in workers’ pockets
First of all, a weak labor market could lead to smaller wage increases for workers in all types of industries, as employers get more conservative.
A recent survey by human resources consulting firm Mercer found that 6% of U.S. employers are already trimming their compensation budgets and another 10% are considering cuts.
But the real problem for workers is that slim salary increases may not keep up with inflation, especially with food and energy prices soaring.
From November through February, average hourly wages have fallen compared to a year earlier, when adjusted for inflation, and the modest gain in wages reported for March will likely be wiped out by price gains when the Consumer Price Index is reported later this month.
Inflation pressures could intensify further if the Federal Reserve continues to slash rates in an effort to spur the economy. That’s because the Fed’s rate cuts have been one factor behind the weak dollar.
A weaker dollar means higher prices for imported goods, especially commodities like oil. The record high for gasoline and the record lows for the dollar are not a coincidence.
Ashraf Laidi, chief foreign exchange strategist for CMC Markets US, said the dollar could lose another 5 percent this year versus both the dollar and the yen as the economy continues to slow. He thinks it will be "difficult for the dollar to make any recovery" if the Fed keeps cutting rates.
Deeper problem for troubled sectors
It now appears the recession started late last year. But the labor market was the one bright spot for much of 2007. Now, a rising unemployment rate has the potential to further dent consumer confidence and put a crimp in spending.
"As long as the unemployment rate was low, people had the sense they could continue to spend and count on improving income," said Bernard Baumohl, executive director of The Economic Outlook Group, a Princeton, N.J. economic research firm. "That has all dramatically changed since the summer of 2007."
An even bigger fear is that the most troubled spots in the economy — housing, Wall Street and the auto sector — will suffer even more.
More home price declines
The housing market has already taken a major hit. And the plunge in home values, the worst since the Great Depression, happened even with the labor market being relatively healthy last year.
Normally, home sales and prices don’t plunge unless there is weakness in the job market. Well, now there is. So that’s another big concern for the already battered real estate market.
Some homeowners who lose their jobs may not be able to afford their mortgage payments because of a loss of income. That could force more people to sell at distressed prices, or have their homes go into foreclosure if they can’t find a buyer.
And this could hurt you even if you have a safe job and home that’s fully paid off since it may mean that your house will now be worth less than previously.
More shocks to Wall Street
The housing problems triggered a meltdown on Wall Street last year, the aftershocks of which are still being felt http://paydayloans-on.com. When mortgage defaults and delinquencies on subprime mortgages started to rise, it caused big problems for securities backed by those riskier home loans.
But if more people who had conventional home loans find themselves out of work and have difficulty paying their mortgages, this could affect safer loans backed by government-sponsored mortgage finance firms Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500).
A rise in defaults in mortgages made to people with good credit, Fannie’s and Freddie’s bread and butter, would put more strain on their already stretched capital reserves.
In the worst case scenario, they might need their own government-sponsored rescue, said Dean Baker, co-director of the Center for Economic and Policy Research.
"Subprime loans went bad first but a lot of the prime loans will go bad as well," he said. "I would be surprised [Fannie and Freddie] don’t need some help before this over."
What’s more, Wall Street is awash in securities backed by other types of consumer debt, including car loans and credit card balances. If rising unemployment causes higher delinquencies with those types of loans, then there is a strong possibility of more unpleasant surprises ahead in the credit markets.
"I’ll be surprised if we don’t see another investment bank get itself into trouble," Baker said.
Auto woes: Not just Detroit any more
The auto industry was battered by high gas prices last year. Sales fell 2.5% in the U.S last year. This year started out even worse, with first quarter sales down 8% compared to a year ago.
And the weak economy is starting to hurt overseas automakers like Toyota Motor (TM), which also saw U.S. sales fall in the first quarter.
Automotive market research firm CNW reports that buyer traffic is sharply lower across the industry. According to the most recent report from CNW, floor traffic at dealerships plunged nearly 30% in the second half of March, the largest drop since the early 1990s.
If more people find themselves out of work, this trend is likely to continue. That could spell trouble for employees of leading Asian automakers, which now make about half the cars and trucks they sell in the U.S. at North American plants.
So far, many of these manufacturers have avoided the temporary shutdowns and closings common at GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler. But weak demand could lead to job cuts and reduced hours by the likes of Toyota, Honda and others.
And if that happens, this could be bad news for many companies that depend upon the auto industry, from parts makers to dealerships and even to media companies that depend on advertising from car companies.
Simply put, fewer auto sales could lead to a deeper recession.
The FBI is looking into fraud allegations against Countrywide Financial Corporation, a U.S. government official told CNN.
The investigation is still in its early stages, another government official familiar to the situation said.
The story was first reported in The Wall Street Journal Saturday.
The probe will examine underwriting and mortgage origination practices, and whether the company misrepresented losses related to subprime loans, the paper said.
Subprime mortgages, or home loans given to borrowers with weak credit, have been at the root of a crisis that has rocked the U.S. economy.
Though the Federal Bureau of Investigation has acknowledged ongoing investigations related to the subprime debacle, neither the FBI nor the Justice Department would comment on the specific targets.
"The FBI has been investigating potential fraud in the mortgage/sub-prime lending industry, however, we can not confirm or deny which companies are under investigation," said FBI spokesman Richard Kolko.
A law enforcement official told CNN that there are currently 16 companies being investigated.
Both Countrywide and Bank of America (BAC, Fortune 500), which agreed in January to acquire Countrywide for $4 billion in stock, did not return calls to CNN.
Calabasas, Calif.-based Countrywide is the nation’s largest home lender, responsible for roughly one-fifth of the mortgages in the United States.
When the housing crash began, Countrywide (CFC, Fortune 500) was faced with an increasing number of subprime customers who were delinquent with their mortgage payments payday loans. The company was forced to essentially shut down its subprime lending operations last year to focus on originating loans that conform to Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) guidelines, considered to be safe investments.
On Friday Countrywide’s founder and CEO, Angelo Mozilo, testified before the House Committee on Government and Oversight Reform, along with two other CEOs who resigned in the wake of the mortgage crisis - Charles Prince of Citigroup (C, Fortune 500) and Stanley O’Neal of Merrill Lynch (MER, Fortune 500). All three defended their lofty compensation packages, despite the loss of billions to their companies and shareholders.
– CNN America Bureau Producer Kevin Bohn contributed to this report.
Defying the gloom that many retailers are feeling, Wal-Mart Stores Inc. expects a more profitable year selling to penny-pinching shoppers after its renewed focus on low prices paid off over the holidays with a 4 percent rise in fourth-quarter profit.
The world’s largest retailer, emerging from a yearlong turnaround effort after sales stumbles in 2005 and 2006, said Tuesday that aggressive holiday discounts and improvements in its more than 4,000 U.S. stores boosted sales despite consumer worries.
"No one has a crystal ball to look into the economic future, but we know the economy will be a critical factor this year," Chief Executive Lee Scott said in a recorded call after releasing results.
Scott said Wal-Mart’s decision to re-emphasize low prices last year came at the right time and added: "In a volatile economy, I believe we are well positioned to succeed."
Chief Financial Officer Tom Schoewe told The Associated Press that Wal-Mart expects a spending boost as consumers receive federal income tax rebates under the $168 billion economic stimulus plan.
"When those checks have been issued in the past, we’ve experienced (spending) either equal to or indexed a little bit higher than our overall market share," Schoewe said free credit report and score.
Analysts said Wal-Mart has several unique factors, including the scale of its grocery business that can bring in traffic for other areas of the store, so that its optimism for the year ahead is not necessarily an indicator for the broader retail sector.
"If I was grading them, I would give Wal-Mart a B. Unfortunately, the rest of retail is getting a C-minus," said Patricia Edwards from investment manager Wentworth Hauser and Violich.
As major U.S. retailers report their fourth-quarter earnings results, the industry is bracing for its bleakest times since the 1991 recession.
Other merchants have closed stores, laid off thousands of employees, scaled back store expansions or pared inventories as consumer spending screeches to a halt.
Strained by war, recently discharged veterans are having a harder time finding civilian jobs and are more likely to earn lower wages for years due partly to employer concerns about their mental health and overall skills, a government study says.
The Veterans Affairs Department report, obtained Thursday by The Associated Press, points to continuing problems with the Bush administration’s efforts to help 4.4 million troops who have been discharged from active duty since 1990.
The 2007 study by the consulting firm Abt Associates Inc. found that 18% of the veterans who sought jobs within one to three years of discharge were unemployed, while 1 out of 4 who did find jobs earned less than $21,840 a year. Many had taken advantage of government programs, such as the GI Bill, to boost job prospects, but there was little evidence that education benefits yielded higher pay or better advancement.
The report blamed the poor prospects partly on inadequate job networks and lack of mentors after extended periods in war, and said employers often had misplaced stereotypes about veterans’ fitness for employment, such as concerns they did not possess adequate technological skills, or were too rigid, lacked education or were at risk for post-traumatic stress disorder.
It urged the federal government to consider working with a private-sector marketing firm to help promote and brand war veterans as capable employees, as well as re-examine education and training, such as the GI Bill.
"The issue of mental health has turned into a double-edged sword for returning veterans. More publicity has generated more public awareness and federal funding for those who return home different from when they left. However, more publicity - especially stories that perpetuate the ‘Wacko Vet’ myth - has also made some employers more cautious to hire a veteran," said Joe Davis, spokesman for Veterans of Foreign Wars.
"The federal government needs to accelerate its hiring and training of these young veterans to fill the ranks of the retiring Boomer generation," he said.
A VA spokesman declined to comment, saying the report spoke for itself. Last November, the VA announced the initial hiring of 10 full-time staff as part of an effort to help veterans find jobs at the department.
Separately, a Labor Department report obtained by the AP showed that formal job complaints by reservists remained high, citing concerns about denied jobs or benefits after they tried to return to their old jobs after extended tours in Iraq. Reservists filed 1,357 complaints with the department in 2006, the latest figures available, down from nearly 1,600 in 2005, when complaints reached the highest level since 1991.
While complaints declined in 2006, the Labor Department report noted for the first time that figures in the previous years might have been inflated cash advance flexible payments. That’s because in some cases a single complaint was double counted after the case was closed in one state and then reopened in another state.
"The military has worked on assisting service members in completing and translating their skills to match equivalent civilian job descriptions; however, training for marketability may require much more preparation than having the ability to improve a resume," the VA study said.
"The federal government may need to reevaluate how it serves the needs of returning service members," it said.
Charles Ciccolella, the Labor Department’s assistant secretary for veterans’ employment and training, said the department provides a wide variety of services to veterans seeking jobs, including workshops that focus on resume writing and interview skills. Staff also are educating reservists about their job rights as well as seeking to connect veterans to new jobs, he said.
"The Department of Labor is constantly working to better assist transitioning service members and veterans as they enter or re-enter the civilian work force," Ciccolella said.
The two reports come as Congress and the Bush administration seek ways to improve veterans’ healthcare and benefits in light of a protracted Iraq war.
A Pentagon survey of reservists released last year found increasing discontent among returning troops about the government’s performance in protecting their legal rights after taking leave from work. Some legal experts have said those numbers may grow once the Iraq war winds down and more troops come home after an extended period in combat.
In recent weeks, some veterans groups and lawmakers have called for an overhaul of the GI Bill, which provides veterans with money to help them further their education.
The difficulty that veterans have had in finding jobs at higher wages has been going on for some time.
The latest VA study, numbering 199 pages, tracked a statistical sample of 1,941 veterans between the ages of 17 and 61, more than half of whom served in the Army. It found that from 1991 to 2003, about 9.5% of recent veterans were unemployed within two years of separation from active duty, compared with 4.3% for non-veterans of comparable age, gender and education.
The veterans also tended to have lower wages, although total income was often similar when factoring in disability pay and other government benefits, and to be in low-income families (under $29,000) for up to eight years after separation.
I’m trying to decide whether to sell my condo now and move into an apartment or try to hold out until the market is better. I want to sell because the condo is costing too much and my brother, who used to do repairs, passed away. In three years, when I retire at 66, I will move into an independent, senior apartment.
As long as you will not go into financial distress, hang on as long as you can. You probably will find that your cost of living in the condo will not differ much from what you will spend in a comparable apartment. Continuing to own also gives you benefits like tax deductibility.
Keep in mind that while you remain in your condo, your association fee takes care of most of the exterior and common elements pay day loans. The only luxury an apartment would afford you would be the service calls you can make for an interior repair.
If you feel the need to explore selling, I would suggest consulting with a seasoned Realtor for a competitive market analysis of your property. This will allow you to make an educated choice.
Powered by WordPress -- XHTML 1.0