(Reuters) - Ford Motor Co said on Tuesday that it raised $1.4 billion through a 300 million share offer for $4.75 per share, a move that its chief executive said was an important step toward getting profitable again.
Ford said the proceeds would be used for general corporate purposes, including to fund a portion of its obligation to a union-run fund set up for retiree healthcare expenses.
Selling the stock "is another key step in our plan to transform Ford into an exciting, viable enterprise poised to return to profitability," Chief Executive Alan Mulally said in a statement.
Issuing equity now and possibly funding a larger portion of its retiree obligations with cash would help Ford improve its balance sheet and reduce the potential impact of those obligations on its shareholders, Mulally said.
Ford is the only U.S. automaker that has not sought government aid.
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Tuesday, 12 May 2009
Oil Companies May Wait for Hedges to End to Go Bargain Shopping
(Bloomberg) -- Quantum Energy Partners, the Houston private-equity firm that put together a $3.5 billion bankroll to go bargain-hunting for acquisitions after oil and natural-gas prices plunged, is waiting for a better time to pounce.
Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.
“By the first quarter of next year, we’ll be pretty darn active,” VanLoh said in an interview at his downtown office. “Many companies are very well hedged for 2009, so the squeeze hasn’t happened yet. The point of capitulation probably will arrive in the fourth quarter or the first quarter of 2010.”
The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.
The number of oil and gas deals last month fell 35 percent from a year earlier, and the value of transactions dropped 60 percent to $5 billion, according to data compiled by Bloomberg. UTS Energy Corp. of Calgary repulsed a third and final takeover bid of C$830 million ($680 million) by Total SA last month, saying the company is worth more.
Time is Wrong
“Now is not a good time to buy because sellers have unrealistically high price expectations,” said Michael Harness, chief executive officer at Osyka Corp., a closely held oil producer in Houston. Harness, a former Amoco Corp. engineer, expects expiring hedges to begin forcing rivals to put oil and gas fields on the auction block as soon as July.
Producers that pre-sold their September 2009 output a year ago locked in a price of $106 a barrel, based on New York Mercantile Exchange futures. If that’s the last month for which they have hedges in place, the best they can hope to get for October production is $58 a barrel, or 45 percent less.
At Quantum, VanLoh and co-founder Toby Neugebauer gathered the managers of their portfolio companies last month to order a halt to acquisition activities on expectations that asset prices will decline more.
“We are still being very, very patient,” VanLoh said in an April 30 interview. “Everything is too expensive, given where prices are going.”
Alberta Acquisition Search
Quantum has invested in 23 companies that later were sold or went public. The firm staked Linn Energy LLC with $15 million in 2003 and took the partnership public in 2006. Houston-based Linn has a market value of more than $2 billion today.
In the Canadian province of Alberta, home to an oil industry that five years ago surpassed Saudi Arabia as the biggest crude exporter to the U.S., cratering stock values and lower energy prices have prompted the C$70 billion ($61 billion) Alberta Investment Management Corp. to step up the search for investment opportunities.
“With commodity prices where they are now, Alberta is looking like it’s going to present a lot of opportunities for us,” Chief Operating Officer Jagdeep Singh Bachher said in a telephone interview.
Edmonton-based AIMCO, as the Crown corporation is known, agreed last month to acquire a 20 percent stake in Calgary-based Precision Drilling Trust, Canada’s largest oil driller. AIMCO’s next move will be to sift through the market wreckage and find companies with assets and management teams most likely to excel even if energy prices remain depressed, said Brian Gibson, senior vice president for public equities at AIMCO.
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Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.
“By the first quarter of next year, we’ll be pretty darn active,” VanLoh said in an interview at his downtown office. “Many companies are very well hedged for 2009, so the squeeze hasn’t happened yet. The point of capitulation probably will arrive in the fourth quarter or the first quarter of 2010.”
The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.
The number of oil and gas deals last month fell 35 percent from a year earlier, and the value of transactions dropped 60 percent to $5 billion, according to data compiled by Bloomberg. UTS Energy Corp. of Calgary repulsed a third and final takeover bid of C$830 million ($680 million) by Total SA last month, saying the company is worth more.
Time is Wrong
“Now is not a good time to buy because sellers have unrealistically high price expectations,” said Michael Harness, chief executive officer at Osyka Corp., a closely held oil producer in Houston. Harness, a former Amoco Corp. engineer, expects expiring hedges to begin forcing rivals to put oil and gas fields on the auction block as soon as July.
Producers that pre-sold their September 2009 output a year ago locked in a price of $106 a barrel, based on New York Mercantile Exchange futures. If that’s the last month for which they have hedges in place, the best they can hope to get for October production is $58 a barrel, or 45 percent less.
At Quantum, VanLoh and co-founder Toby Neugebauer gathered the managers of their portfolio companies last month to order a halt to acquisition activities on expectations that asset prices will decline more.
“We are still being very, very patient,” VanLoh said in an April 30 interview. “Everything is too expensive, given where prices are going.”
Alberta Acquisition Search
Quantum has invested in 23 companies that later were sold or went public. The firm staked Linn Energy LLC with $15 million in 2003 and took the partnership public in 2006. Houston-based Linn has a market value of more than $2 billion today.
In the Canadian province of Alberta, home to an oil industry that five years ago surpassed Saudi Arabia as the biggest crude exporter to the U.S., cratering stock values and lower energy prices have prompted the C$70 billion ($61 billion) Alberta Investment Management Corp. to step up the search for investment opportunities.
“With commodity prices where they are now, Alberta is looking like it’s going to present a lot of opportunities for us,” Chief Operating Officer Jagdeep Singh Bachher said in a telephone interview.
Edmonton-based AIMCO, as the Crown corporation is known, agreed last month to acquire a 20 percent stake in Calgary-based Precision Drilling Trust, Canada’s largest oil driller. AIMCO’s next move will be to sift through the market wreckage and find companies with assets and management teams most likely to excel even if energy prices remain depressed, said Brian Gibson, senior vice president for public equities at AIMCO.
Read more here
Monday, 11 May 2009
GM exit from the Dow looking more likely
(Reuters) - The potential for changes in the blue-chip Dow Jones industrial average remains high, according to the head of the index's oversight committee, the same day the head of General Motors said bankruptcy had become more likely.
Both GM and Citigroup have needed large infusions of capital from the government to stay alive, and while the automaker edges closer to bankruptcy, Citigroup's capital cushion still remains tenuous.
"The chain of events involving GM and Citi seem to be marching in a certain direction," said John Prestbo, executive director of Dow Jones Indexes and the chairman of the DJI oversight committee.
Monday, Fritz Henderson, the chief executive officer of GM, said it was "more probable" the automaker would need to file for bankruptcy in order to restructure, though there was still a chance it could be avoided.
GM might not be the Dow's only casualty, however, as Citigroup may also be on the chopping block because the financial institution has seen its market capitalization shaved to a fraction of its peak and faces the chance that the government may increase its stake in the company.
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Both GM and Citigroup have needed large infusions of capital from the government to stay alive, and while the automaker edges closer to bankruptcy, Citigroup's capital cushion still remains tenuous.
"The chain of events involving GM and Citi seem to be marching in a certain direction," said John Prestbo, executive director of Dow Jones Indexes and the chairman of the DJI oversight committee.
Monday, Fritz Henderson, the chief executive officer of GM, said it was "more probable" the automaker would need to file for bankruptcy in order to restructure, though there was still a chance it could be avoided.
GM might not be the Dow's only casualty, however, as Citigroup may also be on the chopping block because the financial institution has seen its market capitalization shaved to a fraction of its peak and faces the chance that the government may increase its stake in the company.
Read more here
Thursday, 07 May 2009
DJ to double investment in India
Dow Jones has major expansion plans for India and will double its investment in its Indian operation in each of the next two years, the company said today.
“India is an increasingly important market for us. The opportunities are significant and will only continue to grow as the Indian market becomes more and more hungry for high-quality business news and information,” Dow Jones vice-president, Mr Bruce MacFarlane said in a release.
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“India is an increasingly important market for us. The opportunities are significant and will only continue to grow as the Indian market becomes more and more hungry for high-quality business news and information,” Dow Jones vice-president, Mr Bruce MacFarlane said in a release.
Read more here
Wednesday, 06 May 2009
Ford May Suffer as Chrysler Shutdowns Reach Suppliers
(Bloomberg) -- Ford Motor Co., the only self- sufficient U.S. automaker, may be hobbled should prolonged shutdowns at Chrysler LLC and General Motors Corp. lead to failures of essential partsmakers.
Ford, launching three critical models, is at risk of periodic shutdowns if suppliers it shares with GM and Chrysler collapse, analysts said. GM is closing 14 North American plants for as much as nine weeks this summer and Chrysler, which filed for court protection from creditors on April 30, plans to close its factories until emerging from Chapter 11 in a month or two.
“There’s definitely potential for sporadic shutdowns at Ford,” said Mike Wall, supplier analyst at industry consultant CSM Worldwide in Northville, Michigan. The idling of plants at Chrysler and GM “is going to shoot a significant amount of stress through the supply chain.”
Ford is vulnerable because of the interwoven nature of the auto-supply network. Ford shares 70 percent of its suppliers with GM and 64 percent with Chrysler, according to CSM. Asian- based automakers share 59 percent with Chrysler and 58 percent with GM. The loss of a single part can close a plant, Wall said.
“Our ability to unilaterally carry the supply base through this, we just can’t do it,” Ford Executive Chairman Bill Ford told reporters today at a Wayne, Michigan Ford factory. “We’ve spent a lot of time talking to the Automotive Task Force about keeping the viability of the supply base. This is a major issue.”
‘Fluid Situation’
Toyota Motor Corp. and Honda Motor Co. may also be disrupted if suppliers who lose business during the GM and Chrysler shutdowns can no longer afford to stay in business, said Craig Fitzgerald, a supplier consultant at Plante & Moran in Southfield, Michigan.
Chrysler purchasing chief Scott Garberding said in court documents that the failure of suppliers to the Auburn Hills, Michigan-based automaker would “cause severe production problems” for other carmakers, “including GM and Ford.”
Ford doesn’t anticipate production disruptions in the next 30 days, said Todd Nissen, a spokesman for the Dearborn, Michigan-based automaker.
“We don’t see any short-term issues with continuing production,” said Nissen. “Beyond that, we’re all looking at the same things. It’s a fluid situation.”
GM, the largest U.S. automaker, has until June 1 to meet a government-imposed deadline to negotiate concessions with labor and lenders or file for bankruptcy. GM is operating on $15.4 billion in government loans and requested $11.6 billion more.
‘Really Worried’
“Take a supplier with 50 percent GM and 50 percent Ford, if GM files, suddenly their book of business is cut in half,” said Keith Francis, managing director at restructuring firm Hydra Professional in Farmington Hills, Michigan. “Ford, which has positioned itself to stay out of the bailout, has increased risk with its supply base because of what’s happening.”
Ford, Toyota and other automakers are probably “really worried” about the fallout from the production shutdowns and managing their supply bases, John Plant, the chief executive officer of TRW Automotive Holdings Corp. said on a conference call today.
The Livonia, Michigan-based company, the world’s largest supplier of vehicle-safety equipment, managing distress among its own suppliers because of the drop in vehicle production, Plant said.
Ford rose 41 cents, or 7 percent, to $6.26 at 4:00 p.m. in New York Stock Exchange composite trading. Ford has more than doubled this year. GM fell 19 cents, or 10 percent, to $1.66. GM has declined 48 percent this year.
Read more here
Ford, launching three critical models, is at risk of periodic shutdowns if suppliers it shares with GM and Chrysler collapse, analysts said. GM is closing 14 North American plants for as much as nine weeks this summer and Chrysler, which filed for court protection from creditors on April 30, plans to close its factories until emerging from Chapter 11 in a month or two.
“There’s definitely potential for sporadic shutdowns at Ford,” said Mike Wall, supplier analyst at industry consultant CSM Worldwide in Northville, Michigan. The idling of plants at Chrysler and GM “is going to shoot a significant amount of stress through the supply chain.”
Ford is vulnerable because of the interwoven nature of the auto-supply network. Ford shares 70 percent of its suppliers with GM and 64 percent with Chrysler, according to CSM. Asian- based automakers share 59 percent with Chrysler and 58 percent with GM. The loss of a single part can close a plant, Wall said.
“Our ability to unilaterally carry the supply base through this, we just can’t do it,” Ford Executive Chairman Bill Ford told reporters today at a Wayne, Michigan Ford factory. “We’ve spent a lot of time talking to the Automotive Task Force about keeping the viability of the supply base. This is a major issue.”
‘Fluid Situation’
Toyota Motor Corp. and Honda Motor Co. may also be disrupted if suppliers who lose business during the GM and Chrysler shutdowns can no longer afford to stay in business, said Craig Fitzgerald, a supplier consultant at Plante & Moran in Southfield, Michigan.
Chrysler purchasing chief Scott Garberding said in court documents that the failure of suppliers to the Auburn Hills, Michigan-based automaker would “cause severe production problems” for other carmakers, “including GM and Ford.”
Ford doesn’t anticipate production disruptions in the next 30 days, said Todd Nissen, a spokesman for the Dearborn, Michigan-based automaker.
“We don’t see any short-term issues with continuing production,” said Nissen. “Beyond that, we’re all looking at the same things. It’s a fluid situation.”
GM, the largest U.S. automaker, has until June 1 to meet a government-imposed deadline to negotiate concessions with labor and lenders or file for bankruptcy. GM is operating on $15.4 billion in government loans and requested $11.6 billion more.
‘Really Worried’
“Take a supplier with 50 percent GM and 50 percent Ford, if GM files, suddenly their book of business is cut in half,” said Keith Francis, managing director at restructuring firm Hydra Professional in Farmington Hills, Michigan. “Ford, which has positioned itself to stay out of the bailout, has increased risk with its supply base because of what’s happening.”
Ford, Toyota and other automakers are probably “really worried” about the fallout from the production shutdowns and managing their supply bases, John Plant, the chief executive officer of TRW Automotive Holdings Corp. said on a conference call today.
The Livonia, Michigan-based company, the world’s largest supplier of vehicle-safety equipment, managing distress among its own suppliers because of the drop in vehicle production, Plant said.
Ford rose 41 cents, or 7 percent, to $6.26 at 4:00 p.m. in New York Stock Exchange composite trading. Ford has more than doubled this year. GM fell 19 cents, or 10 percent, to $1.66. GM has declined 48 percent this year.
Read more here
Tuesday, 05 May 2009
Chrysler Bankruptcy May Not Dent Economy as Cutbacks Were Set
(Bloomberg) -- Chrysler LLC’s bankruptcy may not rattle the U.S. economy even as the automaker idles all assembly plants for at least 30 days while it reorganizes.
Though the decision will reduce workers’ earnings and force suppliers to reduce or halt operations, Chrysler probably would have had to shut down temporarily anyway, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
“There’s no economic difference between Chapter 11 and the restructuring they would have done outside of bankruptcy,” Zandi said in an interview. “Chrysler, its employees, dealerships, and suppliers are going to end up in the same place whether they go through bankruptcy or not.”
Chrysler, which filed for the fifth-biggest U.S. bankruptcy last week, already had been reducing payroll and closing factories because of the industry’s slump. The third-largest U.S. automaker now will combine with Fiat SpA, a move that will require a retooling of manufacturing processes and products that probably was also inevitable, according to Zandi.
Zandi estimates a one-month shutdown of Auburn Hills, Michigan-based Chrysler’s assembly lines would idle about 45,000 workers at the company and its suppliers. That would result in about $7.5 billion in lost output, which would shave about 0.02 percent from 2009 growth.
Not Like 1970
That’s a minor dent compared with what happened in a similar period in 1970, when the U.S. was also in recession and General Motors Corp. was hit by a 67-day nationwide strike. GDP fell 4.2 percent in the fourth quarter of that year, following the walkout.
A bankruptcy at GM, which faces a June 1 U.S. deadline to prove it can survive without a court restructuring, would probably take a more severe toll on the economy. GM sold twice as many new cars and trucks in the U.S. last year as Chrysler, and had almost 5 times as many employees worldwide.
Auto production makes a much smaller contribution to GDP now than it did three decades ago. Car, truck and parts manufacturing accounted for 0.7 percent of value-added to U.S. gross domestic product in 2007, the last year for which figures were available. Durable goods manufacturing, which includes autos, accounted for 13.4 percent of GDP in 1970, and made up 6.4 percent in 2008.
GDP declined 6.1 percent January through March, in part because inventories fell $103.7 billion. Analysts surveyed by Bloomberg before the Chrysler announcement forecast output to fall 2 percent in the current quarter.
Up to Court
The effects of Chrysler’s bankruptcy would slightly more than double if the shutdown went on for two months, and increase proportionately if a resumption in production were delayed, Zandi said. It may be hard to disentangle Chrysler’s impact from GM’s previously announced plans to idle 13 U.S. assembly plants from mid-May into July to pare inventory.
“A lot in terms of the economic implications is going to depend on whether the court requires an adjustment at different speed than what it was before,” said Mike Montgomery at IHS Global Insight, an economic consulting firm in Lexington, Massachusetts. “The production level over the next six months was expected to be so lean to clean up the inventories that the bankruptcy considerations aren’t as important.”
For parts producers, Chrysler’s production line halt will likely mean “chaos,” said Jim Gillette, director of supplier analysis for CSM Worldwide, a consulting firm in Grand Rapids, Michigan.
Chrysler has more than 150 major suppliers, he said, many of whom do work for other auto companies as well. As part of the bankruptcy, the administration is providing $1.5 billion to Chrysler’s suppliers, including Magna International Inc.,BorgWarner Inc., Visteon Corp., Denso Corp. and American Axle & Manufacturing Holdings Inc., to help prevent halts in production as the company reorganizes.
Read more here
Though the decision will reduce workers’ earnings and force suppliers to reduce or halt operations, Chrysler probably would have had to shut down temporarily anyway, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
“There’s no economic difference between Chapter 11 and the restructuring they would have done outside of bankruptcy,” Zandi said in an interview. “Chrysler, its employees, dealerships, and suppliers are going to end up in the same place whether they go through bankruptcy or not.”
Chrysler, which filed for the fifth-biggest U.S. bankruptcy last week, already had been reducing payroll and closing factories because of the industry’s slump. The third-largest U.S. automaker now will combine with Fiat SpA, a move that will require a retooling of manufacturing processes and products that probably was also inevitable, according to Zandi.
Zandi estimates a one-month shutdown of Auburn Hills, Michigan-based Chrysler’s assembly lines would idle about 45,000 workers at the company and its suppliers. That would result in about $7.5 billion in lost output, which would shave about 0.02 percent from 2009 growth.
Not Like 1970
That’s a minor dent compared with what happened in a similar period in 1970, when the U.S. was also in recession and General Motors Corp. was hit by a 67-day nationwide strike. GDP fell 4.2 percent in the fourth quarter of that year, following the walkout.
A bankruptcy at GM, which faces a June 1 U.S. deadline to prove it can survive without a court restructuring, would probably take a more severe toll on the economy. GM sold twice as many new cars and trucks in the U.S. last year as Chrysler, and had almost 5 times as many employees worldwide.
Auto production makes a much smaller contribution to GDP now than it did three decades ago. Car, truck and parts manufacturing accounted for 0.7 percent of value-added to U.S. gross domestic product in 2007, the last year for which figures were available. Durable goods manufacturing, which includes autos, accounted for 13.4 percent of GDP in 1970, and made up 6.4 percent in 2008.
GDP declined 6.1 percent January through March, in part because inventories fell $103.7 billion. Analysts surveyed by Bloomberg before the Chrysler announcement forecast output to fall 2 percent in the current quarter.
Up to Court
The effects of Chrysler’s bankruptcy would slightly more than double if the shutdown went on for two months, and increase proportionately if a resumption in production were delayed, Zandi said. It may be hard to disentangle Chrysler’s impact from GM’s previously announced plans to idle 13 U.S. assembly plants from mid-May into July to pare inventory.
“A lot in terms of the economic implications is going to depend on whether the court requires an adjustment at different speed than what it was before,” said Mike Montgomery at IHS Global Insight, an economic consulting firm in Lexington, Massachusetts. “The production level over the next six months was expected to be so lean to clean up the inventories that the bankruptcy considerations aren’t as important.”
For parts producers, Chrysler’s production line halt will likely mean “chaos,” said Jim Gillette, director of supplier analysis for CSM Worldwide, a consulting firm in Grand Rapids, Michigan.
Chrysler has more than 150 major suppliers, he said, many of whom do work for other auto companies as well. As part of the bankruptcy, the administration is providing $1.5 billion to Chrysler’s suppliers, including Magna International Inc.,BorgWarner Inc., Visteon Corp., Denso Corp. and American Axle & Manufacturing Holdings Inc., to help prevent halts in production as the company reorganizes.
Read more here
Monday, 04 May 2009
Amazon expected to lift wraps on large-screen Kindle
(MarketWatch) -- Amazon.com is widely expected to lift the wraps on a new large-screen Kindle device this week, which could be the first in a line of electronic reading devices geared toward newspapers and textbooks.
The online retail giant has scheduled a news conference for Wednesday -- 10:30 Eastern -- at Pace University in New York City.
Amazon did not disclose details about the event, but the New York Times reported over the weekend that the company is expected to unveil the latest version of its Kindle e-book reader. This device would reportedly have a larger screen optimized for newspapers, magazines and textbooks.
The Times also said that the newspaper's parent company is expected to be one of Amazon's partners in providing content for the device, citing unnamed sources.
Shares of Amazon were trading up nearly 2% at $80.50. The stock is up 60% since the first of the year.
A new Kindle designed for newspapers could be the first of many such devices. Two newspaper publishing companies -- News Corp. and privately held Hearst Corp. -- have disclosed plans to develop similar e-reader devices. A Silicon Valley startup called Plastic Logic is also developing a large-screen e-reader device geared toward newspapers.
Read more here
The online retail giant has scheduled a news conference for Wednesday -- 10:30 Eastern -- at Pace University in New York City.
Amazon did not disclose details about the event, but the New York Times reported over the weekend that the company is expected to unveil the latest version of its Kindle e-book reader. This device would reportedly have a larger screen optimized for newspapers, magazines and textbooks.
The Times also said that the newspaper's parent company is expected to be one of Amazon's partners in providing content for the device, citing unnamed sources.
Shares of Amazon were trading up nearly 2% at $80.50. The stock is up 60% since the first of the year.
A new Kindle designed for newspapers could be the first of many such devices. Two newspaper publishing companies -- News Corp. and privately held Hearst Corp. -- have disclosed plans to develop similar e-reader devices. A Silicon Valley startup called Plastic Logic is also developing a large-screen e-reader device geared toward newspapers.
Read more here
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