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Monday March 08, 2010

GM to wind down Hummer as Sichuan Tengzhong sale accord fails

General Motors said it will close Hummer, the maker of military-inspired sport-utility vehicles, after Sichuan Tengzhong Heavy Industrial Machinery Co. couldn't win Chinese approval to buy the unit. Winding down the brand will take several months, a spokesman said. "The Hummer brand was very much a product of its time," said Aaron Bragman, an analyst at IHS Global Insight. "In today's much more environmentally conscious world, it's a brand that just doesn't fit in."

Tengzhong was "unable to obtain clearance of the transaction from the Chinese regulators within the proposed deal time frame," according to a statement from the company. The deal would have been worth $150 million. A Tengzhong purchase of Hummer would have bucked China's government policy of promoting fuel-sipping small cars of less than 1.6L. US sales for GM's Hummer unit fell 67% in 2009 as the economy faltered, GM slid into a 40-day government-backed bankruptcy and Hummer's fate was unresolved.

- No love lost for the SUV's of the world, as you might guess from my Jun 2005 blog entry aptly titled "Die SUVs Die!!". They sure took their time to go about it, as it is with any large ongoing trend, and this Hummer shutdown announcement is surely not only the latest but one of the largest nails in the coffin (if you'd excuse the metaphor-mangling).

(2010-03-08 18:17:14 SGT) [Biz] Permalink

Thursday March 04, 2010

Greece could sell islands to cut debt : German MPs

reuters.com :

Greece should consider selling some of its islands as one option to reduce debt, two members of the German parliament, Josef Schlarmann and Frank Schaeffler said. "Those in insolvency have to sell everything they have to pay their creditors," Schlarmann told Bild newspaper. "Greece owns buildings, companies and uninhabited islands, which could all be used for debt redemption." "The chancellor cannot promise Greece any help," Schaeffler told Bild in a story under the headline: "Sell your islands, you bankrupt Greeks! And sell the Acropolis too!"

Greek Deputy Foreign Minister Dimitris Droutsas was asked about the idea in an interview with ARD TV. "I've also heard the suggestion we should sell the Acropolis," Droutsas said. "Suggestions like this are not appropriate at this time." Greece has launched an austerity programme designed to secure European help to tackle its crippling debt burden.

- Some kind of bad blood going on between the Greeks and the Germans. Just some days back, the Greeks had been blaming the "Nazi Germans" for their problems and now the Germans are telling the Greeks to sell off their islands to pay off their debt. I wonder how a monetary, economic and political union like the EU is supposed to hold together under such differences in opinion.

(2010-03-04 22:43:16 SGT) [Biz] Permalink

Tuesday January 19, 2010

Japan Airlines (JAL) files for bankruptcy in $10 billion turnaround plan

bloomberg.com :

Japan Airlines (JAL) filed for the country's fourth-largest bankruptcy under a 900 billion yen ($10 billion) turnaround plan after four government bailouts failed to revive Asia's most indebted carrier. Asia's largest airline will shed staff, cut unprofitable routes and retire older planes as it restructures. The airline, worth more than $6 billion as recently as March 2009, will be delisted following the bankruptcy, wiping out shareholders. JAL, which flew at least 45 million passengers last year, will continue operations. Kazuo Inamori, the 77-year-old Kyocera founder, has been named to oversee JAL's restructuring as CEO. Delta Air Lines and American Airlines have made rival offers to invest in JAL or a restructured company to access routes in China and Japan.

JAL, Asia's first major flag carrier to seek bankruptcy, filled less than 65% of seats on domestic routes in each of the last 6 fiscal years. The airline suffered a 16th straight drop in overall passenger numbers in Nov 2009 as the global recession sapped travel. Worldwide international air travel likely fell 4.1% last year, causing industrywide losses of $11 billion, according to the International Air Transport Association.

- You could have pointed your finger at various factors like lack of management judgment, prolonged government support, rising oil prices, the global economy, or the unfolding trend of Peak Oil, Peak Airlines. There are plenty of reasons to choose from. But well, that was it. Now to see how they fare after the turnaround plan.

(2010-01-19 21:08:19 SGT) [Biz] Permalink

Friday January 15, 2010

Japan Airlines (JAL) to cut 15600 jobs under turnaround plan

channelnewsasia.com :

Troubled Japan Airlines (JAL) is expected to cut 15,600 jobs, or about 30% cent of its group workforce, in 3 years under a rehabilitation plan. The layoffs, coupled with cuts in benefits and wages, will be carried out together with the sale of JAL's subsidiaries including JAL Hotels Co., Kyodo News reported. The carrier's workforce will be trimmed to about 36,000 by the business year to March 2013. The state-backed Enterprise Turnaround Initiative Corp. (ETIC) plans to decide on its bailout package for JAL as early as January 19, the same time the airline is expected to file for bankruptcy protection. The ETIC estimated JAL's consolidated operating loss to expand to about 265 billion yen for the current business year to March 2010, compared with a year-earlier loss of 51 billion yen, due to a drop in passenger numbers.

- Like the GM bankruptcy case, the long decline of Japan Airlines has been noted by outside observers for a long time (see earlier posts dated Feb 2006 and Aug 2006). Traditional airlines have been finding it rather difficult in challenging business conditions in recent years, with increasingly volatile oil prices and a global recession. The rising competition from budget airlines didn't help either. Airlines like JAL and their like will need to revamp and re-invent themselves in order to stay relevant in the economic environment ahread.

(2010-01-15 19:44:02 SGT) [Biz] Permalink

Sunday January 10, 2010

Japan Airlines set to file for bankruptcy on 19 Jan 2010

channelnewsasia.com :

Japan Airlines (JAL) is set to file for bankruptcy on 19 Jan 2010, the first step in a court-led rehabilitation process for the debt-ridden Japanese carrier. The decision came as its creditor banks dropped their earlier proposal for an out-of-court reorganisation of the troubled airline. The state-backed Enterprise Turnaround Initiative Corp will provide 300 billion yen (US$3.2 billion) investment so that it can continue operation.

The government body will also ask JAL's creditors to waive a further 350 billion yen in loans to the airline, while speeding up its restructuring, including massive trimming of its international routes. The carrier is seeking its fourth government bailout since 2001. The airline, which lost about US$1.5 billion in the 6 months to Sep 2009, has said it plans thousands of job cuts and a drastic reduction in routes.

- The airline industry is an obvious case of hyper-sensitivity to oil prices, and with crude oil futures rising and breaking through the $80 resistance level, the peakoiler community has been rumbling about airlines hurting again. In any case, if (/when) oil prices rise further, JAL's case may not be the last we hear about airline bankruptcies either.

(2010-01-10 22:23:39 SGT) [Biz] Permalink

Sunday January 03, 2010

Commodities prices post biggest annual gain in four decades on China demand

bloomberg.com :

Commodities prices posted the biggest annual gain in four decades, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the longest slump in the global economy since World War II. In 2009, the S&P GSCI Index of 24 raw materials rose 50%, the most since at least 1971, and commodities drew record investment of $60 billion, Barclays Capital estimated.

The CRB Index of 19 raw materials advanced 23% in 2009, the most since 1979. Among industrial metals, lead posted the biggest gain, more than quadrupling since end-1999. Copper also doubled in 2009, climbing almost fourfold in the decade. In 2009, gold futures in New York rose 24%, the 9th straight annual gain. The US dollar slump spurred demand for precious metals as an alternative investment. Crude oil prices advanced 78% in 2009. OPEC, which accounts for 40% of global supply, implemented production cuts in response to the global economic recession. Sugar futures more than doubled in 2009, trailing only copper's advance in the CRB index. Cane harvests in Brazil and India, the biggest producers, were hurt by adverse weather.

- It has been pretty good going for commodities prices ranging from gold futures to crude oil to agricultural commodites such as corn and wheat and sugar. It's been a great run even taking into account the Aug-Sep 2008 near global economic collapse. And of course taking into account how the economic system works, governments everywhere do not have much choice but to run the money printing presses, and fast. Which has led us to where we are today, with price inflation looming, the trillions in additional money supply having had the time to work through the economy and finally start appearing where most people least expect, and with economic fundamentals being nowhere near where they should be had this been a real, actual, bona fide economic recovery.

So, what's next? Believe it or not, the inflation vs deflation debate still rages on, though there are some signs that the inflation camp may just get their day in the sun, as long as the central banks especially those in the Western world keep up their monetization thing going, and the Eastern nations continue to follow suit, not wanting to hurt their export-oriented economies. According to the contrarian community and elsewhere, there is a danger of "something" happening in Q2 2010, what it is exactly, and what the impact may be, we have yet to see. Barring that, and of course perhaps a black swan event or two, we could have continuing rising prices alongside with asset inflation going into 2010. We shall see.

(2010-01-03 10:24:02 SGT) [Biz] Permalink

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