TOKYO–Japan's Seiko Epson Corp widened its net loss forecast for the year ending this month to a record $1 billion as it restructures its ailing semiconductor and liquid crystal display operations.
The company, which competes with Canon Inc in printers and Sharp Corp. in small LCD displays, said it would make two-thirds-owned crystal device maker Epson Toyocom wholly owned in a 17.75 billion yen ($180 million) deal.
Seiko Epson is the latest Japanese electronics maker to fall deep into the red. Sony Corp, Hitachi Ltd and Toshiba Corp are headed for multi-billion dollar losses in the year ending this month, hit by slowing demand and a strong yen.
Seiko Epson said it now expects to post an annual net loss of 100 billion yen ($1 billion), compared with its previous forecast for a loss of 4 billion yen and a market consensus for a loss of 8 billion yen in a poll of 8 analysts by Reuters Estimates.
It left its sales and operating profit estimates unchanged, but it lowered its annual dividend forecast by about a third to 26 yen per share.
The company attributed the revision to a 66.2 billion yen special loss for restructuring and write-downs in the value of production equipment in its electronic device division, which houses its struggling LCD and semiconductor businesses.
It also cited a 27 billion yen tax charge due to a writedown of deferred tax assets.
As part of its streamlining, Seiko Epson said it would merge two microchip plants in Japan into one and cut the number of LCD output facilities from three to one instant payday loans.
Seiko Epson said that it was unlikely to invest heavily in those two businesses and that withdrawing from the LCD market was a possibility.
"It is clear that they are not growth areas for us," Seiko Epson Managing Director Kenji Kubota told a news conference.
Seiko Epson was the sixth-largest maker of small- and medium-sized LCDs in 2008, behind Sharp, a joint venture between Toshiba and Panasonic Corp, AU Optronics Corp, Hitachi and Samsung Electronics Co Ltd, a preliminary estimate by research firm DisplaySearch showed.
Demand for small displays has been hurt in recent months by slumping sales of mobile phones and digital cameras.
Seiko Epson said it would aim to break even on a recurring level in the financial year from April 1. It forecast a recurring profit, which is pretax and excludes special items, of 13 billion yen for this business year.
Prior to the announcement, shares of Seiko Epson closed up 8 per cent at 1,088 yen, boosted by a Nikkei business daily report on the firm's plans to streamline its chip and LCD production.
The benchmark Nikkei average gained 4.6 per cent.
Bee colonies might not seem like the most lucrative market for designer drugs. But the need is urgent: CCD, or colony collapse disorder, a strange syndrome that kills adult worker bees outside the hive, has been reported across the U.S. and Europe. The U.S. Department of Agriculture (USDA) says American beekeepers lost 37% of their hives to CCD last year, after losing 31% the year before.
Scientists still can’t agree on which virus, if any, causes CCD. The government estimates that a third of our food supply - $15 billion annually in vegetables, nuts and fruits from plants that depend on bees for pollination - could be in danger.
Enter Beeologics, a Miami biotech startup that aims to create vaccines for all viruses that could lead to CCD. It’s an unlikely collaboration between Eyal Ben-Chanoch, 49, a tech entrepreneur who helped design the first Intel (INTC, Fortune 500) Pentium chip, and Ilan Sela, 71, an Israeli expert on sequencing the genomes of bee viruses.
The pair saw a crisis no other company was responding to and gathered 10 top researchers to work on a cure.
"There hasn’t been a lot of support for bee health," says Ben-Chanoch payday loan. "Our mission is to fill that void." The company’s first proprietary vaccine, Remebee, is in trials with six beekeepers. (Poking insects with syringes is tricky, so the drug is added to a sucrose solution used to feed bees.)
FDA approval is still pending, but the company is confident it will be able to commercialize the vaccine this summer, at around $2 per dose. A hive will need one dose per month. Multiply that by the nation’s 2.5 million remaining hives, and Beeologics could soon be buzzing with revenues.
Jeff Pettis, head of the USDA’s Bee Research Laboratory, is cautiously enthusiastic about Remebee’s potential. CCD likely stems from multiple factors, he says, some of which have yet to be discovered. But with time running out before the food chain is affected, any cure is worth trying.
"We live in a land of milk and honey," says Pettis, "but the honey can no longer be taken for granted."
Jefferson City — Before giving up negativity for Lent, the new director of the Missouri Department of Economic Development viewed the state’s unemployment rate, 8 percent and rising, as a glass half-empty.
Now, keeping with the season, she’s gained inspiration from other dark economic times — particularly during the decline of the McDonnell-Douglas Corp..
Then, Martinez said, employees capitalized on their job losses by starting their own companies. Seizing on that example, she says she’s trying her best to "look at this as 230,000 possible entrepreneurs, rather than 230,000 victims of a recession."
The question facing Martinez, a St. Louis attorney who assumed the reins of the department Feb. 10, is how to maintain a half-full glass in the months to come.
Martinez says she can help by taking the lead in tearing down parochial attitudes between state agencies and local chambers of commerce. Economic development and job creation need to be part of every agency’s mandate.
Another way, she says, is for the state’s 43 career centers to focus on retraining Missouri’s work force for a postrecession economy that will emphasize biofuel, battery-powered transportation and green technology.
"We have to take the skill sets we have and deploy them in a different way," Martinez said.
Martinez herself is taking the expertise she’s learned in one job and applying to another. She came to Jefferson City after 26 years at the Bryan Cave law firm in St. Louis where, as a financial and developmental transaction specialist, she counted some of the region’s top-shelf businesses among her clients.
St. Louis activist Ed Golterman and Martinez clashed over the course of his long quest to restore the Kiel Opera House, a campaign he maintains Martinez stalled with her support for the revitalization of Grand Center. In her new job, Golterman fears Martinez will defer to past connections to powerful interests in the business community to the exclusion of the jobless. Martinez brushed aside the contention with a laugh.
Dick Fleming, the president of the St. Louis Regional Chamber and Growth Association, said Martinez brings unique elements to the director’s job.
"She’s a wonderful combination of smart and strategic and she has the capacity to implement and really focus on a project and complex transactions. That’s a very unusual set of combinations to have," said Fleming.
Still feeling her way barely two months into a new and far more public job, Martinez, 54, congenially shared an economic outlook for the state that emphasized optimism over substance in an hourlong interview in a conference room outside her Jefferson City office.
Martinez said being a litigator gave her a peak inside the business world without actually being a part of it, an experience that is helping her make the transition from the private to the public sector.
"I understand more about the decision-making process that companies go through and (their) training needs," she said good credit score. "I don’t think others have come to this office with that kind of background."
Martinez also understands that reversing the state’s economic decline requires a balancing act, starting with her department’s negotiations with the Republican-dominated Legislature over the size and scope of tax credit proposals and other economic turnaround initiatives.
State Sen. Jim Lembke, representing parts of St. Louis and St. Louis County, was among the Republicans who initially opposed Martinez’s nomination.
His objections, Lembke said, stemmed from Martinez’s pro bono work opposing a controversial Valley Park ordinance that would have cracked down on illegal immigrants — not her qualifications.
"She is more than capable and qualified for the job," said Lembke, adding that he and his colleagues are looking forward to working hand-in-hand with Martinez to facilitate the state’s economic recovery.
The spirit of cooperation, Martinez emphasized, needs to extend past cooperation between the legislative and executive branches.
She’s devoted a significant portion of her first weeks in office, in fact, to pointing out that no state agency is an island. Economic development, agriculture, transportation — in Martinez’s view no agency in the executive wing — is exempt from the challenge of getting Missourians back to work now and in the future.
"Every department in the state needs to minor in economic development," she said. "We all have to be rowing in the same direction."
To Martinez, that means linking the Agriculture Department to ethanol research and production while ensuring that other state agencies, such as the Missouri Department of Transportation, find roles for the unemployed in the execution of various projects and programs.
As she starts rowing, Martinez says local economic development concerns and chambers of commerce, with a reputation for pitting communities against one another by luring businesses with tax breaks and other perks, can also expect a set of oars.
The current market, she says, dictates that once-competing forces in the state’s economy adopt a one-for-all mindset.
At the same time, Martinez promised to work aggressively by providing tax incentives and other programs to keep existing Missouri businesses from fleeing to other states.
"The best defense is a good offense. I don’t want us to be vulnerable anymore," she said, a philosophy Martinez also pledged will apply equally to small businesses. "We have jobs to create and we have too much to do to look backward," she said.
sgiegerich@post-dispatch.com
314-340-8172
Americans fell behind on their mortgages and banks seized homes at a record pace in the fourth quarter as unemployment rose to a 15-year high and real estate values tumbled.
Mortgage delinquencies increased to a seasonally adjusted 7.88 percent of all loans, the highest in records going back to 1972, the Mortgage Bankers Association said today. Loans in foreclosure rose to 3.30 percent, also an all-time high.
The U.S. real estate market lost $2.4 trillion in value last year, according to First American CoreLogic, and unemployment jumped to 6.9 percent in the fourth quarter, the highest since 1993. As the recession enters a second year, unemployment is becoming a major cause of delinquencies, said Jay Brinkmann, the Washington-based trade group’s chief economist.
“When it’s a loan structure issue, you can deal with that, but when it’s an unemployment issue, unless you go out and find them a job there’s not much you can do,” Brinkmann said in an interview. “Eventually that loan will go into foreclosure.”
The combined percentage of loans in foreclosure and at least one past due was 11.18 percent, the highest ever recorded by the Mortgage Bankers. The percentage of loans 60 days past due and 90 days or more past due all broke records set last quarter.
Enticing Lenders
The median U.S. home price plummeted 12 percent in the fourth quarter from a year earlier, with almost half the transactions foreclosures, according to the National Association of Realtors.
President Barack Obama introduced a plan to use $75 billion to entice lenders to modify or refinance home loans, stem foreclosures and rescue delinquent homeowners. Obama also said the Treasury Department will double stock purchases of Fannie Mae and Freddie Mac to as much as $200 billion to expand the availability of mortgages.
To qualify for a refinanced loan applicants will have to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to documents released by the U.S. Treasury in Washington yesterday.
More than 8 cheap credit report.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion in 2008, First American CoreLogic said in a report yesterday. An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent, according to First American, a Santa Ana, California-based seller of mortgage and economic data.
Prices Drop
“There’s no doubt that declining house prices have been a major driver of mortgage delinquencies, defaults and foreclosures,” Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday during a speech in Miami. “Efforts to prevent foreclosures appear to have had only modest success so far.”
A third of owners will stop making mortgage payments if the value of their homes drop 20 percent or more below what they owe, a situation known as “rational default,” said Norm Miller, director of real estate programs at the University of San Diego School of Business Administration.
The jump in late payments from the prior quarter for all types of mortgages was 0.9 percent, the largest gain ever recorded by the Washington-based trade group.
Subprime Rates
The delinquency rate for prime mortgages rose to 5.06 percent from 4.34 percent in the third quarter and the foreclosure inventory increased to 1.88 percent from 1.58 percent, the Mortgage Bankers report said. The share of so-called seriously delinquent prime mortgages, a number that combines payments 90 days or more overdue and loans in foreclosures, was 3.74 percent, up from 2.87 percent.
Subprime delinquencies rose to 21.88 percent from 20.03 percent, the foreclosure inventory grew to 13.71 percent from 12.55 percent, and seriously delinquent subprime loans increased to 23.11 percent from 19.56 percent.
The Mortgage Bankers report is based on a survey of 45.4 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.
Offers of huge rebates and tempting low-interest loans weren’t enough to entice car buyers out of their bunkers in this economic crisis, causing U.S. auto sales in February to hover near historic lows.
General Motors’ sales tumbled 53 percent from a year earlier, while Ford’s U.S. sales fell 48 percent and Chrysler’s dropped 44 percent. The major Japanese automakers fared only slightly better.
Things are so bad that GM, which marked its worst February sales since 1967, is considering a program to let buyers keep their cars for a time without making payments if they lose their jobs.
The overall slide casts further doubt on the financial viability of GM and Chrysler, which need to sell cars and generate critical cash to supplement the $17.4 billion in government loans that are keeping them in business.
Overall, U.S. auto sales were down 41 percent from February 2008 but up 5 percent from January, according to Autodata Corp. and Ward’s AutoInfoBank.
The increase was a good sign, but it’s far less than the usual 14 percent sales bump from January to February, and it doesn’t necessarily mean sales have hit the bottom, said Jesse Toprak, executive director of industry analysis for the auto website Edmunds.com.
"It does mean that there’s some life out there," Toprak said.
Automakers and analysts have been predicting sales will rebound in the second half of this year, but they are becoming less certain. Massive layoffs, the stock market decline and sliding home values are prompting people to hold on to their vehicles, while those who are buying are more often buying a used one.
Emily Kolinski Morris, Ford’s top economist, said retail sales to individuals had been stable for four months but dropped in February. Ford’s forecast still calls for a modest second-half recovery as economic stimulus measures take hold, Morris said.
Analysts say that when all the numbers are tallied, February sales could be worse than January’s total of 656,976 light vehicles, the lowest monthly total since the industry sold 656,310 vehicles in December 1981, according to Autodata Corp car loan. and Ward’s AutoInfoBank.
The trough is likely even though automakers spent more on rebates, low-interest financing and other incentives to lure buyers. "If it wasn’t for the generous level of incentives now, we probably would be seeing even lower sales, if you can believe it," Toprak said.
Industrywide, the average incentive per vehicle last month rose 8 percent from January to $2,914 per vehicle sold, according to Edmunds. Incentives climbed to an average of 20 percent of a new car’s sticker price, topping more than $10,000 on some vehicles.
Chrysler executives said its incentive last month of employee pricing plus cash discounts and zero-percent financing helped spur sales of some vehicles, and it will continue the program in March. Still, February sales for the Dodge Ram pickup, made at the Fenton plant, fell 36 percent from a year ago.
Meanwhile, Toyota Motor Corp.’s U.S. sales plunged 40 percent. Honda Motor Co.’s sales dropped 38 percent, and Nissan Motor Co.’s fell 37 percent.
Within GM’s decline, sales of its GMC Savana fell 47 percent from a year ago, and its Chevy Express dropped 67 percent. Workers in Wentzville make the full-size vans.
Most automakers posted significant declines, but Subaru of America Inc.’s U.S. sales edged up 1 percent in February as sales of its top-selling Forester model doubled. Kia Motors Corp.’s sales were about flat from a year earlier.
Angela Tablac of the Post-Dispatch contributed to this report.
Chancellor of the Exchequer Alistair Darling suggested the Bank of England could start printing money as soon as this week to help revive the economy as interest rates lose their potency.
“We’ve given them the levers,” Darling said, according to an interview in the Daily Telegraph published today in London. “They may decide this month that it’s appropriate to do so.” A Treasury official confirmed Darling’s comments.
Bank of England policy makers sought permission from the Treasury to create money to buy securities after last month’s interest rate decision, when they cut the key rate to a record low of 1 percent. The bank should get authority to use as much as 200 billion pounds ($283 billion) for purchases of government bonds and other assets, Daiwa Securities SMBC Europe Ltd. says.
“If I were the Bank of England, I would start by buying quite a lot of gilts, starting at the short end,” said Daiwa economist Colin Ellis, a former official at the central bank. “We know the bank is nervous about taking the rate all the way to zero. That Darling has given the levers shows the bank is willing to act.”
Data yesterday signaled the recession is intensifying. U.K. manufacturing shrank for a 10th month in February, according to a survey of factories. Consumer lending rose in January at the slowest pace since at least 1993.
Building Industry
Construction companies signaled in a survey last month that the building industry is contracting at the fastest pace in at least 12 years, Markit said today auto loan rates. The Treasury has unveiled a fund to provide finances to 13 billion pounds of government- sponsored building projects that have stalled because of a lack of bank finance.
Seven out 10 of companies in a survey by the Confederation of British Industry, the nation’s biggest business lobby, said access to finance worsened since the start of the credit squeeze. Firms questioned from Feb. 11 to Feb. 19 also expect conditions “to remain difficult” in the next three months, the CBI said in a statement. It surveyed 88 companies.
Bank of England Governor Mervyn King said last month that he hoped to be able to make a decision about so-called quantitative easing at this month’s two-day meeting, which will begin tomorrow.
Policy makers will this week cut the benchmark interest rate by a half-point to 0.5 percent, the lowest since it was founded in 1694, the median of 60 economists’ forecasts shows.
Minutes of the Feb. 5 decision said that the central bank and the Treasury would publish an exchange of letters regarding the details of planned asset purchases. That correspondence has yet to be released.
The deadline to make an RRSP contribution for 2008 is today but the mad scramble to put money into retirement savings this year is clearly missing, say experts.
"It is a muted trend that we are seeing," said Patricia Lovett-Reid, senior vice-president for TD Waterhouse. "There is a certain element of anxiety in the market and it’s reflecting in RRSP contribution too. It is probably consistent with the economic cycle."
Banks and investment advisers usually see a rush in the run-up to the deadline. But this RRSP season has been tepid owing to headlines warning of a recession, huge swings in the Toronto Stock Exchange’s main index and thousands of job losses in recent months.
The RRSP advertising hype of previous years has also been low-key.
Judy Thomson, director of Bank of Montreal’s mutual funds, said it had been slow until last Thursday and then picked up. "Many branches are open Saturday, there are call centres and people can make contributions online. We’ll see how it goes."
Clients apparently want to have cash reserves too. "There is lots of money going into online savings accounts," said Thomson. "That tells me people want to have money on the sidelines in case they need it."
Many investors are making different choices easy online payday loans. For example, fund-linked GICs, which guarantee safe capital but offer exposure to various markets, are appealing to investors, said Lovett-Reid. "People are making contributions into cash, not stock markets, and into areas which don’t tend to go down, like telecom and health care. People are erring on the side of caution."
Advisers are also spending a lot more time with clients, going over their finances, before the clients are comfortable making contributions.
"We are being bombarded with questions," said Thomson.
In recent years, when the market was booming, all that clients were looking at were returns. That scenario has changed.
"People want to know about the status of market, new securities and about risks," said Andrew Pyle, wealth investor for ScotiaMcLeod.
Some investors are tempted to keep this year’s chunk of retirement savings in their bank accounts rather than investing in an RRSP. But despite the economic turmoil, experts say it is crucial to save for retirement.
"Not making the (RRSP) contribution is the worst people can do," said Thomson. "Don’t jeopardize long-term planning for short-term solutions."
President Barack Obama said he expects a fight to get his $3.55 trillion budget through Congress because it will challenge longtime Washington interest groups and lobbyists.
The president said today the spending plan he submitted to Congress reflects the promises he made during the campaign to change the government’s priorities and take the nation in a new direction.
“I realize that passing this budget won’t be easy because it represents real and dramatic change,” Obama said in his weekly radio and Internet address that. “It also represents a threat to the status quo in Washington.”
Obama kicked off his budget fight during a week when the Standard & Poor’s 500 Index fell to a 12-year low as the government rescued Citigroup Inc. The Obama administration’s attempts to break the grip of the worst financial crisis in 70 years are unlikely to bring immediate relief as companies from General Motors Corp. to JPMorgan Chase & Co. cut payrolls.
Gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according a report yesterday from the Commerce Department. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.
Taxing Wealthy Americans
Obama’s budget for the fiscal year starting Oct. 1 would increase taxes on the wealthiest Americans and some companies to fund tax breaks for lower- and middle-income workers, and investments in new energy technology, education and health-care.
Humana Inc., an insurer, was among the health-care stocks that declined last week on concern Obama will cut Medicare payments to insurers and raise rebates drugmakers must provide to Medicaid recipients.
Obama said today that he realizes his proposals “won’t sit well with the special interests and lobbyists who are invested in the old way of doing business.”
“I know they’re gearing up for a fight as we speak. My message to them is this: So am I,” the president, a Democrat, said. “The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t quick guaranteed personal loans.”
Obama’s budget would impose almost $1 trillion in higher taxes over the next decade on the highest-earning Americans — families making more than $250,000 a year — Wall Street financiers, U.S.-based multinational corporations and oil companies while cutting taxes for lower earners.
‘Fair and Balanced’
“During the campaign, I promised a fair and balanced tax code that would cut taxes for 95 percent of working Americans, roll back the tax breaks for those making over $250,000 a year, and end the tax breaks for corporations that ship our jobs overseas,” he said today. “This budget does that.”
He also said he will eliminate unnecessary programs and vowed his administration will go through the federal books “page by page, and line by line” to make cuts.
“This budget also reflects the stark reality of what we’ve inherited - a trillion dollar deficit, a financial crisis, and a costly recession,” Obama said.
Republicans in Congress have said they will be unified in opposition to the tax increases Obama is proposing. Senator Richard Burr of North Carolina, delivering the weekly Republican address, criticized the spending portion of the plan as well.
“This week, the president submitted to Congress the single largest increase in federal spending in the history of the United States, while driving the deficit to levels that were once thought impossible,” Burr said.
“If we just look at what our debt spending will cost us in interest payments alone, we are talking about $4 trillion over the next 10 years, more than a billion dollars of interest payments every day,” he said. “Think of that $4 trillion as a finance charge on your credit card bill — you have to pay, but you get nothing for it in return.”
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