As Toyota’s mass recall threatens the leading automaker’s reputation, several rivals are rolling out incentives to reel in Toyota customers looking to get rid of their cars.
General Motors is offering incentives of $1,000 and low financing rates specifically for Toyota customers worried about their recalled vehicles.
"We decided to make this offer after receiving many e-mails and calls from our dealers, who have been approached by Toyota customers asking for help," GM said in a statement. The offers will run through the end of February.
Starting Wednesday, GM started offering $1,000 rebates or up to $1,000 to help pay off current leases on Toyota products. The automaker is also offering 0% financing on most models for Toyota customers. The offers apply to 2009 and 2010 model year cars.
Hyundai said it is offering a $1,000 rebate for anyone who trades in a Toyota from Thursday to February 1. Customers who trade in their Toyotas with the trade incentive can purchase one of three models only: a Hyundai Sonata, Elantra or Elantra Touring.
Ford is offering $1,000 to customers trading in Toyota Motor Co. products. The offer began Wednesday but a Ford spokeswoman said the offers are not targeted at Toyota’s recall problems. Customers are also being offered the same $1,000 on Honda products.
Chrysler is offering an additional $1,000 to customers who trade in their Toyota Tundra, Tacoma or Sienna and purchase or lease a new Chrysler, Jeep, Dodge car or Ram truck. It is also offering $1,000 in bonus cash to drivers who want to turn in a leased Toyota to buy or lease a Chrysler product.
Such "conquest incentives" — incentives targeted at owners of other manufacturers’ vehicles — are common in the industry, GM spokesman Tom Henderson said.
However, some of the incentives are designed to take advantage of Toyota owners’ worries at a time when they’re concerned about the safety and quality of their cars.
Toyota announced last week that it was recalling 2.3 million cars, SUVs and trucks for a problem with a potentially sticky gas pedal. This was after the company recalled 4.2 million vehicles — many of them the same as last week’s recall — for a problem in which the gas pedal could become stuck on the floormat.
Toyota recently announced that will temporarily stop selling models affected by the most recent recall, including some of their most popular products like the Camry sedan and the Rav4 small SUV.
For its part, Honda said the recall "has no impact whatsoever on Honda or Acura customers" and that it "will not undertake any sales activities that expressly target Toyota customers."
The problem plays to GM’s current strengths, said James Bell, an analyst with Kelley Blue Book’s KBB.com. Some of GM’s strongest products, like the Chevrolet Malibu sedan and Chevrolet Equinox SUV, are strong competitors to products Toyota is now not selling.
"The Equinox is the obvious buy over a Rav4," he said.
If the Chevrolet dealers were still selling last year’s Equinox, before the new, completely redesigned model was introduced, GM’s position wouldn’t have been as strong, he said.
In need of some fash cash? Get instant approval. Apply now for a payday loan or faxless cash advance.
The yen’s surge to a 14-year high and renewed deflation may prompt Japanese Prime Minister Yukio Hatoyama to press the central bank to take further steps to support growth.
Hatoyama, 62, will meet Bank of Japan Governor Masaaki Shirakawa “soon,” Chief Cabinet Secretary Hirofumi Hirano told reporters yesterday. Hirano said the leaders will discuss quantitative easing policies in addition to falling prices and the stronger currency.
The government has stepped up calls on the central bank to prop up growth since it declared the economy was in deflation on Nov. 20. Shirakawa, who yesterday pledged to act “promptly and decisively,” has few options given that the key overnight lending rate is at 0.1 percent and the bank is already purchasing government bonds and corporate debt.
“We’re not in a situation where the BOJ will act just because the government is pressuring it to,” said Junko Nishioka, a chief economist at RBS Securities Japan Ltd. in Tokyo. “There’s an election next year, so the government wants to show how much it has already done.”
Nishioka said she didn’t expect any policies to be announced from the central bank after this week’s meeting with Hatoyama, given that it’s common for policy makers to meet and discuss the economy and financial markets.
Deflation can undermine economic growth by making debt burdens heavier, eroding corporate profit margins and deterring capital investment and consumer spending. Japanese prices excluding fresh food slid 2.2 percent in October from a year earlier, a near record drop, and the government’s declaration of deflation was its first in more than three years.
‘Promptly and Decisively’
“The bank is always prepared to act promptly and decisively if judged necessary to ensure the stability of financial markets,” Shirakawa said yesterday in Nagoya, central Japan. “The bank will do its utmost to overcome deflation both in terms of monetary easing and ensuring the stability of the financial markets.”
Reports yesterday showed Japan’s recovery from its worst postwar recession may be weakening. Industrial output grew at the slowest pace in eight months in October as manufacturers including Toyota Motor Corp. pared production at home. Wages tumbled 1.7 percent, extending their longest losing streak in six years.
Hatoyama championed the Bank of Japan’s independence after he took power in September following his Democratic Party of Japan’s landslide August election victory. Hirano reiterated yesterday that the government respects the bank’s autonomy.
Testing BOJ
Other Cabinet members haven’t been shy in testing the central bank. Deputy Prime Minister Naoto Kan said on TV Asahi last week that he’d “like to see monetary policy work just a little harder” to battle deflation. Financial Services Minister Shizuka Kamei said in October that the bank “sometimes sounds like it’s talking in its sleep.”
“Hatoyama’s Cabinet seems to think that the BOJ isn’t playing a big enough role in fighting deflation,” said Susumu Kato, an economist in Tokyo at Calyon Securities. “The government may ask the BOJ to increase the amount of its government bond purchases” to around 2 trillion yen ($23 billion) a month from 1.8 trillion yen, Kato said.
The government may be looking for monetary policy measures to combat prices and the yen because it has the highest debt burden in the industrialized world, limiting the scope of fiscal policy. Nevertheless, Finance Minister Hirohisa Fujii said yesterday that he is compiling an extra budget of more than 2.7 trillion yen, the amount of money frozen from the previous administration’s budget, to spur growth.
Quantitative Easing
The BOJ introduced quantitative easing steps in March 2001 before suspending those policies in March 2006. Shirakawa has said the policy of flooding the economy with cash had a limited impact on economic growth.
Hatoyama and Shirakawa are also likely to discuss the yen, which rose to a 14-month high of 84.83 to the dollar on Nov. 27, setting off a chorus of complaints from Japanese manufacturers. Canon Chief Executive Officer Fujio Mitarai said Japan is “standing on the edge of a cliff.”
Shirakawa said yesterday the government will decide whether to intervene, adding that the central bank will “closely watch these developments and their effects with great interest.”
Canon Inc. would lose 4.4 billion yen in sales and 2.5 billion yen in operating profit this quarter for every 1 yen drop in the dollar compared with its forecast of 90 yen, the company said on Oct. 27.
Japan last intervened in the currency market in March 2004, when the yen traded around 109 per dollar. The central bank sold 14.8 trillion yen in the first three months of that year.
“We’re paying close attention to whether the BOJ will go along with intervening in the market,” said Shinichi Ichikawa, chief market strategist at Credit Suisse Securities Japan. “Intervention would stop the bleeding for now, so it’s important.”
Irish government workers will stage the biggest strike in at least three decades today in protest at plans to cut pay to contain the budget deficit.
Nurses, teachers and tax officials are among around 250,000 workers taking part in the 24-hour nationwide stoppage over what unions have said are “vicious” cost-cutting plans by the government, which is grappling with a deficit amounting to about 12 percent of gross domestic product.
Ireland, once Europe’s most dynamic economy, has been hit by a property crash and the global recession, eroding tax income and pushing the shortfall to 26 billion euros ($38.9 billion) this year. Finance Minister Brian Lenihan wants to cut about 4 billion euros from spending in the Dec. 9 budget to rebuild investors’ confidence after borrowing costs soared.
“Strikes will send the wrong signals,” said Alan McQuaid, chief economist with Bloxham Stockbrokers in Dublin. “If the international market sees the government standing up, they will see it as a good thing. There is a steely determination on the part of the government to do the right thing.”
The stoppage has been partially scaled back due to flooding in the south and west of the country after heavy rainfall. Hospitals and emergency service workers will maintain services in those areas, unions said on Nov. 22. The strike today will still close shut social welfare offices, passport offices and the public offices of the state tax authorities.
“The private sector has had to discount and cut costs, the public sector must respond,” said John Forde of Dublin- based Chambers Ireland, which represents 13,000 companies. “Hard decisions must now be taken to resolve this issue.”
Lost Rating
The difference in yield, or spread, between 10-year Irish securities and 10-year German bunds was at 150 basis points yesterday. While it’s narrowed since reaching 284 basis points in March, the spread remains five times wider than its average over the last decade. Ireland has also lost its top credit rating at Standard & Poor’s, Moody’s Investors Service and Fitch ratings this year.
The government said this month that the deficit will hit 14 percent of gross domestic product next year, almost five times the European Union limit, unless it takes action. It sees the economy, which doubled in size in the decade through 2007, shrinking 1.5 percent in 2010 after a 7.5 percent contraction this year.
Abercrombie & Fitch posted a much better-than-expected quarterly profit on Friday, helped by cost cuts, and the retailer’s shares rose more than 6 percent.
The retailer of young men and women’s clothing said net income fell to $38.8 million, or 44 cents per share, in the third quarter ended on October 31 from $63.9 million, or 72 cents per share, a year earlier.
Excluding items, the company earned 30 cents per share. Analysts on average were expecting 20 cents, according to Thomson Reuters I/B/E/S.
Net sales fell 15 percent to $765.4 million as same-store sales, or sales at stores open at least a year, fell 22 percent.
Same-store sales, a closely watched metric of retail health, fell 18 percent at the flagship Abercrombie & Fitch chain, 22 percent at the Abercrombie kids’ chain, 26 percent at Hollister and 30 percent at Ruehl, which the company is planning to close by the end of the current fiscal year fast payday loan.
Abercrombie said it expected to incur charges of $60 million to exit the Ruehl business, which is down from its prior estimate of $65 million.
The company also said it was on track to open an Abercrombie & Fitch flagship store in Tokyo in December, as well as five more Hollister stores in Europe during the fourth quarter.
In the next fiscal year, the company expects to open flagship Abercrombie & Fitch stores in Copenhagen and Fukuoka, Japan.
Abercrombie shares rose to $39.00 in premarket trading from Thursday’s close at $36.76 on the New York Stock Exchange.
(Reporting by Martinne Geller; Editing by Derek Caney and Lisa Von Ahn)
This holds true since most gold miners tie their fortunes to the price of gold, as opposed to hedging their bets by locking in prices for sales of future production.
The newest convert to going with the market flow is mining giant Barrick Gold Corp. In the belief that gold will rise well past $1,000 (U.S.) an ounce, Barrick is spending $5.6 billion to unwind its hedging programs.
The cost of producing gold – $484 an ounce recently in the case of Barrick – fluctuates much less than the price of gold. When bullion prices rise sharply, mining stocks tend to go up even faster, as profitability soars.
The potential gains for gold producers can be seen by comparing historical trends in bullion prices to the returns of precious metals equity mutual funds. During the past 15 years ended Aug. 31, the price of gold bullion rose by a compound annual 4.8 per cent. For mutual funds in the precious metals equity category, the median return over that same period was 8.8 per cent or, on average, four full percentage points higher each year.
The largest gold-stock fund in Canada is iShares CDN Gold Sector Index, a low-fee exchange-traded fund (ETF) that holds mostly large-cap stocks. One of the most impressive track records belongs to RBC Global Precious Metals, whose returns rank in the top quartile of its peer group over one, three, five and 10 years.
Precious metals equity funds are highly volatile, so they may be outside your comfort zone. If so, and you still like the idea of investing in gold, check out funds that hold bullion rather than stocks.
Bullion funds are generally cheaper than precious metals equity funds, for which the median management expense ratio (MER) is 2 payday loans.47 per cent. That’s more than double what you would have to pay for a bullion-only fund.
Bullion-fund investors have new choices this year, including Sprott Gold Bullion. Unlike other funds offered by Sprott Asset Management Inc., the bullion fund is passively managed and has no performance fee. The fund’s MER is roughly 1 per cent.
The year’s biggest bullion play to attract new money from Canadian investors is Claymore Gold Bullion Trust, a closed-end fund that began trading in May on the Toronto Stock Exchange after raising $400 million. Its management fee of 0.5 per cent covers nearly all costs other than taxes.
Though gold is priced in U.S. dollars, the Claymore fund will hedge this currency exposure back to the Canadian dollar. The fund will convert to an open-end mutual fund (which trades at net asset value) if it trades at a discount of more than 2 per cent of net asset value for 10 consecutive trading days after Nov. 28.
The Claymore and Sprott funds join other bullion-based funds in Canada, though not all funds invest exclusively in gold. For example, BMG BullionFund holds a combination of gold, silver and platinum. Its MER is a steep 3.31 per cent.
A hybrid fund that holds both bullion and stocks is the recently launched Dynamic Strategic Gold Class. Portfolio manager Robert Cohen, of Goodman & Co., Investment Counsel Ltd., may hold anywhere from 30 to 70 per cent of the portfolio in gold bullion, with the rest in stocks. The fund’s goal, according to Dynamic Funds, is to outperform the price of gold over the long term, but with less volatility than a pure equity play. Given the fund’s asset mix, that’s pretty much what investors can expect.
rudy.luukko@morningstar.com
Top officials from the United States, European Union and Brazil on Friday awaited a pivotal World Trade Organization ruling on subsidies to Airbus that stands to impact the global aircraft sector.
The confidential WTO verdict is due to be issued to U.S. and European diplomats in Geneva around 1400 GMT, and will soon thereafter be reviewed by government and industry leaders in Brussels, Washington and around the world.
Ministers meeting in India to advance negotiations on a new global free trade pact, the Doha round, will be presented with a report which may run to 1,000 pages or more.
“It is important to the European Union, it is important to the U.S. We will wait and see what happens with the ruling,” said EU Trade Commissioner Catherine Ashton.
The three-member WTO dispute settlement panel is expected to agree with complainant Washington that the billions of euros of “launch aid” Airbus received to build the A380 and other top-selling planes was anti-competitive and broke trade laws.
Such a finding could limit Airbus’ options to finance new airliners, such as the wide-body A350 due in the next decade, and also affect how industry rivals in Brazil, Canada, China, Russia and Japan fuel their expansion.
“Of course we will be very interested because it may affect the way others operate,” said Brazilian Foreign Minister Celso Amorim, who flew to New Delhi on an Embraer jet. Embraer and its Canadian rival Bombardier were also embroiled in years of WTO litigation over aircraft subsidies.
NEGOTIATION
The Airbus case, and a counter-claim by Brussels about support to Boeing, whose findings are expected in six months, represent the biggest and most commercially significant dispute in WTO history personal business card.
Boeing claims Airbus got a cumulative boost of $205 billion from advantageous loans and other perks from France, Germany, Spain and Britain over two decades, giving it an unfair edge.
Airbus says the loans were fair and claims in turn that Boeing got illegal subsidies from U.S. agencies including NASA plus big tax breaks from several states, worth some $24 billion.
U.S. Trade Representative Ron Kirk, speaking in New Delhi, said he hoped the long-awaited WTO verdict should prompt changes in the way Airbus operates.
“We continue to believe, and it is a fairly straightforward reading of the statutes, that the extraordinary amount of launch aid that France, Germany — some members of the EU — have provided is not permissible in an open, competitive economy,” he told Reuters.
Friday’s Airbus report will not be made public for several months to give both sides the chance to review it. WTO panels virtually never change the substance of their preliminary rulings before they are made public as final versions.
Years could pass before the WTO arbitration process runs its full course and most industry analysts expect the Boeing-Airbus fight to be settled through negotiation before the cases are appealed to the Appellate Body, the WTO’s top court.
But the extent to which Airbus or Boeing comes out cleaner than the other in the twin preliminary rulings will affect the dynamics of those settlement talks, which both sides have said they eventually want to hold.
The battle for business travellers flying within the so-called "eastern triangle" of Toronto, Ottawa and Montreal is about to heat up, with Air Canada threatening to respond to competitive threats posed by Toronto’s Porter Airlines.
At a time when corporations are slashing their travel budgets, three-year-old Porter is vying for an ever-bigger slice of the dwindling business travel market by continuing to expand its services from Toronto’s island airport, located a short ferry ride from the city’s downtown core.
By contrast, Air Canada operates out of Pearson International Airport in nearby Mississauga.
"Porter is a very able competitor and there’s no question that they have a very good product," Calin Rovinescu, chief executive of Air Canada, said yesterday.
"We are mindful of that and are looking at ways of responding … we are looking at providing an improved product in the triangle."
Rovinescu made the comments during a conference call to discuss Air Canada’s 27 per cent increase in second quarter earnings, due mainly to foreign exchange gains and other one-time items.
Air Canada said it recorded an operating loss during the period.
Air Canada is now looking at relaunching an enhanced version of its former Rapidair service, a high-frequency air shuttle for Toronto, Ottawa and Montreal.
Although Air Canada continues to operate a similar schedule linking those cities, the service is no longer being operated as a separate brand, with its own expedited check-in counters.
The moves are the latest in a series of efforts to prop up Air Canada. Since taking the helm in April, Rovinescu has negotiated key agreements with its unionized workforce that include pay freezes and a moratorium on payments to company pension plans for 21 months lowest fee payday loans. He also led an effort to raise more than $1 billion in new financing in a tough credit market. The loans are to keep Air Canada from tripping certain covenants with its suppliers, which could in turn force it to file for bankruptcy protection for the second time in less than six years.
Rovinescu told analysts yesterday that the national carrier, with the help of an outside consultant, has identified $400 million in costs that can be stripped out of the business over the next three years. He said a "swat team" is to work with different branches of the airline to improve the efficiency of everything from manpower planning to relationships with outside suppliers.
Meanwhile, the airline is looking to exploit new sources of revenue by broadening its distribution channels and implementing customer-focused initiatives, including last-minute upgrade programs for passengers and more opportunities for Aeroplan members to redeem their miles free flights.
Air Canada yesterday recorded earnings of $155 million, or $1.55 a share, in the second quarter, once certain items such as $48 million worth of foreign exchange gains are factored in. That compares with earnings of $122 million, or $1.22 a share, in the year-ago period.
However, Air Canada posted an operating loss of $113 million versus operating income of $7 million in the year earlier quarter. Sales fell to $2.3 billion from $2.8 billion as airlines flooded the market with cheap tickets to stimulate demand.
Leaders of Japan Inc. believe they have learnt a lesson from the global economic crisis — namely that the U.S. business model with its eye on short-term gains has failed and it’s time to return to longer-term strategies.
Recent remarks by corporate chiefs from companies like Suzuki Motor Corp and Chugai Pharmaceutical Co underscore a desire of Japan’s corporate leaders to reject pressure from what they see as short-term interests to concentrate on more sustainable returns.
In one of the most public displays of the current corporate zeitgeist, Osamu Suzuki, who has steered Suzuki for the last 30 years published an essay in February rejecting what he saw as short-term interests tied to earnings.
His views often attract attention, as analysts credit him for having turned his company into a globally-competitive carmaker by making inroads into India decades before it boomed, and expanding revenue more than tenfold.
Arguing against calls from some securities analysts to depreciate the company’s factories gradually so that near-term earnings would not suffer as much, Suzuki said the automaker’s long-term interests were better served by writing down the cost quickly.
“I have no intention of changing our three-year depreciation policy for our production facilities. We follow the principle of gloom first and ease later,” he wrote.
Suzuki’s stance and those of other corporate chieftains pit them against fund managers, whose industry is welded to producing quarterly returns and who fear corporate Japan may return to its habits of old — ignoring the shareholder.
“There are still many companies in Japan which feel no compunction about hurting shareholder values,” said Takaaki Umezawa, head of the Japanese arm of U health insurance plans.S. consulting firm AT Kearney.
SPECTACULAR FAILURE
Japan only adopted compulsory quarterly reporting five years ago. Some, like Honda Motor Co, introduced the concept as early as 1979, but Toyota Motor Corp — a standard bearer for much of corporate Japan — did not begin until 2003.
The shift brought much grumbling from corporate executives, who worried that the focus on quarterly earnings and share price performance would not reflect the realities of doing business — a view that has never really gone away.
Motoki Ozaki, the head of household products and cosmetics maker Kao Corp makes a similar argument to Suzuki’s, shrugging off calls from investors for the company’s non-Japan Asian operations to start showing a profit.
Its Asian operations could be profitable now, but Kao has chosen to plough huge sums into marketing, aiming for a large jump in revenue and profits long-term, he said.
The emphasis on long-term sustainable returns versus short-term profits comes up time and time again, bolstered by the view that amid the spectacular failure of companies like Lehman Brothers and General Motors Corp GMGMQ.PK, the U.S. corporate model has gone fundamentally wrong.
“At Harvard, people are apparently debating what lessons the U.S. should learn from the ongoing crisis. Perhaps there’ll be a movement to correct the ways of companies, share prices and profits,” Osamu Nagayama, president of Chugai, a unit of Swiss drugmaker Roche, told reporters in March.
Toronto’s existing home market surprised economists with a better-than-expected resurgence in June. But a look at major markets across Canada shows that other cities across the country also had a similar — if not more spectacular rebound in that month.
Toronto’s stellar 27 per cent increase in sales in June compared to last year, was outdone by sales in Greater Vancouver and Calgary according to figures compiled by ReMax Ontario Atlantic Canada in a report today.
"More balanced market conditions have emerged, effectively ending the stranglehold that buyers had on the market over the past six to eight months," said ReMax. "Low interest rates and increased affordability have served to stimulate market activity."
ReMax’s research is a preview of the Canadian Real Estate Association’s national figures. Those numbers, expected out tomorrow, give a snapshot of how the entire Canadian market is performing.
Vancouver was the top performer in June with sales up by an eye-catching 76 per cent. The city recorded the second-best month on record with 4,259 sales, compared to 4,333 sales in June of 2005 cash advances.
While the market is largely balanced, bidding wars have emerged in some areas. In Kitsilano, about 50 per cent of housing is selling in multiple offers.
In Calgary, sales of 3,047 homes last month resulted in a 28 per cent jump from the same time last year.
"With increasing competition among first time buyers the supply of starter homes is tightening," said ReMax.
In third place Toronto, the 10,955 units sold in June came close to the historic record of 11,146 units of May 2007. Still, having the second-best month ever in terms of sales is not a bad feat in the middle of a recession.
Inventory is down about 30 per cent from the same time last year. Fewer listings and a lower supply of available homes has resulted in multiple offers in some areas. The strongest demand is for homes in the $300,000 to $600,000 range, says ReMax.
A former Goldman Sachs Group Inc computer programmer accused of stealing secret trading codes from the financial firm has been released from federal custody after posting bail, authorities said Monday.
Sergey Aleynikov, 39, was arrested by the FBI Friday and charged with “theft of trade secrets.” He met the terms of his $750,000 bail and was released Monday, said FBI spokesman James Margolin.
Aleynikov is accused of misusing computer codes that belong to his former employer, a New York-based financial institution that authorities did not identify in court papers but sources say is Goldman Sachs.
A transcript of Aleynikov’s appearance before U.S. Magistrate Kevin Nathaniel Fox in Manhattan Saturday also shows that Aleynikov worked for Goldman.
His lawyer, Sabrina Shroff, said at that proceeding that Aleynikov told authorities after his arrest that he did not intend to sell the information or use it “contrary to my employment agreement with Goldman Sachs.”
Goldman has not seen its business or clients harmed by the purported computer breach, a source familiar with the situation said Monday. The firm declined to comment.
The case could shed light on the workings of intricate trading systems developed by Goldman. It also raises questions about the security of lucrative Wall Street proprietary trading operations.
However, the New York Stock Exchange said Monday there was no connection between the alleged security breach and an error that dropped Goldman from a trading report the NYSE issued last week cash advance lenders.
Aleynikov, a Russian immigrant living in New Jersey, was arrested Friday night as he got off a flight at Newark Liberty International Airport, according to an FBI affidavit filed in the case.
Aleynikov had been held at the Metropolitan Detention Center in Brooklyn.
Terms of his bail required a $750,000 personal recognizance bond to be secured by three financially responsible people.
His bail also included $75,000 in cash, and Aleynikov was ordered to surrender his travel documents and not to access the computer data at issue in the case.
A preliminary hearing was scheduled for August 3.
A “For Sale” sign stood on the lawn of Aleynikov’s home on Monday night in Little Falls, New Jersey. The vacated two-story Colonial-style home, whose open mailbox had letters peeking out, was listed as “priced to sell” in an online advertisement by an area real estate agency.
Authorities contend Aleynikov stole codes used for sophisticated automated stock and commodities trading. They say Aleynikov, who earned $400,000 a year at Goldman, improperly copied proprietary computer code and then uploaded it to a computer server in Germany.
Powered by WordPress -- XHTML 1.0