Icahn mulls another run at Delphi Corp: report

CHICAGO (Reuters) - Activist investor Carl Icahn is considering making another attempt to take over bankrupt auto parts supplier Delphi Corp, the New York Post reported on Saturday.
The report, which cited an unnamed source with direct knowledge of the matter, said that Icahn is considering another run now that a federal bankruptcy court judge has blocked the sale of Delphi to private equity firm Platinum Equity Partners.
Judge Robert Drain told Delphi on Wednesday to open the sale of its assets to other potential bidders who could compete with an offer by Platinum Equity. Suitors now have until July 10 to make competing offers for Delphi.
Icahn's auto-parts company, Federal-Mogul Corp, had held recent discussions with Delphi, but the U.S. auto task force pushed through the deal with Platinum, announced on June 1, the newspaper reported.
The Presidential Task Force on the Auto Industry was set up by President Barack Obama and is charged with overseeing the restructuring of the U.S. auto industry.
The U.S. Treasury is providing Delphi with $250 million in emergency financing and has made that contingent upon a sale being completed by July 23. The company is expected to run out of cash by the end of July.
Federal-Mogul makes pistons, spark plugs, windshield wiper blades, brake pads and other products.
Icahn's original offer for Delphi would have been better than Platinum's both for creditors and the U.S. government, a source close to Delphi told the Post. The source did not elaborate.
Representatives of Delphi and Federal-Mogul could not immediately be reached for comment on Saturday.
Troy, Michigan-based Delphi was spun off from General Motors Corp in 1999 and filed for bankruptcy in 2005.
Auto suppliers have been spooked by the lowest level of U.S. auto sales in nearly three decades, which have forced every major auto maker to cut production.
Federal-Mogul, which emerged from bankruptcy protection in late 2007, said last month it had more than $1.2 billion of available liquidity.
Icahn has acquired a 75 percent stake in the company.
(Reporting by Matthew Lewis; Editing by Will Dunham)

Source: Reuters

Geithner: Too soon to withdraw economic stimulus

By David Lawder
LECCE, Italy (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Saturday it was too early to start withdrawing stimulus for the world's top economies, but governments should pledge a return to more sustainable fiscal policies in the future.
"Growth should remain the principal focus of policy among the G8 and broader G20 economies," Geithner told a news conference after finance ministers from the Group of Eight economies finished a two-day meeting here.
He said recovery has not yet arrived, and governments need to keep reinforcing recent improvements in global demand.
"It is too early to shift toward policy restraint," Geithner said. "Economic and financial recovery, however, will be stronger and more sustainable if we make clear today how we get back to fiscal sustainability when the storm has fully passed."
For that reason, he said the United States was committed to bringing down its fiscal deficits quickly to a sustainable level, starting in 2011, and would work to reduce long-term health care costs that are adding to deficits.
Geithner's remarks partly echoed the G8 finance ministers' communique issued after the meeting, which mentioned the need to prepare appropriate "exit strategies" for efforts to boost growth, and tasked the International Monetary Fund with analysis work to aid the process.
While Geithner said the "force of the economic storm is receding" he told the BBC in Lecce that he wanted recovery firmly in place before withdrawing stimulus.
"We don't have a world economy that's growing anywhere close to potential yet. We want to see recovery firmly established before we start to get on to the next challenge," he said in the interview.
LOW PROFILE, LOW-KEY
Geithner's comments were his first at the meeting in Lecce, where differences were aired on the timing of stimulus withdrawals and on tests to determine the health of banks. He kept a low profile and played down rifts on these issues, preferring to talk about broad consensus for continued work to boost growth and efforts to coordinate financial regulatory reforms.
The United States has emphasized the success of its publishing of stress tests on its 19 largest banks in May, which helped restore confidence in the sector and helped these institutions to sell about $65 billion in new equity. European countries have not published the results of their bank health checks.
In his news conference, Geithner referred to stress test discussions as part of "the usual stock taking" on the financial front, but acknowledged differences in the BBC interview.
"The Europeans are taking a slightly different approach to their banking system," he said.
"What matters of course is what works. And I think our basic approach is to try to make sure we're all committed to keeping at it till we're confident we have a recovery in place and a financial system that is working again."
Although concerns about rising U.S. debt levels have hurt the dollar and pushed up bond yields, Geithner said the G8 ministers had no "significant discussions" about this issue. Continued...
Source: Reuters

Defensives lift Dow, S&P but tech weighs on Nasdaq

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By Chuck Mikolajczak
NEW YORK (Reuters) - The Dow moved into positive territory for the year for the first time since early January on Friday, lifted by defensive sectors like pharmaceuticals while a disappointing outlook from National Semiconductor (NSM.N) weighed on technology stocks.
The healthcare sector rose as investors rotated money into defensive plays, which pushed the S&P 500 to a seven-month high. The AMEX Pharmaceutical index .DRG gained 1.2 percent.
Defensive plays are stocks of companies that tend to weather a recession better than others because their products -- such as food or toothpaste or drugs -- are things that people buy, even if they cut spending, in leaner times.
Procter & Gamble Co (PG.N) rose 1 percent to $52.55.
But technology shares weighed on the Nasdaq after chipmaker National Semiconductor Corp (NSM.N) posted quarterly results and gave an outlook that topped Wall Street's estimates, but the guidance fell short in comparison to an outlook earlier this week from fellow chipmaker Texas Instruments (TXN.N).
National Semi's shares slumped 6.1 percent to $13.59 while the PHLX semiconductor index .SOXX, slid 1.8 percent.
The S&P has risen 39.8 percent since hitting a 12-year closing low on March 9, leading some analysts to believe a pullback is in the offing.
"Everybody is waiting for a correction and certainly when that correction comes, those sectors that will do well are your more defensive sectors," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
The Dow Jones industrial average .DJI gained 28.34 points, or 0.32 percent, to 8,799.26. The Standard & Poor's 500 Index .SPX gained 1.32 points, or 0.14 percent, to 946.21. The Nasdaq Composite Index .IXIC dropped 3.57 points, or 0.19 percent, to 1,858.80.
For the week, the Dow gained 0.4 percent, the S&P 500 added 0.7 percent and the Nasdaq rose 0.5 percent.
For the year, the blue-chip Dow average is up 0.26 percent.
Other defensives such as utilities also rose, with FirstEnergy Corp (FE.N) rising 3.6 percent to $40.48. The S&P Utilities index .GSPU advanced 1.4 percent.
Among the tech bellwethers, iPod and iPhone maker Apple Inc (AAPL.O) shed 2.1 percent to $136.97 and BlackBerry maker Research in Motion (RIMM.O) fell 2.8 percent to $83.02. They were the top two drags on the Nasdaq.
The Reuters/University of Michigan Surveys of Consumers showed consumers' mood in June stood at its highest in nine months, but worries about inflation and labor market uncertainty persisted.
Shortly before midday, the New York Stock Exchange was hit by a technical glitch that temporarily halted trading in about 240 stocks, including blue-chips General Electric (GE.N), Exxon Mobil (XOM.N) and Bank of America (BAC.N). Server connectivity was restored around 12:10 p.m. Continued...
Source: Reuters

Treasury faces pressure on price of TARP exit

By Karey Wutkowski and Patrick Rucker
WASHINGTON (Reuters) - The U.S. Treasury Department is facing mounting pressure to ensure that taxpayers get a fair return on banks' warrants as the largest firms prepare to shake off government ownership stakes.
At the same time, Treasury is mired in negotiations with the banks, who want to lower the warrants' multi-billion dollar price tag and avoid another big hit to their capital position.
"The pricing of the warrants held by Treasury ... will be critical to ensuring an appropriate return on investment for the government and, consequently, American taxpayers," the two chief watchdogs of the financial rescue wrote this week in a letter obtained by Reuters.
A financial industry source said banks' negotiations with Treasury over the value of the warrants are "calm" but said "the price ranges are all over the place."
The debate over the warrants is coming to a head as next week 10 of the biggest banks will begin to repay almost $70 billion in Troubled Asset Relief Program (TARP) funds, freeing the firms of a public stigma and restrictions on executive pay.
Repaying rescue funds will involve banks buying back the preferred shares that many sold to the government when financial markets were squeezed by a credit crunch last fall. But banks also wish to repurchase the warrants that give the government the right to buy common stock at a pre-set price for up to 10 years.
Some big banks, including JPMorgan Chase & Co, argue they should get a discount on the warrants because they did not want the money in the first place. Lawmakers say Treasury should give taxpayers their fair share of the gains in the banks' stock prices.
"We will be working with the government on the timing and valuation of all payments," Ron Gruendl, a spokesman for Bank of New York Mellon, told Reuters.
Bank of New Mellon is on the list of banks green lighted earlier this week to exit TARP. Others include American Express, BB&T, Goldman Sachs, JPMorgan, Morgan Stanley, and U.S. Bancorp.
As negotiations continue, Treasury is facing more scrutiny from the two primary TARP watchdogs have begun a project to "estimate a reasonable range of values" for the warrants.
In a letter dated Wednesday to leading lawmakers on the House and Senate financial committees, Neil Barofsky, the TARP special inspector general, and Elizabeth Warren, the chairwoman of the Congressional oversight panel for TARP, said they will work together to ensure taxpayers get a good return.
The project will also include an audit of the warrant repurchase process, they said.
WHAT IS FAIR VALUE?
Treasury has said it will sell back the warrants at "fair market value" but experts say pricing can be difficult since the investments are unique in the marketplace. That means banks can negotiate on the buyback price.
"We are in the process of going through a judgment about what fair market value for those warrants is likely to be," Treasury Secretary Timothy Geithner told a Senate panel on Tuesday. "Some of the estimates now are in the several billion dollar range for those initial banks that are repaying." Continued...
Source: Reuters

Nearly all dealers agree to work with new GM: CEO

By Mari Saito and John Crawley
WASHINGTON (Reuters) - Virtually all dealers asked to do business with the new General Motors Corp after bankruptcy have agreed to do so, while the automaker will work through the weekend to weigh appeals from those that are being cut loose, the company's chief executive said on Friday.
Fritz Henderson told a House of Representatives subcommittee that 96 percent of the estimated 3,500 dealers the company wants to retain have so far agreed verbally or in writing to participate in the new GM. He said 90 percent of dealers whose franchise agreements are being terminated have signed or verbally agreed to wind-down terms.
The automaker had given dealers invited to stay on until Friday to accept terms aimed at streamlining the distribution and sales network and increasing market share.
"Our dealership consolidation is not just about saving money, but about creating opportunity and revenue growth," Henderson said, adding it received 856 appeals from dealerships facing termination and reversed closure decisions for 45.
GM will consider appeals through the weekend, he said.
Chrysler Group LLC President Jim Press told the panel that Chrysler has sold or redistributed 100 percent of vehicle inventory from the 789 dealers it terminated in bankruptcy.
Unlike GM, Chrysler offers no appeals for dealers, some of whom have complained of severe pressure this year from the manufacturer to buy more vehicles even though Chrysler sales were weak and the company's prospects fast deteriorating.
Lawmakers asked Press about a phone call in which he purportedly told dealers Chrysler would have a "long memory" if they did not help the manufacturer.
"I would never threaten a dealer," Press said.
Chrysler plans to operate about 2,300 dealers under its alliance with Italy's Fiat SpA, which closed earlier this week.
House and Senate members have introduced legislation to force changes in how GM and Chrysler handle showroom closures, which dealers estimate will cost 100,000 jobs.
Lawmakers have also asked the Obama administration to intervene with a White House/Treasury task force driving GM's and Chrysler's restructurings. The government will take a majority stake in GM post-bankruptcy and holds 8 percent of Chrysler.
Henderson said the task force required a competitive dealer network but left details up to management.
Representative Bart Stupak, chairman of the Energy and Commerce subcommittee on oversight and investigations, said he wants GM and Chrysler to become viable, but not at the expense of reputable and productive dealer affiliates.
"I am concerned that the accelerated timeframe for dealership closures and the way in which dealers have been treated may actually damage the brands more than help them," said Stupak of Michigan, where GM and Chrysler are based. Continued...
Source: Reuters

Airline capacity cuts may lead to higher fares

By Kyle Peterson
CHICAGO (Reuters) - Plans by major U.S. airlines to slash the number of seats they sell may bolster fares this fall, further stabilizing prices that tumbled this year as economic weakness drained travel demand.
Delta Air Lines (DAL.N) and AMR Corp's (AMR.N) American Airlines said they would cut their capacity deeper than previously predicted. The capacity reductions are expected to kick in after the peak summer travel season.
"When they do kick in, I expect price points to move up a bit," said Rick Seaney, chief executive of FareCompare.
"It's about competition," he said. "So the routes that are losing the seats are the ones that are going be boosted, and the ones that continue to have excess capacity are still going to have really good deals."
Delta said it would trim system capacity by 10 percent this year, with reductions beginning in September. Previously, it said its system capacity would be down 6 to 8 percent.
American Airlines said it would cut capacity by 7.5 percent this year, compared with a previous forecast for a 6.5 percent decline. Other airlines signaled their intention -- or at least their willingness -- to cut capacity.
The airline industry, battered severely last year by soaring fuel prices and later by falling travel demand, rapidly downsized to offset its two heaviest burdens. But the carriers were largely unprofitable in the first quarter despite a stunning decline in fuel prices in the second half of 2008.
Now, as airlines face a new rally in oil prices and demand remains tepid, experts say they must once again cut their capacity in hopes of charging more for tickets.
Earlier this year, average fares slipped thanks to deep discounts and seasonal sales that lasted longer than usual. Prices since have begun to stabilize, Seaney said.
"If you look at a two- or three-year history, it's not terribly low right now, but there's a lot of sale fares still thrown in the market right now," he said.
Capacity cuts already in place have helped airlines keep planes full, even if fares remain somewhat depressed, said Terry Trippler at tripplersview.com, a travel opinion website.
"Planes are still going to be somewhat full again because capacity is down," Trippler said. "But the airports are going to be a little lighter so the hassle factor is going to drop substantially."
(Reporting by Kyle Peterson; Editing by Gary Hill)

Source: Reuters

Oil falls on stronger dollar, profit-taking

NEW YORK (Reuters) - Oil fell on Friday, dragged from eight-month highs as the dollar firmed and players took profits from a three-day rally.
The U.S. dollar rebounded from a sell-off earlier this week, while demand for the euro fell after data showed a plunge in euro zone industrial production.
U.S. crude fell 64 cents to settle at $72.04 a barrel. London Brent crude settled 87 cents lower at $70.92 a barrel.
"The petroleum markets are seeing at least a light round of Friday profit-taking, encouraged by an upturn in the U.S. dollar," said Tim Evans, energy analyst at Citi Futures Perspective in New York.
A stronger dollar can weaken commodity markets by cutting into the purchasing power of buyers using other currencies.
Signs of a potential rebound in the economy lifted crude prices on Thursday to settle at the highest level since October 20. The crisis has battered fuel demand and sent crude off record highs near $150 a barrel struck last year.
The Organization of the Petroleum Exporting Countries, further reduced its forecast for world oil consumption this year, but said the worst appeared to be over for the oil market.
"As the world economy stabilizes, the world oil demand appears to be settling down," OPEC said in its Monthly Oil Market Report.
"There are no significant downward revisions to our previous oil demand forecasts."
Earlier this week, the U.S. Energy Information Administration and the International Energy Agency slightly raised their demand estimates after months of downward revisions.
No. 2 oil consumer China saw industrial growth and retail sales rebound in May, after U.S. data on Thursday showed an increase in retail sales and a slowdown in weekly jobless claims.
China's refinery output also gained in May, up 10.7 percent versus a year earlier -- the third monthly rise in seven months.
(Reporting by Alex Lawler in London; Chua Baizhen in Singapore; Richard Valdmanis and Matthew Robinson in New York; Editing by Lisa Shumaker)

Source: Reuters