Emotions run high as Madoff sentencing nears

By Martha Graybow
NEW YORK (Reuters) - Next Monday, Wall Street`s biggest and most brazen crook, Bernard Madoff, will leave his jail cell to hear his punishment. But for his victims, even a lifetime in prison may not be enough.
Madoff`s clients, who once considered themselves lucky to be part of his seemingly exclusive investment circle, have struggled in the six months since his arrest with lost nest eggs, unpaid bills, anxiety, depression and anger over what they see as an unfair process to try to get any money back.
The courtroom drama is expected to draw many victims, including a few who will describe their financial ruin to the judge. Others plan a rally to publicize their plight, saying they worry they`ll be forgotten once Madoff is put in prison.
"We don`t care about what happens to Madoff," said Laurance Cohen, 79, of Eldorado, New Mexico, who together with his wife Marcia, 78, plan to be outside the Manhattan federal courthouse when the swindler is sentenced.
"We just want to get our money back."
For many, there will be no justice until more people they believe were in on the crime join Madoff behind bars. Madoff, 71, has pleaded guilty to running a long-standing Ponzi scheme and is expected to spend the rest of his life in prison.
They also are angry that Madoff`s wife, their two sons and his brother, who have not been charged with any wrongdoing in what was a family-run business, do not appear to be suffering like they are.
"I think my biggest concern is that, basically, everything has gone according to his plan," said Jen Meerow, a New York resident who lost money to Madoff. "It is upsetting to know there are people at all levels of this that are probably going to get away with it."
Meerow, 32, whose parents also were bilked, said she fears Madoff long ago hid cash in anticipation of his arrest.
"He knew this day would come," she said. "What if he arranged to stash away some money in an offshore account and his children will get it in 20 years?"
Madoff is expected to speak at the sentencing hearing and will address "the shame he has felt" and "the pain he has caused," his lawyer said in court papers this week. The swindler has been told of the more than 100 victim letters describing the devastating toll of his fraud, his lawyer said.
Only Madoff and an outside auditor have been charged with criminal wrongdoing tied to the $65 billion scam, although U.S. stock regulators have brought civil fraud charges against several middlemen.
Much of the investors` vitriol has been directed at Madoff`s wife, Ruth, who is still living in the couple`s four- bedroom Manhattan penthouse. She has argued she should be allowed to keep the apartment plus $62 million in assets she contends are unrelated to her husband`s crimes.
She spends most of her time at home and, according to the New York Times, was banned from the exclusive hair salon where she used to get blond highlights. Wiped-out victims say such an inconvenience is hardly equal to what they are enduring.
"I do not see his family suffering," investor Rosalind Clark, of San Anselmo, California, wrote to the judge who will sentence Madoff. "They are still leading lives of excess."  Continued...
Original article

Allen Stanford pleads not guilty in fraud case

By Anna Driver
HOUSTON (Reuters) - After spending a week in jail, Texas financier Allen Stanford pleaded not guilty on Thursday to 21 criminal charges that he ran a $7 billion Ponzi scheme.
The once high-flying billionaire and sports promoter has been in federal custody since June 18, when he surrendered to the FBI in Virginia after a Houston grand jury indicted him on 21 counts of conspiracy, fraud and obstruction of justice.
U.S. Magistrate Judge Frances Stacy has yet to rule on whether Stanford must remain behind bars while he awaits a trial that is set to start on August 25.
"Not guilty, Your Honor," said Stanford, 59, wearing an orange jump-suit and hands manacled in front of him. The Texas native could face life in prison if convicted of the charges.
Stanford is the second high-profile fraud case to shake public confidence in Wall Street and the U.S. financial regulatory system after veteran financier Bernard Madoff pleaded guilty to a massive Ponzi scheme that could have cost investors as much as $65 billion.
Stanford is taking the anti-anxiety drug Ativan after initially turning to alcohol to deal with the stress of the case, his criminal attorney said in a filing.
Stanford was ushered into the Houston courthouse early on Thursday after spending a week in detention centers in Virginia and recently in Conroe, Texas, about an hour north of Houston.
According to the U.S. Securities and Exchange Commission, Stanford, with the help of executives at his firm and a top Antigua and Barbuda financial regulator, ran a "massive Ponzi scheme" for over a decade that centered on certificates of deposit in his bank in Antigua.
On Thursday, the island nation`s authorities arrested the country`s former chief financial regulator Leroy King, after the U.S. government last week filed criminal charges against him. A related SEC civil case accused him of taking bribes from Stanford in the form of over $100,000 in cash, Super Bowl tickets and access to Stanford`s fleet of private aircraft.
Stanford says he is innocent of the charges and that his multinational business was legitimate until the SEC "disemboweled" it by filing civil charges, which led to the confiscation of all his assets by a court-appointed receiver.
According to Dick DeGuerin, Stanford`s criminal attorney, his client is not a flight risk, and the government should not force him to take a "perp walk," where the accused is paraded in manacles in front of television cameras.
The U.S. government argued in a filing that Stanford was a "serious flight risk" because he had the means and the motives to flee the country rather than face life imprisonment.
About $1 billion in investors` deposits in the Antigua bank are still missing, and investigators have found $20 million in a Swiss bank account that was not documented in company records, the Justice Department said.
Stanford has an international network of "wealthy acquaintances" who could assist him and has "experience using private jets at a moments` notice," the department said in a filing.
Laura Pendergest-Holt, the former chief investment officer for Stanford Financial Group, charged with obstructing the SEC`s investigation of Stanford, also pleaded not guilty on Thursday.  Continued...
Original article

Microsoft to cut prices on Windows 7 system

By Bill Rigby
SEATTLE (Reuters) - Microsoft Corp (MSFT.O) will sell the standard home-user version of its new Windows 7 operating system for 8 percent less than the comparable version of its Vista system, as the global downturn hits spending on technology.
The world`s largest software company, whose recent ads champion low-priced PCs against more expensive Apple Inc (AAPL.O) computers, said the new system will be available at even lower prices for a short time, as it looks to tempt buyers ahead of the holiday shopping season.
The new operating system, which Microsoft hopes will be a bigger hit than the poorly received Vista, will be generally released on October 22. It will be available on pre-order from U.S. stores such as Best Buy Co Inc (BBY.N), online retailer Amazon.com Inc (AMZN.O) and the company`s own website from Friday.
Microsoft did not detail how much it would charge PC makers such as Hewlett-Packard Co (HPQ.N), Dell Inc (DELL.O) and Acer Inc (2353.TW) for preloading Windows 7 on their machines, which is how most customers will come to use the operating system.
The price Microsoft charges manufacturers is becoming a thorny point, as both sides look to maximize their share of profits as PC sales dip and prices are driven down.
The software giant said it would sell the Home Premium upgrade version of Windows 7 -- which most nonbusiness customers already using Windows will want -- for $49.99 from Friday until July 11 in the United States. The discs would be shipped after general release.
After July 11, the pre-order price will be $119.99, 8 percent less than the current $129.99 price tag for the comparable version of Vista, which cost $159.99 at launch in early 2007.
The Professional upgrade version of Windows 7 -- aimed at small companies using multiple computers -- will be on sale until July 11 at $99.99, then at $199.99 afterward. The comparable Vista version is the same price.
Prices for the full retail versions of the software -- for customers who want to install the system from scratch rather than upgrade their existing Windows system -- are also being reduced or held.
Microsoft will sell the full Home Premium version of Windows 7 for $199.99, 17 percent less than the comparable Vista version. Full versions of the more advanced Professional and Ultimate editions will be unchanged at $299.99 and $319.99, respectively.
To further tempt buyers, Microsoft said it was making a free upgrade option available to computer makers, meaning that customers who buy a PC or laptop with all but the most basic Vista versions from Friday should be able to get a free upgrade to the equivalent Windows 7 version.
How that offer is made available to customers is up to the individual PC makers. Both Microsoft and the manufacturers are hoping such an offer will avoid a sudden drop-off in already falling PC sales by persuading customers not to hold off on purchases until Windows 7 is launched.
Because the upgrade option means Microsoft is essentially selling two operating systems for the price of one, the company is deferring half the revenue from Vista sales over the next several months.
As a result, it said it would defer about $200 million to $300 million revenue from its fiscal fourth quarter, ending June 30, to later quarters, recognizing it either when a customer takes advantage of the upgrade, or at the end of the program on January 31, 2010. The move has no effect on cash flow.
In contrast to the Vista operating system, which was released in different language versions over several months, Microsoft said Windows 7 would be available in 14 languages on October 22 and a further 21 on October 31.  Continued...
Original article

Allen Stanford in courtroom seeking bail

By Anna Driver
HOUSTON (Reuters) - After spending a week in jail, Texas financier Allen Stanford on Thursday will face a U.S. judge who will decide whether the he must remain behind bars while he awaits trial for an alleged $7 billion swindle.
The once high-flying billionaire and sports promoter has been in federal custody since June 18, when he surrendered to the FBI in Virginia after a Houston grand jury indicted him on 21 counts of conspiracy, fraud and obstruction of justice.
Stanford, 59, a native of Mexia, Texas, could face life in prison if convicted of the charges.
Stanford, who arrived at the courthouse early this morning, is scheduled to appear at 10:00 a.m. CDT (11 a.m. EDT) before a U.S. magistrate in Houston who will rule on whether he must remain in federal custody pending trial.
According to the U.S. Securities and Exchange Commission, Stanford, with the help of top executives at his firm and a top Antigua financial regulator, ran a "massive Ponzi scheme" for over a decade that centered on certificates of deposit in his bank in Antigua.
Stanford says he is innocent of the charges and that his multinational business was legitimate until the SEC "disemboweled" it by filing charges, which led to the confiscation of all his assets by a court-appointed receiver.
At a detention hearing in Richmond, Virginia, on June 19, Justice Department lawyers convinced U.S. Magistrate Hannah Lauch that Stanford should remain in custody pending his Houston appearance on Thursday. Since then, Stanford has spent time in detention centers in Virginia and recently in Conroe, Texas, about an hour north of Houston.
The Justice Department is expected to oppose a motion from Stanford`s lawyers to grant bail on Thursday.
According to Dick DeGuerin, Stanford`s criminal attorney, his client is not a flight risk, and the government should not force him to take a "perp walk," where the accused is paraded in manacles in front of television cameras.
Stanford has already offered to surrender to U.S. authorities three times, and was denied each time because the government did not have a warrant for his arrest.
"The government has engineered circumstances designed to thwart Allen Stanford`s efforts to voluntarily surrender and appear," DeGuerin said in court papers filed on Wednesday. "Allen Stanford has shown he is not a flight risk through his actions thus far."
DeGuerin cited five high-profile white-collar crime cases where pretrial release of defendants was granted -- including confessed swindler Bernard Madoff and former HealthSouth Corp head Richard Scrushy, who is serving a seven-year prison term for bribery.
Three other former Stanford employees are also expected to appear separately on Thursday.
They are Laura Pendergest-Holt, the former chief investment officer for Stanford Financial Group, charged with obstructing the SEC`s investigation of Stanford, and two accountants charged with helping him falsify financial records.
Original article

Kimberly-Clark to cut about 1,600 jobs

By Jessica Wohl
CHICAGO (Reuters) - Kimberly-Clark Corp (KMB.N) said on Thursday that it would cut about 1,600 salaried jobs, or roughly 3 percent of its workforce, as it tries to trim costs and respond faster to rivals and store brands.
The latest move comes four years after the maker of Kleenex tissues kicked off a three-and-a-half year cost cutting plan that included slashing about 6,000 jobs and closing about 20 manufacturing plants.
The plan announced on Thursday does not include closing any facilities. Kimberly-Clark had said in April that it expected to cut jobs in the second and third quarters as it tries to squeeze more costs out of the organization.
Its household products, such as Kleenex and Huggies diapers, have faced stiff competition from lower-cost store brands sold by retailers such as Wal-Mart Stores Inc (WMT.N) as consumers cut back. At the same time, its K-C Professional division has been pressured because the restaurants and other businesses it serves have been hit hard by the recession.
The move is "likely a necessary step" to allow Kimberly-Clark to invest in areas such as advertising and promotion as it tries to protect its market share, Sanford Bernstein analyst Ali Dibadj said.
Procter & Gamble Co (PG.N), in particular, has stepped up its push to grab cash-strapped consumers with lower priced versions of Bounty paper towels and Charmin toilet paper, as well as a lower cost line of diapers, Luvs. Kimberly-Clark competes directly with P&G in those categories.
PREDICTS $60 MILLION IN SAVINGS THIS YEAR
Kimberly-Clark said the latest round of job cuts would be in all regions and businesses and mainly impact salaried and non-production jobs.
The company offered a voluntary severance program for U.S. salaried employees this spring which about 600 people accepted, a spokesman said. Those jobs are included in the plan to reduce about 1,600 jobs from the company`s total of around 53,000.
Kimberly-Clark expects to record charges of $140 million to $150 million, or about 25 cents per share. About $110 million of those charges are slated for the second quarter.
It expects to see savings of about $60 million, or 10 cents per share, during the second half of the year.
In another effort to save, Kimberly-Clark decided earlier this year to freeze pension plan benefits for U.S. non-union employees.
Shares of Kimberly-Clark fell 0.6 percent to $51.46 in morning trade.
The shares slipped 1.8 percent from the beginning of the year through Wednesday, outperforming P&G, whose shares fell 11 percent in that period.
(Reporting by Jessica Wohl, editing by Dave Zimmerman)
Original article

U.S. jobless claims rose 15,000 in latest week

By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft.
Gross domestic product, which measures total output within U.S. borders, dropped at a 5.5 percent annual rate in the first quarter after shrinking 6.3 percent in the fourth quarter of last year and 0.5 percent in the third quarter.
Separately, the Labor Department said the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 -- a measure of the strain still faced by hard-pressed consumers.
"This will send a message that the labor market remains difficult and that it`ll be a while until we get some recovery," said Peter Boockvar, equity strategist with Miller Tabak & Co in New York.
Bond prices rose after the jobless claims data was issued as investors grew more cautious, while Wall Street appeared set for a weak stock-market opening.
The GDP reading was the final one for the first quarter. The Commerce Department initially said it shrank 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall. GDP is expected to slip again in the second quarter ending June 30 though less severely than in the first quarter.
"The economic data we`ve seen so far for the second quarter suggest the preliminary number for the second quarter will show a modest decline, maybe half the rate we saw in the first quarter," said Gary Thayer, senior economist with Wells Fargo Advisors in St. Louis, Missouri.
The GDP report reflected an economy still deep in recession as the year began, though the Paris-based Organization for Economic Cooperation and Development predicted this week the U.S. downturn will bottom out this year and be followed by a soft recovery in 2010.
Consumer spending, which fuels two-thirds of U.S. economic activity, increased at a downwardly revised 1.4 percent rate instead of the 1.5 percent previously estimated. Weak job markets and falling home prices are expected to dampen spending for some time.
Partly accounting for the revised GDP figure, the department said companies cut inventories at a slightly less vigorous rate in the first quarter than thought previously. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, meaning they subtracted less from growth.
Reflecting the weak pace of global economic activity, exports plunged at a 30.6 percent rate in the first quarter instead of the 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947.
The department said the drop in exports cut 4.16 percentage points from GDP.
Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980.
Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.
(Additional reporting by Alister Bull; Editing by James Dalgleish)
Original article

U.S. GDP contracts less in Q1, demand still soft

By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft.
Gross domestic product, which measures total output within U.S. borders, dropped at a 5.5 percent annual rate in the first quarter after shrinking 6.3 percent in the fourth quarter of last year and 0.5 percent in the third quarter.
The GDP reading was the final one for the first quarter. The Commerce Department initially said it contracted 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall. GDP is expected to decline again in the current quarter ending June 30 though less severely than in the first quarter.
The GDP report reflected an economy still deep in recession as the year began, though the Paris-based Organization for Economic Cooperation and Development predicted this week the U.S. downturn will bottom out this year and be followed by a soft recovery in 2010.
Consumer spending, which fuels two-thirds of U.S. economic activity, increased at a downwardly revised 1.4 percent rate instead of the 1.5 percent previously estimated. Weak job markets and falling home prices are expected to dampen spending for some time.
Partly accounting for the revised GDP figure, the department said companies cut inventories at a slightly less vigorous rate in the first quarter than thought previously. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, which meant they subtracted less from growth.
Reflecting the weak pace of global activity, exports plunged at a 30.6 percent rate in the first quarter instead of 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947.
The department said the drop in exports cut 4.16 percentage points from GDP.
Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980.
Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.
(Editing by James Dalgleish)
Original article

AIG to spin off two units, cut government debt

NEW YORK (Reuters) - American International Group Inc (AIG.N), which received $180 billion of taxpayer bailouts, said it will give the government stakes in two big life insurance units that it plans to spin off.
The embattled insurer said on Thursday it will put the equity of the units, American International Assurance Co (AIA) and American Life Insurance Co (ALICO), into special purpose vehicles, preparing both for initial public offerings.
The Federal Reserve Bank of New York will receive "preferred stakes" of $16 billion in AIA and $9 billion in ALICO, it said.
The transactions will reduce AIG`s debt to the Fed under a credit facility to $15 billion from $40 billion, it said.
Edward Liddy, AIG`s chief executive, said the agreement with the New York Fed "represents a major step toward repaying taxpayers and preserving the value of AIA and ALICO."
The New York Fed, in a separate statement, said the agreement will help AIG repay taxpayers and restructure. The AIA and ALICO transactions are expected to close in the second half of 2009, pending regulatory approvals.
ALICO operates in more than 50 countries but generates more than half its revenue in Japan.
Once the world`s largest insurer by market value, AIG nearly collapsed last year because of soaring losses from credit default swaps, as customers who bought debt protection from the company`s financial products unit boosted their demands for collateral.
AIG lost more than $99 billion in 2008 and has received a series of government bailouts, including roughly $85 billion of loans.
The company has found it more difficult to sell assets for good prices because prospective buyers know it needs to dismantle itself to help repay taxpayers.
Last year AIG tried to sell AIA privately for as much to $20 billion but failed to find a buyer.
Liddy, a former chief executive at Allstate Corp (ALL.N), last month announced plans to step down as AIG CEO, saying he had planned for his stay to be temporary. He said at the time it might take several years for AIG to repay taxpayers.
AIG shares closed Wednesday at $1.42 on the New York Stock Exchange.
(Reporting by Jonathan Stempel in New York and Sweta Singh in Bangalore; Editing by Dinesh Nair and John Wallace)
Original article

Lennar loss wider than estimates

(Reuters) - U.S. homebuilder Lennar Corp (LEN.N) posted a wider-than-expected quarterly loss, weighed by falling home deliveries and average home prices, even as the housing market experienced an uptick in new home sales.
"While we are sensing pent-up demand in the market, rising unemployment, increased foreclosures and tighter credit standards continue to present challenges for the industry...," Chief Executive Stuart Miller said in a statement.
This combined with a recent spike in mortgage rates has made it difficult to predict when the market will ultimately turn the corner, he added.
Second-quarter loss was $125.2 million, or 76 cents a share, compared with a loss of $120.9 million, or 76 cents a share a year ago. Revenue fell 21 percent to $891.9 million.
On a comparable basis, analysts were looking for a loss of 70 cents a share on revenue of $599.5 million, according to Reuters Estimates.
The quarterly loss included charges of 38 cents a share related to valuation adjustments and other write-offs, and 27 cents a share on a non-cash deferred tax asset valuation allowance, Lennar said.
New home deliveries fell 16 percent, excluding unconsolidated entities, while average sales price of homes delivered fell 8 percent during the quarter, the company said.
Cancellation rate fell to 15 percent from 22 percent a year ago.
The company ended the quarter with $1.4 billion in cash, helped by cutting down its completed, unsold inventory by 53 percent to 626 homes at February 28.
Lennar shares were down 2 percent at $7.66 in trading before the bell. They had closed at $7.82 Wednesday on the New York Stock Exchange.
(Reporting by Dhanya Ann Thoppil in Bangalore; Editing by Anil D`Silva, Himani Sarkar)
Original article

Wall Street futures signal higher open

(Reuters) - Dow Jones futures rose 0.6 percent, S&P 500 futures were up 0.5 percent and Nasdaq futures traded 0.6 percent higher early on Thursday morning, suggesting benchmark U.S. equity indexes would open higher.
Bank of America (BAC.N) was likely to be in the spotlight after the top Republican on the House Oversight and Government Reform Committee, Darrell Issa, said the Federal Reserve sought to hide its involvement in the bank`s takeover of Merrill Lynch.
Fed Chairman Ben Bernanke is due to testify on that acquisition before the committee at 10 a.m. EDT.
Also among financials, Barclays on Thursday cut its Q2 earnings per share estimate for Goldman Sachs (GS.N) to $3.55 from $5.20 and for Morgan Stanley (MS.N) to a Q2 loss per share of $0.70.
Investors were also likely to continue to digest the outcome of the Fed`s two-day interest rate policy meeting, which ended on Wednesday with the central bank sticking to its program of buying government and mortgage debt and saying it saw signs the U.S. recession was easing.
Blue-chip stocks on the move after Wall Street`s closing bell on Wednesday included sport goods maker Nike (NKE.N), down more than 6 percent on the back of disappointing orders reported with its Q4 results.
Other notable after-the-bell movers were Jazz Pharmaceuticals (JAZZ.O), up 30 percent on results of a late-stage drug study, retailer Bed Bath & Beyond (BBBY.O), up 6 percent after Q1 results, and investment bank Jefferies (JEF.N), up 7 percent, after saying it expects record net earnings in Q2.
Four S&P 500 companies are scheduled to report quarterly results on Thursday: Lennar Corporation (LEN.N), McCormick & Co Inc (MKC.N), Micron Tech (MU.N) and ConAgra Foods (CAG.N).
Economic data include final Q1 GDP and corporate profits as well as weekly jobless claims, all at 1230 GMT, and the Kansas City Fed`s June manufacturing survey at 1500 GMT (11 a.m. EDT).
Europe`s benchmark FTSEurofirst 300 index .FTEU3 was down 0.
(Reporting by Peter Starck; editing by John Stonestreet)
Original article

Toyota`s new boss warns of two more tough years

Chang-Ran Kim; Asia Autos Correspondent
TOKYO (Reuters) - Toyota Motor Corp`s new president, the grandson of the group`s founder, warned on Thursday the auto industry faces another two tough years as he outlined his strategy to return the world`s No.1 car company to profit.
Toyota aims to build more autonomous operations in North America and shift its focus to marketing a region-specific vehicle line-up, rather than offering a full line-up in every region, Akio Toyoda told his first media conference in the job.
Most of Toyota`s factories around the world are underused as a global recession hammers car sales, sending two of America`s three big car makers into receivership.
Facing a second year of record losses, Toyota aims to cut costs from its already lean operations so it can be profitable using just 70 percent of its factory capacity.
"We want to do everything possible to avoid a third consecutive year of losses," Toyoda told reporters.
Toyoda said European efforts would focus on hybrid models.
Its remodeled Prius hybrid, launched last month, has been a rare bright spot, winning more than 180,000 orders in Japan.
Production has been limited to two plants so far, creating a bottleneck for delivery, while analysts say the fuel-sipping model could eat into sales of Toyota`s other more profitable cars.
Toyoda has said he aims to steer the company "back to basics" -- a promise also made by his predecessor, Katsuaki Watanabe, when he took over in 2005 as Toyota`s factories scrambled to meet soaring demand.
The push for profits would not involve plant closures, Executive Vice President Atsushi Niimi told the news conference.
"Right now, the market is very tough. But in two years, or at most three years, it will recover so we want to make sure we have the means to meet demand then," said Niimi, who heads manufacturing operations in Toyoda`s new-look executive team.
At the annual meeting this week, Toyota promised shareholders to do better to recover from a 461 billion yen ($4.8 billion) operating loss.
For the year to March 2010, it has forecast an even bigger loss, of 850 billion yen, although consensus forecasts are for a much smaller loss of 495 billion yen.
Unlike bankrupt U.S. rivals Chrysler and General Motors, Toyota has said it plans to ride out the downturn without slashing full-time jobs.
Many industry executives have said recent sales trends in major markets such as the United States and Japan indicate that demand has bottomed, but opinion is divided over when it will recover convincingly.  Continued...
Original article

Oil rises towards $69 on Nigeria attack

By Ramthan Hussain
SINGAPORE (Reuters) - Oil rose toward $69 on Thursday, after Nigeria`s main militant group raided a Royal Dutch Shell pipeline and disrupted a major export terminal, recouping losses caused by hefty builds in U.S. fuel stocks.
Prices had earlier extended Wednesday`s fall after data showed gasoline stocks in the world`s top consumer rose 3.9 million barrels last week, exceeding analysts` predictions, as refiners prepared for the peak driving season that was expected to be less robust this year, while distillates hit 10-year highs.
Analysts said the price drop was limited by a sharp 3.8 million barrel decline in U.S. crude stocks.
U.S. crude futures for August gained 27 cents to $68.94 a barrel by 0626 GMT (2:26 a.m. EDT), after falling to $68.11 earlier. London Brent crude rose 35 cents to $68.68.
"The EIA report which shows a large increase in products stocks was a negative factor for oil prices. But we are seeing that with oil falling from the high $60s, buying support emerged and limited the downside," said David Moore, commodity strategist at Commonwealth Bank in Sydney.
The Movement for the Emancipation of the Niger Delta (MEND) said it had attacked the Billie/Krakama pipeline in Rivers state in the Niger Delta that feeds into pumping stations linked to the Bonny crude terminal, one of Nigeria`s main export terminals.
No independent verification was immediately available on MEND`s latest statement, which came after the group also claimed responsibility on Sunday for attacks on three installations run by Shell, which had said it was investigating the reports.
The raids came ahead of the Nigerian president`s proposal later on Thursday for a 60-day amnesty programme for the militants, in a bid to end years of attacks on the oil industry, which have cut output to less than two-thirds of its installed capacity of 3 million barrels per day over the last three years.
"Bonny is a big stream and it will have a bullish impact," said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.
He added that the market had been in a correction phase after running up to as high as $73.23, the near eight-month high hit on June 11, which analysts see as a key resistance level.
Traders said oil`s recovery was partly due to a rally in Asian shares for a second day after the Federal Reserve reinforced that interest rates will be kept at a record low for a while.
The Fed left interest rates near zero percent but tweaked its statement to say financial markets had improved and signaled less concern about deflation, while reiterating the economy will remain weak.
The U.S. dollar gave up some of its gains, losing some ground to higher-yielding currencies, such as the Australian dollar, on the rise in stocks. A firmer dollar makes commodities priced in dollars more expensive for holders of other currencies.
Optimism over a potential recovery lifting oil demand has raised prices from below $40 over the past three months, though fears about the global economy lingered.
And government forecasters said that even though U.S. oil demand should rebound when the economy recovers, crude imports might not resume growth as quickly as they did when past recessions ended because of new domestic oil production coming onstream.
(Editing by Ben Tan)
Original article

BP selects Ericsson CEO as next chairman

By Tom Bergin
LONDON (Reuters) - Ericsson (ERICb.ST) Chief Executive Carl-Henric Svanberg is stepping down to become Chairman of BP Plc (BP.L) in a surprise appointment that ends the oil major`s lengthy search for a new chairman.
Ericsson said it had appointed its current Chief Financial Officer, Hans Vestberg, to replace Svanberg as President and CEO.
Svanberg will step down at Ericsson at the end of the year and take over from Peter Sutherland at BP in January 2010.
"Everyone had been waiting for something to happen, that is that Carl-Henric would step down," Nordea analyst Mats Bergstrom said.
"That Hans Vestberg is chosen indicates that the board feels the business is moving along well, and investors will appreciate this, feeling that he has a good grip of the numbers."
But a dealer said Svanberg`s move follows investor dissatisfaction with management at the telecoms equipment maker.
The surprise appointment ends a fraught recruitment process at BP. Sutherland had expected to stand down late last year or earlier this year.
BP initially selected miner Rio Tinto`s (RIO.AX) then chairman Paul Skinner, a former Royal Dutch Shell Plc (RDSa.L) executive, to fill the job.
However, Skinner withdrew following investor unease over Rio`s plan to sell $19.5 billion in assets and bonds to Chinese state-owned aluminum group Chinalco, BP sources said.
Skinner stepped down from his Rio role in March and earlier this month, Rio dropped the Chinalco deal.
The failed Skinner appointment poisoned the role for some potential candidates, especially UK businessmen, some executives said.
BP had hoped to select someone with oil industry experience, sources close to the process said, but the Skinner debacle limited its options.
Svanberg will join the BP board in September and, once he becomes Chairman, will be based in London and devote the majority of his time to BP business, BP said.
Svanberg will remain a member of the Ericsson Board of Directors, Ericsson said.
(Additional reporting by Mia Shanley in Stockholm)
(editing by Will Waterman, John Stonestreet)
Original article

Fed holds policy steady, sees recession easing

Fed dents Dow
Play Video
By Alister Bull and Mark Felsenthal
WASHINGTON (Reuters) - The Federal Reserve on Wednesday stuck to its huge program of buying government and mortgage debt, which is designed to keep borrowing costs low and boost recovery, and said it saw signs that the deep U.S. recession was easing.
The U.S. central bank kept interest rates near zero percent and signaled less concern on deflation, which is considered a threat to the economy because a pattern of falling prices causes consumers and businesses to delay purchases, dragging the economy down further.
It also said inflation would "remain subdued for some time" and provided no hint on an imminent exit from bold policy easing, despite fears among investors the huge U.S. stimulus could stoke price increases.
"Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing," the Fed said in its policy statement at the end of a two-day meeting. "Conditions in financial markets have generally improved in recent months."
The Fed said it decided to hold overnight interest rates in a zero to 0.25 percent range -- the level reached in December -- and repeated that rates would likely stay unusually low for some time.
But the Fed cautioned that the economy would remain weak for a time, and the Dow Jones industrial average fell on the news. Economists said the Fed's outlook means rates will be on hold until well into 2010.
"The Fed is highly likely to hold short rates at rock-bottom levels until the volume of economic 'slack' ... is substantially lessened, which means short rates are unlikely to rise any time soon," Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut, wrote in a client note.
The dollar extended gains against the euro and the yen while prices on U.S. government debt fell in disappointment that the Fed did not increase its purchases of longer-dated Treasuries.
Nine out of the 15 primary dealers polled by Reuters said the Fed will raise interest rates in 2010, and six said the central bank will wait until 2011 before hiking rates.
QUANTITATIVE EASING
With the benchmark interbank lending rate virtually at zero, the Fed has focused on driving down other borrowing costs by buying mortgage-related debt and U.S. government bonds.
In its statement, the Fed said it would hold to a previous pledge to buy $1.45 trillion in mortgage-related securities and $300 billion in longer-term government debt.
The central bank dropped a phrase it had used in its April statement in which it warned inflation could run below desired levels for a time -- a suggestion that officials were worried about the risk of a troubling downward spiral in prices.
It also did away with a sentence in the April statement that referenced various emergency liquidity programs devised by the Fed during the crisis to stop credit markets freezing.
"The statement wisely avoiding confusing the market with exit strategy discussions but may have signaled a slight backing away from extraordinary support by dropping reference to the 'range of liquidity programs'," Michael Feroli, an economist with JP Morgan Chase, said in a note to clients. Continued...
Source: Reuters

Lawmaker accuses Fed of "cover-up" in BofA deal

By Kim Dixon
WASHINGTON (Reuters) - The Federal Reserve sought to hide its involvement in Bank of America Corp's acquisition of Merrill Lynch as Merrill's financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday.
The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters.
Bernanke has in the past denied any inappropriate pressure on Bank of America. Fed spokeswoman Michelle Smith on Wednesday referred to a letter Bernanke sent Representative Dennis Kucinich on April 30 and later testimony in which he offered an "unconditional assertion" that he did not ask Bank of America CEO Ken Lewis to withhold information regarding Merrill.
"The Federal Reserve acted with the highest integrity throughout its discussions with Bank of America," Bernanke wrote to the Ohio Democrat, who chairs a subcommittee on the Oversight panel.
The Democrat who heads the committee, Edolphus Towns of New York, has called Bernanke to testify on Thursday. "I am not going to prejudge these issues. We are not even close to finishing the Bank of America-Merrill Lynch investigation at this point," Towns said in a statement.
Former U.S. Treasury Secretary Henry Paulson has also been called to testify before Congress next month about the Bank of America-Merrill Lynch transaction. His planned appearance was confirmed in an e-mail from Jenny Rosenberg, an aide to Towns, who said no date had been set for Paulson's testimony.
POLITICAL FOOTBALL
Democrats on the panel have focused on whether Bank of America's Lewis illegally misled investors about Merrill's finances, while Republicans have zeroed in on whether the Fed and former Treasury Secretary Henry Paulson inappropriately pressured Lewis to seal the deal.
The issue has become a political football as lawmakers look to blame someone for the troubled deal amid taxpayer anger over the billions of dollars the government infused into banks to try to ease the world financial crisis.
A Democratic source close to the committee said Republican members leaked documents just before a hearing earlier this month where Lewis testified. "They framed the story by looking at only a few of the documents," said the source, who was not authorized to be quoted on the matter.
Some Democrats believe Bank of America's Lewis had to know about Merrill's deepening losses and that Lewis was threatening to pull out of the deal as a way to get more assistance from the Fed. Still, the Democratic source said, "The Fed does not come out smelling like roses."
Kucinich said what is remarkable about the situation was that the Fed required no changes in the bank's leadership or conditions on the billions that did go to Bank of America.
The bank, which did not return a phone call seeking comment, has taken $45 billion in bailout funds from the government.
Other documents released by the committee earlier this month revealed that a Fed analysis found deficiencies in the due diligence conducted by Bank of America prior to the Merrill deal.
PRESSURE, DISCLOSURE Continued...
Source: Reuters

Nike orders disappoint, shares fall

By Alexandria Sage
SAN FRANCISCO (Reuters) - Nike Inc (NKE.N) reported a worse-than-expected global decline in forward orders, especially in its European region, sending shares of the world's largest athletic shoe and clothing company down nearly 5 percent in extended trading on Wednesday.
The company, which vies with Adidas (ADSG.DE) in the global market for high-end athletic gear, warned analysts that 2010 would be challenging, with flat or slightly negative revenues.
But Chief Executive Mark Parker did talk of a "swoosh recovery," equating gradual improvement in the world economy with the upward curve of the company's logo.
"We're certainly on that longer road up to recovery," Parker said on a conference call. "But it will take awhile, let's be real."
The weak outlook overshadowed slightly better-than-expected earnings for its 2009 fiscal fourth quarter that ended May 31. Nike shares fell to $50.50 in extended trading after closing at $53.02 in regular trade on the New York Stock Exchange.
Looking to 2010, Nike sees gross margin headwinds due to currency fluctuations and Chief Financial Officer Don Blair said revenues would be flat to slightly down on a currency-neutral basis, with lower revenues in the first half of the year, particularly in the first quarter.
Nike has responded to the global downturn by slashing expenses, compensating for dwindling sales. It is cutting back on marketing, terminating orders from factories in Asia, and laying off 5 percent of global staff.
Net income in Nike's fiscal fourth quarter fell to $341.4 million, or 70 cents per share, from $490.5 million, or 98 cents per share, a year earlier.
The results included a $144.5 million after-tax charge, or 29 cents per share, related to the job cuts and a company-wide realignment involving factory consolidation.
Excluding charges, it earned 99 cents per share, above the 96 cents expected on average by analysts, according to Reuters Estimates.
BRAND CACHET
Beaverton, Oregon-based Nike -- which counts sports superstars Kobe Bryant and LeBron James among its stable of highly paid endorsers -- has weathered the downturn better than some peers, riding its brand cachet and a diverse portfolio of products sold at various prices and channels.
Still, revenue slid 7 percent in the quarter to $4.7 billion. U.S. revenues slipped 2 percent in the quarter, hurt by a lingering slump in apparel sales.
At Nike's European division, which includes the Middle East and Africa, revenues plummeted 19 percent, though they were down a more moderate 3 percent on a constant currency basis.
Sales in the Asia Pacific region were flat, and rose 3 percent excluding currency fluctuations. In China, Nike's fastest-growing region, sales rose only 6 percent, below the 60 percent growth a year ago in advance of the Beijing Olympics. Continued...
Source: Reuters

Fed holds policy steady, less worried on deflation

Market falls on Fed decision
Play Video
By Alister Bull and Mark Felsenthal
WASHINGTON (Reuters) - The Federal Reserve on Wednesday stuck to its huge program of buying government and mortgage debt and said it saw signs that the deep U.S. recession was easing.
The Fed -- the U.S. central bank -- kept interest rates at nearly zero and signaled less concern on deflation.
It also said inflation would "remain subdued for some time" and provided no hint on an imminent exit from bold policy easing, despite fears among investors the huge U.S. stimulus could stoke prices.
Concluding a two-day meeting, the Fed said it had decided to hold overnight interest rates in a zero to 0.25 percent range -- the level reached in December -- and repeated that they would likely stay unusually low for some time.
The Dow Jones industrial average stock index fell on the news as the Fed's caution that the economy would remain weak for a time dampened hopes for a faster rebound. Economists say this means rates will be on hold until well into 2010.
"The Fed is highly likely to hold short rates at rock-bottom levels until the volume of economic 'slack' ... is substantially lessened, which means short rates are unlikely to rise any time soon," Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut, wrote in a client note.
The dollar extended gains against the euro and the yen while prices on U.S. government debt fell in disappointment that the Fed did not increase its purchases of longer-dated Treasuries.
QUANTITATIVE EASING
With the benchmark interbank lending rate virtually at zero, the Fed has focused on driving down other borrowing costs by buying mortgage-related debt and U.S. government bonds.
In a statement, the Fed's policy-setting panel said it would hold to a previous pledge to buy $1.45 trillion in mortgage-related debt by year-end and $300 billion in longer-term U.S. government debt by autumn, a decision financial markets had largely expected.
"Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing," the Fed said. "Conditions in financial markets have generally improved in recent months."
The central bank dropped a phrase it had used in its last statement in April in which it warned inflation could run below desired levels for a time -- a suggestion officials were worried about a broad-based deflation.
While appearing more comfortable on deflation risks in their latest statement, policy-makers made clear inflation was not yet a concern.
"The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the committee expects that inflation will remain subdued for some time," the Fed said.
HOLDING STEADY Continued...
Source: Reuters

Dow slips, but S&P, Nasdaq up after Fed, Oracle

By Caroline Valetkevitch
NEW YORK (Reuters) - The Dow fell for the fourth day and other indexes ended well off the day's highs on Wednesday after the Federal Reserve reiterated concerns about the economic outlook at the end of its policy meeting.
Technology shares sustained some strength, bolstered by stronger-than-expected quarterly results from software maker Oracle Corp (ORCL.O).
The Fed, as expected, left the benchmark fed funds rate at almost zero. The bond market sold off on disappointment that the Fed did not announce an acceleration or increase of its purchases of Treasury and mortgage-related debt.
Stocks also pulled back, as the Fed did not suggest in its statement that it sees any notable recovery any time soon.
"The Fed is a little more downbeat than the market has been ... that they're emphasizing the weakness is a touch disappointing to me and to the markets," said Jim Awad, managing director at Zephyr Management in New York.
Before the release of the Fed's statement, all three major stock indexes were solidly higher, with the Nasdaq up more than 2 percent. Investors were encouraged by a stronger-than-expected report on monthly durable goods orders, which pointed to increased economic demand.
The Fed's words on the economic outlook were mixed. The central bank said the economy was likely to remain weak for a time, but the contraction's pace was slowing.
The Dow Jones industrial average .DJI was down 23.05 points, or 0.28 percent, at 8,299.86. But the Standard & Poor's 500 Index .SPX was up 5.84 points, or 0.65 percent, at 900.94. The Nasdaq Composite Index .IXIC was up 27.42 points, or 1.55 percent, at 1,792.34.
In the U.S. Treasury bond market, the price of the benchmark 10-year note dropped 18/32 lower while its yield jumped to 3.70 percent from 3.63 percent late on Tuesday.
"I think people were kind of hoping this bond purchase program would change," said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
NIKE SINKS LATE
After the closing bell, the stock of Nike Inc (NKE.N) slid 6.2 percent to $49.74 following the company's fourth-quarter results. Nike's earnings, excluding charges, beat expectations, but its forward orders dropped 12 percent. In regular trading on the New York Stock Exchange and ahead of the earnings, Nike fell 1 percent to close at $53.02.
During the regular session, Oracle's results boosted other technology shares and helped drive the PHLX semiconductor index .SOXX up 1.7 percent. Oracle shot up 7 percent to $21.26 and ranked among the Nasdaq's top advancers.
Data before the opening bell showed new orders for durable goods, which are long-lasting U.S. manufactured products such as refrigerators and washing machines, increased by a much stronger-than-expected 1.8 percent in May, and the median price of new homes hit its highest level since December, even though sales slipped, economic data showed.
"You had the good durable number, the good Oracle number that kind of got things going," Massocca said. Continued...
Source: Reuters

New TARP chief: Economy on mend, but vigilance needed

By Karey Wutkowski and Glenn Somerville
WASHINGTON (Reuters) - The new overseer of the U.S. government's $700 billion bank bailout fund said on Wednesday an intently awaited program to cleanse toxic assets from banks' balance sheets should soon be ready to roll out.
Herb Allison told a Congressional Oversight Panel there has been progress in developing public-private partnerships to pair investors and the government in buying poorly performing assets from banks.
"I'm confident that very soon we'll be launching partnerships," Allison said.
In a wide-ranging exchange of questions and answers, Allison said there were signs the U.S. economy was on the mend but stressed there could be no let-up on recovery efforts.
"Our financial system and our economy remain vulnerable, with unemployment still rising, house prices falling and pressure on commercial real estate continuing to build," he said.
Allison also said that Treasury will "soon" publish guidance on how to value warrants that the government received when it injected capital into banks and that the banks are able to buy back as they regain stability and pay back the capital.
"We'll soon be publishing on our website our approach to valuing the warrants and if it comes to that, disposing the warrants," he said.
The warrants to buy shares were intended to provide a means for taxpayers to share in the profits of banks that benefited from being able to draw on taxpayer-funded help.
Allison was confirmed by the Senate last week as Treasury assistant secretary to head the Treasury Department's Office of Financial Stability, which manages the Troubled Asset Relief Program, known as TARP. Congress approved TARP last year under the former Bush administration.
He noted that about 30 companies that received cash injections from the government have repaid $70 billion and added that about $5 billion has been received in dividends on stock the government got in return for investing in firms.
Allison, a former chief executive of mortgage finance company Fannie Mae, replaces Neel Kashkari, who was appointed to head TARP by the former Bush administration. Kashkari carried over in the Obama administration until early May.
OPTIMISTIC ABOUT BANKS
Allison expressed confidence that so-called public-private partnerships to cleanse toxic assets from banks' balance books will soon be launched. The partnerships are intended to pair private investors with the government to finance purchases of poorly performing mortgages and other holdings that might then be sold in the future at a profit while relieving banks of carrying them.
"We've made a great deal of progress," Allison said. "It shouldn't be long before we announce the first stage in that program."
Responding to questions, Allison said it was heartening to see increases in banks' stock prices as well as rising confidence among financial sector participants since the government reported the results of "stress tests" on the adequacy of their capital levels. Continued...
Source: Reuters

Buffett laments that U.S. economy has "no bounce"

By Jonathan Stempel
NEW YORK (Reuters) - Warren Buffett said on Wednesday that the U.S. economy has "no bounce" and will take time to recover, but there is no risk of deflation to push it further into despair.
Speaking on CNBC television, the world's second-richest person also praised efforts by the Obama administration and Federal Reserve to jump-start economic activity.
He lamented that the slowdown has hurt his insurance and investment company Berkshire Hathaway Inc, which runs close to 80 businesses and in the January-to-March period had its first quarterly loss since 2001.
"We have had no bounce" in the economy, Buffett said on CNBC television in New York. "There are a lot of excesses to be wrung out, and that process is still under way, and it looks to me it will be under way for quite a while."
Asked whether the economy was still in a "shambles," as he had said in February, Buffett said: "I'm afraid that's true."
U.S. gross domestic product fell at a 5.7 percent annualized rate in the first quarter.
Government efforts to stimulate business activity remain a work in progress, and President Barack Obama on Tuesday again said the nation's jobless rate will rise above 10 percent.
"They're doing things, but they take a while to have an effect," Buffett said. "You can't produce a baby in one month by getting nine women pregnant."
Yet he added that "I don't worry about deflation at all," and maintained his long faith in the stock market, saying it is "attractive over the next 10 years" relative to alternatives.
Asked whether Obama should reappoint Ben Bernanke to lead the Federal Reserve when the chairman's term expires next January, Buffett said: "I don't see how you could do better."
STOCKS FOR LONG RUN
In a separate interview, Buffett told Fox Business Network he expects the United States to maintain its "triple-A" credit rating for decades. Berkshire lost its equivalent rating this year.
Buffett also said he plans to keep his Goldman Sachs Group Inc warrants, which now show a paper profit.
Last September, Goldman agreed to sell Berkshire $5 billion of preferred stock carrying a 10 percent annual dividend, and warrants to buy $5 billion of common stock at $115 per share.
"We'll make a lot of money off Goldman," Buffett said. Continued...
Source: Reuters

Citigroup to boost salaries, cut bonuses: sources

Citigroup pay fix
Play Video
By Jonathan Stempel
NEW YORK (Reuters) - Citigroup Inc is raising salaries companywide to offset restrictions on bonuses after the troubled bank accepted $45 billion of federal bailout money, but the move could backfire if it drives top-performing workers to other employers.
According to people familiar with the plans, the changes mean some employees may be paid more and others less, but overall compensation should remain unchanged as higher salaries offset lower incentive payouts.
Citigroup also expects to issue new stock options to cushion a roughly 95 percent drop in its stock price since late 2006, one of the sources said. The sources requested anonymity because they were not authorized to discuss the plans.
The changes may help Citigroup better control risk by reducing the focus of investment bankers and traders on performance-related bonuses. Yet because bonuses often account for the bulk of pay for top talent, capping total pay might make it harder for the bank to attract and keep key personnel.
"I don't discount the value of raising guaranteed pay in an uncertain environment," said Ravin Jesuthasan, who leads the rewards and performance management practice at Towers Perrin in Chicago. "It raises the issue of whether that is the best use of money for the most pivotal talent. The superstar might go with the million-dollar deal rather than see his pay capped."
Citigroup's changes follow the Obama administration's naming this month of Kenneth Feinberg as a special master to oversee pay practices at the third-largest U.S. bank and six other companies that received "exceptional" federal aid.
Feinberg's authority over compensation, though, extends only to the 100 highest-paid employees, not the rank-and-file. Citigroup employs close to 300,000 people worldwide.
The bank has lost $36 billion in the last six quarters, and is conducting a stock swap that is expected to leave the government with a 34 percent ownership stake.
BUFFETT: REIN IN "WRONG" INCENTIVES
Lawmakers have attacked the payment of bonuses and other compensation they deem excessive to employees of companies that received government aid.
U.S. President Barack Obama himself has said bank pay packages encouraged excessive risk-taking, one cause of last September's near meltdown of the financial system.
"We got way overleveraged in the financial arena," Warren Buffett, the billionaire investor and chief of Berkshire Hathaway Inc, said on CNBC television. "We do need something to address institutions where the wrong incentives are in place, their personal incentives are at real variance with what our national incentives should be."
Citigroup declined to comment on specific changes to its pay structure. The bank in 2008 paid out $32.44 billion in compensation and benefits. It has slashed tens of thousands of jobs to help lower overall operating costs by about one-sixth.
Investment banking employees will be the first to see the changes, which will later be put in place throughout the bank.
"Retaining and attracting the best talent is very important to the success of Citi and all its stakeholders," the bank said in a statement. "Any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation." Continued...
Source: Reuters

Ford aims to halve number of suppliers

By Soyoung Kim
DETROIT (Reuters) - Ford Motor Co (F.N) aims to cut the number of its parts suppliers by almost half by the end of 2009 as the only U.S. automaker to avoid bankruptcy attempts to shore up its supply base at a time of deep financial stress for the industry.
Tony Brown, Ford's group vice president of global purchasing, told reporters that the company expected to identify 850 suppliers eligible for its future business by the end of this year, down from 1,683 suppliers last year.
"We've accelerated our efforts in this regard to try to rationalize the supply base in order to get to profitable growth for all," Brown said. "There is simply too much capacity in the system. We don't need that capacity."
The No. 2 U.S. automaker, whose purchasing budget runs to about $90 billion annually, said it wants to work with a smaller number of healthier suppliers and plans to reduce its supply base to 750 companies in the long term.
A massive failure of major suppliers could cause havoc for all major automakers manufacturing in North America, including Ford, Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T), due to the interlocking chain of the U.S. supply base.
Suppliers account for more than three-quarters of auto sector employment in the United States, according to a Chicago Federal Reserve study, which estimates that the supply sector employed more than 600,000 people as of 2008.
Ford estimates the number of bankrupt or financially distressed suppliers in North America has doubled in the last year as U.S. auto sales tumbled to their lowest levels in nearly three decades.
Parts suppliers are facing a deeper crisis because of the extensive production shutdowns associated with the bankruptcies of General Motors Corp (GMGMQ.PK) and Chrysler.
Earlier this month, a group led by Fiat SpA (FIA.MI) bought most of the assets of Chrysler, which had been in bankruptcy.
GM filed for bankruptcy on June 1 and hopes to complete a similar sale process to a new company funded by the U.S. government by the end of August.
"The next three to four months are going to be critical as GM and Chrysler try to come back up," Brown said. "As to whether the supplier base will be able to effectively respond to that ... we've got a critical window here."
The Obama administration, which made $5 billion available to guarantee payments owed to auto parts suppliers earlier this year, rejected a new request this month by suppliers for up to $10 billion in additional financing.
But Ford's Brown said he expected that the U.S. government would intervene if failures in the parts sector jeopardized production for major automakers.
"I believe the government understands the importance of the supply base, and a major failure can take down the industry," Brown said. "I believe in recognizing that, should something like that begin to occur, they will take action, and I think action will be appropriate."
Earlier this month, Ford also agreed to provide at least $125 million of financing to support former parts unit Visteon Corp's (VSTN.PK) restructuring under Chapter 11 bankruptcy protection to ensure a continued supply of parts. Continued...
Source: Reuters

Nike orders disappoint, shares drop

By Alexandria Sage
SAN FRANCISCO (Reuters) - Nike Inc (NKE.N) reported a worse-than-expected global decline in forward orders sending shares of the world's largest athletic shoe and clothing company down 4.1 percent.
Orders through November fell 12 percent from the prior year, or a 5 percent fall excluding currency changes. Sterne Agee analyst Sam Poser said Wall Street had been expecting a currency-neutral decline of 2 percent.
Nike has been shedding 5 percent of worldwide staff to lower its costs in the global economic downturn but weak demand and currency fluctuations have hurt results.
The company said net income in its fiscal fourth quarter ended May 31 fell to $341.4 million, or 70 cents per share, from $490.5 million, or 98 cents per share, a year earlier.
The results included a $144.5 million after-tax charge, or 29 cents per share, related to the job cuts and a company-wide realignment involving factory consolidation.
Excluding those charges, Nike earned 99 cents per share, above the 96 cents expected, on average, by analysts polled by Reuters Estimates.
"While we see glimmers of economic recovery, we still have a challenging road ahead," said Chief Executive Mark Parker, citing "modest growth" for 2010 and gross margin headwinds due to currency fluctuations.
Beaverton, Oregon-based Nike has weathered the downturn better than some peers, riding its brand cachet and a diverse portfolio of products sold at various prices and through different channels, from boutiques to discount chains.
Still, revenue slid 7 percent in the quarter to $4.7 billion. U.S. revenues slipped 2 percent in the quarter, hurt by a 15 percent decline in apparel sales.
At Nike's European division, which includes the Middle East and Africa, revenues plummeted 19 percent, but were down 3 percent on a constant currency basis.
Sales in the Asia Pacific region were flat, and rose 3 percent excluding currency fluctuations.
Looking at forward orders by region, the Europe, Middle East and Africa unit saw the greatest decline of 24 percent, while U.S. future orders fell 4 percent.
"They chopped a lot of costs in the quarter, but gross margins weren't very good," said Sterne Agee's Poser. "They appear to be doing a lot of things to keep their (market) share but not helping to (protect the) Nike brand."
Poser cited Nike's placement of product in low-cost chains as an example. He said lower future orders in all its geographical regions suggested poor demand.
In March, Nike announced a global reorganization that created six new geographical territories -- including fast-growing China -- designed to help bring goods closer to market and reduce management overlap. Continued...
Source: Reuters

Bed Bath & Beyond posts surprise rise in profit

By Nicole Maestri
SAN FRANCISCO (Reuters) - Bed Bath & Beyond Inc (BBBY.O) posted an unexpected rise in quarterly profit by cutting costs to offset slumping demand for home furnishings, and the retailer's shares rose more than 6 percent.
"The beat really was on the expense line although they had good operating performance across the board," said Bernstein analyst Colin McGranahan, who has an "outperform" rating on the stock.
"They have absolutely tightened the labor model up. I think they're reducing advertising costs, which had gone way up."
Net income for the fiscal first quarter ended on May 30 rose to $87.17 million, or 34 cents per share, from $76.78 million, or 30 cents per share, a year earlier, the company said on Wednesday .
Analysts on average were expecting earnings of 25 cents per share, according to Reuters Estimates, which would have meant a decline in profit compared with a year earlier.
Sales rose 2.8 percent to $1.69 billion as it opened more stores, but sales at stores open at least a year, a key retail measure known as same-store sales, fell 1.6 percent.
Selling, general and administrative expenses declined to $524.5 million in the quarter from $537.18 million a year earlier.
Bed Bath & Beyond and peers like Pier 1 Imports Inc (PIR.N) and Williams-Sonoma Inc (WSM.N) have seen sales weaken as the crumbling U.S. housing market erodes demand for the home furnishings that they sell.
Bed Bath & Beyond has sought to battle the difficult environment by cutting costs and scaling back expansion plans. In the first quarter, it opened six Bed Bath & Beyond stores, one Christmas Tree Shops store, and one buybuy Baby store. It also closed one Bed Bath & Beyond store.
McGranahan said the results show Bed Bath & Beyond has gained market share since former rival Linens 'n Things closed its doors after filing for bankruptcy protection last year.
The loss of a major competitor means that Bed Bath & Beyond no longer needs to distribute as many coupons as it did in the past to get shoppers into its stores, helping to lower expenses, the analyst said.
Shares rose 6.4 percent to $30.20 after closing at $28.39 on the Nasdaq.
(Reporting by Nicole Maestri; Editing by Gary Hill)

Source: Reuters