Sunday, May 24, 2009

Toyota Falls From Top in Auto Supplier Survey as Honda Climbs

(Bloomberg) -- Toyota Motor Corp., the automaker that expanded its U.S. market share by more than half since 2002, was knocked from the top spot in a ranking of supplier relations in North America for the first time by Honda Motor Co.

Toyota came in second in the annual survey started in 2002 by consulting firm Planning Perspectives Inc. Among U.S. automakers, Ford Motor Co. climbed from the bottom two years ago to gain its largest lead over General Motors Corp., while Chrysler LLC ranked last for the second straight year.

The relationships matter because suppliers can help trim costs, improve performance and speed work on new models, often providing 70 percent of the content. Toyota, which has made cars in the U.S. for more than 20 years, dropped from first place after a decade of broadening its lineup to more closely match U.S. rivals’ and posting its first quarterly losses.

“Research we began in the early 1990s always showed Toyota as having the best relationship with its suppliers, but something seems to be changing,” said John Henke Jr., president of Birmingham, Michigan-based Planning Perspectives. “They’re looking a little more like U.S. automakers.”

Auto suppliers have been under pressure from tight credit and production declines in line with falling sales. Chrysler idled all of its plants while it restructures in bankruptcy and GM said it will idle 14 North American assembly plants for as much as 9 weeks.

More than 40 major suppliers filed for Chapter 11 last year, according to the Motor & Equipment Manufacturers Association. At least five have filed for bankruptcy this year, and many of the country’s largest suppliers, such as Lear Corp. and Visteon Corp., have amended or gotten waivers on loans to stay in compliance with lending terms.

Toyota’s Growth

Henke attributed Toyota City, Japan-based Toyota’s decline to a combination of less-experienced employees on its parts- purchasing team and stricter demands on suppliers from its engineers. The automaker’s U.S. auto sales fell 38 percent this year through April, while industry volumes slid 37 percent.

Toyota increased U.S. market share to 17 percent in 2008 from 10 percent in 2002, according to Autodata Corp., based in Woodcliff Lake, New Jersey. Now the world’s largest automaker, it has added models such as the FJ Cruiser sport-utility vehicle, Lexus brand hybrids, a Venza wagon and four Scion cars. It also makes full-size Tundra pickups in San Antonio.

The 72-year-old automaker’s loss was 766 billion yen, or $8.2 billion, for the three months that ended in March, capping its first annual deficit in 59 years. For the quarter, Toyota’s loss was wider than GM’s $5.98 billion and Ford’s $1.43 billion.

Gauging Trust

“Toyota’s supplier-relations approach is based upon long- standing principles and practices such as mutual trust and prosperity,” Tania Blersch, a Toyota spokeswoman, wrote in an e-mail. “These principles and practices do not change over time.”

Planning Perspectives surveyed 231 companies that supply the country’s six largest automakers on topics such as “trust” and a carmaker’s concern for supplier profit margins. The ranking is determined by Planning Perspective’s Working Relations Index measuring supplier perceptions of how automakers relate to them.

Honda, based in Tokyo, came in first even after slipping 10 points to 349 on the 500-point scale, besting Toyota, which slid to 339 from 415 two years earlier. Nissan Motor Co.’s third-place score improved to 268, followed by Ford at 232, GM at 183 and Chrysler at 162.

None ‘Good’

Toyota and Honda scored below 350, Planning Perspective’s threshold for “good to very good” relationships for the first time since 2003. The three Japanese automakers scored within the “average” range, while the U.S. automakers, with ratings of less than 250, had “very poor to poor” ratings.

“We work really hard with suppliers on communication and personal visits and transparency,” said Ed Miller, a Honda spokesman, who declined to comment specifically on the survey. “When you do that, when there is a problem you can spot it sooner and you can help each other sooner.”

Ford’s score improved the most, 22 percent from last year, 43 percent over two years.

Suppliers said Ford helped them get acceptable margins, and the partsmakers have grown more likely to share technology. The Dearborn, Michigan-based automaker has begun paying upfront for engineering and testing instead of reimbursing over the life of a program, said Tony Brown, the purchasing chief.

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Wednesday, May 20, 2009

BofA seeks to repay $45 billion by year-end

(Reuters) - Bank of America Corp wants to pay back $45 billion in bail-out funds by the end of the year, accelerated by a program to raise capital, the Financial Times reported on its website late on Wednesday.

The largest U.S. bank by assets is on track to raise more than $35 billion in capital by the end of September, the report said, citing people familiar with the matter.

Bank of America said on Tuesday it raised $13.47 billion through a share sale, marking a major step toward meeting the U.S. government's requirements for capital-raising following the recent "stress testing" of the bank.

Including proceeds from the sale of part of its stake in China Construction Bank Corp for $7.3 billion, the bank is now more than halfway to plugging a $33.9 billion capital shortfall identified by the government.

The report also said the bank is in negotiations to sell some of its non-core assets.

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Tuesday, May 19, 2009

Geithner works to fill out Treasury team

(Reuters) - Treasury Secretary Timothy Geithner is surrounding himself with former aides to President Bill Clinton as he attempts to rebound from a rocky start even as top-tier vacancies have slowed decision-making.

Former Clinton press secretary Jake Siewert, who has been chief communications officer at aluminum giant Alcoa, is headed to Treasury soon as a senior adviser, sources said.

He will join an advisory team that also includes former Clinton economic adviser Gene Sperling and Lee Sachs, who was an assistant Treasury secretary for financial matters under Clinton.

Stephanie Cutter, who has been Treasury spokeswoman, is headed to the White House for a time to help manage the rollout of President Barack Obama's nominee to fill a vacancy on the Supreme Court.

The former Clinton aides have credibility because Clinton's tenure in the 1990s was marked by a strong economy, though the economic problems they encountered bear little resemblance to the crushing challenges President Barack Obama faces.

For all of their influence, however, there are real limits on the counselors' authority, including an inability to testify before Congress that effectively shifts more of those duties onto the officials who have been vetted by lawmakers.

And there is strength in numbers. The Washington Post reported this week that some key decisions are on hold because of an absence of top-level deputies to Geithner.

One anecdote cited by the Post was that Rick Wagoner was still technically on General Motors' payroll seven weeks after he was ousted as the automaker's top executive.

Nominees have not even been named yet for some posts, like that of under secretary for domestic finance, a key position because that person must help devise strategy for raising the staggering sums of money Treasury will have to borrow to keep the government operating.

Bill Galston, an economic expert at the Brookings Institution think tank who was a Clinton policy adviser, said Geithner's Treasury Department is being slowed by an absence of a top layer under Geithner.

It is a result, he said, of a Senate confirmation process taken to the extreme. The background checks on potential nominees got tougher after Geithner was damaged by the news that he had failed to pay back taxes and Tom Daschle's bid to become health and human services secretary was derailed over a similar issue.


"We have at this point a system of nominating, vetting and confirming that is almost broken," Galston said. "We have piled layer upon layer upon layer of reviews, questionnaires, disclosures etc. over the last 30 years that it has now reached a point where even people who are willing to go through the process have to wait around forever."

Still waiting for a Senate hearing is Lael Brainard, another former economic adviser in the Clinton administration who was nominated for the position of under secretary for international affairs.

If confirmed, she would become top financial diplomat for Treasury and take on much of the responsibility for sensitive issues from China currency policy to laying the groundwork for economic summits with other countries.

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U.S. housing starts and permits plumb record lows

(Reuters) - U.S. housing starts and permits fell to record lows in April, weighed down by a slump in multifamily units, according to data on Tuesday that still hinted the U.S. recession may be drawing to a close.

The Commerce Department said housing starts fell 12.8 percent to an annual rate of 458,000 units last month, the lowest since records began in January 1959.

The drop reflected a 46.1 percent plunge in breaking ground for multifamily units and indicated homebuilding remains a drag on the economy. However, starts for single-family homes, rose 2.8 percent, a second straight gain that showed the worst-hit part of the market was stabilizing.

"There is some stability. When you look at the housing starts numbers, they are going to be vulnerable to kind of two steps forward, one step back," said Nick Kalivas, vice president of financial research at MF Global in Chicago. "Housing starts are at a level where they are bottoming out."

Analysts said the decline in starts should help the housing market work through a huge stock of unsold homes and lay the foundation for a recovery from a three-year slump, which was the main trigger of the economic downturn.

Compared to the same period last year, housing starts were down 54.2 percent.

"This is essentially a good thing. It means supply will eventually come back in line with demand," said Joseph Brusuelas, an economist at Moody's in West Chester, Pennsylvania.

Shares of U.S. homebuilders fluctuated in choppy trade. The Dow Jones home construction index ended slightly lower following strong gains on Monday after data showed homebuilder sentiment had improved.

In related news, shares of Home Depot Inc, the world's largest home improvement chain, fell 5 percent after the company reported an almost 10 percent drop in quarterly sales.


New building permits, which give a sense of future construction activity, fell 3.3 percent to 494,000 units in April, the lowest since records were started in January 1960.

The decline in permits reflected a 19.9 percent decrease in new building plans for multifamily units. Building permits for single family homes rose 3.6 percent.

Compared to April of last year, permits were down 50.2 percent.

While housing activity continues to fall, the report still offered glimmers of hope for an economy in its 17th month of recession, according to analysts.

A National Association of Home Builders survey on Monday showed U.S. home builder sentiment surged to an eight-month high this month, with industry leaders hopeful the slump was nearing a bottom and market stability was around the corner.

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Sunday, May 17, 2009

GM's Opel might make cars for other brands

(Reuters) - General Motors' (GM.N) Opel unit might make cars for other manufacturers if car parts maker Magna (MGa.TO) becomes its partner, German paper Welt am Sonntag reported, citing unidentified sources close to Magna.

Germany's hunt for a partner for struggling Opel has boiled down to two rival groups, Italy's Fiat (FIA.MI) and Austrian-Canadian Magna, which have been asked to present a full plan within a week, Economy minister Karl-Theodor zu Guttenberg said on May 14.

If Opel has to reduce output of its cars, it could offer capacity to other carmakers such as Peugeot (PEUP.PA) or Ford (F.N), for example in its factory in Ruesselsheim, the sources close to Magna said, according to the weekly newspaper.

Magna therefore does not plan to close any Opel factories in Germany, while it might shut plants in Belgium's Antwerp and in Luton in the UK, the paper said.

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Thursday, May 14, 2009

Japan’s Machinery Orders Fall as Factories Sit Idle

(Bloomberg) -- Orders for Japanese machinery resumed falling in March, a sign that managers remain wary of upgrading factories and equipment before an economic recovery takes hold.

Bookings, an indicator of capital investment in the next three to six months, fell 1.3 percent from February, when they gained a revised 0.6 percent, the Cabinet Office said today in Tokyo. Economists surveyed predicted a 4.6 percent drop.

Although Japan’s worst recession since World War II probably bottomed last quarter, the collapse in global demand has forced manufacturers to cut production by more than a third from last year’s peak. With factory lines sitting idle and profits falling, companies have little reason to invest in new equipment, spending that accounts for about 16 percent of the world’s second-largest economy.

“The economy is still in bad shape,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “Companies are still reluctant to make new investments.”

The Nikkei 225 Stock Average climbed 1.7 percent as of the lunch break in Tokyo. The yen traded at 95.97 versus the dollar from 96.10 before the report.

From a year earlier, orders fell 22.2 percent in March compared with 30.1 percent in February. The Cabinet Office said the “pace of declines has eased,” changing the wording of its assessment from “the orders trend continues to decline.”

China’s Demand

Bookings from abroad, which aren’t included in the headline number, jumped 46.4 percent, the biggest monthly gain on record. The Cabinet Office doesn’t give any information about the geographic origin of the orders, though an official said China is likely to have been a source of demand.

Analysts predict a government report next week will show the economy shrank at an annual 16.2 percent pace last quarter, the worst showing since records started in 1955 and the fourth contraction in a row.

Data released in the past month suggest gross domestic product may rise this quarter, albeit building from a low point.

Confidence among merchants and small businesses improved in April. Exports increased in March from a month earlier, and factory production rose for the first time in six months. Bank of Japan Governor Masaaki Shirakawa said this week that the gain in output shows the economy is “leveling out.”

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