Business Blog Posts

GM bailout payback to take several years: CEO (Reuters)

Addison Ray

DETROIT (Reuters) ï¿½ General Motors Co (GM.UL) is determined to pay back taxpayers as quickly as possible, but the process could take "several years," GM Chief Executive Dan Akerson said on Thursday.

Paying back the government all at once would be "unrealistic," Akerson said in his first meeting with reporters since becoming CEO two weeks ago.

Akerson declined to comment directly on GM's plans for an IPO because of U.S. securities regulations.

The IPO could come within about two months, people involved in the process have said, and would allow the U.S. government to begin to reduce its stake in the automaker and allow GM to start to shed the stigma of a government bailout.

Akerson, a longtime telecommunications industry executive who was head of buyouts at The Carlyle Group private equity firm, said he wanted to build a "culture of speed" at GM, which has been criticized for moving too slowly to make changes.

"We need to have an attacking culture, not a defending culture," said Akerson, a graduate of the U.S. Naval Academy and former Navy officer.

He said GM needed to anticipate more during the development process where its rivals were heading with their competing vehicles, to get ahead in quality and build sales momentum.

Akerson was named GM's fourth chief executive in an 18-month period during a shake-up in August when former CEO Ed Whitacre stepped down to clear the way for a longer-serving CEO to guide the company through its upcoming IPO.

Speaking at GM's Detroit headquarters, Akerson said he intends to steer GM through a period of potential growth and was looking for a house in the Detroit area.

"I don't see myself as transitional," he said.

Akerson also said he was not contemplating more management changes at the automaker after a tumultuous period in which the company has turned over top managers in its finance, marketing and vehicle development operations.

"I like the team that's on the field," Akerson said.

Akerson was named to GM's board in July 2009 by the U.S. Treasury after the automaker emerged from a government-funded bankruptcy that left the government with a nearly 61 percent stake.

The government's ownership of GM has not changed the way it does business, Akerson said, adding that he updates Ron Bloom -- the Obama administration official in charge of the auto bailout -- every few weeks by telephone.

"We keep them informed, I do it personally," he said.

Akerson, a Republican who supported Sen. John McCain's presidential bid, said GM aims to return the taxpayer money.

While GM has faced a backlash from the bailout and has been criticized for becoming a ward of the state as "government motors," Akerson said many people had approached him to let him know they also wanted the GM turnaround to succeed.

"I don't see where there's this patina of government motors but that's OK with me," he said.

Separately, Akerson said he was open to discuss the potential for profit-sharing with the United Auto Workers union in contract talks that begin next year.

UAW President Bob King has said the union would look to win back some of the concessions it granted to GM and other U.S. automakers during the industry downturn over the past five years.

Akerson is expected to become chairman of GM at the end of the year.

(Reporting by Kevin Krolicki; Editing by Maureen Bavdek)

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Geithner signals U.S. impatience on China currency

Addison Ray

By Doug Palmer and David Lawder

WASHINGTON | Thu Sep 16, 2010 10:33am EDT

WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner sought to convince U.S. lawmakers on Thursday he was taking a tougher line on China's currency and trade policies, but Beijing warned that pressure from Washington could backfire.

Striking his sharpest tone yet in what has long been a flashpoint in U.S.-China relations, Geithner planned to tell a Senate hearing that the yuan was strengthening too slowly and he was looking for ways to get Beijing to move faster.

Geithner's testimony could be critical to whether lawmakers, who say China hurts U.S. jobs and corporate profits by keeping its currency artificially cheap, decide to push ahead on legislation targeting Beijing's policies before November elections, which are being shaped by voter anguish over the economy.

"China needs to allow significant, sustained appreciation over time to correct this undervaluation and allow the exchange rate to fully reflect market forces," Geithner said in prepared remarks for the first of a pair of Capitol Hill appearances.

Signaling a reluctance to give in, China's Foreign Ministry said pressure over the yuan exchange rate "not only would fail to solve the problems; on the contrary, it could have the opposite effect."

It was unclear, however, whether Geithner's get-tough talk would be enough to overcome skepticism in Congress over the administration's approach and head off a bill that would slap punitive duties on Chinese goods.

"There's no question that the economic and trade policies of China represent clear roadblocks to our recovery," Senate Banking Committee Chairman Christopher Dodd said, calling for "concrete action" to address the situation.

U.S. PATIENCE WEARS THIN

With the U.S. jobless rate stuck near 10 percent while China is again running up big trade surpluses, some analysts see chances for legislation as more likely now than at any time in the recent past.

Geithner made clear that U.S. patience on China's currency policy was wearing thin.

Implicit was the threat that the Treasury Department's next semiannual foreign exchange report due on October 15 could bring a declaration that China manipulates its currency for unfair advantage, which would open the door to U.S. trade sanctions.

But Geithner also appeared to be looking for breathing room for the administration to try to squeeze concessions from the Chinese before frustrated lawmakers press ahead with a bill that would force its hand.

China in June, a week ahead of a meeting of Group of 20 leaders in Canada, had freed the yuan from a nearly two-year-old peg to the dollar.

RETALIATION POSSIBLE

China could retaliate if Congress actually passes legislation. A trade war between the two countries would be a serious blow to President Barack Obama's effort to ease strains on a range of economic and foreign policy disputes.

Complicating the situation was Japan's first intervention in six years on Wednesday to push its own currency down from 15-year highs against the dollar as Japan struggles to support its export-led economy. Analysts said allowing Japan a free pass to intervene would make it harder to persuade China to curtail such activity.

The yuan has risen only about 1.25 percent against the dollar since Beijing announced the end to its currency peg in June, an increase that Geithner has called insufficient.

In the past six days, however, the yuan has scored its fastest rise since February 2008 -- a move that some analysts view as a response to growing U.S. rhetoric.

The Obama administration faces a delicate balancing act. It wants to pay homage to American resentment over Chinese trade practices but also must avoid alienating Beijing, whose diplomatic support is needed to tackle nuclear standoffs with Iran and North Korea.

Washington is also mindful that Beijing holds massive amounts of U.S. debt, and the two countries are deeply entwined economically.

(Additional reporting by Paul Eckert, writing by Matt Spetalnick; Editing by Leslie Adler)

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Jobless claims at two-month low (Reuters)

Addison Ray

WASHINGTON (Reuters) ï¿½ New claims for unemployment benefits dropped to a two-month low last week, hinting at some stability in the labor market, while producer prices recorded their largest gain in five months.

Although the reports on Thursday confirmed the economy remained on a slow growth path, they further reduced the odds of a double-dip recession and deflation feared by financial markets.

"The economy will not run away, but at least it's not shriveling," said Pierre Ellis, senior economist at Decision Economics in New York.

Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 450,000, the lowest since the week ended July 10, the Labor Department said on Thursday. Financial markets had expected a rise to 460,000.

In a second report, the department said its seasonally adjusted index for prices paid at the farm and factory gate increased 0.4 percent after gaining 0.2 percent in July. Markets had expected a 0.3 percent increase last month.

U.S. stock index futures cut losses on the data, while Treasury debt prices trimmed gains. The U.S. dollar slipped against the yen.

A Labor Department official said data for only two states had been estimated for last week's jobless claims report. The four-week average of new claims, considered a better measure of underlying labor market trends, dropped 13,500 to 464,750.

The second straight week of declines pulled claims for unemployment benefits further away from a nine-month high of 504,000 touched in mid-August and claims are now in the upper end of a 400,000-450,000 range that analysts say is associated with sustainable job growth.

The impaired labor market, characterized by a 9.6 percent unemployment rate, is hobbling the economy's recovery from its most painful recession since the 1930s.

The Federal Reserve is closely watching the jobs market, but is not expected to announce any news steps to ease monetary policy at a regular meeting next Tuesday. Many analysts, however, believe it will resume purchases of government debt by year-end to keep interest rates low and shore up the economy.

"These (PPI) numbers should reduce concerns about deflation a bit, but it probably won't take the discussion about further easing off the table," said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St. Louis.

Frustration over a lack of jobs is eroding President Barack Obama's popularity among Americans and could see the Democratic Party severely punished in November 2 congressional elections.

Many analysts predict Republicans could take control of the House of Representatives from Democrats.

With the economy sluggish, price pressures remain muted, but the rise in producer inflation in August took some of the edge off deflation worries.

Producer prices last month were bumped up by a 2.2 percent jump in energy costs. Gasoline prices surged 7.5 percent, the largest increase since January, after falling 2.2 percent in July. Food prices fell 0.3 percent after rising 0.7 percent in July.

Stripping out volatile food and energy costs, core producer prices edged up 0.1 percent last month, matching market expectations. Core PPI increased 0.3 percent in July.

Core PPI was held back by a 0.4 percent decline in passenger car prices, which offset a 0.2 percent increase in the cost of light motor trucks, the Labor Department data showed.

In the 12 months to August, the core producer price index rose 1.3 percent after increasing 1.5 percent in July. The year-on-year increase was in line with market expectations.

(Reporting by Lucia Mutikani, additional reporting by Ellen Freilich in New York; Editing by Andrea Ricci)

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Jobless claims at two-month low

Addison Ray

WASHINGTON | Thu Sep 16, 2010 9:23am EDT

WASHINGTON (Reuters) - New U.S. claims for unemployment benefits dropped to a two-month low last week, hinting at some stability in the labor market, while producer prices recorded their largest gain in five months.