March 28, 2024

With Debt to Sell, Troubled Euro Nations Find Willing Buyers

On Thursday, the Spanish Treasury sold €4.5 billion, or $5.9 billion, of debt, including bonds with a maturity of as much as 28 years. The average interest rate paid by Madrid on two-year bonds was 2.71 percent, down from 3.36 percent in December — a level not reached since March of last year.

The interest rate on the benchmark 10-year Spanish bond stood at 5.03 percent Thursday. Last year that rate spiked above 7 percent — a level that many economists believe places an unsustainable burden on governments.

Higher interest rates make it not only more expensive but also more difficult for governments to borrow the money they need. Consistently high borrowing costs helped force Greece, Ireland and Portugal to seek international bailouts.

But the renewed sense of optimism in Spain this week led the government to suggest that the country’s economic recession would not be as deep and prolonged as had been feared. When drafting its 2012 budget, the government had expected the economy to contract 1.5 percent, but officials now expect the final figure for last year to be lower.

“The government is adopting the right measures to overcome the crisis, and these efforts are about to bear fruit,” Foreign Minister José Manuel García-Margallo said at an investment conference here Wednesday. “Foreign investors are coming back.”

But some foreign investors in Mr. García-Margallo’s audience gave a much more cautious reading on the recent market rally, as well as warning that it was too early for talk about an economic turnaround.

“Optimism is the flavor of the day, but perhaps people are overoptimistic,” said Birgitte Olsen, fund manager at Bellevue Asset Management in Zurich. “We’ve now seen some car companies shift their production lines to Spain, but a lot more reforms and work need to be done to return to growth and job creation.”

Still, Ms. Olsen said, “it makes sense for any company that has the opportunity to sell bonds to do it right now.”

Indeed, last year’s trickle of Spanish corporate debt issuance has turned this month into a flow. On Wednesday, Banco Santander sold €1 billion of seven-year bonds at an interest rate of 4 percent. In the first two weeks of January, a handful of other Spanish banks, as well as Telefónica and energy companies including Gas Natural and Red Eléctrica, sold bonds totaling over €7 billion, with most sales heavily oversubscribed.

“The results of some of these Spanish bond issues would have been impossible just three months ago, but it’s unclear to me whether what has now opened is really a long-term window,” said Michael Gierse, a fund manager at Union Investment in Frankfurt, which has €180 billion in assets under management.

The next litmus test for investors, Mr. Gierse said, would come at the end of the month, when the Spanish authorities are expected to lift a ban on the short-selling of all stocks trading on the country’s exchanges. The ban, intended to reduce market volatility, was to be lifted at the end of last October but was then extended by three months to help ailing companies like Banco Popular issue debt. Short-selling lets investors sell borrowed shares in the hope that their price will fall and that they could then be repurchased more cheaply, allowing the investors to pocket the difference.

“Once the short-selling ban gets lifted, we will have a much clearer idea of whether this market rally is for real,” Mr. Gierse said. For now, he added, “I don’t think that investors from outside the euro zone are already back in Spain.”

One reason for such wariness is that investors endured a roller-coaster ride last year.

Article source: http://www.nytimes.com/2013/01/18/business/global/18iht-spaindebt18.html?partner=rss&emc=rss

Car Sales End Strong Year on Modest Note

Based on early reports Thursday, analysts predicted a 10 percent increase overall for the industry for December, a gain that would put the year’s sales at about 14.5 million – the best performance since 2007.

The three Detroit car companies all posted sales gains in December, solidifying improvements made throughout year because of consumers replacing their aging cars and trucks.

General Motors, the largest American automaker, said its December sales increased 4.9 percent, primarily because of new products such as the Cadillac ATS sedan and higher incentives on its Chevrolet Silverado and GMC Sierra pickups.

The company had been losing ground in the high-profit pickup truck segment until it added discounts to the Silverado, which posted a 6.1 percent sales increase in December, and the Sierra, which was up 13.4 percent.

For the year, G.M. sold 2.59 million vehicles, an increase of 3.7 percent from 2011. That lagged the overall gains in the market, which were about 14 percent industrywide for the year.

G.M.’s head of United States sales, Kurt McNeil, said the company expects significant growth in 2013, with industry sales as high as 15.5 million. He noted that the resolution of fiscal negotiations in Washington removed some potential concerns for consumers shopping for new vehicles.

“We are especially pleased that the politicians on both sides of the aisle in Washington were able to compromise,” Mr. McNeil said in a conference call with analysts and media Thursday. “The short-term crisis has passed.”

Ford Motor Company reported a slight sales increase of 1.9 percent in December as safety recalls for its new Escape SUV and Fusion sedan depressed results.

Ford said that sales of the Fusion dropped 10.8 percent during the month and Escape sales slid 21.3 percent. The company has been plagued with multiple recalls on engines and other parts on the vehicles, which are usually among its strongest sellers.

The drop was mitigated by strong results for Ford’s two smallest cars, the Focus, which increased in sales by 58.3 percent, and the Fiesta, which was up by 52.8 percent.

For all of 2012, Ford’s United States sales increased 4.7 percent to 2.25 million vehicles. Ken Czubay, head of Ford’s domestic sales and marketing, said the company’s small-car sales were its best in more than a decade.

Ford predicted that industry sales in 2013 could reach 16 million vehicles, as more Americans replace older models with new, more fuel-efficient ones.

Chrysler, the smallest of the Detroit companies, was again the star performer in December, with a 10 percent increase.

The company’s new compact car, the Dodge Dart, showed improvement with a 36 percent gain from the prior month. In fact, much of Chrysler’s lineup – ranging from Jeep SUVs to the tiny Fiat 500 micro-car – posted sales records for the month of December.

For the year, Chrysler sold 1.65 million vehicles, a 21 percent increase from 2011.

The major foreign automakers were expected to report results later in day. In a partial report, Toyota, the biggest of the Japanese manufacturers, said that it sold 2 million vehicles in the United States during 2012, a 26.6 percent increase from the year before.

Article source: http://www.nytimes.com/2013/01/04/business/car-sales-end-strong-year-on-modest-note.html?partner=rss&emc=rss

Good Year for Autos, but a Test Waits in ’12

But the road ahead for General Motors, Ford and Chrysler will be crowded with tougher competition from foreign automakers, as the relatively healthy American car market becomes an even bigger draw.

Japan’s car companies are looking to rebound from natural disasters in Asia, and the debt crisis in Europe has automakers there looking to North America for more market share. Already, Nissan and Volkswagen have posted big sales gains in the United States for last year.

Even with increased demand, the Detroit companies will be hard-pressed to maintain their combined 47 percent share of the market, up from 45 percent in 2010, analysts said.

“It is not going to be an easy task,” said Jesse Toprak, vice president for industry analysis at the research Web site TrueCar.com. “They did benefit from the misery of others in 2011.”

Auto sales in the United States surged in December for the seventh consecutive month, as the industry continued its methodical comeback from the depths of recession.

Sales rose 8.7 percent in December, and increased 10 percent for all of 2011 compared with the previous year.

With about 12.8 million vehicles sold, it was the industry’s best year since 2008 — although still well short of the 16 million annual sales level enjoyed before the recession.

The biggest beneficiaries of the increased demand were G.M., Ford and Chrysler. All three companies reported increases in market share in the same year for the first time in two decades, according to the automotive-research Web site Edmunds.com, which began tracking share numbers in 1991.

Because of their restructurings — and in the case of G.M. and Chrysler government bailouts — Detroit was solidly profitable, a fact that President Obama has sought to use to his political benefit as he seeks re-election this year.

The continued comeback of new-vehicle sales underscored that the United States remained the most profitable car market in the world.

“It’s not the cash cow it once was, but it’s still a mature and profitable market, as opposed to more volatile emerging markets, or stagnant ones in Europe,” said Rebecca Lindland, an analyst with the consulting firm IHS Automotive.

Analysts said consumers were spending more freely on new vehicles because their current cars were aging and financing options were more readily available.

Mr. Toprak estimated that leasing accounted for 25 percent of sales in 2011, more than double the level of two years earlier.

The Detroit automakers all reported increases during December. Chrysler, which had lagged the market a year ago, said its sales jumped 37.1 percent from the year-earlier period on the strength of new Jeeps and sedans. Sales at G.M. climbed 4.6 percent during the month, and Ford reported a 10.1 percent increase.

Among the foreign manufacturers, Volkswagen said its monthly sales increased 31.4 percent, Hyundai posted a 13.3 percent improvement and Nissan reported a 7.7 percent gain. Toyota said its sales were flat in December, while Honda reported an 18.8 percent drop.

The research firm J. D. Power Associates said December was the first month in which sales to individual consumers — a figure that excludes bulk deliveries to businesses and government buyers — topped one million since the August 2009 spike during the federal cash-for-clunkers trade-in program.

“The industry has managed through another series of external shocks and is in a healthier position as the year closes,” said John Humphrey, senior vice president for global automotive operations at J. D. Power.

Sales are expected to climb further this year. Edmunds.com is forecasting 2012 sales of 13.6 million, while TrueCar.com expects 13.8 million.

With the European economy floundering, most global automakers are putting more resources than ever into products for American consumers. Leading the way is Volkswagen, which introduced several revamped models last year and has big plans for more growth.

“We expect V.W. to be very aggressive in the U.S. market,” said Mr. Toprak. “Toyota and Honda will also likely gain back some of the share they have lost, but not all of it.”

Toyota and Honda lost sales last year because of supply constraints from the earthquake and tsunami in Japan as well as floods in Thailand. Their historic dominance in the small and midsize car segments also eroded because of the presence of more competitive models from the Detroit car companies.

Both Toyota and Honda vow, however, that their inventory problems are now behind them, and that a blitz of new products will lure shoppers back to their showrooms.

“I think we are extremely well positioned to show customers once again what we have to offer,” said Jim Lentz, head of Toyota’s sales operations in the United States.

A resurgence by foreign automakers will put pressure on the Detroit companies to hold on to their 2011 gains.

“We are forecasting for the Big Three all to lose some market share in the coming year,” said Ms. Lindland. “That’s not to say, however, that they won’t be profitable because they have restructured so dramatically.”

The American companies are hardly resting on their laurels, and will unveil a number of important new products next week at media previews of the annual auto show in Detroit.

G.M. is expected to show a new small Cadillac sedan and a little crossover vehicle from its Buick division. Chrysler plans to introduce the new Dodge Dart compact car, while Ford will take the wraps off a redesigned version of its midsize Fusion sedan.

There will also be plenty of foreign models competing for attention at the Detroit show.

“The selection of vehicles that consumers have to choose from is the best in the history of the U.S. industry,” said Mr. Toprak. “But it makes it that much harder for any one company to stand out.”

Nick Bunkley contributed reporting

Article source: http://feeds.nytimes.com/click.phdo?i=a96187b9dcc6b460d79b863974809eca

Auto Workers Strike Deal With Ford to Raise Wages and Add New Jobs

The U.A.W. and Ford on Tuesday announced a tentative agreement on a four-year contract that substantially mirrors the deal struck last month at G.M.

The union’s president, Bob King, said he anticipated reaching a settlement soon with Chrysler, the smallest and least profitable of the Detroit car companies.

“We want to go in and finish the job at Chrysler very quickly,” Mr. King said at a news conference here on Tuesday to announce details of the Ford pact.

About 41,000 union workers at Ford will vote over the next two weeks on whether to approve the agreement, which calls for the company to create 5,750 entry-level jobs in the United States over the four years of the contract. Those jobs are in addition to 6,250 positions that Ford previously said it would add over the next two years.

Besides increasing jobs and investment in its facilities in the United States, Ford also agreed to raise the hourly wages of entry-level employees to $19 by the end of the contract, from about $15 now.

Longtime auto workers, who earn about $28 an hour, did not get any increase in base wages. Instead, Ford agreed to give workers with at least one year on the job a $6,000 bonus for signing the new contract as well as annual $1,500 payments beginning next year and through 2015.

The bonuses are higher than those agreed to by G.M., which is still in the early stages of its comeback from a government bailout and bankruptcy protection in 2009.

Analysts said Ford had to sweeten its payments to workers because the company has posted better financial results than its crosstown rivals and rewarded its top executives with bonuses and stock options.

Ford agreed to pay the first six months of 2011 profit-sharing for workers — about $3,700 a worker — in November, and the balance next year. Usually, the automakers make profit-sharing payments after the calendar year.

John Fleming, Ford’s head of global manufacturing and labor affairs, said Tuesday that the contract was meant to reward workers and improve the company’s cost structure.

“We really believe that it’s fair to our employees and recognizes the contribution that they’ve made to the success of the Ford Motor Company,” Mr. Fleming said at a briefing. “But we’re also pleased that it will continue to improve our competitiveness directly here in the United States.”

Ford said it would invest an additional $4.8 billion in its United States plants beyond previously announced capital expenditures. Several factories received guarantees of new products in the contract, including an Ohio assembly plant that will build medium-duty trucks that had been slated for production in Mexico.

“Our membership not only wanted good wages, they wanted to make sure they had security in their jobs,” said Jimmy Settles, the U.A.W.’s chief negotiator with Ford. Ford officials declined to say whether the contract directly matched what G.M. achieved in terms of holding the line on labor costs. G.M. executives have said their deal will add about 1 percent to labor costs annually over the life of the contract.

Mr. King said he believed the Ford deal followed the pattern set by G.M. “The overall costs are very comparable,” he said.

The success of the Detroit labor talks is seen as significant because of the industry’s gradual comeback in the face of strong economic headwinds. The union tried to extract bonuses and new jobs without creating additional costs, said Harley Shaiken, a labor professor at the University of California, Berkeley.

“This is a good contract in very bad times, and that’s an unusual achievement,” Mr. Shaiken said. “It makes the companies more competitive and allows the workers to share in the success.”

Mr. King expressed confidence that Ford workers would approve the deal. G.M. employees ratified their agreement last week by almost two to one.

The negotiations may be trickier at Chrysler, which has taken longer than G.M. to turn around after its own federal bailout and trip through bankruptcy.

Now controlled by the Italian automaker Fiat, Chrysler is still struggling to achieve solid profitability. Sergio Marchionne, the chief executive of both companies, has said Chrysler could not afford contracts as rich as those at G.M. and Ford.

“The contract at Chrysler will not be identical to Ford’s deal,” Mr. Shaiken said. “But it is likely to be the same framework tailored to fit Chrysler.”

The union and Chrysler have agreed to extend their current contract until Oct. 19. Mr. King played down the possibility that the U.A.W. or Chrysler would have to seek arbitration to reach an agreement.

“Sergio doesn’t want to turn it over to a third party to decide, and I don’t want to turn it over to a third party,” Mr. King said.

This article has been revised to reflect the following correction:

Correction: October 4, 2011

An earlier version of this article incorrectly said that $2.4 billion of the $6.2 billion investments that Ford would make had already been announced. Actually, $1.4 billion was already announced.

Article source: http://feeds.nytimes.com/click.phdo?i=ff0e22a380278ff62cda7cc06489664a