Automakers grab loans, look to Obama White House

The long-term fate of the auto industry rests with Barack Obama now that President George W. Bush has given car companies $17.4 billion in emergency rescue loans.
Simply letting the Big Three collapse was not an option amid a recession, housing slump and financial credit crunch, Bush said in announcing the short-term loans and demanding tough concessions from the automakers and their employees.
"By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time," the president said in his Saturday radio address. "And we will give American workers an opportunity to show the world once again that they can meet challenges with ingenuity and determination, and emerge stronger than before."
The Detroit companies pledged to rebuild their once-mighty industry, though they acknowledged it would be tough to fight their way back from the brink of bankruptcy. If the carmakers fail to prove viability — a positive cash flow and ability to make good on the loans — by March 31, they will be required to repay the government loans.
That's something they would find all but impossible to do.
Bush said the loans will give automakers three months to institute plans to restructure into viable companies "which we believe they are capable of doing." He said if restructuring cannot be done outside bankruptcy, the loans will provide time for companies to make the legal and financial preparations needed for an "orderly" Chapter 11 bankruptcy.
"This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers and suppliers," he said. "If a company fails to come up with a viable plan by March 31, it will be required to repay its federal loans. Taken together, these conditions send a clear message to everyone involved in American automakers: The time to make the hard decisions to become viable is now — or the only option will be bankruptcy."
The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out the industry using money from the $700 billion rescue program for financial institutions.
Obama, who takes office a month from Saturday, praised Bush's action but said the companies "must not squander this chance to reform bad management practices and begin the long-term restructuring" absolutely necessary.
Obama will be free to reopen the arrangement from the government's side if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.
Some $13.4 billion of the rescue money will be available this month and next — $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC, which have said they could be facing bankruptcy soon without government help. GM is set to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford Motor Co. says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.
Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the UAW and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. This month, the UAW agreed to suspend the program.

Passenger jet goes off Denver runway; 38 hurt

A Continental Airlines jet taking off from Denver veered off the runway into a ravine and caught fire Saturday night, forcing passengers to evacuate on emergency slides and injuring nearly 40 people, officials said.
No deaths were reported, but 38 people were taken to hospitals, said Kim Day, Denver International Airport manager of aviation. No one was reported in critical condition.
The cause of the accident was not immediately known. The weather in Denver was cold but not snowy when Continental Flight 1404 took off from Denver International Airport for Houston around 6:20 p.m.
The plane veered off course about 2,000 feet from the end of the runway and did not appear to be airborne, Day said.
It was not known when the plane caught fire, but ground crews put out the flames quickly, said airport spokesman Jeff Green. The 112 people on board made it out on through slides on the Boeing 737.
The plane was carrying 107 passengers and five crew members, said Continental spokeswoman Mary Clark.
Denver Health spokeswoman Kalena Wilkinson said seven people were taken to her hospital with injuries that were not life-threatening. Seven people were at the University of Colorado hospital, but no one had life-threatening injuries, a spokeswoman said.

Nike shares rise on strong 2Q sales overseas

Shoe and apparel company Nike Inc. said Wednesday that, despite weak domestic sales, its profit grew 9 percent in the second quarter on strong sales overseas.
The Beaverton, Ore.-based company reported its net income rose to $391 million, or 80 cents per share, compared with net income of $359.4 million, or 71 cents per share, in the same quarter last year.
The company said its total revenue grew 6 percent to $4.6 billion, from $4.3 billion last year. Changes in currency exchange rates boosted revenue by 1 percentage point for the quarter.
The results slightly exceeded Wall Street's expectations. Analysts polled by Thomson Reuters expected the company to earn 79 cents per share on sales of $4.73 billion.
Nike president and Chief Executive Officer Mark Parker said the results demonstrate the strength of the brand. He said the current state of the industry and the world offer opportunities for Nike to become a stronger leader.
"In challenging times like these, it's especially important to stay focused on what we do best — delivering the most innovative and relevant product, strengthening our relationship with consumers and driving excellence into every area of our business," Parker said in a statement. "That's how we continue to lead the industry, take market share from competitors and grow our business."
The company saw strong sales growth in Asia and other foreign markets. Revenue in Asia jumped 22 percent for the quarter. But domestic sales were weak. Total revenue in the U.S. decreased 1 percent, with significant drops in equipment sales.
Nike said sales at six of its top 10 accounts in the U.S. were essentially flat. And comparable-store sales for Nike-owned stores dropped nearly 20 percent, because the company had little promotional activity compared to the rest of the marketplace and many of its stores are in tourist areas, which are among those hit hardest by the economic downturn. Comparable-store sales are considered a key indicator of a retailer's health.
Footwear and athletic goods analyst John Shanley at Susquehanna Financial Group said Nike is feeling pressure from the recession. But he is pleased with the company's ability to perform in tough times and said Nike's leadership is focused on how to cope with the uncertainty of the future.
"They are cautiously optimistic and rightly so," Shanley said.
Nike's orders for product to be delivered between December and April dropped 1 percent below the same period last year. Excluding the effect of changes in foreign currency exchange rates, reported orders grew 6 percent.
But company leaders said they are prepared to thrive under the continued macro-economic pressures and will tightly control inventory, which some analysts were concerned was fattening, and focus on investments that sustain long-term growth.
The company already has taken some steps to control costs, implementing a hiring freeze and cutting travel and other operating expenses.
Shares of Nike fell $1.39 to $49.25 in after-hours trading Wednesday following the announcement.

FedEx profit up, but cuts pay and costs

Package delivery giant FedEx Corp (FDX.N) reported a higher profit for its fiscal second quarter, meeting expectations, but announced a 20 percent pay cut for CEO Fred Smith and said it was suspending retirement plan contributions as the U.S. economy's outlook looks bleak.
FedEx said it has a hiring freeze in place and has cut staff levels at its FedEx Freight and FedEx Office units.
FedEx said new measures include a 20 percent base salary decrease for Smith and pay cuts of between 7.5 and 10 percent for other senior executives as of January 1. All other U.S. salaried personnel will have a 5 percent pay cut.
According to a company filing with the U.S. Securities and Exchange Commission in July, Smith's base salary for the company's fiscal 2009 year was set at around $1.48 million.
The company also announced the suspension of matching contributions to FedEx's 401(k) retirement plan for a minimum of one year as of February 1.
FedEx said the cost-cutting measures would reduce expenses by $800 million by the end of its fiscal 2010 year.
"Our financial performance is increasingly being challenged by some of the worst economic conditions in the company's 35-year operating history," Smith said in a statement.
FedEx also gave a broad earnings outlook range for the second half of its fiscal 2009 year and said it would not provide an outlook for the third quarter because of "significant economic uncertainty."
"It's tough, but it's a sign of the times," Al Meyers, portfolio manager of the AHA Diversified Equity Fund, which owns FedEx shares, said of the pay cuts. "The fact that executives including Fred Smith are taking pay cuts sends a message to employees that 'we're all in the same boat,' which is a positive."
"As long as we have confidence in the management at FedEx and in the overall business model, we'll stick with them," he added.
The Memphis, Tennessee-based company, which like United Parcel Service Inc (UPS.N) is considered a bellwether of U.S. economic health, reported that net income for its fiscal second quarter ended November 30 rose to $493 million, or $1.58 per share.
That compared with the $479 million, or $1.54 per share, the company reported a year earlier.
FedEx said falling fuel prices had lifted profits, which offset lower package volumes due to global economic weakness.
"I am very pleased with the results," said Dan Ortwerth, a research analyst at Edward Jones. "FedEx is getting better and better at managing its cost structure."
Edward Jones has a "buy" rating for both FedEx and UPS.
The company reported revenue for the quarter of $9.54 billion, compared with $9.45 billion a year earlier. Analysts expected $9.78 billion.
FedEx gave a broad profit range of between 69 cents and $1.94 per share for the second half of its fiscal 2009 year and said that apart from economic uncertainty, the recently announced departure of DHL from the United States made it difficult to provide a forecast for the third quarter.
"FedEx has been taking action for some time to offset the effects of a downturn," said Sandeep Kar, a transportation analyst at consulting company Frost & Sullivan. "They have done the right things to navigate them through these troubled waters."
Deutsche Post AG (DPWGn.DE) said in November that its DHL express unit would end U.S. domestic service on January 30 with the loss of 9,500 jobs, citing the U.S. slowdown and DHL's uphill struggle to compete against FedEx and UPS on their home turf.
FedEx and UPS have seen package volumes hit by the slowing U.S. economy. UPS said in November the uncertain economic environment had made it too difficult to give its usual peak-season package volume forecast.
FedEx shares were down 58 cents or 0.9 percent at $63.39 on Thursday afternoon on the New York Stock Exchange, after rising as much as 2 percent earlier in the day.

Stocks finish lower amid lingering economic fears

Wall Street extended its losses Thursday, as a negative ratings outlook on financial and industrial powerhouse General Electric Co. shook an already fragile investor psyche and sent stocks tumbling.
After moving within a narrow trading range for much of the session, the Dow Jones industrial average dropped about 220 points. The broader Standard & Poor's 500 index lost more than 2 percent.
Stocks struggled to find a direction in the early going Thursday as investors sifted through a number of economic indicators, including more layoffs and dismal earnings forecasts.
But a negative ratings outlook on GE from Standard & Poor's added further pressure on the market.
The ratings service lowered its outlook on GE and its GE Capital finance arm to negative from stable. S&P affirmed their Triple-A ratings, but said there is a one-in-three chance they could lose them because of the ongoing financial struggles at GE Capital.
GE shares fell $1.43, or 8.2 percent, to close at $15.96.
At the same time, energy stocks tumbled as oil prices plunged. Crude briefly dropped below $36 a barrel Thursday on worries of a drastic pullback in energy spending, even after a record production cut from OPEC earlier this week. The price settled at $36.22 a barrel in trading on the New York Mercantile Exchange.
Oil prices have been on a downward march since reaching a high of near $150 a barrel in July.
"The fear is that if oil does fall down to $25 or $30 a barrel, that could indicate that the economy is even weaker than market perception and that obviously is negative," said Peter Cardillo, chief market economist for Avalon Partners.
Chevron Corp. fell $3.79, or 4.9 percent, to $73.03, while Exxon Mobil Corp. dropped $4.06, or 5 percent, to $77.
Thursday's news reinforced the belief that the economy's troubles are far from over. The market remains unsure how steep and prolonged the recession will be.
The expiration Friday of some options contracts for December added to the downward pressure, Cardillo said.
The Dow fell 219.35, or 2.49 percent, to 8,604.99. The Standard & Poor's 500 index fell 19.14, or 2.12 percent, to 885.28, while the Nasdaq composite index fell 26.94, or 1.71, to 1,552.37.
The Russell 2000 index of smaller companies fell 7.42, or 1.52 percent, to 479.17.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 5.46 billion shares, up from 5.18 billion shares on Wednesday.
Wall Street's sharp decline late Thursday overshadowed some of investors' earlier enthusiasm over a potential economic stimulus package. President-elect Barack Obama's aides are working on assembling a two-year plan that could cost $850 billion and include new jobs, middle-class tax relief and expanded aid for the poor and the unemployed.
Further weighing on the market were lackluster economic data and mixed corporate earnings reports.
The Labor Department reported that initial jobless claims fell by more than economists anticipated to 554,000 last week. The claims remain near last week's 26-year high, and the four-week moving average for claims is up, but investors had been bracing for a gloomier reading.
Meanwhile, a private research group's measure of the economy's health fell again in November and its six-month rate of decline hit the worst level since 1991.
"Most of the data was better than the market expected, but showed that the economy is still contracting," Cardillo said.
FedEx Corp. reported a 3 percent rise in quarterly earnings, but announced further cost cuts as demand continues to wane. Ingersoll-Rand Co. cut its fourth quarter earnings forecast by more than half, and motor home maker Winnebago Industries Inc. swung to a loss.
But Discover Financial Services swung to a profit and homebuilder Lennar Corp.'s quarterly loss was smaller than last year's.
In recent weeks, the market has moved away from the wild 300-point swings of September, October and early November, leading some analysts to believe that Wall Street is beginning to show some stability.
"People in general are less pessimistic," said Bernie McGinn, chief executive of Alexandria, Va.-based McGinn Investment Management. "They are still not optimistic, but they are less pessimistic, and I think the market reflects that."
Since the S&P 500 and the Dow hit multiyear lows on Nov. 20, the Dow is still up 13.9 percent, while the S&P 500 is up 17.7 percent.
But Thursday's decline, which extended a 100-point drop in the Dow on Wednesday, showed just how fragile the market still is. Because stocks are up so much from their Nov. 20 lows, the market is more sensitive to news, said Chris Hensen, senior portfolio manager with MFC Global Investment Management in Toronto.
"News like this out of General Electric would make the market roll over," he said.
The Dow fell on Wednesday as enthusiasm over the Federal Reserve's historic rate cut the day before dampened on news of a larger-than-expected loss at Morgan Stanley and layoffs at Cooper Tire and Rubber Co. and Newell Rubbermaid Inc. The Dow and the S&P 500 are still down more than 30 percent for the year.
Also Thursday, Obama named three veteran regulators to round out his economic team and vowed to overhaul regulatory rules to prevent a repeat of the financial and economic turmoil the country is currently suffering.
Mary Schapiro, who currently heads a nongovernment regulatory group for securities firms, is Obama's pick to lead the Securities and Exchange Commission.
The SEC faces mounting criticism for its failure to protect investors and detect trouble on Wall Street. Its latest blemish comes from the fraud investigation of prominent money manager Bernard L. Madoff, who is accused of running a $50 billion Ponzi scheme.
General Motors Corp. was the biggest loser Thursday among the 30 stocks that make up the Dow, plunging 16 percent, or 71 cents, to $3.66 as the Bush administration said it is seriously considering "orderly" bankruptcy as a way of dealing with the struggling U.S. auto industry. Ford Motor Co. shares fell 30 cents, or 9.6 percent, to $2.84. Chrysler LLC is not publicly traded.
Long-term Treasury prices soared, sending yields down to new record lows. The yield on the benchmark 10-year Treasury note fell to 2.07 percent late Thursday from 2.19 percent late Wednesday. The yield on the popular three-month T-bill — whose yield has at times gone negative due to frenzied buying — remained flat at zero.
The strong surge in buying has been stoked by the Fed's decision Tuesday to lower its federal funds rate target to a range of zero to 0.25 percent, and express an interest in buying long-term government debt.
The dollar rose against the euro and the British pound, but fell against the Japanese yen. Gold prices declined.
The January contract for light, sweet crude, which closes on Friday, fell 9 percent, or $3.84, to settle at $36.22 a barrel on the New York Mercantile Exchange after dropping as low as $35.98, levels not seen since June 2004.
In Asia, Japan's Nikkei stock average rose 0.64 percent, and Hong Kong's Hang Seng index rose 0.24 percent. Britain's FTSE 100 rose 0.15 percent, Germany's DAX index rose 1.02 percent, and France's CAC-40 fell 0.24 percent.

Struggling home accessories retailer Pier 1 Imports Inc. said Thursday its fiscal third-quarter loss widened amid a free fall in consumer spending, ra

Research In Motion delivered a quarterly profit in line with forecasts and a rosier-than-expected outlook on Thursday that reflects strong holiday sales of its BlackBerry smartphones even as the global economy slows.
Investors were prepared for the fiscal third-quarter results, most of which RIM disclosed earlier this month. More important was the outlook for the current fourth quarter, which includes the crucial December holiday shopping season.
The fourth-quarter forecast has extra importance this year. RIM has a range of new BlackBerries on the market, while the mood for consumer and business spending is uncertain at best. The company has trimmed prices and benefited from heavy promotion from wireless carriers offering its products.
"In order to drive sales RIM has had to lower prices, but the sales growth is phenomenal in this market," Canaccord Adams analyst Peter Misek said of the results. "In the midst of a severe consumer recession, this is incredible."
Waterloo, Ontario-based RIM said it expects fourth-quarter revenue of $3.3 billion to $3.5 billion, and earnings per share of 83 to 91 cents.
The outlook topped analyst expectations for revenue of $2.97 billion and earnings per share of 83 cents, as compiled by Reuters Estimates.
The results, released after the market's regular close, initially pushed RIM's shares up 6 percent to $40.75 in after-hours trading, but they soon dropped back to near their Nasdaq close at $38.44.
RIM said it earned $396.3 million, or 69 cents a share, in the third quarter ended November 29. That was up from a profit of $370.5 million, or 65 cents, a year earlier.
Revenue rose to $2.78 billion from $1.67 billion.
Nick Agostino, an analyst at Research Capital, said RIM's outlook is "suggesting that the product portfolio is certainly starting to have the traction that was hoped for."
The company has recently launched a series of handsets -- a flip phone BlackBerry, the touchscreen Storm and the high-end Bold -- in hopes of capturing a broader swath of subscribers. It said it currently has about 21 million users.
However, the product rollout has also come precisely at a time when big companies and retail consumers alike are cutting costs to conserve cash. This made analysts worried that BlackBerry upgrades and sales could slump.
"Things could've been a lot worse, all things considered," Agostino said. "I think these numbers were, for the most part, a little bit of a relief for me."
RIM co-Chief Executive Jim Balsillie said that besides product-launch delays, the weak economy affected results in the third quarter.
However, the "strong" holiday sales and brisk new product sales "are laying the groundwork for a record number of shipments in the fourth quarter," he said during a conference call with analysts.
"Despite the current turmoil in the economy, we believe RIM is well positioned to take advantage of the industry shift to smartphones that is occurring and to grow its share in this market segment."
RIM's introduction of consumer-aimed devices such as the flip-phone BlackBerry and the touch-screen Storm are part of an aggressive push to diversify its client base beyond the executives, politicians and other professionals who have been its sales mainstay.
Meanwhile, Palm Inc., the California smartphone maker, had a wider-than-expected loss of 73 cents per adjusted share, against Wall Street expectations of 43 cents.
The company said its smartphone revenue was $171 million, down 39 percent from the year-ago period. It said that consumers had purchased only 599,000 units, down 13 percent compared to a year earlier.
(Additional reporting by David Lawsky in San Francisco; ; Editing by Peter Galloway)

Pier 1 3Q loss widens amid spending free fall

Struggling home accessories retailer Pier 1 Imports Inc. said Thursday its fiscal third-quarter loss widened amid a free fall in consumer spending, raising some questions about its ability to weather the economic slowdown.
The company's loss for the quarter ended Nov. 29 grew to $36.9 million, or 41 cents per share, from $10 million, or 11 cents per share, a year earlier. Revenue fell 20 percent to $300.9 million.
Analysts surveyed by Thomson Reuters, on average, expected a smaller loss of 26 cents per share on revenue of $309.6 million.
Pier 1 has struggled with weak results for more than five years, as bigger merchants such as Bed Bath & Beyond Inc. and Target Corp. entered the furnishings business and as the home decor market went into a slump.
Forth Worth, Texas-based Pier 1 has reported only one profitable quarter over the past two years. When Chief Executive Alex Smith came aboard in 2007, he devised a restructuring aimed at improving merchandise, cutting costs and returning to profitability. But that plan was hijacked by a faltering economy and consumer spending drop-off this fall.
Smith called the results Thursday "extremely disappointing, but not a surprise."
He said that while the company still planned to return to profitability in 2010, the recession has "slowed our speed and increased our timeline."
The company also said its liquidity remained strong. It has $150 million available for borrowing under its secured credit facility for total liquidity of $282 million as of the end of the quarter.
Pali Research analyst Stacey Widlitz agreed the company has enough liquidity to get through the near term, she said, but said, "obviously, their sales have to move in the right direction to avoid the same fate as many other retailers we've seen."
Rival Linens 'n Things filed for bankruptcy protection in May. It announced liquidation sales at its stores in October after failing to find a buyer that wanted to operate the company.
"If they keep going at the rate they are now, (bankruptcy) is a risk," she said of Pier 1.
The company could not immediately be reached for comment.
Widlitz said the results weren't a surprise after the company announced last month that it expected sales in stores open at least one year, a key retail metric known as same store sales, to drop 16 to 18 percent in most recent quarter.
"The issue now is how they can get their stock back above a dollar," she said.
Shares, which have closed below $1 since Nov. 17, fell 10 cents to close at 33 cents. The New York Stock Exchange has warned the company was facing delisting if its share price does not have an average price of $1 over a consecutive 30-day trading period within the next six months.
Widlitz said Circuit City Stores Inc. received a similar warning from the NYSE before it filed for bankruptcy protection in November.

Research in Motion 3rd-qtr profit grows 7 percent (AP)

BlackBerry-maker Research in Motion Ltd. reported better-than-expected revenue guidance for the fourth quarter and strong holiday sales of its new smart phones despite the slowing economy.
The Canada-based company met Wall Street expectations on Thursday by reporting income of $396.3 million, or 69 cents per share, for the three months ended Nov. 29, compared with $370.5 million, or 65 cents per share, in the year-ago period. Sales grew 66.3 percent to $2.78 billion from $1.67 billion.
Excluding one-time charges, RIM said its profit was $477.3 million, or 83 cents per share, the high end of its guidance. Profit is 7 percent higher from the same period last year.
Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, expected income of 82 cents per share on sales $2.8 billion.
RIM said it added 2.6 million BlackBerry subscribers net users during the quarter and shipped 6.7 million devices, as it launched three new smart phones in the quarter, including a touch-screen BlackBerry geared for consumers.
RIM's forecast for revenue in the current fourth quarter is forecast at $3.3 billion to $3.5 billion, with net subscriber additions of 2.9 million and earnings per share of 83 to 91 cents.
"Despite the current turmoil in the economy we believe RIM is well positioned to take advantage of the industry shift to smart phones," Co-CEO Jim Balsillie said on a conference call. He said the volume of shipments were expected to rise to between 7.5 million and 8 million in the fourth quarter.
Analysts said revenue and earnings guidance were better than expected.
"The guidance was the key. ... The revenue guidance is at the high end, almost 20 percent higher of where we were," said Peter Misek, an analyst with Canaccord Adams. "This is a really brutal market and the fact that they can grow revenues like that, wow, I'm impressed."
Misek said he was taken aback by Balsillie's confidence on the conference call that RIM would meet its guidance and that margins will improve next year.
"They've never been that certain or confident before, so that was pretty stunning in this market and this economy as we watch consumer spending numbers continue to blow up," Misek said. "You're going to see substantial growth even in a terrible economy."
Genuity Capital Markets analyst Deepak Chopra said RIM now has lower margins but is selling more BlackBerrys. "The BlackBerry is gaining market share versus other wireless products. The products are moving," Chopra said.
Along with the delayed BlackBerry Bold, the new models include the BlackBerry Storm, the first touch-screen BlackBerry without a keypad, and the Pearl Flip, the company's first flip phone.
RIM cut its third-quarter profit and sales forecasts earlier this month. It said adjusted earnings per share would be between 81 cents and 83 cents for the quarter that ended Nov. 29, down from its earlier forecast of between 89 cents and 97 cents per share. Analysts were expecting a profit of 91 cents per share.
Balsillie said a delay in launching the new phones, and not a slowing economy, was the primary reason for the earnings warning earlier this month.
RIM has been targeting the consumer market after enjoying success in the corporate market for years. Apple Inc.'s iPhone is a major competitor.

Oracle 2Q profit dips, still matches analyst views (AP)

Oracle Corp.'s quarterly profit slipped for the first time in three years as a stronger dollar hobbled its international sales, but the business software maker reassured investors by predicting it should still thrive despite the deepening recession.
The optimistic guidance offered late Thursday eclipsed any concerns raised by Oracle's fiscal second-quarter results, which were distorted by wild currency fluctuations driven by the biggest financial crisis since the Great Depression.
Oracle shares gained nearly 3 percent in extended trading as investors digested the developments.
The Redwood Shores, Calif.-based company said it earned $1.3 billion, or 25 cents per share in the three months ended in November. The net income dipped by $7 million from the same time last year while the earnings per share remained the same.
Although it was negligible, the erosion marked Oracle's first decline in profit since its fiscal quarter ending in November 2005.
Investors, though, focus primarily on how Oracle would have fared if it didn't have to account for expenses covering employee stock compensation and its acquisition spree of the past four years.
Excluding those factors, Oracle said it would have earned 34 cents per share — matching the average estimate among analysts polled by Thomson Reuters.
But Oracle's revenue of $5.61 billion, up 6 percent from last year, didn't live up to analyst expectations. On average, analysts had projected revenue of $5.84 billion.
Oracle's sales of new product licenses — a key measure of a software maker's health — also drooped. Software sales totaled $1.63 billion, down 3 percent from last year.
In September, management had predicted that its software license would rise anywhere from 2 percent to 12 percent.
But that forecast didn't envision the dollar rising as rapidly as it did against the euro and other key currencies during October and November after a string of failures and other troubles at major banks triggered a financial panic.
Like many other tech bellwethers, Oracle is vulnerable to currency swings because about half of its revenue comes from outside the United States.
Besides hurting its international sales, the stronger dollar had the effect of exposing more of Oracle's sales to higher U.S. tax rates — a factor that deflated the company's earnings.
If currencies had remained unchanged from last year, Oracle said its fiscal second-quarter profit would have been up by 10 percent and revenue would have been 12 percent higher. And software sales would have increased 5 percent.
"Now, of course, obviously currency was not the only news going on in the quarter in the outside world and yet we feel just extremely good about our results," Safra Catz, Oracle's co-president, told analysts in a Thursday conference call.
Oracle felt enough confident to project adjusted earnings of 34 cents to 36 cents per share in the current quarter ending in February. Analysts, on average, expect 34 cents per share. The company anticipates its revenue in the current quarter will rise 8 percent to 11 percent, also falling within the range of analyst expectations.
If currencies remain at the same level in the current quarter as they were in the prior year, Oracle believes its sales of new licenses should range anywhere from a 2 percent decrease to an 8 percent increase.
Investors apparently liked what they heard. After falling 13 cents to finish Thursday's regular session at $16.61, Oracle shares rebounded by 49 cents to $17.10 in extended trading.
Oracle is counting on the recurring stream of money that it collects for product upgrades and maintenance to offset any weakness in its software sales. These lucrative maintenance contracts account for more than $11 billion in revenue, accounting for nearly half of Oracle's business.
Other major technology companies have been laying off workers and trimming expenses in other areas to shore up profits, but Oracle isn't making any radical changes yet — another sign that its chief executive, Larry Ellison, believes the software maker is in good shape even if the economy isn't.
Some analysts had predicted Oracle would join in the cost-cutting parade, but the company is still expanding its payroll. Oracle ended November with 86,657 employees, adding about 1,500 workers since August.

Bush considering 'orderly' auto bankruptcy

The Bush administration is looking at "orderly" bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry, Treasury Secretary Henry Paulson said Thursday as carmakers readied more plant closings and a half million new jobless claims underscored the deteriorating national economy

Fed mulls interest rate cut, maybe to all-time low

With the country spiraling deeper into recession, the Federal Reserve is ready to slash its key interest rate — perhaps to an all-time low_ in hopes of cushioning some of the economic fallout felt by many struggling Americans.
To battle the worst financial crisis since the 1930s, Fed Chairman Ben Bernanke and his colleagues already have ratcheted down their main lever for influencing the economy — the federal funds rate — to 1 percent, a level seen only once before in the last half-century.
The Fed opens a two-day meeting Monday to assess to economy and decide its next move on rates. Another reduction to the funds rate, the interest banks charge each other on overnight loans, is all but certain to be announced Tuesday.
Many economists predict the Fed will cut its rate in half — to just 0.50 percent. A few think the Fed could opt for an even more forceful action — lowering rates by a whopping three-quarters percentage point or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the targeted funds rate going back to 1954.
Even an aggressive rate reduction won't turn the economy around, analysts said.
"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.
However deeply the Fed decides to cut rates, the prime rate — now at 4 percent — for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a dose of relief.
The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the flat-lined economy. So far, though, the Fed's aggressive rate reductions have failed to lift the country out of a recession that started last December.
Clobbered by the financial crisis, worried banks have hoarded their cash and been extremely reluctant to lend money to customers. Fearful consumers, watching jobs vanish and their investments tank, have sharply cut back their spending, including big-ticket purchases like homes and cars that typically involve financing.
The negative forces have fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.
To unlock lending and get financial markets to operate more normally, the U.S. has resorted to a string of radical actions, including a $700 billion financial bailout where the government is making cash injections in banks in return for partial ownership stakes.
In terms of rate cuts, the Fed is getting ever closer to running out of ammunition.
It can lower the funds rate only so far — to zero. Even if that were to happen — a point of debate among economists — the prime rate would fall to 3 percent but no lower.
Against that backdrop, Bernanke says the central bank is exploring other ways to stimulate the economy.
The Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities, Bernanke says. This might lower rates on these securities and help spur buying appetites.
Another option the Fed has mulled: issuing its own debt, which would give the central bank cash and more flexibility to battle the financial crisis. To do that, however, the Fed would need new powers from Congress.
"The Fed wants to show that it has tools and options and is not out of tricks because interest rates are very low," said Michael Feroli, economist at JPMorgan Economics. "The problems holding back the economy are fairly long lived in nature."
To combat the financial crisis, the Fed already has created first-of-its-kind programs, such as getting cash directly to companies by buying up mounds of "commercial paper," the short-term debt firms use to pay everyday expenses such as payroll and supplies.
It also recently launched massive programs to boost the availability of consumer credit, including that for cars, student loans, homes and credit cards. The Fed also is making loans to banks, is providing a financial backstop to the mutual fund industry, and has injected billions of dollars in financial markets here and abroad.
The Fed could opt to expand programs by enlarging loans it's now making, providing loans to other types of companies, or buying more and different types of debt. The Fed's balance sheet has ballooned to $2.2 trillion, from close to $900 billion in September, reflecting some of those other activities to get credit flowing again.
Even with all the bold moves, the economy continues to sink deeper into despair.
Skittish employers axed 533,000 jobs in November alone. That drove the unemployment rate up to 6.7 percent, a 15-year high.
Since the start of the recession, the economy has shed nearly 2 million jobs. Analysts predict another 3 million more will be lost between now and the spring of 2010.
Last week alone, Bank of America Corp., tool maker Stanley Works and Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, announced job cuts.
General Motors Corp., Chrysler LLC and Ford Motor Co., meanwhile, are fighting for their survival. GM and Chrysler have said they're in danger of running out of money within weeks. The White House is exploring new ways to help Detroit after rescue efforts collapsed in Congress.
With the employment market eroding and consumers retrenching, the economy could stagger backward at a shocking 6 percent rate in the current October-December quarter, analysts predict. It shrank at a 0.5 percent pace in the third quarter.
President-elect Barack Obama is advocating an economic recovery plan that includes spending on big public works projects to bolster jobs. His plan also includes tax cuts to spur consumers to spend more and businesses to step up investment and hiring.
Americans are sorely feeling the toll of the housing, credit and financial crises.
Households' net worth fell 4.7 percent in the third quarter to $56.5 trillion as people watched the value of their homes and investments tank. It marked the fourth straight quarterly decline, the Fed said.

SKorea to build centre for Vietnam's Agent Orange victims

South Korea Monday began building a centre in Vietnam to help thousands suffering from the effects of the defoliant Agent Orange since the Vietnam War, Seoul's veterans affairs ministry said.
The ministry said construction of the two-billion-won (1.47 million dollar) rehabilitation centre in Quang Nam province would be completed next October.
"The centre will include a residence area, hospital and other public facilities that will be used by people and their offspring suffering from exposure to defoliants used during the Vietnam War," its statement said.
The centre is being funded jointly by the Ministry of Patriots and Veterans Affairs and the Korea Disabled Veterans Organisation.
More than 30,000 people in Quang Nam alone still suffer from various ailments associated with exposure to the powerful herbicide, the ministry said.
The centre will house up to 64 live-in patients while providing daily medical services to hundreds of others. It will also offer vocational and academic classes to help victims and their families.
During the Vietnam war, US forces sprayed about 80 million litres (21 million gallons) of Agent Orange, which contains the toxin dioxin, and other herbicides to deprive their enemies of forest cover and crops.
South Korea sent 300,000 troops to fight alongside the United States. In January 2006 a Seoul court ordered the US firms Dow Chemical and Monsanto to compensate 6,800 veterans and their families.
Washington has never accepted responsibility for the millions of Vietnamese people whom the communist government says have died or suffered from direct or second-generation disabilities caused by Agent Orange.
However, Washington and Hanoi have worked together to use three million dollars approved by the US Congress in May 2007 to clean up environmental damage and support health programmes.

Bush: Iraq war is not over, more work ahead

Afghanistan – On a whirlwind trip shrouded in secrecy and marred by dissent, President George W. Bush on Sunday hailed progress in the wars that define his presidency and got a size-10 reminder of his unpopularity when a man hurled two shoes at him during a news conference in Iraq.
"This is your farewell kiss, you dog!" shouted the protester in Arabic, later identified as Muntadar al-Zeidi, a correspondent for Al-Baghdadia television, an Iraqi-owned station based in Cairo, Egypt. "This is from the widows, the orphans and those who were killed in Iraq."
Bush ducked both shoes as they whizzed past his head and landed with a thud against the wall behind him.
"It was a size 10," Bush joked later.
The U.S. president visited the Iraqi capital just 37 days before he hands the war off to his successor, Barack Obama, who has pledged to end it. The president wanted to highlight a drop in violence and to celebrate a recent U.S.-Iraq security agreement, which calls for U.S. troops to withdraw from Iraq by the end of 2011.
"The war is not over," Bush said, but "it is decisively on it's way to being won."
Bush then flew overnight to Bagram Air Base in Afghanistan for a rally early Monday with more than 1,000 U.S. and foreign troops. "Afghanistan is a dramatically different country than it was eight years ago," he said. "We are making hopeful gains."
He then took a helicopter ride to Kabul to meet with Afghan President Hamid Karzai.
After their meeting, Bush said he told Karzai: "You can count on the United States. Just like you've been able to count on this administration, you'll be able to count on the next administration as well."
The president was then leaving Afghanistan to fly to Britain, stopping to refuel and then continue home.
In many ways, the unannounced trip was a victory lap without a clear victory.
In Iraq, nearly 150,000 U.S. troops remain in Iraq, protecting the fragile democracy. More than 4,209 members of the U.S. military have died and $576 billion has been spent since the war began five years and nine months ago.
In Afghanistan, there are about 31,000 U.S. troops and commanders have called for up to 20,000 more. The fight is especially difficult in southern Afghanistan, a stronghold of the Taliban where violence has risen sharply this year.
Polls show most Americans believe the U.S. erred in invading Iraq in 2003. Bush ordered the nation into war against Saddam Hussein's Iraq while citing intelligence claiming the Mideast nation harbored weapons of mass destruction. The weapons were never found, the intelligence was discredited, and Bush's credibility with U.S. voters plummeted.
"There is still more work to be done," Bush said after his meeting with Iraqi Prime Minister Nouri al-Maliki.
It was at that point the journalist stood up and threw a shoe from about 20 feet away. Bush ducked, and it narrowly missed his head. The second shoe came quickly, and Bush ducked again while several Iraqis grabbed the man and dragged him to the floor.
In Iraqi culture, throwing shoes at someone is a sign of contempt. Iraqis whacked a statue of Saddam with their shoes after U.S. marines toppled it to the ground following the 2003 invasion.
White House press secretary Dana Perino suffered an eye injury when she was hit in the face with a microphone during the melee. Bush brushed off the incident. "So what if a guy threw his shoe at me?" he said.
After the news conference, the president took a 15-minute helicopter ride through dark skies over Baghdad to Camp Victory. Telling hundreds of troops he was "heading into retirement," Bush blamed Saddam for the 2003 invasion and said, "America is safer and more secure" than it was before the war.
Air Force One, the president's jetliner, landed at Baghdad International Airport in the afternoon local time after a secretive Saturday night departure from Washington. In a sign of security gains in this war zone, Bush received a formal arrival ceremony — a flourish absent in his three earlier trips.
Bush soon began a rapid-fire series of meetings with top Iraqi leaders.
He met first with Iraqi President Jalal Talabani and the country's two vice presidents, Tariq al-Hashemi and Adel Abdul-Mahdi, at the ornate, marble-floored Salam Palace along the shores of the Tigris River.
Later, Bush's motorcade pulled out the heavily fortified Green Zone and crossed over the Tigris so he could meet al-Maliki at the prime minister's palace. The two leaders signed a ceremonial copy of the security agreement.
The Bush administration and even White House critics credit last year's military buildup with the security gains in Iraq. Last month, attacks fell to the lowest monthly level since the war began in 2003.
Still, it's unclear what will happen when the U.S. troops leave. While violence has slowed in Iraq, attacks continue, especially in the north.
It was Bush's last trip to the war zones before Obama takes office Jan. 20. Obama, a Democrat, has promised he will bring all U.S. combat troops back home from Iraq a little over a year into his term, as long as commanders agree a withdrawal would not endanger American personnel or Iraq's security. Obama has said the drawdown in Iraq would allow him to shift troops and bolster the U.S. presence in Afghanistan.
The new U.S.-Iraqi security pact calls for all American troops to be withdrawn by the end of 2011, in two stages. The first stage begins next year, when U.S. troops pull back from Baghdad and other Iraqi cities by the end of June.
Journalists and staff who made the 10 1/2-hour trip to Iraq with the president agreed to tell almost no one about the plans, and the White House released false schedules detailing activities planned for Bush in Washington on Sunday.

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Private schools remain closed to mourn victims of school bus tragedy

Private schools across the country remained closed Sunday to mourn the death of the students and teachers of Hill Bird Higher Secondary School in a bus-mishap in Nawalparasi district last week. The accident killed 23 persons, mostly school children, and injured 61.
Private and Boarding Schools' Association (PABSON) had on Saturday announced closure of all private schools across the country in memory of the students and teachers killed in the accident.
PABSON has also appealed to the government to form a commission to probe into the accident and punish the guilty.
The school has announced that Rs 25,000 will be provided to all the bereaved families for the funerals of the deceased ones.
Meanwhile, reports from Chitwan, where the school is located, say that students who survived the tragedy including friends and family members have still not been able to come to terms with the terrible loss. Abhinash Chaudhary, 12, a student of Hill Bird School, remembers his three friends who were killed in the accident. He says he constantly remembers his classmates Diwash Shrestha, 12, Deepa Subedi, 12, and Rimu Subedi, 10, and has no place to pour the immense grief of having to lose three of his most closet friends.
"Diwas was my closest friend among the three. He used to come over to my house and I also used to go to his house regularly. No matter how hard I try I am still not able to accept the loss of my best friends," he says in a sad tone.
Abhinash had wanted to go to the picnic with his friends, but had to remain in his home after his parents didn't give him the permission for it.
Similarly, Prajwal Rupakheti, 14, a seventh grader at the school, also lost his close friend Elina Acharya, 12.
"I can't believe that she (Elina) is no more. I think that she is somewhere around and would come to meet me," he says.
A report published in today's edition of the Kathmandu Post states that last Thursday's fatal accident has spread fear and anxiety among those who survived the tragedy. It said the many of these students have not slept well in the last two days and are haunted by the tragedy in which they lost their friends and teachers right in front of their eyes.
In a statement issued Saturday, President Dr Ram Baran Yadav said he was stunned by the road accident that took place in Nawalparai and said it was an irreparable loss to the concerned family and school as well as country and society. He wished for the eternal peace of departed souls and speedy recovery of those injured being treated in various hospitals

Organization fights against trafficking in Nepali girls:

In 1994, Nepal reported that 1,600 girls had been lured into the sex trade, largely in brothels in nearby India. Maiti Nepal, an organization founded to fight the trafficking of young Nepali girls, estimates the actual figure was 100 times higher.
After years of advocacy on behalf of girls who are lured, deceived, and outright kidnapped into brothels, Maiti Nepal has convinced Nepal's government that the problem is much more severe than it had thought.
But there's still much work to do, according to Maiti Nepal's founder, Anuradha Koirala. Koirala brought the story of her struggle to the Kennedy School of Government last Friday (March 7) at a talk sponsored by the Women and Public Policy Program. Program director Swanee Hunt said that trafficking in girls for the sex trade is a growing problem worldwide and one that demands greater attention.
Hunt cited recent FBI estimates that indicated 50,000 people are trafficked into the United States, and 500,000 trafficked worldwide, each year.
"This phenomenon is expanding. It is one of the great tragedies of our contemporary time. There's not a country on Earth not affected by this scourge," Hunt said.
Koirala began Maiti Nepal in 1993. Since then, the organization has attacked the problem from several directions, offering education and intervention to stop the trafficking and rehabilitation to help girls who've escaped or been discarded by the brothels. Five months ago, Koirala was appointed Nepal's minister for women, children, and social welfare. She said she expects to leave the post after five more months, when the next elections are held.
Speaking before about 40 people gathered in the Kennedy School's Fainsod Room, Koirala painted a grim picture of the problem. The trade is fueled by ignorance and illiteracy and driven by poverty, gender discrimination, and greed, Koirala said. Parents sometimes willingly turn their daughters over to traffickers who promise city jobs that will allow the girls to send money home and return better off in a few years. Sham marriages are also arranged, with the girls going off to a new life with "husbands" who turn them over to pimps.
There are three major destinations for the girls, Koirala said. Inside Nepal, girls are hired to work at hotels and restaurants and forced into the sex trade once there. The Middle East is the largest overseas destination, Koirala said, where girls supposedly hired as housemaids are forced to have sex with male members of the household.
But the biggest problem is the sex trade with India, Nepal's giant neighbor to the south. Maiti Nepal estimates that there are between 150,000 and 300,000 Nepali girls in Indian brothels. In 2001, just 69 were rescued.
Girls averaging 16 years old, but some as young as 7, are forced to service between five and 25 clients per day, Koirala said. Unwilling girls are beaten, burned with cigarettes, shocked with electric cords, and even burned with acid. Many have had multiple unwanted pregnancies, followed by multiple backroom abortions.
AIDS is an enormous problem, Koirala said, as the girls and their clients are often infected and can spread the disease. If they are injured too badly or become unable to perform, they are kicked out, to make their way home alone, Koirala said.
"They use them and just throw them back when they're useless," Koirala said. "They use their whole childhood. They use them up and throw them away."
Maiti Nepal's main preventive tool is education. They run workshops for police, lawmakers, and schoolteachers. They're also active in Nepali villages, distributing pamphlets, doing street dramas, and singing songs to teach people about the dangers of trafficking. In addition, Maiti Nepal has prevention homes in three districts where high-risk girls can go.
During their six-month stay at the prevention homes, the girls undergo job training to teach them skills to help them earn a living in their villages. The girls are then given microcredit loans to help them get started.
At Nepal's borders with India, the group has established nine transit homes. These homes are staffed with women who have escaped from Indian brothels, Koirala said. They watch people crossing the border for likely traffickers in hopes of intercepting them before they enter India.
"This is the best surveillance group because they know who is a trafficker," Koirala said.
The transit homes also serve as a safe haven for girls who've escaped from a brothel and are making their way home to Nepal. These girls, she said, had been preyed upon by Nepali border guards, who took advantage of them just when they thought they were home and safe.
The group also runs a hospice, where girls infected with AIDS, hepatitis, or other sexually transmitted diseases can live because they're often not accepted back to their villages. The facility, called Sneha Griha, or Home of Affection, includes fields so residents can grow vegetables and live in an environment similar to the one in Nepali villages.
After hearing Koirala's presentation, Hunt said it's impossible not to be affected by it. In fact, she said, the challenge is not to be paralyzed by its sadness. It is important the issue be aired not only globally, Hunt said, but also here at Harvard.
"It's very important that students here at Harvard get a dose of this kind of reality between their courses on statistics and game theory," Hunt said.

HMV posts 1H loss, says markets keep weakening

HMV Group PLC, the British retailer of music, DVDs, games and books, reported Thursday a net loss for the first half of its financial year as swelling costs offset higher sales. The company also warned markets had weakened further since the end of the period.
The company reported a net loss of 19.8 million pounds ($29.5 million) for the 26 weeks through Oct. 25, compared with a net profit of 25.9 million pounds a year earlier. Last year's figure was boosted by a 49 million-pound one-time gain resulting from the sale of HMV's Japanese retail unit. The company did not publish quarterly figures.
Revenue over the period increased by 3.5 percent to 754.5 million pounds.
But the high cost of achieving those sales — at 733 million pounds, compared with 712 million pounds a year earlier — meant they were not strong enough to push the company into profit.
HMV warned that the picture was unlikely to change soon, as its markets had weakened even more since the end of October because of falling consumer confidence amid the global economic downturn.
"In particular, the book market has seen a marked deterioration in the five-week period to Nov. 29," said the company, whose book retailing arm, Waterstone's, is a household name across Britain.
HMV shares fell 2.93 percent to 107.75 pence.

Swiss bank sees $327M at risk in Madoff affair

The private Swiss bank Reichmuth & Co says it has 385 million Swiss francs ($327 million) at risk in the case of U.S. financier Bernard L. Madoff, who has been accused of securities fraud.
A letter to investors posted on the Lucerne bank's Web site Sunday says the exposure is through the Reichmuth Matterhorn, the bank's "fund of hedge funds," and that amount represents about 3.5 percent of the 11 billion francs ($9.4 billion) under the bank's management.
"We sincerely regret that Reichmuth Matterhorn is affected ... ," the letter said.
It is the second private Swiss bank to acknowledge having investments in funds managed by Madoff. The Geneva-based Banque Benedict Hentsch Fairfield Partners SA says its exposure is 56 million Swiss francs ($47.5 million) of client assets.
Swiss news media speculated Sunday that the total loss to banks in Switzerland could run into the billions of francs (dollars), but Swiss authorities said they were unable to say how much was at stake.
Madoff, a former chairman of Nasdaq stock market, was arrested Thursday in New York hours after the collapse of Bernard L. Madoff Investment Securities LLC. He has been accused by U.S. authorities of running a phony investment business that lost at least $50 billion.

World stock markets eye recovery after 2008 calamityWorld stock markets eye recovery after 2008 calamity

After a catastrophic year in which Wall Street lost five years of gains, investors worldwide are looking for a possible market bottom but remain cautious in the face of a deep economic crisis.
Global markets are assessing the damage of a calamitous year that has sapped 40 percent or more from many stock market indexes.
As of December 12, the broad-market Standard & Poor's 500 index was down a stunning 40 percent, but has been as much as 52 percent below its all-time peak in October 2007, marking the worst bear market since 1931, according to S&P.
The Dow Jones Industrial Average of 30 blue chips has lost 34.9 percent and the Nasdaq composite has fallen 41.9 percent.
Other markets around the world have fared worse including the Paris CAC 40 (down 42.7 percent) and Japan's Nikkei (46.2 percent), while London's FTSE has tumbled 33.7 percent).
Art Hogan, analyst at Jefferies, said the year saw devastation on a historic scale.
"It's literally as bad as the market can get, in every shape or form: losses of jobs, economy, devastation in equities and residential real estate," he said.
The market also witnessed "devastation in brand-name firms being thrown out of the way like Bear Stearns and Merrill Lynch and AIG and Freddie Mac and Fannie Mae."
Because of the unprecedented losses, Hogan said the feeling is that "next year has got to be better."
Investors bruised by the worst losses in decades are trying to determine whether the worst is over or if what seems like a rebound will end up being a "sucker rally."
Sam Stovall, an equity strategist at S&P, said he sees a likely recovery from oversold conditions in 2009.
"There is a good chance that we could be seeing a bit of recovery next year but I still think what I would call a range-bound recovery," he said.
Lewis Alexander, chief economist at Citigroup, pointed out that "given the forces at work in the global economy, however, any forecast must entail an unusually large margin for error."
Alexander said the problems are compounded by the so-called "negative feedback loop" -- falling share prices mean falling wealth, dampening consumer spending and investment, leading to job cuts and lower output that reinforce the cycle.
"Since their peak over the summer, global equity markets have lost about 25 trillion dollars in value. This represents about 40 percent of global GDP," or gross domestic product.
Wall Street and many other markets have slid to their lowest levels since the bear market of 2002-2003. The Dow index has essentially pulled back to its levels of a decade ago.
Things could still get worse. But many analysts are banking on a "bottom" that will allow markets to recover even if the economy is still sputtering.
"It might be that the 40 percent decline over the past year has already factored in much of the bad news already," said Paul Nolte, analyst at Hinsdale Investments.
"Unfortunately stocks won't be waiting for the economy and will rise anticipating the end of the worst," he said in a note to clients.
Fred Dickson, equity strategist at DA Davidson, said market sentiment may be recovering from its depths, helped by the vast array of actions by the Federal Reserve and US government and its counterparts around the world seeking to jolt life back into the moribund economy.
Dickson said the market "may have seen its psychological low point back on October 15" before the bulk of rescue efforts were announced, but that investors may not yet be out of the woods.
"We believe an optimistic estimate would be that the economy bottoms out next summer," Dickson said.
"We don't see the market as being ready to lift off into the next big bull market. Stock prices continue to be very attractively priced, but could become more even attractively priced if the economy suddenly takes another big dip."
Yet there is no shortage of doomsayers arguing that the meltdown is not over.
Bennet Sedacca of Atlantic Advisors said he believes things will get much worse due to a dysfunctional financial system.
"The problem as I see it is that unless the (US) Treasury wants to back the entire credit market, we are simply delaying the inevitable failures that are to come," he said.
Sedacca said he sees "investable levels" coming with the S&P 500 "yet another 40 to 50 percent lower."
Bill Gross, a respected bond fund manager, also argues for caution.
"Stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates," he said.
"That world, however, is in our past, not our future. More regulation, lower leverage, higher taxes, and a lack of entrepreneurial testosterone are what we must get used to."

Wall Street looks to Fed, auto bailout this weekWall Street looks to Fed, auto bailout this week

Don't expect Wall Street's turmoil to ebb in the year's last full week of trading as investors face questions about an auto bailout, the banking crisis, and the Federal Reserve's final rate-setting meeting of 2008.
The market, still hovering at decade lows, has yet to show any sign of a traditional year-end rally. And the next few days it will face a number of tests that could determine if investors are able to get past all the negative economic news to end the year on a bright note.
The fate of Detroit's three biggest automakers continues to be in question this week after the Senate failed to pass a $14 billion bailout for the Chrysler LLC and General Motors Corp. Ford Motor Co. has said in the past that it does not need government money to survive.
The White House this week is expected to unveil ways to provide emergency aid to the automakers, which have said they could run out of cash within weeks without government help. Many expect that the Bush administration will use money from the $700 billion financial bailout fund to provide loans to the carmakers.
"If the administration had some notion that this was a house of cards, that this was going to bring the entire economy down, then they have the authority to write checks out of the already passed bailout program," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
On Sunday evening, major stock indexes were modestly higher in futures trading. Dow Jones industrial average futures rose 49 points, or 0.56 percent, to 8,738. Standard & Poor's 500 index futures added 5.00, or 0.56 percent, to 891.00; while Nasdaq-100 futures rose 7.25, or 0.60 percent, to 1,220.75.
That might add to Wall Street's resilient performance on Friday after it rebounded from an early sell-off to end higher after the government said it would assist troubled U.S. automakers. The Dow rose 0.75 percent, and ended the week with a loss of just 0.07 percent.
The S&P 500 rose 0.42 percent last week, while the Nasdaq advanced 2.08 percent. For the year, the Dow is down 34.9 percent, the S&P 500 is down 40.1 percent and the Nasdaq is off 41.9 percent.
"The market's been pretty resilient," said Matt King, chief investment officer of Bell Investment Advisors. "The bad news keeps coming out ... but the market's been holding firm and making some good gains. So to us that's a good sign."
Along with uncertainty about the auto sector, the Fed's policy meeting on Monday and Tuesday will also remain in focus. The central bank is expected to lower its benchmark fed funds rate by a half-percentage point to 0.5 percent.
But, with rates so low, that means the Fed will soon run out of room to lower interest rates further to stimulate the economy.
Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. investment banks, will report results this week.
Analysts expect Goldman on Tuesday will report its first loss since becoming a public company in 1999. Morgan Stanley is also expected to report a loss during the fourth quarter.
Investors will also pore over economic reports, including Tuesday's release of the government's Consumer Price Index for November and housing starts.

Fed mulls interest rate cut, maybe to all-time low

With the country spiraling deeper into recession, the Federal Reserve is ready to slash its key interest rate — perhaps to an all-time low_ in hopes of cushioning some of the economic fallout felt by many struggling Americans.
To battle the worst financial crisis since the 1930s, Fed Chairman Ben Bernanke and his colleagues already have ratcheted down their main lever for influencing the economy — the federal funds rate — to 1 percent, a level seen only once before in the last half-century.
The Fed opens a two-day meeting Monday to assess to economy and decide its next move on rates. Another reduction to the funds rate, the interest banks charge each other on overnight loans, is all but certain to be announced Tuesday.
Many economists predict the Fed will cut its rate in half — to just 0.50 percent. A few think the Fed could opt for an even more forceful action — lowering rates by a whopping three-quarters percentage point or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the targeted funds rate going back to 1954.
Even an aggressive rate reduction won't turn the economy around, analysts said.
"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.
However deeply the Fed decides to cut rates, the prime rate — now at 4 percent — for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a dose of relief.
The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the flat-lined economy. So far, though, the Fed's aggressive rate reductions have failed to lift the country out of a recession that started last December.
Clobbered by the financial crisis, worried banks have hoarded their cash and been extremely reluctant to lend money to customers. Fearful consumers, watching jobs vanish and their investments tank, have sharply cut back their spending, including big-ticket purchases like homes and cars that typically involve financing.
The negative forces have fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.
To unlock lending and get financial markets to operate more normally, the U.S. has resorted to a string of radical actions, including a $700 billion financial bailout where the government is making cash injections in banks in return for partial ownership stakes.
In terms of rate cuts, the Fed is getting ever closer to running out of ammunition.
It can lower the funds rate only so far — to zero. Even if that were to happen — a point of debate among economists — the prime rate would fall to 3 percent but no lower.
Against that backdrop, Bernanke says the central bank is exploring other ways to stimulate the economy.
The Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities, Bernanke says. This might lower rates on these securities and help spur buying appetites.
Another option the Fed has mulled: issuing its own debt, which would give the central bank cash and more flexibility to battle the financial crisis. To do that, however, the Fed would need new powers from Congress.
"The Fed wants to show that it has tools and options and is not out of tricks because interest rates are very low," said Michael Feroli, economist at JPMorgan Economics. "The problems holding back the economy are fairly long lived in nature."
To combat the financial crisis, the Fed already has created first-of-its-kind programs, such as getting cash directly to companies by buying up mounds of "commercial paper," the short-term debt firms use to pay everyday expenses such as payroll and supplies.
It also recently launched massive programs to boost the availability of consumer credit, including that for cars, student loans, homes and credit cards. The Fed also is making loans to banks, is providing a financial backstop to the mutual fund industry, and has injected billions of dollars in financial markets here and abroad.
The Fed could opt to expand programs by enlarging loans it's now making, providing loans to other types of companies, or buying more and different types of debt. The Fed's balance sheet has ballooned to $2.2 trillion, from close to $900 billion in September, reflecting some of those other activities to get credit flowing again.
Even with all the bold moves, the economy continues to sink deeper into despair.
Skittish employers axed 533,000 jobs in November alone. That drove the unemployment rate up to 6.7 percent, a 15-year high.
Since the start of the recession, the economy has shed nearly 2 million jobs. Analysts predict another 3 million more will be lost between now and the spring of 2010.
Last week alone, Bank of America Corp., tool maker Stanley Works and Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, announced job cuts.
General Motors Corp., Chrysler LLC and Ford Motor Co., meanwhile, are fighting for their survival. GM and Chrysler have said they're in danger of running out of money within weeks. The White House is exploring new ways to help Detroit after rescue efforts collapsed in Congress.
With the employment market eroding and consumers retrenching, the economy could stagger backward at a shocking 6 percent rate in the current October-December quarter, analysts predict. It shrank at a 0.5 percent pace in the third quarter.
President-elect Barack Obama is advocating an economic recovery plan that includes spending on big public works projects to bolster jobs. His plan also includes tax cuts to spur consumers to spend more and businesses to step up investment and hiring.
Americans are sorely feeling the toll of the housing, credit and financial crises.
Households' net worth fell 4.7 percent in the third quarter to $56.5 trillion as people watched the value of their homes and investments tank. It marked the fourth straight quarterly decline, the Fed said.

Global woes pose risks, also openings for US

The economic slump roaring across the world's geopolitical map poses weighty challenges, as well as some unexpected opportunities, for President-elect Barack Obama.
Japan and major European countries have joined the United States in falling into recession. China has seen its remarkable three-decades-long export-fueled rise slowed. Oil-based economies on Washington's worry list such as Iran, Russia and Venezuela, are reeling, too.
The U.S. led the rest of the world into the economic crisis, and many global players hope Washington can lead the world out. International investments pouring into low-interest U.S. Treasury securities in recent weeks show that, even if the U.S. has lost prestige internationally in recent years, it's still deemed one of the safest places to park money.
The financial crisis drives home to other nations that "without an America that is successful financially, economically and therefore also politically, they're not going to be successful," said Zbigniew Brzezinski, who was national security adviser to President Jimmy Carter. "If we don't function well, no one functions well."
Brzezinski said he believes "we have the chance again to establish our legitimacy internationally."
China had been on track to surpass Germany as the world's largest economy after the U.S. and Japan. But last week Beijing said its November exports took their biggest plunge in seven years in the face of weakening demand from the U.S. and other wealthy countries.
While China does not yet appear to be in recession, many factories have closed, raising the threat of heavy job losses that could fuel political unrest.
Analysts say the downturn has led Chinese leaders to put their top emphasis on protecting the domestic economy, including establishing a $586 billion plan to create public works jobs.
"In the long term, the economic crisis could decrease their investment in terms of defense, which had been rising very sharply. On the down side, it kind of reverses the U.S. approach to try to engage them more globally as China turns more inwardly," said Steven Schrage, a former Bush administration trade official now with the Center for Strategic and International Studies.
Also, U.S. multinational companies need an economically healthy China as a market for their own goods.
The effect of the dive in world oil prices — to under $50 a barrel from a high of $147 a barrel in early July — can work to the advantage and disadvantage of the U.S., analysts suggest.
In Venezuela, it could help reduce the funds available for policies that threaten U.S. interests. That could include President Hugo Chavez's aid program for left-leaning Latin American governments.
In Iran, already isolated economically through international penalties, falling oil prices have dealt a hard beating to the country, helping further erode the popularity of Iran's hard-line president, Mahmoud Ahmadinejad, ahead of a tough re-election battle next year.
Ahmadinejad, already under sharp criticism for his unpopular economic policies, said this month that the oil-price plunge will force the government of the world's fourth-largest oil exporter to make painful spending cuts.
His political rivals and other critics accuse Ahmadinejad of squandering the opportunity presented by soaring oil prices over the past three years and failing to use the higher income to insulate Iran for tougher times.
Secretary of State Condoleezza Rice says she hopes the economic shock from falling oil prices "will lead Iran to take a more reasonable course" in its standoff with the U.S. and other international powers over the country's nuclear program.
Across the broader Middle East, tumbling oil prices also have left their mark.
The economic slowdown may cut into the ability of militant groups based in the region from financing terrorism operations elsewhere. But plunging oil prices will make it harder for Iraq to finance needed renovations to their oil fields and could effect the ability of states friendly to the U.S. to bankroll anti-terrorism programs.
"Some states that have been good at keeping dissent in their countries tamped down with all kinds of subsidies — and Saudi Arabia is one — will have fewer resources to do that with," said Dan Benjamin, a former Middle East specialist with the National Security Council in the Clinton administration. "Saudi Arabia does run on oil and this is not be fun for them," said Benjamin, now a scholar at the Brookings Institution.
Russia is confronting its worst economic crisis in a decade. The need to focus on righting its domestic economy could lead Moscow to moderate aggressive foreign policies.
Still, the crisis has allowed the Kremlin to take greater control over oil companies and other industries that Vladimir Putin, the former president and current prime minister, contends should never have been privatized in the 1990s after the fall of the Soviet Union.
The jury is still out on whether the global economic crisis will increase terrorist attacks, as some analysts suggest. But, clearly, al-Qaida and its affiliates are prepared to take credit for the downturn. Some note that the horrific attacks this month in Mumbai, India, were in the heart of an important economic hub.
"For the last several years, Osama bin Laden has spoken again and again to his followers about the need to go after economic targets, that economic targets should be at the top of the list," said Bruce Riedel a senior national security adviser to three presidents. "Al-Qaida believes that it's winning that war, that the global economic meltdown is a sign of its victory in the war,"
Bin Laden put out a video statement one year ago in which he talked about the home mortgage bubble in the United States and the impending crisis on Wall Street.
Either way, Obama inherits a full plate of issues in which economic and foreign-policy concerns are intertwined.
Going for him, suggests former U.N. Ambassador Thomas Pickering, is what appears to be a huge pool of international good will.
But, Pickering warns, this reservoir may not last long. "Every priority he selects will make someone happy and every priority he fails to select will disappoint somebody, so he's now at the zenith of his political popularity internationally unless he can figure a new way around this."
Pickering suggests Obama address various international issues at some length early in his presidency "so people around the world will know how in fact he fits the world together." It also might help if Obama can demonstrate that the United States under his leadership "can walk and chew gum" at the same time, Pickering said.

Fed mulls interest rate cut, maybe to all-time low

With the country spiraling deeper into recession, the Federal Reserve is ready to slash its key interest rate — perhaps to an all-time low_ in hopes of cushioning some of the economic fallout felt by many struggling Americans.
To battle the worst financial crisis since the 1930s, Fed Chairman Ben Bernanke and his colleagues already have ratcheted down their main lever for influencing the economy — the federal funds rate — to 1 percent, a level seen only once before in the last half-century.
The Fed opens a two-day meeting Monday to assess to economy and decide its next move on rates. Another reduction to the funds rate, the interest banks charge each other on overnight loans, is all but certain to be announced Tuesday.
Many economists predict the Fed will cut its rate in half — to just 0.50 percent. A few think the Fed could opt for an even more forceful action — lowering rates by a whopping three-quarters percentage point or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the targeted funds rate going back to 1954.
Even an aggressive rate reduction won't turn the economy around, analysts said.
"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.
However deeply the Fed decides to cut rates, the prime rate — now at 4 percent — for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a dose of relief.
The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the flat-lined economy. So far, though, the Fed's aggressive rate reductions have failed to lift the country out of a recession that started last December.
Clobbered by the financial crisis, worried banks have hoarded their cash and been extremely reluctant to lend money to customers. Fearful consumers, watching jobs vanish and their investments tank, have sharply cut back their spending, including big-ticket purchases like homes and cars that typically involve financing.
The negative forces have fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.
To unlock lending and get financial markets to operate more normally, the U.S. has resorted to a string of radical actions, including a $700 billion financial bailout where the government is making cash injections in banks in return for partial ownership stakes.
In terms of rate cuts, the Fed is getting ever closer to running out of ammunition.
It can lower the funds rate only so far — to zero. Even if that were to happen — a point of debate among economists — the prime rate would fall to 3 percent but no lower.
Against that backdrop, Bernanke says the central bank is exploring other ways to stimulate the economy.
The Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities, Bernanke says. This might lower rates on these securities and help spur buying appetites.
Another option the Fed has mulled: issuing its own debt, which would give the central bank cash and more flexibility to battle the financial crisis. To do that, however, the Fed would need new powers from Congress.
"The Fed wants to show that it has tools and options and is not out of tricks because interest rates are very low," said Michael Feroli, economist at JPMorgan Economics. "The problems holding back the economy are fairly long lived in nature."
To combat the financial crisis, the Fed already has created first-of-its-kind programs, such as getting cash directly to companies by buying up mounds of "commercial paper," the short-term debt firms use to pay everyday expenses such as payroll and supplies.
It also recently launched massive programs to boost the availability of consumer credit, including that for cars, student loans, homes and credit cards. The Fed also is making loans to banks, is providing a financial backstop to the mutual fund industry, and has injected billions of dollars in financial markets here and abroad.
The Fed could opt to expand programs by enlarging loans it's now making, providing loans to other types of companies, or buying more and different types of debt. The Fed's balance sheet has ballooned to $2.2 trillion, from close to $900 billion in September, reflecting some of those other activities to get credit flowing again.
Even with all the bold moves, the economy continues to sink deeper into despair.
Skittish employers axed 533,000 jobs in November alone. That drove the unemployment rate up to 6.7 percent, a 15-year high.
Since the start of the recession, the economy has shed nearly 2 million jobs. Analysts predict another 3 million more will be lost between now and the spring of 2010.
Last week alone, Bank of America Corp., tool maker Stanley Works and Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, announced job cuts.
General Motors Corp., Chrysler LLC and Ford Motor Co., meanwhile, are fighting for their survival. GM and Chrysler have said they're in danger of running out of money within weeks. The White House is exploring new ways to help Detroit after rescue efforts collapsed in Congress.
With the employment market eroding and consumers retrenching, the economy could stagger backward at a shocking 6 percent rate in the current October-December quarter, analysts predict. It shrank at a 0.5 percent pace in the third quarter.
President-elect Barack Obama is advocating an economic recovery plan that includes spending on big public works projects to bolster jobs. His plan also includes tax cuts to spur consumers to spend more and businesses to step up investment and hiring.
Americans are sorely feeling the toll of the housing, credit and financial crises.
Households' net worth fell 4.7 percent in the third quarter to $56.5 trillion as people watched the value of their homes and investments tank. It marked the fourth straight quarterly decline, the Fed said.

Swiss bank says it has $48M invested with Madoff

A private Swiss bank says it has 56 million Swiss francs ($47.5 million) of client assets invested under the management of U.S. financier Bernard L. Madoff, who has been accused of securities fraud.

Banque Benedict Hentsch Fairfield Partners SA said in a statement on its Web site Saturday that it is taking "all necessary measures to protect the interests of its clientele and its own interests."

Madoff, a former Nasdaq stock market chairman, was arrested Thursday in New York hours after the collapse of Bernard L. Madoff Investment Securities LLC. He has been accused by U.S. authorities of running a phony investment business that lost at least $50 billion.

The Geneva bank said the amount of its exposure is less than 5 percent of the wealth it is managing.

The bank merged in September with a New York-based Fairfield Greenwich Group, one of the major investment funds that announced they had placed money with Madoff. Fairfield Greenwich describes itself as a leading alternative asset investment specialist offering "best of breed" hedge funds and related products.

Fairfield said it had $7.5 billion in investments linked to Madoff, about half its total $14.1 billion under management.

The Geneva daily Le Temps reported Saturday that financial institutions based in the Swiss city had invested at least 5 billion francs ($4.2 billion) in Madoff funds.

The Swiss Federal Banking Commission, the country's banking regulator, doesn't yet know the full impact of the Madoff case on Switzerland, said spokesman Alain Bichsel.

White House assessing options to aid carmakers

The White House weighed its options Saturday for preventing a collapse of the troubled auto industry, once the backbone of the U.S. economy. So far, the only thing certain is that the Bush administration wants to avoid the possibility of a disorderly bankruptcy of any of the Big Three.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help.

"Administration officials are continuing to gather financial information from the automakers, assessing the data, their cash position going forward," White House deputy press secretary Tony Fratto said Saturday. "We'll take a look at that information, make some judgments and review our options."

Any avenue of government rescue must surmount political obstacles and take into account the potential fallout on financial markets in a time of recession. The administration is keeping President-elect Barack Obama and his advisers abreast of its discussions.

"We'll be focused on trying to get the policy right while considering the best interests of the taxpayer and our economy, and we'll take the time we have available to do that right," Fratto said. "No decisions have been made."

The White House and congressional Democrats had agreed on a $14 billion measure that would have extended short-term financing to the industry and set up a "car czar" to make sure the money was used to turn the Big Three into competitive companies. The legislation, however, died when Senate Republicans demanded upfront pay and benefit concessions from the United Auto Workers that union officials rejected.

The failure on Capitol Hill prompted urgent requests for White House intervention. Administration officials were dispatched to weigh the pros and cons of a range of other bailout actions. White House and Treasury Department officials are keeping details of their discussions closely held for fear of affecting markets, but financial experts have zeroed in on a few likely avenues for helping the auto industry and its 3 million workers.

One way is to tap directly into the $700 billion financial rescue bailout fund to provide loans to the carmakers. Another is to use part of the bailout fund as a kind of collateral for emergency loans the automakers could get from the Federal Reserve. The administration also could do nothing, leaving open the possibility that one or more of the automakers could go bankrupt. It also could wait for the new Congress, flush with more Democratic votes when it returns in early January, to try again to get bailout legislation passed.

"In terms of what happens next, it seems like the real question is `How long can GM really hold out?'" said James Gattuso, a research fellow in regulatory policy at the Heritage Foundation. "I've heard a couple of weeks and I've heard through February. I think only the people on the inside of GM know that."

For weeks, the White House has insisted that the $700 billion financial industry rescue plan enacted in October should be used solely to help financial institutions. On Friday, however, the White House signaled that it would consider using the so-called TARP — Troubled Assets Recovery Program — to prevent auto manufacturers from collapsing.

Critics quickly pointed out the administration's U-turn. They insisted the White House reject calls to do an end-run around Congress and unilaterally use TARP money to help the carmakers. "You're dealing with a significant amount of money and sums of this sort just simply can't be repurposed just because it's there," Gattuso said.

A second possibility offers Bush some political cover. Treasury Secretary Henry Paulson could use part, but not all, of the $15 billion left of the first $350 billion allocated to the TARP to back up loans the automakers could get from the Fed's emergency lending program. That would leave some money to help troubled financial institutions, which Bush has long argued should be the first in line for TARP money.

Federal Reserve Chairman Ben Bernanke has said he's reluctant to use the Fed's emergency lending program for the automakers. Decisions about giving financial aid to Detroit are best left to Congress, he says.

Bernanke also has questioned whether the automakers have sufficient collateral to secure emergency loans from the Fed. And critics worry that other companies might take risks knowing the central bank could help bail them out too.

However, financial analysts who think this avenue for helping the automakers is viable note that in March, faced with the collapse of Bear Stearns, other investment houses were allowed to draw emergency cash loans from the Fed. That marked the broadest expansion of the Fed's lending powers since the 1930s.

If, for example, the Federal Reserve agrees to lend the automakers $15 billion, the Treasury could deposit maybe $5 billion with the Fed to be used first if any of the automakers defaulted, said Vincent Reinhart, director of the Federal Reserve Board's division of monetary affairs from 2001 to 2007. "From the Fed's standpoint, it makes them feel more comfortable, and politically, Bush hasn't used all the resources in the TARP," he said.

Asked whether GM thinks using the TARP money for direct loans or as collateral on loans from the Fed would provide the automaker with enough help in the short-term to avoid a collapse, GM Spokesman Greg Martin on Saturday replied "Yes."

The company's financial staff worked over the weekend exploring options with Treasury officials.

GM announced Friday it would cut an additional 250,000 vehicles from its first-quarter production schedule — a third of its normal output — by temporarily closing 20 factories across North America. The move affects most plants in the U.S., Canada and Mexico.

The Bush administration, which has just weeks left in office, wants to try to avoid a disorderly bankruptcy.

"It's possible that the administration won't do anything," Reinhart said, listing long-running problems with the industry. "If the administration can convince itself that a bankruptcy could be an orderly proceeding, then they could let it happen."