Today's Business Press

A sum of $34 billion. That's the new magic number the General Motors, Ford, and Chrysler CEOs have calculated they'll need from Uncle Sam as part of a "turnaround plan" to continue operating, the Wall Street Journal, New York Times, and Detroit Free Press write, leading off their business coverage today. This time on Capitol Hill, the CEOs struck a more humbled posture. "All three companies' chief executives agreed to symbolic steps, including salaries of $1 a year and the elimination of corporate jets to make their case more palatable, and they were traveling to the capital in hybrid vehicles to underscore the point. It's 520 miles from Detroit to Washington," the Detroit Free Press writes. To add some urgency to their arguments, GM and Chrysler admitted that if they don't secure federal bailout funds they could collapse before the end of the month, the newspaper adds ominously.

Their plea was underscored by yet more grim industry news delivered on Tuesday: November was "the worst sales month in 26 years" for automakers, the NYT reports. Sales at GM fell 41 percent while Chrysler saw a 47 percent dip, and Ford saw a 30 percent dip last month. The worsening climate has forced GM to disclose a bare-bones restructuring that "would deeply cut jobs, factories, brands and executive pay as part of its plea to get $12 billion in federal loans and an additional $6 billion line of credit." Ford, the best positioned of the three, said in return for federal aid it would roll out a "family" of hybrid and electric vehicles by 2012, according to BusinessWeek.

While lawmakers won't decide until the end of the week on whether to extend aid to Detroit, it appears the Big Three have won over one crucial vote: House Speaker Nancy Pelosi, who declared yesterday, "I think it’s pretty clear that bankruptcy is not an option." Still, underscoring just how contentious a taxpayer-funded bailout is, the NYT went to Michigan to find—surprise, surprise—that there is opposition there, too, to a federal lifeline for the Big Three.

While Congress remains very much divided over Detroit, cue Treasury Secretary Henry Paulson, who has to enter more hostile environs if he wants to pry away the second tranche of the promised $700 billion in bailout funds. According to the WSJ, Paulson "is debating whether to ask Congress for the second installment of the $700 billion bailout package, concerned about competing demands for the funds and a potentially hostile reaction from lawmakers." Paulson may go to Congress as soon as next week if the economy continues to deteriorate, the newspaper writes. Paulson's latest maneuvers come after the nonpartisan Government Accounting Office on Tuesday released a report that is critical of the Bush administration's oversight of how the bailout money is being distributed. The GAO report, according to the Washington Post, says the Bush administration "has failed to adequately oversee its $700 billion bailout program and must move rapidly to guarantee that banks are complying with the plan's limits on conflicts of interest and lavish executive compensation."

Retail sales for November show a "stunning decline" for consumer goods across the board, writes the NYT. Even "a bump in sales on Black Friday" wasn't enough to stop the rot, notes the WSJ. "Sales fell 20% from year-ago levels at apparel and department stores combined, 24% at luxury stores and 25% at electronics stores." A big part of the problem is that while many shops are busy, they are not converting that foot traffic into sales. "Everyone that normally goes shopping will go shopping. But the question is: How much are they going to spend?" one analyst tells the WSJ.

"Delta Will Clip Its Wings To Stay In Air" is how Forbes headlines the airline's drastic decision to institute an 8 percent to 10 percent reduction in U.S. domestic flights and a 3 percent to 5 percent reduction of international routes for 2009. Delta's woes delivered an immediate blow to Boeing, whose shares fell after the WSJ reported that Delta wants to trim Northwest's order for Boeing's new 787 Dreamliner jets and increase the number of larger 777 jets it is buying. Things must be bad if the Brits and Aussies are willing to work together. "Australia’s Labor government said it is open to a $5.9 billion merger between Qantas and British Airways as long as it was not a takeover and that 51 per cent of the airline was in the hands of Australian investors." Any merger would be "the boldest move yet considered to accelerate the consolidation of the global airline industry," writes the FT.

Finally, the WSJ reports this morning that Goldman Sachs is mulling a new secret weapon that seems ripped from the pages of the business section a decade ago to turn around its struggling operation: the launch of an online bank. The move would give it broader access to funds, the newspaper writes, made possible by its recent decision to transform itself into a bank holding company. Goldman Sachs operating a dot-com commercial bank? Yes, the idea is a head-scratcher. "This move is pretty much the polar opposite of what you think about when you think about Goldman Sachs," Glenn Schorr, an analyst at UBS AG, told the newspaper. "But one of the keys to their future is being able to fund their balance sheet, and if they and others can't do it in traditional ways, it makes complete sense to explore other avenues."

It's official: The U.S. economy has been in recession since last December, according to new figures from the National Bureau of Economic Research. While confirming "what many Americans had already been feeling in their bones," in the words of the New York Times, the new figures also tell a portentous tale: "the current economy downturn is already longer than the average for all recessions since World War II, according to the committee of economists responsible for dating the nation’s business cycles." The stock market reacted with typical restraint—the Dow Jones industrial average "plunged" 679.95 points, or 7.7 percent, while the S&P 500 fell 80.03 points, or 8.9 percent, BusinessWeek reports. Not to be outdone, the Nasdaq also shed 8.95 percent. What will stop the rot? Further reductions in short-term interest rates are "certainly feasible," Federal Reserve Chairman Ben Bernanke said yesterday. But with the "benchmark rate already at 1%, more cuts would bring the rate to near zero, prompting concern that the Fed would be out of recession-fighting ammunition," writes the Wall Street Journal. Over at Treasury, they're looking to expand the current bailout by "reviewing applications from hundreds of banks seeking rescue funding," as Secretary Hank Paulson told a Fortune 500 forum that he is "actively" developing new programs to correct the financial fallout, CNN Money reports.

The hours are ticking before the Big Three automakers return to Capitol Hill to make their case for a bailout. Ford says it has a plan, reports the WSJ: "It is retooling itself to build small fuel-efficient cars and break from the past strategy of focusing mainly on large pick up trucks and sport-utility vehicles." Now why didn't we think of that? To show how just how serious he is, Ford Chief Executive Alan Mulally will travel to Washington not by corporate jet but in a Ford Escape Hybrid—and that's not because he's offering to take a pay cut from his last year’s compensation of $21 million, as the NYT reports. That might be one of the few SUVs that Ford hangs on to. As the NYT piece posits, with the Big Three now selling fewer than half of all new vehicles in this country and yet still producing 112 different car and truck models, they will have to show Congress they are serious about trimming their fleet of brands. In this automotive climate, it's not a surprise that U.K. luxury car maker Aston Martin is being forced to cut one-third of its work force.

Against this and other bad economic news the British pound experienced its "largest one day fall in percentage terms since sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992," the BBC reports. The pound fell against the dollar by 5.2 cents to $1.486, but at least it's in good company—the Chinese Yuan fell by its single largest margin on record against the dollar "after dealers bet that China's central bank might use a weaker yuan to help support economic growth," the WSJ reports. Growth is exactly what China needs if another WSJ report is any indication. The newspaper writes that with growing unemployment in its cities, China faces a "wave of reverse migration that has the potential to shake the stability of the world's most populous nation."

The first day of the month saw a raft of banking-sector job losses with JPMorgan Chase cutting 9,200 positions—nearly 20 percent of its work force—at newly acquired Washington Mutual. Over 3,000 of those cuts will come from Seattle. Over in the U.K., HSBC announced it was cutting 500 jobs and Credit Suisse a further 600, the BBC reports. And things just get worse for Goldman Sachs. It is expected to report a loss of $2 billion for its last quarter.

Finally, here's one sector of the news business that is still gung ho. Digg, the online news aggregation and ratings site, is officially not for sale. CEO Jay Adelson tells BusinessWeek that the goal of the company is "to build an independent business that reaches profitability as quickly as possible." He better hope the news industry that his site depends on for content can stay afloat long enough to realize that ambition.

Predictions of a weak Christmas appear to be overblown as shoppers this weekend hit the stores in force, the New York Times, Wall Street Journal, and Business Week report this morning. Ah, but there's a catch. The reason for the better-than-expected start to the holiday shopping season can be pinned on "massive discounts like 'buy one get one free' sweaters at Gap Inc. stores, $200 iPod Touch music players from Amazon.com Inc., and 26-inch LCD TVs at Target Corp. sites for $299," the WSJ writes. Still, there is an upside to all this discounting. The always-reliable American consumer is spending more than last year. "In a survey of 3,370 shoppers, the National Retail Federation estimated shoppers spent an average of $372.57 over the weekend, up 7.2% over last year's $347.55," the newspaper writes.

The NYT though sees "troubling signs in the early numbers." Yes, the bargains are luring in shoppers, but at what cost to retailers' bottom lines? "The bargains that drove shoppers to stores were so stunning, analysts said that retailers—already suffering from double-digit sales declines the last two months—would probably see their profits erode even further," the NYT writes, adding that foot traffic trailed off on Saturday and Sunday after the initial blowout deals expired. Business Week is equally pessimistic about retailers' outlooks. "Sales growth was anemic," it writes. "Shopper Trak, a firm that follows mall traffic, reported that Black Friday retail sales totaled $10.6 billion, up 3% from a year earlier, compared with 7% growth for the same period in 2007."

Detroit's struggling automakers take another crack this week at filling their tanks with $25 billion in federal bailout money, but the Big Three are not heading to Washington with a unified blueprint for the future, the NYT writes. General Motors is likely to disclose it will need to shrink significantly its North American operation to survive. Ford, meanwhile, which is in a slightly more comfortable cash position, will propose making "more symbolic moves" like cutting executive pay, the newspaper writes. Chrysler will admit it needs to merge. The WSJ reports that GM was working through the night with its board, hammering out specifics of the plea it will make to Congress this time around. After the rough handling two weeks ago, the automaker is not taking any chances. It is even building in a contingency that it gets turned down. "At the same time, directors—unlike chief executive Rick Wagoner—are also insisting that all options stay on the table, including a Chapter 11 bankruptcy filing, if a bailout doesn't come through," the newspaper writes.

Not surprisingly, the outlook for GM's and Ford's overseas units looks to be getting more desperate. According to the Financial Times, the two automakers "have approached Sweden’s government about financial aid for their loss-making Saab and Volvo brands." The newspaper writes that the government has been mulling an aid package of roughly $248 million to devote to the recovery of the auto lines. Still, even if the aid comes through, Ford and GM are poised to sell the lines off to the highest bidder, the FT adds.

What's the point of having a powerful cartel if the members won't act in concert? That's the conundrum facing Saudi Arabia as it tries to persuade Iran and Venezuela to cut crude production in order to protect a new OPEC "fair price" of $75 a barrel. "OPEC has a spotty record when it comes to managing oil supplies to maintain a set price band. Lack of compliance with production cuts has been a core theme throughout the organization's 48-year history," writes the WSJ. This time, as during the major oil glut of the early 1980s, some OPEC members are so addicted to their own oil revenue that they are loath to turn off the taps. Nevertheless Saudi Arabia will attempt to install new production cuts when OPEC meets in Algeria in two weeks' time.

"Microsoft is in talks to acquire Yahoo’s online search business for $20 billion," the Times of London reported over the weekend. The only problem is that no other media organization has been able to confirm these talks. The WSJ's "All Things D" site quotes Ross Levinsohn, a former president of Fox Interactive Media (and a purported key player in the deal), dismissing the report as "total fiction." While some deal between the two Web giants is still on the cards at some point, the move by top investor Carl Icahn to increase his Yahoo holdings last week "should be enough of a reason for there to be no Microsoft-Yahoo search deal imminent, given Icahn would be more than well aware of it and buying up almost seven million Yahoo shares—now at historic lows—only days ago would smack of insider trading," writes the WSJ.

Finally: Ever wonder how lawmakers and Washington, D.C., bean counters decide on just how big a number to affix to a federal stimulus package? The NYT this morning provides a bit of insight. Warning: It's a depressing read. The logic is straightforward enough. "The size of a possible stimulus plan rises as the economy contracts," the newspaper writes. This means that when the economy shrinks at a quicker rate than expected (the size of the economy is decreasing at a rate eight times faster than it was this summer, for example, the newspaper writes), the stimulus package required to offset the contraction expands. The goal for policy-makers now is to generate a large enough stimulus package to achieve "zero growth."

The offers seem too good to be true: big, flat-screen TVs for less than $400, diamond earrings from Macy's for 65 percent off. Black Friday bargains? Think again. Retailers have been furiously discounting their goods well before the "Super Bowl" of shopping days, the New York Times reports this morning, as panic sets in that this could be the worst Christmas in memory. Retailers are betting that if they can cut to the bone, they just might salvage the season. Many news outlets predict this Christmas season could see the deepest discounts ever. "For many retailers, their survivability depends not only on having the biggest, boldest Black Friday sales they've ever had, but also on making sure that the critical holiday shopping season doesn't begin and end on the day after Thanksgiving," CNNMoney writes. A quick stat to back that up: industry analysts at ShopLocal say "retailers have increased Black Friday sale offers by 21% over last year."

Hurting matters further, BusinessWeek figures, is the paucity of "must-have" toys. "The customer is so pressed for money, so scared, and so in debt," says Howard Davidowitz, chairman of retail consultancy Davidowitz & Associates. "They are so focused on price that the huge must-have toys are gone."

One person who likely won't be shopping today is Neel Kashkari, the man in charge of the federal government's Troubled Asset Relief Program. According to the Wall Street Journal, the TARP brain trust is running at half-staff, creating a swelling backlog of unprocessed applications. The lack of qualified staff may be the reason why the TARP program has shifted its original focus and now is content to hand out bailout checks to banks. "Outside observers said the difficulty of quickly building a qualified staff may be one reason the Treasury abandoned its original plans to use the TARP to purchase assets from financial institutions, deciding instead to inject capital into the banking system," the newspaper writes. The workload issues do not appear to be fazing companies. Another 20 firms on Wednesday joined the swelling ranks looking for a fat TARP check to recapitalize, Dow Jones Newswire reports.

India's "9/11," as commentators are referring to the terrorist attacks on Mumbai, has "damaged for now the city's lofty ambitions of becoming an international finance capital," writes the WSJ. In recent years, Indian and international planners have sought to build up Mumbai as a financial rival to Hong Kong and Singapore, while Wall Street banks like Goldman Sachs and Morgan Stanley have been particularly bullish on the city "greatly beefing up their presence in an effort to cash in on a larger chunk of India's then-booming economy." Following the attacks, companies like Renault India were said to have shut down operations in Mumbai, but, while Indian business leaders agree that the Mumbai assault took place "with a view to destroying the economy," they remain confident that, "it would not impact investment atmosphere in Mumbai and around," Express India reports.

Back to Europe and the siege on Eurozone interest rates: The Financial Times reports that the European Central Bank appears set to slash rates, "by at least half a percentage point after a survey on Thursday showed the region facing its worst downturn since the recession of the early 1990s." Indeed the cut may yet be deeper after the "ECB's 'Shadow Council'—a body that issues its own verdict before each ECB meeting—voted yesterday for an immediate cut of at least one percentage point," the Daily Telegraph says. "There is a feeling that the damage from the credit crunch is yet to come. We're hearing that companies have seen a collapse in orders over the last few weeks," Julian Callow, Europe economist at Barclays Capital, told the paper.

Finally, a look ahead to the day when News Corp. must decide on the heir apparent to 77-year-old Rupert Murdoch's sprawling media empire. According to a new book by Michael Wolff, the handoff of power at News Corp. will most certainly be a messy one. The FT writes, "[A]n agreement giving equal economic rights in the Murdoch family’s stake in the company to all six of its chairman’s children—but voting control to the eldest four only—contains no provision for breaking tied votes, the book reports." That may be by design; the Murdoch family prefers "old-fashioned talking, arguing, shouting, threatening and ultimately compromise to reach consensus,” a person close to the family tells the FT.

Will the latest round of bailout bucks—$800 billion promised Tuesday by the Treasury and the Federal Reserve—finally do the trick to resuscitate credit markets and slow the shrinking of the economy? Or is Washington, D.C., just needlessly throwing money at a problem too big to fix with taxpayer cash? On the pages of the New York Times, Washington Post, and Wall Street Journal this morning, economists and market pundits of all stripes are debating the latest stimulus plans designed to finance consumer loans and push down mortgage rates. According to the NYT's calculation, the latest bailout brings the federal government's tab this year alone to a staggering level. The feds are now on the hook for "$7.8 trillion in direct and indirect financial obligations"—that's equal to "about half the size of the nation's entire economy and far eclipses the $700 billion that Congress authorized for the Treasury's financial rescue plan," the newspaper writes.

This latest measure is really dividing economists. "We are sort of spitting in the wind," a chief economist at MKM Partners LP in Greenwich, Conn., told Bloomberg. "Banks won't be throwing a lot of loans out there when they fear—rationally—those loans may not be paid back." The WSJ sees it differently. The Fed's moves set off a chain reaction in the lending markets on Tuesday with "rates on 30-year fixed-rate mortgages dropp[ing] by roughly half a percentage point to about 5.5% for borrowers with good credit scores and substantial equity in their homes," the newspaper reports. The flip side: No stimulus plan, no matter how big, is likely to help those with bad credit get refinancing. Still, mortgage rates are expected to finally drop and stay down with the latest move, accomplishing something the Fed has been unable to influence through interest rate cuts, the Washington Post writes. It's no secret why: "The Fed is effectively printing money and funneling it to home buyers," the newspaper explains.

The timing of the latest stimulus package is no coincidence. Home prices fell again in the third quarter, according to CNNMoney, citing the closely watched S&P Case-Shiller Home Price national index. House prices recorded a 16.6 percent decline in the latest quarter, a record plunge.

It's not surprising that the worse things get in the United States, the more pain is felt overseas. As demand from abroad slows, Chinese factories are shutting down, putting the brakes on growth. "Economists are forecasting that after growing nearly 12 percent last year, China's economy could slow to 5.5 percent in the fourth quarter of this year—a stunning retreat for a country accustomed to boom times," the NYT writes. The World Bank says China's economy will grow this year by 9.4 percent, revised downward from a previous 9.8 percent growth estimate, according to the WSJ.

The European outlook is increasingly grim as well. On Wednesday, the European Central Bank was admitting what many private economists have been saying all along: It appears that the Euro Zone economy will contract further in 2009, Reuters reports. To pull the region out of its funk, the continent's biggest economies today are being urged to consider an emergency $170 billion stimulus plan that includes tax cuts and targeted investment, the BBC writes. There's just one hitch: In order for it to work effectively, every country in the EU zone (or at least all the significant economies) have to sign up for the plan—no small feat in the always-squabbling trading bloc. Markets across Europe were down in early trading.

You know retail spending is depressed when customers won't shop online. BusinessWeek reports on "what's shaping up to be the first Scrooge-like Christmas for online retailing since the category first took off a decade ago." E-commerce sales, excluding travel, fell 4 percent from Nov. 1 to Nov. 23, to $8.2 billion, online-measurement firm ComScore reports. There is one silver lining online. Atlantic Records "has reached a milestone that no other major record label has hit: more than half of its music sales in the United States are now from digital products, like downloads on iTunes and ring tones for cellphones," the NYT reports.

And note those online travel figures—it turns out travel companies are slashing prices to get Americans moving over the holiday period. One telling reason? "For the first time in six years, Thanksgiving travel is expected to decline," says the NYT citing AAA figures. Even a Thanksgiving Day parade can't brighten Macy's disposition. The retail giant, which made a big consolidation bet by buying May Co. for $11.5 billion in 2005, has "lost $30 million in the first nine month[s] this year on a 4.3% decline in sales," the WSJ reports.

Over to the doldrums of commercial real estate now and news that a $1.5 billion fund whose key investor was Texas billionaire H. Ross Perot has been forced to liquidate. Perot's woes point to larger problems for property investors. "Other hedge funds and money-management firms that invested in real-estate debt face the potential for more margin calls," writes the WSJ. If yet another tale of real estate fallout is not exactly surprising, how about the case of the bankers who turned down $27 million in pay? The NYT reports on three very contrite UBS execs, including Marcel Ospel, the former chairman of the board at the Swiss bank, who have decided to forgo compensation after the bank reported nearly $50 billion in losses. "They've clearly been shamed into doing that," one financial industry observer tells the NYT.

And finally, yes, the global financial downturn is pretty depressing, but not as worrying as the troubles we face over climate change. That's the finding from a new 12-country survey that includes the United States, France, Germany, the U.K., and developing nations such as China, Brazil, and India. The study was carried out by the HSBC Climate Partnership. The Guardian reports: "Despite the looming prospect of a deep global recession, 43% of the 12,000 respondents of the survey chose climate change ahead of the global economy when asked about their current concerns. Worldwide, 77% of respondents wanted to see their governments cutting carbon by their fair share or more, in order to allow developing countries to grow their economies."

It was a day of circling the economic wagons as, hot on the heels of Sunday's Citigroup rescue, President Bush announced unprecedented close cooperation with President-elect Barack Obama's transition team, and Obama unveiled a powerhouse economic team, bolstering Treasury pick Timothy F. Geithner with former Treasury Secretary Larry Summers. Obama's intent was to assure "Americans and foreign investors that he was seeking to fill any leadership vacuum" during the financial crisis, the New York Times reports. As Obama pledged a long-term economic stimulus package that includes "creating 2.5 million jobs, and spending on roads, bridges, schools and clean-energy programs," in the words of the Wall Street Journal, the Treasury Department and Federal Reserve are readying a major new consumer-loan program—pulling as much as $100 billion from the sanctioned $700 billion Troubled Asset Relief Program—that would establish a government bank to finance hundreds of billions of dollars in car loans, business leases, and student debt. With Main Street banks still unwilling to part with their cash despite the huge government bailout, Treasury Secretary Hank Paulson "is trying to find other ways to jump-start the market for lending," writes the WSJ.

The combined political action of the previous two days gave investors the jolt they'd been craving. The Dow Jones industrial average gained 397 points, or 4.9 percent, and ended the trading day having posted its biggest two-session percentage gain in 21 years, CNN Money reports. The rally continued overnight in Asia with investors sending the Nikkei soaring 5.2 percent and Hong Kong's Hang Seng up 4.3 percent on news of the U.S. government's bailout of Citigroup. The back-from-the-brink bank was a big winner yesterday: its stock price jumped 58 percent and the cost of insuring its debt fell by 50 percent, the Guardian reports. But haven't we experienced this relief before only to be smacked in the face by a new calamity? Over the longer term, "the new bailout could haunt regulators and taxpayers," writes the NYT, because it "may encourage banks to take more risks in the belief that the government will step in if they run into trouble." Already the very fact "that Citi needed a new lifebuoy from the government less than a month after getting an infusion via the TARP capital purchase program shows how the entire financial system is laboring under an unmanageable debt load," writes Fortune.

If Wall Street was happy to see Citi saved, Detroit must have been livid. The Big Three's perceived injustice in being "told to go home and write up a viable business plan" while Citi got a quick $20 billion in spending money Sunday night has everything to do the fragility of the global financial system. Simply put, "Saving a bank like Citigroup has to take precedence over the auto industry," an analyst tells CNN. And so it's a cruel irony that while GM may be on the brink of collapse, its vast pension fund is doing quite well—so well that it hasn't needed to tap the government for help. "G.M. appears to have enough money in the pension fund to pay its more than 400,000 retirees their benefits for many years—even with the markets swooning around it," writes the NYT.

Big news from Down Under this morning. Mining giant BHP Biliton has abandoned its $62 billion takeover bid for rival Rio Tinto, citing the "continued deterioration of near-term global economic conditions.” When the Aussie company launched its assault one year ago, the merger was valued at $140 billion, the Financial Times reports. One factor was the amount of debt BHP would have to assume. "Rio has $42 billion of debt as a result of its acquisition of Alcan last year, while BHP had only $US6.3 billion of debt," the Sydney Morning Herald reports. Shares in BHP jumped 12.1 percent on the news.

Finally, if you think banks not willing to lend makes for bad business, how about book publishers not willing to acquire new books? The WSJ reports that the venerable Houghton Mifflin Harcourt has put a "freeze" on new books in an "unusual move that shows how the slowdown in book sales is hurting publishing." The publisher will focus on existing inventory, though "if the next 'War and Peace' appears at Houghton's doorstep, editors may persuade their superiors to buy it," the WSJ wryly notes.