General Malaise, Hitting the Gas
General Motors reports a $3.25 billion loss on mortgage woes and a strike at a supplier. British gas firm BG bids $12 billion for an Australian gas producer. And airlines are flying abroad to service their aircraft.
NEWS AT A GLANCE
GM posts $3.25 billion loss
General Motors, the world’s largest automaker, reported a quarterly loss of $3.25 billion, due to strike-driven shutdowns at some plants, weak U.S. sales, and mortgage losses at its finance unit. The loss was the third in a row for GM. The automaker said a two-month strike at supplier American Axle and Manufacturing cost it $800 million. (AP in Yahoo! Finance) GM booked an $812 million loss in North America, its largest region, but earned a profit in the other three regions. GM Chief Executive Rick Wagoner “needs to get North America stabilized, and over the last year it has gotten worse,” said Tim Gilbert at Principal Global Investors. (Bloomberg)
BG bids $12 billion for Australian gas firm
BG Group, the No. 3 U.K. natural-gas producer, made an unsolicited $12 billion all-cash bid for Origin Energy Ltd., Australia’s No. 2 energy retailer. The offer represents a 40 percent premium over Origin’s closing price Tuesday, and the energy firm’s shares rose 36 percent in Sydney on the news. (MarketWatch) BG is expanding into Asia’s booming liquified natural gas market, and Origin is Australia’s top producer of gas from coal seams. “It’s a pretty handsome premium and it’s a cash offer,” said analyst Stuart Baker at Morgan Stanley. “This is not a tire-kicking exercise.” (Bloomberg)
Time Warner to spin off cable unit, as profits lag
Time Warner, the world’s largest media company, reported a 36 percent drop in quarterly profits, to $711 million, falling just short of expectations. The company also said it will spin off its Time Warner Cable division, of which it owns 84 percent. Investors have long urged Time Warner to split apart. (AP in Yahoo! Finance) Time Warner’s AOL Internet unit recorded a net loss, while the other major units were profitable. (Bloomberg) It was a “decent” quarter for Time Warner, said Christopher Marangi at Gamco Investors, and the cable unit spinoff “provides some comfort to those expecting a separation.” AOL could be next, he added. (Reuters)
Southwest stays north, others fly south
When the FAA fined Southwest Airlines $10.2 million for safety lapses, the airline shelved plans to have its aircraft maintained in El Salvador, at a repair shop called Aeroman. As soon as Southwest pulled out, two other airlines jumped in to take its place. Aeroman already works on the fleets of JetBlue and America West. The U.S. airline industry outsources half its maintenance to outfits abroad or in the U.S., a $41 billion-a-year business. The airlines save a lot on maintenance costs, but there are other advantages to using Aeroman and other foreign contractors. “I can’t buy this kind of quality in the United States,” says JetBlue maintenance official Mitch Sine. (Los Angeles Times, free registration)
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