NEWS AT A GLANCE
U.S. proposes Fannie, Freddie rescue plan
The Treasury Department and the U.S. Federal Reserve unveiled proposals to shore up ailing government-sponsored mortgage giants Fannie Mae and Freddie Mac. Treasury Secretary Henry Paulson asked Congress to temporarily increase the two firms’ lines of credit at the Treasury and grant it the power to buy shares of Fannie and Freddie, if needed. (CNNMoney.com) The Fed said it will allow Fannie and Freddie to borrow from the Federal Reserve Bank of New York, just like commercial banks. (AP in Yahoo! Finance) While the new measures fall just shy of an explicit guarantee of the firms’ bonds, said Pimco fund manager Bill Gross, “it tells the market that the government will not allow them to fail.” (Reuters)
Bombardier unveils new plane in bad market
Canada’s Bombardier Inc. introduced its new 100-seat C-series jet yesterday and touted a letter of intent to sell between 30 and 60 of the planes to German carrier Lufthansa. Bombardier says the aircraft are 20 percent more efficient than similar-sized planes. It was hoping to have 80 to 100 of the planes sold to three or four airlines, but U.S. airlines especially are in no position to buy aircraft now. (The New York Times, free registration) Fuel prices have doubled over the past year, and American carriers, facing up to $13 billion in losses, plan to ground 413 planes in response, according to the Air Transport Association. (Bloomberg in Los Angeles Times) Bombardier’s Lufthansa deal is worth up to $2.8 billion (MarketWatch)
Anheuser-Busch agrees to InBev sale
Anheuser-Busch agreed to a sweetened $52 billion takeover offer from Belgium’s InBev, creating the world’s largest beer company. The $70-a-share price is 27 percent higher than Anheuser’s October 2002 record high. (Reuters) The combined company, Anheuser-Busch InBev, will be led by InBev CEO Carlos Brito, and Anheuser will get two seats on the 14-member board. InBev said it will keep the company’s North America headquarters in St. Louis and will not close any Anheuser breweries. (Forbes.com) The deal is the biggest cash takeover on record. The peaceful deal will help InBev win over U.S. skeptics, said analyst Grant Saligari at Commonwealth Securities. “Consumers are very emotionally attached to their beers.” (Bloomberg)
When nobody wants to upgrade
With gas topping $4 a gallon, nobody seems to want to rent big cars. Rentals of luxury cars and minivans dropped 24 percent and 15.3 percent, respectively, in April and May, while compact and economy rentals rose 10.2 percent and 14.3 percent, according to travel firm Sabre. This is a big problem for rental companies because, thanks in part to their historically close ties to U.S. automakers, they don’t have enough fuel-efficient cars to meet demand. That means economy cars now sometimes rent for more than luxury SUVs. “Just six months ago, anybody would have taken a Chevy Trailblazer SUV in lieu of a four-cylinder Cobalt,” said Mike Kane at Vehicle Replacement Consulting Group. “Not now.” (Los Angeles Times)
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