Automobiles: Parts makers get a bailout
“Fearing a bottom-up failure of the auto industry if parts makers collapse,” the Obama administration announced that it would supply $5 billion to struggling U.S. auto-parts companies, said Sharon Silke Carty in USA Today. Under the program, which taps Treasury funds appropriated to bail out Detroit carmakers, the U.S. will either lend the suppliers the money they need to pay their bills or guarantee that the bills will be paid. The new program won’t “save every auto supplier,” but it will “reassure the suppliers’ creditors.”
The aid program for suppliers increases “the likelihood the government will extend more aid” to General Motors and Chrysler, said Neil King and John Stoll in The Wall Street Journal. The government would only
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help keep suppliers out of bankruptcy court, analysts say, if it intended to keep the car companies themselves alive. The loss of even one parts maker—a manufacturer of car seats, for example—“could hurt a number of carmakers.”
Energy: Birth of a Canadian powerhouse
Two of Canada’s largest oil companies are joining forces to tap “the most vast reservoir of crude oil on the earth outside of Saudi Arabia,” said Steve Gelsi in Marketwatch.com. Suncor Energy said this week it would pay $15 billion for PetroCanada and assume $3 billion of PetroCanada’s debt. Both companies have extensive operations in Alberta’s oil-rich tar sands. Extracting oil from the sands “involves an expensive process similar to mining.” The companies say they’ll cut annual costs by almost $245 million by combining operations.
Luxury goods: Tiffany’s tough quarter
In a sign that the wealthy are also feeling the recession’s pinch, Tiffany last week reported that profits fell 76 percent in its fiscal fourth quarter, said Cotten Timberlake in Bloomberg.com. “Jewelry sales have slowed as rich shoppers suspend purchases of luxury goods.” Sales at Tiffany’s U.S. stores fell by a third in the 12 months ended Jan. 31. The company said it would close its 16 Iridesse pearl jewelry stores, which have failed to make a profit since they opened in 2004.
International business: Abu Dhabi buys into Daimler
The government of Abu Dhabi will buy 9.1 percent of German automaker Daimler, “becoming its largest shareholder as the industry battles against the worst industry crisis in decades,” said Daniel Schafer in the Financial Times. Aabar Investments, owned by the Abu Dhabi government, “said it would cooperate with Daimler on the development of electric cars and new materials for the car industry.” Daimler recently “shocked markets when it said it expected a large operating loss in the first quarter.”
Bailouts: Sweden won’t save Saab
Saab “may have reached the end of the road,” said Liz Opsitnik in AutoLoanDaily.com. The conservative government of Sweden this week declined to extend a financial lifeline to the Swedish carmaker, which is owned by General Motors. “The Swedish state is not prepared to own car factories,” said Enterprise Minister Maud Olofsson. She accused GM of trying to “wash their hands of Saab and drop it into the laps of Swedish taxpayers.” Saab lost $343 million last year, selling only 93,000 cars worldwide.
