Saturday, January 31, 2009

Financial Crisis Timeline: January 2009

Jan 5 2009: Obama pushes for new stimulus plan
President elect Barak Obama met with members of congress for the approval of the new $770 billion stimulus plan over 2 years that seeks $310 billion in tax cuts.

Jan 6 2009: Cigna to layoff 1,100
Cigna Corp. said it would cut 1,100 jobs worldwide.

Jan 6 2009: Alcoa to cut 13,500 jobs
Pittsburgh based Alcoa, the world’s third largest aluminum manufacturer will cut 13,500 jobs (13% of workforce) and slash spending and output to cope with the economic slowdown. It will also relieve around 1,700 contractors in addition.

Jan 8 2009: Citigroup supports plan to adjust mortgages in bankruptcies
Citigroup has agreed to a plan that would let bankruptcy judges alter mortgages in an effort to prevent more housing foreclosures.

Jan 8 2009: Wal-Mart slashes forecasts
Wal-Mart lowered its earnings forecast to 91-94 cents a share for its fiscal fourth quarter, from its prior guidance of $1.03 to $1.07 a share, issued in November. This was mainly due to the fact that Wal-Mart missed the same store sales forecasts for December.

Jan 8 2009: Nissan to cut 12,000 jobs
Japan’s Nissan, the third largest auto manufacturer in the country, announced it would cut 1,200 jobs at a UK factory due to dramatic decline in demand

Jan 8 2009: Lenovo to cut 2,500 jobs
China’s computer manufacturer, Lenovo, will cut 2,500 jobs, or 11% of its work force, around the world in a bid to enhance savings.

Jan 8 2009: TDK to layoff 9000 workers
Japan’s Electronic components manufacturer announced that it would layoff 9000 workers and close four plants overseas due to drop in demand.

Jan 8 2009: Billion dollar Satyam fraud shakes Indian market
Indian stocks plunged 7.2% yesterday as Satyam’s chairman Ramalinga Raju admitted the Hyderabad-based software services firm overstated its cash and bank balances by $1.03 billion in its September end balance sheet. Satyam shares fell 77.69%.

Jan 9 2009: Unemployment highest since 1945
According to a US Labor Department report, United States lost 2.6 million jobs in 2008, highest since 1945 when 2.8 millions jobs were cut. Unemployment reached 7.2% nationwide in December, highest in 16 years. Employers slashed 524,000 jobs in December, 584,000 in November 2008 and 423,000 in October 2008.

Jan 9 2009: Morgan Stanley may takeover Smith Barney
Citigroup is in talks with Morgan Stanley to merge their brokerage operations in a deal that could result in Morgan Stanley taking over Citibank’s Smith Barney unit. The move will result in the biggest mortgage in the country (8,000 Morgan Stanley brokers and 11,000 Smith Barney brokers). It would surpass Bank of America’s recently acquired Merrill Lynch brokerage unit (16,000 brokers).

Jan 10 2009: Schlumberger to layoff 1,000 employees
The world’s largest oil fields provider Schlumberger announced it would cut 5% of its North American workforce (up to 1,000 jobs) in response to global slowdown in oil and gas drilling.

Jan 12 2009: Boeing to layoff 4,500
Chicago-based Boeing will layoff 4,500 workers at its Seatle based Airplanes unit that builds wide-body planes such as 747 and 737.

Jan 13 2009: Pfizer to layoff 800 scientists
World’s biggest pharmaceutical company Pfizer announced it would layoff 800 global researchers by the end of the year out of a total of around 10,000 researchers.

Jan 14 2009: Retail sales in December 2008 fall more than expected
The Commerce Department declared total retail sales slumped 2.7% to a seasonally adjusted $343.2 billion in December 2008. November sales fell to a revised 2.1% figure following an earlier estimate of 1.8%.

Jan 14 2009:Nortell Networks files for bankruptcy

Canada based Nortell Networks, the biggest manufacturer of telephone equipment, along with a number of its affiliates filed for Chapter 11 bankruptcy in US. Its shares fell more than 76% in electronic pre-market trading.

Jan 14 2009: Citigroup to shed “Financial Supermarket” Model
Citigroup announced yesterday it agreed to merge Smith Barney into a joint venture with Morgan Stanley. It is expected to continue selling its assets that would result in dismantling of the financial supermarket model. It could sell assets worth around $600 billion. The Citigroup’s shares today fell below the $5 critical level.

Jan 14 2009: Seagate to shed 2,900 jobs
Seagate Technology announced it would cut 2,900 or 6% of its world-wide work force. This includes 10% reduction in the company’s US work force.

Jan 14 2009: Councils in UK to cut thousands of jobs
The Times reported councils across UK are to cut thousands of jobs that would affect the job market

Jan 14 2009: Barclays lays off 4,200 workers
Barclays today announced it would cut 2,100 workers from its UK banking business, the same number it announced yesterday to be laid off in fund management, private banking and investment banking units.

Jan 14 2009: Freemans Grattan to cut 3,800 UK jobs
Freemans Grattan, British home shopping firm owned by mail order German Otto Group, will cut 3,800 UK jobs due to losses.

Jan 15 2009: Delta Airlines to cut 2,000 jobs
Delta Airlines that bought North West Airlines lat year, is expected to cut 4,000 jobs

Jan 15 2009: Meadwestvaco to cut additional 2,000 jobs
Paper and plastic products manufacturer Meadwestvaco announced it would cut 2,000 jobs. This announcement came just two months after the Virginia based company announced major job cuts.

Jan 15 2009: Holcim to cut 3,300 jobs
Switzerland’s Holcim, one of the largest cement manufacturing groups in the world will layoff 3,300 jobs.

Jan 16 2009: Citigroup splits and announces $8.29 billion loss
Citigroup announced its plan to split into two and announced the fourth quarter loss of $8.29 billion.

Jan 16 2009: Bank of America loses $1.79 billion
Bank of America posted a loss of $1.79 billion in the fourth quarter, its first quarterly loss in 17 years. Bank of America will get a $20 billion life-line from the government to help absorb Merrill Lynch.

Jan 16 2009: Merrill Lynch loses $15.3 billion

Merrill Lynch posted a loss of $15.3 billion in the fourth quarter due to writedowns of troubled assets.

Jan 16 2009: Consumer Price Index falls for third consecutive month
The consumer price index fell 0.7% in December 2008, after falling 1.7% in November.

Jan 16 2009: Deal for Circuit City fails; will be liquidated with 30,000 becoming jobless
It is expected that the deal for selling Circuit City has failed and the company will be fully liquidated. The company had filed for Chapter 11 bankruptcy in November. The liquidation will result in 30,000 employees being laid off.

Jan 16 2009: Chrysler Financial gets $1.5 billion loan
Chrysler’s finance arm, Chrysler Financials will get $1.5 billion from the Treasury for 5 years to fund new car loans and boost sales.

Jan 16 2009: Wellpoint to cut 1,500 jobs
US health insurer Wellpoint will cut 1,500 jobs (3.5% of workforce) to reduce administrative costs.

Jan 16 2009: HSBC stocks hit 10 year low

Shares of Europe’s biggest bank HSBC fell to 543 pence, a 10 year low today (down 0.8%). The rating of the stock has been downgraded by Goldman Sachs.

Jan 16 2009: GE to cut 7,000 – 11,000 jobs
GE Capital Unit will cut between 7,000 to 11,000 jobs and reduce costs by $2 billion at the unit in 2009.

Jan 16 2009: Hertz to layoff 4,000
Rental car company Hertz will cut down 4,000 jobs worldwide to cut costs in the face of growing economic meltdown.

Jan 16 2009: AMD to cut 1,100 jobs
Advanced Micro Devices announced it would cut 1,100 jobs and reduce salaries up to 20% of its top executives due to slowing economy.

Jan 16 2009: ConocoPhillips to cut 4% of its workforce
The third largest US oil company announced it would cut 4% of its workforce and expects big write downs on some of its exploration and production assets.

Jan 19 2009: Second UK government bailout; Bank stocks plummet
The British government is to announce a second bailout package for banks that would guarantee at least 100 billion pounds ($220 billion) of new lending. Bank shares in the UK stock exchange fell drastically despite the bailout. The shares of Lloyd’s Banking Group fell by 34%, while those of Barclays fell by 10%.

Jan 19 2009: RBS to report biggest loss in UK history
RBS would report a loss of 28 billion pounds ($41 US) for 2008, the biggest loss reported in the history of UK. The shares of RBS fell 66% to a 23 year low level. Following the announcement of the new bailout package, the taxpayers’ share in RBS could rise from 57.9% to 70%.

Jan 20 2009: Rohm and Haas to cut 900 additional jobs
The chemical maker, Rohm and Haas, being bought by Dow Chemical will cut 900 jobs in addition to 925 jobs it cut last June.

Jan 21 2009: Singapore’s economy in worst ever recession
Singapore’s economy has entered the worst ever recession as it shrank in the fourth quarter at a seasonally adjusted annualized pace of 16.9%.

Jan 21 2009: Australia’s BHP to cut 6,000 jobs and take a US $1.6 billion hit
BHP Billiton will cut 6,000 jobs (6%) of its work force and lose its giant Ravens Thorpe nickel mine in Australia that would lead to $1.6 billion in impairment charges in FY 2009.

Jan 21 2009: Clear Channel to layoff 1,850 nationwide
San Antonio (TX) based Clear Channel Communications, the world’s largest outdoor advertising company (973,000 displays in 60 countries), will layoff 1,850 employees (9% of workforce) across US in response to sagging economy.

Jan 21 2009: Warner Bros. to cut 800 jobs
Movie Studio Warner Brothers announced it would lay off 800 workers (10% of workforce) in the coming weeks due to the adverse economic conditions.

Jan 22 2009: Ericsson to cut 5,000 jobs
The fourth quarter profit in 2008 has been announced as 1.7 billion Swedish kronors less than for the same quarter in 2007. Ericsson has blamed restructuring and losses faced by Sony Ericsson for the drop. The company is laying off 5,000 global workers, mainly consultants and other temporary staff.

Jan 22 2009: Sun Microsystems to layoff 5,000 employees
Sun Microsystems laid off 1,300 employees and said that 5,000 people might lose their jobs in the next 18 months.

Jan 22 2009: Intel to shut 4 plants and layoff 6,000 workers
Intel Corp. announced it would shut down 4 chip plants (one each in Oregon, California, Malaysia and Philippines) and layoff 6,000 workers worldwide.

Jan 22 2009: Samsung declares first ever quarterly net and operating loss
South Korea’s Samsung Electronics posted first ever quarterly net and operating loss due to weak chip sales and decline in flatscreen sales. The company announced net operating loss of US $16.16 million in the fourth quarter of 2008.

Jan 22 2009: Huntsman to close UK plant; cut 1,175 jobs
US chemical manufacturer Huntsman (Woodlands, Texas based) announced it would cut 1,175 jobs and close a titanium dioxide plant in UK.

Jan 22 2009: AMD suffers a loss of $1.4 billion
Sunnyvale, California based Advanced Micro Devises suffered a net loss of US $1.4 billion in the fourth quarter of 2008. The net loss for the same quarter in 2007 was US $1.8 billion.

Jan 23 2009: Microsoft $1 billion short in sales target; will cut 5,000 jobs
Microsoft missed the fourth quarter sales target by $1billion US due to sluggish PC market and due to customers shifting to low cost “netbooks. Microsoft has announced that it would be laying off 5,000 workers in the next 18 months, first such layoffs since its foundation 34 years ago.

Jan 26 2009: Earnings of American Express fall
Fourth quarter earnings of American Express fell by 72% due to higher loan losses, lower customer spending and a strengthening US dollar.

Jan 26 2009: Texas Instruments’ profits fall; will cut 3,400 jobs
Texas Instruments announced it would cut 12% of its workforce or 3,400 jobs after posting a quarterly fall in profits.

Jan 26 2009: US financier arrested due to $400 million ponzi scheme
Nicholas Cosmo, Chief Executive of Agape World Inc. based in New York has been arrested due to allegedly running a “ponzi” scheme worth $400 million.

Jan 26 2009: Fannie Mai could need $16 billion
Mortgage Finance Company Fannie Mai could need $16 billion from US government through taxpayers’ aid. Freddie Mac last week said it needed $35 billion from government in addition to $13.8 billion it received last year.

Jan 26 2009: Corus to cut 3,500 jobs
Tata’s Corus, Europe’s second largest steel maker will cut 3,500 jobs in UK and Netherlands following collapse in demand from car manufacturers and builders.

Jan 26 2009: Phillips to cut 6,000 jobs
Consumer Electronics giant Phillips is planning to cut 6,000 of its global workforce due to fourth quarter losses in 2008 that amounted to roughly $1.9 billion.

Jan 26 2009: Sprint to cut 8,000 jobs
Sprint plans to cut 8,000 jobs (14% of workforce) by the end of March after an ill-fated merger with Nextel.

Jan 26 2009: ING to layoff 7,000 workers
ING Group, the biggest Dutch financial services company, will cut 7,000 jobs (5.4% of workforce) following the second successive quarterly loss. The company is expected to post a 1 billion Euro loss for the year 2008.

Jan 26 2009: Home Depot to layoff 7,000 employees
Home Depot is cutting 7,000 positions due to the slump in housing activity. The company will also close several stores.

Jan 26 2009: Caterpillar to layoff 20,000 jobs
The heavy machinery maker Caterpillar will be cutting 20,000 jobs or 18% of its workforce.

Jan 26 2009: Starbucks to layoff 1,000 additional employees
Coffee giant Star Bucks will be laying off 1,000 additional employees due to some new problems that the company is facing.

Jan 27 2009: Best Buy to cut jobs
Best Buy will cut an unknown number of jobs in addition to 500 workers who agreed to leave voluntarily.

Jan 28 2009: Obama wins the new $825 billion Stimulus Package from House
The US House of Representatives passed Obama’s $825 billion economic stimulus package on a 244-188 vote. The package will offer $275 billion in tax cuts and $550 billion in spending.

Jan 28 2009: Wells Fargo loses $2.55 billion
Wells Fargo announced the first quarterly loss of $2.55 billion since 2001. Its stocks soared 31%.

Jan 28 2009: Target to cut 9% of headquarters staff and close distribution center
Discount retailer Target Corp. will cut 9% of its headquarters staff, close a distribution center and reduce planned store openings. The affected jobs will total to around 1,500.

Jan 29 2009: Boeing to cut 10,000 world-wide jobs
Boeing whose net income fell 34% in 20008 to $2.7 billion, announced it would cut 10,000 world-wide jobs in 2009 as order cancellations mount.

Jan 29 2009: Startbucks to close 300 stores; cut 6,000 jobs
Startbucks will be closing 300 stores and layoff 6,000 workers as losses rise.

Jan 30 2009: US GDP sinks to the lowest in a quarter-century
The US economy shrank at 3.8% pace at the end of 2008 which is the worst in last 25 years. The figures are expected to be revised even lower in the months to come.

Jan 30 2009: Cessna to cut 4,600 US jobs
Cessna Aircraft Co. announced to cut 2,000 jobs in addition to 2,600 indicated earlier.

Jan 31 2009: NEC to cut 20,000 jobs
Japanese electronics giant NEC will cut 20,000 Japanese and world-wide jobs as it lost 129 billion Yens in the last nine months.

Friday, January 16, 2009

Financial Crisis Timeline: 2008

Timeline of Financial Crisis for the year 2008:

Feb 20: Sharper Image files for bankruptcy
San Francisco based Retailer of high-end electronics and gifts, Sharper Image Inc. filed for bankruptcy protection due to declining sales, three continuous years of losses and litigation. The company operates 184 locations country-wide.

MARCH 16: Bear Sterns bought by JP Morgan Chase & Co
Bear Stearns is bought by JP Morgan Chase & Co in a deal orchestrated by and backed up by the government following a sharp decline in shares and a collapse in confidence in the company.

JULY 11: IndyMac Takeover
Federal regulators seize IndyMac Bank after it succumbs to the pressures of tighter credit, tumbling home prices and rising foreclosures. IndyMac is the largest thrift ever to fail in the US.

July 30: Mervyns files for bankruptcy protection
Hayward, California based store, Mervyns, has filed for Chapter 11 bankruptcy protection.

Sept. 7: Fannie Mae, Freddie Mac Seized by Government
The U.S. government takes control of mortgage companies Fannie Mae and Freddie Mac, which held about half of the country's mortgages. The move put the liability of more than $5 trillion of mortgages on the taxpayers.

Sept. 14: Bank of America Buys Merrill Lynch
Bank of America, the nation's largest bank, credit card company and mortgage lender, buys Merrill Lynch for $50 billion. The purchase makes Bank of America the largest retail brokerage.

Sept. 15: Lehman Brothers Files for Bankruptcy
After the firm reported $19.3 billion in revenue in 2007, Lehman Brothers was forced to file for bankruptcy after it failed to find a buyer for its $60 billion in failing assets. The company had been in business for 158 years.

Sept. 16: Government Gives AIG Emergency Loan
In exchange for nearly 80 percent equity stake in the company, the government announces it will give insurance giant AIG an $85 billion emergency loan. The government said a failure of AIG could be devastating to the already struggling economy and financial markets.

Sept. 17: Barclays Makes Deal With Lehman
After passing on buying Lehman Brothers before the firm filed for bankruptcy, Barclays -- a British bank -- buys the company's North American investment banking and trading operations.

Sept. 19: Bush Announces Bailout Plan
The Bush administration asks Congress for powers to execute a $700 billion plan to buy bad debt and mortgages.

Sept. 25: JP Morgan Acquires Washington Mutual Bank
JP Morgan Chase announced the acquisition of Washington Mutual Bank, the largest savings and loan in US, from Washington Mutual Inc. JP Morgan will assume assets, deposits and branches for a $1.9 billion payment to FDIC (Federal Deposit Insurance Corporation).

Sept. 21: Goldman Sachs, Morgan Stanley Change Status
Goldman Sachs and Morgan Stanley get approval from the Federal Reserve to transform from investment banks to bank holding companies. The change means the companies will be regulated by the Federal Reserve, and will give them access to its emergency loan program.

Sept. 29: Citigroup Agrees To Buy Wachovia's Banking Operations
Citigroup agrees to buy the majority of Wachovia's banking operations for $2.1 billion in stock.

Sept. 29: House Rejects Bailout Package
The House of Representatives rejects the $700 billion rescue bill by a 228-205 vote.

Sept. 29: Dow Suffers Largest Ever One-Day Drop
The Dow falls 777.68 points to mark its largest one-day point loss in history. The decline is spurred by the House of Representative's rejection of the $700 rescue plan.

Oct. 1: Senate Passes Bailout
The Senate passes an amended proposed bailout bill, putting pressure on the House to do the same.

Oct. 3: Wells Fargo Tries To Acquire Wachovia
Days after Citigroup agrees to buy Wachovia's banking operations, Wells Fargo says it will acquire the company for $14.8 billion in an all-stock deal, without government assistance. This starts a battle between Citigroup and Wells Fargo for the company.

Oct. 3: House Approves Bailout, Bush Signs Bill
After the House voted in favor of the bailout 263-171, President George W. Bush quickly signed it. After the vote Bush said the government "acted boldly" to prevent the Wall Street crisis from spreading, but said "our economy continues to face serious challenges."

Oct. 6: Dow Drops Below 10,000

For the first time since 2004, the Dow Jones industrials dropped below 10,000. At one point during the day, the Dow was down 800 points before it rallied near closing to finish the day down 369 at 9,955.50.

Oct. 8: AIG Gets Another Loan From Feds
The Federal Reserve agrees to provide AIG with a loan of up to $37.8 billion, on top of the $85 billion loan it received in September.

Oct. 8: Motorola to cut 3,000 jobs
Motorola announced it would cut 3,000 or less than 5% of its work force and delay the spin-off of its mobile devices unit as it plans to try production of smart phones to excite the public in 2009.

Oct. 9: Dow Falls Below 9,000
Financial fears caused the Dow to drop to below 9,000 for the first time in five years. The Dow dropped almost 700 points to close at 8,579.19.

Oct. 10: Wells Fargo Wins Battle For Wachovia
Antitrust regulators clear Wells Fargo to acquire Wachovia.

Oct 21: IMF to rescue Iceland
Iceland, teetering on the verge of national bankruptcy due to global financial meltdown, is likely to receive a $6 billion (€4.5 billion) rescue package tailored by the International Monetary Fund (IMF), Nordic countries and Japan.

Oct. 22: Ukraine to get more than $20 billion in international loans
Ukraine will receive more than $20 billion in international loans, out of which around $16 billion would be provided by IMF.

Oct. 28: Dow Has Second-Largest Point Gain Ever
The Dow soars 889 points to reach the 9,065 level.

Oct. 30: Economy Shrinks In Third Quarter, Signaling Recession
The government says consumers cut back on their spending in the third quarter by the biggest amount in 28 years.

Nov. 5: Economy Stumbles After Election
The Dow falls more than 400 points on renewed fears of a recession.

Nov. 10: AIG Gets Bigger Bailout
The government provides new financial assistance to troubled insurance giant American International Group, including pouring $40 billion into the company in return for partial ownership.

Nov. 10: DHL Cuts 9,500 Jobs
Mail and logistics company Deutsche Post AG says it will cut 9,500 jobs and close all of its DHL express service centers in the U.S. amid heavy losses in the market there.

Nov 10: Circuit City Files for bankruptcy protection
Virginia based Circuit City filed for Chapter 11 Bankruptcy despite closing down 155 stores and cutting 17% of its 43,000 work force.

Nov. 13: Jobless Claims Soar
The government says that the number of newly laid-off individuals seeking unemployment benefits jumped more than expected last week to a seven-year high. The Labor Department says jobless claims increased by 32,000 to a seasonally adjusted 516,000.

Nov. 13: Budget Deficit Reaches Record $237.2 Billion
The federal government begins the new budget year with a record deficit of $237.2 billion, reflecting the billions of dollars the government has started to pay out to rescue the financial system. The Treasury Department says the deficit for the first month in the new budget year was the highest monthly imbalance on record.

Nov. 14: Bush Wants to Give $25 Billion In Loans To Carmakers
The White House is throwing support behind a plan to speed release of $25 billion in loans to troubled automakers but is rejecting a Democratic proposal to use money from a financial bailout for car companies. Spokeswoman Dana Perino said the Democratic proposal would lead to partisan gridlock because the $700 billion rescue package was never intended to help automakers and shouldn't be now.

Nov. 15: World Leaders Seek To Prevent Future Economic Crisis
World leaders are agreeing to flag risky investing and regulatory weak spots in hopes of avoiding future financial meltdowns. President George W. Bush and leaders from nearly two dozen countries endorse broad goals to fend off any future crisis and revive the economy. They are pledging to lay the foundation for reform so that the kind of global crisis now dragging down the economy does not happen again.

Nov. 15: Pakistan to get IMF bailout
Pakistan announced today that the country will receive $7.6 billion from IMF. This would be the first IMF rescue in Asia since the global financial crisis began.

Nov. 17: Citigroup to cut 53,000 Jobs
Citigroup, the second biggest bank in US will slash 53,000 jobs in the coming quarters after suffering heavy losses in the current financial crisis. The job cut announced is in addition to the 22,000 job cut the company announced in last October.

Nov. 19: Dow drops below 8,000 for the first time since 2003
Wall Street hit its lowest level since 2003. The Dow Jones industrial average fell below the 8,000 mark. It dropped nearly 430 points to 7,997. The news came as major automakers await a decision from Congress about a bailout for their industry.

Nov. 20: Jobless Claims Rise
Labor Department reports that claims for unemployment benefits hit their highest level since 1992. The Labor Department said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week.

Nov. 22: UK unveils stimulus plan
British Finance Minister Alistair Darling has unveiled a $430 billion package of measures intended to stimulate the flagging U.K. economy, suspending rules that have kept government borrowing in check since the ruling Labor Party came to power in 1997.

Nov. 24: Citigroup Rescue
US Government takes $20 billion stake in Citigroup, guarantees $306 billion in risky loans and securities

Nov 26. European Commission launches stimulus plan
The European Commission unveiled a Recovery Plan worth about EUR200 billion or 1.5% of European Union's gross domestic product. The plan envisages timely, targeted and temporary fiscal stimulus for the economy. Nearly EUR170 billion will be in national budgets and around EUR30 billion will be in the EU and European Investment Bank budgets.

Dec. 2: US Recession Official
The National Bureau of Economic Research (NBER) declared that he US economy is in recession and the economic slump infact started in December 2007. It is expected to last till the middle of 2009 and will be the most severe slump since the 1981-82 recessions.

Dec 2: JP Morgan to Axe 9,200 Washington Mutual Jobs
JP Morgan Chase announced it will cut 9,200 jobs at former Washington Mutual, which on 25th Sep. became the largest US bank to fail. The cut amounts to more than 21% of the work force.

Dec 2: Oil Falls to 3 Year Low
Crude oil fell to the lowest in more than three years on signs the U.S., the world’s largest energy consumer, may be in the longest slump since World War II.

Dec 3: Bank of America Could Cut 30,000 Jobs as it Absorbs Merrill Lynch
Bank of America could end up cutting 30,000 jobs as it moves to absorb Merrill Lynch. The majority of layoffs are likely to come from Merrill’s side of business.

Dec 3: US Automakers Want Up to $34 Billion in Aid
General Motors, Ford and Chrysler submitted requests to Congress for what could amount to $34 billion in Federal assistance to save the struggling industry from collapse.

Dec 4: Dupont to cut 2,500 jobs
Dupont says it will cut 2,500 jobs, mostly serving the U.S. and European automotive and construction markets, because of lower demand linked to the steep global decline in home building, auto sales and consumer spending.

Dec 5: AT&T to cut jobs by 12,000
AT&T said Thursday that it would cut jobs by 12,000 or 4% of its workforce – the job cuts will take place in December and throughout 2009.

Dec 5: Viacom to cut 850 positions
Responding to the economic downturn and weaker revenue, Viacom Inc. is slashing more than 850 jobs (7% of its workforce) and freezing salary increases next year. Deepest cuts will come at its division MTV Networks, which includes MTV, Nickelodeon, VH1 and Comedy Central.

Dec 8: Dow Chemical to cut 11,000 jobs
Dow Chemical announced it was slashing 5,000 full time jobs, or 11% of its global staff, and an additional 6,000 contract workers, as it cuts 30% of its total production.

Dec 8: 3M Slashes 1,800 jobs, cuts 2008 outlook
Diversified manufacturer 3M Co said on Monday it would cut 1,800 jobs and lowered its 2008 outlook due to the global economic downturn, sending its shares down as much as 7.4 percent.

Dec 9: NYC Comptroller says city may lose 165,000 jobs
NYC Comptroller William C. Thompson Jr. said over the next two years about 165,000 jobs may be lost, of that around 35,000 on Wall Street. He said the city will not see the bottom of economic downturn until the beginning of 2010.

Dec 9: Sony to cut 16,000 jobs
Japan’s Sony said it would cut its global work force by 4% or 16,000 jobs. This would include half of the regular and half of contractual employees.

Dec 9: Oil falls 4% on forecast for shrinking demand
US crude oil fell to $42 a barrel after hitting a session low of $41.95 after US government forecast the world economic slowdown would shrink global oil consumption this year for the first time since the early 80s.

Dec 9: Rio Tinto to cut 14,000 jobs
Global miner Rio Tinto, faced with $40 billion in net debt, said it could cut 13% of its global workforce or 14,000 jobs, slash capital spending by more than half and sell more assets.

Dec 9: Anheuser-Busch to cut 1,400 jobs
World’s largest brewer, Anheuser-Busch announced it would cut some 1,400 US jobs – or another 6% of its workforce to help save atleast $15 billion a year.

Dec 10: US House passes $14 billion Auto Bailout – Chances grim in Senate
US House of Representatives passed the $14 billion Auto Bailout package for the “Big Three”, GM, Ford and Chrysler. However, it would be an uphill task to get it approved by the Senate. The loans are intended to carry the companies through March 31 2008, after which more help would be determined according to the quality of restructuring implemented by the “Detroit Three”.

Dec 10: Yahoo to cut 1,500 jobs
Yahoo announced it would cut 1,500 jobs which that would include 3% of its workforce in India.

Dec 10: Office Depot to cut 2,200 jobs
Faced with shrinking profits and ever-increasing operating costs, Office Depot has decided to cut 2,200 jobs across North America and close 112 stores in the next 3 months.

Dec 11: US Retail Sales post biggest drop in 5 years
SpendingPlus, a subsidiary of Master Card reported US retail sales excluding autos posted their biggest monthly drop (3.8%) in 5 years November, despite a sales spurt over the crucial “Black Friday” weekend – the three days after the Thanksgiving Holiday in November.

Dec 11: KB Toys files for bankruptcy protection
KB Toys filed for bankruptcy protection just 14 days before Christmas despite offering heavy discounts to generate sales. The company operates 277 mall-based stores, 40 KB Toy Works stores which are mainly in strip malls, 114 outlet stores and 30 short-term holiday stores. It has 4,400 full-time employees and 6,515 seasonal employees

Dec 11: BlackRock to cut 500 jobs
BlackRock Inc., the largest publicly traded asset manager, has cut 500 jobs worldwide as it grapples with a surge in outflows during the global credit crisis.

Dec 11: Stanley Works to cut 2,000 jobs and close 3 plants
Tool maker Stanley Works said today it will cut 2,000 jobs, close 3 manufacturing facilities and revise future outlook, citing weakness in its construction and industrial segments and the effect of a stronger dollar.

Dec 12: Investors facing billions in potential losses due to Madoff Fraud
Bernard Madoff, 70-year old former chairman of NASDAQ Stock Exchange, was arrested Thursday for allegedly masterminding a Ponzi scheme through a hedge fund he ran. Potential losses from the fraud are said to be around $50 billion and the affected may include rich investors from New York and Florida, banks, funds of funds, corporations, endowments, universities and foundations. The full extent of damage will only be known with time.

Dec 15: Toyota to cut sales goal and costs
World’s top automaker Toyota is expected to cut its 2009 global sales forecast by atleast 1 million vehicles to 8-8.7 million (as opposed to planned 9.7 million before), down from the record sales of 9.37 million in 2007. Toyota is also expected to announce cost cutting measures.

Dec 17: Federal Reserve cuts key interest rate to historic low
In a move to stimulate the ever-weakening US economy, Federal Reserve slashed the key interest rate (target fed-funds rate) from 1% to a range of 0 to 0.25% - the lowest since it began publishing the target in 1990. The move was met by an overnight rally in US stock markets.

Dec 17: Woolworth’s to close 807 stores
Woolworths, the 99-year old bastion of the British high street that sold everything from sweets to toasters, will close by Jan. 5 2009 with the loss of 27,000 jobs.

Dec 17: France’s Valeo to cut 5,000 jobs
The second biggest auto parts maker of France Valeo announced it would cut 5,000 jobs or 9.3% of its workforce due to sharp drop in vehicle production. Around 1,600 positions would go in French plants while 1,800 jobs will be cut in other European countries.

Dec 17: Rio Tinto cancels $10 billion Saudi Joint Venture
Mining giant Rio Tinto will not participate in the Saudi 700,000 tons per year Aluminum joint venture as it will not be able to finance its 49% of the share or $10 billion because of financial crisis. Saudi group Maaden owns the rest of 51% share.

Dec 19: US Government announces $17 billion Auto Bailout
The US government will give $17.4 billion to GM and Chrysler in short term loans in return for deep concessions, including giving the government the option to take stakes in the companies and them to show their viability by March. $13.4 billion will be made available immediately and further $4 billion will be given in February contingent upon drawing down the remaining $350 billion TARP fund. Ford is not included in the package but seeks $9 billion line of credit.

Dec 19: Polaroid files for bankruptcy

Instant photo inventor Polaroid filed for Chapter 11 bankruptcy in order to facilitate the company’s financial restructuring due to the alleged fraud investigation its founder Petters Group is going through.

Dec 19: Oil falls below $37
Oil prices fell to $36.22 a barrel (4.5 year low) due to slowing global economy despite announcement by OPEC that it would be cutting oil production by 2.2 million barrels a day.

Dec 19: Caterpillar to layoff 814 workers
Caterpillar Inc. hit by a drop-off in demand for diesel engines said it plans to layoff 814 production workers at its engine assembly plant in Mossville, Illinois

Dec 19: Citizens Financial Group to lay off 900 workers
Citizens Financial Group announced it would be cutting 900 jobs in 13 different states across the commercial, retail and global transactions sectors.

Dec 22: Electronic Arts to cut 1,000 jobs
California based company, Electronic Arts, the second biggest video games publisher boosted planned job cuts by 1,000 or 10% of its work force. And will consolidate or close atleast 9 studio or publishing locations.

Dec 23: US economy shrank 0.5%
Government data has shown that the US economy shrank 0.5% in the third quarter of 2008, after growing at 2.8% in the previous three months. The fourth quarter is expected to be worse.

Dec 23: Unisys to cut 1,300 jobs
IT solutions and services provider Unisys announced it would cut 1,300 jobs across the world, freeze salary raises, slash retirement plan contributions and consolidate facilities in order to cut costs and return back to profits.

Dec 24. Jobless claims rise to a 26 year high
According to the Labor Department, unemployment insurance last week rose by 30,000, to a 26 year high of 586,000, seasonally adjusted, and the four week average of new claims rose by 13,750 to 558,000.

Dec. 24: GMAC to get a life line
GMAC which is 49% owned by GM and provides auto-financing to GM customers and dealerships has been approved by Federal Reserve to become a holding company from a financial services firm, which will allow it to get funds from the government’s $700 billion bailout package.

Dec. 29: Kuwait cancels $17 billion deal with Dow Chemical

Kuwait has cancelled a $17 billion petr-chemical joint venture deal with the US company Dow Chemical. The company had planned to use the proceeds of this deal to repay large part of $13 billion in debt on its acquisition of rival company Rohm and Hass. Kuwaiti parliamentarians were against the deal as they did not deem it viable in the face of current financial crisis.

Dec 29: UK could lose 600,000 jobs in 2009
According to The Chartered Institute of Personnel and Development, UK unemployment could reach close to 3 million in 2009 while 600,000 jobs could be lost in the same year.

Dec 29: Russian professor predicts US will disintegrate due to debt collapse
A Russian professor, Igor Panarin, has predicted that the United States will break-up into 6 parts by 2010 due to the mounting debt crisis that he called a pyramid bound to collapse.

Dec 30: Home prices fall a record 18%
According to Standard & Poors/Case-Shiller Home Price Indices, the prices of US single family homes have plunged to a record 18% from a year earlier. The composite index of 21 metropolitan areas fell 2.2% in October from September 2008.

Dec 30: 73,000 retail stores could close in the first half of 2009
A recent report by International Council of shopping Centers (ICSC), 73,000 stores could close in the first half of 2009. The Council had predicted that 148,000 stores would shut down in 2008.

Dec 30: GMAC gets $6 billion relief
GMAC received a $6 billion injection from the U.S. government late Monday night as part of the Troubled Asset Relief Program.

Wednesday, January 7, 2009

Party is over for Pakistan's Economy

The eight years of the previous government brought an economic boom in Pakistan. Between 2004 and 2008, real GDP grew at an average of 7%. There were plenty of employment opportunities. Salaries in blue collar jobs reached levels never seen before. Stock Market made record-breaking gains. Privatization proceeds, foreign direct investment, increased remittances and international aid increased foreign exchange reserves to more than $16 billion by 2007. Two sectors, Telecom and Finance, specifically achieved phenomenal growth.

Deregulation in the telecom sector played a vital role in turning around the scenario in this industry. Most of the growth could be attributed to the cellular sector. There was significant foreign direct investment. Network coverage spread to around 90% of Pakistan. The growth rate was 100% between 2004 and 2008 with the number of subscribers reaching around 80 million. Companies improved the quality of service, decreased rates and expanded coverage. This, in addition to the availability of cheap handsets, enabled people from less privileged classes of society to have access to such services. As of today 5 major cellular companies are in operation: Mobilink, Ufone, Telenor, Warid and Zong. Fixed line telephone sector, however, experienced much less growth with consumers reaching just 4.8 million by 2007. Wireless local loop subscribers reached 2 million by the end of 2007. There was growth in Internet subscriptions as well, however this service remained out of the reach of less income groups that contributed to the digital divide.

Banking sector performed very well. Privatization played an important role. State Bank requirements also encouraged existing banks to increase their branch network significantly. Assets of all banks showed a net expansion of Rs. 4,351 billion by 2007. By 2008, 80% of banking assets were controlled by the private sector. A number of Middle Eastern and European Banks started operations in the country including Barclays, RBS (ABN Amro takeover), Dubai Islamic Bank, Emirates Global Bank and others. A number of local groups established banks, mostly in collaborations with foreign partners.

Credit became widely available to businesses and individuals. An ever-increasing number of people obtained leased cars, home loans, personal loans and credit cards. The number sold of electronic and electric devices sky-rocketed. The non-banking financial sector achieved great success as well. For instance, the net assets of mutual funds increased from Rs. 25 billion in FY 2000 to Rs. 313 billion in FY 2007.

Pakistan’s stock market was the fastest growing market in the world between 2000 and 2008. It received enormous foreign investment in addition to the active contributions by local investors. The Karachi Stock Market (KSE 100 Index) grew from 1,521 points in June 2000 to more than 15,000 points by mid 2008.

There was growth in other sectors too. Power sector was one such sector. Construction and Real Estate markets showed vast improvements. Foreign companies like Emaar and Al Ghurair Giga invested heavily in Pakistan. Projects such as Centaurus, Platinum Square, Gold Crest and Giga Towers were announced. Immense investments went into new property and housing schemes. Hotel industry finally began to see light at the end of the tunnel as projects such as Jumeirah in Islamabad, Sofitel in Karachi and Hayat Regency in Lahore were announced. Retail sector also performed well. Malls, super markets and departmental stores sprang in different parts of the country. Foreign stores like Metro, Makro and Carrefour announced their entry. Advertising industry achieved tremendous growth as well in Print, Television, Radio, Outdoor and Internet media.

The situation started to change swiftly as the caretaker government took charge. Rise in oil and food prices at international level, falling currency, slippages in budget, failure to pass on the increased oil price to the consumer, heavy government borrowing from State Bank, mismanagement of wheat crisis and corruption had badly hurt the economy. Recent growth in Pakistan seemed to have been consumption oriented. Agricultural and Industrial sectors were neglected. Trade and current account deficits deteriorated. By April 2008, overall inflation rose to 17.2 percent. The previous government could not match the rise in number of vehicles, sold, to road infrastructure improvements which lead to traffic congestion problems. It did not produce more electricity to take care of the growing energy needs. Shortage of electricity, oil, gas and food posed serious problems for the economy. Although, availability of credit helped people improve their lifestyles, many blamed the banks for charging exorbitant interest rates, while others felt that the old concept of “living within one’s own means” was violated by spread of easy credit. Global financial crisis had its impact felt on Pakistan since exports fell and budget cuts were implemented by multinationals operating in the country. Companies tightened their budgets for existing projects and cancelled those for new ones. The once booming employment market started to take a hit. Stock market faced the worst crash as foreign investment was withdrawn. GDP growth came down to 5.8% in FY 2007-2008, as opposed to the average of 7% in the past few years.

In November 2008, Pakistan announced it would receive a loan of $7.6 billion from IMF as foreign exchange reserves had fallen to very low levels and balance of payments had become extremely worse. The policies of the present government will determine how well Pakistan recovers from the current situation. Deteriorating relations with India and adverse law and order situation will be major challenges in addition to a host of other problems for the present regime in recovering the country out of the present economic crisis, if indeed the government has the ability to achieve this goal.

Thursday, January 1, 2009

Where did General Motors go Wrong?

GM is the world’s largest automaker that has remained the industry leader for the past 77 years. It employs more than 250,000 people and manufactures in 35 countries. In 2007, more than 9 million vehicles were sold all around the world. The budget of GM is more than that of countries like New Zealand and Pakistan. Management Science books are filled with examples of GM, stating how big the company really is, how well it manages its operations, how efficiently it uses technology, how immaculate its supply chain is, how it cares for the employees, how well it creates economies of scale and so on. This is not just a company; it’s a legend in its own right. Why then are we hearing that General Motors is on the verge of bankruptcy? That doesn’t sound logical. Where did GM go wrong? What happened? Why is it asking for bailouts?

In 1990, GM introduced an electric car with zero emissions, which was marketed in the United States, in some regions. It was called E1. The response was not so good and the project was scrapped. The company was later criticized for abandoning E1.

In 2007, after the union strikes, contracts were signed with worker unions, providing product and employment guarantees. Such strikes not only resulted in lost production but also kept financial burden on the company. Half a million former employees get pensions and health care benefits from GM.

As the Japanese competitors, like Toyota and Honda, continued to produce compact and fuel efficient cars, GM remained committed to making larger vehicles that were not so fuel efficient. It kept changing names for newer models but that did not increase sales as the company had lost respect in consumers’ eyes. Japanese car manufacturers came up with new models while retaining old names to bank on their reputation. In 2004, GM started refurbishing its SUVs for introduction as new models in 2007. The fuel costs increased the same year and people started focusing on fuel efficient vehicles. This trend has continued till today. After the sharp rise in oil prices in 2008, consumers bought more of Japanese cars while sales of SUVs declined. In addition to the issue of fuel efficiency, Japanese competitors continued to offer more interesting and comfortable features in their cars, while GM failed to do so at the same pace. Japanese are also good at cutting costs during production which is another reason they survive even when prices are going down.

GM has a good supply chain and it is amazing to see how it manufactures and supplies cars the world over. However, the supply chain only provides what the manufacturer wants and it does not have control over the upstream market demand. The manufacturer in this case did not produce what it should have. In order to do that, GM had to re-structure and re-align the entire supply chain.

Although GM did introduce the world’s fist hybrid car in 2004, the company sold just 843 hybrid cars in the first quarter of 2008. On the other hand, Ford and Toyota sold 5,225 and 430,000 hybrid cars respectively. This shows that General Motors did not follow up with a good initiative that it had taken, just as it had scrapped the E1 project years back. In 2007, GM lost $50 billion and its stock value decreased by 76% in 2008. The talks of merger with Chrysler failed the same year. By December 2008, GM was almost out of cash and could not survive beyond 2009. The possibility of filing for Chapter 11 bankruptcy began emerging as the company asked the government for billions of dollars from the TARP (Troubled Assets Relief Program). On 19th December 2008, the government approved a $13 billion financing for GM and Chrysler while $4 billion could be provided later. The Detroit big three have to prove their viability by March 2009 before they can receive more cash.

In conclusion, GM failed to see the writing on the wall. This is a classic case of a manufacturer producing what it deems to be suitable for the consumers, rather than what consumers really want. The union contracts must have had negative impact on GM, unlike foreign competitors, but the situation got worse due to wrong product decisions. Past success cannot guarantee future accomplishment. In a fast changing competitive world, companies have to be flexible enough to change along with the changing global conditions, consumer tastes, competitor strategies and government regulations.