GM Exits Bankruptcy

General Motors emerged from bankruptcy on July 10, after a just a 40-day stint under court protection. The new GM, which is 60.8% owned by the U.S. government, is a much slimmer company. GM had more than $70 billion in debt before filing Chapter 11, but came out with approximately $11 billion in U.S. debt. The number of nameplates will be whittled down to 34 by next year, from 48. And the company’s U.S. workforce will be cut by about one-third. At a press conference, CEO Fritz Henderson pledged the start of a new era at the 100-year-old company. “Business as usual is over at General Motors,” he said. Henderson also declared his intent to pay off GM’s government loans “much sooner” than the 2015 deadline.

Source: Businessweek

Citi Reshuffles Top Management

In an unexpected move, Citigroup reshuffled its top management, swapping out its CFO for the second time in four months. According to a July 9 statement put out by the bank, Controller John Gerspach, a 19-year Citi veteran, will move into the CFO job. His predecessor, Edward “Ned” Kelly, who quit Merrill Lynch for Citi in 2008, will become Vice Chairman and be in charge of strategy, including mergers and acquisitions. Citi also named Eugene McQuade, a well-respected banker with experience in running troubled institutions, to head its Citibank division. The new appointments may help CEO Vikram Pandit stifle criticism from regulators in Washington that Citigroup’s managers lack commercial banking experience.

Source: Bloomberg, Dow Jones

UBS Resisting Calls to Release Names of U.S. Clients

Switzerland’s biggest bank is under pressure from the U.S. Internal Revenue Service and the Justice Department to disclose the identities of more than 52,000 U.S. clients suspected of tax evasion. But UBS says doing so would violate Switzerland’s banking secrecy laws. The Swiss government, for its part, says it will block any move by UBS to turn over the names should it be ordered to do so by a Florida court, which is scheduled to rule on the matter on July 13.

Source: New York Times

China’s Car Sales Soar

China’s passenger-vehicle sales jumped 48% June, the biggest increase since February 2006, as government stimulus spending helped the country surpass the U.S. as the world’s largest auto market this year. Overall auto sales, including buses and trucks, rose 36% from a year earlier to 1.14 million. The China Association of Automobiles raised its full-year vehicle sales forecast to 11 million from 10.2 million previously.

Source: Bloomberg

Gap Remains at G-8 Summit over Gas Emissions

Developing nations led by China and India refused to back long-term targets proposed by the Group of 8 industrial nations to cut greenhouse gas emissions, balking at reluctance by leaders of the world’s biggest economies to move more quickly on their own. Inability to bridge the gap between rising carbon-emitting countries such as China and the longtime polluters within the G-8 underscores the steep challenges involved in attempting to strike a comprehensive bargain to contain global warming.

Source: Los Angeles Times

What to Expect from Second Quarter Earnings

Earnings season kicked off in the U.S. with Alcoa reporting results on July 8. The aluminum producer logged its third quarterly loss in a row as the global recession crippled demand for the lightweight metal. Looking ahead, analysts are forecasting the biggest year-over-year decline in profitability—a 79% plunge—for the materials sector, which shouldn’t surprise anyone who has followed the deterioration in the housing and commercial real estate markets. Thomson Reuters’ highest earnings forecasts are for a 2% decline for the health-care sector and a 6% drop for consumer-staples companies. A 29% decline is projected for consumer-discretionary companies.

Source: CNN Money, BusinessWeek

U.S. Scales down Bank Plan

After months of back-and-forth with the banking industry, the Obama administration unveiled a scaled-down version of its plan to buy troubled mortgage-related securities. The decision bets on the assumption that banks have recovered sufficiently to help pull the economy out of recession. The Treasury, Federal Reserve and the Federal Deposit Insurance Corp. would commit up to $30 billion of public money to buy bad mortgage-related securities from banks.

Source: New York Times

Google Plans PC Operating System

Stepping up its inroads into Microsoft’s territory, Google announced that it plans to release an operating system for PC’s, a market that Microsoft has dominated for almost two decades. The operating system, news of which was released on a Google blog, will focus initially on netbooks, the smaller portable computers that have created a whole new market segment, and will be released sometime in 2010.

Source: BusinessWeek

Chinese Accuse Rio Tinto Exec of Espionage

One of the four employees of Anglo-Australian mining giant Rio Tinto detained in China is being accused of spying, the Australian foreign minister said today. The disclosure further raises the stakes in the incident, which comes after Rio Tinto recently decided not to proceed with plans to sell a $19.5 billion stake to China’s state-owned mining company Chinalco.

Source: Financial Times

California Closer to Junk Status

With talks between Gov. Arnold Schwarzenegger and lawmakers at an impasse, California’s budget crisis took a new turn for the worse yesterday when Fitch’s downgraded the state’s bond rating to BBB. That’s the lowest bond rating of any American state and just two notches above junk. California has a budget hole of $26.3 billion, and the Republican governor is squabbling with Democrats in the legislature on how to close the gap. The state started issuing the IOUs last week and has distributed $87 million so far.

Sources: Sacramento Bee

Obama Administration Investigating Telecom Companies

The Justice Department is in the early stages of investigating possible antitrust violations by telecommunications companies such as AT&T and Verizon Communications, sources say, with the government also looking into anticompetitive practices in the health care and agricultural industries. The Bush Administration brought no major antitrust cases during its eight years in office but Christine Varney, the top antitrust official at Obama’s Justice Department, has talked about the need for the government to be more aggressive in enforcing antitrust laws.

Source: Wall Street Journal

Bankruptcy for Auto-Parts Maker Lear

Lear Corp, a producer of seating and electrical equipment for vehicles, today filed for Chapter 11 bankruptcy protection. The company, which listed assets of about $1.27 billion and liabilities of about $4.54 billion, has suffered from cuts in production by GM, Ford and Chrysler.

Source: Reuters

Former Goldman Employee Charged With Computer Theft

Sergey Aleynikov, a former computer programmer at Goldman Sachs, has been charged with stealing computer codes related to the firm’s high-speed trading platform. The 39-year-old Russian immigrant, who quit Goldman on June 5, is in Federal custody. Bail has been set at $750,000 and a preliminary hearing on the case is scheduled for Aug. 3.

Source: Reuters

Surprisingly Strong Earnings Predicted at Samsung

Shares of Samsung Electronics rose in Seoul on Monday after the South Korean giant surprised investors with an upbeat earnings forecast. Samsung, the top maker of memory chips and LCD screens, said its second-quarter profits would top $1.74 billion, more than five times higher than earnings in the first quarter of the year.

Source: Financial Times

Will Spike in Oil Prices Doom the Recovery?

Oil’s wild ride shows no sign of ending. With prices up more than 100% so far this year, analysts worry about the impact on a still-weak global economy. “To call this extreme volatility might be an understatement,” said Laura Wright, Southwest Airlines CFO. “Over the past 15 to 18 months, this has been unprecedented. I don’t think it can be easily rationalized.”

Source: New York Times