Business News: July 2009

General Motors and Chrysler higher-ups defended their strategy for down sizing dealerships during a Senate hearing calling it, “a painful but necessary part of creating leaner, more competitive companies.”  Fritz Henderson, chief executive of General Motors, and James E. Press, vice chairman of Chrysler, stated that dealerships selling small numbers of vehicles were weighing down their companies.  They cited a need for more streamlined  dealers that would work toward the survival of their struggling companies.  “Does my heart go out to the dealers who will not be part of the new company? Absolutely,” Mr. Press said in his prepared testimony.  “But we’ve had to make many hard choices to create a viable business and preserve jobs for tens of thousands of people.”  Unfortunately, Senator John D. Rockefeller IV, chairman of the Senate Commerce committee, didn’t agree with their thinking saying that the blame for the auto industry’s  problems should not be blamed on  the dealers.  “Let me be very clear,” Mr. Rockefeller, Democrat of West Virginia, said. “I don’t believe that companies should be allowed to take taxpayer funds for a bailout, and then leave the local dealers and their customers to fend for themselves with no real notice and no real help.”  Chrysler will  close 800-plus dealerships in June and General Motors reduces its 6,000 dealerships to about 3,500 by the end of next year. 

 

Reports have the U.S. deficit at about $1.8 trillion this year as the country spends and spends and spends on financial bailouts, a sweeping stimulus package, additional lending programs, and funds for the auto industry. This will be the highest deficit incurred since World War II.

 

Bing.com takes top honors as the place to go for every search category you can name—from news, to videos, shopping, maps, and travel. Tabs help its users to locate bonus features including Microsoft’s Cashback search rewards program and links to pages for developers and Webmasters.

Microsoft designed Bing as a one-stop site where users can make purchases and engage in other related activities.

 

Stats have the U.S. labor market in bad shape as cities throughout 93 metropolitan areas report unemploy- ment rates of near 10 percent in April.

This comes down to more than 13 times the number reported last year.

Currently, the national unemployment rate is 8.9 percent, and in 150 cities, numbers showed more residents out of work earlier this spring.  Cities posting unemployment rates below 7 percent accounted for 117—less than half of the 347 cities who recorded lower rates last year.  The Labor Department reported nine of the 13 metropolitan areas with jobless rates of at least 15 percent were in California.  El Centro, a  California city half an hour drive from the Mexican border, had the highest rate in the country at 26.9 percent. Detroit had the highest unemployment of 13.6 percent out of 49 metropolitan areas with more than one million population.  

 

A tech industry insider told Reuters that the U.S. Justice Department is investigating allegations by big tech businesses not to poach on each other.  Search engine giants/competitors Google and Yahoo, computer/music player maker Apple and the biotech company Genentech (owned by Roche Holding AG) were put on notice that the Justice Department has a formal probe going to investigate any possible illegal or unethical crossovers among the companies.  Genentech says that it would accommodate any investigation.  ”Our understanding is that a number of companies received this request for information from the U.S. Department of Justice.  Genentech is cooperating and will respond to the request in due course,” the company said in a state- ment.  Reps from Google and Yahoo said they were contacted by the Justice Department and would cooperate.

 

According to reports, two senior U.S. Senate Republicans are drafting legislation that will require the government to hand over to the American taxpayers its controlling stake in the General Motors Corp.

In order for this legislation to pass, the Republicans need a lot of extra help in the form of Democrat supporters, plus  the backing of President Obama.  The bill if passed would widen the debate on the president’s unprecedented action to take a 60 percent ownership stake in GM.  Under the planned bill,  the Treasury Department would handover  the  stock certificates to 154 million Americans who pay federal taxes. Thinking is: Taxpayers financed the government’s $60 billion-plus  investment in GM, who incidentally filed for bankruptcy protection in June.

 

Fewer U.S. workers filed new claims for jobless benefits for a third week and productivity rose faster-than-expected in the first quarter, data showed.  The Labor Department said first-time applications for unemployment insurance benefits fell 4,000 to 621,000 in the week ending May 30, 2009.  In addition, it said the number of people still on the benefit rolls after an initial filing fell for the first time since the start of the year in the prior week.

 

Oil rose to a seven-month high and gas surged after Goldman Sachs Group Inc. said prices may reach $85 by the end of the year as demand recovers and supplies shrink.  Oil jumped five percent when the bank increased its year-end forecast from $65 a barrel and held off on its prediction that prices will dip. The acceleration came after reports showed that less Americans filed claims for unemployment than in prior weeks.  “There seems to be a growing realization that oil will end the year in the $80 area, and this is spurring some buying,” stated John Kilduff, senior VP of energy at MF Global in New York. “The market is taking a little bit of solace from today’s unemployment numbers.”  Crude oil delivery in July rose $3.26 (4.9 percent) to $69.38 a barrel. The trend is moving toward the biggest gain since April 9. Futures climbed as much as $3.48 (5.3 percent) to $69.60, the highest since Nov. 5, 2008.  Prices are up 56 percent this year.  Gasoline for July delivery rose 7.74 cents (4.1 percent) to $1.979 a gallon in New York.  Prices reached $1.9836, highest since Oct. 14, 2008

Initial jobless claims fell by 4,000 to 621,000 in the week ended May 30, in line with forecasts, from a revised said the U.S. Labor Department.  The number collecting unemployment insurance fell for the first time in almost five months, breaking 17 consecutive records.

 

The IRS brings forth new standards for tax return preparers by the end of this year.  The changes could affect chain tax preparation companies like H&R Block Inc. (HRB), Jackson Hewitt Tax Service Inc. (JTX) and Liberty Tax Service, as well as tax software makers like Intuit Inc. (INTU).  Around 80% of Americans use a tax return preparer or tax return preparation software to file their taxes.  The IRS will recommend its plan at the end of the year to U.S. Treasury Secretary Timothy Geithner, which could include regulatory or legislative changes.  Recommendations will cover the groups of unlicensed tax preparers and tax software providers.

 

U.S. mortgage rates surged to their highest in almost six months despite government efforts to help curb the floundering struggling market.  The interest rates on U.S. 30-year fixed-rate mortgages jumped to 5.29 percent for the week ending June 4, up from 4.91 percent the previous week, according to a survey by Freddie Mac.  Higher rates showed an increase in returns on U.S. government bonds, which act as a benchmark for the mortgage market. “Any additional rate increases will significantly hurt the home purchase power and refinance markets, which will really hurt the economic recovery,” stated Alan Rosenbaum, the president of Guardhill Financial, a New York City-based mortgage banker and brokerage company.  The last time that rates exceeded the current levels was the week ending December 11, 2008, when the 30-year rate was at 5.47 percent.  The latest week marked the biggest jump since a 0.42 percentage point rise in the week that ended October 30, 2008, when interest rates hit 6.46 percent.