My finance view

PARIS – Airbus parent EADS hopes to make an acquisition in the U.S. this year following the huge U.S. Air Force contract Airbus recently snatched from rival Boeing Co.

European Aeronautic Defence & Space Co. NV Chief Executive Louis Gallois proposed two takeover projects to the board "in the fields of defense, security or services" of which one "at least should be in the United States," according to a letter sent to staff and read to The Associated Press by an EADS employee who asked not to be named because the document was intended only for EADS staffers.

Gallois said in January that Airbus is planning acquisitions in the United States to take advantage of the dollar’s weakness and reduce its exposure to shifting exchange rates. EADS is aiming at "medium-sized companies," he said _ without naming any potential target.

The Airbus plane that will be delivered under the Air Force contract will be modified at a new factory in Alabama, the European airplane maker has said payday loans. Including General Electric engines, Airbus says about 60 percent of the plane will be built in the United States.

The euro reached a record high of $1.5459 on Friday, hurting Airbus, which sells its planes in dollars while many of its costs are in euros.

EADS and its U.S. partner, Los Angeles-based Northrop Grumman Corp., won a competition with Chicago-based Boeing on Feb. 29 for one of the biggest Pentagon contracts in decades, worth an estimated $35 billion to build 179 midair refueling planes.

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John Talbott has some advice for Canadians looking for cheap vacation homes in the United States: Don’t buy. At least not yet.

While American brokers are filling newspapers (including the Toronto Star) with advertising enticing Canadians to take advantage of depressed housing prices and a high loonie, Talbott says there is more pain to come.

"We haven’t seen the bottom yet," says the author and former investment banker with Goldman Sachs. "There are going to be a lot more For Sale signs."

When Talbott released his first book, The Coming Crash Of The Housing Market in 2000, it was met with a downright hostile reception by the real estate community.

"They basically thought I was crazy," Talbott says.

Talbott, who detailed the excesses in lending in the U.S. market and the steep appreciation in real estate prices, is now recognized as one of the first to call the market correctly.

Talbott says there is still a wave of home foreclosures to come on the market from buyers who have defaulted on mortgages they couldn’t afford, which will trigger lower prices that Canadians can take advantage of.

"I’m still pretty pessimistic. Popular areas for Canadians like Florida and Arizona still have a ways to go," says Talbott.

"Agents will tell you prices have come down 20 per cent or more over the last year. The real question is what were prices five years ago and how much has it gone down since then?"

Meanwhile, Canadians shouldn’t get too smug about their own markets, says Talbott faxless payday loans. "It’s not a stretch to figure out after the run up you’ve had that the market will have to get soft in the future."

Talbott isn’t forecasting a crash in the market as he did in the U.S., but he says Canadians shouldn’t expect the market to continue to appreciate. "That’s just not realistic."

One worry for Talbott is the Canadian condo market, which hit a sales record last year.

"You have a huge supply coming on to the market, you’re hurt by the exchange rate so it’s harder for foreign investors to buy, and the economy looks like it’s getting softer. This isn’t a good sign," says Talbott.

Apart from condos, in a down market leisure properties are usually the first to go, says Talbott.

For Canadians holding on to an investment condo or several recreational properties, Talbott suggests that it might not be a bad idea to sell now to consolidate gains.

Still, Talbott says the Canadian market won’t be hit as hard, simply because the run up in prices wasn’t as dramatic as in the U.S.

"The higher you go, the harder you fall," he says, "and the Canadian pace has been much steadier."

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WASHINGTON – U.S. factories saw demand for their products drop sharply, while the country's service sector contracted, fresh evidence of an economy hobbled by housing and credit crises.

The Commerce Department reported Wednesday that new orders for manufactured goods fell 2.5 per cent in January from the previous month. That marked a deterioration from December's two per cent increase and was the biggest decline in five months.

Meanwhile, activity in the service sector shrank in February for the second straight month.

The Institute for Suppy Management's service sector index clocked in at 49.3. A reading below 50 indicates a contraction. In January, the index stood at 44.6.

Manufacturers, service providers and other companies are feeling the sting of the economic slowdown. Persisting problems in the housing and credit markets are causing both people and businesses alike to be more cautious in their spending and investing. Galloping energy prices also are adding to the strains.

The latest snapshot of manufacturing activity was on target with economists' predictions. The weakness was mostly concentrated in demand for costly "durable" goods, merchandise expected to last at least three years. These orders – including cars, airplanes, machinery and computers – dropped 5.1 per cent in January, compared with a 4.4 per cent increase in December.

Demand for "nondurables," such as food and clothing, edged up 0.3 per cent in January, an improvement from a 0.4 per cent decline in the previous month.

In other economic news, worker productivity slowed sharply in the final three months of last year as the economy lost momentum.

The Labor Department reported that productivity – the amount an employee produces for every hour on the job – increased at an annual rate of just 1.9 per cent in the October-to-December quarter. This key measure of workplace efficiency was down considerably from the third quarter's brisk, 6.3 per cent growth rate and was the slowest pace since the first quarter of last year.

As productivity growth slowed, labour costs went up.

Employers' unit labour costs rose at a 2.6 per cent clip in the fourth quarter. That compared with an annualized decline of 2.7 per cent in the third quarter direct payday loan cash advance. It marked the largest increase in labour costs since the first quarter of last year. Unit labour costs is a measure of how much companies pay workers for every unit of output they produce.

The revised reading on fourth-quarter productivity was slightly better than the 1.8 per cent growth rate initially reported by the government. Economists were expecting no change in that initial estimate.

The productivity report included annual revisions based on more complete data.

For all of 2007, for instance, productivity rose 1.8 per cent, up from a one per cent gain in 2006. Labour costs, meanwhile, rose faster – growing by 3.1 per cent last year. In 2006, labour costs rose 2.9 per cent.

Efficiency gains are important to the economy's long-term vitality. They can help blunt inflation. The gains can allow companies to pay workers more without raising prices, which would cut into paycheques.

For now, Federal Reserve Chairman Ben Bernanke's No. 1 mission is to help bolster overall economic growth. Many fear the United States is on the brink of a recession or already in one.

The economy nearly stalled in the final quarter of last year, growing at a pace of just 0.6 per cent. Economists think growth could be even slower in the current quarter. Some believe the economy is actually shrinking now.

The Federal Reserve, which started cutting a key interest rate in September, recently ramped up reductions to shore up the economy. It slashed rates by an aggressive 1.25 percentage points in the span of just eight days in January. Bernanke last week signalled the central bank stands ready to lower rates again at its next meeting on March 18.

Even as the Fed fights to keep the economy going, it is keeping a sharp eye on inflation. Galloping energy prices, rising food costs and high prices elsewhere are straining pocketbooks and putting a further damper on economic growth.

Some worry that the country could be headed for a bout of stagflation – a dangerous mix of stagnant economic activity and stubborn inflation. But Bernanke, in his congressional appearance last week, said he didn't believe that was the case.

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DETROIT — Automakers got hit where it hurts in February, with U.S. sales of their most profitable vehicles — trucks, sport utilities and large sedans — plunging as consumers reacted to high gas prices and the possible recession. General Motors Corp. and Ford Motor Co. announced second-quarter production cuts in the face of the falling sales.

GM reported a sales decline of almost 13 percent for the month while Ford’s sales slumped 7 percent, Chrysler’s tumbled 8 percent and Toyota’s fell 3 percent. It was expected to be a difficult month for automakers as consumer confidence continued to slide. Declines in home construction also have significantly weakened truck sales.

Mark LaNeve, GM’s vice president for North American sales and marketing, said tightening automotive credit standards may also be hurting sales.

"On the edges of a difficult market, it’s one of those things that makes it more difficult," LaNeve said.
However, Honda Motor Co. and Nissan Motor Corp. bucked the trend, showing increased sales last month low rates payday advance.

GM responded to the downturn by cutting North American production by 5 percent in the second quarter to 1.08 million vehicles.

Weaker sales led Ford to announce it will cut shifts at factories in Chicago, Louisville, Ky., and Cleveland by this summer and reduce North American production by 10 percent in the second quarter to 730,000 vehicles.

This year is expected to be the slowest in a decade for the U.S. auto industry, but automakers are still predicting sales will pick up in the second half thanks to the federal stimulus package and pent-up demand. In the meantime it will be tough going, and the biggest casualties are the kinds of expensive vehicles automakers counted on for profits in the past.

"These segments could get tougher before they get better," said Randy Pflughaupt, vice president of marketing for Toyota’s U.S. division.

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Delphi asked for an extension of bankruptcy protection Friday as the auto parts maker struggles to find loans in an inhospitable credit market.

Delphi, seeking $6.1 billion in loans as credit markets seize up, has asked for a two-month extension.

It said earlier that it planned to emerge from Chapter 11 court protection at the end of March.

A majority of the company’s creditors have approved its proposed reorganization plan, but until the loans are secured, the company is locked in bankruptcy court. Delphi spokesman Lindsey Williams said the company asked for the extension "out of an abundance of caution."

The reorganization plan is made of a number of separate yet dependent deals, including an equity investment worth as much as $2.55 billion from a group led by the Appaloosa Management hedge fund and a settlement agreement with former parent General Motors.

Troy, Mich.-based Delphi was GM’s parts subsidiary until it was spun off in 1999, and their labor obligations have been intertwined.

GM, which depends on parts from Delphi, may need to up its contribution to ensure Delphi’s survival.

"The resulting uncertainty could disrupt our ability to plan future production and realize our cost reduction goals, and could result in our providing additional financial support to Delphi," GM (GM, Fortune 500) wrote in its annual report filed with the Securities and Exchange Commission on Thursday.

Adding to Delphi’s problems is a portion of the Appaloosa deal that limits that amount of interest income Delphi can pay on the loans, making it less attractive for lenders to sign up no fax payday loans. What’s more, the company’s two lead loan arrangers are not required to take any unsubscribed loans.

If the company does not secure the $6.1 billion in exit financing by the end of March, Appaloosa could abandon the investment deal and put into jeopardy Delphi’s emergence from Chapter 11 protection.

Appaloosa is joined by five other equity investors: Harbinger Capital Partners Master Fund I; Merrill Lynch, Pierce, Fenner & Smith (MER, Fortune 500); UBS Securities (UBS); Pardus Capital Management, and Goldman Sachs Group (GS, Fortune 500).

The company has operated under court protection since October 2005. This is the sixth time the company has asked for an extension in the case.

Each month in bankruptcy, the company spends more than $12 million in fees for lawyers and financial advisers. 

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Bloomex is an online florist, based in Ottawa, that offers same-day delivery across Canada.

But the company has strict policies on returns and refunds. And customers say they can’t escalate their complaints when things go wrong.

Colleen Clarke ordered two plant arrangements on the morning of Dec. 31. One was going to Calgary, the other to Edmonton.

"Bloomex guaranteed same-day delivery, which is why I chose to use the company," she says.

The Calgary basket arrived on Jan. 3. The Edmonton basket didn’t show up by Jan. 4, when she left for an overseas trip.

Her aunt in Edmonton said the flowers were upside down and out of the basket when they finally arrived. Bloomex has a policy that customers can’t get replacements unless they send photos by email. But not everyone can comply.

"My aunt, who’s over 75, told them four times that she didn’t have a camera and had no way of taking the picture. Finally, she told them to forget it," Clarke says.

Back in Toronto on Jan. 21, she tried to speak to a Bloomex manager. She reached only a call centre.

On Jan. 28, she got her Visa bill showing a refund for the Edmonton order. Bloomex had picked it up from her aunt’s home on Jan. 15.

But she was still charged $9.95 each for the two late deliveries.

"At this point, I am spitting mad," she said. "I want the two delivery fees deleted and an apology for the horrific treatment, live on the phone by a management person."

I found many Bloomex complaints online. The Better Business Bureau had processed 37 complaints in midwestern Ontario and 63 complaints in eastern Ontario. (There’s no BBB in Toronto.)

"The company has an unsatisfactory record with the BBB due to its decision not to accept or respond to complaints from the BBB," both bureaus said.

When I called president Dimitri Lokhonia, whose name I got from the BBB website, he called me back right away no teletrak payday loans. He said Bloomex delivered 10,000 orders a month. By cutting out the middleman, the company could offer fresher flowers and lower prices.

Clarke should have read the terms and conditions, posted online and sent by email to her, he said.

Bloomex doesn’t deliver on Sunday and statutory holidays. Nor does it offer same-day delivery in Edmonton. That’s available only in Toronto, Ottawa, Montreal, Calgary and Vancouver.

Because she’d placed her order on Dec. 31, she couldn’t expect same-day delivery.

"Some people are not happy. As a consumer writer, you can understand that," Lokhonia tells me. Posting a comment at the On Your Side blog, he tries to explain the many complaints.

"We compete against all local overpriced flower shops and sometimes owners of these shops put their comments online, pretending to be an unhappy customer."

He sends me Clarke’s file and I can see why she’s angry. All the communication is at her end and she never gets a response.

On Jan. 23, she asked for someone in authority to call her or she’d go to the newspaper. A note on her file said: "Order was picked up. She was refunded. Nothing we can do at this point."

Bloomex boasts about caring for customers and uses wecare@bloomex.ca as its email address.

But if Lokhonia truly cared, he would pick up the phone when customers asked for a manager, stop badmouthing complainers and start co-operating with the BBB.

Then, he’d see his online business really start to bloom.

Write to onyourside@thestar.ca

or go to www.ellenroseman.com to check the On Your Side blog.

 

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WASHINGTON — The nation’s economy expanded less than forecast in last year’s fourth quarter as domestic spending declined and only an increase in exports prevented an overall contraction.

Gross domestic product rose at an annualized rate of 0.6 percent, unchanged from last month’s initial estimate, after a gain of 4.9 percent in the third quarter, the Commerce Department said Thursday. Economists surveyed by Bloomberg News had predicted a fourth-quarter GDP increase of 0.8 percent.

"There’s a better-than-even chance that we have actually entered a recession," economist Martin Feldstein of Harvard University said. "The numbers for December and January have basically been flat to down."

The GDP measures the value of all goods and services produced within the United States.
President George W. Bush, speaking at the White House, sought to strike a hopeful note . "I don’t think we’re headed to a recession, but no question we’re in a slowdown," Bush said.

The GDP report, combined with figures on Thursday showing that new claims for unemployment benefits jumped last week, reinforced traders’ expectations that the Federal Reserve will again cut interest rates and helped drive the dollar to a record low against the euro.

Meanwhile, Fed Chairman Ben Bernanke, testifying to the Senate Banking Committee, signaled he again is ready to lower interest rates.

Feldstein also is president of the National Bureau of Economic Research and a member of the group’s business-cycle dating committee, which determines the beginning and end of expansions online payday advance. He said it could be months before the NBER declares if a recession has started.

The Labor Department said initial claims for unemployment insurance climbed 19,000 last week to 373,000. The level was the second-highest since a surge after Hurricane Katrina in 2005.

"We have absolutely no momentum going into the first quarter," said Josh Shapiro, chief U.S. economist in New York at Maria Fiorini Ramirez Inc. "Things are looking pretty grim for the economy. If we’re not in a recession, we’re very close."

The dollar, which had risen as much as 0.3 percent in early trading, erased its gains after the reports and reached a record low against the euro. It traded at $1.5212 at 4:02 p.m. in New York.

The nation’s trade deficit narrowed to an annualized $506.8 billion, adding 0.9 percentage point to GDP. Excluding the improvement in trade, the economy would have shrunk at an annual rate of 0.3 percent, the first decline since 2001, when the U.S. was last in a recession.

"Obviously, there’s been slowing and that’s what we expected," said Ed Lazear, chairman of the White House Council of Economic Advisers. "We do think the Fed has moved quickly enough to help get the economy going," he said.

Consumer spending, which accounts for more than two-thirds of the economy, rose at an annual rate of 1.9 percent in the fourth quarter, down from the increase of 2 percent estimated in January.

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