02/27/2010 (9:15 pm)

European Economic Confidence Unexpectedly Worsens

Filed under: economics, management |

European confidence in the economic outlook unexpectedly worsened in February after the euro region’s recovery almost stalled in the fourth quarter.

An index of executive and consumer sentiment in the 16 nations using the euro slipped to 95.9 from a revised 96 in January, the European Commission in Brussels said today. The economic recovery may fail to gather strength for most of 2010, the commission said in a separate report.

European domestic demand remains weak and it’s not yet clear to what extent the euro region will benefit from a global recovery, the commission said. As governments seek to bolster the recovery, they also are trying to stem investor concern about widening budget deficits in Greece and other nations, which is pushing up bond yields.

“There are still some dark clouds in the air,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said today at a press conference in Brussels. “Clearly, turning the European economy back on a strong and sustainable path is now our overriding objective.”

The February drop in the confidence index was the first in 11 months. Economists had projected an increase to 96.4 from a previously reported January reading of 95.7, according to the median of 25 forecasts in a Bloomberg News survey.

The euro declined against the dollar and was at $1.3489 as of 1:12 p.m. in London, down 0.4 percent. The yield on the German 10-year bond fell 2 basis points to 3.11 percent.

Cautious Outlook

The German economy, Europe’s largest, may fail to grow in the three months through March before expanding 0.3 percent in the following two quarters, the commission forecast. France may grow 0.4 percent in the first quarter and stall in the second. The U.K., which isn’t part of the euro area, is seen expanding 0.2 percent in both quarters.

The commission sees the euro-area economy expanding 0.7 percent this year after a 4 percent contraction in 2009, unchanged from its previous forecast in November. In the fourth quarter, the economy expanded just 0.1 percent.

Carrefour SA doesn’t “see any change in the European environment for the next six months at least,” Chief Executive Officer Lars Olofsson said on Feb. 19, after Europe’s largest retailer reported a 70 percent drop in full-year profit.

Separate data today showed that loans to households and companies in Europe declined in January from a year earlier after the economic expansion curbed demand for credit. German unemployment increased for a second month in February.

Deficit Woes

Concern about Greece’s ability to finance its deficit and debt has roiled financial markets since the government revealed it had a budget gap of 12 guaranteed approval cash loans.7 percent of GDP last year. That’s more than four times the limit allowed for countries using the euro and the highest in the 27-nation EU.

Standard & Poor’s said late yesterday that it may lower its BBB+ rating on Greece by the end of March and Moody’s Investors Service said today that it may reduce its A2 grade in a few months.

The commission said its deficit forecasts remain “broadly unchanged” from its November assessment, when it projected the region’s average budget gap would widen to 6.9 percent of GDP in 2010. All euro-area nations will breach EU deficit limits this year and next, the commission forecast.

It also said there’s a possibility that the impact of sliding sovereign bonds could be “broader, weighing further on the recovery” by pushing up financing costs.

Euro-Area Inflation

Euro-area inflation may accelerate to 0.8 percent in the current quarter and 1.3 percent in the second quarter, according to the commission. For the full year, the commission sees inflation averaging 1.1 percent, compared with 0.3 percent in 2009. In the confidence report, a gauge of consumers’ price expectations over the next 12 months rose to the highest since March 2009.

The European Central Bank, which aims to keep inflation just below 2 percent, earlier this month kept borrowing costs at a record low of 1 percent. The Frankfurt-based central bank will decide next month on a further “gradual” phasing-out of emergency measures introduced to fight the economic crisis, ECB council member George Provopoulos said.

“It’s premature to talk about a self-sustaining, jobs- creating recovery,” said Martin Van Vliet, an economist at ING Group in Amsterdam. The confidence data “highlight the need for the ECB to tread carefully in unwinding unconventional stimulus and to keep interest rates firmly on hold for the time being.”

Companies across Europe are already seeking ways to expand in faster-growing economies to help boost sales. Paris-based Pernod Ricard SA, the world’s second-largest liquor maker, said on Feb. 18 that sales from China will shortly overtake those in Spain, and emerging markets such as Russia are “starting to turn around.”

“The question is how robust the global cycle will prove to be and how much EU economies will benefit from it,” the commission said. “A rather cautious export outlook is therefore warranted.”

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02/24/2010 (8:33 am)

Toyoda to testify before U.S. lawmakers

Filed under: technology |

Toyota president Akio Toyoda accepted on Thursday a formal invitation to testify at a hearing to be held next Wednesday.

The House Oversight Committee sent the invitation Thursday morning. Toyoda had initially said he would not appear before the committee but would instead send North America chief Yoshimi Inaba.

But late Thursday, Toyoda released a short statement: "I have received Congressman Towns’ invitation to testify before the House Committee on Oversight and Government Reform on February 24 and I accept. I look forward to speaking directly with Congress and the American people."

The invitation sent by Committee Chairman Edolphus Towns, D-N.Y., reads: "There appears to be growing public confusion regarding which vehicles may be affected and how people should respond. In short, the public is unsure as to what exactly the problem is, whether it is safe to drive their cars, or what they should do about it."

After Toyoda announced his acceptance, Towns released his own statement, with Ranking Member Darrell Issa, R-Calif,: "We are pleased Mr. Toyoda accepted the invitation to testify before the Committee. We believe his testimony will be helpful in understanding the actions Toyota is taking to ensure the safety of American drivers."

Earlier Thursday, the committee issued a subpoena for "all documents relating to Toyota motor vehicle safety and Toyota’s handling of alleged motor vehicle defects and related litigation" that are held by Toyota’s former U.S. counsel Dimitrios Biller.

Biller has claimed that he possesses documents that proved Toyota hid key findings of safety defects. Even before Thursday’s news, Toyota had filed an injunction to prevent Biller from making those documents public, but a Committee aide said the Committee’s subpoena overrides the state-level injunction.

"Mr. Biller is a former Toyota attorney who left the company in 2007," Toyota spokeswoman Cindy Knight said in an e-mailed statement. "He would have no knowledge about Toyota matters since that time and is not a reliable source of information."

Toyota will continue to fight Biller’s allegations, Knight said.

Mr. Toyoda has been criticized for being slow to speak up regarding the issues. The carmaker has recently faced a string of massive recalls and, only yesterday, became the subject of a second ongoing National Highway Traffic Safety Administration investigation into potential safety problems with its cars.

Also, late Thursday, the NHTSA announced it had officially opened an investigation into possible steering problems with Toyota’s Corolla compact cars.

The investigation involves reports that Corolla cars can wander or drift at highway speeds. Seven people have been injured in incidents that may have been related to the problem, according to a NHTSA report.

Toyota plans to cooperate fully in the investigation, a Toyota spokesman said.

Gene Grabowski, head of the crisis communication practice for Washington-based Levick Strategic Communications, said Toyoda "needs to be very well-prepared."

Grabowski’s firm has worked with more than a dozen witnesses called to testify on Capitol Hill, he said, and the most important thing they all must remember is to remain humble. A witness must remember that the members of Congress need to be seen helping their constituents and the best thing for a witness to do is to play his part.

"Your job in a hearing is to assist the members of Congress," he said, "and sometimes that means taking some lumps."

If Mr. Toyoda is smart, Grabowski said, he’ll come to Washington a few days early to meet privately with the Congressional members he’ll be testifying for.

"If you go in cold and they don’t know you," Grabowski said, "they’re far more likely to attack you." 

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02/20/2010 (2:27 am)

Goldman sues team over move to Credit Suisse

Filed under: economics, term |

Goldman Sachs has filed a lawsuit against seven former Atlanta-based executives in its wealth management division for soliciting employees and former clients after their departure for rival Credit Suisse.

The suit, filed Feb. 17 in U.S. District Court in Atlanta, alleges that Credit Suisse facilitated the executives’ departure promising payouts worth of millions of dollars.

The suit seeks to block the defendants from contacting their former Goldman clients and colleagues.

The five vice presidents and two associates are accused of “pirating” Goldman’s clients and trying to coax employees to defect to Credit Suisse in violation of non-solicitation clauses, the suit alleges. The suit was first reported by Reuters.

Named in the suit were: David Greene, Craig Savage, Andrew Thompson, Sharran Srivatsaa, John Pitt, Stephanie Dennard and Kim Tyson.

Atlanta’s wealth management firms have been embroiled in the industry-wide shakeup of personnel and clients, with established players and newcomers fighting over top talent.

The lawsuit states that the seven investment executives “abruptly” left Goldman on Feb. 5, after Credit Suisse offered the team “tens of millions of dollars to leave.”

The group “immediately began soliciting Goldman Sachs’ clients and employees in violation of non-solicitation clauses” that Greene, Savage, Thompson, Srivatsaa and Pitt had previously accepted. The suit alleges that Dennard and Tyson did an end around the non-solicitation clauses by approaching former colleagues and clients on their superiors’ behalf to convince them to move over to Credit Suisse, and also improperly used confidential Goldman information.

The suit states that Greene and Savage met with the head of Goldman’s Atlanta office late Feb. 5 and announced their intent to leave, and later Greene said in a phone call that he had been promised $11 million to join Credit Suisse.

The suit also alleges that the defendants told clients about a shakeup and claimed that it had destabilized the Atlanta office.

Another Goldman executive claimed in the suit he received an unsolicited offer to leave for Credit Suisse in exchange for $10 million.

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02/16/2010 (6:42 am)

How the U.S. can avoid the Greek problem

Filed under: legal |

Call it the Case of the Missing Commission.

The bipartisan panel that President Obama has promised would tackle the nation’s long-term debt problems is nowhere in sight yet.

The delay in getting the commission up and running is due in great part to partisan jockeying from both sides of the aisle and continued uncertainty about whether current Republican lawmakers will agree to take part.

There’s no guarantee that when it does materialize it will have the respect of many in Congress, which would have the final word on the commission’s recommendations.

And the call for the commission has taken on greater urgency in light of the recent global volatility caused by the sovereign debt crisis in Greece, which threatens all of Europe.

"You need a fiscal commission. You need it now," Simon Johnson, senior fellow at the Peterson Institute for International Economics, told lawmakers this week.

The commission will be asked to figure out ways to get annual deficits down to 3% of gross domestic product by 2015 and thereafter put the country on a more sustainable fiscal track.

The panel’s timeline will be tight. The commission is supposed to issue its report soon after the mid-term elections in November so Congress can vote on them before the year is out.

So every day that goes by without a commission is valuable time wasted considering the complicated issues it is expected to address — everything from taxes and health care to all spending in the federal budget, including Medicare and Social Security.

What’s the rush?

The commission isn’t expected to make recommendations that — if passed — would go into effect right away. In fact, even many deficit hawks say that now is not the time for fiscal austerity. The time for that would be when the U.S. economy is on firmer footing.

But the swift establishment of the commission would help signal to international markets that the United States is working to get its deficits under control, said Johnson, a former chief economist for the International Monetary Fund.

"I think we should take events of the past few weeks in Europe as a wake-up call," Johnson said.

In the past two months, borrowing costs have soared for Greece, where the annual deficit has risen to 12% of the economy. That has forced the country to choose between defaulting on its debt or trying to convince investors of its creditworthiness by imposing stringent austerity measures such as budget cuts, tax hikes and pay freezes business cards.

Of course, there’s a lot that distinguishes the position of the United States from Greece. But the recent events show just how quickly the markets can turn on sovereign borrowers.

What’s the risk?

If the United States takes its time coming up with a deficit reduction plan, all bets are off.

"If you don’t have [a fiscal commission] … the financial markets are going to push you on the lack of medium-term credible fiscal framework," Johnson said.

And if the push for greater fiscal austerity comes during the second half of 2010, when economic growth is expected to slow, that would harm the U.S. economy.

"Raising taxes and cutting spending — you don’t want to do that in the second half of the year. If the markets force you to, that’s a disaster," Johnson said.

Carmen Reinhart, director of the Center for International Economics at the University of Maryland, has studied the patterns that high-debt countries follow after severe financial crises like the kind that almost felled the U.S. economy in 2008 and 2009.

Like Johnson, Reinhart doesn’t believe this year is the time for implementing austerity measures. But it is the year to come up with a plan of action to reduce the country’s debt over time.

"Market discipline can come without warning. Countries that haven’t laid the groundwork for adjustment come to regret it. This time is not different," Reinhart told lawmakers.

There is nothing magic or even necessary about a fiscal commission. But the fact is Congress is showing no signs of taking on sacred cows and addressing the fiscal problem head-on.

Still, having a commission and having it be successful are two very different things.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan group of leading budget experts, has warned against anyone pinning all their hopes for fiscal restraint on a commission.

"In a politically charged environment, a commission is a great idea. However, the administration must have a ‘Plan B’ in case the commission does not succeed." 

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02/14/2010 (9:15 pm)

SLU will snap up ex-Pfizer staff

Filed under: economics |

St. Louis University will tap into the large pool of laid-off Pfizer scientists to launch a new research center focused on discovering drugs to treat medical problems in the developing world.

SLU has committed $5 million over the next two years to fund the Center for World Health & Medicine, which will launch in July, Raymond Tait, SLU’s vice president for research, said Wednesday. The school initially plans to hire a dozen soon-to-be former Pfizer researchers.

In November, Pfizer announced it would lay off 600 of its 1,000 employees in St. Louis, part of a 15 percent reduction of the drugmaker’s global work force. The reductions followed Pfizer’s $68 billion acquisition of the drugmaker Wyeth. Pfizer’s main research campus in the area is located in Chesterfield.

SLU began discussions in early December to figure out ways to keep some of those scientists in St. Louis. In a time of strained university resources, this reflects SLU’s commitment to the region, Tait said.

"St. Louis U. worked with uncharacteristic speed," he said. "The initial reaction was a form of horror to think about the impact of (the layoffs) on the St. Louis region. After we had a chance to digest it, we then thought, ‘Gee, this also provides us with an important opportunity that could be transformative for research at St. Louis U.’"

This is a somewhat unusual venture, in that universities have not typically delved into the realm of drug discovery, Tait acknowledged.

"We’re not going to compete with Pfizer and Wyeth," he said. "We’re not going after blockbuster drugs."

Rather, the appealing part of this idea was that the school could follow its Jesuit mission by helping underserved populations, he said.

Steve Johnson, senior vice president of the St. Louis Regional Chamber and Growth Association, said SLU’s move is a small but important step in the right direction if St. Louis hopes to plug the leakage of high-skilled workers to other areas.

There are between 1,700 and 2,000 laid-off scientists and skilled technical workers in the region right now, Johnson said. Keeping them, and their skills, in St. Louis is becoming an increasingly high priority, he said.

"That represents a tremendous amount of talent," Johnson said payday advance. "You don’t want to dehumanize people, but those are marketable assets for the region."

They are the kind of assets that can help lure other big medical and technology firms here, or that can seed startups, or that, as in this case, can help launch research groups at local universities.

"We applaud (SLU’s effort)," Johnson said. "And we’ll be digging into this whole issue and look at what other regions are doing."

SLU still has to hash out many of the details about the new center — such as whom exactly it will hire, where it will be housed, and what areas it will focus on.

"This is still a work in progress," Tait said. "Give us another couple of months where we can flesh out who will be working with us."

While many of the scientists have already vacated their laboratories, they are still under contract with Pfizer, Tait said. So SLU has not yet officially hired anyone, but it has spoken with several people who are very interested in the new center, he said.

Targeting childhood diarrhea is one area that some scientists have expressed a special interest in, he added.

Tait said he hopes the center will be sustained down the line in part through research grants, subcontracting work, and perhaps foundation support.

"We’ll see if we cannot make this viable," he said. "Over time, we suspect we will get some intellectual property, but intellectual property is not the lifeblood."

SLU has already started writing up an application for a federal stimulus-funded research grant at the new center, he said.

Down the line, Tait said, SLU could work with pharmaceutical companies — including, but not limited to, Pfizer.

"I don’t see us undertaking clinical trials," he said. "What I can see us doing is identifying some promising treatment approaches, working to where we have some evidence or sense that they are safe. But in order to bring them to market, we will have to partner."

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02/11/2010 (9:03 am)

Elizabeth Washko takes charge of Nashville’s Ogletree Deakins

Filed under: management |

Elizabeth Washko has been named managing shareholder at the Nashville office of labor law firm Ogletree, Deakins, Nash, Smoak & Stewart PC.

She replaces Tom Davis, who had held the position for five years.

“As managing shareholder, I look forward to growing the Nashville office and continuing to provide our clients with the best and most responsive legal services.” Washko said in today’s announcement.

In addition to representing employees, Washko has helped companies create employment policies, conducted harassment investigations and provided training on employment issues.

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02/06/2010 (3:16 pm)

Rural/Metro adds new service

Filed under: online |

Rural/Metro Medical Services is launching a new service designed to help the homebound and seniors in case of emergency.

Many people will remember the television commercials in which an elderly woman pushes a button on a wearable monitor for help after falling. Rural/Metro’s HomeHelpLine service offers a similar service with a major difference: Calls come in to trained emergency medical dispatchers who respond using Rural/Metro’s network of local hospitals and ambulance services.

“When you call a LifeLine or other national providers, calls come through security companies or you’re really dealing with a call center that could be anywhere in the country,” says Jay Smith, public affairs manager. “Our dispatchers are medically trained EMTs and emergency dispatch. We’re local and we’re trained.”

Launched in mid-December, the service has signed up 60 customers so far with a goal of 500 by the end of Rural/Metro’s fiscal year in July. The service is currently available in Erie and Niagara counties, but plans call for extending service into all eight Western New York counties.

The company is targeting seniors and homebound individuals, as well as the children of such people who worry they can’t check in on their loved ones as often as they’d like. Smith says the company is relying on brand recognition and Rural/Metro’s reputation in the region to close the deal.

Additionally, the company is targeting individuals recovering from surgery; those with chronic conditions; and anyone who lives alone or spends several hours at home alone on a regular basis.

The service is available for $24.99 per month. That’s lower than some national services, enabled in part by Rural/Metro’s existing equipment and infrastructure that results in less overhead, Smith says.

Based in Scottsdale, Ariz., Rural/Metro Corp. (RURL) is a national provider of emergency services in 22 states.

Locally, the company has more than 550 employees, including 450 EMTs and paramedics, and a fleet of 90 emergency vehicles that responds to more than 100,000 calls every year.

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02/01/2010 (6:12 am)

Mortgage aid will require proof of income

Filed under: marketing |

Homeowners seeking relief under the Obama administration’s mortgage aid program will be required to provide proof of their incomes upfront, a significant reversal for the problem-plagued effort to stem the foreclosure crisis.

Borrowers had been able to state their income verbally and provide documentation later. Mortgage companies, however, said many borrowers didn’t return the documents.

Only about 66,500 borrowers, or 7 percent of those who signed up, had completed it as of December.

Lenders will now be required to collect two recent pay stubs at the start of the process, the Treasury Department said Thursday. Borrowers will have to give the IRS permission to provide their most recent tax returns, rather than submitting the returns themselves.

The changes become mandatory for loan modifications made starting June 1.

The change in policy came after officials concluded that mortgage companies such as GMAC Mortgage and Ocwen Financial Corp. were delivering better results. They had always required documents up front.

Under the new rules, participating mortgage companies must acknowledge receipt of a borrower’s application within 10 days and approve or deny the application within 30 days. After that, borrowers will still be required to make three months of trial payments before the modification becomes permanent.

While the changes should help, the lack of penalties for companies who don’t comply disappointed some experts. "There’s no teeth to that obligation," said Andrew Jakabovics, associate director for housing at the Center for American Progress, a liberal think tank.

Many consumer groups, meanwhile, have been calling for more dramatic changes. They want to help homeowners who have lost their jobs and those who owe the bank more than their homes are worth.

Treasury officials said they are studying ways to aid unemployed homeowners but offered no details.

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