Economic Calendar

Sunday, September 18, 2011

Twitter Directors Wilson, Sabet Leaving Board

Twitter Inc. directors Fred Wilson and Bijan Sabet, who backed the company as venture capitalists, are stepping down from the board in the latest reshuffling at the social-networking service.

The departures follow an expansion of the board late last year, when Twitter added Mike McCue, chief executive officer of tablet-application company Flipboard Inc., and David Rosenblatt, formerly head of display advertising at Google Inc. (GOOG) -- changes made as part of an investment by Kleiner Perkins Caufield & Byers. Wilson is a managing partner of Union Square Ventures, while Sabet is a general partner at Spark Capital.

“Bijan Sabet and Fred Wilson both played important and greatly appreciated roles in our success,” Twitter said in an e-mail. “Both saw what Twitter could become before most anyone else. We look forward to their continued input as both investors in the company and passionate users of the product.”

Twitter has rejiggered management in the past year as the company builds an adverting business and copes with competition from Facebook Inc. and Google. Dick Costolo, a former Google executive, took the CEO job in October, and Jack Dorsey, a Twitter co-founder and former CEO, assumed the role of executive chairman this year. In June, co-founder Biz Stone announced that he’s stepping away from day-to-day duties to join Evan Williams, another co-founder, in a new venture.

Twitter said in August it had raised a new round of funding from DST Global, along with several past investors, without giving details. The San Francisco-based company aimed to raise about $800 million and was looking to use half the money to buy back shares from employees and earlier backers, people with knowledge of the plan said at the time. The investment values the short-messaging service at $8 billion, the people said.

To contact the reporter on this story: Brian Womack in San Francisco at

To contact the editor responsible for this story: Tom Giles at


RIM Drops as Waning BlackBerry, Tablet Sales Seen Making It ‘Niche Player’

Research In Motion Ltd. (RIMM), struggling to compete in the smartphone and tablet computer markets, plunged 19 percent in Nasdaq trading after its earnings report disappointed investors for the third consecutive quarter.

The maker of the BlackBerry smartphone is losing ground in that market to Apple Inc. (AAPL)’s iPhone and devices that use Google Inc. (GOOG)’s Android software. RIM has made little progress with its PlayBook in the tablet computer market, shipping just one device for every 46 iPads that Apple sold in the latest quarter.

“RIM is on a path to becoming a niche player,” said Ted Schadler, an analyst for Forrester Research Inc. “RIM has to essentially retrench its strategy. It has to focus on what about its products make them different or better than Apple or Google products.”

RIM, based in Waterloo, Ontario, fell $5.61 to $23.93 at 4 p.m. New York time on the Nasdaq Stock Market, the largest drop in three months. The stock has lost 59 percent this year.

Profit for the fiscal second quarter, excluding some costs, fell to 80 cents a share, RIM said yesterday in a statement. Analysts predicted 88 cents, according to a Bloomberg survey. Revenue fell to $4.17 billion in the three months through Aug. 27, compared with the average estimate of $4.47 billion.

“RIM’s earning misses over the past few quarters has tainted investors’ confidence,” said Blaine Carroll, an analyst with Rodman & Renshaw LLC in New York. He has an “outperform” rating on the stock.

At least three analysts downgraded their ratings on the stock, including Steven Li of Raymond James Ltd. in Toronto, who dropped his recommendation to “market perform.”

Disappointing Shipments

The company shipped about 200,000 PlayBooks, compared with the average estimate of 490,000 units. Analysts have cut estimates for full-year PlayBook sales to an average of 2.2 million. In its last quarter Apple shipped 9.25 million iPads.

RIM shipped 10.6 million BlackBerrys last quarter. Analysts predicted 11.9 million, according to the average of 10 estimates compiled by Bloomberg.

Co-Chief Executive Officer Jim Balsillie attributed the sluggish shipments to lower-than-expected demand for older devices that have struggled to compete with the iPhone and Android devices such as the Samsung Galaxy. He also said on a conference call yesterday that RIM’s latest handsets, which run on a new BlackBerry 7 operating system, are “having an excellent reception.”

‘Challenging’ Few Months

Co-CEO Mike Lazaridis said RIM will issue a software upgrade for the PlayBook next month that will include dedicated e-mail, contacts and calendar programs, as well as software to allow the PlayBook to run Android applications. RIM drew criticism for introducing the PlayBook in April without e-mail and a shortage of apps like Netflix Inc. (NFLX) movies.

Lazaridis also said prototypes of phones built on a new QNX operating system that already underpins the PlayBook will be available “in the not-too-distant future” and that he will give more details at a conference in San Francisco next month.

“RIM is still going to have a challenging next few months until the QNX products are out and the Android app products are available,” said Alkesh Shah, an analyst at Evercore Partners. “The transition probably doesn’t finish until sometime mid to late 2012.”

RIM forecast third-quarter revenue of $5.3 billion to $5.6 billion and shipments of between 13.5 million and 14.5 million BlackBerrys. Earnings excluding charges related to job cuts will be in the range of $1.20 to $1.40.

Analysts estimated sales of $5.3 billion, 13.8 million units shipped and earnings per share of $1.38.

Under Review

RIM also said that earnings for the year, excluding some costs, would be at the low end of its previous forecast of $5.25 to $6 a share.

“We don’t trust those numbers,” said Jeff Fidacaro, an analyst at Susquehanna International Group in New York.

RIM’s share of the global smartphone market dropped to 12 percent in the second quarter from 19 percent a year earlier, according to Gartner Inc. In the same period, Apple climbed to 18 percent from 14 percent, and Google’s Android, used in phones from Samsung Electronics Co. and Motorola Mobility Holdings Inc., rose to 43 percent.

Net income fell 59 percent to $329 million, or 63 cents a share, from $797 million, or $1.46, a year earlier.

“Remain skeptical of guidance,” said Phillip Huang, an analyst at UBS AG in Toronto, who kept his “neutral” rating unchanged. “RIMM needs fundamental change in vision and strategy, and its transition to QNX must be near flawless to garner support from developers.”

To contact the reporter on this story: Hugo Miller in Toronto at

To contact the editor responsible for this story: Peter Elstrom at


Protesters Converge on Lower Manhattan, Plan ‘Occupation’

By Laura Marcinek - Sep 18, 2011 4:21 AM GMT+0700
Enlarge image Wall Street Protesters Plan to Occupy Lower Manhattan

Demonstrators rally on Wall Street in lower Manhattan. Photographer: Ramin Talaie/Bloomberg

Police officers guard a bull statue at Bowling Green park. Photographer: Ramin Talaie/Bloomberg

Wall Street firms are the target of a nonviolent demonstration in which organizers say they want 20,000 people to participate with tents, kitchens and “peaceful barricades” in lower Manhattan.

Dubbed “#OccupyWallStreet,” the goal of the protest is to get President Barack Obama to establish a commission to end “the influence money has over our representatives in Washington,” according to the website of Adbusters, a group promoting the demonstration. Organizers want participants to “occupy” the area for “a few months,” according to the website.

“People have a right to protest, and if they want to protest, we’ll be happy to make sure they have locations to do it,” New York City Mayor Michael Bloomberg said Sept. 15 at a press conference. “As long as they do it where other people’s rights are respected, this is the place where people can speak their minds, and that’s what makes New York, New York.”

As the demonstration began this afternoon, as many as 1,000 people congregated in the Chase Manhattan Plaza area and, after speakers with a bullhorn rallied the crowd, broke into groups to discuss the event’s goals. Some participants circulated trays of sliced white and wheat bread while others passed out jars of creamy Skippy peanut butter, and distributed apples, bananas and oranges from shopping carts.

Red Flags, Masks

Protesters waved red flags and toted cardboard signs with statements such as “represent the 99%.” Others donned white, mustachioed masks of the anti-authoritarian protagonist from the graphic novel and film “V for Vendetta.” A few people played instruments, including guitars, ukuleles and maracas. Chants and applause periodically erupted around the plaza.

Police encircled the plaza and partitioned Wall Street’s pedestrian walkway.

NYSE Euronext (NYX), Deutsche Bank AG (DBK) and Bank of New York Mellon Corp. (BK) are among firms with operations in the area. Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Citigroup Inc. (C) are among financial firms whose main offices aren’t on Wall Street.

Rich Adamonis, a spokesman for the NYSE, Duncan King of Deutsche Bank, and Bank of New York’s Ron Gruendl declined to comment on the demonstration.

Protests also are planned for financial districts in Madrid, Milan, London and Paris, according to a bulletin from the National Cybersecurity and Communications Integration Center obtained by Bloomberg News. The NCCIC is part of the Department of Homeland Security. Chris Ortman, an agency spokesman, confirmed the bulletin’s authenticity.

The mayor is the founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporter on this story: Laura Marcinek in New York at

To contact the editor responsible for this story: David Scheer at


Greece’s Premier Cancels U.S. Trip Before ‘Critical’ Week

By Maria Petrakis - Sep 18, 2011 2:23 AM GMT+0700

Greek Prime Minister George Papandreou canceled a U.S. visit that was to begin tomorrow, saying he needed to remain in the country for a “critical” seven days in its effort to avert a bond default.

“The coming week is particularly critical for the implementation of the July 21 decisions in the euro area and the initiatives which the country must undertake,” said a statement e-mailed today from Papandreou’s office in Athens. No further details were given.

Greece is rushing to meet demands from international and European Union partners that will allow the release of a sixth tranche of loans to prevent default. The government on Sept. 11 announced a levy on properties to help raise 2 billion euros ($2.8 billion) in a bid to show it’s serious about plugging a swelling budget deficit, key to getting a second financing package agreed to by EU leaders on July 21.

EU and International Monetary Fund inspectors will hold a conference call with Finance Minister Evangelos Venizelos to resume and accelerate their review on Sept. 19, the Athens-based ministry said yesterday. Venizelos said today that putting the July 21 accord in place was the priority for the country.

“Our problem is to ensure that we get the sixth payment and each future payment with the best possible terms as we can’t keep having a repeat of the same scenario,” Venizelos told reporters in Wroclaw, Poland, after a meeting with European counterparts, according to an e-mailed statement today from the Finance Ministry.

No Bankruptcy

In later statements, he dismissed talk of the country declaring bankruptcy and said Papandreou canceled his visit to be prepared to take quick decisions in the coming week.

“The situation is serious in the sense that we need to take serious, definitive and complete decisions,” he said in a statement e-mailed from the ministry late today.

Papandreou’s trip cancellation “isn’t due to the fact there is an economic risk or some extraordinary economic event but to the fact that now is the time to take the necessary political, legislative, organizational and administrative initiatives which will definitively lead the country out of this recycled pressure,” Venizelos said.

An editorial in Kathimerini newspaper published today entitled “Your Country Needs You” called the U.S. trip “inexplicable” and said a week-long absence wasn’t compatible “with the gravity of the current situation, as Greece stares into the abyss.”

Meetings Planned

Papandreou had planned to meet officials including IMF Managing Director Christine Lagarde and U.S. Treasury Secretary Timothy F. Geithner on his trip to New York and Washington. His first meeting was scheduled for New York tomorrow. A separate meeting this month between Lagarde and Venizelos is still planned, a Finance Ministry official said.

Papandreou earlier this week promised a “decisive battle” for budget cuts to persuade European governments and the IMF to release the 8 billion euro loan installment.

Greece is now looking to the next meeting of euro-area finance ministers, on Oct. 3, for a decision on the release of the installment. The loan would be disbursed by mid-October, enabling the government to pay its bills through the end of the year.

Greece has the cash reserves to cover its needs for October, Deputy Finance Minister Filippos Sachinidis said on Sept. 12

Higher taxes and cuts in wages and pensions in return for a 110 billion euro May 2010 package of loans from the EU and IMF have weighed on the Papandreou government’s standing with Greeks, with his Pasok party now trailing the main opposition in opinion polls. EU partners have said the sixth loan won’t be paid if they aren’t convinced Greece is doing enough to curb a budget gap that soared to 15.4 percent in 2009.

To contact the reporter on this story: Maria Petrakis in Athens at

To contact the editor responsible for this story: Angela Cullen at


Boeing 747-8 Hits ’Horrendous’ Setback as Cargolux Puts Off First Delivery

By Susanna Ray - Sep 18, 2011 5:07 AM GMT+0700

Boeing Co. (BA) had to postpone next week’s inaugural delivery of the 747-8 freighter, a jet already two years behind schedule, after its initial customer refused to accept the first two planes.

Boeing had to cancel three days’ worth of ceremonies and events yesterday because of “unresolved issues” with Cargolux Airlines International SA, said spokesman Jim Proulx. The carrier was scheduled to fly its first load of freight on the new plane out of Seattle on Sept. 19 and take delivery of a second jet two days later.

Proulx declined to comment on the reason for the dispute, and Cargolux would only say today that there had been “contractual issues” that compelled its board, which met yesterday, to reject the planes.

The clash mars the arrival of the newest and biggest version of the jumbo jet that, with its iconic hump, has been Boeing’s marquee model since its inception in the 1960s. It also comes after numerous struggles at the company, including a three-year setback to its 787 Dreamliner, inroads into its customer base by Airbus SAS and a shift in its new-jet strategy.

“It’s horrendous,” Ken Herbert, an analyst with Wedbush Securities in San Francisco, said in an interview. “Just when you finally thought they were going to turn the corner, this happens.”


The 747-8 freighter won certification last month from the U.S. Federal Aviation Administration to enter commercial service, capping a two-year, $2.04 billion delay for Boeing’s biggest plane ever. Luxembourg-based Cargolux was to be the first to receive the jumbo jets, which feature new engines and a stretched upper deck and wings.

“We continue to work with Cargolux and look forward to delivering its airplanes,” Boeing’s Proulx said yesterday from Everett, Washington, where the jets are built.

Financing, secured through JPMorgan, has been put on hold, Cargolux, Europe’s largest freight-only carrier, said today.

“In the event that the issues cannot be resolved in a timely manner, Cargolux will source alternative capacity to fully meet customer demand and expectations ahead of the traditional high season,” the company said in a statement.

Qatar Airways Ltd. took a 35 percent stake in Cargolux in June and said it planned to start converting 20 Airbus SAS A330 jetliners into freighters next year to accelerate its expansion into logistics.

Trials Continue

Trials continue on Boeing’s 747-8 Intercontinental passenger model as crews test different systems than on the freighter, including climate control and airflow balancing. The first version of that plane is due to be delivered by the end of this year, and the model is scheduled to begin commercial service in early 2012 with Deutsche Lufthansa AG. (LHA)

The setbacks to the model are due in part to the 787 Dreamliner. Engineers were diverted to work on the composite- plastic Dreamliner as struggles with the new materials and its production system caused what amounted to seven delays. Boeing now expects to deliver the first of that plane to Japan’s All Nippon Airways on Sept. 25.

Flight tests then revealed other problems with the jumbo jet, including flutter in the wings and buffeting around the wheel wells, which had to be resolved. And work on the new flight-management computer extended the length of testing, eventually forcing Boeing to scale back the system to avoid further delays. A software upgrade is planned later.

Leadership Issues

The 467-seat, $317.5 million 747-8 Intercontinental competes with Airbus’s 525-seat A380, which entered service in 2007, while the $319.3 million freighter has no commercial rival. Boeing has 114 orders for the plane.

In July, Boeing abandoned its preference to develop an all- new, narrow body jet and said it would instead offer new engines on the current 737. That mirrored a similar move by Airbus the year before that had helped the European planemaker rack up more than 1,000 orders for its upgraded A320neo in seven months.

The decision came as Airbus broke an exclusive arrangement between Boeing and American Airlines dating back to 1987 by selling the A320neo to American. Boeing announced the following month that it was replacing its top salesman and putting Ray Conner back in the post, in an expanded role.

“Clearly, there’s leadership issues all across the board,” Herbert said. “It’s been a very difficult couple of years. There’s so much capital on the sidelines waiting to get into the stock, and they just need to deliver these airplanes, but it’s always ‘next month, next month.’”

To contact the reporters on this story: Susanna Ray in Seattle at; Natalie Doss in New York at

To contact the editor responsible for this story: Ed Dufner at


GM Will Raise Entry-Level Wage by $2 to $3 Per Hour

By David Welch - Sep 18, 2011 2:14 AM GMT+0700
Enlarge image GM’s $14-an-Hour Jobs Split UAW With Poverty-Level Wage

A worker puts a tire on a General Motors Co. 2012 Opel Ampera GM's European version of the Volt, at Detroit-Hamtramck Assembly Plant in Detroit, Michigan. Photographer: Jeff Kowalsky/Bloomberg

General Motors Co. (GM) will increase entry-level pay by $2 to $3 an hour as part of a tentative agreement on a new four-year contract with the United Auto Workers, said two people familiar with the accord.

Starting pay will increase to about $16 an hour from $14 and rise to about $19 an hour from a previous maximum of $16, said the people who asked not to be identified disclosing details before they have been presented to union members for ratification. UAW President Bob King had said getting those workers a middle-class lifestyle was his highest priority.

“This is a wage gain in an economy that is cratering in some places,” Harley Shaiken, a labor professor at the University of California at Berkeley, said in a telephone interview today. “It’s an important symbol.”

GM will also pay a record $5,000 signing bonus if a majority of the 48,500 hourly workers vote to ratify the accord, the people said. That would cost the Detroit-based automaker $242.5 million. The accord also includes new jobs and better profit-sharing, the union said. Ratification votes will probably be held within 10 days, GM said.

The new entry-level wage will get workers close to the average manufacturing wage in the U.S., Shaiken said. In August, it was $18.90 an hour, according to the Commerce Department.

Tennessee Plant

Chief Executive Officer Dan Akerson also agreed reopen a former Saturn assembly plant in Spring Hill, Tennessee, the people said.

GM made its last Chevrolet Traverse sport-utility vehicle at the Spring Hill, Tennessee, factory in November 2009, according to its website. The assembly plant has been on standby since then. GM continued to produce 4-cylinder engines at the site, about 40 miles south of Nashville, and kept running a stamping plant and paint operation.

“It’s an impressive agreement in a very tough economy,” said Shaiken, the Berkeley professor. “This agreement amounts to a stimulus package because it generates jobs and puts purchasing power into the economy.”

The profit-sharing plan becomes more generous and transparent, the union said last night. The company will give workers a schedule that bases bonuses on GM’s profit in North America, the people said. The plan requires a minimum profit to produce a payout and includes caps on such distributions, they said.

GM must make at least $1 billion in North America to pay a UAW bonus, one of the people said. Last year, members would have received about $5,000 on average instead of $4,300, the person said. The profit-sharing checks would roughly equal $1,000 per $1 billion in North American profit, one of the people said.

Shared Sacrifice

“When GM was struggling, our members shared in the sacrifice,” UAW Vice President Joe Ashton, who directs the union’s General Motors Department, said in a statement released last night. “Now that the company is posting profits again, our members want to share in the success.”

The union typically uses the first accord to set a pattern for pay and benefits for the other two U.S. automakers. UAW negotiators will seek a deal with Chrysler Group LLC next and then go to Ford Motor Co. (F), three people familiar with the talks have said.

King and Ashton plan to present the agreement to the president and chairman of each UAW local on Sept. 20 in Detroit, said four people familiar with the schedule.

The union said it rebuffed efforts to weaken health-care coverage and won “significant improvements.”

‘New Strategies’

“The UAW approached these negotiations with new strategies and fought for and achieved some of our major goals for our members, including significant investments and products for our plants,” King said. “This contract will get our members who have been laid off back to work and will create new jobs in our communities.”

The agreement positions GM for long-term success, Cathy Clegg, GM vice president for labor relations, said in a statement.

“We worked hard for a contract that recognizes the realities of today’s marketplace, enabling GM to continue to invest in U.S. manufacturing and provide good jobs to thousands of Americans,” she said.

The UAW will probably turn its attention next to Chrysler, majority-owned by Fiat SpA (F), said Shaiken. The GM accord, he said “defines competitiveness for Detroit going forward.”

“The details will be critical because the union’s goals of job security and sharing in the success of the company can be in conflict,” he said in a telephone interview last night, noting that he hasn’t been briefed on those details. “The results will not make everyone happy.”

Non-Union Competition

King, 65, has pledged to organize a foreign automaker this year to expand the UAW’s bargaining power beyond GM, Ford and Chrysler. He said the union has “recommitted to that goal.”

“As long as unionized workers are being forced to compete with nonunion workers who in most cases receive lower pay and benefits -- many in temporary jobs -- there will continue to be a downward pressure on the wages and benefits of all autoworkers,” he said in the statement.

Contracts covering 113,000 workers at GM, Ford and Fiat SpA-controlled Chrysler were set to expire Sept. 14 and have been extended while negotiations continued.

The UAW proposed a signing bonus of $8,000 to $10,000 for each member, four people familiar with discussions said last week. A large bonus may help sell the deal to union members looking to be repaid for what King has estimated as $7,000 to $30,000 in concessions they each gave since 2005.

Workers at GM, Ford and Chrysler received signing bonuses of $3,000 after they ratified the current contract in 2007. Prior to that, signing bonuses had been around $1,000, Shaiken said last week.

Past Concessions

Previous concessions included surrendering raises, bonuses and cost-of-living adjustments as well as agreeing to a two-tier wage system, where new hires are paid about half as much as senior employees. With GM and Dearborn, Michigan-based Ford profitable, workers have said they want to recover what they gave up.

Workers at Ford have filed an “equality of sacrifice” grievance against the automaker for restoring raises and bonuses to salaried workers last year. An arbitration hearing on that dispute started Sept. 15.

UAW members agreed to a no-strike pledge at GM and Auburn Hills, Michigan-based Chrysler as part of their U.S.-backed bankruptcies in 2009. Unsettled disputes at the automakers are to be decided through binding arbitration. Ford didn’t receive a U.S. bailout and UAW members there went against the wishes of union leaders and rejected a strike ban and arbitration.

To contact the reporter on this story: David Welch in Southfield, Michigan, at

To contact the editor responsible for this story: Jamie Butters at