Economic Calendar

Saturday, January 21, 2012

PayPal Will Expand In-Store Payments

By Danielle Kucera - Jan 21, 2012 7:59 AM GMT+0700
Enlarge image PayPal Will Expand In-Store Payments

PayPal Inc. signage is displayed at the company's shopping showroom in New York. Photographer: Michael Nagle/Bloomberg

EBay Inc. (EBAY)’s PayPal e-commerce payment business plans to let shoppers pay with its service in more than 2,000 Home Depot Inc. stores by March, part of an effort to win away customers from credit-card companies.

The company began a trial with shoppers this week in 51 of Home Depot’s home-improvement stores, primarily in the San Francisco area, said Anuj Nayar, a spokesman for PayPal. It intends to extend the offer to all national locations, or about 2,200, he said.

PayPal, the fastest-growing part of EBay, aims to maintain that expansion by moving into the offline world, challenging Visa Inc. (V) and MasterCard Inc. (MA) on their home turf. While EBay says payment volume from in-store terminals will be “immaterial” to next year’s financial projections, it expects to profit from the shift during the next three to five years.

“Longer term, this could move the needle for PayPal, but right now it’s still in testing mode,” said Herman Leung, an analyst at Susquehanna Financial Group in San Francisco. “You will have to see a larger commitment from Home Depot (HD) than the 51 stores to truly incentivize the consumer to use it. There’s a little bit of a customer adoption cycle that needs to ramp.”

PayPal also is seeking new leadership. EBay Chief Executive Officer John Donahoe is serving as interim president of the division following the departure of Scott Thompson, who became CEO of Yahoo! Inc. (YHOO) this month.

More Retailers

The in-store service introduced this week lets consumers purchase items at checkout with a PayPal card or with a phone number and pass code. PayPal will hold trials with 20 more retailers by the end of this year, Nayar said.

EBay reported fourth-quarter sales and profit that topped analysts’ estimates, boosted by PayPal’s growth and an expansion of its retail offerings. Revenue at PayPal helped San Jose, California-based EBay reach sales of $3.38 billion in the period.

Still, growth at the payments division slowed from the previous quarter, down to 28 percent from 32 percent. PayPal’s mobile payment volume will rise to $7 billion this year from $4 billion last year, EBay said this week.

EBay shares climbed 1.3 percent to $31.93 today. The stock rose 9 percent in 2011, marking its third straight year of gains.

EBay also has created a so-called mobile wallet that stores credit- and debit-card information from a range of providers, giving the company control over the experience. It plans to offer users the option to choose which payment system they want to use as many as 30 days after the sale.

“This is the beginning of a fundamental change in the company,” Nayar said. “What we are finally rolling out will ultimately be, in part, an international phenomenon. It’s a change in how retailers and consumers are going to connect.”

To contact the reporter on this story: Danielle Kucera in San Francisco at

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


Technology’s Stalwarts Exceed Analysts’ Estimates While Google Disappoints

By Adam Satariano, Ian King and Dina Bass - Jan 21, 2012 4:41 AM GMT+0700

Microsoft Corp. (MSFT), Intel Corp. (INTC) and International Business Machines Corp. (IBM) issued results yesterday that topped analysts’ estimates, showing that buoyant business demand is girding the largest technology companies against Europe’s debt crisis and a consumer-spending slump.

Microsoft’s Office software and other business programs helped profit exceed projections last quarter, even as sales of Windows suffered from sluggish personal-computer orders. Intel and IBM, meanwhile, both delivered rosier sales forecasts than some analysts had predicted.

Reports from the trio of companies, with a combined market value of almost $600 billion and an average lifespan of six decades, allayed investors’ concerns that a slowdown in Europe, anemic consumer demand and last year’s floods in Thailand would hobble the information-technology industry. Corporate customers haven’t let up on orders, lifting sales at all three companies, while Intel is getting an extra boost from emerging markets.

“Old dogs can still hunt,” said Pat Becker Jr., a fund manager at Becker Capital Management in Portland, Oregon. His firm has invested in all three companies.

Microsoft, the world’s largest software maker, climbed 5.7 percent to $29.71 today in U.S. trading. Intel rose 2.9 percent to $26.38, while IBM advanced 4.4 percent to $188.52.

‘Oracle-Specific Event’

The results were a relief for many investors after Oracle Corp. (ORCL) reported weaker-than-anticipated earnings last month, fueling speculation that businesses were holding off on technology spending, said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland.

“The results of these three companies suggest that was an Oracle-specific event,” Barnicle said.

The positive outlook also contrasted with the earnings of Google Inc. (GOOG), which also delivered its report yesterday. The Mountain View, California-based company missed analysts’ sales and profit estimates, dragged down by the European crisis and a push into mobile technology, which yields lower ad revenue. Google shares fell 8.4 percent to $585.99 today.

Sales at Microsoft’s business division, largely made up of Office products such as Word and Excel, rose 2.8 percent to $6.28 billion. Analysts had estimated $6.1 billion on average, according to data compiled by Bloomberg. The company’s Xbox video-game business also topped projections, generating $4.24 billion in revenue.

Microsoft Profit

Microsoft, based in Redmond, Washington, posted net income of $6.62 billion, or 78 cents a share. That beat the 76-cent average estimate.

IBM, the biggest provider of computer services, reported fourth-quarter earnings of $4.71 a share, excluding some items. Analysts had predicted $4.62. The Armonk, New York-based company’s forecast for 2012 earnings also exceeded predictions.

Intel, which dominates the market for computer chips, expects sales of $12.8 billion, indicating that production is bouncing back after the Thai flooding. The disaster wiped out a quarter of the computer industry’s disk-drive production, delaying shipments of PCs. Research firms Gartner Inc. and IDC had lowered their PC sales forecasts as a result of the floods.

The supply disruptions hurt revenue at Santa Clara, California-based Intel last quarter. IBM’s sales also were lower than expected in the period.

Trip Chowdhry, an analyst with Redwood City, California- based Global Equities Research LLC, says technology companies still face long-term challenges. Higher gasoline costs, for one, will both hurt consumer spending and increase the price of raw materials, he said.

Corporate buyers are showing more resiliency than consumers, who are reeling from a still-shaky job market. Businesses are the driving force behind Microsoft, IBM and Intel’s results, said Michael Holland, chairman of New York- based Holland & Co., which oversees $4 billion in assets.

“The consumer continues to have unemployment problems and confidence problems, but businesses are doing everything they can to grind out profits,” Holland said.

To contact the reporters on this story: Adam Satariano in San Francisco at; Ian King in San Francisco at; Dina Bass in Seattle at

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


Intel Names Krzanich COO, Perlmutter Product Chief in Management Shuffle

By Ian King - Jan 21, 2012 4:41 AM GMT+0700

Intel Corp. (INTC), the world’s largest semiconductor maker, promoted Brian Krzanich to chief operating officer, elevating a possible successor to Chief Executive Officer Paul Otellini.

Krzanich, 51, had been senior vice president in charge of worldwide manufacturing, Santa Clara, California-based Intel said in a statement today. The stock closed at a more than four- year high, bolstered by upbeat results released yesterday.

Intel has appointed CEOs from within the company since its founding in 1968, and Otellini and his two predecessors held the COO title before taking the top job. In his new role, Krzanich will retain oversight of manufacturing, while taking on responsibility for information technology and human resources.

“Are they grooming him to be the next CEO?” said Patrick Wang, an analyst at Evercore Partners Inc. in New York. “If history is any guide, yes.”

Wang also said, “I wouldn’t jump to that conclusion just yet.”

Under Intel bylaws, Otellini, 61, can continue to serve as CEO until May 2016, when he’ll reach the company’s mandatory retirement age, said Laura Anderson, a spokeswoman. Today’s promotion isn’t related to CEO succession planning, and the company continues to develop a deep bench of executive talent, she said.

Intel rose 2.9 percent to $26.38 today in New York, the highest closing since Dec. 31, 2007. The stock has climbed 26 percent in the last 12 months.

Barrett, Grove

Otellini served as chief operating officer under his predecessor, Craig Barrett, who himself filled that role under Andy Grove. Grove also served as COO, a position that has been vacant since Otellini became CEO in 2005.

Krzanich is taking on responsibilities held by Chief Administrative Officer Andy Bryant, who -- as previously announced -- is becoming chairman of the board, Intel said.

Intel typically moves senior managers into different roles to give them broader experience and test their ability to handle new challenges. That’s probably what Intel is doing with Krzanich, said Alex Gauna, an analyst at JMP Securities LLC.

“I’ll bet he’s going to have to prove himself,” said Gauna, who has a “market outperform” rating on Intel and is based in San Francisco. “It doesn’t force their hand at this juncture.”

Chemistry Major

Krzanich has been with Intel since 1982, when he joined the company after graduating from San Jose State University with a degree in chemistry.

Intel yesterday announced it would boost spending this year on equipment and facilities to $12.5 billion, plus or minus $400 million. The company says its ability to produce microprocessors with the most advanced technology is a key advantage. Krzanich has played a central role in implementing new production techniques, according to his company profile.

Intel announced the management rearrangement a day after releasing a forecast for first-quarter revenue that may exceed analysts’ predictions. The promotions “recognize outstanding performance” and will occur in the coming 30 days, Intel said.

The company also named Dadi Perlmutter as chief product officer. Kirk Skaugen, a vice president in charge of Intel’s data-center business, will lead the personal-computer chip business. He succeeds Mooly Eden, who is moving back to his native Israel, at his request, Intel said.

Diane Bryant, the company’s current chief information officer, will take Skaugen’s position.

To contact the reporter on this story: Ian King in San Francisco at

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


Google’s Page Stung as Advertising-Price Drop Means First Results Miss

By Brian Womack - Jan 21, 2012 5:09 AM GMT+0700
Enlarge image Google’s Page Stung Following Ad-Price Drop Results Miss

A man talks on the phone outside Google Inc. headquarters in Mountain View, California, U.S. Photographer: Tony Avelar/Bloomberg

Jan. 20 (Bloomberg) -- Jeffrey Davis, chief investment officer at Lee Munder Capital Group, talks about wireless market competition between Microsoft Corp. and Google Inc. Davis, speaking with Scarlet Fu on Bloomberg Television's "InsideTrack," also discusses reaction to Google's fourth-quarter earnings. (Source: Bloomberg)

Google Inc. (GOOG) fell the most in more than three years after Larry Page delivered his first disappointing quarterly results as chief executive officer, showing that a mobile advertising push and weakness in Europe curtailed growth.

Fourth-quarter sales, excluding revenue passed on to partner sites, of $8.13 billion, falling short of the $8.41 billion average estimate of analysts surveyed by Bloomberg, a report yesterday showed. Profit before certain costs was $9.50 a share, missing the $10.50 average estimate.

Page, CEO since April, is exiting poorly performing businesses while expanding in new areas, including the mobile Web, to lessen reliance on traditional search. While that’s helping boost sales, it also crimps the amount of money Google can collect from advertisers because ads viewed on handsets are considered less valuable than those on a computer screen.

“Google looks more mortal this quarter,” said Colin Gillis, analyst at BGC Partners LP in New York. “A lot of what Larry Page is doing is a lot more tolerable to investors when the business is firing on all cylinders.”

The average price Google gets when users click on an ad slumped 8 percent last quarter. Growth was also hampered as demand weakness in Europe dragged down the euro and eroded the value of overseas revenue.

“Google is not invincible,” said Herman Leung, an analyst at Susquehanna Financial Group in San Francisco.

The company, which last year shut down services such as Google Health and PowerMeter, said today it’s phasing out more features. They include “Social Graph API,” which makes connections between people available to developers, and Needlebase, a data-management platform, according to a company blog.

Europe Weakness

Google shares tumbled 8.4 percent to $585.99 at the close, the biggest decline since Dec. 1, 2008, after Google reported earnings yesterday. The stock climbed 8.7 percent last year.

International sales made up 53 percent of revenue in the quarter, down from 55 percent in the third quarter, Mountain View, California-based Google said. Online ad sales in Europe increased about 5 percent in the fourth quarter, compared with a 20 percent increase in the first half of last year, said Clay Moran, an analyst at Benchmark Co. in Delray Beach, Florida.

Search-based advertising spending in Europe rose 14 percent in the fourth quarter, compared with a 22 percent jump in the U.S., according to IgnitionOne Inc., a digital-marketing company.

Google’s net income rose to $2.71 billion, or $8.22 a share, compared with $2.54 billion, or $7.81 a share, a year earlier.

Operating expenses rose to $3.38 billion, or 32 percent of revenue, in the recent period. In the year-earlier quarter, operating costs equaled 30 percent of revenue, Google said.

‘Major Concerns’

“One of the major concerns here is, given the performance on the top line, what does the margin picture look like going forward?” said Ken Sena, an analyst at Evercore Partners Inc. in New York, who rates Google shares “overweight.”

The number of total clicks on ads rose 34 percent during the quarter, Google said.

The company has been working to offer customers more options in mobile and display advertising. Google also has been investing in its search engine to improve the quality of results and maintain its market-share lead over Microsoft Corp. (MSFT)’s Bing.

In December, Google’s share of U.S. searches rose to 65.9 percent from 65.4 percent the previous month, according to ComScore Inc. Microsoft had 15.1 percent of searches, up from 15 percent, while Yahoo! Inc. (YHOO) accounted for 14.5 percent.

Google is betting it can maintain its dominance in search by offering faster, more personal query results. Last year, Google rolled out the “Instant Pages” feature, which aims to cut the time of searches for users by about 2 to 5 seconds.

Personalized Results

Earlier this month, Google introduced “Search, Plus Your World,” intended to give users more personalized search results by tapping content from the Google+ social-networking service. The search service lists items that users may have put on Google+ or related results from friends’ posts on the social site, which competes with Facebook Inc. The Google+ service now has 90 million users, more than double the amount in October.

Still, Google’s efforts to attract users have drawn regulatory scrutiny. The U.S. Federal Trade Commission is focusing on whether Google unfairly ranks search results to favor its own businesses and increases advertising rates for competitors, a person familiar with the matter said in August.

More recently, the FTC expanded its antitrust probe of Google to include scrutiny of Google+, two people familiar with the situation said last week.

Google, which also develops the Android operating system for smartphones and tablets, has been using acquisitions in the past few years to build up its services for display ads, which features images, videos or animation, and ads on mobile devices.

Android, Display Gains

Last year, Google announced it was buying AdMeld Inc., which offers services to Internet publishers to manage display ads, and in 2010 the company bought AdMob Inc., which specializes in advertising on mobile phones.

Page, speaking on a conference call, said he was pleased with company’s performance. Google is on pace to generate $5 billion in sales from display-based ads a year, and there are now about 250 million devices that sport the Android operating system.

“I’m very happy with our results,” Page said. “Google had a very strong quarter.”

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

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


Santorum Investing in Outsourcing Firms

By Bob Drummond - Jan 21, 2012 12:00 PM GMT+0700

Rick Santorum, seeking the votes of factory workers and laborers in today’s South Carolina primary, has promoted what he calls his “Made in America” plan to eliminate U.S. corporate income taxes on manufacturing companies and reverse the flow of jobs to lower-cost countries.

When he invests, though, Santorum’s put some of his own money in companies that ship much of their manufacturing work to factories in China, Thailand, Malaysia and other countries.

Of 18 publicly traded stocks listed in the former Pennsylvania senator’s most recent financial disclosure, six companies sell fiber-optic equipment and outsource production to overseas factories-for-hire or operate their own plants abroad.

The payroll at one of Santorum’s investments, Fabrinet Inc. (FN), last year included 5,300 manufacturing workers in Thailand, 1,200 in China and 30 in the U.S., according to its latest annual report.

Fabrinet, which makes products under outsourcing contracts with other manufacturers, got almost 60 percent of its fiscal 2011 revenue from four Silicon Valley corporations: JDS Uniphase (JDSU) Corp., Oclaro Inc. (OCLR), Finisar Corp. and Opnext Inc. Santorum owned shares in all of them, according to the financial disclosure form he filed last year.

Santorum Response

Santorum said his manufacturing proposals are designed to give companies a benefit from hiring U.S. factory workers.

“My policies over my political career have been very clear -- what we’re trying to do is compete, so those companies can manufacture here in this country,” Santorum said in an interview. “The fact that I or anybody else invests in companies that you think are going to help you in your portfolio -- that’s why you invest. You make public policy for different reasons.”

Reviving U.S. factories is a central part of Santorum’s economic message. The grandson of a coal miner, he often speaks about growing up with blue-collar families in western Pennsylvania’s steel country.

Santorum was asked during a Jan. 19 South Carolina debate about encouraging the use of U.S. manufacturing workers by companies such as Apple Inc., (AAPL) which said in its latest annual report that “substantially all of the company’s hardware products” are made by contractors “primarily” based in Asia.

‘A Specific Plan’

“I’m the only person on this stage that will do something about it,” Santorum said. “I’ve got a specific plan in place” to cut corporate taxes, reduce energy prices and ease regulations at “exactly these kinds of companies that have great technology and then go somewhere else to make them because America is uncompetitive.”

He didn’t mention that he owned between $15,001 and $50,000 worth of Apple stock, according to his most recent disclosure filing.

Federal personal finance forms allow candidates to reveal the value of their investments in broad ranges. Altogether, Santorum owned publicly traded stocks worth between $154,000 and $710,000, including shares in fiber-optic companies valued at $11,000 to $165,000.

Santorum bought all of his individual stocks since filing his last congressional disclosure form at the end of 2006, after being defeated for re-election to the Senate. While in Congress, Santorum footnoted disclosure documents to say he invested only in “widely diversified” mutual funds.

Fiber-optic Investments

If Santorum held on to the equipment stocks, his shares have been falling as a weak economy slowed spending on fiber- optic network construction and flooding last October in Thailand idled two Fabrinet facilities. Oclaro shares have plunged 68 percent in the past 12 months. Opnext (OPXT) has dropped 36 percent, Finisar is down 33 percent, Fabrinet has slumped 28 percent, and JDS Uniphase has fallen 17 percent.

Santorum also invested in Quebec City, Canada-based Exfo (EXF) Inc., which makes testing and monitoring equipment for fiber- optic networks and does most of its manufacturing at plants in Quebec City and Shenzhen, China, according to a filing with the Securities and Exchange Commission. Exfo is down 31 percent in the past 12 months.

Rivals for the Republican presidential nomination had scattered investments in computer or other companies that make many of their products in other countries. Former Massachusetts Governor Mitt Romney owned Apple shares, and former U.S. House Speaker Newt Gingrich invested in Hewlett-Packard Co. (HPQ)

Single Industry

Santorum’s holdings stand out because one-third of his publicly traded stocks are concentrated in a single industry that makes a significant share of its products overseas.

Fabrinet, based in Grand Cayman, owned or leased almost 1.1 million square feet for operations in Thailand and China, according to its 2011 annual report, and has plans to expand in both countries. In the U.S., Fabrinet had a 20,000-square-foot plant in Mountain Lakes, New Jersey.

As it turned to outside contractors, Milpitas, California- based JDS Uniphase’s in-house manufacturing payroll dropped 87 percent to 1,950 people in 2011 from 14,979 in 2001, according to SEC filings.

“We remain committed to streamlining our manufacturing operations and reducing costs by using contract manufacturers where appropriate and consolidating to reduce our footprint and total fixed costs,” the company said in its 2011 annual report.

Made in Thailand

Products made by Fabrinet in Thailand account for about half the revenue in JDS Uniphase’s communications and commercial optical products business, which contributed more than 40 percent of the parent company’s $1.8 billion in 2011 sales.

Finisar (FNSR) employed 6,778 people in Shanghai and in Ipoh, Malaysia, compared with 712 U.S.-based workers, and plans to break ground this year on a factory in Wuxi, China, according to the Sunnyvale, California, company’s most recent annual report.

Opnext, of Fremont, California, got 43 percent of its revenue during the quarter ended Sept. 30 from products it hired Fabrinet to make in Thailand, according to a regulatory filing. On its own workforce, 300 of Opnext’s 500 employees are in Japan.

Oclaro outsources about 30 percent of its production to Fabrinet’s factories in Thailand, according to its SEC filings. San Jose, California-based Oclaro’s biggest company-operated plants are in China, the U.K., Switzerland and Italy.

To contact the reporter on this story: Bob Drummond in Washington at

To contact the editor responsible for this story: Mark Silva at


Romney Faces Battle With Gingrich in South Carolina’s Republican Primary

By Lisa Lerer and Julie Hirschfeld Davis - Jan 21, 2012 12:00 PM GMT+0700

Jan. 20 (Bloomberg) -- Alex Brill, a research fellow at the American Enterprise Institute, and Peter Ferrara, chief economic policy adviser to Republican presidential candidate Newt Gingrich, talk about the tax plans of Gingrich and rival Mitt Romney. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Jan. 20 (Bloomberg) -- Mitt Romney saw his rationale as the Republican presidential front-runner undercut as Newt Gingrich’s rise was threatened by allegations from an ex-wife and Rick Santorum fought them both in last night's debate that showcased tensions in the most turbulent day yet of the primary race. Peter Cook reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Striving to regain ground in the final hours before the South Carolina primary, Mitt Romney offered a dim assessment of his chances in the race as he sparred with a surging Newt Gingrich.

Traveling the state in the final full day of campaigning before today’s voting, the former Massachusetts governor sought to downplay expectations, describing the race as a “neck-and- neck” competition.

“I said from the very beginning South Carolina is an uphill battle for a guy from Massachusetts,” he told reporters yesterday in Gilbert, South Carolina. “We’re battling hard.”

Gingrich, seeking to ride what polls show is a late wave of support, planned a full day of campaign stops in a bid to top Romney.

“The only effective conservative vote to stop a Massachusetts moderate is to vote for me,” Gingrich told an overflow crowd of more than 500 voters yesterday at The Cinema Room in Orangeburg. “If I win tomorrow, I will go on to become the nominee.”

A poll released yesterday, conducted by Clemson University, put Gingrich ahead of Romney, 32 percent to 26 percent. Trailing are U.S. Representative Ron Paul of Texas at 11 percent and former Pennsylvania Senator Rick Santorum at 9 percent, with 20 percent undecided. The survey was conducted between Jan. 18 and yesterday and has an error margin of plus-or-minus 4.7 percentage points.

Same Event

Romney and Gingrich are scheduled to appear at dueling events today, set for the same time at the same barbecue restaurant in Greenville. Both campaigns say they intend to keep their plans to visit Tommy’s Country Ham House, eight hours before polls close in the state at 7 p.m.

Arriving in South Carolina after winning the New Hampshire primary, Romney’s support in polls is slipping amid questions about his wealth, his taxes, and attempts by Gingrich and Santorum to rally fiscal and social conservatives around their candidacies.

During the first week in January, Romney had an 18-point lead in a South Carolina poll. Now, he and his advisers may face the prospect of a drawn-out nominating fight extending into the spring.

Some prominent Republicans seeking an alternative to Romney have rallied to Gingrich in recent days, including former Alaska Governor Sarah Palin, actor Chuck Norris, and Michael Reagan, a talk show host and son of former President Ronald Reagan. The Romney campaign has touted support from South Carolina Governor Nikki Haley, Virginia Governor Bob McDonnell and Ohio Senator Rob Portman.

Ethics Probe

Seeking to regain ground, Romney and his backers called on Gingrich to release details of a 1997 congressional investigation into ethics charges when he was House speaker. The investigation resulted in Gingrich being reprimanded by fellow lawmakers and charged with a $300,000 fine in chamber- reimbursement costs.

“You know it’s going to get out before the general election,” said Romney. “He ought to get it out now.”

Gingrich scoffed at the demand, referring to what he said is a 900-page cache of information publicly available on the matter and Romney’s refusal to immediately release his tax returns.

“Give me a break,” Gingrich told reporters after the town hall in Orangeburg. “I refuse to take seriously any request from the Romney campaign to disclose anything, because they’re clearly not going to disclose anything at any level that involves him.”

Tax Returns

Romney, a multimillionaire from his days as a private- equity executive, has been dogged by questions during the South Carolina campaign about why he’s refusing to provide any tax returns until April -- when his party’s nomination battle may effectively be over.

On Jan. 17, Romney said his effective tax rate is “probably” close to 15 percent because much of his income comes from investments.

Romney supporters worked to discount the tax issue, arguing that voters were more focused on jobs and the economy.

“The people of South Carolina are not talking about tax returns,” said South Carolina Governor Nikki Haley, who has spent days campaigning with Romney. “They want to know how you’re gonna bring jobs.”

As the candidates sparred, South Carolina was living up to its reputation as a hotbed of dark political arts where whisper campaigns and anonymously circulated fliers can spread misinformation with the potential to damage candidates.

False Statement

A phony e-mail was circulating among South Carolinians that purported to be a statement from Gingrich saying, falsely, that he forced his second wife Marianne to have an abortion. His spokesman, R.C. Hammond, said the statement was a fake and Gingrich denounced it, saying the perpetrators should be prosecuted.

“I am sick of the kind of dishonest campaigns that we see, where people fake somebody else’s material for purposes of causing trouble 24 hours before a primary,” Gingrich said.

Earlier, Santorum told reporters that voters were receiving fake telephone calls purporting to be from his campaign saying he had endorsed Romney for the 2012 nomination.

“I think negative robo-calls are sort of the lowest form of campaigning,” Santorum said.

Negative Advertisements

On the airwaves, South Carolina voters were being barraged with a flood of negative television advertisements.

An ad for Santorum targets Romney, pressing the case that he wouldn’t offer a clear alternative to President Barack Obama.

“Why would we ever vote for someone who’s just like Barack Obama when we can unite behind Rick Santorum and beat Obama?” a narrator asks.

Restore Our Future, a pro-Romney political action committee operating independently of his campaign, is airing an anti- Gingrich commercial featuring clips of him admitting past errors.

“Haven’t we had enough mistakes?” a narrator asks.

Paul wrote his supporters calling Gingrich a “counterfeit conservative.”

In the letter that said Gingrich “has a long record of liberal appeasement, flip-flopping on key issues, and lobbying for insider millions,” Paul cast himself as “the only true conservative in the top-tier of candidates running” for the Republican nomination.

Light Schedule

Paul made a series of stops across the state yesterday, an escalation of what had largely been a light schedule for him since New Hampshire’s primary.

Santorum appealed to voters packed into Hudson’s Smokehouse barbecue restaurant in Lexington not to choose Romney simply because they believed he was the only candidate with the ability to win the nomination. “Don’t compromise,” he said.

Still, Santorum told reporters he was just looking for a “respectable showing” today that would allow him to stay in the race as it heads to Florida, which holds its primary on Jan. 31.

“I feel confident we hang around after this, just like an episode of ‘Survivor’ -- just don’t get voted off the island.”

To contact the reporters on this story: Lisa Lerer in Washington at; Julie Hirschfeld Davis in Washington at

To contact the editor responsible for this story: Jeanne Cummings at


U.S. Ends Chevy Volt Battery Fire Probe

By Angela Greiling Keane - Jan 21, 2012 12:01 PM GMT+0700

U.S. regulators, who ended their investigation yesterday into the Chevrolet Volt, said electric- powered vehicles do not pose a greater risk of fire than gasoline cars.

“Based on the available data, NHTSA does not believe that Chevy Volts or other electric vehicles pose a greater risk of fire than gasoline-powered vehicles,” the National Highway Traffic Safety Administration said in an e-mailed statement.

The conclusion by NHTSA came two weeks after General Motors Co. (GM) told Volt owners to bring the vehicles to dealerships for repair.

The government started investigating the Volt after a side- impact crash test in May led to a fire three weeks later. During that test, the lithium-ion battery pack broke open and coolant leaked into the battery. When the car was physically rotated as part of the test, more coolant leaked into a circuit board, leading to a fire. NHTSA replicated the fire in November and started an official probe Nov. 25.

“GM is proud of the technological innovation the Volt represents,” Greg Martin, a GM spokesman, said yesterday in an e-mailed statement. “We appreciate the confidence our Volt customers continued to provide during the investigation.”

Post-Crash Fire

The June fire occurred following a May 12 crash test at a facility in Wisconsin run by contractor MGA Research Inc., which notified the regulator that the blaze burned a line of cars parked near the Volt, NHTSA said yesterday in its report.

The agency and its investigators concluded in July that the fire originated in the Volt battery and performed another side- impact test on a Volt in September. That crash, which didn’t penetrate the battery compartment, didn’t lead to a fire. NHTSA, which tested Volt batteries in November with the Energy and Defense departments, hadn’t previously disclosed the September crash test.

The June Volt fire was reported Nov. 11 by Bloomberg.

The Volt blaze had little effect on sales of the vehicles, so there may not be any significant improvement with the government completing its investigation, said Jeremy Anwyl, vice chairman of auto-researcher, in an e-mail.

“Volt buyers tend to be passionate about their vehicle,” Anwyl said. “They really want an electrified vehicle. The small risk represented by the potential for fire wouldn’t have been an obstacle for this group of buyers.”

New Technology

The attention focused on the Volt fire was, in part, a result of the vehicle’s new technology, Anwyl said.

“We see gasoline powered vehicles blow up in the movies all the time,” he said. “A vehicle with batteries catches fire and it is portrayed as a big deal.”

Representative Darrell Issa, the California Republican who is chairman of the House Oversight and Government Reform Committee, plans to hold a hearing on Jan. 25 about the fires and the regulator’s handling of the incidents. GM Chief Executive Officer Dan Akerson and NHTSA Administrator David Strickland are scheduled to testify.

Issa has asked whether President Barack Obama’s administration kept silent about the fires because of its interest in the success of GM’s government-backed restructuring and a U.S. goal of having 1 million electric vehicles on the road by 2015.

Information Not Withheld

U.S. Transportation Secretary Ray LaHood told reporters in December it was “absolutely not true” that his agency withheld information about the Volt’s safety.

GM, based in Detroit, said Jan. 5 it would provide a fix to the 8,000 plug-in hybrids it has sold, to reduce the risk of a post-crash fire. Strickland said in Detroit Jan. 8 that the agency was pleased with GM’s plan.

The Treasury Department owns 32 percent of GM’s stock, according to data compiled by Bloomberg.

To contact the reporter on this story: Angela Greiling Keane in Washington at

To contact the editor responsible for this story: Timothy Franklin at


US Airways Said to Develop AMR Merger Plan

By Mary Schlangenstein - Jan 21, 2012 4:06 AM GMT+0700
Enlarge image US Airways

Bicyclists pass by a US Airways jet taking off at Ronald Reagan National Airport. Photographer: Andrew Harrer/Bloomberg

Jan. 20 (Bloomberg) -- US Airways Group Inc. is studying a potential merger with bankrupt AMR Corp. that would fix a weak domestic route system at American Airlines and boost revenue, two people familiar with the matter said. Any bid may still be close to a year away, because AMR now holds the exclusive right to file a reorganization plan, the people said. Suzanne O'Halloran reports on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

US Airways Group Inc. (LCC) is studying a potential merger with bankrupt AMR Corp. (AAMRQ) that would fix a weak domestic route system at American Airlines and boost revenue, two people familiar with the matter said.

President Scott Kirby is leading US Airways’ analysis of how to combine the airlines, said the people, who asked not to be identified because the matter is private. Any bid may still be close to a year away, because AMR now holds the exclusive right to file a reorganization plan, the people said.

American has pared its flight network to the point that some corporate travelers have gone elsewhere, leaving the money- losing carrier unable to support most of its hub airports, one person said. That deficiency could be solved by blending American, the third-largest U.S. airline, with No. 5 US Airways, the people said.

“Unsecured creditors would get a better return out of a merged airline than American trying to go it alone,” said Jeff Straebler, an independent airline analyst based in Stamford, Connecticut.

The combination would hold about a 20 percent domestic market share, basically putting it on equal footing with United Continental Holdings Inc., Delta Air Lines Inc. (DAL) and Southwest Airlines Co. (LUV), Straebler said in an interview. Those carriers rank first, second and fourth in the U.S. by traffic.

Evolving Plan

A merger attempt is likely, though Tempe, Arizona-based US Airways is still weighing options, the people said. The shape of any plan would evolve as Fort Worth, Texas-based AMR settles issues such as pensions and labor contracts in court, one person said.

Traffic to American’s hubs would grow by funneling in travelers from US Airways, the person said. In turn, a stronger domestic system would feed into American’s routes across the Atlantic and to Latin America, said the person, who declined to give financial details because the numbers are preliminary.

A US Airways spokeswoman, Michelle Mohr, declined to comment, as did Sean Collins, an American spokesman.

TPG Capital and Delta also are evaluating possible bids for American, people familiar with the matter have said. TPG and Delta have said they aren’t commenting about any interest in AMR, which filed for Chapter 11 protection in U.S. Bankruptcy Court in Manhattan on Nov. 29 after posting annual losses starting in 2008.

No Contacts

US Airways hasn’t discussed its interest with AMR’s executives, one person said. Nor has it spoken with TPG about American, the person said.

TPG founder David Bonderman led a group that invested more than $200 million in America West Airlines Inc. as it exited bankruptcy in 1994, taking a 33.5 percent stake and controlling a majority of its board. That carrier later became America West Holdings Corp., a US Airways predecessor.

US Airways rose 1.9 percent to $6.38 at the close in New York. AMR’s 8.625 percent notes due in October 2021 fell 0.25 cent to 106.5 cents on the dollar at 3:26 p.m., according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

US Airways has been the airline most often cited by analysts as a potential American partner. It has hired Millstein & Co. and Barclays Plc as advisers, according to people familiar with the matter. The airline hasn’t confirmed the arrangement.

Three Survivors

A tie-up with American would shrink the U.S. industry to three major full-service carriers, increasing the survivors’ power to raise fares. It would surpass Delta as the second- biggest U.S. airline and fulfill US Airways Chief Executive Officer Doug Parker’s call for industry consolidation.

The current US Airways was created in 2005 when Parker, then CEO of America West Holdings (AWA), orchestrated a merger to bring the old US Airways out of bankruptcy. He failed in three additional merger attempts since 2006, including a hostile bid for Delta when that company was in Chapter 11.

American’s passenger revenue for each seat flown a mile, an industry benchmark, trailed that of US Airways, United Continental and Delta through 2011’s first three quarters, according to data compiled by Bloomberg.

American’s hubs include Dallas-Fort Worth, Miami, New York and Chicago, while US Airways has major operations in cities such as Charlotte, North Carolina; Philadelphia; and Phoenix.

To contact the reporter on this story: Mary Schlangenstein in Dallas at

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


U.S. Debt in Worst Start Since 2003

By Cordell Eddings and Liz Capo McCormick - Jan 21, 2012 5:20 AM GMT+0700

Treasuries are off to their worst start since 2003 on signs the U.S. economy is strengthening and Europe is moving closer to resolving its debt crisis.

Treasury 10-year notes fell for a third day as a U.S. report showed home sales rose for a third month in December, adding to signs including falling claims for jobless benefits that the world’s largest economy is gaining momentum. Greek officials held debt-swap talks for a third day after Spain and France sold bonds at lower yields yesterday.

“The lack of blowups in European sovereign debt have allowed calm to erupt, and that has weighed on Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which oversees $12 billion in fixed-income assets. “Home sales are improving, though from very poor levels, which underlies the improving data we’ve had of late,”

The benchmark 10-year yield rose five basis points, or 0.05 percentage point, to 2.03 percent at 5:02 p.m. in New York, according to Bloomberg Bond Trader prices. The 2 percent note due in November 2021 was down 13/32, or per $4.06 per $1,000 face amount, to 99 25/32. The yield increased 16 basis points this week, the most since the five-day period ended Dec. 23.

U.S. government securities lost 0.342 percent this year, the most since a 0.693 percent loss in 2003, according to Bank of America Merrill Lynch Indexes. Treasuries finished 2003 returning 2.25 percent despite the weak start and have posted annual gains every year but one since 2009, when they fell 3.7 percent in 2009. U.S. corporate bonds returned 0.5 percent this year and German bunds fell 0.1 percent, the indexes show.

Widening Spread

The difference between two- and 10-year yields widened four basis points to 1.78 percentage points after touching 1.79 percentage points, the most since Dec. 13. The spread was as narrow as 1.47 percentage points on Oct. 4.

The Citi Macro Risk Index dropped to a five-month low of 0.601 yesterday, showing increased demand for higher-yielding assets.

“Domestic data has been reasonably good and that’s been a catalyst to the selloff in Treasuries,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “Risk sentiment has been generally positive this week, which reduces the safe-haven bid, pushing yields higher.”

Initial jobless claims plunged to 352,000 in the week ended Jan. 14, the lowest level since April 2008, the Labor Department said yesterday. A Federal Reserve report on Jan. 18 showed factory output increased.

Labor ‘Traction’

“There is some significant traction in the labor market,” said Richard Gilhooly, an interest-rate strategist at Toronto- Dominion Bank’s TD Securities Inc. in New York. “There is beginning to be some consistency and some acceleration in the U.S. economic numbers. Once we get through the first quarter, you should get a big spike in Treasury yields.”

Sales of previously owned U.S. homes rose to the highest level since January 2011, with purchases increasing 5 percent to a 4.61 million annual rate, the National Association of Realtors said today in Washington. The pace was less than the 4.65 million median forecast of 75 economists surveyed by Bloomberg News.

Even as core consumer prices are running at almost the Fed’s ideal of about 2 percent, investors are snapping up inflation-protected debt for insurance against a risk that price levels rebound. The U.S. sold a record $15 billion in 10-year Treasury Inflation Protected Securities yesterday at a negative yield for the first time.

Negative Yield

The TIPS were auctioned at a so-called high yield of negative 0.046 percent, compared with a forecast of negative 0.027 percent, the average estimate in a Bloomberg News survey of eight of the Fed’s 21 primary dealers that are required to bid on U.S. debt sales. The last four sales of five-year TIPS were at negative yields.

The World Bank said this week that the U.S. economy will expand 2.2 percent in 2012, while the euro area will contract 0.3 percent.

The 10-year yield will advance to 2.59 percent by year-end, according to a Bloomberg survey of banks and securities companies with the most recent forecasts given the heaviest weightings.

“Weak-but-positive growth should allow rates to grind higher, barring an increase in European stress,” according to the report by Royal Bank of Canada analysts including Michael Cloherty, the head of U.S. rates strategy for RBC Capital Markets LLC in New York.

‘Cover to Sell’

Greece’s government and private creditors convened today for a third session of talks on how to reduce the nation’s debt and avert a collapse of the economy.

“There’s been significant progress,” Hans Humes, president of Greylock Capital Management and a member of the creditor committee negotiating the deal with the government, said in a Bloomberg Television interview today.

“The European situation may be dislocating itself some from the Treasury market,” said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. “As the complexion gets better in Europe there is less need for the flight-to-quality to trade. If we didn’t have the European situation we would be further north of 2 percent on the 10-year note. We’ve had no new bad news, which has given investors cover to sell Treasuries.”

Yields indicate investors are becoming more willing to lend. The three-month London interbank offered rate for loans in dollars was at 0.561 percent yesterday, headed for a second weekly decline.

The Fed is seeking to keep longer-term borrowing costs capped by selling $400 billion of its short-term Treasuries and reinvesting the proceeds into longer-term government debt in a program traders dubbed Operation Twist.

The central bank bought $2.52 billion of Treasuries due from 2036 to 2041 today as part of the program, according to the New York Fed’s website.

To contact the reporters on this story: Cordell Eddings in New York at; Liz Capo McCormick in New York at

To contact the editor responsible for this story: Dave Liedtka at


Greece Moves Closer to Debt-Swap Accord With Private Investors

By Marcus Bensasson and Tom Stoukas - Jan 21, 2012 2:07 AM GMT+0700

Jan. 20 (Bloomberg) -- Nouriel Roubini, the New York University professor who predicted the 2008 financial crisis, and Ian Bremmer, president of Eurasia Group, talk about the outlook for the global economy and China-U.S. relations. Roubini and Bremmer, speaking with Bloomberg's Margaret Brennan, also discuss the oil market and the European sovereign-debt crisis. (Source: Bloomberg)

Jan. 20 (Bloomberg) -- Peter Dixon, global equities economist at Commerzbank AG, talks about the possibility of a Greek debt default and his investment strategy. He speaks with Mark Barton on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Greek students stage demonstrations in central Athens. Photographer: Marios Lolos/Xinhua/

Greece and its private creditors are closing in on a debt swap accord that’s crucial to cutting the country’s borrowings and allowing it to receive a second round of international aid.

“There’s been significant progress,” Hans Humes, president of Greylock Capital Management and a member of the creditor committee negotiating the deal with the government, said in a Bloomberg Television interview today. “There’s broad agreement about the coupons and structural elements.”

European officials and the nation’s private bondholders agreed in October to implement a 50 percent cut in the face value of just more than 200 billion euros ($259 billion) of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020. An accord with bondholders is key to a second financing package for the cash- strapped country, which faces a 14.5 billion-euro bond payment on March 20.

Talks on the swap were set to resume at 7:30 p.m. in Athens, Greek Finance Minister Evangelos Venizelos told reporters after meeting with creditors and Prime Minister Lucas Papademos today.

Charles Dallara, managing director of the Institute of International Finance, a Washington-based lobby group representing creditors in the talks, said he may have something to say on the matter later today. He declined to elaborate. The talks broke in Athens earlier today so Greek officials could consult with European Union representatives, Venizelos said.

90 Percent Participation

The parties are nearing an agreement under which old bonds would be swapped for new securities with coupons averaging between 4 percent and 4.5 percent, said a person with knowledge of the discussions. Unresolved issues remain, such as whether private investors would be treated differently from official creditors in the event of a later default, said the person, who declined to be identified because the talks are confidential. The objective is to reach a deal before Jan. 23, the person said.

The two sides, which broke off negotiations on Jan. 13 before resuming them two days ago, have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors.

Humes said he’s “cautiously optimistic” the talks will lead to an accord. “If the IIF shake hands with the other side of the table, we will have a 90 percent or higher acceptance rate,” Humes estimated.

Voluntary Swap

Marathon Asset Management LP CEO Bruce Richards estimated in a Jan. 17 interview that private creditors were likely to get cash and securities with a market value of about 32 cents per euro of government bonds in the debt accord.

Marathon, which has $10 billion under management, is on the committee of 32 private creditors formed in November to negotiate with Greece, the International Monetary Fund and the EU. It’s not on the smaller steering committee directly involved in negotiations.

Questions remain how the two sides can craft a voluntary deal that will provide the debt relief the Greek government requires while attracting enough participation from bondholders. The government may scrap its earlier threat to pass a law compelling full participation from private creditors, said the person familiar with the talks.

Venizelos said before yesterday’s round of talks that for the final deal to lead to a sustainable level of debt for the country there must be a 100 percent participation rate.

Troika Talks

“Critical negotiations are taking place with representatives of the private sector on how they will participate as radically and bravely as possible, but also voluntarily,” Venizelos told lawmakers in Athens, in comments televised live. “It must be voluntary and participation must be 100 percent,” he said.

Hedge funds holding Greek bonds may resist the deal, seeking greater profit by getting paid in full, either by the Greek government or by triggering payouts from credit-default swaps. Winning support from banks seeking to limit their losses may be easier than including hedge funds and other speculators who bought securities at distressed levels.

Vega Asset Management LLC resigned from the committee of Greek creditors negotiating the debt swap last month because the Madrid-based hedge fund refused to accept a net present value loss exceeding 50 percent, according to a Dec. 7 e-mail sent to other panel members, which was obtained by Bloomberg News.

Greek officials also met today with the so-called troika mission, which is comprised of European Commission, European Central Bank and IMF representatives, on the new 130 billion- euro financing accord for the country.


“Reaching an agreement on the new loans and finishing a debt swap are interdependent,” Venizelos told lawmakers in Athens yesterday.

The creditors’ steering committee negotiating the debt swap includes representatives from banks and insurers with the largest holdings of Greek government bonds, including National Bank of Greece SA (ETE), BNP Paribas (BNP) SA, Commerzbank AG (CBK), Deutsche Bank AG (DBK), Intesa Sanpaolo SpA (ISP), ING Groep NV (INGA), Allianz SE (ALV) and Axa SA. (CS)

Financial firms on the IIF’s private-creditor investor committee, a larger group of 32 members that includes the smaller steering committee, hold more than 47 billion euros in Greek sovereign debt, according to data compiled by Bloomberg from company reports.

To contact the reporters on this story: Marcus Bensasson in Athens at Tom Stoukas in Athens at

To contact the editors responsible for this story: Stephen Foxwell at; Jerrold Colten at Craig Stirling at


JPMorgan Trims Dimon’s Stock Payout

By Dawn Kopecki and Michael J. Moore - Jan 21, 2012 7:09 AM GMT+0700

JPMorgan Chase & Co. left Chief Executive Officer Jamie Dimon’s pay package for 2011 almost unchanged at about $23 million after trimming stock and options awards, according to a person with knowledge of the decision.

JPMorgan, the largest and most profitable U.S. bank, paid Dimon $17.3 million in restricted stock and options for 2011, down from $17.4 million for 2010, including 337,032 restricted shares valued at about $12.3 million, according to regulatory filings today by the New York-based company. The package awarded 562,430 options valued by the firm at about $5 million, according to the person, who asked for anonymity because compensation matters are confidential.

Dimon, 55, led JPMorgan through the financial crisis without recording a single losing quarter and surpassed Bank of America Corp. last year as the largest U.S. lender. Net income advanced 9 percent to a record $19 billion in 2011, while the stock dropped 20 percent including dividends.

Total compensation for the year is expected to be about the same as 2010, the person said. Dimon may also receive a cash bonus for 2011 that hasn’t yet been disclosed.

The exact total of his stock payout may differ and will be disclosed when the company files its proxy statement later this year. Dimon’s restricted stock may be worth as little as $12 million based on the average price of $35.61 on Jan. 18, according to the person.

A $500,000 Raise

The board raised his annual base pay for 2011 in March to $1.5 million from $1 million. Dimon also received options proceeds on Jan. 19 of $195,869 and sold $4 million in shares on Jan. 13 as part of a regularly scheduled sale to cover taxes on restricted stock.

Dimon took the $1 million salary and gave up bonuses for 2008 -- the year when the financial crisis nearly toppled the banking system -- after receiving $49.9 million in total compensation for 2007, which included cash and restricted stock bonuses of $14.5 million each.

Dimon was paid $15.2 million for his work in 2009, according to the bank’s calculations.

To contact the reporters on this story: Dawn Kopecki in Washington at; Michael J. Moore in New York at

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


Snow Falling in Chicago, Set for N.Y.

By Brian K. Sullivan - Jan 21, 2012 3:35 AM GMT+0700

New York may receive 4 inches of snow tomorrow while Chicago may get 8 inches today from a storm that’s causing hundreds of flight cancellations.

Visibility in Chicago dropped to a quarter of a mile as snow fell at the rate of about an inch (2.5 centimeters) an hour at midday, said Jamie Enderlen, a National Weather service meteorologist in Romeoville, Illinois. Snow will start falling in New York City overnight.

“We’re seeing moderate to heavy snow and that is going to stick around until 5 p.m.,” Enderlen said by telephone. “That stretches from Rockford to Chicago.”

At least 600 flights through O’Hare International Airport were canceled, said FlightAware, which provides airline tracking data. At Midway International, Southwest Airlines scratched all 70 flights between 2 p.m. and 5 p.m. Chicago time. according to the city aviation department.

Winter weather advisories and storm warnings and watches stretch from western Iowa to central Massachusetts. A weak storm passed across the eastern U.S. earlier today, leaving a snow coating in some areas.

Pacific Northwest Ice

An ice storm that struck the Pacific Northwest yesterday led to the cancellation of at least 192 outbound flights from Seattle-Tacoma International Airport, FlightAware data showed.

Heavy snow across northern Oregon, Washington and Montana caused 24- to 36-hour delays on BNSF Railway Co. freight trains, according to a railroad service advisory.

Snow will start in New York late tonight, said Tim Morrin, a weather service meteorologist in Upton, New York.

“We’re anticipating enough snow to prompt a winter weather advisory for New York City,” Morrin said by telephone. “We are expecting a swath of snow to develop after midnight and continue through midday.”

Boston is forecast to receive 2 to 4 inches of snow tomorrow. Philadelphia may receive 1 to 3 inches by tomorrow, Washington and Baltimore may receive an inch of ice and Cleveland may get 3 to 5 inches of snow.

Morrin said New York’s temperatures will rise above freezing later this weekend, which may clear much of the snow from roads. Alternate side of the street parking rules were suspended in New York City for tomorrow to help snow removal.

To contact the reporter on this story: Brian K. Sullivan in Boston at

To contact the editor responsible for this story: Dan Stets at


EU’s Ratings Affirmed by S&P; Outlook Negative

By Vivek Shankar - Jan 21, 2012 6:49 AM GMT+0700

Jan. 20 (Bloomberg) -- German Foreign Minister Guido Westerwelle talks about the outlook for agreement on a debt swap accord between Greece and its private creditors, and necessary steps to resolve the European debt crisis. Westerwelle said the European Union remains committed to the euro common currency and will erect a firewall to stem the debt crisis. He speaks with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The European Union had its long- and short-term issuer credit ratings of AAA/A-1+ affirmed by Standard & Poor’s Ratings Services, a week after the company cut the AAA ratings of France and Austria.

The outlook is negative because of “ongoing risks” for the Eurozone, S&P said. The long-term rating was removed from CreditWatch negative, where it was placed on Dec. 7.

The European Union’s revenues contributed by AAA-rated member states dropped to 33 percent of 2011 budgeted revenues from 49 percent before the Jan. 13 downgrade. In last week’s review, Germany and Slovakia were only two of the 16 countries that were given a stable outlook.

“Nevertheless, in our opinion, the supranational entity known as the EU benefits from multiple layers of debt-service protection sufficient to offset the current deterioration we see in member states’ creditworthiness,” Frank Gill, an analyst with S&P in London, said in the statement.

The negative outlook corresponds to the negative outlooks on 16 of the 27 member states, according to the statement.

“We could lower the ratings on the EU if the number of AAA rated member states decreases, or if the EU’s headroom decreases compared with its annual debt service, or if member states default on payment obligations to the EU,” S&P said.

The EU and the European Atomic Energy Community borrow on the capital markets under a joint 80 billion ($103.4 billion) euro medium-term note program to give loans or credit lines to member states, according to S&P.

To contact the reporter on this story: Vivek Shankar in San Francisco at

To contact the editor responsible for this story: Chris Wellisz at