Business and Finance

Honda Motor Co posted a 63 percent drop in quarterly operating profit and lowered its annual profit forecasts for a fourth time this year as a stubborn slide in global car sales forced it to make further production cuts.

Japan’s second-biggest automaker now expects an operating profit for the year to end-March of 140 billion yen ($1.6 billion), down from a record 953 billion yen last year and compared with its previous forecast of 180 billion yen.

A median forecast from 17 brokerages surveyed by Reuters Estimates predicted full-year operating profit of 135 billion yen and net profit of 167 billion yen.

The spreading global recession has dealt a severe blow to the auto industry as consumers, fearing for their jobs, put off buying big-ticket items. Tightening credit has also made it difficult for potential buyers to get financing.

While a shrinking car market has forced automakers everywhere to scale down production, Honda faces an especially tough quarter because it waited longer than Toyota Motor Corp and Nissan Motor Co to make the move.

Honda this week announced further production cuts of 50,000 units for this business year, on top of the 370,000 that had been planned in North America, Europe and Japan.

Struggling to work down bloated inventory, Honda is scheduled to close its UK factory for four months starting in February, boding ill for the new business year emergency payday loans.

Honda posted an October-December operating profit of 102.45 billion yen and a net profit of 20.24 billion yen. A year ago, it made an operating profit of 276.24 billion yen and net profit of 200 billion yen.

Third-quarter revenue fell 17 percent to 2.533 trillion yen.

Still, Honda is among the few Japanese automakers expected to escape an annual loss.

Toyota, until last year the most profitable automaker in the world, has projected its first operating loss for the year to March as capacity utilization at its global factories falls below the break-even point.

Honda has never posted a loss in its 60-year history.

Toyota, Mazda Motor Corp and Suzuki Motor Corp report their earnings next week, with Nissan Motor Co results due on February 9.

Shares of Honda rose 6.3 percent in October-December, beating a 3.6 percent drop in Tokyo’s transport sub-index .ITEQP.T.

Ahead of the results, Honda shares closed down 9.2 percent at 2,070 yen.

(Editing by Ian Geoghegan)

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For Europeans, last week’s resumption of Russian natural gas shipments ended a two-week energy dispute. For Ukraine, it may have ended any hope of weathering the global financial crisis.

The accord with Russia will increase Ukraine’s spending on gas by almost 7 percent, to $9.16 billion, at a time when soaring bond yields are raising the specter of default. Already, Ukraine is living on the first installment of a $16.4 billion bailout from the International Monetary Fund. Further payouts will depend on whether the country balances its 2009 budget, cancels a tax on foreign exchange and strengthens banking laws.

Ukraine hasn’t been so fragile since the early 1990s, following the breakup of the Soviet Union. The economy may shrink as much as 10 percent this year, which would be the deepest recession in Europe except for Iceland’s. President Viktor Yushchenko’s support is close to zero and clashes with Prime Minister Yulia Timoshenko may bring down the government.

“The country is staring into the abyss, both politically and economically,” said Neil Shearing, an analyst at London- based Capital Economics Ltd. “I can’t think of another country that will be hit harder this year” in eastern Europe.

The 2004 Orange Revolution, which brought Yushchenko and Timoshenko to power when both favored joining the European Union and the North Atlantic Treaty Organization, seems far away. A promise of EU membership hasn’t been offered, and NATO ruled out near-term entry for Ukraine and Georgia last December.

‘Highly Criminalized’

The outcome of the energy controversy has strengthened Russian Prime Minister Vladimir Putin, 56, who said on Jan. 8 that Ukraine’s leadership was “highly criminalized.” Over time, Ukraine’s income from transit fees for natural gas may be jeopardized as Europe seeks or builds more stable supply routes.

The dispute with Russia that left Ukraine and other eastern European countries without gas is only the latest in a series of events that brought the country to the brink of collapse.

Global steel prices have fallen 50 percent since a record in July, hurting the country’s largest export and cutting sales for VAT ArcelorMittal Kryvyi Rih and Metinvest BV. The higher gas costs will deepen this year’s expected contraction. Gross domestic product will shrink as much as 10 percent, according to Shearing, and 9 percent based on HSBC Holdings Ltd. forecasts.

Yields on Ukraine’s $105 billion of government and company bonds, now at 25.67 percent, are the highest of any country with dollar-denominated debt except Ecuador, which defaulted in December. The Ukrainian currency, the hryvnia, has lost 38 percent in the past year against the dollar and the benchmark stock index has plunged 75 percent.

Russian Gas Effect

Like fellow Russian gas customers Bulgaria and Slovakia, Ukraine failed to diversify its power sources or budget for a gas-price increase that Russia has been trying to impose since Yushchenko took office at the beginning of 2005 payday loan companies. The agreement between Russian gas exporter OAO Gazprom and NAK Naftogaz Ukrainy will make Ukraine pay market prices starting next year.

The bickering between Yushchenko, 54, and Timoshenko, 48, has gone on since they began sharing power, crippling the government’s ability to pass legislation to strengthen the banking and economic systems and sell unprofitable state assets.

“You can start by putting the Ukrainian government on the stand,” said Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy. “One can blame other factors, but the simple fact is you can avoid the situation you have seen in Ukraine with better policies.”

Wrong Direction

A Dec. 17-28 survey conducted by the Kiev-based Democratic Initiatives Foundation showed that 84 percent of respondents believed the country was moving in the wrong direction even before the gas crisis started. That compares with 48.6 percent in 2007. The poll of 2,012 people had a margin of error of 2.2 percent.

The poll also found that if presidential elections scheduled for January 2010 were held today, 22.3 percent would support former Prime Minister Viktor Yanukovych, the pro-Russian opposition leader. Another 13.9 percent would pick Timoshenko and 2.4 percent would choose Yushchenko. Almost half said no politician could deal with the financial and economic crises.

“The government was not ready to meet such obvious worldwide financial threats and currently is not able to protect Ukrainians,” said Oleksandr Slobodyanyk, 27, who lost his job more than two months ago as a broker at Concorde Capital in Kiev. “I see no other option but to look for a job abroad.”

No Early Elections

The government broke down in October after Timoshenko joined the opposition in stripping the president of some powers. Plans for early elections on Dec. 14 were later dropped after the two leaders re-formed the Cabinet and promised to work together.

Now, Yushchenko blames Timoshenko — who went to Moscow and negotiated with Putin — for giving in too far to Russian demands. She is trying to oust central bank Governor Volodymyr Stelmakh, an ally of Yushchenko’s.

Former Soviet republics Latvia and Lithuania to the north experienced rioting this month because of anger over government failure to limit the effect of the financial meltdown.

“Ukrainians, generally speaking, have had enough of the government,” said Tanya Costello, the London director for New York-based Eurasia Group. “I don’t think there is a political leader in whom the public has its trust at the moment. So it’s more likely you will see pockets of social unrest.”

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Starbucks Corp Chief Executive Howard Schultz and other top managers will not get base salary raises in fiscal 2009, the coffee chain said in a regulatory filing Thursday.

The move comes as executive pay, which had soared during the housing boom, is being ratcheted back amid the worst financial crisis since the Great Depression.

The company’s compensation committee said it decided that most of Schultz’s pay should be directly tied to increasing the company’s share price, which currently trades at less than $9 compared with a high of $20.68 about one year ago.

Schultz will not participate in the company’s executive management bonus plan in fiscal 2009. The company said top executives did not receive a bonus payout under its 2008 plans either online payday loans.

Starbucks said it expects to face a "very challenging economic environment throughout fiscal 2009" and said it is difficult to predict the effects that the global financial and economic crises will have on its performance.

"As a result, the Compensation Committee determined that none of the named executive officers will receive a base salary increase for fiscal 2009," the company said in its proxy filing.  

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Russia and Ukraine signed a 10-year gas supply deal on Monday to clear the way for the resumption of supplies to a freezing Europe, cut off for nearly two weeks by a dispute between the ex-Soviet states.

Ukraine will buy Russian gas in 2009 at a 20% discount compared with European market prices, Russian Prime Minister Vladimir Putin said at the signing ceremony.

The deal was signed by the chief executive of Russian gas export monopoly Gazprom, Alexei Miller, and the head of Ukrainian state energy firm Naftogaz, Oleh Dubyna. The exact price was not disclosed.

"Gazprom received an order to start deliveries through all routes indicated by our Ukrainian partners and in full volumes," Putin told a joint news conference with his Ukrainian counterpart, Yulia Tymoshenko.

Tymoshenko, who flew back to Moscow to attend the ceremony after clinching a weekend deal with Putin, said gas transit to Europe would resume as soon as Russian gas reached Ukraine.

Gazprom had previously said gas supplies would resume immediately after the signing. It will take about 36 hours for the first Russian gas to cross Ukraine and enter Europe.

The wrangle between Moscow and Kiev enraged the European Union and brought into question the credibility of Russia and Ukraine as gas suppliers to Europe instant payday advance.

Russia cut supplies to Ukraine on Jan. 1 because Kiev would not pay higher prices for its gas. Six days later, export flows to Europe through Ukraine ceased amid Russian accusations that Kiev was "stealing" gas intended for export.

Ukraine’s pro-Western leaders denied that, and countered that Moscow was trying to blackmail European customers by halting gas supplies.

Ukraine, heading into its worst recession in a decade, said it could not afford to pay higher prices. Analysts forecast its economy will shrink by up to 5% this year.

Ukraine and Russia have also agreed not to use intermediaries in their gas trade, Putin told reporters on Monday. Previous deals have been complicated by the use of Swiss-based intermediary Rosukrenergo, an opaque 50-50 joint venture between Gazprom and two Ukrainian businessmen. 

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Looking for a job? Don that suit — and be hirsute.

One expert says the balding are at a distinct disadvantage, especially in today’s tight job market.

"If you’re looking for a job right now, if you match up a person with hair to a non-hairy person, the competitive marketplace tends to favor the people with hair," said Dr. William Rassman, a hair restoration surgeon and author of "Hair Loss & Replacement for Dummies."

Increasing the hairs on one’s head, he said, can boost self-confidence and even a career.
Rassman, who has been transplanting hair for 18 years, said his patients, especially those in the performing arts, have benefited from the surgeries, which are usually done in several sessions over the course of about a year.

And a full mane can help propel one even to the highest office online payday loans.

"Take a look at all the presidents of the U.S. How many of them were bald? Eisenhower was the last one. Hair like Clinton’s helps a lot, hair like Obama’s got helps a lot," he said.

Hair restoration can cost anywhere from $3,000 to $10,000, depending on the amount of hair that needs to be transplanted. Drugs to slow down hair loss, such as Propecia, made by Merck & Co., meanwhile, would run about $900 a year, he said, and are not covered by insurance.

But a hairy head’s value is incalculable, Rassman said.

"If you land the executive job you want because you look good, I don’t know how you put a value on that."

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A next-generation coal-fueled power plant in central Illinois got a boost Monday when impeached Illinois Gov. Rod Blagojevich signed a bill that will enable work on the project to advance.

Developers of the project near Taylorville, Ill., have been in a holding pattern for more than a year, unable to move forward without long-term commitments to sell the plant’s output. Illinois utilities can’t enter such contracts under a 1997 law that deregulated the state’s electric market.

Legislation signed Monday requires electric utilities including Ameren to enter into 30-year contracts to buy electricity as long as the impact on rates isn’t too great.

"We now have the momentum that we and the state need to get this vital project built and operational," said Bart Ford, vice president of Omaha, Neb.-based Tenaska, the managing partner of the group building the project.

The 500-megawatt plant would be big enough to power about 500,000 homes. It is expected to be completed by 2014 and estimated to cost $3.5 billion.

The project promises to create mining and construction jobs as well as help limit emissions of carbon dioxide, the greenhouse gas most closely linked with global warming. It is been backed by a broad coalition of interests, including environmental groups, organized labor and Illinois Coal Association.

Instead of burning coal, the plant would convert coal to methane, which will be use to generate electricity. Developers say the plant will initially capture 55 to 60 percent of carbon dioxide emissions, which would be injected into underground rock formations or piped to the Gulf Coast for oil recovery.

John Thompson, director of the Coal Transition Project for the Boston-based Clean Air Task force, said the Illinois law requires emissions from coal-fueled plants to be as low as those from plants that run on natural gas payday loans online.

"This very tough standard should become the national model," said Thompson, who works in Carbondale, Ill.

The state will provide up to $18 million for planning and updated cost studies required before construction begins. The Legislature could still block the project if cost estimates rise too much.

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"We have the burden of going back to the General Assembly and showing them that the cost is reasonable," Ford said.

The plant will be subject to regulation by the Federal Energy Regulatory Commission as well as the Illinois Commerce Commission.

The bill caps the amount of any potential rate increase at 2 percent a year, and no increase can be passed through to customers until the plant begins operation. If the impact on rates is greater, utilities can reduce the amount of electricity they buy from Taylorville.

jtomich@post-dispatch.com | 314-340-8320

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The Federal Reserve is nearing a decision on the next president of the New York Fed, with Kevin Warsh’s Wall Street background and role in the government’s response to the financial crisis making him a leading contender.

Korn/Ferry International, the executive-search firm hired by the New York Fed, is seeking someone with an “in-depth understanding of complex financial markets” and an ability to “hit the ground running,” according to an internal memo obtained by Bloomberg News.

That description fits Warsh, 38, a Fed governor who has been at the forefront of devising officials’ strategy to combat the 17-month crisis. He also has ties to the top two decision-makers for the job, as a lieutenant of Fed Chairman Ben S. Bernanke and a former aide to Stephen Friedman, the ex-Goldman Sachs Group Inc. chairman who heads the New York district bank’s board.

“That gives him a significant leg up in terms of qualifications and experience,” said Charles Lieberman, a former New York Fed economist who is now chief investment officer at Advisors Capital Management in Paramus, New Jersey, referring to Warsh’s financial expertise.

Crisis-management experience also makes William Dudley, the New York Fed’s director for markets, a contender for the job. Dudley, 55, has helped develop and supervise the central bank’s emergency lending programs. He previously worked as an economist at Goldman Sachs, and is favored by some staffers at the bank.

Search Panel

Friedman, Warsh’s boss as director of the National Economic Council from 2002 to 2004, heads the panel to find a successor to outgoing New York Fed chief Timothy Geithner.

Michael Franzino, a global managing director at Korn/Ferry in New York, said the process is “moving along” at the direction of the search committee. He declined to comment on candidates or other details.

Geithner, 47, is President-elect Barack Obama’s choice to become Treasury secretary in the administration that takes office Jan. 20.

The New York Fed is expected to submit its preferred candidate, or top picks, to the Fed board in Washington at the earliest in the first half of next week, according to a person familiar with the matter.

At stake: the administration of more than half the U.S. central bank’s $2.27 trillion of assets and leadership of the Fed’s main link with Wall Street. With the economy mired in a deep recession and financial markets still shaky, the Fed needs someone at the New York Fed’s helm to play a critical role in turning things around.

Crisis Management

The Korn/Ferry memo details “crisis management execution” as a key attribute — “not unlike deal-making skills in the private sector.”

Warsh worked in the mergers and acquisitions department of Morgan Stanley from 1995 to 2002 before moving to the White House.

He was still little known to most Fed watchers when he joined the Board of Governors three years ago. Since then, his political talents background and Wall Street savvy secured his position as a top Bernanke adviser during the crisis, along with Vice Chairman Donald Kohn and Geithner.

Warsh was an architect of the terms the Treasury dictated to nine of the biggest U fast cash.S. banks in October in return for a $125 billion injection of government funds. He played a central role in negotiating the sale of the ailing Wachovia Corp., mediating a takeover fight that erupted between Citigroup Inc. and Wells Fargo & Co.

Age Factor

One of Warsh’s liabilities is that “he’s young and relatively untested,” said David M. Jones, a former Fed economist who has written books about the central bank. At the same time, “he has acquitted himself well in dealing with the credit crisis,” he said.

Geithner was also perceived as young when he was picked for the job at the age of 42 in 2003. His experience helping devise the Clinton administration’s response to the Asian financial crisis in the 1990s as a Treasury official under Secretary Robert Rubin helped seal his nomination. Rubin served as an informal adviser to the New York Fed’s search committee at the time.

If picked, Warsh would come to the New York Fed post with even less formal economics training than his predecessor. Geithner has a master’s in international economics from Johns Hopkins University and was a director of the International Monetary Fund’s Policy Review Department from 2001 to 2003. Warsh holds a law degree from Harvard Law School.

Fed Chiefs

Geithner’s predecessor, William McDonough, had a master’s in economics from Georgetown University and worked for First Chicago Corp. for 22 years. His predecessor, E. Gerald Corrigan, was president of the Minneapolis Fed for 4 1/2 years before taking the New York Fed job. Corrigan had a doctorate in economics from Fordham University in New York.

Warsh’s former White House colleagues say he has the right temperament for the job. Ex-policy adviser Philippa Malmgren said he’s “very smooth at balancing competing interests.”

John Cogan, a senior fellow at the Hoover Institution at Stanford University in California, who recommended Warsh for the government posts, said that “although he’s young, he has extraordinary practical experience.”

“From his Morgan Stanley days he understands private finance from the ground up,” said Cogan, former deputy budget director for President George H.W. Bush. “From his White House experience, he has a detailed knowledge of the federal government’s financial-market regulations and the government’s role in housing finance. And, at the Federal Reserve, he knows the ins and outs of monetary policy.”

Washington Term

Warsh’s term as Fed governor expires Jan. 31, 2018, leaving him the option of remaining in Washington for a prolonged period should he not move to the New York Fed.

A shift to New York would leave the Fed board in Washington with just four sitting governors. Obama has announced he will nominate Daniel Tarullo, a former Clinton administration economics aide, succeeding Randall Kroszner. He would then need to choose three more candidates to restore a full complement of seven governors.

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Russian gas flows to four European Union countries were below normal levels on Saturday after Moscow cut off supplies to Ukraine in a pricing dispute, and there were no talks in sight to resolve the dispute.

With temperatures below zero overnight in Europe, Bulgaria’s Bulgargaz operator joined energy firms in Poland, Romania and Hungary in saying they had noted falls in supply, though flows to Europe’s biggest economy, Germany, were not affected.

The European Union, which gets a fifth of its gas from pipelines that cross Ukraine, said it would call a crisis meeting of envoys in Brussels on Monday and demanded that transit and supply contracts be honored.

Three years after a similar dispute briefly disrupted supplies, European fears of gas flows dropping off in the dead of winter were once again becoming a reality - and Russia’s reputation as a reliable gas supplier was under new scrutiny.

Russia halted all supplies to Ukraine on Jan. 1 in what it called a purely commercial dispute, but in the background is a fierce disagreement over a drive by Kiev’s pro-Western leaders to join NATO.

Europe has enough gas stockpiled to manage without Russian supplies for several days. It could face difficulties should problems last for weeks, especially if cold weather drives up demand, analysts said.

Signaling that a way out of the gas row was still some way off, Russia’s gas export monopoly Gazprom said Kiev was not ready to resume negotiations.

"They are not negotiating because there is nobody to negotiate. It looks like they are not thinking about their own country, just playing political games," Gazprom deputy CEO Alexander Medvedev said after talks with officials in the Czech Republic, holder of the EU’s rotating presidency.

In a separate interview with Reuters, Medvedev said volumes going to Poland, Hungary and Romania had fallen because Ukraine was blocking exports by gas trade intermediary RosUkrEnergo, in which Gazprom owns a 50% stake.

"That is why Poland, Hungary and Romania are suffering," he said by telephone from Prague faxless cash advances.

"Europe must be interested in helping to solve the dispute as quickly as possible … What we need from the EU is their help to persuade Ukraine to follow the rules of behavior at the negotiating table," he said.

Ukrainian state energy firm Naftogaz blamed Gazprom for the shortfalls in European supplies, saying Russia had reduced the volumes it was pumping to Europe.

"The company thinks that Gazprom’s position breaches international practices of holding negotiations … and amounts to energy blackmail," it said in a statement.

In Sofia, Bulgargaz CEO Dimitar Gogov said supply levels had not fallen below a critical level but further reductions could force the company to introduce restrictions for customers.

"The pipeline pressure has dropped and we are getting smaller deliveries as of Saturday morning," Gotov told Reuters.

Russia’s 2006 dispute with Ukraine prompted calls for the EU to reduce its reliance on Russian gas but Gazprom forecasts that the bloc will rely on Russia for as much as one-third of its gas by 2015, up from about a quarter now.

Alexei Miller, CEO of Gazprom, said on Thursday he wanted Ukraine to pay $418 per 1,000 cubic metres (tcm) of gas, compared with the $179.50 Kiev paid in 2008.

European customers pay about $500, though that price is set to drop in line with the falling price of crude.

Ukraine, facing a deep recession, says it can ill afford to pay higher prices for its gas.

Ukrainians on the street in Kiev seemed to blame their own politicians for failing to reach a deal with Russia.

"This is just bandits sitting in the Kremlin arguing, deciding, talking to bandits sitting in Grushevska street," said Oleg Karlichyk, a plumber in his mid-30s on his way to work, referring to the seats of power in Moscow and Kiev. 

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