Business and Finance

Put the brakes on the apologies. Think about your brands. And give us a reason to buy your cars.

That’s what marketing gurus say General Motors must do as it begins an overhaul of advertising worth more than $2 billion a year now that it’s out of bankruptcy protection.

Since emerging from bankruptcy court last month, GM is looking to revive sales as it focuses on its four remaining brands: Buick, Cadillac, Chevrolet and GMC. Experts say it has to get back to basics and tell consumers why they should choose its cars over those made by rivals like Ford, Toyota and Honda.

The company can do that, they say, by showing how its vehicles perform and by staking out stronger identities for the brands. GM knows it has work to do, and it assigned the job to legendary auto executive Bob Lutz, not known for his marketing experience but a longtime product development chief known for his blunt style.

Lutz, who took the job last month, promised "quick" and "drastic" changes to GM’s tone. But the company hasn’t announced its strategy yet, other than Lutz saying he wants to position Buick as a competitor to Lexus and Cadillac to BMW.

The company says it is reviewing accounts with its many ad agencies. Lutz told The Associated Press in an e-mail that the marketing revamp is well under way.

"The new stuff is in the works, and it’s great," he wrote, but he declined to say when it would start airing.

Chances are, the company may want to do it soon so it can capitalize on "cash for clunkers," which made last month the best for auto sales in nearly a year. Sales improved from previous months for GM, but they were still down 19 percent from the same time last year, while rival Ford posted a 2 online instant cash advance.4 percent increase.

So what should GM do? First, stop apologizing. The company must distance its corporate identity from its brands, said Jim Wangers, the marketing guru behind the Pontiac GTO, GM’s first muscle car in the 1960s.

"I would like to see them forget about apologizing, …and start talking to me about that fine line of Chevys, Caddies and Buicks," he said.

But it’s not a matter of telling the public through ads, said marketing strategist Al Ries. GM must define niches for its brands and let consumers know, for example, how a Chevy is different from a Toyota, Ries said.

Consumers don’t really know what makes a car "better" but they do respond to "different," he said, citing the success of brands with unique niches like Porsche, Volkswagen and Mini Cooper.

"You won’t solve the problem by making better cars," Ries said. "You’ll solve the problem by making different cars that stand for something."

The company’s lineup is among the best in its history, said Peter De Lorenzo, publisher of autoextremist.com, who used to work in automotive advertising and marketing. But consumers think only two words when they hear GM, he said: "bad" and "bankruptcy."

"The negativity of what happened with GM will eventually recede into the background if the products are so good that they can’t be ignored," De Lorenzo said.

"But that will take time."

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The value of American farm real estate declined for the first time in more than two decades, delivering another dose of bad news to some rural economies already struggling with falling commodity prices and job losses.

The U.S. Department of Agriculture reported values of farm real estate — which includes the value of all land and buildings on farms — had dropped 3.2 percent over the past year, with plunges in some states as high as 22 percent. The declines were released this week in an annual survey conducted by the agency.

"It’s a big deal. The last time values went down was in the 1987 survey," said Ron Plain, professor of agricultural economics at the University of Missouri-Columbia. "It doesn’t happen very often. It reflects problems out there on the farm."

In Missouri, values dropped 4.3 percent, to about $2,200 an acre. In Illinois, the decline was a scant 0.4 percent, to $4,530.

Agricultural economists, including Plain, were quick to point out, though, that the dip follows years of record gains. The decline, while noteworthy, does not necessarily mean land values will tumble as they did in the farm crisis of the 1980s, said Pat Westhoff, a director at the Food and Agricultural Policy Research Institute, based at the University of Missouri.

"We have seen many years in a row of rapid increases," Westhoff said. Still, he noted, "when you see a decline you start to worry."

In the early to mid-’80s, values fell nearly 30 percent nationally over five years, bottoming out in 1987 at about $600 an acre. At the time, high interest rates, government lending practices and decreased demand for commodities, among other factors, forced farmers into foreclosure or into taking distress-sale prices for their land.

"We lived through that in the 1980s, but it’s different now," said Roger Allison, a grain and livestock farmer in north-central Missouri and director of the Missouri Rural Crisis Center.

Indeed, some analysts believe farmers will be more resilient in today’s troubled economy because debt ratios are much lower and because some, particularly grain farmers, have seen near-record profits in recent years.

"We’re coming off a couple of good years," said Gary Schnitkey, a professor of farm management at the University of Illinois at Urbana-Champaign. "Their financial situations are pretty strong."

The areas that saw the greatest declines over the past year were in cattle ranching, hog farming, dairy and ethanol-oriented grain growing areas where demand for those products has slowed, according to the USDA survey. The mountain states where cattle ranching predominates declined nearly 11 percent. Cornbelt states, covering Illinois and Missouri, dipped 2.2 percent. Plains states, including Kansas, saw no change over the last year low rate payday loans.

"In some areas land values are off more than others, and I think it’s primarily areas more impacted by ethanol plants or livestock," said Jerry Warner, president of the Denver-based American Society of Farm Managers and Rural Appraisers. "… Where cash grain farming is the predominant economy, values are very stable."

It’s too soon to say whether the declines are having — or will have — any real impact on farmers, mostly because few farmers are selling their land.

"People seem to be more guarded about buying and selling real estate so there just hasn’t been enough activity to test the marketplace," said Daryl Oldvader, CEO of FCS Financial, a Jefferson City-based financial services company specializing in rural and farm areas.

Oldvader said he hadn’t seen any lending difficulty yet and wasn’t aware of farmers here having trouble getting credit because of the depreciation in land values. "This is relatively fresh," he said. "Whether it will find itself becoming more complex, we don’t know yet."

But much depends on commodity prices and the recession in general, Warner said. "If we have stable commodity prices, I don’t think land values will go down at all."

In some farming areas, though, the picture is already darkening. Less demand for meat and ethanol has meant some areas are already shedding jobs.

A study released this spring by the University of Missouri’s Rural Policy Research Institute revealed that rural areas, which had been shielded from the recession during last year’s spell of high commodity prices, had begun to lose jobs faster than urban areas, particularly in manufacturing. As of February, the study showed, rural job losses in Missouri hit a rate of 4 percent, while the national average for metro areas was 2.8.

"You really have to go back to the ‘73 or ‘74 recession to find a time when rural manufacturing had this type of downturn," said Mark Drabenstott, the report’s author. "This is important in a state like Missouri, where you have a lot of small- and medium-size farmers getting a significant portion of their income from working in a factory."

If job losses continue and commodity prices slide, land values could decline with a deepening recession.

"If the recession drags on, we’ll be down next year," Plain said, referring to land values. "It’s a warning sign of trouble ahead, more than of problems right now."

But, he warned, "If this continues, farms are going to go broke."

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WASHINGTON – Employers sharply scaled back layoffs in July, and the unemployment rate dipped for the first time in 15 months, sending a strong signal that the worst recession since the Second World War is finally ending.

A net total of 247,000 jobs were lost in the U.S. last month, the fewest in a year. That compares with 443,000 jobs that disappeared in June. And the unemployment rate for July declined to 9.4 per cent from 9.5 per cent in June.

In Canada, about 45,000 jobs were lost in July and the unemployment rate remained at 8.6 per cent.

The snapshot the Labor Department released today offered other encouraging news, too: Workers' hours nudged up after sinking to a record low in June, and paychecks grew after having stagnated or fallen.

"There's clearly been a turn for the better," said economist Ken Mayland, president of ClearView Economics. "The worst is behind us in terms of layoffs."

Still, the labour market remains on shaky ground. The 247,000 jobs lost in July represent a vast improvement on much higher job losses earlier in the year. But they're a far cry from the positive job growth needed to sustain an economic recovery.

When the economy is healthy, employers need to add a net total of around 125,000 jobs a month just to keep the unemployment rate stable. And to push the jobless rate down to a more normal 5 per cent range, it would take stronger job growth – of at least 200,000 jobs a month. Economists say it might take until 2013 to drive down the unemployment rate to 5 per cent.

Yet the new figures were better than many analysts were expecting, and they signalled improvements to an economy that has been clobbered by the recession. Analysts had been forecasting that job losses would amount to around 320,000 and that the unemployment rate would tick up to 9.6 per cent.

Stocks surged after the report was released. In early-afternoon trading, the Dow Jones industrial average jumped 175 points, or 1.9 per cent, and other stock averages also gained sharply.

President Barack Obama welcomed the news, saying the numbers indicate "the worst may be behind us" in a recession well into its second year.

"Today, we're pointed in the right direction," he said in remarks in the White House Rose Garden. Even so, Obama added: "We have a lot further to go. As far as I'm concerned, we will not have a true recovery until we stop losing jobs."

The dip in the unemployment rate was the first since April 2008. One of the reasons the rate declined, though, was that hundreds of thousands of people left the labour force. The labour force includes only those who are either employed or are looking for work.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included the unemployment rate would have been 16.3 per cent in July. That's down from 16.5 per cent in June, which was the highest on records dating to 1994. All told, 14.5 million were out of work in July.

After fresh revisions, job losses in May and June turned out to be less than previously reported. Employers cut 303,000 positions in May, compared with 322,000 previously logged. And they trimmed 443,000 in June, compared with an earlier estimate of 467,000 free 3-in-1 credit report.

The job cuts made in July were the fewest since August 2008.

The slowdown in layoffs in part reflected fewer jobs cuts in manufacturing, construction, professional and business services and financial activities – areas that have been hard hit by the collapse of the housing market and the financial crisis. There also were fewer layoffs in the temporary-help industry, which analysts watch for clues about future hiring. Retailers, though, cut more jobs in July.

Those losses were blunted by job gains in government, education and health services, and in leisure and hospitality.

The deepest job cuts of the recession came in January, when 741,000 job disappeared, the most in any month since 1949. Since the recession began in December 2007, the economy has lost a net total of 6.7 million jobs.

Slower job losses are occurring because companies aren't cutting investment and spending as drastically as they had been during the depths of the recession, which came in the final quarter of last year and carried over into the first quarter of this year.

With companies feeling a bit better about the economy's prospects and their own, they boosted workers' hours in July. The average work week rose to 33.1 hours, after having fallen to 33 hours in June, the lowest on records dating to 1964.

And employers bumped up wages. Average hourly earnings rose to $18.56 in July, up from $18.53 in June. Hourly earnings were stagnant in June. Average weekly earnings, which fell in June, rose to $614.34. Those gains raised hopes that consumers – whose spending accounts for the single-largest slice of economic activity – will feel more confident and more inclined to spend in the months ahead, thus helping the recovery.

Other recent barometers have shown some improvements in manufacturing, housing and construction activity.

The government reported last week that the economy shrank at a pace of just 1 per cent from April-to-June, another sign the recession is winding down. Many analysts predict the economy could start growing again in the current July-to-September quarter.

And the Fed recently observed that the economy is finally showing signs of stabilizing in some regions of the country – especially in parts of the Northeast and Midwest – bolstering hopes of a broader-based recovery this year.

Even with the improvements, it will take time for the jobs market to fully heal. The Federal Reserve has said the jobless rate is likely to top 10 per cent in 2009.

Some Fed officials think the rate could rise as high as 10.6 per cent in 2010. The post-World War II high was 10.8 per cent at the end of 1982, when the country suffered through a severe recession.

An elevated unemployment rate could become a political liability for Obama when congressional elections are held next year. The last time the unemployment rate topped 10 per cent, the party of the president – then Ronald Reagan's GOP – lost 26 House seats in the midterm elections in 1982.

Obama has urged Americans to be patient and give time for his $787 billion stimulus package of tax cuts and increased government spending to take hold. Most of the money will flow in 2010.

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Citing weak demand for coal used to fuel power plants, Patriot Coal Corp. will shut a mine in southern West Virginia and eliminate 314 jobs.

Employees were notified that they’ll lose their jobs as of Oct. 5, Creve Coeur-based Patriot said in a statement.

The mine being closed produces about 2.5 million tons of coal a year. It is part of a complex that also includes an underground mine.

The recession and cooler weather across parts of the country have led to a decline in electricity demand. In response, coal producers have shut or idled mines and slashed budgets free business cards.

“Our strategy is to concentrate production at lower-cost mining complexes,” Patriot CEO Richard M. Whiting said in a statement. “By ceasing operations at this higher-cost surface mine, Patriot will keep valuable permitted reserves in the ground until the market yields more favorable pricing and margins.”

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Canadian travel agencies are closely watching an emerging battle south of the border that highlights a wrinkle unique to their industry in the wider fight over rising credit card merchant fees.

United Airlines is trying to cut its credit card processing costs by pushing them onto travel agencies that book the flights.

Travel agents say they can’t afford to absorb the processing fees, which start at 2 per cent of the cost of the ticket, so they will have to pass them on to consumers. More worrisome is the risk that consumers may not get reimbursed when an airline fails, they say.

"If you pay the travel agent and the airline goes out of business, you’d have to sue me and I’d have to sue the airline and that whole level of protection will be gone," said Donavon Gaudette, spokesperson for the Association of Canadian Travel Agencies.

MasterCard Canada says it stands by its policy that when a consumer buys a product or service with a MasterCard, the consumer will be reimbursed for a service not delivered, whether the flight was booked online, with the airline, or with a travel agent. Visa Canada said it couldn’t comment on the issue.

Travel agents fear more carriers will follow United Airlines’ action. So far, United has threatened to cut off only a handful of its U.S. agents, but Canadian agents say they could be next.

"We don’t know if it’s coming here. But we’re supporting our sister organization in the states with their letter-writing campaign and we’ve been lobbying United Airlines," Gaudette said.

The dispute highlights a peculiarity in the travel industry. When you book a flight through a travel agency and pay with a credit card, the card is swiped by the agent but processed by the airline. The cost of processing the card and responsibility for reimbursing you for a flight not delivered rests with the airline instant cash advance.

In most other transactions, the store swipes the card and bears the cost and responsibility if an item isn’t delivered.

There is another wrinkle.

For products like travel, which are paid for well in advance of delivery, the cost of accepting credit card payments contains another cost. Credit card companies require airlines to maintain huge cash reserves to repay cardholders in the event the airline fails to deliver the service.

During the recession, some credit card processors demanded travel companies hold even higher reserves, saying the risk of failure had increased.

In Canada, reserves have been cited as factors in the failure of Conquest Vacations and financial woes at Air Canada.

Some Canadian industry members say United Airlines may be posturing to draw attention to the issue of rising costs associated with accepting credit cards as payment.

"We know you can’t just change the system in a day," said Philippe Sureau, a founder and president of Quebec-based Transat, which operates Air Transat and a string of travel agencies. "It’s nice to say, but it won’t be easy for United to enforce it."

The move comes amid growing complaints from all kinds of businesses, especially retailers, about the rising cost of handling credit card payments.

In Canada, such fees have grown to an average of 2 per cent of the cost of all credit card purchases, or about $4.5 billion a year, according to the Retail Council of Canada.

Merchants and small business operators have asked federal Finance Minister Jim Flaherty to intervene. Flaherty says he is awaiting the report of a joint Commons committee studying the issue.

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Dave Difani had no desire to use his engineering degree when he graduated from college. Instead, in 1986, he chose to gamble on revamping a rowdy biker bar in the Tower Grove South neighborhood in St. Louis. The bar was old, small and disliked by neighbors because of fights that would spill out of it at night.

But Difani used a family inheritance to buy the building and committed to turning his new bar, Black Thorn Pub & Pizza, into a respectable establishment. His entire life became about the bar. He worked evenings and late nights before retiring to the basement for rest. He learned to fix the old building’s plumbing and electricity to save money. It wasn’t glamorous, but it was his.

It took years, but Difani said he was able to change his clientele by making prices high enough to drive out the bikers but cheap enough to attract college students from St. Louis University. He later developed a softball league, 10 years after starting the business, began selling one of St. Louis’ most well-known pizza pies. Black Thorn’s deep-dish pizza is known as much for flavor as for the time it takes to cook (often more than an hour).

In the past five years, Difani has allowed his staff to run most of the business’ daily operations. He said he often stops in to help maintain the 100-year-old building, but Difani is usually gone in time to pick up his kids from the school bus.
How hard was it?

The early years were fun. There were three apartments upstairs which helped make the mortgage. I had a mattress downstairs right under the bar, right next to the boiler so I’d be warm in the winter time. … I spent two years downstairs. I rigged a shower over the drain in the the concrete floor because every cent that I had was going into the business.

How did you turn the corner to a new clientele and image?

In 1988, I sponsored a softball league, which played out of Tower Grove Park, and that was probably what saved us. It turned my worst season into my best season. The summer season had been bad in 1987, because all the students and my friends were gone. Business had dropped off the table and I didn’t know quite what to do about it cash loans in 1 hour. … By the time I quit the league (after 20 years) and turned it over to a friend, we had 52 or 54 teams playing at four or five different parks.

Why did you choose to make thicker pizzas instead of a traditional St. Louis-style thin crust?

The St. Louis style pizza is a wonderful invention. But when you’re starting a business and you have no money, and you’ve got $20 in your wallet and you want dinner, if you spend that $20 you’re going to want dinner from it, lunch tomorrow and probably dinner tomorrow.

… As much as I enjoyed the St. Louis style, it didn’t fill me up and I didn’t feel it was a cost-effective way to spend $20. And I never wanted anyone to feel that way about my product.

How have you been able to overcome the long time it takes to make your pizza?

To this day, it amazes me. … It’s nothing to ask people to wait an hour or hour and a half. As a matter fact, we have had waits go over two and a half hours and have had people say that’s OK.

Personally, I wouldn’t do it! (Laughs) … That is what I mean when I say that once somebody desires your product, telling them it’s a two-hour wait, is not necessarily bad. It brings it in perspective: This is what people will do to have my pizza.

How have you been able to let go and spend less time running the business?

The simplest way I can think to explain it is you hire trustworthy people and then you trust them. I love my staff, try to take care of them. They take care of me. Numbers don’t lie; there are accounting processes that you go through to make sure not too much is lost due to spoilage or things of that nature.

… I have moved on to a point where I love the time I’m able to spend with my family. … My advice is when you get to the point where the business can sustain itself, then allow it to, because there is so much more to life.

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