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Friday, October 31, 2008

ICP's annual Halloween bash brings the insane circus to town

We've heard about Joe the Plumber, and we've heard about Joe Six-Pack. But what about, dare say, Joe Juggalo?

Yes, in the heat of the Presidential election, it seems both parties are ignoring an all-important voter constituent: the Juggalo vote. So what says Violent J, the leader of the Juggalos, of the Insane Clown Posse's brood of devoted fans?

"I'm not too big into politics," says J, on the phone earlier this month from Psychopathic Records headquarters in Farmington Hills. "I've been trying to watch the debates, but I don't understand 90 percent of what they're talking about."

So for his political advice, J turns to someone he knows he can trust. "My mom has always told me to be a Democrat, that's all I know."

In other words, don't expect too much in the way of politics at ICP's Hallowicked concert at the Fillmore Detroit on Friday. Instead, expect business as usual for the Insane Clowns, which is to say a whole lot of sticky Faygo and smeared greasepaint.

The show marks the 15th straight year the ICP has played a Halloween concert in Detroit, and J -- real name Joe Bruce -- has been dusting off some vintage ICP material in preparation for the celebration.

"We're doing 15 years worth of songs," J says. "We'll be doing a lot of stuff we haven't done in a long time, and we've been rememorizing and relearning a lot of older songs. I want it to be special."

The Insane Clown Posse, the disproportionately reviled and revered Detroit-based horror rap duo, may have cooled in terms of mainstream notoriety (or infamy, take your pick), but the ICP machine keeps on cranking. Hallowicked is one of two annual tentpoles on the ICP's schedule, the other being the summertime fan convention known as The Gathering of the Juggalos.

This year's Gathering -- Aug. 7-10 at Cave-in-Rock, Ill. -- was the ninth annual outing, and a documentary team chronicled the weekend's event for future release. J says the goal is to have the movie out by Christmas time.

Also in the world of movies: In January, the Clowns will head to Los Angeles to begin shooting "Big Money Rustlas," the follow-up to the group's previous foray into filmmaking, "Big Money Hustlas."

The film, which J says has a $1-million budget, is a prequel to the 2000 comedy spoof and takes place in the Old West. J stars as Big Baby Chips, a gambling tycoon in a lawless Western town, and Shaggy 2 Dope plays Sugar Wolf, the sheriff who brings justice to town and vows to take down Big Baby Chips.

J wrote the script for the film earlier this year while he was on tour. "It feels just like the first one, which I think is what people want," he says. He says roles will be filled by other members of the Psychopathic Records roster, and he hopes to get a few cult figures to make cameo appearances, as well.

J says he hopes to mount a small tour to support the film next year. As for a new album, he says the duo is taking its time following up 2007's "The Tempest" and may start recording something next year, but not before another solo set from Shaggy 2 Dope.

"We don't want to release an album every year right now," says J, a family man (he has two children, ages 4 and 2) when he's not rapping or wrestling. "We never want to slow down working, but when it comes to ICP albums and touring, we want it to mean a little something more now. When we put out an album, we want it to be a big deal. We work at our own pace."

With Its Steps to Help, China Risks Tripping

When it comes to bolstering its stock market, Beijing is persistent.

The latest effort is a thinly veiled appeal to insurance companies for help. The China Insurance Regulatory Commission has asked firms to stop selling equities and start buying. Publicly, the regulator said insurers must "maintain a long-term and value-investment approach."

The Shanghai stock market -- down 70% in the past year -- has done enough damage to discourage insurers from piling in. China Life's investment portfolio lost $35 million in value in the third quarter. Ping An Insurance saw quarterly investment income drop 81% on a year-to-year basis.

Analysts estimate insurance firms' equity weightings are now under 10% of invested assets.

So, in theory, there is room for them to buy. But a cautious buildup in equity investing may be the best the regulator can hope for.

CIRC's statement Wednesday is probably aimed at encouraging other investors as well. But China's recent macroeconomic data isn't encouraging, and corporate profits look set to decline.

The good news is that the government is taking more concrete steps that should eventually work their way into prices, such as Wednesday's interest-rate cut.

But both insurers and investors will need to see those steps take hold before they take note of rhetoric from regulators.

Williams-Sonoma Illustrates Risks Of Pursuing the Wrong Company

Investors were given a lesson Wednesday in the perils of chasing after consumer-discretionary stocks in such a fraught economic environment.

Shares of furniture and home-accessories retailer Williams-Sonoma gained 11% in Tuesday's rally, following the rest of the consumer-discretionary stocks, which attracted renewed interest despite poor economic data on housing and consumer confidence.

The broader consumer-discretionary sector held together for a solid gain Wednesday as well, but the trading in Williams-Sonoma shows what can happen when guessing on the wrong company. The S&P consumer-discretionary sector rose 9.8% Tuesday, and was up an additional 2.1% Wednesday, but shares of Williams were hit hard after the company said it expects losses in its fiscal third quarter and slower-than-expected growth in the fourth quarter.

The stock fell 24%, or $2.49, to $8.01, hitting a 52-week low, after reaching a low Friday.

"I don't like to buy when stocks make a new 52-week low; there are better places to put one's money," said Bruce Zaro, chief technical strategist at Delta Global Advisors.

Mr. Zaro said high-end retailers are being valued at "catastrophe" levels, with investors anticipating a poor holiday shopping season due to listless economic growth. It doesn't help Williams-Sonoma that it sells products related to one of the weakest segments of the economy, housing.

The declines aren't daunting to value-oriented players such as William Reik, managing member at Reik & Co., which owns the stock. "They're out of favor; the macro environment is not encouraging for a stock like this right now," he said. "Of course, we perceive it as tremendous opportunity at these levels."

The company's Pottery Barn stores are getting hit hardest, with sales at stores open at least one year falling 27% in October from the year-ago period, a weakening of already sluggish trends present in August and September.

Those who have chosen to buy the stock over the past year haven't been rewarded; a one-year chart of the shares looks like a staircase to the basement. Analysts said economic conditions are largely responsible for the stock's performance, but many don't believe investor attempts at grabbing the beaten-down stock will be rewarded for some time. Kristine Koerber of JMP Securities said the company's balance sheet is intact, though she recommended that "investors sit on the sidelines as we believe a turnaround is a long way down the road."

"The ones that have come down the most will likely have a fairly aggressive bounce from the bottom," Mr. Zaro said. "But on some of these, you have individual risks."

For Expectant Parents, Agonizing Choices

GRAND RAPIDS, Mich. -- When Jennifer Carden was told that her unborn child had a rare and potentially fatal genetic condition two years ago, she was convinced that the diagnosis could be wrong and the baby might survive. Her doctors and husband disagreed. They tried, but failed, to persuade her to terminate the pregnancy.

The Cardens' baby, Parker, was born on Valentine's Day 2007, and doctors said he had a kidney disease that often kills infants in their first year. But Parker survived and is now 20 months old. He has poor language and motor skills and may never walk. Already hospitalized three times, Parker's medical odyssey has stretched the Cardens' finances and put a huge strain on their relationship.

Thanks to ultrasound technology and the advent of amniocentesis in the U.S. about four decades ago, doctors have long been able to get basic information about the genetic and biochemical status of a fetus. Now, major strides in prenatal diagnosis are providing a clearer window into the womb, yielding extremely detailed data about the health of the fetus.

This has allowed couples to prepare for the birth of a child with special needs, or, in some cases, intervene to improve the health of the fetus. It also means more couples face difficult choices about whether to continue a pregnancy.

Many conditions diagnosed prenatally are rare and their genetic underpinnings still poorly understood. Most physicians have little or no genetics training. In some cases, doctors can diagnose an illness but struggle to predict how it might unfold or how long a baby will survive.

More than eight years after the human genome was deciphered, advances in genetic knowledge are moving from lab to clinic, altering the practice of everyday medicine. In addition to expanded prenatal diagnosis, for example, most states have increased routine screening for rare genetic disorders in newborns. More couples with family histories of genetic ailments are getting tested before trying to have children of their own.

As such tests proliferate, pregnancy could become an increasingly medicalized -- and anxious -- experience. In an essay published last year in the medical journal Lancet, Evelyne Schuster, of the Office of Medical Ethics at the Philadelphia Veterans Affairs Medical Center, wrote: "Prenatal genetic screening allows parents to take on the role of gene police, and to erect a roadblock at which they search and examine their children-to-be before birth."

On Oct. 1, 2006, when Jennifer Carden was 19 weeks pregnant, she went for a routine ultrasound at a hospital near her home in St. Clair Shores, Mich. The doctor told Mrs. Carden and her husband, Charles, that the fetus had enlarged kidneys and a portion of the brain was thickened.

According to the Cardens, the doctor told the couple that their window to terminate was small -- just five weeks -- and recommended they see a specialist to confirm the diagnosis via another ultrasound and an amniocentesis. The diagnosis: A potentially fatal genetic disorder called autosomal recessive polycystic kidney disease.

Mrs. Carden, now 31 years old, contacted the ARPKD/CHF Alliance, a patient group based in Kirkwood, Pa. She learned that ARPKD is a rare disorder and poorly understood condition; genetic tests for it became available only a few years ago. The disorder occurs in about one in 20,000 individuals, and up to 75% of babies afflicted with it die in the first year after birth. After that, their chances of survival are good. But more than one-third need dialysis by the age of 10.

A year later, in a blog called "Our Family Whirlwind," Mrs. Carden recalled how she wrestled with the diagnosis: "It wasn't until I started reaching out and met other families who had children like Parker that things started to look up a little. I knew there were shades of gray and there had to be some hope for us."

The Cardens already had a tumultuous family life. Each had an 8-year-old son from a previous relationship, and Mrs. Carden's first boy lived at the Carden home. The Cardens also had a child of their own, Jackson, then a year-and-a-half old, who was recovering from major abdominal surgery needed to stave off a life-threatening intestinal blockage. A few months earlier, Mr. Carden had moved 150 miles away to Grand Rapids to take a sales-training job with J.P. Morgan Chase & Co. His wife planned to join him later.

The prospect of having another seriously ill child and the additional financial burden worried Mr. Carden. He suggested the couple terminate the pregnancy and try to have another child. When he first broached the idea during a kitchen conversation with his wife, Mrs. Carden flung his dinner plate into the sink and said: "I won't terminate. It's a marriage breaker."

Looking back at that difficult period, Mr. Carden, 32, says: "It was about the fear of having a baby we'd lose. I didn't know how our lives would be affected."

His wife, who is Catholic, had other reasons for wanting to see the pregnancy through. When she was 18 and unmarried, Mrs. Carden had an abortion. She says she still felt guilty about it, and that was another reason she didn't want to go through the procedure again.

The pressure to do so, though, was intense. She later wrote on her blog: "I felt completely robbed of my pregnancy. Every ultrasound was, 'We don't know if [your] baby will be alive the next time we see you.' This continued every two weeks for the rest of my four months of being pregnant."

But Mrs. Carden became determined to see the pregnancy through. To save money, the couple let go their house cleaner and agreed to accept financial help from their families to pay for groceries. They also began to fight a lot more. If Mr. Carden phoned from work, his wife wouldn't answer or would hang up. She occasionally told him to not bother coming home at all.

Mr. Carden worked late to avoid coming home. "We got to talking about separation and divorce," says Mrs. Carden.

Her husband adds: "We were sleeping back-to-back."

The doctors scheduled a Caesarean section for the baby, because they felt the baby might not survive if allowed to go to term. About a month before the birth, Mrs. Carden says a pediatric specialist in kidney disease told the couple to "prepare for a rough ride," saying that the baby would likely be on a ventilator right after birth. On the drive back from that meeting, she called a local church to inquire about last rites for a newborn. She also called her insurance company to see if her yet-unborn child could be added to her life-insurance policy, so that the burial costs would be covered.

At 8:14 a.m. on Valentine's Day in 2007, while St. Clair Shores was under 10 inches of snow, Parker was born. Though the neonatal intensive-care unit was standing by, the baby's condition was stable. He was fed a special formula and, three days later, the Cardens took him home. That April, Mrs. Carden and the rest of the family joined her husband in Grand Rapids. "We had to learn to live with each other again," she says.

In August 2007, Parker's condition began to deteriorate. His kidneys couldn't hold on to nutrients, so he'd get dehydrated and had to drink two liters of water a day. He rarely slept through the night. He picked up infections and was often on antibiotics. He would eventually need surgery to install a feeding tube.

On New Year's Day this year, Mrs. Carden wrote in her blog: "My marriage made it through another year...today is our anniversary." Referring to her husband of four years, she added: "Through it all, we are still best friends and I have learned to lean on him when I need to -- not take it all on myself."

Parker was born on the same day as a child in Virginia who had also been diagnosed with ARPKD. Mrs. Carden learned about the boy through the patient group and stayed in contact with his mother. She called their sons' shared birthday a "Valentine bond." But in March, the boy in Virginia died. Mrs. Carden says it was a stark reminder about "the mortality of Parker's condition."

It remains far from clear what exact genetic ailment Parker has. The National Human Genome Research Institute, part of the National Institutes of Health, is overseeing a clinical trial to better understand and seek a cure for an entire range of polycystic kidney diseases, which are among the most common inherited genetic conditions. The Cardens have agreed to participate once Parker is stable enough to make the trip to Bethesda, Md.

Meral Gunay-Aygun, a pediatric geneticist at the NIH involved in the trial, says several patients in the trial had problems similar to Parker's at birth, such as breathing difficulty and large kidneys, but went on to do far better than doctors predicted. Many made it safely to adulthood; some didn't even require dialysis.

"Advanced imaging means we can identify more patients prenatally," says Dr. Gunay-Aygun. "But the data we're using to determine these children's fate is outdated. There's the discrepancy."

Indeed, it turns out Parker doesn't have ARPKD, according to his current geneticist, Helga Toriello of Spectrum Health Hospitals in Grand Rapids. She says Parker doesn't have any of the classic signs of ARPKD -- high blood pressure, an abnormal liver and multiple cysts in the kidneys. She says it's unclear what Parker has.

"Prenatal diagnoses are subject to the interpretation of the person doing the ultrasound," says Dr. Toriello. "There are cases where things are missed or misinterpreted."

Still, in the past few months, doctors have told the Cardens that their son now has about 60% of his kidney function. Because Parker may never walk, his mother has ordered a wheelchair. His life is a series of appointments, including physical therapy, occupational therapy, feeding therapy and language therapy.

But every now and then, Mrs. Carden grows more hopeful. In August, she saw her son push himself up into a sitting position. It was the first time he'd managed it entirely by himself.

"This is so big, big, big!!" she wrote on her blog. "He was a little surprised -- but every time he does it he looks at me and smiles."

Thursday, October 30, 2008

Bargain Hunters Help Shrink Housing Glut

Lower home prices are luring some buyers back into the U.S. housing market, but foreclosures and a weakening economy are likely to keep downward pressure on prices for at least another year, economists say.

A quarterly Wall Street Journal survey of housing data in 28 major metro areas shows that the glut of unsold homes listed for sale is shrinking in most of them. In many cases, sales have been stimulated by investors who are grabbing what they see as bargains on homes that can be turned into rentals. Metro areas with the biggest drops in for-sale signs include Sacramento and Orange County in California and the Virginia suburbs of Washington, D.C.

The recent headlines give a mixed picture. On Monday, the Census Bureau reported that new home sales in September were at a seasonally adjusted annual rate of 464,000 units, down 33% from September 2007. The median sales price for new homes in September was $218,400, down 9% from a year earlier. Last week, the National Association of Realtors said sales of previously occupied homes in September edged up 1.4% from the depressed year-earlier level, the first such rise since November 2005, largely reflecting sales of foreclosed homes.

Housing analysts caution that many homes that aren't currently listed for sale may hit the market in the next year or two. This looming supply includes pending foreclosures and homes temporarily taken off the market while their owners await stronger demand. With banks chopping prices on foreclosed homes, other sellers "are giving up and taking their homes off of the market," says Michael Lyon, president of Trendgraphix Inc., a research firm in Sacramento.
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Meanwhile, credit remains tight, consumer confidence is crumbling, and job losses are removing some potential buyers from the market while pushing others toward foreclosure. "Now we're adding a second leg down [in housing], which is the job losses," says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.

Mortgage rates jumped Monday amid continued turmoil in the credit markets. Some mortgage firms quoted rates of 6.5% or more for standard 30-year fixed-rate loans. That was up from an average of 6.2% last week, according to HSH Associates, a financial publisher.

Despite all the gloom, some people believe it isn't too early to pick up bargains. One key, they say, is a deep understanding of the local demand for rental housing.

Dinesh and Rima Kumar, who live in Ashburn, Va., last month bought a town house in Sterling, Va., a suburb of Washington, D.C., for $154,000. The same home sold in June 2005 for $375,000 to a buyer who used subprime loans to finance 100% of the price. It went into foreclosure late last year. Mr. Kumar says he has found a renter at $1,500 a month. The Kumars, who paid cash for the home, calculate their monthly expenses -- including taxes, insurance, maintenance and fees -- at $491 a month.

The couple made the plunge partly because Ms. Kumar, a real-estate agent for Realty Direct, noticed that homes in the area priced at $250,000 or less were attracting multiple offers. Home sales in the northern Virginia suburbs of Washington totaled 3,360 in September, up 92% from a year earlier, according to the Northern Virginia Association of Realtors. The average price: about $333,000, down 32% from a year earlier.

"This could be the bottom," Mr. Kumar says, and even if it isn't, "the down side on a $150,000 property is pretty low." Moreover, he has been burned in the past by stock-market investments and thinks rental income will far exceed the meager interest rates offered on bank deposits.

Real Property Investment Group LLC of Atlanta recently bought a three-bedroom house in Snellville, Ga., a suburb of Atlanta, for $50,000. The home had sold in March 2007 for $116,900 and went into foreclosure a year later. The latest sale price is only modestly above the $45,800 price the home fetched when it was newly built in 1981, according to RealQuest.com, a data service of First American CoreLogic Inc. Charlie Chico, managing partner of Real Property Investment, estimates that the home can be rented out for $900 a month.

Still, Mr. Chico notes that foreclosed homes aren't necessarily bargains. "You have to be picky," he says.

Though housing demand increases over the long run with population, it may be tepid in the next year or two. In hard times, notes Jay Brinkmann, chief economist at the Mortgage Bankers Association, many young people move in with parents or find roommates, reducing the rate at which new households are formed. Mr. Brinkmann, a High Point Realtor, also expects a further rise in foreclosures over the next year.

Barclays Capital estimates that banks and loan investors owned 826,200 foreclosed homes as of Sept. 1, up from 343,500 a year earlier. Barclays forecasts that this inventory will peak at around 1.3 million homes in mid-2010.

Ivy Zelman, chief executive of housing-research firm Zelman & Associates, says far more vacant homes are being held off the market than usual. In the second quarter, vacant homes that weren't listed for sale totaled about 6.5 million, she estimates, using Census Bureau data. That's about one million more than the typical level during the first half of this decade. If a million of those vacant homes were listed for sale, listings would rise about 23% from the current level. Some of these empty homes are in the foreclosure process, Ms. Zelman says.

Based on the S&P Case-Shiller national home-price index, prices on average already were down about 18% in this year's second quarter from the peak two years before. Celia Chen, director of housing economics at Moody's Economy.com, expects a further drop of about 14% before prices bottom out in the second half of 2009. Prices won't bottom out everywhere at the same time, of course. Ms. Chen expects Florida's recovery to lag behind that of the nation as a whole, partly because a backlog of foreclosures in courts there will take time to clear. In the Miami area, nearly 18% of home mortgages are overdue or in foreclosure, compared with a national average of 7%, according to Economy.com.

The glut of homes in South Florida is concentrated on the lower end of the market, says Ron Shuffield, president of Esslinger-Wooten-Maxwell Inc., a big real-estate brokerage there. Homes priced at less than $300,000 account for about 62% of the single-family houses and condos listed for sale in Miami-Dade and Broward counties, up from 33% in April 2005.

But consumer confidence is lacking. As stock prices lurched downward in recent weeks, "the phone stopped ringing," says Tip Powers, president of Realty Direct, Ashburn, Va. Some people tempted to invest in real estate were suddenly too jumpy -- or had lost in the stock market the money they intended to put into property.

Whirlpool to Cut More Jobs, Capacity

Whirlpool Corp. more than doubled its planned layoffs through next year to about 5,000 people as its profit fell 6.9% in the third quarter.

The home-appliance maker also cut its earnings outlook, suspended its stock-buyback program and said it would raise prices further.

In a pointed sign of worsening economic conditions in the U.S., Whirlpool executives said some consumers are delaying replacing appliances that are beyond repair. Officials said such consumers eventually will buy the company's refrigerators, washing machines and other products because they are critical for maintaining a modern standard of living in the U.S.

But the Benton Harbor, Mich., company is uncertain enough about the global economy that it delayed forecasting its 2009 profit until early next year. "These are very challenging and volatile times economically around the world," Whirlpool Chief Executive Jeff Fettig said.

To cope with slowing sales, Whirlpool said it is cutting production in the U.S. and Europe by 20% in the fourth quarter and shutting plants in those two markets as well as Mexico. The pullback comes after the company reduced production by 10% in the third quarter.

The 5,000 layoffs include about 2,000 job cuts Whirlpool announced earlier this year amid plant closings. The jobs to be cut by the end of 2009 represent 7.3% of the company's work force.

While the moves might result in less price discounting because of shrinking inventories in company and retailers' warehouses, the pullbacks will lower productivity at the company's factories, as their full capacity isn't used.

The company cut its 2008 guidance for earnings from continuing operations to a range of $5.75 to $6 a share, from $7 to $7.50.

For several years, the company has been battling rising costs for steel, oil and other commodities. It has closed plants, laid off workers, redesigned its distribution system and undertaken other efforts to slash its costs. While integrating its business with Maytag, which it bought in 2006, Whirlpool has been pushing for price increases.

The company is now aiming to increase its prices on average by as much as 10% both in North America and world-wide. However, Mr. Fettig was circumspect about what the moves could yield, saying the impact of falling commodity prices is "not as positive as some of the recent headlines."

Whirlpool reported third-quarter net income of $163 million, or $2.15 a share, compared with $175 million, or $2.20 a share, a year earlier. Results from the prior year included a tax gain of $12 million. Net sales rose 1.2% to $4.9 billion.

Big Car Retailers Write Off Domestic Brands

DETROIT -- Two big auto dealership chains delivered more bad news for domestic car makers: Many Detroit auto franchises have become practically worthless.

In third-quarter earnings reports Tuesday, Group 1 Automotive Inc. and Sonic Automotive Inc. announced charges of a combined $51 million reflecting declining "franchise value" for stores that sell brands from General Motors Corp., Ford Motor Co., and Chrysler LLC. Franchise value is a measure of the potential profit a company can make from holding the right to sell new vehicles and to provide warranty repairs for a certain make of automobiles.

Group 1, the fourth-largest dealership chain in the U.S., took a write-down of $30 million related to its Detroit-brand dealerships. Sonic, the third-largest chain, reported a write-down of $21 million.

In a telephone interview, Group 1 Chief Executive Earl Hesterburg said Group 1's charge means the company has essentially written off the value of its GM, Ford and Chrysler stores. "We have a Ford store in Lubbock, Texas, that is very profitable, but that tends to be the exception," he said.

The charges pushed both dealership chains into the red. Group 1 reported a net loss of $20.6 million, compared with a profit of $20.8 million a year ago, while Sonic lost $25.3 million in the third quarter, compared to a profit of $26.1 million a year ago.

More similar write-downs could be coming from other dealership chains in the next week or so. AutoNation Inc., the largest U.S. chain of auto dealerships, reports its third quarter earnings early next month. The company declined to comment ahead of its announcement. Detroit produces trucks that require a Tonneau, a Truck Tonneau or Truck Bed cover.

Group 1, like other big dealer groups, has been selling domestic dealerships over the last few years. It still has a "handful" that it would like to sell, but right now deals are unlikely "due to a lack of buyers," Mr. Hesterberg said.

The company reported third-quarter revenue fell 12% to $1.4 billion, due to the impact of the financial crisis and hurricanes that hit the Houston and New Orleans areas. Big Three dealerships provided just 18% of Group 1's new-vehicle sales in the third quarter, down from 39% in 2004, as foreign brands like Toyota, Honda and Nissan have made up an increasing percentage of the company's sales. For Sonic, Big Three dealerships excluding Cadillac provided 17% of its revenue, which fell 16% during the quarter from a year ago. "I don't view these write-downs as particularly surprising given the profitability of certain brands in recent years," said Scott Smith, Sonic's president and chief strategic officer, in a conference call.

The company's $21 million charge reflected the declining franchise value of seven unprofitable domestic dealerships as well as declining property values at eight of its domestic dealerships, according to Sonic Chief Financial Officer David Cosper. Mr. Cosper added that several of the company's domestic dealerships "make a lot of money." Both companies announced cost-cutting measures to try to conserve cash as falling consumer confidence and a tough credit environment threaten to further hurt sales in the coming months.

Sonic said it will cancel plans to improve dealerships and build new stores, and undertake cost cuts aimed at saving $12 million a year starting in the fourth quarter. Group 1 aims to reduce costs by $35 million a year.

The National Automobile Dealers Association expects 700 new-car dealerships to close this year, up from 430 in 2007.

As an industry, the nation's vast network of auto dealerships had managed to avoid sinking along with the domestic auto makers. Dealers historically have been able to offset slow sales of domestic brand cars and trucks with used vehicle sales, strong part and service operations and import sales.

Hertz Raises Retail Rates on Car Rentals

Several rental-car agencies have recently started raising prices to reflect increasing operating costs.

Hertz Global Holdings Inc. said in a press release that it has implemented price increases at its retail rental locations in North America and Europe as part of a restructuring effort begun last year to curb the effects of inflation, rising commodity costs, and a tough used-car resale market.

Enterprise Rent-A-Car, National Car Rental, and Alamo Rent-A-Car, all owned by the Jack Taylor family, have increased retail pricing over the past month at airport locations.

The moves represent the latest attempt by car-rental companies to remain profitable.

The firms have had to deal with fewer than expected travelers as airlines cut capacity and consumers have cut back on discretionary spending, in addition to reduced revenue from reselling used rental cars.

Hertz says car-rental rates will rise by an average of more than 10% in North American airport markets -- or more than $5 a day; 5% in U.S. off-airport markets, and about 10% in European airport and downtown markets.

Rate increases vary by location at National, Enterprise and Alamo, says spokesperson Laura Bryant.

Other companies are eyeing the moves.

"We are very enthusiastic about the announcement," says Chris Payne, spokesperson for Dollar Thrifty Automotive Group, Inc.

"It has been a very tough operating environment for all of us right now. We think it's a good move. We are going to wait and see what competitors do," and then consider raising rates, says Mr. Payne.

All of Hertz's price increases will be in place for reservations made on Nov. 10 and after.

Negotiated contract rates won't be affected by price increase at either Hertz or Enterprise, National, and Alamo.

Hospitals Seek to Limit Use of Transfusions

Amid rising blood costs and mounting safety concerns about transfusions, hospitals are adopting stricter measures to manage their blood supplies.

A growing number of hospitals are developing guidelines for when transfusions are necessary, and they are making sure doctors are in compliance. Institutions also are increasingly checking patients for anemia before surgery and treating them with iron or red-blood-cell-boosting drugs to cut down on transfusions in the operating room.

A machine that recirculates blood during surgery reduces the need for transfusions.

Patients are feeling the impact. Some hospitals are eliminating the practice of having patients donate their own blood weeks before surgery, which can trigger anemia. Instead, they are recycling patients' own blood by collecting it in the operating room for immediate re-infusion during or after surgery. And in intensive-care units, nurses are sharply reducing the amount of blood they draw daily from patients for testing, which can make patients so anemic they require a transfusion.

Mike Witka, a financial consultant for the Roman Catholic archdiocese in Indianapolis, hoped to avoid a blood transfusion during surgery to replace both his knees last year. His orthopedic surgeon at St. Vincent Indianapolis Hospital, Jeffery Pierson, prescribed the drug Procrit to treat a mild case of anemia before surgery. During the operation, Dr. Pierson collected Mr. Witka's own blood so it could be re-infused into the patient. "I was pretty leery of getting a blood transfusion with all the horror stories you hear from hospitals," says Mr. Witka. "This seemed like a common-sense approach."

"Doctors have traditionally thought blood was absolutely safe, and don't see why they should withhold it from patients. But the modern view is that when we give blood unnecessarily we cause measurable harm to patients," says Timothy Hannon, medical director of the blood-management program at St. Vincent Indianapolis, owned by Ascension Health. "We have to be sure we are giving the right dose of blood to the right patient at the right time, and make much smarter use of blood products."

To be sure, blood transfusions save lives in surgery and trauma cases and help cancer patients recover from the ravages of chemotherapy. Hospitals say the new blood-management programs won't reject requests for blood if the doctor's medical judgment says it is necessary. Instead, the programs aim to make doctors stop and think about whether a transfusion is medically appropriate.

The nonprofit Joint Commission, the leading hospital-accreditation group, assembled a task force of blood-management experts. The group has developed a 19-point program that the Commission may adopt to help hospitals determine if they are properly managing their blood supplies and safely administering blood to patients. Meanwhile, the Society for the Advancement of Blood Management, a professional group, is launching an awareness campaign for medical professionals and consumers next week. It has a brochure (available at www.sabm.org) with questions patients should ask before agreeing to a transfusion, including what risks are involved and what options are available to minimize blood loss during surgery.

The cost of a unit of blood has more than doubled over the past decade, and hospitals spend an estimated $25 billion to buy, process and transfuse about 30 million units a year. Safety also is an issue: A growing body of evidence shows that donated blood causes changes in the recipient's immune system that result in higher rates of infections, complications and even death. A study published Tuesday in the journal Chest found that blood stored for 29 days or more, nearly two weeks less than the current standard for blood storage, is associated with a higher infection rate in patients receiving transfusions with the blood. Other risks: mislabeled specimens and the possible bacterial contamination of stored blood.
AIDS Fears Abate

Two decades ago, doctors were reluctant to give transfusions because of the threat of contracting viruses such as AIDS and hepatitis C. Since then, tighter screening has reduced infectious-disease threats, and doctors have become more liberal in their use of donated blood on the assumption that it can't hurt, and might help patients.

But as new concerns emerged in recent years about complications from donated blood, medical groups sought to limit the use of transfusions. These efforts have had limited success, partly because hospitals weren't enforcing the measures. Doctors themselves often aren't aware of the guidelines or ignore them in favor of their own prescribing habits, and hospital staff aren't always trained to recognize signs of complications from donated blood, medical experts say.

"It used to be if a doctor ordered blood in the hospital we would just give it to him," says Michael Waldrum, chief executive of University of Alabama at Birmingham Hospital. "Now we have systems in place to make them justify their access to blood."

Dr. Waldrum says the 1,000-bed hospital cut the demand on its blood supply by 11% since adopting last year a pilot blood-management program sponsored by the Red Cross. He says the hospital noticed wide variation in the blood-prescribing habits of its doctors. It conducted educational sessions on strategies to reduce use, such as checking hemoglobin levels to make sure a transfusion is necessary and drawing less blood from ICU patients.

The Red Cross, which supplies about half the blood to American hospitals, is offering 100 hospital clients the services of Strategic Healthcare Group, a blood-management consulting firm founded by St. Vincent's Dr. Hannon. "Blood management is a win-win for everyone because it focuses hospitals on providing better patient care while conserving a precious resource," says Richard Benjamin, Red Cross chief medical officer.

St. Vincent, which has had a blood-management program in place since 2001, has cut its rate of hospital transfusions since that time by over 30%, resulting in savings of more than $4 million a year.

Baylor University Medical Center at Dallas has gradually reduced the use of almost all blood donated by patients prior to their having joint surgery. A high percentage of this blood ended up being thrown away because it wasn't needed, says David J. Ballard, chief quality officer at Baylor and a co-chairman of the Joint Commission task force. At the same time, patients who pre-donated their own blood sometimes became anemic, and later needed not only their own blood but transfusions of additional units of donor blood. Instead, the hospital has increased the practice of recycling a patient's own blood during surgery.
Fewer Donors

Blood conservation isn't a new idea -- it has been used to avoid massive transfusions in cardiac-surgery patients and in military field hospitals for years. "Bloodless surgery" programs were developed in the 1970s for some religious groups who shun donated blood.

The latest efforts to manage blood supplies come amid a shrinking pool of potential donors. Tighter screening for infectious disease and other potential complications have reduced the donor pool to about 37% of Americans, a study last year showed. That's down sharply from the more than 60% long considered the level of potential donors. The American Association of Blood Banks, which says only about 10% of the population donates blood at any one time, warns that new donor restrictions and an aging population could further narrow the number of donors.
Blood Use Declines

The University of Pittsburgh Medical Center, which has 16 hospitals in Western Pennsylvania and spends about $122 million a year on its blood labs, began a program to lower blood use at its flagship Presbyterian Hospital in 2002. By 2005 the amount of blood provided per hospital admission dropped by 18%, resulting in savings of about $1.8 million a year, says Ed Corona, corporate director of laboratory services. He says the program is being adopted system-wide.

Jonathan Waters, head of the UPMC's blood-management program and another co-chairman of the Joint Commission task force, says doctors sometimes fail to evaluate patients before surgery to detect any pre-operative anemia that could be treated with drugs or intravenous iron. He says about half of elderly joint-replacement patients are anemic and need a blood transfusion. "It's very simple to check a patient's hemoglobin level when they are scheduling surgery, but often surgeons don't do it," Dr. Waters says. "It requires a paradigm shift in how we practice medicine." Hemoglobin is responsible for transporting oxygen to organs.

'Whassup' Comes Out for Obama

The well-known catchphrase "Whassup" helped sell countless cases of Budweiser. Can it help sell a presidential candidate?

The characters that starred in the hit Budweiser ad campaign, which debuted in 1999, are back on video again, but this time they aren't peddling beer. Instead, the characters are hawking Barack Obama.

See the new "Whassup" ad for Barack Obama.

Plus, see the original ad, produced for Budweiser.

Created by Charles Stone III, who conceived the original Budweiser ads, the parody video takes on the presidential election, the war in Iraq and the financial crisis, and throws its support behind Sen. Obama. The Web ad has already generated more than two million views on YouTube since it was posted there Friday.

The parody is raising eyebrows in ad circles, partly because Budweiser's maker, Anheuser-Busch, can't do much to stop it. In a departure from normal industry practice, neither Anheuser nor its ad firm, Omnicom Group's DDB Chicago, own the Whassup slogan or concept. Instead, the brewer paid Mr. Stone roughly $37,000 to license the idea for five years. That deal expired three years ago, says Mr. Stone, who appeared with his buddies in several of the Budweiser Whassup ads.

"If you don't own the idea, you don't have any control," says Allen Adamson, managing director of the New York office of Landor Associates, a corporate branding firm owned by WPP Group. "It's like driving the car from the back seat."

In the new video, one of the characters, an American soldier, calls his buddies from Iraq, and the group exchange their familiar "Whassup" greeting. But they quickly descend into complaining about their dire personal problems. Dookie, one of the characters from the original ads, tries unsuccessfully to hang himself after his stock portfolio plummets.

At the end of the video one of the characters asks again: "Whassup?"

"Change. Change, that's whassup" says another character as he watches TV images of Sen. Obama and his wife.

A soldier calls his buddies from Iraq to say 'Whassup!' in a pro-Obama parody of a Budweiser ad campaign.

Advertising lawyers suggest that even if Anheuser owned the Whassup concept it likely would face a tough court battle to shut down the parody, because First Amendment rights would play in favor of the video's creator.

"If First Amendment butts up against copyright law, First Amendment would generally win, particularly when it's done in a political context," says Douglas J. Wood, a lawyer at ReedSmith who specializes in advertising and media law.

Anheuser-Busch declined to comment.

Mr. Stone says that "out of respect" for the brewer, he put a disclaimer at the end that reads: "The views expressed in this short film are solely those of the individual providing them and do not reflect the opinions of Anheuser-Busch." The filmmaker says he doesn't feel he got a raw deal on the Budweiser ads, but he feels he can use the same concept to "make a difference" for a politician he believes in.

Era Ends at Christian Science Monitor

The Christian Science Monitor will stop printing a daily newspaper and instead switch to a weekly printed version and a daily online version of the paper in April.

The 100-year-old publication, known for its national and international coverage, particularly in politics, will be the first national daily paper to switch to a primarily online-based organization.

"The Christian Science Monitor recognizes that daily print has become too costly and energy-intensive," said editor John Yemma. "There's still a role for print, but one that is geared to weekends, when people still can find time to catch up...and experience the pleasures of print."

Advertising in newspapers has been shrinking as readers increasingly turn to the Web.

Interpublic Lifts Net, But Warns of Slump

Interpublic Group reported higher-than-expected third-quarter profit but joined other advertising-holding companies in warning that the financial crisis is impairing ad budgets around the globe.

"We're seeing [the financial crisis] beginning to weigh on marketers' plans for both the fourth quarter and 2009," said Michael Roth, Interpublic's chief executive. He added that there have been cancellations in the fourth quarter, with particular weakness in spending by financial-services companies and auto makers.

Interpublic rivals Omnicom Group and Publicis Groupe have expressed similar concerns. Maurice Levy, Publicis' chief executive, said Tuesday that he believed the ad industry will face a "difficult end of 2008 and a marked slowdown in 2009." Last week, Omnicom said retail and automotive clients were beginning to push back and even cancel some fourth-quarter ad plans.

Wall Street analysts and ad forecasters are divided on just how low U.S. ad spending will sink in 2009. John Janedis, an analyst at Wachovia, predicts U.S. ad spending will fall 0.8% next year while UBS media analyst Michael Morris suggests ad spending will plunge 6%.

Interpublic, which owns ad firms such as McCann-Erickson and DraftFCB, reported net income of $45.7 million, or eight cents a share, compared with a net loss of $21.9 million, or six cents a share, a year earlier. Third-quarter revenue rose 12% to $1.74 billion, while organic revenue -- a closely watched industry benchmark that excludes the impact of foreign-currency moves and recent acquisitions -- rose 7.6%.

We Can Keep People In Their Homes

The world's turned upside down. For generations of Americans, family homes were assets to be bequeathed to our children. Today, instead, we are proposing to leave them billions of dollars in long-term debt issued by the federal government to prop up a housing market gone bad. This is unfair.

Moreover, while the rescue plan may help the balance sheets of financial institutions, it does nothing to help the balance sheets of households. Their problems must be addressed.

The way to do so is through the shared appreciation mortgage, or SAM. The concept is simple: Homeowners are offered the chance to write down a portion of their mortgage debt, but at the same time, they are required to share future appreciation gains with those who helped them out.

Let's take stock of the dead end into which we are currently careening. Today, as home prices plummet, a growing number of families are defaulting on their mortgages and being kicked out of their homes. By the time housing prices stabilize, as many as 20 million households may be upside down on their mortgages, creating incentives to default.

These defaults set in motion a vicious cycle. Foreclosure is a slow and costly process. Foreclosed properties diminish the worth of nearby homes, driving yet more homeowners into default. Taxpayers are the next casualties. Fannie Mae and Freddie Mac using Treasury money to buy up subprime mortgages, and the bailout authorized by Congress earlier this month, put tax dollars behind the banks and other financial institutions that hold these mortgages.

If we force lenders to write down yet more mortgages, they will just pass the loan losses on to the next generation. Our children -- the future taxpayers of America -- are the "losers of last resort," responsible for today's bad debts of the financial sector.

The federal government needs to give taxpayers an ownership stake in the future. The SAM does just this. For example, a homeowner unable to support payments on a house purchased for $200,000 that today is worth only $150,000 might be offered a write-down of up to $50,000. But this would not be a free lunch.

With the SAM, once the value began appreciating above $150,000, the mortgage holders would be due their share. The details of the write down and the appreciation sharing could be tailored to different circumstances. But one way to give lenders a share of the upside would be to pay back some of the write down if the house is later sold, in the scenario above, for more than $150,000. This is a model in which both parties benefit, preventing default while giving future taxpayers a fighting chance at some real upside to the investment we're forcing on them.

Many mortgages have been sliced and diced so that there is no single lender with whom to bargain. But there are paths to renegotiation that Congress or the Treasury could enact to create the incentives to make it happen.

Appreciation sharing is a cost to the borrower. Thus, if the terms are set correctly, those with the means to get through the decline in their collateral without giving up some of their upside will find it in their interest to do so.

The SAM was pioneered by banks in the U.S. some 40 years ago, but it has been allowed to languish due to an archaic, IRS-imposed block. (The IRS hasn't ruled whether such a contract is a mortgage because it combines elements of equity and debt.) This block could be removed at the stroke of the Treasury secretary's pen.

Almost 75 years ago, in the depths of the Great Depression, the nation faced a housing market collapse even more brutal than today. The federal government responded with a strategy that allowed homeowners to keep their homes and kept the bottom from falling out of the real-estate market. Unprecedented at the time, the 30-year fixed rate mortgage has since become the gold standard in markets around the world.

Today, facing a similar collapse, the federal government needs to be equally bold. SAMs are the new deal in housing that our children need.

Univision Works to Magnify Clout of Hispanic Voting Bloc

Jorge Ramos, one of Univision network's biggest stars, devoted his Sunday news program to the rather mundane topic of how to cast a ballot.

Mr. Ramos addressed such basic questions as "What if your name doesn't appear on the list?" while viewers of the Spanish-language network were reminded to call a bilingual toll-free hotline with questions or concerns about the voting process. His involvement reflects the importance Univision assigns to increasing the electoral clout of its Hispanic audience.

If the path to the White House this election passes through the Hispanic community, then it also passes through Univision. The dominant Spanish-language broadcaster is a powerful influence on its audience -- and in this election cycle, it has been engaged in an aggressive two-year campaign to turn the fast-growing Hispanic constituency into a potent voting bloc.

The network -- whose ratings during prime time often surpass those of ABC, CBS, Fox and NBC -- has used public-service announcements as well as local and national news broadcasts to motivate Latinos to become politically engaged. With other Latino media and grassroots groups, Univision began by spurring more than a million eligible legal U.S. residents to apply for U.S. citizenship; it then goaded them to register to vote.

Now, less than two weeks before the election, it is guiding them right to the voting booth.

"You will not find this on any other network," said Mr. Ramos last week after recording "Al Punto" (To the Point).

Spanish-language television is often associated with spicy soap operas, or telenovelas, and abundant soccer coverage. But campaigns are awakening to the audience's political clout. Sen. Barack Obama's campaign is slated to air a 30-minute infomercial on national networks Wednesday evening.

The network, part of Univision Communications Inc., is likely to attract record political ad money, possibly doubling the $16.2 million in campaign dollars it took in during the 2004 presidential contest. However, that would still be a tiny fraction of the record $2 billion the candidates are expected to spend this season on TV ads.

Regardless, the network's audience has responded strongly to the civics lessons. "My mother became a citizen because of Univision; she's going to vote because of Univision's influence," said Jorge Aceituna, the son of a Mexican immigrant, as he poured fruit, ice and yogurt into a blender at a juice store in Los Angeles last weekend.

Recent polls show Republican nominee John McCain behind Mr. Obama, the Democratic nominee, among Hispanics nationwide. A high Hispanic turnout could determine the outcome in key states. Nearly 90% of all Latino registered voters said they are certain to cast ballots in the presidential vote in a survey released last week by the NALEO Educational Fund, a nonpartisan group that teamed up with Univision and other Spanish-language media for the mobilization drive dubbed "Ya Es Hora, Ve Y Vota" (It's Time, Go Vote).

On the heels of the outreach effort, Hispanic voter registration has reached about 12 million, up from nine million in 2004. In particular, Latinos are poised to shape the result in four battleground states where they are concentrated and the total number of registered Hispanics has soared since 2004: by 144% in Nevada, 35% in Colorado, 34% in Florida and 30% in New Mexico.

A yet-to-be-released poll prepared by Bendixen & Associates for Democracia USA, a nonpartisan voter-engagement group, found that network-news anchorman Mr. Ramos is the most influential figure among both English-dominant and Spanish-dominant Hispanic voters; fellow anchorwoman María Elena Salinas ranked eighth in the survey. "Univision is more influential than I even thought it was," says Jorge Mursuli, president of Democracia USA. "And most Americans don't even know who Jorge Ramos is."

Since last year, Ms. Salinas has starred in a series of public-service announcements designed to energize Univision viewers eligible to vote. In one spot she declares that "united we [Hispanics] are a force politicians cannot ignore. All the power we have amounts to nothing if we don't vote..."

In an interview, Ms. Salinas said "the political empowerment of the Hispanic community is one of the most important things that I can contribute as a Spanish-language journalist."

Univision local stations, from Miami to Los Angeles, are also weaving a get-out-the-vote message into election coverage. "We want to thank those of you who responded to our call to become a U.S. citizen and register to vote," said Los Angeles reporter and anchor Raúl Peimbert on the air recently.

Both parties have reason to court the network and its viewers. Overall, the nation's Latino population has grown nearly 30%, from about 35 million in 2000 to 45 million in 2007. The non-Hispanic U.S. population grew 4% over the same period. The growth so far this century is just a precursor to the coming explosion, demographers say. And while some 12 million Hispanic immigrants are here illegally, their U.S-born children will reach voting age in the next few years.

Univision's Democratic presidential primary debate drew more viewers, 4.6 million, than the average 4.3 million who tuned into English-language debates on the so-called Big Four networks. The median age of the viewer of the Univision debate was 36 compared with 61 for the English-language networks, according to Nielsen NTI Fast National Ratings.

"Without Univision and the Hispanic vote, you can't win this election," says Federico Subervi, author of "The Mass Media and Latino Politics," and professor of mass communications at Texas State University-San Marcos.

Mr. Ramos remembers 1996, when Republican presidential candidate Bob Dole declined several requests for interviews from Univision. In 2004, President George W. Bush talked directly to the Hispanic electorate and won 40% of the vote. Sen. McCain's first interview after officially accepting the Republican Party nomination was with Univision's Mr. Ramos.

"This year the change has been dramatic," says Mr. Ramos, whose Sunday show featured an interview with Alaska Gov. Sarah Palin. "For the first time, the campaigns are calling us."

Dell, PC industry find it isn't easy being green

Proving Kermit's adage, Dell spent three years building 25 prototypes before the computer maker found a way to twist bamboo into a natural fiber exterior for its new "Hybrid" desktop.

The personal-computer industry, like Jim Henson's gangly Muppet frog, is finding it isn't easy being green. Creating biodegradable packaging, eliminating toxic chemicals from components and using energy-efficient chips means throwing out designs used for almost 30 years and starting over. A great soulution for going green s investing in Atlanta Colocation.

For Dell and Hewlett-Packard, fighting for sales in a market with some of the tightest profit margins in technology, the numbers are starting to add up. About 25 million shoppers say they would pay more for greener PCs, a Forrester Research study found. And expenses have dropped, with estimates showing it costs just 3 percent more to produce the new PCs.

"This is going to be a deciding factor for customers now," said David Daoud, an analyst at Framingham, Mass.-based IDC who researches green technology.

The Forrester study found 12 percent of the U.S. adult population would pay more for Earth-friendly PCs. Half of businesses surveyed in April say they use environmental impact as a criterion in purchasing decisions, twice as many as in 2007, Cambridge, Mass.-based Forrester said.

The credit crisis and possible economic recession may hamper those intentions. While these PCs lower energy costs and save money, the vendors still have to prove that consumers and corporations will spend the extra money up front.

The PC shift comes as consumers and businesses take steps to be ecologically aware, from replacing plastic grocery bags with reusable ones to replacing the corporate fleet with hybrid cars such as Toyota's Prius. Companies are buying compostable cafeteria utensils and signing contracts to use renewable fuel to power offices and plants.

Dell bills its Studio Hybrid, released in July, as the company's "greenest PC ever." Aimed at consumers and small businesses, the bamboo-clad computer starts at $599. A version with a plastic sleeve, recyclable in some communities with extensive reuse programs, is $100 less.

The price is in the middle of the consumer desktop PCs on Round Rock, Texas-based Dell's Web site, which start at $279. Gone is the boxy design. This desktop is 80 percent smaller and the plastic sleeve comes in colors like Ruby and Quartz.

"Our big epiphany is that you cannot walk away from the principle of appeal," said Ken Musgrave, who leads Dell's research into how customers relate to the feel and appearance of computers. "Unbelievable as it may seem, Dell and chic are being uttered in the same sentence."

The new systems get their biggest electricity savings from low-energy chips, said Richard Doherty, an analyst at Seaford, N.Y.-based technology researcher Envisioneering Group. And Dell says the smaller size gives it another boost.

Musgrave took an old Dell desktop apart recently and shook his head at the wasted space inside. The boxy 16-by-6-by-18-inch machine is now 8.8 inches tall, 3-inches wide and 8.3- inches deep and uses as much as 70 percent less energy.

The boxes, designed to be filled later with more drives and memory, required bigger fans to cool them at their greatest potential use. Consumers rarely used them that way, wasting the electricity.

Green PCs cut energy costs 21 percent a year, by adding a new power supply system that costs $20 more, said Hewlett-Packard's Kirk Godkin, senior product manager for corporate PCs.

A business that buys 2,000 would spend $40,000 more. Each desktop saves $6 to $25 in energy costs annually. Companies that leave computers running around the clock would save $50,000 and recoup their investment the first year, he said.

Still, even with these steps, PCs aren't as Earth-friendly as they could be, Forrester analyst Christopher Mines said.

"HP and Dell are making credible strides, but remember that these guys have PCs to sell this month, this quarter," he said. "The greenest thing the PC companies could do would be to lengthen the lifecycle and warranty of their products, making PCs more upgradeable and modular — so they don't have to be purchased and thrown away so often."

The environmental push also changed PC packaging. Dell's Hybrid comes wrapped in recycled milk jug material, which is itself recyclable. It's easier to stack and mold than more widely used foam packing, packaging chief Oliver Campbell said.

After 20 years, Dell also is reviving the Air Paq, an inflatable plastic cushioning sleeve that laptops slide into for protection during shipping.

The earlier attempt failed when the seals broke, deflating the cushion and damaging products.

Dell has now made the seals strong enough to hold up and used the new Air Paq this summer on 30,000 shipments, Campbell said.

Taiwan PC makers ready to challenge Silicon Valley in the tech marketplace

TAIPEI, Taiwan — First came the slim fashion models, hugging the slim new laptops.

Then a tuxedo-clad Jerry Shen, chief executive of Asus, stepped onto the stage earlier this month to introduce his company's new S101 mini-laptop to a horde of reporters. He stood in front of a sign that likened the new product, which is now going on sale in the United States, to "fashion on the go."

And just Wednesday, another low-profile Taiwanese tech company took center stage: Little-known HTC introduced the much-hyped first cell phone based on Google software.

These moves signal a dramatic shift in the island's high-tech focus as it seeks to step out of its behind-the-scenes role as a manufacturer and into the spotlight as a direct challenger to Silicon Valley's dominance in the consumer product market.

It wasn't long ago that the closest a Taiwan technology company came to buzz-making was through assembling products for the likes of Apple and Hewlett-Packard.

"A company going bankrupt in Silicon Valley had a better image than a successful company in Taiwan,'' said Stan Shih, founder of Acer who now heads iD SoftCapital, an investment management and consulting company. "Brand Taiwan" includes computer makers Asus and Acer, the world's No. 3 PC vendor, as well as HTC, a manufacturer of mobile phones. They are among a host of Taiwanese tech companies — along with Chinese computer maker Lenovo — trying to move out of the shadows of Western super brands.

With a cultural DNA more suited to tech tinkering than show-and-tell marketing, Taiwanese companies have struggled to pitch their products to Best Buy buyers. Some of their efforts haven't worked — Acer concedes its foray into the United States during the 1990s did nothing but lose money, and Taipei-based BenQ's acquisition of Siemens' mobile phone business was a failure — but now Taiwanese companies are starting to gain ground in the global market.

Executives, feeling constant price pressure from low-cost mainland China, are altering business plans and company cultures, hiring overseas designers and foreign executives. In 2004, Acer hired Italian Gianfranco Lanci to be its president; bringing in a foreigner in a such a role is virtually unheard of in Taiwan. (He is now co-chief executive.) These companies are also aggressively setting up Dever Colocation Services in U.S. offices and hiring Americans to run them.

"People often talk about 'guan xi' being important in China,'' said Mark Stocker, managing director of Direction Design Group, a marketing consultancy in Taipei. He was referring to a Chinese phrase that explains the importance of business networks. "But it is just as important in the U.S. and Europe. Getting somebody with industry connections opens doors much faster."

While grabbing consumer allegiance from American powerhouses HP, Dell and Apple remains difficult, these Asian upstarts have received a boost from the growth of markets outside the United States, which give them global market-share traction and momentum to crack the tough U.S. market.

"These Taiwanese companies used to solely rely on the U.S. market, and most of that was "... making products for U.S. brands," Stocker said. "Growing markets in Eastern Europe, Brazil, Southeast Asia are allowing companies like Asus and Acer to make profits. And that profitability is allowing them to attack the U.S. market."

The United States' slice of the worldwide market for computers has dropped from about 31 percent in 2004 to 25 percent last year, according to research firm IDC. The Asia Pacific region, excluding Japan, has edged up to about 25 percent of the worldwide market for the same period. Indeed, all the industrialized regions — the U.S., Europe and Japan — are showing market shrinkage while emerging economies are grabbing larger slices of global PC sales.

"It's become less of a one-man show and more of an ensemble cast,'' said Richard Shim, IDC research manager. "Costs for PCs have come down. As a result, they are more affordable to a larger part of the world's population.''

While adjusting its sails to the shifting market wind, Acer has also made recent acquisitions — Packard Bell in Europe and Gateway in the United States — to begin a direct assault on No. 1 PC vendor Hewlett-Packard across the globe. The company's goals are to supplant HP as the world's No. 1 notebook vendor by 2011 and to increase its annual sales to $30 billion. Last year, Acer reported $14 billion in revenue.

At the end of 2000, Acer split off its contract manufacturing business to focus on being a consumer brand.

"A common understanding in Taiwan was, you couldn't make money as a branded company,'' Acer Chairman and Chief Executive J.T. Wang said.

Much of the optimism among many of these companies is based on the explosion in popularity of notebook computers, which Acer and Asus specialize in. Asus has hired a team of European designers, and Acer worked with a subsidiary of BMW to create its new Aspire line of lightweight laptops.

HTC, meanwhile, is now prominently displaying its logo on the sleek handsets it is developing for major phone companies in the United States and Europe. And the Taiwan mobile-device maker made a big splash last week, becoming the first company to build a Google Android phone, which will be sold through T-Mobile.

Taiwan is aiming to develop a global tech image similar to that of Japanese manufacturers.

"The Japanese established their brand through quality,'' said Shih, an evangelist for creating branded businesses across Taiwan. "But today, quality isn't enough. Innovation is critical, as is communications and marketing.''

Asus has focused on this strategy with its line of Eee PC mini-laptops, whose success last year surprised many in the industry and prompted HP, Dell and Acer to create their own versions of the low-cost mini-laptops.

Analysts, though, say the ultra-portable laptops aren't true innovative breakthroughs. They also point out that Taiwan PC vendors still must work hard to grow in the U.S. market — the world's single most important land of consumers — if they expect to cut into the business of American competitors. And that can be tough to do solely through hardware design, which is easy to copy.

Apple, for example, fuses hardware, software and services into its products, which enables it to stand apart from look-alike tech companies.

Reaching into the wallets of U.S. consumers also requires a sophisticated marketing strategy and the ability to infiltrate the retail giants, such as Circuit City and Best Buy.

"Very few companies have the skill and patience to do that,'' marketing guru Stocker said. "It may be years before you see any profit.''

Even HTC Chief Executive Peter Chou, who has the advantage of close partnerships with U.S. telecom companies, know's "it's not easy. For HTC, it will take time. Developing brand credibility takes time."

Acer has slowly gained U.S. market share, growing from 2.3 percent in the third quarter of 2006 to nearly 8 percent in the second quarter this year, according to IDC. Asus has much farther to go: It had just a half-percent of the market earlier this year.

Nonetheless, Asus CEO Shen said the Eee PC line has given his company a boost. It has so far sold about 4 million units worldwide. Long known as a motherboard manufacturer and a maker of high-end laptops for gamers, Asus had $6.9 billion in revenue last year. Its latest slender laptop, the S101, which starts at $699, will join other Asus products on the shelves of Best Buy.

"We have much more confidence about developing our brand," Shen said. "We know how to combine aesthetics and technology."

And take risks. The company recently sponsored a fashion show in Las Vegas and just released a laptop that emits a fragrance when it's turned on. The company is also working on multiple innovations, such as a green motherboard that uses less power and fewer hazardous chemicals, and has developed Linux-based software that lets users get online quickly, before Windows boots.

Its next hoped-for headline-grabbing product: a laptop made from bamboo.

Wednesday, October 29, 2008

Chrysler Slashes Managers Amid GM Talks

As talks between General Motors Corp. and long-time rival Chrysler LLC continued over the weekend, a harsh reality has emerged: Without a merger and possibly an assist from the federal government, two of Detroit's Big Three auto makers could run out of cash within a year.

WSJ Detroit Bureau Chief Neal Boudette and WSJ reporter John Stoll discuss the very real possibility of a General Motors Corp.-Chrysler LLC merger amid increasingly poor sales that could send the automakers to the poorhouse. (Oct. 27)

Though GM and Chrysler dismiss the notion, analysts and investors have begun to question whether one of the companies -- locked out of the credit markets and burning cash rapidly -- might have to seek bankruptcy protection. Such a filing could set off a chain reaction across the U.S. auto industry, choking off parts supplies to healthier Asian and European car makers and slamming thousands of local car dealers. It could also create a mess for the federal government, whose pension-guarantee program would be swamped by the addition of hundreds of thousands of retirees.

The auto makers and Michigan political delegations have proposed at least three plans in recent weeks to unlock federal cash for a merged GM-Chrysler, including seeking an equity investment from the government or unlocking funds from its Troubled Asset Relief Program, or TARP.

GM and Chrysler estimate that a combined entity would need $10 billion in new equity to lay off workers, close plants, integrate the two companies and provide liquidity, according to several people involved in the talks or briefed on them.

"Without external intervention, from consolidation or government assistance, we expect GM to reach its minimum cash position in under 12 months," Deutsche Bank auto analyst Rod Lache wrote last week. In an interview, Mr. Lache added that Chrysler is also running dangerously low on funds. "We believe Chrysler is in the same position. It's either August 2009 or December 2009 they run out. Both have a limited runway."

GM and Chrysler said publicly this month that bankruptcy proceedings are out of the question. Auto-industry executives have long said that seeking bankruptcy-court protection would destroy the reputation and desirability of their products. Automobiles are typically the second-biggest purchase for a family behind a house, so buyers want to make sure the manufacturer will be around for the life of the vehicle to provide parts or honor the warranty.

"We continue to hold the position that bankruptcy is not an option," said GM spokesman Steve Harris. Chrysler spokeswoman Lori McTavish said: "Bankruptcy is not an option for Chrysler -- it doesn't make sense for us."

Several people involved in the GM-Chrysler merger discussions say the companies have talked to federal officials about their proposed transaction. But there are no specifics yet about what role the government could, or will, play. There is no indication that Treasury, which oversees the TARP program, is currently considering proposals for anything but financial institutions.
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* Chrysler's Woes Are Partly the Result of Poor Quality

David Patton and Mathew Passy discuss whether these are the darkest months for the Detroit Three auto makers. Can GM, Ford and Chrysler survive the current slump that is hitting them from multiple angles. Will a deal help GM and Chrysler?

GM and Chrysler, through a network of 10,000 dealers, have combined U.S. sales of between $110 billion and $130 billion, a figure that approaches 1% of the U.S. gross domestic product. They employ an estimated 145,000 people in the U.S. at more than 110 assembly, stamping and parts plants. An additional 600,000 retirees depend on the two car makers for health care and pensions.

GM and Chrysler "are basically waiting on the government," said one person involved in the merger talks. "The three choices are bankruptcy, a big intervention from the government or some big deal like this that has massive cost-cutting possibilities," this person said. "That's it. And even the big deal may require government help."

People familiar with the GM-Chrysler talks said over the weekend that the sides are also considering forming a new company that could include a third auto maker.

Talk of a GM-Chrysler merger began in September, following brief discussions between GM and Ford Motor Co., the third major U.S. auto maker. Cerberus Capital Management, a private-equity fund that owns 81% of Chrysler and 49% of GMAC -- GM's lending arm -- approached GM about swapping GM's 49% stake in GMAC for ownership of Chrysler.

Such a merger would have been unthinkable in recent years because it would have only added more brands, dealerships and slow-selling models to GM's bloated structure. But with credit markets tightening and collapsing U.S. auto sales draining GM's cash, the auto maker is scrambling to keep itself afloat.

U.S. car and truck sales are down 13% through September this year. GM sales have fallen about 18%, while Chrysler's are down 25%. Ford's sales are down 17% so far this year. Ford's condition is not considered as grave as that of GM and Chrysler because it has more cash on hand.

In the next 12 months, U.S. auto sales could sink to levels last seen during the early 1980s recession, according to several forecasts, when there were 70 million fewer Americans. Sales peaked at 17.4 million in 2000 and remained near 17 million for five more years. This year, 13.6 million vehicles are expected to be sold, and sales are expected to fall by another half-million vehicles in 2009, according to consumer-researcher J.D. Power & Associates.

Today, the Big Three have the capacity to build three million more cars and trucks than they currently sell -- about 10 plants' worth of idle capacity. "These are truly unimaginable times for our industry," Chrysler Chief Executive Robert Nardelli told employees Friday in announcing 5,000 new white-collar-job cuts.
Investors' Worries

Investors and vendors to the auto makers believe bankruptcy proceedings for one of the Big Three are as likely as not, judging by a range of financial indicators. GM and Ford bonds trade between 20 to 40 cents on the dollar. Investors have valued $9 billion worth of Chrysler debt at about $3.4 billion. On Thursday, Daimler AG, which owns 19.9% of Chrysler, wrote its investment in the auto maker down to zero.

The GM-Chrysler plan would effectively scrap large parts of 83-year-old Chrysler. Even people involved in the deal concede a tie-up would be risky because consolidation would have to take place quickly.

In a merged company, GM would take the driver's seat in product-development activities, say several people involved in the talks. It would retool several existing Chrysler products to base them on GM-designed vehicles, or kill some products outright, these people said. GM is expected to save Chrysler's popular minivans and Jeeps. GM could also sell certain vehicle lines, such as the profitable Dodge Ram, to an auto maker seeking entry into the U.S. light-truck market.

The human toll of such a move could be high. The companies would slash duplicated functions from engineering to marketing. One internal estimate predicts at least 40,000 jobs could be cut from the roughly 166,000 people employed by the two companies in the U.S., Canada and Mexico.

GM's cash cushion has been eroding for some time. Each month, the company spends $1 billion more than it brings in. At that burn rate, GM could effectively run short of cash next summer, without even taking into account further sales declines.

The 100-year-old company has about $20 billion on hand today, but needs at least $11 billion to $14 billion of working capital at all times so it can keep paying its bills, GM has said. The company has been trying for months, without success, to raise at least $5 billion by selling assets, such as its Hummer brand, and by pledging unencumbered assets, such as profitable international operations, as collateral for loans.

But lenders are reluctant to invest. GM debt, once considered the highest investment grade, has tumbled to low-rated, junk status. Many lenders approached to invest in a combined GM-Chrysler have also balked. One large private-equity investor said it would take too many years for the combined entity to realize a forecast $10 billion in annual cost savings. Meanwhile, this person said, it's safer to invest in the company's debt instead of its shares, because creditors get better protection than shareholders in the event of a bankruptcy filing.

When Cerberus purchased Chrysler in the spring of 2007, the capital markets were at full throttle. The firm basically bought Chrysler for free, in exchange for taking on its considerable debt. Cerberus expected that once Chrysler was private, the fund could build a smaller, stronger company with the ready help of debt investors.

It hasn't turned out that way. In two years, Chrysler has fallen from third to fifth in U.S. auto sales. J.P. Morgan estimates it has $11 billion on hand. It uses $3 billion to $5 billion of that as working capital to meet payroll, pay vendors and pay other bills. Its monthly cash burn is estimated at $300 million to $400 million. That figure may grow as vehicle sales slow, suggesting that it could run out of money by late 2009. To conserve cash, Chrysler has halted certain new-product plans, a sign that it sees a deal with GM as the only path out.

The auto makers' huge obligations, meanwhile, are only growing as revenues and profits shrink. For decades, Detroit's Big Three have funded generous programs to take care of former workers and surviving spouses. GM says it provides health care and pensions to about 480,000 hourly and salaried retirees. Chrysler is obligated to support at least 125,000 hourly retirees and their spouses, plus tens of thousands more from the white-collar ranks.

Between 2009 and 2017, GM has committed to pay out $64.14 billion in pension benefits to U.S. retirees. Chrysler has estimated it has $14 billion in pension obligations between 2009 and 2017, and $10 billion in health care.

The manufacturers hope to transfer much of these health-care obligations to a trust they have agreed to establish with the main union representing its workers, United Auto Workers. While the auto makers will have to provide billions of dollars to the UAW trust before it launches in 2010, the arrangement will allow them to reduce billions of dollars in annual health-care costs.

Detroit's pension funds have also been hit hard as stocks -- in which they are heavily invested -- have declined. By the end of the year, GM's massive pension fund could drop to a funding level that would trigger federal mandates that the companies inject more money. The fund has enough money to meet obligations now, but a J.P. Morgan report estimates that given the market's recent performance, the GM pension could be underfunded by $18 billion at the end of 2008. Privately held Chrysler no longer discloses its pension funding levels.

Inside the merger negotiations, the growing feeling is that a combined GM-Chrysler effort, while daunting in its complexity, may be the best way to bring federal money into the mix. Those people have proposed at least three possibilities for a federal role in the merger they say are being discussed in Washington.

The first is to unlock some of the $25 billion from an energy bill passed last year that would compensate manufacturers for costs associated with new fuel-efficiency standards for the U.S. auto industry. It is not clear when the money would be released to auto makers. The manufacturers hope that some of the funds could be expedited to be used in this deal.

Another option would be for the government to take a stake in the entity, perhaps in the form of preferred shares, said several people involved in the talks. The Treasury took equity stakes in major banks earlier this month. It is unclear whether they would do the same for auto makers.

A third option would be using the Troubled Asset Relief Program to buy up troubled auto loans from the companies' financing arms, GMAC and Chrysler Financial. Michigan Senators Carl Levin and Debbie Stabenow, among others, have been told that TARP could be used to buy up troubled auto loans, according to congressional records.

The idea of this option, say people studying the deal, is that the aid would provide relief to Cerberus, which owns Chrysler Financial outright and holds 51% of GMAC. Cerberus would then plow more money into the combined GM-Chrysler.

Michigan lawmakers have pressed the Fed and Treasury to get involved. Last week, a congressional delegation headed by Michigan Rep. John Dingell sent a letter to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson urging the pair to find money for U.S. auto makers.

"It is imperative that the government ensures that liquidity is restored so that the U.S. auto industry is able to function until normalcy is restored to credit markets," the letter said.

One of the biggest fears in Washington is how a bankruptcy filing by one or all of the auto makers would affect the federal agency that insures the retirement savings of almost 44 million Americans. The Pension Benefit Guaranty Corp. ended 2007 with a $14 billion deficit. Were GM to place its pension burden on PBGC, it would more than double the agency's current shortfall, a burden that could fall on taxpayers.

The fate of many suppliers and other auto makers are also tied to the health of GM and Chrysler. According to industry research, 60% or more of the industry's suppliers make parts for all three major auto companies. If one car maker ceases to pay some outstanding bills it could crimp the operations at suppliers and, by extension, healthier U.S. and foreign car makers.

Lear Corp., a seat manufacturer, gets 29% of its $15.3 billion in annual sales from GM, but it is also a large supplier to Ford, Toyota and BMW. Magna International Inc., a Canadian manufacturer of interiors and instrument panels, does more than $3 billion in sales annually with GM and Chrysler, but also provides parts in Europe to auto makers like Volkswagen and Daimler.

"The fall of one is the fall of all. If, say, Chrysler files [for bankruptcy-court protection] and doesn't pay its suppliers, those suppliers would go down and Ford or GM won't get their parts, shutting down some of their plants," said Kimberly Rodriguez, director at Grant Thornton and an adviser to Ford senior management.

"It just can't happen," said Ms. Rodriguez, who lives in suburban Detroit with her husband and two daughters. "It would be tens of thousands of jobs lost and not just in Michigan."

Last week, Michigan Gov. Jennifer Granholm began assembling a task force of cabinet officials who will build a contingency plan in the event of a merger, or if one of the Big Three seeks bankruptcy-court protection. A spokeswoman for Gov. Granholm said Sunday that the task force is talking to industry analysts and Michigan economic planners to develop a plan to deal with what could be massive job loss.

Gannett to Cut 10% of Workforce

The country’s largest U.S. newspaper publisher plans another round of job cuts. About 10% of staff, potentially about 3,000 positions, will be laid off across the company’s more than 80 local daily papers.

President of Gannett’s newspaper division Robert Dickey wrote in a memo to employees that the financial crisis is severely impacting the company. The cuts, though bad news for employees, are an indication of “Gannett’s determination to remain healthy and viable as a company during these turbulent economic times,” he said (via Reuters).

The exact number of people to be cut is difficult to determine; Gannett does not release employee headcount numbers. The cuts will not include hundreds of workers at USA Today.

Publishers’ plans to cut payroll by 10% are due by Nov. 14.

This is the second round of cuts in as many months. Gannett said in August that it was eliminating 1,000 newspaper jobs.

Gannett reported lower-than-expected profit in the third quarter, with ad revenue at its publishing division slipping 18%. Chief executive Craig Dubow pointed out that consumer confidence fell, retail spending was hampered and unemployment rose while demand for all categories waned in the quarter. The critical retail, real estate and employment categories were most profoundly affected.

The newspaper industry has lost more than 12,000 jobs so far this year, as both readers and advertisers shift online, writes MarketWatch. Most recently, the Los Angeles Times announced its third round of cuts this year, eliminating 10%, or 75 people, from its staff.

The subprime mortgage crisis has significantly harmed newspapers in recent quarters. Overall circulation at newspapers is slipping, down nearly 5% over the six months ended Sept. 30.
Related topics: Sign of Doom, Signs of What's to Come, Feature, Real Estate, Planning, Interactive, Newspapers, Print...

Porsche's Owners Will Support VW Purchase

FRANKFURT -- Porsche Automobil Holding SE on Sunday said it had a near-75% stake in Volkswagen AG, a much larger stake than the market expected, and said it wanted to tighten its grip on Volkswagen with a so-called domination agreement that would give it access to Volkswagen's cash flows.

Porsche announced it had control of 31.5% of Volkswagen through cash-settled options in addition to the 42.6% of shares it currently holds, leaving it just 0.9% short of the 75% level needed to log Volkswagen's revenues and assets in its own books.

Previously, Porsche's Volkswagen stake was known to be 35.14% plus an undisclosed number of options.

"The target is to raise this to 75% in 2009, so long as the economic conditions permit, and pave the way for a domination agreement," Porsche said.

A domination agreement under German law requires the control of at least 75% of a company's voting rights at a shareholder meeting.

A spokesman for Volkswagen said the auto maker expected the move and continues to welcome Porsche's investment. Porsche said it disclosed the size of its stakeholding after it became clear that there were more short-sellers in the market than it expected, who now get the chance to clear their positions without any major risk.

Investors betting on Volkswagen's share price to fall have triggered huge share-price movements recently. The volatity of Volkswagen's shares was partly because of its small free float, as the German state of Lower Saxony still controls slightly more than 20% of the voting rights.
[VW logo] Associated Press

A VW spokesman said the auto maker expected Porsche's move and continues to welcome its investment.

Porsche's announcement Sunday makes it clear that barely 5% of the shares are in free float.

Volkswagen's labor unions said they "fiercely oppose" Porsche efforts to achieve a domination agreement. "It would be a catastrophe for the more than 360,000 employees of Volkswagen if managers who trample on workers' rights take over control at this company," said Volkswagen's top labor representative and supervisory board member, Bernd Osterloh, in a statement.

Meanwhile, Porsche said Friday that the rift between its owners, the Piëch and Porsche families, has been resolved, and both families now fully support Porsche Chief Executive Wendelin Wiedeking's plan to take over Volkswagen.

Last month, Volkswagen Chairman Ferdinand Piëch abstained from a crucial board vote, allowing labor representatives to push through a measure that could have hindered Porsche's takeover plans. Under the measure, Porsche would need approval from Volkswagen's supervisory board for any cooperation deal between it and Volkswagen's Audi AG luxury-car unit.

Mr. Piëch's abstention surprised his cousin Wolfgang Porsche, who is chairman of Porsche's supervisory board and also serves on VW's supervisory board. In addition, it caused confusion about the plans of the Porsche and Piëch families, which control 100% of the voting rights in the sports-car maker.

Mr. Porsche said in a statement Friday that the "committee for special business connections" formed by the board vote could be dissolved at the next meeting of Volkswagen's supervisory board, the equivalent of a U.S. board of directors. Mr. Porsche added that Mr. Piëch backs the move to disband the committee.

"It wasn't in the interest of Ferdinand Piëch if there were uncertainties about the joint goal of the families regarding the stakeholding in VW," Mr. Porsche said.

Mr. Piëch, previously Volkswagen's chief executive, has close ties with the car maker's labor unions. His support is crucial for Porsche's plan to take over the wheel at Volkswagen, Europe's biggest auto maker by sales.

VW said Friday that sales in the first nine months of 2008 were up 3.9% from a year earlier at 4.8 million vehicles.