Postal Service $1-Million-an-Hour Loss Puts Abyss in View

Bloomberg News

Just how long the U.S. Postal Service can survive without Congress passing a bill to let it make fundamental changes may become more clear today when the agency reports its 11th consecutive quarterly loss.

Management will update the board on when the service may temporarily run out of cash before rebounding during the Christmas holiday season. The service has said its cash would touch zero in October, a forecast that assumed it wouldn’t make $11.6 billion in required payments to the U.S. Treasury for future retirees’ health-care costs.

Senator Tom Carper, a Delaware Democrat who is a sponsor of the postal overhaul legislation the Senate passed in April, said he expects today’s results to show the service’s condition is worsening.

“It’s going to be kind of hand to mouth,” said Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, whose members include heavy mailers such as Bank of America Corp. (BAC) and EBay Inc. (EBAY) “Their cash is so low, their liquidity overall is so low, that they’re going to be depending on the cash flow coming in the door.”

Congress went on recess Aug. 3, two days after the Postal Service defaulted on a $5.5 billion health-care payment, without passing a bill to allow changes the service says it needs to survive.

The service, which gets no direct taxpayer funding, is trying to close thousands of post offices and mail processing plants and cut about 220,000 jobs, more than a third of its workforce. Many of those changes require Congress’s approval.

$9.1 Billion

The Postal Service has said it’s losing $25 million a day. It reported losing $6.5 billion in its first two quarters of the fiscal year ending Sept. 30, and has predicted a loss of $9.1 billion for the full year.

Carper urged the House, which isn’t in session until Sept. 10, to pass a postal bill that can be reconciled with the Senate version in time for President Barack Obama to sign a measure into law this year.

The House and Senate have 13 more legislative days together scheduled this year.

“The House’s refusal to act on postal reform legislation is fiscally irresponsible and is further eroding confidence in both the Postal Service and in Congress’s ability to provide it with the reforms it needs to save itself,” Carper said in an e- mailed statement.

“I can only hope that as members of Congress are back in their districts meeting with their constituents over the next month, they will hear these concerns about the future of the Postal Service and be persuaded that they cannot continue to postpone passing comprehensive postal reform legislation until it is politically convenient.”

‘Urgent Need’

The Postal Service wants Congress to act, David Partenheimer, a spokesman, said.

“There remains an urgent need for legislative action as part of our business plan to return to financial stability,” he said in an e-mail.

When Congress returns, it may also be asked to pass a drought-relief package for states in the U.S. Midwest and extend George W. Bush-era tax cuts and will have spending bills that need its attention.

“Timing for the consideration of postal-reform legislation has not been set,” said Ali Ahmad, a spokesman for the House Oversight and Government Reform Committee, which passed a postal measure sponsored by Republican Representatives Darrell Issa of California and Dennis Ross of Florida.

Limping Along

“Chairman Issa and House leadership continue to monitor the Postal Service’s efforts to implement all cost-cutting measures they are able to do under current law as well as the Postal Service’s financial condition to ensure that there is no disruption in service,” Ahmad said.

While the service is staring down a cash shortage, it took some pressure off Congress by saying it can limp along for now by withholding the Treasury payments, Sackler, of the mailers’ coalition, said in an interview.

“The conventional wisdom is that Congress will not abdicate its responsibilities and will make sure the Postal Service continues,” he said. “The worry is, continue in what way?”

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Salesforce Attracts Big Rivals as Strategy Delivers

Even before Salesforce.com Inc. (CRM) went public in 2004, Chief Executive Officer Marc Benioff wasted few opportunities to poke fun at bigger, more established software companies, calling their products “landfill.”

In his management book “Behind the Cloud,” Benioff advised upstarts to “box above your weight.”

Now, Oracle Corp. (ORCL), SAP AG (SAP) and Microsoft Corp. (MSFT) are punching back, buying companies that offer business-management tools over the Internet, gaining traction in an area pioneered by Salesforce.

That’s stepping up pressure on Benioff to move beyonrd his core -- programs that manage sales -- and accelerate a push into software-development and social-media marketing, part of a bigger market valued by UBS AG at more than $100 billion.

Salesforce is facing pressure to expand into new markets.

When he started Salesforce, Benioff bet that wider use of the Internet would help enterprises stop buying servers and software and installing them in-house. The bet paid off, as companies look to use online services -- now called cloud computing -- to cut costs and streamline operations.

Salesforce now faces greater competition as Microsoft, Oracle and SAP have all made recent moves to become more broadly competitive against Salesforce.

For Rent

Concern over accelerating competition has diminished Salesforce’s value. The company’s enterprise value -- which accounts for its debt and market capitalization -- will fall to 5.85 times sales in the current fiscal year, versus its yearly average of 7.72 since 2005, data compiled by Bloomberg show. On the same basis, Oracle’s value has held up better amid an acquisition spree, with a ratio of 3.56 for its current year, compared with an average of 4.64.

Salesforce’s revenue growth may taper this year and next, from the 37 percent rate in the fiscal year that ended Jan. 31. The rally that lifted Salesforce’s stock 64 percent through April 19 from a low on Jan. 4 has since fizzled. The shares have declined 15 percent since that peak.

Benioff for years has beaten the drum for corporate software delivered as an online service as a more efficient way for companies to run sales, marketing and customer support. Instead of paying multimillion-dollar licensing fees up front, SAAS allows customers to rent applications by the month via a Web browser, with Salesforce handling updates.

Tough Rivals

Recently Oracle, SAP and Microsoft have all made moves that validate what Salesforce.com has been delivering to companies over the past decade.

Benioff, who recently joined the board of Cisco Systems Inc. (CSCO), spent 13 years at Oracle before starting Salesforce in 1999 with the blessing of Oracle CEO Larry Ellison, who also invested $2 million in the venture.
A decade later, Ellison, speaking at a posh Silicon Valley hotel three summers ago, lambasted Salesforce, accusing the software maker of repackaging decades-old technology. Cloud computing, Ellison ranted, was “nonsense.”

“All it is, is a computer attached to a network.” Of Salesforce, Ellison added, “They change a term and they think they’ve invented technology.”

These days, Ellison has embraced cloud computing, buying companies and starting his own online computing service to deliver Oracle’s business applications and database software.

Gathering Clouds

Oracle, based in Redwood City, California, says it’s already booked $1 billion from cloud computing, as well as online human resources and customer support companies it acquired in the past year. Customers include Yahoo! Inc. (YHOO), Starbucks Corp. (SBUX) and Hyatt Hotels Corp. (H)

Beyond the $13 billion customer relationship management software segment, UBS analyst Brent Thill estimates the broader platform software market, which includes databases and development tools, to be worth $101 billion.
“We’re the second biggest software-as-a-service provider today and to be honest with you, we just got started,” Oracle co-President Mark Hurd said in a recent interview.

Oracle also plans to add accounting, supply chain management, and manufacturing planning to its online offerings.

Dream Deals

SAP, the world’s largest maker of business management applications, reported better-than-estimated earnings thanks to its SuccessFactors online HR software. Redmond, Washington-based Microsoft, a perennial Benioff target, last month bought Yammer Inc., a Facebook-like corporate networking tool that competes with Salesforce’s Chatter.

To contend with the newfound competition, Salesforce is expanding into human resources and tools for marketing on Facebook and Twitter. At its annual Dreamforce conference on Sept. 18 in San Francisco, where Salesforce is based, the company plans to detail its new human resources offering. Benioff will unveil Work.com, which will let managers set organizational goals and recognize employees.

One of Salesforce's  customers DuPont has been acquiring companies through structured M&As and making a lot of acquisitions that give them new capabilities.  said DuPont Co. DuPont has standardized on three vendors -- SAP, Salesforce and Microsoft -- and expects each to deliver technology it can rent on a monthly basis.

Star Hire

Salesforce can hit $10 billion in sales given its pace of growth, though no target dates have been set. Analysts expect Salesforce to reach $10.8 billion in annual sales by 2020, according to estimates.

Salesforce has begun to lean on the expertise of a Silicon Valley engineering executive who joined Salesforce last year after spending 12 years at Oracle and almost three at SAP.

The challenge at Salesforce is that the company grew out of selling primarily to small and medium-sized businesses, not necessarily large enterprises.

The newest senior developer at Salesforce are determined to establish credibility after presiding over the years-late Fusion suite at Oracle, then departing SAP after less than three years.

Social Element

Salesforce and Oracle are also dueling to take advantage of growing corporate demand for marketers to create campaigns and garner product feedback from Facebook and Twitter users’ streams of posts.

Oracle bought closely held Involver Inc. following deals for Vitrue Inc. and Collective Intellect Inc. in the past three months. Google Inc. (GOOG) recently said it would buy Wildfire Interactive Inc. for about $250 million to let ad clients design social media marketing campaigns.

The acquisitions echo Salesforce’s $745 million latest deal for social marketing company Buddy Media Inc.

Oracle and Salesforce are buying social media ad delivery companies because they see a lot of activity, and the growth rates are very high.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Maersk to Add Prius of the Seas With Fuel-Saving Ships

Bloomberg News

A.P. Maersk-Moeller A/S (MAERSKB)’s planned fleet of the world’s largest container vessels will be as groundbreaking for their shape as their size.

The 20 ships will be the first cargo-box carriers with rounded hulls rather than streamlined V-shaped ones, according to Daewoo Shipbuilding & Marine Engineering Co. (042660), which is developing the 18,000-container vessels. The change reflects a shift by operators away from designing ships to go as fast as possible to instead emphasizing fuel economy.

“These vessels will be the Prius of the seas,” said Lee Jae Won, an analyst at Tongyang Securities Inc. (003470) in Seoul, referring to Toyota Motor Corp.’s distinctively-shaped hybrid car. “They’re fuel efficient and environmentally friendly.”

The fatter hulls will let Copenhagen-based Maersk install a fuel-efficient two-engine setup that’s too wide for current ships. It will also recover cargo capacity that is lost with tapered hulls, letting the ships carry 16 percent more boxes than vessels only a few meters smaller. Combined with other technologies, the ships will use about 35 percent less fuel per box than vessels now used on Asia-Europe routes and produce around 50 percent less carbon emissions, according to Maersk.

“The focus now is on how to consume less fuel,” said Odin Kwon, vice president of ship design at Seoul, South Korea-based Daewoo. “Ships currently in operation have been built only with speed in mind.”

Daewoo has begun the initial work for the first of the ships, which will cost about $183 million each. Deliveries are due to start next year and will run until the first half of 2015. Rounded hulls are common on commodity-carrying ships.

Slow-Steaming

Maersk, the world’s largest container-ship operator, is introducing the vessels as the industry contends with tighter emissions standards and fuel prices that have jumped about 40 percent in two years. The higher costs have already prompted shipping lines to slow vessels 18 percent over the past three years to an average speed of about 10.4 knots. That has cut fuel bills and eased global overcapacity that caused industrywide losses last year.

Reducing the speed of container ships by 10 percent can pare fuel consumption by as much as 30 percent, according to ship assessor Det Norske Veritas. A 25 percent reduction can cut carbon emissions by more than 350 tons a day per ship, the Transpacific Stabilization Agreement, a shipping group, said in 2010.

Ultra-Long Stroke

Still, these gains are limited by current ships’ focus on speed as they are fitted with engines that operate best when going fast. By contrast, the Maersk vessels are designed to operate efficiently at both high and low speeds.
Key to the change is the ships’ two propellers and their ultra-long stroke engines, a type usually only found in slow- moving commodity ships and tankers. The setup will use 4 percent less fuel than a single engine and propeller, Maersk said in an e-mailed response to Bloomberg News questions.

“Building vessels that are fuel efficient at different speeds will be the trend,” said Daewoo’s Kwon. “It will eventually dominate the market.”

The Maersk vessels, which will also feature a waste-heat recovery system, will still be able to go as fast as 23 knots. That compares with a top speed of 25 knots for the Emma Maersk, the largest container ship afloat.
The new vessels will be 59 meters wide and 400 meters long. That’s about 3 meters wider and 4 meters longer than the Emma, which holds 2,500 fewer boxes. The limited size increase means major European ports will be able to handle the ships without having to buy new cranes and other equipment. U.S. ports aren’t big enough for such vessels.

Toyota’s Prius, the world’s bestselling hybrid car, is renowned for its distinctive wedge shape. The 2012 plug-in version gets the equivalent of 58 miles per gallon in combined city and highway driving, according to a U.S. government website.

Evergreen Vessels

Other shipping companies are also adding more fuel- efficient vessels. Evergreen Group, owner of Asia’s second- biggest container line, is introducing twenty 8,452-box vessels fitted with electronic-controlled fuel-injection engines that support slow steaming. The ships, built by Samsung Heavy Industries Co. (010140), will also gain fuel savings from a design that minimizes the need for ballast water.

Neptune Orient Lines Ltd. (NOL) has six similar ships, built by Hyundai Heavy Industries Co. (009540) and Daewoo. STX Offshore & Shipbuilding Co. is building six container ships that will be the biggest after Maersk’s and which will “significantly” pare carbon emissions, it said in November.

Emissions Goal

Shipping lines are working to meet a goal of cutting emissions 30 percent by 2030 under a mandate from the United Nations’ International Maritime Organization. Those that miss this target will face penalties that are still under discussion.

The regulations will cut carbon emissions by an estimated 330 million tons a year by 2030, the IMO said in a 2011 statement. That will save an average of $50 billion a year in fuel costs by 2020 and $200 billion by 2030, it said. The rules will also stop the industry’s share of global emissions climbing from about 3.3 percent in 2007 to as much as 18 percent in 2050 amid rising trade, it said.

Ship owners may also be able to meet the tougher standards using technologies that can be fitted onto existing vessels. Hyundai Heavy, Daewoo and Samsung Heavy, the world’s three biggest shipyards, have developed devices that clean ballast water to reduce pollution or improve navigation to save fuel.

Hyundai Heavy has also developed a gas engine that can reduce carbon emissions by 20 percent compared with a diesel engine. Daewoo and MAN Diesel & Turbo SE have devised an engine system that uses liquefied natural gas.

Daewoo is also working on a technology that will spray bubbles along the bottom of ships, easing friction and fuel usage, Kwon said. Japanese yard Imabari Shipbuilding Co. said last year that it found 8 percent energy savings testing a similar system.

“It all shows that it’s going to be a fight about who can be the most efficient and make money,” said Park Moo Hyun, an analyst at E*Trade Securities Co. in Seoul. “It’s no longer just about who can go the fastest.”

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Refinery Fire Expected to Boost Gas Prices

Story first reported from USA Today

Motorists in West Coast states are about to see a big spike in gas prices, the fallout from a fire that cut production at one of the region's largest oil refineries.

Gasoline prices, now averaging $3.88 a gallon in California, $3.72 in Washington and $3.69 in Oregon, could surge to $4.15 to $4.25 a gallon over the next week to 10 days following Monday's partial shutdown of a Chevron refinery in Richmond, Calif.

Nationally, gasoline prices have climbed 27 cents a gallon in the past month. While the refinery fire will drive prices along the West Coast, it will also lift the national average — now $3.65 a gallon — above year-ago levels.

"August looks like a very touch-and-go month for the entire country," says Oil Price Information Service energy analyst Tom Kloza, who expects price relief after Labor Day. For the year to date, gasoline has averaged $3.61 a gallon — 10 cents more than 2011's full year average, the most expensive year ever, he says.

Patrick DeHaan, senior oil analyst for gasbuddy.com, expects California, Oregon and western Washington state to experience price spikes like the ones that hit major parts of the Midwest in June, when an Illinois refinery shut down and three others in the state cut production. Oil and gas consultants say that the price hikes are unavoidable.

"The West Coast is on the launch pad waiting for takeoff," DeHaan says. "We're talking over $4 a gallon, easily. It's not going to be good for motorists."

Prices in Illinois, Indiana, Michigan, Wisconsin and Minnesota remain up to 39 cents a gallon higher than the national average of $3.65 a gallon, according to the Oil Price Information Service. "The infection is going to spread from the Midwest to the West Coast," DeHaan says.

Wholesale prices in San Francisco and Los Angeles have already spiked more than 30 cents a gallon, some of the biggest one-day jumps ever. Those prices have yet to fully pass through at the pump, but are expected to continue pushing prices up through mid-August.

The Richmond refinery supplies about 140,000 barrels of gasoline a day, about 15% of northern California's daily consumption, Kloza says. Regional inventories were already low compared with the rest of the nation, he says.

Crude oil is up sharply since bottoming near $77 a barrel June 28. Wednesday, benchmark West Intermediate traded at nearly $95 before settling off 32 cents to $93.35 on news that weekly U.S. demand eased for the first time since June.

Monday's refinery fire caused billowing smoke for miles, prompting hundreds of nearby residents to seek medical care for eye irritation and breathing issues.

The blaze in the refinery's No. 4 Crude Unit was contained in about five hours, Chevron said, although there was a minor flareup Wednesday. Three employees suffered minor injuries.

The five-hour refinery fire caused billowing smoke for miles. Doctors Medical Center in nearby San Pablo said more than 300 people sought help, complaining of eye irritation and breathing problems. And Kaiser Permanente's Richmond Medical Center said it treated more than 350 people with respiratory concerns.

Carol Bluitt, who lives blocks from the refinery, says she was traumatized by the blaze. "You could clearly tell there was something toxic in the air," she says. "My eyes were really, really red and running."

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Population Loss, Economy Drive Midwest School Closings

Story first reported from USA Today

The Midwest has lost more than 2,100 public schools in recent years as school districts hammered by population loss scrambled to shift students and save money.

From 2006-07 through 2010-11, the region saw a net loss of 2,110 K-12 schools, according to a USA TODAY analysis of U.S. Department of Education data. The rest of the nation had a net gain of 965, largely from growth in the West.

The closings — which often see students moved to other buildings in a district — can affect home prices and businesses and often take an emotional toll on residents.

"It's like losing the soul of the community," said Terry Ryan, vice president for Ohio Programs & Policy at the Thomas B. Fordham Institute, a public policy center focused on education. "It's a painful experience."

The Midwest has been losing schools for some time, but the trend has accelerated in the past decade, largely because of economic issues, Ryan said.

The analysis examined the operational status of more than 100,000 schools each year to identify those flagged as closed. It found:

•Much of the Midwest's school loss came in three states: Michigan, Minnesota and Ohio. There, the number of schools fell by 1,694.

•The schools that closed during the five years studied had served nearly 1.5 million students. Buildings marked as closed in 2010-11 alone served 351,600 students.

•The faster-growing regions of the West and South saw gains. California, Texas and Arizona had a total net gain of 1,133 schools.

School enrollment — and the pressure to open or close schools — follows larger demographic shifts.

In the Midwest, the number of people younger than 18 fell by more than 519,000, or 3%, from 2000 to 2010, according to the U.S. Census.

In Ohio, the Warren City School District shrank its 14 schools to five in two years, closing all elementary and middle schools and consolidating into four K-8 schools and a high school.

"We lost a lot of jobs here," said Larry Simpson, president of the Warren Community PTA. "The steel industry was one of the main employers in Warren. Not anymore."

In Jewell County, Kan., two districts merged in 2006 and later took in students from a third district that closed in 2009. The moves left five buildings empty. One school had gone from an enrollment of 195 a decade ago to 95 in 2008.

"The reality is we didn't have enough students to fill the buildings," said Darrell Bohnert, president of the Jewell City Council.

People used to come into the city for school events, but with less traffic, the lone gas station in town has suffered and a coffee shop closed.

"Our patrons are loyal, so we still do pretty good business, but we don't see the fuel sales we did from when the schools were here," said Jeff Williams, a Randall Coop gas station employee.

Major cities aren't exempt. In Detroit, the district has closed more than 100 schools in recent years.

When it closed in 2007, Mackenzie High School was nearly 80 years old and housed more than 1,000 students, down from nearly 5,000 in the 1950s. One of its best-known alums is NFL halfback Jerome Bettis, who retired after winning a Super Bowl in his hometown and serves the community with his non-profit group, The Bus Stops Here Foundation. "You didn't understand why a school with so much history was closing," Bettis said.

Bettis attended the ribbon-cutting of a new pre-K-8 school that will open in the fall on the old campus of his high school. "It's obviously not the same as it was, but it was great to see that some of the legacy will still be there," Bettis said.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Can America Survive Without the United States Postal Service?

Story first reported from Yahoo.com

As the United States Postal Service misses key financial payments, critics and supporters speculate about bankruptcy or worse for an institution that predates the Constitution and the Declaration of Independence.

USPS officials have said they will miss two benefit payments mandated by Congress, which has caused a whirlwind of speculation about the future of the Postal Service.

The United State Postal Service is one of the few current government institutions spelled out in the Constitution.

The ability of Congress to “establish Post Offices and Post Roads” is spelled out in Article I, Section 8, of the Constitution, as part of a short list of enumerated congressional powers.

The Framers saw the postal system as critical to facilitating commerce and communications among the 13 states, and it was ranked as a high-priority item, along with the ability to create money, form an army, and ensure fair trade among states.

A lot has changed in 225 years, and today, the Postal Service is in a bad financial way–and subject to the control of a Congress that can’t agree on financial assistance for it.

One problem is the unique charter for the Postal Service: It is a federal institution and Congress has an oversight role (along with the executive branch), but the Postal Service has to pay its own way.

A second issue is that a 2006 act requires the Postal Service to fund its employee retirement plan for decades in advance. That additional cost has places a huge financial burden on the Post Office.

A third issue is that the Postal Service has a heavy union presence, which critics say restricts its ability to cut costs and remain competitive with UPS and FedEx.

And finally, the Postal Service has taken a huge financial hit on profits from first-class mail and package delivery, thanks to UPS, FedEx, the Internet, and mobile devices.

Rand Paul, the libertarian senator from Kentucky, told the conservative website Newsmax that a bankruptcy filing was certainly in the Postal Service’s future.

Paul says the USPS, as a private or public institution, needs to contain union costs, and only a bankruptcy filing would let the Post Office cut expenses related to its unionized employees.

Fredric Rolando, the head of the letter carriers’ union, says it’s an issue with congressional policy that is causing the business crisis.

“Besides bringing the Postal Service to the financial precipice, pre-funding also has prevented the agency from doing what it has done for 200 years–adapt to an evolving society. Instead, this artificial political crisis has focused management’s entire energy on a desperate attempt to pay bills that no one else has to pay,” he said in a statement.

What happens to the Postal Service?

Postal Service critics also want to see the service made into a privately run institution. One idea put out by conservative think tanks is that the USPS could monetize its huge real estate inventory, valued as high as $105 billion, to defray costs, attract investment and remain competitive with other delivery services.

But realistically, could the Postal Service actually shut down, if its problems grow worse and Congress can’t or doesn’t act to help? And how would Americans in rural areas or citizens with a lack of access to digital alternatives survive a postal outage?

No Immediate Shutdown for the Postal Service

For a variety of reasons, the Postal Service doesn’t face an immediate shutdown. For pure business reasons, UPS and FedEx partner with the Postal Service on local delivery, especially for packages ordered via Internet shopping. A shutdown would have a ripple effect on the whole package delivery business, and on businesses that market through the mail.

And then there is the issue of privatization and how the process would work.

Proponents of selling the Postal Service believe it would provide a financial lifeline to the 225-year-old system.

Rand Paul, however, points out one key problem.

“I’ve been trying to find somebody who would buy it. I can’t find anybody who’s interested in buying the Post Office. We’ve talked about this for decades,” he told Newsmax.

One reason is the huge unfunded pension obligation compiled by the Postal Service over the years. A buyer would have to pick up the tab for $46 billion, just in pension costs, according to a Bloomberg analysis.

Peter Orszag, an economist and former Obama administration official, argues that privatization is the only way to go, because it would remove Congress from having any role with the Postal Service.

“The U.S. Postal Service has a long and storied history. Yet it is now struggling because the world has changed and because congressional sclerosis has prevented it from adapting to the new realities. The best way to modernize it now is to move it out of the government,” he says.

Finally, there are a slew of potential constitutional issues related to removing the Post Office from the government system.

Postal Service supporters say it is a constitutionally mandated institution, pointing to the Postal Clause in Article 1, Section 8, but privatization supporters believe Congress was only given an option to establish the Post Office.

Add to the fray all the various interest groups tied to the Postal Service, from unions to local politicians.

Also, some people don’t have electronic communications devices and live in rural locations that only the Postal Service serves. Would there be a legal obligation to provide access to mail that would include government communications, like tax information or social security payments, as well as everyday mail?

And imagine the post office’s fate as argued as a Supreme Court case. The Postal Clause is one of the few enumerated powers in the Constitution. As seen in the recent health care decision, there are a lot of creative lawyers and academics who would certainly like a part of what could be an historic decision.

For now, the Postal Service doesn’t seem to be going anywhere, but there are huge questions about its role with Congress and how it can operate as a self-sustaining business.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

Much ado about YouTube, AppleGoo and iOS 6.0

Story reported from  CNN.com

"Apple killing YouTube on iPhone just happens to be the last straw," Jeff Jarvis tweeted Monday when he learned that the next generation of iPhones won't have a YouTube app on their opening screen. "Went into the AT&T store today to begin switch to my Android phone."

That Jarvis, whose "What Would Google Do?" was a 2009 bestseller, was still using an iPhone three years later says a lot about how Apple's (AAPL) iOS stacks up against Google's (GOOG) Android.

That he's switching now says even more about the hysteria with which bloggers and tweeters greeted the news that YouTube had fallen out of the latest release of iOS.

It was still the lead story Tuesday morning on Techmeme, which provided links to more than four dozen news items on the subject. "Apple and Google both win by killing the native iOS YouTube app, but we all lose," wrote The Verge's  Niley Patel. "It's all about money and machismo," opined TheNextWeb's Matthew Panzarino.

Well, not entirely. First of all, as Google made clear before the end of the day, there will continue a YouTube app on the iPhone -- one that Google will write and maintain.

Moreover, it's not at all certain who "killed" Apple's version of the app. According to Apple, its license to put YouTube in iOS had run its course, and apparently it was in both parties' interest to let it lapse.

It's true that between Google Maps and Google's YouTube, Apple seems to be cutting the ties with the firm that seemed so close when Google  chairman Eric Schmidt shared the stage with Steve Jobs at the iPhone's 2007 unveiling and cracked a joke about how close the two firms had grown ( "If we just sort of merge the companies we could call them AppleGoo.")

But it's also true, as Panzarino points out, that from Apple's point of view the app had served its purpose:

The native YouTube app was an effort to legitimize HTML5-compatible video. Apple used it as leverage, got the entire YouTube catalog converted over to iPhone-friendly video and everyone else followed suit. If you were an iPhone user in the early days, you'll remember that the entire catalog wasn't available at launch. Google, who had recently purchased YouTube, started crunching through all of the videos, converting them over to HTML containers and caught up some months afterwards.

This was a huge factor in the sidelining of Flash video. Now, HTML5-compatible MP4 video is the standard so Apple doesn't need a native YouTube presence built into iOS any more.

Google, meanwhile, gets to design its own YouTube app, push out more frequent updates, and do something it's probably been itching to do for a long time: Sell the YouTube ads on iOS that it runs everywhere else. "Google stands to make a ton of money from ads," writes Panzarino.

More money, I would venture to guess, than it was getting from the deal it cut with Apple in simpler times, before the smartphone wars.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Google Googles for Yield, Finds Auto Bonds

Story first reported from WSJ.com

Feeling lucky, Google Inc.  has found a new place to park some of its $40 billion cash hoard: bonds backed by car loans.

The Mountain View, Calif., company has plowed hundreds of millions of dollars in recent months into asset-backed securities, tied largely to automobile loans and consumer credit-card payments. Among Google's recent purchases: triple-A-rated debt from car makers Honda Motor Co.  and Hyundai Corp.  Google had previously restricted itself to U.S. Treasurys, high-quality corporate bonds and other low-risk securities.

Google's foray into auto lending is the latest sign that ultralow rates on the longtime standby of corporate treasurers, highly liquid Treasury securities, are pushing cash-rich U.S. companies to find new places to put their money. That shift has been a boon for bond issuers, even if buyers are only trying to squeeze a bit more juice out of their portfolios.

"We are not trying to hit a home run here," said Google's treasurer, Brent Callinicos.

The shift has benefited issuers of bonds backed by credit cards and auto loans. Through Aug. 2, $60.68 billion of bonds tied to car loans had been sold in the U.S., according to Thomson Reuters. That is up 50% from a year earlier and the highest figure at this point of the year since 2005.

Market participants say the ABS offerings have grown to meet demand, enabling companies to borrow in larger chunks—in some cases at rates unseen since before the crisis. Late last month, a unit of Nissan Motor Co. priced $1.4 billion of bonds—increased from a planned $1 billion—at an average rate of 0.48%, a record low.

Google, the fourth-most cash-rich company in the S&P 100 after General Electric Co., Goldman Sachs Group Inc. and Microsoft Corp., according to FactSet, isn't alone in piling into these offerings. The search firm joins diversified manufacturer 3M Co.  and payroll-services company Automatic Data Processing Inc., which also have purchased asset-backed securities this year, the companies said.

About 80 firms, including asset managers and a handful of corporations, look into buying bonds in the typical auto ABS deal, said Brian Wiele, head of the Americas securitization syndicate at Barclays. That is double the typical figure of a year ago, he said, and deals are being sold in about a day and a half—roughly half of the average time last year.


"We have seen very good participation from corporates," said Amanda Magliaro, head of the asset-backed syndicate at Citigroup, which led the Nissan offering. "Investors have confirmed their own belief that the asset-backed market is safe and very liquid."

The auto portion of an ABS index compiled by Barclays has returned 2.34% this year on deals with an average maturity of just over two years. That compares with 0.30% for comparable Treasurys this year.

Some recent asset-backed securities have been priced to yield as little as 0.5%, but even that is enough of a premium to two-year Treasurys yielding 0.2% for company treasurers as they weigh acquisitions and other longer-term options for deploying cash.

"Auto and credit-card ABS performed well during the crisis," said Scott Krohn, vice president and treasurer in the financing arm of 3M, based in St. Paul, Minn.

So far, asset-backed securities represent less than 1% of Google's cash.

The company says it buys short-term, high-quality debt and participates in deals that are usually overcollateralized. That means for every $100 of loans in the pool there may be only $85 of bonds, for example—lowering the risk that purchasers of the debt will have their payments squeezed by defaults.

An ADP spokesman said the company's ABS holdings account for a number in the low-single-digit percentage of its investment portfolio.

John Bella, managing director in ABS at Fitch Ratings, said net losses on auto asset-backed securities have fallen steadily since the crisis four years ago, and the deals are now backed by stronger collateral, or loans made to so-called prime borrowers.

Their high credit scores and the strength of the loans' performance during the most recent downturn may have helped investors gain more confidence in the debt as an alternative haven.

Only about 1% of the loans originated in 2011 and packaged into auto asset-backed securities are expected by Fitch to default, compared with 2.6% of the loans in auto deals originated in 2007, Mr. Bella said.

Still, there are risks to the bonds in an economic slowdown, should consumers fall behind on their loan repayments.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

US Unemployment Applications Rise to 365,000

Story first reported from ajc.com

WASHINGTON — The number of people seeking U.S. unemployment benefits rose last week, though the data was likely skewed higher by seasonal factors. A Denver employment lawyer says although the news seems discouraging, unemployment applications are actually down from a month ago.

Weekly applications increased by 8,000 to a seasonally adjusted 365,000, the Labor Department said Thursday. The four-week average, a less volatile measure, fell for the sixth straight week to 365,500, the lowest since March 31.

The decline in the four-week average suggests the job market could be improving a bit. But economists are viewing last month's figures with some caution because the government struggles every July to account for temporary summer shutdowns in the auto industry. This year was even more complicated because some automakers skipped the shutdowns, resulting in fewer layoffs.

A Labor Department spokesman said the latest figures should be the last affected by the auto shutdown issues.

Even so, some economists saw positive signs in this week's report.

Separately, the Commerce Department said businesses placed fewer orders with U.S. factories in June compared to May, another sign that manufacturing is weakening. Factory orders fell 0.5 percent in June and a measure of business investment plans declined by 1.7 percent. Demand dropped for heavy machinery, computers and cars. A separate Denver labor and employment lawyer suggests that other sectors of the economy may finally be picking up.

Weekly unemployment applications are a measure of layoffs. When they consistently fall below 375,000, it suggests hiring is strong enough to pull the unemployment rate down.

Consumers are holding back on spending and the economy is showing other signs of weakening. But the dip in applications shows that companies aren't laying off workers in response.

The seasonal distortions could affect the July employment report, which the Labor Department will release on Friday.

Economists predict employers added 100,000 jobs last month. That would be slightly better than the 75,000 a month average from April through June but still below the healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2 percent.

The economy isn't growing fast enough to lower the unemployment rate.

Growth slowed to an annual rate of just 1.5 percent from April through June, down from a 2 percent rate in the first quarter and a 4.1 percent rate in the fourth quarter of 2011.

The Federal Reserve cited the slowdown in growth after its two-day policy meeting, which concluded Wednesday. While the Fed took no new action at the meeting, it appeared to signal a growing inclination to take further steps to lift the economy out of its slump.

The overall number of people receiving benefits fell. Almost 6 million people received jobless aid in the week ended July 14, the latest data available. That's about 70,000 fewer than the previous week.

Consumers have grown more cautious about spending, a key reason growth faltered. Manufacturing shrank in July for the second straight month, according to a survey by a trade group of purchasing managers. A Philadelphia labor and employment lawyer says that without more promising job growth, consumers will likely continue being wary about spending, thus preventing growth furthermore.

Europe's economic crisis, which has already dampened demand for U.S. exports, could slow manufacturing further.

Worries have also intensified the U.S. economy will fall off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. A recession could follow, Fed Chairman Ben Bernanke has warned.

Many economists believe the Fed could launch another program of buying government bonds and mortgage-backed securities at its September meeting if the economy doesn't show improvement. The goal of the program, known as quantitative easing, would be to drive long-term rates, which are already at record lows, even lower.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

Unemployment Checks Running Out

Story first reported from USA Today

Since abruptly losing her $312 weekly unemployment check in June, Laurie Cullinan has depleted her savings, sought food from the Salvation Army and lit candles to save electricity.

If she can't find a job this month, the Royal Oak, Mich., resident worries she'll be evicted from her apartment, an unthinkable prospect for the 52-year-old, who enjoyed a solidly middle-class lifestyle until she lost her office-manager job two years ago.

"What am I going to do if I'm homeless?" says Cullinan, who collected unemployment for 1½ years. "My mind won't let me comprehend that."

Cullinan is among about 1 million long-term unemployed Americans whose jobless benefits are phasing out this year as the federal government reels in Great Recession lifelines that provided unemployment checks for as long as 99 weeks in many states. By year's end, another 2 million will see their checks cut off sooner than Cullinan's were, because extended unemployment benefits will end beyond the standard 26 weeks that states pay for. Congress could renew the program, but many economists say that's unlikely.

The cutbacks, required by a federal law passed in February, are already taking a toll. They are nudging some Americans into poverty, straining social services just as states and localities face their own budget woes and further crimping weak economic growth as those who lose benefits spend less.

The number of jobless workers has fallen from over 15 million in early 2010 to about 13 million now, but the share of unemployed workers collecting jobless benefits has dropped more sharply. It was about two out of three in 2010, but it's less than one in two now. Next year only about one in four will receive payments, according to the National Employment Law Project (NELP).

"There's going to be lots of people without any income still unable to find a job," says George Wentworth, a senior staff attorney for NELP. "You're going to see these people not be able to feed their families and not able to pay their mortgages. It will have a devastating impact on a lot of local economies."

Wentworth, like other advocates for the unemployed, does not accuse Congress of acting rashly, and he believes some scaling back of benefits was warranted. The federal government spent $59 billion on extended unemployment benefits last year and the up-to-99-week periods of subsidies are unprecedented in any economic downturn.

The February legislation was seen as a compromise that kept payments flowing but phases them out as state unemployment rates fall from near-record levels. Yet the cutoffs are coming as job growth has slowed to an average monthly pace of 75,000 in the second quarter from 225,000 in the first quarter. Unemployment rates rose in 27 states in June. The government is expected to report today that the U.S. gained 100,000 jobs in July and the unemployment rate stayed at 8.2%, according to a consensus forecast of economists.

States eye ways to save

Some states, including Illinois, Michigan and South Carolina, have trimmed even initial benefits to less than 26 weeks, and some have cut the size of payments and restricted eligibility. Florida residents must apply online and take a lengthy skills test, keeping some from receiving unemployment insurance.

Under the federal compromise, states are truncating the second phase of benefits, which helps people unemployed from 27 to 79 weeks, when their jobless rate falls below certain levels. The reduction in so-called emergency unemployment compensation will affect about 600,000 recipients through December and 2 million more at year's end, NELP says.

The biggest impact so far has been on the final phase, known as extended benefits, which provides an additional 13 to 20 weeks to those who have been jobless as long as 79 weeks. Benefits in that phase depend on a formula that requires state jobless rates to be higher than the past three years — a tough standard to meet with unemployment falling from recent peaks. So far this year, more than 500,000 Americans in 32 states and Washington, D.C., have lost extended benefits. This month, Idaho will end the program, effectively eliminating it nationwide.

Economists worry most about the likely suspension of all benefits past 26 weeks at year's end. The average unemployed American has been out of work 40 weeks, according to the Labor Department, and there are still about three jobless people for every job opening.

"We're still in a world where you can't expect anybody to find a job within a specific period of time because there aren't enough jobs out there," says Jesse Rothstein, economist at University of California-Berkeley. "I think it still calls for pretty long extensions."

Workers who lost jobs in the recession and exhausted their benefits by January 2010 had a poverty rate of nearly one in five, and about 40% had incomes below 200% of the poverty threshold, according to a Government Accountability Office study this year.

Since jobless people tend to spend virtually all of their income, the phase-out of benefits may cut up to two-tenths of a percentage point off economic growth over the next year, says Mark Zandi, chief economist of Moody's Analytics. Unemployment checks average about $300 a week and typically pay about half of a recipient's former salary.

Is job-hunting delayed?

The development also has renewed a debate about whether such payments encourage job seekers to stay unemployed longer while hunting for a position most to their liking. Some studies have found that extended benefits increase unemployment by a half to one percentage point or even more.

"If we start reducing unemployment benefits, I think workers will make tough decisions they have to make to either reduce their wage demands or move to states like North Dakota where the economy is doing better," says Chris Edwards, an economist at the conservative Cato Institute.

Hank Finke, 54, of Westborough, Mass., concedes that after he lost his job as a sales vice president, he was unwilling to accept anything less than a national sales manager position and 75% of his former pay. But after his unemployment benefits ran out last year, he started considering regional sales head jobs and a 50% pay cut. He still hasn't found work.

Cullinan says her job search grew more desperate after she received a notice in April that her benefits would end in June, 20 weeks earlier than she had anticipated. Michigan cut maximum benefits from 99 to 79 weeks earlier this year because the state's unemployment rate was no longer rising. When Cullinan lost her $32,500-a-year office-manager job, she first sought similar positions but quickly decided she'd settle for being a part-time cashier at McDonald's or a Starbucks barista.
"I can't even get a job doing that," she says.

Cullinan supports a partner who hasn't worked since a job-related injury four years ago. Faced with losing her benefits, "I went into pure panic mode," she says, seeking jobs as a warehouse worker, gas-station cashier, hospital janitor or food server. "I would take any job that's offered to me. You want me to dig a ditch, and pay me, I would do that."

But Cullinan rejects the idea that losing benefits makes her more likely to land a job, observing that if she can't pay her $635 monthly rent and is evicted from her apartment, she'll have no Internet service. "All the ways I have of looking for work — if I lose my home, I no longer have that," she says. "I feel like my safety net was dropped out from under me."

Till Von Wachter, a labor economist at the University of California-Los Angeles, says unemployment compensation's negative economic effects matter less in tough times when there are fewer jobs. They are likely outweighed by the financial hardships people suffer after losing their benefits, he says.

 "The debate has gone a little bit too far," he says. "It's very hard to pretend that all these people just didn't want to work."

A study by Rothstein last fall, one of the few to examine the effects of expanded benefits in the recent downturn, found they boosted joblessness in early 2011 by only about 0.3 percentage points. Just over half the increase was due to older workers who kept seeking jobs, as they must to be eligible for benefits, staying in the labor force longer rather than retiring.

Indeed, many older workers who lose benefits do drop out of the labor force and retire. That lowers unemployment but also could hurt consumer spending and the economy.

Patricia Kirby, 62, is considering retiring early and tapping Social Security benefits after her $450-a-week unemployment payment was cut off after 79 weeks in May. Kirby, who lives in Studio City, Calif., lost her job as managing director of an opera training company in 2010, and has had no luck finding similar jobs or even part-time retail sales positions. When her benefits ended, Kirby largely stopped looking. "I took a break because it gets so depressing," she says.

Kirby and her husband, Terry, who does sporadic work to help film studios with location shoots, are hurting but not in dire shape. They've stopped donating to charities and dismissed the housekeeper. They're also drawing thousands of dollars from savings monthly.

Many others who exhaust benefits apply for Social Security disability benefits, which are for people who can no longer work for health reasons. In a 2011 study, economist Matthew Rutledge of the Center for Retirement Research found that the jobless are significantly more likely to apply for disability when their unemployment checks stop. That further strains disability fund reserves, which are projected to be inadequate to provide full benefits to all beneficiaries by 2016.

Joe Sangataldo, 54, of Vineland, N.J., is healthy and eager to work, making his grinding two-year job hunt even more frustrating. Sangataldo says he was more selective when he first lost his job — as an unemployment office worker who monitored benefit recipients' job searches — in October 2010.

"You try to avoid taking the worst job in the world while you have the time to shop for maybe a new career," says Sangataldo, who recently got an associate degree in accounting to go along with a bachelor's in human resources.

But his search for civil-service jobs proved fruitless. He lived off jobless benefits for about 21 months until the $407 weekly check stopped July 7. Sangataldo has sought jobs as a front-desk clerk in Atlantic City, a server at a cookie stand, and a bathroom janitor. With Vineland area unemployment at 13%, he still has come up empty.

Sangataldo, who is single and lives in his deceased mother's house with no mortgage, has applied for food stamps and will seek Medicaid. He plans to sell many of his and his mother's clothes at a yard sale.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.