By John McCrank and Randall Palmer
TORONTO/OTTAWA (Reuters) - Canada joined the tough talk of the Obama administration about the auto industry on Monday, saying no car maker is too big to fail, but it nonetheless offered billions of dollars in bridge financing to the Canadian units of General Motors and Chrysler.
Industry Minister Tony Clement said the plans set out by GM Canada and Chrysler thus far fall short of making them viable and called for further concessions all around.
"The old rule book is thrown out the window. I don't think anything is too big to fail, but we're going to give it our best shot at having a restructured auto sector and this is all part of it," Clement told CBC television.
He made the statement after announcing C$4 billion ($3.2 billion) in loans to tide the two automakers over while they come up with new restructuring plans.
The governments of Canada and the province of Ontario will provide Chrysler with C$1 billion, advancing C$250 million right away. They will distribute another C$500 million in early April and the remainder as of May 1.
"Very clearly, if the money had not been forwarded today, (Chrysler) would not have been able to meet payroll today or tomorrow," Clement told a news conference in Ottawa.
"So we were faced with this choice of a disorderly bankruptcy ... We felt now was the time to announce this."
GM is eligible for up to C$3 billion in bridge loans and the government said it hoped to close that deal "very soon".
Ottawa and Ontario first announced the short-term financing in December but neither company has drawn on it.
Canada will provide no further financing unless acceptable plans are produced. If they aren't, the government would have the option of calling the loans.
In addition to proving their viability, the companies will have to commit to maintaining 20 percent of their North American production in Canada.
On Monday, Washington demanded tough new restructuring plans at GM and Chrysler and forced out GM's chief executive.
Clement said the Canadian and U.S. governments were working closely on the file. He said Ottawa endorsed plans arrived at jointly with the United States under which Chrysler would have until the end of April to come up with a viability plan that must include a link-up with Italy's Fiat SpA.
LABOR CONCESSIONS
Chrysler will also have to find a compromise with the Canadian Auto Workers union on cutting labor costs, while Canada says a deal that the union already cut with GM does not go far enough.
The union recently agreed to reopen the three-year contract deals it reached with the companies last May to help GM and Chrysler qualify for government aid.
Earlier this month, the CAW reached a deal with GM that the company said will eliminate nearly C$1 billion of costs related to its retired workers from its books, on top of cutting active labor costs by more than C$7 an hour.
Chrysler has said it needs a better deal from the union, or it could be forced to pull its operations out of Canada.
Clement said the GM-CAW deal falls short of what's required.
The Canadian government is "expecting General Motors and the CAW to continue their discussions, particularly on the issue of legacy costs where it has become apparent there wasn't as much progress as we would have liked to have seen," he said, referring to costs related to retiree benefits.
CAW President Ken Lewenza dismissed the idea of reopening the contract with GM to address legacy costs, saying there was nothing the union could do even if it wanted to.
"You can't do it in bargaining, and nor will we," he said at a press conference in Toronto. "I mean, at the end of the day, it's not legal to say to pensioners that you're not entitled to the pension benefits that you left on."
However, Clement said that if the companies enter bankruptcy protection in the United States, they would do the same in Canada, and the unions would then be forced to take a "haircut" along with everyone else.
"While we believe in the long-term viability of these companies, I agree with President Obama that we must also consider the possibility of court-supervised restructuring," he said.
Later, he elaborated to the CBC: "Bankruptcy protection is a whole new ball game for unions as well as for pension holders and others. I would suggest to them that it's in their best interest to start discussing these things directly with the companies."
Lewenza said the union would be willing to sit down with the federal and provincial governments, and the companies, to look at the possibility of setting up a plan similar to what the United Auto Workers union and the companies have agreed.
In the United States, GM and Chrysler have obligations to a retiree healthcare trust, known as a Voluntary Employee Beneficiary Association, and are pushing the UAW to allow them to pay the union in stock rather than cash for half of the remaining obligations.
($1=$1.26 Canadian)
(Additional reporting by Louise Egan and David Ljunggren; Editing by Peter Galloway)
Monday, March 30, 2009
Sunday, March 29, 2009
General Motors CEO To Step Down
CityNews.ca Staff
An announcement out of Detroit has taken the auto world by surprise.
Officials with the Obama administration say General Motors CEO Rick Wagoner will step down immediately at the request of the White House. The news comes as President Obama prepares to unveil additional restructuring plans designed to save the domestic auto industry.
Obama will put forth the strategy Monday as part of the conditions for more government loans for GM and Chrysler.
Wagoner, 56, has been chairman and chief executive since 2003 and has said it would be better if he led the company through its current crisis.
Canadian Auto Workers Union head Ken Lawenza says word of Wagoner's departure is a shock and comes at a bad time for the ailing company.
An announcement out of Detroit has taken the auto world by surprise.
Officials with the Obama administration say General Motors CEO Rick Wagoner will step down immediately at the request of the White House. The news comes as President Obama prepares to unveil additional restructuring plans designed to save the domestic auto industry.
Obama will put forth the strategy Monday as part of the conditions for more government loans for GM and Chrysler.
Wagoner, 56, has been chairman and chief executive since 2003 and has said it would be better if he led the company through its current crisis.
Canadian Auto Workers Union head Ken Lawenza says word of Wagoner's departure is a shock and comes at a bad time for the ailing company.
Saturday, March 28, 2009
Ontario joins the club, will plunge into deficits totalling $56.8B over seven years
By Maria Babbage, The Canadian Press
TORONTO - Make room in that gaping fiscal hole you're digging Canada - beleaguered Ontario is jumping in with $56.8 billion in deficit spending over seven years.
The province will sink into massive shortfalls as it rips apart its tax system and pumps the economy full of high-octane infrastructure dollars designed to overhaul its economic clunker into a leaner, meaner, more business-friendly machine.
Ontario is leading a parade of deficit spending among the provinces hard hit by the global economic downturn, with only Saskatchewan and Manitoba staying on the sidelines so far.
The federal government is expected to rack up $85 billion in deficits by the spring of 2013, when it hopes to break free from the recession.
But it will take the country's most populous province until 2015 to balance the books again, pushing its accumulated deficit to about $162 billion.
Ontario's $109-billion budget will slash corporate taxes to soup up its investment appeal, but may hit the skids with a politically risky plan to merge its provincial sales tax with the five per cent federal GST in 2010 to help reduce business costs.
For consumers, kids' clothing and shoes, car booster seats, diapers, books and new homes under $400,000 are among the items to be exempt from Ontario's eight per cent portion of the 13 per cent harmonized sales tax.
But a score of other items won't escape the new levy, including gasoline, home heating fuel and real estate fees. Even haircuts and beauty treatments will be hit.
Quebec, Nova Scotia, New Brunswick and Newfoundland and Labrador have already harmonized their sales taxes with the GST, a move that became politically unpopular for some when consumers ended up paying more for goods that were previously exempt from the provincial tax.
But of all the provinces, Ontario got the sweetest deal from Ottawa, which is kicking in $4.3 billion over two years to grease the harmonization wheels, experts said.
To ease the pain of switching to a single tax in 2010 and reduce the political fallout, Ontario will give modest income tax breaks to most taxpayers and offer government cheques totalling $1,000 for a family earning under $160,000.
Single people making less than $80,000 will receive $300.
Ontario residents can expect to start seeing the first of three instalments in June 2010.
Businesses will get $4.5 billion in tax cuts over three years and see corporate income taxes drop to 10 per cent by 2013 from the current 14.
It was a stunning detour for a Liberal government that repeatedly thumbed its nose at its federal masters for demanding that Ontario slash taxes to that level to spur investment.
This year, tax reform isn't just necessary, it's "essential," said Finance Minister Dwight Duncan, who defended his sudden about-face.
"This package is the right package for the right time," he said.
"The world's changed since last year... I never imagined a George Bush administration would nationalize banks. I never thought I'd see things like that."
While past Liberal budgets splurged on education and health, this one will try to rev up a sluggish economy and preserve jobs with $27.5 billion over two years to build hospitals, roads and public transit, with Ottawa kicking in another $5 billion.
Nearly $700 million will be added for skills training.
Ontario will also provide $390 million for its share of a federal green infrastructure program and invest $250 million over five years in green technology.
The province's poorest will get a boost in welfare rates and $1.2 billion for social and affordable housing.
But the road to economic recovery will be a bumpy one, starting with a record $14.1-billion deficit in 2009-10 and $12.1 billion in the next.
The last time Ontario saw a shortfall that large, the NDP held the province's purse strings, "Basic Instinct" was big at the box office, Charles and Di's marriage was on the rocks and Johnny Carson was retiring from "The Tonight Show."
But relative to government spending, it still won't top 1992's $12.4-billion deficit on expenses totalling $57.2 billion.
Rising health-care costs and plunging corporate tax revenues were largely to blame for the province's $4-billion shortfall in the fiscal year ending March 31.
Ontario will bleed red ink for six more years but stick to a diet of spending less than it takes in, which should allow it to rebalance the books in 2015, Duncan said.
The government will also tighten its belt by freezing salaries for provincial politicians, cutting five per cent of jobs in the public service - in some case, by shifting workers to the federal payroll - over three years, and finding $1 billion in "efficiencies" in 2011-12.
It's the same year that total spending is expected drop by $2.8 billion - its first decline in years.
Ottawa has seen its deficit figures questioned by the federal budget officer just two months after it delivered its budget, but Ontario's deficit targets are achievable, said TD economist Derek Burleton.
"So yes, they could move to bring the budget into balance sooner, but that would certainly come at the cost of some of the progress made in terms of tax competitiveness and other areas," he said.
Duncan insists his controversial tax harmonization plan won't line provincial coffers at the expense of consumers, but opposition leaders were quick to label it a cash grab that would whack disheartened taxpayers in the wallets at a time when they can least afford it.
The budget is "worthless" for people looking for hope in the midst of a painful recession, said interim Progressive Conservative Leader Bob Runciman.
Rather than put Ontario on the path to prosperity, it will saddle the province with the biggest debt in its history, he added.
"It means more taxes today on everything from gasoline to everyday services," he said.
"And it means more taxes tomorrow when we have to pay for (Premier) Dalton McGuinty's record deficit."
The last cheque aimed at compensating consumers hit with higher costs under the tax harmonization plan will go out in June 2011, just a few months before voters head to the polls for an October election.
"The McGuinty government is trying to bribe them with their own money," said NDP Leader Andrea Horwath.
But federal Finance Minister Jim Flaherty, who also once was Ontario's finance minister, praised the province's decision to merge the PST with the GST.
"This is a tremendous boost for business in that province," Flaherty said in a speech Thursday night at McGill University in Montreal.
He predicted the plan will save Ontario businesses $5 billion a year - $500 million in administrative costs alone.
"This is investment, this is jobs, this is good economic policy," said Flaherty, who expects the remaining non-harmonized provinces to follow.
"It means that 75 to 80 per cent of Canadian businesses will now be able to do business in a harmonized way."
The budget also failed to deliver significant new money for hospitals or a commitment to hire at least 2,000 more nurses, labour leaders complained.
That money would have stimulated the economy because it would have been spent in the province, said Sid Ryan, president of CUPE Ontario.
"Giving corporate tax breaks - that's not going to create jobs in this province," he said.
Ontario's real gross domestic product - a barometer of its economic health - is expected to fall 2.5 per cent in 2009, after sliding 0.4 per cent in 2008.
The budget predicts the province will recover with 2.3 per cent growth in 2010 and 3.3 per cent in 2011.
http://ca.news.yahoo.com/s/capress/090326/national/ontbudget_main
--
Johnathan Vrozos, Vrozos, Toronto, Canada,
TORONTO - Make room in that gaping fiscal hole you're digging Canada - beleaguered Ontario is jumping in with $56.8 billion in deficit spending over seven years.
The province will sink into massive shortfalls as it rips apart its tax system and pumps the economy full of high-octane infrastructure dollars designed to overhaul its economic clunker into a leaner, meaner, more business-friendly machine.
Ontario is leading a parade of deficit spending among the provinces hard hit by the global economic downturn, with only Saskatchewan and Manitoba staying on the sidelines so far.
The federal government is expected to rack up $85 billion in deficits by the spring of 2013, when it hopes to break free from the recession.
But it will take the country's most populous province until 2015 to balance the books again, pushing its accumulated deficit to about $162 billion.
Ontario's $109-billion budget will slash corporate taxes to soup up its investment appeal, but may hit the skids with a politically risky plan to merge its provincial sales tax with the five per cent federal GST in 2010 to help reduce business costs.
For consumers, kids' clothing and shoes, car booster seats, diapers, books and new homes under $400,000 are among the items to be exempt from Ontario's eight per cent portion of the 13 per cent harmonized sales tax.
But a score of other items won't escape the new levy, including gasoline, home heating fuel and real estate fees. Even haircuts and beauty treatments will be hit.
Quebec, Nova Scotia, New Brunswick and Newfoundland and Labrador have already harmonized their sales taxes with the GST, a move that became politically unpopular for some when consumers ended up paying more for goods that were previously exempt from the provincial tax.
But of all the provinces, Ontario got the sweetest deal from Ottawa, which is kicking in $4.3 billion over two years to grease the harmonization wheels, experts said.
To ease the pain of switching to a single tax in 2010 and reduce the political fallout, Ontario will give modest income tax breaks to most taxpayers and offer government cheques totalling $1,000 for a family earning under $160,000.
Single people making less than $80,000 will receive $300.
Ontario residents can expect to start seeing the first of three instalments in June 2010.
Businesses will get $4.5 billion in tax cuts over three years and see corporate income taxes drop to 10 per cent by 2013 from the current 14.
It was a stunning detour for a Liberal government that repeatedly thumbed its nose at its federal masters for demanding that Ontario slash taxes to that level to spur investment.
This year, tax reform isn't just necessary, it's "essential," said Finance Minister Dwight Duncan, who defended his sudden about-face.
"This package is the right package for the right time," he said.
"The world's changed since last year... I never imagined a George Bush administration would nationalize banks. I never thought I'd see things like that."
While past Liberal budgets splurged on education and health, this one will try to rev up a sluggish economy and preserve jobs with $27.5 billion over two years to build hospitals, roads and public transit, with Ottawa kicking in another $5 billion.
Nearly $700 million will be added for skills training.
Ontario will also provide $390 million for its share of a federal green infrastructure program and invest $250 million over five years in green technology.
The province's poorest will get a boost in welfare rates and $1.2 billion for social and affordable housing.
But the road to economic recovery will be a bumpy one, starting with a record $14.1-billion deficit in 2009-10 and $12.1 billion in the next.
The last time Ontario saw a shortfall that large, the NDP held the province's purse strings, "Basic Instinct" was big at the box office, Charles and Di's marriage was on the rocks and Johnny Carson was retiring from "The Tonight Show."
But relative to government spending, it still won't top 1992's $12.4-billion deficit on expenses totalling $57.2 billion.
Rising health-care costs and plunging corporate tax revenues were largely to blame for the province's $4-billion shortfall in the fiscal year ending March 31.
Ontario will bleed red ink for six more years but stick to a diet of spending less than it takes in, which should allow it to rebalance the books in 2015, Duncan said.
The government will also tighten its belt by freezing salaries for provincial politicians, cutting five per cent of jobs in the public service - in some case, by shifting workers to the federal payroll - over three years, and finding $1 billion in "efficiencies" in 2011-12.
It's the same year that total spending is expected drop by $2.8 billion - its first decline in years.
Ottawa has seen its deficit figures questioned by the federal budget officer just two months after it delivered its budget, but Ontario's deficit targets are achievable, said TD economist Derek Burleton.
"So yes, they could move to bring the budget into balance sooner, but that would certainly come at the cost of some of the progress made in terms of tax competitiveness and other areas," he said.
Duncan insists his controversial tax harmonization plan won't line provincial coffers at the expense of consumers, but opposition leaders were quick to label it a cash grab that would whack disheartened taxpayers in the wallets at a time when they can least afford it.
The budget is "worthless" for people looking for hope in the midst of a painful recession, said interim Progressive Conservative Leader Bob Runciman.
Rather than put Ontario on the path to prosperity, it will saddle the province with the biggest debt in its history, he added.
"It means more taxes today on everything from gasoline to everyday services," he said.
"And it means more taxes tomorrow when we have to pay for (Premier) Dalton McGuinty's record deficit."
The last cheque aimed at compensating consumers hit with higher costs under the tax harmonization plan will go out in June 2011, just a few months before voters head to the polls for an October election.
"The McGuinty government is trying to bribe them with their own money," said NDP Leader Andrea Horwath.
But federal Finance Minister Jim Flaherty, who also once was Ontario's finance minister, praised the province's decision to merge the PST with the GST.
"This is a tremendous boost for business in that province," Flaherty said in a speech Thursday night at McGill University in Montreal.
He predicted the plan will save Ontario businesses $5 billion a year - $500 million in administrative costs alone.
"This is investment, this is jobs, this is good economic policy," said Flaherty, who expects the remaining non-harmonized provinces to follow.
"It means that 75 to 80 per cent of Canadian businesses will now be able to do business in a harmonized way."
The budget also failed to deliver significant new money for hospitals or a commitment to hire at least 2,000 more nurses, labour leaders complained.
That money would have stimulated the economy because it would have been spent in the province, said Sid Ryan, president of CUPE Ontario.
"Giving corporate tax breaks - that's not going to create jobs in this province," he said.
Ontario's real gross domestic product - a barometer of its economic health - is expected to fall 2.5 per cent in 2009, after sliding 0.4 per cent in 2008.
The budget predicts the province will recover with 2.3 per cent growth in 2010 and 3.3 per cent in 2011.
http://ca.news.yahoo.com/s/capress/090326/national/ontbudget_main
--
Johnathan Vrozos, Vrozos, Toronto, Canada,
Wednesday, March 25, 2009
Chrysler to leave Canada?
Extent of concessions questioned, analyst says
OTTAWA–The head of Chrysler issued a grim threat to federal politicians last night, warning the struggling automaker may shut down its plants in Canada if it doesn't get significant labour concessions and government aid.
"Chrysler LLC cannot afford to manufacture products in a jurisdiction that is uncompetitive, relative to other jurisdictions," president Tom LaSorda told a parliamentary committee.
Chrysler's labour costs in Canada are about $20 an hour more than the costs of automakers like Toyota and Honda, LaSorda told the committee.
"Currently, Chrysler CAW (Canadian Auto Workers) are not competitive," he said.
The automaker also asked for roughly $2.3 billion (U.S.) from the Canadian and Ontario governments and demanded relief in a tax dispute with Ottawa.
"Failure to satisfactorily resolve these three factors will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce," LaSorda said.
The tax issue involves tax assessments from the 1990s that Chrysler Canada should have earned greater profits than reported in Canada, the automaker said in a brief submitted to the committee.
Chrysler is challenging the assessments, but has had to pay a security and wants an assurance it won't have to pay any more while the dispute is being resolved.
Analysts say the automaker is teetering on the brink of bankruptcy and labour costs are only a small part of its problems.
LaSorda told reporters after his testimony to the House of Commons finance committee that his direct tone was needed to lay out the facts in a serious situation.
"Bottom line, we needed to be very, very clear, and ambiguity doesn't help the process. These are the things that Chrysler needs," he said. "I thought when I came up here today the Canadian government wanted to hear what are the true facts."
He said the Canadian Auto Workers agreement reached with General Motors Corp. last weekend would not eliminate even half of Chrysler's labour cost gap.
"The current agreement with GM is unacceptable and we have to break the pattern," LaSorda said.
Chrysler has 9,400 direct employees in Canada, including more than 3,000 at its Brampton assembly plant. Another 25,900 work at dealerships.
Including suppliers and retirees, the company said 100,000 Canadians depend directly or indirectly on Chrysler Canada.
Meanwhile, an industry watcher says consumers, politicians and the media don't think worker concessions at General Motors of Canada Ltd. are significant enough to qualify for taxpayers' money.
Dennis DesRosiers, president of DesRosiers Automotive Consultants, said yesterday the three groups don't believe freezes in wages and extra costs for health care are sufficient to qualify for more than $6 billion in government loans.
They also think public assistance in shoring up the company's pension shortfall is inappropriate, DesRosiers said in a note to clients.
"These groups are wrong on all these perceptions. All of these items and the many others negotiated are `transformational' and will save hundreds of millions.
"But they don't accept this and don't understand this and they have been `spun' so many times in the past they have a hard time believing GM when told the opposite."
DesRosiers, who appeared before a parliamentary subcommittee last night, said he senses the extent of concessions will create trouble for GM in its bid for aid.
"I hope I'm wrong, but I'm very worried that GM misread public sentiment and that this whole thing might blow up in their face," DesRosiers said.
"In the meantime, we should support what GM did with their labour agreement and hopefully Ford and Chrysler will address these very visible irritants in their negotiations."
DesRosiers said the public can't understand why GM workers didn't lose all their special holidays plus company funding for legal bills, child care and tuition, since many employees in the country don't have such benefits.
Furthermore, he said GM workers don't contribute to their own pension plan, but now the company wants the Ontario government to help cover a huge shortfall.
"How does a politician explain to a taxpayer who has lost a third to half of their RRSP contributions that they have to cover part of the liability of the CAW pension fund when these workers don't contribute to their own pensions," he said.
The Canadian Press, with files from Tony Van Alphen and Reuters
OTTAWA–The head of Chrysler issued a grim threat to federal politicians last night, warning the struggling automaker may shut down its plants in Canada if it doesn't get significant labour concessions and government aid.
"Chrysler LLC cannot afford to manufacture products in a jurisdiction that is uncompetitive, relative to other jurisdictions," president Tom LaSorda told a parliamentary committee.
Chrysler's labour costs in Canada are about $20 an hour more than the costs of automakers like Toyota and Honda, LaSorda told the committee.
"Currently, Chrysler CAW (Canadian Auto Workers) are not competitive," he said.
The automaker also asked for roughly $2.3 billion (U.S.) from the Canadian and Ontario governments and demanded relief in a tax dispute with Ottawa.
"Failure to satisfactorily resolve these three factors will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce," LaSorda said.
The tax issue involves tax assessments from the 1990s that Chrysler Canada should have earned greater profits than reported in Canada, the automaker said in a brief submitted to the committee.
Chrysler is challenging the assessments, but has had to pay a security and wants an assurance it won't have to pay any more while the dispute is being resolved.
Analysts say the automaker is teetering on the brink of bankruptcy and labour costs are only a small part of its problems.
LaSorda told reporters after his testimony to the House of Commons finance committee that his direct tone was needed to lay out the facts in a serious situation.
"Bottom line, we needed to be very, very clear, and ambiguity doesn't help the process. These are the things that Chrysler needs," he said. "I thought when I came up here today the Canadian government wanted to hear what are the true facts."
He said the Canadian Auto Workers agreement reached with General Motors Corp. last weekend would not eliminate even half of Chrysler's labour cost gap.
"The current agreement with GM is unacceptable and we have to break the pattern," LaSorda said.
Chrysler has 9,400 direct employees in Canada, including more than 3,000 at its Brampton assembly plant. Another 25,900 work at dealerships.
Including suppliers and retirees, the company said 100,000 Canadians depend directly or indirectly on Chrysler Canada.
Meanwhile, an industry watcher says consumers, politicians and the media don't think worker concessions at General Motors of Canada Ltd. are significant enough to qualify for taxpayers' money.
Dennis DesRosiers, president of DesRosiers Automotive Consultants, said yesterday the three groups don't believe freezes in wages and extra costs for health care are sufficient to qualify for more than $6 billion in government loans.
They also think public assistance in shoring up the company's pension shortfall is inappropriate, DesRosiers said in a note to clients.
"These groups are wrong on all these perceptions. All of these items and the many others negotiated are `transformational' and will save hundreds of millions.
"But they don't accept this and don't understand this and they have been `spun' so many times in the past they have a hard time believing GM when told the opposite."
DesRosiers, who appeared before a parliamentary subcommittee last night, said he senses the extent of concessions will create trouble for GM in its bid for aid.
"I hope I'm wrong, but I'm very worried that GM misread public sentiment and that this whole thing might blow up in their face," DesRosiers said.
"In the meantime, we should support what GM did with their labour agreement and hopefully Ford and Chrysler will address these very visible irritants in their negotiations."
DesRosiers said the public can't understand why GM workers didn't lose all their special holidays plus company funding for legal bills, child care and tuition, since many employees in the country don't have such benefits.
Furthermore, he said GM workers don't contribute to their own pension plan, but now the company wants the Ontario government to help cover a huge shortfall.
"How does a politician explain to a taxpayer who has lost a third to half of their RRSP contributions that they have to cover part of the liability of the CAW pension fund when these workers don't contribute to their own pensions," he said.
The Canadian Press, with files from Tony Van Alphen and Reuters
Monday, March 23, 2009
Stock markets jump on Suncor-PetroCan merger, U.S. bank plan
By Malcolm Morrison, The Canadian Press
TORONTO - New life has been breathed into the March stock market rally by a major deal in the Canadian energy sector and another stab at helping American banks remove as much as US$1 trillion in bad loans from their books.
Toronto's S&P/TSX composite index surged 367.3 points to 8,873.6 late in the morning after Suncor Energy Inc. (TSX:SU) and Petro-Canada (TSX:PCA) announced a merger in an all-stock deal creating a combined company valued at $43.3 billion.
The new enterprise is to operate under the Suncor name with existing Petro-Canada shareholders owning 40 per cent.
The Canadian dollar was ahead 0.61 of a cent to 81.29 cents US.
New York's Dow Jones industrial average gained 280 points to 7,558.4.
The Nasdaq composite index jumped 52.16 points to 1,509.43. The S&P 500 index moved up 30.15 points to 798.7 after the Treasury Department announced a plan to revive lending that would rely on the government's US$700-billion financial rescue fund, the Federal Reserve and the Federal Deposit Insurance Corp., as well as private investors.
TORONTO - New life has been breathed into the March stock market rally by a major deal in the Canadian energy sector and another stab at helping American banks remove as much as US$1 trillion in bad loans from their books.
Toronto's S&P/TSX composite index surged 367.3 points to 8,873.6 late in the morning after Suncor Energy Inc. (TSX:SU) and Petro-Canada (TSX:PCA) announced a merger in an all-stock deal creating a combined company valued at $43.3 billion.
The new enterprise is to operate under the Suncor name with existing Petro-Canada shareholders owning 40 per cent.
The Canadian dollar was ahead 0.61 of a cent to 81.29 cents US.
New York's Dow Jones industrial average gained 280 points to 7,558.4.
The Nasdaq composite index jumped 52.16 points to 1,509.43. The S&P 500 index moved up 30.15 points to 798.7 after the Treasury Department announced a plan to revive lending that would rely on the government's US$700-billion financial rescue fund, the Federal Reserve and the Federal Deposit Insurance Corp., as well as private investors.
Suncor, Petro-Canada merge to create company worth $43.3 billion
By Lauren Krugel, The Canadian Press
CALGARY - Suncor Energy Inc. (TSX: SU.TO) and formerly government-owned Petro-Canada (TSX: PCA.TO) are merging to create a $43.3-billion global energy giant, which executives from both firms say will thrive in the economic downturn.
The combined company, which will operate under the Suncor name, will be the largest energy company in Canada and the fifth largest in North America.
"It's a made-in-Canada response to the challenges presented by global market uncertainty today, and more importantly it's a made-in-Canada strategy to unleash the potential of these two great companies and their people in the future," Petro-Canada CEO Ron Brenneman said on a conference call with analysts Monday.
"We need to face head-on the issue of global competition in a time of economic uncertainty. In these difficult times, we believe that joining forces provides the strength we need to be a leader in value creation in an extremely competitive industry."
Petro-Canada shareholders would own 40 per cent of the new Calgary-headquartered entity, assuming a proposed share swap approved by the boards of the two companies goes through as planned.
The companies, both headquartered in Calgary, both active in the Alberta oilsands and both involved in refining and retailing, say their plan will reduce their costs by $300 million at a time when Alberta's oilpatch grapples with tough economic conditions.
Petro-Canada shares (TSX: PCA.TO) shot up nearly 24 per cent in morning trading on the Toronto Stock Exchange, rising $7.09 to C$36.74 while Suncor's stock gained five per cent, or $1.60 cents to C$32.50.
Petro-Canada's portfolio spans Canada and the globe, with assets in the oilsands, the East Coast, Libya, the North Sea and elsewhere.
By contrast, Suncor, the oldest and second-largest oilsands operator, has bulk of its activities centred around that industry.
Suncor chief executive Rick George told the conference call that the merged company would be focused on Canada and the oilsands, but that all of the assets will be evaluated.
"This will be a very disciplined approach. It will not be scattergun. But it will be a Canadian oilsands-centric type of strategy," George said.
While the combined entity will keep the Suncor name on the corporate level, Petro-Canada's brand will remain when it comes to selling refined products like gasoline and diesel.
"What we're trying to do here is take advantage of the brand value that both of these companies represent. We believe that Suncor has an excellent brand recognition in the investment community and that's why we've chosen together to go forward with the Suncor name corporately," said Brenneman.
"But we also recognize that Petro-Canada has the No. 1 brand recognition in the Canadian marketplace and so we want to take advantage of that by marketing our petroleum products jointly through the Petro-Canada brand."
Current Suncor shareholders receive a share in the new venture for each Suncor share they own, and collectively own 60 per cent, while investors who own Petro-Canada stock will receive 1.28 shares of the new company for each share they hold.
The deal values Petro-Canada at $19.18 billion based on Friday's closing prices on the Toronto Stock Exchange. The new corporation boasts 7.5 billion barrels of oil equivalent per day in proved and probable reserves, the two companies said.
The deal, which is subject to regulatory and shareholder approval, is slated to close in the third quarter of 2009.
The companies said the merged corporation will continue to be bound by the Petro-Canada Public Participation Act, a piece of federal legislation that prohibited any group from holding more than 20 per cent of voting shares in the former Crown corporation.
In accordance with the act, the new company will be based in Calgary, where headquarters for both Suncor and Petro-Canada are currently located.
The merged entity will be smaller than other global heavyweights such as Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: CP), which boast market capitalizations of US$326.6 billion and US$55.97 billion respectively.
However, the takeover of Petro-Canada signals the end of an integrated oil company first created by Pierre Trudeau's Liberal government in the 1970s to assert Canadian control over the country's energy sector.
The deal comes weeks after the Ontario Teachers Pension Plan, which holds a 3.3 per cent stake in Petro-Canada, launched action aimed at increasing shareholder value in the company. Reports said the province's largest pension fund was pushing for restructuring at the oil and gas firm.
Suncor and Petro-Canada are among the many Canadian energy firms to put off building massive oilsands projects due to languishing commodity prices and rattled financial markets.
Analysts say a fully integrated oilsands project, in which the oil is both extracted and processed, need oil prices of anywhere from US$75 to US$100 per barrel to be economically viable. Crude prices were trading at more than US$52 early Monday, but have been much lower in recent months.
George said in January that two of the company's major oilsands projects would be put into "safe mode" for the time being.
Phases 3 through 6 of its steam-assisted gravity drainage Firebag oilsands project have been shelved, as have plans to build an upgrader to process bitumen from its Voyageur mine into refinery-ready synthetic crude oil.
-With files from Michelle McQuigge in Toronto
CALGARY - Suncor Energy Inc. (TSX: SU.TO) and formerly government-owned Petro-Canada (TSX: PCA.TO) are merging to create a $43.3-billion global energy giant, which executives from both firms say will thrive in the economic downturn.
The combined company, which will operate under the Suncor name, will be the largest energy company in Canada and the fifth largest in North America.
"It's a made-in-Canada response to the challenges presented by global market uncertainty today, and more importantly it's a made-in-Canada strategy to unleash the potential of these two great companies and their people in the future," Petro-Canada CEO Ron Brenneman said on a conference call with analysts Monday.
"We need to face head-on the issue of global competition in a time of economic uncertainty. In these difficult times, we believe that joining forces provides the strength we need to be a leader in value creation in an extremely competitive industry."
Petro-Canada shareholders would own 40 per cent of the new Calgary-headquartered entity, assuming a proposed share swap approved by the boards of the two companies goes through as planned.
The companies, both headquartered in Calgary, both active in the Alberta oilsands and both involved in refining and retailing, say their plan will reduce their costs by $300 million at a time when Alberta's oilpatch grapples with tough economic conditions.
Petro-Canada shares (TSX: PCA.TO) shot up nearly 24 per cent in morning trading on the Toronto Stock Exchange, rising $7.09 to C$36.74 while Suncor's stock gained five per cent, or $1.60 cents to C$32.50.
Petro-Canada's portfolio spans Canada and the globe, with assets in the oilsands, the East Coast, Libya, the North Sea and elsewhere.
By contrast, Suncor, the oldest and second-largest oilsands operator, has bulk of its activities centred around that industry.
Suncor chief executive Rick George told the conference call that the merged company would be focused on Canada and the oilsands, but that all of the assets will be evaluated.
"This will be a very disciplined approach. It will not be scattergun. But it will be a Canadian oilsands-centric type of strategy," George said.
While the combined entity will keep the Suncor name on the corporate level, Petro-Canada's brand will remain when it comes to selling refined products like gasoline and diesel.
"What we're trying to do here is take advantage of the brand value that both of these companies represent. We believe that Suncor has an excellent brand recognition in the investment community and that's why we've chosen together to go forward with the Suncor name corporately," said Brenneman.
"But we also recognize that Petro-Canada has the No. 1 brand recognition in the Canadian marketplace and so we want to take advantage of that by marketing our petroleum products jointly through the Petro-Canada brand."
Current Suncor shareholders receive a share in the new venture for each Suncor share they own, and collectively own 60 per cent, while investors who own Petro-Canada stock will receive 1.28 shares of the new company for each share they hold.
The deal values Petro-Canada at $19.18 billion based on Friday's closing prices on the Toronto Stock Exchange. The new corporation boasts 7.5 billion barrels of oil equivalent per day in proved and probable reserves, the two companies said.
The deal, which is subject to regulatory and shareholder approval, is slated to close in the third quarter of 2009.
The companies said the merged corporation will continue to be bound by the Petro-Canada Public Participation Act, a piece of federal legislation that prohibited any group from holding more than 20 per cent of voting shares in the former Crown corporation.
In accordance with the act, the new company will be based in Calgary, where headquarters for both Suncor and Petro-Canada are currently located.
The merged entity will be smaller than other global heavyweights such as Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: CP), which boast market capitalizations of US$326.6 billion and US$55.97 billion respectively.
However, the takeover of Petro-Canada signals the end of an integrated oil company first created by Pierre Trudeau's Liberal government in the 1970s to assert Canadian control over the country's energy sector.
The deal comes weeks after the Ontario Teachers Pension Plan, which holds a 3.3 per cent stake in Petro-Canada, launched action aimed at increasing shareholder value in the company. Reports said the province's largest pension fund was pushing for restructuring at the oil and gas firm.
Suncor and Petro-Canada are among the many Canadian energy firms to put off building massive oilsands projects due to languishing commodity prices and rattled financial markets.
Analysts say a fully integrated oilsands project, in which the oil is both extracted and processed, need oil prices of anywhere from US$75 to US$100 per barrel to be economically viable. Crude prices were trading at more than US$52 early Monday, but have been much lower in recent months.
George said in January that two of the company's major oilsands projects would be put into "safe mode" for the time being.
Phases 3 through 6 of its steam-assisted gravity drainage Firebag oilsands project have been shelved, as have plans to build an upgrader to process bitumen from its Voyageur mine into refinery-ready synthetic crude oil.
-With files from Michelle McQuigge in Toronto
Saturday, March 21, 2009
Canadian Oil Sands cuts 2009 Syncrude estimate
TORONTO (Reuters) - Canadian Oil Sands Trust said on Friday it is cutting its 2009 outlook for production from the Syncrude Canada Ltd oil sands venture, the world's largest producer of synthetic oil.
Canadian Oil, the joint venture's largest owner, cut the production forecast to 109 million barrels from 115 million barrels. It said this works out to 40 million barrels of production net to the trust, down from 42.3 million.
The revised estimate comes after Canadian Oil Sands said on Tuesday that Syncrude had taken one of its main processing units offline for two months of planned maintenance.
It said then that coker 8-3, part of Syncrude's upgrading operations, will undergo modifications to improve yield and run length during the turnaround.
Syncrude, which can produce as much as 350,000 barrels a day, has two other coker units that turn tar-like crude from the oil sands into refinery-ready light oil.
The trust said on Friday that the reduced forecasts are due to an extension in the schedule for turnaround work on Coker 8-3 and Syncrude's largest sulphur plant.
"As a result of these events, Syncrude production is expected to be lower in the first half of 2009 than originally anticipated," it said in statement.
"Canadian Oil Sands continues to expect modest turnaround activity and more reliable operations at Syncrude in the second half of 2009, resulting in improved production rates."
The trust cut its outlook for the range of Syncrude's 2009 production to 105 million to 112 million barrels from the previous range of 110 million barrels to 120 million barrels. The revised forecast works out to 38.6 million to 41.1 million barrels net to the trust.
The trust warned that the extension in the turnaround schedule is also expected to result in higher operating costs.
It said the exact amount of the costs could not be determined for now, but will be disclosed if material information becomes known. The trust will update investors when they release results on April 29.
Syncrude's other partners are Imperial Oil Ltd , Petro-Canada , ConocoPhillips , Nexen Inc , Nippon Oil Corp unit Mocal Energy Ltd and Murphy Oil Corp .
(Reporting by Jeffrey Hodgson; Editing by Gary Hill)
Canadian Oil, the joint venture's largest owner, cut the production forecast to 109 million barrels from 115 million barrels. It said this works out to 40 million barrels of production net to the trust, down from 42.3 million.
The revised estimate comes after Canadian Oil Sands said on Tuesday that Syncrude had taken one of its main processing units offline for two months of planned maintenance.
It said then that coker 8-3, part of Syncrude's upgrading operations, will undergo modifications to improve yield and run length during the turnaround.
Syncrude, which can produce as much as 350,000 barrels a day, has two other coker units that turn tar-like crude from the oil sands into refinery-ready light oil.
The trust said on Friday that the reduced forecasts are due to an extension in the schedule for turnaround work on Coker 8-3 and Syncrude's largest sulphur plant.
"As a result of these events, Syncrude production is expected to be lower in the first half of 2009 than originally anticipated," it said in statement.
"Canadian Oil Sands continues to expect modest turnaround activity and more reliable operations at Syncrude in the second half of 2009, resulting in improved production rates."
The trust cut its outlook for the range of Syncrude's 2009 production to 105 million to 112 million barrels from the previous range of 110 million barrels to 120 million barrels. The revised forecast works out to 38.6 million to 41.1 million barrels net to the trust.
The trust warned that the extension in the turnaround schedule is also expected to result in higher operating costs.
It said the exact amount of the costs could not be determined for now, but will be disclosed if material information becomes known. The trust will update investors when they release results on April 29.
Syncrude's other partners are Imperial Oil Ltd , Petro-Canada , ConocoPhillips , Nexen Inc , Nippon Oil Corp unit Mocal Energy Ltd and Murphy Oil Corp .
(Reporting by Jeffrey Hodgson; Editing by Gary Hill)
Friday, March 20, 2009
Canadian inflation rises a more-than-expected 1.4 per cent in February
By Julian Beltrame, The Canadian Press
OTTAWA - Canadian inflation jumped more than expected in February, reversing a five-month trend toward lower prices and calming concerns of deflation.
Statistics Canada reported Thursday a sizable 0.7 per cent price increase from January to February and said the annual inflation rate rose to 1.4 per cent - not a large number but significant given that overall inflation had been falling since September.
The Bank of Canada had forecast prices could drop in the absolute during the second and third quarters of this year, raising the spectre of deflation - which comes with fears of nasty spirals in which prices and wages fall in a vicious downward cycle.
But the 0.3 percentage point annual inflation increase from January's 1.1 per cent rate makes that "a remote risk," said Douglas Porter, deputy chief economist with BMO Capital Markets.
"I think there's just a little more underlying pressure on inflation and it's coming partly from the steady rebound in gasoline prices we've seen since the start of the year and partly from the impact of the lower Canadian dollar," Porter said, adding that it has decreased the odds that prices will dip into negative territory for longer than a few months this year.
Porter said the central bank may still resort to non-traditional means of stimulating economic activity - now that interest rates are too low too drop much further - but said it would almost certainly be less dramatic than what the U.S. Federal Reserve has done.
Labour economist Erin Weir of the United Steelworkers also welcomed the slight uptick in inflation as a sign that deflation is diminishing as a concern.
But he cautioned that the Canadian economy remains in need of stimulus and urged Bank of Canada governor Mark Carney to continue with his monetary easing policies.
"The Bank of Canada was right to raise the possibility of credit and quantitative easing and should also consider targeting a zero per cent interest rate," he said.
The Canadian dollar was up 0.56 cent to 80.80 cents US on Thursday after soaring by as much as 1.78 cents earlier in the day to 82.02 cents, the first time it had been above 82 cents since early February.
The currency markets sold off U.S. dollars on concerns of future price escalation in the United States following the Fed's announcement Wednesday afternoon that it will buy up to US$300 billion in Treasury bonds.
"It's a primarily U.S. selling story rather than a Canadian buying story," said Sacha Tihanyi, a currency strategist with Scotia Capital.
"The Federal Reserve announcement spooked currency marketers because they are afraid that could stoke inflation and devalue the currency."
He said the loonie's rise was not as pronounced as other major currencies, mostly because of suggests that Carney may also resort to quantitative easing if credit conditions don't improve.
Porter said the lower loonie is especially being reflected in food costs, since a significant portion of what Canadians eat is imported, especially during the winter months.
The next move by the Canadian central bank is likely to cut the overnight interest rate on April 21, Porter predicted, and if more measures are needed, would likely limit quantitative easing to purchasing commercial paper.
The central bank governor said last weekend that Canada's economy is proving weaker than expected, increasing the chances he will take some action in April to try and make credit to business and consumers more available and cheaper.
The big danger in increasing the money supply, cautioned Porter, is that central banks overshoot by printing too much money and ignite a serious inflation problem.
Although the annual inflation increase was higher than economists had expected, the uptick was moderate and not a total surprise given that U.S. inflation also rose slightly during the month after declining for some time.
Leading the charge was food prices, which have been rising for almost a year.
The cost of food prices at grocery stores rose 8.9 per cent in February, but particularly pronounced was the 25.8 per cent spike in fresh vegetables, 9.7 per cent increase in baked goods and cereal and a 6.1 per cent rise in meat prices.
The inflation rate in Canada would already be close to zero if food was taken out of the calculation, Statistics Canada said.
Shelter costs due to higher mortgage costs also rose in February by three per cent, although that was lower than the 3.3 per cent year-over-year rise the previous month.
But gasoline prices remain the major drag on inflation in Canada.
Although the cost of filling up rose 5.6 per cent last month from January, gas prices were still 19.7 per cent lower than they were a year ago and continue to apply downward price pressure on transportation costs in general.
Also lower in February was the cost purchasing and leasing a passenger vehicle, down 6.4 per cent from last year, clothing, footwear, household appliances and home entertainment equipment.
Wages are also moderating. Canadian wage increases eased to just 2.1 per cent in January from 3.1 per cent in December.
The Bank of Canada core inflation rate, which excludes energy and some food costs, remained 1.9 per cent, near the two-per-cent desired target.
Regionally, prices tended to increase most in the prairie provinces last month and least in the Atlantic provinces. Inflation ranged from 2.6 per cent in Saskatchewan to a meagre 0.3 per cent in New Brunswick.
OTTAWA - Canadian inflation jumped more than expected in February, reversing a five-month trend toward lower prices and calming concerns of deflation.
Statistics Canada reported Thursday a sizable 0.7 per cent price increase from January to February and said the annual inflation rate rose to 1.4 per cent - not a large number but significant given that overall inflation had been falling since September.
The Bank of Canada had forecast prices could drop in the absolute during the second and third quarters of this year, raising the spectre of deflation - which comes with fears of nasty spirals in which prices and wages fall in a vicious downward cycle.
But the 0.3 percentage point annual inflation increase from January's 1.1 per cent rate makes that "a remote risk," said Douglas Porter, deputy chief economist with BMO Capital Markets.
"I think there's just a little more underlying pressure on inflation and it's coming partly from the steady rebound in gasoline prices we've seen since the start of the year and partly from the impact of the lower Canadian dollar," Porter said, adding that it has decreased the odds that prices will dip into negative territory for longer than a few months this year.
Porter said the central bank may still resort to non-traditional means of stimulating economic activity - now that interest rates are too low too drop much further - but said it would almost certainly be less dramatic than what the U.S. Federal Reserve has done.
Labour economist Erin Weir of the United Steelworkers also welcomed the slight uptick in inflation as a sign that deflation is diminishing as a concern.
But he cautioned that the Canadian economy remains in need of stimulus and urged Bank of Canada governor Mark Carney to continue with his monetary easing policies.
"The Bank of Canada was right to raise the possibility of credit and quantitative easing and should also consider targeting a zero per cent interest rate," he said.
The Canadian dollar was up 0.56 cent to 80.80 cents US on Thursday after soaring by as much as 1.78 cents earlier in the day to 82.02 cents, the first time it had been above 82 cents since early February.
The currency markets sold off U.S. dollars on concerns of future price escalation in the United States following the Fed's announcement Wednesday afternoon that it will buy up to US$300 billion in Treasury bonds.
"It's a primarily U.S. selling story rather than a Canadian buying story," said Sacha Tihanyi, a currency strategist with Scotia Capital.
"The Federal Reserve announcement spooked currency marketers because they are afraid that could stoke inflation and devalue the currency."
He said the loonie's rise was not as pronounced as other major currencies, mostly because of suggests that Carney may also resort to quantitative easing if credit conditions don't improve.
Porter said the lower loonie is especially being reflected in food costs, since a significant portion of what Canadians eat is imported, especially during the winter months.
The next move by the Canadian central bank is likely to cut the overnight interest rate on April 21, Porter predicted, and if more measures are needed, would likely limit quantitative easing to purchasing commercial paper.
The central bank governor said last weekend that Canada's economy is proving weaker than expected, increasing the chances he will take some action in April to try and make credit to business and consumers more available and cheaper.
The big danger in increasing the money supply, cautioned Porter, is that central banks overshoot by printing too much money and ignite a serious inflation problem.
Although the annual inflation increase was higher than economists had expected, the uptick was moderate and not a total surprise given that U.S. inflation also rose slightly during the month after declining for some time.
Leading the charge was food prices, which have been rising for almost a year.
The cost of food prices at grocery stores rose 8.9 per cent in February, but particularly pronounced was the 25.8 per cent spike in fresh vegetables, 9.7 per cent increase in baked goods and cereal and a 6.1 per cent rise in meat prices.
The inflation rate in Canada would already be close to zero if food was taken out of the calculation, Statistics Canada said.
Shelter costs due to higher mortgage costs also rose in February by three per cent, although that was lower than the 3.3 per cent year-over-year rise the previous month.
But gasoline prices remain the major drag on inflation in Canada.
Although the cost of filling up rose 5.6 per cent last month from January, gas prices were still 19.7 per cent lower than they were a year ago and continue to apply downward price pressure on transportation costs in general.
Also lower in February was the cost purchasing and leasing a passenger vehicle, down 6.4 per cent from last year, clothing, footwear, household appliances and home entertainment equipment.
Wages are also moderating. Canadian wage increases eased to just 2.1 per cent in January from 3.1 per cent in December.
The Bank of Canada core inflation rate, which excludes energy and some food costs, remained 1.9 per cent, near the two-per-cent desired target.
Regionally, prices tended to increase most in the prairie provinces last month and least in the Atlantic provinces. Inflation ranged from 2.6 per cent in Saskatchewan to a meagre 0.3 per cent in New Brunswick.
Canadian dollar soars against American currency as oil, gold rise
By The Canadian Press
TORONTO - The Canadian dollar is soaring as the American buck falls and key commodities rise following the U.S. central bank's latest efforts to stimulate the economy.
The loonie was up 1.09 cents at midmorning, taking the Canadian dollar to 81.33 cents US. The Canadian currency had been up by as much as 1.78 cents early in the session.
RBC Capital analyst George Davis says the loonie is taking flight because of the American dollar's weakness against most other currencies and because of a spike in oil and gold prices.
The American dollar has fallen because of worries that the latest moves by the Federal Reserve will stoke inflation. In turn, investors have turned to crude oil and gold bullion as protection against inflation.
Gold futures contracts were up more than $66 to US$955 an ounce and crude oil futures were up $3.88 to US$52.02 a barrel in New York in early trading.
Earlier in the day, the Canadian dollar briefly rose above 82 cents US for the first time since early February.
TORONTO - The Canadian dollar is soaring as the American buck falls and key commodities rise following the U.S. central bank's latest efforts to stimulate the economy.
The loonie was up 1.09 cents at midmorning, taking the Canadian dollar to 81.33 cents US. The Canadian currency had been up by as much as 1.78 cents early in the session.
RBC Capital analyst George Davis says the loonie is taking flight because of the American dollar's weakness against most other currencies and because of a spike in oil and gold prices.
The American dollar has fallen because of worries that the latest moves by the Federal Reserve will stoke inflation. In turn, investors have turned to crude oil and gold bullion as protection against inflation.
Gold futures contracts were up more than $66 to US$955 an ounce and crude oil futures were up $3.88 to US$52.02 a barrel in New York in early trading.
Earlier in the day, the Canadian dollar briefly rose above 82 cents US for the first time since early February.
Thursday, March 19, 2009
Toronto Traffic cop one of city's best paid
List reveals 1,006 employees of Toronto police make more than $100,000 annually
Michele Henry
CRIME REPORTER
You may have met him at your driver's side window.
And if you went to court to fight a ticket handed to you by Const. Michael Thompson – a traffic officer with five years on the job – you could have been one of the motorists who helped him become the eighth highest-paid employee in the Toronto Police Service last year.
A list naming police service employees who made more than $100,000 last year revealed Thompson earned $161,892.35, including overtime. That's about double his base salary, which falls between $75,865 and $82,695.
"He worked extremely hard," police spokesperson Mark Pugash said yesterday. "But this is monitored on a very close basis. There are very detailed supervisory mechanisms in place."
Last year, 1,006 police employees topped the list, which is intended to shine light on public sector salaries. Among them, 628 Toronto Police Association members – ranks of staff sergeant and below – earned base salaries below $100,000.
According to reports, Thompson earned more than $150,000 in 2007. Constables Abdulhameed Virani, Alan Cohen, Eduardo Madeira, Guido Cristiano and several others have graced the list for more than one year in the recent past.
Declining to be specific, Thompson said he earned his salary through regular hours of duty plus overtime required for such things as court appearances.
"It takes a lot of hours and a lot of work to get there," he said. "The hours don't come for nothing. Nobody is giving us free money here."
Emmett O'Reilly, a technical analyst employed by the service made the list with $103,136.48. "It was a busy year," the 32-year-old said. "Feels good." Seven years on the force, he designs and reviews systems, including CCTV operations and cameras in cruisers.
The five highest-paid people in the service are Chief Bill Blair, at $299,861.11; deputy chiefs Kim Derry, Keith Forde and Anthony Warr, who each earn $214,057.19; and chief administrative officer Tony Veneziano, who pulled in $212.247.59 last year.
The number of employees on the 2008 list is up from 769 in 2007 and 708 in 2006.
Pugash said as years go by, the base pay of more and more officers nears $100,000, and it doesn't take much to push them over. Salaries for detective sergeants range from $95,000 to $102,000. Sergeants and detectives earn $86,000 to $93,000.
The $100,000 threshold was established in 1996 and is not adjusted for inflation. That amount is equivalent to about $128,000 in today's dollars, and 114 police employees exceeded that sum in 2008.
The salaries include base pay, overtime, court time and retroactive pay, acting pay and money from any other settlement, such as legal or medical. The salaries do not include paid duty, when an off-duty officer is compensated by businesses for outside work.
With files from Jason Miller
Michele Henry
CRIME REPORTER
You may have met him at your driver's side window.
And if you went to court to fight a ticket handed to you by Const. Michael Thompson – a traffic officer with five years on the job – you could have been one of the motorists who helped him become the eighth highest-paid employee in the Toronto Police Service last year.
A list naming police service employees who made more than $100,000 last year revealed Thompson earned $161,892.35, including overtime. That's about double his base salary, which falls between $75,865 and $82,695.
"He worked extremely hard," police spokesperson Mark Pugash said yesterday. "But this is monitored on a very close basis. There are very detailed supervisory mechanisms in place."
Last year, 1,006 police employees topped the list, which is intended to shine light on public sector salaries. Among them, 628 Toronto Police Association members – ranks of staff sergeant and below – earned base salaries below $100,000.
According to reports, Thompson earned more than $150,000 in 2007. Constables Abdulhameed Virani, Alan Cohen, Eduardo Madeira, Guido Cristiano and several others have graced the list for more than one year in the recent past.
Declining to be specific, Thompson said he earned his salary through regular hours of duty plus overtime required for such things as court appearances.
"It takes a lot of hours and a lot of work to get there," he said. "The hours don't come for nothing. Nobody is giving us free money here."
Emmett O'Reilly, a technical analyst employed by the service made the list with $103,136.48. "It was a busy year," the 32-year-old said. "Feels good." Seven years on the force, he designs and reviews systems, including CCTV operations and cameras in cruisers.
The five highest-paid people in the service are Chief Bill Blair, at $299,861.11; deputy chiefs Kim Derry, Keith Forde and Anthony Warr, who each earn $214,057.19; and chief administrative officer Tony Veneziano, who pulled in $212.247.59 last year.
The number of employees on the 2008 list is up from 769 in 2007 and 708 in 2006.
Pugash said as years go by, the base pay of more and more officers nears $100,000, and it doesn't take much to push them over. Salaries for detective sergeants range from $95,000 to $102,000. Sergeants and detectives earn $86,000 to $93,000.
The $100,000 threshold was established in 1996 and is not adjusted for inflation. That amount is equivalent to about $128,000 in today's dollars, and 114 police employees exceeded that sum in 2008.
The salaries include base pay, overtime, court time and retroactive pay, acting pay and money from any other settlement, such as legal or medical. The salaries do not include paid duty, when an off-duty officer is compensated by businesses for outside work.
With files from Jason Miller
AIG CEO says employees starting to return bonuses
By JIM KUHNHENN and TOM RAUM
WASHINGTON – Under intense pressure from the Obama administration and Congress, the head of bailed-out insurance giant AIG declared Wednesday that some of the firm's executives have begun returning all or part of bonuses totaling $165 million. Edward Liddy offered no details, and lawmakers were in no mood to wait.
He was still fielding their questions when House Democratic leaders announced plans for a vote Thursday on legislation to tax away 90 percent of the extra pay for executives at AIG and many other bailed-out firms.
Liddy, brought in last year to oversee a company that has received $182 billion in federal bailout money, said he, too, was angry about the bonuses. But he did not respond directly when advised in pungent terms to pay to the Treasury all the money handed out last weekend in "retention payments."
"Eat it now. Take it out of your profits down the road. It's a lot sweeter now than it's gonna be later," said Rep. Gary Ackerman, D-N.Y.
Liddy slid into the witness chair at a congressional hearing as President Barack Obama sought anew to quell a furor that has bedeviled his administration since word of the bonuses surfaced over the weekend.
Obama, who took office just under two months ago, told reporters his administration was not responsible for a lack of federal supervision of AIG that preceded the company's demise, nor for the decision made last year to pay what he called "outrageous bonuses."
Still, he said, "The buck stops with me." He said that "my goal is to make sure that we never put ourselves in this kind of position again," and he disclosed the administration was consulting with Congress on the possibility of creating a new agency to govern the meltdown of large financial institutions such as AIG.
He also gave a strong vote of confidence to Treasury Secretary Tim Geithner, who has been the target of growing Republican criticism.
Later, at a town hall meeting in Costa Mesa, Calif., Obama said that while his administration was addressing the AIG bonuses specifically, he said he wanted to "make sure we dont find ourselves in this situation again, where taxpayers are on the hook for losses in bad times and all the wealth generated in good times goes to those at the very top."
Obama spoke as congressional Democrats worked on legislation designed to recoup most or all of the $165 million by exposing it to new taxes.
Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, said the new 90 percent tax would apply to bonus money paid to employees earning more than $250,000 at firms that have received more than $5 billion in federal bailout funds. Mortgage giants Fannie Mae and Freddie Mac are covered under the proposal.
Liddy said that on Tuesday, he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 percent," he added.
Majority Leader Steny Hoyer, D-Md., said the House bill would be voted on under rules requiring a two-thirds majority for passage. Democrats are in comfortable control of the House but do not control two-thirds of the seats, meaning the outcome of the vote would probably be determined by tax-averse Republicans.
Republicans raised pointed questions about the extent of Geithner's advance knowledge of the bonuses, and stressed they had been locked out of discussions earlier this year when Democrats decided to jettison a provision from legislation that could have revoked the payments.
"The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate. There was no transparency," said Sen. Charles Grassley, R-Iowa, the senior Republican on the Senate Finance Committee.
On Wednesday, Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, acknowledged that his staff agreed to dilute an executive compensation provision that would have applied retroactively to recipients of federal aid. Dodd told CNN the request came from officials at the Treasury Department whom he did not identify.
While the House and Senate reconciled their stimulus bills last month, the Treasury Department expressed concern with a Senate restriction on bonuses, noting that if it applied to existing compensation contracts it could face a legal challenge.
"The alternative was losing, in my view, the entire section on executive excessive compensation," Dodd told CNN. "Given a choice — this is not an uncommon occurrence here — I agreed to a modification in the legislation, reluctantly."
The legislation does include a provision that allows the Treasury Department to examine past compensation payments to determine whether they were "contrary to the public interest." Geithner on Tuesday said he was using that provision to review AIG's bonuses.
Liddy's presence in a congressional hearing room was evidence of a bipartisan opposition to the bonuses, although his status as a $1-a-year CEO called out of retirement last year to try and untangle AIG's financial mess made him a less-than-easy target for expressions of outrage.
"No one knows better than I that AIG has been the recipient of generous amounts of government financial aid," he said. "We have been the beneficiary of the American people's forbearance and patience," he added, acknowledging the patience was wearing thin.
Asked by Rep. Barney Frank, D-Mass., whether he would turn over the names of individuals who received the bonuses, as well as the amounts, Liddy said he would do so only if assured the information not be made public.
When Frank said he might seek a subpoena, Liddy said he was concerned about the safety of the employees and their families, and read aloud from a death threat received by one of them.
Frank said he would be guided in part by security considerations, but Ackerman later noted that Andrew Cuomo, the New York attorney general, was already seeking the names with a subpoena.
Liddy said he had not yet complied, sidestepped several times when asked whether he would, and finally said "it would be our intent" to do so.
Cuomo swiftly issued a statement saying Liddy's pledge was "simply too little, too late. ... Rather than take half-measures, AIG should immediately turn over the list, which we have subpoenaed, of who got what and when."
Separately, a New York state judge ordered Bank of America Corp. to disclose information about bonuses given to employees at Merrill Lynch & Co. just before the bank bought the brokerage company. Cuomo, who has been sparring with the bank over release of the information, said the decision "will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December."
"AIG should take heed and immediately turn over the list of bonus recipients we have subpoenaed," he said. "The deadline for responding to our subpoena is tomorrow. "
AIG spokesman Mark Herr said he could not say how many executives had turned back the money. "Bear in mind, these bonuses were only just paid," he said.
In Wilton, Conn., headquarters of AIG Financial Products Corp., police chief Edward Kulhawik said his department had not received any reports from the company of threats to employees but was in contact with the company and keeping "a special eye on that whole office complex."
Liddy said the Federal Reserve knew long in advance of the bonus payments and acquiesced in them, noting that officials from the independent agency attend key company meetings. But he said the same was not true of Geithner, adding, "We do our work with the Federal Reserve."
Liddy gave skeptical committee members what amounted to a tutorial in the practice of paying retention bonuses — he did not call them that — to executives.
He said the money was offered to executives in AIG's financial products section, where risky investments finally became the entire company's undoing. He said each executive was offered money to dispose of his "business book," meaning the transactions he had been in charge of handling, and thus far, the company's financial derivatives had been reduced from $2.7 trillion to $1.6 trillion.
He had decided it was worth paying the money to retain the services of executives who knew the business best, he said. And he had received legal advice that there were valid contracts requiring the payments.
"I know 165 million is a very large number. It's a very large number. In the context of 1.6 trillion ... we thought it was a good trade," he said.
Liddy added there was still a risk of financial catastrophe if the remaining $1.6 trillion in financial instruments were not disposed of properly.
But Rep. Stephen Lynch, D-Mass., angrily told the witness the contract read like "the captain and the crew of the ship reserving the lifeboats."
Liddy replied that he was not at the firm when the contracts were negotiated, and said, as he has before, that he would not have approved them.
Lynch said the terms had been put in place in December, after Liddy arrived at AIG.
But Liddy disputed that. "I take offense, Sir," he said.
"Well you take it rightly. Offense was intended," shot back Lynch.
WASHINGTON – Under intense pressure from the Obama administration and Congress, the head of bailed-out insurance giant AIG declared Wednesday that some of the firm's executives have begun returning all or part of bonuses totaling $165 million. Edward Liddy offered no details, and lawmakers were in no mood to wait.
He was still fielding their questions when House Democratic leaders announced plans for a vote Thursday on legislation to tax away 90 percent of the extra pay for executives at AIG and many other bailed-out firms.
Liddy, brought in last year to oversee a company that has received $182 billion in federal bailout money, said he, too, was angry about the bonuses. But he did not respond directly when advised in pungent terms to pay to the Treasury all the money handed out last weekend in "retention payments."
"Eat it now. Take it out of your profits down the road. It's a lot sweeter now than it's gonna be later," said Rep. Gary Ackerman, D-N.Y.
Liddy slid into the witness chair at a congressional hearing as President Barack Obama sought anew to quell a furor that has bedeviled his administration since word of the bonuses surfaced over the weekend.
Obama, who took office just under two months ago, told reporters his administration was not responsible for a lack of federal supervision of AIG that preceded the company's demise, nor for the decision made last year to pay what he called "outrageous bonuses."
Still, he said, "The buck stops with me." He said that "my goal is to make sure that we never put ourselves in this kind of position again," and he disclosed the administration was consulting with Congress on the possibility of creating a new agency to govern the meltdown of large financial institutions such as AIG.
He also gave a strong vote of confidence to Treasury Secretary Tim Geithner, who has been the target of growing Republican criticism.
Later, at a town hall meeting in Costa Mesa, Calif., Obama said that while his administration was addressing the AIG bonuses specifically, he said he wanted to "make sure we dont find ourselves in this situation again, where taxpayers are on the hook for losses in bad times and all the wealth generated in good times goes to those at the very top."
Obama spoke as congressional Democrats worked on legislation designed to recoup most or all of the $165 million by exposing it to new taxes.
Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, said the new 90 percent tax would apply to bonus money paid to employees earning more than $250,000 at firms that have received more than $5 billion in federal bailout funds. Mortgage giants Fannie Mae and Freddie Mac are covered under the proposal.
Liddy said that on Tuesday, he had "asked those who have received retention payments in excess of $100,000 or more to return at least half of those payments." Some have "already stepped forward and returned 100 percent," he added.
Majority Leader Steny Hoyer, D-Md., said the House bill would be voted on under rules requiring a two-thirds majority for passage. Democrats are in comfortable control of the House but do not control two-thirds of the seats, meaning the outcome of the vote would probably be determined by tax-averse Republicans.
Republicans raised pointed questions about the extent of Geithner's advance knowledge of the bonuses, and stressed they had been locked out of discussions earlier this year when Democrats decided to jettison a provision from legislation that could have revoked the payments.
"The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate. There was no transparency," said Sen. Charles Grassley, R-Iowa, the senior Republican on the Senate Finance Committee.
On Wednesday, Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, acknowledged that his staff agreed to dilute an executive compensation provision that would have applied retroactively to recipients of federal aid. Dodd told CNN the request came from officials at the Treasury Department whom he did not identify.
While the House and Senate reconciled their stimulus bills last month, the Treasury Department expressed concern with a Senate restriction on bonuses, noting that if it applied to existing compensation contracts it could face a legal challenge.
"The alternative was losing, in my view, the entire section on executive excessive compensation," Dodd told CNN. "Given a choice — this is not an uncommon occurrence here — I agreed to a modification in the legislation, reluctantly."
The legislation does include a provision that allows the Treasury Department to examine past compensation payments to determine whether they were "contrary to the public interest." Geithner on Tuesday said he was using that provision to review AIG's bonuses.
Liddy's presence in a congressional hearing room was evidence of a bipartisan opposition to the bonuses, although his status as a $1-a-year CEO called out of retirement last year to try and untangle AIG's financial mess made him a less-than-easy target for expressions of outrage.
"No one knows better than I that AIG has been the recipient of generous amounts of government financial aid," he said. "We have been the beneficiary of the American people's forbearance and patience," he added, acknowledging the patience was wearing thin.
Asked by Rep. Barney Frank, D-Mass., whether he would turn over the names of individuals who received the bonuses, as well as the amounts, Liddy said he would do so only if assured the information not be made public.
When Frank said he might seek a subpoena, Liddy said he was concerned about the safety of the employees and their families, and read aloud from a death threat received by one of them.
Frank said he would be guided in part by security considerations, but Ackerman later noted that Andrew Cuomo, the New York attorney general, was already seeking the names with a subpoena.
Liddy said he had not yet complied, sidestepped several times when asked whether he would, and finally said "it would be our intent" to do so.
Cuomo swiftly issued a statement saying Liddy's pledge was "simply too little, too late. ... Rather than take half-measures, AIG should immediately turn over the list, which we have subpoenaed, of who got what and when."
Separately, a New York state judge ordered Bank of America Corp. to disclose information about bonuses given to employees at Merrill Lynch & Co. just before the bank bought the brokerage company. Cuomo, who has been sparring with the bank over release of the information, said the decision "will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December."
"AIG should take heed and immediately turn over the list of bonus recipients we have subpoenaed," he said. "The deadline for responding to our subpoena is tomorrow. "
AIG spokesman Mark Herr said he could not say how many executives had turned back the money. "Bear in mind, these bonuses were only just paid," he said.
In Wilton, Conn., headquarters of AIG Financial Products Corp., police chief Edward Kulhawik said his department had not received any reports from the company of threats to employees but was in contact with the company and keeping "a special eye on that whole office complex."
Liddy said the Federal Reserve knew long in advance of the bonus payments and acquiesced in them, noting that officials from the independent agency attend key company meetings. But he said the same was not true of Geithner, adding, "We do our work with the Federal Reserve."
Liddy gave skeptical committee members what amounted to a tutorial in the practice of paying retention bonuses — he did not call them that — to executives.
He said the money was offered to executives in AIG's financial products section, where risky investments finally became the entire company's undoing. He said each executive was offered money to dispose of his "business book," meaning the transactions he had been in charge of handling, and thus far, the company's financial derivatives had been reduced from $2.7 trillion to $1.6 trillion.
He had decided it was worth paying the money to retain the services of executives who knew the business best, he said. And he had received legal advice that there were valid contracts requiring the payments.
"I know 165 million is a very large number. It's a very large number. In the context of 1.6 trillion ... we thought it was a good trade," he said.
Liddy added there was still a risk of financial catastrophe if the remaining $1.6 trillion in financial instruments were not disposed of properly.
But Rep. Stephen Lynch, D-Mass., angrily told the witness the contract read like "the captain and the crew of the ship reserving the lifeboats."
Liddy replied that he was not at the firm when the contracts were negotiated, and said, as he has before, that he would not have approved them.
Lynch said the terms had been put in place in December, after Liddy arrived at AIG.
But Liddy disputed that. "I take offense, Sir," he said.
"Well you take it rightly. Offense was intended," shot back Lynch.
Monday, March 16, 2009
Canada's dirty subprime secret
An investigation by Globe reporters uncovers a burgeoning subprime mortgage problem that many, including Prime Minister Stephen Harper, have insisted does not exist in Canada
Greg McArthur and Jacquie McNish
Saturday, March 14, 2009
From the ramshackle, plywood deck on Brad Goodyear's rural Vancouver Island home, most people see piles of trash, a mattress, abandoned appliances and heaps of salmon fishing nets.
Mortgage lenders, however, have looked at the same property and, until recently, seen nothing but cash.
But after two decades of continually borrowing up – plowing through mortgages from Royal Bank, private lenders and credit unions, until settling on two subprime lenders – the 46-year-old fisherman has landed in a foreclosure proceeding.
Records show that at least nine different lenders have given mortgages to Mr. Goodyear and his wife Tracy since they bought the Ladysmith property in 1986, producing a constant flow of new loans, which were sometimes paid off with newer loans, until financial institutions shut the window a few months ago.
“I didn't really have to show anything to borrow,” Mr. Goodyear said of his two remaining mortgages, both in default and totalling about $340,000. “I didn't have to show them my tax returns. I just said ‘This is how much I make.' I think I made 11,000 bucks.”
Mr. Goodyear is not alone. A Globe and Mail investigation into more than 10,000 foreclosure proceedings has uncovered a burgeoning subprime mortgage problem that many, including Prime Minister Stephen Harper, have insisted does not exist in Canada.
Data obtained from both the governments of British Columbia and Alberta, as well as from two private companies that specialize in tracking foreclosure proceedings, show that lenders are foreclosing on the homes of overextended borrowers at an alarming pace. Even more startling is that more than half the foreclosures in 2008 were initiated by a mish-mash of subprime lenders who targeted riskier borrowers with tarnished credit histories. The numbers tell a story of thousands of homeowners who borrowed more than they could afford from lenders who lent too readily.
Inventories of unsold homes are building in Canadian cities – and the ripple effect hits everyone, depressing the value of houses owned by people who haven't overextended themselves.
Unlike the United States, where foreclosure statistics are routinely published because they are a key barometer of economic health, detailed numbers in Canada are hard to come by. Alberta and British Columbia are two provinces where private companies collect the data from the courts, where it costs about $10 to view a single file. In Ontario, mortgages in default are usually resolved through a process known as power-of-sale, which has effectively removed the issue from the courts and shielded the scope of the problem.
Since the subprime mortgage meltdown in the United States, Canadian leaders have assured the public that a similar tidal wave of foreclosures can't hit here. They have cited the prudence and market dominance of Canada's five most prominent banks, the conservatism of Canadian consumers and the tiny, 7-per-cent market share of subprime lenders, which is much lower than their 22-per-cent market share in the United States. Just four days ago in a speech, Prime Minister Harper said: “We have avoided the extreme of the unregulated, or barely regulated, financial and mortgage industries that has caused such grief around the world.”
However, The Globe's investigation shows that while Canada's real estate sector hasn't suffered as much as its counterpart in the United States, the Prime Minister and others have grossly underestimated the impact of that small portion of subprime lenders. Until recently, companies who touted their low standards with slogans such as “We Say Yes When The Banks Say No!” and “No Income Verification” proliferated here.
“We have a subprime problem in Canada. Lenders dramatically reduced their lending standards in the past five years,” said Andrew Bury, British Columbia's foremost expert in foreclosure law, who has been practising for 29 years. Mr. Bury, who practises with Gowling Lafleur Henderson LLP, said that since August he has had to extend his work day to 15 hours to cope with a caseload that has tripled. Vancouver courts are so overwhelmed with the flood of foreclosure applications that it now takes six weeks to process a written order compared with one day six months ago, he said.
“The subprime lenders trashed the market. They were doing loans that no one else would do and people were shaking their heads saying, ‘What are these guys doing?'” The data also revealed that scores of wealthy individuals dabbled in subprime lending at a time when many believed the real estate market was on a never-ending ride. Doctors, lawyers, stockbrokers and former bankers offered high-interest-rate mortgages to debt-laden homeowners, many of whom are now facing foreclosure proceedings. In one instance, a holding company for a Vancouver entrepreneur and philanthropist, Abdul Ladha, issued a $150,000 mortgage to a couple at an interest rate of 40 per cent. The mortgage agreement included a clause to ensure that additional fees and commissions should never add up to an effective interest rate of 60 per cent – the “Criminal Rate,” as defined in the Criminal Code of Canada. (One of the borrowers, Vid Wadhwani, said in a brief interview that it was “a rate that I was willing to accept, given that it was supposed to be short-term in nature.” He also said the 2007 foreclosure application did not proceed and that the matter was resolved.) Last year, private investors gave a Vancouver businessman and former lawyer $4.5-million in adjustable rate mortgages that resulted in payments of $89,000 a month, or an interest rate of more than 25 per cent. The investors have initiated foreclosure proceedings against his West Vancouver home.
The number of subprime lenders who have initiated foreclosure proceedings isn't a surprise to anyone in the business, said Kap Hiroti, the owner of Foreclosurelist.ca, one of the companies that tracks foreclosures and supplied data for this story. “It was almost as if the lenders didn't see the big picture,” Mr. Hiroti said.
The spread of subprime mortgages to Canada is one of the country's most poorly researched and misunderstood economic afflictions. Government agencies don't publish numbers on the scope of high-risk lending. Banks and other mortgage lenders do not disclose details about such loans, known in industry parlance as “non-conforming” loans.
Until the early 2000s, subprime mortgage lending was the tiny domain of adventurous private investors or mortgage lenders who were comfortable gambling that they could profit by charging exorbitant interest rates to home buyers who didn't meet the conservative lending criteria of banks and trust companies that dominated the Canadian market.
By the mid 2000s, this little-used lending practice was transformed into the fastest growing segment of the country's mortgage market. Driving the changes was the migration to Canada of aggressive U.S. mortgage lenders such as Accredited Home Lenders Inc., Wells Fargo, GMAC and GE Money, which were drawn to Canada's frothy real estate market, particularly the commodity-stoked cities in Western Canada.
As long as real estate prices soared, these lending high-rollers were comforted by the belief that losses on defaulted mortgages could be recovered by foreclosing and selling repossessed homes at a profit. Added protection for a small portion of these lenders came from aggressive U.S. mortgage insurers that were approved by the federal government in 2006 to compete in Canada. Other mortgage newcomers such as Vancouver-based Abode Mortgage Corp., a company created out of the remains of a former flush toilet maker, and Toronto-based Xceed Mortgage Corp., minimized their risks by selling mortgages to entities that sold securities backed by mortgages to investors.
One of the first experts to sound the alarm about the proliferation of subprime mortgages was Benjamin Tal, an economist with CIBC World Markets who published a report in late 2006 warning “the genie is out of the bottle.” Mr. Tal declined to be interviewed, but his report estimated that subprime loans were growing at a “meteoric” annual pace of 50 per cent by the end of 2006, making it the fastest growing segment of Canada's mortgage market. In 2006, Mr. Tal estimated more than 85,000 Canadian homeowners had subprime loans.
By late 2007, the combination of easy money and soaring real estate prices lulled many borrowers and lenders into viewing houses as virtual cash machines. Some borrowers took out second and third mortgages at high rates of interest to make investments on other properties or fund a lifestyle beyond the means of their paycheques.
Nick Kyprianou, president of Home Trust, one of Canada's first and largest alternative lenders, said his company began to scale back in Western Canada in 2007 because it became uncomfortable with homeowners' soaring debt levels.
“When the values are escalating at that rapid of a rate and you're just allowing people to use their houses as ATM machines and they keep refinancing every year to accommodate their lifestyle, it's just a house of cards,” Mr. Kyprianou said. Home Trust's retreat was apparently not fast enough. According to court data, the company initiated foreclosure proceedings on 120 borrowers in Alberta in 2008.
Home Trust is a federally regulated trust company, unlike competitors such as the U.S.-based GE Money and Wells Fargo that jumped into the Canadian market in mid-2000. Mortgage lenders that aren't federally regulated aren't required, like banks and trust companies, to use a government-approved insurer when the borrower has put down less than 20 per cent of the value of the home.
The lack of government supervision of these companies increased risk in the system, Mr. Kyprianou said. The unregulated lenders, however, vigorously dispute that charge.
“There was nothing wrong with what people were doing. It was a sign of the times,” said a former official with Accredited Home Lenders. “We were all doing the same thing – all of us. We were all making money.... It was a whirlwind of cash and every once in a while you'd stick your arm out into the whirlwind and try to gobble up as much of the cash as you could.”
Brad Goodyear could use some of that cash right now, but the whirlwind blew out of town long ago.
Recently, he received an offer of $280,000 for the two-storey home, which would leave him $60,000 short of what he owes his creditors.
For the past few weeks, he has been calling every mortgage broker he can find. Despite his past success at repeatedly refinancing, no one is biting. Most of the subprime lenders who might have pounced two years ago have either changed their business model to less risky lending, or – in the case of Accredited Home Lenders and GE Money – have exited the country altogether.
His largest outstanding mortgage with ResMor Trust, a $304,000 loan at 8-per-cent interest, is what landed him in court. Mr. Goodyear took the loan out when he got behind on his previous mortgage, he said. The ResMor money staved off that foreclosure, but his monthly payments jumped to $2,300 from $1,000. When he was late on his ResMor mortgage, he took out a second mortgage last year with Jack James, a private lender from Vancouver. Mr. James gave him $28,000 at an initial interest rate of 17 per cent, which jumped to 22 per cent a few weeks ago.
Both ResMor Trust and Mr. James declined to comment about their loans to Mr. Goodyear.
Asked what he was thinking when he took out another loan to pay off a smaller loan that he already couldn't afford, Mr. Goodyear replied: “Well, that's what runs what I do, but I shouldn't have borrowed more money. It was so easy to borrow money. You get in a bind.”
He continued: “Well, I'm sitting there, ‘Jeez, if everything works out'... I might have been able to do it. Just squeak by maybe.
“I thought maybe I'd have to sell, but I didn't think the market would take a tumble.”
© The Globe and Mail
http://www.globeinvestor.com/servlet/story/RTGAM.20090313.wsubprime14/GIStory/
Greg McArthur and Jacquie McNish
Saturday, March 14, 2009
From the ramshackle, plywood deck on Brad Goodyear's rural Vancouver Island home, most people see piles of trash, a mattress, abandoned appliances and heaps of salmon fishing nets.
Mortgage lenders, however, have looked at the same property and, until recently, seen nothing but cash.
But after two decades of continually borrowing up – plowing through mortgages from Royal Bank, private lenders and credit unions, until settling on two subprime lenders – the 46-year-old fisherman has landed in a foreclosure proceeding.
Records show that at least nine different lenders have given mortgages to Mr. Goodyear and his wife Tracy since they bought the Ladysmith property in 1986, producing a constant flow of new loans, which were sometimes paid off with newer loans, until financial institutions shut the window a few months ago.
“I didn't really have to show anything to borrow,” Mr. Goodyear said of his two remaining mortgages, both in default and totalling about $340,000. “I didn't have to show them my tax returns. I just said ‘This is how much I make.' I think I made 11,000 bucks.”
Mr. Goodyear is not alone. A Globe and Mail investigation into more than 10,000 foreclosure proceedings has uncovered a burgeoning subprime mortgage problem that many, including Prime Minister Stephen Harper, have insisted does not exist in Canada.
Data obtained from both the governments of British Columbia and Alberta, as well as from two private companies that specialize in tracking foreclosure proceedings, show that lenders are foreclosing on the homes of overextended borrowers at an alarming pace. Even more startling is that more than half the foreclosures in 2008 were initiated by a mish-mash of subprime lenders who targeted riskier borrowers with tarnished credit histories. The numbers tell a story of thousands of homeowners who borrowed more than they could afford from lenders who lent too readily.
Inventories of unsold homes are building in Canadian cities – and the ripple effect hits everyone, depressing the value of houses owned by people who haven't overextended themselves.
Unlike the United States, where foreclosure statistics are routinely published because they are a key barometer of economic health, detailed numbers in Canada are hard to come by. Alberta and British Columbia are two provinces where private companies collect the data from the courts, where it costs about $10 to view a single file. In Ontario, mortgages in default are usually resolved through a process known as power-of-sale, which has effectively removed the issue from the courts and shielded the scope of the problem.
Since the subprime mortgage meltdown in the United States, Canadian leaders have assured the public that a similar tidal wave of foreclosures can't hit here. They have cited the prudence and market dominance of Canada's five most prominent banks, the conservatism of Canadian consumers and the tiny, 7-per-cent market share of subprime lenders, which is much lower than their 22-per-cent market share in the United States. Just four days ago in a speech, Prime Minister Harper said: “We have avoided the extreme of the unregulated, or barely regulated, financial and mortgage industries that has caused such grief around the world.”
However, The Globe's investigation shows that while Canada's real estate sector hasn't suffered as much as its counterpart in the United States, the Prime Minister and others have grossly underestimated the impact of that small portion of subprime lenders. Until recently, companies who touted their low standards with slogans such as “We Say Yes When The Banks Say No!” and “No Income Verification” proliferated here.
“We have a subprime problem in Canada. Lenders dramatically reduced their lending standards in the past five years,” said Andrew Bury, British Columbia's foremost expert in foreclosure law, who has been practising for 29 years. Mr. Bury, who practises with Gowling Lafleur Henderson LLP, said that since August he has had to extend his work day to 15 hours to cope with a caseload that has tripled. Vancouver courts are so overwhelmed with the flood of foreclosure applications that it now takes six weeks to process a written order compared with one day six months ago, he said.
“The subprime lenders trashed the market. They were doing loans that no one else would do and people were shaking their heads saying, ‘What are these guys doing?'” The data also revealed that scores of wealthy individuals dabbled in subprime lending at a time when many believed the real estate market was on a never-ending ride. Doctors, lawyers, stockbrokers and former bankers offered high-interest-rate mortgages to debt-laden homeowners, many of whom are now facing foreclosure proceedings. In one instance, a holding company for a Vancouver entrepreneur and philanthropist, Abdul Ladha, issued a $150,000 mortgage to a couple at an interest rate of 40 per cent. The mortgage agreement included a clause to ensure that additional fees and commissions should never add up to an effective interest rate of 60 per cent – the “Criminal Rate,” as defined in the Criminal Code of Canada. (One of the borrowers, Vid Wadhwani, said in a brief interview that it was “a rate that I was willing to accept, given that it was supposed to be short-term in nature.” He also said the 2007 foreclosure application did not proceed and that the matter was resolved.) Last year, private investors gave a Vancouver businessman and former lawyer $4.5-million in adjustable rate mortgages that resulted in payments of $89,000 a month, or an interest rate of more than 25 per cent. The investors have initiated foreclosure proceedings against his West Vancouver home.
The number of subprime lenders who have initiated foreclosure proceedings isn't a surprise to anyone in the business, said Kap Hiroti, the owner of Foreclosurelist.ca, one of the companies that tracks foreclosures and supplied data for this story. “It was almost as if the lenders didn't see the big picture,” Mr. Hiroti said.
The spread of subprime mortgages to Canada is one of the country's most poorly researched and misunderstood economic afflictions. Government agencies don't publish numbers on the scope of high-risk lending. Banks and other mortgage lenders do not disclose details about such loans, known in industry parlance as “non-conforming” loans.
Until the early 2000s, subprime mortgage lending was the tiny domain of adventurous private investors or mortgage lenders who were comfortable gambling that they could profit by charging exorbitant interest rates to home buyers who didn't meet the conservative lending criteria of banks and trust companies that dominated the Canadian market.
By the mid 2000s, this little-used lending practice was transformed into the fastest growing segment of the country's mortgage market. Driving the changes was the migration to Canada of aggressive U.S. mortgage lenders such as Accredited Home Lenders Inc., Wells Fargo, GMAC and GE Money, which were drawn to Canada's frothy real estate market, particularly the commodity-stoked cities in Western Canada.
As long as real estate prices soared, these lending high-rollers were comforted by the belief that losses on defaulted mortgages could be recovered by foreclosing and selling repossessed homes at a profit. Added protection for a small portion of these lenders came from aggressive U.S. mortgage insurers that were approved by the federal government in 2006 to compete in Canada. Other mortgage newcomers such as Vancouver-based Abode Mortgage Corp., a company created out of the remains of a former flush toilet maker, and Toronto-based Xceed Mortgage Corp., minimized their risks by selling mortgages to entities that sold securities backed by mortgages to investors.
One of the first experts to sound the alarm about the proliferation of subprime mortgages was Benjamin Tal, an economist with CIBC World Markets who published a report in late 2006 warning “the genie is out of the bottle.” Mr. Tal declined to be interviewed, but his report estimated that subprime loans were growing at a “meteoric” annual pace of 50 per cent by the end of 2006, making it the fastest growing segment of Canada's mortgage market. In 2006, Mr. Tal estimated more than 85,000 Canadian homeowners had subprime loans.
By late 2007, the combination of easy money and soaring real estate prices lulled many borrowers and lenders into viewing houses as virtual cash machines. Some borrowers took out second and third mortgages at high rates of interest to make investments on other properties or fund a lifestyle beyond the means of their paycheques.
Nick Kyprianou, president of Home Trust, one of Canada's first and largest alternative lenders, said his company began to scale back in Western Canada in 2007 because it became uncomfortable with homeowners' soaring debt levels.
“When the values are escalating at that rapid of a rate and you're just allowing people to use their houses as ATM machines and they keep refinancing every year to accommodate their lifestyle, it's just a house of cards,” Mr. Kyprianou said. Home Trust's retreat was apparently not fast enough. According to court data, the company initiated foreclosure proceedings on 120 borrowers in Alberta in 2008.
Home Trust is a federally regulated trust company, unlike competitors such as the U.S.-based GE Money and Wells Fargo that jumped into the Canadian market in mid-2000. Mortgage lenders that aren't federally regulated aren't required, like banks and trust companies, to use a government-approved insurer when the borrower has put down less than 20 per cent of the value of the home.
The lack of government supervision of these companies increased risk in the system, Mr. Kyprianou said. The unregulated lenders, however, vigorously dispute that charge.
“There was nothing wrong with what people were doing. It was a sign of the times,” said a former official with Accredited Home Lenders. “We were all doing the same thing – all of us. We were all making money.... It was a whirlwind of cash and every once in a while you'd stick your arm out into the whirlwind and try to gobble up as much of the cash as you could.”
Brad Goodyear could use some of that cash right now, but the whirlwind blew out of town long ago.
Recently, he received an offer of $280,000 for the two-storey home, which would leave him $60,000 short of what he owes his creditors.
For the past few weeks, he has been calling every mortgage broker he can find. Despite his past success at repeatedly refinancing, no one is biting. Most of the subprime lenders who might have pounced two years ago have either changed their business model to less risky lending, or – in the case of Accredited Home Lenders and GE Money – have exited the country altogether.
His largest outstanding mortgage with ResMor Trust, a $304,000 loan at 8-per-cent interest, is what landed him in court. Mr. Goodyear took the loan out when he got behind on his previous mortgage, he said. The ResMor money staved off that foreclosure, but his monthly payments jumped to $2,300 from $1,000. When he was late on his ResMor mortgage, he took out a second mortgage last year with Jack James, a private lender from Vancouver. Mr. James gave him $28,000 at an initial interest rate of 17 per cent, which jumped to 22 per cent a few weeks ago.
Both ResMor Trust and Mr. James declined to comment about their loans to Mr. Goodyear.
Asked what he was thinking when he took out another loan to pay off a smaller loan that he already couldn't afford, Mr. Goodyear replied: “Well, that's what runs what I do, but I shouldn't have borrowed more money. It was so easy to borrow money. You get in a bind.”
He continued: “Well, I'm sitting there, ‘Jeez, if everything works out'... I might have been able to do it. Just squeak by maybe.
“I thought maybe I'd have to sell, but I didn't think the market would take a tumble.”
© The Globe and Mail
http://www.globeinvestor.com/servlet/story/RTGAM.20090313.wsubprime14/GIStory/
Friday, March 13, 2009
Half million Canadians to lose jobs this year, TD Bank says
By Julian Beltrame, The Canadian Press
OTTAWA - Canada is suffering through one of the worst recessions in decades, one that will see more than half a million people thrown out of work, corporate profits tumble and household wealth decline sharply, says the Toronto-Dominion Bank.
In one of the gloomiest economic outlooks of any major forecaster, the TD Bank rejects relative rosy forecasts by the federal government and the Bank of Canada that predict a painful but short recession.
Rather, TD says, the recession will be painful and long.
"There is no doubt that 2009 will go down in the history books as one of the most difficult economic years for Canadians," said Beata Caranci, the bank's director of economic forecasting.
The bank says the economy will shrink 2.4 per cent this year - twice the rate projected by the Bank of Canada - and will only stop falling in the fourth quarter. Next year will be slightly better with a 1.3 per cent advance, but nowhere near the central bank's predicted 3.8 per cent bounceback.
The report also contradicts Prime Minister Stephen Harper's and Finance Minister Jim Flaherty's contention that Canada will lead the U.S. and the rest of the world out of the recession.
A separate forecast from the Royal Bank is more sanguine, although with a projection of 2.6 per cent growth in 2010, it too is predicting a more muted recovery than that foreseen by the Bank of Canada.
"The odds are Canada will outperform the U.S. in the recovery period," said RBC chief economist Craig Wright, although he stressed that all forecasters are making projections in an atmosphere permeated by uncertainty.
"The problem is we're seeing violent volatility. We're seeing moves in the financial markets in one day we used to see in one year."
Caranci said since Canada's return to prosperity is heavily contingent upon a U.S. recovery, it's unlikely it can do better than rebound in tandem with its main trading partner. In either case, both will have muted recoveries at best, she says, something with which Wright concurs.
In fact, the TD bank says the economy won't return to a "normal, steady state" for at least five years.
"We don't see a robust recovery, because there are too many risks on the downside. Three months ago we only had three risks, now we're up to five."
For Canadian workers, it will be a long recession.
The bank projects shrinking employment until the second quarter of 2010, by which time 583,000 Canadians will have lost their jobs and the unemployment rate will have ballooned from 5.9 per cent last winter to 10 per cent.
The accumulated job losses are more than the 462,000 that were thrown onto the unemployment rolls during the 1990-91 recession, and near levels reached in the early 1980s slump.
Canada lost 129,000 jobs in January and a consensus of economists believe another 50,000 contraction will be reported by Statistics Canada for February. The report is released Friday morning.
The high number of expected job losses dominated Parliament for most of the week, with Flaherty accusing Liberals senators of stalling passage of his stimulus budget that extends employment insurance benefits.
Liberal Leader Michael Ignatieff announced Thursday that the Senate will pass the Conservative stimulus budget by the end of the day, saying the senators had only recently discovered the employment benefits were backdated and would take effect as soon as the bill passed. Senators were told of the backdating on Tuesday.
"Never will a Liberal put himself between the unemployed and employment insurance," Ignatieff said.
The government, with some backing from the International Monetary Fund, maintains the economy will begin to recover somewhat in the third quarter and rebound strongly, in part due to its $40-billion stimulus package and lower interest rates.
But the TD bank gives minimal importance to the stimulus, estimating it will boost activity at about one-third the level the government claims.
It's best-case scenario is for a 0.5 per cent impact on gross domestic product this year, not enough to save Canadians and Canadians businesses from the shock the worst year the world economy has suffered since the Great Depression.
The impact on Canada, the bank says, will be felt in a collapse of corporate profits to about two-thirds last year's levels, individual income declines for three quarters, and falling wealth, a point made by parliamentary budget officer Kevin Page in his report Wednesday.
"With nominal (gross domestic product) to decline in 2009 as a whole (by 4.5 per cent) for the first time on record, this will come to bear on employment, wages, capital investment and government revenues as the year rolls forward," the bank report states.
OTTAWA - Canada is suffering through one of the worst recessions in decades, one that will see more than half a million people thrown out of work, corporate profits tumble and household wealth decline sharply, says the Toronto-Dominion Bank.
In one of the gloomiest economic outlooks of any major forecaster, the TD Bank rejects relative rosy forecasts by the federal government and the Bank of Canada that predict a painful but short recession.
Rather, TD says, the recession will be painful and long.
"There is no doubt that 2009 will go down in the history books as one of the most difficult economic years for Canadians," said Beata Caranci, the bank's director of economic forecasting.
The bank says the economy will shrink 2.4 per cent this year - twice the rate projected by the Bank of Canada - and will only stop falling in the fourth quarter. Next year will be slightly better with a 1.3 per cent advance, but nowhere near the central bank's predicted 3.8 per cent bounceback.
The report also contradicts Prime Minister Stephen Harper's and Finance Minister Jim Flaherty's contention that Canada will lead the U.S. and the rest of the world out of the recession.
A separate forecast from the Royal Bank is more sanguine, although with a projection of 2.6 per cent growth in 2010, it too is predicting a more muted recovery than that foreseen by the Bank of Canada.
"The odds are Canada will outperform the U.S. in the recovery period," said RBC chief economist Craig Wright, although he stressed that all forecasters are making projections in an atmosphere permeated by uncertainty.
"The problem is we're seeing violent volatility. We're seeing moves in the financial markets in one day we used to see in one year."
Caranci said since Canada's return to prosperity is heavily contingent upon a U.S. recovery, it's unlikely it can do better than rebound in tandem with its main trading partner. In either case, both will have muted recoveries at best, she says, something with which Wright concurs.
In fact, the TD bank says the economy won't return to a "normal, steady state" for at least five years.
"We don't see a robust recovery, because there are too many risks on the downside. Three months ago we only had three risks, now we're up to five."
For Canadian workers, it will be a long recession.
The bank projects shrinking employment until the second quarter of 2010, by which time 583,000 Canadians will have lost their jobs and the unemployment rate will have ballooned from 5.9 per cent last winter to 10 per cent.
The accumulated job losses are more than the 462,000 that were thrown onto the unemployment rolls during the 1990-91 recession, and near levels reached in the early 1980s slump.
Canada lost 129,000 jobs in January and a consensus of economists believe another 50,000 contraction will be reported by Statistics Canada for February. The report is released Friday morning.
The high number of expected job losses dominated Parliament for most of the week, with Flaherty accusing Liberals senators of stalling passage of his stimulus budget that extends employment insurance benefits.
Liberal Leader Michael Ignatieff announced Thursday that the Senate will pass the Conservative stimulus budget by the end of the day, saying the senators had only recently discovered the employment benefits were backdated and would take effect as soon as the bill passed. Senators were told of the backdating on Tuesday.
"Never will a Liberal put himself between the unemployed and employment insurance," Ignatieff said.
The government, with some backing from the International Monetary Fund, maintains the economy will begin to recover somewhat in the third quarter and rebound strongly, in part due to its $40-billion stimulus package and lower interest rates.
But the TD bank gives minimal importance to the stimulus, estimating it will boost activity at about one-third the level the government claims.
It's best-case scenario is for a 0.5 per cent impact on gross domestic product this year, not enough to save Canadians and Canadians businesses from the shock the worst year the world economy has suffered since the Great Depression.
The impact on Canada, the bank says, will be felt in a collapse of corporate profits to about two-thirds last year's levels, individual income declines for three quarters, and falling wealth, a point made by parliamentary budget officer Kevin Page in his report Wednesday.
"With nominal (gross domestic product) to decline in 2009 as a whole (by 4.5 per cent) for the first time on record, this will come to bear on employment, wages, capital investment and government revenues as the year rolls forward," the bank report states.
Wednesday, March 11, 2009
Tim Hortons contest odds give Ontarians reason to cry over double-double
NEW.BRUNSWICK (CBC) - Tim Hortons lovers across Canada are rolling up rims of coffee cups and, although millions dream of seeing a shiny new car reveal itself under the lid, documents show that's not likely to happen especially if they live in Ontario.
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Debra Deveau, a Tim Hortons server in Saint John, N.B., watches traffic at the popular coffee shop mushroom during the annual "Roll Up the Rim to Win" contest, where customers can roll up the rim of their cups to see potential prizes.
"I've seen people come in and buy tons and tons of larges," Deveau said.
"You'll get six, eight, 10 ... cups of large coffees from people who will come in the run of a day, compared to when the contest is not running."
Tim Hortons has issued 281.7 million special contest cups for its popular springtime contest, which runs across Canada and in 11 American states.
The average Canadian adult will roll up a rim 10 times before the company closes the promotion May 1.
Top prize is a $32,000 Toyota Venza and is hidden beneath the rim of 35 of the cups, but company documents show they are not distributed equally across the country.
For example, although 52.5 per cent of all contest cups will be sold in Ontario, only 15 of those 35 grand prize cups or 43 per cent have been allotted to the country's most populated province.
That's three fewer than provincial coffee drinkers could have expected under a proportional distribution of top prizes.
Instead, those three cups have been slipped, one each, into stores in British Columbia, Quebec and Atlantic Canada.
Tim Hortons lists the overall chances of winning a Toyota Venza as slightly more than one in eight million.
But because of the distribution of cups those odds vary across the country. The best chance to win big is in British Columbia (one in 5.9 million) and the worst is in Ontario (1 in 9.9 million).
Tim Hortons gives no reason in its contest documents for the uneven placement of the car cups around the country.
All other prizes are distributed proportionately.
A call to Tim Hortons headquarters in Oakville, Ont., about the issue was not returned.
Still, many customers say they have their sights set lower than the grand prize anyway.
Katie Burtt, a student at the University of New Brunswick in Saint John, said she would happily celebrate a free doughnut.
"I keep a tally. I've had 26 coffees and won nothing," Burtt said.
ADVERTISEMENT
Debra Deveau, a Tim Hortons server in Saint John, N.B., watches traffic at the popular coffee shop mushroom during the annual "Roll Up the Rim to Win" contest, where customers can roll up the rim of their cups to see potential prizes.
"I've seen people come in and buy tons and tons of larges," Deveau said.
"You'll get six, eight, 10 ... cups of large coffees from people who will come in the run of a day, compared to when the contest is not running."
Tim Hortons has issued 281.7 million special contest cups for its popular springtime contest, which runs across Canada and in 11 American states.
The average Canadian adult will roll up a rim 10 times before the company closes the promotion May 1.
Top prize is a $32,000 Toyota Venza and is hidden beneath the rim of 35 of the cups, but company documents show they are not distributed equally across the country.
For example, although 52.5 per cent of all contest cups will be sold in Ontario, only 15 of those 35 grand prize cups or 43 per cent have been allotted to the country's most populated province.
That's three fewer than provincial coffee drinkers could have expected under a proportional distribution of top prizes.
Instead, those three cups have been slipped, one each, into stores in British Columbia, Quebec and Atlantic Canada.
Tim Hortons lists the overall chances of winning a Toyota Venza as slightly more than one in eight million.
But because of the distribution of cups those odds vary across the country. The best chance to win big is in British Columbia (one in 5.9 million) and the worst is in Ontario (1 in 9.9 million).
Tim Hortons gives no reason in its contest documents for the uneven placement of the car cups around the country.
All other prizes are distributed proportionately.
A call to Tim Hortons headquarters in Oakville, Ont., about the issue was not returned.
Still, many customers say they have their sights set lower than the grand prize anyway.
Katie Burtt, a student at the University of New Brunswick in Saint John, said she would happily celebrate a free doughnut.
"I keep a tally. I've had 26 coffees and won nothing," Burtt said.
Sunday, March 8, 2009
Telescope blasts into space to find other Earths
By MARCIA DUNN, AP Aerospace Writer
CAPE CANAVERAL, Fla. – NASA's planet-hunting telescope, Kepler, rocketed into space Friday night on a historic voyage to track down other Earths in a faraway patch of the Milky Way galaxy.
It's the first mission capable of answering the age-old question: Are other worlds like ours out there?
Kepler, named after the German 17th century astrophysicist, set off on its unprecedented mission at 10:49 p.m., thundering into a clear sky embellished by a waxing moon.
"It was just magnificent. It looked like a star was being formed in the sky," said Bill Borucki, Kepler's principal scientist. "Everybody was delighted, everybody was screaming, 'Go Kepler!'"
Kepler's mission will last at least 3 1/2 years and cost $600 million.
The goal is to find, if they exist, Earth-like planets circling stars in the so-called habitable zone — orbits where liquid water could be present on the surface of the planets. That would mean there are lots of places out there for life to evolve, Borucki said.
On the other hand, "if we don't find any, it really means Earths are very rare, we might be the only extant life and, in fact, that will be the end of 'Star Trek.' "
Once it's settled into an Earth-trailing orbit around the sun, Kepler will stare nonstop at 100,000 stars near the Cygnus and Lyra constellations, between 600 and 3,000 light years away. The telescope will watch for any dimming, or winks, in the stellar brightness that might be caused by orbiting planets.
Astronomers already have found more than 300 planets orbiting other stars, but they're largely inhospitable gas giants like Jupiter. Kepler will be looking for smaller rocky planets akin to Earth.
Kepler is designed to find hundreds of Earth-like planets if they're common and, perhaps, dozens of them in the habitable zone, Borucki said. The telescope is so powerful that from space, NASA maintains, it could detect someone in a small town turning off a porch light at night.
It won't be looking for signs of life, though. That's for future spacecraft.
NASA was counting on a successful launch to offset the loss last week of the space agency's Orbiting Carbon Observatory. That environmental satellite ended up crashing into the Antarctic because of rocket failure. It was a different type of rocket than the one used for Kepler.
Everything seemed to go well with Kepler's launch.
CAPE CANAVERAL, Fla. – NASA's planet-hunting telescope, Kepler, rocketed into space Friday night on a historic voyage to track down other Earths in a faraway patch of the Milky Way galaxy.
It's the first mission capable of answering the age-old question: Are other worlds like ours out there?
Kepler, named after the German 17th century astrophysicist, set off on its unprecedented mission at 10:49 p.m., thundering into a clear sky embellished by a waxing moon.
"It was just magnificent. It looked like a star was being formed in the sky," said Bill Borucki, Kepler's principal scientist. "Everybody was delighted, everybody was screaming, 'Go Kepler!'"
Kepler's mission will last at least 3 1/2 years and cost $600 million.
The goal is to find, if they exist, Earth-like planets circling stars in the so-called habitable zone — orbits where liquid water could be present on the surface of the planets. That would mean there are lots of places out there for life to evolve, Borucki said.
On the other hand, "if we don't find any, it really means Earths are very rare, we might be the only extant life and, in fact, that will be the end of 'Star Trek.' "
Once it's settled into an Earth-trailing orbit around the sun, Kepler will stare nonstop at 100,000 stars near the Cygnus and Lyra constellations, between 600 and 3,000 light years away. The telescope will watch for any dimming, or winks, in the stellar brightness that might be caused by orbiting planets.
Astronomers already have found more than 300 planets orbiting other stars, but they're largely inhospitable gas giants like Jupiter. Kepler will be looking for smaller rocky planets akin to Earth.
Kepler is designed to find hundreds of Earth-like planets if they're common and, perhaps, dozens of them in the habitable zone, Borucki said. The telescope is so powerful that from space, NASA maintains, it could detect someone in a small town turning off a porch light at night.
It won't be looking for signs of life, though. That's for future spacecraft.
NASA was counting on a successful launch to offset the loss last week of the space agency's Orbiting Carbon Observatory. That environmental satellite ended up crashing into the Antarctic because of rocket failure. It was a different type of rocket than the one used for Kepler.
Everything seemed to go well with Kepler's launch.
Thursday, March 5, 2009
GM: 'Substantial doubt' about survival
Automaker's annual report says it hopes to get $7.7 billion from the government to remain viable.
By Chris Isidore and Ben Rooney, CNNMoney.com staff writers
Last Updated: March 5, 2009: 8:22 AM ET
NEW YORK (CNNMoney.com) -- General Motors Corp. said in a government filing Thursday that its accounting firm has found there is "substantial doubt" about the automaker's ability to survive.
The embattled automaker made the disclosure in a 480-page filing with the Securities & Exchange Commission.
GM has sustained large and continuing losses, while saying it needs additional federal loans to remain in business. Thursday's statement from the company's auditors presents another hurdle the automaker will have to clear as it makes the case that it deserve additional taxpayer support going forward.
The Obama administration, under the terms of the $13.4 billion in federal loans GM has already requested, must determine that the company's plans make it viable in the long run.
The government must determine that GM has a "positive net present value" or else demand repayment of the loans within 30 days - a development that would almost certainly plunge the company into bankruptcy and quite possibly force it out of business.
But the government has wide latitude in how it judges the company's net present value, based on assumptions it makes about future sales, car prices and costs for the company going forward. The administration clearly does not want to force the largest U.S. automaker into bankruptcy.
The GM filing disclosed that the Treasury already agreed to waive requirements that the automaker meet certain terms of the original loan agreement, including that it win agreement with creditors to convert two-thirds of its unsecured debt to equity by Feb. 17.
But even if the Obama administration continues to give support to GM (GM, Fortune 500) and rival Chrysler LLC, which has also received federal loans, Thursday's filing could create problems in its relations with suppliers and banks.
For example, concerns about GM's future could cause companies that supply it with parts start to demand cash on delivery from the cash-starved automaker, according to GM's filing.
While parts makers would be reluctant to damage their largest customer with such a demand, they may have no choice because of GM's filing. Those parts makers' own auditors and banks could use the doubts raised by GM's auditors to raise questions about their own future.
Privately held Chrysler does not have to file a year-end financial statement with the SEC. Last week,Ford Motor (F, Fortune 500) said its auditors have not substantial doubt about its future. Ford went into this auto crisis with a much stronger cash position than GM or Chrysler.
GM said Thursday auto sales, which have plunged more than 40% in recent months, must rebound by next year if it is to survive.
Meantime, GM also said it needs additional federal loans to stay in business.
GM received $13.4 billion so far, and it has asked for up to $16.6 billion more. In addition, it is seeking $7.7 billion in loans to convert production from light trucks to more fuel efficient cars under an Energy Department loan program.
"The failure to obtain sufficient funding from the U.S. government or governments outside the United States may require us to shrink or terminate operations or seek reorganization for certain subsidiaries outside the United States," the filing said.
"If we fail to obtain sufficient funding for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief under the U.S. Bankruptcy Code," GM added.
GM's stock was 12% lower in premarket trading.
By Chris Isidore and Ben Rooney, CNNMoney.com staff writers
Last Updated: March 5, 2009: 8:22 AM ET
NEW YORK (CNNMoney.com) -- General Motors Corp. said in a government filing Thursday that its accounting firm has found there is "substantial doubt" about the automaker's ability to survive.
The embattled automaker made the disclosure in a 480-page filing with the Securities & Exchange Commission.
GM has sustained large and continuing losses, while saying it needs additional federal loans to remain in business. Thursday's statement from the company's auditors presents another hurdle the automaker will have to clear as it makes the case that it deserve additional taxpayer support going forward.
The Obama administration, under the terms of the $13.4 billion in federal loans GM has already requested, must determine that the company's plans make it viable in the long run.
The government must determine that GM has a "positive net present value" or else demand repayment of the loans within 30 days - a development that would almost certainly plunge the company into bankruptcy and quite possibly force it out of business.
But the government has wide latitude in how it judges the company's net present value, based on assumptions it makes about future sales, car prices and costs for the company going forward. The administration clearly does not want to force the largest U.S. automaker into bankruptcy.
The GM filing disclosed that the Treasury already agreed to waive requirements that the automaker meet certain terms of the original loan agreement, including that it win agreement with creditors to convert two-thirds of its unsecured debt to equity by Feb. 17.
But even if the Obama administration continues to give support to GM (GM, Fortune 500) and rival Chrysler LLC, which has also received federal loans, Thursday's filing could create problems in its relations with suppliers and banks.
For example, concerns about GM's future could cause companies that supply it with parts start to demand cash on delivery from the cash-starved automaker, according to GM's filing.
While parts makers would be reluctant to damage their largest customer with such a demand, they may have no choice because of GM's filing. Those parts makers' own auditors and banks could use the doubts raised by GM's auditors to raise questions about their own future.
Privately held Chrysler does not have to file a year-end financial statement with the SEC. Last week,Ford Motor (F, Fortune 500) said its auditors have not substantial doubt about its future. Ford went into this auto crisis with a much stronger cash position than GM or Chrysler.
GM said Thursday auto sales, which have plunged more than 40% in recent months, must rebound by next year if it is to survive.
Meantime, GM also said it needs additional federal loans to stay in business.
GM received $13.4 billion so far, and it has asked for up to $16.6 billion more. In addition, it is seeking $7.7 billion in loans to convert production from light trucks to more fuel efficient cars under an Energy Department loan program.
"The failure to obtain sufficient funding from the U.S. government or governments outside the United States may require us to shrink or terminate operations or seek reorganization for certain subsidiaries outside the United States," the filing said.
"If we fail to obtain sufficient funding for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief under the U.S. Bankruptcy Code," GM added.
GM's stock was 12% lower in premarket trading.
Tuesday, March 3, 2009
Loonie little changed despite Canada rate cut
This was on yahoo today
TORONTO (Reuters) - The Canadian dollar fought back on higher oil prices to finish nearly unchanged on Tuesday after hitting a three-month low in the morning after the Bank of Canada cut interest rates to a record low.
The currency swung in a wide range, between C$1.2808 to the U.S. dollar, in the overnight session to a three-month low at C$1.2976 to the U.S. dollar at midmorning.
The Canadian dollar closed at C$1.2911 to the U.S. dollar, or 77.45 U.S. cents, compared with C$1.2914 to the U.S. dollar, or 77.44 U.S. cents, at Monday's close.
The Canadian dollar recovered as the price of oil edged higher above $41 a barrel. It often tracks the price of oil, a key Canadian export.
"You're getting buffeted by concern about the U.S. recovery ...however with oil prices rising over the course of the day, that's been an offset. The Canadian dollar has had a hard time finding direction," said Paul Ferley, assistant chief economist, at Royal Bank of Canada.
The currency lost early gains against its U.S. counterpart after the Bank of Canada cut its key overnight rate by half a percentage point to 0.5 percent and said for the first time that it may turn to unorthodox measures to further stimulate the economy.
Measures such as buying assets in the market to expand the money supply may be among options the central bank is considering. It pledged to unveil a detailed framework in April.
"You've got a whole gamut of things coming out of this policy statement to suggest that rates are going to remain low in Canada for a considerable amount of time," said Stewart Hall, an economist at HSBC Canada.
The currency rallied ahead of the rate announcement as the U.S. dollar -- which has been a safe haven choice -- weakened on dulling risk aversion and after the Reserve Bank of Australia unexpectedly left interest rates on hold.
The Australian dollar, a fellow commodity-linked currency, was one of the top performing currencies on Tuesday.
BONDS MOSTLY HIGHER
Canadian bond prices were mostly higher across the curve as they adjusted to the Bank of Canada's rate cut announcement.
Only the 30-year bond was in negative territory, in line with its U.S. counterpart, a day after a massive rally brought on by sharp losses on the equity markets.
The interest-rate sensitive two-year bond extended the previous session's gains, rising 13 Canadian cents to C$103.07 to yield 0.970 percent. The 10-year bond climbed 18 Canadian cents to C$106.76 to yield 2.978 percent.
The 30-year bond lost 42 Canadian cents to C$124.05 to yield 3.631 percent.
The Bank of Canada's statement on Tuesday prompted at least one bank to revise its forecast for rate cuts after the central bank said it would consider taking extra steps to pump money into the system.
TD Securities now forecasts the Bank of Canada will cut its overnight rate by another 25 basis points to take it to a record low at 0.25 percent. TD also gives a greater than 50-percent probability that the central bank will opt for some less conventional ways of pumping money into the economy after the April 21 rate decision.
By Ka Yan Ng
(Editing by Peter Galloway)
TORONTO (Reuters) - The Canadian dollar fought back on higher oil prices to finish nearly unchanged on Tuesday after hitting a three-month low in the morning after the Bank of Canada cut interest rates to a record low.
The currency swung in a wide range, between C$1.2808 to the U.S. dollar, in the overnight session to a three-month low at C$1.2976 to the U.S. dollar at midmorning.
The Canadian dollar closed at C$1.2911 to the U.S. dollar, or 77.45 U.S. cents, compared with C$1.2914 to the U.S. dollar, or 77.44 U.S. cents, at Monday's close.
The Canadian dollar recovered as the price of oil edged higher above $41 a barrel. It often tracks the price of oil, a key Canadian export.
"You're getting buffeted by concern about the U.S. recovery ...however with oil prices rising over the course of the day, that's been an offset. The Canadian dollar has had a hard time finding direction," said Paul Ferley, assistant chief economist, at Royal Bank of Canada.
The currency lost early gains against its U.S. counterpart after the Bank of Canada cut its key overnight rate by half a percentage point to 0.5 percent and said for the first time that it may turn to unorthodox measures to further stimulate the economy.
Measures such as buying assets in the market to expand the money supply may be among options the central bank is considering. It pledged to unveil a detailed framework in April.
"You've got a whole gamut of things coming out of this policy statement to suggest that rates are going to remain low in Canada for a considerable amount of time," said Stewart Hall, an economist at HSBC Canada.
The currency rallied ahead of the rate announcement as the U.S. dollar -- which has been a safe haven choice -- weakened on dulling risk aversion and after the Reserve Bank of Australia unexpectedly left interest rates on hold.
The Australian dollar, a fellow commodity-linked currency, was one of the top performing currencies on Tuesday.
BONDS MOSTLY HIGHER
Canadian bond prices were mostly higher across the curve as they adjusted to the Bank of Canada's rate cut announcement.
Only the 30-year bond was in negative territory, in line with its U.S. counterpart, a day after a massive rally brought on by sharp losses on the equity markets.
The interest-rate sensitive two-year bond extended the previous session's gains, rising 13 Canadian cents to C$103.07 to yield 0.970 percent. The 10-year bond climbed 18 Canadian cents to C$106.76 to yield 2.978 percent.
The 30-year bond lost 42 Canadian cents to C$124.05 to yield 3.631 percent.
The Bank of Canada's statement on Tuesday prompted at least one bank to revise its forecast for rate cuts after the central bank said it would consider taking extra steps to pump money into the system.
TD Securities now forecasts the Bank of Canada will cut its overnight rate by another 25 basis points to take it to a record low at 0.25 percent. TD also gives a greater than 50-percent probability that the central bank will opt for some less conventional ways of pumping money into the economy after the April 21 rate decision.
By Ka Yan Ng
(Editing by Peter Galloway)
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