Monday, November 24, 2008
U.S., Brazil to speed up cellulosic ethanol research
SAO PAULO (Reuters) - The world's top two producers of ethanol, the U.S. and Brazil, will join forces to speed up research into cellulose-derived biofuels, which use inedible plant matter rather than crops as their feedstock.
In a statement they said they would expand scientific collaboration led by the U.S. National Renewable Energy Lab (NREL) and Brazilian oil giant Petrobras' Center for Research and Development CENPES.
The two nations would also to help five countries in Africa, Central America and the Caribbean to develop their own biofuel industries, investing $4.3 million in biofuel projects in Guatemala, Honduras, Jamaica, Guinea Bissau and Senegal.
Existing partners already being helped to develop their biofuel industries including the Dominican Republic, El Salvador, Haiti and St. Kitts and Nevis would also benefit.
The U.S. agriculture secretary Ed Schafer and Brazil's foreign minister Celso Amorim announced their agreement late on Thursday at an international biofuels conference Brazil has been hosting in Sao Paulo, which concludes on Friday.
The Latin American nation began pioneering use of sugar cane ethanol in the mid-1970s making cars adapted to run on the biofuel. A newer generation of "flex-fuel" cars launched around four years ago can run on any mix of ethanol and gasoline.
"Second generation" or cellulosic ethanol which is not yet produced on a commercial scale, involves breaking down the woody bits of crop waste or plants into sugars to ferment -- a method expected to emit less greenhouse gases than cane and corn-based production.
(Reporting by Peter Murphy; Editing by Marguerita Choy)
By Peter Foster
Nothing more clearly indicates the supremacy of charisma over ideas than attitudes towards the green schemes of Stéphane Dion and Barack Obama. Mr. Dion's "Green Shift" was a lead balloon, carried by a man whose earnest personality was already a millstone. And yet U.S. president-elect Obama's far more potentially-disastrous plans to create "green jobs" is being portrayed as inspirational leadership.
This week, both the leading candidates for Mr. Dion's Liberal leadership job — Michael Ignatieff and Bob Rae — sought to put as much distance as possible between themselves and Mr. Dion's vote-loser (which even he was trying to shove down the memory hole by the end of the recent federal campaign). Although Mr. Dion's plan was claimed to be too complex, perhaps his main mistake was to be too honest. Instead of concentrating on that bright shining new high-tech Emerald City on a hill, Mr. Dion started with the painful bit: the cost, specifically a carbon tax. Mr. Obama by contrast promises to create 5 million "green" jobs by spending $15-billion a year for 10 years. These jobs will not only help save the world from climate change, but also increase energy security. Where will the money come from? Where's your vision? Are you racist?
President-elect Obama's plans represent an enormous threat both to the U.S. and world economies. Far from creating new jobs, any "green" jobs arising from draconian legislation and/or subsidies will be bought at the cost of more jobs lost in restricted/disfavoured sectors. Green jobs carry a reverse multiplier.
As for the benefits of green government guidance, just look at how much Corporate Average Fuel Economy standards have done to help guide U.S. auto makers towards viability. Nevertheless, the conventional wisdom is that any bailouts for the Big Three must be accompanied by commitments on their part to create "more fuel efficient" cars rather than simply cars that people want to buy. Government bureaucrats may even be put on their boards to lend their expertise to the process. Having poured good money after bad, the government will add to the investment's guaranteed failure by further muddling corporate direction with political input.
Similarly, the $700-billion bank bailout, whose nature is as vague as the sum is arbitrary, might be linked to financial institutions directing loans towards chosen instruments or technologies. A number of features might be noted about the ongoing "green shove." It is based on what may be the biggest political and scientific scam in world history: the alleged need for grand, coordinated schemes to combat anthropogenic climate change. Government-favoured "technologies of the future" are in most cases technologies of the past. This suicidal policy thrust is being promoted by a growing army of policy entrepreneurs, corporate rent-seekers, freelance consultants, carbon traders, hot air market builders, and the compliance industry of lawyers and accountants. Even if the worst-case scenario about climate change is true, global schemes based on cap and trade and forced technology are, as Bjorn Lomborg's Copenhagen Consensus has indicated, a lousy way to spend taxpayers' dollars. They are also wildly impractical. If, that is, your real concern is human welfare rather than hatred of development, empire building, or a desire to line your own pockets at the public expense. When it comes to chosen technologies, as this column has pointed out many times, governments invariably pursue the drunk under the lamppost approach of supporting what is available: the same old greasy deck of solar, wind, fuel cell, and "bio" sources that have been around for anything from decades to millennia.
The only reason that these technologies have enjoyed a boom in recent years (which is now collapsing) is that they have been subsidized by governments, and stoutly supported by the chattering classes in the media. One recent example of this latter trend was a programme last week by the CBC's Fifth Estate titled, appropriately, "The Gospel of Green," which lauded the German approach to subsidies, and pointed to a Canadian company, Arise Technologies, which had allegedly benefitted from hefty German subsidies. Unfortunately, the programme aired just as Arise's main German customer was floundering and its own share price was sinking.
There is nothing more ephemeral than government-supported jobs. As for supporters of junk science and economics, the Financial Post this week carried a positively depressing special section which paraded an army of lawyers twittering about all the great business there was to be done on the back of climate change policy; from quantifying, verifying and aggregating "pollution" for trading purposes, to hunting down and prosecuting carbon criminals. One lawyer even waxed about the growth of carbon derivatives. Mmm. Collateralized carbon obligations? It's got bubble written all over it!
Then there's the lucrative prospect of helping companies negotiate any new U.S. regime to combat "unfair' trade from countries that refuse to sign on to industrial self-mutilation in the name of saving the planet. Like the dead hand of government investment guidance, such a regime would prove fatal for global development, even if it does mean boffo business for trade lawyers. The only hope is that ordinary people will spot this destructive lunacy and stop it. We might take some hope that the Green Shift was rejected. Meanwhile, although it did not get a great deal of coverage, two recent green initiatives in California — Proposition 7, to force the use of renewable power, and Proposition 10, to subsidize alternative vehicles — were soundly defeated. Like that joke about the lawyers at the bottom of lake Ontario, it's a start.
Financial Post
What do they say about first impressions?
GM Gives Up Two Corporate Jets
Struggling General Motors, which was blasted and mocked for using one of its corporate jets to fly chief executive Rick Wagoner to Washington this week to beg Congress for $25 million in bailout cash, is preparing to give back two of its leased corporate jets, the company said today.
GM started the year with a fleet of seven(!) leased jets, gave back two in September and is preparing to shed two more, bringing the GM fleet down to three jets.
GM said the company was already preparing to give back the two additional jets even before this week's hearing.
"We understand the symbolic issue of people showing up in Washington in corporate jets," GM spokesman Tom Wilkinson told Dow Jones. "We're very sensitive to that."
Why the private jets to begin with?
GM's board -- like many corporate boards -- requires its top executives to fly on company planes for their own security. Further, GM said, the smaller jets can fly company execs to places not easily accessible by commercial flights.
-- Frank Ahrens
GM says board doesn't see bankruptcy as option
DETROIT (AP) — General Motors Corp.'s board of directors does not consider bankruptcy protection a viable option to solve the company's financial troubles, but it has discussed Chapter 11 because it has a legal duty to do so, a spokesman said Saturday.
Century-old GM, an icon of American manufacturing, has been battered by a plunge in car sales as American consumers tighten their belts and shift away from the big moneymaking pickup trucks and SUVS that have long the staples of GM's lineup.
GM, which has slashed jobs and closed plants since early in the decade, has warned that it could run low on cash by the end of the year unless it gets a taxpayer-funded rescue from the government.
"The board has a responsibility to keep all options open considering the circumstances," said Vice President of Communications Tony Cervone. "Chapter 11 protection is not a viable option because it doesn't fundamentally address the issues at hand today."
The board, which has been meeting regularly by teleconference since the company's finances worsened, agrees with Chairman and CEO Rick Wagoner that bankruptcy would be disastrous for the company, Cervone said. Wagoner has said it would scare away customers who would not make a big-ticket purchase from an automaker that is under court protection.
Instead, Cervone said the board supports Wagoner's strategy to seek congressional approval of low-interest government loans, getting the company through its liquidity problems until the U.S. auto market recovers and it can be profitable again, Cervone said.
"The board continues to support management and has continued to express support for management," Cervone said.
But industry analysts say the board has to prepare for bankruptcy if the government doesn't come through with loans in time, and even with a loan if the U.S. auto market doesn't recover in the next year or so.
The board probably believes in the company's plan to get government help and survive, but members with financial knowledge also know that they need to explore the bankruptcy option because of GM's huge cash burn, said Kevin Tynan of New York-based Argus Research Corp.
"It may be the best way to go, and they may find that out. They may not have a choice," he said. "The cash is what keeps you in business."
Erich Merkle, auto analyst with the consulting firm Crowe Horwath LLP, said the board has to plan its next move in case Congress doesn't come through with a loan quickly.
"The decision isn't really theirs to be made," he said. "Unfortunately it's Washington's decision. They either get this bridge loan or they have to prepare for the bankruptcy filing."
Without loans, the board likely would seek bankruptcy protection and then ask the government to provide debtor-in-possession financing, Merkle said.
Wagoner, in testimony to the Senate Banking Committee on Tuesday, said that independent research shows 80 percent of consumers would not consider buying a car from GM if it were in bankruptcy.
Bankruptcy experts say the company may not be able to pay all its bills, and that some parts suppliers may start demanding cash from GM upon delivery. GM, though, may be able to negotiate terms from suppliers whose fates depend largely on the company's success.
Wagoner, Ford Motor Co. CEO Alan Mulally and Chrysler LLC CEO Robert Nardelli appeared before Congress this week seeking $25 billion in low-interest loans, but were drubbed by criticism from members of House and Senate committees.
Instead of leaving Washington with a commitment for the bailout loans, the three headed back to Detroit empty-handed, rebuffed by lawmakers who were upset that the trio flew to the nation's capital in separate private jets to ask for aid. Lawmakers also criticized the CEOs for appearing without a solid plan and for allowing high labor costs that put them at a disadvantage with their Japanese competitors.
In a letter to the auto executives released Friday afternoon, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid demanded a detailed accounting by Dec. 2 of the companies' financial condition and short-term cash needs, as well as their plan to achieve long-term viability.
The Democrats also called on the automakers to show how they would ensure that the government would be reimbursed and share in future profits, eliminate dividends and lavish executive pay packages, meet fuel-efficiency standards, and address their health care and pension obligations if they get the federal help.
The Bush administration sharply criticized the Democrats for departing Washington for a congressional recess without acting on a rescue for the car makers.
GM is considered by many to be in the worst financial shape of the three automakers. The company spent $6.9 billion more than it took in during the third quarter and has warned that it could reach the minimum amount of money needed to run the business by year-end.
GM already has cut expenses and has delayed for two weeks reimbursements to dealers for sales incentives such as rebates.
GM shares closed Friday at $3.06. They have withered since peaking near $94 in 1999 and 2000, and they have lost 93 percent of their value from $43.20 as recently as October of 2007.
By Anil Varma
Nov. 24 (Bloomberg) -- India's rupee declined on signs investors are taking money out of emerging markets as financial institutions worldwide face mounting credit-market losses.
The currency extended two weeks of losses after data from the nation's capital market regulator showed overseas investors extended record sales of local equities. Eight of the 10 most- active currencies in Asia outside Japan fell today as Asian stock indexes dropped on speculation demand for the region's assets and exports is falling amid a deepening global economic slump.
``The rupee will face some more uncertainty and volatility in the short term,'' said K.V. Mallik, treasurer at state-owned UCO Bank in Kolkata. ``Outflows from the equity market and import-related payments will keep some pressure on the rupee.''
The rupee weakened 0.1 percent to 50.095 a dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It touched an all-time low of 50.5925 in intraday trading on Nov. 20. The currency has lost 21.3 percent this year, the most since 1991.
Implied volatility on one-month dollar-rupee options rose today to 26 percent, near the highest this month, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options.
The Bombay Stock Exchange's benchmark Sensitive Index lost 0.1 percent. The MSCI Asia-Pacific Index declined 0.6 percent.
Stock Sales
Investors based abroad pulled a record $4.27 billion out of India's equity and debt markets last month as the credit crisis escalated following the collapse of Lehman Brothers Holdings Inc. in September. They sold $13.4 billion of shares this year, data provided by the Securities and Exchange Board of India show.
The rupee's losses were curbed by speculation the central bank seeks to limit declines that may stoke inflation.
The Reserve Bank of India's foreign-exchange reserves have fallen by almost $65 billion from a record $316.2 billion reached in May, indicating it has been selling dollars. India's inflation eased to 8.9 percent, the slowest in five months, in the first week of this month, the government said Nov. 20. Currency losses increase the cost of imported goods.
Offshore forward contracts showed bets for how far the rupee will weaken in the next month were little changed. Non- deliverable contracts showed an implied rate of 50.95 rupees to the dollar, versus 51.05 on Nov. 21.
Forwards are agreements in which assets are bought and sold at current prices for future delivery. Indian rupee forwards traded overseas are non-deliverable, meaning they are settled in dollars rather than the local currency.
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
Last Updated: November 24, 2008 07:07 EST
Friday, November 21, 2008
The Automobile industry is only asking for 2.27 countries?
Iceland today (Thursday) secured nearly $11 billion in loans from the International Monetary Fund (IMF) and other nations. The bailout will help the island nation stabilize its currency and recapitalize its banks, but it will also saddle its tiny population with a huge debt burden.
The IMF will lend Iceland $2.1 billion, and Finland, Sweden, Norway and Denmark will loan $2.5 billion to help the country re-float its currency and shore up its banking sector.
The Icelandic krona, or crown, has lost about 70% of its value since the nation's financial crisis first began. The government put restrictions on currency trade as it wrestled with the crisis, however one of the stipulations of the IMF loan is that Reykjavik once again float its currency. Once it does, it's likely that there will be a "massive currency outflow," Iceland's central bank said.
The krona, which traded at 176 against the euro at a Nov.19 auction, could trade weaker than 250 per euro after the float, Lars Christensen, chief analyst at Danske Bank A/S, told Bloomberg.
"They'll have to accept that there'll be a pretty significant pressure on the currency when they reintroduce a free float," Christensen said.
The IMF said that $827 million of its loan would be made available immediately and the rest in eight installments of about $155 million, subjected to quarterly reviews.
Iceland will also get about $6.3 billion from the United Kingdom, the Netherlands, and Germany to cover foreign deposits at Icesave – a unit of the failed bank Landsbanki Islands.
"Iceland is in the midst of a banking crisis of extraordinary proportions," John Lipsky, deputy managing director of the IMF, said in a statement. The country "is facing a severe recession, given the high debt level in the economy and significant dependence of the private sector on foreign currency and inflation-indexed debt."
The debt burden resulting from IMF, European, and Nordic loans totals nearly $11 billion, greater than the nation's gross domestic product (GDP). The Icelandic economy is worth roughly $7.5 billion, based on 2007 GDP at current krona exchange rates, Bloomberg reported.
Divided amongst a population of 320,000, each citizen would have to come up with $34,375 to pay off the debt. But that's only if Icelanders stick around.
The automobile industry directly employs 235,000 people, so each employee would only have to come up with 1.06 million to pay off the debt.
TAIPEI -(Dow Jones)- Dell Inc. (DELL) Asia-Pacific and Japan President Steve Felice said Friday growth in China and India is insufficient to offset the weak U.S. market.
"Our growth in China and India did allow overall Asia to grow...but it's still not enough to offset what's going on in the U.S.," Felice said in a conference call with reporters.
Dell, the world's second largest computer vendor by revenue after Hewlett- Packard Co., posted a 5% drop in net income and a 3% decline in revenue for its fiscal third quarter.
How much would it cost for all three CEO's to take a hike?
By Dana Milbank
Thursday, November 20, 2008; A03
There are 24 daily nonstop flights from Detroit to the Washington area. Richard Wagoner, Alan Mulally and Robert Nardelli probably should have taken one of them.
Instead, the chief executives of the Big Three automakers opted to fly their company jets to the capital for their hearings this week before the Senate and House -- an ill-timed display of corporate excess for a trio of executives begging for an additional $25 billion from the public trough this week.
"There's a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands," Rep. Gary L. Ackerman (D-N.Y.) advised the pampered executives at a hearing yesterday. "It's almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here?"
The Big Three said nothing, which prompted Rep. Brad Sherman (D-Calif.) to rub it in. "I'm going to ask the three executives here to raise their hand if they flew here commercial," he said. All still at the witness table. "Second," he continued, "I'm going ask you to raise your hand if you're planning to sell your jet . . . and fly back commercial." More stillness. "Let the record show no hands went up," Sherman grandstanded.
By now, the men were probably wishing they had driven -- and other members of the House Financial Services Committee weren't done riding the CEOs over their jets. "You traveled in a private jet?" Rep. Nydia M. Velázquez (D-N.Y.) contributed. Rep. Patrick T. McHenry (R-N.C.) felt the need to say that "I'm not an opponent of private flights by any means, but the fact that you flew in on your own private jet at tens of thousands itself dollars of cost just for you to make your way to Washington is a bit arrogant before you ask the taxpayers for money."
It was a display of stone-cold tone-deafness by the automaker chiefs. In their telling, they have no responsibility for the auto industry's current mess. Threatening the nation with economic Armageddon if they are not given government aid, they spent much of the session declaring what a fine job they've been doing in Detroit.
"Chrysler really is the quintessential American car company!" Chrysler's Nardelli boasted.
"We have products that are winning car and truck of the year regularly," General Motors' Wagoner proclaimed.
"We are equal to or better than Honda and Toyota," Ford's Mulally added. "Every new vehicle that we make, whether it's small, medium or large, is best in fuel efficiency. The given is safety. And we have more, at Ford, more five-star quality and safety ratings than any other automobile."
Committee Chairman Barney Frank (D-Mass.) cut him off. "Thank you, Mr. --"
"And the best value!" Mulally blurted out.
"Commercials can go later," the chairman proposed.
They would have to go later, because members of the committee wanted to turn the session into a special edition of "Car Talk." Rep. Mike Castle (R-Del.) spoke of his '99 Jeep: "It probably has about 150,000 miles on it, and it's still running doggone well." Rep. Jeb Hensarling (R-Tex.) invoked his '98 Jeep Cherokee: "Small problem with the back hatch staying open; we can talk about that afterwards." Rep. Michele Bachmann (R-Minn.) praised her Chrysler minivan. Rep. Judy Biggert (R-Ill.) had good words for her Jeep but complained that it didn't come in a hybrid version.
"I drive the same '66 Plymouth Valiant that I've always had," Ackerman proffered. He went on to discuss a problem with the GPS system in his Cadillac. "I wanted a loaded car in blue; I had to reach out to five states to find one in blue," he complained.
It seemed everybody had a car story to tell. Rep. John Campbell (R-Calif.) let it be known that he was a car dealer for 25 years. Rep. Stephen Lynch (D-Mass.) disclosed that he had worked at the GM plant in Framingham. Rep. Donald Manzullo (R-Ill.) wanted to see more ads for the car made in his district, while Rep. Michael Capuano (D-Mass.) said the Edsel was once made in his home town. Rep. Walter Jones (R-N.C.) read from Cicero and held up photos of cars. And Rep. David Scott (D-Ga.) had no car stories to tell but delivered the surprising news that the problem with the Titanic was not its collision with an iceberg.
Detroit area lawmakers made passionate arguments that the carmakers had already done what "they possibly can to restructure and become globally competitive," as Rep. Thaddeus McCotter (R-Mich.) put it.
But the executives were not helping their own case. When Rep. Paul Kanjorski (D-Pa.) tried to find out when GM would run out of cash, Wagoner hemmed and hawed until the lawmaker protested that "I don't quite understand what the hell you just told me." When Rep. Ed Perlmutter (D-Colo.) asked about GM's outlook for the quarter, Wagoner informed him that "we don't provide financial guidance in earnings."
So it was hard to feel sorry for the executives when Rep. Peter Roskam (R-Ill.), late in the hearing, reminded them again that "the symbolism of the private jet is difficult," and mischievously asked the witnesses whether, in another symbolic gesture, they would be willing to work for $1 a year, as Nardelli has offered to do.
"I don't have a position on that today," demurred Wagoner (2007 total compensation: $15.7 million).
"I understand the intent, but I think where we are is okay," said Mulally ($21.7 million).
"I'm asking about you," Roskam pressed.
"I think I'm okay where I am," Mulally said.
And don't even think about asking him to fly commercial.
One of Big Three US carmakers 'could fail'
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