(Headlines - scroll down for full stories)
1. Ford, Toyota Discuss Potential Partnership
2. Dollar Continues Decline
3. Incentives, Low Prices Spur New Home Sales in November
4. Cold Weather, Gift Card Demand Could Boost Retail Sales
1. Ford, Toyota Discuss Potential Partnership
The chief executive of Ford Motor Co. met with the chairman of Toyota Motor
Corp. as the first step in potential partnership negotiations, the Japanese
business daily Nihon Keizai Shimbun said Tuesday.
The newspaper reported in its online edition that Ford CEO Alan Mulally and
Toyota's Chairman Fujio Cho met last week. The meeting was also attended by Ford
Executive Vice President Mark Fields, who is in charge of restructuring the
automaker's loss-making North American operations, the newspaper said.
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The newspaper cited unnamed sources familiar with the talks as saying that Ford
was interested in Toyota's hybrid and fuel-cell technologies as well as its work
in reducing manufacturing and parts procurement costs.
A spokesman for Ford said the automaker would neither confirm nor deny the
report.
"I can't confirm or deny the report other than to say that we have discussions
with participants in our industry all the time," Ford spokesman Oscar Suris
said.
A Toyota spokesman for the company's U.S. sales operation also declined comment,
saying any comment would have to come from the automaker's headquarters in
Japan.
Ford shares were up 1.2 percent, or 9 cents, at $7.51 on the New York Stock
Exchange on Tuesday afternoon.
The report said Toyota could be considering a partnership as a way to ease
potential friction with the U.S. auto industry at a time when its own growth has
been surging.
Analysts were skeptical that Toyota and Ford would agree to an outright merger
or a substantial joint investment given the diverging paths for the two
automakers.
Toyota is poised to overtake General Motors Corp. as the world's largest
automaker in terms of production next year, and many analysts expect it will
also unseat Ford as No. 2 in the U.S. market as soon as next year.
While Toyota's U.S. sales have jumped by almost 13 percent this year, Ford's
sales have fallen by almost 8 percent, according to monthly sales data.
Ford's Mulally, who took over as Ford CEO in October with a mandate to turn the
struggling company around, has spoken repeatedly about his admiration for
Toyota, a company he has said he studied closely as a manufacturing executive at
Boeing Co.
Ford currently licenses Toyota's market-leading hybrid engine technology for the
hybrid versions of its Escape and Mariner sport utility vehicles.
Ford, which has relied heavily on its line-up of trucks and SUVs, would stand to
gain from a cooperative partnership with Toyota if it focused on fuel economy
and other technology seen as environmentally friendly, said Edmunds.com analyst
Jesse Toprak.
"In terms of long-term planning, I think it's very smart for Ford to be looking
at this," Toprak said. "This is going to be a factor that will determine whether
an automaker is successful in the future."
Efraim Levy, an equity analyst at Standard & Poor's, agreed,
"Toyota could teach Ford a lot in any kind of joint venture . . . suggestions on
improving manufacturing efficiencies or sharing technologies," he said. "The
benefits that would accrue to Toyota are less obvious."
He added: "I don't think any major transaction is going to occur between them.
It's probably just going to be technology sharing."
The possible partnership is the latest in a series that have captured headlines
for the global auto industry in recent months.
GM declined to enter an alliance with Nissan-Renault in early October after
three months of negotiation, sparking speculation that the French-Japanese auto
group could turn to Ford to secure a North American partner.
Carlos Ghosn, who heads both Renault SA and Nissan Motor Co., said last month
that he was open to adding a U.S. automaker to form a three-way alliance, but
said the timing was not right for Nissan.
© Reuters 2006.
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2. Dollar Continues Decline
The dollar dropped the most in a week against the euro in the wake of news that
the United Arab Emirates intends to convert some of its reserves of U.S. assets
into the European currency.
Bloomberg.com reported that Sultan Bin Nasser al-Suwaidi said the U.A.E. will
switch 8 percent of its reserves from dollars into euros before Sept. 2007. He
added that the U.A.E. has already started "in a limited way" to sell its dollar
reserves.
The dollar also took its biggest hit against the yen this month. The dollar fell
to 118.63 yen at 7:17 a.m. in New York, from 119.15 late yesterday.
The dollar also slid to $1.3158 against the euro, from $1.3098. The dollar has
already fallen 9.9 percent against the euro this year, marking its first decline
since 2004.
With the U.S. Conference Board's index of sentiment expected out tomorrow,
economists polled by Bloomberg News are expecting it will likely drop slightly
to 102 for December from 102.9 in November.
MasterCard Advisors also reported holiday retail sales increased this year at a
slower pace than in 2005.
All this, some experts speculate, is hedging their bets the Federal Reserve will
lower interest rates next year. The Fed has left borrowing costs unchanged at
5.25 percent for the past four policy meetings, after a two-year cycle of rate
increases.
According to Bloomberg.com, interest-rate futures show traders see a 28 percent
chance the Fed will lower its overnight target lending rate between banks by a
quarter point to 5 percent in March. That's up from a 17 percent likelihood
reported a week ago.
If there's any consolation to this news it's that the U.S. isn't the only
country dealing with lower-than-expected retail sales. In Japan, gains in the
yen may be limited after a government report showed retail sales in that country
rose less than expected last month, says Bloomberg.com. In addition, with a
household spending report showing an 11th month of declines and gains in
consumer prices failing to beat forecasts, Bloomberg.com says traders are still
betting that the Japanese central bank will raise borrowing costs in January.
Editor's Note:
3. Incentives, Low Prices Spur New Home Sales in November
With so much bad news coming out of the mortgage industry, the Commerce
Department's announcement yesterday that sales of new homes rose 3.5 percent in
November was welcome news.
Experts are attributing the increase last month to a seasonally adjusted annual
rate of 1.047 million to lower mortgage rates, lower prices and incentives being
offered by builders.
Even, says Bloomberg.com, a glut of unsold homes means the housing slump may
still continue well into 2007, dragging on growth and costing the economy jobs.
Lehman Brothers Holdings Inc.'s Ethan Harris, chief U.S. economist, opines. "The
drop in long term rates is providing a cushion. Builders are continuing to very
aggressively unload inventory with bargain incentives. We've probably seen the
worst in terms of the drop in home sales, and we're probably in an environment
of choppiness in sales."
Earlier this month, the National Association of Realtors forecast 1.06 million
new home sales for 2006. While that's 17.7 percent below last year's level, it's
still the fourth highest on record. The NAR expects home sales in 2007 to
decline 9.4 percent to 957,000.
Meanwhile, existing homes sales, which make up about 85 percent of residential
sales, may increase 4.6 percent by the fourth quarter 2007 compared to the
fourth quarter 2006, says the NAR. Still the group predicts for all of 2006,
existing home sales will be 8.6 percent below last year's record.
Amidst all this speculation and forecasting, one thing remains certain: the
housing market is in its biggest contraction in 15 years after average price
increases of 60 percent over the past five years put purchasing a home out of
reach for many Americans. Home construction in the third quarter 2006 saw its
biggest decrease in 15 years, and the Mortgage Bankers Association said today
that its index of applications for mortgages to purchase fell 10.6 percent the
week ending Dec. 22.
In addition, reports Bloomberg.com, the housing slowdown is starting to cost
jobs. Builders laid off 53,000ome constH workers in the last two months,
according to government reports.
Editor's Note:
4. Cold Weather, Gift Card Demand Could Boost Retail Sales
Colder weather and huge demand for gift cards should give retailers one last
chance this week to make up for slack December sales growth, but it may be too
little, too late to rescue fourth-quarter earnings.
The weekend before Christmas, which typically includes the busiest shopping day
of the year, did little to alleviate concerns that holiday spending would come
up short of expectations.
"Based on our channel checks, shoppers were out and they were buying, but not at
the level we had expected, especially at many of the apparel driven retailers,"
Roth Capital Partners analyst Elizabeth Pierce wrote in a note to clients.
"Although results were softer than we expected over the weekend, we believe it
is premature to 'call' the holiday season given the increasing popularity of
gift cards," she added.
Retailers record revenue from gift cards when the cards are redeemed, not when
they are sold. That can deflate traditional holiday season sales but lift
results in late December and into January.
Many retailers held back some winter merchandise so that they could show
something new after Christmas, hoping that shoppers armed with gift cards would
pay full price for items such as coats and sweaters - two categories that have
suffered through an unusually warm December.
Planalytics, which tracks weather-related spending, predicted a gradual trend
toward more seasonable winter weather through the first half of January.
Holiday sales from the day after Thanksgiving through Christmas Eve grew about 3
percent, well behind last year's 5.2 percent growth rate, according to
SpendingPulse, the retail data service provider for MasterCard Advisors.
Holiday season sales rose 6.6 percent without adjusting for an extra sales day
between Thanksgiving and Christmas, MasterCard's SpendingPulse said.
Final December sales figures won't be released until next week, but apparel
stores appeared to be among the biggest disappointments in the vital
Thanksgiving-to-Christmas holiday season, and some chains have already slashed
prices in a last-ditch effort to tempt shoppers.
"From our checks days before Christmas, women's specialty retailers in most
cases threw in the towel early," CIBC World Markets analyst Roxanne Meyer wrote
in a note to clients earlier this week.
That could pressure fourth-quarter profits. December is the biggest earnings
driver in the period, which for most retailers ends in January.
Analysts said demand for consumer electronics may have fizzled out last weekend
after a strong start that was driven by demand for discounted flat-panel
televisions.
"Even typical holiday shopping procrastinators seemed fewer and further between,
with parking lots of malls and strip malls relatively easy to navigate (as)
opposed to typical jams," Kaufman Bros. analyst SooAnn Roberts wrote in a
research note.
Online sales remained strong, however, with Amazon.com Inc. reporting its
busiest day of the holiday season on Dec. 11. The retailer said it shipped more
than 99 percent of orders in time to meet
© Reuters 2006.
Editor's Note:
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