By Phil Boeyen, ShareChat Business News Editor
Friday 1st May 2009 |
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Chrysler LLC filed for bankruptcy protection, opening the door to a reorganisation that will bring Italy’s Fiat on board as a partner and shed debt.
America’s third-biggest automaker sought Chapter 11 bankruptcy after missing a government deadline to come up with a restructuring plan robust enough to qualify it for more government aid.
A slimmed-down Chrysler, with lower debt and holding the automaker’s best brands - Jeep and Dodge – would be able to tap Fiat’s expertise in smaller vehicles. Chrysler will get a “new lease on life,” President Barack Obama said.
He was critical of a group of hedge funds and other holders of Chrysler’s debt that refused to agree to terms of a debt reduction proposal that may have saved the automaker.
“I don’t stand with those who held out when everyone else is making sacrifices,” Obama said in Washington. Some stakeholder held out for “an unjustified taxpayer-funded bailout,” he said.
Chrysler’s move helped lift shares of General Motors by 6.1% to US$1.92 amid speculation it stands to gain market share as Chrysler shrinks. Ford rose 9.7% to US$5.98.
Exxon Mobil Corp., the world’s biggest company by market value, posted a 58% drop in first-quarter profit to US$4.55 billion, the weakest in five years, as the global economic slump sapped demand for fuel and weighed on prices. Sales dropped 45% to US$64 billion. Shares of Exxon fell 2.6% to US$66.67.
Chevron declined 2.2% to US$66.10. The Dow Jones Industrial Average rose/fell 0.2% to 8168.12 and the Standard & Poor’s 500 Index rose/fell 0.1% to 872.81.
The Nasdaq Composite rose 0.3% to 1717.3. US consumer spending fell a greater-than-expected 0.2% in March, according to the Commerce Department, the first decline in 12 months, amid a rising jobless queue and shrinking pay increases for workers.
Some 631,000 Americans applied for jobless benefits in the week ended April 25, pushing the number of people on jobless rolls to 6.27 million.
Business activity shrank at a slower-than-expected pace.
The Institute for Supply Management-Chicago business barometer rose to 40.1 from 31.4 on a scale where readings below 50 signal contraction.
Labour Department figures showed employment expenses rose just 0.2% in the first quarter, the smallest gain since records began in 1982.
The US dollar rose 0.5% to $1.3224 per euro and gained 0.7% to 98.61 yen. The euro strengthened 0.2% to 130.43 yen.
The slide in demand and prices for crude oil also drove down earnings at Royal Dutch Shell Plc, the biggest oil company in Europe. Profit tumbled 62% to US$3.49 billion. The shares rose 1.7% in London as earnings exceeded some analysts’ estimates.
ArcelorMittal, the world’s biggest steelmaker, posted a worse-than-expected first-quarter net loss of US$1.06 billion, compared with a year-earlier profit of US$2.37 billion, or $1.68, a year earlier. The steelmaker plans to raise US$3 billion by selling shares and bonds, to repay existing debt. The shares fell about 11%.
Bayer AG, Germany’s biggest drugmaker, reported a 44% slide in first-quarter profit on an operating loss at its plastics division. Shares in Europe gained.
The Dow Jones Stoxx 600 Index gained 1.5% to 200.23.
The UK’s FTSE 100 rose 1.3% to 4243.71, Germany’s DAX Index climbed 1.4% to 4769.45 and France’s CAC 40 rose 1.4% to 3159.85.
Meantime, European Central Bank President Jean-Claude Trichet has ordered members of the ECB’s Governing Council members to avoid public comment on the central bank’s potential next steps to drag the region out of recession.
The council is split over the extent of further interest rates from the current 1.25% and consideration of alternate measure to revive growth.
Crude oil rose as traders speculated fuel demand will recover with signs the global economy may be bottoming. Crude for June delivery rose 59 cents to US$51.94 a barrel in the electronic trading on the New York Mercantile Exchange.
Copper futures for July delivery rose 2.1% to US$2.0475 a pound in New York. Gold futures for June delivery fell 1% to US$891.20 an ounce.
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