Finance and Economic

There’s no shortage of deals for the consumer suffering the recession.

Automakers will make your car payments. Apartment complexes will look the other way should you decide to break your lease. A clothier will fork over a cash rebate for the new suit you just bought.

All you have to do to qualify is lose your job.

From corporate giants to obscure pet manufacturers, businesses are offering incentives to millions of Americans who are spending less out of fear they will lose their jobs. Companies are trying to remain viable until the economic pendulum swings the other way.

In that pursuit, it’s hello to

empathy and farewell to marketing that appeals to conspicuous consumption, sex appeal and other base interests.

"Marketers in general are not altruistic," said Mary Albrecht, a professor of marketing at Maryville University. "What they try to do is move people forward in the buying process. They realize that people perceive risk as a wall that can keep them from buying. They’re trying to show them a way over the wall."

General Motors and Ford, for example, are offering programs that cover the payments of vehicles purchased through company financing in the event a buyer is pink-slipped. The domestic automakers followed the lead of Hyundai of America, the first out of the block with such a plan.

No one has turned in a vehicle to date, Hyundai spokesman Jim Trainor said Thursday. Still, such incentives have been applauded by marketing experts because they give customers a little more security about their purchases.

Historically, companies that adapt to economic and social cataclysm are the ones that survive, said Terry Clark, a professor of marketing at Southern Illinois University Carbondale.

He cites Woolworth’s, the five-and-dime that remained in declining urban downtowns while its competitor, S.S. Kresge, re-christened itself "Kmart" as it followed the population to the suburbs.

Offering a perk to consumers when they are down, Albrecht noted, can engender good will and, possibly, continuing patronage paperless payday loans. Customers using the free health care in Walgreens "Take Care" clinics, for example, are likely to return to the pharmacy long after the service ends at the end of the year, Albrecht said.

Established firms may view the recession as an opportunity to, as Clark puts it, "make a virtue out of necessity." But for fledgling companies, virtue is a way to get an otherwise obscure brand in front of the public.

A small California pet care concern, "Dogswell," will provide free bags of dry dog food to the first 10,000 jobless workers.

"There are really two bottom lines in business — profit and social awareness," said Marco Giannini, the founder of the five-year-old firm. "This is the second part, social awareness. We’re doing a small part to promote a social cause and its helping us profit, too."

So far, more than 5,000 people have taken advantage of the "Bow-Wow BailOut."

Giannini’s offer aside, consumer advocates are reminding customers to remain vigilant.

Scott Mulford, a spokesman for Illinois Attorney General Lisa Madigan, said consumers need to be particularly aware of enticements attached to the purchase of big-ticket items.

"We urge consumers to closely check the terms of any offer ask questions and, by all means, get it writing before they sign anything," Mulford said.

And while companies hope such enticements will lure more business, they must still overcome the doubts of people like Alicia Otera of Maryville, Ill. She ignored the incentives during a three-month stretch of unemployment. And she plans to continue to ignore them now that she has landed at Boeing Corp. as an independent contractor.

Working or not working, Otera said, now is not the time for a major purchase. "I don’t want to bet on my future with a $500 car payment and lose my home."

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SunTrust Banks Inc posted its second straight quarterly loss on Thursday, hurt by charges related to the collapsing real estate market.

The U.S. southeast regional bank said net loss applicable to common shareholders was $875.4 million, or $2.49 per share, compared with a profit of $281.6 million, or 81 cents, a year earlier.

Excluding the goodwill charge, Atlanta-based SunTrust said the loss was $160.6 million, or 46 cents per share.

Results included a $714.8 million goodwill charge, which SunTrust said reflected deteriorating real estate and economic conditions that reduced the value of mortgage and commercial real estate assets. Goodwill typically arises in acquisitions.

SunTrust “is still working through credit and earnings challenges as the weak economy continues to take a toll on performance,” Chief Executive James Wells said in a statement.

The bank set aside $994.1 million for bad loans, up 78 percent from a year earlier, while net charge-offs more than doubled to $610.1 million.

Loans that are not performing, or otherwise not accruing interest, increased $701 million from the end of the year to $4.64 billion, or 3.75 percent of total loans. Nonperforming assets totaled $5.25 billion.

Residential mortgages and home equity lines of credit accounted for 54 percent of nonperforming loans, with a large portion of the weakness in Florida, SunTrust said payday loans.

SunTrust posted a net loss of $815.2 million before accounting for payment of preferred stock dividends. Analysts expect the bank to lose money in every quarter this year.

Shares of SunTrust closed Wednesday at $15.40 on the New York Stock Exchange. The shares are down 48 percent this year, compared with a 27 percent drop in the KBW Bank Index .BKX.

SunTrust has taken $4.9 billion from the government’s $700 billion Troubled Asset Relief Program. The bank is one of 19 undergoing government “stress tests” to measure its need for capital in a deep recession. Results are due May 4.

Earlier this year, SunTrust lowered its quarterly dividend 81 percent to 10 cents per share. The bank’s ratio of tangible common equity to tangible assets ended March at 5.82 percent, above the 5 percent that some analysts prefer.

SunTrust ended March with $179.1 billion of assets. It operates about 1,694 branches in 11 U.S. states and Washington, D.C.

(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn and Derek Caney)

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The Obama administration will make about $500 million available to Chrysler LLC through the end of this month as it seeks to reach an alliance with Fiat, and up to $5 billion through May to help General Motors Corp restructure outside of bankruptcy, an independent oversight report on the Treasury Department’s corporate rescue fund said on Tuesday.

Separately, the United Auto Workers (UAW) union urged its members to lobby the White House by phone or email to ensure that workers and retirees are treated fairly in negotiations at both companies on new concessions, which are considered vital for the automakers’ to survive.

“We need President (Barack) Obama and his auto task force to stand up for the interests of workers and retirees in these restructuring negotiations,” the union said in an appeal on its Web site to members.

The UAW represents about 26,000 workers at Chrysler and 62,000 at GM.

The union is under pressure along with bondholders and banks to help Chrysler and GM slash debt so they can restructure. The central issue for the UAW and the car companies is reaching an accord on restructuring the finances of a multi-billion-dollar retiree health care trust.

The administration’s task force does not believe Chrysler can stand alone and is brokering meetings this week in Washington and Detroit to see if a deal with Fiat is possible.

The administration has offered up to $6 billion to help finance the alliance that would give Chrysler access to Fiat’s small car technology and the Italian automaker a platform for building light trucks and a robust network for selling its vehicles in the United States.

Analysts and consultants have questioned whether the companies can close the deal and avert what most believe would be a certain Chrysler bankruptcy faxless payday loan online.

At the White House on Monday, Obama’s chief spokesman, Robert Gibbs, would not forecast where the talks were headed but said the administration was working “with all of the stakeholders involved” and was hopeful a solution would be found to “continue the Chrysler brand” and strengthen the industry overall.

“The President continues to be involved in this issue and understanding the tremendous economic importance both for the overall industry and for the dozens of communities throughout the country that are dependent upon Chrysler and auto parts suppliers that supply Chrysler for good-paying jobs,” Gibbs said.

The administration in March set aside up to $500 million to help Chrysler get through April, according to a report on oversight of corporate bailout funds prepared by the Treasury Department inspector general. GM was slated to receive up to $5 billion through May.

GM said on Monday it would cut another 1,600 salaried jobs by May 1. The reductions are part of GM’s plan to slash its global salaried work force this year by about 10,000, or 14 percent. GM also aims to cut 37,000 hourly jobs worldwide by the end of the year.

GM and Chrysler, controlled by Cerberus Capital Management, received a $17.4 billion government bailout in December. Ford Motor Co is also struggling but opted against seeking rescue funds.

(Reporting by John Crawley; Editing by Lincoln Feast)

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First-quarter sales at Roche Holding AG, the Swiss drugmaker that recently bought Genentech for $46.8 billion, rose 8 percent and met forecasts thanks to the strong growth of blockbuster cancer drug Avastin.

Roche said on Thursday it was confident of meeting its full-year targets and would update its outlook to include the impact of the Genentech deal with half-year results in July.

Pharmaceutical companies have been relatively insulated from the recession as health care is traditionally one of the last areas that consumers cut back on spending, but even so, they are still seeing some slowdown.

Roche is aiming for mid-single-digit sales growth for both divisions and the group and for its core earnings per share target to remain at the 2008 level in spite of more investment in research and development and a lower net financial result.

“Sales in both divisions continued to grow significantly faster than their respective markets. We are therefore confident that we can achieve our full-year targets,” Chief Executive Severin Schwan said in a statement.

Quarterly sales rose to 11.6 billion Swiss francs ($10.17 billion), in line with the average estimate of 11 guaranteed cash loans.65 billion in a Reuters poll of 16 analysts.

Sales of Avastin — for which key clinical data in colon patients who have undergone surgery is expected soon — rose 30 percent to 1.5 billion francs and drove Roche’s overall revenue growth.

Investors are keen to know more about Roche’s plans to integrate Genentech after it said the U.S. group’s chief executive, Arthur Levinson, would stay on as chair of a new board.

Roche said integration plans will be finalized by mid-year and it aims to have completed the process by the end of 2009.

In Swiss francs, sales rose 7 percent as the weaker euro weighed, Roche said.

Roche trades at nearly 12 times expected 2010 earnings, a healthy premium to other big European drugmakers — Swiss rival Novartis AG, GlaxoSmithKline Plc, AstraZeneca Plc and Sanofi-Aventis SA — thanks to its strong portfolio of cancer drugs and Genentech’s growth prospects.

($1=1.141 Swiss Franc)

(Editing by Sam Cage and Simon Jessop)

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Indian mid-sized IT outsourcer Tech Mahindra won an auction to buy Satyam Computer Services Ltd, the company at the heart of India’s biggest corporate scandal.

Satyam said on Monday Tech Mahindra agreed to buy a 31 percent stake at 58 rupees per share — a 23 percent premium to Satyam’s last closing price. The bid edged out offers from engineering conglomerate Larsen & Toubro, widely seen as a front-runner, and private equity firm WL Ross & Co.

Tech Mahindra, in which Britain’s BT Group holds about 31 percent stake, will pay $351 million for 31 percent preferential allotment of new shares.

Satyam’s sale is likely to help restore confidence in India’s IT services sector at a time the global economic downturn has already slowed growth.

“Tech Mahindra will really have to act fast now and if they don’t act fast then client erosion will continue at Satyam,” said Tarun Sisodia, head of research at Anand Rathi Financial Services.

Three months ago, Satyam’s founder and chairman shocked investors by saying profits had been overstated for years, and put in doubt the survival of a company once ranked as India’s fourth-largest software services exporter.

The government quickly stepped in and sacked the board to limit damage to India’s once-shining IT services sector.

With the purchase, Tech Mahindra, the sixth-largest Indian outsourcer, will be better equipped to wrestle market share from leading local outsourcing rivals Tata Consultancy Services, Infosys Technologies and Wipro

() cash till payday.

Tech Mahindra, a unit of tractor and utility vehicle maker Mahindra & Mahindra, will have to make open offer for a further 20 percent of Satyam at a minimum price of 58 rupees a shares, valuing Satyam at about $1.1 billion on paper.

“If the winning bid had been more than 60 rupees a share then it wouldn’t have made any sense for the buyer. The 58 rupees offer is on fair value side,” Sisodia said.

The Satyam buy will help Tech Mahindra, diversify its services by reducing its reliance on the telecoms industry, analysts said.

Tech Mahindra shares surged by as much as 25 percent after Larsen & Toubro, which owns 12 percent of Satyam, was reported to have dropped out of the bidding, but trimmed gains to trade 15.3 percent higher at 368.95 rupees by 0900 GMT.

Satyam shares rose 5.8 percent to 49.90 rupees, after earlier jumping 16 percent to a nine-week high. The company was valued at roughly $675 million in the market.

UNCERTAINTY OVER VALUATION 

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NEW YORK — Chrysler President and Vice Chairman Jim Press said Wednesday that the government’s May 1 deadline for the automaker to complete a deal with Fiat allows "ample time" to reach a definitive agreement that is key to saving Chrysler from bankruptcy.

"We prefer having a shorter timeframe to get through this period, get all the questions out of our minds, and get back to business as usual," Press said during the first day of media previews at the New York International Auto Show.

He surprised reporters at Chrysler’s news conference to unveil a new Jeep Grand Cherokee by arriving on the stage in an iconic Fiat 500 subcompact. The 500, one of the Italian automaker’s most successful models, would help fill the void of small vehicles in Chrysler’s lineup if Chrysler survives and brings Fiat cars to U.S. showrooms by 2011, as planned.

"Don’t you think that this would be a perfect car to get around New York City?" he asked reporters.

Press said Chrysler aggressively has been moving to reduce costs while still unveiling new vehicles. The company plans to introduce eight new vehicles in the next 18 months.

"We realize we have a responsibility to the American public," he said.

Press said Chrysler has been having a "constructive dialogue" with Fiat free 3-in-1 credit report. "At this point in time with Fiat, we don’t see anything that would be an impasse or a deal breaker," Press said. He said the company is progressing under the assumption that bankruptcy will not be required.

"We’re pursuing the deal with Fiat assuming that a bankruptcy would not be the favored option. It wouldn’t be in the best interest," he said.

The government has said it will continue providing short-term aid for Chrysler while the Auburn Hills, Mich., company works out a deal, but Press said Chrysler hasn’t needed more than the $4 billion the government provided earlier this year.

"We’ve been assured that if we need additional short-term aid, it’s available from the government," he said. "Right now we’re OK at this point in time."

Press declined to comment on reports that banks that lent Chrysler $6.8 billion in 2007 are resisting efforts to convert most of the automaker’s debt to equity.

"We’ve got a lot of discussions going on with a lot of stakeholders, a lot of balls in the air," he said. "Those discussions are going on right now."

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One corner of the wild and wooly world of derivatives is about to get a little tamer — and not a moment too soon for those who fret over the rising cost of bailouts.

The banks that handle the bulk of the trading in credit default swaps — the unregulated contracts whose misuse helped AIG (AIG, Fortune 500) bring about its own demise — are adopting new trading and settlement rules this week in a shift the industry has labeled the "big bang."

The changes will set new terms for credit default swaps traded on companies in North America, standardize payment schedules, or coupons, and eliminate clauses that would force CDS users to settle trades when a company does a limited restructuring under certain circumstances. Other shifts will streamline the process for settling the swaps in the event of default.

The moves should eventually make it easier for regulators to oversee the CDS market, whose rapid growth and limited transparency have long been a source of acute anxiety.

Treasury Secretary Tim Geithner has called for putting the market, currently an "over-the-counter" affair that consists of private contracts between traders, on the same footing as the markets for stocks and commodities, in which parties trade with a central counterparty or exchange.

The changes, which are due to take effect Wednesday, will push the market closer to that goal.

"Regulators and the industry have been working together for some time to strengthen the infrastructure," said Karel Engelen, global head of technology solutions at the International Swaps and Derivatives Association trade group. "This is the next step in the evolution toward a more standardized market."

Even so, it will be some time before the CDS market is all grown up. In the meantime, some observers are warning of the dangers of concentrated derivatives exposure in a banking sector already leaning on federal support.

Dealers are taking "an inordinate risk — and exposing taxpayers to substantial risk as well," said Gary Kopff, a former McKinsey consultant who is now an expert witness in shareholder litigation involving subprime mortgages, collateral debt obligations and credit default swaps.

U.S. commercial banks’ net current credit exposure — a measure used by regulators to estimate possible losses on outstanding derivatives contracts — more than doubled last year, to $800 billion, the Office of the Comptroller of the Currency said last month. Total credit exposure, which reflects how derivatives exposure could rise over time, hit $1.58 trillion - up 50% from 2007 levels and in line with the 2006 all-time high.

The nation’s largest banks, many of which have received tens of billions of dollars of federal assistance over the past year, have the most exposure to these derivatives.

Four the top five commercial banks with the biggest U.S. derivatives dealings — JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and Britain’s HSBC (HBC) — lost money in the fourth quarter on their credit-related trading.

Goldman Sachs (GS, Fortune 500) was the only one in the top five that made money in the fourth quarter on its credit trading, the OCC said faxless payday loan. Still, one of its units — New York-based Goldman Sachs Bank — lost $926 million on credit trading last year, according to reports filed with the Federal Financial Institutions Examination Council.

Goldman notes in its annual report filed earlier this year that the market for credit derivatives — 98% of which are credit default swaps, going by OCC data — is no picnic.

"The market for credit default swaps is relatively new, although very large, and it has proven to be extremely volatile and currently lacks a high degree of structure or transparency," Goldman said in the report.

‘Lots of changes’ but ‘little visibility’

This week’s changes set out to change that, however modestly. Engelen said there could be some hiccups as traders get used to the new regime, with "lots of changes taking place at once." But he said he expects little disruption.

Geithner said in congressional testimony last month that a regulatory overhaul must include federal oversight of unregulated over-the-counter derivatives such as credit default swaps. He called for CDS trading to move to so-called central clearing — eliminating the fears that one party won’t make good on its obligations.

Even in a centrally cleared market, however, it will be difficult for investors to track which firms end up holding the counterparty risks embedded in tradable derivatives. That’s why Geithner wants to give regulators the authority to privately view firms’ books and monitor traders’ risk management.

"The days when a major insurance company could bet the house on credit default swaps with no one watching and no credible backing to protect the company or taxpayers from losses must end," Geithner said in reference to AIG, the insurer that imploded last September and has since required more than $170 billion in taxpayer funds to stay afloat.

Not everyone is alarmed by the banks’ derivatives exposure. Unlike AIG, banks are widely assumed to habitually hedge their trading books. It’s also worth noting that the OCC’s current exposure estimates don’t reflect the collateral held by dealers — a number that tends to run around 30%-40% of net exposure, the agency said.

Still, FBR Capital Markets analyst Steve Stelmach estimated in a report last month that the potential credit derivatives losses at two big dealers, Goldman and Morgan Stanley (MS, Fortune 500), stood at $568 million and $675 million, respectively.

Stelmach stressed that this level of losses is unlikely, but that "given the minimal disclosure" provided on counterparty exposure, there is "little visibility on any potential problems, and the market would likely receive little forewarning if losses were to develop."

Perhaps a bigger problem for the banks is that adding structure to the CDS market stands to squeeze their profits, Stelmach added. That’s because it would make pricing more competitive at a time when many of their businesses are already under pressure.  

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New York-based private equity firm Patriarch Partners won the auction for bankrupt Polaroid Corp’s assets, both companies said Thursday, with Patriarch winning over three rival bidders.

The result of the auction, which ended Tuesday, is subject to court approval at an April 6 hearing. The assets Patriarch is buying include the company’s name, intellectual property, and photography collection.

It beat bids from PHC Acquisitions, Hilco Consumer Capital Corp and Ritchie Capital.

Patriarch’s bid totaled $59.1 million, the company said.

"We look forward to reconnecting Polaroid with its history of innovation in photography," Lynn Tilton, chief executive of Patriarch Partners said in a statement.

"We intend to continue rebuilding the brand of this great American company on a worldwide scale and to re-establish Polaroid as a globally acknowledged innovator."

In the same statement, Polaroid Chief Executive Mary Jeffries referenced Patriarch’s turnaround expertise individual health insurance.

"Patriarch Partners has the vision and the resources to act on the myriad opportunities to leverage this iconic brand," Jeffries said.

The instant camera-maker had agreed in January to sell almost all of its assets to PHC Acquisitions, an affiliate of Luxembourg-based private equity firm Genii Capital, for $42 million, plus the assumption of certain liabilities, if no higher bids emerged.

PHC Acquisitions, was the "stalking horse" or leading bidder. The stalking horse bid is typically used in bankruptcy auctions to set a floor for the bidding.

Polaroid filed for bankruptcy in December 2008.

Patriarch’s portfolio of companies includes Rand McNally, Arizona Iced Tea and MD Helicopters.

A court hearing to approve the sale is set for April 6 in federal bankruptcy court. 

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Research In Motion posted surprisingly strong quarterly earnings on Thursday and offered a rosy outlook that signaled further growth despite the global economic slowdown as consumers embrace its newest BlackBerry smartphones.

The results, which also revealed RIM now has a total of about 25 million BlackBerry subscribers, sent the company’s shares about 21% higher in after-hours trade.

RIM’s profit rose to $518.3 million, or 90 cents a share, in its fourth quarter ended Feb. 28, from $412.5 million, or 72 cents, a year earlier.

The results topped the expectations of analysts, which had been dampened by a profit warning that RIM delivered in February.

"They are crushing it," Canaccord Adams analyst Peter Misek said. "Not only are they holding up, but it’s clear they’re gaining market share."

Revenue was $3.46 billion, up 84% from $1.88 billion in the year-before quarter, putting it on the high end of RIM’s December forecast for revenue of between $2.6 billion and $2.8 billion.

"This is wildly better than people were looking for," DSAM Consulting analyst Duncan Stewart said of the company’s overall results. "Getting improvement in both margin and growth at the same is a rare thing in the field of technology."

For the current quarter ending May 30, RIM expects revenue of between $3.3 billion and $3.5 billion and earnings per share of 88 cents to 97 cents. Gross margin is expected to come in between 43% and 44%, the company said, up from 40% currently.

It expects to add between 3.7 million and 3.9 million subscribers. It added 3.9 million this quarter.

Analysts had previously expressed concern about RIM’s ability to maintain momentum during the recession.

But such worries - as well as the February profit warning - seemed like ancient history on Thursday as RIM’s shares (RIMM) jumped to $59.52 in late trading from their regular-session close of $49.09 on the Nasdaq.

Still, the company is keeping a close eye on operating expenses to make sure it can continue to thrive even if the downturn continues, RIM co-CEO Jim Balsillie said during a conference call with analysts compare car insurance prices.

"RIM is faring well in the current environment and we continue to believe we can grow market share," he said.

"However, we believe it is prudent to turn our attention to making sure that the operations are as streamlined as possible in case of further deterioration in the broader economy."

Consumer demand returns

Retail consumers in general have curbed spending, which may mean they are not willing to pay more for flashy new smartphones. But the plunge in spending may be coming to an end, Misek said.

"There was a big rebound in consumer demand in mid-February," he said, adding BlackBerry handsets are selling well with wireless carriers such as Verizon (VZ, Fortune 500) and Vodafone (VOD).

Balsillie said BlackBerry demand in the retail market was stronger than the company had expected following the holiday season, in part thanks to aggressive promotions from carriers.

Meanwhile, large corporations that use the BlackBerry as the mobile communications tool of choice have also cut their budgets. Even so, Balsillie said, demand from corporate customers is also staying strong.

RIM’s main customers have traditionally been business executives, lawyers, politicians and other professionals who use its BlackBerry handsets to send wireless email securely.

To diversify its user base, RIM has pushed aggressively into the broader consumer market with multimedia-laden handsets like the Pearl model and the touchscreen BlackBerry Storm - its answer to Apple’s (AAPL, Fortune 500) popular iPhone.

This week, it also launched an online store to sell entertainment, games, news and travel software to BlackBerry users.

While the iPhone has been a hit with consumers, it has yet to gain enough traction with business users to threaten RIM’s dominant position in the corporate client market. 

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Honda Motor Co., Japan’s No. 2 automaker, said it would cut production in North America by temporarily shutting factories from next month and will reduce pay for workers as sales in the United States plunge to multi-decade lows.

Honda (HMC) will shut down six factories for 13 days, starting in May, to cut production by 62,000 vehicles. Honda does not provide a production forecast, but the reduction would be equivalent to 3.4% of what it built in the region in the year to March.

The decision by Honda comes amid a sharp downturn in auto sales that is threatening the survival of General Motors Corp. (GM, Fortune 500) and Chrysler.

Data due out later are likely to show U.S. auto sales at the weakest monthly rates in more than 27 years.

"U.S. sales look set to fall about 40% in March, and there’s no signs of a recovery beyond April either," said Okasan Securities analyst Yasuaki Iwamoto.

"When sales are this bad, it’s natural that production is going to be weak," he said, while adding that there was no change to his view that the worst was over for production cuts after Japanese automakers made deep reductions in January-March.

Japan, Korea sales slide

Sales in Asia are also suffering.

In Japan, industry-wide auto sales fell 25% in March from a year earlier to 546,098 vehicles.

Sales at South Korea’s five automakers in March fell 19% to 402,563 vehicles, with exports down 20%.

Shares in Honda gained 6.7% in Tokyo on Wednesday along with jumps in other auto stocks.

Market participants cited reasons ranging from the dollar’s gradual rise this week to hopes for some resolution for GM and Chrysler, which the New York Times reported might involve some form of controlled bankruptcy.

Honda said it would cut pay for salaried and factory workers and also offered buyouts and early retirement incentives to most of its 32,400 workers in the United States and Canada.

It is the most sweeping program to reduce payroll costs offered by Honda, a spokesman said free business cards.

Honda has trailed Japanese rivals Toyota Motor Corp. (TM) and Nissan Motor Co. in reacting to a buildup of unsold cars in the United States, and executives have said it would likely take until the summer to bring inventory back to appropriate levels.

The slow pace is also partly due to Honda’s policy of limiting sales incentives, which erode cars’ resale value as well as profits. According to research firm Autodata, Honda’s average spending on incentives per vehicle in February was the lowest among mass-market brands, at just over $1,300 versus nearly $1,600 for Toyota and $2,900 at Nissan.

Nissan Chief Operating Officer Toshiyuki Shiga said earlier in Tokyo he expected global production at Japan’s No. 3 automaker to be 10% higher in the first half of the new business year that started on Wednesday compared with the previous six months.

Honda has assembly plants in Indiana, Ohio and Alabama in the United States, as well as in Canada and Mexico. It also operates two engine plants and two transmission plants in North America.

Pay hit

Like Toyota, Honda previously paid its non-union hourly workers even when it shut down factories to reduce inventory. But Honda said this time hourly workers would not be paid for six of the 13 days, to be scattered between May 1 and July 31.

Salaried workers will also see compensation reduced this financial year, said spokesman Ed Miller.

Miller said Honda told employees it expected bonus payments for both hourly and salaried employees to be reduced or eliminated this year.

The steps taken by Honda will have the effect of reducing hourly wage costs at its U.S. factories just as GM and Chrysler face pressure to bring their own compensation levels in line with the pay of workers at U.S. plants run by Honda, Toyota and Nissan. 

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