Finance and Economic

Some soccer moms will have to give up hulking SUVs. Carpenters will still haul materials around in pickups, but they will cost more. Nearly everybody else will drive smaller cars, and more of them will run on electricity.

The higher mileage and emissions standards set Tuesday by the administration of President Barack Obama, which begin to take effect in 2012 and are to be achieved by 2016, will transform the American car and truck fleet.

The new rules would bring new cars and trucks sold in the United States to an average of 35.5 miles per gallon, about 10 mpg more than today’s standards. Passenger cars will be required to get 39 mpg, light trucks 30 mpg.

That means cars and trucks on American roads will have to become smaller, lighter and more efficient.

Eric Fedewa, vice president of global powertrain forecasting for the auto consulting firm CSM Worldwide in Northville, Mich., said the changes would make pickups so much more expensive that they would be used almost exclusively for work.

And instead of a minivan or SUV, more parents will haul their families in much smaller vehicles with three rows of seats — something more like the Mazda 5 small van, he said.

"I think what you’ll see is a lot more creativity in interior packaging," Fedewa said. "You’ll get more rows of seats where you traditionally had cargo space."

Already on Tuesday, some drivers were skeptical. Dixie Bishop, who runs a plumbing business in San Antonio, Texas, that uses vans, worries that the new requirements will drive up her costs at a time when customers are cutting back on repairs.

"Are they going to take my horsepower down?" she asked. "I have to be able to carry old water heaters and toilets."

The new standards mean the end of full-size vans such as the GMC Savana and Chevy Express "as we know them," auto industry analyst Erich Merkle said. GM builds the Savana and Express at its Wentzville plant.

Vans, Merkle said, will probably become more like Ford’s Transit Connect, which uses a four-cylinder engine. Ford expects the Transit Connect, not yet available in the United States, to get 22 mpg in the city. In contrast, a 2009 GMC Savana 1500 two-wheel drive, six-cylinder cargo van, and a similar Express, both get 15 mpg in the city.

The changes will start with smaller cars and trucks, and improvements to the internal combustion engine, Fedewa said free business cards. Automakers are already working on new technology, including direct fuel injection and high compression of the air-fuel mixture.

Car companies are rewiring vehicles so components such as air conditioners and power steering pumps are powered by electricity rather than by the engine.

And they’re developing computer-controlled transmissions with six or more gears, adding efficiency, and rolling out more gas-electric hybrids — among the few cars sold today that meet the 2016 standards.

Of course, developing the technology will cost money — billions of dollars — and automakers will pass that on to customers.

Consumers were already going to pay an extra $700 for mileage standards that had been approved previously, according to administration officials. The Obama plan adds another $600 to the price of a vehicle, bringing the total extra cost to $1,300 by 2016, although some private analysts say the increase will be much heftier.

The administration says gas savings will make up the difference in about three years and would, over the life of a vehicle, save consumers about $2,800 through better gas mileage.

Under the new rules, vehicle carbon dioxide emissions also must be reduced by about one-third by 2016.

"The fact is, everyone wins," Obama said Tuesday at a Rose Garden ceremony attended by representatives of the auto industry and environmental groups as well as state and federal lawmakers.

"Consumers pay less for fuel, which means less money going overseas and more money to save or spend here at home. The economy as a whole runs more efficiently by using less oil and producing less pollution," he said. "And companies like those here today have new incentives to create the technologies and the jobs that will provide smarter ways to power our vehicles."

The new rules will cause manufacturers "to accelerate their technology plans, probably a little more aggressively than they originally thought," said Tony Posawatz, who heads development of the technology used in the Chevrolet Volt electric car that GM plans to build. "For us, we feel comfortable that we’ve got choices."

Angela Tablac of the Post-Dispatch contributed to this report.

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MINNEAPOLIS — Airlines are doing a better job of taking care of the passengers they still have, according to a new study.

Passenger satisfaction with airline service rose 3.2 percent earlier this year, the first increase in six years, according to a University of Michigan study to be released today.

The increase came as the number of passengers dropped and airlines reduced flying. Also passengers checked fewer bags as luggage fees became more common, making it easier for airlines to keep track of the bags that remained. Enplanements on U.S. routes dropped 1.5 percent in 2008, according to the Federal Aviation Administration.

And if fewer passengers are the reason for the improved satisfaction score, imagine how happy they’ll be this year, when the FAA expects domestic boardings to fall 8.8 percent.

Southwest Airlines Co. had the highest score, 81 on a zero-to-100 scale. After that it was Continental Airlines Inc. at 68, Delta Air Lines Inc. at 64, AMR Corp.’s American Airlines at 60, US Airways Group Inc. at 59, Northwest Airlines at 57, and UAL Corp.’s United Airlines at 56.

The overall satisfaction improvement at airlines masked some big jumps at individual carriers, according to the university’s American Customer Satisfaction Index.

The most improved were Continental Airlines Inc., up 9.7 percent, and US Airways Group Inc., up 9.3 percent. Customer satisfaction at US Airways was on the rebound after a big drop in 2007, when it had the worst on-time showing among big carriers. For 2008, US Airways was first among big carriers for on-time arrivals.

Continental also regained lost ground after a drop the previous year. Delta Air Lines Inc.’s score rose 6.7 percent.

American Airlines’ score fell 3.2 percent, though it was still in the middle of the airline pack.

American Airlines spokesman Tim Smith said the airline’s internal customer satisfaction measurements show big improvements from a year ago pay day loans. He said American has "customer experience teams" at its airports that look for ways to improve customer service, and that last week American paid out some $14 million in employee rewards for meeting customer service and operational goals.

United’s score was unchanged from last year, when it was also in last place.

"We need to focus on the basics of running a good airline, and that means one that runs on-time with clean planes. When our flights are on-time and our planes are clean, we can deliver great service to our customers," United spokeswoman Robin Urbanski said.

Claes Fornell, a University of Michigan business professor and director of the research center that compiled the customer satisfaction data on airlines and other industries, said traffic dropoff appears to have as much to do with the airline improvement as any action taken by the airlines.

"Nobody’s making any money," he said. "It’s very difficult in that environment to provide good customer service."

The study noted that even though airlines showed some improvement, their average score of 64 was good enough for a tie with newspapers but lower than most other industries measured, including utilities (74) the Postal Service (82), express delivery companies (82), movies (70), and cellular phone service (69).

The phone survey of about 25,000 people during the first quarter of this year had them rate their satisfaction with companies in a variety of industries, including airlines. The index was created based on responses to questions about overall satisfaction, intention to be a repeat customer and perception of quality, value and expectations.

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State Street Corp said it plans to sell $1.5 billion of stock and will also sell notes to help repay government bailout funds, and took a $3.7 billion charge to move some assets onto its balance sheet at a loss.

The Boston-based custodial bank and asset manager said it will use proceeds from the securities sales to help repay a $2 billion infusion from the Troubled Asset Relief Program.

It said the debt offering would not be backed by the federal government. Issuing such debt is a requirement for paying back TARP.

Many banks want to repay TARP funds because of restrictions imposed by the government, including on executive pay, and because holding the funds is viewed as a sign of weakness.

State Street was among 19 large U.S. banks to undergo government “stress tests” of their ability to handle a deep recession, and was among nine found not to need more capital.

“The capital-raising is positive,” said Murali Gopal, vice president at Keefe, Bruyette & Woods Inc in New York. “State Street is taking advantage of a run-up in its stock to raise capital, and who knows how long this run-up will last.”

State Street shares have more than doubled since bottoming on January 20 but have fallen by nearly half since last July amid worries about losses from asset-backed commercial paper conduits, a special-purpose vehicle that holds receivables.

The $3 pay day loan lenders.7 billion charge relates to unrealized losses on $22.7 billion of assets from the conduits, which State Street is now moving onto its balance sheet. In February, the bank slashed its dividend and reduced bonuses to bolster capital.

State Street’s charge, equal to about $7.70 per share, will help the company “ensure that capital issues are behind them,” wrote Goldman Sachs & Co analyst Brian Foran. “It makes sense to put the issue to bed.”

Shares of State Street rose $2.09, or 5.4 percent, to $40.60 in afternoon trading. They have traded in a range of $14.44 to $74.85 over the last year.

Foran raised his 12-month share price target to $45 from $25. KBW’s Gopal rates State Street “market perform.”

PROFIT FORECAST

State Street on Monday projected 2009 operating profit of $4.25 to $4.50 per share, including 75 cents per share from interest revenue from the conduit assets.

Excluding the boost from interest revenue, the forecast is below analysts’ average estimate of $3.80 per share, according to Reuters Estimates.

State Street said its forecast reflects a “marginally weaker” environment than expected, and assumes a 12 percent drop in operating revenue and a 17 percent return on equity. 

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J.C. Penney Co. said Friday that its first-quarter profit tumbled 79 percent because of a big one-time pension expense, but it beat analysts’ estimates as its expenses fell and demand remained strong for the Sephora cosmetics and American Living merchandise it sells. Looking ahead, however, the department store chain said it will miss Wall Street’s full-year forecast because of soft consumer spending and weak mall traffic. Plano, Texas-based J instant payday loan.C. Penney earned $25 million, or 11 cents per share, for the quarter that ended May 2. That compares with $120 million, or 54 cents per share, a year earlier. Penney’s sales dropped 6 percent to $3.88 billion from $4.13 billion in the period a year earlier. (AP)

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J.C. Penney Co Inc warned that it expects consumer spending to stay weak and forecast second-quarter and full year results below Wall Street’s expectations, sending its shares down 3.8 percent before markets opened.

The forecast came even as the department store operator’s first-quarter profit was in line with analysts’ expectations.

Penney is one of many department store retailers facing steep sales declines in recent months as shoppers back off from spending on non-essential items in the recession. Such consumer thrift has hurt the department store sector.

The mid-priced chain, which has been trimming inventories and offering fewer discounts to drive profitability, has tried to emphasize affordable prices and trendy items to entice cash-strapped shoppers.

But 2009 would remain rough, Penney warned.

“We expect consumer spending and mall traffic to remain weak, which will be particularly evident against tough comparisons in the second quarter,” Chief Executive Myron “Mike” Ullman said in a statement on Friday.

Earlier this week, rival Macy’s Inc posted a 9.5 percent drop in first-quarter sales and stuck to its forecast for sales to fall for the full year instant personal loans guaranteed.

Penney’s net profit was $25 million, or 11 cents per share, in the fiscal first quarter that ended May 2, compared with a profit of $120 million, or 54 cents per share, a year earlier.

Analysts expected a profit of 11 cents per share, on average, according to Reuters Estimates.

Sales fell 5.9 percent to $3.88 billion, while sales at stores open at least one year fell 7.5 percent.

For the second quarter, Penney forecast total sales to fall 7 percent to 10 percent, and a loss of 15 cents to 25 cents per share. Analysts expect a loss of 9 cents per share.

For the year, Penney expects a per-share profit of 50 cents to 65 cents, and same-store sales to fall about 9 percent.

Analysts expect a profit of 75 cents per share.

Penney shares were down to $25.65 from Thursday’s close of $26.65 on the New York Stock Exchange.

(Reporting by Aarthi Sivaraman; Editing by Derek Caney, Dave Zimmerman)

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Sony Corp reported a second straight quarterly loss hurt by a firmer yen, sluggish sales and restructuring costs, and it projected another year of red ink during which it will close eight factories worldwide.

Consumer electronics makers around the world were battered last year as the global downturn dampened demand for TVs and mobile phones. Japanese companies such as Sony, Panasonic Corp and Sharp Corp suffered an additional blow as the yen’s strength made their products less price competitive overseas.

Sony is in the process of cutting 16,000 jobs and reducing its network of 57 manufacturing sites by 10 percent to survive the financial crisis. It said on Thursday it would close an additional five plants this year, including a flat-screen TV factory in Mexico.

Expecting losses at its electronics operations to widen and its games division to stay unprofitable, Sony forecast an operating loss of 110 billion yen ($1.15 billion) for the financial year to March 2010.

That would be an improvement from the 227.78 billion yen loss it booked a year earlier and less than a consensus loss forecast of 132.9 billion yen in a poll of 20 analysts by Thomson Reuters.

Analysts expect the worldwide digital camera and mobile phone market to contract this year as the recession dampens replacement demand, capping Sony’s earnings recovery despite aggressive cost cuts.

“Cost-cutting and wringing profits out of the TV division are important, but that will only take you so far,” said Nobuo Kurahashi, analyst at Mizuho Investors Securities cheap car insurance.

“What I really want to know is how Sony is going to compete after the economy recovers.”

Kurahashi said Sony’s focus on portable devices with network capability wasn’t yielding results, while rivals such as Sanyo Electric Co appear to be securing a brighter future by latching on to solar panels and organic displays.

‘NO. 1′ PRODUCT WANTED

In January-March, Sony’s operating loss came in at 294.31 billion yen, a huge reversal from its profit of 6.18 billion yen a year ago. Sales fell 22 percent to 1.524 trillion yen.

Sony saw sales at its cell phone joint venture with Ericsson tumble, while costs to shed jobs and close plants also weighed on the company, which vies with Panasonic for the title of the world’s largest consumer electronics maker.

Sony, which competes with Samsung Electronics Co in LCD TVs and Canon Inc in digital cameras, said it aims to sell 15 million LCD TVs this financial year, down slightly from 15.2 million last year.

It aims to boost sales of its PlayStation 3 game console by nearly 30 percent to 13 million units.

“Their outlook gave me the impression that their business is heading for a gradual recovery. But it would all depend on whether they will be able to start making popular products because right now they have no ‘No. 1′ product,” said Fujio Ando, senior managing director at Chibagin Asset Management. 

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U.S. foreclosure activity in April jumped 32 percent from a year ago to a record high, and should mount because temporary freezes on foreclosures ended in March, RealtyTrac said on Wednesday.

One in every 374 households with mortgages got a foreclosure filing in April, the highest monthly rate since RealtyTrac began tracking it in January 2005. Filings were reported on 342,038 properties last month.

The abundance of distressed properties keeps pressuring home prices, thwarting a housing recovery that is critical to rejuvenating the recessionary U.S. economy.

Most of April’s filings, which included notices of default and auctions, were in early stages. Bank repossessions, known as real-estate owned or REOs, fell on a monthly and annual basis to the lowest level since March 2008.

“This suggests that many lenders and servicers are beginning foreclosure proceedings on delinquent loans that had been delayed by legislative and industry moratoria,” RealtyTrac chief executive James J. Saccacio said in a statement.

A temporary foreclosure freeze by major banks and government-controlled home funding companies Fannie Mae and Freddie Mac ended before President Barack Obama’s massive housing stimulus, unveiled on March 6, could take root.

“It’s likely that we’ll see a corresponding spike in REOs as these loans move through the foreclosure process over the next few months,” Saccacio said.

Foreclosure activity rose less than 1 percent in April from March to post the second straight monthly record online instant cash advance. A dip would have been more typical following the March jump, but the moratoria caused artificial delays, RealtyTrac said.

“It looks like the dam burst in March and continued in April,” Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.

Unemployment that is at its highest rate in more than a quarter century has left many borrowers drowning in debt even as new federal housing relief starts to trickle in.

Fear of losing a job is also draining consumer confidence and the willingness to commit to such a large purchase.

Still, housing affordability is at a record high and the deeply discounted foreclosure market accounts for more than half of home sales activity.

Home prices have tumbled more than 30 percent from their 2006 peaks, based on Standard & Poor’s/Case-Shiller indexes.

Also luring first-time home buyers are new federal tax credits and mortgage rates at generational lows. Fixed 30-year mortgage rates averaged 4.81 percent in April, down from 5.92 percent a year earlier, Freddie Mac said.

RealtyTrac expects at least three or four months of high foreclosure activity before the wave ebbs, noting a lag of up to six months between unemployment and foreclosure. 

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Major airlines are scrounging for every dollar now that fewer people are flying amid the economic downturn, yet the carriers have been slow to install in-flight wireless Internet access across their fleets that could generate millions in fees.

Cost, technology and passengers’ willingness to pay for the service are issues some of the carriers are dealing with. Others say it simply takes time to install the necessary equipment to allow fliers to surf the Internet and send e-mail from their laptops and PDAs from the comfort of their seats.

"They’re trying to appeal to customers who they think will choose an airline based on the ubiquitous use of WiFi onboard aircraft," said Robert Mann, an aviation consultant in Port Washington, N.Y. "The risk in making these product announcements is that you’re not going to have the product."

Delta Air Lines Inc. and American Airlines, a unit of AMR Corp., have both stated plans to install WiFi onboard 300 or more aircraft, though Delta has installed it on roughly 130 aircraft as of Friday and won’t reach its original goal of having the remaining domestic mainline planes retrofitted by the end of June. American has the service on 15 aircraft and its plan calls for the work on the remaining planes to be spread over a couple years.
United Airlines, a unit of UAL Corp., currently doesn’t have WiFi available on any of its aircraft, a spokeswoman said. It plans to have the service available on 13 aircraft in the second half of this year.

"Hopefully, we’ll get really good at it (the installation process) and it will be faster, but I don’t think anyone wanted to make a boastful date promise like some others have done," American spokesman Tim Smith said.

Delta spokeswoman Betsy Talton said her carrier’s "initial ramp up was a little slower than anticipated." She said the world’s biggest airline operator is on track to complete the installations on Delta’s domestic mainline fleet this fall. Even then, it will include only 300-plus aircraft. Delta doesn’t expect to have WiFi on board all of Northwest Airlines’ domestic mainline aircraft until the end of 2010. The carrier hasn’t announced plans to add the service to aircraft used by its regional subsidiaries or international aircraft.

"We think that this will be most valuable to customers when it reaches a critical mass, which is why we have committed to broad implementation," Talton said faxless cash advance.

Continental Airlines said early last year that it planned to introduce onboard WiFi services on flights operating within the continental U.S. at the beginning of 2009. A spokeswoman did not respond to an e-mail Friday seeking an update on the status of Continental’s rollout.

Cost versus benefit also is an issue the airlines face.

Some airlines charge up to $12.95 to use the service on flights, depending on the length of the flight and the type of device the passenger is using.

None of the carriers will say how much it exactly costs to install the hardware necessary to make WiFi work on their aircraft. But Smith said that American expects it to cost millions of dollars to retrofit 300 planes.

Mann said he believes there is a "fair amount of wrangling with vendors about what share of revenue ought to remain with the airline versus what portion of costs should remain with the airline."

JetBlue Airways Corp., which currently has free wireless connectivity available on one aircraft, isn’t moving with more urgency to install the service across its fleet because the technology is still being developed and customer demand and willingness to pay remains to be seen, spokesman Bryan Baldwin said. At this time, the airline has plans to install the free service on an additional 20 aircraft, but the exact start and completion dates have not been disclosed.

American’s Smith said in his carrier’s case, the big picture impact from providing the service is strongest on the customer preference side rather than sheer revenue from the customer purchasing the service.

"Our best customers in surveys tell us that connectivity is very important to them among their wish list," Smith said.

Mann said he is not surprised that airlines aren’t able to move with greater speed on making WiFi more broadly available on flights.

"Unless you are buying all new aircraft direct from the factory with these technologies installed, then you can’t guarantee the technologies will be available on your fleets," he said.

American is working on ways to have the WiFi technology installed on new aircraft prior to entering service, according to Smith.

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Missouri regulators last month denied a Laclede Gas Co. proposal to recover much of its bad debt expense by raising fuel charges on customers.

But the St. Louis-based utility continues to press its case in Jefferson City; this time with the Legislature.

Laclede and other investor-owned gas utilities in Missouri are pushing a measure that would change the way they recover millions of dollars in unpaid bills.

Utilities already recover bad debt expense through base rates, but only after hearings and an extensive audit of its books — a process that can take 11 months.

The pending legislation, Senate Bill 299, would allow the utility to pass through about three-quarters of its bad debt expense by tacking the amount to the purchased gas adjustment — a special line item on bills that reflects fuel and related gas-transportation and storage costs.

Those expenses make up 75 percent of gas bills, so the same percentage of unpaid bills is related to the cost of natural gas, supporters say.

"It is a gas cost," said Mike Pendergast, Laclede’s associate general counsel. "We firmly believe that it ought to be recovered in the same manner that our other gas costs are recovered."

The proposed change would lead to more accurately tracking unpaid bills, he said.

Currently, regulators must estimate how much bad debt utilities will incur — a task that has become trickier with wild swings in energy prices witnessed over the past several years. If they guess too low, utilities absorb the loss. If they guess too high, shareholders get the benefit.

Efforts to change the law in Missouri reflect a nationwide increase in utility bad debt and customer shutoffs as higher gas prices and a sour economy left more customers unable to pay their bills cashadvance.

Utilities in at least 20 states are allowed to recover all or part of their bad debt expenses through fuel charges, according to Laclede.

The Missouri PSC rejected Laclede’s proposal in an April 15 ruling. The commission ruled that only expenses outside of the utility’s control, such as the price of gas, should be included in the fuel charge. Meanwhile, Laclede does have some control its bad debt levels through more aggressive collection efforts, the order said.

The PSC decision was a victory for consumer advocates who said bad debt expenses should be treated like any other cost, such as employee wages or the cost of office furniture.

Lewis Mills Jr., the state’s public counsel, similarly sees the legislation as bad policy that strips away consumer protections and reduces incentives for utilities to pursue unpaid bills.

"They’re trying to disguise this as a gas cost, and it’s not a gas cost," said John Coffman, a lawyer for the AARP and Consumers Council of Missouri.

Pendergast disagrees. He said the legislation would require regular audits and any over recovery of bad debt expenses would be refunded to customers in future months.

Meanwhile, the utility would still pursue collections of unpaid bills as vigorously as it already does because it would be on the hook for a fourth of the amount owed.

"Twenty-five cents on the dollar — that’s a pretty stout incentive," Pendergast said.

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Chemicals maker DuPont Co said it would cut another 2,000 jobs as part of its cost-cutting plan and take a $340 million to $390 million charge in the second quarter.

Those job cuts are on top of the DuPont 2,500 employees and 4,000 contractor positions the company had said in December that it would eliminate.

The restructuring plan is expected to deliver a $70 million in benefits in 2009 and $225 million in savings by the end of 2010, DuPont said in a statement creditreport.

About 40 percent of the second-quarter charge is expected to be noncash.

The chemicals sector has suffered as the economic recession shrunk demand from both industrial customers and consumers. DuPont said last month its first-quarter sales fell 20 percent.

(Reporting by Matt Daily, editing by Gerald E. McCormick)

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