Finance and Economic

Colombia’s central bank cut its benchmark rate by the smallest amount in five months in a bid to spur growth without sparking inflation, and said it doesn’t see additional rate changes in the “near future.”

The seven-member board, led by bank chief Jose Dario Uribe, reduce the interbank rate by half a point to 4.5 percent, matching expectations of 24 of 31 economists surveyed by Bloomberg. Four analysts expected no change, one saw a 0.75- point cut and two expected a quarter-point cut.

Latin America’s fifth-biggest economy shrank for the first time since 1999 in the fourth quarter of 2008 and a report next week may show that gross domestic product contracted again in the first quarter. The slump has cooled consumer spending and slowed inflation to within the bank’s target range, giving policy makers room to continue their longest rate-cutting cycle in more than six years.

“A good part of the effect of the rate reductions on the economy will be seen in the coming quarters, and with the information available to us up to now, we don’t expect changes to the benchmark rate in the near future,” bank chief Uribe said today at the central bank in Bogota after the rate announcement.

The government has reduced its official economic growth forecast for 2009 twice, from 5 percent in October to 0.5 percent now, and may cut it further once first-quarter GDP data is released later this month.

‘Fine Tuning’

Policy makers expect to see the effect of lower interest rates on the economy in the quarters ahead, as the economy recovers and inflation continues to fall toward their target, the bank said in a statement after the rate announcement.

“The central bank said very clearly it considers the current level already expansionary,” said Jimena Zuniga, Latin America economist at Barclays Capital in New York. “What we’re seeing now is fine tuning rather than shock therapy.”

Finance Minister Oscar Ivan Zuluaga, who is also president of the bank’s board, on June 16 said the economy is expected to improve in the second half and that GDP may expand 2.5 percent in 2010.

“Given the green shoots we’re observing in the global market and the up-tick in commodities, these suggest the economy will enjoy some tailwinds going forward,” said Zuniga, who expected the half-point reduction today.

Target

The economy saw record growth through 2007 when GDP expanded 7.5 percent, a three-decade high. President Alvaro Uribe’s improvements in security created a boom in consumer spending, construction and industrial output.

That in turn sparked annual inflation last year that hit 7 guaranteed approval payday loans no teletrack.7 percent, its highest in eight years. The central bank raised rates 16 times to bring prices under control.

Zuluaga said inflation should end this year at 5 percent and end 2010 at 4 percent. The board targets inflation this year of 4.5 percent to 5.5 percent. It has missed its annual target two years in a row.

After pushing the benchmark rate up to 10 percent last year, policy makers kept it at that level — the highest since August 2001 — until half-point cuts in December and January.

Before today, the bank trimmed the rate by a full point at each of the last four monthly meetings.

‘Time Lag’

Now, after seven straight rate cuts, bank chief Uribe has cautioned against keeping rates low for too long, saying that by encouraging borrowing policy makers run the risk of fueling inflation.

“We have to take into consideration the time lag in the effects of the central bank’s decisions,” said Mario Nigrinis, an economist at BBVA Colombia. “If they are lowered too much, then they will need to be raised later and that creates market instability.”

Policy makers may signal that they will pause after today’s cut or say that the easing cycle is coming to an end, Rafael de la Fuente, chief Latin American economist at BNP Paribas SA in New York, wrote in a report ahead of the meeting.

“The bank has to consider 2010 inflation,” Nigrinis said.

Colombia’s consumer prices rose 0.01 percent in May from the previous month and the annual inflation rate eased to 4.77 percent from 5.73 percent in April.

Still, Camila Estrada, chief analyst at Banco de Credito de Colombia SA, thinks the economy still needs help.

Exports, industrial output and retail sales are weak and the economy expanded just 2.5 percent in 2008 as the global economic slump choked bank lending and sapped consumer confidence, she said.

Retail sales fell 7.1 percent in April from the year- earlier period, while industrial output fell 14.5 percent in April from a year earlier, the biggest decline in a decade, the national statistics agency said yesterday.

Bank chief Uribe said that output has “hit bottom,” in comments to reporters in Bogota today.

“The need for monetary stimulus hasn’t finished yet,” said Estrada, who sees the bank cutting the rate to 4 percent this year. “The economy remains in poor shape.”

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HELSINKI – Nokia on Monday began rolling out its much-anticipated online software and content store, Ovi Store, as it aims to follow the success of Apple’s App Store.

Nokia said it had started moving Ovi Store to production servers, preparing for the global commercial launch, and the store was opened to users of a few of its phone models in Australia and Singapore on Monday.

Nokia has promised to open the store globally this week.

To cope with slowing phone demand Nokia is building a new business from mobile Internet services – like games or maps – but is scaling back separate investment plans due to the slowdown, and focusing on merging the delivery of services.

Nokia, which made its first ever quarterly pretax loss in January-March, is cutting annual costs at its key handset unit alone by more than 700 million euros ($979.7 million U.S.) to counter plunging phone demand.

The Apple App Store has proved extremely popular, with one billion applications downloaded in less than a year, and operators and technology firms including Vodafone Nokia, and Microsoft now want a piece of the pie.

However, analysts say firms will likely struggle to match the success of Apple’s store when creating their own stores, hampered by technical issues, a lack of applications and increased competition.

"Ovi Store is in some ways the last castle for Nokia – both N-Gage and ‘Comes with Music’ are industry laughing stocks," said Global Crown analyst Tero Kuittinen.

Games and music have been spearheads of Nokia’s services push, but its mobile gaming offering has had little success, and its much-hyped music offering, which bundles free music downloads with a sold phone, has also found few clients cash advance payday loan.

Nokia will also sell games and music through the Ovi Store.

"Ovi Store is where Nokia tries to re-group and muster its forces for a counter-offensive," Kuittinen said.

After Apple introduced the iPhone in 2007, handset vendor rivals all focused their efforts on building similar, sleek devices with large touch screens – a situation that is being repeated in 2009 in the rush to build a rival App Store.

Research firm Strategy Analytics has forecast the value of the mobile content market – including downloadable games, ringtones, wallpapers, video, mobile TV, text alerts and mobile Web browsing – to grow 15 percent this year to $62 billion (U.S.).

Nokia shares rose slightly on the news, up 1.3 per cent at 10.76 euros at 1501 GMT.

The store will combine Nokia’s legacy software distribution channels such as the Download! service, which has been pre-installed on more than 200 million phones. However, only a fraction of those phones have ever been used to buy a program through the service.

In late April, Nokia said it would have operator billing – something it expects to boost takeup – in place in eight countries for its launch, but dropped an earlier goal of including the key U.S. market from the start.

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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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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 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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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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The global downturn could lead to unrest, more poverty and environmental challenges in Asia, regional leaders were warned on Monday, after they agreed on a $120 billion emergency fund to counter the crisis.

Asia has been hard hit by the collapse in global demand largely because of the region’s heavy reliance on exports. Singapore, Hong Kong, Taiwan and Japan are in recession and growth elsewhere is the weakest in years.

“Poverty is worsening in many countries. Businesses are struggling. The extremely urgent climate change agenda could be affected,” Indonesian President Susilo Bambang Yudhoyono said at the annual meeting of the Asian Development Bank.

“If all this goes unchecked, down the road we could see social and political unrest in many countries,” he told representatives of the ADB’s 67-member countries, including finance ministers and central bank governors.

To counter the downturn, the ADB said it will raise lending by half and Asian governments agreed at the weekend to launch a $120 billion fund countries can tap to avert a balance of payments crisis.

Japanese Finance Minister Kaoru Yosano warned that private capital flows into Asian developing nations could turn negative in 2009 after falling below $100 billion in 2008 from over $300 billion in 2007.

“ADB should play a leading role to cushion the impact of such a brutal reversal in capital flows,” he told the meeting, adding though that a resurgence in Asia could trigger a global recovery online cash advance lenders.

Longer term, it was vital for emerging Asian economies to build domestic demand to counter the reliance on export earnings, ADB delegates said.

Many Asian exporters have seen demand for their products halve from a year earlier as the deepest global downturn in decades hammered world trade.

“The Chinese government’s basic approach is to expand domestic demand, particularly consumer demand, to promote growth,” Finance Minister Xie Xuren said.

Karen Mathiasen, the chief U.S. delegate, said the shift to rely more on domestic demand would be profound.

“Such a fundamental economic transformation will not be easily or rapidly attainable, but ultimately will be key to underpinning a healthy, global and balanced recovery.”

MORE SPENDING

To achieve this goal, ADB Governor Haruhiko Kuroda said Asia needed to channel more savings into investments and consumption.

“They need to spend more on health, education and social security to reduce household needs for precautionary savings. They need strategies to transfer more corporate savings to households to encourage greater consumer spending.” 

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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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A healthcare agreement struck between Ford Motor Co and the United Auto Workers would not work for General Motors Corp, GM’s chief executive said Tuesday.

"It probably works for Ford. It does not work for us," Rick Wagoner said, without elaborating why. "So we need to do something different. We’re working with the UAW on how we might do that."

As part of the $17.4 billion bailout extended to the two companies in December, GM (GM, Fortune 500) and Chrysler are required to bring wages and benefits of U.S. factory workers in line with those at Toyota Motor Corp (TM) and other Japanese automakers.

GM and Chrysler have reached tentative agreements on some issues, but have not released details.

Unlike Ford (F, Fortune 500), the two have yet to settle on a plan for restructuring a retiree healthcare trust in which the companies would offer a sizable amount of stock or equivalents to reduce their cash contributions.

Wagoner also told a meeting of newspaper reporters and editors that suppliers could see some help soon and restructuring without bankruptcy was still the best option for GM, which faces a March 31 deadline to prove to U.S. government that it can be viable and worthy of more bailout funds.

Wagoner again dismissed the idea of a court restructuring where concessions and other provisions are worked out up front, saying it was unproven for the industry and too risky overall. He said GM’s research continues to show that consumers would not buy cars from a bankrupt automaker.

"It could work and it might not work, and if it doesn’t work, it could mean a long period of bankruptcy, which I believe would result in the liquidation of the company," Wagoner told the meeting, sponsored by the Christian Science Monitor.

"It makes sense from everybody’s perspective that we have to do this outside of court," Wagoner said.

He also expressed hope that GM and its bondholders could work out their differences on concessions without "government engagement payday loan companies."

Bondholders have balked at a proposal to reduce by two-thirds the roughly $27 billion they are owed through an exchange of new equity in a recapitalized company. Bondholders call that proposal unfair compared to payout terms being offered to the UAW and for remaining GM debt.

The Obama administration task force weighing a bailout request of more than $16 billion from GM and a $5 billion from Chrysler LLC would prefer an out-of-court restructuring, its lead adviser said this week.

On suppliers who have asked for billions in government help to survive, Wagoner said their problems are getting "more precarious" and that the task force is "well informed" on the matter.

"Hopefully, some help is on the way soon because I think it’s getting pretty drastic for the suppliers," Wagoner said.

On GM’s Opel subsidiary, Wagoner said GM is willing to take a "less than 100 percent" stake in the company in order to receive German government aid and save it.

"We’re open to a different structure in Europe. We need more cost savings," Wagoner said, noting conditions for its participation are being discussed.

Germany is open to the possibility of helping Opel but has said it needed to be sure no state support would find its way back to Detroit.

Wagoner met with the German Economy Minister Karl-Theodor zu Guttenberg on Monday night in Washington. Guttenberg said it was essential for GM to find a private investor.

GM shares closed down 2% at $2.47 on the New York exchange. Ford shares were up 8.6% at $2.28. 

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