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The U.S. government may agree to finance the purchase of some American International Group Inc. businesses, take stakes in assets and ease terms of its aid package to the insurer, a person familiar with the matter said Thursday.

These are some of a wide range of options under discussion between the government, the insurer and credit rating agencies, as AIG, once the world’s largest insurer by market value, looks to avoid a credit downgrade that would trigger a host of liquidity issues and hurt its business, the source said.

Other options that are being discussed include changing the terms of a $40 billion preferred stock investment that has a 10% coupon, the source said. New terms could include reducing or even eliminating the dividend on that.

The sides are also looking at the possibility of lowering the interest rate on the government’s credit line to AIG, and swapping debt for equity for some businesses, the source added.

AIG may also get an additional equity commitment of several billion dollars from the government, which could come as an expanded credit line, the source said.

But the options are still under discussion, and it was unclear what the final plan would look like exactly, the source said.

"We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG’s financial challenges," AIG spokesman Joe Norton said.

Too big and unwieldy?

One idea being discussed with the government is that AIG is too big and unwieldy, and some businesses may be more valuable outside of the company than inside, the source said.

Talks include possibly breaking out certain units, including American Life Insurance (Alico), American International Assurance Co (AIA) and the U.S. auto insurance business, the source said.

Under one scenario, there could be a debt-to-equity swap, where the government would take a stake in these businesses and reduce AIG’s debt. But the valuation of the businesses was unclear, the source said.

The talks come as AIG expects to post a record $60 billion quarterly loss, according to another source - that’s about $460,000 a minute.

A ratings downgrade could have serious ramifications on the insurer’s liquidity and hurt businesses no faxing payday loans. Customers could cancel their insurance policies if a minimum rating is no longer satisfied.

AIG was first rescued in September after bad mortgage bets left it on the verge of collapse. The government stepped in with $85 billion in bailout financing, as the credit crisis peaked with Lehman Brothers Holdings Inc. filing for bankruptcy and Merrill Lynch agreeing to be bought by Bank of America Corp (BAC, Fortune 500).

The government subsequently offered additional financing, bringing the support up to $123 billion.

And in November, the government had to revise its bailout package, raising its aid further, to about $150 billion.

Last year, AIG said it would sell all assets except its U.S. property and casualty business, foreign general insurance and an ownership interest in some foreign life operations, to pay back the government.

While the company has announced some sales, it has been difficult to find buyers and get a good price for assets amid the financial crisis.

Credit for deals remains difficult to arrange due to the crisis and as many would-be buyers struggle with their own problems.

Asset sales

AIG was in talks to sell its U.S. auto insurance unit to Swiss insurer Zurich Financial Services AG in a deal that was expected to be worth around $2 billion, a source has told Reuters, but the transaction has run into problems because of the credit crisis.

Some buyers, especially for the large businesses such as its aircraft leasing unit, International Lease Finance Corp., have been looking for government help with financing, another source has said.

Deadlines for bids for the Asian assets are due Friday, according to sources. The sales could raise tens of billions of dollars for AIG.

But there is a sense that prices for the businesses in the current environment will not reflect their true value, a source said.

AIG’s shares (AIG, Fortune 500) closed up 6 cents at 52 cents on the New York Stock Exchange. 

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Deutsche Post said it was still in talks over a possible cooperation with United Parcel Service, providing a sought-for update on its drawn-out negotiations.

But a tie-up with other providers was also a viable option, Europe’s biggest mail and express delivery company said in presentation slides on Thursday.

In 2008, Deutsche Post and UPS agreed to cooperate on air freight in the United States, but talks stalled. The exclusivity of talks between the two companies expired at the end of January.

Deutsche Post has since the start of the talks said it planned to shut down its domestic U.S. express delivery business and cut a total 14,900 jobs there. That move would cut its air capacity there to less than 100,000 shipments per day, from 1.2 million previously.

Restructuring in the U.S. was on track, Deutsche Post said, adding it still expected to post an adjusted EBIT loss of $900 million at the business in 2009 payday loan in advance.

In 2008, it booked $2.1 billion of an expected total of $3.9 billion of restructuring costs. Other DHL businesses were not affected by the changes in the United States.

Deutsche Post on Wednesday said the head of its DHL Express business, John Mullen, had resigned and would be replaced by Ken Allen, who most recently headed up the U.S. restructuring project. Mullen had suffered health problems, it said.

According to Thomson Reuters StarMine, which weights analysts’ forecasts according to their track record, the stock trades at 8.7 times its 12-month forward earnings, a discount to both UPS and FedEx as investors worry it is losing ground against its rivals.

Deutsche Post’s stock has lost more than 60 percent of its value in the past twelve months.

(Reporting by Maria Sheahan)

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Federal Reserve Chairman Ben S. Bernanke spurned outright federal control of U.S. banks in favor of a public-private partnership that the government would eventually exit.

Bernanke told lawmakers yesterday the government would use supervision instead of shareholder control to guide major banks, and warned against dismantling their franchises. The remarks eased concern Treasury Secretary Timothy Geithner’s financial plan would push aside private shareholders, and spurred the biggest gain in financial shares in a month.

“Bernanke was a voice of reason and he provided clarity in areas where others have failed,” said Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co. LLC in New York. The Fed chairman assured markets that “the nation’s banking regulators were not proposing nationalizing banks.”

The Fed chief’s remarks countered a growing drumbeat among some economists and lawmakers in favor of government takeovers of major financial firms to cleanse them of distressed assets and ensure they keep lending. Establishing ownership control poses legal issues and could undermine banks’ value with private investors, Bernanke warned.

President Barack Obama last night signaled the administration will likely need to expand the $700 billion financial-rescue program to break the back of the credit crisis.

More Money

“This plan will require significant resources,” the president told a joint session of Congress. “And, yes, probably more than we’ve set aside.”

The Treasury will buy convertible preferred stock in the 19 largest U.S. banks if stress tests determine they need more capital to weather a deeper-than-forecast recession, Bernanke said yesterday.

The central banker spoke out amid signs of increasing challenges surrounding the government’s September seizure of American International Group Inc. — a takeover that predated the government’s $700 billion bank-rescue fund. While AIG planned to repay a $60 billion federal loan by selling businesses, a failure to find enough bids means it may have to hand some operations over to the government, a person familiar with the matter said.

Bernanke said at the Senate Banking Committee hearing yesterday: “I don’t see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalize a bank when it just isn’t necessary.”

Investor Concern

Geithner on Feb. 10 provided just an outline of the Obama administration’s plans for buttressing the financial industry. The lack of details led some investors to speculate on their own that a recapitalization of banks would involve substantial government control.

The Standard & Poor’s 500 Banks Index surged 15 percent yesterday to 68.20, taking back more than 40 percent of the losses incurred after Geithner’s presentation.

Senator Christopher Dodd, of Connecticut, the banking panel’s chairman who helped to stir concern about government takeovers in a Feb low interest rate personal loans. 20 interview, said his remarks should have been “better thought-out.” He told reporters yesterday that “banks run by private hands are far more desirable,” after last week saying nationalizations might be needed “at least for a short time.”

“There seems to be a growing sense of relief that nationalization was de-emphasized and put into perspective by Bernanke and some of the people in Congress,” said Marshall Front, who oversees $500 million as chief executive officer of Front Barnett Associates LLC in Chicago.

Hit to Shareholders

Regulators late last year put a priority on preventing the failure of some financial firms, at the expense of common shareholders if necessary. Stockholders of Fannie Mae, Freddie Mac and AIG were all mostly wiped out.

“They learned a hard lesson — if they nationalize, we are going to find ourselves in a bunch of AIGs,” said Kevin Fitzsimmons, managing director at Sandler O’Neill & Partners LP in New York. “He acknowledged that if the government owns it, the franchise value goes down.”

Bernanke said “the best sign of success” will be when the “government can start taking its capital out or the banks can start replacing the public capital with private-sector capital.”

Joshua Rosner, an analyst at the investment research firm Graham Fisher & Co. in New York, said the government may not run banks with the same sort of control it now has over mortgage finance companies Fannie Mae and Freddie Mac, which are under federal conservatorship.

‘Winding Down’

“But I don’t think we can ultimately resolve the problem without taking some kind of control and forcing the winding down or the sale of certain business units,” Rosner said.

The Treasury’s new convertible preferred stock would be converted to common-equity stakes only as extraordinary losses materialize, Bernanke said yesterday.

“We don’t need majority ownership to work with the banks,” said Bernanke, who testifies today to the House Financial Services Committee.

Bernanke also said the so-called stress tests that regulators will run on the 19 banks will look at potential losses over a two-year horizon if the economy worsens.

The assessment will use “both a consensus forecast — where we think the economy is likely to be based on private sector forecasts — and an alternative which is worse,” Bernanke said.

The Treasury is expected to provide further information about the stress tests today.

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Ameren’s 840,000 natural gas customers in Illinois will see heating prices decline further next month because of a continued weakening in energy demand.

Retail prices for natural gas, which makes up about two-thirds of customers’ bills, will go down 17 percent or 19 percent depending on the utility, St. Louis-based Ameren said. The price for Cilco and CIPS customers will drop to 64 cents a therm from 77 cents. AmerenIP prices will fall to 68 cents from 84 cents.

Natural gas demand has eroded, especially among industrial customers, as the recession lingers. Retail gas prices charged by Ameren’s Illinois utilities have fallen as much as 55 percent since their peak last fall low interest rate personal loans.

"We also recognize that the extremely cold temperatures that occurred in December and January meant that our customers used more natural gas this year than a year ago," said Scott Glaeser, Ameren’s vice president of gas supply.

Ameren utilities buy gas from producers across the country. Retail prices are adjusted monthly depending on changes in the wholesale market.

jtomich@post-dispatch.com | 314-340-8320

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Ryan and Christy Schrock began married life $80,000 in debt, just days after Ryan graduated from the U.S. Military Academy in 2001.

"We didn’t have the money to pay for the wedding, so it went into credit card debt," said Christy, who lives in Fort Campbell, Ky., while Ryan serves his third tour of duty in Iraq. The $12,000 wedding tab was on top of car loans, personal loans and other credit card debt the couple ran up while putting themselves though college.

Clayton Pope, a state park ranger in Wilmington, Del., also had college loans and more than $2,000 in credit card debt when he began working for the park system in 2005.

"Growing up, I knew what poor was like," said Pope, whose father earned a modest income as a carpenter to support a family of five. Pope also faced "the pretty overwhelming task" of deciding how to invest his retirement plan contributions at work.
In Des Moines, Iowa, Patricia Fike, then in her mid-40s, confronted another type of challenge — a divorce in 1994 while one of two daughters was still in college.

"You are accustomed to having two incomes," Fike said. "When I went down to one, I knew I’d have to fend for myself."

I talked to Schrock, Pope and Fike to learn not about their challenges but of their successes. Their stories exemplify the smart savings habits to be celebrated during the third annual "America Saves" week, which begins today.

"We hope the week encourages and assists Americans to pay down high-cost debt and build savings that will help them weather any economic storms," said Stephen Brobeck, executive director of the Consumer Federation of America, which manages the America Saves campaign.

America Saves has helped thousands of Americans, mostly with low and moderate incomes, to save and pay down debt. During America Saves Week last year, upward of 75,000 people attended more than 1,800 events promoting savings.

The first step, as the Schrocks, Pope and Fike exemplify, is to make the commitment empire payday loans.

"We were committed to paying our debt from the beginning," Christy Schrock said. "We started prioritizing by interest rate and by balance and paying them down."

Other than the mortgage, the couple’s debt is down to only about $5,000. "To me, it was the little things, starting to clip out coupons, bringing the lunch to work, shopping around for everything," she said of how they found the money. Also, "any time we got a promotion or cost-of-living increase, instead of having the mentality of what are we going to buy, we took the additional income to pay off debt, and kept going."

More collective wisdom from these savers: Make savings automatic by having a portion of your pay go directly to a savings or retirement account; comparison-shop for everything, don’t disdain small savings, and enjoy a simpler life.

"You’d be surprised even if it’s just $10 or $20 at a time how much it grows," said Fike, a product analyst at an insurance company who turned 60 last month and is on track to be able to retire at 62. At the same time, "it’s important to emphasize we are not missing out on life," said Pope, who paid off his debt and invests for retirement in low-cost diversified mutual funds.

Pope and Fike became involved with America Saves groups in their states. Under a Military Spouse Financial Fellowship program, Christy Schrock became an accredited financial counselor at Fort Campbell.

AskHumberto@aol.com

2009, TRIBUNE MEDIA SERVICES INC.

On the Web

For saver success stories, check out:

•www.AmericaSaves.org

•www.MilitarySaves.org

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General Motors and Chrysler LLC will present their latest plans to the federal government Tuesday about how they will survive for the long-term.

The two companies have already received approval for $17.4 billion in loans from the government, money that most experts believe has kept the struggling automakers from bankruptcy.

If GM and Chrysler do not prove to the government that they can be viable in the future, the loans could be recalled. With that in mind, here is what people should be paying close attention to in the plans.

What concessions did they win from the UAW and creditors? GM (GM, Fortune 500) and Chrysler are required to include details of deals they reached with their unions and their creditors to further cut costs.

So far, the two companies have reached agreements with the United Auto Workers on some issues, such as the elimination of the so-called "jobs bank," which gives laid-off autoworkers the right to near full pay for the life of the contract. GM and Chrysler also announced new buyout offers to further cut their hourly work force.

But there have yet to be any details on bigger cost-saving deals, such as how to fund union-controlled trusts that cover tens of billions of dollars in future retiree health care costs. The fund was created as part of the 2007 labor deal between the UAW and Detroit’s Big Three automakers.

The expectation was that the United Auto Workers union would agree to accept equity in GM and Chrysler for half of the assets to be placed in those funds. But the UAW walked away from the negotiating table late last week, reportedly when GM asked the union to take even more of its depressed stock.

There has also been little indication so far that debt holders have agreed to swap debt for equity in the companies. The loans call for the automakers to shed two-thirds of their unsecured debt.

While Chrysler has little unsecured debt, it is widely believed to be trying to reach deals with holders of its secured debt. GM is struggling under $35 billion of unsecured debt.

What other costs can GM and Chrysler cut? GM could announce a decision to discontinue several brands, such as Hummer, Saturn, Saab and even Pontiac. In December, when GM first asked Congress for financial assistance, the company said these brands were on the bubble.

GM also said in December that it may cut in the number of U.S. factories from 47 to 38 over the next four years. So a more detailed time table for those closings could be announced Tuesday.

Chrysler could also announce additional plant closing plans, as it discusses various options to partner with overseas automakers such as Nissan (NSANY) and Fiat.

The Wall Street Journal reported Saturday that GM also layout a bankruptcy option in its plan — even though the company has repeatedly said it did not believe such a plan was workable.

According to the report, the government would provide so-called "debtor in possession" financing to fund GM’s operations during a court supervised reorganization. The company would not comment on the report no fax needed payday loans.

But a source familiar with GM’s plans said that while the bankruptcy option will be discussed, GM will argue that the government financing needed to keep the company alive during bankruptcy would be many times greater than what it would cost to keep out of bankruptcy.

And that leads to the next question.

How much more money will GM and Chrysler ask for? In December, GM said it needed $18 billion to make it to 2010. Chrysler was asking for $7 billion.

But when Congress failed to pass the Detroit bailout, the Bush administration stepped in with stopgap loans of $13.4 billion for GM and $4 billion for Chrysler.

The companies would clearly like the full amount of money they asked for in December, given the weakening sales environment. The question is whether they will want more money on top of that.

Several experts believe it will take a lot more than $34 billion - a number that includes a $9 billion line of credit that Ford Motor (F, Fortune 500) requested in case conditions in the auto market deteriorated even more than expected - to save the U.S. automakers.

Mark Zandi, chief economist of Moody’s Economy.com, testified before Congress in December that it would cost between $75 billion and $125 billion to bailout the Big Three.

What are their current sales forecasts? GM and Chrysler both gave 2009 sales forecasts in December that seemed grim at the time. But now, they appear to be optimistic.

GM’s baseline forecast was for a seasonally adjusted annual sales rate, or SAAR, of about 11 million vehicles in the first quarter, on its way to 2009 industrywide sales just under 12 million. It forecast that sales would rebound to just under 15 million cars and light trucks by 2012.

But January sales were below a 10 million SAAR for the first time since 1982, and the early take on February sales show little improvement. GM announced in January it is now working with the assumption that full-year sales this year will be just over 10 million vehicles.

Chrysler’s plans called for a more conservative 11.1 million SAAR in 2009. But its vice chairman Jim Press said earlier this month that industrywide sales may stay near 10 million for the next four years.

The terrible December and January sales have led to losses and production cuts even at formerly profitable Asian automakers such as Toyota Motor (TM) and Nissan. Nissan has announced 20,000 staff cuts worldwide. Toyota has stopped work on a nearly complete Mississippi plant that had been set to make a hybrid Prius on U.S. soil for the first time.

The weaker forecasts from these companies only raise more red flags for the U.S. automakers. Most experts believe it is impossible for GM and Chrysler to return to profitability if annual vehicle sales remain below 10 million for the foreseeable future. That means the price tag of a Detroit bailout is likely to climb much higher. 

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No time to cruise the drive-thru or wait for a pot of drip to brew? Don't worry, Starbucks Corp. is planning to offer a new instant coffee product.

This week, the Seattle-based coffee retailer will go on the road to New York and other cities, bringing with it the company's latest product, which Starbucks said that it has been working on for 20 years.

In a memo sent to Starbucks (Nasdaq: SBUX) employees, Vivek Varma, Starbucks senior vice president of public affairs, said the product could be in stores by Feb. 18.

Varma said this won’t be your father’s instant coffee instant payday loan. She said Starbucks has developed technology to “absolutely replicate the taste of Starbucks coffee in an instant form.â€

Worldwide, there is a $17 billion market for instant coffee, according to the memo.

There are about 20 Starbucks stores within a 20-mile radius in the Albany, N.Y., area.

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Canadians spent less on auto repairs and maintenance in 2008 than the previous year for the first time in more than decade, according to DesRosiers Automotive Consultants.

Preliminary data show consumers paid $17.56 billion for auto repairs last year, or 1.5 per cent less than in 2007, the consulting firm said yesterday.

"It was a very tough year," said DesRosiers president Dennis DesRosiers.

He attributed the decline to Canadian motorists driving less because of high fuel prices which meant they did not need to visit their repair shops as much installment payday loans.

The data, which do not include revenues from collision repairs and the addition of accessories, also revealed a slight shift to "do-it-yourself" work.

Tony Van Alphen

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Chrysler LLC and General Motors Corp. could announce plant closures when they submit viability plans to the U.S. Treasury next week, an auto industry analyst said today.

Chrysler, GM and Ford — which isn’t receiving federal loans but still is burdened with the economic downturn — could each close two assembly plants and have enough capacity to meet demand, said Haig Stoddard, an industry analyst for IHS Global Insight. Among the plants at risk for closure between now and 2012: the St. Louis North Plant, where the Dodge Ram is made, Stoddard said Monday.

The Detroit Free Press and Wall Street Journal reported this weekend that plant shutdowns are expected to be part of the restructuring. Both media outlets quoted Stoddard and mentioned the Chrysler’s Fenton plant, where more than 1,000 people work.

Chrysler spokeswoman Shawn Morgan declined to comment Monday.
In 2008, Chrysler produced nearly 1.9 million vehicles, according to Automotive News. Production is expected to drop about 31 percent to 1.3 million vehicles this year, and Stoddard said 10 assembly plants could meet that amount. Chrysler has 12 assembly plants in operation.

Meanwhile, the Wall Street Journal cited anonymous sources that said Chrysler would close at least one assembly plant.

Since Chrysler cut one shift of the Fenton pickup assembly in September, analysts have considered the plant at risk of closure saving account payday loan. Last month, Stoddard told the Post-Dispatch it was possible that Chrysler would close some plants this year and the Fenton plant would be a probable choice.

One production shift in manufacturing is considered inefficient and unprofitable.

"Typically you want at least 80 percent capacity in most assembly plants to keep them profitable," Stoddard said.

The St. Louis North plant is operating at 43 percent of its capacity, he added.

Chrysler could meet demand by consolidating Dodge Ram production to plants in Warren, Mich., and Saltillo, Mexico, that also make the pickup, analysts have said.

The Fenton plant isn’t the only vulnerable Missouri plant. Stoddard said Ford might close the F-150 pickup assembly plant in Claycomo, a suburb of Kansas City.

Chrysler and the other automakers, both foreign and domestic, have been battered by the recession and credit freeze. In December the federal government agreed to lend $4 billion to Chrysler and $13.4 billion to GM.

A week from Tuesday, the two companies must outline to the U.S. Treasury how they will become viable.

atablac@post-dispatch.com | 314-340-8140

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The Shane Co., which filed for Chapter 11 bankruptcy protection in January, sustained a net loss of $29.3 million in fiscal 2008 after reporting net income of $3.9 million the previous year, according to a filing made Friday in U.S. Bankruptcy Court in Denver.

The latest filing provided the first detailed look at the finances of the privately held company since the Centennial-based jewelry retailer filed for reorganization Jan. 12.

Shane Co. operates about 23 stores in 14 states.

The company said its net sales for the fiscal year ended Feb. 2, 2008, were $278.6 million, up from $267.9 million the previous year, and its gross profit for fiscal 2008 was $119.7 million, up from $115 million in fiscal 2007, according to the filing.

But it said its selling, general and administrative expenses went up $29.3 million, to $136.5 million, in fiscal 2008.

Shane Co. reported an operating loss of $22.5 million in 2008 versus operating income of $6.8 million the previous year. It said its interest expenses more than doubled, to $7.1 million.

The filing said Shane Co. went from stockholders’ equity of $46.7 million as of February 2007 to $15.9 million in February 2008. It said retained earnings fell from $40 million in 2007 to $6 million in 2008.

The company reported assets of $165.8 million as of Feb. 2, 2008, with $107.4 million of it in inventory.

Shane Co. filed for Chapter 11 protection Jan. 12.

Tom Shane — the company’s president, CEO and chairman, in addition to its commercial pitchman — owns about a 70 percent stake in Shane Co ace cash advance.; the rest is owned by trusts formed for the benefit of his children, filings with the court show.

The latest filing says the company owed its “principal stockholder” $20 million as of February 2008 under promissory notes. It said interest on the notes was $1.3 million each year.

The company paid its namesake CEO $1.2 million in 2007 and again in 2008 “as part of the company’s strategy in developing and maintaining brand value and increasing its market shares with corresponding sales increases” for those years, the filing with the court says.

Earlier filings said the company also owed $4.7 million to Dison Gems of New York.

Denver attorney Caroline Fuller, of Fairfield and Woods PC, who represents Shane Co., has said the current economy and the state of the luxury goods retail market put the diamond merchant in a cash crunch. She said the company hoped to emerge from Chapter 11 by year’s end.

“The severity of this past holiday season dramatically impacted existing liquidity requiring the company to seek this bankruptcy protection,” Tom Shane said in a written statement last month. “I am confident that this action will guarantee that our customers will continue to enjoy the top-notch service, expansive selection, and unbeatable prices that they have enjoyed since the days of my grandfather.”

Founded in 1971, Shane Co. operates in Colorado as well as Arizona, California, Georgia, Florida and other states.

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