World financial news

MetroPCS Communications Inc., a wireless phone company known for its no-contract, prepaid service, posted a 2009 profit of $176.8 million.

The company credits an expansion into northeastern U.S. states and a broadening of its rate plans for its 2009 success.

Richardson-based MetroPCS (NYSE: PCS) posted an annual profit of $176.8 million, or 49 cents per share, on revenue of $3.5 billion in 2009. That is up from the company’s profit of $149 million, or 42 cents per share, on revenue of $2 cash advance america.8 billion in 2008.

For the fourth quarter of 2009, MetroPCS posted a profit of $33.1 million, or 9 cents per share, on revenue of $930 million. That compares to a profit of $14.6 million, or 4 cents per share, on revenue of $723.6 million for the fourth quarter of 2008.

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Prime Minister Gordon Brown will pledge today to make Britain’s tax system attractive to large multinational companies in an effort to secure the backing of business leaders before this year’s election.

Brown’s government will propose a set of principles that include promises to ensure new taxes aren’t too complex and a commitment to hold consultations before introducing new corporate taxes. The plan will be published by Chancellor of the Exchequer Alistair Darling at a conference in London.

“By maintaining a world-class environment for business to do business we can attract the investment that will underpin our move from recession to recovery to growth,” Brown said in his weekly podcast yesterday.

Brown’s Labour Party and David Cameron’s Conservatives are competing to win credibility with business leaders before the election, which Labour Party documents suggest will be held on May 6. So far, the campaign has centered on which party has the best recipe for tackling Britain’s record peacetime budget deficit.

Darling began talks with company leaders in April 2008, establishing a panel of more than 10 executives from international companies who meet regularly with Treasury ministers and civil servants.

Brown, Darling and Business Secretary Peter Mandelson will be joined at the London conference by executives from companies including Bombardier Inc., China Merchants Bank Co. Ltd., Burberry Plc and Lockheed Martin Inc.

Bank Stakes

The Conservatives pledged yesterday to sell U.K. government stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc to voters as their support continued to slip in opinion polls.

The plan to sell shares at a discounted price, outlined by Conservative Treasury spokesman George Osborne, came as opinion polls show the party’s lead slipping after it called for spending cuts to start this year to reduce the deficit and the economy exited recession in the fourth quarter of 2009.

A poll by YouGov Plc in the Sunday Times newspaper showed the Conservative lead over Labour at its narrowest since December 2008.

YouGov said the Conservatives had the backing of 39 percent of those surveyed, down one percentage point from a month ago, while Labour were backed by 33 percent, up two points. Details of when the poll was taken and the margin of error weren’t given.

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For all the concern over the $1.6 trillion U.S. budget deficit and record debt load, the dollar is as valuable now as 35 years ago.

Measured against a basket of currencies from the Group of 10 nations proportioned by how they trade against each other, the greenback is up about 3 percent since 1975, according to Bloomberg Correlation-Weighted Currency Indexes. That was four years after the Bretton Woods agreement, set up in 1944 to link currencies to the price of gold, collapsed. The U.K. pound has dropped 34 percent and the Canadian dollar has fallen 6 percent.

The U.S. dollar gained 6 percent since November after losing 12 percent in the first 11 months of 2009 as measured by the Bloomberg index. Barclays Capital and Morgan Stanley say the U.S. will grow faster than the rest of the developed world this year and 2011. At the same time, Europe faces worsening finances in Greece, Spain and Portugal, Japan’s economy is struggling and concerns about valuations in emerging markets are increasing.

“To quote Mark Twain, the reports of the dollar’s demise have been greatly exaggerated,” said Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co., which manages about $40 billion in assets.

Rising Demand

Nowhere is that more evident than in the market for U.S. Treasuries. The amount of America’s government debt held by investors outside the U.S. rose 17 percent to $3.6 trillion in 2009 through November, according to the Treasury Department.

Purchases may continue to rise as investors seek refuge from growing sovereign credit risk in the euro area. The dollar “will benefit from relative liquidity of the U.S. Treasury markets,” Barclays Capital currency strategists led by David Woo in London said in a Feb. 5 report.

Barclays Capital economists said in a report the same day that U.S. gross domestic product may grow 3.6 percent this year, versus 2.5 percent for the developed world, and 3.1 percent in 2011, compared with 2.6 percent elsewhere. Japan’s GDP may expand 1.9 percent this year, and the euro zone 1.3 percent, they said.

A day earlier, strategists at New York-based Morgan Stanley boosted their dollar forecast, saying it will strengthen to $1.24 per euro by year-end from its previous estimate of $1.32. It traded at $1.3676 as of 6:46 a.m. in New York today. The firm sees the U.S. currency gaining to 109 yen from 89.42 today, and rallying to $1.49 to the pound from $1.5578

Reserve Currency

Investors and traders predicted last year the dollar would lose its position as the world’s reserve currency, which means it’s the first place central banks look to park their cash.

“With all the concerns about the problems with the U.S. financial system last year, the banking sector in the euro zone looked a bit more stable,” said Robert Sinche, chief strategist at Lily Pond Capital Management LLC in New York. “That created a sense of the euro as an alternative to the dollar.”

Central banks that disclose breakdowns of their reserves bought a record $60 billion worth of euros in 2009’s second quarter, more than half of their new cash in the period, based on International Monetary Fund data adjusted for exchange-rate changes using methodology developed by Barclays Capital.

They then reversed course, putting 15 percent of new reserves, or $17.8 billion, into euros in the third quarter, the smallest share of any period in which their reserves grew since early 2008. Central banks put 45 percent, or $52 billion, into dollars, up from 36 percent.

Rally by Default

Rather than a referendum on the U.S., the dollar may be rallying by default. Nouriel Roubini, the New York University professor who predicted the credit crisis, said on Feb. 4 that the greenback may weaken for the next three years.

Moody’s Investors Service said last week the U.S. government’s Aaa bond rating will come under pressure unless additional measures are taken to reduce budget deficits projected for the next decade. The ratio of government debt to GDP and revenue increased “sharply” during the seizure in credit markets and recession, Moody’s said.

“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven Hess, a senior credit officer at Moody’s in New York.

The Obama administration’s plan to offset spending by more than $1.2 trillion over 10 years showed larger deficits and higher debt levels than in the original budget, Moody’s said. The ratio of debt to GDP in the U.S. will continue to expand, reaching 76.5 percent in 2019 compared with an earlier forecast of 70.1 percent, Moody’s said.

Treasury Secretary Timothy F. Geithner said in an ABC News interview broadcast yesterday the U.S. isn’t in danger of losing its Aaa rating.

“Absolutely not,” Geithner said, when asked whether a downgrade is a concern. “That will never happen to this country.”

‘A Better Bet’

The U.S. Office of Management & Budget said America’s budget deficit will fall each year through 2014, to $706 billion from $1.56 trillion in 2010, as borrowing needs drop to $814 billion from $1.75 trillion.

“Under stress, people trust the U.S. to do the right thing,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The U.S. is a better bet.”

A global reserve currency must provide investors with the ability to invest, which requires liquid markets, and few capital controls, according to investors. China’s yuan can’t replace the dollar because it isn’t fully convertible and doesn’t float freely. The euro region and the markets for commodity currencies, such as the Australian, New Zealand and Canadian dollar, don’t have enough trading to absorb the amount of cash the reserve banks hold.

‘No Alternative’

“There is no alternative to the dollar, so it’s status as a reserve currency can’t be under threat,” said Adam Boyton, a senior foreign-exchange strategist at Deutsche Bank AG in New York.

The dollar’s preeminence will remain intact, as it continues to be the most widely used currency in business and finance worldwide, the Federal Reserve Bank of New York said in a report released Jan. 5. Some $580 billion in banknotes, or 65 percent of all bills in circulation, were held outside the U.S. as of March 2009, according to Fed data.

The greenback has an 86 percent share of the foreign- exchange market, more than twice the euro’s 37 percent. Its share of the international debt market is 39 percent.

“The international role of the dollar remains substantial a decade after the introduction of the euro, and despite changes in the value of the dollar and the financial turmoil that began in 2007,” Linda Goldberg, a vice president at the New York Fed, wrote in the report.

Relative Deficits

While the Congressional Budget Office expects America’s debt to reach 65 percent of GDP in 2010, that would still be below the 77 percent of GDP the European Commission expects for Germany, the U.K.’s 80 percent and Japan’s 180 percent.

“I would want to stay away from the euro, the euro zone and some of the emerging European currencies,” Michael Gomez, the co-head of emerging markets at Pacific Investment Management Co., said on Feb. 4 at a conference in Moscow. The Newport Beach, California-based firm manages the world’s biggest bond fund.

At their meeting this weekend in Iqaluit, Canada, Group of Seven finance ministers pledged to press ahead with economic stimulus measures. Canadian Finance Minister Jim Flaherty told reporters that “we need to continue to deliver the stimulus to which we are mutually committed and begin looking at exit strategies to move to a more sustainable fiscal track.”

Yen Gains

Rather than using a weighted average of exchange rates based on trade data, which is reported on lag and subject to revision, the Bloomberg Correlation-Weighted Currency Indexes calculate weights based on variances in exchange rates.

The indexes have a start date of Jan. 2, 1975, and a base value of 100. The index for the dollar was little changed at 102.69 today and the yen index was at 395.70. The Swiss franc index was at 271.20 and the euro index was at 107.60, from 271.23 and 107.58 on Feb. 5 respectively. The index for the euro replicates the German deutsche mark before 1999, when Europe’s common currency started trading.

The New Zealand dollar index fell 0.2 percent to 50.14 today, the Swedish krona index climbed 0.1 percent to 52.89 and the Australia dollar index dropped 0.2 percent to 64.07.

Though the dollar is the world’s reserve currency, it doesn’t affect the movement of foreign-exchange rates as much as the euro, the indexes show. Since the euro’s creation, its correlation to other G-10 currencies has steadily risen, overtaking the dollar in 2004 and all others by December 2008.

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Critics say a $139 million settlement reached this week between securities regulators and eight big financial institutions is small potatoes.

Don’t be fooled.

I think this settlement is a big enchilada.

It’s not far behind the $205 million paid by five mutual fund managers in 2005 to settle complaints about short-term trading of fund units.

Both cases showed that investors have rights that can’t be trampled upon by large financial firms.

In 2005, fund managers agreed they should treat investors’ money as carefully as if it were their own.

They were failing to protect the interests of long-term investors by letting short-term traders take away some of their profits.

In the current case involving third-party asset-backed commercial paper (ABCP), there were several key principles at stake for investor rights. These principles include the following:

Investment advisers should not sell products they don’t understand.

Two firms were selling ABCP to smaller retail investors.

Cannacord Financial Ltd. will pay $3.1 million and Credential Securities Inc. will pay $200,000 under a deal with the Investment Industry Regulatory Organization of Canada. IIROC said the two firms did not do enough homework on the product in order to learn about its complexities and underlying risks.

They relied primarily on the credit rating provided by Dominion Bond Rating Service, an agency whose work was paid for by the issuers of the rated securities.

Interviews with several advisers working for these firms showed they knew nothing about the issuers or the composition and structure of the product, IIROC said.

Some advisers were representing it to their clients as a safe and secure product that was similar to a T-bill, guaranteed investment certificate or a term deposit.

Investment dealers should disclose known risks of products to investors.

Two firms were selling ABCP after learning of its risks from the product issuer.

CIBC World Markets will pay $21.7 million and HSBC Bank Canada will pay $5.9 million under separate deals reached with the Ontario Securities Commission.

They were dealing with an ABCP issuer, Coventree Inc., which had said that its average exposure to U.S. subprime mortgages was 7.4 per cent.

But in late July, Coventree sent an email to all dealers noting that its exposure to subprime mortgages in some conduits was as high as 42 per cent.

Coventree did not put any limits on disclosing information in its email, the OSC said.

But neither firm notified investors of the risks.

"CIBC continued to sell Coventree and certain other third-party ABCP from July 25 to August 3, 2007," the OSC said.

"During that period, CIBC sold $245 million to investors who may not have been aware of those issues."

HSBC sold $172 million in ABCP to clients who didn’t know about the risks that it had been made aware of during the same period.

Short-term credit products can be as risky as stocks.

ABCP was sold under an exemption from securities rules that allowed it to avoid much of the disclosure required for other securities, such as company shares.

The Canadian Securities Administrators has proposed that distributors of asset-backed short-term debt should have to issue a prospectus, similar to stock issuers.

It also wants to reduce reliance on the use of credit ratings in securities legislation.

I think both recommendations should go ahead.

Few investment products are safe and secure any more, even short-term debt.

Meanwhile, buyers aren’t protected in a system in which sellers rely on endorsements from for-profit commercial agencies.

eroseman@thestar.ca

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Nobel Prize-winning economist Joseph Stiglitz urged U.S. lawmakers to use “overwhelming force” to cut a 10 percent unemployment rate that is forecast to rise.

Stiglitz, a professor at Columbia University in New York and a former White House adviser under President Bill Clinton, told the Joint Economic Committee that more government spending and tax cuts are needed to put Americans back to work.

“There is, in economics, something akin to the Powell doctrine in the military: One needs to attack the problem with overwhelming force,” Stiglitz testified, referring to former chairman of the Joint Chiefs of Staff Colin Powell. “As we approach the looming jobs problem, we should not repeat the mistakes we have continually made in responding to this crisis: too little, too late.”

President Barack Obama this week proposed additional spending on the nation’s transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient in a second round of initiatives aimed at cutting the jobless rate.

Employers have cut more than 7.2 million jobs since the recession began in December 2007. The unemployment rate last month fell to 10 percent from a 26-year high of 10.2 percent in October. The rate will exceed 10 percent through the first half of next year, according to a Bloomberg News survey of economists taken Dec. 1-8.

“We should not be fooled” by the decline in the jobless rate, Stiglitz said. “Growth in private demand” will probably be “insufficient to restore employment to normal levels any time soon.”

Too Small

Stiglitz said the $787 billion package of spending and tax cuts enacted in February “has been working” although it was too small.

“Unless action is taken, we risk facing a vicious cycle: unemployment contributing to a weak economy, more mortgage foreclosures, more bad debts, lower demand, and possibly more, but certainly not less, unemployment no faxing payday loan.”

Stiglitz said priorities for spending should include extending unemployment benefits, aiding states facing revenue shortfalls, giving tax credits for weatherizing homes, government jobs programs and research and technology initiatives.

The economist shared the Nobel Prize in 2001 for work on problems that may arise in markets when parties don’t have equal access to information.

Restructure Mortgage Debt

Stiglitz also said Congress should act to encourage mortgage debts be restructured to reflect lower home values.

He said banks and mortgage lenders have been discouraged from restructuring home loans because they are allowed to carry those loans at face value even though many of the mortgages are underwater and likely to result in a default.

“I call that marking to hope, not marking to market,” Stiglitz said.

He said Congress should pass a “homeowner’s Chapter 11” bankruptcy reorganization law to make it easier for people to force a restructuring of their mortgage debt.

“That would provide a legal backdrop to encourage restructuring,” Stiglitz said. “We need a homeowners Chapter 11 that treats homes at least as well as we treat corporations.”

Stiglitz, 66, also said the Federal Reserve contributed to the financial crisis by failing to supervise banks or stem the housing bubble. He questioned proposals to give the central bank more authority to supervise firms whose failure might threaten the financial system.

“Giving more power to an institution which has failed so miserably, with results that have imposed such costs on all of us, cannot be the right solution unless there are deep and fundamental reforms in the institution, of a kind that are beyond those currently being discussed,” he said.

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The Bank of Canada is widely expected to keep its hands off interest rates Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.

Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth will speed up in the fourth quarter after a disappointing third quarter, when it barely crept out of recession with tepid 0.4 per cent annualized growth.

All 12 of Canada's primary securities dealers forecast the central bank would hold its overnight target rate unchanged at 0.25 per cent at its final policy-setting meeting of the year. The bank releases its rate decision and accompanying statement at 9 a.m. ET.

Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.

Reuters News Agency

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The Japanese government may delay an economic stimulus package after members of Prime Minister Yukio Hatoyama’s coalition said the proposed plan was insufficient.

“It probably won’t come together” today, Mikio Shimoji, head of policy research at the People’s New Party, told reporters in Tokyo. The head of the Social Democratic Party, also a minority coalition member, said the government was still debating the plan.

PNP leader and Financial Services Minister Shizuka Kamei has urged for spending of at least 8 trillion yen ($90 billion). Hatoyama’s Democratic Party of Japan had planned a package of as much as 4 trillion yen, Finance Ministry officials familiar with the matter have said.

Kamei “won’t relent on the 8 trillion yen figure,” Shimoji said, adding “We’ve put negotiations on hold same day payday loans.” He said signs the economic expansion has been weakening mean the government will need to spend more than planned.

“We’re in deflation, so we need something quantitative,” Shimoji said. “We think that unless it’s around 8 trillion yen, the economy won’t respond. They have no choice but to bow down,” he added, referring to the DPJ.

“I think there’s a possibility it won’t happen today,” SDP leader Mizuho Fukushima told reporters at the Prime Minister’s residence in Tokyo.

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Citigroup Inc. hired Willem Buiter, a former Bank of England official who has criticized the Federal Reserve for being too close to Wall Street, as its chief economist.

Buiter, 60, will join the bank in January and fill the position left vacant by Lewis Alexander’s move to the U.S. Treasury eight months ago, New York-based Citigroup said in a statement today.

The appointment by the bank, which is 34 percent owned by the U.S. government, puts an academic known for his outspokenness in its most senior economics position. In 2008, Buiter told the Fed’s annual symposium in Jackson Hole, Wyoming, that it pays an “unhealthy and dangerous” amount of attention to the concerns of the biggest U.S. financial institutions.

“As one of the world’s most distinguished macroeconomists, Willem’s deep knowledge of global markets and economies, and emerging markets economies in particular, will be invaluable to our clients,” Hamid Biglari, Vice Chairman of CitiCorp, said in the statement.

Buiter, currently a professor of political economy at the London School of Economics, has been unafraid to speak his mind about former or potential future employers.

CDO Comments

“In August 2007, several CEOs of major cross-border banks admitted they didn’t know what a CDO was,” Buiter said at the European Banking Congress on Nov. 20 in a discussion on the role of collateralized debt obligations in the financial crisis. “Most members of the Bank of England’s Monetary Policy Committee didn’t either.”

Buiter called Citigroup “a conglomeration of worst- practice from the across the financial spectrum,” in an April posting on his blog, posted on the Web site of the Financial Times.

In June, he wrote in the blog that the appointment of former Citigroup Chairman Winfried “Win” Bischoff to help oversee a report on the future of U.K. international financial services was “the most ridiculous appointment since Caligula appointed his favorite horse a consul.”

Citigroup spokeswoman Danielle Romero-Apsilos declined to comment. A message left for Bischoff at Lloyds Banking Group Plc, where he is now chairman, wasn’t returned. Felix Salmon of Reuters reported Buiter’s comments on Citigroup and on Bischoff earlier today.

Founding Member

Buiter was one of the founding members of the U.K. central bank’s rate-setting panel when he joined in June 1997. In March 1999, he voted for a 0.4-point interest-rate cut, the only attempt in the MPC’s history for a move that wasn’t in a quarter-point multiple.

In 2008, Buiter turned his fire on his hosts when the Fed invited him to its annual retreat in the Teton Mountains.

“The Fed listens to Wall Street and believes what it hears,” Buiter told an audience of central bank officials from the Fed and around the world. “This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous.”

Fed Governor Frederic Mishkin said at the same event that Buiter’s paper fired “a lot of unguided missiles,” and former Vice Chairman Alan Blinder “respectfully disagreed” with his analysis of the central bank’s crisis management.

Dubai Views

Buiter has been a consultant to Goldman Sachs Group Inc. since 2005, according to today’s statement. He has a bachelor’s degree from Cambridge University and a doctorate from Yale University.

Questioned on Bloomberg Television today about government- controlled Dubai World’s request for a standstill agreement with creditors, Buiter said that they shouldn’t expect a full state- backed rescue.

“This is a business that’s fallen on hard times and its creditors and bondholders simply have to take their lumps and not expect a sovereign bailout,” he said.

Buiter was chief economist for the European Bank for Reconstruction and Development from 2000 to 2005. He has been an adviser to the International Monetary Fund, the World Bank and the Inter-American Development Bank, according to the statement.

Alexander, who had worked at Citigroup since 1999, left in March to become a counselor on domestic finance issues to Treasury Secretary Timothy Geithner. He was paid $2.4 million by Citigroup in 2008 and the first months of 2009, according to his financial-disclosure form filed with the Treasury. In December 2007, he predicted the U.S. would probably avoid a recession.

Buiter is married to Anne Sibert, an economics academic who was appointed as a member of Central Bank of Iceland’s five- member Monetary Policy Committee earlier this year, according to a Web log posting on his site.

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Looking for a holiday gift for the kids that might have lasting meaning? There’s an abundance of well-written, even entertaining books on the market that teach kids lessons in finance.

The Berenstain Bears’ Trouble With Money — Stan & Jan Berenstain, Random House Children’s Books, $3.99

From junk food to environmental pollution, the Berenstain Bears haven’t been afraid of tackling the issues since they first appeared on the children’s literature scene with 1962’s "The Big Honey Hunt." This title, first published in 1983, teaches kids ages 4 to 7 the basics about money. It’s not just about spending, but earning. Brother and Sister Bear find ways to build up a stash of quarters so they can play video games. Along the way, they learn how to find a middle ground between being spendthrifts and little misers.

The Teens Guide to Personal Finance — Joshua Holmberg, David Bruzzese, iUniverse Inc., $12.95

Designed for young adults taking the first step to learn about money management, "The Teens Guide to Personal Finance" lays out the basics concepts of saving, borrowing, investing and maximizing tax advantages. It’s all explained in a way that’s easy to understand with graphics, work sheets and action plans.

Prepare to be a Teen Millionaire — Kimberly Spinks-Burleson, Robyn Collins, Health Communications Inc., $16.95

The authors are founders of a Texas-based business magazine called "Millionaire Blueprints" and here they compile some of the best advice from some of their issues on how successful young entrepreneurs turn their vision for a business into reality. The book features the real stories of successful teens. It details how they raised money, promoted their business ideas and other aspects of launching their ventures.

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Is it too early to call a GM turnaround?

Less than five months after emerging from bankruptcy protection in July, General Motors Co. last week reported a significant drop in losses, a stronger-than-expected balance sheet at this early stage in its recovery, and that it would start repaying loans received from Washington and Canada next month – five years ahead of schedule.

While it is still losing money in the core North American market, no global automaker is thriving in a U.S. market with a 10.2 per cent jobless rate.

Meanwhile, GM is turning an impressive profit in its Asia-Pacific and Latin American markets. Buick is something of a dead brand in North America, as GM design czar Bob Lutz acknowledged a few years ago. But in China and Japan, Buick is a sought-after status symbol.

GM is solidly entrenched in the rapidly-growing Chinese market, where it sold 478,000 vehicles in the third quarter – more than it sold in North America. And Chevrolet has made significant inroads in Russia, expected to be Europe’s fastest-growing market in the next few years, eclipsing Germany.

In the so-called BRIC nations – Brazil, Russia, India and China – GM has powered itself to a 13 per cent market share. Its volume and revenues are climbing in what collectively will be the planet’s highest-growth market in the decades to come.

GM’s steep losses earlier this decade in continental Europe have narrowed considerably over the summer. GM’s Opel brand benefited greatly from European "Cash for Clunkers" programs.

In an ironic twist, better-engineered GM models with curb appeal for Canada and the U.S. were in the pipeline when GM was hitting the wall last year. The government bailout has made it possible for GM to get those vehicles onto the market.

GM hits with auto critics and buyers include the Chevy Equinox SUV, the Chev Malibu, the Buick LaCrosse full-size sedan and the Chev Camaro retro muscle car assembled in Oshawa. The Chevy Cruze compact, due next fall, is GM’s make-or-break entry in what will be the fastest-growing market segment over the next few years.

Not being forced to sell Opel, which GM has owned since 1929, to a Magna-led consortium has been a blessing.

"It would have made everything a lot harder," said Mark Reuss, GM’s new head of global engineering, of the prospective loss of Opel. "I’m really happy that we’re keeping it."

Opel has been key to many of GM’s most promising current models.

The Buick LaCrosse, the first "agile" quasi-land yacht offered by Buick maybe since David Buick was still drawing breath, is a rebranded Opel Insignia, voted by auto critics the European Car of the Year. The Opel-designed Buick Regal for next fall will be the brand’s first credible sports sedan.

Opel styling and engineering are also behind the bestselling Malibu and the forthcoming Cruise. The dull, ultrasafe GM styling of previous decades has given way in GM’s most successful models to the pleasing angularity of Mercedes, BMW and Audi.

But of course there are lingering problems from the GM of old. Product is everything in GM’s bid for survival. But GM’s product line is spotty payday loans guaranteed no fax. One of the reasons the above models stand out is that too little of GM’s output has been overhauled. By contrast, Ford will have replaced its entire lineup by 2011. GM’s crosstown rival already has a jump on GM’s Cruise, for instance, with an all-new Focus and a critically acclaimed Fiesta coming soon.

The battleground for global automakers next century will be small cars boasting advanced fuel-economy technology. And here GM remains behind the curve, having unduly put most of its chips on an overhyped Chev Volt. The Volt’s technology isn’t proven, and it will bear too steep a sticker price for its small size. It also won’t reach the market until after an abundance of better-value rivals have hit the showrooms, including the Fiat small-car flagship 500 due in Chrysler showrooms next year.

GM needs to use its formidable, post-bankruptcy cash horde of $42.6 billion (U.S.) not on premature loan repayments, but on two things only: developing still more must-have products, and marketing the heck out of them.

To pick an example of sorry GM marketing, GM Oshawa is routinely at or near the top of the North American factory rankings in quality and productivity. GM could shoot a commercial around that. Buick, which commands a pathetic 3 per cent of the North American market, has been running a close second to Lexus in J.D. Power’s quality rankings for several years, with BMW and Porsche languishing in the middle of the pack.

Yet these winning attributes are GM’s little secret. GM, perhaps out of misplaced pride, is averse to sharing its compelling story with the buying public.

But the biggest worry is GM’s continued obsession with market share. Maintaining market share is pointless if, like GM in North America for the past decade, you’ve been losing money on almost every vehicle you make.

In announcing its financial results last Monday, GM bragged about reclaiming market share. What GM needs to do is emulate Ford’s discipline in aiming to make a profit on every single vehicle, even if that means surrendering market share. Apple made more money in the third quarter with 2.5 per cent of the global cellphone market than Nokia did with its 35-per-cent share.

Apple’s iPhone is a must-have product and with high profit margins to match. GM has hit that sweet spot with its Camaro, and must work to achieve that status for everything it puts on the market.

"GM’s old management often seemed eager to blame their problems on just about anything — the economy, exchange rates, gas prices – except the deficiencies in their product lineup," veteran auto observer John Rosevear wrote in response to last Monday’s good news out of Detroit headquarters. "Have they really transcended that mindset?"

A much smaller but assuredly successful new GM was the object of the exercise in Washington’s decision to provide GM a second chance. It’s not clear GM understands that.

Absent the dramatic culture change of which GM critics have always thought "the General" incapable, the firm’s nascent recovery will be short-lived.

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