Friday, July 25, 2008

Why millions of people may be just 11 days from financial ruin

Unemployment could soar to 2.5m over the next two years

Unemployment could soar to 2.5m over the next two years

More than a third of adults could survive financially for only 11 days if they were to lose their job or be too ill to work, according to a survey.

The finding gives a worrying insight into the lives of millions who are living on a financial tightrope.

Researchers looked at how much people spend every month and how much they have in savings.

It found a massive gap between the two, which means most would be crippled by a sudden change in their circumstances.

The research involved interviews with more than 2,000 adults about their typical weekly spending and their accessible savings, which excludes pension.

It found the average weekly spend is £333.56 including essentials, such as council tax, luxuries, such as eating out, and debt repayments.

But a shocking 36 per cent of people have less than £500 in savings to use in an emergency.

As a result, they could survive for just 11 days before their finances would implode.

On average, women would be much less well prepared to cope than men.

Tanya Jackson of Yorkshire Building Society, which carried out the research, said: 'In the current economic climate, this research paints an extremely alarming picture.

'Many people's finances are already finely balanced due to the rising cost of living.

'But our research reveals that both state benefits and savings are not viable options for the majority of consumers to rely upon for any adequate length of time.'

The findings come as the likelihood of people losing their jobs is rising as bosses seek to cope with the economic downturn. Economists believe unemployment-could rise from 1.6million to 2.5million over the next two years.

On Wednesday, the Bank of England said it has found evidence of bosses starting to freeze or cut back on recruiting staff to reduce costs.

Overall, the research from Yorkshire Building Society found that a typical person could survive for 52 days before hitting financial disaster.

They have monthly outgoings of £1,445 but savings of only £2,474, excluding any money tied up in a pension fund.

Few have any insurance to protect themselves against the sudden financial shock of losing their job or becoming ill.

In fact, the research found they are more likely to have insurance which will pay out if they die than insurance to cover becoming ill or unemployed.

The report said: 'The majority are therefore better prepared for their own death, than if they were unable to work due to illness.'

One in five people said they had 'no idea' how they would cope if they were suddenly unable to work.

Some said they would sell their home if they needed to get money quickly, but this is no longer a practical option.

The number of homes which are finding a buyer has halved over the past year, with many sellers forced to wait or slash their asking price.

The Association of British Insurers has urged the Government to introduce incentives to persuade people to improve their financial security.

These include increasing the tax-free ISA savings allowance to £9,600 and promoting longterm investments rather than cash deposit accounts.

The ABI said the average household had run up unsecured debts of £21,000, with people owing a further £102,000 on their mortgage.

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Recessions and black America

CNN's Stephanie Elam examines the impact of a recession on blacks in the U.S.
CNN's Stephanie Elam examines the impact of a recession on blacks in the U.S.
Stephanie Elam
CNN Business News Correspondent

When I set out to do a story on the effect recessions have on black Americans, I was prepared for some dire statistics. I wasn’t pleasantly surprised. Here’s my biggest takeaway: as the unemployment rate increases for the population overall in a recession, the increase among blacks is roughly double. And when a recession hits, blacks take longer to regain employment after the economy recovers.

As if that isn’t bad enough, it was what I learned about younger black Americans that really left an impact. According to John Schmitt of the Center for Economic and Policy Research, the unemployment rate for black teens is about twice that of white teens. In the recession that lasted from 1980 into 1982 – the black teen unemployment rate skyrocketed to 50 percent.

If young people can’t get a job, their future prospects are greatly limited. As Schmitt put it, people in this situation can languish in unemployment or low-wage jobs that don’t help build a foundation for future wage increases or better opportunities. The teenage unemployment rate for blacks is a huge indicator of the future.

No doubt there are several reasons for the disparity. For one thing, while the number of college-educated blacks continues to grow there is still a larger group that has a high school diploma or less. That’s the demographic that tends to suffer the most during a recession. Another problem is a decline in manufacturing jobs. In fact, most of the black American middle-class built its wealth through manufacturing and union jobs held in the fifties, sixties and seventies. At the end of the seventies, a quarter of black workers had manufacturing jobs. Today, that statistic is down to 10 percent.

A lot of the headlines at CNN are about Issue #1 – the economy – but it seems for many blacks in America the headline is even more specific: Jobs Wanted.

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Ford Suffers Record Loss As Oil Shock Hits Industry


DETROIT -- In a fresh sign of the turmoil wrought upon the auto industry by high fuel prices and cratering demand for trucks, Ford Motor Co. reported an $8.7 billion loss for the second quarter and outlined a plan to reorient its North American operations to ramp up production of small cars.

Ford posts an $8.7 billion second-quarter loss and unveils details of a plan to radically alter its North American product portfolio. Jeff Bennett reports. (July 24)

Ford's loss was its largest quarterly setback ever, and it came as Germany's Daimler AG reported a 26% drop in profit in the second quarter and warned of lower earnings for the rest of the year. In France, Renault SA reported a 12% rise in second-quarter earnings but cut its sales outlook for 2009 in light of declining auto sales in Europe. General Motors Corp., Ford's cross-town rival, is expected to report a substantial loss of its own in the next few weeks.

On top of the troubles in the U.S and weakening auto sales in Europe, auto makers now also face moderating growth in China, whose booming car market has helped offset manufacturers' difficulties in mature markets.

Ford, which in the U.S. is being hit by declining vehicles sales and a sudden consumer shift to small cars, is "in a stress period right now," Chief Financial Officer Don Leclair said in an interview.

[Cheat Sheets]
What to expect from other major companies -- including analyst forecasts for profit and revenue -- as they report quarterly earnings.

The bulk of Ford's loss stemmed from $5.3 billion in non-cash charges reflecting the drop in value of plants and equipment for making trucks. It also took an additional write-down of $2.1 billion to cover unprofitable auto leases made by its credit arm. Worries about more big losses in the quarters to come and their impact on Ford's cash levels sparked a selloff in the stock. In 4 p.m. composite trading on the New York Stock Exchange, Ford was down 15% at $5.11. GM shares tumbled 11% to $13.

Both Ford and GM have been slammed by rising gasoline prices and a steep decline in sales of trucks, which generate most of their revenue in North America.

As expected, Ford also said it will retool three North American truck plants to make small cars that it now makes and sells in Europe. By 2012, the company expects to have six European car models in the U.S. market, in hopes of winning over the rising number of Americans who are flocking to fuel-efficient cars and spurning pickup trucks and sport-utility vehicles.

[Ford is furiously slashing costs and shifting capacity to passenger-car production in light of the harsh realities of the U.S. market. ]
Associated Press
Ford is furiously slashing costs and shifting capacity to passenger-car production in light of the harsh realities of the U.S. market.

The plan amounts to a gamble that small cars can save a company whose business has long been based on trucks. And it comes with two big risks: Will Ford have enough cash to keep going until the new European models arrive, and will it sell enough of those vehicles to make healthy profits?

Liquidity is a critical issue. In the first half of the year, Ford used up $8 billion in cash, leaving its gross cash reserves at $26.6 billion.

Mr. Leclair, the CFO, noted that overhauling a single truck plant could cost $250 million. But he said he's confident the company will have enough money to carry out its strategy. About $4.5 billion of the cash Ford has used so far this year represented a one-time payment to a trust fund that the United Auto Workers will manage and use to cover the cost of retiree health care in the future. Ford also paid $1.6 billion to its credit arm, and expects those payments to decline in the future, Mr. Leclair said.

"We feel as if we're well-positioned on cash and liquidity," Mr. Leclair said.

In response to escalating gas prices, Ford Motor plans to transform three North American truck plants to build small cars developed originally for European markets. WSJ's Matt Dolan discusses the plan with colleague John Stoll. (July 22)

Chief Executive Alan Mulally said Ford is confident its European small cars will sell well in the U.S., even though several past efforts to bring European models over here have flopped. "We know what success looks like. We have dynamite cars and [small SUVs]," in Europe, he said. "And we make a reasonable return on them." Ford's European operations posted a pretax profit of $582 million in the second quarter.

He also argued that Americans are now more accepting of the kinds of small cars that sell well in Europe, now that U.S. gas prices have climbed to more the $4 a gallon.

Ford said it expects its U.S. market share to drop to just below 14%. It was 14.7% in the first half of the year.

Wall Street analysts had generally predicted a smaller loss. But some said Ford appears to be moving faster than GM to change its strategy.

GM last week said it would cut costs by $10 billion, but gave few details, such as the number of jobs it will cut. GM hasn't announced any accelerated plans to bring small cars from its overseas operations to the U.S.

Ford has been "quicker to evolve their product strategy toward cars," said Brian Johnson, an auto analyst with Lehman Brothers Inc.


The four main European cars Ford will bring to the U.S. won't hit American roads until 2010, indicating the company may endure about two more lean years. It will get a boost when its updated F-150 pickup truck is launched in the fall, and it will have gas-electric hybrid versions of its Ford Fusion and Mercury Milan sedans to offer next year. It is also introducing new engines that will improve the fuel-efficiency of its current vehicles.

Mr. Mulally declined to give a precise earnings outlook, saying the environment is "very volatile." Ford's losses totaled $15.3 billion for 2006 and 2007, and the company recently abandoned its pledge to return to profitability in 2009.

Ford plans to retool truck plants in Wayne, Mich., Louisville, Ky., and Cuautitlán, Mexico, to make small cars. The first European model, the Fiesta subcompact, will be made in Mexico and arrive in showrooms in early 2010. It will be followed later in that year by a new Focus compact, a small car for the Mercury brand and another small vehicle in a new segment of the market.

"The plan is a good one, but it places a premium on execution," Calyon Securities analyst Mark Warnsman said, noting that Ford has had a somewhat troubled history in its efforts to convince the U.S. public to buy its European-styled vehicles.

In the second quarter, Ford's revenue fell to $38.6 billion, from $44.2 billion a year ago, as declining sales in North America offset sales growth in Europe, Asia and South America.

Its North American automotive business had a pretax loss of $1.3 billion. Ford Motor Credit had a pretax loss of $334 million, compared with a profit of $105 million a year ago, as a result of higher depreciation expenses for leased vehicles and higher provisions for credit losses.

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Haverstraw family rents home with no water since May

The owner of 55 New Main St. in Haverstraw has been cited by the Health Department for violations, including having no running water.

The owner of 55 New Main St. in Haverstraw has been cited by the Health Department for violations, including having no running water. (Kathy Gardner/The Journal News)

HAVERSTRAW -A village woman and her children have been living in a rental house under foreclosure that hasn't had water since May, health inspectors said yesterday.

Officials from the Rockland Department of Health have been trying to contact the owner of 55 New Main St. for months.

Rockland officials tried to serve owner Charles Polanco with legal papers at a residence in Florida where he said he lived.

"But that house had been foreclosed on, too," housing inspector Tim Hekl told the Board of Health yesterday.

County officials went to court in June to ask a judge to order the two families renting the two-story brick house in the heart of Haverstraw's downtown to leave the residence.

After the water was turned off in May, one tenant left. But the other tenant told state Supreme Court Justice Margaret Garvey that she had no other place to go and needed time to make other plans, inspectors told the Board of Health.

The front yard of the house is strewn with overgrown weeds and garbage, including empty shoe boxes and Pepsi bottles.

A teenage girl answering the door yesterday declined to identify herself. But she said the home has had no water, and she has gone to a family member's home when she needs water, including using a toilet. At least one of the rooms of the apartment was air-conditioned. A younger boy was also in the apartment. He came out to the door to ask if he could use the phone the girl had in her hand.

The girl said she and her family would be moving out of the apartment very soon.

The mother was not available yesterday, and it could not be determined if she was still paying rent to the landlord.

The house is bordered on both sides by well-maintained buildings. Former Haverstraw Trustee Angelo Cintron lives in one of them.

Cintron said he didn't know anything about the family next door, adding that he believed that both apartments in the building were vacated about three weeks ago.

"There were a bunch of people sitting outside all the time," Cintron said. "They didn't make friends with anybody as far as I know."

Cintron said that when he moved into his house in 1978, the owner of the next-door building lived there. But since the owner sold the house and moved, the property had changed hands a number of times.

"People who bought it rented the whole place," Cintron said. "They did nothing to fix the house. The house is a mess."

Garvey, the justice, had told the county that she was adjourning the matter until July 7, but when county officials went to court July 7, they were told that Garvey was on vacation, the officials told the board.

When Garvey returned, they showed her that the court transcript showed that she had adjourned the case until July 7.

The justice then ordered all parties to appear in court Aug. 12.

"Is she aware that people are living with no water?" board member Jeffrey Oppenheim asked Hekl.

Hekl said he had made the justice aware of the situation.

Public health law prohibits anyone living in a home without drinkable water.

Hekl said the tenant -a woman with her three children, ages 20, 14 and 9 -has not been very cooperative with housing inspectors.

No one has been able to locate Polanco, who also has an address in the Bronx. Yesterday, the board assessed a $6,000 fine against him for failing to provide water to the home and for failing to clean garbage from the property.

A bank is in the process of foreclosing on the home, but it is still owned by Polanco.

County officials will ask Garvey again Aug. 12 to order the home vacated.

Reach Jane Lerner at or 845-578-2458.

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Hole in Qantas jet forces emergency landing

(CNN) -- A Qantas flight from Hong Kong to Melbourne made an emergency landing in the Philippines on Friday after a hole appeared in the fuselage and the cabin lost pressure suddenly.

Qantas pilot Captain John Francis Bartels looks at the damaged fuselage in Manila, Philippines.

Qantas pilot Captain John Francis Bartels looks at the damaged fuselage in Manila, Philippines.

An inspection revealed a hole in the Boeing 747-400's fuselage, and initial reports indicated that a section of the fuselage had separated in the area of the forward cargo compartment, the Australian Transport Safety Bureau (ATSB) said in a written statement.

"There was an almighty crack," one passenger said. "We dropped a bit in the air, but other than that it was fine." The Associated Press reported that the plane was at 29,000 feet when the incident happened before descending to 10,000 feet.

"There was a big bang," said another. "I knew there was a hole somewhere, but I didn't know what was going on."

Marina Scaffidi, 39, from Melbourne, told The Associated Press: "There was wind swirling around the plane and some condensation."

She said a hole extended from the cargo hold into the passenger cabin.

Michael Rahill, 57, an architect from Melbourne, told AP the bang sounded "like a tire exploding, but more violently."

Images of the Boeing 747-400 after it landed showed a large hole where the leading edge of the wing attaches to the fuselage.

Manila International Airport Authority spokesman Octavio Lina said there were no injuries, but some of the 345 passengers vomited after disembarking, AP reported. Video of the incident shows passengers applauding as the plane landed safely.

Qantas said the hole, which was between 2.5 to three meters in diameter, was being inspected by engineers.

A report by the airport authority quoted pilot John Francis Bartels as saying an initial investigation indicated there was an "explosive decompression."

Lina said the cabin's floor gave way, exposing some of the cargo beneath and part of the ceiling collapsed, AP reported.

The flight originated in London. It was diverted to Manila International Airport, where it landed around 11:15 a.m. (11:15 p.m. ET Thursday.)

There were no reports of injuries among the 346 passengers and 19 crew, the airline said in a statement. Oxygen masks were deployed during the emergency

Passengers said their ears popped because of the plane's rapid descent to a lower altitude.

The Australian Transportation Safety Bureau and the Civil Aviation Safety Authority have been notified and plan to investigate, according to Geoff Dixon, Qantas CEO.

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Randy Pausch, noted CMU prof, succumbs to cancer

Randy Pausch, the Carnegie Mellon University computer science professor whose final lecture inspired millions, died early today in Virginia of pancreatic cancer.

Dr. Pausch, 47, who turned the lecture into a book, said that no one would have been interested in his words of wisdom were he not a man in his 40s with a terminal illness, leaving behind a wife and three young children.

According to Dr. Pausch's Web site, a biopsy last week revealed that the cancer had progressed further than expected, based on recent PETscans.

"Since last week, Randy has also taken a step down and is much sicker than he had been," the Web site said. "He's now enrolled in hospice. He's no longer able to post here so I'm a friend posting on his behalf because we know that many folks are watching this space for updates."

Last fall, Dr. Pausch delivered the lecture at CMU, which still posts it on its Web site. The lecture has attracted more than six million viewers.

In the year preceding the lecture, he had gone through rounds of chemotherapy and radiation, but refused to give in to morbidity or self-pity. Instead of focusing on the cancer, he talked about how to fulfill childhood dreams and the lessons he learned on his life's journey.

In his 10 years at CMU, he helped found the Entertainment Technology Center, established an annual virtual reality contest and helped start the Alice program, an animation-based curriculum for teaching high school and college students.

After the lecture, he moved to Chesapeake, Va., to spend his remaining time with his wife, children and family.

Steve Seabolt, a vice president at video-game maker Electronic Arts and one of Dr. Pausch's best friends, was with him when he died at 4 a.m. today. Dr. Pausch was lucid until near the end, he said, and even went up and down the steps a couple times at home yesterday, "although he had minimal energy."

Dr. Pausch had stopped taking chemotherapy in recent weeks but was investigating a possible vaccine therapy up until the end of his life, Mr. Seabolt said.

"Randy had an enormous and lasting impact on Carnegie Mellon," said university President Jared L. Cohon. "He was a brilliant researcher and gifted teacher. His love of teaching, his sense of fun and his brilliance came together in the Alice project, which teaches students computer programming while enabling them to do something fun -- making animated movies and games. Carnegie Mellon -- and the world -- are better places for having had Randy Pausch in them."

With the help of Wall Street Journal columnist Jeffrey Zaslow, Dr. Pausch wrote a book, "The Last Lecture," which was published earlier this year and has now been translated into 30 languages. He elaborated on his lecture and emphasized the value he placed on hard work and learning from criticism. His words were intended as a legacy for his young children.

In May, Dr. Pausch spoke at the Carnegie Mellon University commencement. He said a friend recently told him he was "beating the [Grim] Reaper" because it's now been nine months since his doctor told him he would die in six.

"But we don't beat the Reaper by living longer. We beat the Reaper by living well," said Dr. Pausch, who urged the graduates to find and pursue their passion. He put an exclamation point at the end of his remarks by kissing his wife, Jai, and carrying her off stage.

Mr. Zaslow said the commencement was the last time he saw Dr. Pausch. He recalled that Dr. Pausch was weak enough from his cancer that he had to lie down on a couch before and after his appearance, but as he often did, he mustered his energy for the public appearance, "and he was excited and happy."

Mr. Zaslow said he had become obsessed with Googling Dr. Pausch's name each day on the Internet to see how many new Web sites were devoted to him. In an e-mail exchange they had about a month ago, Dr. Pausch "said to me, 'Will you stop Googling me and go hug your kids?' So I did."

In addition to his wife, Dr. Pausch is survived by his children, Dylan, Logan and Chloe. Also surviving are his mother, Virginia Pausch of Columbia, Md., and a sister, Tamara Mason of Lynchburg, Va. The family plans a private burial in Virginia. A campus memorial service is being planned. Details will be announced at a later date. In September, Carnegie Mellon announced a plan to honor Dr. Pausch's memory and his work as "a tireless advocate and enabler of collaboration between artistic and technical faculty members." CMU is to build the Randy Pausch Memorial Footbridge, which will connect the Gates Center for Computer Science, now under construction, with an adjacent arts building.

The family requests that donations on his behalf be directed to the Pancreatic Cancer Action Network, 2141 Rosecrans Ave., Suite 7000, El Segundo, Calif. 90245, or to Carnegie Mellon's Randy Pausch Memorial Fund, which primarily supports the university's continued work on the Alice project.

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US to help upgrade Pakistan fighter fleet

A US Air Force F-16. The White House confirmed Thursday that it wants to shift 230 million dollars in aid to Pakistan from counter-terrorism programs to upgrading Islamabad's ageing F-16 fighter jets.(AFP/USAF-HO/File)
AFP/USAF-HO/File Photo: A US Air Force F-16. The White House confirmed Thursday that it wants to shift...

WASHINGTON (AFP) - The White House confirmed Thursday that it wants to shift 230 million dollars in aid to Pakistan from counter-terrorism programs to upgrading Islamabad's ageing F-16 fighter jets.

The news came as US President George W. Bush prepared to host Pakistan Prime Minister Yousuf Raza Gilani on Monday for talks set to focus on cooperation to fight Taliban and Al-Qaeda extremists and Pakistan-Afghanistan tensions.

White House spokeswoman Dana Perino said a New York Times article detailing the shift was "accurate," but rejected criticism that Pakistan chiefly views the jets through the lens of its nuclear rivalry with neighbor India.

"The F-16s that they have are used in counter-terrorism operations. We made them available to the Pakistanis and they need to be maintained," Perino told reporters.

Pakistan's new government "is facing a lot of pressure from a severe fiscal situation" stemming partly from soaring food and energy costs, and "they need assistance from the United States," the spokeswoman said.

But the Times reported that some US lawmakers have greeted the proposed shift with anger and may seek to block it, saying that Pakistan does not use its F-16s in support of the campaign against fighters in its remote tribal areas out of a fear that civilian casualties could fuel support for extremists.

Asked what the United States would get in return for the move, Perino replied: "The F-16s are used in their counter-terrorism operations, so we get support in our national security efforts."

The package for the fighters would run about two-thirds of the 300 million dollars that Pakistan will get this year in US aid for military equipment and training, the Times said.

In 2007, US lawmakers specified that the monies should to go to law enforcement or counter-terrorism.

At the US State Department, spokesman Gonzalo Gallegos said the money would go to improving the jets' radars, communications, targeting systems, giving them real-time intelligence and enabling them to operate effectively at night.

"The bottom line here is that we've shifted money to help the democratically elected government of Pakistan to fight a common foe, a common enemy that we have," Gallegos told reporters.

The move came with Gilani expected to face searching questions about his fledgling government's commitment to battling Islamist extremists, particularly in the remote tribal areas along Afghanistan's border, where terrorist mastermind Osama bin Laden is thought to be hiding.

Bush said earlier this month that he was "troubled" by the movement of extremists from Pakistan to Afghanistan and would discuss the threat with Gilani when he visits.

US military commanders have reported a 40 percent rise in militant attacks on parts of eastern Afghanistan since Pakistan's new government launched peace talks with Taliban rebels in the tribal belt.

Legislation was introduced in the US Congress on July 15 proposing non-military aid to Pakistan be tripled to 7.5 billion dollars over five years, but linking security aid to counter-terrorism performance.

Washington has already pledged 750 million dollars in development aid to the tribal areas over the next five years, in addition to the 10 billion in military aid it has channelled to Islamabad since 2001.

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