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Boston Finance News – Automotive – Final Cash for Clunkers Weekend

Boston Money — Tue, 25 Aug 2009 00:15:12 +0000

Monday, August 24, 2009

Final weekend of clunkers program draws big crowds

EMILY FREDRIX / AP Business Writer

From Vermont to California, exhausted but appreciative car dealers watched their lots grow empty as crowds rushed to trade in gas guzzlers during the final weekend of the popular Cash for Clunkers program.

The hectic pace of the $3 billion rebate program accelerated in the final weekend, after the government announced the program would end at 8 p.m. EDT Monday, two weeks earlier than expected.

Adding to the urgency, some dealers had said they would stop Cash for Clunkers sales even earlier to make sure the government reimbursed them for the rebates — or because they didn’t have enough eligible cars left.

In the final hours, customers streamed in.

“We thought about it a couple weeks ago,” said Annette Palmer, 51, at Town and Country Honda in Berlin, Vt., on Saturday with her husband. They hoped to trade in a 1999 Jeep Grand Cherokee for a Honda CR-V.

“We kind of dragged our feet. Then we heard it was closing and we picked up our feet and ran,” she said.

Though short of some new models, such as the Ford Focus, Honda Civic, Toyota Corolla and Nissan Altima, many dealers were still selling as many cars as they could before Monday night’s deadline.

Standing outside one of his Hyundai dealerships in Appleton, Wis., John Bergstrom said customers traded in 100 clunkers throughout his fleet of 20 dealerships on Saturday and 100 the day before. They were his two biggest sales days during the clunkers program.

“That’s about as good as it gets,” Bergstrom said. “It’s going out with a bang.”

In all, Bergstrom said his dealerships — whose brands include Ford, GM and Toyota — sold 800 cars during the program, boosting sales 30 percent. He had to bring in extra staff to deal with the paperwork, but the sales were worth the hassle, Bergstrom said.

At Universal City Nissan in Los Angeles, Alberto Vasquez said keeping up with the pace of the program has taken a toll on employees. Some labored past midnight to wrap up last-minute deals.

“Are we tired? Definitely,” said Vasquez, the dealership’s director of training. “But it’s also bittersweet, because we’re happy that we’re selling cars.”

The dealership has sold more than 700 vehicles through the program and brought in extra staff to help enter information on the government’s reimbursement Web site.

Cash for Clunkers has been wildly successful in spurring new-car sales and getting gas-guzzling models off the road, though some energy experts have said the pollution reduction is too small to be cost-effective. Customers receive rebates of between $3,500 and $4,500, depending on the improvement in fuel efficiency from their old vehicle to their new one. As of early Friday, nearly half a million cars had been sold through the program.

But the new sales left many dealers worried about not being reimbursed by the government. As of Friday, dealers had been reimbursed for just a small fraction of the billions in sales.

Some dealers chose to stop participating over the weekend so they could have enough time to process and file the paperwork, including AutoNation Inc., the nation’s largest auto dealership chain.

At Toyota Direct in Columbus, Ohio, employees were told to double- and triple-check paperwork so it wouldn’t be rejected for reimbursement, said Jim Collins, the dealership’s assistant general manager.

Sales picked up on Saturday, though the dealership had only 20 new cars eligible for sale under the program. Sales employees sometimes jogged paperwork into the manager’s office to keep up with the pace.

The dealership won’t take any new sales on Monday so it can be assured of reimbursements, Collins said.

“We have quite a bit of paperwork, but is it worth the selling of a car right now? Absolutely,” he said. “We like to sell cars. That’s what we’re in business to do.”

Martin Main Line Honda in the Philadelphia suburb of Ardmore stopped its Cash for Clunkers sales at noon on Saturday. But by late afternoon there were still groups of people wandering the lot.

General sales manager Michael Freeman said the program had been “overwhelming,” with 115 clunker sales and big surges in customer traffic at the start and now at the end. He’s aiming to get the final stack of paperwork filed before Monday’s deadline.

“I have people upstairs, that’s all they’re doing — paperwork,” he said. “The backlog is a nightmare, and it’s starting to be a nightmare at the end.”

Customers were feeling the urgency, too.

In Appleton, Wis., April DeKeyser looked at her new Mazda 3 2010 and still had trouble accepting that it was hers.

The 22-year-old nurse from Brussels, Wis., had wanted to trade in her Chevy S10 truck as soon as the clunkers program began. But she had a hard time finding the car she wanted and had to run to numerous dealers.

DeKeyser said she knew she had to get the rebate this weekend. Without it, she wouldn’t have bought her new car.

“I would have waited,” she said. “Basically, I would have driven the other vehicle until it died.”

——

Associated Press writers Alex Veiga in Los Angeles, Andrew Welsh-Huggins in Columbus, Ohio, Ron Todt in Philadelphia and David Gram in Berlin, Vt., contributed to this report.

Find this article at:

http://www.detnews.com/article/20090824/AUTO01/908240319/Final-weekend-of-clunkers-program-draws-big-crowds

Boston Financial – JetBlue & Southwest Faceoff

Boston Money — Mon, 17 Aug 2009 16:26:08 +0000

Beantown showdown: JetBlue and Southwest face off

By SAMANTHA BOMKAMP (AP)

Article Courtesy of: Associated Press

NEW YORK — The cool kids of the airline industry are giving big-city travelers more opportunities to show who they like more.

For years, JetBlue and Southwest catered to customers in the same way — with cheap fares and good customer service — but avoided much head-to-head competition in major markets. These days, they are trying to distinguish themselves as they ramp-up competition in places like New York, Washington, Baltimore — and starting this weekend, Boston.

Fliers stand to benefit as these airlines expand in the Northeast. This rivalry not only pits one popular low-cost carrier against another; it puts further pressure on other airlines to stay competitive with them.

It also means JetBlue and Southwest must find ways to differentiate themselves. Southwest is touting its fewer baggage fees and more extensive nationwide presence, while JetBlue is highlighting its live TV service and its own comprehensive route system.

Just over a month after Southwest began flying out of New York’s LaGuardia — eight miles from JetBlue’s base at John F. Kennedy International — Southwest begins service on Sunday from Boston’s Logan International Airport. In September, Southwest starts service between Boston and Baltimore.

A few years back, their flights mostly crossed paths in places like Burbank, Calif., and Orlando, Fla.

The move to New York was a game-changer for Southwest. Formerly it concentrated on smaller, less-congested airports, where it could count on quick turnarounds, a key to its low-cost model.

And with Southwest breathing down its neck, JetBlue has had to make a more aggressive defense of its traditional turf, cutting fares and mulling new routes.

Expect to see low fares discounted further on routes where Southwest and JetBlue will compete out of Boston — especially to Northeastern markets, Chicago and Los Angeles.

When Southwest announced it would fly from Boston to Baltimore for as low as $49, JetBlue said a week later it would launch the same route — offering tickets for $10 less.

“It makes me think of gunfighters in the Old West — who is going to be the last man standing?” said Harlan Platt, a finance professor at Northeastern University who follows the airline industry.

Dallas-based Southwest is the biggest U.S. airline by the number passengers flown. JetBlue is tenth, but it’s No. 2 at Logan.

Much of JetBlue’s model of low fares and quick turnarounds came right out of Southwest’s playbook. It’s no wonder. JetBlue founder David Neeleman started JetBlue in 1999 after he was fired from Southwest.

In 1993, Southwest bought a little-known discount charter airline called Morris Air, based in Salt Lake City. Its co-founder — Neeleman — came to Southwest.

But that didn’t last long. Southwest founder Herb Kelleher — a cigarette-smoking, Wild Turkey-drinking Texas lawyer that revolutionized the airline industry in the 1970′s — fired Neeleman after just five months. Neeleman, a Brazilian-born Mormon father of nine who’s never touched booze, had new ideas for expanding Southwest that were scoffed at by long-time executives there.

JetBlue (originally NewAir) was started with $130 million from investors — the most ever for a startup carrier. Neeleman attracted several Southwest executives to the new airline as well. Three Southwest veterans are with JetBlue today. One worked with Neeleman since his days at Morris Air.

JetBlue started with a single flight to Fort Lauderdale, Fla. It now has 650 daily flights to 56 cities. Its rapid growth has now started to plateau, but JetBlue is still steadily adding new service in markets larger carriers have turned away from — like the Caribbean.

JetBlue has been in Boston for five years, although it’s only recently targeted the city as a focus of its expanding operations.

Southwest will start Boston service with five weekday nonstops to Chicago-Midway and Baltimore-Washington International, with connecting and direct service to 48 other spots including Houston, San Francisco, Las Vegas and Los Angeles.

Boston is familiar with Southwest because of its service in nearby Manchester, N.H., Providence, R.I., and Hartford, Conn. — three markets it has been serving for about a decade.

Both carriers’ low fares and brand loyalty should give them a leg up against major carriers in Boston. It’s already worked for JetBlue. The airline has worked its way up to second place at Logan in passenger traffic, behind American and ahead of US Airways, which operates a Boston-New York and Boston-Washington shuttle service.

“When you enter a town the size of Boston as really the sole low-cost carrier (like JetBlue did), you really can pick off a lot of the legacy carriers,” finance professor Platt said. “But when the last two gunfighters are JetBlue and Southwest, you’ve got another game.”

Platt thinks Southwest eventually will win the discount competition with JetBlue in Boston because of its large network and image as an anti-fee airline with ads that say “Your Bags Fly Free.” Southwest lets two bags fly free, but charges for a third checked bag. JetBlue charges for the second checked bag.

JetBlue wants more business travelers, as does Southwest, which has tried to lure them with its “Business Select” option launched two years ago. Passengers that pay a premium can go to the front of the boarding line. Neither airline offers business or first class seats.

JetBlue said in July that although it has not focused on courting business travelers in the past, it’s landing more of them in New York and Boston as companies cut travel budgets.

Because of their cheap fares and high customer service rankings, both airlines have legions of loyal travelers. Part of that loyalty can also be traced to fresh marketing that tries to put some fun in flying. JetBlue’s tongue-in-cheek ads have urged executives to get off their private jets and fly JetBlue. In Southwest TV ads, CEO Gary Kelly told customers “It’s On” in New York.

Both airlines are on YouTube. Blogs and Twitter are also important parts of their brands.

Kelleher and Neeleman no longer run the airlines they started. Kelleher, 78, stepped down as chairman last year, but he is still under contract until 2013. Neeleman, 49, runs Azul Airlines in Brazil — a venture he started after he was pushed out of JetBlue in 2007 following the company’s bungled response to a Northeast snowstorm, leaving 130,000 passengers stranded or delayed.

But the airlines they started still have the low-cost, passenger-savvy traits of their founders. Both have flown farther and lasted longer than some of their larger competitors. Platt thinks the big airlines may have something to worry about now in Boston — and JetBlue will have to ramp up its game, too.

“Boston has really been a two-horse town with (two major carriers dominating service there),” he said. “Just the mere presence (of another low-cost carrier) is going to change the landscape.”

Boston Financial – National Health & Mob Rule

Boston Money — Tue, 04 Aug 2009 03:03:12 +0000

‘Yes We Can’ vs. ‘Tell Washington No’:

Public passions seen rising on health care overhaul

Kimberly Hefling

Public passions are rising on health care overhaul

WASHINGTON — Booed, jeered and occasionally cheered in a raucous session with the public, a Democratic senator said Monday that other lawmakers can expect the same as they face voters on the divisive issue of overhauling health care.

“I wouldn’t be surprised if that’s the harbinger of things to come,” Pennsylvania’s Sen. Arlen Specter said a day after facing the rowdy crowd in Philadelphia. A House member who was surrounded by protesters shouting “Just say no!” to Democrats’ health plans in Texas over the weekend accused Republicans of organizing the opposition.

“This mob … did not come just to be heard, but to deny others the right to be heard. And this appears to be part of a coordinated, nationwide effort,” Rep. Lloyd Doggett, D-Texas, said in a statement. “What could be more appropriate for the ‘party of no’ than having its stalwarts drowning out the voices of their neighbors by screaming ‘Just say no!’”

With Congress’ monthlong recess looming, lawmakers are encountering growing public doubts about President Barack Obama’s push to remake the system for providing medical care, evident in polls that find confidence in the president’s handling of the issue has fallen since January.

Turn Your Head and Gag!

The White House is determined to frame the debate on its terms this month and counter fears about government-run insurance plans, a growing federal deficit, the impact on small businesses, abortion and end-of-life provisions — all issues that have dominated the health care debate. Political parties and special interest groups will add to the cacophony by spending millions of dollars on competing ads.

For lawmakers such as Specter and Doggett, the weekend events captured the public mood and the obstacles for the Obama administration.

At Specter’s forum Sunday in Philadelphia, some chanted Obama’s “Yes we can” campaign slogan, while others carried signs that said, “Tell Washington no.”

Specter and Health and Human Services Secretary Kathleen Sebelius faced an antagonistic, standing-room-only crowd at the National Constitution Center. Specter said he thought political organizations orchestrated some of the commotion, but individuals with serious concerns — some in dire medical conditions — were there as well.

“I do think there’s a big concern in America,” Specter said in an interview Monday. “We heard it yesterday about the growing deficit and national debt.”

Specter is a recent Republican-turned-Democrat who indicated earlier this year that he’s open to a government health insurance plan that would compete with private insurers, an idea backed by Obama and many Democrats.

Four of five congressional committees have approved versions of health care bills, but lawmakers fell short of Obama’s deadline for the House and Senate to vote on bills before their August recess. That sets up a September showdown on the legislation and all sides have moved into high gear.

The House has begun its recess, with the Senate to follow on Friday, as lawmakers continue to work on bipartisan legislation.

Frustrated with the pace of those talks, Democratic leaders promised to push a sweeping health care bill through the Senate whether they get Republican support or not.

Sen. Chuck Schumer, D-N.Y., the third-ranking Senate Democrat, raised the prospect of the leadership crafting a bill to Democratic specifications and using a rare legislative procedure to expedite it.

“We will have contingencies in place,” Schumer told reporters on a conference call. “These plans will likely be considered as a last resort, but they are on the table.” He would not elaborate.

After numerous delays, three Democrats and three Republicans on the Senate Finance Committee are facing a Sept. 15 deadline to wrap up secretive talks and come up with a plan.

“If we cannot produce a bipartisan solution by then, you have to wonder if the Republicans will ever to be willing to agree to anything,” Schumer said.

However, one of the negotiators — Republican Sen. Mike Enzi of Wyoming — said Monday he did not recognize such a deadline, and another, Sen. Olympia Snowe, R-Maine, said: “I don’t like deadlines.”

After those objections were voiced, Finance Chairman Max Baucus, D-Mont., said that senators were looking at a target date internally but “the main thing is we got to get it right.” Baucus said a draft bill would be ready by the end of this week.

Senators have plenty of action on the Senate floor this week, including a vote on Judge Sonia Sotomayor’s Supreme Court nomination, but health care is still a focus. Senate Democrats are lunching at the White House Tuesday and will hear from White House adviser David Axelrod and Deputy Chief of Staff Jim Messina at a closed-door session Thursday.

Schumer said Democratic leaders continue to look at invoking a procedural maneuver that would allow them to pass the health bill with 51 votes instead of 60. That route is viewed as a last resort, in part because it would probably limit the breadth of policy initiatives.

On the same call, Sen. Robert Menendez, D-N.J., accused Republican leaders of trying to hinder bipartisan progress to deny Obama a political victory.

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, R-Ky., scoffed at the complaints. He noted that Schumer himself hasn’t committed to supporting whatever the Finance Committee negotiators produce and that other Democrats have also criticized the plan that’s taking shape.

“Seriously, how can any Democrat who doesn’t support what the bipartisan group of Finance members is working on complain about there not being a bipartisan approach?” Stewart asked. “Has Sen. Schumer or anyone in the Democrat leadership offered a bipartisan bill?”

Schumer and many other liberals favor a strong new government-run insurance plan that would compete with private insurers, and all the plans approved so far have included that. But Republicans nearly uniformly oppose a new public plan, saying it would drive private insurers out of business, so the Finance negotiators are looking at a system of nonprofit health co-ops instead.

Schumer said negotiations on the Finance bill were continuing.

“No one’s drawing any lines in the sand right now, but I feel very strongly we need a public option and that fight is continuing,” he said.

Associated Press writer Erica Werner contributed to this report.

Boston Clunkers – Fed is a Wreck

Boston Money — Fri, 31 Jul 2009 08:15:54 +0000

White House reviewing ‘cash for clunkers’ program

By KEN THOMAS, Associated Press Writer Ken Thomas, Associated Press Writer

WASHINGTON – The White House said Thursday it was reviewing what has turned out to be a wildly popular “cash for clunkers” program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.

Transportation Department officials called lawmakers’ offices earlier Thursday to alert them of plans to suspend the program as early as Friday. But a White House official said later the program had not been suspended and officials there were assessing their options.

“We are working tonight to assess the situation facing what is obviously an incredibly popular program,” White House press secretary Robert Gibbs said of the Car Allowance Rebate System. “Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”

Gibbs said the administration was “evaluating all options” to keep the program funded.

A Transportation Department official said the department was working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly about the discussions.

The CARS program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.

Congress last month approved the program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting talk of a possible suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.

Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, said he was worried that the government wouldn’t pay for some of the clunker deals his dealership has signed because they aren’t far enough along in the process.

His dealership has done paperwork on about 20 sales under the clunker program, but in some cases the titles haven’t been obtained yet or the vehicles aren’t yet on his lot.

“There’s no doubt I’m going to get hammered on a deal or two,” Helfman said.

The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.

So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.

“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”

Michigan lawmakers planned to meet on Friday to discuss the program.

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”

___

AP Auto Writer Tom Krisher in Detroit contributed to this report.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Dealers riding clunkers to the bank

Allure of $4,500 boost for trade-in pulls buyers into auto showrooms

Cash for CLUNKERS

By Sean Sposito, Globe Correspondent | July 30, 2009

Massachusetts auto dealers say the new “cash for clunkers’’ voucher program is giving them a much-needed boost in business this week.

The federal promotion – which offers buyers an instant discount of up to $4,500 when a qualifying vehicle is traded in for a new, fuel-efficient model – was rolled out over the weekend, and by yesterday dealers were reporting a jump in sales. Buyers have an additional incentive, too – avoiding the 25 percent increase in the state sales tax that takes effect Saturday.

While there have been complaints that the program is too complicated and won’t ultimately cure automakers’ ills, for now area dealers are just happy to see customers flocking to their showrooms.

“It’s the best week in several years for people in the automotive industry,’’ said Dan Quirk, president of Quirk Auto Dealerships. Quirk said the prospect of shaving thousands of dollars off the price of a car is driving up activity at his 10 showrooms.

Quirk said he usually sells about 1,500 cars a month, but expects to do significantly better in July. “We’ve probably sold 350 just this weekend, 120 through cash for clunkers,’’ he said.

Kevin Haggerty, 60, of Pembroke was shopping at Quirk Chevrolet in Braintree on Monday, hoping to trade in his 1999 Ford F-150, which he estimates is worth around $1,600, as a clunker. The Chevrolet Colorado he was eyeing had already been sold, but Haggerty expects to eventually buy a new car under the voucher program.

“I’m 90 percent sure that I’m going to make a move, unless something is too pricey,’’ he said.

Juan Banos, lead sales manager at Expressway Toyota in Dorchester, said his dealership closed about 30 cash for clunkers deals over the weekend alone. Banos said that even if the program increases monthly sales modestly, he’ll consider it a success.

“An extra 10 to 30 deals, we make at least an average of $1,000 per deal, that’s $30,000 for the dealership just in one weekend,’’ he said. “That could either make it or break it, as far as quotas go.’’

Gregg McCutcheon of Brockton said he was motivated to shop by the promise of cash for clunkers, formally the Car Allowance Rebate System, or CARS. The $1 billion program, which will run through Nov. 1 – or as long as the funds last – allows $3,500 to $4,500 trade-ins on cars that get less than 18 miles per gallon and are less than 25 years old. The money can be applied only toward new cars, and there are other restrictions.

“Cash for clunkers is what got us out here,’’ said McCutcheon, 57, after he bought a car from Mansfield Jeep-Chrysler. But McCutcheon ended up with a 2007 Chrysler Town & Country van instead of a current model.

“I’m 6-foot-6,’’ he said. “The dashboards on the new ones seemed to come out a little bit further, so I picked up a used one.’’

Not buying a new car meant McCutcheon wasn’t eligible for the CARS program, however.

Despite the upbeat moods in showrooms, some dealers said the paperwork associated with the federal program has been overwhelming. Reidar Davies, general sales manager of Prime Honda in West Roxbury, said his dealership has already written more than 40 cash for clunkers deals, but it has required a lot of extra effort.

“The paperwork is extremely, extremely rigorous and demanding,’’ he said. “It requires a ton of data entry.’’

And submitting the deals for government approval online has been painfully slow, Davies said.

Melissa Steffy, general manager at Herb Chambers BMW and Mini in Boston, said sales made with customers over the weekend are just now getting processed online.

“It’s a matrix to put these deals together,’’ Steffy said.

Even signing up to participate in the program was a headache for some dealers. Karen Aldana, a spokeswoman for the National Highway Traffic Safety Administration, said more than 20,000 of the nation’s 25,000 auto dealers have enrolled in the program. But the demand was so high that some dealers could not get onto the agency’s website, she said.

Some local auto industry officials are trying to put the promotion in perspective. With Chrysler merging with Fiat to survive, and General Motors emerging from bankruptcy propped up by $50 billion in taxpayer funds, no one is saying automakers’ troubles are history.

“It’s a $1 billion program and the money will go fast,’’ Quirk said of cash for clunkers. The funding translates to about 225,000 vehicles – just one week of sales across the country.

Sean Sposito can be reached at ssposito@globe.com.

Local Finance – Harvard Endowment Decline

Boston Money — Sun, 26 Jul 2009 00:23:19 +0000

Harvard pres.: School has tough choices in decline

By MELISSA TRUJILLO – 18 hours ago

Courtesy of: Associated Press

Billions of lost endowment dollars later, though, Faust faces a much different reality.

“We can’t have chocolate and vanilla and strawberry. We have to decide which one,” she said.

It’s a question few at Harvard expected Faust to be forced to answer in the infancy of her presidency.

Her appointment in 2007 was hailed as a historic turning point for the 373-year-old university. Faust, then the dean of the Radcliffe Institute for Advanced Study and a Civil War scholar, would be the first woman to step into the country’s most high-profile presidency and appeared perfectly suited to cool tensions within the faculty after the controversial five-year tenure of Lawrence Summers.

She would have the nation’s richest endowment to work with — $34.9 billion in 2007.

But by last fall, the crashing economy began to pull down even the country’s most famous university. Its endowment fell to $28.7 billion, and the university estimated it would drop 30 percent for the fiscal year that ended Tuesday. The steep decline is particularly difficult for Harvard, which gets roughly one-third of its budget from endowment earnings.

Much of Faust’s time now is spent figuring out how Harvard can weather the downturn, through layoffs, early retirement packages, cuts in services, even changes to breakfast menus for undergraduates. She said further reductions in the endowment distribution next year will mean more cuts.

“People say to me often now, ‘This must not be what you expected,’ and my response is that it would be foolish not to expect surprises in a university presidency,” Faust said recently, sitting in her office in Massachusetts Hall.

“I’ve used the metaphor of marriage about this, saying I signed on for sickness or health or richer or poorer. And it’s turned out to be quite a ride,” she said laughing.

Most faculty and students still strongly support Faust, despite a general unease on campus about Harvard’s finances. For many, Faust’s warm and inclusive demeanor remains a welcome change from her predecessor.

Summers, now President Barack Obama’s top economic adviser, was pressured to leave after a series of high-profile clashes with faculty — conflicts that worsened after his comments that innate ability may partly explain why few women reach top science posts.

“I think the crucial issue that undermined his leadership was he was extremely abrasive,” said J. Lorand Matory, a professor of anthropology, African and African American studies now planning a move to Duke in the fall. “He did not display a talent for listening to his fellow administrators.”

Faust cited listening as a key component of her leadership, not an easy task at a university notorious for its segmented colleges, schools and institutes, all with their own management.

“I learn what people are telling me, but I also learn where they are politically, where they need to be moved towards in order to get done what we need to get done,” she said.

Faust says part of her desire to look at all complexities of an issue comes from her background as a historian. Her most recent book, “This Republic of Suffering: Death and the American Civil War,” looked at how the vast numbers of soldiers who lost their lives during the Civil War changed how Americans understood and coped with death. It was a finalist for both the National Book Awards and the Pulitzer Prize for history.

“I think historians understand how we’ve been affected by attitudes and assumptions that have shaped our institutions and our families and our socialization,” she said.

She cited her decision earlier this year to save money by pausing construction of a new $1.2 billion science building, the first phase of a planned 50-year expansion into Boston’s Allston neighborhood across the Charles River from Cambridge. The university is now reviewing how much — if any — of the project to continue.

“It’s a very fraught question. It involves the city, it involves the community, it involves constituencies with totally different interests,” she said. When the decision is made, she said, “I think that people will feel that we’ve really thought it through in a considered and responsible way. Moreover, I will know that we will have thought it through.”

Faust has been criticized, though, for being too cautious at the beginning of the economic crisis and for failing to strongly communicate her vision for a new, leaner Harvard. Anger spread on campus last week, for example, when Faust announced the layoffs of 275 employees.

“Because of this sort of mild demeanor, we’re kind of wondering what’s going to happen,” philosophy professor Warren Goldfarb said. “She hasn’t stepped up and said, ‘This is what we’re going to have to do.’ ”

Added student Andrea Flores, president of the Harvard Undergraduate Council: “I can kind of see where they’re coming from in the sense that I don’t think Harvard is being very forward thinking, but I think that’s because we’re covering things that needed to be addressed in the past.”

Faust said it has been a challenge to keep people focused on the university’s strengths, from its commitment to financial aid for all students who need it to its ability to gather experts from multiple schools and disciplines to tackle large problems like global health or global warming.

“It’s a challenge in this environment to keep people’s eyes on the really important issues that give us all something to believe in,” she said. “I’m thinking a lot about that this summer.”

Regardless of how much anger bubbles on campus over layoffs, budget cuts and faculty reductions, Harvard Law School professor Alan Dershowitz said Faust also has a great deal of goodwill, which should help her weather the economic downturn. Goldfarb and Flores also expressed overall approval for her tenure thus far.

Once the crisis ends, Dershowitz said, Faust will be in position to push her own bold agenda.

“You have to give her time. … Everybody would be thrilled if we end up in a few years not worse than it is today,” she said. “Everyone wants Drew to succeed, everybody is rooting for her.”

Boston Financial – CrossHarbor Capital Partners

Boston Money — Sun, 26 Jul 2009 00:10:57 +0000

Montana resort for elite sold for $115 million

By MATTHEW BROWN (AP) – 1 day ago

BILLINGS, Mont. — Montana’s ultra-posh Yellowstone Club is in new hands, following a $115 million deal that the new owner hopes will close the door on the resort’s much publicized descent into bankruptcy.

Eight months ago, the millionaires-only club was on the verge of liquidation, a victim of its prior owners’ excesses and the broader economic downturn that choked off the flow of money fueling the club’s rise.

On Friday, CrossHarbor Capital Partners of Boston bought the 13,600-acre private ski resort about 50 miles south of Bozeman at what was considered a bargain-basement price.

The firm’s managing partner, Sam Byrne, had offered to buy the club last year for $470 million and had already invested more than $200 million in club real estate over the last several years.

Byrne acknowledged Friday the club’s once-sterling reputation will need some polishing.

“It’s going to take time to win back the trust of members and the community and re-establish the brand,” he said. “We’re confident that the place has a bright future.”

The resort was nearly pulled apart last year during the bitter and high-profile divorce of its founders, Edra and Tim Blixseth. Later came revelations that the pair had drained tens of millions of dollars from the resort, helping push it more than $400 million into debt.

The collapse was extraordinary for an enterprise that counts Microsoft Corp.’s Bill Gates and hotel magnate Barry Sternlicht as members.

Those who are allowed to join must buy real estate with price tags that can top $10 million, and pay a $300,000 deposit. The privacy members thought their money was buying was shattered when the club’s rolls were made public as part of its bankruptcy case.

With the Blixseths now out of the picture — and fighting each other over the remains of a personal fortune once estimated at $1.3 billion — members are looking to Byrne to get the club out of the headlines.

“There’s going to be a massive sigh of relief, a collective sigh of relief,” said Bill Curtis, a club member and the chief executive of CurtCo Media, which publishes the Robb Report, a magazine that caters to the wealthy.

Only about 300 of the club’s more than 800 available memberships have been filled since it opened in 2000. Just three properties changed hands during its months in bankruptcy.

Curtis said Friday’s deal will shake up the market for the club’s property, but he cautioned that the resort isn’t out of rough waters yet.

“If you ask me what the economy’s going to do, it’s going to continue to make it a challenge,” he said. “Nothing’s going to happen overnight.”

Byrne said more than $150 million on top of the purchase price has been pledged to pay for improvements at the resort.

That’s likely to include the club’s 120,000-square-foot centerpiece Warren Miller Lodge — left unfinished despite a reported $100 million investment.

Byrne also said he persuaded a large group of members to put money behind his plans to recapitalize the resort. He declined to offer specifics.

The club will continue to be managed by the Discovery Land Co., brought in last year when Edra Blixseth took over the operation following her divorce.

Tim Blixseth tried to scuttle the deal between his ex-wife and Byrne until the day the sale became final. He has claimed they colluded to drive the resort into a financial hole so Byrne could scoop it up on the cheap.

Those claims were repeatedly rejected by U.S. Bankruptcy Judge Ralph Kirscher in Butte, Mont., and on Thursday he denied Tim Blixseth’s latest effort to block the deal through a court-ordered stay.

In his opinion, Kirscher said the parties in the sale had acted in good faith. He said Tim Blixseth’s “generalized allegations of misconduct” were irrelevant.

He added that the case — which involved more than 100 lawyers and resulted in several spin-off lawsuits that are still being resolved — “was of a magnitude never seen before in this court.”

Obama wants Fed to be finance supercop

Boston Money — Fri, 15 May 2009 22:41:23 +0000

Boston.com
The Associated Press
AP sources: Obama wants Fed to be finance supercop

By Anne Flaherty, Associated Press Writer | May 9, 2009

WASHINGTON –The Federal Reserve could become the supercop for “too big to fail” companies capable of causing another financial meltdown under a proposal being seriously considered by the White House.

The Obama administration told industry officials on Friday that it was leaning toward making such a recommendation, according to officials who attended a private one-hour meeting between President Barack Obama’s economic advisers and representatives from about a dozen banks, hedge funds and other financial groups.

Treasury Secretary Timothy Geithner and other officials made it clear they were not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators. Geithner told the group that one organization needs to be held responsible for monitoring systemwide risk.

“Committees don’t make decisions,” said Geithner, according to one participant.

Officials from the Treasury Department and National Economic Council, which hosted the meeting, told participants that the Fed was considered the most likely candidate for the job, according to several officials who attended or were briefed on the discussions.

The administration officials said a legislative proposal would likely be sent to Capitol Hill in June with the expectation the House Financial Services Committee, led by Rep. Barney Frank, D-Mass., would consider the measure before the Independence Day recess.

The officials requested anonymity because the meeting had not been publicly announced and they were not authorized to discuss it.

A Treasury Department statement provided to The Associated Press on Friday confirmed Geithner’s position that he wants a “single independent regulator with responsibility for systemically important firms and critical payment and settlement systems.”

A spokesman said Geithner also is open to creating a council to “coordinate among the various regulators, including the systemic risk regulator.”

The Fed itself hasn’t taken a position on whether it should have the job, although Chairman Ben Bernanke has said the Fed would have to be involved in any effort to identify and resolve systemwide risk.

New York Times Chairmen – “The Globe’s Fate”

Boston Money — Sun, 26 Apr 2009 05:00:59 +0000

Article Courtesy of Associated Press - CLICK HERE

New York Times chairman weighs in on Boston Globe

By ANDREW VANACORE – 2 days ago

NEW YORK (AP) — Weighing in for the first time on the future of The Boston Globe, New York Times Co. Chairman Arthur Sulzberger Jr. said Thursday he hopes to cut the newspaper’s expenses enough to avoid having to shut it down.

“We hope to place this great newspaper on a path to sustainability,” Sulzberger said at the Times Co. annual shareholder meeting. He batted away specific questions on the Globe’s fate.

The recession — and the advertising downturn that began at many newspapers years before — have pushed the Globe deep into the red. The newspaper had an operating loss of $50 million last year and is on track for a loss of $85 million in 2009.

That has prompted the Times Co., which bought the Globe in 1993, to threaten to pull the plug on the newspaper if it can’t get employee unions to agree to concessions that would cut the company’s annual expenses by $20 million.

“Of all our properties, The Boston Globe has been most dramatically affected by the secular and cyclical forces that are roiling the entire media industry,” Sulzberger said. “More needs to be done to align the Globe’s costs and revenues.”

Times executives have not specified the Globe’s costs or explained how $20 million in concessions can save a newspaper losing more money than that. The Globe’s management this week rejected a proposal from union officials that negotiations be held publicly.

The idea that Boston could lose the 137-year-old newspaper has provoked angry reactions. Employees, union representatives and civic leaders are expected at a rally for the Globe at Fanueil Hall in Boston on Friday afternoon.

Meanwhile, some Times Co. shareholders expressed frustration with the decline in the company’s stock. Shares have fallen from a 2002 peak of over $50 to about $5.

David Norton, the company’s senior vice president for human resources, pointed out that executives are being paid less this year than last, after not having a salary raise in “multiple years.”

In response to a question about whether the Times Co. board had any plans to buy out shareholders, Sulzberger said “we have no plans to take this company private.”

The meeting came two days after the company reported a first-quarter loss of $74.5 million. With advertisers continuing to pull back, revenue dropped 19 percent in the first quarter, and Chief Executive Janet Robinson said the current quarter looks about as bleak.