Kitsap Business and Economy

Daily updates on the local economy, the latest reports and trends that affect us, stories, events and columns. Join the conversation with Kitsap Sun reporter Rachel Pritchett.
Subscribe to RSS
Back to Kitsap Business and Economy

Archive for May, 2009

GM Bankruptcy Expected Monday; Company to Build Compact Cars In U.S.

Friday, May 29th, 2009

DETROIT (AP) — General Motors Corp. said Friday that it plans to reopen a shuttered U.S. factory to build subcompact cars that will be the smallest vehicles GM has ever produced here.

The company said in a written statement that the retooled factory will be able to build 160,000 cars per year. The automaker did not say which factory would be selected or which models it will build.

GM, which is expected to file for Chapter 11 bankruptcy protection Monday, also plans to announce then that it will close 14 more factories, including four assembly plants.

A person briefed on GM’s plans said the small cars would be built at one of the plants to be announced Monday. The person, who requested anonymity because of the sensitive nature of the plans, said GM has not determined which plant will get the new vehicles.

The reopened factory, he said, would create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes the 14 factories by the end of next year.

The automaker had said in documents submitted to Congress that it planned to produce up to 51,000 subcompacts per year in China and ship them to the U.S. starting in 2011, when GM plans to start selling the Chevrolet Spark here. The three-door hatchback with a 1.2-liter turbocharged engine is about the size of a Honda Fit or Toyota Yaris and is set to go on sale in Europe next year.

But in an interview with The Associated Press on Thursday, United Auto Workers President Ron Gettelfinger said GM will not import the cars from China and had agreed as part of a concession deal to build them in the U.S.

“Small cars represent one of the fastest-growing segments in both the U.S. and around the world,” GM CEO Fritz Henderson said in the statement. “We believe this car will be a winner with our current and future customers in the U.S.”

Henderson said the UAW concessions ensure GM’s manufacturing competitiveness in the U.S.

GM already builds the compact Chevrolet Cobalt and Pontiac G5 at a plant in Lordstown, Ohio, and it plans to retool that plant to start making a new small car, the Chevrolet Cruze, next year. It also jointly manufactures the Pontiac Vibe, a rebadged Toyota Matrix, at a factory in Fremont, Calif.

A summary of a concession deal between the UAW and GM deal says an innovative labor agreement is needed for the company to produce small cars in the U.S. But Gettelfinger said that deal is near completion.

“I think basically we’re there,” he said. “There may have to be a few minor tweaks. The agreement that’s in place here is competitive.”

GM’s plan to make the Spark in China and ship it to the U.S. drew criticism from the UAW and some members of Congress as it was negotiating the concession agreement. The plan was a political problem for the company, with the UAW saying it was wrong to take U.S. taxpayer loans and then ship jobs overseas.

GM has received $19.4 billion in federal loans and likely will get another $30 billion from the U.S. government as it makes its way through the bankruptcy court process. The company faces a government-imposed Monday deadline to complete restructuring, but all signs point to Chapter 11.

The person briefed on GM’s plans said the company made the decision to build the small cars in the U.S. with the blessing of the government’s auto task force.

Although GM had planned to import the cars, the cost-cutting UAW agreement and new fuel economy standards that require the U.S. new vehicle to average 35.5 miles per gallon changed the equation and made it a favorable business proposition, the person said.

GM would become the first automaker to make subcompact “B-segment” cars in the U.S., the person said.

GM now imports the Chevrolet Aveo subcompact from South Korea.


Friday Dow Freezes on Investor Indecision, Now at 8,410

Friday, May 29th, 2009

Only up 6 points as we near the close. Rachel

NEW YORK (AP) — After shifting from stark pessimism earlier this year to fierce optimism, investors are now seeing shades of gray.

Stocks fluctuated Friday as investors tried to reconcile mixed economic signals. They were relieved when the government trimmed its estimate for the decline in first-quarter gross domestic product. Another positive sign was a rise in May consumer sentiment.

But a group representing Chicago-area purchasing executives reported a much steeper drop in Midwest business activity than expected. Also, the dollar is falling and oil prices are rising, stoking inflation worries.

The Dow Jones industrial average rose about 0.2 percent by early afternoon trading, moving in and out of positive territory. The other major indexes made similarly modest moves.

On the last day of trading in May, the Dow is still on track for a third straight monthly gain. The index would have to drop 236 points Friday to finish the month lower.

May, however, has been the shakiest month since the market’s rally began in early March. Enthusiasm about the economy’s stabilization is turning into skepticism about how strong growth will really be once a bottom is hit.

New worries are weighing on investors: Climbing interest rates, a weaker dollar and rising commodity prices. Crude oil prices recently hit a six-month high above $66 a barrel, while the dollar on Friday sank to multi-month lows against the euro and British pound. Some analysts say these developments are simply the consequence of a recovery in the economy and the financial markets, but others warn these trends could threaten the economy’s health in the long-term.

Another more short-term obstacle is General Motors Corp.’s expected bankruptcy filing on Monday, the automaker’s restructuring deadline. The market has been factoring in the likelihood of a GM bankruptcy for months, but investors still are unsure what the fallout might be for auto suppliers and other companies.

“Technically, the market is looking quite good,” said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc. “Although, I suspect we’ll probably stay within this trading range for another couple of weeks.”

In midafternoon trading, the Dow rose 14.66, or 0.2 percent, to 8,418.46. The Standard & Poor’s 500 index rose 2.84, or 0.3 percent, to 909.67. The Nasdaq composite index rose 1.89, or 0.1 percent, to 1,753.68.

The Dow is still up about 28 percent from the 12-year low it reached in early March, but remains down more than 40 percent from its record high in October 2007.

The Commerce Department’s report on first-quarter gross domestic product Friday showed the economy contracted at an annual rate of 5.7 percent, a bit more than analysts’ forecasts. Also, personal spending was revised lower. But the drop in GDP was smaller than the 6.1 percent estimated last month, and the report showed corporate profits rising.

The report “points to recovery,” Cardillo said. “And what you have here is a market that continues to look for recovery.”

The index from Chicago-area purchasing executives showed a bigger decrease in activity in May than in April. Analysts had anticipated a smaller contraction. The report is viewed as a precursor to the Institute for Supply Management’s national manufacturing index, due Monday.

But helping counteract that disappointing report was the University of Michigan’s index of consumer sentiment, which showed a larger-than-expected increase in May. Another report earlier in the week suggested an upswing in consumer confidence, too.

Government bonds rose, pushing down yields. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.54 percent from 3.62 percent late Thursday.

The 10-year yield hit a six-month high of 3.75 percent on Wednesday. Spiking interest rates earlier this week stoked concerns about Americans’ ability to borrow and refinance mortgages.

Oil prices have been jumping to six-month highs as the dollar tumbles. Light, sweet crude rose 91 cents to $65.97 a barrel on the New York Mercantile Exchange. Gold and silver prices rose as well.

Although rising commodity prices have fueled inflation worries, they have driven some of the best performers in the market over the past month: Metal and coal producers, miners and pipelines.

Technology stocks have also picked up in recent weeks.

The weakening dollar is also drawing more investors, like Robert Pavlik of Banyan Partners LLC, to the stocks of multinational companies. Those companies can export more and earn higher overseas revenues when the dollar is down, he said.

The worst performers in May were companies tied to the housing market and discretionary spending, such as construction companies, home improvement retailers, furniture makers and consumer electronics sellers. And financial stocks, while holding up, have not been leading the market higher as they were in March and April.

The Russell 2000 index of smaller companies rose 3.57, or 0.7 percent, to 495.78.

Advancing stocks outnumbered declining stocks by about 9 to 5 on the New York Stock Exchange, where volume was 675.6 million shares. Volumes were lighter than on Thursday.

Overseas, Japan’s Nikkei stock average rose 0.8 percent. Britain’s FTSE 100 rose 0.7 percent, Germany’s DAX index rose 0.2 percent, and France’s CAC-40 rose 0.4 percent.


Kitsap Gas at $2.62 Friday, Up 6 Cents from Week Ago

Friday, May 29th, 2009

And oil prices continue recession-proof march. Rachel

COLUMBUS, Ohio (AP) — Oil and gasoline prices continued a recession-defying march higher Friday, doubling in the past six months largely on optimism of a strengthening economy.

The predictions for just how high oil can reach this year, just like 2008, continue to creep upward just five months removed from crude priced around $32 per barrel.

Benchmark crude for July delivery rose $1.15 to $66.23 a barrel on the New York Mercantile Exchange.

The gasoline-pump panic of 2008 has yet to surface, but that’s not to say there haven’t been some double-takes.

Wholesale gasoline prices, which typically rise during this time of the year, are up a staggering 140 percent since Christmas Eve. Retail gasoline prices have hit a national average of $2.467 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices are up 20 percent just in the past month.

But a gallon of gas is still $1.485 below the price a year ago and that, at its heart, is why you are unlikely to see the same price spikes this time around.

Crude prices have spiked 30 percent this month, enough to give anyone vertigo. But the pain is relative.

At this time last year, crude prices were brushing up against $130.

While crude has risen fast through may, we’re still around $66.

For gas prices to hit $3, crude would need to go to about $100 a barrel, well above even the highest projections this year of $70 to $75, said Tom Kloza, publisher and chief oil analyst at Oil Price Information service.

Still many analysts, including Kloza, have been surprised by the run-up in gasoline.

“If you had asked a month ago if we would see a $2.50 national average, I would have said ‘no.”’

The jump in energy prices has not been fueled by rising demand, but a belief that demand will rise at some point. That has created a lot of momentum in a market that does not have the fundamentals to support it.

With demand for gasoline running flat to slightly below last year, unemployment moving higher, and ample inventories and refinery capacity it is hard to see prices much higher from here, Adam Sieminski of Deutsche Bank.

“We’ve climbed out of the depths, but it’s still not growing on a year-over-year basis,” he said.

Just like in 2008, however, the weakened U.S. currency is bringing billions of investments into oil markets. Because crude is priced in dollars, it gets a lot cheaper when the U.S. currency falls.

That points to another speculative bubble that many blame for record prices last summer, on Nymex and at the gas pump.

“It’s more hope that fact,” said Adam Sieminski. “Investors think the economy has bottomed and possibly recovering and they’re moving to assets they think will benefit from the economic recovery and that includes commodities generally and oil specifically.”

Gasoline futures have been on a tear as well, even though the government reported again last week that demand for it has fallen.

Retail gasoline prices have followed as refiners, seeing consumers driving billions fewer miles, cut back on production.

In a potentially good sign for consumers, refiners ramped up production last week, according to government reports, even though they are still operating well below normal levels.

This comes at a time when American motorists, whether its because they’ve lost jobs or are worried about losing a job, are not driving as much. Industries are using far less fuel and natural gas.

The Commerce Department said Friday that the economy sank at a 5.7 percent pace in the first quarter, worse than the 5.5 percent decline analysts were forecasting.

That does not point to a market that will support a sustained run on prices.

In other Nymex trading, gasoline for June delivery rose less than a penny to $1.91 a gallon and heating oil gained 4.7 cents to $1.6488 a gallon. Natural gas for June delivery fell 12 cents to $3.835 per 1,000 cubic feet.

In London, Brent prices rose $1.08 to $65.47 a barrel on the ICE Futures exchange.


Coming Up: New Openness, Hope for Expansion at TeleTech

Friday, May 29th, 2009

Bloggers,

I met with Andreas Wierman yesterday, who has been brought in to run the TeleTech call center at Highway 303 and McWillliams.

He represents, I think, a new openness for the company, which historically has been tightlipped with me. 

I was able to tour the facility and learn a little about hopes it has for expansion.

The major layoff is finished, though the company is very serious about raising performance standards for workers who troubleshoot and solve problems called in by Sprint customers. Sprint is TeleTech’s one and only client in Bremerton.

More coming in the next few days.

Rachel Pritchett


$300-A-Month Car Allowance for Bozeman

Friday, May 29th, 2009

Bloggers,

The contract between Cary Bozeman and the Port of Bremerton has been signed as he moves closer to taking on the role of port chief executive officer.

It’s a two-year pact, and contains a $300-a-month car allowance, which comes to $3,600 per year or $7,200 for the life of the contract.

The pay rate is $120,000 a year, a $3,000 improvement over his current salary as Bremerton mayor.

And, he gets four weeks paid vacation.

Not bad. He assumes his new responsibilities June 8.

Rachel Pritchett


Hart To Run As ‘Taxpayers’ Watchdog’ For Bremerton Port Commission

Thursday, May 28th, 2009

By Rachel Pritchett

rpritchett@kitsapsun.com

BRemerton

It’s been more than two years, but anger hasn’t ebbed over the Port of Bremerton’s surprise property tax hike for the expansion of its Bremerton Marina, now two-thirds empty.

Gene Hart, who announced Thursday he will run for the District 1 seat, said that under his watch, such an “infamous money grab” and “pickpocket” episode will never happen again.

Characterizing himself as a “taxpayers’ watchdog,” the 62-year-old Bremerton resident critized the commission he said never informed residents that the steep increase was coming.

Any proposed increase in taxes by the port district should go to a pubic vote, he said.

Hart said the current holder of the seat, Cheryl Kincer, has not risen above the level of “caretaker” and is simply “warming the seat.” Kincer has not yet said whether she will seek a third term. Chico resident Roger Zabinski is the other announced candidate, so far. The District 1 position is the only one of the commission’s three seats up for election this year. Each term lasts six years.

Hart, who is retired, said he will run on a platform of making the port open and accountable. And, he will have a five-year plan to “terminate operating defincits and operating losses.”

While Hart is for bringing new businesses to the port district, he said he would not be agreeable “to squandering one more penny of local taxes on SEED.” 

SEED is the port’s wished-for Sustainable Energy and Economic Development project, a blueprint for  attracting clean-tech industry.

A constant fixture in Port of Bremerton commission audiences, Hart has long objected to the practice of commissioners requiring people who give public testimony to first state their names.

“What I’m concerned is about other citizens out there having to do that because, in my view, it’s a form of intimidation,” he said.

Bremerton Mayor Cary Bozeman’s upcoming move to chief executive officer for the port sits well with Hart.

“I liken Cary to a strong workhorse,” Hart said. Put him in front of a plow and he’ll pull it, he added.

Hart lives on Trenton Avenue and has been a Kitsap resident for 25 years. He is retired out of the Navy, where he said he served both as an enlistee and an officer who reached the rank of lieutenant commander. Much of his Navy work concerned budgeting.

Since retirement, he has been involved in real estate and in owning a music store.

Today, he enjoys online securities trading.

He said he holds a bachelor’s degree from Western Washington University.

Hart can be found most mornings at a downtown Bremerton coffee shop talking about the days events with other retirees.

Hart said he will front the money himself for his campaign. He can be reached at geneh@silverlink.net.


Hart Soon to Announce Run for Port Commissioner

Thursday, May 28th, 2009

I’m about to interview Gene Hart. Stay tuned for story. Rachel


A Few Early Hints on Bozeman and the Port

Thursday, May 28th, 2009

Hello Bloggers,

This is reporter Rachel Pritchett. Bremerton Mayor Cary Bozeman was a guest yesterday of a Kitsap Sun editorial-board meeting, and from that, I began to identify what I believe is a change in direction he will attempt to bring to the port.

That change might be toward making the port a player in education, in expanding higher-education opportunities here, and even more specifically in the area of four-year degrees in areas such as sustainability. He even spoke of a “sustainability institute” at the port, just for that purpose. The port has had some modest partnership with Olympic College, but the port becoming a partner in education has never been discussed on my watch.

Like many others, Bozeman said our best and brightest young people leave and don’t come back because of a lack of higher-ed opportunities and non-military, non-government jobs for highly trained people. 

He’d like to change that, and if I had to guess at this early juncture, he’ll be working to make that happen. And I’m guessing Olympic College could be a part of that, in a much bigger way.

That might mean a reinterpretation of the port’s wished-for SEED project, which calls for a business-incubator building at the port to spawn clean-tech businesses to grow and diversify Kitsap’s employment base. At the very least, Bozeman said he doesn’t think the port will even call it the SEED project anymore.

The SEED program has at least one friend on the Port of Bremerton commission in Bill Mahan, and it remains to be seen whether Mahan signs on to this new education emphasis I expect from Bozeman. We don’t yet know if Commissioner Cheryl Kincer, who seems supportive of SEED, is going to go for a new term. Mahan, after all, has done a lot of groundwork to lift SEED off the ground, including trying to set up a relationship between the port and a WSU-affiliated incubator in Spokane, as well as advocating for a SEED nonprofit board.

Rachel


Thursday on Wall Street So Far So Good

Thursday, May 28th, 2009

Now at 8,375, up 76

 

NEW YORK (AP) — Investors shuttled between worries about the housing industry and hopes that the economy might be stabilizing.

Stocks fluctuated in a narrow range Thursday, falling after a twin dose of disappointing housing news but also drawing support from crude oil’s advance to a six-month high above $64 a barrel. Investors saw a bigger appetite for oil, as well as a dip in weekly unemployment claims and an increase in sales of big-ticket manufactured goods, as reasons to believe the economy will start growing and lift demand for raw materials.

The government said sales of new homes edged up only 0.3 percent in April, less than analysts expected. A separate report showed that a record 12 percent of mortgage holders were behind or in foreclosure in the first quarter.

Volatility in interest rates also tugged at the market.

On Wednesday, stocks tumbled following a plunge in Treasury bond prices and a corresponding spike in interest rates. Investors grew fearful that higher borrowing costs would choke the economy’s recovery. The yield on the Treasury’s 10-year note — a key benchmark for home mortgages and other kinds of loans — reached its highest level since November. The note recovered some of those losses Thursday but then gave back some of its gains, leaving traders on edge.

Investors also looked for insights into the prospects for General Motors Corp., which said a committee of bondholders agreed to a sweetened deal to erase some of the automaker’s unsecured debt in exchange for stock. The agreement may not prevent GM from seeking bankruptcy court protection, but investors are eager for any signs that a reorganization would be orderly. GM shares rose 6 cents, or 5.2 percent, to $1.21.

“We still have headwinds ahead, in terms of the housing market going down,” said Michael Sheldon, chief market strategist at RDM Financial Group. “And we don’t know how high the unemployment rate is going to peak.”

In midday trading, the Dow Jones industrial average fell 12.35, or 0.2 percent, to 8,287.67. The broader Standard & Poor’s 500 index rose 2.11, or 0.2 percent, to 895.17, and the Nasdaq composite index fell 2.74, or 0.2 percent, to 1,728.34.

The yield on the 10-year Treasury note, which moves opposite its price, pulled back to 3.71 percent from 3.75 percent late Wednesday.

Light, sweet crude rose $1.10 to $64.55 a barrel on the New York Mercantile Exchange.

Energy stocks gained. Marathon Oil Corp. rose $1.26, or 4.3 percent, to $30.50, while XTO Energy Inc. rose $1.29, or 3.1 percent, to $42.46.

Investors are keenly focused on indicators for the housing market, which analysts say must find a bottom before the broader economy can recover. Home builder stocks fell after the reports on housing and as the prospect of higher interest rates stirred worries that already weak demand will worsen.

Toll Brothers Inc. fell 76 cents, or 4.2 percent, to $17.26, while Beazer Homes USA Inc. fell 16 cents, or 6.3 percent, to $2.41.

While many investors are betting the economy will rebound later this year, companies across various industries are still hurting.

Procter & Gamble fell 54 cents to $51.23 after the consumer products maker issued a disappointing profit forecast, while Costco Wholesale Corp. fell 96 cents, or 2 percent, to $47.87 after its most recent quarterly profit sank 29 percent.

In other trading, the Russell 2000 index of smaller companies fell 4.78, or 1 percent, to 485.08.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 557.8 million shares, compared with 499.8 million shares traded at the same time Wednesday.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Japan’s Nikkei stock average edged up 0.1 percent. In afternoon trading, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index fell 1.4 percent, and France’s CAC-40 slid 0.8 percent.


Westpark Being Recycled

Thursday, May 28th, 2009

 

Homes in the neighborhood are being demolished, but 93 percent of that material will be recycled.

By Rachel Pritchett  |  rpritchett@kitsapsun.com

BREMERTON

A

nybody who has been to Westpark recently has noticed big machinery knocking down some of the old, worn housing at Oyster Bay Avenue and Arsenal Way to make way for new development.

What they might not know is that 93 percent of all the materials coming down being recycled, not sent to a landfill.

A whopping 35,451 tons of material will be recycled and only 2,459 tons will go into a landfill, according to Nancy Austin, a 

development manager for Bremerton Housing Authority, which owns Westpark. 

Old walls, floors and framing from the 43 buildings now being “deconstructed” will be converted into steam energy.

Window glass will be transformed into new windows. Metals go to a scrap yard. 

Even asphalt used to patch the roads will be broken down and used again.

Big trees that will have to be cut down will be sent to the lumber mill. And soil that’s removed will be sifted and replaced.

Most astounding is the concrete used for foundations, porches and walkways. It will be grounded up on-site and used to build roads that will serve the new Bay Vista neighborhood that is to replace Westpark.

“We have an opportunity to do something that’s environmentally responsible,” said Kurt Wiest, BHA executive director.

How times and attitudes have changed.

BHA and its contractor, Hos Brothers Construction of Woodinville, have come across an old, 1930s-era dump off Oyster Bay Avenue in Westpark. People in the ’30s, of course, didn’t recycle. 

The land today cannot support buildings, because they would settle atop the old dump. That forced Bay Vista designers to alter their plans. A ball field now will top the old dump.

“Here we are jumping forward 80 years; we don’t want to make the same mistakes,” Wiest said.

The recycling doesn’t cost much more money. Austin estimated it cost BHA $190 a ton to deconstruct and recycle the homes. But BHA is expecting to receive $128 a ton from materials it sells to recyclers. That’s a net cost of $62 a ton. With fewer landfill fees to pay, the deal is close to a wash.

“What we’re trying to do is reduce the amount that we have to pay to deconstruct these buildings,” Wiest said.

BHA’s massive recycling of Westpark has won the admiration of folks like Art Castle, executive vice president of the Homebuilders Association of Kitsap County.

“I think it’s real smart,” he said, who added that about a quarter of his association’s builders are enrolled in its Built Green program, which encourages recycling.

Despite the recession, the Westpark conversion remains a going concern.

About 75 percent of the residents of the 571 Westpark housing units have been relocated to other low-income housing. The rest will be gone by the end of the year, Wiest said.

The $300 million Bay Vista is to include a retail and office village at the corner of Kitsap Way at Highway 3. A few developers have expressed interest, but it’s difficult for them to get credit and no deals to develop the commercial village have been reached, Wiest said. 

Already built is the Bay Vista Commons, an assisted-living facility.

Coming in the next year or two will be 75 units of affordable duplexes, triplexes and townhomes where the deconstruction and recycling work is taking place now, as well as The Summit, an 83-unit apartment building with affordable units off Arsenal Way.

Bay Vista, scheduled for completion in 2012 or 2013, could have as many as 850 homes, a quarter of them affordable and the rest of them market-rate.

 

Plants Recycled, Too

The public can pick up free plants that have been removed from Westpark beginning at 9 a.m. Saturday near Bremerton Fire Station No. 2 off Kitsap and Arsenal ways. Plants include rhododendron, lilac and rose bushes.