White House tells banks to stop hoarding, start lending

WASHINGTON — An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans. Wall Street soared nearly 900 points on bargain-hunting and hopes of a hefty interest rate cut by the Federal Reserve.

The stock market's amazing climb, with its second-largest point gain ever, was a welcome burst of good news for a nation suffering big job losses and seemingly tumbling into a painful recession.

Consumer pessimism reached record levels in October amid rising unemployment, plunging home prices and shrinking retirement and investment accounts. The Conference Board, a private research group, said consumer confidence fell to its lowest point since it began tracking consumer sentiment in 1967.

Hoping to thaw the credit freeze that has chilled the economy, the Bush administration sent banks an unmistakable message to put aside fears and open up loan windows for cash-starved businesses and consumers who have pulled back on spending.

"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House press secretary Dana Perino said. While there are limits to Washington's power to affect banks' behavior, the White House decided that it was time to use its bully pulpit.

"They (regulators) will be watching very closely, and they're working with the banks," Perino said.

Efforts haven't worked

Washington has pumped money and confidence-building measures into the system over recent weeks to get lending, the lifeblood of the credit-dependent American economy, flowing freely again and to combat the worst financial crisis since the 1930s. So far, though, it has not worked. While the crucial and much-watched short-term lending rate called the London Interbank Offered Rate, or Libor, has come down, it remains at elevated levels.

Today, the Federal Reserve is expected to announce a cut in its fed funds rate — and Wall Street is looking for a drop in the key interest rate by half a point to 1 percent.

At the center of the administration's efforts to thaw credit is the $700 billion financial bailout plan approved by Congress and signed by President Bush this month. Under that law's authority, the administration is doling out $250 billion to banks in return for partial ownership.

The Treasury Department, which is overseeing the massive capital injection program along with the rest of the bailout, will pour $125 billion into nine of the country's largest banks, which account for 50 percent of all U.S. deposits. Anthony Ryan, Treasury's acting undersecretary for domestic finance, said the first payments went out Tuesday. An additional $125 billion will start flowing to other banks within days, he said.

"As these banks and institutions are reinforced and supported with taxpayer funds, they must meet their responsibility to lend, and support the American people and the U.S. economy," Ryan told the annual meeting of the Securities Industry and Financial Markets Association. "It is in a strengthened institution's best financial interest to increase lending once it has received government funding."

Rep. Henry Waxman, D-Calif., chairman of the House Oversight Committee, asked the banks getting the $125 billion to detail what they are paying their executives and employees, including bonuses.

"I question the appropriateness of depleting the capital that taxpayers just injected into the bank through the payment of billions of dollars in bonuses, especially after one of the financial industry's worst years on record," he said.

Banks may buy other banks

The infusion of federal money is to rebuild banks' battered capital reserves so the institutions would feel comfortable resuming more normal lending practices. But that confidence was undercut somewhat when reports surfaced that bankers might use the money to buy other banks. Indeed, the government approved PNC Financial Services Group Inc. to receive $7.7 billion in return for company stock on Friday and, at the same time, PNC said it was acquiring National City Corp. for $5.58 billion.

There is little federal officials can do about it. There is no language in the bailout bill that obligates banks receiving money to increase their loans. Officials had argued that attaching strings to the capital-infusion program would discourage financial institutions from participating.

"The way that banks make money is by lending money," Perino said. "And so they have every incentive to move forward and start using this money."

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Excitement builds for 2010 Chevrolet Camaro

Chevrolet's revived Camaro coupe, which goes on sale early next year as a 2010 model, will have a starting price of $22,995 (including freight) for the base V-6 model, while the performance-oriented V-8 model will begin at $30,995, General Motors has announced.

Dealers are taking orders for the cars, which the automaker says have generated excitement among baby boomers who grew up with the Camaro. The previous model went out of production in 2002.

GM showed the concept version of the new Camaro coupe at the 2006 Detroit auto show, and a convertible concept followed. It's making the rounds of auto shows nationwide but will not go on sale until sometime in 2010. No prices have been announced yet for the convertible.

As for the coupe, "The wait is almost over," GM North America Vice President Ed Peper said in an announcement of the pricing. "The return of the Camaro gives sports car enthusiasts a reason to rejoice. It's a 21st century sports car with a distinctly American legacy."

Auto sales are down this year, with consumers having been scared off earlier by $4 a gallon gas prices and by the credit crunch and uncertainty about the national economy.

Thousands request information

With gasoline prices at their lowest levels in about 17 months, auto dealers hope that consumers will return to showrooms to buy. The lower gas prices bode well for the Camaro, although fuel economy isn't expected to be a major issue, anyway, as the
V-6 model is rated at up to 27 miles per gallon, and the V-8 up to a 23 mpg rating.

GM said that more than 600,000 potential buyers have requested information on the Camaro just since production plans were announced this past summer.

GM says production will begin in mid-February at a plant in Ontario, Canada, and the cars will begin arriving at dealerships by early March.

Also coming to dealerships at the same time will be an array of accessories that can be used to customize the cars, including 21-inch wheels and tires, ground effects and stripe kits, and a Hurst shifter, GM said.

All those accessories can be ordered and installed before delivery, and in some cases can even be "rolled into the monthly payments," the company said.

Already, the 2010 Camaro is starring in a TV show — an NBC drama called My Own Worst Enemy, with Christian Slater as a man with two personalities, a suburban dad and a risk-taking spy. The Camaro also appeared in the 2007 film Transformers.

Three trim levels will be offered, the V-6 LS and LT models, and the V-8 Super Sport or SS version, intended for die-hard enthusiasts.

Two V-8 engines are offered. The LS3 engine from the 2008 Corvette, with 422 horsepower and 408 foot-pounds of torque, will be available only with a six-speed manual gearbox. Those who want the optional six-speed automatic transmission will get the L99 engine, rated at 400 horsepower and 395 foot-pounds of torque.

The original Camaro, which arrived for 1967, was GM's answer to the popular Mustang, which debuted in 1964. GM isn't alone in bringing an icon of the 1960s back to life this year.

Dodge has introduced a new version of its two-door Challenger muscle car, also available in V-6 and V-8 versions. The Camaro, built on GM's new global rear-wheel-drive architecture, has a unibody structure designed to enhance safety and handling. It features one-piece body side stampings and tight spaces between body panels, the automaker said.

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Whirlpool will cut jobs, close Jackson plant

JACKSON, Tenn. — Whirlpool Corp. said Tuesday that it is eliminating about 5,000 jobs worldwide this year and next — a move that will include 500 layoffs and the closure of the company's plant here, a two-hour drive from Nashville.

The local jobs cuts are a further blow to an area with an unemployment rate of 8.8 percent, one of the highest levels in the state. Whirlpool has been Madison County's eighth-largest employer, according to the Jackson Area Chamber of Commerce.

"This is the beginning of the recession in West Tennessee," said Union University economist Kenny Holt said. The last time a plant closure of this magnitude occurred was in 2001 when Murray closed, cutting 768 jobs. Murray made snow blowers and lawn mowers.

The nation's largest home appliance maker said the cuts are tied to the long-lasting downturn in the U.S. housing market. Whirlpool reported that its earnings fell
7 percent during the third quarter on lower sales and higher material costs. Whirlpool lowered its earnings outlook for the year and announced price increases.

4 plant closures announced

Since January, Whirlpool had announced the closure of four plants in La Vergne, Tenn.; Oxford, Miss.; Puebla, Mexico; and Reynosa, Mexico — a loss of about 2,000 jobs. Whirlpool, whose brands include Maytag, KitchenAid and Jenn-Air, has about 73,000 employees worldwide.

The company said the move to shutter its facility in Jackson means a shift of production from there to its plant in Findlay, Ohio.

James Cupples, owner and president of Whirlpool supplier J&J Co. in Jackson, said he was surprised by the news. "I just thought they were solid," said Cupples.

Holt said pressures on the auto industry and other recessionary factors could cause more layoffs in the area. "There are going to be people who will have trouble paying their bills," the economist said. "There will be those who may lose their homes."

Local government officials said they will look for another industry to take over the Whirlpool building once it is vacant.

City Councilman Danny Ellis said that should be a priority, but city officials also should consider finding ways to help residents open small businesses. "We need … to explore having a small business incubator," Ellis said.

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Business Briefs: BioMimetic raises cash balance

Franklin-based BioMimetic Therapeutics said it has increased its cash balance by $39 million in a deal with Deutsche Bank AG. The money is essentially a loan with BioMimetic's auction-rate securities portfolio as the collateral. BioMimetic borrowed 70 percent of the value of the portfolio, which has been affected by the meltdown in credit markets.

Fresenius opens new center

Fresenius Medical Care North America, based in Waltham, Mass., has opened an advanced dialysis treatment center in Centerville, Tenn.

The company is a subsidiary of Fresenius AG, which acquired the former Nashville-based Renal Care Group in 2006.

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Select accountant based on needs

How much can I expect to pay as a business owner for a good accountant?

A: Certified public accountants often charge $150 to $300 an hour, depending on the complexity of the job and their level of experience. If you need an audit — or help with a loan application — a CPA may be what you need.

But don't confuse a CPA with a general accountant or a bookkeeper. Your business may simply need a bookkeeper to enter data into the company's accounting program or to process simple financial statements. Many bookkeepers will charge $15 to $25 an hour. The next step up is a general accountant, who is likely to charge $85 an hour and up. General accountants can handle somewhat more complex chores.

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Tennessee says computer seller misled buyers

The Tennessee attorney general's office has filed a 129-page lawsuit against a Baltimore computer sales company, saying BlueHippo violated the state consumer protection act and unlawfully took $2.6 million from at least 4,500 Tennesseans.

The lawsuit says the company, which advertised nationally on TV and the Internet, targeted households with poor credit making less than $25,000 annually to sell them computers through layaway or finance plans, misleading them about when they would receive their computers by mail and then refusing to refund the up-front payments customers had made.

The up-front payment "costs the consumer two and three times more than what suppliers or licensed retailers charge for the same product,'' the lawsuit said.

A time stamp on the lawsuit says it was filed Oct. 23 in Shelby County Chancery Court, although a press release from the attorney general's office said it was filed Monday.

The lawsuit also says BlueHippo doesn't have a license as a lender in Tennessee, as required by law.

FTC settled earlier

The Federal Trade Com mission settled a complaint in February of this year for $5 million with the company, saying many consumers paid hundreds of dollars for computers they never received and that the company failed to disclose its no-refund policy when signing up customers.

"In today's market, our customer base is finding it even more challenging to purchase computers and other consumer electronics through traditional financing," said John Ford, chief operating officer of BlueHippo in a February statement. "This settlement comes at exactly the right time for us and allows us to renew our efforts to provide innovative financing for our customers."

Attorneys with the state of Tennessee were not available late Monday to discuss the lawsuit.

A spokesperson for BlueHippo could not be reached.

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Down housing market challenges agents

The real estate market slowdown has Nashville agent Marcie Sweet hustling.

Instead of selling houses, she's selling event T-shirts. She sold them at Belmont University for the presidential debate and in Jena, La., at a rally to support a high school student at the center of a controversial prosecution.

Sweet hasn't had a closing in two months. Her doldrums as a real estate agent come as home sales in the Nashville area overall have dipped to levels last seen a decade ago. Single-family home sales in September were down about 13 percent compared with a year earlier.

"It affects your confidence," Sweet said. "You start wondering, 'Is it me?' With the market down like it is, you have to spot opportunities and get creative with it."

The Tennessee Real Estate Commission reported a drop of nearly 6,000 registered agents since 2006. Nationwide, thousands of agents have been pushed out of the market — the number fell from 1.5 million in 2006 to 1.47 million last year, according to the Bureau of Labor Statistics.

For them, hanging onto their licenses isn't worth the costs. Those costs can include association and desk fees, according to the Greater Nashville Association of Realtors, and the agents pay for their own signs, advertising and gas.

Others are hanging on by taking side jobs. Some report going into nursing, food service or advertising sales. Several agents didn't want to reveal their sidelines so clients wouldn't think they're not working hard to sell houses.

It's 'lack of movement'

Optimistic agents are trying to make it work in different ways despite the market, said Don Klein, chief executive officer for the Greater Nashville Association of Realtors.

"They are trying to find the right way to put buyers and sellers together," Klein said. "There are many full-time Realtors who are digging and researching opportunities and equipping themselves with that. Newer Realtors are not distracted by past expectations."

Alyse Sands, a broker for seven years, found herself without a closing for four months. Potential buyers are waiting to sell their homes in other states before they can close here.

"It all trickles down," Sands said. "It's not for a lack of clients; it's a lack of movement. This too shall pass, and that's the way you have to look at it. When it (the market) drops, it seems like an eternity."

Sands will remain a broker but decided to polish up her resume and apply for a job online. She's selling advertising for the Spanish Yellow Pages.

As with most real estate agents, two years ago Sweet's properties were moving. Then came the housing downturn, and Sweet started thinking of ideas to make a living.

She tried graphic design and sold business cards, and is doing work for a construction company, but her idea to sell shirts took off. After she heard a sociologist speak last year about the Jena Six, a case in which six black teens were accused of beating a white student, she found people online who were looking for related shirts and paraphernalia.

"That was a sign right there," Sweet said. "I drove seven to eight hours and set up my table at the rally. It was quite an experience."

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Retail building binge can't last

The clatter of bulldozers and the whir of riveters — these have been familiar sounds over the past few years for people who live and work in Nashville's suburbs.

But not for much longer. After four years of quick growth, a period that has brought a slew of strip malls, big-box discounters and lifestyle centers to Middle Tennessee, the retail construction boom finally appears to be winding down.

From Williamson County to Wilson County, developers are finishing projects started when consumers were spending fast and residential growth seemed boundless.

Now many are planning to pull back and wait out what could be a protracted slump. Cranes and steel frames may still be rising, but they're probably the last burst of activity before a lull that could span about 18 months, say developers, brokers and others in the commercial real estate industry.

"I don't know of anybody that has really been going after something that has been put on ice," said Thomas Frye, managing director of the Nashville office of CB Richard Ellis. "But I think everybody's been gradually scaling back on everything."

The slowdown hasn't shown up in rusting girders and idled earthmovers. Because it is often costlier to stop a project than to complete it and because builders rarely start construction on a major project without having a tenant signed up in advance, work has continued on dozens of projects around the region even as the economy has moved into what many experts fear could be a deep recession.

In fact, Nashville-area developers are expected to finish about 2.6 million square feet of retail space in 2008, an area more than twice the size of the CoolSprings Galleria mall.

But signs of a coming slowdown abound, retail real estate experts said.

More storefronts sit empty. The vacancy rate has risen from about 3 percent in 2003 to nearly 6 percent this fall, according to CoStar Group Inc., a Bethesda, Md.-based commercial real estate information and marketing services firm.

Homebuilding, an important driver of suburban retail growth, has slowed. According to MarketGraphics Research Group, a Brentwood real estate data firm, the number of building permits issued in the Nashville area has fallen 40 percent from a year ago.

Few expect homebuilding to rebound anytime soon.

"We may never see the level of activity we'd seen over the last three years," said Mike Moulton, Sumner County's planning director.

And finally, many of the chains that drive retail construction, such as Wal-Mart and Target, have scaled back expansion plans across the country. That will mean fewer new stores in Middle Tennessee.

"They're definitely saying, 'We're cautious,' which is good. But, too, they don't have the money," said Steve Rudd, a partner in the Nashville firm Restaurant Retail Properties. "They don't have banks that will lend to them, they don't have the cash flow and they can't issue stock."

Phases pushed back

The pullback is expected to be the most severe the retail industry has seen in decades, far worse than the cutbacks made after the Sept. 11 attacks seven years ago.

"We haven't seen this since the early 1990s," said David Baker, a principal with the real estate firm Baker Storey McDonald.

Developers of projects that would have taken years to complete anyway can push back some phases.

Boyle Investments, the developer behind the Berry Farms project between Franklin and Spring Hill, says it plans to build only enough retail space for a bank, a few restaurants and other small businesses next year.

Boyle eventually plans to build more than 1.8 million square feet of retail space in Berry Farms, but the bulk of it will not come until residential construction takes off again, said Jeff Haynes, a partner in the firm.

Atlanta-based Gipson Co., the development firm behind The Paddocks project in Mt. Juliet, said it also will move more slowly than anticipated.

The 150-acre development's $80 million first phase, which includes a Wal-Mart and a Lowe's, is under construction and scheduled to open early next year. But future phases of the 150-acre development are on hold for a while, said Colin Barker, Gipson's vice president.

"There's activity," Barker said "It's just a matter of economics and timing."

Big projects to ebb

The slowdown will not mean a total freeze on construction.

Boyle, for instance, will start construction soon on a Mt. Juliet shopping center anchored by a Publix grocery store, and Dan Downs, a Sumner County developer, says a plan to open a Publix-anchored shopping center in Gallatin by fall 2010 are still on the books.

Swanson Development, of Murfreesboro, says it hopes to start construction on Gateway Village, a three-building project that will have condos, stores and offices, early next year.

Nonetheless, Middle Tennesseans should start to see evidence of the slowdown by early next year, industry experts said. By then, many of the current projects, which were planned during the economic boom — perhaps as far back as two or three years ago — will start to wind down.

One sign will be a climbing vacancy rate. As more space is added in the face of the economic downturn, developers will have a harder time renting space to the smaller businesses that typically fill out a shopping center, such as beauty salons, liquor stores and pizza parlors.

"Once they (major projects) have started, they've started," said Peggy Sells, the Middle Tennessee retail division leader for Colliers Turley Martin Tucker. "The traditional leasing of 2,500 square feet, the mom-and-pops, a lot of that is not out there."

Another will be a dearth of big new shopping centers.

Major retailers have been pulling back their growth plans for about a year, brokers said. They predicted it will be an additional six months before they start to talk about growing again.

That means it could be a year or two before another round of construction begins. Until then, the booming suburbs can do little but wait out the coming slowdown.

"Perhaps the interest (in starting new projects) is declining some," said G.C. Hixson, director of Wilson County's Joint Economic and Community Development Board. "I'm encouraged by where we are … but who could project where we will be in 12 months or 18 months?"

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Regional banks to sell maximum stock amount

The parent company of First Tennessee Bank and Regions Financial Corp. both said Friday they would sell the maximum amount of stock they can to the U.S. Treasury under the government's plan to inject $250 billion into the banking system.

Birmingham, Ala.-based Regions, the Nashville area's largest bank, said it has preliminary approval to sell $3.5 billion worth of preferred stock.

Memphis-based First Horizon National Corp., the parent company of First Tennessee, said it has preliminary approval to sell $866 million worth of preferred stock to the government.

"It's a very attractive program,'' said First Horizon's CEO, Bryan Jordan. "It will allow us to grow our banking business and continue to support our commitment to customers in Tennessee."

The Treasury wants to avoid further economic misery by providing more capital for the U.S. financial system, which has been hobbled by risky bets placed on mortgages and declining real estate values in much of the country.

First Horizon's profits have been hurt by mortgage and residential real estate development loans outside the state of Tennessee that now are going bad. It reported a $118 million loss during the third quarter and has outsourced, sold or closed much of its mortgage business.

But the bank is continuing to expand retail bank branches in Tennessee. Jordan said the bank would use the federal money to increase loans to consumers and other businesses.

Dowd Ritter, Regions' chairman, president and chief executive officer, said in a statement the capital would "enable us to expand lending and step up acquisitions."

Regions will pay the government a 5 percent dividend, or $175 million annually, for each of the first five years of the investment, and 9 percent thereafter unless Regions redeems the shares, the company said.

The government will also receive warrants for common stock, giving it the opportunity to benefit from an increase in the common stock price in the future.

Analysts expect the top 50 banking companies in the country to benefit from the stock sales, rather than any smaller, community banks. Bank of America already has agreed to sell $25 billion worth of stock to the government, among other top banks that have participated such as J.P. Morgan and Citigroup.

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Businesses need to take fresh look at loan papers

With all the news about trouble on Wall Street and the banking crisis, many entrepreneurs are scrambling to figure out how it all affects their banking relationships.

The economy has been slowing down for the past year. Since the third quarter of 2007, there has been a slowdown in the demand for loans from small business owners as they become more cautious. The National Federation of Independent Business reports that this drop in demand has resulted not so much in a credit crunch for small business as it has in a softening of demand for loans for expansion and growth.

However, banks are coming under increasing scrutiny by federal regulators. This is going to lead to some changes in the relationship between small businesses and their banks. Owners must prepare for the fact that their loans will be getting increased scrutiny.

Every business loan from a bank has covenants. The bank may require that insurance and tax payments be kept current, while at the same time it may put limits on things such as distributing profits or taking on more debt without approval from the bank.

Covenants also may define minimal financial performance expected from the business. These typically define minimal financial ratios for the liquidity of the business, debt ratios, minimal cash flow requirements, and the necessity of meeting certain profitability ratios.

Read the fine print

Many entrepreneurs pay little attention to these covenants after they close the loan. When times are good this may not become a serious issue. But in times like these, any loans that are out of compliance with stated financial covenants can be "set aside" by the regulators. The bank will be required to set aside additional reserves to cover these loans.

The result is that the bank no longer makes money on these loans. If this happens, banks may be forced to call in these loans, demanding immediate payment of all principal owed by the business. This can happen even if the business has never been late or missed a single loan payment.

Business owners who have bank loans should read all covenants carefully. Make sure that they are in compliance with all actions required in the covenants, for example, keeping insurance policies current and not doing things that may be restricted, such as taking on additional debt.

Any financial covenants require constant monitoring. The entrepreneur or his accountant should calculate and review all required ratios every month. If any of these ratios fall below the bank requirements, swift action should be taken to get them into compliance.

In a recent survey of small businesses conducted by American Express, about one in five owners voiced a concern that the current economic crisis is putting their business at risk of failure. Don't put your business at risk by ignoring the covenants in your loans, especially during times like these.

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Dow's drop befuddles analysts

CHICAGO — The advice from financial experts has been painfully repetitive during weeks of decline in the markets: A bottom should be near. History says stocks always bounce back. Don't sell now and miss the recovery.

But when panic selling washed over the markets again Friday, sending the Dow Jones industrial average down as much as 6 percent at one point, the pundits and money managers sounded less certain than ever about what comes next.

"There's a debate right now, is the next major milestone in the Dow 5,000 or 10,000," said Art Hogan, chief market strategist at Jefferies & Co. "I think compelling arguments can be made on both sides."

Many financial professionals, Hogan included, think the bad news is largely reflected in current stock prices: a global economic slowdown, a residential real estate recession, the credit market crunch and poor corporate earnings.

It already seemed that way when the Dow Jones industrial average plummeted 27 percent in the first eight trading days of this month to a 5½-year low of 7,882 during the session on Oct. 10.

But investor emotions remain a wild card in a shaky global economy. After climbing back near the 10,000 mark briefly last week, the Dow is sliding again and finished down 4 percent Friday at 8,379. As the market opened, the potential loss was feared to be much greater after some international markets were hammered by double-digit declines.

U.S. market analysts were at as much of a loss to estimate how much further the descent might go as they were to explain the latest drop.

"It just is something we haven't seen in our lifetimes, so it's hard to tell exactly where we are," said Tom Forester, portfolio manager for the Forester Value Fund in Chicago.

"This seems more like panic selling than fundamentally based," he said. But if the financial system remains troubled and everyday loans are tougher to get, he said, "then who knows? Maybe panic's the right move."

Emotions take over

Investors' fear is in evidence in the markets and in the faces of those who have lost tens or hundreds of thousands of dollars in their retirement and other accounts this fall.

"Anxiety is running overtime," according to Dr. Stephan Quentzel, chief of primary care psychiatry at Beth Israel Medical Center in New York.

The steady stock decline makes people feel more emotionally vulnerable and increasingly prone to bad market moves, usually ill-timed decisions to sell, to try to regain a sense of financial security, he said.

The tension shows in other forms, too.

Across from the New York Stock Exchange, artist Geoffrey Raymond set up a giant canvas Friday featuring the face of former Federal Reserve Chairman Alan Greenspan and invited passers-by to write their own messages on the painting.

One person wrote simply, "Greenspan is the devil." Another wrote: "When things go too well, someone should get nervous." Still another: "You've got to know when to fold."

Investors told to hold

Steve Martin, a 55-year-old systems analyst standing nearby, said he has been too afraid to check his retirement savings balance during the crisis. He has his suspicions, though: "The 401(k)'s almost gone."

That's still not enough to make him consider shifting out of stocks, with his portfolio already down so heavily. "I think I kind of missed that opportunity," he said. "I figure at this point I'm just going to ride it out."

Many experts continue to say holding on may be the best strategy left available.

When clients of Piedmont Investment Advisors have asked about shifting their funds from stocks to cash during the tumult, the Durham, N.C., managers at the firm have asked clients to remain calm, according to Dawn Alston Page, executive vice president and director of research.

"We're pretty much of a mind that any broad-scale move to cash is much too late in the game," she said. "You should definitely look forward to the future and look more for opportunities at this point."

Morningstar Inc.'s director of personal finance, Christine Benz, is among those advocating hanging in there, if not considering buying.

"I can't say whether it's the bottom or whether we're even near the bottom," she said. "But when it's the bottom, there won't be flashing lights and someone with a bullhorn saying it's time to buy."

Investors risk being caught off guard by a market rebound when they sit on cash investments.

That's because it takes time to reposition the money and get back in the market, and it's easy to miss some of the market's biggest days.

A lot of smart money is increasingly betting on a turnaround, and not just Warren Buffett, who has invested billions in the market in the past month.

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Leviton to open Lebanon center

Electrical and wiring devices maker Leviton Manufacturing Co. will open a distribution center in Lebanon in February, bringing 150 jobs to the area.

The Little Neck, N.Y.-based firm plans to occupy a 450,000-square-foot building at the intersection of Highway 109 and State Route 840, the economic development arm of the Nashville Area Chamber of Commerce said Friday.

Leviton is the latest company to list the Nashville area's central location among reasons for locating or expanding operations here.

"At the end of the day, Wilson County distinguished itself as the right match for our needs," said the company's Chief Executive Donald Hendler. Leviton received a state incentive package for infrastructure improvements and plans to seek concessions on Wilson County personal property taxes, said G.C.Hixson, director of the Wilson County Joint Economic and Community Development Board.

The new center will be one of Leviton's two U.S. warehouse and distribution hubs; it will handle shipments to customers east of the Mississippi River. Leviton sells products such as lighting controls and wall outlets to distributors, manufacturers and retailers.

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Chrysler, GM cuts will put hundreds out of work

DETROIT — The employment carnage in the ever-shrinking U.S. auto industry continued Thursday as Chrysler LLC announced it would get rid of 1,825 factory jobs and General Motors Corp. trimmed some benefits and said it would make further white-collar cuts.

As the shaky U.S. economy speeds the industry's out-of-control slide and tight credit cuts into sales, Auburn Hills, Mich.-based Chrysler said the jobs will be eliminated at the end of the year, when it closes a Newark, Del., sport utility vehicle plant ahead of schedule and eliminates a shift at a Toledo, Ohio, Jeep plant.

At GM, senior managers sent a memo to executives Wednesday saying early retirement and buyout offers to white-collar workers had been well received but that the company still would have to make involuntary layoffs.

More job cuts are likely if the U.S. auto sales volume continues to decline into 2009, said Laurie Harbour-Felax, president of the Harbour-Felax Group, a Detroit-area auto industry consulting company.

"If volume continues to fall through the tank as we go into 2009, then they're going to be left with a whole bunch more people," she said.

If recent talk about a potential acquisition of Chrysler by GM comes true, even more job losses are likely, she said.

"The whole thing becomes somewhat scary of a concept to think about, more job losses, especially in Michigan," she said.

GM, Ford Motor Co. and Chrysler employ about 230,000 people. As of June, the U.S.-based automakers had announced the shutdown of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor.

Along with 35 additional closures at GM and Ford's chief suppliers, about 149,000 hourly and salaried jobs have been cut in that time.

Chrysler's job cuts Thursday amount to about 6 percent of its U.S. hourly work force. They include the indefinite layoff of about 825 workers at the Toledo North Assembly Plant, where the company makes the Jeep Liberty and Dodge Nitro.

The Newark assembly plant, where 1,000 people make Dodge Durango and Chrysler Aspen SUVs, originally was expected to shut down at the end of 2009, and its hastened closure puts in doubt whether the company will keep making the large truck-based SUVs.

Newark is the only plant that makes the Durango and Aspen, and Chrysler spokesmen wouldn't say if production would be sent to another factory.

They said, however, that a plant in Detroit was being retooled to make several sport utility vehicles.

Employees at the Newark plant said they were told Durango production will shift to Michigan, but the model design will change.

Necessary steps

Chrysler said in a statement that the changes will adjust inventory to better match consumer demand.

Through the first nine months of the year, the company's U.S. sales have fallen 25 percent from the same period last year, the largest decline of any major automaker.

U.S. sales industrywide are down 13 percent from a year earlier.

"The markets are facing unprecedented turmoil, and we are in a time of historic change in the auto industry," said Frank Ewasyshyn, Chrysler's executive vice president of manufacturing.

"These tough but necessary steps are vital to our long-term viability."

The company said it would work with the United Auto Workers union to handle the layoffs in a "socially responsible manner." In the past, it has offered buyout and early retirement programs to workers affected by plant slowdowns and closures.

At the Toledo plant, the second shift will be eliminated, said Jeep UAW leader Dan Henneman.

"We pretty much knew it was coming," he said. "The orders since June have drastically gone down."

Through September, Nitro sales were down 46 percent from the same period last year, while Liberty sales were off 21 percent, according to Autodata Corp.

Durango sales were down 54 percent and Aspen sales dropped 21 percent.

At the Newark plant, workers who had just returned Monday from a three-week layoff to scale back production, were told Thursday morning that their last day would be Dec. 19, less than a week before Christmas.

Reality jolts workers

"It was just sad to look around and see the faces of so many people and how it's going to affect them," said Donna Branch-Jones, 43, a 15-year veteran who works on the door assembly line.

"We've been expecting it, but it's just kind of a slap in the face to hear it today. The reality is finally here."

At GM, the company decided it will temporarily stop matching salaried employees' 401(k) contributions as of Nov. 1, and it suspend tuition reimbursement and adoption assistance programs at the end of this year.

Spokesman Tom Wilkinson would not say how many white-collar workers had accepted offers to leave, nor would he say if the company has a goal for reducing their ranks.

Detroit-based GM has been working to slash its costs this year as it tries to save money to outlast a prolonged economic downturn.

In August, the automaker began offering buyouts to some salaried workers to cut 15 percent of white-collar costs.

GM had 44,000 U.S. salaried workers in 2000. That dropped to 32,000 by the end of last year.

In Newark, Delaware AFL-CIO President Samuel Lathem, who worked at the Chrysler plant for about 25 years, said U.S. automakers got too complacent over the years and finally are getting the message that Americans want smaller, more efficient cars.

"In that respect, we're way behind," he said, adding that American manufacturing workers are a dying breed. "We're becoming a servicing country."

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Job losses accelerate, and worst may lie ahead

WASHINGTON — Unemployment claims, already well into recession territory, are rising even faster than expected, leading economists to warn Thursday that the worst is yet to come.

As the Labor Department released bleak new numbers on the job market, Goldman Sachs, Chrysler and Xerox all announced that they were cutting workers by the thousands, adding to the woes of an economy beset by tight-er credit and wobbly banks.

The government said new applications for unemployment insurance rose 15,000 last week to a seasonally adjusted 478,000, above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession.

White House is frank

The White House, in unusually stark language, acknowledged that the economy is going through what spokeswoman Dana Perino called a "rough
ride."

"We expect our GDP (gross domestic product) number next week not to be a good one and the next quarter to be tough as well," Perino said.

The Commerce Department will release its first estimate of third-quarter economic performance Oct. 30, and Wall Street analysts project it will show the economy contracted by 0.5 percent, according to Thomson/IFR.

Slump expected to last

Many economists expect the decline to continue into the current quarter and the first three months of 2009, if not longer. The classic definition of a recession is at least two consecutive quarters of negative growth.

Zach Pandl, an economist at Barclays Capital, estimates that unemployment will rise to between 7 percent and 8 percent by early next year. Other economists have estimated it could rise to 8.5 percent.

Currently, the unemployment rate is 6.1 percent. Unemployment peaked at 6.3 percent in 2003 after the brief recession of 2001. It peaked at 7.8 percent in the 1991-92 recession, and above 10 percent in 1982.

The Goldman Sachs Group Inc. said it would cut about 3,260 jobs, or 10 percent of its work force.

Also on Thursday, Chrysler LLC said it would cut 1,825 jobs and Xerox Corp. said it planned to eliminate 3,000 positions, or 5 percent of its work force.

Other companies have announced reductions this week: Yahoo Inc. is cutting 10 percent of its employees, or 1,500 people, drugmaker Merck & Co. is eliminating 7,200 positions, and financial services firm National City Corp. will shed 4,000 jobs.

Spending is falling, too. Americans who still have jobs are worried about keeping them, and those who have lost jobs must watch every penny.

Consumer spending accounts for about 70 percent of the economy, and economists estimate that it fell by more than 3 percent last quarter in what would be the first quarterly drop in 17 years.

Stimulus plans weighed

Democrats in Congress have urged that unemployment benefits, which last for 26 weeks, be extended as part of a new economic stimulus package.

Democratic presidential nominee Sen. Barack Obama endorsed that plan in a statement Thursday, and said he would also "suspend the taxes on those benefits and jump-start job creation by giving small businesses emergency loans and tax credits for each new job they create."

His Republican opponent, Sen. John McCain, said he would "make sure that bailout dollars are used to … stop the foreclosures and free-fall in housing prices."

"Times are tough, and we need immediate action to take this economy in a new direction," he said in a statement.

Ike's impact was factor

The four-week average of jobless claims, which smooths out fluctuations, dropped slightly last week from a seven-year high to 480,250, the Labor Department said.

The number of people continuing to claim unemployment insurance dropped by 6,000 to a seasonally adjusted 3.72 million, down from 3.73 million, a five-year high.

The department said claims also were higher because of the impact of Hurricane Ike, which added about 12,000 requests for unemployment benefits, the same as the previous week.

Worries over the economy and financial instability have caused the stock market to fluctuate wildly recently. On Thursday, stocks initially fell but then recovered, and the Dow Jones industrials finished up 172 points, or about 2 percent.

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Laurel Cove developers seek new lenders

The developers of the Laurel Cove golf course community in Williamson County are planning to refinance after the bankruptcy of lender Lehman Brothers Holdings Inc.

Tentara Partners and Legacy Properties will turn to private investors to complete the
$121 million development on Arno Road, Tentara president and chief executive Philip Jones said Wednesday.

The move comes because Lehman Brothers suspended payments on a $70 million construction loan for the project when it filed for Chapter 11 bankruptcy last month.

Since then, Franklin-based Tentara and Legacy have been funding construction of Laurel Cove from a bond, Jones said.

"It's very important to know that Lehman Brothers, but not Laurel Cove, is in bankruptcy," Jones said. "It's a setback in terms that Wall Street is affecting Main Street."

Laurel Cove has asked the judge in the case, which is filed in New York City, to let the company buy back its loan.

That will enable Laurel Cove to secure new financing from a group of private investors led by Legacy, a Danbury, Conn., firm that specializes in golf course development.

Refinancing should take two to four months, and Laurel Cove's first phase should be completed in the spring, Jones said.

In the meantime, work on the 18-hole golf course, which was designed by Greg Norman, has been stopped for the winter but will resume in the spring, Jones said.

Arno Road upgrades that the county has required of the developers will continue while the refinancing plan is completed.

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Markets are battered again

NEW YORK — Now what?

After three days of relative calm, turbulence returned to Wall Street on Wednesday. Louder warnings of a deep recession and weak corporate earnings took the Dow Jones industrial average down 514 points amid fears that government intervention won't be enough to prevent global economies from faltering.

Previous dramatic drops — two of them more than 700 points — were followed by rebounds. If that doesn't happen this time, the Dow could slip closer to closing below the 8,000 mark, which hasn't happened since March 31, 2003.

Wednesday's sell-off came after poor earnings from large companies in disparate sectors — Wachovia Corp., Boeing and Merck & Co. — illustrated how wide the economic downturn has spread. One bright spot was McDonald's Corp., where third-quarter profits rose, thanks to the strength of its low-priced meals.

Even with the aggressive steps the government has already taken, Treasury Secretary Henry Paulson told interviewer Charlie Rose on Tuesday that Americans would "have a number of difficult months ahead of us in terms of the real economy."

Since stocks began tumbling on Sept. 15, the Dow has plunged as low as 8,451.19, its close on Oct. 10. On Wednesday, it closed at 8,519.21.

Big rallies last week on Monday and Thursday were enough to send all the major indexes higher, giving Wall Street its best week since 2003. The Dow gained 4.75 percent for the week — a gain that was erased in Wednesday's trading alone.

This week, the Dow had climbed 413 points Monday, then dropped 231 points Tuesday.

Losses are widespread

On Wednesday, most major indexes fell 5 percent or more, with the Standard & Poor's 500 down 6 percent. Oil prices hit lows last seen in June 2007, trading below $67 a barrel on worries about weakening demand.

Stocks dropped across Asia and Europe, falling even harder in South America, where Brazil's Bovespa index and Argentina's Merval had losses near 10 percent. Argentina's president announced plans to nationalize private pension funds to protect retirees from the financial crisis.

Mutual funds, pension funds and individual investors lost $700 billion in Wednesday's trading. It was the fifth time since Sept. 29 that the broadest measure of U.S. stocks, the Dow Jones Wilshire 5,000, had lost more than 5 percent in a day. During the prior 25 years, it had only eight days that bad.

For the week, the Dow is up 3.76 percent, the Standard & Poor's 500 index is up 4.65 percent, and the Nasdaq composite is down 5.58 percent.

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Big-time Waffle House guy in trouble

Local entrepreneur James L. Shaub II's job running SouthEast Waffles, a 113-restaurant Waffle House franchise based in Nashville, remains under the scrutiny of creditors amid whispers of missing millions and the shadow of a pending Chapter 11 bankruptcy hearing.

Next week, Shaub could lose his job at what is now the second-largest franchise under the umbrella of Norcross, Ga.-based Waffle House, which granted SouthEast Waffles its franchise here.

Executives with the Waffle House parent company want a bankruptcy judge to oust Shaub from the franchise he bought nearly a decade ago and stop his $20,000-a-month executive salary.

The Georgia-based chain isn't in bankruptcy itself — only Shaub's franchise is mired in the court proceedings. A court-approved turnaround specialist has been appointed to help run the franchise with Shaub serving as his adviser.

Shaub, known for his work at several community nonprofits, including holding a seat on the board of Cheekwood Botanical Garden and Museum of Art, says he was unaware of an alleged check-kiting scheme that creditors say operated through his franchised restaurants.

"I invested 15 years of my life in this company," said Shaub, a Vanderbilt University economics major and an ex-banker. "This has been devastating to me and my family. I would not have done anything to harm any work that I've done."

SouthEast Waffles reported sales of $67 million for the fiscal year that ended in May. But officials at SunTrust Bank said in early August that they discovered "a massive check-kiting scheme perpetrated over several months," according to court documents. Check-kiting refers to a customer's passing worthless checks between banks.

SunTrust officials say the bank lost about $3.7 million, according to court documents. FirstBank of Lexington, Tenn., which had a loan agreement with SouthEast Waffles, says in a court filing that it's owed $12 million.

IRS says it's owed $2.8 million

SouthEast Waffles filed for Chapter 11 bankruptcy protection in August, with $50 million in debts and $10 million in assets, court records show. Among other debts, the company owes nearly $2.8 million in federal employment taxes to the IRS, according to a claim filed in court.

Since September, Internal Revenue Service officers have copied files on the company's computer server that contained financial information, and the FBI has interviewed some employees, said Gary Murphey, the chief restructuring officer. The IRS and FBI declined to comment.

Shaub, 51, acknowledges that he was ultimately responsible as the franchise's chief executive, but said he delegated responsibility for company finances to Chief Financial Officer Becky Sullivan, who left the company earlier this summer as allegations of missing funds first surfaced.

Shaub said most of his time was spent out of the main office, surveying far-flung operations and even cooking alongside employees. "The financial side was ultimately my responsibility, too, but I felt I had delegated that over," he said.

That argument "doesn't make any sense," said Jon Waller, general counsel for Waffle House Inc., the Georgia-based parent. "While we encourage and ask our principal operators to work in the restaurants … we also expect (them) to manage the business prudently."

Sullivan, the deposed chief financial officer, declined to comment. Her attorney, Peter Strianse said: "Whatever she did in her employment at SouthEast Waffles was done at the direction of Mr. Shaub."

Last month, the court approved Murphey, 46, to oversee operations and figure out SouthEast Waffles' finances. "All I can tell you is the books and records are a mess," Murphey told The Tennessean. Murphey's stay can be extended if all parties involved in the case agree to it.

Fate to be argued in court

Shaub gets his $20,000 monthly salary, plus health-care benefits, until December, according to court documents. Shaub's fate — basically whether he will be allowed to stay at the company — will be argued next Tuesday in court.

For now, Murphey has Shaub auditing store managers' weekly reports, overseeing maintenance and making sure managers' specials are consistent across all the restaurants. He has even worked shifts that include busing tables, cooking food and serving customers, Murphey said.

The court-approved turnaround expert said he trusts Shaub and has "no problem with Jim performing the duties that I've assigned to him."

Murphey said the franchise remains profitable, and each store averages $10,900 in weekly sales.

Waller, the Waffle House parent company's attorney, said it's too soon to discuss the future structure of SouthEast Waffles, but added "we do expect that Waffle House as a brand will remain a strong brand in those markets."

Meanwhile, Shaub resigned last month as chairman of the board of trust at Cheekwood, where he oversaw a $6 million annual budget and met face-to-face with donors. However, he remains a member of Cheekwood's board.

Other Cheekwood board members said they stand by Shaub.

"Many of us were taken off guard. Certainly I was," said Dr. Paul Sternberg, the board's new chairman. He said Shaub "has been very committed and has really done an excellent job and has shown integrity in everything he has done."

Shaub said he remains hopeful that SouthEast Waffles can get back on its corporate feet.

"The people that know me know my character. They know I wouldn't be involved in anything like that," Shaub said.

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Economy puts pressure on state Medicaid programs

The polar ice caps may be melting, but the credit markets have been frozen solid for much of this year. What does the current economic situation bode for health care?

The Nashville health-care community has a special interest in the state economic pressures, namely Medicaid programs.

More than 30 states are facing budgetary shortfalls for fiscal year 2009. The budget gaps range from approximately 20 percent of general fund revenues for California and Florida, to approximately 4 percent for Tennessee.

During economic slowdowns, states have traditionally responded to budgetary pressures by cutting services to beneficiaries and payments to providers.

In fact, during the last economic downturn, all 50 states froze or decreased Medicaid provider payment rates. Financial analysts have been modeling the projected impact and suggest that the payment cuts could range from a low of 2 percent to as much as 10 percent in high-risk states.

States facing severe significant budgetary shortfalls could even cut deeper. Last month, Alabama suspended payments completely when it expended its allotted Medicaid funds.

A recent investment research report attempted to assess the vulnerability of the major hospital companies to Medicaid cuts. Its analysis focused on the five publicly traded hospital management companies, but the results are illustrative.

In the hot seat was Universal Health Services. UHS was considered the most vulnerable to Medicaid cuts because of its high concentration of operations in Las Vegas. Nevada is experiencing a severe economic slowdown and extraordinary state budgetary pressures.

At the other end of the spectrum was Nashville-based Community Health System. The report concluded that Community Health faced the least exposure overall because of its deliberately broad geographic dispersion and moderate Medicaid mix. Brentwood-based LifePoint Hospitals fell in the middle of the pack, with more exposure than Community but less than Universal Health.

Other hospitals keep watch

Medicaid cuts also are of specific interest to Nashville-based Psychiatric Solutions. Psych Solutions is the nation's largest provider of in-patient psychiatric care and receives a significant portion of its revenue from Medicaid programs for children and adolescents.

Health care is generally considered one of the safest harbors in times of recessionary pressures. Reliance on federal programs, such as Medicare, is reasonably safe in tough economic times. State health programs, such as Medicaid, are more vulnerable because of state mandates for balanced budgets.

Companies that are more dependent on Medicaid revenue will take a special interest in this subject.

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Below-$3 gas is welcome in Nashville

The average price of regular unleaded gasoline in Nashville fell below $3 a gallon on Monday, the lowest it's been since February, and it was all smiles at the pumps as drivers reveled in the lower prices.

"I'm tickled," said Georgia Wallace, 81, as she prepared to put gas into her aging Nissan Maxima at a station in West Nashville at $2.999 a gallon. "It's surprising to me that anything is going down these days."

Nashville's average price was $2.95 per gallon for regular unleaded on Monday, and it's likely to head lower before the holidays. Prices have fallen an average of $1.14 a gallon in the Nashville area in the past month, according to a survey by AAA.

The lower prices will bring immediate aid to strained family budgets, and could help build consumer confidence, said University of Tennessee economist Bill Fox.

Eduardo Lobato, 28, filling his Chevrolet Tahoe SUV, said a full tank costs him about $20 less than it did a month ago. "This is a big difference," said Lobato, a restaurant worker. "I just hope it stays this way."

AAA spokesman Randy Bly expects prices to decline more over the next few weeks, although probably not at the fast pace motorists have seen in the last month.

Lower gas prices would be a bonus for travelers at Thanksgiving and Christmas, with pump prices possibly in the mid-$2.50s per gallon or lower in much of Tennessee, Bly said.

At a Kangaroo Express store off Interstate 24 in Antioch, the price for regular on Monday was $2.899, and clerk Kesheila Boyd said, "My customers are loving it. The pumps are loading up."

"It's wonderful," said Ben Cunningham, 33, a car-stereo installer who was re fueling his Dodge Charger. "I drive a lot in my work, so any break in gas prices helps."

National average is lower

Still, Nashville's average price remains slightly above the national average of $2.92 per gallon, AAA said. And some parts of the country have much lower prices. The lowest state average was $2.485, in Oklahoma, and 35 states are now under the $3-per-gallon mark, Bly said.

During the big summer holidays — Memorial Day, July Fourth and Labor Day — pump prices were around $4 a gallon and traffic was significantly down. "I think the consumer is going to enjoy much lower gas prices," Bly said.

"Presumably gas prices going down will have some effect on car sales," said Fox, the UT economist. "But I never thought that gas prices alone were driving car sales down. There still are other factors in the economy affecting big-ticket purchases like cars, including unemployment and the tight credit market."

While car sales might tick upward, Fox doesn't believe consumers will rush out and start buying big trucks and SUVs again anytime soon.

"People aren't going to forget the high gas prices that fast," he said. "But overall, consumer memories will be somewhat short."

"I'm appreciating these lower prices, and I think gas will get down to $2.50" a gallon, said Tommy Judkins, 62, a retired painter filling up a Toyota Celica in West Nashville on Monday.

"But it's a long way from the first gasoline I remember buying," he said. "It was 24.9 cents a gallon. Now, those were the days."

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Rescue teams step in

Over the past 14 months, Tom Singleton has split time between Nashville and New York, where he serves as interim chief executive of a three-hospital system.

Faced with challenges, including reimbursement cuts by New York's Medicaid program and private insurers, the system hired Singleton's employer, FTI Cambio, to help it improve performance.

A confluence of factors has turnaround specialists such as Singleton expecting more business over the next two years. That's because hospitals face a tougher road ahead — proof that even the once recession-proof health-care industry isn't immune to the current economic downturn.

"Most of the hospitals feel like there's going to be another major cut next year because (New York's) tax revenues are going down," Singleton said, citing lingering effects of Wall Street's meltdown on that state's treasury.

Among problems ahead, analysts expect cuts in Medicare reimbursements next year along with more states searching for ways to cut their Medicaid budgets.

On top of that, with many hospitals relying on investment income to fund expansions, the recent drop in stock prices means there's less money for that new emergency room or cancer treatment program. And health-care executives fear that donors might also reduce contributions to nonprofit hospitals and health systems.

A tighter credit market has reduced access to capital; and rising unemployment threatens to add to the ranks of the uninsured. That means more patients may be unable to pay their medical bills, a problem that has already plagued a lot of hospitals in Tennessee and nationwide.

"It's going to be a tough go," said Darren Lehrich, an analyst with Deutsche Bank, adding that Medicare and Medicaid account for half of all revenues at most hospitals.

Sheryl Skolnick, an analyst with CRT Capital in Stamford, Conn., said she expects more hospitals to seek outside help for financial counseling, consulting and distressed workouts in the future.

But she said how serious the repercussions are for individual hospitals depends on a lot of factors, including insurance payments, investments and how bad the economy is where a facility operates.

Specialists take over

Companies such as Brentwood-based FTI Cambio, the health-care arm of global consulting firm FTI Consulting Inc., provide consultants to help in specific areas or interim management to run hospitals or hospital systems.

At the New York system, Singleton led a team of 10 financial and operations specialists that helped recruit doctors, improve the mix of patients and reduce the length of hospital stays where possible.

Curt Whelan, a managing director of Chicago-based health-care consulting firm Wellspring Partners, said activity is strong nationwide but there's more demand for interim management and performance consulting in the Northeast and Midwest.

"It's a healthy sector that will get stronger given all of the environmental factors in health care," he said. "It's a market that has a lot of need and limited resources."

Nancy Falls, managing partner in the Nashville office of Atlanta-based executive services firm Tatum LLC, said executives today hope to manage expenses more closely and find new ways to save money.

Clients of Tatum have included Nashville-based Saint Thomas Health Services, whose current chief financial officer initially was brought in from that firm on an interim basis.

Upon his arrival in mid- 2006, Alan Strauss evaluated the role of financial staffers at each of the system's four hospitals and set specific operational and performance goals. Tatum also helped with a turnaround at the Spokane, Wash., hospital system Empire Health Services before its recent sale to Community Health Systems of Franklin.

Mark Turner, senior vice president of operations with Brentwood-based Brim Healthcare, said that hospitals often seek the company's help after they have tried on their own to get through a crisis or improve operations. Brim manages 35 hospitals nationwide mostly under long-term contracts.

Turner expects to start receiving more calls in the next six months to a year, adding that it can take up to a year for sour swings in the economy to start affecting hospitals. "It's business as usual, but I anticipate we're going to see more in the next year," he said.

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Home foreclosures oust faithful renters

MIAMI — Tita Mendoza and her husband moved into their Miami Beach condo in June and have been dutifully paying the $1,800 rent on time every month. And yet, they could be evicted any day now.

Last month, the Mendozas were served with court papers notifying them that their landlord was being foreclosed on, meaning the couple could be turned out on the street.

"It's unbelievable to me that people could be so irresponsible," said Mendoza, who moved to Miami Beach from Chicago, where the couple had owned a home. "We're just waiting to see what happens next."

Across the country, thousands of renters have become innocent victims of the mortgage crisis: They have been forced to move because the owner of the property was in foreclosure. Security deposits have been lost and lives turned upside-down as people scramble to find a new place to live on short notice.

A few states recently passed or proposed laws to protect renters by requiring mortgage holders to provide sufficient notice for tenants living in foreclosed properties. Sheriffs in Illinois and Michigan also have stepped in to help.

"It's a huge issue, and it's one that until recently has flown under the radar," said Danilo Pelletiere, research director at the National Low Income Housing Coalition. "Renters haven't been addressed by some localities because they have been focusing on homeowners."

Almost 15 million renters, or 40 percent of all renters, live in single-family homes, townhouses, condos or duplexes, according to Census data. While there are no national figures on foreclosure-related evictions, these types of rental properties have been vulnerable to foreclosure because they tend to be owned by small investors.

According to RealtyTrac, about one-third of the 378,250 properties with valid mailing addresses that were in default or waiting for a foreclosure sale in May were not occupied by the owner. That would indicate they are investment properties or rentals.

Sheriffs take stand

Last week, Tom Dart, the sheriff in Chicago's Cook County, drew the ire of landlords and lenders everywhere when he announced he would no longer send his deputies on court-ordered foreclosure evictions because many of the people being turned out on the street were tenants who had faithfully paid the rent. On Thursday, Dart announced that his deputies will resume taking part in foreclosure evictions next week, but only with stringent legal safeguards worked out with the courts. Among other things, a bank that is foreclosing on a property must prove it informed all tenants of a state-mandated grace period designed to allow them to look for new housing.

In Michigan, Genesee County Sheriff Robert Pickell put a two-week moratorium into effect Monday on evicting renters living in foreclosed homes.

"My sheriff doesn't wring his hands and gnash his teeth very long," said Undersheriff James Gage. "He looks at the situation, sees it's wrong and takes action."

Legislatures act

Last week, Ohio state Reps. Ted Celeste and Mike Foley, both Democrats, proposed the Ohio Renter's Protection Act. The law would require landlords to tell potential tenants if the rental property is in foreclosure and notify current tenants of a foreclosure within 30 days of the filing. The bill also calls for 30-day notice to the tenant before a sheriff's sale. It could reach a vote by the end of the year.

"You want to protect the tenant to the degree that they have some notice, should there be a need to have them leave," Celeste said.

In July, California Gov. Arnold Schwarzenegger signed a law giving a tenant 60 days to leave a rental housing unit after the property is sold in foreclosure.

Illinois passed a measure in August that calls for 90 days' notice before an eviction — a law that apparently was not being followed too closely because Dart told a judge that his deputies were often evicting renters who had not been given proper notification.

When it comes to tenant laws and renter's rights, each state has its own rules, and each state legislature is free to add further protections for tenants.

But there are no state or local laws in Miami to prevent the eviction of the Mendozas. They have asked a real estate agent to start planning for that possibility.

Other states — Indiana, Minnesota, Rhode Island and Washington — considered bills strengthening tenants' rights in foreclosures, but they apparently died in their legislatures, according to the National Conference of State Legislatures.

In Michigan, a bill was introduced to require landlords to notify tenants at least 30 days before a property is put up for auction. But the measure has been in committee since last December.

Renters can forget about help from the federal government, at least for now. The National Low Income Housing Coalition tried to get the government to spend $200 million for relocation assistance for renters who lose homes to foreclosure, but the request didn't make it into the big bailout of the financial industry.

Sheila Crowley, the coalition's president, said she will continue to press the issue: "If we spent $700 billion, can't we spend a chintzy $200 million?"

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$10M retail expansion cleared for Mt. Juliet

A Wilson County developer has been cleared to build a $10 million expansion of a development on the northern end of Mt. Juliet.

Developer Ben Forkum will start construction early next year on a 4-acre shopping center called Fountain Plaza, Forkum said last week.

The development is part of the larger Mt. Juliet Commons development, a mixed-use project that features another commercial development and more than 150 single-family houses and townhouses.

The Mt. Juliet Municipal-Regional Planning Commission approved the Fountain Square plan at a meeting Thursday.

The 36,000-square-foot project has been designed by Lebanon architect Michael Manous as a lifestyle center, an open-air shopping plaza that features amenities and stores aimed at upscale shoppers.

The development will be built on speculation, meaning no tenants have yet signed up, but Forkum aims to attract at least two restaurants, boutiques, professional offices and possibly a day spa.

"This is really a prime location in Mt. Juliet," Forkum said. "Wilson County has the second-highest median household income in Tennessee, and the northern side is where all the people are."

Forkum's plans call for building four buildings in two phases. Combined, these buildings will have room for as many as 18 businesses, with spaces available from 1,250 square feet to 13,450 square feet.

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If GM and Chrysler combine, what stays and what goes?

A drastically reduced number of Chrysler vehicles, plants and dealers could result from a merger of the automaker with General Motors Corp., a deal that has about a 50-50 chance of going through, possibly by the end of October, auto analysts say.

Reports abounded last week that Cerberus Capital Management LP was continuing serious talks with General Motors Corp. on the sale of all or parts of its Chrysler LLC subsidiary to GM.

A major player in the deal could be JPMorgan Chase & Co., one of the largest holders of Chrysler bank debt and one of GM's key lenders, The Wall Street Journal said.

There were even suggestions that France's Renault S.A. might be interested in a piece of Chrysler — the Jeep brand that Renault sold to the U.S. automaker 21 years ago.

Renault officials denied that Friday evening, though. "There are no discussions between Renault and Chrysler," Renault spokeswoman Frederique Le Greves said in an e-mail from France.

Speculation continues over how the U.S. car manufacturing business could be rearranged, though, in an environment of shrinking car sales, difficult financing and high debt. Possibilities range from a complete takeover of Chrysler by GM to the breakup of Chrysler into smaller parts, with several buyers swooping in for pieces, analysts say.

There's still a chance that Cerberus, which bought an 80.1 percent stake in Chrysler from Germany's Daimler-Benz in August 2007, could decide to continue running Chrysler as an independent automaker. (Daimler still holds a 19.9 percent share of Chrysler, although Cerberus is in negotiations to buy the rest of the company.)

But what happens if Chrysler is carved up or sold outright?

With a breakup of Chrysler, GM could be expected to go after the automaker's highly successful minivan business, along with a truck plant in Mexico and perhaps even the Dodge Ram pickup as an addition to GM's already profitable line of Chevrolet Silverado and GMC Sierra pickups, analysts say.

Strategically, a complete merger between Chrysler and GM "probably doesn't make much sense," said Jeremy Anwyl, a longtime auto-industry analyst who now serves as chief executive officer of the auto consumer Web site Edmunds.com.

But banks holding GM's debt might push such a merger, Anwyl said.

"The pressure is coming from the bankers, because they obviously are thinking about getting the debt repaid," he said.

Chrysler has about $10 billion in cash on hand, which potentially could help GM get through a possible cash crunch during 2009. GM lost $1.6 billion last year and posted a $510 million loss in its first quarter this year. The company is going through about $1 billion of its cash each month.

Cash, credit unit in play

Under a potential deal widely reported by the financial media, Cerberus would trade Chrysler and $3 billion in cash for the remaining 49 percent stake that GM still holds in the GMAC finance unit. Cerberus bought the other 51 percent of GMAC from GM last year.

"There would be some benefits from a complete consolidation, such as allowing the combined company to take some of its capacity offline," Anwyl said. "It could result in the shutdown of some dealers and plants, and maybe even some brands. But that would also mean ultimately giving up market share as well, and that doesn't seem to be a good strategic move."

GM's real interest in Chrysler might lie with the Jeep sport utility vehicle brand, as well as the minivan line, which includes the Chrysler Town & Country and Dodge Grand Caravan.

GM has no minivans in its current lineup, although it does sell a line of crossover utility vehicles, including the new Chevrolet Traverse made in Spring Hill, that compete against minivans.

"Some of this makes sense, but not all of it," auto analyst George Magliano with Global Insight said of a possible Chrysler-GM merger.

"Initially when Chrysler was put into play, GM wanted the Jeep brand and the minivans," he said. "Beyond that, the other stuff probably would be up for grabs. In an ideal world, GM would keep Jeep and the minivans, and sell off the rest."

With a breakup of Chrysler, the other potentially valuable pieces that could find separate buyers include its Mopar parts operation and Chrysler Financial, its captive finance unit.

In almost any merger or breakup scenario, Dodge and Chrysler's midsize cars and truck-based sport utility vehicles would be eliminated, analysts said. That includes the Dodge Avenger and Chrysler Sebring sedans, as well as the Dodge Durango and Chrysler Aspen SUVs.

GM has a strong line of midsize sedans, led by the award-winning Chevrolet Malibu and Saturn Aura. And it has a popular line of SUVs, including the Chevy Tahoe and Suburban, GMC Yukon and Cadillac Escalade.

Also in doubt would be the Dodge Ram pickup line, Anwyl said. The Ram — with just a 20 percent market share — is a relatively small player.

GM already has the industry's best-selling full-size pickups — the Chevrolet Silverado and GMC Sierra — whose combined sales totaled nearly 1 million units last year, although sales are off significantly this year.

If GM bought Chrysler, "would you stop making Ram and hope those buyers like the Silverado?" Anwyl said. "Or would you try to differentiate them enough in the marketplace to keep from losing share? Throw another vehicle into the mix, and it gets complicated."

What would GM toss?

GM also might have to do away with some brands, as well, analysts said. Chrysler is considered to be the most vulnerable, because Dodge and Jeep are more popular.

But some GM brands could be on a hit list, too. During GM's recent financial upheaval, some critics suggested axing the Pontiac, Buick and Saturn lines, leaving only Chevrolet, GMC and Cadillac in the GM fold. GM already has the Hummer SUV brand on the auction block.

Jeep could fill the void left by Hummer, several analysts said.

While Hummer has just premium-priced vehicles in its lineup, both of which are regarded as gas-guzzlers, Jeep has a full range of sport utilities, with prices starting around a modest $16,000.

It also has the iconic Wrangler off-road vehicle that has been the key Jeep product since the brand's inception after the end of World War II.

"Jeep is strong," Anwyl said, even with this past year's downturn in SUV sales. "It's something that GM or any other automaker might want."

The most economical Jeeps have fuel economy similar to that of some compact cars. The five-passenger Patriot, for instance, has EPA ratings as high as 23 miles per gallon in the city and 28 on the highway.

For Renault, the acquisition of Jeep would allow it to slip back into the U.S. market, which it abandoned completely with the sale of Jeep and American Motors. The company has said in recent years that it would like to return to the United States. But startup costs have been prohibitive, considering that without an alliance with an automaker already here, Renault would have to establish an entirely new dealer network.

With the purchase of Jeep, it would have an established dealer network that could also be used to sell some of Renault's fuel-efficient small cars that are popular in Europe.

Renault's chief executive is Carlos Ghosn, who also is the CEO of Japan's Nissan. Nissan North America is based in Franklin.

Renault holds a 44.3 percent stake in Nissan, while Nissan owns 15 percent of Renault. The French government also is a Renault stockholder.

In a recent memoir, former Renault Chairman Louis Schweitzer said that he regretted selling Jeep and AMC to Chrysler. At the time, though, the two brands were languishing.

"Renault buying Jeep could make sense," Magliano said. "It would be a quick way to get back into the U.S. market."

Ghosn made it clear during a visit to Nashville in July that Nissan wasn't interested in acquiring Chrysler. But the two companies do have agreements to manufacture vehicles for each other over the next few years, and Nissan is not expecting those deals to be affected by any changes in Chrysler ownership.

"As you know, we have three recently announced vehicle agreements in place with Chrysler —two small cars and a truck," Nissan spokesman Fred Standish said.

"Other than that, we're just keeping the lines of communication open."

Nissan will build the two cars for Chrysler, and Chrysler will provide Nissan with a full-size pickup.

The cash that Chrysler would bring to GM might make an all-in-one sale the best option for Cerberus and GM, Magliano said, although he believes it's more likely that Chrysler would be broken up.

But either way, Cerberus probably wants to get out of the auto business, he said. "The timing for them just turned out to be wrong," he said.

"When the deal was made for Chrysler last year, I don't think anybody counted on the credit crisis and the market going this way. It's been tough for Cerberus."

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Perkonomics takes business owners to the head of the class

Thirteen, the classic baker's dozen, is one of the oldest versions of perks to earn customer loyalty, but it takes more than a free doughnut to keep customers coming back these days.

In today's hyper-competitive world, true business-building perks cannot be just old-school loyalty programs or run-of-the-mill discounts.

TrendWatching.com, which says it has 8,000 people around the world on the lookout for new consumer trends, has coined the term "perkonomics" to describe consumer brand preferences that are increasingly determined by experience and differentiation.

Two of the most important consumer benefits — status and convenience — are the foundations for the most successful customer loyalty programs. Perks can help you achieve the following:

• Create uniqueness for commodity products

• Attract first-time customers

• Generate positive word-of-mouth and spark publicity

• Cultivate more desirable brand perceptions

Commodity products (credit cards, for instance) use perks to set themselves apart from one another. Capital One's air miles are the norm today, and a new perk is a credit card with your own photo on it. (So who's in your wallet? You are!)

At a recent festival in San Francisco, Visa Signature cardholders got an interesting perk — access to private luxury restrooms — while others, including those priceless MasterCard customers were relegated to Porta-Potties.

Saving time is a perk that customers hold dear. How many of you have taken advantage of the Disney FastPass, Dollywood's Q-bot or Avis Preferred to avoid standing in theme park or rental car lines?

Here's a combo deal on fast access: FLO, an airline security company, sells a $100 card that provides expedited stadium entrance at Washington Redskins' home games and speedy security screenings at selected airports.

Good health pays

An innovative South African health insurance company, Discovery, has a wellness program titled Vitality that offers points that result in travel and shopping discounts. You earn points for living a healthy lifestyle and decreasing risk factors for illness.

In subway stations throughout Manila, Nokia has installed mobile phone charging stations. There's no cost for the service that leaves Nokia customers "fully charged" to use their minutes.

All IKEA stories in Canada showcase the company's environmental consciousness by providing reserved parking for hybrid cars. This perk is also offered to visitors on Lipscomb University's campus.

Exclusivity is a time-tested way to deliver high levels of perceived value to customers. In a "perk partnership," American Express teamed with the creators of Bravo's Project Runway TV show.

American Express cardholders had exclusive rights to purchase the winning dress from the Sept. 3 episode. The frock came with a $650 price tag and some unusual bragging rights.

Some innovative hotels in the U.S. and elsewhere have set aside entire floors for female business travelers. An example is the Naumi in Singapore. In addition to the segregation, its Ladies' Floor offers in-room cosmetic and aromatherapy products in addition to an all-female staff.

So what guidance does "perkonomics" give to marketers? It tells marketers to understand the perks that can motivate top customers and prospects. Test fresh ideas for perks, and put the ones that work the best into practice. Your customers and your bottom line will thank you.

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Credit trickle slows construction

Local cities and counties are delaying millions of dollars in bond issues, waiting for municipal debt markets to calm down. Meanwhile, some local businesses are putting off expansions or new construction projects because of trouble getting loans.

Despite actions taken in recent weeks by the federal government to head off a deeper economic crisis, the impact of the credit meltdown still is being felt on Main Street.

Williamson County, the city of Franklin and Rutherford County are putting off a combined $132 million in bond issues to fund projects such as schools and government office buildings.

As a result, the city of Franklin is dipping into a reserve fund to complete its new police headquarters under construction. The Williamson County schools have put off construction of a new elementary school in the community of Spring Hill.

None of those governments delaying raising money have canceled projects for good, and many observers expect the municipal bond market to improve in time.

But no one is sure when that will happen or what the long-term impact could be on borrowing costs and interest rates.

"Our financial advisers are all advising us not to even consider going to market now," said Franklin finance director Russell Truell. "My big concern was what will be the cost of capital?"

Lenders are more picky

The credit crunch has also hit private businesses. Rob Shuler, managing partner of All-American Holdings, a Nashville-based private equity group, said interest rate costs have increased a total of 27 percent in recent weeks for a specialty chemicals manufacturer his firm owns in the Northeast.

"I was thankful that I still got the money. I was more concerned that they might not be willing to give me the money than about (the) cost of it," Shuler said.

A year ago, 10 lenders were willing to make a revolving credit loan to the same company.

"Good companies are still getting financed, but the market is looking closer at those deals and is more picky," said Sam Belk of Wells Fargo's regional commercial loan office in Nashville.

For some companies, financing is still available, but at a higher cost. Lenders are seeking 2 to 3 percentage points more in interest than a year ago, said James P. Craig, executive vice president with Health Care Finance Group Inc., a lender to health-care companies.

The pressures have caused delays in some commercial real estate projects.

Franklin-based MRCO LLC, which owns 85 Taco Bell restaurants in the Southeast, has put on hold for up to a year plans to build two replacement locations and two new ones, including one in the Nashville area. The reason: it was too difficult to obtain loans.

"Those two new ones would have obviously created new jobs," said Michael Shahsavari, the group's chief financial officer and a partner.

Bond market in disarray

Some of the biggest impact has been seen in the municipal bond market.

Several big investment firms that bought municipal bonds and then sold them to investors have either disappeared or cut back on their work force.

Wall Street giant Lehman Brothers filed for bankruptcy this fall, and UBS, a major international bank, exited the municipal bond business earlier this year. Likewise, investors have been holding onto cash or government Treasury bills, feeling too anxious about the economy to buy long-term municipal bonds.

"There is so much uncertainty with the government's bailout plan and who is going to be our next president, investors are sitting on the sidelines,'' said Mark McBryde, executive vice president of public finance for investment bank Stephens Inc.

With so few investors, interest rates have been rising.

The yield on 30-year AAA general obligation bonds was 5.92 percent Thursday, up from 4.84 percent just one month ago, according to Thomson Reuters' Municipal Market Data.

For a $40 million bond issue, that could add hundreds of thousands of dollars to yearly borrowing costs.

With higher interest rates, lots of municipalities have been putting off bond issues.

Since Sept. 18, a total of 201 bond and note sales totaling $11.25 billion have been rescheduled, postponed or canceled, according to industry publication The Bond Buyer.

Rutherford County decided not to pursue a $44.6 million bond issue planned for this fall.

The county will use its own funds or borrow short-term to start planned projects, including a new elementary school as it waits for the bond market to improve.

New school put on hold

Williamson County has put off a $42 million bond issue planned for this fall, hoping the bond market picks up early next year.

The Williamson County schools wanted $125 million last month for construction projects but got approval from the county commission for just $17 million instead.

As a result, the school district will put off building an elementary school in Spring Hill and put some portable classrooms at existing elementary schools instead, said the schools' director of budget and finance, Leslie Holman.

Some Williamson County schools could be forced into year-round schedules if county and school officials can't find a balance between the district's growth and
the county's finances, schools director Becky Sharber said.

"I don't think this is going to kill projects,'' said Rick Dulaney, a managing director at investment bank Morgan Keegan & Co. in Nashville.

"I hope this is temporary."

He thought some projects might get delayed in the midst of an economy that could benefit from more construction jobs.

"It's not good for the economy for all this to get shut down,'' he said.