Chrysler going toward bankruptcy

The company faces a Thursday deadline to come up with a viable business plan supported by its creditors, the United Automobile Workers union, and Fiat, the Italian car company that wants to acquire a stake in Chrysler.

As talks continue, Chrysler and the Treasury Department are preparing paperwork for bankruptcy filings, one as a reorganization in Chapter 11 with government funding and the other as a liquidation if no government money is available, both people said. Both spoke on condition of anonymity because the fast-moving negotiations are private.

With a deadline for restructuring less than a week away, Chrysler LLC and Treasury Department officials are still holding out hope that they can reach deals to keep the automaker out of bankruptcy courts, two people briefed on the talks said Friday.

Published reports Thursday also said Auburn Hills, Mich.-based Chrysler was preparing a bankruptcy filing. Such a bankruptcy would protect the pensions and retiree health-care benefits of United Auto Workers union members, The New York Times reported.

"My hope is that it's not a liquidation," Sen. Chris Dodd, chairman of the Banking Committee, said Friday morning on the Early Show on CBS, "but what they call a debtor-in-possession, sort of Chapter 11 filing, which would allow for the reorganization of these companies."

One possibility is that a bankruptcy would allow the company to rid itself of unwanted liabilities. That would allow Fiat SpA to select which operations it wants, according to The Wall Street Journal.

"As we move forward in this process, we believe it's important to keep all options open," Chrysler said in a statement. "Chrysler will continue to work through the end of the month, based on the direction given by the Presidential Auto Task Force, to secure the support of the necessary stakeholders and reach a successful conclusion that the Administration and U.S. Treasury deems appropriate."

Messages seeking comment were left with the UAW and the Treasury Department.

Chrysler has been operating on $4 billion in government aid since the beginning of the year. The Obama administration has promised another $6 billion to the carmaker if it can arrange a tie-up with Fiat and extract deeper concessions from stakeholders, but that outcome appears increasingly remote.

A sticking point involves a group of banks and hedge funds that hold about $6.9 billion in secured Chrysler debt. They are negotiating with the Treasury Department over a possible debt-for-equity exchange involving a stake in a Chrysler-Fiat alliance. Most recently, Treasury has asked the debt holders to forgive $5.4 billion and take a 5 percent stake in the alliance, which is far from the lenders' latest offer.

"The kind of deal they need to cut to survive outside of bankruptcy doesn't seem likely," said Douglas Baird, a University of Chicago Law School professor who specializes in bankruptcy cases.

He said the debt holders, whose loans are secured by the company's assets, may prefer that the company go into bankruptcy because that might be their best chance to recoup the biggest portion of their investment.

"The big prize-asset that the creditors are banking on is the Jeep brand name," he said, which would be up for sale if the company liquidates.

Chrysler would file for bankruptcy even if it reaches an agreement with its lenders and Fiat, but if the deals fall through, the company would begin the process of liquidation, the Journal reported, citing several people familiar with the matter.

"I wish we had different results, but the realities are what they are," Dodd said. "This may be the best option, even though we would have preferred a different one."

"I hope this is not a liquidation - I think that would be the wrong step - but rather one that allows for reorganization," he said.

Sen. Debbie Stabenow, DMich., said late Thursday that she continued to oppose bankruptcy for Chrysler.

"With Chrysler, we want to see Chrysler/Fiat come together," Stabenow said on The Ed Show on MSNBC.

She said banks that have received government aid should "be willing to stand up" to help Chrysler.

Fiat, which struggled earlier this decade, is seeing new opportunities in Detroit's troubles. Its chief executive, Sergio Marchionne, has raised the possibility of also acquiring General Motors' Opel division in meetings with U.S. officials, a top government negotiator said Thursday.

Such a deal, while far from certain, could turn Marchionne, a lawyer by training, into one of the most prominent auto executives in the world.

During a call with analysts Thursday, Marchionne said he had not had direct talks with Opel, adding, "Chrysler is my first and foremost objective."

Despite any plans for a smooth outcome from a Chapter 11 filing, there are risks in bankruptcy. Consumers may avoid Chrysler cars because of worries about their quality or resale value.

A bankruptcy filing for Chrysler likely would wipe out existing equity stakeholders, notably Cerberus Capital Management, which took over the carmaker from Daimler in 2007.

Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of a GM filing. GM faces a June 1 deadline in its own efforts to draft a new restructuring plan. The company said Thursday that it would idle 13 assembly plants in North America to reduce production by 190,000 vehicles from May through July.

The Treasury Department on Friday said is has given GM another $2 billion in federal loans.

A government report earlier this week said Treasury was prepared to provide GM with up to $5 billion more in federal loans and Chrysler with up to $500 million more in bailout support as they race against deadlines to restructure.

Information for this article was contributed by Tom Krisher and Dan Strumph of The Associated Press and Micheline Maynard and Michael J. de la Merced of The New York Times.

Be cautious when making offer

Your goal is always the same. You want to buy the best house for your needs and pay the lowest price. In many cases, you can start with a price that is less -- maybe even considerably less -- than the asking price and negotiate from there.

However, this strategy might not work in some California inland markets where housing prices have dropped about 50 percent in recent years. Some low-end housing markets plagued with foreclosures have heated up in recent months. Multiple offers are common, and some listings sell for more than the asking price.

Decades ago, sellers priced a little high to leave room to negotiate down. Buyers typically offered 5 percent less. Then they negotiated and settled at a price in between. Today, there is so much variability in the housing market that it's impossible to use a pat formula for coming up with an offer price.

Tailor your offer price to the specific house you want to buy. How much you offer should depend on how much you can comfortably afford to pay, which may be less than what the lender says you can afford. The price should be determined by current local market values, how well the listing is priced for the market and whether or not you are in competition.

HOUSE HUNTING TIP: Buyers making offers in competition should try to make a rational decision regarding how much they're willing to pay. Don't get caught up in the frenzy of activity and offer more than your top price for the property. If you overpay, you could get cold feet and back out. In this case, your deposit might be at risk.

An appraisal contingency makes your offer contingent on the house appraising for the price you agreed to pay in the purchase agreement. If the property appraises for less than that price, you can withdraw from the contract and your deposit will be returned to you. That is, if your purchase agreement clearly stipulates this.

Other options are to try to renegotiate the price with the seller or put more cash down to make up the difference between the loan amount the lender is willing to lend and the purchase price.

Lenders are being just as cautious about appraisals as they are about qualifying buyers for a mortgage. Some appraisals are coming in lower than market value and some lenders are knocking down the appraisal 5 percent or so if they're concerned that home prices might decline.

Buyers who offer an under-asking price can improve their chances of starting a dialogue with the seller if they are preapproved by a lender for the financing they'll need to close the deal. The number of transactions that fail has increased in the current market. In most cases, this is due to buyers having difficulty getting financing. If the sellers know you will be able to perform, they'll be more likely to work with you to come up with a mutually acceptable price.

Short-sale sellers will need lender approval if the accepted price is lower than the amount of financing secured against the property. This can be a slow and tedious process. Many lenders realize that it makes more sense for them to work with a buyer on a short sale than it is to let the property go into foreclosure. But, your contract should include an escape clause so that you can withdraw without penalty if the lender is not responsive.

THE CLOSING: If you make a low offer on a bank-owned property and you don't get a response, make another offer at a higher price, but only if you think the property is worth it.

Dian Hymer is a nationally syndicated real estate columnist and author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

Waste Services Inc.

Waste Services Inc. is a multi-regional integrated solid waste services company that provides collection transfer disposal and recycling services in the United States and Canada. Waste Services Inc. has a market cap of $224.4 million; its shares were traded at around $4.87 with a P/E ratio of 12.2 and P/S ratio of 0.4. Waste Services Inc. had an annual average earning growth of 20.2% over the past 5 years.

Highlight of Business Operations:

Revenue was $95.8 million and $116.6 million for the three months ended March 31, 2009 and 2008, respectively, a decrease of $20.8 million or 17.8%. The decrease in revenue from our Florida operations for the three months ended March 31, 2009 of $9.8 million or 16.3% was driven by decreased collection volumes, primarily in our industrial and commercial lines of business of $2.9 million, coupled with lower third-party transfer station, recycling and landfill volumes of $2.6 million. Declining fuel costs resulted in lower surcharges of $2.6 million and other net decreases of $3.5 million, primarily related to the expiration of certain residential recycling collection contracts. Offsetting these decreases were net price increases of $1.3 million, which was adversely affected by commodity pricing declines of $0.8 million, and increases from acquisitions of $0.5 million.

In March 2008, we sold our hauling and material recovery operations and a construction and demolition landfill site in the Jacksonville, Florida market to an independent third party. The proceeds from this sale approximated $56.7 million of cash, including working capital. At the time of close, we were actively pursuing an expansion at the landfill. If the construction and demolition landfill site did not obtain certain permits relating to an expansion, we would have been required to refund $10.0 million of the purchase price and receive title to the expansion property. Accordingly, at the time of closing we deferred this portion of the proceeds, net of our $3.0 million cost basis. During December 2008, the permits relating to the expansion were secured and the deferred gain was recognized. Simultaneously with the closing of the sale transaction we entered into an operating lease with the buyer for certain land and buildings used in the Jacksonville, Florida operations, for a term of five years at $0.5 million per year. The lessee had the option to purchase the leased assets for a purchase price of $6.0 million, which it exercised in March 2009 resulting in a gain on sale of $3.3 million in the quarter. The proceeds from the sale of the leased assets were utilized to repay amounts under the revolver portion of our Credit Facilities. At the time of close in March 2008, we utilized $42.5 million of the proceeds to make a prepayment of the term loan under our Senior Secured Credit Facilities. Accordingly, we expensed approximately $0.5 million of unamortized debt issue costs relating to this retirement. For the year ended 2008, we recognized a pre-tax gain on disposal of $18.4 million ($11.1 million net of tax) relative to the sale of the Jacksonville, Florida operations, of which $11.5 million ($7.0 million net of tax) was realized during the first quarter of 2008. Included in the calculation of the gain on disposal for the Jacksonville, Florida operations was approximately $23.6 million of goodwill. Subsequent to the disposal of the Jacksonville, Florida operations, we adjusted the pre-tax gain on disposal for the settlement of working capital of approximately $0.2 million.

The decrease in revenue from our Canadian operations for the three months ended March 31, 2009 of $11.0 million or 19.5% was primarily due to the unfavorable effect of foreign exchange movements of $10.9 million. After considering foreign exchange rate changes, revenue from our Canadian operations was relatively flat. We realized net price increases of $1.9 million, which were adversely affected by net commodity pricing declines of $0.3 million, and organic volume growth of $0.1 million. Offsetting these increases were decreases in fuel surcharges of $1.0 million resulting from lower fuel costs, and other decreases of $1.1 million, primarily related to the loss of residential contracts.

The decrease in cost of operations from our Canadian operations for the three months ended March 31, 2009 of $6.4 million or 17.0% was primarily due to the favorable effect of foreign exchange movements of $7.5 million. After considering foreign exchange rate changes, the increase in cost of operations from our Canadian operations of $1.1 million primarily relates to increased disposal rates for waste volumes shipped to the United States of $0.9 million, increased labor costs of $0.4 million, repair, maintenance and other increases of $0.8 million, offset by decreased fuel costs of $1.0 million. As a percentage of revenue, cost of operations for our Canadian operations was 68.6% and 66.6% for the three months ended March 31, 2009 and 2008, respectively. The decline in our Canadian gross margin is primarily due to lower commodity revenue coupled with low margin waste streams disposed of at our transfer stations and higher operating costs, as previously discussed.

Depreciation, depletion and amortization was $10.4 million and $11.7 million for the three months ended March 31, 2009 and 2008, respectively, a decrease of $1.3 million or 11.1%. As a percentage of revenue, depreciation, depletion and amortization was 10.8% and 10.1% for the three months ended March 31, 2009 and 2008, respectively. This decrease primarily relates to decreased landfill depletion of $0.5 million, which is primarily due to decreased third-party and internal disposal volumes at our domestic and Canadian landfills. Amortization of intangible assets decreased $0.3 million primarily due to lower amortization associated with our customer relationship intangible assets. Foreign exchange rate movements had a favorable effect of $0.9 million. Landfill depletion rates for our U.S. landfills ranged from $5.67 to $6.09 per ton and $3.57 to $6.16 per ton during the three months ended March 31, 2009 and 2008, respectively. Landfill depletion rates for our Canadian landfills ranged from C$0.66 to C$8.01 per tonne and C$2.99 to C$7.28 per tonne during the three months ended March 31, 2009 and 2008, respectively.

Selling, general and administrative expense was $13.2 million and $16.4 million for the three months ended March 31, 2009 and 2008, respectively, a decrease of $3.2 million or 19.5%. As a percentage of revenue, selling, general and administrative expense was 13.8% and 14.0% for the three months ended March 31, 2009 and 2008, respectively. The overall decrease in selling, general and administrative expense was affected by a restructuring of corporate overhead and other administrative and operational functions that we completed during the fourth quarter of 2008, which is more fully described in our annual report on Form 10-K for the year ended December 31, 2008. These restructuring efforts have, for the most part, resulted in decreased salaries, wages, bonuses and other benefits of $1.4 million and decreased consulting and other administrative costs of $0.6 million. Stock-based compensation increased $0.4 million, primarily as a result of grants made in the first quarter of 2009 and the vesting of previously granted options and restricted stock units, which are more fully described in the notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere herein. The favorable effect of foreign exchange movements was $1.6 million.

Norwood tours shows

In its heyday more than a half century ago, the Norwood neighborhood just northeast of downtown was a premiere address in Birmingham. Its Victorian and Elizabethan-influenced mansions sit among cozy craftsmen cottages and stately American four-square homes, centered on a central boulevard that served as a promenade for residents.

The folks who live there today, decades after urban flight started a downhill transition among the mansions on the hill, are determined to restore the neighborhood to its original charm. An influx of people, from gay and straight couples to young black and white professionals to a smattering of architects, has been buying and renovating the old homes.

Next Saturday, May 2, residents plan to reintroduce the new and improved Norwood to the rest of Birmingham with the 2009 Historic Norwood Home Tour, from 10 a.m. to 4 p.m. For $10, tour-goers get to visit 10 houses - some fully restored and decorated, others in various stages of renovation. That's why it's nicknamed "the Hard-Hat Tour," Norwood resident and home tour committee member Tom Creger says.

"A lot of what's going on here is a process, and we wanted to invite people to see the process. It will also give people a chance to see other houses that are available. Some may look like they can't be saved, but if a house is standing, there is hope," Creger says. Houses now sell from about $30,000 for a fixer-upper to $130,000 for a finished property, he says.

Neighborhood president Robert Gilmore, along with the Norwood Seniors, will be greeting folks and selling tickets at the old trolley stand at Norwood Boulevard, near the intersection of 15th Avenue and 32nd Street North. The Norwood Walk Club will be strolling the neighborhood, giving directions to the tour houses, including the fully restored Nygren House at 1501 27th St. North. The house, built in 1926 by Swedish immigrant Leander Nygren, now serves as the office of the Norwood Resource Center, which addresses social and physical needs of the community.

The tour also stops at Bell-Hanbury House, 1615 31st St. North, home of James and Shontay Wilson and their young children. James Wilson, an architect, moved three walls to make the kitchen the hub of the house and also add room for a master bath.

The Prairie-style Westley House, at 1623 31st St. North, belongs to Peace Corps alum James Clark and his partner, Robert Christian. The two secured a HUD loan to finance the home's total rehabilitation. Robert added a garden.

Architect Doug Shaddix is working on his bungalow, the Johnson-Ozley House, at 1317 32nd St. North. Shaddix hired a contractor to replace the major systems but is doing the rest of the work himself, including repairing the original plaster.

Shaddix will be sharing what he's learned with visitors. In fact, each house will have a renovation theme, from how to work with an architect or contractor to how to do a green renovation or get a HUD loan.

"We're really pushing the renovation thing," Creger says. "We're not the Hollywood Tour of Homes, or the Forest Park tour. We have some showplaces that are beautifully appointed. But we have some with saw horses in the middle of the living room.