Thursday, April 9, 2009

No clear sign of recovery in real estate market

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No clear sign of recovery in real estate market

6 Apr 2009, 2100 hrs IST, Supriya Verma Mishra, ET Bureau

 

MUMBAI: There seems to be no clear sign of recovery in the real estate market. Even the otherwise busy season (January to March) could not prove

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to be any better than the previous quarters. This is evident from the offtake of inventory at project sites of various developers.
A recent property brokers’ poll conducted by Edelweiss on the residential property market also throws up the same results. The only projects that are selling are the ones that are priced at least 25-30% discount to the ongoing market rates. In fact, some of the new projects (Lodha’s project in Thane, Dombivili, HDIL’s project in Andheri and Kurla) launched in Mumbai and around did see some good response as they were priced very attractively.
Buyer sentiment is expected to remain negative due to weak economic environment. Consequently, property volumes would remain muted and prices would decline further.
As per the survey, 76% brokers expect price trend to be negative over the next three months and 53% brokers expect price trend to be negative over the next one year.
Location wise, Bangalore is the least pessimistic market with 32% brokers having negative outlook over the next one year. On the other hand, Chennai remains the most pessimistic with 73% brokers having negative outlook for the same period.
This would further have a subdued impact on the earnings estimates for the sector. Sales are expected to be down by more than half of what they were in the March’08 quarter. Both DLF and Unitech, the largest players of the sector, are faced with unsold inventory and increasing interest costs.
No utopian situation can lend a helping hand to the declining operating profit of these developers, and things do not seem to be getting better for another year for either of these developers.

Sahara seeks Rs 2000 crore from Jet Air

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Sahara seeks Rs 2000 crore from Jet Air

10 Apr 2009, 0649 hrs IST, Swati Deshpande, TNN

 

MUMBAI: In round two of the Jet versus Sahara litigation, Sahara Commercial Corporation on Thursday said that Jet was no longer entitled to the

concession of the renegotiated Rs 1,450 crore in the takeover deal. Sahara, responding to Jet's application against attachment of its aircraft and movable properties, alleged that since the Naresh Goyal-led Jet defaulted on the payment, it was now liable to pay the original Rs 2,000 crore for the takeover.
Jet's counsel Janak Dwarkadas refuted the charge that the airline had defaulted on the payment. Jet was given time to file a rejoinder to Sahara's affidavit. Jet bought Sahara India Airlines in April 2007 for Rs 1,450 crore after an arbitration award brought down the original takeover price of Rs 2,000 crore. Jet paid Rs 900 crore upfront and was to pay the balance in four equal annual instalments.
According to Sahara, Jet had defaulted on the first instalment and was thus no longer entitled to the concession of the renegotiated amount. Sahara had initiated an attachment process of Jet's movable properties, including its furniture at the airline's Santa Cruz headquarters and its 40 jets. At the hearing last week on Jet's plea, when the Bombay high court had given a stay against attachment of Jet's aircraft , the airline's lawyer Dwarkadas, had said that in March 2008, the I-T department demanded tax dues of Rs 107 crore from Sahara India Airlines (now called JetLite). According to Jet, this amount was due from the Sahara as it pertained to the period prior to the acquisition. As per the deal, any tax liablity on Sahara prior to deal would have to be borne by Sahara.
So, last March, while paying Sahara the instalment of Rs 137 crore, Jet deducted part of its I-T dues. This year too, Jet deducted Rs 50 crore on the same account.

Plans on track, 1st car to roll-out before summer 2010: Nissan

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Plans on track, 1st car to roll-out before summer 2010: Nissan

10 Apr 2009, 1115 hrs IST, PTI

 

MUMBAI: Japanese auto major Nissan, which is setting up a Rs 4,500-crore car-manufacturing facility with Renault in Chennai, said that the

project is on schedule and that its first car would roll out before summer 2010.
"There is no delay, our plans are on track and Nissan India will come out with its next-generation A-segment car- Micra, on schedule before summer 2010," Nissan Motor India's Managing Director and CEO Kiminobu Tokuyama said.
The 50:50 joint venture between Nissan and Renault at Oragadam near Chennai, will have a capacity to manufacture four lakh cars annually and Nissan will initially produce two lakh cars, which it then proposes to scale-up to manufacture up to three lakh cars in about four years time.
The Micra hatchback car is named March in Japan and the Indian version would be christened either Micra or March, he said.
As of now the joint venture stands, though Renault, which was to originally roll out its models by mid-2010, has not yet indicated when it would now launch its vehicles from the facility.
"As of now, we only know that their launch has been postponed," Tokuyama said.
Tokuyama said Nissan proposes to manufacture 4-5 models from its stable in the next 4-5 years.
The Micra would be available in both petrol and diesel engines, he said, adding that nearly two-third of its production would be exported.
The Ennore port in north Chennai would have a dedicated jetty for exports of Nissan cars and the company hopes to export 2-2.5 lakh cars annually in 3-4 years and sell 90,000-1,00,000 units in the domestic market.
Tokuyama made it clear that Nissan has no plans to manufacture a small car to take on the Tata's Nano at this facility, but Nissan-Renault would be collaborating with BajajAuto to manufacture a small car in the country.
He also said that Nissan's plans to manufacture light commercial vehicles with Ashok Leyland was on but its launch has been delayed because of the prevailing economic environment.
This would be at a different facility, which was coming up in Chennai, and the proposal is that Nissan India would market the vehicles, he said.

HP, Dell, Acer log on to green computing

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HP, Dell, Acer log on to green computing

10 Apr 2009, 1020 hrs IST, Writankar Mukherjee, ET Bureau

 

KOLKATA: After consumer electronics and mobile phones, it’s now the turn of computers to turn green. Leading vendors such as Hewlett-Packard

(HP), Dell and Acer are adopting ‘green computing’ in a major way in India. Apart from rolling out energy-efficient computers made from recyclable materials, the vendors are launching recycling programmes in India to reduce e-waste.
The vendors feel their latest initiatives will boost sales amidst the slowdown, since green computers consume much less energy and reduce the total cost of ownership. Analysts, too, feel green computing could become the next growth driver at a time when market watchers like IDC have projected that there could be a drop inPC sales in India this year.
Interestingly, the government is also coming up with energy efficiency standards for computers. Bureau of Energy Efficiency (BEE) secretary Saurabh Kumar said the organisation is already collecting data to come up with the standards by March 2010. “Initially, we will come up with energy standards for desktops and monitors, and eventually for laptops,” he said.
Be that as it may, the vendors claim sensitivity for green PC is already growing amongst corporates and IT/BPO firms. “Corporates are, for sure, seeing the benefits of cost savings. However, the consumer segment is yet to wake up to green computing,” said Acer India chief marketing officer S Rajendran. The BEE labelling is expected to fill that gap and create consumer awareness about energy efficient computers.
HP has just rolled out a notebook battery replacement programme in India. “During discussions with CIOs, we found that many of them are clueless about the best way to dispose their notebook batteries. We expect more than 500 enterprise customers in India to benefit from this,” said HP India country manager - commercial attach (PSG) Deepak Jagtiani.
Dell, too, is betting on green computing to drive growth.
“At a time when companies are reducing costs, energy efficient computers andservers will find more acceptance. It makes business sense for enterprises and consumers since these products enable huge savings on power bills throughout the product’s lifecycle,” a Dell India spokeswoman said.
Apart from innovations in the product line, Dell and HP have rolled out recycling programmes in India for safe disposal of old equipment in an environment responsible manner. Dell is even innovating packaging by making them from sustainable material. HP’s design centre in India is working on developing several such products.

IBM bags another outsourcing deal from Bharti

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IBM bags another outsourcing deal from Bharti

10 Apr 2009, 0132 hrs IST, Joji Thomas Philip, ET Bureau

 

CHENNAI: Global IT major IBM has bagged yet another outsourcing deal from Bharti Airtel, the country’s largest private telecom company. IBM will

manage the IT requirements of Bharti’s hived-off tower arm, Bharti Infratel. The deal is estimated to be worth around Rs 250 crore, according to executives in the know of the development.
When asked on the IBM deal, the Bharti spokesman confirmed the development: “Bharti Infratel has outsourced its IT platform to IBM to bring in a comprehensive architecture that provides benefits to its customers, suppliers and employees. This is a continuation of Bharti’s strategic partnership with IBM across its various businesses, including
Bharti Airtel and Bharti Retail.” But he refused to comment on the deal size and the duration.
Bharti Infratel is the second-largest telecom tower company after Indus Towers, which is a JV between Bharti, Vodafone and Idea Cellular. It has 42% in Indus and is estimated to have 65,000-70,000 towers across the country. In 2008, Bharti had offloaded up to 12.5% in Infratel to a clutch of PE players for about $1.25 billion, valuing the company at around $12.5 billion.
This is IBM’s seventh deal with Bharti Airtel over the last five years. In 2004, the US-based IT major had bagged a $750-million outsourcing deal from Bharti and this deal has already touched the $2.5 billion mark as of March-end 2009. IBM also handles theIT operations for Bharti’s recently launched operations in Sri Lanka and also for the telco’s operations in Jersey where a Bharti subsidiary offers mobile services.
Last year, IBM’s BPO arm in India, IBM Daksh, bagged a six-year contract to provide voice and back-office services, including customer service, collections, and customer retention, for Bharti’s premium customers.
Bharti and IBM also signed a $150-million deal under which the software major would handle all IT operations for the telcos’ direct to home television and Internet Protocol TV services.
Beyond IT outsourcing, Bharti has also developed a $100-million service development platform in a tie-up with IBM for companies to develop and offer applications to Airtel customers across mobile, landline, broadband and DTH services

BT may renegotiate pacts with vendors

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BT may renegotiate pacts with vendors

10 Apr 2009, 0119 hrs IST, Pankaj Mishra, ET Bureau

 

HYDERABAD: BT Group, the biggest customer for Infosys Technologies and Tech Mahindra, has approached these vendors for renegotiating its

outsourcing contracts, and is seeking at least 20% lower billing rates for several existing and new projects.
Outsourcing customers are using the downturn as an opportunity to question the high margins of Indian service providers. The top five Indiansoftware companies renegotiated contracts worth $1.5 billion since September last year at around 15% lower rates.
Britain’s biggest phone firm is currently restructuring its BT Global Services (BTGS) unit, which accounts for almost half of Infosys’ BT revenues. Tech Mahindra derives almost 57% of its revenues from BT.
“Having announced over 6,000 job cuts at its services unit few weeks ago, BT is driving cost-saving initiatives very aggressively with its contractors,” said a UK-based outsourcing expert. “Some insiders suggested that BT might have to write off almost $1 billion in its services unit, which will put further pressure on contractors.”
When contacted by ET on Wednesday, spokespersons at BT and Tech Mahindra did not respond to an email. Infosys would not comment as it is in a silent period prior to announcing its financial results next week. Infosys’ BT revenues could be down to almost $300 million, from around $380 million last year, the expert added. In a worsening economic environment, customers such as BT are also asking their vendors to give up on the premium rates for some of the niche projects, impacting average billing rates for the total outsourcing contract.
Other experts such as Bob McDowall of TowerGroup say that by renegotiating rates with vendors, BT is reacting to the current environment. “We live in a buyer’s market. If the recession continues and turns into a depression, combined with weaknesses in sterling, some outsourcers might be adversely impacted by shorter-term contracts, for example, development of applications staying on shore,” said Mr McDowall.
Earlier this year, BT had to write off nearly $500-million contracts signed during the tenure of former CEO Ben Verwaayen. On January 22, 2009, BT announced in its earnings call that BTGS had overstated profits in 17 major contracts, and would be taking £340 million writedowns for 15 of those contracts. “BTGS’ performance could have a significant impact on Infosys’ growth expectations for FY10E,” Diviya Nagarajan, an analyst at Mumbai-based JM Financial, wrote in her report.
BT, which accounted for almost 9.1% of Infosys’ revenues last year, will contribute around 6.9% of the company’s business this year, down over 2%, Ms Nagarajan added.
Meanwhile, some UK-based customers are also seeking to reduce offshoring because of local sentiments about rising unemployment rate. “UK companies are more sensitive to preserving jobs at a time of increasing unemployment, now over 2 million in the UK and estimated by some forecasters to reach 3 million in 2010,” Mr McDowall added.
As reported by ET last month, top Indian tech firms such as TCS, Infosys, Wipro and HCL are signing new outsourcing contracts at 15-20% lower billing rates than last year, as customers including BT, BoA and Citibank renegotiate existing contracts and award new projects at much lower rates.

Laid-off US workers finding new jobs, less pay

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Laid-off US workers finding new jobs, less pay

9 Apr 2009, 1011 hrs IST, REUTERS

 

NEW YORK: Half of US workers laid off in the past year who were questioned in a survey released on Wednesday reported finding new jobs, but often

with less pay and in a different field.
The survey of 807 adults who lost full-time jobs in the past year showed that 49 percent had found new jobs but of those, 49 percent now earn less money.
The survey was conducted for CareerBuilder.com, an online jobs site. Those questioned for the survey were chosen as representative of workers in an array of industries at various job levels around the nation, CareerBuilder.com spokeswoman Jennifer Grasz said.
Of those with new jobs, 38 percent said they are now employed in a different field, the survey found. Eight percent reported finding part-time work.
One-sixth of those with new jobs said they had to relocate, one-sixth are now working more hours and one-sixth reported getting higher pay, the survey found.
"This is encouraging news for the job seekers out there," Grasz said. "There is a popular misconception that if you lose your job today you won't be able to find another opportunity."
"There are companies out there hiring today," Grasz said.
Workers aged 35 to 44 were most likely to find new jobs, while workers aged 18 to 24 were least likely, according to the survey. More men than women found new jobs.
A third of the laid-off workers said they got severance packages from their employers, and two-thirds of those said the severance lasted for two months or less. Forty-five percent of the laid-off workers said they had to tap into long-term savings.
The survey was conducted between February 20 and March 11 by Harris Interactive. Its margin of error was plus or minus 3.4 percentage points.
CareerBuilder.com is owned by Gannett Co, Tribune Co, the McClatchy Co and Microsoft Corp.

India may see 75, 000 IT job cuts this year

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India may see 75, 000 IT job cuts this year

10 Apr 2009, 0930 hrs IST, Jessica Mehroin Irani & Deeptha Rajkumar, ET Bureau

 

MUMBAI: The Indian IT industry, already under pressure since the downturn began in the US financial, banking and insurance markets last year, is

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likely to see close to 75,000 job losses this year, according to seniorexecutives of leading software companies.
US president Barrack Obama’s policy on outsourcing had prompted some technocrats to estimate the extent of possible job losses in India at about 50,000 jobs in the first half of the new year itself. These job losses would be across sectors such as IT, ITeS and BPO, they added.
“As on March 31, 2008 there were 550,000 direct jobs created by the IT industry in Bangalore,” said Infosys board member TV Mohandas Pai. “I would estimate close to 30,000 IT professionals, earning an average salary of Rs 5 lakh per annum, would have lost their jobs between April 2008 and March 2009 in Bangalore.”
Mr Pai also said that for fiscal year 2009-2010, an additional 25,000-30, 000 jobs may be lost in Bangalore alone. “These job losses are due to the fact that many companies have shed excess capacity as the growth rates of industries have decreased. It is possible that a fair number of these people would have found jobs in other industries too during this time at a lesser salary,” he added.

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Laid-off US workers finding new jobs, less pay

Mr Ravi Ramu, CFO of realty firm Puravankara and former CFO of Mphasis says about 50,000 jobs could be at risk next year. However, what worries him more is the spin off effect that will see a lot more losses. “Every direct job in the BPO is supported by 6 indirect jobs. In reality, the spin-off will be even more negative.” Even though, IT bigwigs are concerned about the high rate job loss, IT lobbying body Nasscom, doesn’t think so.
According to Nasscom president Som Mittal, earlier the retrenchment was not on such a large scale as attrition was high. “Companies are stressing more on performance issues in these times as they want to increase productivity. The coming times are uncertain and people are not hiring in large numbers as before. There is already a wage moderation that is happening across the industry and this will definitely reflect on the spending,” he told ET.

Asia's China-fueled equity rally may run out of steam

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Asia's China-fueled equity rally may run out of steam

10 Apr 2009, 1008 hrs IST, REUTERS

 

HONG KONG: Asian equity markets are likely to run out of steam after leading a one-month rally in global stocks, with the full brunt of the deep

Asia stocks

global recession yet to be fully felt on corporate earnings and balance sheets.
The 26 per cent jump has been driven by cyclical plays such technology and consumer discretionary shares, mainly on hopes that the worst of the global economic recession was over and that China's growth was cranking up again. But the road to recovery will be long.
The global economy could take longer than expected to recover, banking systems may suffer fresh setbacks and credit markets are still strained. Companies needing torefinance debt also continue to face steep costs in credit markets, even as their cash flow shrinks as consumer demand sputters.
"There are a number of ways it can come a cropper. The risks are innumerable," said Tim Rocks, Asia equity strategist at Macquarie Securities in Hong Kong. Analysts recommend looking for companies with relatively robust balance sheets which may outperform their peers once doubts about a global recovery are finally wiped away, likely late this year or in 2010. Other investors said they prefer to invest in high-grade bonds in the United States or elsewhere rather than Asian equities, thanks to the steep returns available due to a blow-out in credit spreads.

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CHINA EFFECT
Markets more closely hitched to China's economic engine have benefited the most in the recent rally, as investors hope Beijing's nearly $600 billion of fiscal stimulus will filter through to regional economies, partly offsetting a collapse in exports to recession-hit Western markets.
Chinese stocks have climbed 32 per cent this year. Outside of China, Taiwan's TAIEX index and South Korea's KOSPI have been the next best performing markets in the world, gaining 24 and 17 per cent respectively.
Rush orders from China to bring technology to rural households has been a boon to companies such as Taiwan chip maker UMC. Asia's relatively healthier fundamentals have been another factor behind the rally. While hurting from its extreme export dependency, Asia has avoided the crippled banks and high household debt levels plaguing the United States and Europe.
Plus, Asian countries have hefty reserves. "Asia is in the beneficial position of actually being to afford stimulus without having to go into significant debt. That's a positive for the majority of Asian countries and a positive for production and growth going forward," said Al Clark, head of Asia-Pacific multi-asset investment at Schroders in Singapore, which manages $158.4 billion of assets. Clark was among the investors preferring high-grade bonds.

RIL set to enter fuel retailing in US, Europe

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RIL set to enter fuel retailing in US, Europe

Mumbai: Reliance Industries Ltd (RIL), the largest private sector company in the country, is set to enter fuel retailing in the US and Europe, almost a year after it closed retail operations in India.

The company plans to sell petrol directly to retail outlets in the US. After evaluating the US response, it will start selling diesel to bulk consumers in Europe, sources familiar with the developments said.
RIL is looking at floating subsidiaries for its operations in the US and European countries such as France, Italy, Germany and Switzerland. The company, which has trading desks in Houston, London, Singapore and Dubai, will set up more desks in the US and Europe. It will also set up separate marketing divisions for each country.
RIL is also believed to be in talks with fuel retailers such as Jiffy Lube and Hess Corporation for its US retail operations.
Selling petrol directly in the US market could save the company 5 to 10 per cent additional cost as traders’ commission, so the company has approached the US authorities for approvals to start direct fuel sales.
Asked about its overseas retail plans, an RIL spokesperson said, “We are looking at various options to enhance our operations across the globe. However, we cannot comment on specific initiatives.”
After closing its fuel retailing in India, RIL was supplying some products from its 33 million tonne a year Jamnagar refinery to the US and Europe. The second Jamnagar refinery, which has an annual capacity of 27 million tonne and is expected to go on full stream in a month, will increase supply in the overseas markets, sources said.
A company executive said unlike India, the price of petrol changed on a daily basis in the US. "In India, we don’t have a level playing field, since the government gives public sector oil marketing companies subsidies. Since the RIL refineries operate on better refining margins, we could earn more revenue from free markets,” he said, adding, “We have better understanding beyond a theoretical knowledge about the US and European markets after our long experience in these markets.”
For the past couple of months, RIL has been looking at acquiring a storage facility on the west coast of the US, the world's largest fuel consumer. The company is expected to conclude the acquisition in a month, sources said.
The company had recently started gasoline (petrol) trading operations in Houston for the US Gulf Coast and New York Harbor markets. Last month, RIL booked 1.3 million barrels of clean product storage in the New York Harbor area, the first time an Indian firm has taken storage in the US to store and trade petroleum products.
RIL recently commissioned its clean storage facility at the Ashkelon terminal in Israel to tap the Mediterranean and European markets. It has also leased clean oil products storages in Singapore and the Caribbean. The company owns a storage facility in Africa through its subsidiary, Gapco.

Bankruptcy will be made fast if necessary: GM chief

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Bankruptcy will be made fast if necessary: GM chief

London: General Motors will move ahead with bankruptcy process at a faster pace if it becomes necessary to restructure the auto maker, its new chief executive Fritz Henderson has said.

The chief of the ailing car maker pointed out that he would prefer an out of court restructuring for GM.
"If we have to resort to bankruptcy then we're going to do it fast... There are non-traditional ways to do this but it requires a fair amount of force, will and leverage and we have force, will and leverage," Henderson told the Financial Times.
The daily quoting Henderson said that "restructuring GM out of court remains his preferred option".
A few days back, the auto taskforce of the US Federal government had appointed Henderson as the beleaguered auto maker's chief executive, replacing Rick Wagoner.
Pointing out that a clean balance sheet was "not negotiable", the new chief executive said it could very well happen through bankruptcy.
Regarding bankruptcy Henderson said, "There were many people saying 'well, the government would never let that happen'. Well, it's pretty clear that's not the case".
"The government said they don't want to run the company," Henderson noted. 
GM has already received billions of dollars from the US to shore up its battered fortunes.

Cars: What It Means to 'Buy American'

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In case you thought Buy American was just a slogan, consider this.

The administration has ordered the GSA to speed up its purchases of automobiles. The agency is charged with purchasing 17,600 cars and the administration wants it done by June 1. The cars have to be American-made, but that means something more than just made in America.

The President issued this statement:

“By purchasing fuel-efficient vehicles from American automakers over the next two months, this move will help stimulate the economy, support the auto industry and achieve energy-efficiency goals.”

If you happen to live in Alabama or Kentucky or Texas and work for Toyota (TM), Honda (HMC) or one of the other companies that have their headquarters outside the U.S. but build cars here, don’t plan on any overtime. 'American automakers' means car companies that make cars here and also happen to have their headquarters in the U.S.

I’ve no problem with the government buying U.S.-manufactured products. I do have a problem with a bunch of men and women getting stiffed just because they happen to work for a company that has its headquarters elsewhere. This administration made much of a the lack of competitive bidding that went on during the Iraq War during the election campaign. When push comes to shove they pull the same sorry tricks.

Let’s not dance around this. It’s a political payoff to the unions and regions that supported the President’s candidacy. It’s not surprising but it’s also not much “change.”

U.S. Squeezes Auto Creditors

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U.S. Squeezes Auto Creditors

Treasury Seeks Billions in Concessions for GM and Chrysler From Banks, Bondholders

By JOHN D. STOLL, JEFFREY MCCRACKEN and KATE LINEBAUGH

The federal government is taking an increasingly hard line with the creditors of General MotorsCorp. and Chrysler LLC, trying to squeeze billions of dollars in concessions out of banks, bondholders and others.

In both cases, the U.S. is directly and not-so-directly managing negotiations for the car companies as they prepare for what could be Chapter 11 bankruptcy filings.

Chrysler has been told by the Treasury Department to get a deal done with creditors by the end of April, while GM has until the end of May. A Treasury spokeswoman declined to comment on dealings with GM and Chrysler debtholders.

GM's restructuring could play out in one of two ways. It could successfully negotiate cost-cutting concessions with unions and bondholders so it can become viable outside of bankruptcy. Or, in the more likely scenario, it will reorganize by filing for Chapter 11, said people familiar with the situation.

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The Treasury Department is pushing GM to offer its bondholders, who are owed $29 billion, a small portion of shares in the company. That's a sharp cut from a bond-exchange offer GM made two weeks ago, which included about $8.5 billion in cash and new debt in the company as well as 90% of GM's stock, said people familiar with the terms.

The Treasury, which has pumped $13.4 billion into GM to keep it afloat, believed the earlier plan was too generous to bondholders, said people familiar with the matter.

The new debt-exchange offer, which could be presented as soon as next week, is sure to face strong resistance from bondholders. But the offer may be a last chance at avoiding bankruptcy, which GM worries would be more expensive and disruptive than an out-of-court solution.

President Barack Obama's auto task force, meantime, has made it "crystal clear" that its members think a managed, or "prepackaged," bankruptcy is GM's best option, but it is letting GM pursue the out-of-court option for now, said people familiar with the matter.

Many of GM's bigger bondholders prefer to negotiate outside of court, said people involved, but have been frustrated by a lack of engagement by the government and GM.

These bondholders also are raising concerns that the bankruptcy revamp GM is considering may be unfair to investors and unions, said these people. The plan would split the company into a "New GM" containing its desirable assets, such as Chevrolet and Cadillac, and an "Old GM" holding troubled brands such as Saturn and the auto giant's union health-care liabilities.

Treasury officials, many of whom are now working on GM's restructuring from an office in Detroit, plan to meet in coming days with a committee representing GM's bondholders.

[auto makers and bailout and chrysler]Getty Images

Chrysler has been told by the Treasury Department to get a deal done with creditors by the end of April. Above, Chrysler Vice Chairman Jim Press unveils a remodeled Jeep Grand Cherokee at the New York auto show on Wednesday

The bondholders likely will struggle to figure out how to value the latest debt-exchange offer, said a person familiar with the matter, because it isn't clear what the government will do about the $13.4 billion it has lent GM. In a bankruptcy scenario, the government could reduce its debt in the company by transferring some or all of it to the "Old GM," said this person.

If the government agreed to reduce its debt outside of bankruptcy, that likely would make GM shares worth more. That could sweeten the new bond-exchange offer. Such a move also could make the United Auto Workers union more favorable to a new health-care deal with GM, another requirement of the Treasury.

The UAW has been largely unwilling to negotiate with GM until it sees what concessions will be made by bondholders and others.

The standoff between bondholders and the UAW underscores the difficulty surrounding GM's attempt to reorganize without the coercion of bankruptcy. Key players in the Obama administration are pointing to the lack of progress as a reason that bankruptcy could be unavoidable.

At Chrysler, the U.S. wants banks and investors who control its bank debt to give up about 85% of the nearly $7 billion they are owed. In bankruptcies, such senior secured lenders typically get most of their money back.

Some senior lenders believe they would get more than 70 cents for each dollar of their secured loans if Chrysler is broken up and sold under bankruptcy, said people familiar with the talks. Other lenders don't have an exact number nailed down and are awaiting detailed figures from the auto maker on its assets.

All of the 40-plus lenders and investors are nonetheless incensed by the last Treasury offer: that they accept about 15 cents per dollar of face value of their loans.

Secured lenders -- those whose loans are backed by the rights to Chrysler assets should the company default -- haven't made a counteroffer to the Treasury, but one is forthcoming, say these people.

The lenders have now added the hedge fund Elliott Management to their negotiating team, which also includes Chrysler's four largest bank debtholders: J.P. Morgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley.

Those four banks hold about $4.3 billion of the bank debt, said people familiar with the situation. Elliott Management is also a large holder of Chrysler bank debt, which it bought on the secondary market.

In a statement Thursday, a steering committee representing secured lenders, including the four big banks and Elliott Management, said: "We are engaged in ongoing discussions with the U.S. Treasury and Chrysler, and continue to work diligently toward achieving a thoughtful solution prior to the April 30th deadline."

The lenders' steering committee held a conference call with lenders on Monday to update them on the Treasury offer, which one Chrysler debtholder called "ugly, really a pretty low starting point."

Chrysler, which is controlled by Cerberus Capital Management LP, has estimated that if it liquidates, the amount its senior secured lenders would see is between 11 cents and 43 cents on the dollar, according to the viability plan it submitted to the government in February.

With Chrysler bank debt trading at around 12 cents on the dollar, the government view has been, "Why offer more than 15 cents?" said a person involved in the talks.

But some of the senior secured lenders think that is a low-ball estimate and say recoveries could reach 70 cents on the dollar in liquidation, said another person familiar with the talks.

Chrysler said in its February plan that the company had identified $1 billion worth of noncore assets that could be sold and had sold $700 million of those assets, such as its California design center.

In addition, the lenders say there is value in Chrysler's Jeep brand. Aside from vehicle sales, the brand generates $500 million a year in royalty revenue for use of its name on everything from bicycles to strollers.

It is the value of Chrysler in liquidation that prompted some of the secured lenders to buy the company's debt. These lenders are distressed-asset buyers and hedge funds that haven't received federal assistance.

But the largest portion of the company's debt is held by banks that have received federal aid, including J.P. Morgan, Citigroup, Goldman Sachs and Morgan Stanley. Michigan Gov. Jennifer Granholm and one of the state's congressmen have suggested lenders that received funds under the Troubled Asset Relief Program should have to write off their debt to ensure the future of Chrysler.

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