April 27th, 2009
12:14 PM ET

Financial Dispatch: Flu fears hit global markets

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/HEALTH/04/27/swine.flu/art.newspaper.cnn.jpg]

Andrew Torgan
CNN Financial News Producer

With the World Health Organization calling the outbreak of swine flu a "public health emergency of international concern," stock markets around the world stumbled overnight and into Monday morning.

At a time when the global economy and financial system are already fragile, such a health scare will likely put the brakes on global travel and trade. The European Union, for example, is urging its citizens to avoid non-essential travel to Mexico and the United States in the face of the outbreak.

Meanwhile, airline and hotel stocks are tanking across the board on fears that a potential pandemic will cripple the global tourism industry.

And as you might expect, shares of the leading flu vaccine makers are getting a lift on the expectation that orders will increase.

Oil prices tumble

Crude oil fell more than 5% overnight as concerns about the potential economic repercussions of a swine flu pandemic weighed on the market and lifted the U.S. dollar.

Crude fell below $49/barrel in electronic trading this morning. On Friday, oil surged nearly 4% to settle at $51.55 a barrel.

GM goes for broke

General Motors today announced plans to cut 23,000 U.S. jobs by 2011, drop its storied Pontiac brand and slash 40% of its dealer network in its latest bid to stay out of bankruptcy.

The new restructuring proposal will leave the Treasury Department, and as such U.S. taxpayers, owning a significant stake in GM. The Treasury will accept GM stock rather than cash for repayment of about $10 billion that the government has already lent to the automaker.

Trust funds controlled by the United Auto Workers union would also hold a significant stake in the company. Between them, Treasury and the unions would own 89% of GM.

GM also announced an offer to its bondholders to swap $24 billion of the company's $27 billion in unsecured debt for stock. GM is offering bondholders 225 shares of its stock for every $1,000 it owes the bondholders in principal.

CEO Fritz Henderson warned during a press conference today that bankruptcy is still very likely unless bondholders agree to the swap.

The moves are GM's latest efforts to cut costs and stem losses that have dogged its North American auto operations since 2005, and today’s news represents an additional reduction of 7,000 to 8,000 jobs beyond what GM disclosed in its previous viability plan back in February.

Chrysler wins concessions from UAW

Meanwhile, privately-held Chrysler cleared another major obstacle to its survival Sunday when it reached a tentative deal for concessions with the United Auto Workers union

The automaker is just days away from a government deadline to gain concessions from its unions and debtholders, as well as form an alliance with Italy's Fiat, or face almost certain liquidation.

The UAW said the agreement was reached with Chrysler, Fiat and the Treasury Department - and includes modifications to the union's 2007 collective bargaining agreement and the trust program dedicated to retiree health benefits.

The deal does not, however, guarantee that Chrysler will be able to avoid bankruptcy. It still needs to be ratified by the automaker’s rank-and-file union members. That vote is scheduled to take place Wednesday.

Stay tuned…

Filed under: 360° Radar • Economy • Finance • Gas Prices • Oil • Public Health • Wall St. • What You Will Be Talking About Today
soundoff (4 Responses)
  1. Annie Kate

    Well, I hate that the Pontiac line is going to be dropped. That was the only car my parents would buy when I was growing up and I have very fond memories of it. Those cars would last for 20 years and more – we had one that felt like a member of the family we had it so long. Hopefully the car industry will be able to revitalize and there will be a hybrid that is as nice as the Pontiacs I remember.

    April 27, 2009 at 7:48 pm |
  2. Sharon Kitchen

    now is the time to retool these plants for the electric cars and battery stations and solar panels.
    Not to mention any frame will fit the air (one engine on each wheel) type. That's right the Austrian inventor had this and offered it first to any US company for frames. But ..........no..............all cars had to be big oil way or not. So this inventor went to another country.
    all workers should be able to begin with the current factories just retooled for the NEW type of engine. Hydrogen/air/electric/solar/battery.
    Let's get with this.
    the BYD/GS are getting ready to come out.......do you want to shop at a Wal-Mart for your car.......that is where they may show up.ah yes,do not forget the plane/car and the aptera/electric motorcycles and bikes.

    April 27, 2009 at 4:46 pm |
  3. earle,florida

    Very good news from GM. I think were slowly getting there,without alot of pain for so many (better thousands of job lost, than hundreds of thousands) people. This is a very generous offer to the bond-holders. CEO Henderson has taken the bull by the horn!

    April 27, 2009 at 3:24 pm |
  4. A Jones

    There has been a lot of hubbub about the Bush Administration's use of torture - of course, the Bush Administration says they did not torture. As a Vietnam vet, this bothers me because we are supposed to uphold the Geneva Conventions, but Bush and Cheney circumvent these rules of law by creating new words "enhanced interrogation" and they say it prevented other acts of terrorism. Now, I may be wrong, but I recall that soon after 911, we had some sort of terrorist threat going on in Los Angeles - it was in 2002 for certain. Now, I see Cheney telling us that torturing, or whatever they want to call it, 9/11 mastermind Khalid Sheikh Mohammed prevented this terrorist act in Los Angeles in 2002. However, I recall that Khalid Sheike Mohammed (the hairy guy) was captured around March 2003. How can Cheney be allowed to argue his point - he's no better than the Craig's List murderer or that 16-year-old pirate we captured. Cheney should not be allowed to twist history.

    April 27, 2009 at 12:47 pm |