9 Mouthy Executives and How They Suffered

May 11, 2014, 11:00 pm

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Filed under: Scandals and Lawsuits, Celebrities, CEOs, People, Investing

By Jenn Gidman

Los Angeles Clippers owner Donald Sterling has been banned from the NBA for life and fined $2.5 million after a secret audio recording of him making racist comments surfaced. In announcing the ban, NBA Commissioner Adam Silver said that he would encourage other NBA owners to vote to force Sterling to sell the team and that Sterling's views "simply have no place in the NBA."

It's fascinating to watch people in power implode from chronic foot-in-mouth disease, but it's disturbing when their unsavory statements transcend run-of-the-mill idiocy and venture into hate speech and discrimination. The Sterling case has rebooted the national conversation about racism, misogyny and homophobia, but he's far from alone in his transgressions. Subtle and (not-so-subtle) denigration of people based on race, gender or sexual preference is alive and well in professional sports, the business world and in the media.

Are any or all of these business folks below in the same league as the Sterlings, Cliven Bundys and Don Cathys of the world? Is ignorance ever a valid excuse? The lines may appear blurred, but keep in mind that the "elegant racism," Hollywood-style homophobia, and online misogyny we encounter every day may be a tougher, more insidious enemy to fight than the more obvious ones.

1. Robert Benmosche, CEO of American International Group (AIG)

The blunder: In September, Benmosche addressed public and governmental outrage over $165 million in bonuses paid to employees in the AIG Financial Products unit (the same unit that almost brought down the country's financial system) just a few months after the company took a $182 billion government bailout. "[The uproar over bonuses] was intended to stir public anger, to get everybody out there with their pitchforks and their hangman nooses, and all that -- sort of like what we did in the Deep South [decades ago]," he told the Wall Street Journal. "And I think it was just as bad and just as wrong. ... It is a shame we put [the employees] through that."

The aftermath: Not everyone agreed with Benmosche's comparison of the torture and murder of African-Americans during the civil rights era to his bonus-receiving employees. Even though Benmosche issued an email apology a few days after his comments were publicized, Rep. Elijah Cummings (D-Md.) called for Benmosche's resignation, stating: "As the leading critic of AIG's lavish spending before and after its taxpayer-funded bailout -- and as the son of sharecroppers who actually experienced lynchings in their communities -- I find it unbelievably appalling that Mr. Benmosche equates the violent repression of the African-American people with Congressional efforts to prevent the waste of taxpayer dollars."

Benmosche and Cummings met privately in October, and Cummings accepted the CEO's apology. Benmosche issued a statement after the meeting that said, "When I referred to the South, I unintentionally trivialized a horrible legacy of our country. That was the opposite of my intent."

2. Guido Barilla, Chairman of Barilla Group

The blunder: Barilla, head of one of the world's most well-known pasta brands, told an Italian radio station in September that his company would never use a gay family in its ads. "Ours is a classic family where the woman plays a fundamental role," he said, adding that he also opposed gay adoptions and that "[if gays] like our pasta and our advertising, they'll eat our pasta; if they don't like it, then they will not eat it and they will eat another brand."

The aftermath: Fair enough. Shortly after the interview aired, gay and lesbian groups took Barilla up on his invite and called for a consumer boycott of his company's wares.

Blatant disrespect to an entire demographic aside, Barilla's choice of words was also ill-advised from a business standpoint: A Nielsen study cited in Forbes found that same-sex-partnered households make 16 percent more shopping trips than heterosexual households, and average annual spending on consumer packaged goods is 25 percent higher than the average U.S. household. The company wouldn't say if the boycott hurt sales, but it's worth noting that Barilla's net profit in 2012 fell more than 21 percent during Italy's worst economic downturn in 60 years. So, yeah, it wasn't exactly smart business to alienate an entire community of consumers (Julia Roberts says it best).

Barilla responded with a written apology and a video mea culpa. The company has also since claimed that its new ad campaign will be more inclusive, created an advisory board to promote diversity, and it announced a "diversity challenge," which asks entrants to submit videos that celebrate diversity.

3. Marijn Dekkers, CEO of Bayer (BAYRY)

The blunder: Dekkers was miffed after Natco Pharma was awarded a license from the India patents office to make a generic form of Bayer's Nexavar cancer drug -- a drug that was out of reach for India's poorest citizens. Dekkers, who called the license "theft," elaborated on his feelings at a December conference in London. "We did not develop this medicine for Indians," he said, according to Bloomberg News. "We developed it for Western patients who can afford it."

The aftermath: That was an incendiary statement, but there was a problem: Columbia Journalism Review discovered that Bloomberg News had messed up the quote. Dekkers' actual complete quote was: "Is this going to have a big effect on our business model? No, because we did not develop this product for the Indian market, let's be honest. We developed this product for Western patients who can afford this product, quite honestly. It is an expensive product, being an oncology product."

As CJR points out, this may be splitting hairs, but while the difference in content isn't terribly significant, the difference in tone and context is. The tone of the original Bloomberg quote comes off more insensitive, and Dekkers was simply answering a question about how the ruling would affect Bayer's business in India. This doesn't let Dekkers off the hook. As CJR notes, the Bloomberg mistake still doesn't "excuse the CEO's Kinsley gaffe or, for that matter, Big Pharma's business practices."

4. Justine Sacco, Former Executive at IAC/InterActive (IACI)

The blunder: Sacco became infamous in December for posting what's now known as "the tweet heard round the world." Right before a long flight to Cape Town, she tweeted, "Going to Africa. Hope I don't get AIDS. Just kidding. I'm white!"

The aftermath: The tweet went viral, spurring a #HasJustineLandedYet hashtag and social media parody accounts -- all while Sacco (who was born in South Africa) was still in the air. By the time she disembarked from the 12-hour flight, Twitter users were poring over other questionable tweets she had previously made and her employer (a media company) issued its condemnation of the tweet. IAC "parted ways" with Sacco the next day, and the former head of corporate communications issued an apology saying she was "ashamed" and insensitive toward people who had the virus.

5. Brendan Eich, Former CEO of Mozilla

The blunder: When Eich was appointed CEO of Mozilla (best known for its Firefox browser) in March, not everyone was thrilled. The reason: In 2008, Eich donated $1,000 to California's Proposition 8 campaign, a ballot initiative trying to ban same-sex marriage.

The aftermath: Gay rights activists started calling for Eich's resignation, and at least one Mozilla development company pulled its app from Firefox. But the final nail in Eich's coffin came courtesy of dating site OkCupid, which implored its members to use any other browser but Firefox. Eich posted a message about inclusiveness on his personal blog, and Mozilla issued a statement that said, in part, "Mozilla supports equality for all, including marriage equality for LGBT couples. No matter who you are or who you love, everyone deserves the same rights and to be treated equally." It was too late for Eich: He stepped down as CEO in April after just two weeks in the job.

6. Michael Fowler, former CEO of Solid Gold Bomb

The blunder: Fowler thought he had hit the algorithmic jackpot after he wrote a computer script in 2011 that took the phrase "Keep Calm" (from "Keep Calm and Carry On") and randomly paired it with a noun and verb. Some examples of available T-shirts that made their way onto his Amazon.com (AMZN) seller's page: "Keep Calm and Knife Her," "Keep Calm and Hit Her," and "Keep Calm and Rape a Lot."

The aftermath: The idea initially seemed solid: According to CNNMoney, the company's catalog jumped from 1,000 to more than 10 million and there was no inventory risk, since Fowler only made the T-shirts after a customer ordered. However, after the offensive T-shirts were discovered (Fowler said he didn't go over the computer-generated list closely enough), Amazon shut down Fowler's accounts; Fowler was forced to shutter the company in June 2013.

One could argue that it's indeed possible Fowler didn't greenlight the outrageous T-shirts and discovered them too late, but a) some of the supposedly randomly generated phrases seem suspect ("rape a lot"? Really?), and b) a company owner (especially one who owns a small business) should have better oversight of the product he's selling.

7. Bernardo Hees, Former CEO of Burger King (BKW)

The blunder: In 2011, less than a year into his stint as Burger King CEO, Hees spoke to a group of students at the University of Chicago and tried to strike up a rapport by filling them in on what he thought of British food -- and British women. "The food is terrible and the women are not very attractive [in England]," he said, according to the Chicago Maroon, explaining why it was so easy to concentrate on his studies while he was at the University of Warwick. "Here in Chicago, the food is good, and you are known for good-looking women."

The aftermath: Burger apologizing for Hees' comments, saying it was "intended as a humorous anecdote to connect with his audience." Charli Fritzner, women's campaigns officer at Warwick University's student union, didn't take it that way: "If he views women as potential distractions in academia, I wonder how he views them in the workplace. It doesn't make Burger King an attractive employer for women." British chefs weren't happy, either. Michelin-rated chef Marcus Wareing proclaimed, "It's an insult to British gastronomy."

8. Michael O'Leary, CEO of Ryanair (RYAAY)

The blunder: The colorful CEO of Ireland's low-cost airline has been called the "duke of discomfort" for his off-the-cuff, provocative remarks (The Guardian has even compiled a list of his "33 daftest quotes").

But while some outlets portray O'Leary as a goofy, "unusual" clown, there's a more objectionable subtext to some of his antics. For example, Ryanair annually publishes a calendar showing its female cabin staff in underwear and bikinis. In October, O'Leary held his first Twitter "chat" under the #GrillMOL hashtag. "Inappropriate" and "misogynistic" is how PR Daily described some of his interactions, which included commenting on profile pics of female questioners and extending the chat time "to allow the pretty girls [to ask] questions."

The aftermath: While O'Leary has been routinely dressed down in the press for some of his actions, he continues to tread the hot water he's in with aplomb. A good number of people appreciate his irreverent style, and his comments don't seem to have hurt sales: Ryanair is set to record fiscal 2014 net profits above 500 million euros ($690 million). Standard & Poor's rates it the best investment in the airline industry.

However, O'Leary has (apparently) realized the airline's image needs a makeover. "We have been needlessly irritating people, from our creaking old website to our interrogation of passengers over the size of their purses," he told the Associated Press in March, announcing a new initiative that includes a revamped website, new TV ad campaign, and a partnership with Google (GOOG) to allow Ryanair fares to be searched online.

9. Pax Dickinson, Former Executive at Business Insider

The blunder: The Business Insider chief technology officer regularly spewed racist, homophobic and sexist tweets and comments on his own publication's stories, until they finally caught the virtual eye of the Valleywag blog. His defiant response: "It is not misogyny to tell a sexist joke, or to fail to take a woman seriously, or to enjoy boobies."

The aftermath: One day after Valleywag's post, Business Insider editor in chief Henry Blodget announced that the CTO was no longer with the company. Dickinson is now the CTO at Glimpse Labs, the startup he cofounded with Elissa Shevinsky, who has apparently forgiven him for his comments about women. Read his interview with NY Magazine shortly after he was fired from Business Insider and decide if you can.

 

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Nissan Forecasts Profit Growth but Margins Remain Weak

May 11, 2014, 11:00 pm

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Filed under: Company News, Earnings, Currency, International Trade, Automotive Industry

By Yoko Kubota

YOKOHAMA, Japan -- Nissan expects profit to grow at a slower rate than analysts forecast this year and an operating margin that would be the lowest of its compatriots, weighed down by the costs of aggressive expansion.

Japan's second-largest automaker expects a 4.1 percent rise in net profit for the year to next March, boosted by sales of low-priced Datsun cars in emerging markets and growth in China, the world's largest auto market.

Nissan Motor (NSANY) also forecast an operating profit margin of 5 percent for this financial year, up 0.2 percentage point from last year but still well below Toyota Motor's (TM) forecast 8.9 percent and Honda Motor's (HMC) projected 6 percent.

"We were expecting Nissan's guidance to fall short of analyst expectations and it seems it has turned out to be true. We think Nissan will be having a hard time, unlike some of its competitors," said a trader at a European asset management advisory firm.

Nissan forecast 405 billion yen ($3.98 billion) in net profit for the year ending March 2015, compared with the 425.4 billion yen mean estimate of 21 analysts polled by Thomson Reuters I/B/E/S.

Like its Japanese rivals, Nissan said that foreign exchange moves will become a negative factor for its earnings this year after providing a major boost last year, when the weakening yen substantially increased the value of its overseas earnings.

Currency moves are expected to cut Nissan's operating profit by 55 billion yen for 2014/15, after providing a 247.6 billion yen boost the year before.

Nissan forecast a rise in its global market share this fiscal year to 6.7 percent from last year's 6.2 percent, although the automaker has promised to emphasize profitability over market share after heated expansion increased its costs and depressed profit margins.

Nissan is currently increasing manufacturing capacity in Thailand, China and Russia.

Nissan's share price has suffered accordingly, rising a modest 27 percent since mid-November 2012, when the prospects for reflationary policies pushed by Prime Minister Shinzo Abe spurred a slide in the yen and boosted Japanese exporters' shares.

Toyota is up 80 percent over that period and Honda is up 41 percent, although since the start of this year Nissan has outperformed the other two.

Shares of Nissan ended 0.2 percent lower before the results announcement, compared with a 0.4 percent decline in the benchmark Nikkei average.

For the three months to March 2014, net profit rose 4.8 percent year-on-year to 114.9 billion yen, Nissan said in a statement on Monday. That exceeded the 97.1 billion yen analyst estimate.

Chief Executive Officer Carlos Ghosn said Nissan posted a "satisfactory outcome" for the year that ended in March, but added, "These results, which mark the half-way stage in our Power 88 mid-term plan, do not yet reflect Nissan's actual potential."

He added that Nissan will stick to its mid-term targets and will focus on boosting quality and fully utilizing its manufacturing capacity as well as boosting profit margin.

 

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Lessons From Target's Data Breach Fumble

May 11, 2014, 11:20 pm

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Filed under: Identity Theft, Target, Security, Consumer Protection, Investing

By Jennifer Schlesinger | @jennyanne211

As the risk of data breaches are on the rise, so are the number of attacks and financial impact on American businesses.

For executives at companies experiencing data breaches, the consequences can be even more dire. It can cost managers their jobs.

Five months after Target's (TGT) holiday data breach, the retailer's former chairman and chief executive Gregg Steinhafel stepped down from his more than $23 million-a-year position. While Steinhafel also faced criticism for Target's Canadian expansion, the massive breach -- which included leaked credit and debit card information for millions of customers -- likely played a role, according to analysts.

"Gregg [Steinhafel] led the response to Target's 2013 data breach. He held himself personally accountable and pledged that Target would emerge a better company," the company said in a May 5 statement.

Craig Carpenter, a chief strategist at cybersecurity company AccessData, said the information security community believes the resignation will "help raise information security to a C-level [corporate] issue."

Business managers are paying closer attention to information security because the costs of data leaks only are expanding.

Since last year, data breaches on average have risen 15 percent to $3.5 million, according to a new study by IBM (IBM) and the Ponemon Institute, a researcher on data protection and information security.

The costly damage to a business includes expenses related to seeking experts' help, the actual company investigation and any loss of customers. Part of the 15 percent increase can be attributed to more customer records being stolen.

Here's what corporate executives and business managers need to learn about data breaches.

Cybersecurity Is Everyone's Issue

After data breaches, the person who usually takes blame is the chief information security officer or the chief information officer, Carpenter said. In the case of Target, the chief information officer resigned in March before the chief executive's departure.

The acknowledgement that all senior managers are responsible for data security is part of the challenge.

A study by cybersecurity firm Stroz Friedberg found that just 45 percent of senior management acknowledged they are responsible for protecting against cyberattacks.

Shawn Henry -- cybersecurity expert and a former executive assistant director of the FBI -- said companies need to acknowledge every employee is responsible for cybersecurity, not just the tech guys. "Technology is a piece of the solution but it's not the sole solution," said Henry, now president of cybersecurity company CrowdStrike Services.

Detect Breaches and Mitigate Effects

Experts also told CNBC that companies receive so many cybersecurity threats that they need to learn to detect breaches and mitigate the effects, instead of setting the unrealistic goal of trying to block all attacks.

AccessData's Carpenter said larger companies see thousands of cybersecurity alarms every day.

Communication Is Key

Corporate executives also need to learn how to effectively communicate data breaches, Henry said. Letting consumers know about a breach early on can help prevent damage to a business's reputation.

Target waited to comment on their breach until after it was announced by security blogger Brian Krebs. Then, the retail giant revealed in January that even more customers were affected than originally announced.

"[Businesses] need to understand what to do when they face one of these breaches, who to communicate with, how they rally their troops, how they deal with regulators," Henry said.

 

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Credit Suisse, BNP Ask Feds for Leniency in Probes

May 12, 2014, 12:17 am

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Filed under: Company News, U.S. Government, Banks, Scandals and Lawsuits

By Supriya Kurane

BNP Paribas and Credit Suisse Group have appealed to U.S. authorities to allow their local subsidiaries, rather than the parent companies, to plead guilty to criminal charges they face in the United States, The New York Times reported, citing people briefed on the talks.

Prosecutors are investigating BNP over allegations that it violated U.S. sanctions against Iran and other countries, and are conducting a probe of Credit Suisse (CS) over allegations that it helped wealthy Americans evade U.S. taxes.

The newspaper said prosecutors appeared to balk at the overtures for leniency.

The banks are concerned that criminal charges against the parents could imperil their larger operations.

Julia Boyce, a spokeswoman for BNP Paribas in Paris, declined to comment on the report.

Representatives of Credit Suisse and the U.S. Department of Justice weren't immediately available.

U.S. Attorney General Eric Holder said in a video last week that the Justice Department was pursuing criminal investigations of financial institutions that could result in action in the coming weeks and months, and that no company was "too big to jail."

Two people with knowledge of the matter also told Reuters last week that prosecutors have been pushing for Credit Suisse to plead guilty in connection with the probe.

A source told Reuters that the bank was in talks to pay as much as $1.6 billion to resolve the investigation.

Credit Suisse is expected to strike a deal with prosecutors as soon as this week, the New York Times said.

The newspaper also said that BNP Paribas Chief Executive Officer Jean-Laurent Bonnafe and other top executives traveled to Washington and New York, arguing that a guilty plea could wreak havoc on the bank, the French economy and beyond.

The paper said U.S. prosecutors had held their own meetings with regulators to gain assurances that a guilty plea wouldn't cost BNP its license to operate in the United States.

An eventual settlement for BNP is likely to be closer to $2 billion than the $1.1 billion that had been set aside as a provision last year, and will likely involve a guilty plea, a person familiar with the matter told Reuters last month.

 

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Apple Tries to Lift Online Sales by Slicing Refund Times

May 12, 2014, 12:52 am

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Filed under: Company News, Apple, Shopping, Internet, Mobile Technology

By Christina Farr

SAN FRANCISCO -- Apple (AAPL) has cut in half the time it takes to give refunds to online store customers who want to return their iPhones and other gadgets, a small but crucial step to try to get more people to buy direct from its website.

The move is a big upfront expense on Apple's part, but could pay off in the long run if the company can lure online customers away from retailers such as Amazon.com (AMZN) and Best Buy (BBY), industry experts say.

According to retail-intelligence firm StellaService, customers who buy a product from Apple's online store can get a refund in under a week, versus 10 days previously.

Apple is processing refunds at a faster rate because the company now uses an expedited service, FedEx 2Day, to let customers ship returned items with prepaid labels to its warehouse in three days.

StellaService researchers first noted the improvement in refund processing times in November, but chalked it up to a temporary measure for the busy holiday season. The company, which orders items from Apple's website several times a day for research purposes, also discovered that packages were stamped with FedEx 2Day, rather than a Newgistics prepaid label.

A source with knowledge of the new procedure confirmed that customers will incur no additional cost.

"This is the first time we're seeing an investment like this on the returns side," Kevon Hills, StellaService's vice president of research, told Reuters.

StellaService does business with Amazon-owned Zappos, but declined to disclose whether its customer base included Apple, Amazon or eBay (EBAY).

Amazon remains the frontrunner in online retail, but the race is heating up. Trade publication Internet Retailer estimated that Apple recently took the No. 2 spot from Staples (SPLS) in worldwide sales. These rankings don't include sales by third parties.

Apple experienced a 24 percent increase in online sales to $18.3 billion in 2013, Internet Retailer estimated.

E-commerce experts say Apple prides itself on its customer service and believes in controlling every aspect of its business.

"Speed is becoming a significant competitive weapon" in the e-commerce wars, said Marc Wulfraat, president of MWPVL International, a logistics and supply chain consulting firm. But most e-commerce firms don't invest in making the returns process more efficient, as it doesn't serve the bottom line.

"Returns are viewed as a hidden cost, so many e-commerce companies make the process very difficult," he added. "Returns are the first place to cut corners."

Apple rival Amazon offers instant refunds in some cases. However, this puts the company at risk for fraud, as some customers may not actually return the item. By cutting down on the days an item is in transit, Apple can offer a speedier refund and avoid fraud.

Amazon spokeswoman Julie Law said the company doesn't comment on its competitors.

Apple spokeswoman Amy Bessette said the company had no comment at this time.

FedEx (FDX) declined to speak publicly on customer agreements.

 

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Hillshire Looks Beyond Meat with Pinnacle Purchase

May 12, 2014, 12:54 am

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Filed under: Company News, Mergers & Acquisitions, Consumer Goods, Food & Beverage, Stocks

NEW YORK -- Hillshire Brands is pushing further outside the deli case with a deal to buy the maker of Birds Eye frozen vegetables, Duncan Hines cakes mixes and Hungry-Man frozen dinners.

The Chicago-based company, which makes Hillshire Farm lunch meats, Jimmy Dean sausages and Ball Park franks, said Monday that it would buy Pinnacle Foods in a deal valued at $4.23 billion. The move builds up Hillshire's push into other sections of the supermarket as more Americans watch how much meat they're eating.

Among Pinnacle's other brands are Wish-Bone salad dressing, Celeste frozen pizzas and Vlasic pickles.

"Meats go with vegetables, sandwiches go with pickles," Hillshire CEO Sean Connolly said in explaining why the deal made sense during a conference call with analysts. Even with the variety of food brands, he noted that Hillshire remains a company focused on the U.S.

The combined company is expected to have better profit margins than Hillshire alone, given its reduced reliance of meat products that typically require much higher ingredient costs.

Still, some of Pinnacle's brands are seen as having an outdated image. When asked whether Hillshire planned to hold onto all its brands, Connolly said it was "too early to tell," but noted Hillshire's record of focusing on leading brands.

Last month, Hillshire also said it was buying Van's Natural Foods, which makes gluten-free foods including cereal, chips and snack bars.

Shares of Hillshire and Pinnacle rose in premarket trading on word of the deal Monday.

The combined company, which is expected to have annual revenue of approximately $6.6 billion, will use the Hillshire Brands name and be based in Chicago. Connolly will serve as its president and CEO.

Each share of Parsippany, New Jersey-based Pinnacle Foods (PF) common stock will be exchanged for $18 in cash and 0.50 shares of Hillshire Brands (HSH) common stock. The companies said the implied purchase price is $36.02 a share, an 18 percent premium to Pinnacle's Friday closing price of $30.45.

The companies put the deal's total value at about $6.6 billion, which includes Pinnacle's outstanding debt. Pinnacle shareholders will own about 33 percent of the combined company.

Hillshire was created in 2012 after Sara Lee split in two. Pinnacle went public in March 2013.

The acquisition is expected to result in an estimated $140 million in annual cost savings by the end of the third year. Hillshire anticipates that it will maintain its annual dividend of 70 cents a share and suspend a previously announced stock repurchase program.

Both companies' boards unanimously approved the acquisition, which is expected to close by September. It still needs shareholder approval.

Pinnacle Foods shares rose $7.20, or 23.7 percent, to $37.65 in premarket trading two hours ahead of the market open. Hillshire Brands shares rose $2.25, or 6.1 percent, to $39.20.

 

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Suppliers Rank GM Worst Automaker

May 12, 2014, 1:30 am

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Filed under: Company News, General Motors, Industry News, Automotive Industry, Manufacturing

By James B. Kelleher

DETROIT - General Motors (GM), already locked in a public relations crisis because of a deadly ignition defect that has triggered the recall of 2.6 million vehicles, has a new perception problem on its hands.

The U.S. company is now considered the worst big automaker to deal with, according to a new survey of top suppliers to the car industry in the United States.

The annual survey, conducted by the automotive consultant group Planning Perspectives, asks the industry's biggest suppliers to rate their relationships with the six automakers that account for more than 85 percent of all light vehicle sales in the United States.

Those so-called "Tier 1" suppliers say GM is now their least favorite big customer, according to the rankings, less popular even than Chrysler, the unit of Fiat Chrysler Automobiles, which since 2008 had consistently earned that dubious distinction.

Suppliers gave GM low marks on all kinds of key measures, including its overall trustworthiness, its communication skills, and its protection of intellectual property.

The suppliers also said that GM was the automaker least likely to allow them to raise prices to recoup unexpected material cost increases.

"As a result, GM is now the least preferred customer of suppliers," PPI says.

Nissan Motor overtook Ford Motor (F) for third place in PPI's Supplier Working Relations Index, pushing Dearborn-based Ford into fourth place. Toyota Motor (TM) and Honda Motor (HMC) finished in the No. 1 and No. 2 spots, respectively.

PPI, which has been conducting the survey for 14 years, says supplier perceptions of automakers are critical because they can determine which car makers see the suppliers' newest technologies first, get their best pricing and work with their best engineers.

John Henke, the head of PPI and a research fellow at Center for Supply Chain Management at Rutgers University, said the Japanese sweep of the top three places suggested the industry "could be entering an era in supplier relations that doesn't bode well for the U.S. Big Three."

The reason: the Japanese automakers aren't just benefiting from a deterioration in relations between suppliers and the Big Three -- they are actually rising in the estimation of their suppliers.

Toyota and Nissan, in particular, saw the percentage of suppliers who characterized their relationship with the two automakers as "good or very good" surge.

GM, meanwhile, is in an especially unenviable spot, with 55 percent of the suppliers surveyed characterizing their relations with the automaker as "poor to very poor," up from 48 percent last year.

One bit of good news for GM. When the list of car makers was expanded to include the three German auto companies, which have a far less significant market share in the U.S., suppliers said Daimler's Mercedes-Benz and Volkswagen were even harder to deal with.

But because BMW ranked second in the expanded list, just below Toyota but ahead of Honda, GM's overall position fell to seventh place in the supplier's rankings.

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Money Minute: Virginia Sees Big Rate Hikes for Obamacare

May 12, 2014, 1:37 am

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Filed under: Market News, Advertising & Marketing, Labor, Entertainment Industry, Health Insurance

A first look at how much health care premiums may go up in the second year of Obamacare.

Insurance companies in Virginia have filed rate proposals for 2015 that call for significant rate increases, but nothing near the dire predictions of Obamacare opponents. The Wall Street Journal reports the proposed increases easily top overall inflation, but that's been true of health care costs for years. One of the biggest plans, Wellpoint's (WLP) Anthem HealthKeepers, is asking for an average increase of 8.5 percent. Other plans call for rate hikes of 3.3 percent to nearly 15 percent.

But it may be a bit easier to pay for those increases. Economists polled by USA Today expect wage increases to be a bit higher than they've been in recent years. That's partly because the unemployment rate has dropped sharply to 6.3 percent.

Another important trend developing for next year has to with our TV viewing habits -- and the dramatic slide in the audience for music-based TV shows. The audience for "American Idol" and its imitators has declined to the point that many of those shows are in jeopardy of being canceled. Along with the slide in viewership, The New York Times reports the average age of the people watching has increased to above 50 for many shows, including "The Voice" -- and that's not the group that advertisers are going after.

Here on Wall Street last week, the Dow Jones industrial average (^DJI) rose 0.4 percent, while the Standard & Poor's 500 index (^GPSC) was little changed and the Nasdaq composite (^IXIC) fell 1.3 percent.

The Dow begins the week at a record high, but the Nasdaq has lost 6.5 percent since topping out 10 weeks ago. Many of the new technology stocks that had been high-flyers are now viewed as over-priced -- in some cases, way over-priced. The software company Splunk (SPLK) is good example. It has lost more than half of its value over the past year. It's taken a round trip from below $50 a share to nearly $100, and all the way back down again.

Splunk and other are known as momentum stocks. They can move up very quickly when investors are jumping on board, but they can decline just as quickly.

-Produced by Drew Trachtenberg.

 

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Chrysler Posts $690 Million Loss in 1Q on Merger Charges

May 12, 2014, 2:40 am

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Filed under: Company News, Earnings, Chrysler, Automotive Industry, Manufacturing

By DEE-ANN DURBIN

DETROIT -- Chrysler Group saw big sales gains in the first quarter thanks to the new Jeep Cherokee and Ram pickup, but its results were overshadowed by charges related to its merger with Italian automaker Fiat SpA.

Chrysler lost $690 million in the January-March period. Without one-time charges related to the merger, the company's net income more than doubled to $486 million.

In January, Fiat paid $3.65 billion to a union-run health care trust to acquire Chrysler's remaining shares. As part of the deal, Chrysler agreed to pay $700 million to upgrade its factories.

Aurburn Hills, Michigan-based Chrysler took a $672 million charge in the first quarter to meet those commitments. It also booked a $540 million non-cash loss on extinguishment of debt related to the merger.

Revenue rose 23 percent to $19 billion.

Worldwide vehicle sales jumped 10 percent to 621,000.

In the U.S., Chrysler's biggest market, the company's sales rose 11 percent, far outpacing the 1 percent average gain for the industry.

Chrysler saw strong sales of the new Jeep Cherokee SUV, which went on sale at the end of last year. Ram pickup truck sales were also up 25 percent in the U.S.

 

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What the 'Cheap Date Index' Shows About Global Prices

May 12, 2014, 3:40 am

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Filed under: Family Money, Travel, Shopping, Saving

By Ansuya Harjani

In some cities, even a "cheap date" can burn a hole in your pocket.

According to Deutsche Bank's (DB) Cheap Date Index -- which measures the cost of a movie-and burger date in 32 global cities in U.S. dollar terms -- London is by far the most expensive place for a simple night on the town, while Mumbai is the cheapest.

The index measures the cost of cab rides, McDonald's (MCD) burgers, soft drinks, two movie tickets, and a couple of beers.

In London, this basket of items would cost $121, compared with just $23 in Mumbai.

"With the cheap date index, what we were trying to work out is a proxy for the cost of living without taking real estate costs directly in there," Sanjeev Sanyal, global strategist at Deutsche Bank told CNBC.

Cheap Date Index

City	Country	Price	Relative to New York
London	UK	$121	130%
Wellington	New Zealand	$111	119%
Edinburgh	UK	$110	118%
Berlin	Germany	$105	112%
Sydney	Australia	$104	112%
Paris	France	$104	111%
Tokyo	Japan	$100	107%
Frankfurt	Germany	$98	106%
Melbourne	Australia	$97	104%
Auckland	New Zealand	$96	103%
New York	USA	$93	100%
Toronto	Canada	$91	98%
San Francisco	USA	$89	95%
Boston	USA	$87	93%
Chicago	USA	$80	86%
Ottawa	Canada	$71	77%
Moscow	Russia	$69	74%
Sao Paulo	Brazil	$62	67%
Singapore	Singapore	$62	66%
Shanghai	China	$61	65%
Hong Kong	China	$60	65%
Rio	Brazil	$59	63%
Beijing	China	$50	54%
Johannesburg	South Africa	$40	43%
Cape Town	South Africa	$37	39%
Kuala Lumpur	Malaysia	$36	39%
Mexico City	Mexico	$33	35%
Jakarta	Indonesia	$31	34%
Bangalore	India	$26	28%
Manila	Philippines	$26	28%
New Delhi	India	$25	27%
Mumbai	India	$23	25%

Source: Deutsche Bank

The index was launched in 2012; however, its components have varied slightly in previous years, making it difficult to draw precise historical comparisons.

While it's no surprise that London has topped the ranking, Mumbai's placement at the bottom reflects a curious dynamic.

"India is an interesting case -- it's cheap even though it's continued to see high inflation -- and that's because the exchange rate is correcting for it," Sanyal said.

While the rupee has regained some of its losses against the greenback in the recent months, it is almost 12 percent below levels seen two years ago. The currency has been under pressure due to structural issues in the economy including its twin - current account and budget - deficits and elevated inflation.

A notable trend that has emerged is the declining cost of living in Tokyo -- a city that has been synonymous with an excessively high cost of living.

Tokyo has topped a few of the traditional cost of living indices in the recent years. However, weakness in the yen -- which fell over 20 percent against the dollar last year -- has pushed it off the top of some rankings. In the Economist Intelligence Unit's cost of living survey published in March, for example, Singapore topped Tokyo to become the world's most expensive city.

A "cheap date" in the Japanese capital city costs $100, according to the index -- below London, Wellington, Edinburgh, Sydney, Berlin and Paris.

"Everyone has this image of Japan being outrageously expensive, but it's no longer the case," Sanyal said. "Due to a weaker yen and the cumulative impact of years of deflation -- there are many cities in the world that are now more expensive than Tokyo."

The index reflects another important trend: China is getting more expensive, said Sanyal.

"China is no longer the very cheap location it used to be, it's slowly converging with world prices," he said.

A cheap date in Shanghai, for example, costs $61 -- compared with $26 in Manila and $36 in Kuala Lumpur.

More from CNBC:

• Tips for dating on Wall Street-yep, she thinks you're a jerk
• Singapore now world's most expensive city
• Dating for the 1%: Spending $100000 to find love

 

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Should You Splurge on Organic Eggs? -- Savings Experiment

May 12, 2014, 5:30 am

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Filed under: Savings Experiment, Shopping, Did You Know

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When it comes to eggs, buying organic isn't all it's cracked up to be. Before you hit the checkout line, make sure you know what's in your cart.

Let's take a look at the price tags. A dozen organic eggs can cost you $5, while a dozen standard eggs are just $2. That's more than double the price.

Some of the labels you may see include "no antibiotics" or "no added hormones," but all eggs sold for human consumption, as regulated by law, are free of both. So, these two labels aren't saying anything out of the ordinary, and definitely aren't worth paying extra for.

The term "cage free" can also be misleading. The most nutritious eggs come from hens that are allowed to roam about and eat a natural diet. However, with organic eggs, the usage of the term "cage-free" is unregulated, so you might not be getting what you think you're paying for.

When it comes to eggs, don't pay double for zero added benefit. Keep these tips in mind, so you can break a few eggs without breaking the bank.

 

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11 Financial Documents Unmarried Couples Should Know About

May 12, 2014, 5:40 am

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Filed under: Family Money, Personal Finance, Wills, Marriage, Financial Education

By Teresa Mears

For 32 years, Stieg Larsson and Eva Gabrielsson shared a life and a home. She says she even helped the celebrated Swedish author research his best-selling trilogy of novels that started with "The Girl With the Dragon Tattoo."

But because Larsson died in 2004 without a will, none of the profits from the books went to Gabrielsson, nor does she control the literary estate. If you die without a will, Swedish law, like American law, leaves everything to your next of kin. But the law, not you, decides who next of kin is.

This case is a reminder that unmarried couples, regardless of sexual orientation or relationship length, are classified as unrelated individuals in the eyes of the law, leaving both parties vulnerable to the loss of homes they helped pay for, assets they helped accumulate and even children they helped raise.

Estate planning and medical surrogate documents are essential for everyone, but they're particularly important for unmarried couples. The sudden death or disability of one partner could cut the other out of critical decisions and jeopardize ownership of shared property and other belongings.

"The law assumes decisions should be made and inheritances pass to next of kin," says Elizabeth F. Schwartz, a lawyer who practices what she calls "modern family law" in Miami Beach, Fla. "Gay or straight, the last thing you would ever want is for your wishes not to be followed in the case of disability or death."

About 6.7 million couples live together without being married, more than 90 percent of whom are heterosexual, according to the U.S. Census Bureau. Couples have all kinds of reasons for not getting married, from philosophy to loss of pensions, alimony or government benefits.

"If you choose not to marry or the law prevents you from marrying ... it's of critical importance that you make your intentions known," says Schwartz, one of the lawyers in the case challenging Florida's ban on same-sex marriage. "The consequences for not doing that can be grave."

This type of planning is not just for the rich. When you die, your estate is anything you own, from trinkets to your best-selling novels to your 15-year-old used car. Plus, there are situations short of death when unmarried couples may need documents spelling out their rights. Those include the disability or illness of one partner, requiring someone else to make financial and medical decisions. The equivalent of a prenuptial agreement -- known as a domestic partnership agreement or living together agreement -- can also be useful if a couple joins their financial lives and then splits.

The rights of unmarried couples differ from state to state. Some states recognize common-law marriage and others don't, for example. Married same-sex couples face particular challenges because currently only 17 states and the District of Columbia have embraced marriage equality. That means the rights marriage grants may not apply if these couples move to or even visit states that haven't legalized gay marriage.

While you can download documents online and write up a will on notebook paper -- and those are better than nothing -- Schwartz advises unmarried couples to consult a lawyer who specializes in estate planning and family law.

"I always hammer home how complicated this patchwork of rights are," she says. "I've spent a whole lot of time and unnecessary client money trying to fix these things."

Plus, if your life circumstances change, you need to update your documents.

Here are 11 documents and provisions unmarried couples should consider to protect themselves from financial disaster.

A will. This outlines what you would like done with your property after your death, and it designates someone who will be in charge of carrying out those wishes.

A living trust. Property held in a trust passes to the heirs without going through probate, which is a court procedure that freezes assets while it is underway. Trusts save money as well as public scrutiny, since wills become public records and trusts don't. A trust can also be used to handle the affairs of someone who isn't competent.

Beneficiary designations on retirement accounts. Property in these accounts passes directly to beneficiaries without going through probate. If you haven't updated your beneficiaries since you signed up for your company's 401(k) plan years ago, make sure you still want those beneficiaries to inherit.

Durable power of attorney. This gives the other party the right to make decisions and sign documents on your behalf. Not all couples will want this, but you might consider it if you're undergoing major surgery or have a terminal illness.

Designation of health care surrogate. This lets medical personnel know whom you would like to make decisions if you're unable to make them yourself. Since the Health Insurance Portability and Accountability Act of 1996 went into effect, medical providers have been hesitant to discuss health issues with anyone but the patient, unless the patient grants advance permission.

Advance directive or living will. This details what measures you want taken if you are in a vegetative state or unlikely to recover from major injuries.

Properly titled property. Most couples, married and unmarried, hold real estate as "joint tenants with right of survivorship," which means that if one party dies, the other inherits the rest of the home without going through probate. But tax issues may complicate the issue for unmarried couples, so it's best to consult with a lawyer about how to handle jointly owned property -- or property owned by one person who wants the other to inherit it.

Funeral wishes. Funeral directors may be hesitant to allow unmarried partners to make funeral arrangements, especially if the family disagrees. A directive outlining who should make arrangements and what the deceased would like can avert such problems.

Life insurance. If there are no children involved and neither partner depends on the other financially, couples might think life insurance is unnecessary. But the surviving partner may be unable to pay the mortgage, estate taxes or other expenses on his or her own, which is why it's an important consideration.

A domestic partner agreement. This is similar to a prenuptial agreement since it outlines how assets and income will be handled during the relationship and what happens to joint assets if the relationship ends.

Child custody. Schwartz encourages same-sex couples to do second-parent adoptions in states that allow it. With this method of adoption, the nonbiological parent is granted equal rights. In other families, the biological parent may need a document giving the stepparent the right to authorize medical treatment for the child or even give permission for field trips. Parents also need documents spelling out who should care for their children if they die or become disabled.

 

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Class of 2014: Here Are 4 Tips for Acing Real-World Finances

May 12, 2014, 6:45 am

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Filed under: Student Loans, Personal Finance, Saving, Financial Education

Congratulations! You have just become a college graduate. This is an exciting -- and maybe scary -- time. You're probably looking to start a career, earn your first significant paycheck, take your serious relationship to the next level, find a new place to live, and accomplish a lot more fun stuff.

But you might also be staring down the barrel of a lot of heavy financial issues: paying down student loan debt, saving up for those big life changes, figuring out how to manage your own finances, and determining how soon you'll need to start thinking about retirement. (Spoiler alert: now.)

Don't worry. I'm going to give you four tips to financial success that will make it all a lot simpler.

1. These Are Your Financial Priorities

You have a lot going on right now. The best thing to do is take a deep breath, relax and plan. Start by determining your financial priorities. Most people will want to focus on the following (in order of importance):

• Building up an emergency savings fund.
• Paying down your highest-interest rate debt.
• Repaying your student loans.
• Balancing debt repayment with saving for retirement.

Wait, we're already talking about retirement? You bet.

2. Save What You Can for Retirement and Future Needs

If you're earning an income from a full-time job, it's time to start contributing to your retirement accounts, and investing some of your savings. It's never too early to start making progress in this area, because time is your biggest advantage as an investor.

The earlier you start, the more your nest egg will eventually be worth -- even if you don't feel like you're saving much. The secret is compound growth -- something so potent that when people claim Einsten called it one of the the most powerful forces in the universe, folks believe it. (Whether he said it or not is debatable. Its capacity to seriously buff up your retirement nest egg is not. )

Even if it's just $50 or $100 a month right now, contribute what you can to your retirement and major savings accounts that will help you cover future needs and expenses. And then don't touch it.

Make this easier on yourself by taking advantage of "free money" opportunities where you can. Your company benefits package is an excellent place to start.

3. Live Frugally to Aggressively Pay Down Debt

Learn this lesson as soon as possible: Material stuff doesn't make you any more of a person. Possessions are unlikely to make you genuinely happy and fulfilled. So stop wasting your money by trying to accumulate things, things, and even more things.

Instead, make sure your spending is in line with your priorities and your values. You worked hard for your money, so be mindful of what you purchase with it. Embrace living frugally -- which doesn't mean living cheap.

Being frugal means you're more resourceful and less wasteful. It means you're not pressured into buying things you don't need -- or maybe don't even want -- by your peers, family members or a society that encourages mass consumerism.

Once you've realized you don't have to spend every cent you make on stuff that you don't really value, you should have money to allocate toward your debt. Get aggressive with your loan or credit card balance payments.

The sooner these big debts are gone, the sooner you'll be more financially stable and secure. The longer you hang on to debt, the longer you'll be unable to advance other financial goals and the more money you'll be paying in interest.

4. Establish a Side Hustle

Feel like there's not enough money to go around each month to cover all your financial goals, expenses and wants? You do have the power to solve this problem. It's called a side hustle. Any kind of part-time work you can do on the side will accelerate your progress as you repay debt, save for the future and acquire the money you need to make big things happen in your newly independent, real-world adult life.

Sophia Bera is a financial planner for millennials and the founder of Gen Y Planning. You can sign up for the Gen Y Planning newsletter for more tips on millennials and money.

 

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After Market: Dow, S&P Hit New Highs as Russia Stays Quiet

May 12, 2014, 9:45 am

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Filed under: Earnings, Market News, Economy

The Dow and the S&P 500 both jumped to record highs on Monday, and the Nasdaq bounced back from a recent bout of heavy selling.

The market was lifted by some merger activity, some optimism about the economy, and because Russia hasn't made any aggressive moves or statements following this weekend's autonomy vote in eastern Ukraine.

The Dow Jones industrial average (^DJI) rallied 112 points, the Standard & Poor's 500 index (^GPSC) rose 18, and the Nasdaq composite (^IXIC) gained 72 points.

It was a good day for tech stocks, both old and new.

IBM (IBM), Apple (AAPL) and Microsoft (MSFT) all gained more than 1 percent. Adobe (ADBE), Texas (TI) Instruments and Oracle (ORCL) gained 2 percent. While many tech companies have had a rough go of it lately, Oracle is up 22 percent in the past six months.

Among the Internet and social media leaders: Facebook (FB) rose 4½ percent and Google (GOOG) added 2 percent. Twitter (TWTR), Pandora (P) and Salesforce.com (CRM) all gained more than 6 percent.

Biotechs also rebounded. Biogen (BIIB), Regeneron (REGN) and Alexion (ALXN) all up about 5 percent. Alnylam (ANLY) rose 6 percent on word that it plans to file a new drug application for its hepatitis B treatment.

Tesaro (TSRO) jumped 21 percent after the successful completion of clinical tests on its drug to reduce the side-affects of chemotherapy.

But Allergan (AGN) fell 1-percent after officially rejecting Valeant's (VRX) takeover bid.

Pinnacle Foods (PF) said yes to a $6.6 billion offer from Hillshire Brands (HSH). Pinnacle makes the Birds Eye, Duncan Hines and Aunt Jemima brands. Pinnacle jumped 13 percent while Hillshire fell 3 percent.

But the deal boosted a number of other food stocks: Annie's (BNNY), up 5 percent; Boulder Brands (BDBD), up 5 percent, Aaron's (AAN), up 3½ percent; and Hain Celestial (HAIN), up 2½ percent.

Retail stocks gained on optimism that rising consumer sentiment will lead to more buying. Aeropostale (ARO) rose 7 percent, J.C. Penney (JCP) gained 4 percent and both Macy's (M) and Nordstrom (JWN) added 2 percent.

Elsewhere, VeriFone (PAY) rose 8 percent on a Forbes report that Apple will use the company's point of sale payment system.

But Core Labs (CLB) tumbled 12 percent. The energy services firm cut its earnings guidance for the quarter and for the full year.

What to Watch Tuesday:

• At 8:30 a.m. Eastern time, the Commerce Department releases retail sales data for April, and the Labor Department reports import and export prices for April.
• The Commerce Department releases business inventories for March at 10 a.m.
• Fossil Group (FOSL) reports quarterly financial results after U.S. markets close.

-Produced by Drew Trachtenberg.

 

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What Is Your Spending Personality?

May 12, 2014, 11:00 pm

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Filed under: Saving, Spending

Just as your personality influences the way you act, your spending personality can tell you a lot about why your finances are in their current state.

Below, you'll find four major spending personality types that can get you into trouble. Which best describes you? And how can you use your spending attitude to your advantage?

Spending Personality Test

Shop Till You Drop: You've turned shopping into an art form, a sport and a recreational hobby. You head to the mall whether you particularly need anything or not. You never return home empty-handed. The thrill of the hunt sustains you, as does examining all your spoils and basking in your savvy shopping when you get home.

Impulse Buyer: You never mean to spend all that money; it just happens. You fall in love with things the instant you see them. You are highly susceptible to "limited time only" ploys. You obsess over your latest "gotta have it" item until you have it, and then you wonder what the fuss was about. You've found yourself regretting a purchase the instant you've made it or wondering where all your money went to at the end of the month.

Extreme Cheapskate: You cannot resist the lure of a good bargain. You love scanning your receipt to see your savings. Sale signs make your heart race. When someone compliments your new shoes, the first thing you say isn't "Thanks, aren't they cute?" but "I got them on sale." Sometimes, the price you paid more than the item itself.

Convenience Buyer: All those pricey travel-sized items in the checkout line were invented for you. You think it's worth paying more for something just to make life easier. You eat out constantly because you don't feel like making something for yourself. You buy a daily latte because it's easier than making your own coffee at home. You're always running to the corner store when you run out of things. Scanning a store circular or clipping coupons seems like a waste of time. You don't get what all the fuss is about.

Make Your Type Work for You

Each attitude has its own strengths and weaknesses.

Shop Till You Drop: Using shopping as therapy can lead to rampant spending that depletes your budget or lands you in a pile of credit card debt. Use hobbies to take up your time and channel your emotions. Working out could be a great way to relieve some stress; joining a sports league could harness that competitive thrill you love to get from snagging a great deal. The good news? Since shopping is a fine art for you, when you do have a goal to your shopping -- like snagging the perfect gift for your niece's birthday -- you know how to rock it. Just make sure you don't spend aimlessly.

Impulse Buyer: You're enthusiastic. When you see something you like, you instantly fall in love with it -- but your passion can run away with you. So, learn to take a step back and evaluate an item objectively. Ask yourself if you really need it now. Ask yourself if you can't find it somewhere else for cheaper. Consider putting it on layaway or your own 30-day list. If, after 30 days, you still really want it, then you can consider buying it. You'll be surprised how many things you forget about.

Extreme Cheapskate: Contrary to your best intentions, being a bargain-hunter can lead you to spend more than you need. If you've ever stockpiled cream of chicken soup because it was cheap, only to acknowledge later that you don't like cream of chicken soup, you know what I mean. Learn to harness your discount drive by examining store circulars and making detailed lists before you head out. Don't grab something just because it's on sale; make sure it's something you'll use and that the sale isn't misleading. Half off a brand-name item could be more expensive than the store brand.

Convenience Buyer: The only way to get around being lazy about your money is to learn to put forth a little more effort. It's time to start thinking about the consequences of your throwaway spending. Making a regular budget and tracking your spending can help you realize just how much you're losing by being careless with your cash. Sure, it's a lot easier to grab a cup of coffee on the go each morning, but if you woke up an extra 15 minutes early and made it at home, think of how much less money you'd spend per month. Then think of all the other things you could spend that money on. Doesn't that make it seem a little more worth it?

Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 30 countries, owns six rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who refuse to say, "I can't afford it." Visit Afford Anything to learn how to shatter limits and live life on your own terms.

 

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How to Pay Down Credit Cards to Boost Your Credit Score

May 12, 2014, 11:00 pm

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Filed under: Credit Cards, Credit Reports, Credit History, Credit Score, Credit Repair

By Abby Hayes

If you know anything about credit scores, you know carrying high credit card balances is a big no-no. In fact, your debt-to-credit ratio (how much you owe versus your total available credit) makes up about 30 percent of your overall credit score. And revolving debt -- like credit cards -- weighs heavier than other outstanding debts -- like your mortgage or car loan. So if you're carrying a bunch of maxed-out credit cards, your credit score is likely in the tank.

The most straightforward way to improve your debt-to-credit ratio is to simply pay down those balances. But chances are if you're in a lot of debt, you can't pay off all the balances right away. (That's how you got here in the first place, right?)

Here's the good news: You don't have to pay your credit cards off to boost your credit score. But to get the most credit score traction out of every extra payment, you do need to come up with a plan for paying down your credit cards in a certain way.

The Snowball Method

The snowball method is excellent for paying off debt quickly and efficiently. Basically, you throw extra money at one debt, and when it's paid off, put the extra plus the old debt's minimum payment toward the next debt. Repeat this until you're debt-free.

This is an excellent way to get out of debt, if just getting out of debt is your goal. But what if your goal is to get out of debt while also boosting your credit score as quickly as possible? Maybe you're hoping to apply for a mortgage soon, or a car loan?

In this case, the snowball method probably isn't how you want to start. Eventually, you might switch to that, but you may want to begin by evening out your credit card balances.

Lowering Your Debt-to-Credit Ratio

When FICO calculates your credit score, it looks at not only your overall debt-to-credit ratio, but also the individual debt-to-credit ratios of your various credit cards and other revolving debt accounts.

Here's an example:

• Card 1: $5,000 balance/$10,000 limit = 50 percent debt-to-credit ratio.
• Card 2: $4,500 balance/$5,000 limit = 90 percent debt-to-credit ratio.
• Card 3: $500 balance/$1,500 limit = 33 percent debt-to-credit ratio.
• Overall: $10,000 balance/$16,500 = 60 percent debt-to-credit ratio.

In this case, your overall 60 percent debt-to-credit ratio will ding your credit score pretty severely. A "good" debt-to-credit ratio is around 30 percent, and you're nearly doubling that.

But since your score also accounts for individual credit cards, you can see that Card 2 is hurting you the worst -- it's nearly maxed out, which is not good. Card 3 is posing the smallest problem, since it is nearly in that "good" range.

In a situation like this, you'll boost your credit score if you focus on paying down Card 2 first. Depending on the interest rates of each of these cards, you might choose to pay that card down all the way.

Or if it's a card with a lower APR, consider throwing money at its balance until it's at or near $1,500 to reach the 30 percent debt-to-credit ratio. Then move on to Card 1 or whichever card has the highest interest rate.

Now, this strategy isn't guaranteed to add hundreds of points to your credit score. But because you're improving individual debt-to-credit ratios for each of your credit cards, you will make progress more quickly than if you just snowballed your debt.

Still, you need to marry this with some aspects of the debt snowball, including the intensity with which you pay down your debt. After all, the only way to try to achieve credit score perfection is to pay your credit cards off completely, and refuse to carry a balance again.

Why Not Just Spread It Around?

Maybe you're reading this thinking, "Why not just transfer some of the balance from Card 2 to Card 3? Or get another credit card to transfer some of that balance?"

You could. In fact, moving balances to zero percent APR balance transfer cards can be a good strategy for both boosting your credit score and getting out of debt. But just shifting your balances around isn't going to help much here, partially because the credit limit on Card 3 is so low to begin with.

What if you do have a $0 balance card in the mix? In this case, you still don't want to transfer another card's balance. This is because one part of your credit utilization mix is the number of accounts that carry a balance. So having three accounts carrying a balance and one with no balance is better than having four accounts carrying a balance -- even if that move improves one card's debt-to-credit ratio.

You Can't Game the System

The bottom line here is that credit scoring models are so sophisticated these days that you can't really "game the system" by shifting debt from one card to another. In the long run, you just need to focus on getting those credit card balances paid off.

In the meantime, bringing cards below a 30 percent (or even 50 percent) debt-to-credit ratio may boost your credit score more quickly than simply snowballing your debt. This is especially true if your debt snowball would leave a maxed-out credit card in the mix for months to come.

Abby Hayes is a freelance blogger and journalist who writes for personal finance blog The Dough Roller and contributes to Dough Roller's weekly newsletter.

 

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America's Top 10 Most Stressed Out Cities

May 12, 2014, 11:00 pm

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Filed under: Cost of Living, Job Market, Unemployment, Saving

By Robert McGarvey

NEW YORK -- So stressed that many mornings your eyeballs feel ready to explode out of your face?

The cause may be as simple as where you live.

That's the news from online real estate brokerage Movoto which has unveiled its ranking of America's top 10 most stressed out cities.

What didn't make the top 10 list is as interesting as what did. Not a contender is Detroit (No. 21) despite municipal bankruptcy, a violent crime rate that often puts it on top of any most dangerous cities poll, and frankly there is no light at the end of Motor City's very dark tunnel. Even so, it's not a stressful place to live, per Movoto.

Houston, the nation's fourth biggest city, came in a tranquil 43.

The sixth biggest city, Phoenix, didn't even make Movoto's top 50 ranking (it placed 52nd). That makes it the least stressful big city, with even less stress than Charlotte, N.C. (No. 50).

The only other truly big city that didn't place is the nation's seventh biggest, San Antonio, which, said Movoto blogger Randy Nelson who wrote up the research, came in a laid-back 71.

So the stress-phobic know where to move.

Stay tuned for the top 10 countdown but, first, here is how Movoto determined stress. It started with a list of the nation's 100 largest cities, then calculated these measures:

• Commute time
• Unemployment
• High cost of living
• Crime
• Hours worked
• Population density
• Percentage of income spent on rent

Fair enough. The more time spent working and commuting to pay high living expenses is an undeniable gateway to stress. Factor in population density -- overcrowd rats, and in psych lab experiments they eat each other -- and genuine reasons to fear becoming a crime victim, and indeed there is plenty to be on edge about.

The actual Movoto rankings of the top 10 are sure to incite bar brawls, and it starts with Los Angeles, which won a surprising tenth place finish. Surprising, because Los Angeles always bills itself as a kind of lotus land where worries melt into the Pacific Ocean. Apparently not, because Angelenos have a very high cost of living (eighth highest, per Movoto) and that's stressing out the citizens.

Philadelphia came in ninth, Newark eighth, Chicago seventh and Oakland sixth. No surprises there. Oakland has horrific crime (ninth worst in the nation), and Chicago and Philadelphia have high population density. To boot, really, all of these towns are kinds of second cities, places where people are even though maybe they want to be elsewhere (San Francisco or Berkeley, for Oakland residents, for instance).

Then the race gets more intense. In fifth place is Jersey City, N.J., the second biggest city in the Garden State after Newark and directly across the Hudson River from Manhattan. What won it such a high ranking is long commutes to work (37 minutes on average) and the nation's third highest population density with 16,793 people per square mile.

Fourth place went to San Francisco, which scored high in population density (second highest in the nation with 17,233 people per square mile). But what pushed it into stress overdrive is a cost of living that is the country's highest and, said Movoto, 52 percent higher than the national average.

Third place is Miami where you might think it is all about tall cool drinks and sun -- but residents are seriously stressed about simply affording rent, said Movoto. There's also a lot of crime (it ranks 12 in the country, compared to 56th for San Francisco in the crime count).

Now let the fight begin.

The second most stressful city is New York City.

The most stressful is Washington, D.C.

That's not a typo.

Blogger Nelson, in an interview, said that what many found most surprising was Washington, D.C.'s win, but, he insisted, it won fair and square. More than three rating points separated it from New York, and going down the survey just about all other cities won their place by a margin of one stress point more than the next place finisher.

Jersey City, for instance, totals 22.43 points. San Francisco edged it out for fourth with 21.57 points. Sixth place Oakland scored 23.

New York City's total is 19.57 in an index where the lower the city score, the higher the stress, said Nelson.

Washington, D.C. slammed it with a 16.43 score, mainly due to the number of hours worked by residents (40.1 hours, third highest work week in the country) and long commutes (33 minutes).

Extremely high population density (27.092 people per square mile), long commutes (44 minutes) and fiercely high rents give New Yorkers their stress.

But now they also have to deal with being edged out by Washington D.C., in the stress race and that has got to hurt.

Maybe enough to net a win for New York City in next year's tally.

 

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A Whopper at 8 A.M. Isn't the Answer, Burger King

May 12, 2014, 11:00 pm

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Filed under: Company News, McDonald's, Restaurants, Stocks, Investing

It's apparently never too early to have a hamburger. While most chains wait until 10 or 11 a.m. to begin offering their signature burgers, early risers will be able to skip straight to lunch at thousands of participating Burger King (BKW) locations. The fast food giant's betting that some morning commuters want more than just a breakfast burrito or a ham and egg sandwich for breakfast. Later this month Burger King is rolling out a "burgers for breakfast" campaign across 5,000 of its restaurants, offering its signature Whopper as well as a few other burgers and chicken sandwiches in the morning. Assuming that you don't want hash browns on the side, fries will also be made available. So will apple pie.

Whopper, BK King and Original Fried Chicken sandwiches will be part of the chain's breakfast offerings. Will it confuse diners? Will the move complicate matters for employees manning the prep tables and fryers? Will the great variety stall patrons as they ponder the menu when it's time to order, creating longer wait times for food?

The questions won't be answered right away, but Burger King doesn't have much of a choice. Breakfast is big business, and chains have to stand out one way or another.

Another Shot in the Battle for Breakfast

It isn't easy to make a difference in the morning. Just ask Wendy's (WEN), which has already retreated twice from the national breakfast market over the past decade. The first time it thought that it could set itself apart by offering sausage gravy-soaked biscuits and breakfast versions of its then-popular Frescata sandwiches. More recently it tried to stick closer to the McDonald's (MCD) playbook with oatmeal, breakfast burritos and biscuit sandwiches. That didn't pan out either, and last year it discontinued breakfast at all but less than 10 percent of its restaurants.

It's not just the burger flippers hoping to woo diners with caffeinated mornings. Subway -- the world's largest restaurant chain based on the number of locations -- got into the game four years ago with by offering eggy sandwiches for breakfast.

The latest unlikely player is Yum Brands' (YUM) Taco Bell. It rolled out its morning menu in late March, quickly following that up with two ads targeting niche leader McDonald's.

Everyone's Chasing Ronald

McDonald's owns breakfast, and that's a challenge for any quick-service chain hoping to extend its operating day by opening in the morning. Burger King has been taking notes in the past, ripping off many of the chain's most popular items down to a near replica of McDonald's flagship Egg McMuffin sandwich. Smoothies, oatmeal and caramel frappes were all introduced at McDonald's before Burger King got in on the fun.

Burger King could've gone the Taco Bell route. The Waffle Taco and A.M. Crunchwrap are unique items that one can only get at the country's largest burrito roller. Instead we're seeing Burger King trying to stand out by serving some of its lunch options a couple of hours earlier in the day.

Will it be enough? Selling parents driving their kids to school or commuters heading out to work on the merits of a Whopper at 9 a.m. won't be easy. Some of these items can get messy for distracted drivers. It will be incremental, and that's the point. As long as it doesn't slow up the drive-thru queue, this will help grow Burger King's business. But it may come at the expense of losing its breakfast identity.

The ideal solution is to follow Taco Bell into unique items that sound more outrageous than they actually taste. Burger King's breakfast menu isn't a photocopy of what McDonald's is doing. It does have a few items -- including croissant sandwiches and French toast sticks -- that were popularized there.

That's probably where the chain's emphasis should remain. Make breakfast better. Don't just make lunch earlier. Hungry morning drivers will have the final say in this breakfast battle. They always do.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's.

 

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Small-Business Owners Still Cautious, Surveys Find

May 12, 2014, 11:00 pm

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Filed under: Small Business, Economic Indicators, GDP, Economic Recovery, Small Business Advice

NEW YORK -- Small-business owners are keeping a cautious approach to running their companies even as they grow more optimistic.

Two surveys released Tuesday, one by Wells Fargo (WFC) and the other by Bank of America (BAC), found many owners still have conservative hiring plans and little appetite for loans.

Stronger revenue and cash flow are behind the increasing optimism. In the Bank of America spring survey, 68 percent of owners said they expect revenue to increase in the next 12 months. They feel confident about their local economies but have their eye on national and international issues that could affect their businesses.

About three-quarters cited health care costs and the federal government's effectiveness, or lack thereof, as potential problems. Seventy percent are concerned about higher commodities prices.

Wells Fargo's second-quarter Small Business Index rose to 47 from the first quarter's 45, its highest level since the second quarter of 2008, before the financial meltdown. That was still far below the high of 114 hit in December 2006, but much better than the minus 28 posted in the third quarter of 2010.

The Wells Fargo survey found owners are gradually getting more optimistic about the prospects for their companies' financial situation a year from now. Sixty-seven percent forecast their businesses would be in good shape, up from 66 percent in the first quarter. Fifty-nine percent expect their cash flow to be good over the next year, up from 57 percent.

The Wells Fargo survey and Bank of America's are in line with other recent reports that show owners' confidence slowly improving.

Both surveys found owners willing to hire. In the Wells Fargo survey, 21 percent plan to hire in the next 12 months, little changed from 22 percent in the first quarter. A larger number of owners in the Bank of America survey, 52 percent, said they were willing to hire, a jump of 21 percentage points from a year earlier.

Despite that gain, Robb Hilson, head of small-business banking at Bank of America (BAC), still notes owners' caution.

"They're probably not going to hire in explosive numbers like they did 10 years ago," he said.

Loans are easier for small businesses to get, adding to owners' confidence, although many don't want to borrow. Only 14 percent of owners surveyed by Bank of America said they plan to apply for loans this year, down from 19 percent a year ago. Owners just don't need loans right now: More than half said their businesses are well-funded, and 42 percent said they don't want to take on anymore debt.

The Bank of America survey questioned 1,000 small-business owners during March. The Wells Fargo survey questioned 600 owners from March 31 to April 4.

 

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BlackBerry's Plan to Regain Ground in Emerging Markets

May 12, 2014, 11:00 pm

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Filed under: Company News, Research In Motion, Consumer Goods, Mobile Technology, Cell Phones

By Randy Fabi and Euan Rocha

BlackBerry (BBRY) launched a low-cost touchscreen device in Jakarta, the Z3, as the embattled smartphone maker looks to revive sales in emerging markets like Indonesia where its once-fervent following has shriveled.

The handset, unveiled at a glitzy launch event in the Indonesian capital Tuesday, is the first in a line of devices being made with FIH Mobile, a unit of the giant Taiwanese Foxconn Technology Group best known for assembling gadgets like iPhones and iPads for Apple (AAPL).

The success of the handset retailing for less than $200 could well decide the outcome of both BlackBerry's tie-up with the contract manufacturing giant and its own future in smartphones. The Z3 Jakarta Edition will hit store shelves on May 15.

"If this device allows them to grow again, even if it's just small, steady growth, that's a success in itself. That says there is still room for BlackBerry in Indonesia," said Ryan Lai, market analyst at consultancy IDC.

The Z3 is the first phone to be launched by BlackBerry since new Chief Executive Officer John Chen took the helm late last year. After Indonesia it will be gradually introduced in six other countries including the Philippines, India, Vietnam and Malaysia.

Waterloo, Ontario-based BlackBerry hopes that the device and others to follow will help it claw back some of the collapse in its market share, ceded to Apple's iPhone and Samsung Electronics' line of Galaxy devices powered by Googles (GOOG) Android operating system.

"If the market doesn't receive this product well, then we definitely have some negative issues to deal with," Chen said at the launch at Jakarta's Ritz-Carlton hotel. BlackBerry said it doesn't have an official sales target for the device, but Chen said he expects to sell millions of Z3 handsets around the world, without disclosing further details.

Market-Share Slide

Just two years ago, the Canadian firm had a 40 percent share of the Indonesian market, shipping more than 600,000 handsets per quarter in a country once known as "BlackBerry Nation."

But the launch of the premium, high-priced BlackBerry 10 last year failed to attract buyers in a country where nearly 40 percent of the population live on about $2 a day. The company's market share has slumped to just 4 percent, with shipments of around 100,000 devices in the first quarter this year, according to IDC.

Indonesia is now dominated by Samsung, which sells about one of every three smartphones in Southeast Asia's largest economy.

Chen hopes that the Z3 and other devices to follow spark a change in the company's fortunes. The Z3 is being launched at a price point below $200 to address one of the big turnoffs for consumers in emerging markets -- BlackBerry 10 devices being too pricey.

"From conception to delivery, the BlackBerry Z3 Jakarta Edition was designed specifically with our Indonesian customers in mind," Chen said in a statement. The device will allow users to type in Bahasa and come with a special set of BlackBerry Messenger or BBM Stickers featuring local characters.

Later this year, BlackBerry will launch a new, non-touchscreen device dubbed the BlackBerry Classic in partnership with Foxconn. The handset will see a return of the command keys that include "Menu," "Back," "Send" and "End" buttons, along with a trackpad. BlackBerry hopes the move will address the concerns of those users who found their new devices hard to navigate.

For Foxconn, the tie-up fits with plans to set up a manufacturing plant in Indonesia to build smartphones and other electronic devices. The Taiwanese company's ambitions have been on hold since 2012 due to drawn-out talks over tax breaks, property and import restrictions.

-Reporting by Randy Fabi in Jakarta, Indonesia, and Euan Rocha in Toronto.

 

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