Biz People

Buffett moves into bonds

Billionaire investor Warren Buffett's new insurer on Tuesday made its first foray into guaranteeing tax-free bonds, beginning with $10 million of outstanding New York City debt that matures in 2012, according to market sources.

The insurance was purchased by Goldman Sachs & Co, which paid an unusually costly premium of 26 basis points, according to one of the sources.

Spokesmen for New York City and Goldman Sachs were not immediately available. A spokeswoman for Berkshire Hathaway Inc directed all questions regarding the new insurer to Ajit Jain, who runs Berkshire Hathaway Assurance Corp. Jain did not immediately return calls seeking comment.

Berkshire Hathaway's new venture won its license from New York state in late December, and he also has applied to Puerto Rico. Buffett is known for his astute value-investing, and his decision to start insuring tax-free bonds follows the hammering several insurers have taken from subprime-mortgage plays.

Insurance industry leaders AMBAC Financial Group and MBIA Inc took yet another pummeling on Tuesday, with Ambac's shares sinking 17.3 percent to $19.42 and MBIA shedding 20.8 percent to $13.85.

Like many states and cities, New York City faces yawning budget gaps, and the insurance from Berkshire Hathaway's new company should help stabilize prices of the city's general obligation bonds, said the sources, who requested anonymity.

Ford woes reflect US economic ills

Ford Motor Co, whose stock price hit a 22-year low last week, reflects "concern about the state of the US economy", Chief Executive Alan Mulally said.

"Clearly, most of the parameters of our economy are associated with a real slowdown," Mulally told reporters in Dearborn, Michigan. "Everything has deteriorated more than we anticipated", which "puts a lot of pressure on confidence of consumers". He declined to say if the US was in a recession.

Ford "wouldn't do anything different because of the stock price", Mulally said. The company will adjust production to lower vehicle demand and remains committed to returning to profitability in 2009, he said.

Ford is cutting jobs, closing plants and developing new models after recording a record loss of $12.6 billion in 2006. The company recruited Mulally, 62, that year from Boeing Co, where the executive headed commercial airline operations.

At Ford, Mulally wants to stabilize the US share of its main Ford, Lincoln and Mercury brands at 14 percent to 15 percent. Those brands captured 14.8 percent of the US market in 2007.

The automaker, based in Dearborn, was surpassed in 2007 by Toyota Motor Corp for No 2 in US vehicle sales, behind General Motors Corp. Ford had held the slot since 1931 and hadn't been No 3 or worse since 1905.

Ford hasn't posted a US market share gain since 1995, when it accounted for one in every four cars and trucks sold.

Ford first hit the 22-year low on January 4 when it closed at $6.13 a share and was as low as $6 a share.

(China Daily 01/10/2008 page16)