GM Seeks to Convert Debt to Equity and Save $44 Billion

General Motors said the company plans to strengthen its balance sheet with a bond exchange offer and a slash in production, which would reduce its debt by $44 billion. The updated viability plan released Monday involves a proposed bond exchange offer of $27 billion in its unsecured public debt. The plan will convert $10 billion in U.S. debt to equity, and leave GM bondholders with 10% of the company.

The viability plan is subject to the co-operation of the U.S. Treasury and the United Autoworkers (UAW) union. The plan also involves the phasing out of the GM Pontiac brand, and a reduction in the number of U.S. dealerships from 6,246 in 2008 to 3,605 by 2010.

The company plans to produce at an industry volume of 10 million vehicles, against the average annual rate of 15 to 17 million recorded from 1995 to 2007.

Dallas Area Manufacturing Index Improves for Second Straight Month

Manufacturing in the Dallas Federal Reserve district posted a second consecutive monthly improvement, but is still within contractionary territory. The Texas Manufacturing Outlook Survey showed that 31.6% of business executives reported worsening conditions. Economists were expecting a 46% reading, against the 49.0% reading in March.

The production component grew to -8.9 from -22.3, capacity utilization climbed to -12.9 from -25.2, and new orders jumped over 15 points to -14.8. Texas produces more than 8% of all manufactured goods in the United States, ranking second behind California in factory production.

Swine Flu Concerns Grip Equity Markets

Concerns over a flu pandemic caused U.S. equity futures to weaken on Monday ahead of the Open, led by sharp drops in airline stocks. Dow Jones Industrial Average futures were down 1.74% on the day and S&P futures were down 1.9% ahead of the Open, though both indexes climbed back into positive territory around midday.

The World Health Organization (WHO) is continuing to assess the global health threat, but has not issued any warnings yet. On Sunday, the U.S. declared a public health emergency after 20 cases of swine flu were confirmed in America. According to media reports, an emergency committee at the WHO will meet later on Monday to discuss declaring a health emergency.

Eight of the cases have been reported in New York, seven in California, two in Kansas, two in Texas and one in Ohio. Six cases of swine flu have also been reported in Canada; four in Nova Scotia and two in British Colombia. According to media reports, the virus originated in Mexico.

"Over the coming weeks swine flu is likely to either fade away as a market theme or escalate into an all-consuming market driver depending on whether or not it develops into a pandemic in the US and/or other industrialised countries," a Danske Bank report said.

ECB's Hurley Doesn't Exclude a Further "Measured" Cut in May

A further "measured" cut to the European Central Bank's main refinancing rate cannot be ruled out at the ECB's meeting in May, Irish central bank Governor John Hurley said.

"While the governing council is never pre-committed, I cannot exclude the possibility that the council may, in a very measured way, further reduce the main policy rate," Hurley, a member of the ECB's Governing Council, said at a meeting of EU ambassadors on Monday. Furthermore, a decision on non-standard monetary policy actions will be decided at May's meeting, Hurley added.

Canadian Commodity Prices Fall Further in March, Says Scotiabank

An index of Canada's 32 major commodities shows prices maintained their downward trend in March amid continued global economic contraction and tight credit conditions. Scotiabank's Commodity Price Index fell 2.8% in March from the previous month, bringing its annual decline to 32.7%.

The global economic contraction and tighter credit conditions are the leading causes for a 41.8% fall in commodity prices from their peak in July 2008, the report noted. The metal and mineral index led the decline, falling 4.3% month-over-month, while the oil and gas index fell 2.6%.

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