… Obama Reveals Budget, Toyota and GM Struggle, UK Manufacturing Output Falls and MORE.

Rescuing AIG… Again (x4)
American International Group Inc. (AIG) posted a $61.7 billion loss for the fourth quarter — the biggest quarterly loss in its history — after reaching a revised rescue deal with the government today.

In the latest bailout effort, the United States government, which already owns 80 percent of AIG’s assets, agreed to give the insurance giant an additional $30 billion in taxpayer money and loosened the terms of its loans to the insurer. The government will reduce a $60 billion credit facility in exchange for taking a preferred interest in AIG subsidiaries American Life Insurance Company and American International Assurance Company Ltd. The federal government will also ease the interest rate it charges AIG for tapping the credit line.

This is the fourth time the U.S. has had to step in to help AIG — first a $60 billion loan, then a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.

The government’s aid to AIG far eclipses the ones extended to other financial companies such as Bank of America, which received $45 billion, and Citigroup Inc., with $50 billion. But, after Citigroup posted another $10 billion in fourth-quarter losses, the government agreed to step in again to get Citi’s house in order. Rather than give Citi more money, the government will swap $25 billion worth of its preferred shares for common stock, boosting its stake 28 percent and effectively quadrupling its stake in the company from 8 percent to about 36 percent.

President Unveils 2010 Budget
President Barack Obama laid out a sweeping $3.6 trillion budget for fiscal 2010, making a major down payment on many of his priorities and marking a historic shift toward more government involvement in health care, energy and education while raising taxes on the wealthiest people in America.

According to MarketWatch, President Obama’s 134-page budget blueprint also predicts “eye-popping deficits” for fiscal years 2009 and 2010. Obama said that the budget “lays out for the American people the extent of the crisis we inherited,” as well as “the steps we will take to jump-start our economy to create new jobs and our plans to transform our economy for the 21st century.”

Those steps include an ambitious 10-year, $630 billion plan to overhaul the U.S. health care system. U.S. stocks — especially shares of health-care companies — fell after Obama released his budget blueprint, MarketWatch says.

Another big item in the budget involves the environment. The budget touched on Obama’s proposal to force companies to buy permits for emissions in an effort to reduce greenhouse gases to 14 percent below 2005 levels by 2020 and 83 percent below 2005 levels by 2050. The budget also removes almost all funding for the Yucca Mountain nuclear waste storage project, effectively killing a plan 20 years in the making. The administration will focus on a new strategy of how to handle waste, and the only funds spent on Yucca Mountain will be used to meet a legal requirement for the Nuclear Regulatory Commission to process a Bush-era application.

Regarding tax increases for individuals making more than $200,000 and families whose incomes are over $250,000, the president’s budget director said those wouldn’t kick in until 2011.

Top 2 Automakers Struggle with Demand
Toyota Motor Co., the world’s largest automaker, told its suppliers that it foresees a 12 percent drop in annual production starting in April due to a sharp fall in demand. Sales of new vehicles in Japan plunged 32.4 percent last month from a year earlier, the steepest decline for February since 1974. Toyota brand vehicles fell 32 percent from a year prior.

Anticipating a continued slowdown, the company says it will manufacture an estimated 6.2 million vehicles next year, down from 7.08 million this year. “This figure is not an official target but a guideline for suppliers,” Agence France-Press reports from a statement by the automaker.

Meanwhile, General Motors Corp. continues to struggle as well, reporting another massive loss for the fourth quarter of $9.6 billion. The company has burned through $6.2 billion in cash in the last three months of 2008 as the automaker sought more funding from the federal government and fought the worst U.S. auto sales climate since 1982.

The nation’s biggest domestic automaker said Thursday it lost $30.9 billion for the full year, the Associated Press notes.

Ford and UAW Reach Deal on Health Care
After reaching a deal with the United Auto Workers (UAW) to lower labor costs by modifying the terms of its 2007 contracts, Ford Motor Co. said on Feb. 23 it has reached a tentative deal with its main union that will allow it to fund a multibillion-dollar health care plan with stock instead of cash. The agreement will allow Ford to meet up to 50 percent of its outstanding obligations to a trust fund for retiree health care benefits with common stock instead of cash, Agence France-Press reports Ford as saying. As of Aug. 29, Ford owed $13.2 billion to the fund.

Meanwhile, Ford CEO Alan Mulally announced Wednesday he will take a 30 percent salary cut for two years as part of cost-cutting efforts. Mulally earned $21.67 million in 2007. Other white-collar pay cuts included the elimination of performance bonuses for salaried employees and senior execs. Ford’s board also agreed to give up all cash compensation this year.

Weekly Unemployment Report
First-time applications for unemployment benefits for the week ending Feb. 21 rose 36,000 to a seasonally adjusted 667,000, the U.S. Department of Labor reported Thursday. The level of initial claims is the highest since October 1982 and up 86 percent from the same period in the prior year, MarketWatch says. The four-week average of new claims, which measures the underlying trend, rose 19,000 to 639,000 — also the highest level since October 1982, and up 84 percent from 2008.

The advance number for seasonally adjusted insured unemployment during the week ending Feb. 14 was 5,112,000, up 114,000 from the preceding week’s revised level of 4,998,000. The four-week moving average was 4,932,250, an increase of 89,250 from the preceding week’s revised average of 4,843,000.

Continuing claims also hit a record high with 5.11 million, 86 percent higher than the year before. The four-week average of continuing claims gained 89,250 to 4.93 million, 80 percent higher than 2008.

UK Manufacturing Slide Speeds Up
The downturn in manufacturing in the United Kingdom has accelerated and could lead to 140,000 job cuts in the sector this year, a new survey from the EEF indicates. The EEF “forecast that manufacturing output would fall by 8.6 percent in 2009, with a growth of just 0.2 percent in 2010,” BBC News reports. At the same time, however, a separate survey of 11,000 firms by BDO Stoy Hayward (EEF canvassed 782 firms) reports a “slight rise in short- and mid-term confidence as many accept the realities of the recession.”

BDO Stoy Hayward tells BBC News that the growth in optimism suggested action was being taken to adapt to the economic climate. Still, it predicted that 320,000 more jobs would go across the UK in the next three months alone as firms cut back.

According to the EEF, the UK’s Times adds, “39 percent more companies expect to cut output than to raise it in the next few months, while for orders the survey showed a negative balance of 54 percent.” The organization also “repeated its calls for companies to get help from the government in paying workers put on short time,” citing “anecdotal evidence of international companies cutting jobs in Britain rather than on the continent because they did not receive financial help to retain workers in the UK.”

But the gloom goes beyond manufacturing, the Times continues. According to a confidence survey by KPMG, 81 percent of senior executives felt prospects for the British economy to be bad or very bad. In last year’s final quarter, 60 percent had that view and 87 percent said that the economy would get worse before it gets better.

Along with manufacturing output, engineering output is set to shrink by 10.9 percent this year and rise by 0.9 percent next year, the EEF concludes.