U.S. Moves to Revamp Ailing Automakers
General Motors Corp. and Chrysler LLC have almost depleted the combined $17.4 billion in federal aid they received in December and since have asked for another $16.6 billion and $5 billion, respectively. President Barack Obama tasked his auto-industry team to restructure both companies before any additional aid could be given.

For starters, the White House yesterday pushed out GM Chairman G. Richard Wagoner, who will be replaced by GM's chief operating officer, Fritz Henderson. Most of the company's board will be replaced over the next few months.

"The decision to ask GM's chairman and chief executive ... to resign caught Detroit and Washington by surprise, and it underscored the Obama administration's determination to take a hands-on role in the companies it is bailing out — a level of government involvement in business not seen since the Great Depression," the New York Times reports. "President Obama is scheduled to announce details of the auto package at the White House on Monday, but two senior officials, offering a preview on condition of anonymity, made clear that some form of bankruptcy — a quick, court-supervised restructuring, as they described it — could still be an option for one or both companies."

Meanwhile, Chrysler has been instructed to form a partnership with Italian automaker Fiat SPA within 30 days if it is to receive government aid. The auto industry task force report says "Chrysler could not survive as a stand-alone company." It must also reduce its debt and health care obligations. Chrysler and owner Cerberus Capital Management this afternoon said they agreed on a framework for a global alliance with Fiat. Prior to today's statement, the administration said it would consider another loan of $6 billion to Chrysler on the condition of a partnership between automakers.

"The administration is giving GM 60 days to present a cost-cutting plan and will provide taxpayer assistance to keep it afloat during that time," the New York Times reports. The restructuring plan will also include government backing of warranties for GM and Chrysler cars and trucks, even if one or both are forced into bankruptcy.

Eurozone Biz Activity Perks Up
Although still in depressed levels, business activity in the eurozone picked up slightly in March with the purchasing manager's index (PMI) rising to 37.6 from 36.2, data and research group Markit reports. The manufacturing sector index rose to 33.2 points from 30.8. "We may have reached a turning point, but one shouldn't forget that the index level still is deeply in the contraction area," Carsten Brzeski, an economist at ING Groep, tells Industry Week.

This is the 10th month that the index for Europe's manufacturing and retail sectors have come in below the key 50-point threshold. Europe is currently "being dragged into its deepest recession since World War II," Bloomberg News says.

In September, Ireland became the first eurozone country to fall into an official recession. Its economy contracted by 2.3 percent in 2008 and gross domestic product (GDP) shrank by 7.5 percent in the three months to December compared with the fourth quarter of 2007, the Central Statistics Office also said.

Europe's largest economy is also in decline and Commerzbank forecast the German economy to shrink by 6 percent to 7 percent this year, the Wall Street Journal (subscription required) notes. "Gloomy data from German industry is prompting more analysts to cut expectations, adding fuel to the debate over whether the country should adopt a more aggressive fiscal-stimulus policy." As of last week, economists were predicting a 3.5 percent decline in 2009.

China Proposes New Global Currency
In an essay posted on the People's Bank of China's Web site, bank governor Zhou Xiaochuan called for a new international reserve currency "to achieve the objective of safeguarding global economic and financial stability." To better insulate countries from the ills of one country or one currency, Zhou said the International Monetary Fund (IMF) should create a "reserve currency" based on shares in the body held by its 185 member nations, known as special drawing rights (SDRs), the Associated Press reports. "He said it also should be used for trade, pricing commodities and accounting, not just government finance."

Currently, the value of SDRs is based on the U.S. dollar, yen, euro and sterling. According to the Financial Times, "the proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions."

Analysts believe this proposal could likely lead to the debate over the future of the global foreign-exchange system, MarketWatch says. President Obama and European Union Commissioner Joaquin Almunia rebuffed the proposal, saying the dollar's role as the international reserve currency is secure. "I don't believe that there's a need for a global currency," Obama said. Almunia added "that the present world reserve currency, the dollar, is there and will continue to be there for a long period of time."

EPA: CO₂ Danger to Public Health
The Environmental Protection Agency (EPA) has submitted a proposed finding to the White House indicating that "carbon dioxide is a danger to public health, a step that could trigger a clampdown on emissions of greenhouse gases across a wide swath of the economy," according to the Wall Street Journal (subscription required). Environmentalists called it overdue and essential, while business representatives warned it could further weaken the struggling economy.

Two years ago, the Supreme Court instructed the EPA to decide if greenhouse gasses, especially carbon dioxide, pose a threat to public health. "If such a finding is made, these emissions are required to be regulated under the Clean Air Act," the Associated Press reports the court as having said. (See How an Executive Order Could Transform the Auto Industry)

While the EPA's finding is not final, experts began debating what it would mean for the U.S. economy. William Kovacs, vice president of Environment, Technology, and Regulatory Affairs at the U.S. Chamber of Commerce predicted it could halt many of the projects funded under the just-passed economic recovery package. "At a time when we need to jump-start our economy, regulating CO₂ in this manner would stop most of President Obama's stimulus proposal cold in its tracks and create a regulatory train wreck," he said.

But before there's widespread panic, industry officials say it could take months, even years, for the administration to finalize greenhouse gas emissions regulations.

Plus, EPA spokeswoman Adora Andy said in a statement (subscription required) that if the administration goes ahead with the proposal, it will be subject to public hearings and comment before becoming final. It "does not impose any new regulatory burdens on any projects, let alone those funded" under the American Recovery and Reinvestment Act, Andy adds.

Tangentally related, a new report by the Alliance for American Manufacturing (AAM), with a team of environmental and legal experts, "documents China's ineffective enforcement of weak pollution-control standards, its failure to use adequate pollution-prevention measures, and the resulting high levels of pollution.

"Propelled by its rapid industrial expansion and low environmental standards, China has also become one of the world's biggest polluters. It now produces more sulfur dioxide than any other country, and has taken the lead in generating carbon dioxide as well."

The extensive report focuses on China's rapidly growing steel industry and goes on to compare the nation's environmental protection practices to those in the U.S.

Hiring Remains Anemic
Initial unemployment claims jumped 8,000 to 652,000 in the week ending March 21, the Department of Labor reports. The four-week moving average, on the other hand, has decreased by 1,000 from the previous week's revised average of 650,000.

The seasonally adjusted continuing unemployment benefits claims continue to skyrocket, having increased by 122,000 to a record 5.56 million for the week ending March 21. "It was the third consecutive week that continuing claims rose by more than 100,000, a strong signal that hiring is anemic," MarketWatch says.

The raw numbers are even worse. Those show 6.4 million collecting state unemployment benefits and an additional 1.4 million who have been collecting federal benefits while fruitlessly looking for a job for more than six months. Approximately 4 million more people are officially unemployed but aren't eligible for jobless benefits. Another 8.6 million can only find part-time work and another 2 million gave up their job search.

"Some economists suggested payrolls would fall by about 700,000 in March and the unemployment rate could climb to 8.5 percent from 8.2 percent in February," MarketWatch adds.

Incomes Fall, Spending Slows
Consumers closed up their wallets in February after splurging in January, the Commerce Department has announced. Real consumer spending fell 0.2 percent last month after rising by a three-year high of 0.7 percent the month before. At the same time, personal incomes fell 0.2 percent in February and wages dropped 0.4 percent. This puts incomes at the lowest level since April last year.

Additionally, "with incomes falling and nominal spending increasing, the personal savings rate ticked lower, to 4.2 percent of disposable incomes, compared with 4.4 percent in January," MarketWatch adds.

Cracking Down on Wall Street
Treasury Secretary Timothy Geithner unveiled sweeping new "rules of the game" last week, seeking dramatically expanded federal powers to regulate a broad swath of the financial industry, including hedge funds, derivatives trading and money-market mutual funds, MarketWatch reports. The blueprint seeks to achieve two objectives as laid out by President Obama: to crack down on abusive practices on Wall Street while still allowing financial markets to thrive.

Geithner asked Congress to require all "private investment funds with assets under management over a certain threshold" to register with the Securities and Exchange Commission (SEC) and disclose certain information so government officials can determine whether their size or complexity puts the broader economy at risk. Hedge-fund advisers would also have to register with the SEC.

"In the wake of the [Bernie] Madoff episode, it is clear that, in order to protect investors, we must close gaps and weaknesses in regulation of investment advisers and the funds they manage," Geithner said. He also talked about tighter international control and the importance of global rules so that no country becomes a haven for riskier activities.