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The Buffalo economy: Taking advantage of fixer-uppers

   In Business Today the last day or so, news about how Buffalo, forlorn center of recession before recession was everywhere, is now a center of making lemonade out of lemons:

M&T sees good fit in takeover - David Robinson/The Buffalo News
  Don’t think of M&T Bank Corp.’s $351 million deal to buy Wilmington Trust as a takeover.
  Think of it as a take-under. ...
   With a painfully high 12 percent of its loans classified as non-performing, it isn’t the type of bank Mtlogo you’d normally expect M&T’s conservative bankers to buy. ...
   The reason is twofold: For starters, it gives M&T a leading position in Delaware, ranking first in deposits and near the top in lending, which goes nicely with its No. 2 share in neighboring Maryland. There’s no overlap in the two banks’ branch networks. ...
   But this deal is all about the fees.
   M&T coveted Wilmington Trust’s wealth management and trust business, which generates a stream of fee income strong enough to make M&T willing to take on its loan problems. Wilmington Trust’s wealth management business is almost three times the size of M&T’s similar unit and has the added advantage of being based in Delaware, where its clients can take advantage of favorable trust laws to protect their assets. ...
  Related:
M&T has become a legend in small-business lending - Eric Ruth/Wilmington News Journal
   ... M&T is something of a legend within the banking industry for its aggressiveness in the small-business lending market, raising the potential for some easing of the state's still-tight credit market -- and some tough new competition for local rivals.
Wilmington to Test M&T's Skills - Barron's
Wilmington Trust's $3.84 Take Under Catches ... Sellsiders With Pants Down - Tyler Durden/ZeroHedge
- Wilmington Trust Sued by Shareholder Claiming M&T Takeover Price Too Low - Bloomberg

Franchised firms upbeat on growth - Matt Glynn/The Buffalo News
   Buffalo Niagara's economy may not be booming, but a number of franchised companies see opportunities to grow here and are searching for suitable franchisees to open more locations. ...
   Among the expanding companies is AAMCO, which plans to open four additional auto service centers in the area in the next three to five years. Snap Fitness wants to grow from its six area locations to about 20. Pump It Up, which hosts children's parties and other events, wants to open its first area location, and Cartridge World plans to add several more stores.
   Their expansion plans might seem to run counter to Buffalo's reputation as a steady, slow-growth market. But looking in from the outside, they say the region's demographics suit them and they see a chance to capitalize on trends in their respective industries. ...
   J. Randy Steiner bought his first AAMCO franchise in 1999. Today he has four ...
   Steiner said a "middle market" like Buffalo makes sense for AAMCO to target for expansion. Residents have enough money to maintain their vehicles, he said, but aren't so affluent that they are constantly replacing them. "People around here aren't foolish with their cars." ...

   That is to say, we don't do this. [Good luck tonight, Conan]

 

-- George Pyle/The Buffalo News

Farewell to Pontiac

The official end of Pontiac came quietly at the end of October, when General Motors' agreements with Pontic dealers expired. The brand's fate was known long before that, with GM announcing in April 2009 that Pontiac would be eliminated by the end of 2010.

As Pontiac fades into history, it's worth noting it was a strong seller for years in the Buffalo Niagara market. In 2009, the year its impending shutdown was announced, 1,946 new Pontiacs were sold in the region, according to the Niagara Frontier Automobile Dealers Assocation, seventh among brands. In each of 2007 and 2008, more than 3,000 Pontiacs were sold.

Back in 1999 and 2000, when new-car sales overall in the United States were running at a higher level, nearly 4,000 Pontiacs were sold in each of those two years, with Pontiac routinely among the top-selling local brands.

-- Matt Glynn

Buying more cars. Paying more for power.

   In Business Today:

Customers return to auto showrooms - Matt Glynn/The Buffalo News
   U.S. auto sales rose in October as buyers grew slightly more confident in the economy and new models drew them into dealerships.
   Duane Paddock of Paddock Chevrolet in Kenmore said his October sales were robust, led by the Cruze, Autoline Equinox, Silverado and Malibu. ...
   General Motors, which is preparing for an initial stock offering expected later this month, saw sales rise 3.5 percent in October. [GM's press release stresses a 13 percent increase in sales for its four remaining brands -- Chevrolet, Buick, GMC and Cadillac -- which it can do when it ignores brands that have either been sold or closed -- Saturn, Hummer, Pontiac and Saab.]
   Ford Motor Co.'s sales rose 19.2 percent, led by big increases in trucks and small cars. Sales of the redesigned Edge crossover were up 24 percent, while Ford Escape sales rose 17 percent. Ford says sales of the F-Series pickup rose 24 percent, thanks in part to a monthlong truck promotion. ...
   Chrysler Group LLC's sales were up 37 percent from last October, partly on the strength of the new Jeep Grand Cherokee, which saw sales more than triple. Ram pickup sales rose 41 percent.
   New products also gave a boost to Honda Motor Co., whose sales climbed 16 percent. October was the first full month on the market for the Odyssey minivan, which saw October sales jump 52 percent. Wagons were also hot at Honda, where CR-V sales climbed 19 percent.
   Automakers are expecting to sell around 11.5 million vehicles this year, up from a 30-year low of 10.4 million in 2009.
   Consumer confidence rose slightly in October, according to a report released last week by the Conference Board. That, and a rebounding stock market, may have spurred buyers to invest in a new vehicle. Analysts are expecting last month to be the best October for the industry since 2007. ...
   * Hyundai said its October sales jumped 38 percent as sales of the new Sonata midsize sedan more than doubled.
   * Subaru sales rose 25 percent for the month on strong sales of the Outback and Forester wagons.
   * Volkswagen sales rose 18 percent with a boost from sales of the new Jetta. Jetta sales were up 32 percent over last October.
    More from The Detroit NewsThe Detroit Free Press, The Washington PostUSA Today and
- General Motors Can Fly Again for Stock Sale - The New York Times
   The automaker has met federal guidelines to use chartered aircraft as early as Thursday to ferry managers on a “road show” promoting G.M.’s public stock offering, according to government and company officials who declined to be identified. ...
   The use of private jets by the Detroit automakers to fly to Washington for Congressional hearings on an auto bailout in November 2008 was harshly criticized by lawmakers, who saw the jets as symbolizing the industry’s need to cut unnecessary costs.
   G.M. and other executives drove to the next hearing.

 - National Grid finds support for rate hike - David Robinson/The Buffalo News
   The Buffalo Niagara region’s business groups lined up Wednesday to voice their support for the infrastructure improvements that are part of the $361 million rate increase that National Grid is seeking.
   National Grid, which has spent more than $1.4 billion since 2002 to upgrade its upstate transmission and distribution network is proposing to spend $1.8 billion on transmission and infrastructure improvements from 2011 to 2013. ...

   Time to make the Thunderbirds:

 

-- George Pyle/The Buffalo News

Other returns: Manufacturers up. Housing down.

   It's the Day After Election Day, so in Business Today we need to count winners and losers, just like everyone else.

September home sales hit new low - Jonathan D. Epstein/The Buffalo News
   Home sales plunged again in September to their lowest levels for the month in at least a decade, as the housing market continues to stumble along after the federal tax credits expired.
   For September, 717 homes changed hands, down by 24 percent from 944 a year ago, according to new statistics released by the Buffalo Niagara Association of Realtors.
   However, that was up by 12.2 percent from a dismal August performance, when only 639 homes closed. So far this year, sales are down by 13 percent, to 6,443.
   “It’s a reflection of all the people who bought in the first half with the tax credit,” said Philip L. Aquila Jr., president of Western New York Real Estate Information Services, which runs the multiple listing service for the Association of Realtors. “We anticipated it being slow, and it is slow. It’s catching up to us.”
   Related:
- Nation’s rate of homeownership still at lowest level in a decade - AP/Buffalo News
- Freddie Mac posts $4.1B loss for Q3 - AP/Buffalo News
- New home sales are up...barely - Christian Science Monitor
   New home sales numbers are so weak that it looks like the Homebuyer Tax Credit actually hurt more than it helped. [Census press release here]

Region’s manufacturing jumps - David Robinson/The Buffalo News
   ... A report by a local purchasing managers group released Tuesday found that activity at the region’s Factory factories jumped sharply in October after declining for the first time in 11 months during September.
   A sharp jump in production and a strong flow of new orders combined with growing inventories to offset continued weakness in employment and soaring commodity prices.
   “The index paints a somewhat uncertain, although maybe slightly optimistic, outlook,” said Mikhail I. Melnik, a Niagara University economist.
   “We will continue to expand during the course of 2010, although at a decreasing rate,” Melnik said. “2011, however, is shaping up to be a complex year. We are likely to see continued slowing growth in the first half of the year, followed by a rise in inflation in the second half of the year.”

Mod-Pac’s profits hold steady - David Robinson/The Buffalo News
   Mod-Pac Corp.’s third-quarter profits held steady, even though lower sales of the Buffalo printing company’s folding cartons led to a nearly 2 percent dip in revenues. 

 - Stalemate in Congress might not be bad for economy - AP/Buffalo News
   On its own, the economy is showing slow but steady improvement. Consumers and businesses are spending a bit more. Some companies are hiring. And most economists expect those gains to continue.
   For both Democrats and Republicans, the inability to do much for the next two years may not be such a bad policy for the economy. ...
   "If the economy sticks to the script, (gridlock) is not a major problem," says Mark Zandi, chief economist at Moody's Analytics.
   The danger, Zandi says, is if the economy should take a turn for the worse.
   "If the economy doesn't cooperate and starts to backtrack, then this will become a problem," he says. "Policymakers will not be able to respond, and they'll need to."

   Just hang on to the house:

 

-- George Pyle/The Buffalo News

Deals: Truckers. Strippers. Glass.

   From the Business Today staff:

Teamsters at YRC Worldwide OK pact - Matt Glynn/The Buffalo News
   Teamsters at YRC Worldwide’s trucking companies have approved extending contract concessions for an additional two years, aimed at helping the trucking giant survive its financial struggles. ...
   The workers agreed to extend a 15 percent pay cut for an additional two years. YRCW will resume partial pension contributions in June 2011; without the change, full pension contributions were supposed to resume in January. ...
   Local workers at YRC and Holland voted 67 percent in favor of the agreement, while local New Penn workers voted 90 percent in favor. They are represented by Teamsters Locals 375 and 449.
   [Union statement here. Company statement with video here.]
   Related:
-
ABF Sues YRC Unit, Teamsters Union Over Master Freight Contract - Transport Topics
- YRC Surges On Union Concession Agreement - Barron's 

Rick’s Tally Ho is sold to owner of Tonawanda strip club - Matt Glynn
   The owner of a Town of Tonawanda strip club has acquired Rick’s Tally Ho strip club in Cheektowaga. Tallyho
   David Scrivani bought the property, through a company called 5111 Genesee St. — the address of the club — for $750,000, according to county records.
   Richard A. Snowden, who sold the property through an entity called Rade Holding, declined to disclose the entire value of the transaction, which would be a price reflecting how much the business is worth.
   Scrivani owns Tiffany’s Cabaret at 300 Sawyer Ave., as well as another Tiffany’s in Myrtle Beach, S.C. Snowden said that Rick’s Tally Ho will eventually be renamed Tiffany’s and that Scrivani will apply for a liquor license for the club. The clubs feature semi-nude dancers.
   [No statements with video. This is a family newspaper.] 

- Despite quarter’s 22% profit jump, Corning lags in sales of LCD glass - AP/Buffalo News
  ROCHESTER — Corning Inc. said Monday that its profit jumped by 22 percent in the third quarter, but it missed Wall Street expectations on lower sales of glass for flat-panel televisions.
   Its shares rose despite concerns about weaker retail demand in the United States for liquid-crystal-display TVs. Because of ample supplies, the world’s largest maker of LCD glass said that it expects a more pronounced drop than usual in LCD glass prices in the current quarter.
   Related:
- Corning - Stalled, Time For The Bears? - TradersHuddle
- Corning Escapes Penalty For Double Whiff - Forbes
Corning Sees Glass Prices Falling - Wall Street Journal

   As we play the Tally Ho off the stage:

 

   Told you it was a family newspaper.

-- George Pyle/The Buffalo News

Buffalo banks keep getting bigger

   Breaking today:
- M&T buying Wilmington Trust, largest bank in Delaware - David Robinson/The Buffalo News
   M&T Bank Corp., moving to bolster its position in its mid-Atlantic market, agreed this morning to buy M&ttower Wilmington Trust Corp., the largest bank in Delaware, in a deeply-discounted stock deal worth $351 million. ...
   Wilmington Trust's stock had lost more than three-quarters of its value over the last three years as the Wilmington, Del.-based bank reported six straight quarterly losses, including a $370 million third-quarter loss today.
   Wilmington Trust's losses stemmed from bad commercial real estate loans and investments in pools of trust-preferred securities. The bank had been contacting bigger lenders in recent weeks to gauge their interest in an acquisition, Bloomberg News reported late last month. ...

   What it looks like from the other side:
Wilmington Trust sold to M&T Bank - Eric Ruth/The News Journal, Wilmington, Del.
   An era that helped shape the state’s economic identity and leverage its success for over a century ended today as Wilmington Trust bank yielded to financial pressures and agreed to be bought by M&T Bank Corp. of Buffalo, N.Y.
   Long vowing to remain independent, the fiercely proud institution had been struggling to recover from a stock slide and balance-sheet bruising that began when the regional real estate market faltered and several multi-million-dollar loans to developers went bad.
   In the end, a 4-year-long fall in share prices and six straight quarters of losses simply made the bank too weak and too short on cash to avoid seeking a suitor. Today’s deal, a stock transaction valued at approximately $351 million, is expected to close by mid-year 2011.

   And from outside:
- M&T To Acquire Ailing Wilmington Trust - Wall Street Journal
   ... Wilmington Chairman and Chief Executive Officer Donald Foley said his company has "two very strong fee-based businesses that continue to perform well. However, as our third-quarter earnings announcement shows, we continue to face difficult financial realities associated with the credit quality of the loan portfolio in our banking business." ...
   Mr. Foley admitted, "There is no significant economic or real estate recovery on the horizon in our markets. ..."
Wilmington Trust agrees to be bought by M&T for $351 million - Bloomberg/Washington Post
   Wilmington Trust Corp., the Delaware bank founded [107 years ago] by the du Pont family and undermined by souring loans, agreed to sell itself to M&T Bank Corp. for $351 million in stock, or about half its market value last week.
- M&T Bank snaps up bargain-priced Wilmington - Reuters
- M&T Bank announces take-under of Wilmington Trust - Dividend.com
- Wilmington Trust sold cheap to NY's M&T - Philadelphia Inquirer 

   Also:
First Niagara buys Philadelphia insurance and benefits company - David Robinson
   First Niagara Financial Group is moving into the eastern Pennsylvania insurance market with the acquisition of a Philadelphia-based insurer and employee benefits consulting business, the Buffalo-based bank said today.
   First Niagara, through its First Niagara Risk Management business, has acquired Summit Insurance Group and Summit Benefits in a deal that will push it into the eastern Pennsylvania business and personal insurance market. ...

   Meanwhile, back in Business Today, things that banks do that affect people who aren't bankers:

Small-business loans ascend -  Jonathan D. Epstein/The Buffalo News
   Small-business owners across the country have complained that the recession spooked banks into overly tight lending standards, making it almost impossible to finance growth.
   But under an enhanced Small Business Administration program, many Western New York firms have found a lending source.
   Partners Packaging, a industrial packaging supplier in North Tonawanda that does more than $1 million in sales, needed money for cash flow and to buy new equipment. ... So it developed a business plan with the Small Business Development Center at Niagara County Community College and obtained $200,000 from M&T Bank in July, including an operating loan, an equipment loan and a line of credit. ...

   M&T Bank? That's where we came in.

-- George Pyle/The Buffalo News

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