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DETROIT–General Motors Co. chairman Ed Whitacre Jr. urged the troubled automaker’s employees to forget their old bureaucratic culture, telling them Friday not to fear being fired for taking risks.

Whitacre, who also announced key management changes, wants to speed up the automaker’s shift to an entrepreneurial culture where decisions are made quickly.

"We want you to step up. We don’t want any bureaucracy,” Whitacre told employees, strolling back and forth across a stage at the company’s headquarters.

"We’re not going to make it if you won’t take a risk," he told the audience of 800.

In a 45-minute presentation that was broadcast to employees on internal television networks and over the Internet, Whitacre also unveiled a mission statement to design, build and sell the world’s best vehicles.

Whitacre, who peppered his address with self-deprecating humour, named vice-chairman Bob Lutz, who has long advocated for a more risk-taking culture, as his adviser for product development.

Whitacre also said he is recombining sales and marketing, placing them under Susan Docherty no faxing payday loans.

She became head of sales when former CEO Fritz Henderson separated the roles of sales and marketing. Henderson left the company earlier this week.

Lutz, 77, who had been in charge of marketing, will help Whitacre learn about the business, he said.

In another key move, the chairman, who joined GM in June, promoted engineering chief Mark Reuss to run North American operations. Reuss recently was named head of engineering, and before that ran the company’s Holden operations in Australia.

GM board member Stephen Girsky, a former auto analyst with Morgan Stanley, will also be an adviser to Whitacre.

During his speech, Whitacre set a tone of humility and encouraged employees to give him ideas.

"I’m on the 39th floor of the RenCen. You’re all welcome," he said.

"You’re a terrific bunch of employees. You have our support. Let’s go hit it and make this thing big."

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Recently a friend was shopping for boots at Saks, only to be told the store was out of her size. "You’re the sixth person I’ve had to turn away," the sales clerk said. My friend is not alone. But at a time of slumping sales, shouldn’t it be easier to find what you want?

Not necessarily. It looks as if some retailers ordering merchandise in the depths of the credit crisis overestimated just how bad things would get. Now certain stores appear at risk of running short of inventory heading into the crucial holiday shopping season.

What does all this mean for consumers? While there will still be plenty of discounts this season, the markdowns probably won’t approach last year’s rock-bottom level. And hot items — like Netpal laptop or Sony’s e-reader — will sell out fast. "You’re not going to see merchandise piled high like you did last year," says Stevan Buxbaum, a consultant.

The cost of inventory is one of the biggest expenses for retailers, and therefore a natural place to cut when sales are falling, as they have been for most of this year. Retailers typically try to order slightly less goods than they expect to sell. It’s a fine balancing act: Not cutting enough results in markdowns to clear unsold goods, while cutting too much risks turning customers away empty handed.

The former scenario played out last Christmas. Caught unprepared by the sharp slowdown in sales following the collapse of Lehman Brothers and other financial institutions, retailers were awash in extra goods. That resulted in lots of great deals for consumers, but those discounts ate into store profits.

This year, the opposite situation appears to be playing out. Retailers were extremely cautious heading into the holiday season, and some may not have ordered enough goods.

During the second quarter, for example, Abercrombie & Fitch’s (ANF) inventory was down 42%, compared with a 28% decline in sales. Ann Taylor (ANN) and Talbots (TLB) both shrank inventory 30% in the period. "These are some of the biggest declines in inventory we have seen since we started tracking the measure in 1992," says Lazard analyst Todd Slater.

These retailers may have miscalculated. Suddenly, the doom and gloom of the past year has been replaced by a slight optimism. Sales at stores open at least a year in September rose for the first time since August 2008. The October figures, due to be released Thursday, are also expected to show strength.

Third quarter GDP grew at a surprisingly strong 3.5%, marking an official end to the Great Recession, although most of that growth was the result of government stimulus programs such as the Car Allowance Rebate System (popularly "Cash for Clunkers). The National Retail Federation predicts holiday sales will decline 1% to $438 billion — less than last year’s 3.4% drop.

Some analysts are predicting an even stronger turnout. Customer Growth Partners, a consulting firm, released a report last week that estimated holiday sales would rise 2.4%, compared with a year ago.

Retailers that try to reorder goods to meet this small but promising uptick in demand may run out of time. For instance, American Eagle Outfitters (AEO) has one of the more nimble supply chains, but it still takes the retailer 45 days to restock merchandise that is made in China. "Many of the companies that I cover have cut inventory too much," says Richard Jaffe, a retail analyst with Stifel Nicolaus. "What do you do Dec. 15 when you’re out of goods?"

Time isn’t the only problem. Dozens of Asian factories have gone bust during the financial crisis, which will restrict supply when demand picks up, says James Lawton, a senior vice president with Dun & Bradstreet, a research and credit-monitoring firm. "A lot of capacity is coming out of the system permanently," he says.

That problem is not just restricted to apparel. Lawton says he knows of one retailer forced to delay store openings because the company that made its shopping carts went bankrupt. "They literally didn’t have enough carts," he says.

The lesson: If you can’t live without those Christian Louboutin booties, you’d better buy them now. 

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Wal-Mart Stores Inc on Monday announced its second round of price cuts on toys as the world’s biggest retailer backs up its intention to be the “price leader” this holiday shopping season.

U.S. Walmart stores are cutting prices on 100 toys, like the Buzz Lightyear talking action figure and Star Wars light sabers, by roughly 20 percent to 30 percent.

The cuts are in addition to ones the retailer implemented at the end of September, when it began selling 100 toys for $10 each.

The new prices will be available through December 25 or while supplies last.

Wal-Mart has vowed to be the “price leader” this holiday season, and announced plans on October 21 to cut prices every week until Christmas to fend off rivals and win over shoppers easy online payday loans.

After it reduced toy prices at the end of September, Target Corp responded with price cuts of as much as 50 percent on toys like Barbie and G.I. Joe.

Analysts said many of these holiday price cuts are planned in advanced, allowing retailers to protect their margins.

But such cuts can be damaging to manufacturers, because they train shoppers to expect lower prices for their goods. They can also hurt retailers’ profits if they must slash prices lower than expected to match competitors’ prices, or they can not sell enough goods to offset the lower prices.

(Reporting by Nicole Maestri, editing by Leslie Gevirtz)

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Half a million people are now in trial modifications under the Obama administration’s mortgage rescue plan, but getting them permanent help is proving to be difficult.

The foreclosure prevention plan, which reduces eligible borrowers’ monthly payments to no more than 31% of their pre-tax income, requires homeowners to make three on-time monthly payments before they can receive a permanent modification.

Loan servicers use the trial period to verify borrowers’ income and ascertain whether they can handle the reduced payments.

But servicers say they are having a tough time collecting the necessary documents to determine whether troubled borrowers should receive permanent adjustments. They contend that some homeowners aren’t sending in their tax returns, bank statements and pay stubs. Borrowers, on the other hand, complain that their paperwork is being lost.

The Obama administration recently made several changes to the program to give the transactions more time and streamline the plan.

Last month, it extended the trial period by two months to give servicers more time to collect the documents. And last week, it announced that servicers could automatically move qualified borrowers into permanent modifications without their signatures.

The Treasury Department said these moves should make it easier for qualified borrowers to get permanent modifications, according to a spokeswoman. Officials are discussing ways to make it even easier, she said, including allowing servicers to access tax records directly from the Internal Revenue Service.

It is in servicers’ interest to convert eligible borrowers since they only get incentive payments when the modification is made permanent, the Treasury spokeswoman said. Plus, if the government finds institutions to have wrongly deny swaths of people, it could impose penalties.

"Treasury is also working intently with servicers to help ensure that they execute in helping more borrowers convert to permanent modifications," she said.

Who’s to blame?

Servicers say they are wrestling with getting the completed documents they need to put borrowers in permanent modifications.

At JPMorgan Chase, for instance, representatives call and send letters to homeowners detailing what they still need to mail in. The bank says it has improved its system for collecting paperwork so that lost documents are not the problem. The issue, it says, is that homeowners are simply not sending in what’s required.

"At first blush, you’d think that for people who’ve made three payments, it would be a no-brainer to get the paperwork in," said Tom Kelly, a Chase (JPM, Fortune 500) spokesman. "But for some people, it just hasn’t been the case."

A Citigroup (C, Fortune 500) spokesman also said the documentation process has been challenging.

But many borrowers and housing counselors contend that homeowners send in their documents multiple times, only to be told their files are incomplete. This has been a problem that’s plagued the program from the beginning.

On top of that, housing counselors report that banks are sending homeowners forms with the wrong income data listed, which could jeopardize their chances of getting a permanent modification.

One homeowner’s problem

Many borrowers are growing increasingly nervous as they near the end of their trial modification periods with no decision from their servicers.

Jim Copley, a Minneapolis homeowner, was given a trial modification five months ago. He found he could no longer afford his $1,650 monthly payments after the housing collapse decimated his home-painting business.

After receiving a temporary adjustment that cut his payments to $955 a month, Copley sent his servicer, Bank of America, all the required income documentation in June. He was shocked to learn two months later that there was some paperwork missing. He called again and was told that his file was, in fact, complete and that he should continue making reduced payments until he was told otherwise.

"Every time I talk with them, I get a different story," said Copley, a single dad who now makes a third of his previous income selling meat to restaurants. "No matter what I do, I can’t get any kind of an answer."

A Bank of America (BAC, Fortune 500) spokeswoman said that Copley’s file is complete and that he should receive a decision about a permanent modification soon.

It remains to be seen how many people will qualify for permanent modifications.

"If the trial modifications don’t convert to permanent modifications, then the program won’t be considered a success," said Barry Zigas, director of housing policy for the Consumer Federation of America.

Have you turned into a saver because of the recession? How have your saving and spending habits changed? Please email your stories to CNNMoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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Ballpark — A mildly pungent jalape

The U.S. economy is starting to climb out of a “deep hole” but with a tepid recovery likely it will remain vulnerable to shocks, a top Federal Reserve policy-maker said on Monday.

Janet Yellen, president of the San Francisco Fed, said that the Fed’s policies need to protect against “disinflationary forces” that currently pose a bigger threat to the U.S. economy than the possibility of inflation.

“The economy seems to be brushing itself off and beginning its climb out of the deep hole it’s been in,” Yellen said in remarks prepared for the Certified Financial Analysts of San Francisco.

The severe recession probably ended in the summer, and the U.S. economy will grow in the second half of 2009 as housing, manufacturing and even consumer spending start to show some signs of life, she said.

But Yellen, a voting member of the monetary policy-setting Federal Open Market Committee in 2009, said that consumers could not be relied on to power a recovery.

“It may well be that we are witnessing the start of a new era for consumers … The destruction of their nest eggs caused by falling house and stock prices is prompting them to rebuild savings,” said Yellen.

Yellen said views on the inflation outlook have coalesced into two diametrically opposed views, but threw her weight behind those worried on falling prices — a consequence of high unemployment and substantial “slack” in the economy.

“With slack likely to persist for years, it seems likely that core inflation will move even lower, departing yet farther from our price stability objective,” Yellen said.

Yellen said fears that the Fed would be pressured to “monetize” the growing U.S. budget deficit were “real, growing, and disruptive” — but also misplaced.

“We at the Fed are and will remain fiercely independent from politics. We have the means — and we certainly have the will — to tighten policy when the time is right.”

(Editing by James Dalgleish)

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Dainippon Sumitomo Pharma Co Ltd agreed on Thursday to buy U.S. drugmaker Sepracor Inc for $2.6 billion, giving the Japanese firm a big, local sales force in the world’s largest drugs market.

The deal is the latest in a string of overseas acquisitions by Japanese drugmakers keen to grow outside a mature home market and build product pipelines before key drug patents expire.

Dainippon, Japan’s No.7 drugmaker by revenues, will gain a sales force of 1,200 familiar with central nervous disorders as it looks to promote its experimental schizophrenia drug lurasidone, which has performed well in late-stage trials.

It will also gain Sepracor’s insomnia drug Lunesta, asthma drug Xopenex and an experimental epilepsy drug.

“We anticipate our business will shrink if we focus only on Japan, where medical prices are under pressure,” Dainippon Sumitomo President Masayo Tada told a news conference.

“Even if the U.S. carries out healthcare reform it’s not as if the market is going to halve. It will remain the world’s biggest drug market.”

The deal is the fourth-largest overseas acquisition by a Japanese drugmaker, and the second-biggest this year by any Japanese company.

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Dainippon’s shares climbed 1.2 percent in a weaker Tokyo market, with volume at six times the daily average this year. Some analysts said the purchase was the easiest route into the U.S. market, others said it looked pricey and risky.

Dainippon will pay $23 cash for each share, a premium of 27.6 percent on Tuesday’s close before media reports of the deal sent Sepracor’s stock surging to $22.8 on Wednesday. The acquisition cost is roughly equal to Dainippon’s annual sales.

“It’s a very expensive deal for a company of Dainippon Sumitomo’s size and also very risky, given the series of patent expirations on Sepracor’s mainstay drugs in the next few years,” said Credit Suisse analyst Fumiyoshi Sakai.

“Dainippon must be extremely confident in lurasidone, although I have some doubts,” he said, adding the deal would not have been possible without the backing of the Sumitomo Group, which includes Sumitomo Mitsui Financial Group, Japan’s third-biggest bank. Dainippon is majority-owned by Sumitomo Chemical.

Aaron Gal, an analyst at Sanford Bernstein, said that based on projections for 2013, the deal values Sepracor at 3.5 times sales, compared with 3.1 times for the average of other specialty pharmaceutical and generic drug industry acquisitions.

It also values Sepracor at 19.4 times EBITDA (earnings before interest, taxes, depreciation and amortization) compared with an average of 15.1 times for other deals, he said. 

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LOS ANGELES–Software giant Microsoft Corp. has apologized for altering a photo on its website to change the race of one of the people shown in the picture.

A photo on the Seattle-based company’s U.S. site shows two men, one Asian and one black, and a white woman seated at a conference room table. But on the website of Microsoft’s Polish business unit, the black man’s head has been replaced with that of a white man. The colour of his hand remains unchanged.

"We apologize and are in the process of pulling down the image," Microsoft spokesperson Lou Gellos said in a statement. Microsoft replaced the altered version of the photo with the original, unedited image on its Polish website.

Bloggers argue Microsoft was attempting to please all markets by having a man with both a white face and a black hand.

Others say the ethnic make-up of the Polish population, which is predominantly white, may have played a part in the decision to change the photo.

Associated Press

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Magna and its Russian partner Sberbank have reached an agreement in principle with General Motors’ management over a contract to buy a stake in GM’s European unit Opel, Magna Co-Chief Executive Siegfried Wolf told Reuters on Thursday

The boards of directors of GM and Canadian automotive group Magna still need to approve a deal before trustees who control a 65 percent stake in Opel can give their final consent.

The agreement between Magna’s consortium and GM — which follows weeks of hard bargaining — does not necessarily mean that competing Opel bidder RHJ International is out of the race, however.

GM’s chief negotiator on the deal, John Smith, has said that the Belgian private equity firm had already reached an agreement with GM management on Opel. Now it is up to GM’s board and Opel trustees to pick one of the two rival offers.

But the overwhelming support for Magna in Germany from key players like Chancellor Angela Merkel suggests that the Opel Trust will likely sign off on a deal with the Canadian auto parts supplier and Russian lender Sberbank.

GM Europe said the company would review revised draft agreements on an Opel deal presented on Thursday by Magna and Sberbank, stopping short of saying the remaining issues between GM, Magna and Sberbank had been resolved over a sale fast cash.

GM also said it has asked the Opel task force created by the German government to outline a financing package that Germany and other European states hosting Opel plants would support.

Worried about 25,000 Opel jobs in Germany as September elections approach, Berlin put up 1.5 billion euros ($2.1 billion) in bridge finance for a ring-fenced Opel in May, just before the U.S. parent slid briefly into bankruptcy.

“This is the best solution for Opel and Opel workers,” top politicians in the German state of Rhineland-Palatinate, which hosts one of four Opel plants in Germany, said in a statement.

Magna is in the middle of negotiations over the financing for a deal, which includes an equity component of 500 million euros along with 4.5 billion euros in loans guaranteed by European governments.

(Editing by Michael Shields)

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BERLIN–Bombardier's transportation division has won a US$54 million contract to supply trams for the British city of Blackpool, the Montreal-based company announced Wednesday.

The contract to supply 16 trams is the first for the Flexity 2 model, which Bombardier says will revitalize Britain's tram system while reducing energy consumption.

The vehicles manufactured in Germany and Austria are scheduled to be delivered between May 2011 and March 2012.

Bombardier's contribution is part of a contract valued at US$176 million.

Blackpool, England, becomes the fourth British city after London, Nottingham and Manchester to select Bombardier light rail products.

More than 450 Flexity low-floor vehicles have been ordered and are in service in the cities such as Innsbruck, Geneva, Brussels, Marseille and Spain's Valencia and Alicante instant payday loans completely online.

Toronto recently placed the world's largest light rail order for 204 Flexity Outlook trams worth C$1.2 billion, including taxes, spares, maintenance and other costs.

Belin-based Bombardier Transportation is the world's largest rail company. It has more than 100,000 vehicles in operation in more than 60 countries.

Parent company Bombardier Inc. had US$19.7 billion of revenue in the fiscal year ended Jan. 31.

On the Toronto Stock Exchange, its shares were down three cents at C$3.31 in morning trading.

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