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Qatar Airways ordered 24 planes from Airbus as the world’s largest air show opened in Paris on Monday, the Gulf carrier flexing its financial muscles as many recession-hit rivals struggle to find funds.

Airbus and U.S. rival Boeing Co face their worst year in more than a decade as many airlines, hit by slowing demand and tight credit conditions, look to cancel or defer plane orders.

Qatar’s $1.9 billion deal for A320 and A321 single-aisle airliners will double its medium-haul fleet but Chief Executive Akbar Al Baker stopped short of announcing a foray into the budget airline sector.

“We are not planning a low-cost carrier, but if our market share is eroded by regional low-cost carriers, we will join the fashion show and launch one,” he said.

The airliner sector has burned hot for several years but the global recession has the cycle’s downturn looking more like a freefall while recession also constrains defense spending, limiting options as Boeing and Airbus parent firm EADS look for revenues there.

The Lockheed Martin F-22 Raptor fighter jet was dropped from an expected flying display at the air show, a decision which the manufacturer said the U.S. Air Force had taken based on availability.

The world’s most advanced jet fighter, the Pentagon proposed axing further production of the F-22 under a fiscal 2010 budget plan it sent to the Congress last month.

BOEING EYES MID-2010

This year’s Paris Air Show is expected to fall far short of the clamor of orders at the biennial event two years ago when Airbus and Boeing took their order backlogs to record levels compare car insurance.

Airlines have roughly $800 billion of planes on order following the order boom.

Scott Carson, head of Boeing’s commercial airplanes division, said Monday that growth might return to the industry in mid-2010.

But the scope and shape of the recovery remained the big question, he told a news conference. He added that he expected a more normal trend in credit in the second half of next year.

In the meantime, airlines face tight credit conditions, rising oil prices, new concerns about swine flu and a global recession which is prompting travelers to shelve vacation plans.

The emergence of swine flu in April triggered a worldwide health scare and Sunday Britain recorded its first death from it, three days after the World Health Organization declared an influenza pandemic.

The aviation industry also awaits answers after the crash of an Air France A330 Airbus with 228 people on board on June 1.

“It is safe to say that the aviation community is still (in) some shock,” Airbus Chief Executive Tom Enders told a briefing ahead of the air show.

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As an NBA Hall of Famer, Earvin "Magic" Johnson faced down such giants as Larry Bird and Julius Erving. Diagnosed with HIV in 1991, Johnson has fought off full-blown AIDS for the past 18 years. Now, as a coffee shop proprietor, he’s fighting his latest battle against…scones.

"My customers in urban America are so skeptical, we have to win them over," he says — and the skepticism extends to exotic pastries. "So in my Starbucks, we serve sweet potato pie."

Sixteen years after retiring from pro basketball, Johnson is finding almost as much success as a small business owner as he did on the court. Magic Johnson Enterprises, a private Los Angeles-based company, has 35 employees and assets of more than $700 million. It works with local entrepreneurs to open franchises in inner-city neighborhoods across the U.S., and has signed a unique deal with Starbucks (SBUX, Fortune 500) that allows MJE to open franchises and split the revenue fifty-fifty.

Now Johnson is advising big-box stores such as Best Buy (BBY, Fortune 500) on how to crack urban markets once the economy allows the stores to expand again. The key, he says, is paying attention to customers. When Johnson makes public appearances — as he does about 100 times a year — he isn’t just signing autographs. He also gives his office phone number to any customer who complains to him personally, even if the problem is a dearth of sugar packets. If the problem persists, he wants to know about it.

"Minorities appreciate that, because we are used to corporations coming in, opening up their building, but then disrespecting us with their service," Johnson says cash loan lenders. "If you don’t engage us, we’re going to cut you off our list."

He found that out the hard way. One of his first franchises was an NBA store that lost $200,000 before it closed. The reason? Johnson picked the inventory based on his own preferences rather than the customers’. Another early venture, a movie theater near L.A.’s gang-ridden Crenshaw district, seemed doomed to failure until Magic sat down with the gang leaders and asked for their respect. It worked. The theater is now one of the highest earners in the AMC chain.

Johnson is on to something, says Dominique Hanssens, chair of the marketing department at UCLA’s Anderson School of Management. Selling sweet potato pie instead of scones, she says, "shows customers that you’re trying to figure out how to serve them in new ways." By targeting a less affluent market, Johnson benefits from less competition, greater loyalty and, paradoxically, more revenue in the long run.

"The lifetime value of his customers can be quite high, even if they don’t bring in as much money in the short term," Hanssens says. "Everybody loses business in a recession. But it’s better if your existing customers stay with you and just spend a little less."  

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One year ago today, St. Louis learned its premier corporation was "in play," as they say on Wall Street. In a flurry of late-afternoon press releases, it was revealed that Anheuser-Busch was being targeted for a takeover. The hunter: Belgian brewer InBev.

A potential takeover of Anheuser-Busch had been mulled among analysts for a while. InBev, formed in 2004 from a combination of Belgium’s Interbrew and Brazil’s AmBev, was constantly on the prowl for acquisitions. Its executives had alternately admired and coveted Anheuser-Busch for a long time. InBev, imbued with an investment bank’s ultra-aggressive style, had quietly put itself into position to vie for the ultimate prize.

Anheuser-Busch, long the world’s biggest brewer, had slipped from the pinnacle. But it still dominated the U.S. beer market, the world’s most profitable. St. Louis still thought of it as the "King of Beers."

On June 11, 2008, that illusion was damaged. Later, it would be shattered.

At first, InBev couched its $46.3 billion buyout offer in friendly terms. It said it would invite a number of A-B directors to join the board of the combined company and would retain key A-B managers. It would work to make Budweiser the company’s flagship brand.

"We have the highest respect for Anheuser-Busch, its employees and leadership" InBev chief executive Carlos Brito wrote in a letter to August Busch IV, his counterpart at A-B.

But InBev’s tough reputation had preceded it. For some, the shock to the system was immediate.

"I was nearly in tears," Maureen Ogle, author of "Ambitious Brew," a historical look at the U free credit report online.S. beer industry, said this week. If Anheuser-Busch was taken over, she recalled thinking, "it would never be the same."

A-B employees, area residents, beer distributors and others also had plenty of worries. "There was so much fear in the network," said Harry Schuhmacher, editor of Beer Business Daily.

But at first, there was plenty of doubt that InBev could pull off the buyout, said Schuhmacher. "It was still very much in limbo."

The proposed deal was the biggest news to hit the beer industry in years. It even eclipsed the creation of MillerCoors — a U.S. joint venture between SABMiller and Molson Coors.

For a month, Anheuser-Busch and InBev alternately maneuvered behind closed doors, in courtrooms and in the media. St. Louis citizens hoped the Busch family had a strategy to keep the company independent. Observers wondered whether the company’s hastily announced plan to cut costs was designed to help it escape InBev, or simply a ploy to get a better price.

It was soon a moot point. A-B’s board accepted a sweetened bid in mid-July. The official purchase would wait for a few months, but it was a fait accompli.

The foreign buyout of an American icon did not spark a widespread backlash. Outside St. Louis, the controversy died down quickly.

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if he can find a lender willing to make the loan.

NEW YORK (CNNMoney.com) — Struggling small business owners can begin applying next week for an interest-free debt-relief loan through a new Small Business Administration program — if, that is, they can find a bank to process their application.

The new "America’s Recovery Capital" (ARC) loan program, authorized by February’s stimulus bill and slated to launch on June 15 after four months of planning, aims to make small, government-backed loans available to viable companies laid low by the recession. (For full details on ARC eligibility and loan terms, click here.) But the loans will be made and managed by SBA lenders, and so far, few have jumped on board.

Before the details of the program were released on Monday, lenders were hesitant to commit, concerned that there wasn’t enough economic incentive for them. Now, with key details about how the program will work finally available from the SBA, many haven’t retreated from their initial wariness.

"While we have received a few requests from our customers, we are still leaning against it," says John Handmaker, president of Quadrant Financial, a small business lender based in Louisville. "The guidance from the SBA indicated rates and terms, which have provided some clarity, but we’re not 100% certain about what we need to be careful of. We don’t feel we have a solid grasp of the standard operating procedures and rules, and we’re not going to jump in until we really understand it."

One deterrent for the banking community is the interest rate for the loans. While the loans are interest-free for borrowers, the SBA will pay lenders an interest rate of prime plus 2%. For the month of June, that’s 5.25% — a lower interest rate than the SBA sets for its other loan programs.

"The SBA provided for a variable but fair rate," says SBA spokeswoman Hayley Matz. "It’s important to remember that these loans carry virtually no risk to the lender — they are 100% guaranteed by SBA in terms of principal, and the SBA is paying the interest."

As the lenders debate the merits and potential pitfalls of making ARC loans, small business owners that need the money are wondering where to turn payday advance. Mack Sullivan, for example, is poised on a starting block, ready to run through lenders’ doors with his application on June 15.

Sullivan’s tourism literature company, Due South Publishing, based in St. Simons Island, Ga., was profitable for the five years leading up to 2008. Then, the companies that advertised in Due South’s publications began cutting back dramatically.

"The credit-card debt we have has accumulated primarily for just cash-flow management. As revenues have come down, we used it as a cash advance credit line, to pay for a publication we just printed, or expenses and payroll," Sullivan’s says. At the same time, the interest rates on his four cards have doubled in recent months. The highest is now at 25.9%.

With an ARC loan, Sullivan hopes to pay off the debt on those cards, which costs him about $2,000 a month. That move, he says, will put the company on more stable footing and position it to launch new products when the economy rebounds.

When Sullivan contacted Bank of America (BAC, Fortune 500), his past lender, a representative told him the bank hasn’t yet decided if it will participate.

"If they do it, I want to be first in line," Sullivan says. "But I started contacting other SBA lenders in the meantime, and I talked to the senior vice president of another bank who said she doesn’t think her bank will do it."

Sullivan’s says his next step will be to start calling every lender on the SBA’s preferred lender list until he gets a hit.

If he gets as far as CountryBank USA in Cando, N.D., he may be in luck. While CountryBank hasn’t yet made a final decision, CEO Terry Jorde says her bank will probably participate in issuing ARC loans.

Jorde believes the weak financial incentives and uncertainty surrounding the program are outweighed by the needs of the community. "The interest rate is irrelevant. We’re only dealing with $35,000," she says, referring to the maximum allowable ARC loan size. "The more important point is helping businesses survive. Those businesses may have $150,000 loans from us in the future. It’s that long-term goal that’s making us want to help them survive in the short run."

Quadrant Financial’s Handmaker disagrees, saying that while his bank sees value in the program, closing a $35,000 SBA loan can be just as hard and administratively burdensome as closing a much larger loan. He plans to use other tactics, such as loan-payment deferrals and moratoriums, to help customers while also making money for the bank.

"Many of the clients we’ve talked to don’t want to incur additional debt," he says. "If we can achieve same ultimate result, to help with cash flow at end of the day, then we can protect loans we’ve got without stepping into a program we don’t fully understand."

Has the recession actually helped you? From lower debt payments to cheaper home prices, many people have benefited from the current downturn. If you’ve made out financially and want to share your story, please email steve.hargreaves@turner.com. For the CNNMoney.com Comment Policy, click here.  

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The Obama administration will unveil executive pay rules for firms receiving government aid by the end of the week and will name a pay czar with power to reject compensation plans at firms getting “exceptional assistance,” an administration official said late on Tuesday.

“In the case of a company receiving exceptional assistance, the special master would have the authority to disapprove of a company’s compensation plan if he determined they were paying excessive and unjustified salaries to their top executives,” the official said.

In early February, the administration had said it would put a $500,000 per year cap on the salaries of executives whose firms were being supported with money from the government’s $700 billion rescue fund. Any compensation above that amount was to have been in restricted stock or a similar long-term bonus incentive.

Officials determined that plan was not optimal after Congress passed legislation requiring that bonuses account for no more than one-third of an executive’s compensation. If coupled with the administration’s planned salary cap, that would limit annual compensation to $750,000.

The official said the congressional limit on bonuses led the administration to find an alternative way to try to ensure pay practices were not excessive at companies most heavily reliant on government bailout money, such as Bank of America, Citigroup and insurer AIG.

Kenneth Feinberg, who oversaw compensation to the survivors of the September 11, 2001, terror attacks, would be given the role of pay czar, according to a source familiar with the administration’s plan.

President Barack Obama has argued that Wall Street’s pay structures were short-sighted and pushed banks to take excessive risks that led to the financial crisis which has pushed much of the world into recession group health insurance.

U.S. Treasury Secretary Timothy Geithner, who has said compensation practices became “divorced from reality,” will meet on Wednesday to discuss bank pay with Securities and Exchange Commission Chairman Mary Schapiro, Federal Reserve Governor Daniel Tarullo and other compensation experts.

While the administration had been expected to lay out its new rules on Wednesday, Geithner is only slated to make brief public remarks during the open portion of that meeting.

The administration official said late on Tuesday night that the new rules to be outlined this week would apply to the top five senior executive officers at companies supported by the Treasury Department’s Troubled Asset Relief Program, or TARP, plus the next 20 highly paid employees, whether or not they serve in an executive role.

In addition to the new rules for TARP recipients, the administration is pushing a broader effort to influence pay practices across the financial industry at large.

The Federal Reserve has said it plans to use its authority to promote healthier compensation structures, and Geithner told lawmakers on Tuesday that the SEC may seek new powers that would allow it to encourage compensation reform at publicly traded companies.

“As you’ll hear from us in the next few days, the SEC has some important responsibilities and obligations in this area, and some tools and authorities they may seek,” Geithner told a Senate Appropriations subcommittee.

(Additional reporting by Karey Wutkowski, Editing by Sandra Maler)

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U.S. auto suppliers, who negotiated federal loans earlier this year, plan to ask the Obama administration’s auto task force this week for $8-$10 billion in loan guarantees, Bloomberg reported on Tuesday.

Industry trade groups plan to request the U.S. Treasury to back at least a part of loans for auto suppliers from banks to reduce risk and increase lending, the news agency said, citing Neil De Koker, president of the Original Equipment Suppliers Association (OESA).

The banks may be part of a group of lenders who could choose the suppliers to receive loans, De Koker was cited by the news agency as saying.

Suppliers will need loans to start producing parts for General Motors and Chrysler when the automakers resume manufacturing, De Koker was cited as saying in the report one hour cash loan.

“We have very good companies that can’t get financing,” Bloomberg quoted De Koker as saying. “It’s essential to provide support to suppliers in order to ensure that the money already spent on GM and Chrysler doesn’t go to waste.”

The OESA and the Motor & Equipment Manufacturers Association will meet with the auto task force on Wednesday, and U.S. House and Senate members later in the week, according to the report.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Dan Lalor)

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States are poised to pass as much as $24 billion in tax and fee hikes in coming weeks, as they struggle to balance their budgets amid the worst economic downturn since the Great Depression, a report released Thursday found.

The spike blows away the $726 million in recommended increases for fiscal 2009.

At the same time, state budgets are set to shrink for a record second year in a row. The recession has caused tax collections to plummet and the need for social services to soar.

State officials are scrambling to close last-minute budget gaps that opened after April tax revenues came in below already-lowered estimates. States may be forced to tap rainy day funds or impose even more stringent spending cuts to balance their budgets before their fiscal years end on June 30.

Governors’ proposed budgets for fiscal year 2010 show a 2.5% decrease in general fund spending, which comes after an estimated 2.2% decline in the current fiscal year. State spending usually rises 6% a year.

This is the largest pullback in the survey’s 30-year history and the first time state spending would decline for two years in a row, according to the National Governors Association and the National Association of State Budget Officers.

Also, in an unusual turn, the recession is hammering nearly all states across the country.

"These are some of the worst numbers we’ve ever seen," said Scott Pattison, executive director of the budget officers group.

General fund spending, which is not earmarked for specific uses, covers mainly education, Medicaid, corrections, public assistance and transportation.

Tax hikes abound

Some 29 states are recommending tax and fee increases for the coming fiscal year.

California, which is struggling to close a $21.3 billion budget gap, accounts for $11.3 billion of the hike. Illinois makes up another $4.4 billion, while New York is proposing $4 billion in additional levies.

Hikes in personal income taxes account for $8.8 billion, while sales taxes are set to rise $6.5 billion. Higher cigarette taxes would bring in $1.5 billion, while corporate taxes would rise $539 million.

State officials are searching for ways to boost revenue at a time when tax collections are falling off a cliff. Corporate income tax revenue is expected to be down 15.2%, personal income down 6.6% and sales tax down 3.2%.

Though state officials are reluctant to raise taxes during a recession, they have little choice these days 16 pt business cards.

"If you look historically, we’ve seen numbers at times of $14 or $15 billion, but never a number of that order or magnitude," said Raymond Scheppach, head of the governors’ group, referring to the proposed $24 billion in tax hikes. "As we go along, governors are going to continue to want to cut budgets, but they are going to be forced to look more and more unfortunately on the revenue side."

States also are dipping into their rainy day funds to pay the bills. The funds’ balances totaled 9.1% of expenditures in fiscal 2008, but have declined to 5.5% in the current year. However, excluding Texas and Alaska, the funds’ balances dip to 3.6% of expenditures. A balance of 5% of expenditures is considered a relatively adequate cushion.

This downturn is likely to damage state’s financial health more seriously than other recessions in recent years because it is deeper and will last longer, said Scheppach. The last really bad year for states was 1983, when budgets shrank 0.7%, but it was preceded and followed by strong periods. This recession will likely plague states for up to three more years.

"There’s no capability to build the revenue base, build the rainy day fund," he said. "You are really on the defensive the entire time."

Spending slowdown

Though demand for state services is up, officials are slashing spending on a wide range of government programs.

Some 28 states have proposed cutting spending on higher education and personnel, while 27 want to reduce funding for K-12 education. Another 25 states have proposed cuts to Medicaid and corrections, while 23 are reducing funds for public assistance.

A record 42 states had to cut their fiscal 2009 budgets in the middle of the year as revenue came in below estimates.

Even worse, 20 states still have budget gaps they must close before the end of the fiscal year.

State officials predict tight times through fiscal 2011 and possibly 2012 since state fiscal recovery historically lags a national economic rebound.

They are currently facing an estimated $230 billion in budget gaps between fiscal 2009 and fiscal 2011. 

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Mexico’s Finance Minister Agustin Carstens said the nation’s recession will ease in the coming two quarters after gross domestic product declines sharply in the three months through June 30.

The economy is returning to normal quickly after an outbreak of swine flu, Carstens said today at financial conference in Monterrey, citing an almost complete recovery in domestic tourism.

“Economic activity, especially production and sales figures, should improve month to month from now until the end of the year,” the minister said.

Goldman Sachs Group Inc. forecasts GDP will shrink 8.5 percent this year, which would be the biggest contraction since 1932, as a slump in the U.S. reduces tourism, remittances and demand for exports. Central bank Governor Guillermo Ortiz said yesterday that Mexico must improve tax collection and make the labor market less rigid to avoid having its credit rating cut cheap payday loans.

Moody’s Investors Service rates Mexico’s debt as Baa1, the eighth-highest ranking, alongside Russia and Hungary.

The government forecasts a 5.5 percent decline in GDP in 2009 from a year earlier. Carstens sees the economy posting almost zero growth in the fourth quarter, which would be an improvement from the third quarter, he said.

The spread of swine flu continues to decline, the Health Ministry said yesterday, reporting that deaths climbed to 103 from 5,563 cases. International tourism is still being affected by the flu, Carstens said.

The government aims to push laws boosting the economy through Congress in the second half of this year and next year, he said.

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DETROIT – General Motors Corp. took a key step toward its downsizing today, striking a tentative deal to sell its Hummer brand, while also revealing that it has potential buyers for its Saturn and Saab brands.

GM (NYSE: GM) has a tentative agreement to sell its rugged Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co. of China, said a person briefed on the deal.

The Detroit automaker announced this morning that it had a memorandum of understanding to sell the brand of rugged SUVs, but the buyer's identity was not released. A formal announcement of the buyer was to be made today afternoon.

Sichuan Tengzhong deals in road construction, plastics, resins and other industrial products, but Hummer would be its first step into the automotive business, said the person briefed on the deal. The person spoke on condition of anonymity because the details have not been made public.

GM said the sale will likely save more than 3,000 U.S. jobs in manufacturing, engineering and at various Hummer dealerships.

As part of the proposed transaction, GM said, Hummer will continue to contract vehicle manufacturing and business services from GM during a transitional period. For example, GM's Shreveport, La., assembly plant would continue to contract to assemble the H3 and H3T through at least 2010.

The automaker also said today that it has 16 buyers interested in purchasing its Saturn brand, while three parties are interested in the Swedish Saab brand.

Chief financial officer Ray Young told reporters and industry analysts on a conference call that GM is continuing to pursue manufacturing agreements with a new Saturn buyer.

GM would like to sell the money-losing Saturn brand's dealership network, contracting with the new buyer to make some of its cars while the buyer gets other vehicles from different manufacturers.

At the same time, bridge loan discussions with the Swedish government are progressing, Young said.

GM, which filed for Chapter 11 bankruptcy protection in New York on Monday, is racing to remake itself as a smaller, leaner automaker. It is hoping to follow the lead of fellow U.S. automaker Chrysler LLC by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.

But GM is much larger and complex than its Auburn Hills-based rival and isn't up against Chrysler's tight June 15 deadline to close its deal with Fiat.

Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges. But as with Chrysler, she notes that the Treasury Department made sure many of GM's moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.

"They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time," Lindstrom said.

In addition to its plan to sell the Hummer, Saab and Saturn brands, GM will also phase out its Pontiac brand, concentrating on its Chevrolet, Cadillac, Buick and GMC nameplates.

Separately, the German government said today it paid out the first euro300 million (US$425 million) in bridge loans to GM's Adam Opel GmbH division. The loans are part of a deal to shrink GM's stake in Opel and shield it from GM's bankruptcy protection filing in the U.S.

Over the weekend, the German government agreed to lend Opel $2.1 billion. The loans are part of a deal in which Canadian auto supplier Magna International Inc. (TSX: MG.A) and Russian-owned Sberbank will acquire 55 per cent of the company.

A sale of the Hummer brand had been expected. Chief executive Fritz Henderson had said in April that the automaker was expecting final bids from three potential buyers within the month payday loan for bad credit.

Critics had seized on the rugged but fuel-inefficient Hummer as a symbol of excess as GM's financial troubles grew and gas prices rose. Sales at Hummer, which is known for models like the H3 with military-vehicle roots, have been in a steep slide since gasoline prices rose to record heights last summer. For the first four months of this year, Hummer sales are down 67 per cent.

GM nailed down deals with its union and a majority of its bondholders and arranged to sell off most of its Opel operations in Europe in order to appear in court Monday with a near-complete plan to quickly emerge with a chance to become profitable.

The government has said it expects GM to come out of bankruptcy protection within 60 to 90 days. By comparison, the judge overseeing Chrysler's case approved the sale of its assets to a group led by Italy's Fiat Group SpA in just over a month. Some industry observers think Chrysler could emerge as early as this week.

During Monday's hearing, GM attorney Harvey Miller stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2 billion in cash left.

"If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible," Miller said in his opening statement.

The automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 per cent ownership stake. The Canadian government would take 12.5 per cent of the "New GM," with the United Auto Workers union getting 17.5 per cent and unsecured bondholders receiving 10 per cent. Existing shareholders are expected to be wiped out.

Attorneys for GM stakeholders packed the stuffy courtroom well ahead of the automaker's first-day Chapter 11 hearing. U.S. Judge Robert Gerber moved swiftly through the agenda's more than 25 mostly procedural motions.

Gerber set GM's sale hearing for June 30, putting it on a path similar to that of Chrysler. Objections are due on June 19, with any competing bids required to be submitted by June 22.

Gerber also gave GM immediate access to $15 billion in government financing to get it through the next few weeks, and interim approval for use of a total $33.3 billion in financing, with final approval slated to be ruled on June 25. The funds are contingent on GM's sale being approved by July 10. Gerber also approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs.

The sheer size of GM makes it a more complicated case than Chrysler.

GM made twice as many vehicles as Chrysler's 1.5 million last year and employs 235,000 people compared with Chrysler's 54,000. GM also has plants and operations in many more countries, meaning it will likely have to strike separate deals to navigate the bankruptcy laws of those places.

Henderson said GM has learned a few things by watching Chrysler's case.

"Certainly the court showed that it can address 363 (sale) transactions in an expeditious fashion," Henderson said at a news conference Monday. "Particularly in our case with what will be a very large 363 transaction."

GM's filing for Chapter 11 bankruptcy protection is the largest ever for an industrial company. GM, which said it has $172.81 billion in debt and $82.29 billion in assets, had received about $20 billion in low-interest loans before entering bankruptcy protection.

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Mortgage rates burst past the 5% mark for a 30-year fixed-rate loan late in May, peaking at an average of 5.45% on Thursday. It was the highest level reached by mortgage rates this year, but on Friday they fell back to 5.27%.

Still, the days of sub-5% mortgage rates may be over, which could threaten to depress already stagnant housing markets. A half-point rate increase adds about $30 a month to mortgage payments for every $100,000 borrowed. That could be enough to discourage some potential homebuyers from going through with purchases.

To figure out where mortgage rates are going, you have to watch the bond market. The price of a home loan closely follows the yield on the 10-year Treasury note. And Treasurys are trying to figure what direction they are heading.

"We had an ugly Treasury market the other day, which caused a flare up in mortgage interest rates," said Keith Gumbinger of HSH Associates, a publisher of mortgage data.

The government is currently issuing a great deal of debt — otherwise known as Treasurys or bonds — in order to pay for all its economic-recovery programs. But there haven’t been as many buyers at recent auctions, which drove the yield on the 10-year note higher to 3.7% last week. It had stayed below 3% most of the year until late April, when the rate broke through the 3% barrier.

When supplies of Treasury bills increase - or demand for them falls - yields rise and price falls to draw in more buyers. "The demand for Treasurys won’t grow [this year] as rapidly as the supply. Mortgage rates will take a direct hit. You can kiss 5% goodbye," said Stuart Hoffman, chief economist for PNC Financial Services, the nation’s fifth-largest bank.

Price prop

The Federal Reserve has stated that it will prop up Treasury prices — and tamp down yields — by purchasing more longer-term Treasury securities over the next six months fast cash advance. It has committed up to $300 billion for that purpose.

But that still might be enough to keep mortgage rates from rising, according to Mark Zandi, chief economist for Moody’s Economy.com. He said the Fed may need to spend closer to a trillion dollars to meet its goal.

Mortgage interest rates have been at historical lows all year, never surpassing an average of 5.25% (with 0.8 origination points and fee) before this week. But home sales have lagged despite these low rates, even with home prices at their most affordable levels in many years and a first-time homebuyers tax credit that, effectively, lowers purchase prices by up to $8,000.

Of course, the possibility of rising interest rates could convince people to buy, according to Tom Kunz, CEO of real estate agency franchiser Century 21.

"There’s a segment of the market saying, ‘Prices are still falling. I’ll wait for the bottom,’" he said. "These people will probably miss the bottom. Even if they could save $15,000 or $20,000 on the purchase price, the savings could be wiped out by the rise in interest rates."

HSH Associate’s Gumbinger argues that rates should plateau for a while, and that while they have risen, they are still very attractive - even if it doesn’t feel that way to homebuyers trying to lock rates right now.

"We’re coming out of emergency levels that we’ve been in so long they feel normal," he said. "Whether interest rates will remain at 50-year lows remains to be seen. But even if they don’t, rates will still be favorable, just not as favorable." 

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