Car Insurance

Oleg Deripaska wants it all. He already has quite a lot: assets in Russian insurance, pulp, construction, airports, media, cars, and oil, and a controlling stake in the world’s largest aluminium company, Rusal. These make him Russia’s second-richest man, worth $18 billion according to Forbes; only Roman Abramovich is richer.

But Deripaska’s ambition is not yet sated.

He wants a place in the top league of global businessmen alongside Bill Gates and Lakshmi Mittal. And so far his ambition appears to enjoy strong Kremlin backing.

This is remarkable considering the extent to which he is a Yeltsin-era figure, and how badly others of that ilk, such as Boris Berezovsky or Mikhail Khodorkovsky, have fared under President Putin. But, like Abramovich, Deripaska has managed to make the transition from the era of the oligarchs to the era of the security services.

More than any other Russian businessman, Deripaska is now profiting from Putin’s ambitious ‘public-private partnership’ programme to rebuild Russia. The Kremlin is preparing to put tens of billions of dollars into infrastructure projects around Russia, and Deripaska’s company, Basic Element, has already attracted state backing for a new hydroelectric dam and aluminium smelter in central Siberia. It also recently bought 30 per cent of a German construction company, Strabag, for $1.6 billion, which puts it in a strong position to win huge PPP road-building contracts. So tight is Basic Element’s embrace with the Kremlin, it is practically a ministry of the Russian government.

The big gun in Deripaska’s industrial arsenal is Rusal, which was formed last year by the merger of Deripaska’s Russian Aluminium with SUAL, the aluminium business of another oligarch, Viktor Vekselberg, and the Russian metals assets of Glencore, Marc Rich’s former company. The merger was personally approved, on television, by Putin, who has long called for the creation of ‘national champions’ to project Russia’s economic muscle into the global economy.

Now, Deripaska wants to move to the next level. Rusal is preparing for an IPO on the London Stock Exchange, possibly as soon as November. Rusal doesn’t just want to be the first Russian company to list on London’s primary market, it wants to be the first Russian blue-chip: ‘Getting into the FTSE100 is the top prize, ‘ says one banker working on the IPO.

The company plans to float a 25 per cent stake, which could raise as much as $10 billion — the biggest-ever foreign listing of a Russian company. This would give Deripaska the fire-power to continue an extraordinary run of acquisitions: in the last six months, he bought a Canadian car-parts maker, Magna ($1.5 billion), and a Russian oil company, Russneft ($3 billion), as well as the Strabag stake, and more. He’s also rumoured to have bought 5 per cent of General Motors, and to have approached Ford about buying Land Rover and Jaguar. There is speculation that after the IPO, Rusal might bid for Alcoa or Alcan or buy out the Russian shareholders of Norilsk Nickel, the world’s largest nickel company, who are thought to be less in favour with the Kremlin.

What could stand in Deripaska’s way? As with other Russian businessmen looking to go global, his past may come back to haunt him. He started off as a young metals broker, and was spotted by a Jewish entrepreneur from Uzbekistan called Michael Cherney, 15 years his senior, who met him at a Metals Bulletin conference in London and was impressed by his drive and vision. Cherney says he helped finance Deripaska’s acquisition of the Sayansk smelter in Siberia, and the two set up a 50/50 holding company for the smelter, called Sibirsky Aluminium.

The aluminium industry in Russia in the mid-1990s was rough terrain. It was here that the mafia diversified beyond their usual areas of business and made a bid to go mainstream. Violent battles were fought over smelters around Siberia. When I visited one in Krasnoyarsk, now owned by Deripaska, my guide pointed to the hotel car park and said, ‘Here’s where the car bomb exploded.’ Our young metals broker was not intimidated. As Vladimir Zhukov, metals analyst at Alfa Bank, says: ‘Many people were killed during the aluminium wars. Deripaska survived, and won.’ One by one, his rivals were either arrested or sold their assets to Deripaska or a rival aluminium firm, Sibneft, controlled by Abramovich and Boris Berezovsky. Sibneft and Sibirsky eventually merged in 2000 to create Russian Aluminium, in negotiations in which Cherney says he played a key role.

What happened next is subject to vigorous dispute. A spokesman for Deripaska says he ‘has never had a business partnership with Mr Cherney’, whose claims are too ’spurious’ to merit detailed response. ‘This person had no relation to my business, ‘ Deripaska himself told the FT earlier this year, in an interview in which he also summed up his own career: ‘I was lucky. Just consider that everything fell from the sky.’ Cherney says it was all a bit more complicated than that. His version is that shortly after the creation of Russian Aluminium, Deripaska told him that the new Putin regime did not look favourably on Cherney and it would be better if his name were taken off the shareholder register. Deripaska, according to Cherney, said he would hold Cherney’s assets for him in trust. Cherney says: ‘I placed complete trust in Deripaska. I would describe our relationship as akin to one of father and son.’

At BLACK ENTERPRISE, we believe homeownership is the key to building wealth in America. Over the next three months, we will present a comprehensive guide to help you take this vital step toward improving your financial future.

Terri Sly had enough of paying rent. “I felt like I was throwing away money each month,” says Sly. “I wanted my own home.” Last January, after a four-month search, Sly moved in to her own place–a newly built, four-bedroom house in suburban Atlanta. “There was a lot of paperwork involved,” says the 29-year-old flight attendant. “But when I made my first mortgage payment, I felt that it was worth the effort.”

Sly had two advantages when she started searching for a home loan. First, she knew she wanted to buy a house in a subdivision where a friend already owned a home. Second, she knew a real estate agent with a solid reputation. “The agent recommended a local loan officer with Wells Fargo,” Sly says, “and my loan officer walked me through the entire process.”

To help you make it through the process of securing financing for your home, loan officers and mortgage brokers suggest that you take the following steps:

1 LEARN THE LANGUAGE

Buying a home is one of the biggest purchases a person will make. It’s important to understand financial terms so you can secure the best deal possible. “Many lenders, real estate firms, and nonprofit groups offer free homebuying seminars, which can help you get started,” says Stephanie Simon, vice president of programs and products at Wells Fargo Home Mortgage Emerging Markets Division in Silver Spring, Maryland. “When you’re trying to finance a home, you’ll run into terminology you won’t find elsewhere. These seminars can help you understand what people are talking about.”

2 DON’T LET COST DETER YOU

“One common misconception is that you need lots of money to buy a house,” says Simon. “There are ways to buy a house with very little money. In fact, one recent trend has been an increase in low, down-payment mortgages. People want to hold on to their cash to use for other things.”

Nevertheless, you can’t expect to get a free ticket for a new house. “You should have at least 10% of the cost of the house saved up to cover a down payment, closing costs, and other expenses,” says Lisa Wilds, a Pittsburgh-based residential loan officer for National City Corp.

3 CHECK YOUR CREDIT

When you apply for a home loan, lenders will scrutinize your credit history. Wilds suggests paying down your financial obligations such as credit card debt and car loans. And Simon advises reviewing your credit report. “You need to know what’s there before a lender does,” she says.

As you check your credit, you can find out your “credit score,” a standardized measure used by many lenders to assess potential borrowers (900 is considered an ideal score). “Credit scores over 620 have a good chance for a conventional mortgage,” says Debbra Carrigan, residential mortgage sales manager for Bank of America in Oakland, California. “If you’re below that score, and especially if you’re below 600, you may have to use more creative financing and pay a higher interest rate.”

Even if you have had credit problems, don’t give up on looking for a mortgage. When Ronald Jacobs, 41, and his wife, Bonita, 35, of Oakland, California, filed for bankruptcy in 1998, they were told by lenders to keep a clean credit record for two years before applying for a mortgage. “We kept our record clean, kept current on all bills, and went through a first-time homebuyer’s program sponsored by a local community group,” says Ronald. Working with Carrigan, the couple found a 30-year, fixed-rate mortgage in 2000 and have since refinanced at a lower interest rate.

4 HOW MUCH CAN YOU AFFORD?

In real estate lingo, you need to be “pre-qualified” to buy a house for a given amount. No real estate agent will bother showing you $300,000 homes if your finances won’t stretch beyond $50,000.

” just gives you an idea of how much of a mortgage you can expect, based on your income,” says Keith Gumbinger, vice president of the Butler, New Jersey-based HSH Associates, a financial publishing company that compiles mortgage industry data. “As a rule of thumb, you can get a mortgage of 2.5 to 2.75 times your income.” Thus, if you make $60,000 a year, you might be pre-qualified for a mortgage of $150,000-$165,000.

5 DECIDE ON A LENDER OR BROKER

When lining up financing, you can work directly with a lending institution or you can hire a mortgage broker who’ll choose from a number of lenders.

“I started out with a broker through a referral,” says Janine Greer, 35, an insurance adjuster in Oakland, California. “It soon became apparent that he didn’t know what he was doing; he was telling me that I’d have to sell my car to get rid of my car loan in order to get a mortgage. The bottom line was that he never found a lender. Fortunately, I connected with Debbra Carrigan at Bank of America, who put together the loan I needed.”

There are instances, however, when brokers can work in your favor. “If your credit history is not great, a broker may be helpful in shopping for the best possible deal,” says Holden Lewis, a reporter for Bankrate.com in North Palm Beach, Florida. “However, you need to do some research or get references in order to find a competent, trustworthy broker.”

Gumbinger says start locally. “If you already own a home, you might begin with your present lender. Otherwise, ask people you know for leads. Find out who has had a good experience.”

Grumbinger warns against finding your loan online. “The Internet can be a great resource for learning about mortgage rates and various types of loans,” he says. “However, the lenders you’ll find on the Internet are often data mining firms. If you enter your personal information, your name and e-mail address will be sold to any number of marketers for solicitations.”

6 RETAIN A LAWYER

Most experts suggest having a good lawyer at your closing. In fact, you should have an experienced real estate attorney examine all paperwork before you make any commitments or sign any contracts. “We recommend a lawyer unless you’re thoroughly familiar with not only the mortgage process but also the various filing requirements,” says Gumbinger. “These include having the title search done, arranging for the appraisal and inspections, and other tasks that require knowledge of town and state law. If there are problems, it might even invalidate the mortgage transaction. If you don’t use a lawyer, who can you call”

7 SELECT THE RIGHT MORTGAGE

There are many types of loans potential homeowners can choose from other than the traditional 30-year, fixed-rate mortgage and the adjustable rate mortgage (ARM) that increases or decreases each year. Thirty-and 15-year, fixed-rate mortgages are the most common, says Wilds. “I generally suggest 30-year mortgages,” she says. “The monthly payment is lower so you can afford to carry a larger mortgage. Some people, however, prefer the 15-year mortgage, which might have an interest rate that’s about a quarter of a point lower.” Homeowners who are in for the long haul will save large amounts of interest if they pay off their mortgage in 15 years rather than 30 years.

If you’re going to stay in the house for five years or less, says Lewis of Bankrate.com, an ARM is probably the best choice because the initial interest rate will be lower than most fixed-rate loans. “Currently,” he says, “3-to-1 and 5-to-1 ARMs are popular because you lock in an attractive rate for three or five years. Then the rate may go higher, year by year, but that won’t make a difference if you plan to be in another house by then.”

8 ASK ABOUT LOAN PROGRAMS

When she bought her new home, Sly says she got “a loan with a 5.5% rate locked in for the first five years.”

Sly’s loan officer helped her find a program that required only a token down payment–about $1,000 on a house selling for more than $120,000. Greer found a program for first-time homebuyers that enabled her to purchase a new home near downtown Oakland. “My total outlay was about $10,000,” she says. “That’s a lot easier to put together than $20,000.”

According to Greer, she borrowed $155,000 to buy her house, but because of the program, she may have to repay only $125,000. “If I stay in the house for 10 years, some of the debt will be forgiven, and more will be forgiven after 20 years,” she says.

The Jacobses found a federally funded program that helped them with their down payment. “We wound up buying a newly built, $175,000, four-bedroom house in 2000 with $15,000 of our own money, $30,000 from this program, and a $130,000 mortgage,” says Ronald. Saving on the down payment has left the couple with more money to spend on their three children.

First-time homebuyers such as Greer and the Jacobses are often eligible for special mortgage programs. “They might offer lower interest rates, a lower down payment, or reduced costs,” says Wilds.

9 GET A PRE-APPROVAL LETTER

“A pre-approval is more meaningful than a pre-qualification,” says Gumbinger. “Sellers may be more interested in dealing with you because you look like a serious buyer.”

To get pre-approved for a loan, you have to present some financial information to a lender. That lender will look at your income, your debts, your credit rating, etc., and pre-approve you for a certain loan. For example, you might be pre-approved for a 30-year, fixed-rate mortgage at 5% until a given expiration date, typically 30 to 90 days.

Pre-approval largely goes by the numbers. “Individual circumstance will vary,” says Lewis, “but a rule of thumb is that lenders will want to see total housing payments of no more than 28% of your pre-tax income.” With $60,000 in annual income, or $5,000 per month, for example, a lender might like to see total payments of no more than $1,400 a month.

“The catch,” says Lewis, “is that your total payments include principal, interest, taxes, and insurance, and you won’t know up front how much you’ll owe in taxes and insurance. Another rule of thumb is that your tax and insurance payments will be about the same as your principal and interest payments on a mortgage.”

10 THE PAPERWORK–PERSEVERE

“Pre-approvals are helpful,” says Gumbinger, “but they’re not as binding as you might think. You still need to submit documents that corroborate your financial information to get a loan. Thus, property must be appraised at a certain value, too.” For example, a lender won’t approve a $150,000 mortgage loan if its appraiser says the house you want to buy is worth $125,000.

After you find a house you like, and your bid has been approved, you’ll have to go back to the lender and turn your pre-approval into a solid commitment. You’ll have to “clarify and verify” all the financial information you submitted to get your pre-approval.

You also may have to clear any hurdles in your path. Your assets will be evaluated. Often, says Carrigan, “lenders look for employment history showing at least two years in the same line of work. In some cases, higher education can be used instead of employment history if you’re new to the work force.”

The general rule is that you’ll need to show three examples of how you’ve handled credit to build up a credit history. “If you don’t have enough of a credit history, you may be able to use regular monthly payments such as rent, phone, cable TV,” says Gwen Thomas, consumer real estate multicultural executive for Bank of America in Charlotte, North Carolina.

Sly says she ran into a snag when construction of her home was delayed, pushing the closing back a month. “That meant more paperwork,” she says, “such as a new pay stub to show continued employment.”

As many maintenance services are eliminated completely or have their intervals extended, a new one-the cabin air filter-has emerged.

When first introduced, cabin air filters were listed as 2-year/30,000-mile replacement items. The bottom line, however, is that the typical cabin filter lasts a year or even less, depending on where the vehicle is operated. Airborne dust, such as in desert areas, can shorten a filter’s life, as can airborne particles from industrial operations.

Unlike such items as engine oil and air filters, which almost always are in the straightforward category, replacing cabin air filters can be anything from a piece of cake to a time-consuming struggle, Either way, filter replacement can be a service worth pursuing. Depending on the vehicle mix in your shop, you may be called upon to:

* Replace a plugged filter with an equivalent unit.

* Install an upgraded filter. This can be one with added-value features that many customers will be willing to pay for.

* Install a filter kit where there was none as original equipment, or perhaps a filtering screen if its not possible to retrofit a filter. This can be an appealing service on those cars and light trucks that don’t have filters, but have encountered evaporator odor.

There are two basic types of cabin air filters-the particle-trapping type and the type that adds a charcoal layer for odor absorption. Within those two types, there are further variations.

Some particulate filters have two layers-one that traps larger particles and a second layer that’s electrostatically charged , to attract and hold smaller particles.

The first known OE cabin air filter was used on a Rambler in the 1970s, but the first ones to become a significant factor were on European luxury cars, particularly BMW and Mercedes in the late ’80s. The OE supplier was Freudenberg NOK, a German manufacturer, winch became a major player in the U.S. aftermarket with its Micronair brand. It has sinc-e attracted a lot of competition here, with DENSO, ACDelco, Bosch, DuPont, Fram, Purolator and WIX, among others.

The 1995 Ford Contour and Mercury Mystique compacts were the first domestic nameplates equipped with cabin air filters, perhaps because they were based on a European Ford (Mondeo) platform. They have a simple particulate filter that traps cigarette smoke and pollen particles, plus airborne dust.

The easiest installation of a cabin air filter for a vehicle maker is at the fresh air intake, accessible under the hood, and that’s what the Contour and Mystique have. The air intake location still is a popular one, although some shielding is necessary to protect the filter from snow or rain damage. Or you may get to it through the glovebox opening. If this type of filter is plugged, the outside airflow drops dramatically, a problem that gets noticed both in Heat mode and in normal a/c use. In Retire, when outside air isn’t used, airflow is almost normal, so if airflow is weak in all HVAC modes except Retire, that’s a tip-off that the cabin air filter is plugged.

Some cars have the filter in the HVAC case between the blower motor and evaporator core, so a plugged filter will restrict airflow in any mode. This location, however, has a couple of real advantages: For one thing, it clears the cabin air if a passenger is smoking. For another, it’s a barrier between the blower motor and the evaporator core. So it prevents copper debris from motor operation from getting to the cores aluminum face, where it can produce a galvanic effect, resulting in surface and eventual pinhole corrosion. The advantages notwithstanding, this is a more difficult location for a vehicle maker to employ for a technician to service.

The most important thing to know when you start selling cabin air filter replacement is which vehicles have it. That may be the toughest part of the deal, because not every model of a nameplate has it. It may be on only a top-of-the-line model, or it may not have been used before or after some model year. Even shop manuals don’t always list the cabin filter, particularly if the replacement procedure is a relatively simple one.

If you carry a major cabin filter line, you can check the catalog listings. But even the best of them may not go beyond 80% coverage, which means you might be ordering some replacements from the car dealer. You can make a simple inspection of the air intake under the hood, or look through the gap behind the glovebox. If the filter is in neither location, is not a familiar item to the dealer parts department, is not illustrated in the owner’s manual or on the maintenance schedule and/or isn’t listed in your suppliers catalog, it still might be elsewhere.

It’s easier to keep a customer than to make a customer, says the Car Care Council, but National Car Care Month and Fall Car Care Month can help repair shops do both by reminding motorists to Be Car Care Aware.

Shops can use the Be Car Care Aware consumer education campaign in a four-pronged approach to teach the importance of keeping a well-maintained vehicle:

*The Service Interval Schedule (published in English and Spanish) can be downloaded free of charge from the Council’s website and printed as a handout during National Car Care Month and throughout the year.

*The 56-page Car Care Guide covers nine major service occasions and 12 component vehicle groups plus service interval recommendations, a maintenance log and much more.

*You can host a car care clinic with help from a step-by-step guide available at the Councils website.

*Vehicle check-up events educate motorists about the condition of their vehicles and how to better care for them. Online registration for these events is available.

Tougher environmental laws can mean lots of extra costs for business. A Brazilian insurance company, though, sees opportunity as well.

Unibanco-AIG Seguros, a joint venture between Unibanco, Brazil’s third-largest private bank, and American International Group, (AIG), a U.S. insurer, now offers Brazil’s first comprehensive corporate environmental liability insurance. While no policies have been issued, the insurers say they have received a slew of coverage requests from pollution-prone companies.

Guilhermo Leao, a Unibanco-AIG environmental insurance product manager, says the company expects to sell dozens of policies by year’s end. It has been selling this type of policy for two decades in the United States. “Signing up companies has been slow because this is such a new product. But we are now negotiating policy terms and prices with some 25 major companies in Brazil to whom we’ve given price quotes,” says Leao. “And I estimate that we will issue 30 to 40 environmental insurance policies by the end of the year.”

Many companies–oil, petrochemical, chemical, pulp and paper, textile, metals and mining concerns–are interested in this insurance because, while their overall liability insurance covers them for pollution that can be contained within a 72-hour period, they have no coverage for so-called gradual pollution, which takes place over longer periods.

Coverage protects against losses from leaking underground fuel tanks to industrial-residue containment pools, which might contaminate river or water tables over months and years, says Unibanco-AIG’s industrial risk director Luis Nagamine. These kinds of risks are getting more expensive, Nagamine says. A 1998 law increased to US$17 million from $17,000 the maximum penalty for environmental infractions, especially pollution. At the same time, domestic and foreign banks in Brazil have taken the initiative to make their corporate clients take steps to reduce environmental risks. Loan approvals might depend on insurance policies to antipollution safeguards. “These banks are making such demands because of their growing concern about being co-liable for environmental damage that results from investment capital they lent,” says Nagamine.

To receive coverage, a company must undergo an external environmental audit to determine potential risks. That risk level determines price and what will and won’t be covered. The Unibanco-AIG policy covers up to $35 million, double the $17 million maximum fine that the government can impose on a company for serious environmental offenses, such as oil spills. The policy covers damage inflicted on-site and offsite, including in residential and industrial properties. It also covers damage done to the environment in general, including rivers, beaches, water tables and other areas not controlled by the company.

Brazil is the only country in Latin America where Unibanco-AIG offers such an environmental policy, says Henry Arima, general manager in Brazil of American International Underwriters (A.I.U.), AIG’s international arm. “It is so new in Brazil that we don’t expect to have competitors in Brazil until the end of 2005,” Arima says.

When Brazilian companies run through their general liability insurance and their sudden-and-accidental pollution insurance, their coverage often does not cover accidents involving underground equipment, like fuel or industrial waste tanks, and it usually only includes, as part of its off-site coverage, residential and industrial areas, not the environment in general, says Walter Polido, the technical and juridical director of the Brazilian office of Munich RE, a German insurer.

“Unibanco-AIG’s broadly defined first- and third-party coverage is one big plus of its new comprehensive insurance,” says Polido. “But the big breakthrough of the Unibanco-AIG’s new product is its coverage of gradual pollution.”

Trends. That breakthrough has prompted other Brazilian insurers to gear up for offering similar types of insurance. “We expect to be offering companies a policy similar to the Unibanco-AIG one during the first half of 2005,” says Alvaro Igrejas, the civil liability manager of Itau Seguros, another large Brazilian insurer. “To offer such insurance, we’re going to have to acquire know-how from a foreign insurer who offers it.”

Roberto Smeraldi, the director of the Brazilian office of Friends of the Earth, says the new coverage could prompt businesses in Brazil to be more proactive with their environmental practices here. Preparing to the pass the third-party audit will force companies to become more environmentally careful before qualifying for coverage, says Smeraldi. “And to preserve their image and to keep their environmental insurance premiums from skyrocketing,” he says, “they will likely have to maintain such environmental consciousness and caution.”