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June 1, 2005
Consumer Confidence Rises in May
U.S. consumer confidence surprisingly rebounded in May after three
straight monthly declines, the Conference Board said yesterday. The
consumer confidence index rose to 102.2 in May from 97.5 in April.
Economists expected the index to fall to 95.9 from the earlier estimate
of 97.7. “Consumer confidence improved in May, gaining back nearly
all of the ground it lost in April,” says Lynn Franco, Director of
The Conference Board’s Consumer Research Center. “The
Present Situation Index, despite fluctuations in recent months, is more
than 26 points higher than a year ago. Consumers’ concerns about
the economy and jobs have eased. The Expectations Index, while slightly
below year-ago levels, continues to signal economic growth in the months
ahead.”
Report Finds Underfunding at Largest U.S. Pensions
Over half of the 100 largest traditional corporate pension plans were
underfunded to some degree in 2002, according to
href='http://www.gao.gov/new.items/d05294.pdf'>a study by
congressional auditors issued yesterday, Reuters reported. A quarter
were less than 90 percent funded. From 1995 to 2002, flexible funding
rules and accounting credits also meant that each year no cash
contributions were made to an average 62.5 percent of the 100 biggest
pension plans, the Government Accountability Office (GAO) found. The
study was based on an analysis of disclosure forms filed by companies
with the Pension Benefit Guaranty Corp. (PBGC), the agency that insures
traditional pensions and reported a $23.3 billion annual deficit at the
end of September 2004 after an $11.2 billion deficit for fiscal 2003.
Rep. John Boehner (R–Ohio), who chairs the House Education and the
Workforce Committee, said the report illustrated once again that
outdated pension rules were failing to protect the interests of workers
and retirees. “Today’s outdated rules also put the taxpayers
at significant risk of a possible multibillion-dollar bailout of the
PBGC if the agency’s financial condition continues to
worsen,” he said in a statement.
A Surge in Bankruptcy Filings Is Expected Ahead of New Law
Bankruptcy lawyers and others are bracing for an increase in
bankruptcy filings in advance of the new bankruptcy law, the Wall
Street Journal reported. The law goes into effect Oct. 17, and
already the numbers have been going up—climbing to 660,566 this
year as of last week from 635,443 in the comparable year-earlier period,
according to Lundquist Consulting Inc. While official U.S. Bankruptcy
Court numbers for the first quarter aren’t yet available, some
experts say a big increase is inevitable, especially because the number
of bankruptcy filings fell 3.9% to 1.55 million last year, the first
time that has happened since 2000.
United Airlines
United Air Makes Pact with IAM
United Airlines has reached an agreement in principle with the
International Association of Machinists (IAM), a union representing some
of its ground workers, Reuters reported. A UAL spokesperson said
separately that the parties would now have until June 17 to go through
due the diligence process on the way to signing a final deal. The
airline, a unit of UAL Corp., hopes to secure $700 million a year in
annual labor savings to exit chapter 11 bankruptcy protection.
Chase Launches Card for United Miles
Chase is launching a new credit card to collectors of United Airlines
frequent-flier miles, the Wall Street Journal reported.
Yesterday, J.P. Morgan Chase & Co. launched the United Mileage Plus
Platinum Class Visa Signature card, which comes with three key features:
double miles for many everyday purchases, no cap on the number of miles
that can be earned through the card each year, and the ability to earn
miles that count toward qualifying for elite status on the airline. The
card has an annual fee of $140, which is $55 more than the next
most-expensive card offered by Chase and United, a unit of UAL Corp.,
the newspaper reported
Judge Allows U.S. Airways to Weigh Rival Bids
A federal judge yesterday allowed US Airways Group Inc. to consider
any bids that rival its proposed merger with America West Holdings
Corp., Reuters reported. Judge Stephen Mitchell approved a set of
procedures that would let other qualified investors submit rival plans
to help US Airways emerge from bankruptcy. So far, the proposal by
America West and a group investors is the only one that has been
negotiated. US Airways hopes to emerge from bankruptcy by Aug 31.
Judge Denies Parmalat Motion Against Citigroup
A New Jersey judge yesterday denied Italian company Parmalat’s
motion to dismiss a counterclaim filed by Citibank in Parmalat’s
$10 billion fraud suit against it and parent Citigroup Inc., Reuters
reported. “The record presented on this motion gives me no
confidence that plaintiff has demonstrated each of the elements
necessary to enjoy claim preclusion against Citibank,” Judge
Jonathan Harris of Bergen County Superior Court wrote in an opinion.
Parmalat Finanziaria SpA has maintained that Citigroup was partially
responsible for the dairy company’s collapse, while Citigroup has
claimed it was a victim of Parmalat’s fraud and sought to have the
lawsuit dismissed.
Merrill Raises Northwest to ‘Buy’
Shares of Northwest Airlines Corp. rose more than 10 percent
yesterday, after a Merrill Lynch analyst raised his rating on the shares
to “buy” from “neutral,” citing their recent
underperformance relative to other airline stocks, Reuters reported.
Merrill Lynch analyst Michael Linenberg also reiterated
“buy” ratings on rival airlines AMR Corp., Continental
Airlines Inc., JetBlue Airways Corp. and Southwest Airlines Co. On a
conference call with investors, Linenberg said the probability of a
strike at the carrier is “extremely low.” Northwest Airlines
last week declared an impasse in negotiations with its mechanics union
that would have saved the carrier $176 million annually.
California Water-marketing Company Files for Bankruptcy
Western Water Co. filed for chapter 11 bankruptcy protection this
week in U.S. Bankruptcy Court in Oakland, the Sacramento
Bee reported. Chairman and CEO Michael Patrick George said his
company’s troubles partly reflect the considerable red tape
Western Water encountered when it tried to arrange transactions.
Rigas Sentencings Delayed Until June 13
A federal judge has delayed the sentencings of John and Timothy
Rigas, convicted last year in the massive fraud at Adelphia
Communications Corp., until June 13, Reuters reported.The sentencings
had been set for today. Prosecutors said the delay was because of a
pending court filing related to a recently reached settlement between
the government, Adelphia and the Rigas family. John Rigas, who founded
Adelphia, and his son Timothy, who served as CFO, were convicted in July
2004 of conspiracy, bank fraud and securities fraud.
Canadian Bankruptcy Numbers Dropped in the First Quarter
Fewer consumers and businesses filed for bankruptcy in the first
quarter of the year, the Office of the Superintendent of Bankruptcy
reported yesterday, CP reported. The office said good economic
conditions, including low interest rates and modest growth in personal
income and employment, helped keep people in the black. In the first
quarter, 83,800 consumers declared bankruptcy, compared with 85,300 in
the same period a year ago. There were 9,600 business bankruptcies in
the quarter, down from 10,600 last year.