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Greenspan Optimistic on Economy but Cites Risk
Federal Reserve Chairman Alan Greenspan said on Wednesday he remains
hopeful the end of the Iraq war will result in stronger economic growth
and repeated his opposition to substantial tax cuts that would run up a
larger deficit, the Associated Press reported. In his appearance on
Wednesday, Greenspan held firm to his February view that any further tax
cuts should be paid for and that tax legislation was more suitable to
addressing the economy's long-term growth prospects and not as a
short-term stimulus measure, given the length of time it takes to get a
tax bill through Congress. Greenspan said that in the event the economy
needs a further boost, the Fed is prepared to deliver more stimulus by
cutting already low interest rates further. 'We still have room in
monetary policy if we choose to move,'' he told the House Financial
Services Committee, reported the newswire.
On the current economy, Greenspan said he still held to his February
view that the so-far lackluster recovery from the 2001 recession would
accelerate to faster growth once the uncertainties associated with the
Iraq war are removed. 'I continue to believe the economy is positioned
to expand at a noticeably better pace than it has during the past year,
though the timing and the extent of that improvement remains
uncertain,'' Greenspan said, the Associated Press reported.
Productivity Increases 1.6 Percent As Workforces Stay Lean
Productivity improved in the first quarter, increasing at an annual rate
of 1.6 percent as companies produced more while they kept workforces
lean, Dow Jones Newswires reported. The gain in nonfarm business
productivity -- the amount of output per hour of work - for the first
three months of 2003 was more than twice the size of the 0.7 percent
growth rate registered in the previous quarter, the Labor Department
reported on Thursday. Productivity rose at a 2.3 percent rate from the
year-earlier period. Economists had been expecting productivity to grow
at a 2 percent rate, reported the newswire.
Half of Pension Plans Underfunded
More than half of the 32,000 traditional pension plans offered by
private employers are underfunded, exceeding a record $300 billion, the
head of the government's pension insurance program said on Wednesday,
CongressDaily reported. The Pension Benefit Guaranty Corp.'s
growing deficit topped $5.4 billion as of March 31, based on unaudited
figures, Executive Director Steven Kandarian said at a House Ways and
Means Select Revenue Measures Subcommittee hearing. The agency, which
pays a portion of retirement benefits promised to workers enrolled in
bankrupt plans, can continue to do so 'for a number of years,' the
executive director said. 'But putting the insurance program on a sound
financial basis is critical. We should not pass off the cost of today's
problems to future generations,' he said, reported the newswire.
Leahy Seeks Support For Alternative Class Action Measure
With business lobbyists scrambling to capture the support of a
supermajority in the Senate for a pending class action reform bill
tentatively slated for May floor action, Senate Judiciary ranking member
Patrick Leahy (D-Vt.) yesterday began petitioning support for an
alternative measure he has drafted, CongressDaily reported. 'My
legislation would take the necessary steps to correct problems in class
action litigation and expand federal court jurisdiction for truly
national or regional class action cases,' Leahy wrote in a letter to
senators. The pending legislation, which was reported out of the
Judiciary Committee earlier this month with the support of all
Republicans but only two of the panel's Democrats, is vigorously opposed
by key Democratic constituents in the trial bar, and also by consumer
advocates, civil rights groups and environmental lobbyists, reported the
newswire.
ENRON
New Charges Are Expected in Enron Case
After more than a year of investigations into the collapse of Enron, the
government will announce today the most significant indictments yet,
charging eight new defendants with participating in frauds at the
company, people involved in the case said yesterday, the New York
Times reported. The indictments, which these people said would be
unsealed this morning in Federal District Court in Houston, will name a
raft of officers and their associates as participants in different fraud
schemes. These defendants include a former treasurer, a former head of
one of Enron's most prominent divisions and the wife of the former chief
financial officer, who himself is already facing criminal charges. To
read the full article, point your browser to
href='http://www.nytimes.com/'>www.nytimes.com.
Credit Agencies Refuse to Hand Over Enron Papers
Standard & Poor's and Moody's Investors Service have warned that
they will resist attempts by a court-appointed investigator to make them
hand over internal documents about work on Enron, FT.com
reported. The agencies told the court handling the energy trader's
bankruptcy case that the request by Neal Batson, a lawyer
appointed to look into Enron's off-balance-sheet vehicles, raised
'troubling constitutional issues.' The rating bodies have long claimed
protection from such requests under the first amendment of the
Constitution, which protects journalists from having to produce
materials gathered during research. Fitch Ratings, the third main credit
rating agency, has also indicated it will resist any subpoenas issued
under a court order signed last Friday. The agencies have come under
intense scrutiny since Enron filed for bankruptcy in December 2001, for
their alleged failure to alert the financial markets to the state of the
energy company's finances. They had rated Enron as 'investment grade'
until four days before it imploded. In Batson's request for permission
to subpoena the rating agencies, he said he believed they 'possess
significant information concerning [Enron] or the SPEs'-special-purpose
entities the company set up in the 1990s, the Financial Times
reported. To read the full article, point your browser to
href='http://www.ft.com/'>www.FT.com.
HEALTHSOUTH
Executives-for-hire Try to Revive HealthSouth, United
Antonio Alvarez Jr., co-head of Alvarez & Marsal, a New York-based
firm that's been named to run eight U.S. public companies struggling to
avoid bankruptcy or come out of it, is among a growing number of
executives-for-hire profiting from failing businesses, Bloomberg News
reported. 'We do the surgery and whatever else we need to make a company
more viable,'' said Alvarez, 54. He stepped down this month as chief
executive officer of Warnaco Group Inc. after leading the maker of
Calvin Klein jeans from chapter 11 bankruptcy. Warnaco paid Alvarez
$125,000 a month plus bonuses in cash and stock worth $5.7 million for
18 months, court papers say, reported the newswire.
Record bankruptcy reorganizations of such companies as Kmart Corp., UAL
Corp.'s United Airlines and WorldCom Inc. mean more business for
turnaround specialists, Bloomberg reported. Fees as high as $600 an hour
and the chance at bonuses reaching $7 million are boosting the number of
executives hiring themselves out to revamp companies in crisis. Alvarez
& Marsal has more than tripled in size to 180 consultants since
1999, while rival Huron Consulting Group LLC has grown to more than 300
from 70 a year ago. 'The turnaround industry is seeing extraordinary
growth,'' said Harlan D. Platt, a professor of business at Northeastern
University in Boston specializing in corporate restructuring, reported
Bloomberg.
HealthSouth to Cut Jobs, Hire New Auditor
HealthSouth Corp. said it has cut 250 management jobs and intends to
announce a new auditor by Wednesday following an accounting scandal that
has led to criminal fraud charges leveled against 11 former executives
so far, Reuters reported. The company also said in a letter contained in
a filing with the Securities and Exchange Commission that it has enough
funds to support its operations and adequate insurance for the doctors.
HealthSouth, which is trying to stave off bankruptcy, said in the filing
that it intends to send the letter to its affiliated physicians.
HealthSouth also said it is cutting back on costs by slashing jobs,
seeking to sell company aircraft and other vehicles and scaling back on
construction projects, reported the newswire.
Comdisco Sells German Unit to Comprendium for Up to $358
Million
Comdisco Holding Co. sold its German leasing unit to Comprendium SA for
as much as $358 million, Bloomberg News reported. Comprendium, which
bought Comdisco's Swiss unit last year, is controlled by Thomas Flohr, a
former president of Comdisco Europe. Comdisco received about $316
million at Tuesday's closing and will get four performance-based
payments that total as much as $42 million over the next 42 months, the
company said in a statement. Comdisco is selling assets to pay creditors
and expects to liquidate. The Rosemont, Ill.-based company filed for
chapter 11 protection in July 2001 after investing $3 billion in
startups that proved unprofitable or failed to repay loans, reported the
newswire.
Hutchison Scraps Plan to Buy Global Crossing Amid U.S Probe
Hutchison Whampoa Ltd. scrapped a plan to buy control of Global Crossing
Ltd. after the United States extended a national security review of the
proposed $250 million purchase, Bloomberg News reported. Singapore
Technologies Telemedia Pte., which had jointly bid with Hutchison, will
proceed with an offer on its own, Hutchison said in a statement
distributed through PRNewswire. U.S. government officials are concerned
that China would exert undue influence on Hong Kong-based Hutchison's
ownership of Global Crossing's fiber-optic network. A U.S. panel
informed the companies earlier this week that it will take an additional
45 days to determine whether the sale threatens national security,
Bloomberg reported.
Mechanics, Baggage Handlers At United Approve Contract
Mechanics and baggage handlers for UAL Corp.'s United Airlines approved
new contracts Wednesday morning, helping the beleaguered airline slash
labor costs by about $4.7 billion over the next six years, the
Associated Press reported. The vote follows flight attendants' approval
on Tuesday of a contract that will save the world's second-biggest
carrier another $1.9 billion over the same time period. The airline is
currently operating under bankruptcy-court protection, reported the
newswire.
United Chief Executive Glenn Tilton said the unions' vote helped push
forward the carrier's restructuring effort. 'Four months ago we set
several goals: to reach consensual agreements on cost savings with all
of our unions, to improve productivity, and to lay the foundation for a
more competitive, flexible and efficient airline,' he said. 'With
today's ratifications, we have achieved all of those goals,' AP
reported.
American Airlines Begins Cutting Jobs
Executives of cash-strapped American Airlines are moving quickly to
slash their unionized work force by an estimated 7,000 employees under
new concessionary contracts the carrier demanded in an effort to remain
solvent, the Associated Press reported. Company spokesman Bruce Hicks
said the company was scheduled on Wednesday to start sending out notices
to about 1,300 mechanics and related workers represented by the
Transport Workers Union, to become effective May 16. New contracts with
three key unions are poised to kick in on Thursday. The Fort Worth,
Texas -based carrier sent out notices to 5,000 junior flight attendants
on Tuesday, warning that they could be laid off as early as July 1.
Also, 1,200 fleet service clerks will receive notices within the next
few weeks, informing them of a June 14 layoff, reported the
newswire.
Owens Corning Gets Deadline Extension from Bankruptcy Court
The U.S. Bankruptcy Court in Wilmington, Del., has extended the deadline
for Toledo, Ohio-based Owens Corning to get support for its
reorganization plan from its creditors, according to Home Channel News.
The new deadline is Nov. 30; the old one expired last month. The company
filed its reorganization plan in January.
Air Canada Seeks C$2.4 Billion in Annual Savings From
Restructuring
Air Canada said it needs to emerge from bankruptcy protection with C$2.4
billion ($1.67 billion) in annual cost savings to return to
profitability, Bloomberg News reported. Montreal-based Air Canada told
its unions yesterday that they will have to contribute C$770 million in
concessions, or 26 percent of current labor costs, to achieve the
overall target, said company spokeswoman Angela Mah. Air Canada won
protection from creditors on April 1, citing its failure to get wage
concessions, reported the newswire.
Bethlehem Steel Corp. Is No More
Bethlehem Steel Corp. ceased to exist yesterday, the Washington
Post reported. Felled by cheap imports, overwhelming debt and the
burden of paying benefits to an aging workforce, the nearly 100-year-old
company leaves behind about 95,000 retirees who lost their company-paid
health insurance and saw their pensions transferred to the control of
the federal government, which will reduce the benefits. Its assets were
sold in bankruptcy court for $1.5 billion to International Steel Group,
which will continue to operate them, including the giant Sparrows Point
plant in Baltimore, which has about 3,000 workers. To read the full
article, point your browser to
href='http://www.washingtonpost.com/'>www.washingtonpost.com.
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