August 31, 2004
Report Shows More
Spending by Consumers
Consumer spending rebounded in
July as households dipped aggressively into their pocketbooks after an
unexpected spell of restraint in June, government figures showed
yesterday, the New York Times reported. While the rebound
bolstered hopes that the economy is recovering from its recent weakness,
a sluggish rise in personal incomes in July stirred concerns that
spending might slow down again soon if businesses do not begin hiring
substantially. 'Everything is very finely balanced,' said Steven
Ricchiuto, chief United
States economist at ABN Amro. 'Anything
can upset the apple cart at this point.' The Commerce Department
reported that personal consumer spending grew 0.8 percent in July,
bouncing back from a 0.2 percent decline in June, which was revised from
a drop of 0.7 percent, the newspaper reported.
Separately, the Associated
Press reported that an unsettling report on consumer incomes set off a
spate of profit-taking on Wall Street on Monday as investors worried
that a tepid economy would erode companies' third-quarter earnings.
While investors were cheered by the report of a strong rise in consumer
spending for July, nearly flat growth in personal incomes and a handful
of profit warnings for the third quarter made investors nervous. The
news prompted them to cash in their gains following two weeks of
advances, the newswire reported.
Interstate Bakeries
Could File Bankruptcy
Credit Suisse First Boston (CSFB) said there is a
possibility that Interstate Bakeries will
have to file for chapter 11 bankruptcy, Reuters reported. The baked
goods company, which owns brands such as Wonder, Hostess and Sunbeam,
recently announced the hiring of a turnaround company. CSFB said it
believes neither the company's lenders nor its unions 'want to own
baking plants but that possibility exists.' It added that the company's
survival depends on 'top line stabilization' and that 'there are some
signs of life in the bread half of the portfolio, but snack cakes may be
structurally impaired.' CSFB maintained its 'neutral' rating and target
price of $13.
Redline Hits the Skids, Files Chapter
7
San Diego-based Redline Performance Products Inc.
filed for relief under chapter 7 of the U.S. Bankruptcy Code and has
ceased all business activity and operations, the Business
Journal reported. The snowmobile maker has determined that it
does
not have sufficient resources to continue its operations and has been
unable to secure additional financing, according to a statement. All
directors and officers have resigned except Mark Payne, president and
CEO, who will remain with the company to facilitate transition to a
court-appointed trustee that will oversee the wind-up of the business.
Redline's filing was with the U.S. Bankruptcy Court for the District of
Minnesota.
US Air Locked in
Down-to-wire Talks on Cuts with Its Pilots
US Airways was locked in
bargaining yesterday on wage and benefit cuts with its pilots' union,
whose backing is critical if the airline is to avoid another bankruptcy
filing, the New York Times reported. US Airways, which
wants
to reposition itself to compete with low-fare airlines, is asking its
major labor unions for contract concessions worth $800 million as the
crucial component of that plan. Over all, the airline is striving to cut
$1.5 million in annual costs. The concessions would be the third round
granted in the last two years by the airline's four major unions. They
agreed to two rounds while US Airways was operating under bankruptcy
protection, which it sought in August 2002.
US
Airways emerged from bankruptcy in April 2003, only to find that its
costs were still higher than those of its leanest
competitors.
Until last week, the pilots
were offering cuts worth $100 million to $115 million less, along with
some changes in work rules, according to people briefed on both sides'
offers. But yesterday, leaders of the Air Line Pilots Association sent
signals that they were softening their resistance to US Airways'
demands. On Friday, the union's 12-member master executive
council decided to send bargainers back to the negotiating table for the
first time since talks broke off the previous Sunday. Then, on Saturday,
the union made a new proposal to the company.
Airways countered that with its own offer on Sunday, the newspaper
reported.
Bombardier Likely Headed to Junk By Moody's
For struggling aircraft and
rail car maker Bombardier, last week's earnings results for its second
quarter offered a rare relief to credit investors used to negative
surprises every three months, Reuters reported. But thanks to Moody's
Investors Service, the relief proved short-lived after the ratings
agency still threatened to cut the ratings into junk territory. After
Bombardier reported increased cash, reduced debt and a slight profit,
the company's credit spreads rallied on hopes that some of the market's
worst fears were overblown. The Moody's ratings threat quickly changed
that, the newswire reported.