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October 20, 2004
Greenspan Downplays Debt Worries
Federal Reserve Chairman Alan Greenspan said yesterday that he did
not foresee big price distortions developing in home prices and said
Americans were handling their debts well, Reuters reported. Speaking to
a group representing America’s Community Bankers, Greenspan
conceded there were concerns about “the exceptional run-up in home
prices” but said debt burdens seemed to be under control, provided
that incomes did not tumble. “A significant decline in consumer
incomes could quickly alter the outlook,” Greenspan said, adding:
“Nonetheless, both scenarios appear unlikely in the quarters
ahead.” The very size of the U.S. housing market shielded it from
widespread price bubbles, he suggested. “While local economies may
experience significant speculative price imbalances, a national severe
price distortion seems most unlikely in the United States, given its
size and diversity,” Greenspan said.
US Airways Cuts Management Pay by 10 Percent
Bankrupt US Airways has announced a plan to cut its annual wage and
benefits bill which will affect 3,700 management workers, Europe
Intelligence Wire reported. The move has been used to apply more
pressure on the airline’s unionized workers with whom it is
negotiating over USD 950m in annual concessions to help the airline
survive its bankruptcy. The cut of up to 10 percent for management is
less than what the airline is asking from its unions but will bring it
into line with the low-cost carrier structure the airline hopes will
bring it out of bankruptcy.
Trial of WorldCom’s Ebbers Is Delayed
A federal judge on Tuesday delayed the trial of former WorldCom chief
executive Bernard Ebbers until January, granting his lawyers more time
to prepare their defense, the Associated Press reported. The trial,
among the most closely watched cases in the recent spate of white-collar
prosecutions, was set to begin on Nov. 9. U.S. District Judge Barbara
Jones said it may have been an error for lawyers for Ebbers to agree to
the November trial date in the first place, but said she would not
penalize him for it. Ebbers is accused of orchestrating the $11 billion
accounting fraud at WorldCom Inc., the newswire reported.
Facing Lawsuits, Bulletproof Vest Manufacturer Files for Chapter 11
Bankruptcy
Second Chance Body Armor Inc. filed for chapter 11 bankruptcy after
being hit with lawsuits in at least 10 states accusing it of selling
defective bulletproof vests to police officers, the Associated Press
reported. One lawsuit blames the company in the shooting death of a
California police officer. Another, brought by the state of Utah, led to
a $210,000 settlement. The bankruptcy petition, filed on Sunday, puts
the lawsuits on hold while Second Chance tries to work its way out of
financial trouble.
Three Former Enron Executives Will Share a Trial
Kenneth Lay, a founder of the Enron Corporation, will get two
criminal trials—one by himself and one with Jeffrey Skilling, a
judge ruled yesterday, the Associated Press reported. Judge Sim Lake of
Federal District Court partly granted Lay’s request to be tried
separately from Skilling, a former CEO, and a third defendant, Richard
Causey, a former top Enron accountant. The judge said Lay would be tried
separately on four counts of bank fraud and making false statements,
centering on allegations that he misled banks about using loans to buy
Enron stock on margin. But on seven pending counts of conspiracy and
fraud, Lay will face a jury with Skilling and Causey, each of whom face
more than 30 counts that include conspiracy, insider trading, fraud and
lying to auditors, the newswire reported.
Analyst Says Flyi Could Go Bankrupt
The stock price of Independence Air’s parent, Flyi Inc.,
decreased 29 percent yesterday after a Wall Street analyst offered a
grim forecast for the four-month-old low-cost carrier, The
Washington Post reported. The Dulles, Va.–based airline is
“looking at large losses” and a potential chapter 11 filing
“by January, when it must make a large aircraft rent
payment,” wrote Robert N. Ashcroft, an analyst for UBS Investment
Research. “It’s clear to us that Flyi’s business plan
isn’t working,” Ashcroft wrote, the newspaper reported.
Northwest Posts Loss
Northwest Airlines Corp. today posted a quarterly loss, versus a
year-ago profit, as high fuel prices and low fares weighed on the
industry, Reuters reported. The Eagan, Minn.–based airline said
its third-quarter loss amounted to $46 million, or 54 cents per share. A
year earlier, it posted a profit of $42 million, or 49 cents per share.
Wall Street analysts on average expected the company to report a loss of
81 cents per share, with loss estimates ranging from 40 cents to $1.15 a
share, according to Reuters estimates.
Delta’s Quarterly Loss Balloons
Delta Air Lines Inc., which has said it is sliding toward a
bankruptcy filing if it can’t restructure its debt and win
concessions from pilots, reported its loss ballooned in the third
quarter, the Wall Street Journal reported. The company
attributed the loss to high fuel prices and the weak domestic-yield
environment. Delta also said it expects to record a significant charge
in the fourth quarter related to its restructuring plan, most notably
for layoffs, and that “time is of the essence” for its
turnaround plan, the online newspaper reported.
Departing CEO at Kmart Is Set to Get Big Payoff
Kmart Holding Corp. CEO Julian Day, who resigned from the
retailer’s top job after 30 months, is walking away with stock
options potentially valued at as much as nearly $120 million at current
market value, the Wall Street Journal reported. The
retailer has improved its fortunes greatly since it exited from chapter
11 bankruptcy protection last year under the leadership of Day, who
assumed the CEO post Jan. 19, 2003.