March 16, 2004
U.S. Industrial Production Surges 0.7 Percent
U.S. industrial output advanced by a stronger-than-expected 0.7 percent
in February, as American firms operated at their fastest pace since
August 2001, the Federal Reserve said in a report yesterday, Reuters
reported. February's production gain was larger than Wall Street
analysts' expectations for a 0.4 percent increase. Capacity utilization,
which measures how much productive capacity is in use, rose to 76.6
percent from 76.1 percent in January. Factory production, which makes up
more than four-fifths of overall industrial production, posted a 1.0
percent rise in February. Manufacturing capacity in use increased to
75.2 percent, its highest level since June 2001, the newswire
reported.
Wary Consumers Need a Hand from Business
Mixed indicators show consumers are uneasy about the economy but still
spending; however, businesses may have to step up hiring if they want
consumers to keep spending, UPI reported. While productivity inventories
and profits are up, jobs aren't rallying the same way, which is
producing a mixed outlook from consumers. The University of Michigan's
consumer sentiment index, which came out Friday, came out lower than
predicted, falling to 94.1 in March from 94.4 in February, according to
the subscriber-only report. Economists had forecast an improvement to at
least 103, according to Briefing.com. The survey's consumer expectations
index, which measures consumer optimism about the next few months,
dropped to 86.6 from 88.5 in February. However, the survey's current
consumer conditions index, which measures consumers' feelings about the
current financial situation, rose to 105.7 from 103.6 in February.
Though last month saw the sixth-straight jobs increase in six months,
which has created about 364,000 jobs so far, the number of jobs
increased by only 21,000 in February, below analyst expectations, and
hundreds of thousands of people dropped out of the workforce. The bottom
line is that businesses may finally need to start hiring to keep
consumers' outlook in the pink and not the red. 'Keep in mind that
confidence is a two-way street: consumers look to businesses for growth
and increasing employment while businesses develop their strategy around
consumer spending patterns,' Investopedia.com said, the newswire
reported.
Tower Records Emerges From Bankruptcy
Music retailer Tower Records emerged from bankruptcy on Monday with its
creditors owning 85 percent of the company, its debt newly trimmed by
$80 million and a last hurdle cleared on the way to selling itself, the
Associated Press reported. The store chain ompleted the process in
near-record time, resurrecting itself only 35 days after filing for a
chapter 11 reorganization in the U.S. Bankruptcy Court in Wilmington,
Del.
'The effective date will be set shortly, but for all practical purposes,
this is the last hearing,' said Tower spokeswoman Maya Pogoda. A group
of creditors led by London-based Barclays Bank, and including Highland
Capital Management of Dallas, AIG Global Investment Corp. of New York
and MW Post Advisory Group in Los Angeles now runs Tower Records, which
is being marketed for sale by Los Angeles investment banker Lloyd Greif.
Under terms of the restructuring, Tower's founder Russ Solomon and other
family members who started and ran the privately held company will
retain 15 percent ownership, the newswire reported.
Discover Uses Greeting Cards to Remind of Late Credit Card
Payments
Discover Card has tried to inform customers that the bill is overdue by
using greeting cards created by Hallmark Cards Inc. for some customers
who have missed payments, the Associated Press reported. Discover says
the cards are intended to let people know the company may be able to
help, not bully them into paying.
'It's just our way of sending them just a very soft reminder that if
they are behind in their payments, we are there for them,' Discover
spokeswoman Jennifer Kang said.
Scott Robinette, president of Hallmark Loyalty, a division of the Kansas
City-based greeting card company that helps businesses retain customers,
said Discover has taken a bad situation and put a good spin on it.
'Discover didn't want to alienate those customers just because something
has come up potentially that has made it difficult for them to pay,'
Robinette said. Robinette said Hallmark has done similar projects for
other financial services companies, although he declined to provide
details or names, the newswire reported.
Nortel CFO, Controller Put on Leave
Nortel Networks Corp. shares sank more than 14 percent on Monday
after the company shook investor confidence by placing two top
executives on paid leave of absence as part of an accounting review,
Reuters reported. The suspension of CFO Douglas Beatty and controller
Michael Gollogly came less than a week after the telecom equipment maker
warned it would likely restate its results for the second time in six
months and delay filing key documents with U.S. regulators. The moves
are the result of the independent accounting review launched last year
by Nortel's audit committee. Initially viewed by many as a housekeeping
exercise, analysts are now questioning if it has not uncovered deeper
and more worrying issues with Nortel's accounting. 'It's tough to know
what to think ... I don't know whether the suspension of the CFO is just
them being thorough and wanting to have a completely independent review
or if that implies something necessarily negative,' said A.G. Edwards
analyst Gregory Teets, Reuters reported.
US Airways Wins Relief on Federal Loan Conditions
The Air Transportation Stabilization Board agreed in a 2-1 vote to relax
stringent earnings-related milestones as long as US Airways
significantly narrows losses this year and returns to profitability in
2005, the Knight-Ridder reported. The deal also requires US
Airways to immediately pay back $250 million, leaving it with a loan
balance of $726 million and $925 million in cash. The $1 billion loan,
provided by three lending sources with the government guaranteeing 90
percent, was vital to US Airways' emergence from bankruptcy a year ago.
But the company is still losing money, and there was widespread concern
it would not meet the loan's strict cash requirements by June.
For US Airways, the new arrangement gives it the time it needs to 'turn
the company around,' said CFO Neal Cohen. The goal now is to put
together a turnaround plan by mid-year that calls for another $1.5
billion in cost reductions on top of $2 billion in cuts the past two
years, half of which came from unionized employees through wage and
benefit givebacks, the newswire reported.
Judge Agrees to End Benefits for Struggling Steel Mill Retirees on
April 1
A judge on Monday ordered an end to health care coverage for at least
9,000 retirees of Weirton Steel Corp. and their dependents after lawyers
argued continued payments of $3 million a month could force the company
into liquidation, the Associated Press reported. Weirton Steel filed for
chapter 11 protection last year and has cut its work- force nearly in
half but has continued to pay full benefits to retirees. It is trying to
complete a $255 million sale to International Steel Group, but attorney
Mark Freedlander said Weirton might not be able to continue operating in
the meantime if the liability wasn't removed. The company had asked that
benefits be cut off on Monday, but U.S. Bankruptcy Judge Edward Friend
delayed the effective date to April 1 to give retirees time to find
alternative coverage.
Many retirees have complained they accepted lower wages when they worked
at the mill in exchange for free, lifelong health care. But Weirton CEO
Leonard Wise has said those promises were made when health costs were
lower and Weirton's fiscal position was stronger, AP reported.
Asbestos Issue Delays Bankruptcy Proceedings of Armstrong World
Industries
After expecting to emerge from bankruptcy at the end of last year,
Armstrong World Industries remains stalled by a legal challenge to the
federal judge weighing its reorganization plan, the Knight-Ridder
reported. The legal challenge originated in the bankruptcy of another
former asbestos-products firm, Owens-Corning. But the matter has
affected Armstrong's case, too. '...(W)hen confirmation of the plan of
reorganization will be considered by the U.S. District Court is
uncertain,' Armstrong said. Armstrong made the statement last week in a
filing with the U.S. Securities and Exchange Commission. In the face of
sliding sales and profits, Armstrong continued to slash spending on
advertising, research and development and new equipment. Armstrong filed
for bankruptcy reorganization in December 2000 to resolve more than
170,000 asbestos-injury lawsuits, stemming from its past sales and
installation of asbestos insulation. Armstrong was one of dozens of
former asbestos firms to file for bankruptcy about that time, the
newswire reported.
Northwest Airlines Pilots Union To Poll Members on Cost
Cutting
Leaders of the pilots' union at Northwest Airlines agreed to poll
its members to see if they would support a labor agreement that would
reduce expenses by $200 million annually through 2006 in return for
stock, profit-sharing or other forms of investment, the Wall Street
Journal reported. Representatives of the Air Line Pilots Association
voted unanimously to recommend its plan to its 5,250 active pilots. If
the feedback is positive after 13 meetings to be held in coming weeks at
individual pilot bases, the union said it will ask its negotiating
committee next month to commence talks with Northwest, the online
newspaper reported.
The Garbage and the Governor: Enron in Impeachment Inquiry
A suit filed in January by the town of New Hartford names Gov. John G.
Rowland as a defendant and alleges that an Enron deal was but one way
the state's trash authority, the Connecticut Resources Recovery
Authority, was used to reward the governor and people close to him, the
New York Times reported. Billed in 2001 as an energy trade by the
trash authority, because it involved electricity generated by burning
trash, the deal has since been characterized by Attorney General Richard
Blumenthal as an illegal, unsecured loan to a company desperate for
cash. Residents in 70 towns and cities served by the authority,
representing 30 percent of the state's population, are now paying higher
bills to make up for the loss. Read the
href='http://www.nytimes.com/2004/03/16/nyregion/16ENRO.html?hp'>full
article.
Judge Cites Prosecutors' Error in Adelphia Case
The federal judge in the corporate fraud trial of the Rigas family said
on Monday that the government had made 'an egregious error' in the
presentation of its case and said he would consider how to respond if
the defense made a motion for a mistrial, the Washington Post
reported. The issue arose as defense lawyers continued to attack the
testimony of former director Dennis Coyle about his knowledge of the
compliance of cable television company Adelphia Communications Corp.
with agreements for syndicated loans taken jointly by the company and
Rigas family businesses.
In arguments before U.S. District Judge Leonard Sand on Monday, Peter
Fleming, attorney for John J. Rigas, said he may ask the judge to
declare a mistrial because prosecutors failed to show Coyle the correct
documents, the newspaper reported.
Amerco Emerges from Chapter 11
Amerco, the parent company of U-Haul International announced in a press
release yesterday that it has completed its plan of reorganization and
has successfully emerged from its chapter 11 bankruptcy. In conjunction
with the emergence, Amerco entered into a $550 million credit facility
with a banking syndicate arranged by Wells Fargo Foothill, a part of
Wells Fargo & Company. Under the plan of reorganization, the
company's creditors are paid in full and its preferred and common stock
are unimpaired by the bankruptcy, according to the press release.
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