January 30, 2004
GDP Grows 4 Percent
The U.S. economy grew at a 4 percent annual rate in the final three
months of last year, the government reported today, but the pace was
weaker than expected and less than half the rate of the third quarter as
consumers turned more cautious on spending, Reuters reported. The
Commerce Department said consumer spending, which accounts for
two-thirds of overall gross domestic product, rose at a 2.6 percent pace
in the fourth quarter, a sharp slowdown from the heady, tax-cut induced
6.9 percent gain of the prior three months. Growth in business spending
and residential investment also slowed, it said.
While the 4 percent GDP gain last quarter was relatively healthy by
historical standards, it was less than the 4.8 percent gain expected by
economists, and far below the sizzling 8.2 percent rate of increase
reported in the third quarter. Gross domestic product, after adjustment
for inflation, expanded 3.1 percent last year, up from 2.2 percent in
2002, for the best performance since 3.7 percent in 2000, reported the
newswire.
Pension Agency to Cut Its Stock Holdings
Ten years after it adopted an 'all equities' strategy, the agency that
insures pensions has decided it has taken on too much risk and will
reduce stocks to as little as 15 percent of its total investments, the
New York Times reported. The agency's shift is coming as debate
continues about whether workers should be allowed to invest some of
their Social Security money in stocks. Steven A. Kandarian, executive
director of the Pension Benefit Guaranty Corporation (PBGC) said
yesterday that he was not trying to tell companies how to invest pension
portfolios. He said the goal was to make sure that as the government
takes on more obligations from failed company pension plans, it has
enough money to pay benefits. 'We're managing our assets against
liabilities that we have to make good on down the road,' Kandarian said
in a briefing, reported the Times.
The agency plans a gradual reduction in its stockholdings, so that
after two years, stocks will make up 15 to 25 percent of its
investments. The agency's portfolio was worth $33 billion at the end of
2003. Stocks account for 42 percent of that. The agency acquired many of
these stocks in the last two years, when it took over the assets of a
record number of failed pension plans. As the agency has taken them
over, its own financial strength has deteriorated sharply. Its growing
deficit has raised concerns that taxpayers might eventually have to bail
out the system, reported the newspaper.
Filings for Jobless Claims Drop
The number of Americans filing first-time claims for unemployment
benefits fell last week, the government said yesterday, staying close to
a three-year low, Bloomberg News reported. Initial jobless claims fell
1,000 last week, to 342,000. Claims at the end of last year reached
339,000, the lowest since January 2001. Economists had projected a
decline to 340,000 in last week's claims from the initially reported
341,000 the week before.
The number of people continuing to collect state jobless benefits in
the week ended Jan. 17 rose 11,000, to 3.131 million. The four-week
average of continuing claims fell by 40,750, to 3.164 million, the
lowest since 3.135 million in the week ended Aug. 25, 2001, Bloomberg
reported.
Adelphia Shares Plunge; Valuation Dispute Seen
Shares in Adelphia Communications Corp. plunged on Thursday after
officials at the bankrupt cable company said its reorganization plan
would leave nothing for shareholders, setting the groundwork for a
valuation dispute with shareholder representatives, Reuters reported.
Shares in the cable TV company lost as much as 68 percent of their value
on the over-the-counter market, dropping as low as 24 cents from
Wednesday's close of 75 cents. Shares were recently trading at 32 cents.
Adelphia CFO Vanessa Wittman told Reuters in an interview that a
forensic accounting investigation over the last year found that the
company's debt exceeds the value of the company.
Alcan Disputes Kaiser Attempt to Cancel Agreement
Aluminum company Alcan Inc. on Thursday said it would contest an attempt
by Kaiser Aluminum Corp. to cancel an alumina supply agreement, Reuters
reported. Kaiser has filed a motion before a bankruptcy court in
Delaware seeking to reject the five-year agreement with Alcan's unit
Pechiney Trading Co., the company said in a press statement. The
agreement calls for the supply of 300,000 tons of alumina a year to the
unit, from January 2002 to the end of 2006, the company said.
Stelco Granted Creditor Protection; Stock Plunges
Stelco Inc., Canada's biggest steelmaker, was granted protection from
creditors on Thursday, Reuters reported. The company blamed the move on
its deteriorating cash position and a high cost structure that has made
it unable to compete effectively. Although Stelco still produces the
most steel among Canadian companies, it has fallen behind rival Dofasco
Inc. in revenue.
An Ontario court granted Stelco bankruptcy protection under Canada's
Companies' Creditors Arrangement Act, the equivalent of chapter 11
bankruptcy in the United States. Stelco can keep operating while it
tries to file a restructuring plan. 'Recent increases in steel prices
have not been, and are not expected to be, sufficient to offset the even
more significant past and projected escalation in our costs,' Courtney
Pratt, Stelco's CEO, said in a release, reported the newswire.
Sierra Pacific Says Natgas Lawsuit Dismissed
Sierra Pacific Resources Corp. said on Wednesday that a federal court
had dismissed a complaint filed by the company against several natural
gas producers seeking $600 million in total damages, Reuters reported.
The Las Vegas-based company and its utility unit Nevada Power filed the
lawsuit in April 2003, claiming suppliers conspired to drive up prices.
Defendants included Sempra Energy, El Paso Corp. and Dynegy Inc. Sierra
Pacific, in a filing with the U.S. Securities and Exchange Commission,
said counsel for the company and its utility unit were reviewing the
matter to determine what action, if any, it might take in response to
the ruling.
Halliburton Posts Wider Loss; Stock Rises
Halliburton Co. on Thursday posted a wider fourth-quarter loss due to a
charge for settling asbestos injury claims, but saw its stock soar
beyond a 52-week high because of controversial U.S. government contracts
to rebuild Iraq, Reuters reported. The Houston-based oil field services
company reported a 63 percent surge in revenue to $5.46 billion in the
quarter. Chairman and CEO Dave Lesar expects customer spending to
accelerate over the course of this year, boosting the company's stock to
a more than two-year high. The stock has doubled over the last 12 months
on the added reconstruction business in Iraq and investor confidence
that the bulk of its asbestos litigation troubles are behind it,
reported the newswire.
Delta's Pilots Union Warns Of Contract Talk Troubles
Delta Air Lines' pilots union told its members to 'begin financially
preparing for the future' as midterm contract talks with the company
drag on, the Wall Street Journal reported. Union officials said
they met with management on Thursday for a negotiating session but that
the company's position remained essentially unchanged. The company has
requested a 30 percent wage cut plus changes in work rules to boost
pilot efficiency. The union has countered with a 9 percent wage cut and
cancellation of a raise due this year, plus some work rule changes. In a
letter to rank-and-file pilots, John Malone, a Delta captain and
chairman of the carrier's Air Line Pilots Association unit, said,
'Although optimism is fading, your union remains open to reaching a
mid-contract agreement,' reported the online newspaper.
Bankruptcy Court to Rule in February on Avianca Extension
A U.S. bankruptcy judge postponed until Feb. 10 a decision on whether to
grant Colombian airline Avianca another deadline extension -- this time
until March 30 -- to present a restructuring plan, creditors said on
Thursday, Reuters reported. Colombia's carrier, struggling to keep
itself in the air and a possible acquisition target by Continental
Airlines, had until Jan. 30 to present the plan. It requested the
extension two weeks ago. Last March, Avianca and its U.S. subsidiary
filed for chapter 11 bankruptcy protection in the United States, hurt by
high fuel costs and slack demand stemming from the political and
economic crises in Venezuela and Argentina.
Avianca has a U.S. subsidiary, which allowed it to apply for chapter 11
proceedings to try to renegotiate at least $269 million in debt while
continuing to operate. A source close to Avianca said earlier this week
that Continental Airlines Inc. is negotiating the possible purchase of
the struggling airline, reported the newswire.
Bankruptcy Judge Rejects IRL Bid for CART assets
Tony George's bid to put his main competitor out of business failed
yesterday when a U.S. Bankruptcy Court judge approved the sale of
Championship Auto Racing Teams to a group intent on keeping the series
alive, the Seattle Times reported. His $13.5 million bid for CART
assets was rejected by judge Frank Otte. Otte acknowledged that the
IRL's bid was greater than the $3.2 million offer from the CART owners'
group, Open Wheel Racing Series LLC. But the judge said the IRL offer,
which would involve canceling most of the races on CART's 2004 schedule,
could have resulted in costly litigation from promoters of those events.
Open Wheel, started by CART team owners Paul Gentilozzi, Kevin Kalkoven
and Gerald Forsythe, has agreed to accept contractual responsibilities
for the CART season and run a full schedule, reported the
newspaper.
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