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January 11, 2005
Bush Pension Plan Raises Premiums, Changes Formula
Labor Secretary Chao yesterday unveiled the Bush
administration’s plan for overhauling rules that govern private
pension plans, a package that includes premium hikes for
companies’ pension insurance and a contentious formula for
calculating companies’ contributions, CongressDaily
reported. Chao said the changes, which will require congressional
action, are needed to bring companies’ pension contributions more
in line with pending payouts. The changes require new pension promises
to be immediately funded and companies to make up shortfalls within a
“reasonable” amount of time. Additionally, insurance
premiums will be raised to account for inflation. Chao said the changes
are intended to simplify rules and reduce massive underfunding. The
changes would affect defined benefit pension plans, which specify
payouts to retirees.
Meanwhile, Congress is beginning work to revamp pension law. To ready
for the coming debate, congressional staff from both chambers and
parties, along with administration staffers and representatives of
business and labor groups, met this weekend for a retreat to discuss
pension problems and potential solutions. House Education and the
Workforce Chairman John Boehner (R–Ohio), who is readying a
pension bill, said he plans to review the administration proposal.
“It’s clear that today’s outdated pension laws have
failed to protect the interests of workers, retirees and taxpayers, and
it’s essential that Congress take action in the coming months to
reform and strengthen the defined benefit pension system on behalf of
workers and employers,” he said in a statement yesterday, the
newswire reported.
Business Groups Say Specter’s Asbestos Draft Lacks
‘Certainty’
Industry stakeholders in the debate over asbestos legislation are
targeting one element of the draft bill that Senate Judiciary Chairman
Arlen Specter (R–Pa.) released on Friday they say could result in
continued court claims by asbestos victims, CongressDaily
reported. In seeking a solution to asbestos litigation, industry has
argued for a plan that would take the issue out of the court system.
Business groups have said they cannot support legislation that does not
end asbestos tort cases. Those concerns will be discussed today at a
hearing before the Judiciary Committee. Specter’s
“discussion draft” includes provisions that would allow
victims to pursue court cases if the proposed trust fund does not have
enough money to pay their awards.
US Air Seen Close to Deal for Extended Financing
With big labor savings assured, bankrupt US Airways is expected to
secure new access to its only source of ready cash, an official with the
government agency backing the airline’s financing said yesterday,
Reuters reported. The money is crucial for the airline to operate as it
tries to restructure during its second trip through bankruptcy in two
years. US Airways hopes to emerge from chapter 11 protection by June
30.
WestPoint Stevens to Cut 2,465 Jobs, Close 5 Plants
WestPoint Stevens Inc., a textile maker operating under bankruptcy
protection, yesterday said it will lay off 2,465 employees, or 21
percent of its workforce, and close five of its 24 U.S. plants, Reuters
reported. The cutbacks relate directly to the recent end of U.S. textile
quotas on imports from low-wage countries, the West Point,
Ga.–based company said. It said it will source a
“significant amount” of production in other countries, and
will also move some production to other plants in the United States.
Former AOL, PurchasePro Executives Indicted
A federal grand jury yesterday indicted six former executives of Time
Warner Inc.’s America Online unit and former business partner
PurchasePro.com on charges of conspiracy to inflate revenues, Reuters
reported. The six men, including PurchasePro’s former CEO Charles
Johnson, were accused of conspiracy, securities fraud, obstruction of
justice and wire fraud. Time Warner agreed last month to pay $510
million to resolve Justice Department and Securities and Exchange
Commission charges that AOL had inflated revenue figures.
Ultimate Sales Fall; May File for Chapter 11
Ultimate Electronics Inc., yesterday said its sales so far in January
remain weak and it could consider filing for bankruptcy protection,
Reuters reported. Ultimate Electronics said December sales from its
stores open at least a year, or same-store sales fell by about 18
percent and selling so far this month continues to “show an
increasingly negative trend.” The retailer faces escalating
competition from rivals like Best Buy Co. Inc. and Wal-Mart Stores Inc.,
the newswire reported.
Independence Air Misses Interest Payment
Independence Air has missed an interest payment on some of its bonds,
according to a source whose firm owns the bonds, prompting market
speculation that the company is close to filing for bankruptcy
protection, Reuters reported. Talk that Independence Air or its
corporate parent FLYi Inc. may soon seek bankruptcy protection pulled
Bombardier Inc.’s bond prices lower yesterday, several market
participants said, the newswire reported. Independence Air is a
Bombardier customer.
UAL Gets Some Breathing Room After Labor Deals
Tentative labor deals reached by bankrupt UAL Corp. with its flight
attendants and mechanics on Friday and Saturday are key steps toward
achieving the $725 million in annual savings the airline needs to exit
bankruptcy, UAL’s CFO said yesterday, Reuters reported. However,
the parent of United Airlines still needs to renegotiate a cost-cutting
deal with its pilots after a federal bankruptcy judge sent both sides
back to the bargaining table on Friday. United’s new labor
agreements pre-empted a scheduled trial in which the carrier had sought
court permission to terminate the collective bargaining deals of UAL
labor unions with which it had no agreement, the newswire reported.
Judge Resets Date for HealthSouth Trial
A judge delayed the corporate fraud trial of Richard M. Scrushy, the
former CEO of HealthSouth, by one week on Monday to give his lawyers
additional time to sort through potential evidence recently turned over
by prosecutors, the Associated Press reported. Judge Karon O. Bowdre of
United States District Court in Birmingham said she reluctantly agreed
to the request “for good cause shown and in the interest of
justice.” Judge Bowdre rescheduled opening statements for Jan.
25.