Wednesday PM January 14th, 2009
by: Ed Mayberry, January 14, 2009 9:01:05 pm
Dow Chemical will cut about 500 full-time jobs at its Texas operations facility in Freeport as part of an effort announced last month to control costs amid the economic recession. The Facts newspaper reports the job cuts will be both administrative and plant positions. The Texas operations facility is the world's second largest chemical manufacturing facility. It's located about 60 miles south of Houston. It was not immediately known when the job cuts would be made. One of the largest chemical makers in the world, Dow announced last month it would slash 5,000 full-time jobs by closing 20 plants and selling several businesses. That's about 11 per cent of its work force.
A new study has found that Hurricane Ike damaged nearly half the homes in Harris County and left more than 18,000 uninhabitable. The study by the Harris County Housing Authority finds the small Galveston Bay community of Shoreacres about 30 miles southeast of Houston was hit the hardest. Nearly 60 per cent of the homes there were destroyed or suffered greater than 50 per cent damage when Ike came ashore near Galveston September 13th. The study was based on inspections of 774,000 of the county's 994,000 residential units from September 23rd through November 13th. A team of 200 inspectors detailed the damage to houses, apartments and mobile homes. Homes determined to have major damage, or 51 per cent or more of their value, are considered uninhabitable. The total value of residential property damage in Harris County was $8.2 billion. The monetary value of damaged property in Houston was $4.6 billion. That's higher than in smaller cities because of higher property values. But smaller communities sustained major damage to more of their homes than Houston did.
Governor Rick Perry has repeated his criticism of the federal government for a slow response to housing and other needs since Hurricane Ike. The devastating hurricane struck southeast Texas on September 13th. Perry, after addressing lawmakers on opening day of the legislature, gave a wide-ranging interview to the Associated Press — and the talk turned to Ike. Perry says the state is in a "Catch-22" because it wants to move forward to help Galveston and the University of Texas Medical Branch at Galveston, which had to lay off 3,000 employees. But Texas can't come up with a definite plan until Washington officials say how much they'll contribute. Perry says he thinks legalizing casino gambling in Galveston to help the island's economic recovery — won't happen this legislative session. He says what Galveston needs is immediate help from the federal government.
The Federal Reserve says the economy started the New Year on weaker footing and the outlook appears equally dim. The Fed's survey of business conditions nationwide, collected between late November and January 5th, suggests the economic picture has darkened over the last two months. It shows that recession-shocked Americans retrenched further, forcing retailers to ring up fewer sales and factories to cut back production. The report concludes: "overall economic activity continued to weaken across almost all of the Federal Reserve's districts."
Retail sales plunged far more than expected in December, a record sixth straight monthly decline as consumers were battered by a prolonged recession, a severe credit crisis and soaring job losses. The Commerce Department says retail sales dropped 2.7 per cent last month, more than double the 1.2 per cent decline that Wall Street expected. The weakness in consumer spending has been a prime contributing factor to the economy's current swoon and analysts say they don't see that turning around soon. They predict the current recession, already the longest in a quarter-century, will continue at least until the second half of this year.
Businesses slashed inventories in November by the largest amount in seven years as they scrambled to cope with a record plunge in sales. The Commerce Department says that inventories were reduced by 0.7 per cent in November, even worse than the 0.5 per cent drop analysts expected. It marked the third straight month that businesses have cut their stockpiles, the longest stretch since four straight months of reductions that ended in August 2003. The big drop in inventories in November reflected a record 5.1 per cent drop in total business sales that followed a 3.9 per cent decline in October.
A published report says Citigroup, the original financial supermarket, could soon shrink itself by one-third. The Wall Street Journal reports today that Citi is likely to announce plans next week to shed two consumer-finance units, the bank's private-label credit card business and cut back on trading it does on its own behalf. Citigroup announced it was merging its Smith Barney brokerage into a joint venture with Morgan Stanley. That signaled the end of a decade-long experiment to create one-stop shopping for all manner of financial services. The deal, will give Citigroup $2.7 billion in badly needed cash. Many on wall street believe Citigroup could be headed for an even larger-scale dismantling if the federal government has its way. The government now has a stake in citi thanks to its recent bailout.
It looks like President-elect Barack Obama is a winner in his first major showdown on Capitol Hill. Obama went to the Capitol to deliver a pre-inauguration threat — if lawmakers don't approve the second half of the $700 billion financial rescue package, he'll use his first veto to make sure he gets the money. That, coupled with a promise to refocus the bailout on helping Main Street, seems to have done the trick. Several Democrats say it looks like Congress will ok the cash before the end of the week. Obama also is urging lawmakers to act quickly on the massive economic stimulus measure his aides have been negotiating with Congressional officials. It will blend federal spending with tax cuts, and could reach $1 trillion in size.
President-elect Barack Obama's Democratic allies on Capitol Hill want to use his jobs creation bill to extend a middle class tax cut despite concerns from Obama's transition team that it won't boost the economy. New York Democrat Charles Rangel, Congress' top tax writer, says lawmakers feel strongly about using Obama's economic recovery package to advance the annual fix to the alternative minimum tax now instead of later in the year. It'll cost about $70 billion to fix the AMT, which means other job-creating tax cuts would have to be trimmed. The AMT was designed in 1969 to make sure wealthy taxpayers pay at least some tax. Now it threatens to snag about 20 million taxpayers for whom it was never intended.
There are signs that government efforts to unfreeze the credit markets are working. Companies are selling bonds at a pace not seen since last spring, in a promising turn that could bolster the economy. Companies are also finding it easier to issue commercial paper. Those are the short-term loans necessary for quick access to cash. Data-tracker Dealogic says global sales of new corporate debt jumped to $82 billion last week. That's the highest since $103 billion last may and nearly double the level seen right before the credit crisis intensified in September. The thawing means companies such as Cablevision Holdings Corporation and General Electric can raise money more easily for everything from payrolls to paying down debt. That's an important shift that ultimately could benefit consumers.
President George W. Bush says he's confident that his own personal financial accounts have lost money in the financial meltdown, but won't find out for sure until he leaves office. In an interview with CNN's Larry King, the president said his money is in a blind trust and he last spoke with the trustees eight years ago. Bush says he has "no earthly idea" how much he and First Lady Laura Bush have lost in the market slump, but says he's confident they have lost money. Asked what part of the responsibility for the financial meltdown rests on his shoulders, bush defended his decisions on the financial system rescue plan and bailouts.
The Ukrainian president says Russia is using a gas dispute that has deprived Europe of energy supplies in winter to gain control of Ukraine's gas transit network. Viktor Yushchenko says Russia's gas monopoly Gazprom wants to charge the former Soviet republic an unjustly high price in order to drive it into debt and later acquire a stake in its pipeline network. Visiting Poland, Yushchenko said he will not allow that to happen. Much of Europe is heavily dependent on Russian gas that is shipped primarily through Ukraine. Russia briefly restarted sending gas through Ukraine on Tuesday. Ukraine's gas company Naftogaz did not deliver the gas to Europe, saying Gazprom demanded it use a route that was technically arduous and would force it to halt supplies to a large swath of its own territory. Naftogaz head Oleh Dubina said Gazprom made a similar request Wednesday. He said Naftogaz will not agree to halt supplies to Ukrainian consumers. The politically charged dispute has dramatically lowered supplies to Europe and angered the European Union. Ukraine said Russia deliberately chose a pipeline route that would force Ukraine to cut off domestic users before the gas could reach Europe.
Venezuela's president Hugo Chavez says OPEC could further reduce oil production to boost slumping prices. During a marathon national address, Chavez said Venezuela's "strategy" is to "defend fair prices for oil." The cartel agreed last month to cut production by 2.2 million barrels a day in an effort to boost prices. Chavez says OPEC could cut it by as much as 4 million barrels a day if necessary. Venezuela currently pumps about 2.4 million barrels of oil a day and announced last week it's cutting output by 189,000 barrels a day under the OPEC agreement.
The U.S. Environmental Protection Agency is fining a Shell facility in Puerto Rico more than $1 million for allegedly contaminating surrounding waters. The agency says Shell Chemical Yabucoa discharged excess waste into Santiago Creek and the Caribbean Sea. It says Shell agreed to pay the fine and spend $274,000 on repairing equipment and monitoring waste discharge. The EPA also ordered Shell to build a 1.3 million gallon facility to store contaminated storm water if it restarts petrochemical activities. It shut those down in July. Shell officials did not immediately respond to a request for comment. Royal Dutch Shell bought the facility from Puerto Rico Sun Oil in 2001.
Texas oilman T. Boone Pickens is adding a new wrinkle to his push for U.S. energy independence: monthly updates to remind Americans how much money they're paying for foreign oil. The Dallas billionaire is spending $60 million on a high-profile campaign to boost the use of wind power and natural gas. He says the updates will offer a yardstick for measuring the incoming Obama administration's progress on eliminating Middle East oil imports within a decade. Pickens and environmentalist Robert F. Kennedy, Jr., made the comments during a briefing at the Capitol. They say oil-rich Middle East nations are using billions of U.S. energy dollars to build new schools, roads and airports while America's infrastructure crumbles. Pickens wants to erect wind turbines in the Midwest to generate electricity to replace the 22 per cent of U.S. power produced from natural gas. The natural gas then could be used for transportation. Kennedy backs Pickens' proposal. Texas, California, Iowa, Minnesota and Washington are the top wind-energy producing states, according to the American Wind Energy Association.
An appeals court has ruled in favor of oil producer Anadarko Petroleum in a case that could prevent the Feds from collecting billions in oil and natural gas lease royalties. The 5th U.S. Circuit Court of Appeals upheld a lower court ruling that said the federal government couldn't collect royalties from eight deepwater leases held by Anadarko in the Gulf of Mexico. The leases were obtained between 1996 and 2000 by Kerr-McGee Corporation, which Houston-based Anadarko later acquired. Anadarko says the lawsuit involves more than $150 million in royalties sought by the U.S. Interior Department. The department leases offshore tracts to oil and gas producers and, as owner, stands to collect a percentage of revenue. But the ruling could affect other leases and prohibit the government from collecting royalties from other producers. The Interior Department said it may work with Congress to resolve the issue or appeal the case again.
On-time performance of U.S. airlines, baggage handling and domestic cancellation rates weren't as good in November as they were in October. The U.S. Department of Transportation says they're still improvements over a year earlier. The department also says it's gotten fewer complaints about airline service. As airlines have cut capacity and made other changes, generally they have been able to cut delays and do a better job handling bags. But some have struggled compared to their peers. The DOT's Bureau of Transportation statistics says the 19 reporting carriers recorded an overall on-time arrival rate of 83.3 per cent in November. That's an improvement over November 2007's 80 per cent rate but below the rate of 86 per cent recorded in October 2008. Dallas-based discount carrier Southwest Airlines had the second-highest November on-time arrival rate and the highest among discount carriers at 87.2 per cent. Year-to-date from January 2008 through November 2008, Fort Worth-based American Airlines is last among the 19 reporting airlines in on-time performance. American's performance improved significantly in the second half of 2008, but its year-to-date numbers were pulled down by its on-time performance in the first few months of the year. Houston-based Continental Airlines has an overall on-time arrival rate of 80.73.
Taxpayers who want to file their federal income tax returns electronically will have more options this year. The IRS says its free file program will be available to "virtually everyone." It will begin accepting electronically-filed federal returns on Friday. Taxpayers are being encouraged to file electronically, so they can get refunds more quickly through direct deposit. Last year, nearly 60 per cent of all federal income tax returns were filed electronically, and the IRS is hoping for more than that this filing season. More information can be found online about the free file program on the IRS Web site.
Dallas-based Blockbuster is announcing an alliance it hopes will help it catch up to rival Netflix. Blockbuster is adopting Cinemanow's video delivery system over the Internet. The alliance will provide the video rental chain with another avenue for reaching consumers who want to rent and buy movies without traveling to a store. Blockbuster Chairman Jim Keyes says the move gives the company a significant leap forward in its consumer offerings for digital delivery. By putting Blockbuster's name on Cinemanow's technology platform, Keyes believes consumers will become more interested in the service and thereby encourage consumer electronics manufacturers to design devices that will make it easier to connect the service to televisions. Cinemanow has been around for the past decade, but never gained the name recognition of Blockbuster--still the largest U.S. video chain even though it has been losing money for years. Netflix has diversified beyond its DVD-by-mail service by piping more than 12,000 movies and TV shows over high-speed Internet connections.
A nearly 30-hour Screen Actors Guild board meeting has exposed a cavernous divide between a faction which supports a strike vote and one that doesn't. In the end, SAG's president says the union will press on with plans for the vote, but needs to reassess when to send out ballots. During the meeting, board members tried but failed to fire the guild's lead negotiator with Hollywood studios, Doug Allen, who supports a strike vote. The no-strike faction has a majority on the board but delays from the other side resulted in no vote being taken to remove Allen, find a replacement, and try to kick-start stalled talks. Actors in the 120,000-member guild have been working without a contract on movies and prime-time TV shows since June 30th. An actors' strike could threaten this year's Oscars, and shut down lots of other projects.
The University of California, Davis is getting a $2.5 million endowment from Chevron for a chair to head energy efficiency research. The new Energy Efficiency Center director will oversee research on energy efficiency technologies in buildings, agriculture and transportation. University Chancellor Larry Vanderhoef says the new director will be tasked with bridging academic research with real-world applications. The Chevron endowment is the latest gift by an oil company to a California University to study energy issues. The University of California, Berkeley in 2007 received a $500 million grant from another major oil company, BP. That sparked a debate on campus about the role of corporations in academic research.