Friday PM May 29th, 2009
by: Ed Mayberry, May 29, 2009 4:05:29 pm
A top Conn's official says the Beaumont-based appliance retailer will continue to work closely with state officials to resolve consumer complaints about its warranties. The statement from Conn's Vice President Bill Nylin comes in response to a consumer lawsuit Texas Attorney General Greg Abbott filed in Houston against the chain. The state accuses Conn's of not honoring product warranties, misleading customers about its extended warranties, false advertising and other deceptive sales practices. Nylin says Conn's has been working closely with Abbott's office for three months and has acted in good faith to resolve the complaints. He points out that Conn's has the highest possible rating with the Better Business Bureau. However, he says improvements have been made at its service center and call center.
The government says the economy sank at a 5.7 per cent pace as the brute force of the recession carried over into the start of the year. However, many analysts believe activity isn't shrinking nearly as much now as the downturn flashes signs of letting up. The updated reading shows the economy's contraction from January to March was slightly less deep than the 6.1 per cent annualized decline first estimated last month. But the new reading was a tad worse than the 5.5 per cent annualized drop economists were forecasting.
The government says thousands of first-time homebuyers will be able to get short-term loans so they can quickly make use of a new $8,000 tax credit. The Federal Housing Administration on Friday released details of a plan in which borrowers who use FHA loans can receive the credit before they complete their taxes. Borrowers will still have to come up with the FHA's required 3.5 per cent down payment, unless they work through a state or local housing program. But officials say the money can still be used for closing costs or a larger down payment. The tax credit was included in the economic stimulus package signed by President Barack Obama in February.
Houstonians are paying an average of $22.8 per gallon for unleaded gasoline, according to AAA. The average retail price for gasoline jumped more than six cents last week in Texas to almost $2.33 per gallon. The national average is at $2.45, about nine cents higher than last week.
Oil and gasoline prices continue their upward climb. In the past six months, they've doubled — largely based on optimism that a stronger economy will drive demand higher. Wholesale gasoline prices normally rise during this time of the year. They're now up by 140 per cent since Christmas Eve. Retail prices have reached a national average of about $2.47 a gallon. The chief oil analyst at Oil Price Information Service, Tom Kloza, says the run-up in gasoline prices shouldn't last. But then again, he says he never would have predicted prices would be so high by now.
Small business owners can learn about credit, access to financing and other topics needed to survive and prosper during the current economy at a weekend economic forum. A seminar designed to help entrepreneurs grow their small businesses is regularly sponsored by the Small Business Alliance, which includes Capital One, SCORE, Houston Community College, the Black MBA Association and the Hispanic MBA Society. Laurie Vignaud is with Capital One.“We’re very fortunate to have a number of resources available — non-profit partners and entities that we’ve worked with over the years. We’re able to bring them together to provide the information to our constituents who are all small business owners and the families and individuals that we serve around our banking institutions. This started off, believe it or not, as workshops that we did once a quarter, and now we’re doing them once a month. It’s going to be held tomorrow from nine to 2 p.m. Registration begins at 8:30 and it’s going to be at the Houston Community College, 3100 Main Street, and it’s on the second floor auditorium.”
Sessions are held in Spanish and English.
It'll take at least one more day for a judge to determine whether it's in the best interests of Chrysler and its stakeholders to sell most of the company to Italy's Fiat Group. Chrysler's departing chairman and chief executive, Robert Nardelli, testified in court that he expects the required U.S. regulatory approvals for the sale of the bulk of Chrysler's assets to a Fiat-led group to be in place, with international approvals to come later. But after a nearly 13-hour marathon session, the hearing was adjourned shortly before midnight, and it remains unclear when testimony and arguments related to the sale will wrap up and allow U.S. Judge Arthur Gonzalez to rule. Even if Gonzalez does approve the sale, it's likely that attorneys representing three Indiana state pension and construction funds, which hold Chrysler debt and are aggressively opposing the sale, will appeal the decision. That would force the company to postpone the closing. Fiat could back out if the deal doesn't wrap up by June 15th.
Members of the United Auto Workers have ratified a package of concessions designed to reduce General Motors' labor costs. UAW President Ron Gettelfinger said that 74 per cent of GM's 54,000 U.S. production and skilled-trade workers voted in favor of the deal. Bankruptcy experts say having the labor agreement in place will help move the process through court more quickly. The contract freezes wages, ends bonuses, eliminates noncompetitive work rules and ends the possibility of a strike until the next contract expires in 2015. It also gives a union-run retiree health care trust 17.5 per cent ownership of a post-bankruptcy protection GM, with a warrant to buy another 2.5 per cent.
General Motors is confirming that it plans to build a new small car in the U.S. at an idled factory. The company said that the retooled factory will be able to build 160,000 small and compact cars per year. GM says it hasn't identified which plant it will use. GM had said in documents submitted to Congress earlier this year that it planned to import small cars from China. But United Auto Workers President Ron Gettelfinger told the Associated Press that GM agreed not to import Chinese-made subcompact cars to the U.S. as part of its concession deal with the union. GM is expected to file for bankruptcy protection Monday, when it also will identify 14 factories it plans to close as part of its restructuring.
With General Motors expected to file for bankruptcy protection as early as Monday, the company is trying to secure whatever cost concessions it can beforehand. Experts say the better the shape it's in before seeking Chapter 11, the leaner and stronger it can be when emerging. On Thursday, a bloc of GM's biggest bondholders agreed to a sweetened deal to wipe out $27 billion of the automaker's unsecured debt in exchange for company stock. And an announcement is expected on the fate of the Hummer brand, while talks are scheduled to resume in Germany about the future of GM's European Opel unit. GM's board will be meeting to decide what the automaker will do when its government restructuring deadline arrives Monday. Workers won't know until Monday which 14 plants GM will close in shedding 21,000 more jobs. As things appear to be going, the U.S. Treasury--which already has loaned GM $19.4 billion--would get 72.5 per cent of the new company's stock. And it would provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection.
The White House says President Barack Obama thinks progress is being made toward restructuring General Motors and putting it on a path to being a viable auto company. White House Press Secretary Robert Gibbs says: “we have seen encouraging signs.” But he refused to speculate whether GM would be able to avoid bankruptcy.
The ranking Republican on the Senate Banking Committee says he believes the federal government's key role in a likely bankruptcy filing by GM puts Washington “on the road to socialism.” Senator Richard Shelby said the financially beleaguered GM should have filed a Chapter 11 bankruptcy six months ago. And he said the U.S. government's stake in the company now facing a restructuring-or-bankruptcy deadline in the next few days is entirely too large. Appearing Friday on CBS's The Early Show, the Alabama Republican said, “What I worry about is the government is going to have over 50 per cent invested in GM. It's basically going to be a government-owned, government-run company.” The Treasury has loaned GM $19.4 billion and would provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection.
The Labor Department is suspending a regulation adopted shortly before President George W. Bush left office that would have made it easier for farmers to bring in foreign workers. Many immigration and labor advocacy groups opposed the rules for lowering wages and eliminating some protections for temporary farm workers. The rule affects the H-2A guest worker program, which lets employers hire foreign workers if they can't first find American workers. Farm owners supported Bush administration changes, saying they eliminated red tape that made it harder to bring in foreign workers to help harvest crops. Labor Secretary Hilda Solis had proposed suspending the rule in March. The suspension restores old program regulations while officials craft new rules.
The Federal Reserve says banks reduced borrowing from its emergency lending program, while investment firms took a pass for the second week in a row, a sign some credit stresses may be easing. The Fed says commercial banks averaged $38.153 billion in daily borrowing over the week that ended Wednesday. That was down slightly from $38.155 billion in the week ending May 20th. Investment firms didn't draw any loans over the past week from the Fed program. The identities of the financial institutions are not released. They pay just 0.50 per cent in interest for the emergency loans.
President Barack Obama says cyber threats are among the most serious economic and military dangers the nation faces. Obama says he is setting up a White House office to protect the security of the nation's computer networks and he plans to appoint a cyber czar who will report to the National Security Council and the National Economic Council. Obama says the nation isn't as prepared as it should be to handle the millions of cyber attacks, ranging from nuisance hacking to possible cyber spying by other nations, such as China. He calls the decision a “transformational moment.” But, Obama is assuring companies the government won't dictate how private industry should tighten its network defenses.
One of the world's largest magazine publishers appears to be having second thoughts about giving away most of its articles on the Internet. Time Warner CEO Jeffrey Bewkes told an investor conference that he doesn't think it makes much sense for publishers to provide their content without a way to recover the production costs. But Bewkes didn't say whether Time Warner's magazine group, which includes Time, People and Sports Illustrated, is considering charging fees for access to its Web sites. Many publishers, particularly in the newspaper industry, are drawing up plans to charge internet readers to help offset a steep decline in ad revenue. Ad revenue in Time Warner's publishing division plunged 30 per cent in the first quarter.
Southwest Airlines says it will let passengers carry small dogs and cats onboard for a $75 fee each way. The airline also will start charging a fee for unaccompanied minors, and it's raising its fee for checking a third piece of luggage or an overweight bag. The new fees will begin June 17th. Chief Executive Gary Kelly said the new fees are “a charge for items that are truly an extra service.”
The number of rigs actively exploring for oil and natural gas in the United States fell by one this week to 899—down more than half from a year ago. Of the rigs running nationwide, 703 were exploring for natural gas and 187 for oil, Houston-based Baker Hughes reported. Nine were listed as miscellaneous. Texas lost one. A year ago, the rig count stood at 1,877. The U.S. count is down 56 per cent since the end of August as weak energy demand has hampered oilfield activity. Oil prices peaked at almost $150 a barrel in July before plunging. Light, sweet crude rose to about $65 a barrel in trading Friday on the New York Mercantile Exchange. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.