Tuesday PM June 2nd, 2009
by: Ed Mayberry, June 2, 2009 6:06:35 pm
An energy company says the two Americans on board missing Air France Flight 447 were a geologist and his wife. Devon Energy confirmed that Michael Harris and his wife, Anne, were on the airliner that disappeared over the Atlantic Ocean on a flight from Brazil to Paris with 228 people on board. Company spokesman Chip Minty says Michael Harris was a geologist in Devon's Rio de Janeiro office. Harris had moved to Brazil from Houston in July. Anne Harris' sister, Mary Miley of Lafayette, tells the Louisiana newspaper The Advertiser that Anne Harris was originally from Lafayette and the couple had lived there until 2004. She said they had been married for 16 years.
Pending home sales in April posted the biggest monthly jump in nearly eight years, a sign that home sales are finally coming to life after a long and painful slump. The National Association of Realtors says its seasonally adjusted index of sales contracts signed in April rose 6.7 per cent to 90.3. Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. It was the biggest monthly jump since October 2001. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales. The index was 3.2 per cent above last year's levels and has risen for three straight months after hitting a record low in January.
A bankruptcy judge says General Motors can have immediate access to $15 billion in government financing as it attempts to quickly restructure under court protection. U.S. Judge Robert Gerber gave interim approval to the Detroit-based automaker's use of a total of $33.3 billion in financing, with the $15 billion available for use over the next three weeks. He'll rule on final approval of the financing on June 25th. Gerber also set GM's sale hearing for June 30th. In its bankruptcy filing, GM said it has $172.81 billion in debt and $82.29 billion in assets.
A person briefed on the deal says General Motors has a tentative agreement to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery of China. GM announced that it has a memorandum of understanding to sell the brand of rugged SUVs. The announcement comes a day after the U.S. automaker filed for bankruptcy protection with hopes that it will transform its most profitable assets into a new company within just 30 days. GM did not name the proposed buyer or the price, but says the sale will likely save more than 3,000 U.S. jobs in manufacturing, engineering and at various Hummer dealerships. Critics had seized on the rugged but fuel-inefficient Hummer as a symbol of excess as GM's financial troubles grew and gas prices rose. A sale of the Hummer brand had been expected. Chief Executive Fritz Henderson had said in April that the automaker was expecting final bids from three potential buyers within the month. GM also says it has 16 buyers interested in Saturn and three more eyeing Saab.
General Motors is closing 17 plants around the nation, but the Arlington facility is unaffected, where 2,500 workers assemble large SUVs. Local United Auto Workers President J.R. Flores says it’s a sad time for GM.
“It’s a double-edged sword--kind of bittersweet--that we were not on the list to be closed. But we have our employees come from nearly every facility across the country, so they have family and friends in all those facilities that are closing.”
The government ownership of a majority of General Motors raises new questions about capitalism, politics and the economy. Ira Milstein, a senior partner at GM's bankruptcy law firm, says it's uncharted territory. Milstein says there's no book of instructions on how to run a government-owned private company. Washington says it will stay out of day-to-day auto decisions. But bankruptcy lawyer Jerry Reisman, who's not involved in the case, wonders what happens if management wants to buy parts overseas. Reisman says that could put GM's board in conflict with its government owners. GM's CEO Fritz Henderson says federal ownership will last, in his words, “years not months.” But he predicts GM will rocket through the bankruptcy process.
Ford says its sales fell 24 per cent in May from a year ago, but sales rose 20 per cent from April as the automaker continues to gain market share from its U.S. competitors now under bankruptcy protection. The Dearborn, Michigan, automaker says it sold 161,197 cars and light trucks. Sales of the Ford Fusion rose 9.4 per cent as the company began selling new 2010 models of the midsize sedan along with a hybrid version. Ford says its better cars are driving sales and its increasing market share, not the bankruptcy protection filings of General Motors and Chrysler. Automakers are facing the worst sales climate in 27 years. The companies and analysts are expecting are a rebound as the consumer confidence improves, but there's concern that heavy incentives to are inflating sales.
Chryslersays its U.S. sales fell 47 per cent in May, but the company says being under bankruptcy protection did little to deter customers from purchasing its vehicles. Auburn Hills-based Chrysler said it sold 79,010 cars and light trucks last month. The company says its sales were pulled lower because it didn't sell any cars in may to fleet buyers like rental car companies, but its retail sales to individual buyers were the best they've been all year. With 789 dealers set to stop selling the company's cars next week, many of those purchases were fueled by deep discounts. Chrysler had the highest average incentive among automakers last month--$4,159 per vehicle, according to Edmunds.com. GM’s U.S. sales in May fell 30 per cent from a year ago, but they improved 11 per cent from April.
Houston-based O’Connor & Associates calls the lawsuit and temporary restraining order filed against it by the Texas Attorney General’s Office “ludicrous.” Texas AG Greg Abbott is suing O’Connor based on allegations it violated the Texas Deceptive Trade Practices Act and the Texas Property Tax Code. The lawsuit alleges that O’Connor filed thousands of tax protests without taxpayers’ consent. The suit says the firm failed to appear at hearings and submitted fraudulent documents. O’Connor representes homeowners in attempts to reduce property taxes. A spokesperson for the firm told the Houston Chronicle that O’Connor is an aggressive advocate for its clients, and by doing so “has made some powerful enemies.”
A former Enron broadband executive who pleaded guilty instead of facing a third trial will be sentenced this fall by U.S. District Judge Vanessa Gilmore. Kevin Howard pleaded guilty on Monday to one count of falsifying books and records as part of a plea agreement, and will serve four to 12 months of probation or home confinement--or a combination. Jury selection in his second retrial had been scheduled to begin on Monday. Howard, who had been the unit's finance chief, and four other broadband executives were first tried in 2005. Their trial ended in a hung jury. Howard and former in-house accountant Michael Krautz were retried in 2006. Howard was convicted while Krautz was acquitted. In January 2007, Judge Gilmore in Houston threw out Howard's convictions, ruling prosecutors had used a faulty legal theory. A federal appeals court in February 2008 upheld her decision.
Houston-based real estate services consultant Portfolio Property Advisors has entered into a joint venture with two California firms to create Next Wave Advisors. The new company is designed to assist the Federal Deposit Insurance Corporation with complex issues associated with the agency’s takeover and liquidation of hundreds of banks over the next several years. The FDIC says there currently are some 252 problem institutions. Next Wave is a federally-certified minority and woman-owned business.
The Texas Senate has signed off on a plan to restructure the Texas Windstorm Insurance Association that covers coastal property in case of a hurricane. The Senate voted unanimously to approve a House-Senate compromise for TWIA, sending it on to the governor. House members approved the plan Sunday. The plan relies in large part on ten-year bonding to replenish the windstorm account after a major hurricane. The state-chartered windstorm association is the only property insurer for residents and businesses in 14 coastal counties and part of Harris County. It was depleted after last year's Hurricanes Dolly and Ike slammed the coast, resulting in large numbers of claims.
Treasury Secretary Timothy Geithner says the Obama administration is committed to doing everything possible to maintain investor confidence in U.S. financial markets. Geithner, wrapping up two days of talks with Chinese leaders, says in an interview on Chinese state television that he thinks Chinese officials have a lot of confidence in the strength and resilience of the U.S. economy. He says the Chinese government understands that the steps the Obama administration has taken to bolster the economy will cause the U.S. budget deficit to rise temporarily. But he says the administration is committed to getting control of the deficits over time. China is the largest investor in U.S. Treasury securities.
A White House report concludes that fixing the economy goes hand-in-hand with overhauling the U.S. health care system. The report by the White House Council of Economic Advisers says health care costs will rise to 34 per cent of the gross domestic product in 30 years if left unchecked. Costs are now about 18 per cent of GDP. Critics were quick to dismiss the report. House Minority Leader John Boehner says President Barack Obama's administration hasn't offered a credible plan. Obama wants legislation that would hold down costs, guarantee choice and extend coverage to the 50 million Americans who don't have it now.
A key Senate chairman says he hopes to convince President Obama that taxing some employer-provided health benefits will help control escalating health care costs. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, faces a hard sell. During his campaign for president, Obama ruled out taxing health benefits provided by employers. Baucus says the tax-free benefit packages Americans now enjoy are a big factor in the high costs of the country's health care system, because they provide workers free or low-cost access to too many health care services.
Microsoft says Windows 7, the next version of its computer operating software, will go on sale October 22nd. Windows 7, which replaces the much-complained-about Windows Vista, will be available on new PCs. Microsoft, the world's largest software maker, will also sell versions that people can install on existing PCs. Upgrades will be free for people who buy a new Windows Vista computer shortly before Windows 7 arrives, though Microsoft did not say when the upgrade program begins. Microsoft also didn't say how much Windows 7 will cost. The availability of Windows 7 in time for the holidays could boost PC sales, which have slowed in the recession.
Southwest Airlines, which has posed stewardesses in hot pants and the CEO with a bag over his head to sell tickets, is launching a new campaign that tells consumers to get over the recession and fly again. One spot ends with the narrator saying, “we don't fly around tough times. How about you?” The ads feature the tagline, “Grab your bag. It's on.” Created by Southwest's longtime advertising agency, GSD&M in Austin, the new spots lack the punch lines and laugh-out-loud humor of past campaigns. Officials at Dallas-based Southwest say that's because they're intended for a more sober time. Dave Ridley, Southwest's senior vice president of marketing, says “it's an image campaign to reflect what we hope is the view of the American public that it's kind of time to put the challenges and difficulties of the past year behind and get going.'' The “it's on” spots will replace a yearlong campaign that poked other airlines for charging fees to check baggage. Last week, Southwest itself unveiled new fees to take pets on board and to let unaccompanied minors fly. Ridley said there was no connection between those charges and the end of the “no hidden fees” ad campaign.