Wednesday PM August 25th, 2010
August 25, 2010 4:08:00 pm
A BP vice president says critical time was wasted in the hours after the Gulf of Mexico well explosion trying to learn what changes had been made to the blowout preventer. BP's Harry Thierens told a panel of federal investigators that as attempts were being made to shut the well with the blowout preventer, it became clear rig-owner Transocean had made changes to the device's locking mechanism. Thierens says it took between 12 and 24 hours to get the right drawings of the changes. In the end, the device meant to prevent oil from leaking from the blown-out well failed. A Transocean employee earlier told the panel that bonuses were calculated on a rig's "down time." Transocean could lose as much as a half-million dollars a day in rig rental fees if drilling had to be stopped for repairs. The joint U.S. Coast Guard and Interior Department panel is working with the FBI to assess whether any criminal charges should be brought as a result of the worst offshore oil spill in U.S. history. BP's two top officials on the Deepwater Horizon drilling rig and a drilling engineer have refused to testify in the hearings, invoking their Fifth Amendment right against self-incrimination.
The head of the agency overseeing offshore drilling at the time of the oil spill says she deeply regrets that the accident occurred when she was in charge. The comments are the first from Elizabeth Birnbaum since she resigned under pressure from her position in May. She headed the Minerals Management service for ten months, and was replaced by a former federal prosecutor, Michael R. Brownwich in June. Birnbaum also told the panel that she supported the Obama administration's decision to expand offshore drilling. But when asked if the idea for a moratorium on deepwater drilling originated with her agency, she said that decision was not hers.
Sales of new homes dropped sharply last month to the slowest pace on record, the latest sign that the economic recovery is fading. The Commerce Department says new home sales fell 12.4 percent in July from a month earlier to a seasonally adjusted annual sales pace of 276,600. That was the slowest pace on records dating back to 1963. Economists surveyed by Thomson Reuters had expected a pace of 330,000. June's sales figures were revised downward to an annual pace of 315,000. May's figures were revised upward and are now the second-slowest pace on record. The median sales price in July was $204,000. That was down 4.8 percent from a year earlier and down 6 percent from June.
A trade group says mortgage applications rose 4.9 percent last week as more borrowers refinanced at the lowest rates in decades. The Mortgage Bankers Association said the gain was fueled by a 5.7 percent increase in refinancing applications. The number of loans taken out to purchase homes edged up by less than one percent. The numbers are adjusted for seasonal factors. While refinancing is at its highest level since May 2009, low mortgage rates have done little to boost home sales, which have been hurt by high unemployment, slow job growth and strict credit standards. Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.
Orders to U.S. factories for big-ticket manufactured goods increased slightly in July, but businesses spent less as the economic recovery lost momentum. The Commerce Department says demand for durable goods rose 0.3 percent last month. The overall increase was driven by a 75.9 percent increase in orders for commercial airplanes. Without the volatile transportation sector, orders dropped 3.8 percent--the steepest decline since January. Businesses spent less on equipment and machines. Orders for capital goods were down 8.0 percent. Machinery and computers were especially hard-hit. High unemployment and the end of government stimulus programs are slowing the recovery.
The amount consumers owed on their credit cards in the second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy. The credit reporting agency Transunion says the average combined debt for bank-issued credit cards--like those with a Mastercard or Visa logo--fell to $4,951 in the three months ended June 30th. That's down more than 13 percent from $5,719 in the same period a year ago. Transunion says it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.
Mechanics at American Airlines voted nearly 2-to-1 to reject a contract offer from the company and authorized their union to take actions including calling a strike. After votes were counted, the Transport Workers Union said the contract offer by American didn't make up for wage cuts that employees accepted in 2003. An American Airlines spokeswoman said the proposal included “immediate financial gains,” more vacation days, holidays and sick time for employees. The mechanics and stock clerks will ask the National Mediation Board to declare negotiations deadlocked and permit them to go on strike after 30 days. But it's not clear what will happen next. The board has previously ordered the union and American to keep negotiating, and could do so again. Also, federal law gives the president power to block a strike by airline employees.
Travel club AAA says more Americans will take trips over the Labor Day weekend than a year ago. The organization says it expects 34.4 million people to travel at least 50 miles from home between Thursday September 2nd and Monday September 6th. That's up nearly ten percent from 2009. The survey predicts most people will travel by car. The average distance will be about 635 miles and median spending is estimated at $697, up slightly from a year ago.
The chairman of the Joint Chiefs of Staff says business leaders need to take a chance on veterans returning from the wars in Iraq and Afghanistan and offer them jobs and mentorship. Admiral Mike Mullen told the executives' club of Chicago on Wednesday that the unemployment rate for veterans is 11 percent. The national average is 9.5 percent. He also says countless veterans from current conflicts remain homeless. As combat operations end in Iraq, troops will spend more time at home than they have in the recent past. Mullen called on the business leaders to help veterans, many of whom are in their 20s, transition back to civilian life. He said the military also is placing a renewed focus on their post-deployment needs.
Complaints of engine stalling on Toyota Corolla sedans and Matrix hatchbacks have caught the attention of U.S. safety regulators. They're stepping up their investigation but government officials stopped short of announcing a recall. The National Highway Traffic Safety Administration is looking at two possible causes: improper coating on circuit boards and a crack in the surface of a glass coating. Both could have happened during production of the cars. The new probe, called an engineering analysis, covers 1.8 million Corolla and Matrix cars from model years 2005 to 2007. NHTSA said it has received 163 complaints of stalling engines in the cars as of last week. A problem with the Corolla, one of Toyota's top-selling models, would further embarrass the Japanese automaker, which has long prided itself on its quality controls.
Federal regulators are moving toward making it easier for shareholders to nominate directors of public companies, a change sought by investor advocates that is already sparking protest from the nation's biggest business lobby. The action expected from the Securities and Exchange Commission will allow groups that own at least three percent of a company's stock to put their nominees for board seats on the annual proxy ballot sent to all shareholders. SEC Chairman Mary Schapiro says the change is “a matter of fairness and accountability.” But the U.S. Chamber of Commerce's president called it “a giant step backwards for average investors” and said the organization will fight it “using every method available.”
Dell says its Aero smart phone is now on sale in the U.S. for $99 with a two-year AT&T contract. Dell has been selling similar phones in China and Brazil since late last year, and has been promising a U.S. version since January. Dell has been looking for ways to diversify its business as profit margins on traditional PCs have grown thinner. Dell also wants to stay relevant as more everyday computing tasks get done on smart phones instead of desktops and laptops. The Dell Aero uses an older version of Google's Android operating system than many competing phones now on the market.
U.S. safety officials have opened a preliminary investigation into three million Jeep Grand Cherokees. At issue are reports that problems with gas tanks could cause fires in some crashes. The probe by the National Highway Traffic Safety Administration is the first step in determining whether a recall of the popular Chrysler-made SUV is necessary. The investigation covers Grand Cherokees in model years 1993 to 2004. An advocacy group, the Center for Auto Safety, had asked for a review on whether the gas tank's position could cause fuel to spill if the SUV were struck from behind. The group also said that the neck of the fuel tank could tear off in crashes.
Ad sales for NFL games on CBS have recovered so strongly that the network is on pace to bring in record revenue this season. A CBS executive vice president says signs of the recession have all but disappeared--at least when it comes to advertising during pro football games. He said at the network's NFL media day that “the market is extraordinarily strong.” The president of CBS Sports says NFL ratings have proven to be far more stable and attractive than other programming. He says some of the most significant growth has come from automotive, telecommunications and insurance companies.
Royal Dutch Shell says it has signed a $12 billion joint venture agreement with Cosan of Brazil to produce and distribute ethanol from sugar cane. The companies say in a joint statement the binding agreement will create one of the largest ethanol producers for industry and transportation in brazil, and will explore a global market. Cosan will contribute its existing production capacity of two billion liters. Shell's contribution will be $1.6 billion in cash and its equity in Iogen Energy and Codexis, which research biofuel technology. Both would put their Brazilian retail sites into the distribution network--a total of nearly 4,500 outlets. The deal follows a nonbinding agreement in February and requires regulatory approval.