Thursday AM May 17th, 2007
by: Ed Mayberry, May 17, 2007 12:05:00 am
Even though the price of gasoline is up over $3 a gallon and closing in on $4-a-gallon in places, government figures indicate we're really not driving any less. Demand for gasoline is only just starting to level off, even though prices have soared 43 percent since January. And the worst may not be over. The average U.S. household is already spending $1,000 more per year on gasoline than it did five years ago. That's according to consumer groups testifying before a House Judiciary Committee task force. Experts say most Americans are locked into their driving habits and really can't buy less gas when prices rise. So they cut back elsewhere. Wal-Mart says its earnings in the current quarter will fall short of Wall Street expectations, in part because of higher gas prices.
Construction of new homes managed a small gain last month. At the same time, building permits, a gauge of future construction, had the biggest decline in 17 years. The Commerce Department says housing starts rose 2.5 percent to a seasonally adjusted annual rate of more than 1.5 million--better than expected. Builders reduced their applications for permits by 8.9 percent. That's the biggest monthly drop for permits since early 1990, when housing was also in a downturn.
The Federal Reserve says that industrial production rose seven-tenths of one percent last month. It is a stronger-than-expected showing, reflecting a rebound in manufacturing and a jump in utility output. Industry was operating at 81.6 percent of capacity, a rise of four-tenths of one percent.
Continental Airlines was one of only three major U.S. airlines to add workers in March, according to a report in the Houston Business Journal from the Bureau of Transportation Statistics. Dallas-based Southwest Airlines added 1,600 workers or five percent to give it the biggest hiring increase of any U.S. airline, bringing its work force to 33,000.
Railroad operator Burlington Northern Santa Fe has furloughed several hundred workers due to slower demand to ship freight. Pat Hiatte with Fort Worth-based BNSF says more than 400 workers are drawing health benefits and partial pay while they off the job. Another 30 were furloughed with no pay. He says the workers will be recalled “as soon as business levels allow.'' Burlington Northern had more than 41,000 employees at the end of March. The reduced pay and continued health benefits are provided under the railroad's union contracts. The number of furloughed workers has declined since late February, when more than 600 workers were on partial pay and another 100 got no pay. Hiatte says typically there are no furloughs in the busier fourth quarter.
A state court jury says Dynegy owes $2.5 million in legal fees and damages to the lawyer of former Dynegy worker Jamie Olis. The jury says Dynegy committed fraud when it did not pay Terry Yates for representing the former Dynegy worker in the November 2003 trial. Olis was found guilty and sentenced to 24 years in prison. His sentenced was later overturned and reduced to six years. Dynegy is considering its options, including a possible appeal.
The U.S. Department of Labor’s Wage and Hour Division reports Houston-based BJ Chemical Services and Magna Flow International and Magna Flow Environmental Services are paying back wages to 155 employees. BJ Chemical Services has paid $256,787 to 56 employees under the overtime wage provisions of the Fair Labor Standards Act. The Magna companies have paid $174,999 in back wages to 99 employees for violations of the minimum and overtime wage provisions. Magna Flow International was also fined $2,145 for violating the youth employment provisions of the act.
An employee of Fort Worth-based Radio Shack is seeking class-action status for his lawsuit alleging the consumer electronics retailer mismanaged its employee 401(k) plan by keeping it top-heavy with RadioShack stock. The Dallas Morning News says the Connecticut resident’s lawsuit accuses the company of violating pension law by causing employees to invest in or hold RadioShack stock even when it was imprudent to do so. According to Securities and Exchange Commission filings, RadioShack’s 401(k) assets totaled about 43 percent company stock in late 2005, but only about 29 percent since mid-2006. After thousands of Enron employees and retires lost the bulk of their savings when the company’s stock collapsed, many companies moved to make their stock a smaller part of employee’s savings.
Legislation has been proposed that would outlaw some credit-card billing and interest-rate practices that critics say confuse consumers and can push them deeper into debt. The bill would ban interest from being charged on any portion of a credit card debt that the consumer paid on time during a grace period. It would also limit so-called penalty increases in interest rates, which are imposed when a payment is made after a due date. The bill would limit that increase to a maximum seven percentage points above the current rate. The legislation is being heralded by consumer groups, but many lawmakers have expressed reluctance to impose mandates on how banks do business.
The 2007 Boston Consulting Group/BusinessWeek Innovation Survey shows that fewer half of the 2,468 senior executives responding--about 46 percent--are satisfied with the return on their innovation investments. The Houston Business Journal says that compares with 52 percent last year. About two-thirds of those polled rank innovation as one of their top three priorities, compared with 72 percent in 2006.
While the major objective in investing is to make money, being sure you don't get taken is pretty high on the list, too. To that end, the North American Securities Administrators Association has released its list of the top ten traps likely to ensnare investors. NASAA President Joseph Borg notes that investor traps are usually baited with slick sales pitches promising high returns for little or no risk. He says if it sounds too good to be true, it probably is. Among the top traps are affinity fraud in which con artists target religious, ethnic, cultural and professional groups, and Internet fraud, where scammers continue to take advantage of technology to lure investors into pump-and-dump stock schemes.
The 2007 Trends in Energy Litigation report has been released, authored by energy lawyers from Fulbright & Jaworski. The analysis looks at the criminalization of energy and environmental matters through a marked increase in government regulations, investigations and litigation. Factors driving energy litigation could include growing global demand, rising prices and heightened geopolitical tensions. More than 20 of Fulbright’s 250 energy attorneys contributed articles and analyses of the emerging U.S. and international trends in this third biennial report.
American Access Technologies and privately held M&I Electric Industries have completed their previously announced merger. The newly-combined company will operate as American Electric Technologies, with headquarters in Houston, and has begun trading on the NASDAQ Capital Market under the symbol “AETI.”
Billionaire investor Carl Icahn has added shares in two energy companies from the Houston area, according to Reuters, reporting on filings with the Securities and Exchange Commission. He bought 3.1 million shares of Anadarko Petroleum of The Woodlands and 4.59 million shares of Pride International. Icahn’s previous investments include Kerr-McGee, which was bought last years by Anadarko.
Bank of England Governor Mervyn King thinks former Federal Reserve Chairman Alan Greenspan should keep his opinions on the U.S. economy to himself. Asked about Greenspan's behavior after the release of the bank's Quarterly Inflation Report, King said he's grateful that his own predecessor has kept silent about the economy. And he says he'll do the same when he steps down. Greenspan, who left the Fed chairman post in January of last year, has given private talks to business and investment groups since his retirement. His widely reported comments include the view that the U.S. economy could be heading toward recession. That's in direct contrast to the opinion of Fed Chairman Ben Bernanke, who is predicting economic growth will pick up slightly toward the end of the year.
DaimlerChrysler's supervisory board has formally cleared the way for the sale of most of the company's money-losing Chrysler Group to private equity firm Cerberus Capital Management. The board, similar to a board of directors in the U.S., says “the closing of the transaction is expected to take place in the third quarter,'' but gives no further details. A statement does not elaborate on the board meeting. DaimlerChrysler announced Monday it plans to sell 80 percent of Chrysler to Cerberus in a nearly $7.5 billion deal. Daimler will retain a minority stake in Chrysler.
With foreclosures at an all-time high, Citibank Texas is hosting seminars to explain home equity and to discuss the pros and cons of using equity as a source in borrowing. The free seminars will compare home equity loans with other sources of borrowing and review issues associated with applying for a home equity loan. The seminars are being held this evening at 11 different area Citibank retail branches.
General Electric is recalling 2.5 million dishwashers because of a wiring problem that could cause fire. The recall includes GE dishwashers sold under the brands Eterna, GE, GE Profile, GE Monogram, Hotpoint and Sears-Kenmore. GE has received nearly 200 complaints of overheating, including 12 fires caused by the washers. The problem: liquid rinse-aid can leak from the dispenser onto the internal wiring, which can cause a short circuit and overheating. The Consumer Product Safety Commission says consumers should stop using the devices immediately and contact the company for a free repair or a rebate to go toward a replacement.
Christus St. John Hospital has broken ground on a $7 million expansion project in Nassau Bay, according to the Houston Business Journal. The project will add or renovate the hospital’s emergency care and chest pain center and women’s imaging pavilion and new imaging technology. The project is to be completed by 2008.
The charitable organization of oilman T. Boone Pickens announced that it'll donate $50 million each to two leading Texas medical centers. The University of Texas M.D. Anderson Cancer Center in Houston and UT Southwestern Medical Center in Dallas would each get up to $50 million--but with a string attached. The hospitals would have to put that money into a fund that must grow to $500 million in 25 years through earnings on the original principal or other donations. Only then could the centers use the money as they see fit. It's the largest single contribution ever given to M.D. Anderson, where Pickens served on the board of visitors from 1977 to 1986. Both medical centers plan to name new buildings after Pickens, a billionaire whose Dallas-based foundation supports educational programs, conservation initiatives and medical research, among other causes.