Posted by: Cristina Lindblad on July 07
Frustrated with repeated delays on its 787 Dreamliner jet, Boeing announced on July 7 that it will spend $580 million to purchase a South Carolina plant run by Vought Aircraft Industries, which is owned by the Carlyle Group. The plant manufactures the rear sections of the composite fuselage for the Dreamliner. Although the acquisition should seal Boeing’s control over the delay-hampered assembly process for the plane, investors reacted negatively to the news. Boeing’s shares were down nearly 3% to 39.44 as of mid-afternoon trading in New York.
Boeing executives recently announced a sixth and so-far indefinite delay in the plane’s maiden flight, which had been set to take place before the end of June. The company still expects to start deliveries of the Dreamliner in the first quarter of 2010. But Broadpoint AmTech analyst Peter Arment, in a note to clients, says customers may not get their planes until 2011.
Sources: BusinessWeek, MarketWatch
A July 7 report from the American Bankers Association shows that delinquencies on U.S. consumer debt hit 3.23% in the first quarter of 2009—the highest level since record-keeping began in 1974. The rate for bank credit cards, which are not included in the headline number, rose to 4.75%, also a record. The culprit: Soaring unemployment.
Regardless of age or income African-Americans and Hispanic workers contribute less often, and less money, to a 401k account than do white and Asian-Americans, according to a new study sponsored by Ariel Investments and Hewitt Associates. The study, which pooled data on 3 million employees at 57 large U.S. corporations, found that while 77% of white Americans contribute to their employer’s 401(k), only 66% of African Americans do, and just 65% of Hispanics participate. And the sharp disparities are likely even worse today, as the study ran through December 2007, before the worst of the economic slump hit.
With talks between Gov. Arnold Schwarzenegger and lawmakers at an impasse, California’s budget crisis took a new turn for the worse yesterday when Fitch’s downgraded the state’s bond rating to BBB. That’s the lowest bond rating of any American state and just two notches above junk. California has a budget hole of $26.3 billion, and the Republican governor is squabbling with Democrats in the legislature on how to close the gap. The state started issuing the IOUs last week and has distributed $87 million so far.
Sources: Sacramento Bee
Earnings season is scheduled to start tomorrow with Alcoa reporting results. The biggest year-over-year decline in profitability—a 79% plunge—is expected in the materials sector, which shouldn’t surprise anyone who has followed the deterioration in the housing and commercial real estate markets. Thomson Reuters’ highest earnings forecasts are for a 2% decline for the health-care sector and a 6% drop for consumer-staples companies. A 29% decline is projected for consumer-discretionary companies.
Even as Asia remains a bright spot for General Motors, its Korean subsidiary looks more like the hapless parent company than GM’s fast-growing Chinese operations. GM Daewoo Auto & Technology lost $702 million in 2008, and this year its sales are off by nearly half, to 261,000 vehicles in the first six months. Now the Korean unit says it’s on the cusp of a critical liquidity crunch. “Things look ugly at GM Daewoo,” says Stephen Ahn, head of research at brokerage LIG Investment & Securities in Seoul.
EMC, battling against NetApp for control of Data Domain, on Monday announced a $33.50-a-share offer for the Santa Clara, California-based company. The EMC cash offer is $3.50 higher than both an earlier EMC offer and the cash-and-shares offer from NetApp that Data Domain’s board has accepted.
Source: Associated Press
The Justice Department is in the early stages of investigating possible antitrust violations by telecommunications companies such as AT&T and Verizon Communications, sources say, with the government also looking into anticompetitive practices in the health care and agricultural industries. The Bush Administration brought no major antitrust cases during its eight years in office but Christine Varney, the top antitrust official at Obama’s Justice Department, has talked about the need for the government to be more aggressive in enforcing antitrust laws.
Source: Wall Street Journal
Spanish telecom operator Telefonica scored a big win over rival Vodafone on Tuesday, announcing an exclusive deal to carry the Palm Pre in Britain, Germany, Ireland and Spain. Telefonica will likely begin selling the smartphones in October.
Source: Financial Times
Lear Corp, a producer of seating and electrical equipment for vehicles, today filed for Chapter 11 bankruptcy protection. The company, which listed assets of about $1.27 billion and liabilities of about $4.54 billion, has suffered from cuts in production by GM, Ford and Chrysler.
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