On Monday February 14, 2011, 6:25 pm EST
Obama budget: Some cuts,
not the slashes GOP asks
WASHINGTON (AP) -- Putting
on the brakes after two years of big spending increases, President Barack Obama
unveiled a $3.7 trillion budget plan Monday that would freeze or reduce some
safety-net programs for the nation's poor but turn aside Republican demands for
more drastic cuts to shrink the government to where it was before he took
office.
The 10-year blueprint makes
"tough choices and sacrifices," Obama said in his official budget
message. Yet the plan, which sets the stage for this week's nasty congressional
fight over cuts in the budget year that's already more than one-third over,
steers clear of deeply controversial long-term problem areas such as Social
Security and Medicare.
The budget relies heavily
on the recovering economy, tax increases and rosy economic assumptions to
estimate that the federal deficit would drop from this year's record $1.6
trillion -- an astronomical figure that requires the government to borrow 43
cents out of every dollar it spends -- to about $600 billion after five years.
Obama foresees a deficit of
$1.1 trillion for the new budget year, which begins Oct. 1, still very high by
historical benchmarks but moving in the right direction.
GM to pay more than $400
million in worker bonuses
DETROIT (AP) -- Less than
two years after entering bankruptcy, General Motors will extend millions of
dollars in bonuses to most of its 48,000 hourly workers as a reward for the
company's rapid turnaround after it was rescued by the government.
The payments, disclosed
Monday in company documents, are similar to bonuses announced last week for
white-collar employees. The bonuses to 76,000 American workers will probably
total more than $400 million -- an amount that suggests executives have
increasing confidence in the automaker's comeback.
In the four years leading
up to its 2009 bankruptcy, GM piled up more than $80 billion in losses and was
burdened by enormous debt and costly labor contracts.
The company made $4.2
billion in the first nine months of 2010 and is expected to announce a
fourth-quarter profit soon.
Most of GM's hourly workers
will get a record payment of more than $4,000 -- more than double the previous
record in 1999, at the height of the boom in sport utility vehicles and pickup
trucks. Nearly all 28,000 white-collar workers such as engineers and managers
will get 4 to 16 percent of their base pay. A few -- less than 1 percent --
will get 50 percent or more.
Bill Selesky, an auto
industry analyst with Argus Research in New York, called the recovery dramatic
and said the payments were needed to stop talent from jumping to other
automakers, especially crosstown rival Ford.
Clothing prices to rise 10
pct starting in spring
NEW YORK (AP) -- Shoppers
looking to update their wardrobes may find their money won't stretch as far.
As the world economy
recovers and demand for goods rises, a surge in raw material and labor costs is
squeezing retailers and manufacturers who have run out of ways to pare
expenses.
Clothing prices had dropped
for a decade as tame inflation and cheap overseas labor helped hold down
manufacturers' costs. During the recession, retailers and clothing makers cut
frills and experimented with fabric blends to keep prices in check.
But cotton has more than
doubled in price over the past year, hitting all-time highs. The price of
synthetic fabrics has jumped roughly 50 percent as demand for alternatives has
risen.
Clothing prices are
expected to rise about 10 percent in coming months, with the biggest increases
in the second half of the year, said Burt Flickinger III president of Strategic
Resource Group.
Brooks Brothers'
wrinkle-free men's dress shirts now cost $88, up from $79.50. Levi Strauss
& Co., Wrangler jeans maker VF Corp., J.C. Penney Co., Nike and designer
shoe seller Steve Madden also plan increases.
More specifics on price
increases are expected when clothing retailers such as J.C. Penney Co. and
Abercrombie & Fitch Co. report financial results this month.
FedEx cuts profit forecast,
citing weather, fuel
FedEx Corp. on Monday
sharply cut its quarterly profit forecast, citing higher-than-expected fuel
costs and severe winter weather that disrupted delivery operations in the U.S.
and Europe.
The world's second-largest
package delivery company now expects an adjusted profit of 70 to 90 cents per
share for its fiscal third quarter, which ends Feb. 28. That's down from the
company's earlier forecast for profit of 95 cents to $1.15 per share.
Analysts surveyed by
FactSet expect FedEx to post a profit of $1.06 per share, on average.
The company's updated
forecast assumes no further weather impact and stable fuel prices for the rest
of the quarter. FedEx, based in Memphis, Tenn., said those factors also would
affect its full-year financial forecast, which will be updated when the company
reports third-quarter numbers on March 17.
FedEx has faced unusually
high costs from winter storms, Chief Financial Officer Alan Graf Jr. said.
Parts of the U.S. Northeast and Midwest have been hit by unusually heavy snow
this winter, disrupting airport operations and ground travel. Ice and snow have
hit areas as far south as Georgia and Texas.
Japan confirms China surpassed
its economy in 2010
TOKYO (AP) -- Japan
confirmed Monday that China's economy surpassed its own as the world's second
largest in 2010 and said a late-year downturn was its first quarterly
contraction in more than a year.
Japan's economy expanded
3.9 percent in the calendar year in the first annual growth in three years. But
it wasn't enough to hold off a surging China. Japan's nominal GDP last year
came to $5.4742 trillion, less than China's total of $5.8786 trillion, the
Cabinet Office said. China, however, remains far poorer with GDP per person
about a fifth of that in Japan even when purchasing power differences in each
country are taken into account.
China was acknowledged last
year as having surpassed Japan as the world's No. 2 economy -- a title it had
held since 1968. But full-year Japanese data confirming it were not available
until Monday. The historic shift underscores the nations' stark contrasts:
China is growing rapidly and driving the global economy, while Japan is struggling
with persistent deflation, an aging population and ballooning public debt.
At the same time, the rise
of its Asian neighbor has been critical for Japan's own economic engine. China
is now Japan's biggest trading partner and a significant source of growth for
Japanese companies like Toyota Motor Corp. and Canon Inc.
Japan's economy minister
Kaoru Yosano described China's expansion as important for the region and said
he hopes for deeper economic ties between the two countries.
Top gov't watchdog over
$700B bailout to resign
WASHINGTON (AP) -- The
government's top watchdog over the $700 billion financial bailout said Monday
that he will step down next month, after leading an office that uncovered
millions of dollars in fraud among potential recipients.
Neil Barofsky said in a
letter to President Barack Obama that he will leave this job as special
inspector general for the Troubled Asset Relief Program on March 30. A
spokeswoman says Barofsky believes the office met the goals that he laid out
for it: deterring fraud, improving transparency and overseeing the government's
management of the bailouts.
Barofsky led investigations
that resulted in 14 criminal fraud convictions of bankers. The office's
enforcement staff followed leads from a tip line Barofsky set up and from
banks' applications for bailout money. It was the only watchdog overseeing the
bailout that had law enforcement authority.
His office saved taxpayers
$553 million by recognizing fraud at Colonial Bank and halting the Treasury
Department's plan to send the bank money. Colonial collapsed months later. It
was the sixth-largest U.S. bank failure.
Barofsky criticized both
the Obama and Bush administration. He blasted Treasury Secretary Timothy
Geithner and his predecessor, Henry Paulson, in a series of audits of the
bailout fund, which was created by Congress in October 2008. The audits
examined issues such as Geithner's role in the rescue of American International
Group Inc. and the department's decision to close of thousands of auto dealers.
Barofsky's audits often
prodded Treasury to make its bailout decisions more transparently.
Chevron fined $8 billion in
Ecuador
QUITO, Ecuador (AP) -- An
Ecuadorean judge ruled Monday in an epic environmental case that Chevron Corp.
was responsible for oil drilling contamination in a wide swath of Ecuador's
northern jungle and ordered the oil giant to pay $8.6 billion in damages and
cleanup costs.
The amount was far below
the $27.3 billion recommended by a court-appointed expert. But whether the
plaintiffs -- who include indigenous groups who say their traditional hunting
and fishing grounds were decimated by billions of gallons of toxic waste -- can
collect remains to be seen.
Chevron called the decision
illegitimate and unenforceable and said it would appeal.
It has long contended it
could never get a fair trial in Ecuador and has removed all assets from
politically volatile Andean country, whose leftist president, Rafael Correa,
had voiced support for the plaintiffs.
The high-stakes,
high-profile case, fraught with corporate espionage and geopolitical intrigue,
has been winding its way through U.S. and Ecuadorean courts for 17 years.
Emergency Medical Services
agrees to $3.2B buyout
GREENWOOD VILLAGE, Colo.
(AP) -- Ambulance services provider Emergency Medical Services Corp. said
Monday it agreed to sell itself to private equity firm Clayton, Dubilier &
Rice at a discounted price of $64 per share, or about $3.2 billion.
EMS said its board has
accepted the offer, which comes at a 9.4 percent discount to its Friday closing
price of $70.66. EMS expects the sale to close in the second quarter pending
approval from shareholders and regulators. The company said its largest
shareholder, Onex Corp., and its affiliates support the deal, and that Onex and
its affiliates have enough voting power to approve the sale.
The company, based in
Greenwood Village, Colo., takes patients to hospitals in ambulances and with
air transports. It also runs a physician outsourcing business. It said it
provides services in 2,200 communities around the country and dealt with 14
million patients in 2010.
EchoStar to buy Hughes
Communications for $1.34B
ENGLEWOOD, Colo. (AP) --
EchoStar Corp. will buy satellite Internet services company Hughes
Communications Inc. for about $1.34 billion so it can boost its ability to
transport data and video via broadband, the company said Monday.
The value is based on
Hughes' 22 million outstanding shares. EchoStar, which makes equipment for
cable, telecom and satellite TV providers, said the deal is worth $2 billion
including debt, which the company said it will refinance.
The buyout, approved by the
boards of both companies, gives Hughes shareholders $60.70 for each share they
own. This is slightly lower than Friday's closing price of $61.78. But it
represents a 31 percent premium over Hughes' closing price of $46.43 on Jan.
19, the last trading day before acquisition rumors drove the stock higher.
China says drought in wheat
belt 'grim'
BEIJING (AP) -- Provinces
in China's severely parched northeast have been ordered to step up emergency
irrigation as part of a $1 billion effort to minimize the loss of crucial wheat
crops.
China is the world's
largest wheat-growing nation but its wheat belt has gotten virtually no
precipitation since October. Expected shortages of the crop in China have
already pushed up global prices for the commodity.
The government's Office of
State Flood Control and Drought Relief Headquarters said in an online statement
late Sunday that the drought situation remained "grim" and urged
local officials to dig more wells and carry out other emergency irrigation
measures.
The U.N.'s food agency has
warned the drought is driving up China's wheat prices, and now the focus is on
whether China will buy more from the global market, where prices have risen
about 35 percent since mid-November.
By The Associated Press
The Dow Jones industrial
average fell 5.07 points, or less than 0.1 percent, to 12,268.19. That's just
the second time the Dow closed lower so far in February.
The Standard & Poor's
500 index rose 3.17 points, or 0.2 percent, to 1,332.32. The Nasdaq composite
gained 7.74 points, or 0.3 percent, to 2,817.18.
West Texas Intermediate
crude fell 77 cents to settle at $84.81 on the New York Mercantile Exchange.
Meanwhile Brent crude rose $2.14 to settle at $103.08 a barrel on the ICE
Futures exchange in London,.
In other Nymex trading in
March contracts, heating oil rose 5.46 cents to settle at $2.7504 a gallon and
gasoline gained 5.22 cents at $2.5174 a gallon. Natural gas rose 1.5 cents to
settle at $3.925 per 1,000 cubic feet. At the pump, the national average for a
gallon of regular gasoline was $3.126, according to AAA, Wright Express and the
Oil Price Information Service.