The now largely-defunct Arthur Andersen is paying $16 million to Enron creditors, according to Bloomberg, to settle claims that the firm was negligent in auditing and advising the energy trader. A hearing for a bankruptcy judge to approve the settlement is set for May 14th. The payment would resolve a lawsuit accusing Arthur Andersen of approving transactions that manipulated Enron’s financial condition for the benefit of its executives. The firm was convicted by a federal jury in 2002 of obstructing an investigation into Enron’s collapse. The U.S. Supreme Court overturned the verdict in 2005.
A private research group says that consumer confidence soared in April amid hopeful signs that the economy is starting to stabilize. The Conference Board says that its consumer confidence index rose 12 points to 39.2, up from a revised 26.9 in March. The reading marks the highest point since November and well surpasses economists’ expectations for a level of 29.5. The expectations index, which measures how shoppers feel about the economy over the next six months, skyrocketed to 49.5 from 30.2 in March. Earlier, a housing index showed that home prices dropped sharply in February, but for the first time in 25 months the decline was not a record–another sign the housing crisis could be bottoming.
The outlook for executive employment is showing some improvement, according to ExecuNet’s recruiter confidence index. It inched higher for the second consecutive month. According to the April survey of 142 executive recruiters, 41 per cent are confident or very confident the executive employment market will improve in the next six months—up from 38 per cent last month and 28 per cent in February.
You see “help wanted” signs in fast food restaurants. But the recession will make it extremely difficult for teenagers to find employment this summer, according to outplacement consultants Challenger, Gray & Christmas. The firm says it possible that for the first time since 1954 fewer than a million 16- to 19-year-olds will find summer jobs, based on recent trends. As of March 31st, 4.7 million in that age group were employed.
Labor Secretary Hilda Solis says the agency continues working to close the pay gap in the work force. She says women still earn just 78 cents for every dollar a man earns. But new numbers say the gender gap in pay among federal employees is shrinking. Women working in the federal government still earn less than their male counterparts. But the difference in average annual salary for men and women has declined from 19 cents to 11 cents on the dollar between 1998 and 2007. That’s according to a draft report from the Government Accountability Office. The report says all but seven cents of the gap can be accounted for by differences in measurable factors, such as differences in education levels and the type of jobs men and women had. The gap narrowed the more men and women shared characteristics, including the jobs held, levels of experience and education. The gap among federal employees has been steadily shrinking since 1988, when female government workers earned 28 cents on the dollar less than men.
A widely watched housing index shows home prices dropped in February, but for the first time in 16 months the decline was not a record. The Standard & Poor’s/Case-Shiller index of home prices in 20 major cities dropped by 18.6 per cent from February 2008, slightly better than the 19 per cent in January. The ten-city index slid 18.8 per cent, compared to 19.4 per cent the month before. But the good news was mixed. All 20 cities in the report showed monthly and annual price declines, and half recorded annual records. Prices fell by more than 10 percent in 15 cities. Prices in the 20-city index have plunged 30.7 percent from their peak in the summer of 2006, and the 10-city index has lost more than 31.6 percent.
The Wall Street Journal reports that Bank of America and Citigroup have been told by regulators that “stress test” results show they may need to raise additional capital. Each bank has received $45 billion in government bailout funds. The paper says Charlotte, North Carolina-based Bank of America is looking at a shortfall in the billions of dollars. It cites people familiar with the situation. According to the Journal, both banks plan to rebut the preliminary findings, with Bank of America expected to respond today ahead of its shareholder meeting tomorrow. Citigroup has declined comment and Bank of America officials weren’t immediately available to comment. The Federal Reserve stresses that a bank’s need for more capital reserves to meet the requirements should not be considered a measure of the “current solvency or viability of the firm.”
The Obama administration says General Motors’ proposed restructuring deal is an important step in pulling the company from the brink. The plan would make the federal government a majority shareholder in the automaker. But the administration says it hasn’t yet made a final decision on whether to accept the deal. GM plans to ask the government to take more than 50 per cent of its common stock in exchange for canceling half the government loans to the company as of June 1st. The swap would cancel about $10 billion in debt. On addition, GM is offering stock to the united auto workers for at least 50 per cent of the $20 billion the company must pay into a union run trust. The restructuring plans would also see the automaker shed 21,000 jobs and drop its Pontiac division. GM CEO Fritz Henderson says if the debt exchange isn’t successful, he would expect GM to file for bankruptcy protection somewhere around June 1st.
GM says it will force 1,000 to 1,200 underperforming dealerships to close their doors as the automaker tries to thin dealer ranks to make the remaining outlets stronger. Dealers were told of the move in a video conference. In addition, the company expects to lose 500 Hummer and Saturn dealers when the brands close or are sold, and it expects 400 dealers to close voluntarily. Another 500 would be consolidated into other dealers. A dealer who watched the conference told the Associated Press about the changes, and company spokeswoman Susan Garantakos confirmed the numbers. The company announced it plans to reduce dealerships by 42 per cent from 2008 to 2010, cutting them from 6,246 to 3,605.
A person familiar with the talks says the Treasury Department has reached a tentative agreement with four of Chrysler’s major debt holders as the automaker races to stave off bankruptcy. Under the agreement, the four banks will forgo claims to their portion of Chrysler’s $6.9 billion debt in exchange for $2 billion in cash when the deal closes. The person spoke on condition of anonymity because the agreement has not been formally announced. The person says Treasury needs to persuade all 46 banks and hedge funds that hold Chrysler debt to go along. If not, a bankruptcy filing could still be possible for the nation’s third largest automaker.
United Auto Workers President Ron Gettelfinger says the union’s factory-level leaders voted unanimously Monday night to recommend that members approve concessions designed to keep Chrysler out of bankruptcy. Union leaders say ratification votes across the nation should be finished by Wednesday. That’s one day before Chrysler’s government-imposed deadline to restructure or the government will end all aid to the struggling company. Chrysler is living on $4 billion in U.S. government loans and must win concessions from its unions, swap equity for debt and ink a partnership deal with Fiat. Without the deals, Chrysler almost certainly will be auctioned off in pieces.
The California Public Employees’ Retirement System says it will vote against re-electing all 18 Bank of America board members, including CEO Ken Lewis. The influential fund says Lewis and the board failed to disclose information on Bank of America’s acquisition of Merrill Lynch. “The entire board failed in its duties to shareowners and should be removed,” Rob Feckner, system board president, said in a statement. Bank of America is scheduled to hold its annual meeting on Wednesday in Charlotte, and management has been under pressure lately as more holders express their displeasure with the bank’s current leaders.
There are major wins and at least one loss for the president in a budget plan agreement sealed with Congressional Democrats. The $3.5 trillion plan announced by Senate Budget Committee Chairman Kent Conrad calls for an overhaul of the health care system. It would prevent Senate Republicans from delaying or blocking Obama’s plan to vastly expand government-subsidized health care this fall. The outline also embraces funds for domestic programs and clean energy and a tax increase for high earners. But the plan also allows Obama’s signature $400 tax cut for most workers to lapse at the end of next year. Conrad says he thinks the plan, which leads to a more than half-trillion dollar deficit, is a “good budget.” But, he says more needs to be done to get the country on a “more sustainable course.”
Air travel is down for the ninth consecutive month, according to aviation data consultant OAG, as reported by the Houston Business Journal. The world’s airlines scheduled six per cent fewer flights compared to the same time last year, with a three per cent drop in capacity. That’s a reduction of more than 136,000 flights and nine million seats, year-over-year. Flight schedules in Europe are down by eight per cent, with capacity down by seven per cent. North America has a nine per cent drop in domestic flights and an eight per cent drop in capacity.
Oil refiner Valero Energy says first-quarter profits rose more than 18 per cent, easily beating beat Wall Street expectations as higher refining margins offset weak gasoline demand. The San Antonio-based company said that net income for the January-March period amounted to $309 million–up from the $261 million it earned a year ago. Revenue fell 51 per cent to $13.82 billion from a year ago with the recession eating into demand for energy.