Monday PM May 18th, 2009
Enron and other companies. Justices will consider a challenge to the Sarbanes-Oxley law from pro-business conservatives. Critics say the board established by the law to oversee the accounting industry violates the constitution's mandated separation of powers. The head of the public company accounting oversight board and the other four directors are appointed by the Securities and Exchange Commission. The accounting board is funded by fees on publicly traded companies according to their size. Congress created the board to replace the industry's own regulators amid the business scandals—giving it subpoena power and the authority to discipline accountants.
The Supreme Court says women who took maternity leave before it became illegal to discriminate against pregnant women can't sue for bigger pensions. The high court overturned a lower court decision that said decades-old maternity leaves should count in determining pensions. Four AT&T employees who took maternity leave between 1968 and 1976 sued the company to get their leave time credited toward their pensions. Their pregnancies occurred before the 1979 Pregnancy Discrimination Act, which barred companies from treating pregnancy leaves differently from other disability leaves. AT&T lawyers said their pension plan was legal when the women took pregnancy leave, so they shouldn't have to recalculate their retirement benefits now.
A state court judge has ordered the deposition of Dell Chief Executive Michael Dell in a civil lawsuit over crime cameras in New Orleans. Judge Rosemary Ledet also said she would set a contempt of court hearing requested by plaintiffs' attorneys over what they see as a piecemeal production of documents by Dell. Two companies involved with the crime camera system sued in 2007, claiming their system was misappropriated by people within and with ties to New Orleans' Technology Department. They also allege a conspiracy with Ddell to sell the system. Plaintiffs' attorneys want to know whether Michael Dell and Mayor Ray Nagin discussed crime cameras in 2004. Trial is currently set for September, though attorneys for Dell are seeking to have that date pushed back.
Flight attendants at Southwest Airlines easily approve a new contract that gives them annual pay raises of three percent and bigger retirement contributions. The airline says the deal was ratified by 89 percent of voting flight attendants. Southwest said that flight attendants will get three percent raises each of the first three years of the contract, and raises in the fourth year will depend on company performance. The contract is retroactive to June 2008.
A new study shows airlines are doing a better job of taking care of the passengers they still have. Passenger satisfaction with airline service rose more than three percent earlier this year, according to a new University of Michigan study. That's the first time in six years that airlines have seen their score rise. The increase comes as the number of passengers drop and airlines have reduced flying. Southwest Airlines has the highest score. The biggest improvers were Continental Airlines and US Airways, which both rose more than nine percent. United Airlines was unchanged in last place. Claes Fornell led the study. He says businesses that are losing money have a tough time providing good service.
A study by the Texas Healthcare and Bioscience Institute says the life sciences industry supports 236,000 jobs and a $31 billion payroll. In the Gulf Coast region, some 21,943 were directly employed in life sciences in 2008, with an average wage of $68,000. In the past five years, life science job growth in the region increased by 2,754 direct jobs or 14.4 percent. The report says private and government investments, like those from the Texas Emerging Technology Fund and the Texas Cancer Prevention and Research Institute, will help fuel further growth. The cancer initiative could grow the state's share of U.S. research and development investments a full percentage point from seven to more than eight percent—another 40,000 direct and indirect jobs.
Gasoline costs a quarter more per gallon than it did three weeks ago, but compared to this time last year, it's still a lot better. That's according to the national Lundberg survey of fuel prices released Sunday. Analyst Trilby Lundberg says the average U.S. price of regular-grade gasoline was $2.30 a gallon Friday, when the survey was completed. That's up from $2.05 a gallon recorded on April 24, but $1.49 a gallon cheaper than at this time last year. The lowest price for gasoline in the U.S. was found in Phoenix, at $1.99 a gallon. The highest was in Chicago, at $2.63.
About 475 people attended the Real Estate Disposition Corporation's foreclosed home auction of about 100 properties at the George R. Brown Convention Center on Sunday. REDC says $19.6 million was spent at this auction and two other ones in San Antonio and Dallas in a two-day auction series.
Governor Rick Perry said when the legislature opened that his goals included tax relief for small businesses and replenishment of his job creation accounts. Lawmakers adjourn June 1st, and Perry's fond of pointing out that major legislation often comes together in the final few days of the Texas session. Lawmakers writing the two-year spending plan seemed willing to put money into the Texas Enterprise Fund and the Emerging Technology Fund, which Perry uses to create jobs in Texas. Whether he gets about $500 million combined that he wanted for the accounts is far from certain. An increase in the business tax exemption for companies from the current $300,000 to $1 million in revenue won approval in the House but hasn't made it through the Senate. The GOP-backed voter identification bill won passage in the GOP-dominated Senate, but odds for the bill are slimmer in the House where the partisan makeup is almost even.
The White House's budget director says the economy has almost bottomed out and the sense of economic free-fall is over. Peter Orszag says that as the economy improves in the months ahead, the nation's budget will run lower deficits. He also says that the Obama administration's financial assumptions are going to be updated because of higher-than-expected unemployment rates. The budget director says President Barack Obama is committed to changes in the health care system this year. Orszag says the president's plan to provide health care to millions of uninsured Americans would not add to the federal deficit in the short term, and actually reduce it in coming years. Orszag spoke on CNN'sState of the Union.
Treasury Secretary Timothy Geithner says the economy is stabilizing but that unemployment will continue to rise. Geithner said that even as the nation recovers from a recession, millions of Americans will still feel the pinch of the downturn because hiring tends to lag behind other improvements in the economy. Geithner made his comments in a luncheon hosted by Newsweek magazine. He pointed to positive signs in the economy, including improvements in credit markets. But he called the recession the most challenging economic crisis that the nation has seen in generations. He predicted recovery would be bumpy.
Geithner says the government should not impose caps on executive pay in the financial sector. However, he said government can set compensation standards to curb excessive risk-taking by financial institutions. Such standards could combine with compensation disclosure requirements and giving shareholders the ability to vote on salary packages. Wall Street bonuses and retention packages have provoked anger among the public and in Congress. Lawmakers have moved to limit pay for top employees at financial institutions that have received federal government assistance. The standards envisioned by Geithner would apply to all financial institutions.
The National Association of Home Builders says its housing market index increased for the second month in a row in May, reflecting growing optimism on the part of many builders. While still near historically low levels, the Washington-based trade association said the index rose two points to 16, it's highest reading since September. Index readings lower than 50 indicate negative sentiment about the market. The report reflects a survey of 733 residential developers nationwide, tracking builders' perceptions of market conditions. And the index readings for current sales conditions and expectations for sales over the next six months each increased in May.
The U.S. Postal Service has slashed 25,000 jobs this year as it struggles to reduce a massive budget deficit. Postmaster General John Potter said that agency employment is below 635,000, down from about 800,000 in 1999. Thousands of carrier routes have also been eliminated as mail volume declines. Potter said the service has an infrastructure that it can't afford based on finances. The service is facing a potential deficit of $6.5 billion this fiscal year. He stressed that the main problem is the weak economy and the Post Office is "anxiously awaiting a turnaround."
Small businesses are optimistic about long-term prospects in the down economy, according to a survey by the Economist, as reported by the Houston Business Journal. The April survey surveyed owners and executives around the world, although 29 percent of the respondents are in North America. Some 83 percent of small business executives are optimistic about their company's long-term ability to rebound when the economy improves. Forty-eight percent of those surveyed said local government is unsupportive of their business, and 39 percent say the same about national governments.
An advisory group of retired admirals and generals says reducing America's reliance on oil and addressing climate change is critical for future national security. The group's report says over-reliance on oil—not just foreign oil—undermines U.S. foreign policy and leaves the country vulnerable to unstable and hostile regimes. It says future oil markets will be marked by limited supplies and increasing demand, posing a national security risk. The report, presented to members of Congress and the Pentagon, was written the military advisory board of CAN, a nonprofit research organization. The board is made up of some senior retired general officers of all branches of the military.
The Houston Business Journal kicks off its annual four-day Celebrate!Enterprise program of business events tomorrow. A networking event called "Vintage Capitalism" is set for 6 p.m. at the Tasting Room in Uptown Park. The Houston Growth Summit takes place in the morning on May 20th at the Wortham Center-Grand Foyer with economist Ray Perryman. The Wortham Center also hosts the Health Care Heroes awards luncheon at noon. On May 21st, another breakfast event called the Houston Energy Forum is set for the Wortham Center. The 40 Under 40 event, recognizing future business leaders, and the Battle of the Business Bands is set for May 21st at Warehouse Live downtown. And the Best CFOs of Houston awards luncheon rounds out the events on May 22nd at the Wortham.
A Texas company looking to build a $10 billion oil refinery in southeastern South Dakota and opponents who say it will emit too many pollutants will face off in Pierre this coming week. Hyperion Refining Vice President Preston Phillips has called an air quality permit a "critical hurdle" that would allow the Dallas company to finalize details for the refinery construction. The Texas Department of Environment and Natural Resources issued a draft permit in September. Both sides will make formal arguments to Board of Minerals and Environment members during a contested case hearing set to begin Tuesday. If constructed, the 3,300-acre tract of farmland north of Elk Point would become the first new site for an oil refinery since 1976. The Hyperion Energy Center would process 400,000 barrels of Canadian tar sands crude oil each day into low-sulfur gasoline and diesel. Total demand for gasoline and distillate in South Dakota, Nebraska and Iowa in 2006 was almost 300,000 barrels per day, Hyperion said. But there are no refineries in the tri-state area.
Significant city service reductions and layoffs could be on the horizon as the city of Dallas remains at least $100 million short of balancing its books. The city has already slashed $66 million from next year's budget. But without accounting for those cuts and other savings, Dallas' budget shortfall stands at $190 million. City Manager Mary Suhm said officials have had to take painful steps to balance the budget and that things won't get any easier as she works to deliver a balanced budget for approval by the city council in late September. She told the Dallas Morning News she's already decided to ask the council to postpone the next bond sale from November to May, saving the city $15.7 million in interest payments. Suhm said also she does not plan to ask the city council to raise the current property tax rate of 74.79 cents for every $100 of assessed value.
Toyota is rolling out its new Prius and aims to sell 300,000 to 400,000 of the hybrid vehicles a year. Toyota has launched the third generation of the world's top-selling hybrid vehicle with a ceremony in Tokyo. It announced the Japan price of the new Prius, which starts at about $21,600. That is cheaper than the predecessor model. The new Prius will arrive in other markets in coming weeks.
It's a buyer's market at nearly 800 Chrysler lots across the U.S. The Detroit automaker is dropping the dealerships and leaving them with 44,000 cars on the lot. The dealers have just a few weeks to sell off the cars and Dave Champion of Consumer Reports says buyers have "got some very good negotiating power." Champion says dealers are eager to shift inventory that's "stacking up all around them." But, Chrysler is arranging homes for its unsold cars. Dealers that Chrysler plans to keep will get loans so they can take on some of the unsold inventory. Still, one analyst expects remaining dealerships will be reluctant to take on more cars, meaning those who are shutting down may sell them at a loss. GM, meanwhile, is planning to lose 1,100 dealerships itself. But, the company isn't seeking bankruptcy protection, meaning dealers have more leeway.
With the recession turning more Americans into homebodies, home-improvement companies are watching their sales perk up. One analyst says an increase in garden sales and do-it-yourself jobs will result in "relatively healthier" sales for Lowe's. A Citi investment research analyst says Home Depot's sales are trending better than expected. Handyman, painting and floor covering businesses are also reeling in the jobs as homeowners notice dingy walls and leaky faucets. One contractor says "it was like someone flipped a switch and" he's "booked solid." Georgia-based Floor Coverings International says sales swelled in April after months of remaining flat.
A report by the national gambling industry's trade association says revenue and jobs fell last year as Americans became less willing to risk their money. A study released by the American Gaming Association found revenue nationwide was down 4.7 percent in 2008 to $32.5 billion. The year before, revenue had increased by 5.3 percent. The nation has more than 1,600 casinos, slot parlors and other gambling halls. The number of casino jobs fell one percent to more than 357,000. The gambling halls paid $5.7 billion in taxes to state and local governments last year. That's down slightly from $5.8 billion the year before. One-quarter of the adult U,S. population visited a casino in 2008.
In the midst of the recession, there are some products that people apparently are unwilling to do without. Like chocolate. And comfort food. Strong sales of Spam, Dinty Moore stew and chili helped Hormel Foods post a six percent increase in grocery product sales in the first quarter of the year. Kraft Foods reported double-digit growth in macaroni and cheese dinners, while Hershey's profits surged 20 percent. People are also buying gold coins, gardening seeds, running shoes and guns. Wine drinkers are still sipping, though they're choosing cheaper vintages and drinking them at home. In short, consumers have trimmed household budgets and put off major purchases, but they're willing to shell out for small indulgences. A man whose company, Envirosell, monitors shopping behavior says in nearly every recession, the focus shifts to home, hearth and things that provide immediate happiness. As he puts it, "lipstick and chocolate are small rewards that make you feel better."
A fairly light schedule is ahead this week for new economic data. Tomorrow, the Commerce Department releases April housing starts, and building permits, with gains seen for both numbers. The following day, the Federal Reserve releases minutes from the policy-setting meeting held late last month. Thursday brings the leading indicators from the Conference Board as well as new claims for unemployment benefits.
Lowe's, the nation's second biggest home improvement chain, says its first-quarter profit fell 22 percent due to the housing market downturn. But the results are still above Wall Street's expectations. Lowe's says consumers continued to stay away from bigger-ticket housing items as they tried to shore up their savings amid the recession. But it says shoppers welcomed spring with smaller, outdoor purchases. Mooresville, North Carolina-based Lowe's said its profit fell to $476 million in the quarter ended May 1st. It says sales dipped two percent to $11.83 billion, beating Wall Street's expectation of $11.63 billion.
The U.S. Supreme Court today agreed to rule on the constitutionality of an anti-fraud law that grew out of accounting scandals at