Thursday AM December 13th, 2007

Governor praises state's economic success, promotes Texas Enterprise Fund and Texas Emerging Technology Fund...International Air Transport Association lowers 2008 outlook...Pentagon to spend another $10 billion on base closings and realignments...

Governor Rick Perry praised the state's economic success and encouraged business and government leaders to continue global competitiveness, in an Austin speech to the Texas Economic Development and Tourism Summit. The summit, sponsored by the Governor's Texas One Program, provides information about resources to help businesses achieve and maintain international competitiveness. Perry used the opportunity to promote the Texas Enterprise Fund and the Texas Emerging Technology Fund.


Higher oil prices and credit-market turmoil prompted an international aviation trade group to sharply lower its 2008 profit outlook. The International Air Transport Association estimates a global industry profit of $5 billion in 2008. That's down from previous guidance of $7.8 billion. Fuel costs, at about 25 percent, accounted for the largest chunk of the operating expenses of U.S. carriers in the second quarter of 2007. Texas is home to the nation's largest airline--Fort Worth-based American Airlines. Continental Airlines is based in Houston, while Southwest Airlines is based in Dallas. The trade group maintained its forecast of a $5.6 billion profit this year--which will be the industry's first since 2000. Higher oil prices were more than offset by strong traffic and revenue growth.


Dynegy said it expects strong results from its generation businesses in 2008. The Houston-based power provider also says it continues to look for potential combinations or acquisitions. Chairman and Chief Executive Bruce Williamson told investors that Dynegy expects earnings before interest, tax and amortization to grow by an average of 15 percent a year over the next five years. Dynegy says it expects net income of $140 million to $200 million in 2008.


The U.S. trade deficit has risen to the highest level in three months, as record oil prices and a flood of imports from China swamped a solid gain in American exports. The Commerce Department says the deficit for October increased to $57.8 billion. That's the highest level since July and 1.2 percent above the September imbalance. The widening deficit was slightly worse than expected. It occurred even though U.S. exports of goods and services rose for an eighth consecutive month, to an all-time high of almost $142 billion. The gain was offset by a one percent rise in imports. The deficit with China jumped 9.1 percent to just under $26 billion, a record for a single month. The demand for Chinese imports is still surging despite a string of high-profile recalls of Chinese products. So far this year, the trade imbalance with China is running at an annual rate of $256 billion. It's on track to surpass last year's $233 billion deficit, which had been the highest deficit ever recorded with a single country.


U.S. Treasury Secretary Henry Paulson is stressing that the rising interdependence of the American and Chinese economies requires flexible exchange rates, guarantees of product safety and reduced trade barriers. Paulson's remarks at the start of a two-day China-U.S. strategic economic dialogue comes against a background of rising protectionist threats from both sides. They're spurred by China's huge trade surplus and worries within China over soaring inflation, asset bubbles and economic overheating. The gathering follows a similar forum in Beijing Tuesday that produced wide-ranging agreements on boosting Chinese tourism to the U.S., increasing safeguards over Chinese products and opening up mid-sized Chinese cities to American imports.

China launched a nationwide recall system Wednesday that shifts responsibility to companies to recall harmful drugs, a day after U.S. and Chinese officials signed an agreement on the safety of medicine and medical devices. A state food and drug administration official says the recall plan will place Chinese-made drugs and imported drugs in three classes according to their possible danger to people's health.


The Pentagon plans to spend about $10 billion more than originally estimated on base closings and realignments. That's according to the Government Accountability Office. The GAO also says the Defense Department expects about $200 million less in savings. The GAO says the Pentagon expects to spend $31 billion to implement the Base Closing and Realignment Commission's recommendations and predicted net annual savings of $4 billion. Also, it'll take until 2017 for the Defense Department to recover upfront costs. That's four years longer than the Base Closing Commission predicted. The Base Closing Commission conducted a fifth round of decision-making affecting U.S. military bases in the country and abroad in 2005. The GAO said the 2005 round was the biggest, most complex and costliest ever. South Texas Congressman Solomon Ortiz chairs the House Armed Services Committee Panel on Readiness. The one-time cost increases include $550 million more to establish the San Antonio Regional Medical Center and realign enlisted medical training to Fort Sam Houston.


The Houston Independent School District has applied to the Texas Commission on Environmental Quality's program to clean up school bus emissions, according to the Houston Business Journal. The Texas Clean School Bus program was launched on November 10th, with the TCEQ leveraging $7.5 million to reimburse school districts for expenses associated with reducing emissions from school buses. HISD is seeking $249,600 to retrofit 312 buses.


Webster-based Spacehab has signed a licensing agreement with Praemittias Group to market and sell Spacehab's technology to the U.S. Department of Defense, according to the Houston Business Journal. The Colorado-based defense contractor will market the miniature mass spectrometer technology from spacehab's Spacetech subsidiary that detects, identifies and analyzes potentially dangerous explosives.


International Truck and Engine has announced a tentative agreement with the United Auto Workers leadership on three-year contracts for 3,700 striking workers. UAW members are expected to be able to vote on the agreement this weekend. If approved by a majority of those voting, the contracts would replace five-year agreements that expired October 1st. The UAW represents employees at nine company facilities in the Dallas area, Melrose Park; Indianapolis and Fort Wayne, Indiana; and in Ohio, Georgia and Pennsylvania Larry Sharp is president of UAW Local Six in Melrose, Illinois. He confirmed the agreement, but won't comment on specifics of the deal. Workers in six states have been on strike against International Truck and Engine since October 23rd, alleging unfair labor practices.


AT&T Mobility agrees to pay $76.3 million in back taxes to about 300 Missouri towns. The deal could end years of litigation. Local cities in Missouri have argued in court that San Antonio-based AT&T and other phone companies must pay taxes the same way that landline companies do. Wireless companies have said cell phones are different from traditional phones, so they should not be taxed. The St. Louis Post-Dispatch reports that the settlement still needs final approval from the towns involved. Verizon Wireless agreed earlier this year to pay Missouri towns $24.5 million for two years' worth of back taxes, plus $5 million in cities' legal bills.


Teenagers flipping burgers or stocking shelves don't think about retirement. But the government does, and the prognosis isn't good. The Government Accountability Office says more than one-third of American workers born in 1990 will have zero dollars in a 401(k)-style plan at retirement. And considering that many businesses are dumping pension plans, it's an ominous sign. The report says the numbers will be even worse for low-income workers: 63 percent of them will have no money in such accounts at retirement time. The study concludes that if workers were automatically enrolled in 401(k)s it would cut in half the number of low-income workers with zero retirement dollars.


Petrohawk Energy announced it's agreed to buy reserves in a Louisiana natural gas and oil field, paying $169 million to several private sellers. The Houston-based company estimates it bought 83 billion cubic feet equivalent of proved reserves in the Elm Grove Field. It has an estimated current production of 10 million cubic feet of natural gas equivalent per day. About 3,000 acres are included in the deal, which is expected to close at the end of January. Petrohawk operates mainly in Texas, northern Louisiana, Arkansas, and Oklahoma.


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