Business

Wednesday PM February 27th, 2008

Climate change effect on business discussed at British Consulate event in Houston…Federal Reserve Chairman Ben Bernanke tells House Financial Services Committee “economic situation has become distinctly less favorable” since summer…Euro hits record high against dollar, peaking at nearly $1.51…

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The British Consulate addressed implications of climate change and its effect on business in a conference at the Federal Reserve today here in Houston. Shell Oil President John Hofmeister talked about his company's recent dialogues with community leaders nationwide about the balance of environmental concerns and energy security.

"It was remarkable to see how open and how engaging people are once they get past the initial trepidation of talking with an oil company. The message of energy security is very much on people's agenda; the issue of CO² management, very much on people's agenda. And I think we're in an election year and we have to deal with energy issues in this election year and find out where the candidates stand. So, yes, the message is getting out."

James Cameron with the Carbon Disclosure Project says he's happy with corporate awareness.

"I think there's still a lot of work to do to get the right policy frameworks in the U.S. to be enacted and implemented and to cause the change that needs to take place here. But I'm much, much more encouraged by the level of awareness and engagement and commitment to make those changes, and I think the business community is very obviously changing to be a positive force for the shift in policy that we need. It's critical for the rest of the world because for many, many reasons, people wait to see what the U.S. does before they act themselves, and if we can get clear signals that the U.S. is doing something significant on the climate change issue at all levels of society where business is fully engaged, it will have a profound effect–a multiplier effect–on the rest of the world. They're not going to be put at a competitive disadvantage, and indeed, the markets that we create and the technological solutions and the business and finance solutions will be that much bigger, that much more attractive."

A report by the Climate Group shows Texas leads the nation in oil consumption and greenhouse emissions, but also leads in renewable energy–especially wind power.


Federal Reserve Chairman Ben Bernanke warns that economic growth remains at risk, providing a fresh signal that interest rates are likely headed lower. Bernanke tells the House Financial Services Committee that “the economic situation has become distinctly less favorable” since the summer. While the job market, credit crunch and housing market are all worsening, Bernanke also says the central bank has to keep an eye on inflation. Oil prices hit new trading highs and recent reports on inflation have come in higher than expected. The Fed started lowering a key interest rate in September. It has recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points–the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting on March 18th.


If you are looking for a sign that the housing market has bottomed, you won’t find it in the report covering January new home sales. The Commerce Department says new home sales fell 2.8 percent in January, marking the third straight monthly decline. The drop puts sales at the slowest pace in nearly 13 years. The median price of a new home fell to $216,000, down 4.3 percent from December and at the lowest level in more than three years. Analysts look for the housing market to weaken further. Rising foreclosures are forcing more homes onto the already saturated market. In January, while the inventory of unsold homes dropped, the pace of sales activity slowed as well. As result, the number of months it would take to exhaust the current inventory rose to 9.9 months, the longest period in more than 26 years. Earlier this week, a real estate trade group reported that sales of previously owned homes fell 0.4 percent.


The Euro has hit a record high against the dollar in European trading, peaking at nearly $1.51. Europeans think the U.S. Federal Reserve is going to continue cutting interest rates. The surging Euro affects tourists, along with exports and imports. Americans traveling in Europe are having to pay more for everything from hotel rooms to museum tickets to chocolates. At the same time, Europeans coming to the U.S. are getting some really good deals for their money. The higher Euro also makes goods from the Euro-zone more expensive for customers abroad. Either that or European manufacturers will have to give up some of their profits if they want to keep the U.S. dollar price of their products constant.


The U.S. Supreme Court seemed inclined to reduce a $2.5 billion punitive damage award to victims of the Exxon Valdez disaster. Several justices indicated they think the amount approved by a federal appeals court is too high. However, there appeared to be no consensus about how much Irving-based Exxon Mobil should have to pay for the 1989 accident. The Exxon Valdez was a 987-foot tanker that ran aground on a reef and dumped 11 million gallons of oil into Alaskan waters. Justices Anthony Kennedy and David Souter suggested that perhaps a reasonable number would be twice the amount of money the company has paid to compensate victims for economic losses. That would be about $1 billion. Overall, Exxon has paid $3.4 billion in fines, penalties, cleanup costs, claims and other expenses resulting from the worst oil spill in U.S. history.


Microsoft has been slapped with a huge fine. The European Union says the American software giant charged rivals too much for information on its software and is ordering it to pay $1.3 billion. EU regulators says Microsoft set “unreasonable prices” for developers of software products compatible with the company’s windows operating systems. Microsoft says the fines involve past issues that have since been resolved. It says it’s abiding by new principles to make its products more open. The European fine is the largest ever for a single company. It’s also the first time the EU has penalized a business for failing to obey an antitrust order.


US Airways is the latest airline to charge passengers for carrying luggage. The carrier says it will start charging fliers $25 to check in a second bag. Carriers are looking to raise revenue at a time of rising fuel and other costs. The announcement follows a similar policy change disclosed early this month by United Airlines. A US Airways spokesman says the baggage charge is expected to generate $75 million in revenue and cost savings each year. In the past, some eight percent of US Airways customers have checked more than one bag. Under the new program, fliers will get one checked bag free plus their carry-on bags. US Airways already charged customers who checked between two and nine bags $80 per extra bag, and they are now boosting that charge to $100. Those in the company’s frequent flier programs who reach preferred status won’t have to pay the fee, nor will those flying First Class. United made a similar announcement recently.


Jewelry retailer Zales announced it will close more stores and cut 20 percent of its headquarters staff in a cost-cutting move. Irving-based Zales is attempting to save more than 65 million per year. The company will close another 23 stores, bringing to 105 the number it expects to shutter by the end of July. That would leave about 2,145 stores and kiosks under several brands including Zales Jewelers and Piercing Pagoda. Zales says it will lay off 140 people and eliminate 140 unfilled positions at its headquarters in suburban Dallas. Most of the $4 million in severance-related and other costs will be recorded in the company’s fiscal third quarter–which ends April 30th. Zale has struggled through weak holiday seasons, plus is facing signs of a slowdown in spending by middle-class consumers.


Overwhelming but not unanimous. That’s the final vote by members of the Writers Guild of America to accept a new contract. About 94 percent of the more than 4,000 votes cast in Los Angeles and New York were in favor. That means fewer than half the writers who were eligible to vote did so. It’s hard to tell if those who didn’t vote were protesting the contract or if they just didn’t bother to vote. Either way, a union leader says “this contract is a new beginning for writers in the digital age. It ensures that guild members will be fairly compensated for the content they create for the Internet.” The 100-day strike by writers against producers and studios had devastated the entertainment industry.

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