Friday PM May 1st, 2009

Reliant Energy closes sale of its retail power business to NRG Energy…Continental Airlines cuts back on Mexico flights because of H-1-N-1 virus outbreak…Asian-American College and Career Day set for Saturday morning at Sharpstown High School…

Reliant Energy closed the sale of it retail power business to New Jersey-based NRG Energy in a $287.5 million deal and $65 million in working capital. The retail business will continue to function as a self-contained business unit doing business as Reliant Energy. As a result of the acquisition, NRG expects price reductions to take place almost immediately. NRG says customers will benefit from the company’s ability to back its Reliant operation with its own electricity, cutting out the middlemen. Sponsorship arrangements with Reliant Park and Reliant Stadium will continue. NRG says Reliant serves more than 1.7 million residential, business, commercial and industrial customers.

Continental Airlines is temporarily cutting back on flights to Mexico because of lower demand since the outbreak of the H-1-N-1 virus. Continental is also working smaller planes into some scheduled flights to Mexico, as it cuts capacity by half starting Monday. Departures will be cut by about 40 percent because of flu concerns. The Houston-based air carrier had been averaging 450 flights a week to 29 destinations in Mexico. Fewer than half the available seats were booked on flights leaving Houston Thursday night. Continental’s Dave Messing says flights heading back north, though, have been full. Continental Chairman and CEO Larry Kellner says airlines have already been experiencing soft market conditions due to the economy, and now the Mexico routes in particular have extra weakness. Itinerary changes are available without penalty through May 31st. Fort Worth-based American Airlines reports some of its passengers have been changing travel plans or requesting refunds.

Carnival Cruise Lines will be staying away from Mexican ports of call longer than previously expected because of the swine flu. The company said it has modified itineraries through May 11th to avoid the country–a week longer than Carnival announced earlier. Most ships are stopping at alternate ports. Some trips are even being lengthened. Four- and five-day cruises from Galveston and New Orleans have been turned into seven-day voyages. The five-day passengers can take the extended trip for free, but four-day cruisers will have to pay a little extra. Those guests can also rebook or get full cash back. Passengers with less drastic itinerary changes will also have the option to rebook a future cruise.

Stewart Information Service has cut about three percent of its work force, or about 170 jobs. The Houston-based title insurer reported a net loss of $42 million on revenue of $313.5 million for the first quarter. It reports fewer closed title orders during the quarter, with steep investment losses of nearly $9 million. Stewart has cut its payroll by nearly 30 percent since the end of 2007.

Houston-based Texas Petrochemicals is idling some chemical processing and production lines at its Houston and Port Neches facilities, laying off 75 workers, or 15 percent of its work force. The move will cut $25 million in annual costs. Texas Petrochemicals sells chemicals to make synthetic rubber, fuel additives, plastics and detergents.

Independent petroleum producer Partners Limited says it’s filed to reorganize under Chapter 11 bankruptcy protection. The New Orleans-based company announced its filing in a Houston bankruptcy court today. It also announced that it’s reached a deal with senior creditors on restructuring terms to substantially reduce the company’s long-term debt. Energy partners says the company and its subsidiaries will continue to manage their properties and operate their businesses “in the ordinary course” during the Chapter 11 process.

A private group’s measure of the manufacturing sector’s health shows slower contraction in April than in the previous month, a possible sign that the economy is stabilizing. A trade group of purchasing executives says an index of manufacturing activity rose to 40.1 in April from 36.3 in March. A reading below 50 indicates a contraction. Economists had expected the index to rise to 38 in April. The index is based on a survey of members of the Tempe, Arizona-based Institute for Supply Management. The index fell steadily as the economy deteriorated and hit a 28-year low in December. The report covers indicators including new orders, production, employment, inventories, prices, and export and import orders.

The government says orders to U.S. factories fell a larger-than-expected 0.9 percent in March, while factory shipments dropped for a record eighth consecutive month. The report was further evidence of the severity of the recession. The Commerce Department’s reported decrease exceeded the 0.6 percent fall economists had been expecting. Shipments of manufactured products tumbled 1.2 percent, an eighth consecutive decline. It marked the longest stretch of decreases on records going back to 1992. American manufacturers have been battered by a prolonged recession in the United States and spreading weakness overseas that has sharply reduced their foreign sales.

A government official says the Federal Reserve will release “stress tests” results for the nation’s biggest banks on Thursday. Deliberations between banks and regulators about the tests’ results pushed back the release date, which initially was expected to be earlier in the week. In addition to an overall snapshot of the health of the 19 large banks being assessed, the Fed will provide details about individual banks, according to the official. The Fed will describe the resources banks would need to absorb losses on certain types of loans and investments under adverse economic conditions. Last week, Fed officials said that all 19 banks that underwent stress tests will need to keep an extra buffer of capital reserves beyond what’s now required, in case losses continue to mount. That would mean some banks will likely have to raise additional cash.

Attorneys for Chrysler plan to ask a federal bankruptcy judge Monday to let the ailing automaker start using a new infusion of $4.5 billion in loans from the Treasury Department. That would allow it to operate under bankruptcy protection. At today’s hearing in a Manhattan bankruptcy court, a Chrysler attorney said the company will also file its motion to sell substantially all of its assets to Italian automaker Fiat Groupbefore Saturday morning. The moves, along with typical first motions approved at the hearing, set in motion a chain of events designed to ensure that the bankruptcy process is the quick and “surgical” one that Chrysler and the U.S. government have promised. Attorneys packed the courtroom for Chrysler’s first hearing since it filed for Chapter 11 bankruptcy protection Thursday with an ambitious plan to emerge in as little as 30 days as a leaner company aligned with Fiat.

R. Allen Stanford, accused by federal regulators in a civil complaint of running an $8 billion investment fraud, tried to turn himself in to federal marshals in Houston, but they didn’t take him into custody because there is no warrant out for him. The Houston Chronicle reported in its online edition Thursday that Stanford and his lawyer marched the few blocks from Dick DeGuerin’s office to the federal courthouse to “surrender.” DeGuerin said they were taking those measures to show that Stanford wasn’t running and to show Stanford is available to authorities. The Securities and Exchange Commission has accused him of running a ponzi scheme. Stanford has denied the allegations and said if there was fraud, he wasn’t involved in it. Justice Department attorney Paul Pelletier declined comment.

AAA Texas reports the average retail rice of regular, unleaded gasoline in Houston dropped about three cents this week to $1.92. Statewide, the average price was also down three cents. The national average is at $2.05 per gallon.

Shoppers around the globe are cutting optional purchases, turning to cheaper store brands for everyday items. That’s hurting the financial showing among companies like Procter & Gamble, Colgate-Palmolive and Kellogg. P&G reported a drop in quarterly profit for the first time in eight years. It forecast full-year sales will drop as well. Cereal and snack-maker Kellogg says sales were off three percent but its profit climbed two percent behind cost cutting. And while P&G rival Colgate-Palmolive saw first-quarter profits up nine percent on higher prices and cost cuts, revenue was down six percent. Even grocery-store operator Safeway, which has seen sales of its store brands remain strong as consumers keep spending down, lowered its full-year outlook. Its first-quarter report showed revenue down eight percent and profits down 25 percent.

The status of hundreds of decisions by the leading federal agency that referees labor management disputes is being placed under a legal cloud. This, after conflicting federal appeals court rulings issued virtually simultaneously. The U.S. Court of Appeals in Washington held that all the decisions handed down last year by the National Labor Relations Board are invalid because they were made by just two members. The U.S. Court of Appeals, in Chicago, took the opposite position, ruling within the same hour that the votes were appropriate and binding. The board normally is supposed to have five members. But it had worked with three vacancies for a year because Democrats who controlled Congress objected to President George W. Bush’s labor policies and refused to confirm nominees considered too pro-business. With the appeals court decisions at odds, the Supreme Court is more likely weigh in on appeal on what one industrial relations Professor Gary Chaison called “a terrible mess.”

The Securities and Exchange Commission is considering changing a formula that critics say often allows public companies to low-ball in regulatory filings just how much top executives are paid. At issue is how companies report in a summary compensation table found in their annual proxy statements the totals for stock options and stock awards, which often make up most of top executives’ pay. When the rules were last revised three years ago, the SEC directed companies to include a figure that is based only on how much of a charge against earnings is taken each year for the portion of those awards that vested during the year. Executive pay experts say a better gauge of what boards of directors consider when setting pay levels is the estimated present value of all stock-based awards on the day they are granted. But the 2006 SEC rules relegated those totals to a separate table lower in the proxy statement that investors often overlook or find hard to decipher.

Some CEOs taking a hit in the recession are being set up for a potential windfall when things improve. Their companies are already making adjustments that could mean fatter paychecks in the future. The AP found that some boards have changed the rules to make it easier for executives to qualify for bonuses. Others are doling out more stock options, which give executives the right to buy shares in the future at prices locked in today. An Associated Press analysis shows the median pay package for CEOs of companies in the Standard & Poor’s 500 index fell seven percent in 2008. But it’s still $7.6 million. Of the ten CEOs who took the biggest pay cuts last year, four were heads of financial services companies. CEO pay expert Jesse Brill of the Web site calls this a “watershed opportunity” for executive compensation but fears many boards won’t enforce significant change.

People with knowledge of the matter say the Federal Reserve is considering allowing longer loan terms in a program aimed at bolstering commercial real-estate lending. The aim is to make the yet-to-be-launched program more attractive to investors. To that end, the Fed is weighing providing investors with five-year loans, versus the three-year loans now available to jump-start consumer credit, according to the people familiar with the matter. Both the consumer and the commercial real-estate components are part of the Term Asset-backed Securities Loan Facility, or TALF. It figures prominently in government efforts to ease the financial crisis.

The Federal Reserve says commercial banks borrowed more over the past week from its emergency lending program, while investment firms drew less. The Fed says commercial banks averaged $44.8 billion in daily borrowing over the week that ended Wednesday. That was up from $43.1 billion in the week that ended April 22nd. Investment firms drew $5.5 billion over the past week from the Fed program, down from an average of $9.2 billion the previous week. The identities of financial institutions are not released. They pay just 0.50 percent in interest for the emergency loans.

The Obama administration has put 12 nations on a consumer piracy “watch list.” It says they have failed to sufficiently protect American producers of copyrighted material including music and movies. The action will mean extra scrutiny for the countries listed and could eventually lead to sanctions if the U.S. decides to take any cases before the World Trade Organization. Among the 12 countries are China, Russia and even Canada. It’s the first time Canada has been put on the list. The administration says Canada needs to implement copyright reforms and do more to police its borders and seize pirated goods. U.S. trade representative Ron Kirk also notes that nowadays, creative and innovative products can hit the global marketplace with just a keystroke. He says intellectual property rights can vanish just as quickly if the U.S. and its trading partners aren’t vigilant.

The Asian-American College and Career Day is set for Saturday morning at Sharpstown High School on Bissonnet. Students are receiving information about business careers, as well as careers in communications, counseling and social work, education, engineering, fine arts, health care, medical information technology and law.

The number of rigs actively exploring for oil and natural gas in the United States fell by ten this week to 945, down nearly half from a year ago. Of the rigs running nationwide, 741 were exploring for natural gas and 196 for oil, Houston-based Baker Hughes reported. A total of eight were listed as miscellaneous. A year ago, the rig count stood at 1,839. The U.S. count is down 53 percent since the end of August as weak energy demand has hampered oilfield activity. Oil prices peaked at almost $150 a barrel in July before plunging. Light, sweet crude for May delivery rose $2.22 to $53.34 a barrel in trading Friday on the New York Mercantile Exchange. Of the major oil- and gas-producing states, Texas lost three rigs. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.

Earnings Ford says its April sales fell 32 percent, but the company gained market share on record retail sales of its midsize Ford Fusion. Dearborn, Michigan-based Ford sold 133,979 light-vehicles in April, compared with 195,665 for the same month last year. Sales rose from March to April, with Ford selling 2,878 more cars. Ford says it sold a record number of fusions, as the company rolled out its 2010 gas and hybrid versions of the car. The company said April marked the sixth time in seven months that it gained retail market share.

Chevron says its first-quarter profit fell 64 percent as it, along with competitors, was stung by lower oil and natural gas prices. Chevron, the second-largest U.S. oil company, said its profit for the first three months of 2009 amounted to $1.84 billion. That compared with $5.17 billion in the quarter a year ago. The most-recent result included gains of about $400 million for the sale of assets. San Ramon, California-based Chevron says total revenue fell 45 percent to $36.1 billion from $65.9 billion a year ago.

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