Companies Hobbled by Uncertainty

GM to Trim Production; 2 Big Mergers Scrapped

There was no outbreak of relief yesterday for a wide variety of American corporations that are still facing tight credit markets, uncertain economic prospects and fluctuating stock prices.

Two big mergers fell through, corporations began lowering earnings forecasts, General Motors said it would cut production at three plants, and General Electric's chief executive said "you'd be crazy" not to worry about the cancellation of orders for expensive equipment.

Weeks of financial uncertainty are already altering plans at companies across the country, even though euphoria gripped stock markets yesterday as investors welcomed government financial rescue plans and searched for bargains amid battered shares.

Waste Management, the nation's biggest trash hauler, dropped its $6.7 billion hostile bid to take over its smaller rival, No. 3-ranked Republic Services, citing the financial crisis. "Given the current state of the financial markets, we believe that it would not be prudent to continue to pursue the acquisition of Republic," the company said yesterday. Waste Management's shares jumped 18 percent; Republic's share rose 9 percent.

United Technologies also abandoned its $2.6 billion offer to buy ATM manufacturer Diebold, saying Diebold had refused to provide financial information. But United Technologies' appetite for Diebold had been fading for several weeks.

In the latest blow for the reeling automobile industry, GM said it would stop producing sport-utility vehicles at a Wisconsin plant, close a Michigan metal stamping plant by the end of the year and shut down a Wyoming plant by the end of 2009. The Wyoming plant alone employs about 1,340 hourly and 180 salaried workers.

GM's consumer finance arm, GMAC, also announced that it would limit auto loans to customers with better credit scores than were needed in the past. It also said that it would raise by 0.75 percentage points the rates charged to dealers for buyer loans.

To qualify for a car loan, consumers will now need credit scores of at least 700. Scores range from 300 for poor ratings to 850 for perfect records. The tightening of standards is designed to protect GMAC against possible defaults, but it will also make it more difficult for some customers to purchase new vehicles.

Speaking to the Detroit Economic Club yesterday, National Association of Manufacturers president John Engler called on the government to expedite the $25 billion low-interest loan package for domestic car manufacturers that Congress recently approved. The Department of Energy is currently writing program rules, which it hopes to complete by the end of November.

"It's not a time for meetings, this is a time for action," Engler said. "If the Energy Department can't work through the weekend and get this done, then they need to stand aside and let the Treasury Department take the lead."

Although the auto industry is suffering the sharpest and most immediate downturn in business, other areas of the economy could soon report substantial declines in sales. Microsoft co-founder Bill Gates, speaking at a conference at Harvard Business School, said the United States is heading for a "fairly significant recession" that might push unemployment as high as 9 percent.

At the same conference, General Electric chief executive Jeffrey Immelt's comments failed to reassure investors. GE was one of only a handful of the nation's biggest companies whose stock fell yesterday.

"I'm pretty optimistic now. Government always wins, and government is going to win this one," Immelt said. But he added that while GE, the world's biggest maker of jet engines and power-plant turbines, has not seen any orders canceled as a result of financing problems, "I think you'd be crazy if you didn't worry about it." He said that if governments can stabilize financial markets, a recession might last only two quarters.

Other companies began reining in their projections. BE Aerospace, the world's largest maker of aircraft interiors, cut its earnings forecasts through the end of 2010, blaming high fuel costs and upheaval in the financial world. Amin J. Khoury, the company's chief executive, said in a statement that "the near-term outlook has significantly deteriorated."

He added that "global macroeconomic trends have become increasingly negative over the past couple of months." The airline industry was already battling high fuel costs and a sharp drop in traffic in August, and now, he said, "the business jet industry has also begun to be negatively impacted by the weakened global economy, lower corporate profitability, high jet fuel costs and difficulty in arranging new aircraft financing."

Staff writer Kendra Marr contributed to this report.