A 32.5 Percent Solution?
Airline woes continued. Delta pilots tentatively agreed to a 32.5 percent pay cut that could save the airline $1 billion a year in operations, in exchange for options on 15 percent of company shares, but executives warned Delta might still seek bankruptcy reorganization if creditors do not agree to reschedule debt. The parent of discount airline ATA, meanwhile, filed for bankruptcy protection and shed assets, while newly relaunched Independence Air reported it would raise fares and cut service to stem mounting losses.
Family of Steel
London's Mittal family will buy International Steel Group -- the remnants of the storied Bethlehem, Weirton and LTV operations in the United States -- for $4.5 billion, creating the world's largest steel company. Starting from a plant in their native Calcutta, the Mittals built a global empire buying newly privatized mills, mostly in Eastern Europe. Now they will add U.S. plants purchased out of bankruptcy by "vulture" investor Wilbur L. Ross Jr., who will turn a quick $2.4 billion profit for himself and his investors.
Oil companies' profits soared on record-high oil prices. Third-quarter earnings were up 119 percent at Royal Dutch/Shell, 62 percent at ChevronTexaco, 56 percent at Exxon Mobil and 54 percent at ConocoPhillips. By one estimate, the seven largest western oil companies will generate more than $70 billion in free cash this year. Companies are using the cash to fatten dividends and buy back stock but have been reluctant to increase drilling and exploration based on assumptions that prices will remain at current levels.
China's central bank raised benchmark interest rates, the first in what is expected to be a series of steps to further slow the Chinese economy, deregulate the country's banking system and ultimately allow the yuan to float on world currency markets. The announcement sparked a decline in the futures price for oil and other commodities. The rate moves are meant to cool an overheated real estate market and debt-driven consumer spending, but could also put extra financial pressures on money-losing state enterprises.
The Securities and Exchange Commission loosened regulations that prevent executives from speaking publicly about their companies in the weeks before a securities offering. With two Republican members dissenting, the commission also required hedge funds to disclose basic information about their operations. Industry officials warned that registration will lead inevitably to full-blown regulation that will stifle innovation and reduce returns at the highly secretive funds, which now manage $870 billion.