Tightening Belts at GM
General Motors announced it would reduce capacity and shed 25,000 more jobs over the next three years -- an acknowledgment that it may lose its spot as the world's top automaker. Chairman G. Richard "Rick" Wagoner pressed unions to provide relief on soaring health care costs, but union leaders said lousy product design, not labor costs, have caused GM's problems. Rival Toyota, meanwhile, announced it would raise U.S. prices to avoid precipitous declines at Ford and GM that might inflame trade friction.
The Apple of Intel's Eye
Apple Computer announced that it would switch to Intel chips to power its next generation of products. The move ends one of the oldest commercial rivalries in the tech sector, and it means Apple will use the same semiconductors to power its computers that are used to power Windows-driven PCs. Analysts said the transition would give Apple the faster processing speed it needs to launch a wider range of new consumer products as growth slows on its hot-selling iPods and cool-looking Macs and PowerBooks.
A report by the Pentagon's inspector general blames the White House, Defense Secretary Donald H. Rumsfeld and other top civilian officials for trying to push through an Air Force tanker deal to help Boeing retain jobs and boost sales during a difficult period. The report charged the tankers weren't urgently needed, procurement rules were broken and the proposed lease arrangement was overpriced. Northrop Grumman announced it would team with the parent of Boeing's European rival, Airbus, when and if the contract is reopened for competition.
Warnings on Pensions
Delta and Northwest airlines warned they would be forced to follow their competitors into bankruptcy protection unless they are given more time to bring employee pension plans up to full funding. And they aren't alone: The government reported that corporate plans nationwide are underfunded by $353.7 billion, thanks in part to loose funding rules. House leaders introduced legislation to raise premiums on government pension insurance and to bar companies from sweetening pension plans unless they were fully funded.
Fed Chairman Alan Greenspan acknowledged heightened concern about regional housing markets where prices have reached "unsustainable levels." He cited increased reliance on "exotic" new types of loans that allow homeowners to put less money down and pay less in monthly fees, but leave them (and their lenders) more vulnerable to a spike in interest rates or a decline in housing values. Meanwhile, Merrill Lynch reported that rich Americans, no doubt sensing a market top, have reduced their real estate investments.