Glenn Tilton, chairman and chief executive of UAL (UALAQ), is finally in the homestretch of United Airlines' bankruptcy. Nearly 30 months after Tilton put money-losing United into Chapter 11, management reached a tentative contract on May 31 with the last of its labor unions on a second round of wage and benefit cuts.
The pact with the International Association of Machinists & Aerospace Workers came only hours after members of the Aircraft Mechanics Fraternal Assn. approved a 3.9% cut in pay. All together, employees have given up $700 million a year this spring. That's on top of $2.5 billion in givebacks in 2003. Earlier in May, Tilton won bankruptcy court approval to dump United's pension obligations on the government's Pension Benefit Guaranty Corp., saving $645 million a year.
Tilton could still stumble. He must line up new financing and get the judge's blessing on a restructuring plan. But that will be a lot easier now that he has gotten what he wanted from labor.
Global warming may not be a big concern of the Bush Administration, but the Terminator is forging ahead anyway. On June 1, Republican Governor Arnold Schwarzenegger announced a new plan to cut California's emissions to 1990 levels by 2020 and to 80% below 1990 levels by 2050. State officials fear such a climate change could lead to water shortages and more forest fires in California. They also see big markets for local companies that offer alternative energy sources and technologies to reduce emissions. Schwarzenegger is getting kudos just for tackling the issue and breaking with the White House, but some environmentalists wish that the plan set stricter targets and had more teeth.
A kinder, gentler Fannie Mae (FNM) -- or more of the same? The June 1 permanent appointment of Acting Chief Executive Daniel Mudd to the top job signals a break with the housing giant's past politics, but not with its business model. Mudd, 46, has served as a calming influence for the past six months, apologizing for Fannie's accounting scandal, yielding to calls for new regulation, and reining in Fannie's arrogant lobbyists. In that, he differs from former CEO Franklin Raines, who was forced out last December. But critics were quick to note that Mudd was Raines's No. 2 during the three years when aggressive accounting for hedging racked up $11 billion in misstatements -- and that he's resisting a White House push for new caps on Fannie's profitable mortgage portfolio.
SBC Communications (SBC) sent a jolt through the broadband Internet market on June 1 by slashing its price for DSL service by 25%, to $14.95 a month. The move pulls broadband below the cost of dial-up service for the first time and puts pressure on providers such as AOL (TWX) and Earthlink (ELNK). But SBC is also aiming to hold off its cable rivals, which serve about 57% of broadband households in the U.S. SBC's price cut lowers its bundle of local and long-distance telephone service, plus Internet service, to $59.54. That competes more favorably with cable operators such as Cox Communications that have invaded SBC's turf with bundles of similar services for about $60.
After months of on-again, off-again negotiations, the U.S. and European Union are asking the World Trade Organization to rule on their dispute over aircraft subsidies. On May 31 the U.S. Trade Representative officially complained to the WTO that European governments have unfairly helped European planemaker Airbus develop new aircraft, by providing loans that only have to be repaid if the plane is commercially successful. The EU fired back that Boeing (BA) has received billions in tax breaks and indirect government aid. Both sides say they are willing to seek a negotiated settlement.
-- Without admitting or denying guilt, Citigroup (C) paid $208 million to settle fraud charges by the SEC.
-- The government is probing engine-stalling in Toyota's (TM) Prius hybrids.
-- EBay (AMTD) will acquire Shopping.com for $620 million in cash.
Kohl's (KSS) shares surged 4.9%, to $51.05, after the value-priced apparel retailer reported better-than-expected May sales on June 1. The 0.2% sales gain at stores open at least a year convinced investors that Kohl's efforts to enliven its wares are paying off.