Another Day, Another Few Big-Name Warnings (Updated)

What's bad for General Motors is still bad for America.

The world's largest car maker said Tuesday that it will can 16,000 workers worldwide, or 4 percent of its total workforce.

It also joined the other two of the big three-- Ford Motor and DaimlerChrysler--in warning that it would miss earnings estimates.

GM also said it will close an engine plant in Lansing, Mich. and a passenger car production plant in Luton, England.

It will also phase out Oldsmobile, its longest- survivingbrand, as part of a larger restructuring.

These announcements will have a ripple effect on the economy, impacting parts suppliers, dealers and companies that serve them.

Even the local sandwich shops and newstands are affected by these moves.

Meanwhile, over in computer land, Compaq Computer Corp. said it would miss quarterly earnings and revenue estimates. Thus, the world's No. 1 personal computer maker joins a rash of other computer makers, chip makers and printer makers who have warned about unexpected slowdowns.

Compaq blamed businesses as well as consumers for the shortfall. Most worrisome: It said it is experiencing a slowdown in demand for its low-end servers, especially the kinds sold to dot-coms.

However, it said major corporations are still rolling out spending plans.

Compaq also said it expects to take a non- cash, non-operating charge of ``somewhat more than'' $1 billion in the quarter to reflect the decreased value of chiefly Internet-related investments.

Other Earnings Disappointments

• Whirlpool Corp. said that fourth quarter sales would come in below expectations because of a decline in the appliance market, and that it would restructure its business and cut jobs in 2001, incurring charges of between $300 million and $350 million.

• Claire's Stores Inc. said fourth-quarter earnings would come in below expectations. It said earnings would amount to between $0.70 and $0.80 per diluted share in the fourth-quarter ending Feb. 3, much less than the consensus forecast of $1.12 per share.

• Delphi Automotive Systems cut its fourth- quarter and 2001 earnings forecasts and plans to sell some factories and warehouses, consolidate corporate functions and step-up cost cutting overall. It also said it will turn around or sell underperforming business units that account for between $4 billion and $5 billion.

• Ask Jeeves Inc. said it will cut 25 percent of its workforce and take a fourth quarter charge of $10 million to $12 million for a restructuring. It recently issued an earnings warning and its CEO resigned.

• Praxair Inc. said it will lay off about 750 people, or about 3 percent of its work force. It also said it will take a $150 million, pretax charge against its fourth-quarter earnings.

Workers Take Chairman Hostage
Hundreds of Korean bank workers held their chairman hostage Wednesday. The reason: They oppose a planned merger that they fear would lead to layoffs.

Kim Sang-hoon, head of Kookmin Bank, one of South Korea's largest and healthiest banks, was being detained in his seventh-floor office by 300 employees.

The standoff began late Tuesday evening after reports that Kookmin Bank was mulling a merger with Housing and Commercial Bank, which is also deemed to be a healthy bank.

The merger announcement was scheduled for Wednesday.

About 2,000 Kookmin union members barged into their bank's head office in central Seoul and kept their bank chairman in his office. All but 300 returned home early Wednesday.

Ford, GM Take Stakes in Commerce One
Ford Motor Co. and General Motors Corp. will invest a total of $1.26 billion in Commerce One.

The transaction, in effect, makes Commerce One, a business-to-business software company, a partner in the automakers' Covisint online exchange.

Commerce One will issue to GM and Ford 14.4 million shares apiece, with each stake valued at about $631.8 million. The combined number of shares represents a 14 percent interest in Commerce One.

Half the shares for each company will be held in escrow until 2002. They will be released to Ford and GM upon satisfaction of certain conditions. If conditions are not met, the shares will be released to the two automakers in mid-2004.

Commerce One said it will restructure into a holding company and get a 2 percent equity interest in Covisint, the Internet exchange started by Ford, GM and three other automakers.

Commerce One's stake in Covisint will be held in escrow until the completion of the restructuring, on which Commerce One shareholders are to vote next year.

Commerce One will be entitled to a share of the revenue generated by the Covisint exchange for an expected 10-year term, as well as be paid for consulting services it provides to Covisint.

Microsoft Signs Permanent Pact
Well, it looks like the legendary temporary Microsoft workers will finally be invited to the company Christmas party.

The software giant has settled an eight-year class-action lawsuit, which claimed that Microsoft improperly denied benefits to temporary employees.

Microsoft has agreed to pay $97 million to an estimated 8,000 to 12,000 workers, according to The New York Times.

The figure is based on what these workers would have theoretically earned from a Microsoft stock option program if the shares were exercised and sold a year after they were held.

Microsoft has also denied these workers, who called themselves "perma-temps" health and pension benefits and even chose not to invite them to the annual Christmas party and summer outings.

These workers even had to wear different color badges than their full-time counterparts.

Inflation? Ask the Purchasing Managers
Commodity prices and wages continue to rise, and in some cases at rapid paces.

Harbinger of rising inflation? Rising interest rates?

Nope. At least according to people who should know—the purchasing managers. They report strong difficulty in passing on these costs to consumers.

According to a survey by the National Association of Purchasing Managers, only 13 percent in manufacturing and 25 percent outside manufacturing reported that their companies are able to pass along all or most rising costs to their customers.

Just one year ago, 17 percent of manufacturers and 36 percent of non-manufacturers were able to pass on the rising costs.

Most manufacturers—87 percent—and 75% of managers from non-manufacturers said they can pass only a few increases or none at all.

Pretty encouraging for the economy, but not for the companies' profit margins.

In general, manufacturing purchasers are "less than bullish about their orgnaizations' prospects," according to the survey.

Delta Flies Into Court
Delta Air Lines appealed a federal judge's refusal to force pilots to work overtime.

On Monday, U.S. District Judge Willis Hunt Jr. ruled that Delta couldn't prove that the Air Line Pilots Association had coordinated a campaign against overtime. However, Hunt did warn the pilots' union that he saw evidence of an ongoing and illegal concerted effort by the pilots to avoid overtime flights.

The airline said Hunt misinterpreted the Railway Labor Act, which prohibits ``self- help'' and other job actions by airline and railroad employees.

Delta a seeking an emergency injunction, which would require the pilots to resume the extra shifts. Delta says pilots flying overtime account for about 5 percent of its flights.

Hunt's ruling said that while he had ``found that there is an ongoing concerted effort on the part of Delta pilots to refuse overtime work,'' he was at a loss to determine who to enjoin related to the activity. He wrote that Delta also had not proved what roles the 49 pilots named in the lawsuit had played.

From the CFO.com "Brief" Case

• Ernst & Young reported a 14.1 percent jump in global revenue to $9.2 billion for the fiscal year ending June 30, 2000, up from $8.1 billion last year, marking its sixth consecutive year of double-digit growth. E&Y's corporate finance services surged 32.2 percent, tax and law grew 16.1 percent while audit and advisory business climbed 10.5 percent.

• Daimler Chrysler North America Holdings, a unit of DaimlerChrysler sold $1 billion in two-year floating rate notes, according to co-lead manager Banc of America Securities Inc.

• Amgen Inc. said it plans to repurchase up to $2 billion of its stock between January 1, 2001 and December 2002. The company also said Chief Executive Officer Kevin Sharer will take on the additional role of chairman as of January 1. Gordon Binder, Amgen's chairman since 1990, previously announced plans to retire at the end of this year.

• Standard & Poor's said engineering, construction and services provider Fluor Corp. would replace Massey Energy Co. in the S&P 500 index. The change will take place after the close of trading on Dec. 21. Massey is spinning off Fluor to Massey Energy shareholders.

• Rental store operator Rent-Way Inc., which in October began investigating possible accounting tricks used to boost earnings, said it asked President and Chief Operating Officer Jeffrey Conway to resign and that it faced an adjustment of at least $65 million.