Boeing Might Close Troubled 717 Program
Boeing Co. said it might stop production of the money-losing 717 jetliner, the last jetliner built in Southern California.
The long-troubled 717 program employs more than 3,000 workers, all that remains of a work force at the former Douglas Aircraft facility that numbered more than 40,000 in the 1980s. The fate of the plant, a buttress of the Long Beach economy, has been uncertain for at least a decade.
Sales of the 106-seat plane were sluggish before Sept. 11. But the airline industry’s massive losses and schedule cuts since the terrorist attacks are slowing production of commercial jets generally and putting pressure on Boeing to reevaluate all of its programs to cut costs.
Boeing, in announcing its third-quarter financial results, singled out the 717 as “the one production line in question.” The Chicago-based aerospace giant is mulling over various plans “including stopping production.”
Boeing also said its third-quarter profit--excluding $100 million in one-time costs related to severance programs for thousands of workers that Boeing is laying off--rose 14% from a year earlier. The results were in line with analysts’ expectations.
Airlines’ Results Give a Post-Attack Glimpse
The major airlines began reporting their third-quarter results, providing the first details of how the attacks and the subsequent plunge in airline travel are hampering the carriers. Southwest Airlines and Alaska Air Group Inc. managed profits for the three months ended Sept. 30 but acknowledged that they’ve been losing money since the attacks.
And the financial damage is expected to be much worse at the other major airlines, which are due to post their third-quarter results in the coming days. AMR Corp., the parent of industry leader American Airlines, is scheduled to unveil its quarterly results Wednesday.
The airlines say passenger traffic is steadily, if slowly, climbing, but the carriers still are hurting because much of the added travel is being spurred by promotional discount fares that don’t cover the airlines’ costs.
So the airlines keep slashing expenses to survive. UAL Corp.’s United Airlines slashed its service out of Los Angeles International Airport by nearly 40%, effective Oct. 31, and UAL Chairman James Goodwin warned that United might “perish” if its financial health doesn’t improve. Delta Air Lines Inc. said it’s ending its LAX-to-Tokyo service effective Dec. 1.
But British Airways and Air France announced that the supersonic Concorde will resume service more than a year after a fatal Concorde crash in France grounded the bird-shaped jets. Initial demand was brisk for Concorde tickets, which cost more than $6,000 for a one-way trip across the Atlantic.
Microsoft Profit Lowest Since 1997
Microsoft Corp. reported its lowest quarterly profit since 1997 as it racked up $1.2 billion in investment losses. But the company’s software sales were better than Wall Street expected, given the sagging demand for personal computers.
The world’s biggest software company said earnings fell to $1.28 billion, or 23 cents a share, for its fiscal first quarter, from $2.2 billion, or 46 cents, a year earlier. Without the investment write-downs, mainly for cable and telecommunications holdings, Microsoft would have earned 43 cents, topping Wall Street estimates averaging 39 cents.
Its sales rose 6% to $6.13 billion because of rising demand for business software and programs that run corporate networks, which command higher prices than PC software.
Company officials said they did not see a huge impact from last month’s attacks, but the company trimmed its profit targets for the current quarter and its fiscal year.
Auto Makers’ Earnings Stall
Revved-up sales at the start of this month have the major auto makers hoping that the industry will recover from the steep downturn that followed the Sept. 11 attacks. But the third quarter, nonetheless, was stained by red ink, as both General Motors Corp. and Ford Motor Co. posted losses.
GM, No. 1 in U.S. and global sales, posted a loss of $368 million including one-time charges, though it remained profitable on an operating basis. The company blamed underachieving foreign operations, slowing fleet sales and rising marketing costs. No. 2 Ford reported a loss of $692 million, including $502 million from operations, citing production cuts after the attacks and the costs of an interest-free financing offer designed to match GM incentives and lure customers back to showrooms.
Even before posting their earnings, the companies were dealt a setback when Standard & Poor’s reduced their long-term corporate credit ratings to the third-lowest investment grade.
Sony Pictures to Trim Television Operations
Sony Pictures Entertainment is expected to dramatically pare its TV operation and cease further development of new prime-time network programming.
Sony insiders indicated the decision to scale back production arm Columbia TriStar Television follows an internal financial review of all studio operations.
The studio declined to discuss its plans, but sources estimated 50 to 70 employees could be let go over a period and that deals with writing and producing talent would be allowed to lapse. A core staff probably will be left to supervise the studio’s existing programs, which include “The King of Queens” and “Dawson’s Creek.”
Rising programming costs and a softening economy have taken a toll on all of the television industry. A major withdrawal by Sony would be the latest sign of network television’s worsening economic picture and would leave the production community with fewer outlets to vie for their services.
WellPoint Agrees to Buy RightChoice
WellPoint Health Networks took an expensive step toward becoming a national health-care company with its agreement to buy a well-regarded Midwestern managed-care company for $1.3billion.
The purchase of RightChoice Managed Care of St. Louis is the latest in a string of acquisitions by WellPoint, which since 1997 has picked up insurers in Georgia, Illinois and the mid-Atlantic region to diversify beyond California.
WellPoint, based in Thousand Oaks, is the parent of Blue Cross of California, the state’s second-largest managed-care organization next to Kaiser Permanente. RightChoice operates Blue Cross-Blue Shield of Missouri.
Analysts said the deal is another sign of how cost pressures within the industry are causing health insurers to consolidate.
The largest managed-care firms have the most clout to negotiate better deals with pharmaceutical companies and spread their administrative costs over a broader revenue base, said Greg Crawford, an analyst with Fox-Pitt Kelton Inc. in San Francisco.
Patriotism Boosts L.A. Garment Industry
New orders for flags and apparel are providing a shot in the arm to Los Angeles-area garment contractors, who have been rehiring laid-off workers to help meet demand.
Production of flags, patriotic T-shirts and other Americana has swelled in the wake of the terrorist attacks.
At the same time, tightened borders with Mexico and global trade uncertainties have persuaded a number of apparel companies to contract for work closer to home.
Skeptics, however, are not sure how long the good times will last. Apparel employment in Los Angeles County has declined to 97,600, down from 112,000 five years ago. And if shipping problems subside and international turmoil diminishes, many contractors believe that companies will again contract work with the cheapest foreign manufacturers they can find.
Stock Indexes End Week Lower, Breaking Streak
Major stock indexes finished in the red last week, breaking a three-week string of positive weekly returns.
The Dow Jones industrial average lost 1.5% for the week, the Standard & Poor’s 500 index was off 1.7% and the Nasdaq composite index fell 1.9%.
The losses came on the first big week of corporate earnings reports for the third quarter. A raft of companies reported steep profit declines or outright losses. Although expected in many cases, the dismal reports still painted a gloomy picture of the state of the U.S. economy. Worse, many companies were unable to provide much guidance to Wall Street of when business might improve.
In addition, the pall of the national anthrax scare continued to hang over investors, who were clearly unnerved as new cases of exposure or infection were reported on a daily basis.
Home Prices Rise in L.A., Orange Counties
Although home sales retreated in Los Angeles and Orange counties last month, prices continued to rise at a sizzling pace, according to the first statistical report of the region’s housing market after the terrorist attacks.
Sales of new and existing homes fell 6% last month in Los Angeles County and more than 10% in Orange County. That came after double-digit percentage gains in combined sales for July and August for both counties, according to a report by DataQuick Information Systems Inc., a La Jolla real estate research firm.
Even though the latest figures showed that home sales were softening in the days before the attacks, there was not a sharp drop after the events of Sept. 30. DataQuick’s report is based on escrow closings, which reflect sales agreements from the previous 30 to 60 days.
Ford to Launch Think City Electric Car
Ford Motor Co.’s latest for California isn’t the hot new Thunderbird roadster or the Lincoln Blackwood truck but a bug-like, plastic-bodied, battery-powered two-seat hatchback called the Think City.
Think City gets its official launch in the U.S. late next spring or early summer.
