TOP STORIES -- May 15-20
America West to Merge With US Airways
US Airways and America West Airlines agreed to a merger that would form the nation’s sixth-largest airline.
If completed, the proposed deal will join the airlines’ parent companies, US Airways Group Inc. and America West Holdings Corp., and help bring US Airways out of Chapter 11 bankruptcy protection, under which it has been operating since September.
The new airline would be called US Airways, but the existing US Airways headquarters in Arlington, Va., would be consolidated at America West’s home offices in Tempe, Ariz. America West Chief Executive W. Douglas Parker would be chairman and CEO of the carrier. US Airways Chief Executive Bruce Lakefield would be vice chairman.
The airlines said their goal was to create a lower-cost, full-service national airline that can offer discount fares and still turn a profit.
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U.S. Gives China Warning on Currency
The Bush administration warned China that it must move “without delay” to overhaul its currency system or face the possibility of economic sanctions.
The warning was the administration’s strongest statement yet that China must stop linking its currency, the yuan, to the weakened U.S. dollar. Critics say that peg gives China an unfair trade advantage, adding to a massive U.S. trade deficit with that country and causing the loss of thousands of American jobs.
The Treasury Department, in a report to Congress, described China’s exchange rate regime as “highly distortionary” and said it posed a threat to the global economy. Unless Beijing moves to a more flexible exchange rate system, the report said, China is “likely” to be cited for currency manipulation, which would open the door for sanctions.
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California Payrolls Show Moderate Increase
California’s economy added a net 20,400 payroll jobs in April, the state Employment Development Department reported, a moderate rise that suggested the state’s recovery was firing on some, but not all, cylinders.
The gain followed a revised increase of 21,000 net jobs in March. Unemployment remained unchanged at 5.4%, versus 5.2% for the nation.
Economists were cheered by the breadth of California’s April job gains, as nine of 11 categories reported job growth, led by education and health services.
U.S. employers added a net 274,000 jobs in April, a surprisingly strong showing that eased fears that the national economy might be entering a soft patch.
Economists say the state’s employers are facing the same challenge as their counterparts elsewhere: Productivity gains have largely run their course. If employers need to expand to meet orders, they must hire more workers.
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Home Prices Climb but at Much Slower Pace
Southern California home prices rose to record highs in April but did so at their most sluggish pace in more than three years, data showed.
The median home price in the region’s six counties rose 15% last month on a year-over-year basis to $445,000, according to real estate tracker DataQuick Information Systems. But it was the slowest rate of appreciation since March 2002 and came after an 18.6% gain two months ago and increases exceeding 20% for the last year, DataQuick said.
Orange County’s median home price rose 10.1% to $576,000.
Home sales too persisted at near-record levels. In April, 31,431 transactions were completed in the Southland, a decline of 4.5% from a year earlier, DataQuick reported. But that was still the second-best showing since DataQuick started keeping statistics in 1988. The sales record was set in April 2004.
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Greenspan Sees ‘Froth,’ Speculation in Housing
Federal Reserve Chairman Alan Greenspan said that some regions of the U.S. housing market were showing signs of unsustainable speculation and “froth” and that there were a lot of local housing bubbles.
The statement was seen as Greenspan’s strongest warning yet on the risks in the booming housing market and reflected the Fed’s growing concern about the need to toughen mortgage lending standards.
The Fed chief said he didn’t see a national housing bubble that would significantly crimp the national economy. He didn’t specify the local markets where he saw bubbles. He said price surges might “simmer down” as housing becomes less affordable.
“It’s pretty clear that it’s an unsustainable underlying pattern,” Greenspan said. “People are reaching to be able to pay the prices to be able to move into a home.”
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Top Court Lifts Curbs on Direct Wine Sales
The Supreme Court opened the way for vintners to sell their wines directly to consumers across the nation, a major victory for California’s $15-billion-a-year wine industry.
The 5-4 decision struck down laws in New York and Michigan on the grounds that they discriminated against out-of-state wineries by prohibiting them from selling directly to consumers while letting local vintners do so. The ruling, especially important for hundreds of small wineries, is likely to spur sales on the Internet.
But the effect of the ruling on California wine drinkers may be minimal.
Californians already have the right to buy directly from vintners in their state, which produces 90% of the nation’s wine, and in 26 others, including Washington and Oregon, that allow direct shipping of wine.
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Gateway Founder Resigns as Chairman
More than two decades after Ted Waitt launched Gateway Inc. in his grandmother’s Iowa farmhouse, the entrepreneur resigned as chairman of the folksy personal computer maker that reflected the rise and fall of the technology industry.
Waitt, who surrendered most of the day-to-day operation of the Irvine-based company after its 2003 acquisition of EMachines Inc., said he planned to pursue investment and philanthropic activities.
“It was a great ride,” Waitt said, “a great 20 years.”
Board member and former Gateway President Richard Snyder will succeed Waitt as chairman. Wayne Inouye will remain chief executive. Waitt, 42, is still Gateway’s largest shareholder, with a 28% stake.
Under Inouye, the company has laid off thousands of people and shored up its finances.
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Out With the Old as CBS Cancels Four Shows
CBS announced that it had canceled four shows -- including one critics’ favorite -- whose audiences are among the oldest in network television.
Departing from a “big tent” strategy that embraced viewers of all ages, CBS Chairman and Viacom Inc. President Leslie Moonves vowed that the network was determined to be “stronger, better and younger.”
CBS canceled three dramas, “Joan of Arcadia,” “Judging Amy” and “JAG,” whose viewers had a median age of 53.9, 54 and 58, respectively. CBS also pulled the oldest-skewing show on network television, “60 Minutes Wednesday.” The median age of its audience: 59.
Moonves and his team unveiled the new season’s prime-time programming at the network’s annual “upfront” presentation in New York.
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Wal-Mart Yields to Netflix on DVD Rentals
Wal-Mart Stores Inc. called it a wrap for its fledgling online movie rental business and turned the operation over to industry leader Netflix Inc.
The move represents a rare setback for the nation’s largest retailer, which had only 1% of the online DVD market and never made significant inroads into the business. Wal-Mart instead will continue focusing on selling DVDs at cut-rate prices.
Netflix will link its movie buffs to the DVD sales area on Wal-Mart’s website, while Netflix gets access to a massive pool of potential subscribers in Wal-Mart customers.
The deal came after Netflix Chief Executive Reed Hastings found himself buying DVDs on Wal-Mart.com for Christmas. In January, he pitched Wal-Mart on the partnership.
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Regulators Investigate Pension Consultants
Federal regulators said they were investigating several pension consultants over possible conflicts of interest for failing to disclose significant payments from investment managers whose services they recommend to retirement plans.
The Securities and Exchange Commission said it surveyed 24 pension and 401(k) consultants for possible conflicts. The agency found that 19 firms sold products and services to money managers but gave little or no disclosure to retirement-plan clients.
Lori Richards, director of the SEC’s office of compliance, inspections and examinations, said the enforcement unit was investigating potential disclosure violations at several firms.
The SEC would not reveal the companies being probed.
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For a preview of this week’s business news, please see Monday’s Business section.
