In this issue:

U.S. BANKRUPTCIES SOARING AS ECONOMY TANKS

POP GOES THE BUBBLE

U.S. Corn and Soybean Harvest Devastated by Drought


From the Vol.1, no.24 issue of Electronic Intelligence Weekly

U.S. ECONOMIC/FINANCIAL NEWS

U.S. BANKRUPTCIES SOARING AS ECONOMY TANKS

Aerospace in Tailspin as Bankruptcies Hit Airlines

The aerospace industry is struggling with the ripple effect generated by the recent bankruptcy of U.S. Airways, the potential impending bankruptcy of United Airlines, the 9% cut in operating capacity of American Airlines, and the acute contraction of the airline industry as a whole (see INDEPTH for additional coverage).

The Evendale, Ohio-based GE Aircraft Engines, a subsidiary of General Electric, announced that airline engine deliveries are down 15-20% this year, and probably will be down by a similar percentage next year. GE Aircraft Engines spokesman Rick Kennedy stated that this division recently sent a letter to employees warning of new job cuts by the end of the year. "We don't know how many yet. We know we have ... 18 months where it's going to be tough." During October 2001, GE Aircraft Engines already announced that it would cut 4,000 jobs, or 13% of the workforce.

Two of the leading divisions of United TechnologiesHamilton Sundstrand, which makes parts and systems for the airline industry, and Pratt & Whitney, which makes jet-engines— have been struggling. United Technologies announced it plans to cut 5,000 jobs during 2002.

Boeing Corp., the largest aircraft-maker in the world, has slashed its jet-plane production this year to half the level it produced during 2001.

U.S. Corporations Set Bankruptcy Record in 2002

Assets in bankruptcy this year to date have now surpassed the previous record of $258.6 billion set for all of 2001, BankruptcyData.com reported Aug. 14. However, that dollar figure involved 255 publicly traded companies in the United States. Three of the 10 largest-ever bankruptcies have been declared in 2002: WorldCom, Inc., $103.9 billion in assets, when it filed in July, beat the previous record set by Enron Corp., at a mere $63.3 billion. Global Crossing, Ltd., $25.5 billion, filed in January.

Individual Bankruptcies Top Record-Breaking Year

New data released Aug. 14 by the American Bankruptcy Institute reveal that not one, but two new bankruptcy-filing records were set, highlighting especially the surge in individual bankruptcies. The new records set are: 1) with 1,505,306 million new bankruptcy filings by individuals and corporations combined, from June 30, 2001 to June 30, 2002, it is the first time filings totalled over 1.5 million in a 12-month period; and 2) the 400,686 new filings in the second quarter of 2002 added up to the highest single quarter in the history of bankruptcy recordings. This is also the second year in a row of record-breaking filings.

Of the 1.5 million new cases, an incredible 1.47 million were individuals. This is an 8.6% increase over 2001. The corporate bankruptcy filings rose to 39,201 year-over-year, a 5.6% jump from June 2001, which included the three biggest-ever (see previous item).

And More U.S. Companies Are Now on the Verge of Bankruptcy

Likely to soon join the previously mentioned corporate leaders in bankruptcy:

United Airlines, the second-largest air carrier, warned last week that it will file for bankruptcy within 30 days, unless granted concessions from contractors, employees, and creditors, to cut costs to win the Federal government's approval for a $1.8-billion loan guarantee, as the company faces $875 million in debt payments coming due in the fourth quarter, with "insufficient access to the public capital markets to repay" the debt.

Dynegy, the Houston-based energy trader, said it may file for bankruptcy if the $928-million sale of its Northern Natural Gas pipeline to Warren Buffett's Berkshire Hathaway, is not completed by the end of the month.

Conseco, the once-high-flying financial-services firm, which posted a $1.3-billion quarterly loss, due to a $2.95-billion writedown in assets, said that its accounting was under investigation by the Securities and Exchange Commission. The company, with $6.5 billion in debt, said the SEC probe focusses on events around the spring of 2000, after it acquired Green Tree Financial Corp., which specialized in high-risk consumer loans for mobile homes, which became a burden as loan default rates rose.

POP GOES THE BUBBLE

Job Cuts, Store Closings, Corporate Losses Continue

IBM announced it is cutting 15,600 more jobs, of which, 14,213 are in services and 1,400 from its microelectronics business.

Ames Department Stores is closing all 327 stores; 22,000 employees laid off, following its bankruptcy filing in August 2001.

AOL Business Affairs unit Director David M. Coburn— architect of "unconventional" advertising deals with eBay online auctioneer, and others, which are now under Federal investigation— was locked out of his office on Aug. 9. AOL refused to state Coburn's employment status.

Sir Rupert Murdoch's News Corp. recorded a net loss of $1.74 billion for the period ending June 30, compared to a loss of $265 million for the same time last year. Included in the loss was a charge of $1.9 billion writedown on News Corp.'s stake in Gemstar-TV Guide. News Corp.'s net loss for the full fiscal year was $5.27 billion, compared to a net loss of $445 million in 2001. Murdoch's Fox Entertainment Group recorded net income of $40 million, or $.05/share, ending June 30, down 77% from $.24/share same time in 2001.

U.S. Steel Pension Fund Slammed by Stock-Market Meltdown

U.S. Steel's pension fund has plunged into the red, as a result of big stock-market losses. The news is rocking the steel industry, where it has been axiomatic that U.S. Steel was immune to the pension and legacy problems of other companies, and could therefore play a leading role in the restructuring (takedown) of the industry.

The company in its second-quarter report reported an estimated $400-million shortfall in the pension fund attributed to losses on the stock market.

U.S. Corn and Soybean Harvest Devastated by Drought

U.S. corn and soybean harvests will plunge to mid-1990s levels due to the fierce drought, which has struck much of the Midwest farmbelt. Parts of Nebraska, the third-largest corn state, have the worst drought since records began nearly a century ago. Eight states, which produced 72% of last year's corn crop, are experiencing serious drought. The Aug. 12 crop projection for this year's harvest, by the U.S. Department of Agriculture, is for 8.886 billion bushels of corn, down 6.5% from last year, and at a level of 1995; and for 2.628 billion bushels of soybeans, the smallest crop since 1996.

At the same time, Canadian wheat production is at is lowest level in more than a quarter-century, because of the drought over the Prairies. "A very real tragedy," says Greg Arason, of the Canadian Wheat Board.

Also affecting U.S. agriculture: Global wheat prices are expected to rise 20%, as the huge food cartels make a killing, and seize greater domination of food production. Higher food prices, and more consolidation in the food chain ahead, can be expected to follow from the drastic drop in corn, soybeans, and wheat output in North America, unless there is government intervention. For example, animal feed accounts for two-thirds the expense of producing a hog. Smithfield Foods Inc., already the world's largest hog producer and processor, expects to gain more market domination, because smaller outfits will not be able to withstand the sharp rise in feed costs, and will shut down.

Most of U.S. sweetener is corn-based, dominated by Cargill and ADM, which are positioned to gain from passing on costs as food price inflation. Domestic processors are now lining up what they expect will be scarce supplies, cutting out foreign purchasers.

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