Grim corporate news deepens gloom in US

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

FRIDAY OCTOBER 19 2001 Grim corporate news deepens gloom in US BY CHRIS AYRES AND LEA PATERSON Merril Lynch third-quarter profits slump 52 per cent. Bear Stearns shedding 830 jobs. GM reports third-quarter net loss of $368 million. McDonald's net profits fell 1 per cent. Boeing lowers 2002 estimates by $6 billion.

SOME of America’s biggest corporations gave warning on profits yesterday as the country continued its slide into recession.

The grim corporate news coincided with a blunt warning from President Bush’s chief economic adviser that the US could already be in recession. Lawrence Lindsey said that although he believed the US would bounce back, a short, shallow recession may be inevitable.

Microsoft added to the gloom last night by reporting a 42 per cent slump in first-quarter net profits to $1.3 billion (£900 million), down from $2.2 billion. Microsoft said it had been hit by weak computer sales and a $1.2 billion loss on its investments in the telecoms industry. It cautioned that second-quarter revenues would be at the bottom end of analysts’ expectations.

Wall Street banks, which were hit particularly hard by September 11, led the bad news, with Merrill Lynch reporting a 52 per cent slump in third-quarter net profits to $422 million. The investment bank cut 2,300 jobs during the period, and is thought to be considering cutting 10,000 more.

General Motors, the world’s biggest car manufacturer, added to the gloom with a third-quarter net loss of $368 million, including one-off charges of $753 million. During the same period last year, the company earned $829 million. The carmaker also gave warning that its fourth-quarter results would be lower than expected. “There is considerable uncertainty regarding the strength of the key automotive markets during the balance of the year and in 2002,” Rick Wagoner, chief executive of GM, said. “We’re buckling down to enhance our cost position while remaining very aggressive in our effort to maximise revenue and grow market share.”

McDonald’s, the world’s biggest fast food chain, said that net profits had fallen 1 per cent to $545 million in the third quarter, the company’s fourth consecutive quarterly profits decline.

The results would have been worse had it not been for a $137 million windfall from the flotation of its Japanese unit. This was offset, however, by $84 million of charges, related to the closure of underperforming restaurants.

Boeing said that third-quarter net profits were $650 million, including $100 million of charges related to shedding up to 30,000 employees. This was slightly up on profits of $609 million for the same period last year.

But the aircraft engine-maker also lowered its estimate for 2002 revenues by about $6 billion, to $56 billion, and said it may deliver as few as 350 aircraft next year, down from an estimated 522 this year, with the number likely to decline further in 2003.

US shares endured another poor day’s trading, with the Dow Jones industrial average closing down 69.75 points at 9,163.22. In London, the FTSE 100 index fell 87.4 points at 5,116.0.

Workers at Rolls Royce in Britain are braced for the imminent loss of up to 4,000 jobs. The cuts are also likely to lead to heavy job losses at supplier companies to the aerospace business. A board meeting at the Derby-based business yesterday agreed large-scale job cuts and employees are expected to be informed either today or on Monday.

http://www.thetimes.co.uk/article/0,,5-2001363156,00.html

-- Martin Thompson (mthom1927@aol.com), October 18, 2001

Answers

And yet the stock market does not really reflect the severity of all of this. It's hard to figure.

-- Chance (fruitloops@hotmail.com), October 19, 2001.

Moderation questions? read the FAQ