In today's paper.

El Segundo base welcomes a new leader By Muhammed El-Hasan, Staff Writer

The Air Force's El Segundo-based procurement arm for satellites, rockets and other space systems will welcome a new commander today.

Lt. Gen. Michael A. Hamel will relinquish command of the Los Angeles Air Force Base's Space and Missile Systems Center to Lt. Gen. John T. "Tom" Sheridan.

The change of command will occur at a ceremony this morning at Fort MacArthur in San Pedro, ending Hamel's three-year tenure at the center's helm.

In the afternoon, a retirement ceremony for Hamel will feature a battery of 15 firing howitzer cannons and an F-16 fighter jet flyover to salute the outgoing commander.

Read the full story.

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I wouldn't be surprised if the US led the slowdown.

UN: World economy to grow by 1.8 percent in 2008

UNITED NATIONS (AP) -- The world economy is "teetering on the brink" of a severe downturn and is expected to grow only 1.8 percent in 2008, the United Nations said in its mid-year economic projections Thursday.

That's down from a global growth rate of 3.8 percent in 2007, and the downturn is expected to continue with only a slightly higher growth of 2.1 percent in 2009, the U.N. report said.

The mid-year update of the U.N. World Economic Situation and Prospects 2008 blamed the downturn on further deterioration in the U.S. housing and financial sectors in the first quarter, which is expected to "continue to be a major drag for the world economy extending into 2009."

But the U.N. said developing countries will suffer as badly: They should grow by 5 percent this year and 4.8 percent next year, compared to a robust 7.3 percent in 2007, the report said.

The U.N. economists said the deepening credit crisis in major market economies triggered by the U.S.-led slump in housing prices, the declining value of the U.S. dollar, persistent global imbalances and soaring oil and commodity prices pose considerable risks to economic growth in both developed and developing countries.

"The baseline forecast projects a pace for world economic growth of 1.8 percent in 2008," the U.N. report said.

However, it said the final figure will largely depend on developments in the United States.

Global growth this year could fall to 0.8 percent if the U.S. sub-prime mortgage market turmoil has a more serious impact on developing countries and countries in transition, the U.N. report said.

But if the monetary and fiscal measures the U.S. government has taken to stimulate the economy -- including tax refunds and lower interest rates -- boost consumer spending and restore confidence in the business and banking sector, the world economy could only slow to 2.8 percent growth this year and 2.9 percent in 2009, it said.

The report, prepared by the U.N. Department of Economic and Social Affairs, forecast that U.S. economic growth will decline from 2.2 percent in 2007 to -0.2 percent this year, with only slight recovery in 2009 to 0.2 percent growth.

"At issue is how deep and long this contraction will be," the report said. "As the housing slump continues and the credit crisis deepens, a broad array of ... indicators are already hinting at a recession."

It cited a decline in U.S. employment, consumer confidence at its lowest level in a decade, household spending growth slowing sharply and business equipment spending slowing alongside large inventories of housing and a 30 percent decline in residential investment.

This strongly suggests "that the implosion of housing activity will not stabilize until 2009," the report said.

As for other developed countries, the U.N. forecast that Japan's economic growth will decline from 2.1 percent in 2007 to 0.9 percent in 2008 and that Western Europe's growth rate will drop from 2.6 percent last year to 1.1 percent this year.

Despite the slowdown in global economic growth in 2008, the U.N. said global inflation is expected to accelerate this year to 3.7 percent.

The report said the recent sharp rise in commodity prices and the continued rise in oil prices are key factors spurring inflation along with higher wages.

The growth of world trade also slowed from 7.2 percent in 2007 to 4.7 percent in early 2008, largely due to weak U.S. demand for imported goods, it said.

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Boeing issued a statement on its loss today to Lockheed Martin Corp. for a $1.46 billion Air Force contract to build a new network of navigation satellites for military and civilian use, known as GPS III.

Had it won, Boeing would have built the satellites in El Segundo.

Here's the statement: "Boeing is disappointed by this loss, for we assembled a great team that submitted a solid proposal for the GPS III program. We look forward (to) receiving the debrief from the United States Air Force."

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Boeing's satellite factory is in El Segundo.

Lockheed Beats Boeing for $1.46 Billion GPS Satellite

(Bloomberg) -- Lockheed Martin Corp., the world's largest defense company, beat Boeing Co. for a $1.46 billion U.S. Air Force award to build a new network of navigation satellites for military and civilian use.

The contract covers development of the first two Global Positioning System III satellites, with options for 10 more, the Defense Department said in a statement today.

The current constellation of 33 GPS satellites lets the Air Force direct so-called smart bombs to targets and also helps civilian pilots, drivers and hikers pinpoint their locations. Boeing's ties date to the first award in 1974 and since then it has delivered almost twice as many satellites as Lockheed, which won its first order in 1989. Today's award cedes the next generation to Bethesda, Maryland-based Lockheed.

``Lockheed Martin is proud to be selected,'' Stephen Tatum, a company spokesman, said in an interview. ``This win represents an important achievement for the corporation.''

The loss is Boeing's fourth straight in three months on a U.S. defense contract valued at more than $500 million.

Read the full story.

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Chevron Corp said that it was shutting down a unit at its 260,000-barrel-per day El Segundo refinery after it malfunctioned and triggered flaring on Wednesday afternoon, according to Reuters.

"The flaring was due to a failure of a gas compressor in one of the process units," Chevron spokesman Lloyd Avram told Reuters. "Process gas from the unit -- which is propane and butane -- is being sent to the safety flare."

Here's a link to Reuters.

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Homeowners in LA County set a new foreclosure record in March, according to a Default Research, which collects such data.

LA County had 11,666 homes were entering some stage of foreclosure in April -- through a Notice of Defaults and Notice of Trustees Sale. That's up 230% from the same month last year.

"About 2.3 percent of L.A. households are facing foreclosure," said Serdar Bankaci, founder of Default Research. "Unfortunately families all over the region who watched their home appreciate for years are now seeing that the real estate pendulum does swing both ways."

The hardest hit cities in LA County were Los Angeles (with 2,137), Palmdale (960), Lancaster (896), Long Beach (524) and Santa Clarita (302).

But in Southern California, Riverside was the most distressed with a 450% year-over-year increase in foreclosure actions last month.

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One of Toyota's Texas dealerships is the first in the nation to receive the US Green Buidling Council's gold certification for LEED, or Leadership in Energy and Environmental Design.

The designation further bolsters Toyota's image as an environmentally-friendly car maker.

According to the USGBC, 48% of the nation's energy is used by buildings, including 70% of the nation's electric use.

Just to remind you, Toyota US sales and marketing headquarters is in Torrance.

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Will Obama's wife make divestments?

McCain's wife sells Sudan-related investments

By JIM KUHNHENN, Associated Press

Cindy McCain, whose husband has been a critic of the violence in Sudan, sold off more than $2 million in mutual funds whose holdings include companies that do business in the African nation.

The sale on Wednesday came after The Associated Press questioned the investments in light of calls by John McCain, the likely Republican presidential nominee, for international financial sanctions against the Sudanese leadership.

McCain, who was campaigning in Ohio, said neither he nor his wife were aware of the Sudan-related holdings.

Last year, at least four presidential candidates divested themselves of similar holdings involving companies doing business in Sudan.

According to McCain's personal financial disclosure, Cindy McCain's investments include two mutual funds -- American Funds Europacific Growth fund and American Funds Capital World Growth and Income fund -- that are listed by the Sudan Divestment Task Force as targets for divestment.

"Those have been sold as of today," said McCain spokesman Brian Rogers. Both funds have holdings in Oil & Natural Gas Corp., an India-based company that does business in Sudan. The American Funds Capital World Growth & Income Fund also has holdings in Petrochina, a Chinese government-owned oil company with vast investments in Sudan.

Last year, in a speech on energy policy to the Center for Strategic and International Studies in Washington, McCain cited China's investments in Sudan as an example of regimes that survive off free-flowing petro dollars.

"The politics of oil impede the global progress of our values, and restrains governments from acting on the most basic impulses of human decency," he said. "There is only one reason China has opposed sanctions to pressure Sudan to stop the killing in Darfur: China needs Sudan's oil."

On Wednesday, Rogers said: "Senator and Mrs. McCain remain committed to doing everything possible to end the genocide in Darfur."

After touring a waste-reprocessing plant near Columbus, Ohio, described the American Funds as "one of the country's largest mutual funds."

"Obviously, we didn't know about it and I didn't know anything about it until I saw the story, because I don't have anything to do with her finances," he said. "But they divested as soon as it was brought to us."

For the McCains, the Sudan-related investments are among scores of different investments listed in his financial disclosure documents. Cindy McCain is heiress to a Phoenix-based beer distributing company whose fortune is in the $100 million range.

Sen. McCain is regularly ranked among the richest lawmakers in Congress, but under the terms of a prenuptial agreement, much of the family's assets are in Cindy McCain's name. While the disclosure reports provide the identity of income and assets held by candidates and their spouses, they only offer a range of the amount of the holding. Indeed, the report lists Cindy McCain's investments in the two mutual funds as simply "over $1,000,0000."

In tax returns he released last month, the Arizona senator reported a total income of $405,409 in 2007.

But Cindy McCain files separate tax returns which she has not made public. Last week, she said she would never make her returns public even if her husband becomes president.

Later Wednesday, the Democratic National Committee reiterated its call for Cindy McCain to release her tax returns. "The fact the McCain family was holding Sudan-related investments even as John McCain was out on the campaign trail calling for sanctions is a reminder of why the American people expect and deserve full disclosure from their elected officials," said DNC spokesman Damien LaVera.

McCain aides pointed out that the Sudan investments were contained in publicly disclosed data. John McCain on Wednesday also defended his wife's decision not to release her tax returns.

"When we file our (financial disclosure) report in the Senate, there's quite a bit of information in there," he said.

The Sudan-related investments illustrate the hazards for wealthy candidates whose vast holdings undergo thorough scrutiny during a presidential campaign.

A year ago, several presidential candidates divested themselves of Sudan-related holdings. Among them were Democrats Barack Obama and John Edwards and Republicans Sam Brownback and Rudy Giuliani.

In 2006, Brownback was among members of Congress who wrote 44 governors to urge them to divest their employee pension funds from businesses linked to Sudan. He is now serving as a top adviser to McCain's campaign.

At the time, Obama placed the total value of his divestitures at $180,000. The sales of the investments were recorded in their financial disclosures.

According to Giuliani's financial disclosure, he invested between $500,000 and $1 million in a Vanguard Wellington Fund. Data compiled by the Sudan Divestment Task Force shows that Vanguard Wellington has a small percentage of stock in Schlumberger Ltd., a French oil field services company that does business in Sudan.

Edwards sold stock he and his wife owned in Schlumberger for between $40,000 and $100,000. He also invested $50,000 to $100,000 in Evergreen Equity Income Fund, another fund identified by the divestment task force as having stock in Sudan-related companies.

"Considering Democrat candidates, including Barack Obama, had the very same type of holdings, it is the height of hypocrisy to attack Senator McCain and his family," said Republican National Committee spokesman Danny Diaz said.

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In case you missed it.

Torrance ranks 2nd for foreign businesses in Los Angeles County
By Muhammed El-Hasan, Staff Writer

With car companies, stereo manufacturers and a Japanese-themed mall, Torrance represented the county's second-most popular city for foreign- owned businesses last year, according to a report released today.

Last year, Torrance had 309 foreign-owned companies, including such major operations as Honda Motor Co.'s North American headquarters and Toyota Motor Corp.'s U.S. sales and marketing headquarters.

Only Los Angeles had more foreign-owned businesses at 1,633, according to the report on foreign direct investment by the Los Angeles County Economic Development Corp.

Read the full story.

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Why not? The price of everything else is going up.

Honda May Boost U.S. Car Prices as Steel Costs Rise (Update1)

(Bloomberg) -- Honda Motor Co., Japan's second- largest automaker, may increase prices for its vehicles in North America and other markets to offset higher steel and other raw materials costs.

``We will definitely consider it,'' Yoichi Hojo, chief operating officer of Honda's business management operations, said in an interview on May 12 in Tokyo. ``It may be difficult to raise prices right away in Japan and North America, as market conditions are tough.''

Honda's North American headquarters is in Torrance.

Honda, which gets about 70 percent of its operating profit from North America, may follow Toyota Motor Corp. and Nissan Motor Co. in boosting prices in the region. Honda expects a 32 percent drop in operating profit this fiscal year as raw materials prices and a stronger yen erode earnings.

``The global automakers have to tackle some negative situations,'' Hirofumi Yokoi, an analyst at CSM Worldwide, said in an interview with Bloomberg Television yesterday in Tokyo. ``They have to consider all the things to achieve their goals.''

Read the full story.

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Skechers USA Inc., the Manhattan Beach-based maker of trendy shoes, will use starlet Tori Spelling and her 13-month-old son, Liam, as the first celebrity pairing to promote the company's new family footwear brand "Nothing Compares to Family," Skechers said Tuesday.

Skechers is touting what is says is the brand's cross-generational appeal. The promotion, slated to run through next year, stars celebrity families and benefits children's charities with ads in celebrity weekly magazines and other fashion and lifestyle glossies.

Tori Spelling is best known for her starring role in the '90s show "Beverly Hills, 90210." Tori and her husband and their son currently star in the Oxygen reality series, "Tori
& Dean: Home Sweet Hollywood."

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A lot of people will agree with this.

Economic 'misery' more widespread

(CNNMoney) Americans are feeling a lot more economic pain than the government's official statistics would lead you to believe, according to a growing number of experts.

They argue that figures for unemployment and inflation are being understated by the government.

Unemployment and inflation are typically added together to come up with a so-called "Misery Index."

The "Misery Index" was often cited during periods of high unemployment and inflation, such as the mid 1970s and late 1970s to early 1980s.

And some fear the economy may be approaching those levels again.

Read the full story.

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In today's paper.

Port trade forecast is gloomy
By Muhammed El-Hasan, Staff Writer

The Los Angeles Customs District will see muted growth this year as shaky economic factors weigh on international trade, according to a study released today.

The total value of imports and exports through the customs district is forecast to reach $365.7 billion, up 4.7 percent from last year, according to the study by the Los Angeles County Economic Development Corp.

The largest portion of the customs district traffic goes through the ports of Los Angeles and Long Beach, as well as Los Angeles International Airport.

The two ports will see a 1percent annual increase in loaded container traffic this year, to a combined 15.8 million 20-foot equivalent containers, the study forecasts.

"We're used to 10-percent-a-year growth in container traffic," said Jack Kyser, chief economist at the LAEDC. "We didn't get that last year. We won't get that this year. The question is, will it recover next year?"

Read the full article.

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See it for yourselves. Here's the video.

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US Aerospace employment increased just slightly in March to 651,700, compared to the 2007 year-end average of 645,600, according to the Aerospace Industries Association.

Aerospace employment has climbed steadily since hitting a 2003 low of 587,100.

Employment is tied closely to industry sales, which reached a record $198.8 billion in 2007 and are expected to eclipse $210 billion in 2008, AIA said.

The industry is facing a potential workforce "crisis" as longtime employees retire. Almost six in 10 US aerospace workers was at least 45 years old last year.

AIA President and CEO Marion Blakey said in a statement: "As the workers that won the Space Race and the Cold War get ready to retire, there is a whole world of opportunity in this industry. We can't encourage the next generation of workers enough to study math and science so as to take advantage of the enormous number of exciting career opportunities."

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California didn't do so hot.

Home prices continue sharp descent

(CNNMoney.com) Single-family home prices dropped 7.7% in the first quarter in the largest year-over-year decline since the National Association of Realtors began reporting prices in 1982.

The median sales price fell to $196,300, down 4.8% compared with the last three months of 2007.

Lawrence Yun, the chief economist of NAR, attributed much of the record decline to liquidity problems dragging down high-priced markets.

"These are highly unusual results because there were very few jumbo loan originations in the latest quarter," he said. "So sales are much slower in high-cost areas."

Sun-Belt cities were among the biggest losers. In California, Sacramento prices plummeted 29.2% to $258,500 compared with last year and Riverside prices fell 27.7% to $287,100. Prices in Las Vegas fell 20.2% to $247,600 and those in Phoenix dropped 15.4% to $222,200.

Read the full story.

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The South Bay's first Fresh & Easy Neighborhood Market will open on July 2 in Manhattan Beach, the retailer said Monday.

The Manhattan Beach store will be located at 1700 Rosecrans Ave., along a busy upscale commercial area. The cross street is Douglas Street.

British retail giant Tesco is opening dozens of grocery stores across California, Arizona and Nevada. Each store is about 10,000 square feet, offering fresh, prepared meals and produce, as well as national and private-label household products.

Tesco 's US division is based in El Segundo.

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The US Air Force has placed the first Boeing-built Wideband Global SATCOM satellite into operation over the Pacific region, Boeing said Monday.

Built in El Segundo, the satellite "transitioned to operations" on April 16 after extensive tests proved the systems worked.

Each so-called WGS satellite has the capacity to transmit information at rates of more than three gigabits per second, more than 10 times the capacity of the government's Defense Satellite Communications System.

WGS-1 was launched Oct. 10 from Cape Canaveral Air Force Base in Florida.

"WGS-1 is the highest capacity Department of Defense communications satellite on orbit," Craig Cooning, vice president and general manager of Boeing Space and Intelligence Systems, said in a statement. "WGS-1 is now providing essential support to military operations overseas, and Boeing looks forward to launching the second and third WGS satellites in the coming months."

Read a profile on Cooning.

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It's not a conspiracy.

The Slump: It's a Guy Thing

(BusinessWeek) They eat from the same dishes and sleep in the same beds, but they seem to be operating in two different economies. From last November through this April, American women aged 20 and up gained nearly 300,000 jobs, according to the household survey of the Bureau of Labor Statistics (BLS). At the same time, American men lost nearly 700,000 jobs. You might even say American men are in recession, and American women are not.

What's going on? Simply put, men have the misfortune of being concentrated in the two sectors that are doing the worst: manufacturing and construction. Women are concentrated in sectors that are still growing, such as education and health care.

This situation is hardly good news for women, though. While they're getting more jobs, their pay is stagnant. Also, most share households--and bills--with the men who are losing jobs. And the "female" economy can't stay strong for long if the "male" economy weakens too much.

Read the full story.

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I've interviewed a number of generals over the years, none of them as easy-going as Craig Cooning.

Boeing vice president has a Tab on success
By Muhammed El-Hasan Staff Writer

Retired Air Force Gen. Craig Cooning sits at a side table in his El Segundo office, an open can of Tab diet soda at his elbow.

Another of the distinctive pink Tab cans sits on Cooning's desk, 12 stories above the runways of LAX.

On a display case - amid mementoes that include an ink well from his grandparents and a toy dancing hamster - a model satellite made of Tab cans helps put Cooning's distinctive mark on his work space.

"I got hooked on Tab in the '70s," Cooning explained during a recent interview in his office.

On Feb. 1, this retired two-star general with the casual manner of someone hosting a backyard barbecue became vice president and general manager of Boeing Space and Intelligence Systems, Boeing Co.'s satellite development arm.

Cooning is responsible for 7,500 employees, with 5,500 in El Segundo.

Although the business is based in Seal Beach, Cooning spends about three days a week in El Segundo overseeing the Boeing Satellite Development Center, a million- square-foot facility that builds military and civilian satellites.

"Anytime you're closer to the factory where you can kick the tires, so to speak, it changes the tempo," Cooning, 57, said.

Read the full story.

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The economic downturn is changing many things.

Carson OKs used-car lot
COMMERCIAL ZONE: City changes policy as market slumps and tax revenues fall.
By Muhammed El-Hasan, Staff Writer

A Carson city ordinance that has lasted at least three decades finally broke under the weight of the nation's slumping car market and resulting drop in municipal sales tax revenue.

Carson has given the green light for a used-car dealership to open in a commercial area, an exception to the city's zoning rules. Previously, dealerships were not allowed to sell used cars as the primary product in commercial zones.

Sonic Automotive Inc., a Charlotte, N.C.-based car retailer, plans to open the car lot this summer, possibly as early as June, according to Carson officials.

The used-car dealership will open at the former site of Don Kott Ford, which closed in December because of the sluggish vehicle market.

An adjacent lot, Don Kott Lincoln Mercury, also closed for the same reason. Both dealerships were owned by Sonic.

"We have to be somewhat pragmatic given the changes in the (car) market," Sheri Repp Loadsman, Carson's planning manager, said of the zoning exception. "We know that the manufacturers are struggling. We know there are only a limited amount of points of sale. What are our options?"

Read the full story.

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Hopefully, this won't put newspapers out of business.

El Segundo advertisers see green on TV screens

By Muhammed El-Hasan
Staff Writer

At coffee shops, customers wait to order amid the intermingling scents of lattes and cappuccinos.

After ordering, the patrons wait some more as baristas prepare their drinks.

The founders of an El Segundo-based company see these customers as more than just coffee drinkers.

They are a captive audience - at least until they walk out the door.

Ripple, a small company with 40 employees, is trying to capitalize on this captive audience by selling advertisements on a network of monitors it has installed at coffee shops, juice bars, restaurants and other venues where people wait. Launched in 2006, Ripple has placed screens in about 1,000 locations nationwide, including more than half in Southern California.

"It's getting harder to reach people, with TiVo and the Web," said Ali Diab, 33, co-founder and president of products and technology at Ripple. "This is a chance to capture their attention where there's no other competing media at the time."

Powered by $15 million in venture capital, Ripple is found in the large media markets of Los Angeles, San Francisco, New York City and Boston. The company recently opened a sales office in New York.

Read the full story.

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I hope you stocked up on the so-called "forever stamps."

(Bloomberg) The price of a first-class stamp will increase one penny to 42 cents tomorrow, the US Postal Service said on its Web site as a reminder.

Prices for other mailing services, including standard mail, periodicals, package services and special services, will also increase tomorrow, the Postal Service, an independent federal agency, said.

Forty-two-cent stamps will be required on first-class mail weighing an ounce (0.02 kilograms) or less, while first-class mail weighing as much as two ounces will increase 1 cent to 59 cents, the Postal Service said.

Posted at 2:37 PM | Permalink | Comments (0)

Watch Out Boeing and Airbus. I wonder if the Air Force will ever buy aerial refueling tankers from China.
Oh, yea. And happy Mother's Day.

China establishes company to make its own jumbo jets

BEIJING (AP) -- China has established a homegrown company to make passenger jumbo jets, state media reported Sunday -- a step forward in the country's quest to become less dependent on Boeing and Airbus.

China Commercial Aircraft Co. was established in Shanghai with registered capital of 19 billion yuan $2.7 billion, the official Xinhua News Agency said.

It said the central government and the Shanghai government are among the major shareholders, as are China's two main aircraft manufacturing and servicing companies, China Aviation Industry Corp. I and China Aviation Industry Corp. II, which were split off from state-owned China Aviation Industry Corp. in 1999.

Europe's Airbus has forecast that China's domestic market will increase fivefold by 2026. Airbus and Chicago-based rival Boeing dominate the market for commercial airplanes carrying 100 or more people.

Xinhua said Commercial Aircraft Co. will be able to make planes with more than 150 seats.

General manager Jin Zhuanglong said in a Xinhua interview that it was too early to say when a Chinese-developed jumbo jet would be taking off, as it would take a long time to develop homegrown talent and do research.

"According to the development history of Airbus and Boeing, the development and success of civil planes cannot be realized by relying on one or two generations," he said.

Posted at 8:35 AM | Permalink | Comments (0)

This article makes sense to me.

Analysis: Good economic news something of a mirage

WASHINGTON (AP) -- The unemployment rate drops. Productivity grows. The trade deficit shrinks. Sounds great, right? Not so fast.

Borrowing radio broadcaster Paul Harvey's signature saying: let's hear the rest of the story.

Some seemingly good economic numbers can be something of a mirage masking weaknesses in the national economy.

Let's take the unemployment rate, which dipped to 5 percent in April, from 5.1 percent in March. A closer look reveals that the decline in unemployment is not as good as it looks at first blush. The drop came as the number of people holding part-time jobs for economic reasons swelled to 5.2 million in April, up sharply from 4.4 million a year earlier.

The dip in the unemployment rate also occurred as employers cut jobs for the fourth month in a row, pushing up total losses beyond the quarter-million mark -- to 260,000. Wages barely grew and workers' hours were trimmed. Taken altogether, these things point to a tepid picture of employment conditions nationwide.

Federal Reserve Chairman Ben Bernanke and his colleagues recently used the word "softened" to describe the labor situation.

U.S. productivity -- an important ingredient to the country's long-term vitality -- grew solidly in the first three months of this year. That efficiency gain, however, came at the expense of workers.

"Productivity gains were due primarily to declines in hours worked," the Labor Department's Bureau of Labor Statistics explained. Those hours fell at a 1.8 percent pace, the biggest drop in five years. Employers also shed workers in the first quarter. Thus, companies were able to produce more with fewer workers, and that boosted productivity, the amount an employee produces for every hour of work.

"American workers, you just got to love them," said Joel Naroff, president of Naroff Economic Advisers. "They just seem to produce more and more and more. That was the case in the first quarter of the year as fewer workers working fewer hours managed to produce more," he said.

Still, healthy efficiency gains are important for the economy because they can blunt inflation; that's good for companies' profits and good for those earning paychecks.

Let's take a closer look at the nation's trade deficit. It shrank to $58.2 billion in March as the United States' appetite for imports fell faster than foreign demand for U.S. exports.

A drop in the United States' foreign oil bill -- reflecting less oil being imported -- played an important factor in the decline in imports. However, demand for foreign-made autos, furniture, toys, clothing and other goods also waned, underscoring the strains faced by U.S. consumers.

Consumers have turned cautious, battered by housing and credit problems and high food and energy prices. Many -- watching their single-biggest assets, their home, sink in value are less inclined to spend. High energy and food prices are leaving people with less cash to buy other things. And, harder-to-get credit has made financing big-ticket goods, like cars, appliances and of course, homes, more difficult.

In the first quarter of this year, consumer spending increased at the slowest pace -- a mere 1 percent growth rate -- since the last recession in 2001. Consumer spending accounts for the single-biggest chunk of U.S. economic activity. Thus, how consumers behave shapes whether the country will survive the blows of the housing, credit and financial debacles or fall victim to them as many fear.

U.S. exports, meanwhile, have been helped by the falling value of the U.S. dollar. That makes U.S.-made goods and services less expensive to foreign buyers. But that weaker dollar also makes imported goods more expensive in the United States. That contributes to the surging prices for oil, food and other commodities.

And, while falling interest rates in the United States help ordinary people and businesses, it also contributes to the dollar's decline. Add to that the perception of economic weakness in the United States and the U.S. dollar has fallen to record lows compared with the euro.

Still, export growth played an important role in keeping the economy growing -- albeit slowly -- during the first quarter. "Exports are booming and helped keep GDP in the black," said Commerce Secretary Carlos Gutierrez. Gross domestic product, or GDP, measures the value of all goods and services produced in the United States. It grew by a feeble 0.6 percent growth rate from January through March.

When exports and business' inventories are removed and imports are added in, economic activity actually contracted at a 0.4 percent pace in the first quarter. That figure shows that U.S. consumers have a dwindling appetite to spend.

Many economists -- and members of the public -- believe the economy is in a recession. Bernanke has said a recession is possible, while President Bush acknowledges the country is going through tough times. Both men hope the Fed's seven-month rate-cutting campaign and the government's stimulus package of rebates and tax breaks will lift the country out of its slump later this year.

Meanwhile, the mirage continues.

In another anomaly, consumer borrowing rose in March at the fastest clip in four months. It sounded like people were back in a buying groove, with credit card charges especially heavy. But building up the credit charge balances is another form of debt. Economists said people don't have a choice because their paychecks aren't going as far and they can't tap into their homes, as they did during the housing boom, for ready sources of cash.

So some silver linings are not so silver.

When you look closely, "you do see some dark economic clouds in the silver linings," said Mark Zandi, chief economist at Moody's Economy.com. "The darkness is much greater than any sunshine."

Posted at 3:17 PM | Permalink | Comments (0)

I attended Northrop's Friday rally and celebration over its win of the KC-45 aerial refueling tanker for the Air Force.

At $35 billion, its the second biggest Department of Defense contract ever.

This link will send you to the full story.

The event was held in a parking lot outside an design center where Northrop engineers develop some of the most technologically advanced military aircraft systems including for unmanned aircraft.

The mood was festive. It had the air of a political rally, with Northrop executives and local politicians insisting that Boeing's challenge to Northrop's contract win was basically ridiculous. Behind the the speakers' podium, employees waved small American flags like a presidential candidates rally, creating a patriotic image meant to impress anyone who sees the images from home.

Northrop says that it won the Air Force contract fair and square, and that Boeing is using politics to overturn the result. If that's true, then Northrop is also using politics to maintain its win. Northrop employees were asked to contact their Congress members to support the Northrop win.

The event reminded me of two clear memories I have.

One was at a Northrop dinner a few years ago where chairman and CEO Ron Sugar told the attendees that the company's political clout in Washington DC had increased dramatically.

The other was an interview I had with Sy Ramo, co-founder of TRW and now an adviser to Sugar and other Northrop top brass. Ramo bemoaned the politicization of the defense industry, where defense systems are purchased due, in large part, to political factors -- which Congressional districts get which jobs -- rather than strictly based on what is best for the defense of the nation.

Ironic, huh?

Posted at 10:09 AM | Permalink | Comments (0)

This makes sense.

Toyota's 28% decline still enviable

(DETROIT FREE PRESS) Thursday was a rare bad day for Toyota Motor Corp., the world's second-largest and most profitable automaker.

Toyota, whose US sales and marketing headquarters is in Torrance, reported a 28% decline in fiscal fourth-quarter earnings and saw its stock slide 4% on the day. Toyota's stock closed at $100.56 Thursday, down $4.20 per share.

Toyota's net income fell to 316.8 billion yen -- $3.2 billion -- for the three months ending March 31, based on that day's exchange rates.

The automaker missed the 375.2 billion yen median of six analyst estimates compiled by Bloomberg.

But a bad day for Toyota may still be the envy of the auto industry. For the same 3-month period GM lost $3.3 billion, Ford reported a profit of $100 million and Chrysler LLC, now a private company that does not report results, recently acknowledged that it is not yet profitable.

Like many automakers, Toyota is getting hurt by falling pickup and SUV sales in the United States and rising raw material costs. But unlike the Detroit Three, Toyota is also facing unfavorable currency exchange rates.

"The conditions surrounding Toyota are changing rapidly, with the rise in raw material costs, drastic changes in foreign exchange rates, and more stringent environment regulations worldwide," said Toyota Senior Managing Director Takeshi Suzuki during a conference call Thursday. "We plan to turn all of these challenges into business opportunities."

Toyota also said it expects earnings to drop 27% for its current fiscal year, which runs from April to March. Assuming the yen continues to gain against the dollar and the euro, Toyota expects its operating income will decline by 690 billion yen or $6.9 billion.

"It just shows Toyota is not immune to problems in the economy," said Erich Merkle, a vehicle forecasting analyst for IRN Inc. "They've really been helped by a strong U.S. dollar for a number of years, but now the dollar has gone the other way."

Lehman Bros. equity analyst Tsuyoshi Mochimaru predicted Toyota's dour forecast will continue to depress the company's stock, but also pointed out that Toyota typically provides Wall Street with worst-case scenarios and then outperforms those forecasts.

"We think these are bottom-end targets," Mochimaru said in a research note Thursday. "However, the 30% profit-decline outlook is likely to have a heavy impact on investors."

The last time Toyota's annual profit declined was in the fiscal year ending March 2002; the last time annual sales fell was in the year ending March 2000, mainly because of a weak dollar.

Honda Motor Co., Japan's No. 2 automaker behind Toyota, said last month that its January-March profit declined 86% compared with the same period a year ago because of a corporate tax levied on its Chinese joint venture. Nissan Motor Co. reports earnings next week.

Toyota's full-year results were much better than its fourth quarter. For the year, Toyota said net income increased 4.5% to $1.7 trillion yen ($24.5 billion) this year. Toyota's revenues increased 9.7% from 23.9 trillion yen ($241.4 billion) last year to 26.3 trillion yen ($265 billion).

Toyota reported that sales for the quarter increased 3.7% to 6.6 trillion yen ($66.2 billion).

Toyota also continues to gain market share in the United States and said it reached a record high of 16.3% for the year.

But Merkle said Toyota's problems in North America are significant. Last year, Toyota launched its redesigned Tundra pickup while ramping up output from its new plant that opened in San Antonio, Texas, in 2006.

"It certainly starts to impede profitability when you have a plant that is not operating at full potential," Merkle said.

Toyota's stock is trading at the low end of its one-year range. It is down more than $27 from its 52-week high of $128.33, reached last July. The low over the range was $91.21.

Posted at 10:13 AM | Permalink | Comments (0)