The news at a glance
General Motors: Cutting its way to a profit; Government contracting: The home team wins; Car safety: Toyota launches a new round of recalls; Real estate: Blackstone bets on retailing; The economy: Consumers squeeze a bit tighter
General Motors: Cutting its way to a profitGeneral Motors, the largest U.S. automobile manufacturer, reported a $4.7 billion profit in 2010, the company’s first full-year profit since 2004 and its best earnings performance since 1999, said Nick Bunkley in The New York Times. GM achieved the turnaround by eliminating debt, “reducing factory output, cutting labor costs, and developing more-enticing cars and trucks.” Those new models, including Chevrolet’s plug-in hybrid Volt and compact Cruze, and the Buick Verano, an upscale version of the Cruze, position GM well for an era of higher oil prices. “We’re hitting North America with the right products,” CEO Daniel Akerson said.
Despite the profit, which Akerson called “a good start,” and the $4,300 bonus paid to each hourly worker at GM, life on the assembly line remains precarious, said Tom Walsh in the Detroit Free Press. With incomes tight and consumers skittish, GM management “expects to adjust staffing and production levels as demand dictates.” So it’s good-bye to regular pay hikes and hello to “sharing the upside via bonuses and lump-sum payments.”
Government contracting: The home team winsThe decadelong competition to supply the Air Force’s next-generation refueling tanker reached a crucial turning point last week when the Pentagon picked Chicago-based Boeing to build 179 of the airplanes for a total of $30 billion, said Christopher Hinton in MarketWatch.com. The choice reverses the Pentagon’s 2008 decision to award the contract to EADS, the European maker of Airbus aircraft. Boeing protested that decision and was allowed to submit a rebid; EADS now has the right to challenge the Pentagon’s latest decision and block the deal temporarily.
Car safety: Toyota launches a new round of recalls Japanese carmaker Toyota has recalled 2.17 million cars and SUVs to fix floor mats so they can’t interfere with accelerator pedals, said Valeriya Safronova and Bill Hutchinson in the New York Daily News. The recall marked “the third time the automaker has made such a move since 2009.” In that time, Toyota has recalled 19 million vehicles, primarily to address complaints of unintended acceleration. In February, U.S. regulators concluded that Toyota’s electronic controls did not cause the problem.
Real estate: Blackstone bets on retailingBlackstone Group, the giant U.S. private-equity firm, will buy 588 shopping malls in 39 states from Australia’s Centro Properties Group for $9.4 billion, said Angus Whitley and Nichola Saminather in Bloomberg.com. Blackstone’s biggest deal since 2007, when it acquired Hilton Worldwide, amounts to an aggressive bet that U.S. retailing is recovering from a lengthy slump. Before the 2008 financial crisis, Centro had gone on a U.S. buying spree that “backfired as the world’s largest economy contracted and debt costs soared.”
The economy: Consumers squeeze a bit tighterConsumer spending barely budged in January from its year-earlier level, despite a tax cut that “gave consumers the biggest jump in their incomes in nearly two years,” said the Associated Press. Consumer outlays increased only 0.2 percent, the smallest rise since June 2010, even though disposable incomes were up 1 percent because a reduction in payroll taxes took effect in January. The tax cut will give the typical American family an additional $1,000 to spend this year, but it may end up being absorbed by higher gasoline prices rather than spent on new goods and services.