Archive for August, 2008

Electric fault spurs big GM recall (Reuters)

Friday, August 29th, 2008 | Finance News

DETROIT (Reuters) -
General Motors Corp (GM.N) is recalling
857,735 vehicles equipped with a heated windshield wiper fluid
system for a potential short-circuit problem, according to
federal safety regulators.

A short-circuit in the system may cause other electrical
features to malfunction, create an odor or cause smoke,
increasing the risk of a fire, the National Highway Traffic
Safety Administration
said on its website.

The recall involves the 2007-2008 model year Chevrolet
, Tahoe, Avalanche and Suburban, Cadillac Escalade,
Escalade ESV and Escalade EXT, GMC Acadia, Sierra, Yukon, Yukon
and Saturn Outlook; 2006-2008 Hummer H2, Cadillac DTS and
Buick Lucerne; and the 2008 Buick Enclave.

GM plans to install a wire harness with an in-line fuse
free of charge to fix the problem, NHTSA said.

Separately, GM is also recalling 88,809 2008-model year
Buick Enclave, and 2007-2008 model year GMC Acadia and Saturn
SUVs in 28 states and Washington, D.C..

A build-up of snow or ice on the windshield or the wipers
may restrict the movement of the wiper arm in the SUVs and
could cause the wiper to detach from its motor, according to
the NHTSA website.

(Reporting by Poornima Gupta; editing by Jeffrey Benkoe)


Consumer spending weakens as stimulus fades (Reuters)

Friday, August 29th, 2008 | Finance News

WASHINGTON (Reuters) -
Personal income tumbled unexpectedly
in July and inflation-adjusted spending shrank at sharpest rate
in four years as the lift from government stimulus checks
waned, a government report on Friday showed.

A big jump in prices pushed inflation to a 17-year high,
the Commerce Department said, eroding what little spending
power consumers had. The report suggested the economy's
stimulus-related momentum was fading after a surprisingly
strong second quarter.

"With the tax refund effect on spending now more or less
over, we think the worst is yet to come for consumers," said
Ian Shepherdson, an economist with High Frequency Economics in
Valhalla, New York.

U.S. stocks opened lower, while Treasury debt prices gained
slightly after the report. Short-term interest rate futures
trimmed chances for Federal Reserve interest rate increases
next year.

Personal income fell 0.7 percent in July, the sharpest
decline since a 2.3 percent plunge in August 2005 after
Hurricane Katrina, the government said. Analysts were expecting
income to hold steady.

Consumer spending, which accounts for about two-thirds of
national economic activity, rose 0.2 percent, as expected, the
slimmest gain since February. However, inflation-adjusted
spending fell 0.4 percent, the biggest drop since June 2004 and
the second consecutive monthly decline.

The government issued $13.7 billion rebate checks last
month as part of a plan to deliver an extra $107 billion to
American households this year to cushion the blow from a deep
housing slump and tight credit. However, the amount of checks
issued in July dropped by half from June's level.

Prices paid by consumers rose by a sharp 0.6 percent last
month, pushing the year-on-year rise in the personal
consumption expenditures
price index up to 4.5 percent, the
highest since February 1991.

Much of the increase was due to fast rising food and energy
prices. But even with those costs stripped out, prices gained
0.3 percent from June and were up 2.4 percent over the past
year, the biggest year-over-year gain since February 2007.

A separate report showed New York City's economy shrank for
a third straight month in August, providing one of the first
glimpses on how the economy may have fared this month.

The National Association of Purchasing Management-New York
said its index of current business conditions rose to 45.3 in
August from 38.5 in July. But that was still below the 50 level
that separates growth from contraction.

The report showed business managers facing stiffer costs as
a prices paid index rose to an 11-month high.

While fast-rising food and energy prices have taken a big
toll on U.S. consumers and businesses, a big drop in the price
of oil
since a record high reached last month could soon offer
a wave of relief.

(Additional reporting by Pedro Nicolaci da Costa in New
York; Editing by Neil Stempleman)


Suitmakers hit hard as retailers want discounts (Reuters)

Friday, August 29th, 2008 | Finance News

LAS VEGAS (Reuters) -
Competition and a move away from
tailored dressing, only exacerbated by a weak economy, are
hurting the men's suit business hard, and retailers are adding
to manufacturers' pain by demanding more discounts.

Suit vendors at a trade show this week described how men's
taste for more casual clothing, a flood of low-cost rivals from
Asia, and a recent pull-back in spending due to tough economic
times are plaguing the suit industry, the most economically
sensitive category in the apparel business.

"(Suit makers) can't withstand the competition and the
downturn in the economy at the same time," Mark Lipman, vice
president of national sales for Los Angeles suit maker and
wholesaler Marina Imports, said at the Magic Marketplace
apparel trade show. "It's a perfect storm."

The troubles can be seen in some major players' numbers.
Retailer Men's Wearhouse Inc's second-quarter profit fell 40
percent, while profit dropped 44 percent for Oxford Industries
, a manufacturer and retailer whose men's tailored division
cut inventory by more than 25 percent in its most recent

One big problem is how men now dress. Many pair a dress
with more casual pants, even jeans, when they dress up, a
far cry from the buttoned-down, tailored looks of years past.

"Casual Friday," a 1990s phenomenon that allowed office
workers one day a week to dress down, was a big thorn in the
side of the suit industry and the gradual shift to more casual
looks has only intensified in the United States.

"The overall dress-up market has changed dramatically in
the past 10 years," said retailer Cy Rosengarten, owner of
Suits 20/20 outside Chicago, who noted fewer menswear vendors
were in attendance at the Las Vegas trade show this year.

Apart from men's stores stocking sportswear at the expense
of suits, the industry is also competing for the attention of
fewer retailers amid industry consolidation and the decline of
small haberdasheries in American cities.

Moreover, cheaper fabrics from Asia that compete with
costlier Italian imports have driven down prices, which helps
any guy looking for a suit, but hurts profit margins.

"If volume is down and the price is down, retailers have an
additional problem," Lipman said.

Given these challenges, retailers are being more demanding.

"People are balking at the prices, they're bargaining with
me, but they do want my product in their stores," said Anna
Bouskila, owner of New York-based BMG Imports. "We'll make less
but we'll make a sale."

Bouskila -- who said she's not able to pass along to
retailers the 40 percent price hike in Italian fabrics due to
the weak dollar -- said stores that historically ordered dress
shirts in every color are now being much more selective.

One big manufacturer, which declined to be named, said
department stores in this weak market are increasingly asking
for "margin support" if branded or private-label products end
up being marked down, eating into the retailers' margins.

Vendors have few options when powerful accounts start
bargaining. "A lot of them (vendors) are sitting with
merchandise they want to sell," Rosengarten said.

Yet despite all the bad news, some manufacturers are moving
into more modern suits that may attract younger clients and
jazz up the tired category.

Louis Raphael, one of the country's top trouser makers that
sells to clients from Macy's Inc to Kohl's Corp, said it is
expanding into suits with more athletic fits and fabrications,
like washable wools or crease prevention fabrics.

"We're expanding and growing," said Kenneth Petersen, the
Brisbane, California-based company's vice president of
merchandising and design. "We think this is the right time to
gain market share through innovation."

Retailers have been testing new looks from Louis Raphael,
he said, pointing to suits with slimmer shoulders and a lower
rise in pants, and details like peak lapels or more colorful
suit linings.

(Editing by Braden Reddall)