DETROIT – Chrysler Group LLC said Thursday it won't sue to try to stop arbitration with hundreds of dealers it wants to close.
Chrysler shut down 789 dealers in June amid lagging sales. General Motors Corp. also told 2,000 dealers it plans to revoke their franchise agreements by October. But Congress objected and passed a law in December allowing GM and Chrysler dealers to appeal those decisions.
Chrysler said Thursday that 409 of its dealers have filed paperwork to appeal the closures. The American Arbitration Association, which is handling the appeals, said 1,573 dealers in all have filed to appeal, including dealers from GM.
Chrysler had been considering a federal lawsuit to try to stop the process, but said Thursday it will go forward with arbitration.
Sources familiar with Chrysler's case say the arbitration process could cost the company hundreds of millions of dollars. There also is a question of whether Congress's action went against the Treasury Department, which granted aid to Chrysler on condition that it pare its dealerships. The sources requested anonymity because they were discussing sensitive company issues.
The arbitration hearings are scheduled to begin in late February or early march and end by June 14.
NEW YORK – Stocks fell sharply Thursday as investors absorbed more evidence of a troubled economy.
The Dow Jones industrial average skidded 115 points following disappointing reports on employment and orders for big-ticket manufactured goods. A lower forecast from technology maker Qualcomm Inc. dragged the Nasdaq composite index lower. Drops in Motorola Inc. and Apple Inc. also hurt tech stocks.
The market also fell in response to a report from Standard & Poor's that said it no longer considers Britain among the "most stable and low-risk" banking systems. The report drove the dollar higher as investors sought safety. That sent some commodities prices lower, hurting materials stocks.
The S&P report was yet another worry for investors who have been focused on politics, not the economy. Stocks have fallen five of the past eight days as concern builds that a fragile economic recovery could be derailed by missteps in Washington. The questions have some analysts saying that a 10-month surge of 62.2 percent in the Standard & Poor's 500 index isn't warranted.
President Barack Obama's plan to overhaul banking regulations and restrict trading at large financial institutions spooked the market during the past week. The possibility Federal Reserve Board chairman Ben Bernanke wouldn't be confirmed for a second term also had investors on edge, though those worries have subsided as the vote neared.
"Our full-contact politics is really beginning to affect the markets as it's migrating into subjects that investors care deeply about like who is our Fed chairman going to be," said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors. "That wasn't uncertain two weeks ago. Now it is."
The Senate scheduled a vote Thursday to determine whether Bernanke can win approval from at least 60 senators to defeat a filibuster aimed at preventing his reappointment. His term ends Sunday. Senate leaders from both parties said he would be reappointed.
During his State of the Union address Wednesday evening, Obama avoided talking about the banking overhaul plan. Uncertainty over details of how that plan might be enacted are adding to investors' uncertainty.
Concerns about economy are also creeping back to the forefront. The Fed said Wednesday it would keep interest rates at historic lows and that the economy was showing signs of improvement. That helped stocks reverse a slide to end higher.
The enthusiasm faded Thursday after the Labor Department said weekly jobless claims fell by less than expected last week and the Commerce Department reported durable goods orders didn't rise as fast as anticipated last month. The reports provided reminders that the economic recovery is likely to be slow.
In early afternoon trading, the Dow fell 116.31, or 1.1 percent, to 10,119.85. The Standard & Poor's 500 index fell 12.59, or 1.2 percent, to 1,084.91, while the Nasdaq fell 45.38, or 2 percent, to 2,176.03.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.67 percent from 3.66 percent late Wednesday.
The dollar rose against other major currencies, while gold fell.
Crude oil fell 9 cents to $73.58 per barrel on the New York Mercantile Exchange.
Tech shares slid after Qualcomm, which makes chips and other technologies used in cell phones, fell $6.39, or 13.5 percent, to $40.81 after it said it expects a "subdued" rebound in the economy and reduced its full-year sales forecast.
Motorola fell 85 cents, or 11.5 percent, to $6.55 after its profit forecast fell short of expectations.
Apple Inc., whose stock has more than doubled in the past year, fell $8.32, or 4 percent, to $199.56 as investors showed doubts about a new tablet-style computer that looks like a large iPhone. The stock closed higher Wednesday after making the announcement.
In economic news, new requests for unemployment benefits fell modestly, dropping to 470,000 last week. Economists polled by Thomson Reuters had been expecting a bigger drop to 450,000 new unemployment filings.
Orders to U.S. factories for big-ticket manufactured goods rose less than expected in December, increasing just 0.3 percent. Economists had been expecting a 2 percent increase in orders.
For all of 2009, durable goods orders — items expected to last at least three years — tumbled 20.2 percent. It was the largest drop on records that go back to 1992.
On Friday, the government releases its initial reading on fourth-quarter gross domestic product. The GDP number, which measures the entire country's economic output, likely rose at an annualized rate of 4.5 percent during the final three months of 2009.
About four stocks fell for every one that rose on the New York Stock Exchange, where volume came to 507.1 million shares.
The Russell 2000 index of smaller companies fell 10.84, or 1.8 percent, to 607.54.
Britain's FTSE 100 fell 1.4 percent, Germany's DAX index dropped 1.8 percent, and France's CAC-40 fell 1.9 percent. Earlier, Japan's Nikkei stock average rose 1.6 percent.
WASHINGTON – A drop in new jobless claims came in short of expectations and factory orders rose only slightly, fresh evidence the economy is recovering at a slow, uneven pace.
The Labor Department said Thursday that first-time jobless claims dropped by 8,000 to a seasonally adjusted 470,000. Analysts had expected a steeper drop to 450,000, according to Thomson Reuters.
The four week average, which smooths out volatility, rose for the second straight week to 456,250. The average had fallen for 19 straight weeks before starting to rise.
Two weeks ago, claims surged by 34,000 due to administrative backlogs left over from the holidays in the state agencies that process the claims, a Labor Department analyst said. Those delays may still be affecting the data, the analyst said.
That means the current figures could be artificially inflated. At the same time, it would also mean that the steep drop in claims in late December and early January was also exaggerated by the backlogs.
Economists closely watch initial claims, which are considered a gauge of the pace of layoffs and an indication of companies' willingness to hire new workers.
Separately, orders to U.S. factories for big-ticket manufactured goods rose 0.3 percent in December, much less than the 2 percent advance economists had been expecting.
For all of 2009, durable goods orders plunged by 20.2 percent, the largest drop on records that go back to 1992.
The decline highlighted the battering that U.S. manufacturers have suffered during the recession. Economists are hoping that improving outlooks in the U.S. and globally will make 2010 a better year for U.S. manufacturers.
The data comes after President Barack Obama spent most of Wednesday's State of the Union address focused on the economy and jobs.
Obama called on Congress to enact a second stimulus package "without delay," urging that it contain help for small businesses and funding for infrastructure projects.
The Federal Reserve, meanwhile, said Wednesday "the deterioration in the labor market is abating."
Still, the Fed kept the short-term interest rate it controls at a record-low level of nearly zero, and pledged to keep it there for "an extended period."
Jobless claims, meanwhile, have dropped since last fall, as companies cut fewer jobs. In late December, initial claims fell to their lowest level since July 2008, before the financial crisis intensified that September.
Despite the downward trend over the winter, the economy is not yet consistently generating net increases in jobs. The Labor Department said earlier this month that employers cut 85,000 jobs in December, after adding 4,000 in November. November's small increase was the first in nearly two years. The unemployment rate was unchanged at 10 percent.
The number of people continuing to claim benefits, meanwhile, dropped by 57,000 to 4.6 million. Those figures lag initial claims by a week.
But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.
More than 5.6 million people were receiving extended benefits in the week ended Jan. 9, the latest data available. That's about 300,000 fewer than the previous week. All told, more than 10 million people are receiving unemployment assistance.
Some employers are continuing to cut jobs. Home Depot Inc. said Tuesday that it will lay off 1,000 employees. And Wal-Mart Stores Inc. said it will cut 11,200 jobs in its Sam's Club stores as it outsources product demonstrations.
Among the states, California saw the largest increase in claims, with 43,748, which it attributed to clearing a backlog in claims. Florida, West Virginia and Iowa also reported increases. The state data lags initial claims by one week.
Pennsylvania saw the biggest drop in claims, a drop of 25,819, followed by New York, North Carolina, Wisconsin and Georgia.