General Motors and Delta Air Lines, two premier blue-chip companies, sunk deeper into red ink and, in the latter's case, was being warned that efforts to stave off bankruptcy appear futile. GM posted a $1.2 billion operating loss for the second quarter, despite a surge in sales last month that reduced a bloated inventory. Delta reported a second-quarter loss of $388 million, well below the $1.97 billion for the same period a year ago. But The Wall Street Journal reported that several top executives and board members have warned chief executive Gerald Grinstein that "avoiding Chapter 11 soon will be impossible." Chapter 11 of the federal bankruptcy code extends protection from creditors to companies that are in deep financial trouble.
In an apparent bow to the Bush administration, China's government said it no longer will tie its currency to the US dollar. Effective immediately, it announced that the yuan will be linked to a "basket" of other currencies, presumably meaning the dollar, the euro, and Japan's yen. The announcement caused an immediate rise in the yuan's exchange rate - from 8.28 to 8.11 to the dollar. It had been at the lower level for more than a decade, bringing a chorus of complaints from trading partners that China's exports enjoy an artificial advantage. The move, however, appears almost certain to mean that consumers will pay higher prices for Chinese-made goods, such as apparel. The announcement came one day after Federal Reserve Chairman Alan Greenspan warned of a "very serious" risk to China's economy if the yuan was not revalued. For years, senior leaders in Beijing have insisted that the yuan would be adjusted only on the basis of domestic needs and not because of foreign demands. (Story, page 1.)
The Walt Disney Co. has received three offers, each in the $3 billion range, for its radio operations, the Financial Times reported. It identified the bidders as Citadel Broadcasting, Entercom Communications, and Emmis Communications. Disney's radio assets comprise include 71 local stations, ABC News Radio, and ESPN Sports Radio.
Honeywell International said it will cut 2,000 jobs from its aerospace division by year's end as part of an effort to streamline operations. Although sales have been up, chief executive Dave Cote reportedly told a conference call Wednesday that customers have complained about Honeywell's structure being "too complicated to do business with."