The Wall Street Journal-20080115-The Evening Wrap- GOP Works Michigan- Online edition
Return to: The_Wall_Street_Journal-20080115
The Evening Wrap: GOP Works Michigan; Online edition
In Michigan, Republican candidates pushed economic plans as they vied for primary votes, even though prospects for the state's economy -- and its embattled auto industry -- rest more on petroleum than whatever politicians can dream up.
The GOP vote today in Michigan -- Democrats agreed not to compete in Michigan, because its early primary date violates party rules -- is widely seen as a battle between former Massachusetts Gov. Mitt Romney, who may be making his last stand, and Sen. John McCain. Insurgent candidate and former Arkansas Gov. Mike Huckabee's ability to get voters from his conservative Christian base to the polls before they close at 9 p.m. will also be closely watched. But it is economic, not social, issues that are expected to motivate the electorate's selection. It's no wonder. In November -- the last month state figures were available -- Michigan's unemployment rate was 7.4%, a full percentage point above any other state and more than two points above the U.S. jobless rate of 5%. As a result, the GOP candidates have been competing with each other as offering the best answer to Michigan's problems. Taking a "straight talker" tack, Sen. McCain has said that some jobs that have left Michigan are not coming back, and proposed spending for education and job training, an overhaul of the federal unemployment-compensation system and better community colleges as possible solutions. Mr. Romney, a Michigan native whose father served as both an auto industry executive and a popular governor of the state, has attacked Mr. McCain's position as a "just give up" approach to job creation. For his part he says he'd focus federal resources on beefing up research, technology and basic science to "rebuild this industry."
It's arguable that any politicians could do much about the downturn in the U.S. auto industry, which was caught flat-footed by a runup in gas prices that has turned consumers off to high-margin trucks and SUVs. Domestic manufacturers are trying to adjust. For instance, at this week's North American International Auto Show in Detroit, they unveiled new fuel sippers -- such as Ford's Verve and General Motor's concept electric, the Chevy Volt. Unfortunately, neither will hit the showrooms this year, meaning Detroit remains at the mercy of gas at above $3 a gallon. So, auto makers, workers in Michigan and maybe even would-be presidents all have reason to hope for lower gas prices. And perhaps the sitting president should be added to that list as well, since President Bush made the point of complaining to Saudi Arabian officials about high oil prices during his three-day visit to the kingdom this week. Unsurprisingly, a top Saudi official offered no indication that his country, the world's biggest producer, would jump to lower prices any time soon.
---
Stocks Tumble
Stocks sank, drowning in red ink from Citigroup, project delays at Boeing, and weak retail-sales data. The Dow Jones Industrial Average dropped 277.04 points, or 2.2%, at 12501.11. The Standard & Poor's 500 was off 2.5%, or 35.30, at 1380.95. The tech-focused Nasdaq Composite Index fell 2.5%, or 60.71, to 2417.59. Treasurys prices rose as investors fled from equities. Crude-oil futures tumbled $2.30 to $91.90, as traders focused on a potential drop in demand due to the U.S. economy's softness. The dollar weakened against the yen and strengthened against the euro. Markets in Asia ended lower and European shares fell.
---
More Delays for Boeing's 787
Boeing is near announcing additional delays for its 787 Dreamliner jet program that could hurt its ability to deliver as many airplanes as promised during the initial year of production. People familiar with the situation told The Wall Street Journal that the jet maker continues to experience problems on a variety of fronts, from getting the first plane ready to fly, to overcoming parts shortages and other issues at suppliers' factories. An announcement that would include a new time schedule could come as soon as Wednesday. "Investors are likely to require clear signs that this is the last of the delays, which will take some months to prove out," wrote analysts for Morgan Stanley. Boeing shares fell 4.7%.
---
Apple Unveils Ultra-Thin Notebook
Apple introduced a super-slim laptop computer, dubbed the MacBook Air, as well as an online movie rental service in alliance with major film studios. Apple sees the Internet video service as another key element in its effort to put its products at the center of the living room entertainment hub of the future, and at the same time, sell more of its hardware products. This tactic worked before, when the Cupertino, Calif., company created iTunes music store to drive iPod sales. Mr. Jobs also disclosed Apple had sold more than four million iPhones world-wide in the 200 days since the company's trend-setting smartphone was launched.
---
Intel's Results Disappoint
Intel's profit jumped 51% on higher processor sales and lower costs, but the results fell short of Wall Street's expectations. Shares plunged more than 15% in late trading. The company said revenue for computing-related products was as expected while revenue for NAND memory <ndash> used in flash-memory cards -- was lower than expected, primarily due to lower average selling prices.
---
BofA Streamlines Investment Bank
Bank of America CEO Ken Lewis outlined a streamlined corporate and investment banking unit that would focus on functions most closely aligned with serving large businesses, while scaling back more exotic trading functions. Bank of America is selling its prime brokerage, which lends to hedge funds. The company is also gutting parts of its trading unit and shutting down such structured products areas as collateralized debt obligations. In the process, Bank of America will lay off an additional 650 people in its global corporate and investment bank. The bank, which is slated to report quarterly numbers next week, is still reeling from a $1.45 billion loss in its trading account in the third quarter.
---
Citigroup, Merrill Get Capital Infusions
Citigroup announced plans to sell another $14.5 billion in preferred stock, as it posted a $9.83 billion loss on nearly twice as much in write-downs and credit costs. The bank slashed its dividend by 41%. Separately, Merrill Lynch lined up investments totaling $6.6 billion from Korean Investment Corp., Kuwait Investment Authority and Japan's Mizuho Corporate Bank, as the U.S. firm tries to shore up its finances in the wake of massive mortgage-related write-downs. Also from the financial sector, U.S. Bancorp reported a 21% drop in fourth-quarter net income as it tried to navigate amid the credit crisis.
---
Tight-Fisted Consumers
Retail sales fell 0.4% in December, taking a holiday season tumble that suggested the housing slump and gasoline prices might have caught up with consumers. "Sales lost momentum in December, and that weakening pattern is showing strong evidence of continuing in January. As a result, the downside risks to real consumer spending growth continue to rise in the first quarter of 2008," wrote economist Brian Bethune, of Global Insight. Meanwhile, a slight decline in December U.S. producer prices wasn't enough to prevent them from posting the highest calendar-year increase in over a quarter century on the back of sharply higher energy, commodity and food prices.
---
Justices Restrict Securities Suits
The Supreme Court handed corporations another securities-lawsuit victory. The court ruled 5-3 that investors can't bring private suits against third parties in corporate-fraud cases unless they relied on them when making investment decisions. The court ruled against investors who accused two suppliers -- Scientific-Atlanta and Motorola -- of colluding with Charter Communications to deceive Charter's stockholders and manipulate the price of the cable-television company's stock.
---
Bush Talks Oil in Saudi Arabia
Bush said he has warned Saudi officials during his visit to the Mideast kingdom that high crude prices could hobble Western economies if producers don't boost supply. "I would hope, as OPEC considers different production levels, that they understand that if their -- one of their biggest consumers' economy suffers, it will mean less purchases, less oil and gas sold," Mr. Bush said. Separately, Secretary of State Condoleezza Rice made an unannounced visit to Baghdad, where she congratulated Iraq's prime minister on the passage of so-called de-Baathification legislation and encouraged him to speed along other benchmark laws sought by the U.S.
---
Oprah to Get Own Network
Oprah Winfrey plans to start her own TV network next year in a joint venture with cable programming company Discovery Communications. Her syndicated talk show wouldn't migrate immediately
---
Samwer Brothers Invest in Facebook
A group of European Web entrepreneurs have agreed to invest $10 million to $15 million in social-networking site Facebook. The personal investment by brothers Alexander, Oliver and Marc Samwer -- the founders of Alando.de, an online auction site that was sold to eBay Inc. -- follows a $240 million Facebook investment by Microsoft and a $60 million investment by Li Ka-shing, chairman of the Hong Kong conglomerate Hutchison Whampoa. The investments value the Palo Alto, Calif., company at $15 billion.
---
Congress Wades Into Steroids Scandal
Congress began its public examination of the Mitchell steroids report by urging the Justice Department to investigate baseball star Miguel Tejada for possible perjury. Those testifying at a hearing today included baseball commissioner Bud Selig an players union leader Donald Fehr. No players were slated to participate today.
---
Job Cuts at Nokia
Nokia said it may slash as many as 2,300 manufacturing jobs in Germany as it moves production to lower-cost European countries, such as Romania. The world's largest maker of mobile phones said the decision to close its production plant in Bochum, Germany, by mid-2008 was based on its lack of competitiveness. Job cuts are also on tap for Applied Materials, which said it plans to cut about 1,000 positions, about 7% of its work force, following a reorganization of its semiconductor business this summer.
---
India, China Join Forces on Nuclear Power
China and India pledged to expand trade ties on the third day of Indian Prime Minister Manmohan Singh's visit to China. The quest for energy and the fight against possible environmental sanctions are starting to bring the longtime rivals together.
---
Beirut Blast Apparently Targeted Americans
A bomb blast shook Beirut, in what Lebanese officials said was an attack against vehicles belonging to the U.S. Embassy. U.S. and Lebanese officials said the attack killed four Lebanese and injured a local embassy employee.
---
Thinking With Your Limbs
Via WSJ.com's ever-fascinating blog "Informed Reader" comes today's kicker on the long-established therapeutic benefits of pacing. The blog picks up on Boston Globe reporter Drake Bennett's story on the emerging field of "embodied cognition," which explores how behaviors such as pacing or talking with one's hands could do as much to sort out your thoughts as anything that goes on in your actual gray matter. The story cites a study led by Arizona State University psychology professor Arthur Glenberg, which found that arm movements can have an impact on the comprehension of language and that children are more likely to solve math problems if told to gesture with their hands as they think it through. Other research has found that unconscious eye movements assist people trying to untangle some types of brainteasers. No insight was offered on whether kicking over garbage cans and weaving together a lacework of four-letter words helps out or not. But I happen to think the research just hasn't gotten there yet.
---
The Associated Press contributed to this report.
---
Write to Matt Phillips at [email protected]
