AIRLINES

UNITED, UNIONS SEEK AGREEMENTS DURING ONGOING TRIAL

CHICAGO – As United Airlines proceeds with its trial to convince a federal judge to void the labor contracts of its mechanics and ramp workers, unions for both groups and the airline yesterday continued with negotiations toward settlements that may ultimately pre-empt a ruling.

Representatives from the Aircraft Mechanics Fraternal Association and the International Association of Machinists said that they are hopeful a deal can be reached by next week, though some significant hurdles remain. Such a deal with each union would likely keep employees from striking, while at the same time giving the airline the concessions it seeks.

UAL’s United has said it needs to pare an additional $725 million from labor costs to attract the money in needs to emerge from bankruptcy.The company’s other unions have all reached consensual, long-term deals.

The trial, which began Wednesday and continued yesterday with testimony from Chief Financial Officer Jake Brace, is expected to wrap up next week. The end of the trial – when Judge Eugene Wedoff would make a final ruling on United’s request to tear up the contracts – stands as the hard deadline for the ongoing negotiations.

– Dow Jones Newswires

AUTOMOTIVE

MOODY’S CUTS FORD; NOW CLINGING TO INVESTMENT GRADE

Moody’s Investors Service cut Ford Motor Company’s long-term credit ratings yesterday, but kept the automaker clinging to investment grade status.

Moody’s cut Ford’s long-term debt rating two notches to Baa3, its lowest investment grade rating, from Baa1, and cut financing arm Ford Motor Credit Company’s to Baa2, from A3. At the same time, it affirmed Ford Motor Credit’s Prime-2 short-term rating. The outlook for both Ford and Ford Motor Credit is negative.

The move comes one week after Standard & Poor’s slashed Dearborn, Mich.-based Ford’s debt ratings to BB+, its highest speculative-grade rating. At the same time, S&P cut crosstown rival General Motors to BB. The moves sent shock waves through markets as investors mulled the prospect of the two largest automakers and American icons as junk-rated companies.

– Dow Jones Newswires

COLLINS & AIKMAN CHAIRMAN, CEO DAVID STOCKMAN RESIGNS

Collins & Aikman Corporation said chairman and CEO David Stockman has resigned, two years after the former director of the Office of Management and Budget stepped in as CEO to try and stem losses. The auto-parts maker also said it’s seeking help from creditors and others to avoid running out of money.

Mr. Stockman, 58, who was budget director under President Reagan, had been chairman since 2002 and became CEO a year later. Troy, Mich.-based Collins & Aikman wouldn’t comment on why he left.

Collins & Aikman, which makes dashboards and door panels, said it had to get a waiver on loan terms after GM and Ford credit ratings were lowered to junk status. Other suppliers have struggled as automakers cut production and steel prices rose. The company’s bond prices plunged and the New York Stock Exchange suspended trading of its shares and plans to delist them.The NYSE said financial reports to U.S. regulators haven’t been filed for 2004 or this year’s first quarter and the stock fell below standards with an average close below $1 over a 30-day period.

– Bloomberg News

TECHNOLOGY

DELL FIRST-QUARTER NET RISES 28% AS DISCOUNTS DRIVE SALES

Dell, the world’s largest maker of personal computers, said first-quarter profit rose 28%, as discounts and printer giveaways drove PC sales.

Net income increased to $934 million, or 37 cents a share, from $731 million, or 28 cents, a year earlier, Round Rock,Texas-based Dell said yesterday in a statement. Sales advanced 16% to $13.39 billion, compared with Dell’s $13.4 billion forecast. Profit and sales may beat analysts’ estimates this quarter, Dell said. CEO Kevin Rollins cut prices on notebook PCs, servers, and storage devices to spur sales. He threw in a free printer with many purchases to entice customers. Founder Michael Dell has kept production costs low and limited research spending to maintain profit. “It’s a pretty good report,” said Daniel Morgan of Synovus Investment Advisors in St. Petersburg, Fla., which manages $6.5 billion, including Dell shares. “The guidance is good, that’s a positive.”

– Bloomberg News

TELECOMMUNICATIONS

MCI INVESTORS HOLDING 20% OF SHARES WON’T BACK BOARD

MCI shareholders owning at least 20% of the company plan to withhold votes for directors at next week’s annual meeting to protest the board’s decision to accept a takeover bid from Verizon Communications.

Omega Advisors and six other investment firms that together hold about 65 million of MCI’s 325 million shares won’t back the re-election of MCI’s directors at the May 16 meeting in Chantilly,Va., according to officials at the firms.

The revolt signals MCI CEO Michael Capellas may not easily win shareholder support for the decision to accept Verizon’s $8.44 billion offer. Qwest Communications International may also take the vote as a cue to return with a new bid after withdrawing a $9.75 billion offer last week. MCI, the no. 2 American long-distance telephone company, is expected to hold a vote on the Verizon deal as early as June. “I’m just expressing my dissatisfaction with what they did,” said Leon Cooperman, who runs Omega, a New York-based hedge fund owning about 3% of MCI’s shares. “If a large number of MCI shareholders withhold their vote, it may be a message to Qwest that they’d win if they came back in.”

– Bloomberg News

IN THE COURTS

SCRUSHY TRIAL JUDGE DISMISSES OBSTRUCTION, SARBANES CHARGES

The judge in the accounting fraud trial of HealthSouth founder Richard Scrushy dismissed two more criminal charges, leaving 36 counts for jurors to weigh when they begin deliberations next week.

U.S. District Judge Karon Bowdre dismissed two counts involving conversations with Mr. Scrushy that former finance chief William Owens secretly recorded for the FBI in March 2003. Judge Bowdre said the tapes failed to prove that Mr. Scrushy obstructed justice or encouraged Mr. Owens to violate the Sarbanes-Oxley Act, which makes it a crime to certify false financial reports.

Mr. Scrushy, 52, is accused of inflating profit at HealthSouth by $2.7 billion from 1996 to 2002. Judge Bowdre said the evidence didn’t support the obstruction charge, which accused Mr. Scrushy of encouraging Mr. Owens to lie to the Securities and Exchange Commission during an investigation of company accounting.

– Bloomberg News

MERGERS AND ACQUISITIONS

E*TRADE GOES PUBLIC WITH PROPOSAL FOR AMERITRADE DEAL

E*Trade Financial has gone public with its proposed takeover of Ameritrade Holding, hours after Ameritrade publicly said it isn’t for sale. The move may be an attempt to publicly pressure Ameritrade into a deal.

In a statement, E*Trade said its proposal would give Ameritrade shareholders a 47.5% fully diluted stake in a combined company, plus about $1.5 billion in cash. E*Trade said it sees “synergies,” or merger benefits, of at least $650 million.

A spokeswoman for Ameritrade, Donna Kush, declined to comment.

E*Trade also said its proposal to Ameritrade includes “joint participation in senior management roles and representation on the board of the combined entity.” But E*Trade spoke of the combined company as one that would be under the leadership of E*Trade CEO Mitchell Caplan.

– Dow Jones Newswires

FOREIGN EXCHANGE

DOLLAR RISES TO HIGHEST POINT VS. EURO THIS YEAR

The dollar climbed to its highest level against the euro this year yesterday, lifted by a strong American retail sales report that boosted optimism about the economy. The dollar also rose against the Japanese yen and British pound.

The dollar’s surge dropped the euro to $1.2705, surpassing the previous low of $1.2733 set in February, and down from $1.2804 late Wednesday in New York.

“We may be revising away some of the weakness (in the economy) we were expecting in the middle two quarters of the year,” said John Rothfield, currency strategist at Bank of America in San Francisco. “We think over the next few months we could see significant improvement in the dollar” against the euro.

– Associated Press