Stocks point to plus open after big gain By MADLEN READ, AP Business Writer

Stocks point to plus open after big gain By MADLEN READ, AP Business Writer
18 minutes ago



NEW YORK - U.S. stock futures pointed toward a higher opening Wednesday as Wall Street looked to extend its rally a day after a half-point rate cut from the Federal Reserve.

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Stocks soared Tuesday after the Fed slashed the target federal funds rate to 4.75 percent from 5.25 percent because of signs that credit market problems could hurt the overall economy. The Dow Jones industrials, climbing nearly 336 points, had their biggest one-day point gain in nearly five years.

Wednesday brings new economic data, which investors will be parsing to determine how the economy is faring amid the current credit climate and volatile stock market.

The Labor Department's August consumer price index is scheduled to come out at 8:30 a.m. EDT. According to a Thomson Financial survey, economists on average are anticipating a 0.1 percent decline in the headline CPI, and a 0.2 percent uptick in the core CPI, which eliminates food and energy prices.

At the same time, the Commerce Department reports on new home construction. The data is anticipated to show that construction of new homes and apartments in August fell to an annual rate of 1.339 million units, down 3 percent from an annual rate of 1.381 million units in July.

But in advance of the data, which of course reflects activity well before Tuesday's rate cut, investors appeared to hold on to their renewed optimism — even after Morgan Stanley, the second-largest U.S. investment bank, posted a 17 percent drop in third-quarter profit. The decline was steeper than analysts predicted.

Dow Jones industrial average futures expiring in December rose 45, or 0.32 percent, to 13,880. S&P 500 index futures rose 5.80, or 0.38 percent, to 1,538.90, and Nasdaq 100 Index futures rose 3.50, or 0.17 percent, to 2,062.75.

In August, commodity prices fell along with stocks as investors drew their cash out of riskier assets and put it into safer government securities. However, crude oil prices are back at record highs above $81 a barrel. In premarket trading on the New York Mercantile Exchange, crude rose another 48 cents to $81.99 a barrel.

Gold prices also extended strong gains made Tuesday.

And in a trend that's likely to exacerbate the effects of high commodity prices on U.S. consumers, the dollar slumped to a new low against the euro Wednesday. The euro rose as high as $1.3987 in morning European trading before settling back to $1.3981, still above the $1.3971 it bought in late New York trading Tuesday.

European and Asian stocks surged following the Fed's rate cut.

Britain's FTSE 100 rose 2.26 percent, Germany's DAX index rose 1.81 percent, and France's CAC-40 rose 2.43 percent.

Japan's Nikkei index rose 3.67 percent and Hong Kong's Hang Seng Index rose 3.98 percent.

___

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

General Mills profit rises 8 percent 56 minutes ago

General Mills profit rises 8 percent 56 minutes ago



MINNEAPOLIS - The foodmaker General Mills Inc. reported on Wednesday that its first-quarter profit rose 8 percent as rising revenue offset higher ingredient costs and increased spending on marketing.

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The maker of Cheerios cereals, Yoplait yogurt and Pillsbury baking mixes said it earned $288.9 million, or 81 cents per share, during the quarter that ended Aug. 26, up from $266.9 million, or 74 cents per share, a year ago.

Revenue rose 7 percent to $3.07 billion from $2.86 billion a year ago.

Analysts surveyed by Thomson Financial were expecting 80 cents per share on revenue of $3 billion. Those earnings forecasts typically exclude one-time items.

The company left its full-year guidance unchanged at $3.39 to $3.43 per share.

Sales in General Mills' retail foods division, the company's largest, grew 6 percent to $2.03 billion. Operating profits rose 6 percent to $473 million. Sales of Big G cereal rose 5 percent.

___

On the Net:

General Mills Inc.: http://www.generalmills.com

Morgan Stanley profit tumbles 17 percent By JOE BEL BRUNO, AP Business Writer

Morgan Stanley profit tumbles 17 percent By JOE BEL BRUNO, AP Business Writer
50 minutes ago



NEW YORK - Morgan Stanley on Wednesday reported third-quarter profit fell 17 percent, as the No. 2 U.S. investment bank was slammed by a global credit crisis that cut into stock trading, corporate lending, and results from investments.

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Quarterly profit fell to $1.54 billion, or $1.44 per share, from $1.85 billion, or $1.75 per share, in the year ago period. Income from continuing operations, which includes results of the recently spun-off Discover Financial Services, slid 7 percent to $1.47 billion, or $1.38 per share, from $1.59 billion, or $1.50 per share.

Stronger investment banking fees helped prop up revenue during the third quarter, which rose 13 percent to $7.96 billion from $7.06 billion a year earlier.

Analysts polled by Thomson Financial expected a profit of $1.54 per share on $8.35 billion of revenue.

John Mack, Morgan Stanley's chairman and chief executive, pinned the quarter's poor performance on the "impact of the severe market disruption on some areas of the firm — including our credit products, leveraged lending and quantitative strategies businesses."

The company said its saw losses of $940 million in the quarter from the decreased market value of loans on its books as well as other financing commitments. Those losses cut 33 cents per share off of its bottom-line results.

Morgan Stanley fell $1.76, or 2.6 percent, to $66.75 in premarket electronic trading after closing Tuesday at $68.51. The stock has tumbled 24 percent since the end of the second quarter, as financial services firms were squeezed by defaults in mortgage positions and a tightening credit environment.

Consumer prices drop 0.1 percent By MARTIN CRUTSINGER, AP Economics Writer

Consumer prices drop 0.1 percent By MARTIN CRUTSINGER, AP Economics Writer
7 minutes ago



WASHINGTON - Consumer prices in August fell for the first time in 10 months as another big drop in energy costs offset higher food prices.

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The Labor Department reported Wednesday that its closely watched Consumer Price Index dipped 0.1 percent last month, slightly better than the flat reading that had been expected. It was the first decline in consumer prices since a 0.4 percent fall in October 2006.

The new report came a day after the Federal Reserve cut a key interest rate by a half point, a bigger decrease than had been expected, in an effort to ensure that recent financial market turbulence didn't push the country into a recession.

The Fed in its statement said that "some inflation risks remain," but by making the bolder half-point cut in its federal funds rate, it was signaling that it clearly believed the threat of a recession outweighed concerns about inflation.

The Commerce Department reported Wednesday that construction of new homes fell by 2.6 percent in August to a seasonally adjusted annual rate of 1.331 million units, the slowest pace in 12 years.

Outside of food and energy, inflation remained well contained as well in August, rising by 0.2 percent. This core inflation rate had been up by just 0.2 percent or 0.1 percent for the past six months.

The 0.1 percent fall in overall prices reflected a hefty 3.2 percent drop in energy costs. It was the third straight decline in energy and the biggest drop since last October. The price of gasoline dropped by 4.9 percent while natural gas prices were down 4.2 percent.

Consumer prices drop 0.1 percent By MARTIN CRUTSINGER, AP Economics Writer

Consumer prices drop 0.1 percent By MARTIN CRUTSINGER, AP Economics Writer
7 minutes ago



WASHINGTON - Consumer prices in August fell for the first time in 10 months as another big drop in energy costs offset higher food prices.

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The Labor Department reported Wednesday that its closely watched Consumer Price Index dipped 0.1 percent last month, slightly better than the flat reading that had been expected. It was the first decline in consumer prices since a 0.4 percent fall in October 2006.

The new report came a day after the Federal Reserve cut a key interest rate by a half point, a bigger decrease than had been expected, in an effort to ensure that recent financial market turbulence didn't push the country into a recession.

The Fed in its statement said that "some inflation risks remain," but by making the bolder half-point cut in its federal funds rate, it was signaling that it clearly believed the threat of a recession outweighed concerns about inflation.

The Commerce Department reported Wednesday that construction of new homes fell by 2.6 percent in August to a seasonally adjusted annual rate of 1.331 million units, the slowest pace in 12 years.

Outside of food and energy, inflation remained well contained as well in August, rising by 0.2 percent. This core inflation rate had been up by just 0.2 percent or 0.1 percent for the past six months.

The 0.1 percent fall in overall prices reflected a hefty 3.2 percent drop in energy costs. It was the third straight decline in energy and the biggest drop since last October. The price of gasoline dropped by 4.9 percent while natural gas prices were down 4.2 percent.

Jury awards family $600K in Denny's suit 26 minutes ago

Jury awards family $600K in Denny's suit 26 minutes ago



EAST ST. LOUIS, Ill. - A jury has ordered the Denny's restaurant chain to pay $600,000 to 15 members of a black family who claimed their white waiter deliberately ignored them and used racial slurs.

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The federal jury awarded each family member $5,000 in compensatory damages and $35,000 in punitive damages on Friday.

Sandra Green's family sued over a November 2003 meal at a Denny's restaurant in the St. Louis suburb of Fairview Heights. The waiter, who later was fired, allegedly served white patrons and ignored the family. Some of Green's family members said they had to get their own drinks, utensils and napkins.

"It's not really about the money. We don't want another black family or our children to have to go through what we went through," family member Charles Tart Sr. said.

Ed Ordonez, an attorney for Spartanburg, S.C.-based Denny's Corp., told jurors that the Green family had received bad service but they were not harmed.

He said the company will decide whether to appeal.

Fears spread among U.K. bank's customers By D'ARCY DORAN, Associated Press Writer

Fears spread among U.K. bank's customers By D'ARCY DORAN, Associated Press Writer
26 minutes ago



LONDON - Hundreds of customers lined up to withdraw their savings from a British mortgage bank Saturday, ignoring government assurances that their money was safe despite the bank's request for an emergency loan.

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Police were called in some cities to steer panicked crowds away as Northern Rock bank branches closed for the day.

Fears have spread over the bank's request earlier in the week for an emergency Bank of England loan amid the global credit crisis. Northern Rock, Britain's fifth-largest mortgage lender, is the first British bank in 15 years to be bailed out by regulators.

Customers withdrew $2 billion from the bank Friday, The Financial Times reported, citing an unidentified person described as close to the situation. The bank declined to confirm the figure, which represents 4 percent of its deposit base.

Treasury chief Alistair Darling and the country's Financial Service Authority tried to assure customers there was no doubt over Northern Rock's solvency.

The authority "has reiterated yet again tonight that it is satisfied that Northern Rock is solvent, can carry on doing business and, crucially, paying out money if people want to withdraw their funds," Darling said on Channel 4 TV on Saturday night.

But The Sunday Telegraph said Northern Rock was preparing itself for a sell-off. Quoting unidentified sources, the paper said one plan would divide the bank's mortgage portfolio between other major banks in what would be a private-sector rescue of the lender.

The bank made the loan request Thursday because it relies heavily on wholesale money markets for cash, and had been unable to borrow the amounts it required from other banks since the money markets choked up last month. That was caused in part by U.S. banks making mortgage loans to Americans with poor credit histories.

Although Northern Rock requested substantial emergency funds at a penalty rate, the bank has said it had billions of pounds in cash at its disposal. It has yet to draw on any emergency funding.

Despite Darling's message, lines stretched around the block Saturday at some of the bank's 76 branches in Britain and the bank extended opening hours to deal with the situation.

"Yes, we are making matters worse, but I do think people need some reassurance from Northern Rock and the government and financial services that their money is safe," account holder Jane Taylor told Sky News while waiting outside a branch in Kingston-upon-Thames, west of London.

But others said they had faith in the bank and financial authorities and watched the lines in disbelief.

"It's mostly, in my opinion, ignorance and that's why they're panicking," said another bank customer who gave only his first name, Tom. "I'm leaving mine there."

Under Financial Services Compensation Scheme, deposits of up to $63,900 are guaranteed should a bank default.

Ron Stout, a spokesman for Northern Rock, told The Associated Press that reckless comments by some analysts about the bank's solvency prompted customers to panic and line up outside branches or strain the company's online banking system.

He said Northern Rock would continue to extend its banking hours, by opening one hour ahead of schedule on Monday, and to reassure customers that their investments are safe with the bank.

Greenspan faults Bush over spending By JEANNINE AVERSA and ANN SANNER, Associated Press Writers

Greenspan faults Bush over spending By JEANNINE AVERSA and ANN SANNER, Associated Press Writers
13 minutes ago



WASHINGTON - Former Federal Reserve Chairman Alan Greenspan, in his new book, bashes President Bush for not responsibly handling the nation's spending and racking up big budget deficits.

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A self-described "libertarian Republican," Greenspan takes his own party to task for forsaking conservative principles that favor small government.

"My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending," Greenspan wrote.

And he weighed in briefly but pointedly on the Iraq war: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

Bush took office in 2001, the last time the government produced a budget surplus. Every year after that, the government has been in the red. In 2004, the deficit swelled to a record $413 billion.

"The Republicans in Congress lost their way," Greenspan wrote. "They swapped principle for power. They ended up with neither. They deserved to lose."

In 2006, voters put Democrats in charge of Congress for the first time in a dozen years.

Greenspan's memoir, "The Age of Turbulence: Adventures in a New World," is scheduled for release Monday. The Associated Press purchased a copy Saturday at a retailer in the Washington area.

The book is a recollection of his life and his time as Fed chief.

Greenspan, 81, ran the Fed for 18 1/2 years and was the second-longest serving chief. He served under four presidents, starting with his initial nomination by Ronald Reagan.

He says he began to write the book on Feb. 1, 2006, the day his successor — Ben Bernanke — took over. A caption under a photo of Bernanke's swearing-in has Greenspan saying he was "very comfortable leaving the post in the hands of such an experienced successor."

The ex-Fed chief writes that he regrets the loss of fiscal discipline under Bush.

"`Deficits don't matter,' to my chagrin, became part of Republicans' rhetoric."

Greenspan long has argued that persistent budget deficits pose a danger to the economy over the long run.

At the Fed, he repeatedly urged Congress to put back in place a budget mechanism that requires any new spending increases or tax cuts to be offset by spending reductions or tax increases.

Large projected surpluses were the basis for Bush's $1.35 trillion, 10-year tax cut approved in the summer of 2001.

Budget experts projected the government would run a whopping $5.6 trillion worth of surpluses over the subsequent decade after the cuts. Those surpluses, the basis for Bush's campaign promises of a tax cut, never materialized.

"In the revised world of growing deficits, the goals were no longer entirely appropriate," Greenspan noted. Bush, he said, stuck with his campaign promises anyway. "Most troubling to me was the readiness of both Congress and the administration to abandon fiscal discipline."

Greenspan, in testimony before Congress in 2001, gave a major boost to Bush's tax-cut plan, irking Democrats.

He argued then that a tax cut could help the economy deal with sagging growth. The economy slipped into a recession in March 2001. The downturn ended in November of that year.

Surpluses quickly turned to deficits after the bursting of the stock market bubble and the 2001 recession cut into government revenues.

Government spending increased to pay for the fight against terrorism and receipts declined because of a string of tax cuts.

The Bush White House defended its fiscal policies in light of the Greenspan book.

"Clearly those tax cuts proved to be the right medicine for an ailing economy," White House spokesman Tony Fratto said. The 2001 recession was a mild one.

"Tax cuts contributed a portion to early deficits, but those tax cuts accelerated growth over time," Fratto said. He added: "We're not going to apologize for increased spending to protect our national security."

Greenspan said he was surprised by the political grip that Bush exerted over his administration.

The Bush administration turned out to be different from "the reincarnation" of the Ford administration that Greenspan said he had imagined. "Now the political operation was far more dominant." Greenspan was chairman of the Council of Economic Advisers under President Ford.

Greenspan enjoyed a good relationship with Bush's predecessor, Bill Clinton, "a fellow information hound."

They also were on the same economic page. During the Clinton administration, budget deficits turned to surpluses.

Greenspan recalled a conflict with the White House when Bush's father was president. The elder Bush wanted lower interest rates and challenged Greenspan's inclination to raise them because of inflation risks.

For Bush's father, the economy was his "Achilles' heel, and as a result we ended up with a terrible relationship." The economy went into a recession in the summer of 1990 and emerged from it in the spring of 1991.

Many supporters of the elder Bush blamed Greenspan's tight-money policies for the recession that contributed to Bush's loss to Clinton.

Greenspan says in the book he does not lament the loss of America's manufacturing base.

"The shift of manufacturing jobs in steel, autos and textiles, for example, to their more modern equivalents in computers, telecommunications and information technology is a plus, not a minus, to the American standard of living," Greenspan wrote.

Greenspan's memoir includes his early years growing up in a New York City neighborhood of low-rise brick apartment buildings filled with families of Jewish immigrants, his stint as a jazz musician and his decades as a Washington policymaker.

On other topics, Greenspan:

• Says he believes looser mortgage terms for "subprime" borrowers — those with spotty credit histories or low incomes — raised financial risks. However, he says the benefit of expanded home ownership in the United States was worth the risk.

• Questions whether global powerhouse China can continue its economic successes over the long run if it doesn't incorporate democratic processes. However, he predicts that if Beijing continues to move ahead on free-market principles "it will surely propel the world to new levels of prosperity."

• Predicts the most important economic decision U.S. lawmakers and courts will confront in the next quarter century will be to clarify rules involving intellectual property — patents, copyright and trademarks.

• Proposes lowering barriers to skilled immigrants and improving education to narrow income inequality.

China recalls tainted leukemia drugs By CHRISTOPHER BODEEN, Associated Press Writer

China recalls tainted leukemia drugs By CHRISTOPHER BODEEN, Associated Press Writer
26 minutes ago



BEIJING - Chinese authorities ordered the recall of tainted leukemia drugs blamed for leg pains and other problems, state media reported Sunday, the latest crisis to strike the country's embattled food and drug industries.

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Most of the drugs involved — methotrexate and cytarabin hydrochloride — have been recovered and authorities have traced the remainder, the Xinhua News Agency said. The report did not say if any of the drugs had been exported.

Authorities have banned the sale and distribution of the drugs, produced by the Shanghai Hualian Pharmaceutical Co., it said.

China, a major global supplier, has been facing growing international pressure to improve the quality of its exports after dangerous toxins — from lead to an antifreeze ingredient — were found in goods including toys and toothpaste.

China has been eager to cast itself as a victim, too, of unsafe imports. Xinhua on Saturday announced that inspectors recently found residue of the banned stimulant ractopamine in frozen pig kidneys imported from the United States and frozen pork spareribs from Canada. The names of the exporting companies were not identified. Ractopamine is forbidden for use as veterinary medicine in China.

Xinhua said the 18.37 tons of frozen pork kidneys and 24 tons of frozen pork had been returned to importers exporters, said the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).

Ractopamine, a hormone that promotes the growth of lean meat in pigs and cattle, is banned by China and most other countries as a health hazard, although its use in stock animals is permitted in the U.S. and Canada. China has also recently banned imports of U.S. meat contaminated with salmonella, additives, and veterinary drugs.

Xinhua said the State Food and Drug Administration and Health Ministry banned the two leukemia drugs after several child leukemia patients who were taking them complained of leg pains and difficulty walking. Xinhua said some patients also complained of urine retention.

It said the Health Ministry and drug administration had traced the problems with the drugs to their being tainted with vincristine sulfate, an anticancer drug. Xinhua said factories manufacturing the drugs had been closed.

China has taken a series of steps to crackdown on tainted drugs and other unsafe products, in part due to concern over the reputation of its exports.

In the harshest action so far, the country's former top drug regulator was executed in July for taking millions of dollars in bribes to approve substandard medicines, including an antibiotic that killed at least 10 people.

GM, UAW make progress; hurdles remain By DEE-ANN DURBIN, AP Auto Writer

GM, UAW make progress; hurdles remain By DEE-ANN DURBIN, AP Auto Writer
17 minutes ago



DETROIT - General Motors Corp. and the United Auto Workers made progress at the bargaining table Saturday but still faced significant hurdles and ended negotiations for the day without reaching an agreement.

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Negotiations ended around 9 p.m. EDT, GM spokeswoman Katie McBride said. They are scheduled to resume midmorning Sunday.

Some union subcommittees — which handle issues such as pensions, benefits and job security — have wrapped up talks, but an agreement wasn't expected Saturday because negotiators were still dealing with some key issues, according to a person who was briefed on the negotiations.

The person, who spoke on condition of anonymity because the talks are private, also confirmed that GM Chairman and CEO Rick Wagoner and UAW President Ron Gettelfinger are actively involved in the discussions.

Several local union officials who have been in touch with bargainers said the talks are going well but the outstanding issue is retiree health care expenses. GM wants the union to take over responsibility for retiree health care costs using a company-funded trust and the union was asking for job guarantees in exchange for taking on the costs.

The local officials spoke on condition of anonymity because they weren't authorized to speak publicly about the talks.

GM's 73,000 U.S. auto workers were without a contract as of midnight Friday and could go on strike at any time if negotiations break down. In Spring Hill, Tenn., hundreds of union members were at the local UAW hall Saturday, waiting for news.

"Members are very apprehensive. These are historic times and everybody realized that," said UAW Local 1853 President Mike O'Rourke. Workers have faith in the UAW's negotiating team, he added.

Some other union halls were quiet as local leaders prepared for membership meetings or awaited word from the UAW. In Lansing, UAW Local 652 President Chris "Tiny" Sherwood said he was keeping the hall open and making sure members were ready if a strike was called.

A message was left Saturday for UAW spokesman Roger Kerson.

Five of GM's 18 U.S. assembly plants were operating Saturday, GM spokesman Tom Wickham said, including two plants in the Lansing area and one each in Flint, Wentzville, Mo., and Lordstown, Ohio. Only two plants in Flint and Lansing were scheduled to be running Sunday.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said tensions often run high when the union and the automakers dive into the details.

"If there aren't some raised voices and sweaty palms, you're not doing your job," he said.

But Cole said he believes there's little chance for a strike. A short strike might not have much effect on GM but could backfire against the UAW if the public believes the union is asking for too much from a company that is struggling, Cole said.

"They've got to be very careful of anything that could hurt their public image," he said.

This year's contract talks are considered crucial to the survival of GM and its U.S.-based counterparts, Ford Motor Co. and Chrysler LLC. Ford and Chrysler were also in talks over the weekend, but they extended their contracts with the UAW indefinitely Thursday after the UAW named GM the lead company in the negotiations. Once the union wraps up talks with GM it will try to implement similar agreements at Ford and Chrysler.

All three companies want to cut or eliminate what they say is about a $25-per-hour labor cost gap with their Japanese competitors. The gap, the companies say, is one reason why the Detroit Three collectively lost about $15 billion last year, forcing them all to restructure by shedding workers and closing factories.

The UAW is also fighting for its survival. The union represented 302,500 active workers during the last contract talks in 2003. This year, that number fell to 180,681.

The central issue this year has been skyrocketing health care costs. Automakers have been pushing the union to take over responsibility for retirees' health care, an unfunded expense estimated at more than $90 billion for GM, Ford and Chrysler. The automakers want that liability off their books in order to improve their stock prices and credit ratings.

Both sides have been wrangling over how much the automakers would contribute to the trust. In a note to investors Friday, Lehman Brothers analyst Brian Johnson said the automakers want to fund the trust at 65 to 67 percent of their total health care obligation. But Johnson said he believes automakers will agree to 75 percent because they don't want strikes.

Johnson also said he expects the union to compromise and accept a two-tier wage system that pays newer employees less money in order to ensure continuing membership and work at U.S. plants.

___

AP Auto Writer Tom Krisher contributed to this report.

EU court to deliver Microsoft ruling By AOIFE WHITE, AP Business Writer

EU court to deliver Microsoft ruling By AOIFE WHITE, AP Business Writer
Sat Sep 15, 5:43 AM ET



BRUSSELS, Belgium - When Europe's second-highest court rules Monday on Microsoft Corp.'s appeal of its landmark antitrust conviction, more will be at stake for regulators than just the behavior of the world's largest software company.

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Experts say an affirmation of the European Commission's 2004 order and record 497 million euro ($613 million) fine could embolden regulators as they pursue probes of Intel Corp., Rambus Inc. and Qualcomm Inc., among others.

But a major victory for Microsoft could turn the regulatory landscape upside down, curbing the ambitions of European officials who have recently taken a more aggressive stance against alleged monopolists than regulators in the United States.

The 13 judges on the Luxembourg-based Court have been considering Microsoft's appeal for 15 months. Judge Bo Vesterdorf — on his last day on the job — will read the order that could change how the world's most powerful corporations are regulated by Europe.

The case started in the 1990s with complaints from Microsoft rivals about how the software giant used its presence on most desktop computers to elbow into new markets and block competitors. It's also always been about something more — nothing less than the role of Europeans in the regulation of U.S. companies.

If the Commission's tougher approach is upheld, that means U.S. companies with a global presence will have to conform to Europe's rules, said Keith Hylton, a professor at Boston University School of Law.

"The end result is, the EU ends up being the global regulator of dominant firms," he said.

Both sides can appeal the decision Monday to Europe's highest court.

The case, which originated from a 1998 complaint by U.S.-based server maker Sun Microsystems Inc., has become a classic David and Goliath tale. Here, however, both sides claim the role of David.

EU regulators say they're battling a corporate bully that stifled competition and used its Windows monopoly to muscle in on new markets — media players and servers. A similar U.S. Department of Justice case against Microsoft was settled in 2002.

Microsoft counters that it's the one being bullied by regulators who imposed heavy fines and buried the software maker under reams of criticism without suggesting specific remedies for their complaints.

On March 24, 2004, the European Commission found Microsoft guilty, ordering it to share the code that would help rivals' servers work well with Windows and make a version of its operating system available without its media player software. It also levied the record-setting fine.

How much Microsoft has complied with the code-sharing order is still up to debate. Last year, it was fined an additional 280.5 million euros ($357 million) for failing to supply the "complete and accurate" interoperability information. Microsoft has said it will appeal that decision.

The company also offered a version of Windows without its Media Player — a year and a half after the initial ruling. The software designed by EU lawyers was a total failure. No computer makers bothered to ship it with new PCs.

The case is about "whether or not the state can force a company to provide its research and development to its direct competitors at little or no cost," said Microsoft lawyer Erich Andersen.

EU spokesman Jonathan Todd said Microsoft does not have the right to exclude competitors "without constraint." By selecting who gets to play in the market, "Microsoft wants to make those choices for the consumer," he said

But a ruling in favor of Microsoft would have implications far beyond the current case, said Ted Henneberry, a lawyer in Heller Ehrman's London and Washington, D.C. offices and a former member of the Irish competition authority.

"There is an issue as to what the Commission's abilities are to restructure markets," he said. "This will set the bounds" for how aggressive the EC can be in regulating technology companies.

It's a question that applies to many more companies than just Microsoft.

In July, EU regulators charged Intel Corp. with monopoly abuse for allegedly offering customer rebates and below-cost pricing. They said Intel's actions undercut smaller rival computer chip-maker Advanced Micro Devices Inc.

Last month, the Commission charged Rambus Inc. with antitrust abuse, alleging the memory chip designer demanded "unreasonable" royalties for its patents that it said were fraudulently set as industry standards.

And it's also pondering further moves on Microsoft and its new Windows Vista operating system as well as investigating complaints about Qualcomm Inc.'s licensing fees for cell phone chip patents.

Ultimately, though, Microsoft isn't the same company it was in the 1990s, said Matt Rosoff of independent consultancy Directions on Microsoft. Today, it's an aging octopus struggling to match Google Inc. on Internet search and Apple Inc. on music players.

"Microsoft is not perceived as the all-powerful giant it was ten years ago," he said. "It's a combination of rapid change in the technology industry, the natural life cycle of any company growing and maturing."

___

AP Technology Writer Jessica Mintz in Seattle and Christopher S. Rugaber in Washington contributed to this report.

Chicken chain takes on Southern fryers By DANIEL YEE, Associated Press Writer

Chicken chain takes on Southern fryers By DANIEL YEE, Associated Press Writer
Sat Sep 15, 5:41 AM ET



HIRAM, Ga. - Robert Bowman loves his chicken, especially when it's breaded and loaded in a fryer. "When I go on a trip, that's all I'll eat is fried chicken. I just like fried chicken," the 67-year-old retired postal worker says.

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But during a recent lunch at a restaurant near his home, the poultry on Bowman's plate was prepared differently from the Southern style he was used to. Instead of being fried, it was grilled and marinated with citrus, herbs and spices.

It's part of a move by a California-based fast food chain to sell Mexican-style grilled chicken deep inside the deep-fried South and begin expanding beyond its West Coast markets.

"We're giving the South, which loves its chicken, a healthy, wholesome alternative to fried chicken," said Steve Carley, CEO of Irvine, Calif.-based El Pollo Loco Inc. (pronounced El Po-yo Lo-co).

The suburban Atlanta restaurant, which opened at the end of August, is the first Southern location for the chain, which is ranked 70th in the nation's list of top restaurant chains based on sales according to Restaurants & Institutions magazine.

Last month, the privately held company of 340 restaurants reported a net income of $1.59 million for the 26 weeks ended June 30, a 26.4 percent increase over the $1.26 million in net income it reported for the same period a year ago. The company was purchased in November 2005 by affiliates of the New York-based equity investment firm Trimaran Capital L.L.C. and company management.

El Pollo Loco is under contract with a company led by a former Church's Chicken executive to open 50 restaurants in the Atlanta area in the next six years. The chain also plans to open restaurants in the Orlando and Tampa, Fla., areas, in Charlotte, N.C., and in Norfolk, Va.

"We think the South is ready for El Pollo Loco," Carley said. "We have a high level of confidence this is going to be a big winner."

Although grilled chicken is not new to the South — it's often found on backyard grills, a labor of love for weekend chefs — it's not the traditional focus of Southern palates, said John T. Edge, director of the University of Mississippi's Southern Foodways Alliance.

"We tend to argue about the foods to which we are devoted — fried chicken and barbecue," Edge said. "Nobody's fussing and fighting over grilled chicken in the South."

Indeed, the South's chicken wars tend to be of the fried variety. Some of the nation's Top 100 restaurant chains built upon their success serving up fried chicken in the South, including Louisville, Ky.-based KFC, which is part of Yum Brands Inc., the Atlanta-based chains Chick-fil-A and Popeyes Chicken & Biscuits, San Antonio-based Church's Chicken, Charlotte, N.C.-based Bojangles' Restaurants Inc. and Athens, Ga.-based Zaxby's.

"The heaviest weighting of our outlets are in the South, testimony to the fact that fried chicken is a Southern staple," said Kirk Waisner, vice president of menu development for Popeyes Chicken & Biscuits.

Most of the country's "major chicken players" in the $15.1 billion industry of limited service chicken chains — which includes fried chicken outlets — are based in the South, said Darren Tristano, executive vice president of the Chicago-based Technomic, Inc., a research and consulting firm that serves the food industry.

If successful, El Pollo Loco's move into the heavily competitive Southern market gives the company a good chance to become a national chain instead of remaining a regional West Coast brand, Tristano said.

"The more they are able to grow in larger cities in the East, the stronger their brand is, which allows them to leverage their advertising, marketing and customer loyalty as their brand grows," he said.

Once in the South, Carley said, the chain will stick to its roots, meaning fried chicken won't be served anytime soon. Instead, the chain is banking on the view that offering grilled chicken instead of fried food will be attractive in a region that struggles with obesity.

Last month Mississippi was named the first state to pass the 30 percent mark of adults considered obese, with Alabama and West Virginia not far behind, according to the Trust for America's Health, a research group that focuses on disease prevention.

"Everybody I think needs to change their eating habits," said Kimberly Newkirk, a 38-year-old nurse from Dallas, Ga., who came to El Pollo Loco at a friend's recommendation.

Chris Elliott is a former Church's Chicken COO and the CEO of Fiesta Brands, Inc., which has contracted with El Pollo Loco to open the 50 new restaurants. He said grilling the chicken provides "healthy overtones."

"For the same size chicken breast if you fry one versus grill it, it's about 300 calories difference," he said.

El Pollo Loco's plan of attack also includes a year's worth of marketing to people who live within a few miles of a store, including offers to try the chicken for free. In addition to Hiram, the chain initially will focus on suburban Atlanta. It January the company plans to open a restaurant inside the city.

"We know we do have to work to get in people's considerations, we have to change their routines," Carley said.

Bowman said he's not sure all lovers of fried chicken will turn to the grilled variety. But he hopes many will at least try it.

"That's the way Southerners are — a bunch of them will stick to fried chicken," Bowman said. "But when something new comes to them, they'll get used to it."

____

On the Net:

El Pollo Loco: http://www.elpolloloco.com/

Countrywide caught in mortgage spiral By ALEX VEIGA, AP Business Writer

Countrywide caught in mortgage spiral By ALEX VEIGA, AP Business Writer
Sat Sep 15, 5:42 AM ET



LOS ANGELES - Countrywide Financial Corp. grew from a two-man startup in 1969 to become the nation's leading mortgage lender by deftly riding out housing boom-and-bust cycles. This time around, however, the ride has been a lot rougher, leaving the company in a scramble to regain its footing as the housing market has turned from boom to bust.

To survive, it's been forced to borrow billions of dollars, announce thousands of job cuts and dramatically restructure its lending practices to nearly eliminate risky subprime loans to borrowers with shaky credit that have led to massive foreclosures and defaults wracking the housing market.

"In an absolute level sense, this is the biggest challenge" Countrywide has ever faced, said Frederick Cannon, an analyst with Keefe, Bruyette & Woods Inc.

Several analysts believe Countrywide will survive the crisis, based on the strength of its retail banking operation, track record in the industry and operating changes made in recent weeks.

But they said it could see deeper cutbacks and lose ground to competitors while weathering a housing crisis expected to last at least 18 more months.

"At the end of the day, in this environment, Countrywide is not in as strong a position as its biggest competitor, Wells Fargo," Cannon said.

Stan Ross, chairman of the Lusk Center for Real Estate at the University of Southern California, said Countrywide will face intense competition as big and small lenders move to focus on prime loans, a sector once dominated by Countrywide.

"It's going to take time, and I think their cutbacks are going to be greater than perhaps we anticipate," Ross said.

Countrywide dominated the industry when interest rates began to plummet at the start of the decade and competitors rushed to make subprime loans.

The company didn't lead the charge to make those loans, "but as an industry leader, they were right there," said Robert Napoli, an analyst with Piper Jaffray.

"They have an effect on the market. They have to, being the biggest," he said.

The Calabasas, Calif.-based company's loan production last year totaled $468 billion and it accounted for more than 13 percent of the loan servicing market as of June 30, according to the mortgage industry publication Inside Mortgage Finance.

Countrywide and the rest of the mortgage industry also got caught up in the frenzy to make nontraditional loans then resell the mortgages for hefty profits to Wall Street banks.

Fortunes dove when demand for those loan packages plummeted amid rising defaults. The resulting credit crunch that tore through the markets has left Countrywide and others holding loans they couldn't sell and hurting for cash to keep funding new ones.

"The market changed very quickly on them ... they just underestimated how rapidly the market changed," Napoli added.

A report in The New York Times cited unnamed former Countrywide employees saying the company used financial incentives to encourage employees to steer borrowers into subprime loans to boost profits.

The allegations prompted North Carolina Treasurer Richard Moore to send a letter dated Tuesday to Countrywide asking for an explanation. Moore is the trustee of a pension fund that holds more than $11 million in Countrywide shares.

"Countrywide has sacrificed long-term sustainability for short-term profits," Moore wrote. "As an investor, I expect assurances that these practices have ceased and that the company is returning to a business model that both respects consumers and protects shareholder value."

Countrywide has strongly refuted the report, noting its business processes are designed to prohibit pushing customers who qualify for prime loans into subprime loans, and that its loan officers do not receive higher commissions for selling subprime loans.

During a conference call with Wall Street analysts in January, Countrywide Chairman and Chief Executive Angelo Mozilo said the company expected rising delinquencies and a weak housing market but was "well positioned and extremely optimistic about our prospects to continue generating growth and superior returns over future cycles."

Since then, Countrywide stock has dropped about 60 percent and is now trading around $19 a share.

In a recent letter to employees announcing as many as 12,000 layoffs, he characterized the current housing market cycle as "the most severe in the contemporary history of our industry."

Countrywide didn't return calls seeking an interview with Mozilo.

The son of a butcher, he has guided Countrywide through a number of housing cycles.

He co-founded the company nearly four decades ago with fellow New Yorker David Loeb, taking the fledgling company public only six months after it launched.

Trading at less than $1 a share, the startup failed to generate much investment capital, so Mozilo and Loeb headed West in the fall of 1969 and set up shop in suburban Los Angeles, a housing hotbed.

Its rise was part of a broader trend in which banks and traditional savings and loans lost market share as borrowers turned to more market-savvy mortgage firms offering a wider variety of loan programs.

Countrywide's expansion was also fueled by its move to sell conventional mortgage loans that were then resold to government-sponsored mortgage companies the Federal National Mortgage Association, also known as Fannie Mae, and the Federal Home Loan Mortgage Corp, or Freddie Mac.

The strategy helped Countrywide weather the crash of the high-flying housing market at the end of the 1980s. In 1990 the company reported its loan production totaled more than $3 billion.

The interest rate upheaval during the 1990s had a mixed impact on the company. Low rates at the start of the decade helped boost business amid a surge in refinancing.

But when rates eventually kicked back up, the company and other mortgage lenders saw loan production fall off.

Countrywide coped with that downturn by diversifying into more financial services, eventually opening its retail bank.

When interest rates began to plunge at the start of this decade, Countrywide joined the rest of the industry in rushing to feed an unprecedented demand on Wall Street for home loans.

Last fall, Wall Street investors began to sour on mortgage loans, particularly subprime loans.

While Countrywide was less exposed to subprime loans than the rest of the market, it had stepped up high-yield loan products such as pay option loans, which give borrowers the option to make a lower payment but can result in the unpaid portion being added to the principal balance.

In recent weeks, the company has drawn down on an $11.5 billion line of credit and raised $2 billion by selling a stake to Bank of America.

This week, it boosted its borrowing capacity by another $12 billion through new or existing credit agreements.

To further help reassure investors of the company's stability, management has implemented layoffs and shifted its loan production through its banking arm.

It's also closed the door to all subprime loans except for those it can sell back to U.S. government-backed lenders.

"Countrywide is quickly adjusting to market conditions and ... now has the breathing room to do so," said Bart Narter, senior analyst at Celent, a Boston-based financial research and consulting firm. "One sees glimmers of hope."

Fed rate cut may spark rally on Wall St. By JOE BEL BRUNO, AP Business Writer

Fed rate cut may spark rally on Wall St. By JOE BEL BRUNO, AP Business Writer
Sat Sep 15, 5:40 AM ET



NEW YORK - Wall Street players aren't the only ones with a lot riding on whether the Federal Reserve cuts interest rates on Tuesday — Main Street could also see some pretty dramatic benefits.

Policy makers are widely expected to decrease short-term rates by up to one-half of one percentage point, a move big institutional investors have been clamoring for in recent months.

For the man on the street, a cut would lower credit card bills, make mortgages cheaper and perhaps inject enough confidence into the stock market to revive ailing 401(k) investments.

Economists will likely debate until the 11th hour what the Fed will do when it releases its decision Tuesday afternoon. Even those far removed from high finance are nervous about what could be the biggest decision the Fed has made in years.

"Customers have told me not to touch their loans until the Fed meets," said Darin Hardin, owner of San Clemente, Calif.-based Coastal Hills Mortgage Inc. "People have been assuming for the past six months that rates will be lowered, and nobody wants to make a move until some kind of event happens."

Hardin said his business has been slower in brokering mortgages in California's Orange County, one of the nation's hottest real estate markets. New calls for mortgages aren't coming in as frequently, and those looking to switch to fixed-rate financing from adjustable have been stalling.

A cut in interest rates would immediately make fixed-rate mortgages cheaper. Homeowners with lines of credit will pay less, and those "waiting on the fence to borrow" will have reason to pick up the phone, he said.

A whole host of other borrowings will also become cheaper as U.S. banks follow an interest rate cut by lowering their own prime rates. For those that qualify, loans spanning everything from automobiles to education will be affected — as will the amount consumers are charged by credit cards issuers.

There's also the psychological impact a rate cut would have on the stock market, where the Dow Jones industrial average has plunged into volatility after hitting an all-time high in July. Traders have been cagey since then, sending the blue chip index bouncing around with triple-digit swings.

Wall Street pundits have pinned their hopes on a rate cut to stem the choppy market conditions, and send stocks higher. That would bring welcome relief in the short term to individual investors whose stock portfolios have fallen in the process.

"The whole thing with the stock market is perception," said Adam Hewison, president of ino.com, a financial Web site catering to individual investors. "We've had a five-year expansion in stock prices, and in the history of things, that's a long time before there's some kind of retrenchment. That has investors on edge."

While a rate cut would likely give the markets a short-term boost, whether its effects would be long lasting remains unclear. There are still a number of economic challenges facing individual investors, with some economists believing that the U.S. might be heading into a recession.

Though a cut might help boost mortgages, it might do little to help the slumping housing industry. Stocks might rally if the Fed delivers, but it won't help some of the underlying problems behind why corporate earnings are weakening.

"As far as rate cuts, when the Fed begins changing direction, there's a very short-run relief rally," said Tom Wilson, managing director of institutional investments at Brinker Capital. "But you have to keep in mind that they are cutting because there is something not right with the economy in one way or another."

UAW, GM end marathon bargaining session By DEE-ANN DURBIN

UAW, GM end marathon bargaining session By DEE-ANN DURBIN
2 hours, 5 minutes ago



DETROIT - Negotiators for the United Auto Workers and General Motors Corp. ended a marathon bargaining session early Saturday, more than four hours after their contract was set to expire.

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Bargainers, who on Friday night agreed to extend the contract while they continued negotiations, decided to resume talks later Saturday, said GM spokesman Dan Flores, who did not know exactly when negotiators would return to the table.

"The parties have agreed to take a break and resume later on this morning," Flores said. "Our bargaining continues, but both parties have agreed to take a short break."

The hiatus came hours after workers at factories nationwide mobilized Friday night for a possible strike. Local union leaders had expected a call from Detroit around 10 p.m. telling them whether the union would walk off the job, but the call never came.

Instead, negotiators agreed to bargain hour by hour as the workers stood by and a midnight contract expiration deadline passed. By early Saturday, local leaders said they were told to go home and wait for updates from Detroit.

This year's contract talks are considered crucial to the survival of GM and its U.S.-based counterparts, Ford Motor Co. and Chrysler LLC.

All three companies want to cut or eliminate what they say is about a $25-per-hour labor cost gap with their Japanese competitors.

The gap, the companies say, is one reason why the Detroit Three collectively lost about $15 billion last year, forcing them to restructure by shedding workers and closing factories.

The central issue in this year's talks has been skyrocketing health care costs. Automakers have been pushing the union to take over responsibility for retirees' health care, an unfunded expense estimated at more than $90 billion for GM, Ford and Chrysler.

Automakers want to pay billions into a union-run trust that would pay retiree health care bills, and both sides have been wrangling over how much the automakers would contribute to the trust, according to people who have been briefed on the talks.

A local UAW leader said early Saturday the union also was seeking guarantees for future work at U.S. plants in exchange for taking over health care. The local leader and the other people who were briefed on the talks spoke on condition of anonymity because the talks are private.

If the union takes on the health care costs, the companies could remove a huge liability from their books — potentially improving their credit ratings and stock prices.

Industry analysts have said they expect GM to offer the union 65 to 70 percent of the retiree health care obligation.

The UAW chose GM as its lead company and possible strike target Thursday. Typically, the union negotiates a contract with the lead company and then presses the other two to accept the same terms. Ford and Chrysler have extended their contracts indefinitely, although talks were continuing and either side could break off the contract extension with three days' notice.

Ahead of the deadline, some workers prepared picket signs, while others watched late-night television or just chatted.

"I'm waiting patiently. We're in it for the long haul," said Douglas Rademacher, president of UAW Local 602 near Lansing. "We're planning for the worst, hoping for the best. We support the international union 100 percent."

Jim Graham, president of Local 1112 in Lordstown, Ohio, told union members early Saturday to go home and return in the morning for a progress report. He made the decision after speaking with union negotiators.

"From what they're telling us, they're making good progress. If this thing falls through the floor, we're going to be right back here (in the morning)."

As the automakers cut their hourly work forces by thousands through early retirement and buyout offers, UAW membership continued to drop. The union represented 302,500 active workers during contract talks in 2003; that fell to 180,681 this year.

The UAW still could strike GM, or the two sides could continue negotiating and workers would be covered by the terms of the old four-year contract.

Industry analysts said a short strike wouldn't hurt GM that badly. The company had a 65-day supply of vehicles at the end of August, slightly lower than the 67-day average for the U.S.-based automakers, according to Ward's AutoInfoBank. Paul Taylor, chief economist for the National Automobile Dealers Association, said the ideal is a 60-day supply, so that indicates GM didn't build up its inventory in anticipation of a strike.

A short strike could actually help GM reduce its inventory of pickups. Right now, the Chevrolet Silverado stands at a 90-day supply, higher than the industry average of 81 days for pickups. GM announced last month that it plans to cut 1,200 jobs at one of the plants that makes the Silverado, and a strike could speed that process.

But Taylor said a longer strike, or a strike that could hurt hot-selling vehicles, would be disastrous.

Bank of England funds Northern Rock By TARIQ PANJA, Associated Press Writer

Bank of England funds Northern Rock By TARIQ PANJA, Associated Press Writer
47 minutes ago



LONDON - Britain's fifth largest mortgage lender recieved emergency funding from the Bank of England in an attempt to head of a liquidity crisis.

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Northern Rock PLC warned Friday that market turmoil sparked by a mortgage crisis in the U.S. would cut profits to between 500 and 540 million pounds ($1 billion and $1.1 billion) — which is as much as 147 million pounds ($298 million) lower than expected.

Northern Rock shares plunged 25 percent to 476.75 pence ($9.60) on the London Stock Exchange.

Chief executive Adam Applegarth said Northern Rock expected to borrow substantial amounts of money from the Bank of England at a penalty rate, but did not specify how much. The bank said it was having trouble borrowing from other banks, and that the liquidity problem was likely to continue for the rest of the year.

Applegarth said the bank had billions of pounds in cash, but that it had approached the Bank of England early to head off a possible liquidity crisis.

"We can't tell when the global (credit) freeze is going to unwind. On that basis it made sense to get this facility now," Applegarth told Sky News.

He said the banks' customers would be unaffected, and that business at the bank's branches was going on as usual.

"All this stems from the problems in the American housing market," British Treasury Secretary Alastair Darling told Sky News. "There's plenty of money in the system; all the banks have money, but at the moment they're not lending to each other in the way they usually do."

Darling said the Bank of England had approved the funds in the interest of keeping the British banking system stable and told customers there was no reason to panic.

The chief executive of the British Bankers' Association, Angela Knight attempted to sturdy the nerves of Northern Rock customers.

"I think that anybody who is waking up this morning who is either a saver with Northern Rock or has got a mortgage ... can be absolutely confident that they have got their money with or they have borrowed from a very sound financial institution," she told British Broadcasting Corp. radio.

"This isn't about solvency, this is about a short-term problem that the Northern Rock has in getting liquidity — that is, getting some cash from the normal interbank lending market."

Bankers warned against making parallels between Northern Rock and troubled Countrywide Financial Corp. in the United States_ which is releasing 13,000 employees and has been forced to borrow billions of dollars as it struggles to weather a wicked downturn in the U.S. housing market.

The British bank is more diligent in its lending policy, no longer has a subprime book, and has a repossession rate of less than one percent, said Eric Leenders an executive director of the British Bankers Association.

"It's a very healthy business which has run into a simple liquidity issue owing to the market jitters around the U.S. subprime mortgage market," Leenders said.

___

On the Net:

Northern Rock PLC: http://www.northernrock.co.uk

Car-buying spurs retail sales rebound By MARTIN CRUTSINGER, AP Economics Writer

Car-buying spurs retail sales rebound By MARTIN CRUTSINGER, AP Economics Writer
20 minutes ago



WASHINGTON - Retail sales posted a modest gain in August, helped by the biggest jump in auto sales in more than a year. But there are concerns that spending could falter as the steep slump in housing and financial market turbulence weigh on consumer confidence.

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The Commerce Department reported Friday that retail sales increased 0.3 percent in August, compared to July, when sales had been up by 0.5 percent. The strength last month was led by a 2.8 percent jump in auto sales, the biggest increase since July 2006.

The increase in retail sales was just about half what had been expected. In another sign of weakness, industrial production in August edged up by just 0.2 percent. It was the poorest performance in three months and reflected a 0.3 percent drop in output at U.S. factories, the first decline in manufacturing after five straight increases.

The gain in industrial otuput followed much stronger increases of 0.5 percent in July and 0.6 percent in June. The drop in manufacturing output was accompanied by a decline of 0.6 percent in mining, the category that includes oil production. These declines were offset by a 5.3 percent surge in output at the nation's utilities, reflecting a hotter-than-usual August.

A separate report Friday showed that consumer confidence, as measured by the RBC Cash Index, fell to 71.1 in early September, a sharp drop from an August reading of 89.3. It was the worst showing for the survey, done by polling firm Ipsos, since May 2006.

Meanwhile, the government said that the current account, the broadest measure of trade, totaled $190.8 billion in the second quarter, down 3.1 percent from a $197.1 billion in the first three months of the year.

The trade improvement supported the view of economists that America's trade deficit, after setting records for five consecutive years, should show finally begin to decline in 2007, helped by stronger overseas growth and a weaker dollar, which boosts the competitiveness of American products.

The weaker-than-expected 0.3 percent rise in retail sales did not dispel worries that consumer spending, which accounts for two-thirds of total economic activity, could falter in coming months under the impact of a serious credit crunch and rising gasoline prices.

"We expect a clearly slowing trend," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "Lower confidence and the accelerating housing collapse will hurt."

The Federal Reserve is scheduled to meet next Tuesday and there is a widespread belief that the central bank will cut a key interest rate for the first time in four years, hoping that cheaper credit will give the economy a boost.

Financial markets have been roiled since early August by rising worries that loans to consumers and businesses are becoming harder to obtain as banks and other lenders tighten standards. The credit crunch began with rising defaults on subprime mortgages, home loans provided to borrowers with weak credit. But those problems have since spread to other lending areas and have also roiled global financial markets.

The retail sales performance would have been much weaker without the big gain in auto sales in August. Excluding autos, retail sales would have fallen by 0.4 percent, the poorest showing in nearly a year.

Part of the weakness in August came from a 2.4 percent drop in sales at gasoline stations, reflecting declining prices. However, with oil rising to new records above $80 per barrel, analysts predicted that gasoline prices will start rising again, a factor that will mean consumers will have less to spend on other items.

Sales at department and general merchandise stores edged up 0.3 percent in August, reflecting strong back-to-school sales. Sales at furniture stores were up 0.5 percent but hardware stores saw sales decline by 1 percent. Sales at specialty clothing stores dropped by 0.1 percent.

Stock futures fall as retail sales drop By LAUREN VILLAGRAN, AP Business Writer

Stock futures fall as retail sales drop By LAUREN VILLAGRAN, AP Business Writer
32 minutes ago



NEW YORK - U.S. stock futures extended their declines Friday after the government reported August retail sales excluding autos fell sharply, suggesting that consumers held off spending in the face of turmoil in the financial markets.

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Weaker retail sales were expected after the chain stores reported disappointing results earlier this month. Still, the report was worse than economists predicted. The Commerce Department said retail sales fell 0.4 percent in August excluding vehicle sales, compared with a 0.7 percent rise in July and economists' consensus forecast for a 0.1 percent increase.

Investors have been on edge over whether tight credit, a housing slump and volatility on Wall Street have hurt the consumer, whose willingness to spend is critical to economic growth. The feeble retail sales figure makes it more likely that the Federal Reserve will cut its benchmark federal funds rate on Tuesday. But while investors have been clamoring for such a cut to stimulate business activity, Friday's report raised concerns about a slowdown in economic growth.

Dow Jones industrial futures, already down before the retail sales report, slid 86, or 0.64 percent, at 13,450. Standard & Poor's 500 index futures lost 10.50, or 0.70 percent, to 1,487.50, and Nasdaq 100 index futures shed 17.25, or 0.85 percent, to 2,007.25.

Merrill Lynch downgraded shares of chip maker Intel Corp. and credit card company American Express Corp., Dow Jones Newswires reported, sending both stocks lower in premarket activity.

A separate report Friday showed that consumer confidence, as measured by the RBC Cash Index, fell to 71.1 in early September, a sharp drop from an August's level of 89.3. It was the worst showing since May 2006.

Investors are also awaiting a report on August industrial production and a preliminary reading on September consumer sentiment. Economists polled by IFRMarkets.com expect the University of Michigan's preliminary reading on September consumer sentiment to have weakened slightly. Industrial production is forecast to have risen 0.3 percent in August, on pace with July.

Also pressuring stock futures was news that the Bank of England approved emergency funding for lender Northern Rock PLC to head off a possible liquidity crisis. Northern Rock issued a profit warning and blamed the shortfall on credit market turmoil.

Investors in London reacted badly to that news, which heightened concerns about the viral nature of problems in the U.S. subprime mortgage market. Adding to the disappointment, a key house price index in Britain showed a 2.6 percent decline in September. The index is considered an indicator of future prices. Britain's FTSE 100 fell 2.00 percent.

Other European stock markets also slumped. Germany's DAX index fell 1.01 percent, while France's CAC-40 fell 1.20 percent.

Bond prices rose, as the 10-year Treasury note yield fell to 4.45 percent from 4.48 percent.

The Dow rose more than 130 points on Thursday, helped by strong gains in shares of McDonald's Corp., which raised its dividend, and General Motors Corp. on reports of progress with labor negotiations.

As talks with the United Auto Workers continued overnight, the union was expected to choose GM as the lead company in contract negotiations with the Detroit Three. Contracts between the UAW and GM expire Friday at midnight.

In Asia, Japan's Nikkei stock average rose 1.94 percent at the close, while Hong Kong's Hang Seng Index gained 1.47 percent.

Oil fell below the $80 a barrel mark in electronic trading before the opening of the New York Mercantile Exchange. Gold prices also weakened, as the U.S. dollar traded mixed against other major currencies.

Social security scandal angers Japanese By MARI YAMAGUCHI, Associated Press Writer

Social security scandal angers Japanese By MARI YAMAGUCHI, Associated Press Writer
1 hour, 46 minutes ago



TOKYO - After reading a book this year about serious flaws in Japan's pension system, retired deliveryman Yoshikazu Hirano thought he'd check his own records just to be safe. He's glad he did: The 74-year-old discovered the government had shortchanged him by 460,000 yen ($3,770) in benefits he accrued while driving a truck for three years in the 1950s and 60s.

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Hirano wasn't alone. Shortly afterward, the government confessed to losing track of pension records linked to an astounding 64 million claims — igniting a scandal that has punished the ruling party at the polls and eroded confidence in the ability of the world's second largest economy to support its growing legions of elderly.

Hirano, who is single and lives outside Tokyo, felt defrauded. "Had I not asked, I would have never gotten the money back," he said.

The pension mess, fully disclosed in May, has landed on one of the world's fastest-aging societies: 21 percent of its 127 million inhabitants are 65 or older and some 25 million retirees are collecting pensions, rising to 35 million by 2040.

People have flooded pension offices and 24-hour call centers seeking to check their records, and titles such as "Recover your pension!" fill bookstores and newsstands.

The confusion has hit Prime Minister Shinzo Abe. The outrage contributed to a plunge in his popularity and forced him to delay an upper house election for a week — to no avail, since his ruling party was trounced at the polls anyway, though he remains in office.

An interim government report released in July alleged widespread incompetence at the Social Insurance Agency: records kept in yellowing files instead of on computers, evidence of possible embezzlement of funds, and rampant clerical mistakes.

"The organization had little sense of compliance," said the report, which blamed the mess on faulty governance, low morale, lack of professionalism and ignorance of "the duty to protect the people's rights."

The agency was established a decade ago to unify three separate pension organizations — one for self-employed or non-workers, another for company employees, and the third for public servants. With 70 million members and $1.3 trillion in reserves, it is one of the world's largest.

The panel found internal agency documents indicating embezzlement of pension money by employees. But the fund's flaws were largely clerical; it failed to properly match some 50 million claim records with the correct individuals, and more than 14 million records aren't computerized, meaning they can't be readily retrieved when claims are submitted.

The government has not released an estimate for the number of people affected or amount of money involved, so estimates of the sum in limbo fluctuate widely, between $25 billion and $175 billion.

Hirano has recovered his missing money in a one-time payment, but his case is rare. The agency says it has cleared up only about 40 cases since the scandal erupted.

It's not the first time the agency has been in trouble.

In 2004, a series of scandals led to the arrest of a senior official on bribery charges. A string of agency-run resorts have suffered massive losses. In 2005, the agency disciplined nearly 3,300 staff for various types of misconduct including accepting questionable gifts and money from office suppliers, an agency report shows.

With his job on the line, Abe has promised to rectify the problems within a year and "squeeze out the pus" ahead of the agency's partial privatization by 2010. The agency chief has been fired.

But many remain leery of the agency.

Three years ago it was revealed that many top politicians had skipped their contributions, highlighting concerns over the system's solvency and prompting a growing number of self-employed, students and non-working to stay out of the system altogether.

Pension payment is mandatory for all Japanese from age 20 to 60. An average company employee pays more than 6 percent of a salary and can expect about $1,450 a month after retirement, usually at age 65.

The growing number of nonpayers has pushed the agency to go after them more aggressively. Last year, the agency mailed collection letters to 310,000 nonpayers and seized assets from 12,000 of them. Today the employee pension is covered almost 100 percent but its revenue is decreasing.

Hirano, the ex-deliveryman, was helped by Tomoichi Shibata, a social insurance consultant who calls himself a "pension detective" and says he has helped more than 2,000 pensioners win redress.

"Ideally, my business wouldn't have to exist if the government operated the pension program properly," he said.

Mine search over, Utah towns try to cope By BROCK VERGAKIS, Associated Press Writer

Mine search over, Utah towns try to cope By BROCK VERGAKIS, Associated Press Writer
2 hours, 9 minutes ago



SALT LAKE CITY - Signs of prayer and support for six trapped miners remained on display Saturday as residents of central Utah's coal belt struggled with the realization that the men would not be found alive.

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"It's a hard thing. Some are coping with it better than others," said Colin King, a spokesman and lawyer for families of the six miners trapped nearly four weeks ago in a collapse. "They're still dealing with the fact they have to accept now that these miners are not going to be recovered any time soon — that they've died, in all likelihood."

Rescue efforts at the Crandall Canyon Mine were suspended indefinitely Friday.

A thunderous mountain shudder early on Aug. 6 caused mine ribs to shatter, trapping Kerry Allred, Don Erickson, Luis Hernandez, Carlos Payan, Brandon Phillips and Manuel Sanchez. It is not known whether they survived the initial collapse.

Three rescuers working underground were killed in a second collapse Aug. 16, bringing an abrupt halt to tunnel-clearing efforts to reach the miners.

Rescue workers drilled seven holes deep into the mountain in search of the men more than 1,500 feet underground but found no signs of life. After a robotic camera became stuck in mud in one hole Friday, federal officials said they had run out of options and told families the search was ending.

The announcement ended hope that the men would be found alive or that their bodies would be retrieved any time soon, if ever. Federal officials said it's too dangerous to drill a hole large enough to send a rescue worker down into the mine if there's no possibility of finding survivors.

"Sadly, there is no remaining hope of finding these miners alive," MSHA chief Richard Stickler said in a statement Saturday.

It was a difficult blow for people in Utah's coal country, where messages of hope adorned cars, homes and businesses throughout Carbon and Emery counties and where residents have gathered for prayer services and vigils in the weeks since the collapse.

"The signs are still up, and I think they will be for a few more days," said Julie Jones, a Huntington City Council member. "We're not going to forget these families."

President Bush issued a statement Saturday praising central Utah's coal community for inspiring the nation with its "incredible strength and courage in the face of tremendous loss."

A nondenominational memorial service for the six men on the football field at a junior high school was being planned for Sept. 9. A fundraiser is planned for Sept. 15.

"Even when we got the news last night, even though in our hearts we knew this would come, it was still hard. But yet, it is time for healing. It is time for the healing process to start and the community is ready for that," Jones said.

As the community begins to heal its emotional scars, the federal government will begin investigating the circumstances that led to the initial cave-in.

A Mine Safety and Health Administration team will begin arriving in Huntington, about 120 miles southeast of Salt Lake City, on Tuesday to began the investigation, said Rich Kulczewski, a spokesman for the U.S. Department of Labor, which oversees MSHA.

The investigation will involve people who have no ties to MSHA's Western district, which oversees safety at the mine.

They include Timothy Watkins, assistant district manager in Kentucky, who has ventilation and retreat mining experience; Gary Smith, a supervisor in Pennsylvania who has roof-control expertise; and Joseph O'Donnell, based in MSHA's district office in Alabama.

Labor Secretary Elaine Chao has also ordered an independent team of mine-safety experts to review MSHA's handling of the Crandall Canyon accident. The review will look at MSHA's actions before the collapse and during the subsequent rescue operations.

The newly formed state Mine Safety Commission is also beginning an investigation to determine whether Utah should begin regulating the mines, which it hasn't done since 1977.

Gov. Jon Huntsman appointed the commission after public disputes with mine co-owner Bob Murray, who Huntsman at one point said wasn't doing enough to retrieve the miners' bodies and had been disrespectful to the miners' families.

Some members of Congress also criticized Murray for dominating news conferences at the beginning of the rescue efforts, a role designated for MSHA representatives. Murray later deferred to federal officials and his employees in news conferences.

After the three rescue workers were killed, Murray disappeared from public view for a few days. He later said he was devastated by the experience and had been under care of a doctor.

Murray did not respond Saturday to a request for comment from The Associated Press.

King said a lawsuit will likely be filed on behalf of the families, but he didn't know how soon or who would be named in it.

Late Friday, Huntsman issued a statement saying that the most important thing is for the families to feel at peace with the decision to end rescue efforts.

"These families, and the whole community, have endured so much throughout this devastating tragedy. Each family must determine their own way of gaining closure," he said.

Sen. Craig resigns over sex sting By JOHN MILLER, Associated Press Writers

Sen. Craig resigns over sex sting By JOHN MILLER, Associated Press Writers
2 hours, 56 minutes ago



BOISE, Idaho - In a subdued ending to a week of startling political theater, Sen. Larry Craig announced his resignation Saturday, bowing to pressure from fellow Republicans worried about damage from his arrest and guilty plea in a gay sex sting.

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"I apologize for what I have caused," Craig said, his wife Suzanne and two of their three children at his side with a historic Boise train station as backdrop. "I am deeply sorry."

Craig, 62, said he would resign effective Sept. 30, ending a career in Congress spanning a quarter-century.

Making no specific mention of the incident that triggered his disgrace in his remarks, he spoke for under six minutes and took no questions.

Among those attending was Republican Gov. C.L. "Butch" Otter, who will appoint a successor for the remaining 15 months of Craig's term.

It was a relatively quick end to a drama that began Monday with the stunning disclosure that Craig had pleaded guilty to a reduced charge following his arrest June 11 in a Minneapolis airport men's room.

Craig at first tried to hold on to his position, contending in a public appearance on Tuesday that he had done nothing inappropriate and that his only mistake was pleading guilty Aug. 1 to the misdemeanor charge. But a growing chorus of leading GOP leaders called for him to step down to spare the party further embarrassment and possible harm in next year's elections.

Otter said Saturday he has not chosen a replacement, although several Republicans familiar with internal deliberations said he favored Republican Lt. Gov. Jim Risch.

Otter called speculation that he has made a choice "dead wrong" and declined to say when he would fill the seat.

Craig said he would remain in the Senate until Sept. 30 in hopes of providing a smooth transition for his staff and whoever is chosen as his successor.

President Bush called Craig from the White House after the senator's announcement and told him he knew it was a difficult decision to make, said White House spokesman Scott Stanzel.

"Senator Craig made the right decision for himself, for his family, his constituents and the United States Senate," Stanzel said.

Craig was arrested June 11 in a police undercover vice operation. The arresting officer, Sgt. Dave Karsnia, said in his report that the restroom where he encountered Craig is a known location for homosexual activity.

Craig has faced rumors about his sexuality since the 1980s. He has called assertions that he has engaged in gay sex ridiculous.

"I am not gay. I never have been gay," Craig said defiantly after a news conference Tuesday. He said he had kept the incident from aides, friends and family and pleaded guilty "in hopes of making it go away."

Other lawmakers embroiled in sex scandals also have resigned from Congress, albeit usually at the end of scenarios that took longer to play out than the one that claimed Craig.

Former Rep. Mark Foley, R-Fla., quit last fall over sexually explicit Internet communications with male pages who had worked on Capitol Hill.

Sen. Bob Packwood, R-Ore., resigned in 1995 amid allegations he had made unwanted sexual advances to 17 female employees and colleagues and altered his personal diaries to obstruct an ethics investigation.

On Saturday, Craig said he would pursue legal options to clear his name. He has retained Billy Martin, a Washington lawyer who represented Atlanta Falcons quarterback Michael Vick in his dogfighting case, to pursue his legal options. Washington lawyer Stan Brand will represent Craig before the Senate ethics committee, said spokesman Dan Whiting.

"The people of Idaho deserve a senator who can devote 100 percent of his time and effort to the critical issues of our state and of our nation," Craig said. "I have little control over what people choose to believe. But clearly my name is important to me, and my family is so very important also."

Senate Minority Leader Mitch McConnell, R-Ky., said Craig "made a difficult decision, but the right one."

"It is my hope he will be remembered not for this, but for his three decades of dedicated public service," McConnell said. McConnell had been one of Craig's harshest critics, calling his actions "unforgivable."

Some Idaho residents who attended Craig's public resignation said it felt like a "political funeral."

Bayard Gregory, from Boise, said Craig should have been more forthright after his arrest.

"It's a horribly embarrassing experience to go through," Gregory said. "But if it were me, and I had done nothing wrong, I wouldn't have pleaded guilty."

Craig spokesman Sidney Smith said he did not know whether Craig would return to Washington on Tuesday, the start of the post-Labor Day congressional session.

"We haven't decided that yet, whether he's going to return or not," Smith said.

Craig represented Idaho in Congress for more than a quarter-century, including 17 years in the Senate. He was up for re-election next year.

Republicans, worried about the scandal's effect on next year's election, suffered a further setback Friday when veteran Republican Sen. John Warner of Virginia announced he will retire rather than seek a sixth term. Democrats captured Virginia's other Senate seat from the GOP in the 2006 election.

Craig opposes gay marriage and has a strong record against gay rights. He was a leading voice in the Senate on gun issues and Western lands. Craig chaired the Senate Veterans Affairs Committee and was a senior member of the Appropriations Committee, where he was adept at securing federal money for Idaho projects.

A fiscal and social conservative, Craig sometimes broke with his party, notably on immigration, where he pushed changes that many in his party said offered "amnesty" to illegal immigrants. Much of the impetus behind Craig's push to ease bureaucratic hurdles to immigrant farm workers stemmed from his background as a rancher and the state's large rural, farming community.

___

Associated Press writers Matthew Daly and Deb Riechmann in Washington, D.C., and Todd Dvorak in Boise contributed to this report.

63 arrested in Copenhagen clashes 1 hour, 16 minutes ago

63 arrested in Copenhagen clashes 1 hour, 16 minutes ago



COPENHAGEN, Denmark - A protest by hundreds of youth activists turned violent early Sunday, with protesters setting fire to street barricades and cars and smashing shop windows, police said. Officers used tear gas to disperse the crowd.

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Authorities said 63 people were arrested as riot police clashed with rock-throwing youth in the Noerrebro district of Copenhagen.

The unrest started after a demonstration late Saturday commemorating the Youth House, a makeshift cultural center for the city's anarchists and disaffected youth that was demolished in March.

"It's six months since we cleared the house there, and they want to show they've not forgotten," police spokesman Mads Firlings said. "Almost immediately they started building barricades and throwing rocks through the windows of shops and banks."

He said police used tear gas to disperse the crowds who set fires to barricades and cars, including a police vehicle that had been abandoned by officers fleeing the angry mob.

The situation had calmed down Sunday morning as crews started cleaning up streets charred by fire and littered with broken glass and garbage, police spokesman Gunnar Noerager said.

He said one police officer received minor injuries when a tear gas canister accidentally exploded inside a police van.

In March, hundreds of people were arrested in several days of street violence when police evicted squatters living in the graffiti-sprayed brick building.

Lebanese army kills 28 militants By SAM F. GHATTAS, Associated Press Writer

Lebanese army kills 28 militants By SAM F. GHATTAS, Associated Press Writer
2 hours, 21 minutes ago



BEIRUT, Lebanon - Lebanese troops killed 28 al-Qaida-inspired militants and captured 15 others in a massive gunfight Sunday after they broke out of a northern Palestinian refugee camp devastated by over three months of fighting, a senior security official said.

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The official spoke on condition of anonymity because no official casualty figure was released.

Heavy gunbattles that began during the dawn breakout continued through early afternoon, with troops engaging Fatah Islam fighters in buildings, fields and roads around Nahr el-Bared camp, residents and television stations reported.

In a statement, the military said troops were attacking the remaining militant strongholds inside Nahr el-Bared and "chasing the fugitives outside the camp" who had staged "a desperate attempt to flee."

It called on Lebanese citizens to inform the nearest army patrol of any suspected militants in their area, but gave no specifics on casualties excepting saying "a large number" had been killed or captured.

Lebanese security officials, who also spoke on condition of anonymity because no official casualty figures had been released by the military, said two Lebanese soldiers were killed in the fighting, raising to 155 the total number of troops who have died in the conflict.

Before Sunday's battle, Lebanese officials had said up to 70 Fatah Islam fighters remained in the camp. When the fighting broke out more than three months ago, the number was estimated at 360.

Sunday's developments indicated the battle was almost over for the camp, large parts of which have been reduced to rubble.

According to security officials and television reports, the breakout began early Sunday when a group of militants sneaked through an underground tunnel to an area of the camp under army control and fought with troops. At the same time, another group of militants struck elsewhere to try to escape, reportedly receiving help from militants outside the camp.

State-run Lebanese television said the militants inside the camp were aided by outside fighters who arrived in civilian cars to attack army positions around the camp.

Residents said troop reinforcements deployed close to the camp and blocked roads to prevent fighters from sneaking out. Helicopters provided aerial reconnaissance.

State television reported Lebanese residents of nearby villages, armed with guns and sticks, fanned out to protect their houses and prevent militants from seeking refuge and melting into the local population.

Army officials said they did not know whether Fatah Islam leader Shaker al-Absi was among those who attempted to break out. Al-Absi has not been seen or heard since early in the fighting. His deputy, Abu Hureira, was killed by security forces in Tripoli recently, apparently after escaping the siege.

Fighting erupted May 20 between troops and Fatah Islam militants holed up in Nahr el-Bared camp near Tripoli, becoming Lebanon's worst internal violence since the 1975-90 civil war.

The battles have killed more than 20 civilians and scores of militants. Families of the militants — women and children — were evacuated late last month, the last civilians to leave the camp.

Prior to Sunday, the army had inched its way into the camp under artillery and rocket fire, destroying buildings and capturing militants' fortified positions one by one while facing tough resistance from the Islamic fighters.

In recent days, the army has cornered the militants in a small area of the camp and has been pounding it with bombs dropped by helicopters.

Iran: Uranium centrifuge goal reached 9 minutes ago

Iran: Uranium centrifuge goal reached 9 minutes ago



TEHRAN, Iran - Iran has reached its long-sought goal of running 3,000 centrifuges to enrich uranium for its nuclear program, Iranian President Mahmoud Ahmadinejad announced Sunday in a report on state media.

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The U.N. Security Council had threatened a third round of sanctions against the country if it did not freeze the uranium enrichment program — which Iran maintains is for peaceful energy purposes, but the U.S. says is to hide a weapons program.

"The West thought the Iranian nation would give in after just a resolution, but now we have taken another step in the nuclear progress and launched more than 3,000 centrifuge machines, installing a new cascade every week," the state television Web site quoted Ahmadinejad as saying.

Still, Ahmadinejad's comments seemed at odds with independent assements of the status of his country's enrichment program.

As recently as Thursday, a report drawn up by International Atomic Energy Agency chief Mohamed ElBaradei, put the number of centrifuges enriching uranium at closer to 2,000 at its vast underground hall at Natanz.

The 2,000 figure is an increase of a few hundred of the machines over May, when the IAEA last reported on Iran. Still the rate of expansion is much slower than a few months ago, when Tehran was assembling close to 200 centrifuges every two weeks.

As well, Iran continued to produce only negligible amounts of nuclear fuel with its centrifuges, far below the level usable for nuclear warheads, the report said.

"They have the knowledge to proceed much more quickly," said a U.N. official.

While Iran has denied stalling, the official and others suggested it could have decided to proceed at a slower pace as it increases its cooperation with agency investigators looking at past suspicious activities so as to reduce any sentiment to impose new U.N. sanctions.

Former U.N. nuclear inspector David Albright and Jacqueline Shire of the Washington-based Institute for Science and International Security said the slowdown could be a combination of both "technical difficulties" and "political considerations."

"Iran likely has managed to learn how to operate individual centrifuges and cascades adequately. However, it still may be struggling to operate a large number of cascades at the same time in parallel," they wrote in a report e-mailed to The Associated Press. "In addition, Iran's leadership may have decided to slow work to overcome technical problems in order to forestall negative reactions that would lend support for further sanctions by the UN Security Council."

Felix becomes Category 2 hurricane By MARGARET WEVER, Associated Press Writer

Felix becomes Category 2 hurricane By MARGARET WEVER, Associated Press Writer
1 hour, 40 minutes ago



ORANJESTAD, Aruba - Felix gathered strength and became a Category 2 hurricane early Sunday, the U.S. National Hurricane Center said. The storm was forecast to pass just north of the Dutch Caribbean island.

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Felix was upgraded from a tropical storm to a Category 1 hurricane Saturday evening, becoming the second Atlantic hurricane of the season. By early Sunday, it had sustained maximum winds of about 100 mph and threatened to become a major hurricane as the day went on, the center said.

A tropical storm warning and hurricane watch were in effect for the islands of Aruba, Bonaire and Curacao.

Franklin Yarzagarag, a staffer at Aruba's airport, said it was closed until Felix passes.

On Saturday, a line of jittery residents and hotel employees snaked through a hardware store in the capital of Oranjestad to purchase supplies.

"This kind of weather doesn't usually make it to Aruba, so people are definitely worried," said store cashier Mark Werleman.

At 5 a.m. EDT, Felix was centered about 85 miles east-northeast of Aruba and was moving westward at about 18 mph, the hurricane center said.

On Saturday, Felix brought heavy rains and strong winds to Grenada as a tropical storm, snapping small boats loose from their moorings, temporarily knocking out local radio and TV stations and toppling utility lines. No injuries were reported.

A tropical storm watch also was issued by the government of Jamaica, which was battered by Hurricane Dean on Aug. 19.

Felix was on track to pass near Honduran resort islands Tuesday and plow into Belize on Wednesday.

On Honduras' Roatan Island, home to luxury resorts and pristine reefs, the weather was normal and guests were simply enjoying their vacations, said Mayan Princess Beach Resort & Spa employee Arturo Rich.

"We aren't evacuating people yet, but maybe on Monday" as the storm gets closer, he said.

The storm ripped roofs off at least two homes and destroyed a popular concert venue in the southern Caribbean island of Grenada. Orchards were left in ruin.

Jess Charles, 29, said he and his family hunkered down in their house in the town of Calliste as the storm's winds howled outside.

"It was really very, very scary," Charles told The Associated Press. "The wind was blowing so hard we thought our roof might come off."

Felix also spawned thunderstorms and downed trees in Barbados, St. Vincent and the Grenadines and the twin-island nation of Trinidad and Tobago. Those islands reported only minor damage.

Rebecca Waddington, a meteorologist at the hurricane center, advised employees of oil platforms in the Gulf of Mexico to monitor Felix's progress and said the storm could reach the area in four to five days.

Along the Pacific coast of Mexico, meanwhile, authorities discontinued storm warnings as Tropical Storm Henriette moved out to sea.

Henriette dumped heavy rain on western Mexico earlier, loosening a giant boulder that smashed into a home in Acapulco, killing an adult and two children and injuring two other people.

A teenager and her two brothers also were killed when a landslide slammed into their house in a poor neighborhood of the resort city.

With maximum sustained winds of 70 mph, the storm was expected to become a hurricane Sunday. But forecasters put it on a path that would not threaten land until Thursday, when it could hit a remote section of the Baja California peninsula.

___

Associated Press Writer Linda Straker in St. George's, Grenada, and Sofia Mannos in Washington contributed to this report.

Hyundai Motor, union to keep talking By KELLY OLSEN, AP Business Writer

Hyundai Motor, union to keep talking By KELLY OLSEN, AP Business Writer
Sat Sep 1, 6:07 AM ET



SEOUL, South Korea - Unionized workers at Hyundai Motor Co. will negotiate further with management over a new wage package despite approving a resolution to go on strike, a union spokesman said Saturday.

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"We decided not to go on strike until Sept. 5 ... to try to resolve the dispute smoothly," said Chang Kyu-ho, spokesman for the union, which has 44,867 members.

Results of a union vote released earlier in the day showed that 28,243 members supported a walkout, while 12,544 opposed it. A total of 40,995 union members, or 91.4 percent of the total membership cast ballots. Some votes were declared invalid.

Hyundai, the world's sixth-largest automaker, and the union have been unable to reach an agreement on a new pay deal despite 10 formal negotiating sessions.

The company has offered a 5.4 percent increase, or $83 more a month in basic salary, while the union is seeking an 8.9 percent hike.

Hyundai also has offered an incentive of three months of pay and a bonus of $1,066 per unionized worker if the company meets annual business targets.

The union wants the automaker to pay 30 percent of its 2007 net profit to union members as bonuses and to raise the retirement age to 60 from 58.

Strikes at Hyundai are common. Workers already have walked off the job twice this year. The union has gone on strike every year but one since it was founded in 1987.

This year's tensions come at a sensitive time. A Seoul court will issue a ruling Sept. 6 on an appeal by Hyundai Motor Chairman Chung Mong-koo against his three-year prison term for embezzlement.

Chung, who is free on bail, is actively running Hyundai. He was sentenced earlier this year.

The union's Chang said negotiations will resume Monday. Hyundai earlier had proposed an 11th session for that day.

"We promised to our unionists that we will do our best for a smooth resolution," Chang said, though warned that a strike would be unavoidable if management fails to offer "a proposal unacceptable to us."

Negotiations take place in Ulsan, the industrial and port city 260 miles southeast of Seoul where Hyundai's main factory is located.

Lee Sang-wook, the head of the union, had exhorted members to vote in favor of the strike.

"I hope you can express your steadfast will to fight," he told members in a statement Friday. "Let's express our rage with an unanimous landslide vote against the company that has cheated more than 44,000 union members."

Last year was Hyundai's worst ever in terms of labor unrest.

A total of four walkouts cost the automaker 118,293 vehicles in lost production worth $1.75 billion, according to company figures.

___

Associated Press Writer Jae-soon Chang contributed to this report.