TUESDAY, NOVEMBER 2, 2010


KLMNO U


DOW11,124.62 UP6.13,0.1%


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REPORTS GIVE MIXED SIGNALS


Manufacturing up, spending slow


BY DAVID S. HILZENRATH With economic angst poten-


tially driving the results of Tues- day’s elections, indicators re- leased Monday sent mixed sig- nals about the pace of the U.S. recovery. A report on manufacturing provided a glimmer of encour- agement, but a separate govern- ment report suggested that con- sumer spending was stuck in the doldrums. Manufacturing rose in October


to its highest level since May, according to a monthly survey by the Institute for Supply Manage- ment. Activity in the sector reached 56.9ontheISMindex,up from 54.4 in September. InMay, it was at 59.7. The group said that 14 of 18


industries reported growth in October. Exceptions included the furniture business. “It’s not terrific, but it’s still


respectable, and enough to in- duce slightly more hiring,” said Brian Bethune, chief U.S. finan- cial economist at IHS Global Insight. Separately, as voters prepared


to elect a new Congress, a report from the Commerce Department showed no dramatic recovery in consumer income or spending. Amid high unemployment, personal income declined 0.1 per- cent in September after increas- ing 0.4 percent in August. Exclud- ing emergency government un- employment insurance benefits, which put more money in peo- ple’s pockets in August, personal income was up by 0.1 percent. Real personal consumption ex- penditures — which are adjusted for price changes—increased 0.1 percent in September, compared with 0.3 percent in August. As far as personal spending


was concerned, inflation was nearly flat in September, accord- ing to the Commerce report. A price index based on personal spending increased 0.1 percent in September. A month earlier, it was rising twice as fast. That could give the Federal


Reserve more leeway to buy as- sets in an effort to boost the economy. Key stock market gauges rose


significantly in morning trading Monday. But by the end of trad- ing, those gains had nearly van- ished, with the Dow Jones indus- trial average and the Standard & Poor’s 500-stock index closing with slight gains. The manufacturing report


“signals a continuation of the recovery that began 15 months ago, and its strength raises expec- tations for growth in the balance of the quarter,” Norbert J. Ore, ISM’s chairman, said in a state- ment. October’s manufacturing level corresponds to 5 percent annual growth in the economy as mea- sured by real gross domestic product, he said. Readings above 50 on the ISM


index indicate that the economy is expanding; readings below 50 point to a decline. The index takes into account new orders, production, employment, suppli- er deliveries and inventories. The new-orders component of


the index rose to 58.9, a 7.8- percentage-point increase from September. That was the largest month-to-month increase since January 2009. The expansion was driven in part by exports, which benefit


DAVID J. PHILLIP/ASSOCIATED PRESS Daniel Petrocelli represents former EnronCEOJeffrey Skilling.


Skilling asks appeals court for new trial Former Enron chief executive Jeffrey K. Skilling asked a federal


appeals court onMonday to grant hima newtrial based on a Supreme Court ruling his attorney said puts his conviction for conspiracy and securities fraud in question. Skilling’s lawyer, Daniel Petrocelli, presented his argument to a


three-judge panel of the New Orleans-based U.S. Court of Appeals for the 5th Circuit. The Supreme Court’s ruling in June that an anti-fraud lawwas improperly used to help convict Skilling in 2006 for his role in Enron’s calamitous downfall demanded a new trial, Petrocelli said. The jury received bad instructions, he said, that could have tainted their decision-making process. The prosecution countered that the instructions given to the jury


were “harmless” because the evidence against Skilling was over- whelming and that Skilling’s 19 convictions for conspiracy, securities fraud, insider trading and lying to auditors should stand. The arguments focused around a short addendum to the federal


mail and wire fraud statue that makes it illegal to scheme to deprive investors of “the intangible right to honest services.” The Supreme Court ruled in June that prosecutors can use this only in cases where evidence shows the defendant accepted bribes or kickbacks. — Associated Press


ALSOINBUSINESS


l CEO seeks to take energy firm private: Exco Resources chief executive Douglas H. Miller said Monday that he plans to buy all of the outstanding shares of the oil and gas producer in a deal valued atmore than $4 billion. Taking Exco private would


“It’s not terrific, but it’s still respectable, and enough to induce slightly more hiring.” —Brian Bethune, IHS Global Insight


from a weak dollar. New export orders rose 6 percentage points to 60.5 percent on the index. But it also reflected domestic de- mand. Production rose to 62.7 on the


index, up 6.2 percentage points from September. That was the largest monthly increase since January 2010. Manufacturers’ inventories de- clined by 1.7 percentage points, to


53.9. Meanwhile, the Semiconduc-


tor IndustryAssociation reported that worldwide chip sales rose 2.9 percent from August to Septem- ber.


Month to month, sales were


rising faster abroad — for exam- ple, 3.9 percent in Europe. Do- mestically, the increase was 0.5 percent.


hilzenrath@washpost.com


Consumer spending and personal income


Percentage change from previous month, seasonally adjusted


0.5 0.6


0.1 0.2 0.3 0.4


-0.2 -0.1 0


0 0


M A M J J A S M A M J J A S 2010


2010


SOURCE: Bureau of Economic Analysis, Commerce Department


THE WASHINGTON POST % SPENDING INCOME


make it easier to shut down unprofitable natural gas projects and wait out the slump in prices. Miller’s offer of $20.50 per share represents a 38 percent premium over Exco’s closing price on Fri- day. Shares rose Monday $4.47, or 30.1 percent, to $19.30. Exco, based in Dallas, develops on- shore properties inNorth Ameri- ca and controls about 1 trillion cubic feet of proven gas reserves. In a letter to the Exco’s board


of directors,Miller wrote that he expects to use a “significant por- tion” of his 3 percent ownership in the company to raise money for the deal. He also expects contributions from the compa- ny’s seniormanagement, outside investment partners and loans.


l Nursery product injuries spike: Injuries caused by cribs, strollers, high chairs and other nursery products spiked 21 per- cent in 2009 from the previous


year, theConsumer Product Safe- ty Commission said Monday. Regulators estimated there were 77,300 emergency-roomvisits re- lated to products aimed at chil- dren younger than 5, compared with 63,700 in 2008, the CPSC said in a report published Mon- day. The agency doesn’t have an


explanation at this time, said Scott Wolfson, a CPSC spokes- man.


l Corning profit up despite weaker LCD-TV sales: Corning said Monday its third-quarter profit jumped 22 percent from a year earlier to $785million, but it missed Wall Street expectations on lower sales of glass for flat- panel televisions. Revenue rose 8 percent to $1.6 billion. Analysts surveyed by Thomson Reuters had expected slightly higher rev- enue of $1.61 billion. Revenue in Corning’s display


technologies segment fell 5 per- cent to $643million. U.S. sales of LCD-TVs fell 3


percent in July, 11 percent in August and 8 percent in Septem- ber.


— Fromnews services AIG raises $37 billion from Alico sale and IPO in effort to repay U.S. bailout


Remaining balance of N.Y. Fed loans


is about $20 billion BY BRADY DENNIS


In its ongoing effort to repay


taxpayers, bailed-out insurance giant American International Group in recent days has raised nearly $37 billion through the sale of one of its premier subsid- iaries and the initial public offer- ing of another. AIG announced Monday that


it had closed on the sale of one of its crown jewels, American Life Insurance Co., or Alico, which operates in more than 50 coun- tries.MetLife purchased the unit for about $16.2 billion, including $7.2 billion in cash and the remainder in MetLife securities. The deal comes on the heels of


AIG’s successful public offering of Asian-based AIA,which raised more than $20 billion. AIA’s stock soared more than 17 per- cent on its first day of trading last week in Hong Kong. AIG said Monday that the


Alico and AIA transactions com- bined raised about $36.71 billion,


of which $27.71 billion were cash proceeds. Those funds will be used to repay emergency loans fromthe FederalReserve Bank of New York, which stepped in to rescue AIGin September 2008 as it teetered on the edge of bank- ruptcy. The remaining balance of those loans is about $20 billion. “We promised the American


taxpayers we would repay them and the initial public offering of AIA last week and the comple- tion of the Alico transaction move us closer to delivering on our promise,” AIG chief execu- tiveRobertH. Benmosche said in a statement.


After AIG satisfies its debt to


the Fed, it must repay the Trea- sury Department’s investment of nearly $50 billion in the compa- ny.


To do that, Treasury plans to


swap the preferred shares that it holds in AIG for about 1.7 billion shares of common stock, leaving the federal government with a temporary 92.1 percent owner- ship stake, up from its current stake of 79.8 percent. Treasury expects to sell those


shares to investors over time, which means AIG’s stock price ultimately will determine how quickly the government can pull


out of the company and how much of the taxpayer investment it can recoup. If the stock per- forms poorly, taxpayerswould be on the hook. If the stock flourish- es, taxpayers would reap signifi- cant profit. Treasury said Monday that


based on theOct. 29 closing price of AIG, the number of common shares it plans to own soon would be worth about $69.5 bil- lion. “This amount significantly exceeds Treasury’s current $47.5 billion cash investment in AIG,” the agency said in a state- mentMonday. Government officials and AIG


executives expect the company to complete its restructuring by the end of the first quarter of 2011. It undoubtedly will emerge as amuch smaller company than the behemoth it was before the financial crisis. It also will oper- ate primarily as an insurance company once again, rather than depending on the profits of units such as AIG Financial Products, whose troubled derivatives con- tracts nearly drove its parent company into the ground, prompting the massive govern- ment bailout. dennisb@washpost.com


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Economic picture still cloudy V INSURANCE


Ambac warns of possible bankruptcy filing Bond insurerAmbac Financial


Group saidMonday itwill file for bankruptcy protection by the end of the year, either through a prepackaged plan arranged with senior debt holders or through Chapter 11 proceedings. The development is the em-


battled company’s latestwarning amid two years of struggle to regain its footing after getting pummeled by the collapse of the housingmarket. Shares of the once high-flying


stock tumbled 41 cents, or 50.2 percent, to 41 cents, trading on high volume. The stock traded above $95 a share in the spring of 2007, before the housing bust. Ambac spokesman Peter Poil-


LEGAL


lon said the company missed a scheduled interest payment that was due Monday. The company has 30 days to pay or it will be in default. A default on one pay- ment will allow debt holders and others to accelerate proceedings that would force Ambac into bankruptcy. “This brings us one step clos-


er,” Poillon said, acknowledging that the company has beenwarn- ing of the potential for a bank- ruptcy filing sinceMarch. Ambac’s talks on restructuring


its debt have been ongoing. If it needs to file for bankruptcy pro- tection, Ambac said it will do so by the end of the year. — Associated Press


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