Durable goods orders slip in January
Jobless claims climb in recent week
Boeing to sell divisions in Kansas, Oklahoma
DOE, industrial firms test wireless networks on machinery
Metalformers to stay course over next three months
Spring manufacturers predict jump in 2005 business
Leading indicators decline in January
Federal judge sentences ex-Boeing exec to prison time
Bush administration wins class-action lawsuit legislation
Mercury Marine to build engines in China

Durable goods orders slip in January
New orders for manufactured durable good decreased $1.7 billion, or 0.9 percent, in January to $200.4 billion, according to the Commerce Department. This followed a 1.4 percent December increase.

Excluding transportation, new orders increased 0.8 percent. Excluding defense, new orders decreased 0.8 percent.

Transportation equipment had the largest decrease, $3 billion, or 5.3 percent, to $53.3 billion, due to non-defense aircraft and parts, which decreased $2.2 billion.

New orders for machinery increased 0.3 percent and new orders for capital goods fell 0.8 percent.

“Softening in durable goods demand was evident in the January data,” said Cliff Waldman, economist for the Manufacturers Alliance/MAPI. “Apart from a sizable decline in the volatile transportation category, the demand for computers and electronic products, as well as machinery, was considerably weaker in January, while electrical equipment and appliances experienced a considerable bounceback from depressed December levels."

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Jobless claims climb in recent week
New claims for unemployment insurance increased 9,000 to 312,000 for the week ended Feb. 19, according to the Labor Department. The four-week moving average was 308,750, a decrease of 3,250 from the previous week's revised average of 312,000.

The four-week moving average is generally considered by economists to be the more reliable of the two because it smoothes out week-to-week volatility. Both rates remained below 400,000, which is the level economists use to define a weak labor market and a stable one.

Continuing claims for unemployment insurance fell 62,000 to 2.7 million for the week ended Feb. 12. Continuing claims are those older than two weeks.

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Boeing to sell divisions in Kansas, Oklahoma
Onex Corp. will acquire the Wichita/Tulsa Division of Boeing Commercial Airplanes, a subsidiary of The Boeing Co. The transaction includes Commercial Airplanes facilities and assets in Wichita, Kan.; Tulsa, Okla.; and McAlester, Okla.

Transaction consideration to Boeing includes approximately $900 million cash, transfer of certain liabilities and long-term supply agreements that provide Boeing ongoing cost savings.

The single-source supply agreements cover the structures and parts currently produced by the Wichita/Tulsa Division, providing a stable base of revenue for the new business to build upon. In addition, the Wichita/Tulsa operations will continue as a major partner on the 787 Dreamliner.

The sale is expected to close during the second quarter of 2005. Boeing expects to recognize a non-cash loss on the transaction attributable to the transfer of pension-related assets and liabilities. Recognizing these non-cash charges at closing will reduce future pension expenses. Boeing Integrated Defense Systems operations in Wichita and Oklahoma are not included in the transaction.

"This agreement fully supports our strategy to focus Boeing on large-scale systems integration, which is where we are most competitive and can add the most value to our airplanes and services," said Boeing Commercial Airplanes president and CEO Alan Mulally. "Boeing will benefit from lower procurement costs and the Wichita/Tulsa operations now can grow by winning new business with other customers."

Mulally said Boeing selected Onex based on its successful history of investing in and growing companies.

Onex will form a new company to operate the facilities. The plants will continue to operate under the leadership of Jeff Turner, currently vice president and general manager of the Boeing Commercial Airplanes Wichita Division, who will be the new company's CEO.

"Onex has a strategy to build the most efficient and innovative company in the aerostructures industry. We intend to invest over $1 billion in Kansas and Oklahoma in the next few years," said Seth Mersky, an Onex managing director.

Mersky said Onex's vision is to grow the value of the Wichita/Tulsa operations over a number of years.

"We are committed to working in close partnership with the current Wichita/Tulsa senior leadership team to make the transition as seamless as possible," said Nigel Wright, another Onex managing director. "The new company will compete for work inside and outside of Boeing, providing potential for more and more stable jobs. The key is to get the cost structure right."

Boeing announced in April 2004 it was studying the possible sale of its plants in Wichita , Tulsa and McAlester. Boeing included balancing the interests of employees, customers, shareholders and its plant communities in its criteria for the decision.

"We firmly believe that this decision provides the best available outcome for the Wichita/Tulsa Division and its plant communities by creating new opportunities for sustained growth as a separate operation. Onex shares this perspective, and we look forward to a long and productive relationship together," Mulally said.

Approximately 9,000 Commercial Airplanes employees currently work at the Wichita , Tulsa and McAlester sites. The Division incurred approximately $2.2 billion in annual costs for 2004. The facilities currently supply Boeing with fuselage and other structural components for the 737, 747, 767 and 777 programs, and the division is a supplier partner on the 787 Dreamliner.

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DOE, industrial firms test wireless networks on machinery
The U.S. Department of Energy and three industrial partners are testing the use of wireless networks in evaluating the performance of plant machinery.

The $18 million research program will focus on the uses of wireless technology in plants to monitor plant equipment such as electric motors and piping systems.

The Department of Energy wants to look at the link between energy conservation and precise data delivered through wireless systems and hopes it will save 122 trillion Btu by 2020.

General Electric Co., Eaton Corp. and Honeywell Inc. will all participate in the project. GE Global Research was selected to lead the project to develop novel, low-cost wireless sensor networks for industrial equipment monitoring. The first focus will be to analyze the efficiency of industrial motors.

"Electric motor driven systems consume 23 percent of all electricity used in the United States - a truly staggering number. Working with GE and the Department of Energy to deploy smart wireless mesh networking technology for improving these motors' energy efficiency is a real world example of technology making a significant difference," said Paul Sereiko, CEO of Sensicast, the company that will work with GE to develop its wireless networks.

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Metalformers to stay course over next three months
Metalforming companies expect business conditions to remain steady, according to the Feb. 1 Precision Metalforming Association (PMA) Business Conditions Report.

Conducted monthly, the report is an economic indicator for manufacturing, sampling 150 metalforming companies in the United States and Canada.

When asked whether they anticipate an increase, decrease or no change in general economic activity over the next three months, 43 percent of respondents reported that they expect business conditions to improve, down from 48 percent in January. Fifty percent think activity will remain the same, compared to 38 percent last month, and 7 percent predict it will decrease, down from 14 percent in January.

Metalformers also expect little change in incoming orders during the next three months. Fifty-six percent anticipate orders will rise, up from 52 percent in January; 34 percent expect no change,  compared to 35 percent the previous month; and 10 percent forecast a decrease in orders, down from 13 percent in January.

Reported average daily shipping levels increased slightly, with 39 percent stating that current levels are above those of three months ago, compared to 32 percent in January. Thirty-eight percent reported no change, down from 43 percent last month; and 23 percent indicated that February shipping levels are below levels of three months ago, compared to 25 percent in January.

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Spring manufacturers predict jump in 2005 business
U.S. spring manufacturers recorded a solid year of gains in 2004 and projections for 2005 are optimistic, despite material shortages and alarming raw material cost increases, according to the Spring Manufacturers Institute (SMI) Key Business Trends survey.

“Of course imports from China have been a problem,” said SMI president Dave Weber of A.V. Weber Co. in North Wales, Pa. “But there has been a dramatic increase of domestic business for industrial equipment and specialty products, such as medical and aerospace products, that has benefited most component manufacturers in North America.”

Soft spots remain in North American manufacturing. Business in the New England area remains slow, but generally the component metalworking manufacturers have seen business improve for the past six quarters.

A total of 42 spring manufacturers provided responses to the fourth quarter 2004 survey.

“Half of the reporting companies indicated that business had increased, while 29 percent reported that business remained at the same high level from the previous quarter,” said Ken Boyce, SMI executive vice president.

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Leading indicators decline in January
The U.S. leading index decreased 0.3 percent in January, but this follows increases in the previous two months, and there were significant upward revisions to the leading index from August to December, according to the Conference Board.

In addition, there has been more widespread strength in the leading indicators in recent months, with weakness concentrated in vendor performance and the interest rate spread.

The leading index was on a rising trend from early 2003 to the middle of 2004, but has now fluctuated around a flat trend over the last six or seven months, falling below its long-term trend of a 1.5 percent annual rate.

The recent behavior of the leading index is consistent with the economy continuing to expand in the near term, but more slowly than its long-term average growth rate.

Four of the 10 indicators that make up the leading index increased in January. The positive contributors – beginning with the largest positive contributor – were average weekly manufacturing hours, real money supply, building permits, and manufacturers’ new orders for nondefense capital goods.

The negative contributors – beginning with the largest negative contributor – were vendor performance, index of consumer expectations, stock prices, interest rate spread, and manufacturers’ new orders for consumer goods and materials.

The contribution of average weekly initial claims for unemployment insurance (inverted) remained unchanged.

The leading index now stands at 115.6 (1996=100). Based on revised data, this index increased 0.3 percent in December and increased 0.3 percent in November.

During the six-month span through January, the leading index decreased 0.3 percent, with five of 10 components advancing.

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Federal judge sentences ex-Boeing exec to prison time
Former Boeing Co. chief financial officer Michael Sears was sentenced to four months in prison for his role in negotiating employment for Air Force official Darleen Druyun while she ran point on a much sought-after $23 billion contract.

Following the federal ruling, the Government Accountability Office ruled that a separate contract, which was also negotiated by Druyun and awarded to Boeing in 2003, should be reworked because Druyun altered the contract to favor Boeing.

For her part in the deception, Druyun was sentenced to nine months in prison last year.

“Today’s action brings this matter one step closer to closure," Boeing senior vice president and general counsel Doug Bain said in a press release. "The Boeing Co. has provided information every step of the way to support the government’s ongoing review of Darleen Druyun-related procurements and to achieve our mutual goal to finally resolve this matter.

“In addition to dismissing Sears and Druyun in November 2003, the company commissioned an independent external review of its hiring practices, which determined that Boeing had in place well established policies and procedures. Nevertheless, the company has adopted recommendations from that review and strengthened its policies in this area, including establishing an Office of Internal Governance reporting directly to the CEO."

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Bush administration wins class-action lawsuit legislation 
President Bush will sign into law today a new bill that will allow federal courts to lay hold of multi-million dollar class-action lawsuits, preventing them from being heard in state courts.

Businesses have complained the class-actions lawsuits are often frivolous and lead to huge monetary payoffs for lawyers while generating very little or no compensation for the plaintiffs involved.

To date, lawyers for plaintiffs from multiple states could shop their cases around to friendly jurisdictions where they would likely bend a sympathetic ear. A favorite among trial lawyers was Madison County, Ill., in which lenient venue policies and plaintiff-friendly juries earned the county the nickname "judicial hellhole."

“Passage of this important legislation means a legal system that is simpler, fairer and faster," said Edward M. Liddy, chairman of the Business Roundtable Civil Justice Reform Task Force and chairman, president and CEO of The Allstate Corp. "Our nation’s civil justice system is the most expensive in the world, costing our economy $246 billion a year. This number has increased more than a hundredfold over the past 50 years. Yet less than 50 cents on every dollar is actually awarded to victims."

This is President Bush's first legislative victory following his inauguration. His administration's aim was to stem the tide of class-action, asbestos and medical malpractice lawsuits afflicting America's business sector.

House Majority Whip Roy Blunt, R-Mo., said moving these types of lawsuits to a federal venue will make sure states don't "routinely approve settlements in which the lawyers receive large fees and the class members receive virtually nothing."

Opponents of the legislation call it a boon to regulation-skirting businesses and say it will open the flood gates to Enron-style deception.

"When Americans are injured or even killed by Vioxx or Celebrex or discriminated against by Wal-Mart, they may never get their day in court," said House Minority Leader Nancy Pelosi, D-Calif. "Those cases that do go forward will take significantly longer because the federal courts are overburdened and unequipped for this caseload.

"Special interests have even admitted that the real intent of this bill is to clog the federal courts and therefore stop the cases," she said. "It is exactly what they asked for...powerful corporations will largely be immune from the accountability that currently comes from meritorious state class-action cases."

Companies including Allstate Corp., Ford Motor Co., Pfizer Inc., and Hartford Financial Services Group Inc. lobbied heavily for the legislation. It passed 72-26 in the Senate and 279-149 in the House of Representatives.

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Mercury Marine to build engines in China
Mercury Marine Inc., the watercraft engine maker from Fon du Lac, Wis., will open a factory in China in two weeks. The factory will be used to manufacturer four-stroke engines for recreational boats and commercial vessels.

The new factory near Beijing will help Mercury Marine build an engine at the lowest possible price. The company also recently opened an engine factory in Japan with its partner Tohatsu Corp.

Company president Patrick Mackey said the new factory won't necessarily result in job cuts in Wisconsin, but verified that certain employees will not be replaced upon retirement.

"Our strategy is to get the smaller engines into the best economic position we can," Mackey told the Milwaukee Journal-Sentinel. "North America is difficult when you consider the cost of labor, health care and other things here."

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