Business briefs for September 17, 2001

Monday, Sept. 17, 2001 | 10:08 a.m.

Bankrupt bike maker's assets sold

DENVER -- Schwinn/GT Corp.'s bicycle and fitness business was sold to Pacific Cycles and Direct Focus Inc. in a bankruptcy court auction for $151 million.

The new owners said the brand would almost certainly move out of specialty stores to the mass market.

The move was expected to spread havoc among independent bicycle retailers, who rely on higher prices and service to drive sales. Schwinn has been the No. 2 seller for some time.

"I would see a lot of smaller stores and medium sized stores go out of business," said Greg Seebart, owner of Campus Cycles in Denver. "Their mainstay has been Schwinn for years."

Under the purchase agreement, Pacific will control Schwinn's bicycle assets and Direct Focus will get Schwinn's fitness equipment line.

Utility rescue deal dies, emergency session called

SACRAMENTO -- Gov. Gray Davis called a third emergency legislative session early Saturday, after the Senate failed to vote on a plan to rescue Southern California Edison from bankruptcy.

That session, scheduled to start after the Jewish religious holidays in October, would take another shot at saving Edison from sliding into bankruptcy.

On the Senate floor, President Pro Tem John Burton, a San Francisco Democrat long skeptical of the Edison deal, said the third session would do little or no good.

If the Senate had considered the Edison deal that passed the Assembly last week, Burton said, it would have received seven votes out of 40 senators.

"We didn't take it up because we didn't want to embarrass the governor," Burton said. "It would have been a rip-off of residential people to help big business and bail out a corporation."

Throughout Friday and into early Saturday morning, senators could not come up with a politically palatable way to salvage the Edison deal. That, Edison officials and Davis aides said, means the state's second-largest utility will most likely file for federal bankruptcy protection.

Automaker hurt by terrorism

DEARBORN, Mich. -- Ford Motor Co. reduced its third-quarter earnings forecast and production as auto-parts deliveries are delayed by tighter security at the U.S.-Canada border and grounded flights after terrorist attacks.

The second-largest automaker said it will earn less than its forecast of 10 cents a share before one-time items. Ford reduced third-quarter North American production as much as 13 percent as the company adjusts to slower sales and parts delays.

"That's a pretty big hit," said Burnham Securities Inc. auto analyst David Healy, who also owns Ford shares. The move cuts Ford earnings another 20 to 25 cents a share, he estimates.

The automaker will build an estimated 810,000 to 820,000 cars and trucks in the quarter ending Sept. 30, Ford spokeswoman Della DiPietro said. That's down from its previous estimate of 930,000 vehicles and the 1.052 million cars and trucks it built in last year's third quarter.

Automakers keep a limited number of parts at assembly plants to reduce costs, and they depend on frequent shipments from suppliers. Those "just-in-time" shipments have been disrupted by stepped-up border inspections and a halt in air-freight shipments after Tuesday's attacks. The production losses come as automakers cope with reduced sales in the U.S.

General Motors Corp. and Toyota Motor Corp. each closed one North American plant as auto-parts deliveries are delayed.

Utility allegedly underreported income

COLUMBIA, S.C. -- Regulators have ordered an audit of Duke Power's financial statements to determine whether the company underreported income to avoid cutting rates for 2 million customers in North Carolina and South Carolina, The State reported Sunday.

Internal company documents obtained by the newspaper indicate that top executives discussed underreporting income as early as December 1998, the newspaper said.

The documents discussed how Duke Power could avoid exceeding its "allowed return."

The allowed return, set by state regulators, determines how much Duke Power can charge its customers. Should it exceed that return, it could have to cut rates for its customers.

The State obtained the documents from a Duke accountant who asked not to be identified. The accountant previously told South Carolina regulators about the possible underreporting of income.

A Duke Power spokesman said Sunday that the company never intended to mislead regulators and denied any deliberate wrongdoing.