Change comes to two businesses: The executive who steered General Motors out of bankruptcy is stepping down, and a Brooklyn pizzeria some say is the best in the city faces eviction. It's WNYC's Financial 411 -- our take on the economic news of the day.
MARKETS FALL ON WEAK LABOR DATA
The markets were not helped by word from the Labor Department that the number of people applying for jobless benefits rose unexpectedly last week -- to the highest level in five months. Analysts say the increase suggests companies may not hire enough workers this month to lower the national unemployment rate, which stands at 9.5 percent. New York reported one of the largest increases in new jobless claims because of continued layoffs in construction and services.
The Dow Jones Industrial Average shed 59 points, dropping to 10,320. The S&P 500 lost 6 points, closing at 1,084. The Nasdaq closed at 2,190, down 18 points.
In housing news, mortgage rates fell again to record lows this week, even as the number of foreclosures rose in July, and banks seized a near-record number of homes.
SHIFTING GEARS AT GENERAL MOTORS
In the General Motors' earnings call today...a little surprise.
"So this morning I'm pleased to announce that effective September the first, I will step down as CEO of GM," announced Ed Whitacre, who has led the company since December. The 68-year-old made this announcement shortly after GM reported its second straight quarterly profit. Whitacre will turn over the reigns to Dan Akerson, who's sat on GM's board since last summer.
Akerson was asked whether he'd shake up management when he takes over the job next month. "I have to get in and get my feet on the ground, " he said, "before I'd be prepared or willing to discuss that particular subject."
To talk more about what this big change means for GM and U.S. taxpayers -- remember, we own 61 percent of the company -- we turn to Michelle Krebs, a senior analyst with the online automotive site Edmunds.com.
How significant is this news that the CEO is stepping down?
Well, it certainly was a surprise that it came today. He's 68 years old, he has a very nice retirement package from AT&T, where he was CEO, so we fully expected him to be fairly short-term. But I think what surprised people is that he didn't stay on through the launch of GM's initial public offering.
Right, there are reports GM could have a stock offering as early as tomorrow. That's part of a step to pay back the more than $40 billion owed to taxpayers. How likely is that now?
Well, we certainly think they are preparing the paperwork. We don't know exactly when they'll launch that IPO. We're hoping that they do it when market conditions are much better than they are now, both the stock market and the global economy and the U.S. auto sales market. We're hoping they time it well.
There are growing fears the economic recovery is hitting the brakes. How would this stall in the economy effect GM's bottom line?
We're already seeing that it may -- certainly will effect it in the second half. We were told by GM executives today that the first and second quarters, which were good quarters for them, will be the best of the year, that the rest of the year is not going to be as strong. There's been some weakening in Europe, even in markets in Asia that had been really fast-growing. China, as everybody knows, is slowing down a bit and there's some price competition going on there, even in South America. So the global economy is going to effect its bottom line for sure.
A SLICE OF BROOKLYN HISTORY IN PERIL
And now to a story about another icon, this time in Brooklyn. Grimaldi's, the 105-year-old pizzeria under the Brooklyn Bridge, faces eviction. Popular with locals and especially tourists, some think it's the best pizza in the city.
There's a court hearing tomorrow, WNYC's Ilya Marritz is here now with a preview.
What's the case against Grimaldi's? What happened?
Well, Grimaldi's owner is a man named Frank Ciolli and apparently he's been pretty consistently late on his rent and also taxes that he was going to pay to the city. His landlady, Dorothy Waxman, took him to court in the spring, and they reached an agreement in June that set specific dates by which point he would make different payments for different monies that he owed. Waxman's attorney says he has not been making those payments on time. Some of the payments have been made, but the checks have come late, or they've been dated strangely. And she says she's had enough and she wants to evict him.
And Ciolli's defense?
Well, in an interview in The Wall Street Journal, Ciolli says he has sent her checks for most of the money that's owed. Most of those checks are indeed post-dated, so that's a little bit strange, perhaps. Ciolli's lawyer wouldn't talk to me, but I did speak with the manager at Grimaldi's, Gina Peluso. And she says yeah, sure, Frank Ciolli is habitually late, that's just sort of the way he does things. But this isn't about cash flow, its about a landlord who wants to evict a business for whatever reasons she has, she's focusing on the technicalities of when a check came in, rather than whether it's being paid.
And, briefly Ilya, how is this possible? There are always huge lines outside Grimaldi's.
No kidding. I was there at 4:30 yesterday and there was still a long wait to get in. I can tell you Grimaldi's hasn't raised prices in 12 years. A large pie still starts at $14. Several people on line said if it's a cash flow issue, they would be willing to pay more.