Detroit on Thursday became the largest U.S. city to file for bankruptcy. Read about this and more of the day's top business news stories.
Detroit Files for Bankruptcy
The hits just keep on coming for the Motor City. With an estimated $18.5 billion in debt, Detroit on Thursday became the largest U.S. city to file for bankruptcy. The filing could translate into laying off city employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed, The Los Angeles Times reports. The population of Detroit’s largest city has declined from 1.8 million in the 1950s to around 700,000. The city has lost a quarter-million residents between 2000 and 2010. Much of the middle-class and scores of businesses also have abandoned Detroit, taking their tax dollars with them. Detroit's creditors are expected to face huge losses, and the future of retiree pension and health benefits for thousands of city workers hangs in the balance. General Motor, which itself filed and emerged from Chapter 11, reiterated its commitment Thursday to Detroit. "GM is proud to call Detroit home,” the company said in a statement.
Growing Economy Gives USA a Moody’s Rating Boost
Moody’s Investors Service on Thursday raised its U.S. sovereign outlook to stable from negative and affirmed its top Aaa rating for the country, Reuters reports The economy, Moody’s said in a statement, is "progressing at a faster rate compared with several Aaa peers and has demonstrated a degree of resilience to major reductions in the growth of government spending," Last month Fitch also affirmed the U.S. sovereign AAA rating. But that agency maintained a negative outlook, saying still-elevated debt levels leave the country vulnerable to shocks without more deficit reduction. Standard & Poor's rates the country AA-plus, with a stable outlook.
Microsoft Struggles Continue with Lower-Than-Forecast Quarterly Earnings
Microsoft Corp on Thursday reported lower-than-expected quarterly earnings, Reuters reports. The world’s largest software company has seen its personal computer sales slow. The company also took an unexpected $900 million charge for its inventory of unsold Surface tablets, sending its shares down 5 percent after hours. Earlier this week, Microsoft said it was drastically cutting prices and expanding distribution of Surface devices. The Surface was created to challenge the iPad, but sales have been disappointing. Last week, Microsoft announced a massive reorganization to transform itself into a "devices and services" leader,
Insurance Companies Ask for Congressional Assistance with Climate Change
Officials from the Reinsurance Association of America told Senators Thursday that changes in weather patterns has negatively affected the insurance industry in the form of billions of extra dollars in payouts and requested Congress consider tax incentives to homeowners to help them protect their homes from new weather-related catastrophe. The association told Congress to consider climate change in project reviews. “The industry is at great financial peril if it does not understand global and regional climate impacts, variability and developing scientific assessment of a changing climate,” Franklin Nutter, president of the association, said in testimony to the Senate Environment and Public Works committee. “In response, some members of the Senate Environment and Public Works committee expressed doubt about global warming as a consistent threat to insurance policies.
Verizon Wireless to Offer Payment Plans for Phones
Verizon Wireless is set to become the next cellphone carrier offering installment plans for the purchase of phones, joining AT&T and T-Mobile in that effort. Verizon said it would introduce its plan Aug. 25 and it would allow customers to take 24 months to pay off the full retail price of the phone. Once a buyer pays off 50 percent of the cost of the original phone, that customer can upgrade to a new phone in six months.
Panasonic to Pay $5.8 million in Price-Fixing Scheme
The Justice Department announced Thursday that Panasonic will pay $45.8 million criminal fee for price-fixing of switches, steering angle sensors and other components it produced as automobile parts for Toyota, Honda, Mazda and Nissan Panasonic. The Justice Department’s investigation of auto parts companies has now netted 11 companies and 15 executives who have pleaded guilty or agreed to plead guilty, and the investigation has picked up $874 million in criminal fees. According to the charges, the price fixing being investigated started in 1998 and went to at least 2010.