GM Market Share Could Fall Below 20% and News on Other Financially Challenged U.S. Companies for June 3

The items below are taken from the Credit Manager’s Weekly Summary of Financially Challenged Companies. A full issue contains information on more than 200 companies. Please visit the insideARM bookstore for information on subscribing to the Summary.

Callaway Golf Co., a Carlsbad, Calif. maker of golf products, is closing a manufacturing plant in Gloversville, N.Y., resulting in the loss of 120 jobs. The firm will outsource production to China.

Delta Air Lines Inc., Atlanta, managed to get 1,000 more employees than it had planned to take part in its voluntary severance program. Back in March, the carrier said it wanted to cut 2,000 jobs (2% of its workforce), but with the added participants it will be able to trim 3,000 positions as it moves to combat high fuel prices. Delta is in the process of merging with Northwest Airlines Cop. in a $17.7 billion transaction.

Eastman Kodak Co., plagued by high costs for raw materials, is boosting prices on some of its consumer prices by up to 20%. Kodak, the Rochester, N.Y. film and camera company, is a year out of a four-year restructuring and recently reported, for the first time in years, its first quarterly results that didn’t include restructuring charges. While Kodak managed to whittle its loss in the recent quarter, results didn’t meet expectations.

Ford Motor Co., adapting to market conditions, will assemble its Fiesta subcompact car at a Mexican plant that currently builds full-size pickup trucks. Working in Mexico allows Ford to take advantage of lower labor costs, but replacing pickup-truck production with the Fiesta also reflects Ford’s shift to smaller cars in an era of $4 gas in the U.S.  Ford could start selling the Fiesta in the U.S. market in 2010. The carmaker recently said it would reduce shifts at four of its truck plants and lengthen some summer shutdowns as it tries to reduce its inventory.

Frontier Airlines Inc. of Denver lost $16.5 million during its first three weeks under Chapter 11 protection, including $2.2 million in reorganization fees and a $12.8 million operating loss. Total revenue was $69 million, against total operating costs of $81.4 million.

General Motors Corp.’s market share could fall below 20% for May when reports on the month’s vehicle sales come out. For several years, sales of SUVs and pickup trucks have been dropping industry-wide, but the decline has been speeding up this year. In April GM held 20.5% of the U.S. market, but recent statistics suggest that it will decline again in May.

Gottschalks Inc., a Fresno, Calif. department-store operator, trimmed its corporate payroll by twenty positions and said that it will continue trying to trim inventory. The firm is coming off a first quarter loss of $5.1 million on a 12% slide in sales–to $125 million. Same-store sales plunged more than 10% in the quarter.

HydroGen Corp., a Cleveland manufacturer of fuel cell systems, will cut its staff by seventy-six positions (nearly two-thirds of its payroll) at plants in Ohio and Pennsylvania, citing the “difficult equity market”. The job cuts will hopefully give the firm some time to develop a financing strategy, which could include putting itself up for sale.

Michaels Stores Inc., an Irving, Texas retailer of arts and crafts, reported a first quarter loss of $20 million, an improvement over its $23 million loss in the year-earlier period.  Net sales edged up 1%–to $847 million, and same-store sales increased almost 3%. Michaels operates more than 1,100 Michaels and Aaron Brothers stores in the U.S. and Canada.

Milberg LLP, a class-action law firm, is said to be close to a deal with federal prosecutors to settle allegations of paying kickbacks. It’s thought Milberg will pay out somewhere in the ballpark of $75 million. Since the firm was indicted two years ago, many of its attorneys have jumped ship and the firm has seen a decline in business. Milberg has already paid out more than $120 million to settle class-action litigation against it.

Sharper Image Corp., a San Francisco specialty retailer, said that it will close all of its remaining stores following moves last week by Hilco and Gordon Brothers to acquire its assets at a bankruptcy auction for $49 million. 

St. Petersburg Times in Florida, wanting to trim its payroll, is offering “enhanced retirement options” to an undisclosed number of workers. The publisher, responding to weak ad revenue, will also freeze wages of remaining workers for the next year. Last year the newspaper, with 300,00 daily subscribers, closed its Citrus Times publication and cut jobs, but the company expanded on another front by purchasing three real-estate magazines. All told, the Times has already reduced its staff by some 13%, bringing its payroll down to 1,300 workers.

TransUnion Corp., a Chicago-based credit reporting agency, won preliminary court approval to pay $75 million to settle litigation on behalf of up to 150 million plaintiffs who said that the firm improperly sold credit information.