Here is a look at more of Thursday's top business stories:
General Electric cuts outlook, take $1.4 billion charge
FAIRFIELD, Conn., Nov. 21 (UPI) -- Global conglomerate General Electric Co. has cut its 2002 earnings forecast and said it would take charges totaling $1.4 billion at its money-losing reinsurance unit, and signaled that 2003 profits would be softer than previously expected.
The company also said it would raise its quarterly dividend by 6 percent.
In a widely expected move, GE said it would take a charge of approximately $1.4 billion, or 14 cents a share, after taxes as it moves to shore up reserves at Employers Reinsurance Corp.
GE said the planned charge is based on new information and related
analysis developed through Employers Reinsurance Corp.'s annual comprehensive actuarial and business reviews of its reserves, which are
conducted in the fourth quarter.
GE said it would contribute $1.8 billion to shore up Employers Reinsurance Corp.'s reserves.
Jeff Immelt, chairman and chief executive officer, said, "Reinsurance is an industry that has had a difficult time over the past few years, and we're disappointed in our results.
"We are committed to running Employers Reinsurance Corp. effectively for our investors. This includes restoring profitability and exploring strategic options," Immelt said.
GE also said it would contribute $4.5 billion to GE Capital to reduce its debt leverage.
The company also cut its 2002 earnings forecast to $1.51 a share from $1.65.
For 2003, GE said it expects earnings to range between $1.55 and $1.70 a share. Analysts were expecting GE to earn $1.70 a share, according to Thomson First Call.
Immelt said earnings from operations should increase 10 percent or more, offset by the effects of non-operating items such as reduced pension income, nonrecurring gains, and option expense.
Performance gains will be broad-based, Immelt said, with 11 of GE's 13 businesses in line to deliver double-digit operating profit growth.
Dave Calhoun, president and chief executive officer of GE Aircraft Engines, and Henry Hubschman, president and chief executive officer of GE Capital Aviation Services, noted that GE's businesses supporting the airline industry will see positive earnings growth next year.
John Rice, president and chief executive officer of GE Power Systems, said that Power Systems earnings from gas turbine sales will decline as anticipated after several years of exceptional growth; however, the rest of Power Systems, particularly its services, oil and gas, and wind businesses, will deliver strong performances and provide a solid platform for future earnings growth.
GE also said it will increase its quarterly dividend 6 percent to 19 cents a share. The board of directors has approved the increase, and will declare it in December, payable in late January.
Keith Sherin, senior vice president and chief financial officer, said, "These moves are consistent with our strategy to run GE as a triple-A company while continuing to fund growth. In addition, the improved transparency will allow investors to compare the returns of our four financial services businesses with their peers'."
"In a period of slow economic growth and high market volatility, GE is very well positioned," Immelt said.
"We have a great set of businesses, and we are driving a solid set of
growth initiatives. We have financial flexibility and a triple A-rated balance sheet. We are leading in governance and transparency. No other company faces the challenges ahead with the size, strength and staying power of GE," Immelt added.
OECD sees Fed raising interest rates next summer
PARIS, Nov. 21 (UPI) -- The Organization for Economic Cooperation and Development said it expects the Federal Reserve to start raising interest rates gradually next summer as the U.S. economic recovery regains steam after a weak spell.
In an annual report on the global economic outlook, the organization said world growth will be "heavily dependent" on a U.S. recovery next year.
OECD said it expects the U.S. economy to grow slightly faster in 2003 than it did this year -- just enough to spur the Fed to begin raising interest rates.
"The economy appears to be expanding only slightly in the final quarter of 2002, and sluggish growth is likely to continue through the first half of 2003," OECD said.
Still, it said the economy should enjoy more robust growth after that. It predicted the U.S. gross domestic product will grow by 2.6 percent next year, up from an estimated 2.3 percent in 2002.
That forecast is slightly less optimistic than the one the OECD made just a month ago.
In a report on the U.S. economy published in October, the organization predicted the economy would grow 2.75 percent in 2003.
Nevertheless, it said Thursday the Fed will be inclined by the summer to start withdrawing the monetary stimulus it provided to the economy over the last two years.
Since the start of 2001, the Fed has cut its key federal funds rate by 5.25 percentage points to a 41-year low of 1.25 percent.
The Fed is not expected to change the rate when its top policymakers meet Dec. 10. But the OECD said the central bank next year will raise the rate to a "neutral" level that neither stimulates nor restrains economic growth.
"It is assumed that the current level is maintained through the middle of next year, with a gradual move toward a more neutral monetary stance beginning around that time as demand picks up," OECD said.
Economists say the "neutral" level for the fed funds rate is about 3.5 percent.
More robust growth in 2003 will not heal all of the U.S. economy's weaknesses, OECD said. It predicted the U.S. unemployment rate, 5.7 percent in October, will rise to a peak of 6 percent next year. The country's record current-account deficit will continue expanding through 2004.
"With domestic growth exceeding that of trading partners and the dollar only modestly weaker, the current-account deficit is expected to remain over 5 percent of GDP throughout the projection period," OECD said.
Financial Assn sees need to change credit rating system
NEW YORK, Nov. 21 (UPI) -- Jim Kaitz, president and chief executive of the Association for Financial Professionals, said corporate financial executives feel the current credit rating system needs a change.
In an interview with CNBC on Thursday, Kaitz said the ratings are not accurate or timely.
"There is a consensus among financial executives that the Securities and Exchange Commission should step in and help revamp the rating system," he said.
Many executives feel the system lumps individual companies into industry sectors, rather than looking at them from a case-by-case basis, Kaitz said.
"The SEC hasn't looked at this for at least 25 years, I think it's time for them to look at this," he said.
He said he wasn't asking the SEC to step in and actually implement the ratings system. He was asking for a review of the current system.