Federal Prosecutors will retry Former Westar Energy Executives David Wittig and Douglas Lake

According to the Kansas Star via Kansas.com "The government will retry former Westar Energy executives David Wittig and Douglas Lake on charges of defrauding the company."

According to the Kansas City Business Journal, the two former executives had been convicted on 39 and 30 counts of defrauding the utility. An appeals court threw out the convictions due to insufficient evidence on one of the isues in the case. Although prosecutors will not be able to pursue all of the original convictions, "Wittig will face 14 counts of circumventing internal controls and one count of conspiracy, [a federal spokeperson] said Monday. Lake will face 13 circumvention counts and one count of conspiracy ."

This will be their third trial.

New Orders

The Commerce Department's durable goods orders data release showed significant strength in manufacturing.

New orders for durable goods were up 3.4 percent compared with a 2.2 percent consensus estimate according to Bloomberg and 2.7 percent polled by the Wall Street Journal. Particularly relevant to Wichita, new orders for commercial aircraft were up by 37.6 percent more than offsetting a 48.8 percent decline in military arircraft orders. In a significant reverse of form, motor vehicles and parts were up 3.3 percent. Boeing announced 27 percent higher profits based on its revenues which are being driven by its strong order book.

Will the delating housing bubble pull us down?

The national housing market remains a worry for the economic outlook. Yesterday we learned existing home sales were down by 8.4 percent in March, the largest drop in eighteen years. Weather has caused these numbers to bounce like a yo-yo. Indeed they spiked in February setting up a snap back. Thomas Lawler, the Vienna, Virginia housing economist, predicted a 7 percent drop in house prices this year (fourth quarter, 2007 over fourth quarter, 2006.) Lawler's prediction was quoted in today's Wall Street Journal. More encouraging was a 1.6 percent drop in the inventory of unsold homes and higher than expected new home sales in March of 1.213 million.

NLRB Levels Unfair Labor Practice Complaints Against FedEx Home Delivery

FedEx has always tried to avoid unions. Management, from Fred Smith on down, sees unions as a barrier to the flexibility and entrepreneurial drive that it views as essential to FedEx's culture and profitability. Doubtlessly, there is a sprinkle of ideology as well.

Not surprisingly, the Teamsters see things differently. If you click on the title link for this posting, you will find their press release proclaiming a victory of sorts in their skirmishing with FedEx.

A key element in FedEx's business model for their package delivery operation and in particular for FedEx Home Delivery is its use of nonunion contractors.

This might develop into an interesting story to follow.

The Wichita economy is Steaming ahead

Wichita's unemployment rate falls further below the national average

The Bureau of Labor Statistics reported this morning that Wichita's job market was stronger than the national job market. Our unemployment rate dropped to 4.4 percent in February compared to 4.6 percent in January and 4.9 percent in the America as a whole.

Strong job growth

Employment, as measured by the Bureau's survey of Wichita's payrolls, grew 3.9 percent over February last year an increase of thirty nine hundred jobs. Strong orders in the aerospace industry have fueled this growth. Recent new orders data confirm that this sector is booming even while other key parts of manufacturing weaken. The news in the automotive industry, for example, continues to be weak.

Aerospace leads the way

Aerospace seems to be on the boom part of traditional boom and bust cycle. Although the domestic economic growth appears to be cooling off, foreign demand continues strong and a strong replacement demand exists in the U.S. as it battered airlines nurture their balance sheets back into health. Moreover, a new IMF study argues that the rest of the world is less vulnerable to a U.S. economic slowdown.

The Department of Commerce reported that the unfilled order backlog for the aerospace indutry was up 31.3 percent in February. The growth was almost entirely in the non defense book was up almost 40 percent.

Mortgage Meltdown

Andy Laperriere argues that we see in the subprime mortgage market debacle the bursting of the housing bubble. But it is just the begginning. He asks "[w]hat role did the Fed's loose monetary policy from 2002-2004 play in fueling the housing bubble? Should the Federal Reserve reexamine its policy of ignoring asset bubbles?"

Mr. Laperriere, a managing director in the Washington office of ISI Group, comments in today's Wall Street Journal.

He goes on to say, "Stock markets world-wide have sold off the past few weeks over concerns the collapse of the subprime mortgage industry could prolong and deepen the housing slump and threaten the health of the U.S. economy. Federal Reserve officials and most economists believe the problems in the subprime mortgage market will remain relatively contained, but there is compelling evidence that the failure of subprime loans may be the start of a painful unwinding of a housing bubble that was fueled by easy money and loose lending practices."

The "wealth effect" has been a the tail wind boosting consumption growth and GDP. If house prices do fall 10 percent this year, it will feel like a Kansas gale in our faces. How far will it push us back?

China Threatens to Start Manufacturing Big Jets

The Financial Times had some dramatic news for the aircraft industry over the weekend.

China announced it will set up a state-owned company to build large commercial jet aircraft. The state council, roughly the cabinet, had made what it called an “important strategic decision” to begin research and development to enter the market dominated by Boeing and Airbus.

China is one of the biggest markets with an estimated demand for almost $350 billion in planes over the next two decades. Serving a big domestic market is a key success factor in industries with large scale production.

China's entry into this market over the next fifteen years could have significant impact on Boeing and its suppliers like Spirit Aerospace.

Boeing is on Schedule with the 787 And Will Increase Production

Ann Keeton in the Wall Street Journal reports "Boeing Co.'s new 787 aircraft is 'targeting' a first flight in late August, followed by the first delivery, as previously scheduled, in May 2008...

"During the first update this year, Mike Bair, head of the 787 program, said Boeing likely will increase production of the aircraft to meet strong customer demand, which now stands at close to 500 aircraft."

Spirit Areospace makes the composite fuselages.

Judging a Manager By His Subordinates' Success

Ron Turcotte aboard Secretariat

By their fruits ye shall know them

Breeders judge a horse by the races, particularly the stakes, won by the stud's or mare's offspring. Secretariat was the greatest horse that ever circled the oval, but his offspring have had nothing like their father's success.

Darren Everson in this weekend's Wall Street Journal looks at the big name college basketball coaches and asks whose assistants became successful head coaches. He develops a scorecard similar to that kept by horse breeders. He looks at the suces rates of assistants of big name coaches. Why do some coaches like Rick Pitino produce subordinates who go on to be great head coachs, while others do not? This is an issue not only for baketball fans, but for students of management everywhere.

Whom do companies reward?

Corporations invest heavily in training and succession planning. How often do they identify, encourage, and reward managers who are successful mentors? The managers who produce great managers are a powerful and underappreciated asset.

One last note in Secretariat's defense: he may not have been horse racing's greatest sire, but he is arguably the greatest broodmare sire God ever created!

2006 Newspapers' print advertising revenues down; internet jumps to $2.7 billion

The Newspaper Association of America, in data reported in the Wall Street Journal, reports that advertisers spent $46.6 billion (down 1.7 percent) on their print ads and $2.7 billion on their internet ads. The newspapers' internet advertising was up 31.5 percent. Although that was in line with the 34 percent increase in all internet advertising spending, it was not enough to offset their losses on the print side. The internet side of the business provides only 5.4 percent of the industry's advertising revenue.


The Journal got its overall internet ad spending data from the Interactive Advertising Bureau.