Associated Press Business Briefs - July 26, 2024
U.S. economic growth increased last quarter
WASHINGTON — The nation's economy accelerated last quarter at a strong 2.8% annual pace, with consumers and businesses helping drive growth despite the pressure of continually high interest rates. The gross domestic product picked up in the April-June quarter after growing at a 1.4% pace in the January-March period. Economists had expected a weaker 1.9% annual pace of growth. The GDP report also showed that inflation continues to ease, though still remaining above the Federal Reserve's 2% target. The latest figures should reinforce confidence that the U.S. economy is on the verge of achieving a rare "soft landing," whereby high interest rates, engineered by the Fed, tame inflation without tipping the economy into a recession.
Video game performers will go on strike over AI concerns
LOS ANGELES — Hollywood's video game performers are going on strike, throwing part of the entertainment industry into another work stoppage after talks for a new contract with major game studios broke down over artificial intelligence protections. The strike will begin at 12:01 a.m. Friday. It's the second strike for video game actors and performers under the Screen Actors Guild-American Federation of Television and Radio Artists. It comes after nearly two years of negotiations with gaming giants. Union negotiators say gains have been made over wages and job safety but that the game studios will not make a deal over the regulation of generative AI.
Southwest Airlines plans to start assigning seats
DALLAS — Southwest Airlines plans to drop the open-boarding system it has used for more than 50 years and will start assigning passengers to seats, just like all the other big airlines. The airline said Thursday that preferences have changed over the years and the vast majority of travelers now want to know where they are sitting before they get to the airport. Southwest's unusual boarding process started as a fast way to load passengers and limit the time that planes and crews spend sitting idly on the ground, not making money. It helped the airline squeeze a few more flights into the daily schedule. Southwest also plans to offer redeye flights for the first time.
Car buyers reject lofty prices at time of huge capital outlays
DETROIT — Investors are punishing automakers' stocks this week after second-quarter earnings reports exposed industrywide issues of slowing sales and high prices. That has come just as the companies are having to spend huge sums to make new electric and gas vehicles. Many automakers have growing stockpiles on dealer lots, requiring increased discounts to sell them to buyers with stressed-out household budgets. Ford reported a drop in second-quarter earnings due electric vehicle losses and persistently high warranty costs. It led the declines with shares falling 20% this week. But others such as General Motors, Tesla, Stellantis and Nissan, all saw shares drop at least 6%. Stellantis CEO Carlos Tavares said the industry is in a significant storm and facing turmoil.
OpenAI tests ChatGPT-powered search engine
SAN FRANCISCO — OpenAI is testing a ChatGPT-powered search engine that could put the artificial intelligence company in direct competition with search giant Google and affect the flow of internet traffic seeking news and other timely information. San Francisco-based OpenAI said Thursday it is releasing a preview of the SearchGPT feature to get feedback from a small group of users and publishers. Google upended its search engine in May with AI-generated written summaries now frequently appearing at the top of search results. The summaries aim to quickly answer a user's search query so that they don't necessarily need to click a link and visit a website for more information.
Norfolk Southern profits complicated by derailment insurance payments, proxy fight and productivity
Norfolk Southern got a boost during the second quarter from insurance payments related to last year's disastrous East Palestine derailment, but it also made progress in reducing its expenses and getting more efficient. The Atlanta-based railroad said it earned $737 million, or $3.25 per share, in the quarter. But there were several unusual factors influencing the results, including the insurance payments, ongoing costs related to the derailment and a costly proxy fight against an investor that wanted to take control of the railroad and fire management. But CEO Alan Shaw said he is most proud the railroad is delivering on the $250 million in productivity and the safety gains it promised. Plus, Norfolk Southern was able to increase volume 5%.
Carmaker Stellantis pledges to tackle problems in North America as profits plunge
MILAN (AP) — Stellantis CEO Carlos Tavares pledged action to tackle problems in North America and elsewhere after reporting a plunge in first-half earnings. Net profits at the U.S.-European automaker were down by half in the first six months of the year, due largely to lower sales and restructuring costs. The carmaker, which was created in 2021 from the merger of Fiat-Chrysler with PSA Peugeot, reported net profits of just over 6 billion dollars in the period, compared with slightly under 12 billion dollars in the same period last year. Tavares singled out North America as a place where there is "significant work to do," citing issues with inventory management and sliding market share.
Ford shares slide as disappointing Q2 adjusted profit rattles investors
Shares of Ford Motor Co. are tumbling Thursday after the automaker's second-quarter adjusted profit badly missed Wall Street's expectations as it spent more money fixing customers' cars and trucks. On Wednesday Ford posted an adjusted profit of 47 cents per share. That was far short of industry analysts' estimates of 68 cents, according to FactSet. Warranty costs have vexed the nation's second-largest automaker for several years and lopped billions off of its profits. In the second quarter, warranty and recall costs totaled $2.3 billion, $800 million more than the first quarter and $700 million more than a year ago.