Business

Sales brake With foreign automakers continuing to carve a bigger slice of the American car market, most analysts expect Detroit's Big Three automakers to dish out extra buying incentives on their existing models this summer. Following strong sales in May, U.S. auto sales plunged in June. The industry's seasonally adjusted annual selling rate of 15.4 million units was the lowest since August 1998. And both GM and Ford posted double-digit percentage losses from a year ago. With new models slated to roll off the assembly line later this year, analysts expect GM, Ford, and DaimlerChrysler to offer significant cash-back and financing offers to consumers in the coming months to clear out bloated inventories. Industry executives hope these added bonuses will also help American automakers regain market share. According to Autodata Corp., the Big Three accounted for just 59 percent of U.S. sales in June, while Asian automakers increased their share to 34.3 percent. New vehicle launches in the second half of the year could also spur business. Ford's offerings will include the new Five-Hundred sedan and a redesigned Mustang. GM will add the Chevy Cobalt, a replacement for the high-volume Cavalier, and the Pontiac G6, which will replace the popular Grand Am. Growing pains U.S. auto sales weren't the only economic indicator to hit a bump in the road in June as the Labor Department reported that new job growth was much smaller than analysts had originally anticipated. The economy created 112,000 jobs last month, marking the 10th straight month of payroll gains. But the total number of new jobs created was significantly lower than the previous three months, in which nearly 1 million new jobs were added. The jobs report served to cloud the picture of an economic recovery that seemed much clearer only days earlier when the Federal Reserve Board raised the federal funds rate by one-quarter of a percentage point, to 1.25 percent. This rate, which represents the interest that banks charge each other on overnight loans, is the Fed's primary tool for influencing economic activity. The rate had remained unchanged for a year after the Federal Reserve cut rates 13 times to the 46-year low of 1 percent in June 2003. In reaction to the Federal Reserve's decision, the benchmark borrowing rate for millions of consumer and business loans rose from 4 percent, the lowest rate since 1959, to 4.25 percent. Balance sheet • Burger King Corp. chief executive Brad Blum left the fast-food company, citing strategic differences with its board of directors. The move comes a month after Burger King announced that its U.S. same-store sales had increased for four straight months, but some franchisees and analysts have criticized the No. 2 fast-food chain for "trying to be everything to everyone." • The Royal/Dutch Shell Group said an overstatement of its proven oil and gas reserves resulted in profits being exaggerated by $276 million, and that "inappropriate" accounting in other areas resulted in profits being embellished by an additional $156 million. The revision followed an embarrassing series of disclosures that led to the departure of several top executives. • United Airlines recently announced a 5 percent fare hike on most flights to international destinations from the United States, citing rising fuel costs as the reason. Last month, United rescinded a $10-per-round-trip fuel surcharge on most North American fares after only a day when American Airlines was the only competitor to follow. United, which hasn't turned a profit in four years, is under intense pressure to raise revenue as it tries to emerge from Chapter 11 bankruptcy.