Business briefs - GM gets 'junk' credit rating from Fitch

Fitch is giving General Motors Company a junk-level credit rating, saying its pensions remain underfunded and the auto market remains uncertain.

It is the automaker's first credit rating since emerging from bankruptcy protection last year. The rating of 'BB-' comes as the automaker is preparing an initial public offering of stock, likely to come in mid-November.

The ratings agency said GM has come a long way since bankruptcy. It said it has a strong cash position, a better cost structure and an increasingly competitive line-up of cars and trucks.

But auto industry sales remain weak, and GM still has large cash obligations tied to the reorganisation of its business in Europe. Its pension obligations are also underfunded by US$27 billion.

BA, Iberia, American Air launch pact

American Airlines, British Airways and Spain's Iberia are strengthening their existing 'oneworld' alliance ties - but stopping short of a full merger, because of strict United States laws that bar foreign ownership in the airline industry.

The carriers announced four new flight routes and codeshares on more than 2,600 additional flights.

Passengers will be able to buy tickets for a route network that serves more than 400 destinations in 105 countries on each of the carrier's websites. Customers will be able to mix and match flights between the three carriers for the first time.

The four new routes are: New York to Budapest, Chicago to Helsinki, London to San Diego and Madrid to Los Angeles.

Wells Fargo pays to end mortgage probe

Wells Fargo is paying US$24 million to end investigations by eight states probing whether lenders acquired by the company made risky mortgages to consumers without disclosing their perils.

The states said loans known as option-adjustable-rate loans, or "pick-a-payment" mortgages, were deceptive to borrowers.

Those particularly toxic loans allowed borrowers to defer some of their interest payments and add them to the principal balance.

Borrowers could make payments so low that loan debt actually increased every month.

San Francisco-based Wells Fargo & Company announced the agreement on Wednesday with attorneys general in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington state.

The loans were made by Wachovia Corp and a California company it acquired, World Savings Bank. Wells purchased Wachovia at the end of 2008. Wachovia had already stopped making those loans before the acquisition was complete.

As part of the agreement, Wells has agreed to offer loan assistance worth more than US$770 million to more than 8,700 borrowers through June 2013, though that amount will depend on how the economy fares during that time.

The US$24 million will be used to help states reach out to customers who took out such loans.

The agreement includes no admission of wrongdoing by Wells Fargo. The states' investigations centered on allegations that consumers were misled about the possibility that their mortgage amounts would increase.

American Airlines recalling workers

American Airlines is recalling about 800 furloughed employees, about one per cent of its work force, as it adds flights on international routes.

CEO Gerard Arpey announced the jobs as American launched a new trans-Atlantic business with British Airways and Spanish airline Iberia.

American is working on a similar alliance with Japan Airlines across the Pacific.

"This is exactly the kind of growth we're looking for, and my hope is that trends like this will continue," Arpey said at a news conference in London.

Arpey said that a recent rebound in business traffic and growing signs that the United States would avoid a double-dip recession were encouraging to the airline industry, "but I would have to describe the recovery as fragile".

American will recall 250 pilots starting in November and 545 flight attendants starting this month. The airline last recalled pilots in 2009 and flight attendants in 2008.

The moves will reduce the number of furloughed pilots at American to about 1,730 and out-of-work flight attendants to 805, the company said. American has 73,000 employees, including 7,800 pilots and 14,755 flight attendants, according to a spokesman.

GE buying Dresser for US$3b

General Electric is buying the privately held energy infrastructure company Dresser Inc for US$3 billion in hopes of capitalising on the increase in natural gas production and use around the world.

GE had signalled it was ready to start acquiring companies after a very difficult period for the company brought on by the financial crisis.

This is the first major acquisition for GE since the beginning of the crisis.

Natural gas production is booming because of the development of huge new fields of natural gas in shale formations in the US and abroad.

Dresser makes natural gas-fired engines and motors, pumps and control equipment used to move natural gas and liquids through pipelines, liquefied natural gas facilities and power plants.

With gas prices projected to be low for an extended period, companies will likely use more of it.

Citi selling consumer finance assets to GE

Citigroup is selling US$1.6 billion in retail sales finance assets to GE Capital as the bank continues to restructure its business to focus on core consumer banking operations.

The assets being sold to GE consist of consumer financing portfolios for select small- to mid-sized merchants in the home furnishings, flooring, consumer electronics and heating, ventilation and air-conditioning industries across the United States.

The assets are part of Citi's US$50-billion retail partner cards business, which services more than 40 million customers and includes relationships with retailers such as The Home Depot, Shell, Macy's, Sears, and ExxonMobil. These large retailers are not included in the transaction.

"Selling these assets enables us to streamline the strategic operating model, including our bank legal vehicles and operating platforms, for the Retail Partner Cards business," said Bill Johnson, CEO of Citi's Retail Partner Cards division.

"Going forward, we are better positioned for future growth as we continue to partner with premier brand retailers across a broad spectrum of industries and retailing specialties."

GE Capital said the Citi portfolios being acquired include nearly three-dozen retail partner relationships that collectively represent more than 18,000 small- to mid-sized Main Street merchant locations across the US. Citi will service the portfolio until the first quarter as GE Capital finishes converting merchants and cardholder accounts to its system.

The terms of the deal were not disclosed, but the companies said on Wednesday that the sale has received regulatory approval.

No 'quick fix' at KFC in US

The recipe for a turnaround is proving elusive at KFC, the chain made famous by the secret mix of herbs and spices coating its Original Recipe chicken.

A day after KFC posted an 8 per cent quarterly sales drop at US restaurants open at least a year, the top executive of its parent company acknowledged that rejuvenating the ubiquitous brand will take time.

"There is no quick fix," Yum Brands Inc Chairman and CEO David C. Novak said on Wednesday during a conference call with industry analysts.

"We are absolutely committed to turning KFC around. And we're seeing slow but steady progress."

KFC's struggles were magnified by solid US sales growth at two other Yum chains — Pizza Hut and Taco Bell.

- AP Stories