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Pentagon audit says Boeing cleaned up on Air Force parts
WASHINGTON | Boeing overcharged the Air Force nearly $1 million for spare parts on C-17 cargo planes, including an 8,000% markup for simple lavatory soap dispensers, according to the Pentagon’s inspector general.
The Defense Department’s auditor reviewed prices paid for 46 spare parts on the C-17 from 2018 to 2022 and found that 12 were overpriced and nine seemed reasonably priced. It couldn’t determine the fairness of prices on the other 25 items.
The Office of the Inspector General said it reviewed the soap dispenser prices after getting a hotline tip.
Boeing disputed the findings.
“We are reviewing the report, which appears to be based on an inapt comparison of the prices paid for parts that meet aircraft and contract specifications and designs versus basic commercial items that would not be qualified or approved for use on the C-17,” Boeing said in a statement. “We will continue to work with the OIG and the U.S. Air Force to provide a detailed written response to the report in the coming days.”
The C-17 Globemaster is one of the military’s largest cargo aircraft. It can carry multiple military vehicles, large pallets of humanitarian supplies or, in extreme circumstances, hundreds of people. The Air Force flew C-17s nonstop for two weeks during the hectic August 2021 withdrawal from Afghanistan, evacuating more than 120,000 civilians fleeing the Taliban.
Since 2011, the U.S. government has awarded Boeing more than $30 billion in contracts to purchase needed spare parts for the C-17 and be reimbursed by the Air Force.
Boeing is still trying to recover from financial and reputational damage caused by two deadly crashes in 2018 and 2019 of its bestselling airline jet, the 737 Max.
This has been a particularly volatile year for the aerospace giant. It came under renewed scrutiny and federal investigations after a door plug flew off a 737 Max during an Alaska Airlines flight in January. Federal regulators limited Boeing production of the plane.
In July, Boeing agreed to plead guilty to a felony count of conspiracy to defraud the government for misleading regulators who approved pilot training rules for the Max. That plea deal is pending before a federal judge in Texas.
Boeing is on its third chief executive in five years, having hired an outsider who joined the company in August. Last week, Boeing reported a third-quarter loss of more than $6 billion because of charges for several commercial, defense and space programs.
A strike by 33,000 union machinists is now seven weeks old and has crippled production of 737s, 777s and 767 freighters, cutting off much-need cash. New CEO Kelly Ortberg has announced roughly 17,000 layoffs, and the company will issue new stock to raise up to $19 billion to shore up its debt-laden balance sheet.
Court approves Tupperware’s
sale to lenders
NEW YORK | A U.S. bankruptcy judge approved a sale of Tupperware Brands on Tuesday, paving the way for the iconic food storage company to soon exit Chapter 11 protection and continue offering its products while undergoing a hoped-for revitalization.
The sale given the court’s green light in Delaware still is subject to closing conditions. Under terms of the deal, a group of lenders is buying Tupperware’s brand name and various operating assets for $23.5 million in cash and more than $63 million in debt relief.
Tupperware agreed to the lender takeover last week, pivoting from a previously planned asset auction. The brand said it expects to operate as The New Tupperware Co. upon completion of the deal.
Going forward, customers in “global core markets” will be able to purchase Tupperware products online and through the brand’s decades-old network of independent sales consultants, but the new company is set to be “rebuilt with a start-up mentality,” Tupperware said.
The specifics of how that will look are unclear. Tupperware did not immediately respond to The Associated Press’ requests for further comment Tuesday.
Tupperware once revolutionized food storage, with the brand’s roots dating back to a post-World War II mission of helping families save money on food waste with an airtight lid seal. The plastic kitchenware saw explosive growth in the mid-20th century, notably with the rise of direct sales through “Tupperware parties.”
First held in 1948, the parties were promoted as a way for women in particular to earn supplemental income by selling the containers to friends and neighbors. The system worked so well that Tupperware eventually removed its products from stores.
In the following decades, the Tupperware line expanded to include canisters, beakers, cake dishes and all manner of implements, and became a staple in kitchens across America and eventually abroad. But the brand struggled to keep up in more recent years.
An outdated business model and rising competition contributed to some of the company’s challenges. When filing for bankruptcy last month, Florida-based Tupperware noted that consumers were shifting away from direct sales, which made up the vast majority of the brand’s sales, and increasingly favoring glass containers over plastic.
While sales improved some during the height of the COVID-19 pandemic, when consumers cooked and ate at home more, Tupperware saw an overall steady decline over the years. Rubbermaid, OXO and even recycled takeout food containers snagged customers — as well as home storage lines at major retailers like Target, Walmart and Amazon.
Financial troubles piled up in the meantime. In September’s bankruptcy petition, Tupperware reported more than $1.2 billion in debts and $679.5 million in assets.
“This is a situation that was in urgent need of a vast global resolution,” Spencer Winters, an attorney representing Tupperware, said during a U.S. Bankruptcy Court hearing Tuesday. Winters called the sale agreement a “great outcome” that he said preserves Tupperware’s business, customer relationships and jobs.
The sale agreements calls for Tupperware to become a privately held company under supportive ownership of the purchasing lender group, which includes investment firms Stonehill Capital Management and Alden Global Capital.
Last week, Tupperware said the new company’s “initial focus” would be in the U.S., Canada, Mexico, Brazil, China, South Korea, India and Malaysia, followed by European and additional Asian markets.
Other closing conditions that must be met before the transaction is completed include an issue with a Swiss entity that still needs to be resolved, according to statements made in court Tuesday.
Average rate on a 30-year mortgage
in the U.S. rises
The average rate on a 30-year mortgage in the U.S. rose for the fifth straight week, returning to its highest level since early August.
The rate rose to 6.72% from 6.54% last week, mortgage buyer Freddie Mac said Thursday. That’s still down from a year ago, when the rate averaged 7.76%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also increased this week. The average rate rose to 5.99% from 5.71% last week. A year ago, it averaged 7.03%, Freddie Mac said.
When mortgage rates increase they can add hundreds of dollars a month in costs for borrowers, reducing homebuyers’ purchasing power at a time when home prices remain near all-time highs though the housing market is in a sales slump going back to 2022.
The average rate on a 30-year home loan hasn’t been this high since Aug. 1, when it was 6.73%.
Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions and data on inflation and the economy. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
The yield on the 10-year Treasury was at 4.30% on the bond market at midday Thursday. It was at 3.62% as recently as mid-September, just days before the Federal Reserve cut its main interest rate for the first time in more than four years and signaled further cuts through 2026. While the central bank doesn’t set mortgage rates, its policy pivot cleared a path for mortgage rates to generally go lower.
But that hasn’t been the case in recent weeks because a string of encouraging reports on inflation and the U.S. economy have pushed Treasury yields higher.
On Tuesday, reports said confidence among U.S. consumers jumped more than economists expected, while the number of job openings edged lower in September, though the number of hires remained relatively steady. If the government’s October U.S. jobs report on Friday also comes in hotter than anticipated, that could push bond yields higher.
“With several potential inflection points happening over the next week, including the jobs report, the 2024 election, and the Federal Reserve interest rate decision, we can expect mortgage rates to remain volatile,” said Sam Khater, Freddie Mac’s chief economist. “Although uncertainty will remain, it does appear mortgage rates are cresting, and we do not expect them to reach the highs that we saw earlier this year.”
The average rate on a 30-year mortgage is down from 7.22% in May, its peak so far this year. In late September, the average rate got as low as 6.08% — its lowest level in two years.
Economists predict mortgage rates will remain choppy this year, but generally forecast them to ease in 2025. That should help boost how much home shoppers can afford, but also could lead to higher home prices if more buyers enter the market.
U.S. applications for jobless benefits fall
Fewer Americans filed for unemployment benefits last week as layoffs remained at historically healthy levels despite elevated interest rates.
The Labor Department reported Thursday that jobless claim applications fell by 12,000 to 216,000 for the week of Oct. 26. That’s fewer than the 227,000 analysts forecast.
The four-week average of weekly claims, which quiets some of the week-to-week fluctuations, fell by 2,250 to 236,500.
Weekly applications for jobless benefits are considered a proxy for U.S. layoffs.
In response to weakening employment data and receding consumer prices, the Federal Reserve cut its benchmark interest rate in September by a half of a percentage point as the central bank shifted its focus from taming inflation toward supporting the job market. The Fed is trying to pull off a rare “soft landing,” whereby it brings down inflation without tipping the economy into a recession.
It was the Fed’s first rate cut in four years after a series of increases starting in 2022 that pushed the federal funds rate to a two-decade high of 5.3%.
Inflation has retreated steadily, approaching the Fed’s 2% target and leading Chair Jerome Powell to declare recently that it was largely under control.
Also Thursday, the government reported that an inflation gauge closely watched by the Fed fell to its lowest level in three-and-a-half years.
During the first four months of 2024, applications for jobless benefits averaged just 213,000 a week before rising in May. They hit 250,000 in late July, supporting the notion that high interest rates were finally cooling a red-hot U.S. job market.
In August, the Labor Department reported that the U.S. economy added 818,000 fewer jobs from April 2023 through March this year than were originally reported. The revised total was also considered evidence that the job market has been slowing steadily, compelling the Fed to start cutting interest rates.
Despite some signs of labor market slowing, America’s employers added a surprisingly strong 254,000 jobs in September, easing some concerns about a weakening job market and suggesting that the pace of hiring is still solid enough to support a growing economy. The Labor Department issues its October jobs report on Friday.
Continuing claims, the total number of Americans collecting jobless benefits, declined by 26,000 to 1.86 million for the week of Oct. 19. Last week’s figure, which had been the most in three years, was revised down by 12,000.
—From AP reports
