Baker issues restated profits that show improvement

Michael Baker Corp. today issued financial results for 2007 after sorting out accounting errors that forced the Moon-based engineering and energy management company to restate results for 2006 and the first nine months of 2007.

Restating 2006's financial statement made 2007's results look even better.

For 2007, Baker reported net income of $19.3 million, or $2.18 a share, up 87.4 percent from 2006 net income of $10.3 million, or $1.19 a share. The 2006 net income figure originally had been reported as $11.8 million, or $1.36 a share.

Revenue for 2007 totalled $727 million, up 12.4 percent from 2006's $647 million. The 2006 figure was restated downward from $651 million originally reported.

"We are pleased to have completed the restatement and to be able to report our outstanding 2007 financial performance," CEO Bradley L. Mallory said in a statement.

Baker over the last three years has been forced to request extensions from the Securities and Exchange Commission for reporting its financial results due to the company finding, then correcting accounting errors.

Baker's engineering segment last year had revenue of $401 million, up from $380 million in 2006, while the company's energy business reported 2007 revenue of $326 million, compared to restated 2006 revenue of $267 million. Originally, the Baker energy business had $270.9 million in 2006 revenue.

"We can now place our complete focus on executing our business strategy for the company," Mallory said in a statement. "(That) includes our core engineering business, both organically and through acquisition, resuming our evaluation of strategic alternatives, including a potential sale of our energy business, and continuing to make the necessary process improvements which will contribute to increasing our profitability on a consistent basis."

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Bush administration freezing cuts in Medicare fees

WASHINGTON -- The Bush administration said today it is freezing a scheduled 10 percent fee cut for doctors who treat Medicare patients, giving Congress time to act to prevent the cuts when lawmakers return from a July 4 recess.

Physicians have been running ads hinting that as a result of the cuts, patients may find doctors less willing to treat them. The administration's delay in implementing the cuts, which had been scheduled to go into effect Tuesday, spares lawmakers from having to use the recess to explain to seniors why they didn't do the job before leaving town.

Kevin Schweers, a spokesman for the Department of Health and Human Services, said Monday the Centers for Medicare and Medicaid Services will hold doctors' Medicare claims for services delivered on or after July 1. Claims for services received on before June 30 will be processed as usual, he said.

Congress, not willing to face millions of angry seniors at the polls in November, will almost certainly act quickly when it returns to Washington the week of July 7 to prevent the cuts in payments for some 600,000 doctors who treat Medicare patients. The cuts were scheduled because of a formula that requires fee cuts when spending exceeds established goals.

HHS Secretary Mike Leavitt had promised Friday that his agency "will take all steps available to the department under the law to minimize the impact on providers and beneficiaries." On Monday, the department used its administrative tools to delay implementing the scheduled 10.6 percent cuts.

"By holding claims for health care services that are delivered on or after July 1, CMS will not be making any payments on the 10.6 percent reduction until July 15 at the earliest," Schweers said.

Almost every year, Congress finds a way to block such cuts. But last week the Senate fell just one vote short of the 60 needed to proceed to legislation that would have stopped the cut.

In a particularly vitriolic exchange, Democrats and Republicans blamed each other for what Dr. Nancy H. Nielsen, president of the American Medical Association, said has put the country "at the brink of a Medicare meltdown."

"Seniors need continued access to the doctors they trust. It's urgent that Congress make that happen," the AMA said in ads taken out in Capitol Hill newspapers read by members of Congress and their aides.

Doctors have complained for years that Medicare payments have failed to cover rising costs.

This year majority Democrats homed in on cutting the Medicare Advantage program, which is an ideological issue for both parties. The Bush administration and Republicans like Medicare Advantage because it lets the elderly and disabled choose to get their health benefits through private insurers rather than through traditional Medicare. Democrats argued that government payments to the insurers are too generous.

The White House warned that President Bush would be urged to veto a bill that contained cuts to Medicare Advantage.

That didn't stop the House last Tuesday from approving the legislation 355-59, well above the margin needed to override a veto. Every Democrat supported it, and Republicans, bucking their president, voted 129-59 for it.

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Highmark, West Penn sign five-year pact

Highmark Inc. and West Penn Allegheny Health System today announced they've signed a new five-year contract between the region's largest health insurer and West Penn Allegheny's six hospitals. Terms weren't disclosed.

"Maintaining our long-standing relationship with West Penn Allegheny was very important to us and our members," Highmark President and CEO Kenneth Melani said, in a statement. "The system plays an important role in the health care of our region, and we are pleased to be able to have their services available to Highmark members."

As part of the agreement, all West Penn Allegheny hospitals, including Allegheny General, Allegheny General-Suburban Campus, Western Pennsylvania, Western Pennsylvania-Forbes Regional Campus, Alle-Kiski Medical Center and Canonsburg General, again will participate in Highmark's Quality Blue Pay for Quality Program.

The initiative is designed to enhance patient care by sharing provider-specific data, identifying areas of improvement and developing plans to create systems and processes that ensure clinical quality and patient satisfaction.

"We are most gratified to have come to this agreement," said West Penn Allegheny President and CEO Christopher T. Olivia, in a statement. "We look forward to advancing our efforts with Highmark to provide high quality, cost-effective health care to Western Pennsylvania in the years to come."

The Highmark-West Penn Allegheny deal also provides access to Allegheny General's organ transplant program.

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Arizona man built $500,000 observatory in backyard

June 30 marks the 100th anniversary of an asteroid that exploded over Tunguska, Russia, with a force 1,000 times more powerful than the nuclear bomb that leveled Hiroshima at the end of World War II.

David Healy, by day an auto analyst with New York-based Burnham Securities Inc., wasn't around to warn people about that one. He built his own $500,000 observatory in his backyard in Arizona so he can have a shot at preventing the next.

Healy, 71, has some experience with predicting disasters. In 1979, as an analyst with the now-defunct investment bank Drexel Burnham Lambert Inc., he was one of the first to project Chrysler Corp.'s initial brush with bankruptcy. He cashed out of Drexel before the company collapsed in 1990 under the weight of federal probes of securities violations. The profits went to fulfill his childhood dream -- building an observatory.

"I'm very proud of the fact that I can spend some of my ill-gotten money on doing something like this," Healy said. "This is something I've wanted to do since I was a kid."

He named his outpost in Sierra Vista, Ariz., the Junk Bond Observatory, after the high-yield debt that was Drexel's claim to fame and fortune.

Healy's love for astronomical photography prompted him to move to Arizona from New York. In 1996, he built an observatory with a roll-away roof behind his house on the outskirts of Sierra Vista, 90 miles (145 kilometers) southeast of Tucson and 9 miles north of the Mexican border.

The skies there are "clear and very dark" at night, he says. In 2001, he upgraded to a new one with a traditional domed roof.

Healy is one of fewer than 200 amateur astronomers around the world who make up a shoestring effort to find the next heavenly body hurtling Earth's way. The trick is to track an object's orbit early enough to allow an attempt to alter its course using missiles or a spacecraft.

"This is the only natural hazard that we can hope to avoid altogether, if we have enough time to plan," said David Morrison, interim director of the Lunar Science Institute for the National Aeronautics and Space Administration in Moffett Field, Calif., and an expert on the search for so-called near-Earth objects. "It's a process that is highly dependent on volunteers."

By the end of this year, these amateur astronomers -- in cooperation with government, university and other publicly supported observatories -- will have helped identify and track the orbits of 90 percent of the 1,000 or so biggest near-Earth objects. That would include asteroids more than a kilometer (0.6 mile) across, Morrison said.

"I used to say that the number of people protecting the Earth from asteroids was about the size of a shift at a McDonald's restaurant," Morrison said. "We now have the equivalent of three or four shifts."

More than 5,500 near-Earth objects have been found, according to NASA. Most are "smaller" ones -- objects less than a kilometer and larger than a football field, like the one that exploded over Siberia. Just 3 percent to 4 percent of the potentially thousands of small asteroids have been tracked.

Healy discovered his first asteroid in 1998.

"It's a unique feeling," he said. "You're looking at this object on the monitor that no one has ever seen before."

The competition to make discoveries is intense, Healy says, because the items left to find are about a 50th as bright as the ones he was discovering in the 1990s. Most discoveries are now made by larger, publicly supported observatories, said Brian Skiff, a research assistant at the Lowell Observatory in Flagstaff, Ariz., which receives U.S. government support. The amateurs are valuable in helping refine the orbits, said the 52-year-old researcher, whose discoveries include 12 comets in his name.

Healy, by virtue of his 32-inch, computerized all-night robotic telescope, is among the few amateurs who have the tools to make discoveries, Skiff said.

"The chance of finding the one with our name on it is pretty damn small, but it's a contribution," Healy said.

Healy's interest in astronomy started at age 9, after a trip to the Griffiths Observatory in Los Angeles. It was reinforced in Mrs. E. Phyllis Devey's science class in Brentwood Town and Country School, where he was a classmate of actress Jane Fonda.

Thanks to software developed by a computer-savvy friend, Healy's telescope snaps photos most nights in a predetermined sequence that he reviews the next day. So far, he has discovered 487 asteroids, including 60 that he gets to name.

Healy, with his eye on the next generation of asteroid fighters, does show-and-tell sessions at schools with his smaller telescopes.

"Where's the next generation of scientists coming from if you don't turn the 9-year-olds onto astronomy?" Healy asked. "Maybe this will turn on the interest of a future scientist who will save the world."

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Personnel Moves

Banking and finance

• Susan M. Rhodes joined HBK Sorce Financial LLC as director of marketing.

• Ben Greenfeld, an assistant advisor at Legend Financial Advisors Inc., obtained the accredited wealth management advisor designation.

Accounting

Hunter R. Morris joined KPMG LLP as an associate in its tax practice, where he will provide economic and valuation services.

Legal

• John W. Burns and John D. Waclawski Jr. were elected shareholders in Dickie, McCamey & Chilcote P.C., Pittsburgh office. Burns concentrates his practice in transportation/trucking litigation, high technology and general liability. Waclawski concentrates his practice in litigation, with emphases in commercial law and technology law.

• Buchanan Ingersoll & Rooney PC elected to its board of directors for three-year terms Jeremy Garvey and Tom Giotto, both of the Pittsburgh office.

• Elizabeth Martin Colombo joined the Pittsburgh office of Eckert Seamans Cherin and Mellott LLC as an associate in the business division. She has represented clients in employment discrimination, construction litigation, premises liability, medical malpractice and workers' compensation defense litigation.

Advertising, public relations

• JLS Creative Solutions named Alicia Blystone client relations manager and Vincent E. Mannino chief business development officer.

• Kolbrener Inc. hired Sara Minion as a designer and Conrad Schroeder as a writer specializing in business development.

Education

• Chatham University promoted Samantha M. Swift to assistant vice president for university advancement.

Health care

• St. Clair Hospital promoted Andrea Kalina to vice president, human resources and organizational advancement.

• UPMC Health Plan hired Jeffrey D. Nelson as vice president for marketing and communications.

Technology

Matrix Solutions hired Patricia Garst-Napier and Katie McGinley as account managers and Adam Sullivan as an instructional designer. The company promoted Jonathan Danial to associate marketing specialist and Jennifer Santry to senior client services analyst.

Nonprofits

Cheryl Boggess was elected president of Women in Nuclear Global. She is a senior project manager and principal engineer at Westinghouse Electric Co.

Other

• The Rev. Thomas J. Burke was appointed pastor of Good Shepherd Parish in Braddock.

• Rick Beaver, vice president of quality and support services at Heritage Valley Health System, was appointed to the 2008 Board of Examiners for the Malcolm Baldrige National Quality Award, given by the National Institute of Standards and Technology.

• Astorino promoted Dino Persichetti to chief operating officer, Ron Dellaria to chief compliance officer and president of Astorino Development Co., Robert Ward to president of engineering, Nikola Doichev to senior vice president of design and hired Traci McGavitt Yates as vice president of business development.

• Michael J. Dennehy Jr., chairman of the Township of Pine Board of Supervisors, was elected to a three-year term on the executive committee of the Pennsylvania State Association of Township Supervisors.

• GPS Consulting hired in its Pittsburgh office Mike Poggi as business development and sales manager and Keith Wehner as public affairs manager.

• Congregation Beth Shalom appointed Avi Steindel youth director.

• ServiceLink appointed Kevin Kelly vice president of development for vision global solutions.

• Michael Baker Corp. appointed Michael Ziemianski vice president and chief resources officer. Michael Baker Jr. Inc. promoted David W. McFayden to vice president of Homeland Security services and Frank D. Terak to vice president in the facilities service area.

• Centria Coating Services hired Paul Swinski as regional sales manager.

• H.J. Heinz Co. appointed Chris Warmoth executive vice president, Asia Pacific.

• Debra S. Ulrich became president and chief executive officer of Sysco Corp.

• The Allegheny Tax Society named as officers and directors: President, Leonard Andrews of Sisterson & Co. LLP; past president, Thomas Bakaitus Jr. of Herbein & Company Inc.; vice president, Donald Johnston of Grossman Yanak & Ford LLP; treasurer, David Adams of Alcoa Inc.; corresponding secretary, Matthew Schwartz of James Lange Law Offices; recording secretary, Paul Kasicky of Thorp Reed & Armstrong LLP; Paul Mavrinac of McCrory & McDowell LLC and Michelle Kopnski of Tucker Arensberg P.C.

Awards

• Dr. Gwendolyn Sowa, an assistant professor of physical medicine and rehabilitation at University of Pittsburgh, received the Dennis W. Jahnigen Career Development Scholars Award. The award provides two-year grants of $200,000, including an institutional match, to help young faculty members initiate and ultimately sustain careers in research and education in the geriatrics aspects of their disciplines. Sowa was selected because of the promise demonstrated in her proposal, "Investigation into the use of serum biomarkers as an improved diagnostic tool for active pain generators in aging patients with low back pain."

• First National Bank of Pennsylvania received the Pillars of the Community Award from Federal Home Loan Bank.

New business

Vector Marketing opened a sales office at 3578 Brodhead Road, Center, run by branch manager Jessie Wright.

Speakers

• Marie Milie Jones of the law firm Meyer, Darragh, Buckler, Bebenek & Eck P.L.L.C. spoke at the County Commissioners Association of Pennsylvania/PCoRp Prison Risk Management Workshop. She presented "Surviving the Bermuda Triangle: the ADA, FMLA and Workers' Compensation," and provided a legal update on issues facing prison officials and governmental entities in civil rights litigation.

• Marc S. Raspanti, a partner in the law firm Pietragallo Gordon Alfano Bosick & Raspanti LLP, presented "Hot Fraud Topics for 2008, The Good, the Bad & the Ugly" at the Pennsylvania Institute of Certified Public Accountants 2008 Health Care Conference. Raspanti is chair of the firm's white collar criminal defense group.

Personnel Moves is a listing of promotions, hirings and other personnel actions at area companies. Submitted items should include contact names and telephone numbers. Photographs should bear the names of the individuals. Items may be mailed to: Personnel Moves, Pittsburgh Tribune-Review, D.L. Clark Building, 503 Martindale St., Pittsburgh, PA 15212, faxed to 412-320-7921 or e-mailed to business@tribweb.com.

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National slump evident here

A prolonged slump in sales appears to have brought the residential real estate market in the Pittsburgh region more in line with the national downturn, new figures show.

Home sales in five area counties in May fell 21.5 percent compared to sales during the same month of 2007. It was the 15th consecutive month that sales here trailed those in the prior year, according to RealStats, a real estate information company on the South Side.

The figures cover Allegheny, Beaver, Butler, Washington and Westmoreland counties.

The latest figures brought the total number of sales here for the first five months to 9,778 units, down 17.2 percent from the January-through-May period a year ago.

Figures from the National Association of Realtors for the United States through April showed existing-home sales -- including single-family, townhomes, condominiums and co-ops -- were running at a pace 17.5 percent below that of April 2007.

At year-end 2007, the Pittsburgh region's sales were down 7 percent compared to the year before versus a 12 percent decrease for the nation.

The region is not immune to economic conditions that have been impacting other areas of the country, said Robert Dye, senior economist with PNC Financial Services Group Inc.

The national mortgage and credit crisis has made it more difficult for people here to buy homes, in particular those with less-than-perfect credit, he said.

Nonetheless, he said, the housing market here has held up reasonably well, particularly in regard to prices, which have continued to appreciate while many other markets experienced declines.

Recent economic reports that show job creation here improving should help the housing market, Dye said.

He cautioned that interest rates may be increasing soon; some experts expect the Federal Reserve will take action sometime this year.

"Now may be the time to snatch up some housing bargains while we still have reasonable rates," Dye said.

Real estate notes:

• The law firm of Maiello Brungo & Maiello LP plans to open its third area office in Building 3 at SouthSide Works by the end of the month. The firm, which serves as legal counsel for Soffer Organization, SouthSide Works' developer, has its main office in Penn Hills at the Churchill boundary and a satellite office in North Hills. Two staff members will be stationed at SouthSide Works, said Michele Pelusi, a spokeswoman. Development of the Hofbrauhous is on schedule with a December opening, said Pamelyn McMahon, Soffer marketing director.

• New tenants at the Twin Towers, 4955 Steubenville Pike, Robinson, are Horsehead Corp., which leased 6,595 square feet, and CTI Bio Chemicals LLC, which leased 5,710 square feet. Martha Graham represented the landlord, Massaro Properties LLC.

• A $15,000 grant from the Community Development Investment Fund of the Pittsburgh Urban Redevelopment Authority will fund rehabilitation of 3060 Brereton St., Polish Hill. The grant to the Polish Hill Civic Association, which occupies the first floor of the building, will allow it to fix three residential units on the upper floors.

• Coventry Court, a 12-lot residential community on a cul-de-sac between Trafford and Level Green in Westmoreland County, is a project of Makenzie Land Development LP. Single-family houses are priced from $270,000 and are built by Elchik Builders; Howard Hanna Real Estate Services is marketing them.

• Smith Brothers Agency LP, which last year acquired the former Boggs & Buhl department store, 116 Federal St., North Side, plans to occupy the third floor early next month, said Lindsey Smith, who operates the firm with brothers Bronson and Miles. The fourth floor will be a meeting room that can be rented. The 40,000-square-foot building has first-floor retail and restaurants, with several small offices on the second floor. Smith Brothers is relocating from 2425 Liberty Ave., Strip District.

• New at Summerset at Frick Park, a residential community in Pittsburgh's Squirrel Hill region, is Alcott Village, a 3,405-square-foot traditional brick four-bedroom, 3 1/2-bath house with first-floor master suite plus a loft over the two-car attached garage. Builder is Montgomery & Rust.

• Crazy Mocha Coffee opened its seventh Downtown location and 16th local store on the lower lobby of One Mellon Center, Downtown, said Jared Imperatore, retail specialist at Grant Street Associates. Robert Geiger of Grant Street represented the landlord, Bank of New York Mellon.

• Barton Malow, a general contractor and construction manager based in Michigan, has leased 3,221 square feet at 601 Technology Dr., Southpointe I, Washington County, owned by Horizon Properties Group LLC, said Michael Swisher, principal.

Transactions:

• Guardian Self Storage purchased a six-story warehouse at 29th Street and Liberty Avenue, Strip District, from BBSB LP for $1.77 million, according to a deed filed in Allegheny County. Guardian will convert the building into a self-storage business.

• Three single-family houses at 818-20-22 Chartiers Ave., McKees Rocks, have been sold to ASLA Realco Pa. II LLC, 111 Margaret St., McKees Rocks, for $1.07 million by Gary and Debra Bianchin and Aglaia Crop.

Real estate gallery:

• Coldwell Banker Real Estate Services hired sales associates Patricia Snyder and Daria Miller, Fox Chapel; Mary Jo Iachini and Brett Harsh, Cranberry; Patricia Wilson, Peters; Joseph Janosik Route 19/Galleria; Dan Haeck, Pleasant Hills; Peggy Raible and Erica Raible, North Huntingdon; Yvonne Schifino, East Regional; Margaret Daniels and Scott Daniels, Beaver; and Victoria Dibble, Moon.

• Prudential Preferred Realty hired Steven Friedman as residential chief operating officer.

Contributors: Sam Spatter and Laura L. Lenk

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Siemens Power to put solid-oxide fuel unit on block

Siemens Power Generation Inc. said Friday it's putting its solid-oxide fuel cell unit on the selling block after running it 10 years because the business in Churchill won't hit Siemens' profit targets.

The business employs about 130 people in George Westinghouse Research & Technology Park. Siemens acquired the operation from the former Westinghouse Electric Corp. for $1.53 billion in 1998.

The "for sale" notice marks Siemens' second retreat from fuel cells here. The company in 2004 dropped plans to develop a solid-oxide fuel cell plant in Munhall that had been in the works since 2001.

In a statement yesterday, Siemens said the business is "not a core competency for its energy business." The company had invested in development of the technology for many years but now finds the time frame to bring the cutting-edge technology to commercialization does not fit its mandate to reach "target profit ranges by 2010."

Westinghouse, along with the Department of Energy, invested a combined $150 million to develop the technology in the 1980s and early 1990s. Similarly, Siemens has been researching the technology in tandem with the Energy Department.

The solid-oxide variety is one of several types of fuel cells, which for decades have been viewed as a highly efficient, environmentally friendly alternative for generating power.

The solid-oxide fuel cell is a specially coated rod made of ceramic materials that chemically converts gaseous fuel -- usually natural gas -- directly into electric energy. It has no moving parts and emits virtually no pollutants.

Siemens Power Generation, based in Orlando, Fla., said it hopes to find a buyer which would be able to "bring the technology to its full commercialization."

"We continue to believe that fuel cell technology is extremely promising as an alternative green source of electricity," said Siemens' statement.

Siemens employs about 1,070 at five locations in the Pittsburgh region, including the Environmental Systems and Services business, which employs about 500 workers Downtown.

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Restaurants shave profits to keep diners

Rising food and fuel prices, coupled with a decreased demand from cash-strapped consumers, are creating a do-or-die climate for restaurateurs.

It's hard to swallow, but many owners say they're absorbing cost increases without raising prices to keep customers. Employees might share some of the pain, too. And it could get worse as prices continue to climb, some predict.

Many restaurateurs say they try to micromanage every overtime hour, every cut of salmon, every piece of produce -- in short, every penny -- to turn a profit while providing customers with the same quality and quantity of food they've always served.

Owners of local establishments say they haven't cut portion sizes or replaced expensive ingredients with cheaper substitutes because they want to maintain customer satisfaction and trust. Instead, they claim they're pulling in smaller profits and have focused on reducing waste while cutting energy and labor costs.

"The truth is, we take less money as owners, and you try to watch your payrolls," said Jeff Cohen, president of the western chapter of the Pennsylvania Restaurant Association. "What other choice do you have?"

Kevin Joyce, owner of The Carlton, Downtown, talks to his chefs, line cooks and other employees to make sure they are preparing food properly and wasting as little as possible.

"That's one of the tools you hone in on," Joyce said. "It's all about handling the food, from the moment it arrives at your door to the moment it leaves. And you don't want to buy 30 pounds of salmon and have some of it not make it through to the customer."

Joyce raised the prices of some items three months ago but said he probably won't raise them a second time this year. He is using cheaper charcoal, but the ingredients in recipes haven't changed. To save money, he changed his employees' health care policy, requiring them to be responsible for the first $2,500 in health care spending per year.

"You have to cut things that you can cut. You find yourself making employees work a little harder, you find yourself scrutinizing overtime," said Joyce, who has lost customers this year. "If you can't raise your prices, you have to cut your expenses."

Cohen said food and delivery costs have increased for every product he uses at Smallman Street Deli, which he co-owns with Bill Wedner. He can't raise prices because he doesn't want to chase away loyal customers.

Cohen said he told employees to weigh sandwiches to make sure they don't give bigger portions than they're supposed to. He tries not to over-order food. His average daily food waste is about 3 percent. If he monitors it closely, that could drop to 2 percent. It doesn't seem like a huge number, but every little bit matters now, he said.

"Anything you cut is good, because you're not throwing it away," Cohen said. "You get nothing out of anything you're throwing away."

Times are tough in the restaurant business, but people are still working and going out to lunch, Cohen said.

Todd Viola, who works Downtown and usually eats lunch at Subway or another casual restaurant, agrees.

"I would say everybody still goes to lunch," said Viola, 30, of Sewickley. "For, like, six bucks, you get two big slices of pizza, a drink and a bag of chips. It's not that bad."

Viola said higher prices at the grocery store for items such as bread, lunch meat and sandwich bags -- plus the time it takes to pack a lunch -- make it worth it for him to eat out.

"Once you add all that up, it's the same as spending six bucks a day."

The reason it might seem that eating out is just as cheap as buying and preparing food is that restaurant owners say they're absorbing most cost increases and not passing them along. Atria's Restaurant and Tavern increased the price of steak and salmon dishes, but most dishes have not increased in price, said CEO Patrick McDonnell.

"Our position is, we've got to hang in there, that things will change, and we're in a position where we're taking the majority of these expenses on ourselves," he said.

McDonnell is relying on more efficient operating procedures to save money where he can. He made sure his buildings' windows and doors are properly insulated, and tells employees to turn off lights at night to conserve electricity.

"We're just operating better -- less waste, less mistakes, paying better attention to recipes," McDonnell said.

Even Eat'n Park, which operates more than 75 restaurants in the region, is using the same strategy: focus on the small stuff. The company has trained employees to make sure they properly weigh portions and keep knives sharp, which helps to reduce waste, said Brooks Broadhurst, senior vice president of food and beverage.

Managers ensure that trucks carry full loads and make fewer deliveries each week, to cut down on fuel surcharges. The chain has paid about $500,000 in fuel surcharges this year to transport food from distributors to restaurants, even though it paid nothing in surcharges two years ago, Broadhurst said.

The price of flour used to make Eat'n Park's signature Smiley Cookies has increased 80 percent since last October, he said. Still, Broadhurst is more worried about the cost of meat and poultry, items that haven't increased dramatically in price but might in the next year, when fewer animals are being raised.

"Most of our concern now is long term, because things like corn have gone up so much, and corn is such a cost input to items like beef, chicken and pork," he said. "Right now, we've seen pretty low pork prices because a lot of producers are slaughtering their herds because they can't afford to keep them anymore."

Some larger operations can negotiate to make sure costs don't rise as quickly. Restaurants that don't employ their own drivers to deliver food or supplies are billed by vendors for fuel surcharges, usually $10 to $20, on deliveries. Marc Teklinski, director of operations for Primanti Bros., said he refuses to pay surcharges he thinks are unreasonable.

"It's, 'Do you want to make some profit on our business, or would you rather lose the business and make no profit?' " he said. "We deal primarily with local vendors, and they understand Primanti Bros. is a good account, and you can't just keep passing on the expense to the customer."

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Medicare changes loom after cost-cutting in the Senate

Area health care providers and medical supply companies worried Friday that hundreds of thousands of Medicare recipients could lose out on services as a result of two cost-cutting changes to the federal program expected to take effect Tuesday.

U.S. senators who oppose the changes fell two votes short, 58-40, late Thursday in an attempt to bring to a vote legislation that would have halted or delayed the changes -- a 10 percent cut in federal reimbursements to doctors who treat Medicare patients, and a competitive bidding process for providers of equipment such as wheelchairs and oxygen.

"For physicians on the front line, who need Medicare payments to support their practices, further cuts or reimbursements that do not keep up with inflation may drive more physicians out of practice, or force them to limit the types of patients they see," said Dr. Adam Gordon, president of the Allegheny County Medical Society.

Cindy Wilson, general manager of UPMC Home Medical Equipment, was just as critical of the bidding procedure that begins in Pittsburgh and nine other cities next week. Locally, it affects about 300,000 traditional Medicare recipients.

"These beneficiaries were only notified last Saturday" by Medicare administrators, she said. And while the changes apply only to traditional recipients, who get their benefits directly from the federal government, members of managed Medicare plans such as UPMC for Life got the letters, creating more confusion.

"These people are disabled. They're on home oxygen, in hospital beds and in very complex wheelchairs -- and they're supposed to figure all this out in seven days?" she said.

The Senate could revisit the measure again after the July 4 recess. Wilson said the Centers for Medicare and Medicaid Services could opt to delay the changes.

Medicare officials have said that the bidding will reduce prices by an average 26 percent and project that when fully implemented, the system could save $1 billion annually. Medicare spent $8.6 billion on durable medical equipment in fiscal 2007, which ended in September.

The House had voted 355 to 59 this week to push back the bidding program by 18 months. Rep. Jason Altmire, D-McCandless, who pushed for the delay, had hoped the momentum would carry to the Senate. The Senate's inaction, he said yesterday, "could spell disaster for seniors, physicians and small home medical suppliers," he said.

Democratic Sen. Bob Casey Jr. of Scranton voted for taking action on the delay.

But Sen. Arlen Specter of Philadelphia, a Republican, opposed bringing the delay measure to a vote, saying he was given the bill Thursday night "with the ultimatum to either take it or leave it with no opportunity to offer any amendments" because House members had left town.

A 30-day extension on the physicians' cuts had been expected, but didn't happen because of political maneuvering, Specter said, adding he expects the cuts to be eliminated and other changes made in early July.

Medicare's new bidding process awarded contracts to companies that will supply recipients with 10 categories of medical supplies. Large national companies often won out over smaller, independent providers because their bids were lower, UPMC's Wilson said, but many devices such as wheelchairs are specially fitted for those using them, and require education and maintenance services.

Until now, patients have been able to buy equipment through Medicare from companies in their communities. But 38 percent of the contract-winning companies in the Pittsburgh region are from out of state, Wilson said, adding that UPMC submitted bids, but lost out to companies that quoted lower prices.

After Tuesday, patients using Medicare's system to order oxygen, for example, might have to call Tampa, Fla., or Indiana, she said. And because companies won or lost in various bid categories, they might have to call different providers to get a hospital bed or feeding equipment rather than ordering everything from one company.

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GM, Ford shares drop to new lows

Shares of General Motors Corp. plunged to their lowest price in more than 33 years, and Ford shares hit another 52-week low Thursday as analysts continued to speculate about just how bad things will get for U.S.-based automakers.

GM shares fell $1.38, or 10.8 percent, to close at $11.43, after tumbling as low as $11.21 earlier in the session. The low price for the day tied the low reached on Dec. 30, 1974, according to the University of Chicago's Center for Research in Security Prices. The center adjusts prices for stock splits.

Ford shares hit a 52-week low of $4.94 in early trading before recovering to close at $5.07, still down 17 cents, or 3.2 percent. They have traded as high as $9.70 over the past year. GM's drop came after a Goldman Sachs analyst cut his rating to "sell" from "neutral" and his price target to $11 from $19, saying things could still get worse for the North American automotive industry as a whole.

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Esmark has potential, winning bidder says

Steelmaker and distributor Esmark Inc. has an attractive assortment of plants and equipment with unrealized potential, but Russian metals and mining company OAO Severstal said Thursday it plans to change that with a $250 million, five-year capital investment.

Severstal announced late Wednesday it won the bidding war for Wheeling, W.Va.-based Esmark, offering $19.25 per share. Including the assumption of debt and loans, that puts the value of the deal at $1.25 billion.

Esmark shares fell $1.34, or 6.6 percent, to $19.13 in afternoon trading.

Founded by brothers James and Craig Bouchard, Esmark had been eyed by Severstal and India's Essar Steel Holdings for months. While management initially backed Essar's offer, the United Steelworkers union supported Severstal.

Neither Esmark Chairman Jim Bouchard nor President Craig Bouchard will remain on board after the buyout.

"We plan on helping Severstal in any way we can to hit the ground running," Craig Bouchard said in an e-mail. "At close of the tender, we each hope to take some time off and focus all attention on our families. My wife and kids have made many sacrifices to support our hectic pace over the past five years. It's payback time now."

Severstal Chief Operating Officer Gregory Mason said Esmark and subsidiary Wheeling-Pittsburgh Steel have "a very nice concentration of steel production facilities in the heart of the consumption," with service centers scattered over the Midwest.

"It was not a fluke," Mason said in a telephone interview. "We really believe we have a very nice puzzle all stitched together now. We see a good future for these operations."

Severstal had a partnership with Wheeling-Pitt, through a coke plant in Follansbee called Mountain State Carbon. By assuming full ownership, it ensures a long-term supply of coke, a key raw material in steelmaking.

Severstal's offer is worth $775 million, but it has agreed to assume $400 million in debt and to cover a $110 million term loan from Essar.

Mason said Severstal's strategic plan includes investments in the hot strip mill, which should be running at full capacity, possibly with slabs brought in from the Sparrows Point mill near Baltimore. And Wheeling-Pitt's $115 million electric furnace, less than five years old, has never been taken to its full capacity of nearly 2.5 million tons a year, Mason said.

While he wouldn't divulge details of where Severstal will spend its $250 million, Mason said it is "committed to bringing this plant to the condition that is required for a sustainable operation."

For years, critics have said Wheeling-Pitt had a bloated and inefficient work force. The Bouchards' vision for restructuring involved shutting down certain lines at the facilities scattered throughout West Virginia, Ohio and Pennsylvania, resulting in layoffs.

In all, Esmark has operations in 20 states, including a plant in Greensville County, Va.

"Everything is on the table for review," Mason said.

"We do have our vision for restructuring, and this vision was shared with and endorsed even by the Steelworkers," he said. "Even if we decided to optimize the production with work force reduction, that would come naturally, through attrition."

The USW issued a statement calling the deal with Severstal a victory for the 3,000 Wheeling-Pitt employees it represents.

Severstal is committed not only to investment, but to improving the contract, said District 1 Director Dave McCall in Columbus, Ohio. Partnering with Severstal "creates a long-term, viable entity, which will obviously provide the most security for our members, their families and our retirees," he said.

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Oakland Portal might be path to growth

Oakland -- a compact area of universities, medical facilities, offices and housing -- may get relief from its crowded condition through a proposed $150-million-plus development called the Oakland Portal.

The project, on the drawing board for several years, appears poised to move ahead, with a $30 million request for state capital budget funds being considered in Harrisburg.

Proposed by FWG Realty Inc. and local investors, the complex would provide more than 1 million square feet of space on a 10-acre site for physician offices and commercial businesses, a 200- to 250-room hotel, a 1,500-car parking garage and residential condominiums. The complex would be built in three phases over a five- to seven-year period.

"There is a capital budget request on our behalf, but I can't comment further," said Frank Gustine Jr., partner in FWG. Gustine and Ed Pope, a local architect, head the development team. Joining Gustine and Pope in the project are Lou Molnar and members of the late Bill Baierl family.

Gustine's father, the late Frank Gustine, an All-Star infielder for the Pirates from 1946-48, operated Gustine's tavern on Forbes Avenue in Oakland for many years.

The first phase of the project would put a 160,000-square-foot physicians building on the corner of Forbes and Craft avenues including space for relocation of the Dialysis Clinic Inc. that occupies a building on Craft within the project site. A second, 100,000-square-foot building catering to business office tenants would be built on top of the central parking garage with entrances from Fifth and Forbes avenues. The hotel would be built on a site formerly occupied by Lamar Advertising closer to Forbes.

An agreement in principle with the Dialysis Clinic has been obtained.

Once financing is in place and city approvals obtained, demolition and site preparation could occur later this year, and construction could begin in 2009, with the first building completed in about 2 1/2 years.

About 60 percent to 70 percent of the financing for the project's first phase will be private. Negotiations are under way with lenders for pre-construction loans.

Plans for the second phase would include as many as four buildings, with about 500,000 square feet of space. Those structures, to be built in the center of the project site off Fifth and Craft, will cater to business offices, but could include educational uses.

The developers have acquired most of the properties needed for the project but are in negotiations for several parcels, including smaller properties owned by the University of Pittsburgh or the University of Pittsburgh Medical Center.

"Gustine provided my board with a concept of the project, and the board was receptive," said Georgia Petropoulos, executive director of the Oakland Business Improvement District. "We are excited to see that section come to life, since the project is very much needed because it is the entry point into Oakland."

Petropoulos said the site is located near Carlow University, UPMC Magee-Womens hospital and UPMC Montefiore hospital.

"Oakland has a high demand for space, and the Oakland Portal project is going to meet that demand in key ways. ... It should be a fabulous addition to the city and the region," said Dewitt M. Peart, president of the Pittsburgh Regional Alliance, which markets the region to companies worldwide.

The developers will seek funding under a tax-increment finance plan to construct the 1,500-car parking garage, expected to cost about $35 million.

Rep. Don Walko, D-North Side, said the city's Urban Redevelopment Authority and the state are helping to secure financing for the parking garage. Walko said that of the $30 million authorized in the budget for the project, about $2 million is earmarked for the garage.

Before the amount is approved, the state must raise its debt ceiling to meet the budget requirements, he said.

"We (the delegation from this region) recognize Oakland as a regional center, and we realize this portal site is underutilized," Walko said.

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Senate to vote on bid-rule delay

Area medical supply businesses are hoping the U.S. Senate will vote today to delay competitive bidding rules they say make it more difficult for them to provide customized wheelchairs and other equipment to Medicare recipients.

The House, in a 355-59 vote Tuesday, passed legislation that would delay for 18 months the bidding process that is set to take effect Tuesday. Then, "I hope we can use that 18 months to re-evaluate the thought process on the whole idea," Rep. Jason Altmire, D-McCandless, said Wednesday.

The federal Centers for Medicare & Medicaid Services has said the changes will prevent fraud and save taxpayers $1 billion a year, as companies that provide items in 10 categories cut their prices. Medicare beneficiaries in Pittsburgh could save 28 percent a year, estimates say.

Spokesman Peter Ashkenaz said yesterday that pushing back the new program "would mean a delay in savings for Medicare beneficiaries on high quality supplies, available through accredited suppliers."

Altmire said the House bill would cut reimbursement rates by 9.5 percent to create a cost savings, yet allow small, independent businesses to keep serving Medicare recipients who need items such as wheelchairs that often must be specially fitted for them.

Large, national providers usually will beat the small providers' prices. But Tammy Zeleko with Advacare Home Services Inc, with offices in Aspinwall, Beaver and Bridgeville, said Medicare administrators didn't factor in the education and ongoing service patients need.

Most of the large companies are out of state and won't set up offices or staffs in the region, she said, and many won't have the state certifications by Tuesday that they need to provide oxygen, for example. Advacare won a bid to distribute oxygen for the Pittsburgh area.

Altmire wouldn't predict the outcome of the Senate vote. "It is going to be very close," he said.

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British lawmakers criticize Heinz for pulling ad

LONDON -- A group of British lawmakers said Thursday that foodmaker Heinz Co. was wrong to withdraw a television advertisement that showed two men kissing.

Six legislators from the governing Labour Party filed a House of Commons motion saying the decision to pull the ad was "ill-considered" and likely to offend gay people. They called on Heinz to reconsider.

Heinz pulled the ad for Deli Mayo last week after some viewers complained. The ad depicted a family kitchen scene involving two children, a father and a male deli cook with a New York accent whom the children called "Mum." At the end of the ad, the cook kissed the father as he left for work.

The Advertising Standards Authority said it received 202 complaints, with some viewers calling the advertisement offensive, inappropriate and unsuitable for children.

The ad, which was on air for a week, could not be shown during children's programs under rules restricting the advertising of foods with high levels of fat, sugar or salt.

Gay rights groups said they have received many complaints about Heinz's decision and have urged gay consumers to boycott the company.

The lawmakers' nonbinding motion noted "that the manufacturer Heinz has withdrawn its television advertisement, which features two men kissing, on the basis of 200 complaints that it might be embarrassing for parents with children to watch."

But, it added, "millions of children watch depictions of same-sex relationships in soap operas every day." It also said the ad was meant to be humorous and "not intended to be a realistic depiction of a same-sex relationship."

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Flights to be trimmed 8 percent to 9 percent

Flights out of Pittsburgh International Airport will be reduced by 8 percent to 9 percent after Labor Day as airlines struggle to counter soaring fuel costs, airport officials said Wednesday.

That means about 244 fewer flights locally, said Brad Penrod, executive director of the Allegheny County Airport Authority, which runs Pittsburgh International in Findlay.

Service to most destinations will be less frequent, and all of US Airways' direct flights to Harrisburg will be eliminated as airlines trim operating costs.

US Airways as of Oct. 1 will reduce flights to Richmond from two to one daily, and to St. Louis from three to two, said spokesman Morgan Durrant. The airline will add one additional flight each to Newark, Charlotte and Boston, and add three additional flights to New York's LaGuardia Airport. Service to other destinations, including Las Vegas, Philadelphia, Los Angeles and three Florida cities will remain unchanged.

"All of these adjustments are due to astronomical fuel prices," Durrant said. "We will pay $2 billion more for fuel in 2008 than we did in 2007."

Penrod said the airport authority has made its calculations based on airlines announcements in the past few weeks about their cuts in capacity. That will translate into reductions of revenue based on landed weight, but Penrod said the de-hubbing of Pittsburgh by US Airways and its two bankruptcies has taught the authority how to cope with downturns.

The authority has in recent years taken over such common-area operations as flight information displays, de-icing and jetway maintenance, which used to be the province of airlines. New efforts to help carriers become more efficient could include such ground services as baggage handling and even pushing back planes.

The authority also has over the past several months discussed with the state and some airline officials a pilot program to begin large twin-engine jet service between Pittsburgh and such towns as Harrisburg, Dubois, Latrobe and Erie. An airline would operate the flights, while individual airports could provide on-ground service.

"We don't have the airlines' fuel bills, but we're partners," Penrod said. "Their well-being is our well-being. We want them to be profitable."

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Penney weighing options at closed Foundry store

J.C. Penney Co. said it's considering several options for the Washington, Pa., area market after closing its store in The Foundry shopping center, including a move to its old location at Washington Mall. Spokesman Tim Lyons said Monday the retailer is deciding whether to move more merchandise from the Foundry store, threatened by soil movement, and what to do in the long run. Penney's announced a temporary closing June 6; two other stores had closed. Attorney Robert B. Stein, court-appointed receiver for the South Strabane center, said he's talked to the department store chain and other tenants about a plan to stabilize the site, allowing them to reopen. Meanwhile, developer Christopher P. White, whose Premier Properties USA built The Foundry, was charged last week with stealing $100,000 from an Indianapolis bank. Premier lost control of its sites in a bankruptcy case.

Lawsuit seeks return of funds

Gerard Construction Co. of McCandless, its owner James Glancy and the company's retirement plan has been sued in federal court in Pittsburgh for allegedly taking money from the retirement plan and putting it into accounts they controlled. The June 3 lawsuit filed by the U.S. Department of Labor does not specify how much money was taken from the retirement account between September 2004 and March 2005. Glancy, whom the government said was the lone trustee, could not be reached for comment. The Labor Department wants Glancy to restore the money to the pension account, and wants him and his company removed as trustees for the plan.

$50 million for mercury cuts

Reliant Energy Inc. will spend some $50 million to reduce at least 80 percent of mercury emissions at five of its 19 Pennsylvania power plants. Installation of equipment at the Shawville, Clearfield County, Portland, Northhampton County, Conemaugh, Indiana County, Titus, Berks County, and New Castle, Lawrence County, facilities will begin early in 2009, and will be completed by December. Reliant already is spending $375 million at the Keystone, Indiana County, and Cheswick, Allegheny County, plants to reduce carbon dioxide emissions, work to be completed next year, plus $10 million to upgrade existing carbon dioxide reduction equipment at the Elrama, Washington County, facility.

United cutting 950 pilots

United Airlines says it will eliminate about 950 pilot jobs beginning this summer in addition to an announced plan to cut 1,600 salaried positions and reduce its fleet. United told its pilots union about the cuts Monday. The Chicago-based carrier says it's still working with the unions on the reductions. The Air Line Pilots Association could not be reached for comment. United spokeswoman Megan McCarthy says the initial layoff notices will go out in mid-July and take effect in September. She says the cuts will continue into next year.

Plaza files bankruptcy

Crossroads Plaza Limited Partnership, which last year developed an expansion that added an Aldi store at the Crossroads Plaza shopping center in Lower Burrell, Westmoreland County, filed for Chapter 11 bankruptcy protection. In documents in federal court in Pittsburgh, the company lists assets and liabilities ranging between $1 million and $10 million. Operations at stores at the center are unaffected, according to Lower Burrell city officials and store representatives. Tenants include Aldi, National City Bank and a Walgreen pharmacy. Steve Arciulo, president of the general partner, could not be reached for comment.

Local construction falls

New construction activity in the Pittsburgh region continued to decline in May with the total value of new contracts at 46 percent below the same month last year. The total was $123 million, down from $228.1 million in May 2007, according to the Research and Analytics unit of McGraw-Hill Construction. Nonresidential work was down 64 percent while residential, down 25 percent. For the year, total construction value was $919.4 million, a 9 percent decline from the $1 billion for the same five-month period for the counties of Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland.

Other business news:

• The Internal Revenue Service is raising for the remainder of this year the mileage rate that businesses and others can claim for operating costs. The tax agency said that it will raise the optional standard rates to calculate deductible operating costs for vehicles from 50.5 cents to 58.5 cents a mile. The IRS said the increase was implemented in light of the major impact that gas prices are having.

• Partners of the Downtown law firm of Kirkpatrick & Lockhart Preston Gates Ellis and Kennedy Covington Lobdell & Hickman law firm of Charlotte, N.C. on Monday voted to merge, effective July 1. The firms in May announced they were exploring a merger. The combination would add three offices -- in Charlotte, Raleigh and Research Triangle Park, N.C. -- to Kirkpatrick's 25 offices in the United States, Europe and Asia. and more than 175 attorneys to its approximately 1,500, including about 235 in Pittsburgh.

• Bayer AG said Monday it would invest $156 million through the end of 2009 in its Brazilian operations, a key market for the German pharmaceutical and chemical company. "Brazil is our biggest market in Latin America, and we want to further expand our position in this growth region," said CEO Werner Wenning.

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Flights to be cut at Pittsburgh International Airport

Flights will be drastically cut at Pittsburgh International Airport starting in September.

The Findlay airport typically loses flights after the summer travel season but this year's cuts will be more severe than before, said JoAnn Jenny, an Allegheny County Airport Authority spokeswoman.

"It's pretty severe," she said. "It's happening across the board. It's not like Cleveland is thriving and Pittsburgh's suffering."

Once the cuts hit, there will be no direct service to Harrisburg, she said.

No other cities will be eliminated but the frequency of flights will be cut back, she said. The cuts will be made by all airlines serving Pittsburgh International.

"It's terrible," she said. "What they're trying to do is correct the system but cutting capacity. They just can't function and operate under what they're going through right now."

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Louis Vuitton, Burberry to open Ross Park stores

Louis Vuitton's initialed handbags and Burberry's plaids are coming to new stores at Ross Park Mall.

Both designer brands plan to open stores "in coming months" at the 1.2 million-square-foot mall that will also will welcome Nordstrom and Tiffany & Co. this fall, Simon Property Group Inc. announced today.

The mall owner said the recently expanded complex along McKnight Road in Ross also will feature True Religion Jeans and Michael Kors stores, the first for the region. Tea retailer Teavana also will have an outlet.

Mall Manager Lisa Earl said the mall is "going to offer shoppers options that are unequaled to anything else that exists in Pittsburgh."

Nordstrom will open Oct. 24. Tiffany's also will open sometime this fall. Other new retailers recently announced include White House/Black Market, BCBGMaxAzria, L.L. Bean, Bare Escentuals, Zounds and Martin + Osa.

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Greensburg Web site aims to negotiate gas deals

A Greensburg-area company has launched a Web site that helps residents get profitable deals for natural gas drilling on their property.

Pete Dochinez launched Resource Trading Online, last week.

Dochinez says he launched the site after seeing an unfair gas deal signed by an elderly client.

He says there are two leases. The first makes the driller pay the landowner for the right to drill a well. The second ensures the property owner gets royalties from gas pumped from the land.

Leasing activity has increased in recent years as drillers try to remove gas reserves from a rock formation that stretches across Pennsylvania and four other states.

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Business seminar aimed at veterans

California University of Pennsylvania's Government Agency Coordination Office is holding a Federal Government Contracting Seminar for Veteran-Owned Businesses from 9 a.m. to noon Thursday.

The seminar will be held at the Center for Research and Economic Development at Waynesburg University.

The federal government spends about $300 billion annually on a variety of goods and services to support its operations. Purchases include items such as office supplies, cleaning equipment and supplies, software, and machined parts. Service-related procurements range from janitorial and construction services to environmental and information technology services.

To ensure that small businesses get their fair share of government contracts, statutory goals have been established for federal executive agencies. The goal established for awarding contracts and subcontracts to service-disabled veteran-owned small businesses is 3 percent. There is a best-faith effort for doing business with veteran-owned businesses.

This free seminar will provide veteran-owned businesses with information on federal government procurement processes, regulations and contracting opportunities. A representative from the Department of Veterans Affairs, Center for Veterans Enterprise will discuss key legislation that supports veteran business owners, as well as the programs that are available through CVE to assist veterans in pursuing federal contracts.

Seminar attendees also will hear from prime contractors and government agencies regarding their contracting opportunities.

For information on the seminar, contact Deborah Wojcik at 724-938-5881 or wojcik@cup.edu.

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Losses in a portfolio should not disrupt a long-term strategy.

NEW YORK -- Surging costs for gasoline and food might elicit the most groans about rising prices, but inflation also can tax a portfolio. Investors who aren't mindful can find the composition of their holdings makes about as much sense as a fuel-hogging SUV.

People don't necessarily need to rush to outfit their portfolio with defenses against inflation. However, some well-considered steps might be appropriate, economists say.

"I think you're in an environment where people are wondering what to invest in at all because you're looking at the safest investments -- like a short-term investment in a money market fund or a Treasury bill -- that obviously have very low returns," said Ethan Harris, chief U.S. economist at Lehman Brothers in New York.

"I don't think there is any magic answer on what to invest in. I think people have to have realistic expectations that you're going to be in a period of higher-than-normal risk and a little bit lower-than-normal returns."

Harris contends that investors should, as always, take a long-term view and make sure their portfolio remains well-diversified.

"It's not like you can look at any asset class and say one area is much better than others," he said. "You have an economy that's really just trundling along in the mud here, and I think that six months or a year from now you're going to have a better picture."

Recent readings haven't been heartening. The Labor Department's consumer price index rose at a 0.6 percent rate in May, slightly more than expected. And excluding often-volatile food and energy prices, inflation edged up a more moderate 0.2 percent.

For investors who believe their portfolio needs some fortifying to fight inflation, there are traditional defenses such as commodities or real estate investment trusts, said Sean Simko, head of fixed-income management at SEI Investments in Philadelphia.

With oil prices having nearly doubled in the past year, some observers contend that a bubble has formed in the energy markets. So Simko advises investors who are considering wading into the volatile commodities markets do so gradually.

"You don't want to be buying at the highs. If you have a long-term perspective I would say you could probably take a look and slowly dollar-cost average into an investment," he said, referring to the process of investing a fixed amount at regular intervals to avoid having decisions be swayed by the market's ups and downs.

He said investors with large portions of their portfolio in cash might want to consider alternatives. "It's going to be harder to keep up with inflation if you're in cash than if you're in other securities."

Investors could consider tapping into investments that try to keep pace with inflation. Some mutual funds or exchange-traded funds, which are like mutual funds but trade like a stock, invest in what are known as Treasury Inflation-Protected Securities, or TIPS. The principal on these Treasury investments is linked to government inflation figures and increases as prices rise.

Keith Hembre, chief economist for First America funds in Minneapolis, contends, however, that inflation pressures are better contained than they might appear, and that the rise in energy and food prices eventually will cool so that shifts to a portfolio to beat inflation shouldn't disrupt a long-term investing plan.

"We're modestly defensive in this environment. If we thought there was a sustained inflation problem we'd be a lot more defensive," he said. He predicted that a slowdown in demand from abroad because of rising prices will help cap some of the inflation pressures and said that U.S. markets aren't signaling a serious worsening of inflation.

"If you get beyond the commodity prices there is very little inflationary pressure evidence in most of the other areas of the economy. And the increase in energy and commodity prices is being driven by largely external forces," he said, pointing to factors such as demand from economies abroad.

Investors could get a better sense of where the government's inflation watchdogs think prices will go when the Federal Reserve meets next week to decide on interest rates. Many economists expects the Fed will hold rates steady at 2 percent, a four-year low.

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Homeowners can seek help when faced with foreclosure

Count Heather Hoye of Homestead among the lucky ones when it comes to the national mortgage foreclosure crisis.

Thanks to help from Pennsylvania's new Refinance to an Affordable Loan program, Hoye and her 7-year-old son, Andre, remain in the home she could have lost when she found herself facing hundreds of dollars more in monthly payments when her adjustable rate mortgage reset at a higher interest rate.

Hoye is one of an estimated 25,000 homeowners in Pennsylvania who could face foreclosure -- potentially 5,000 in Allegheny County -- when their mortgage payments increase this year, according to some estimates. And while programs like the state's REAL initiative are helping some, experts say the number of people benefiting remains relatively small.

"We haven't been getting as many clients as I would have liked to have seen, and I attribute that to a number of factors, including clients who wait until they are facing sheriff sale or just give up, before coming in for help and it's just too late," said Dawn T. Williams, an attorney with the Urban League of Greater Pittsburgh and the league's director of housing.

She has helped to counsel about 150 homeowners.

Since the state started its REAL program Oct. 31, just 31 homeowners across the state, including five in the Pittsburgh area, have obtained new, lower-interest rate loans, costing the state about $4.1 million, said Kate Newton, director of the Pennsylvania Housing Finance Agency's Homeownership Programs. Twenty more locally are being processed.

Hoye was one of the five. She was able to have her existing loan refinanced, and she obtained a 30-year fixed-rate loan -- at 7.6 percent -- from American Financial Mortgage Corp. The loan then was purchased by the state.

"Working through the Mon Valley Initiative, and after attending counseling sessions to help me better budget my finances, I got rid of an 11.99 percent interest rate and now can afford my monthly mortgage payments," said Hoye, an employee of American General Services Corp., Downtown, a local mortgage title insurance and real estate closing company.

The REAL program combines 100 percent financing with flexible credit underwriting. It is for homeowners who may not qualify for typical mortgage refinance programs. It is funded by the state Housing Finance Agency, which has spent $4.1 million through last week.

Sometimes the efforts of local agencies to keep people in their homes don't work, even when their mortgage payments are reduced.

Shelly Davis of Penn Hills, a single mother with two teenage children, can attest to that.

Despite the Urban League of Pittsburgh's success in modifying her loan with Option One Mortgage, the final numbers still couldn't make her home affordable, she said.

"On my income of $1,088 a month, from disability payments, my mortgage payments fell from $734 to $615 a month, yet that left me with little money to pay for basic things for me and my children," she said.

Her next choice may be rental housing, which the Urban League is attempting to arrange once the mortgage company agrees to foreclose on her current home.

The foreclosure epidemic is expected to affect 1 million homeowners this year, according to the Mortgage Bankers Association of America.

With that in mind, Congress approved $180 million in funding for counseling services to homeowners nationwide facing foreclosure from problems with subprime and adjustable rate mortgages.

One local agency that is sharing those funds is the Allegheny County Association of Community Organizations for Reform Now -- better known as Acorn.

"We have counseled about 150 homeowners facing possible foreclosure action, and with the 50 other homeowners we've counseled under other programs, we have been successful in saving about 80 percent from foreclosure," said Maryellen Hayden, lead organizer for the local chapter.

The Urban League's Williams said that when Mayor Luke Ravenstahl announced a 311 mortgage crisis hotline in early March, efforts to counsel homeowners became more intense, supported by a grant from Congress.

Williams said most clients come in for help once they receive a default notice from their lender and the initial step the league takes is to qualify them for the state Housing Finance Agency's REMAP -- Homeowners' Emergency Mortgage Assistance Program. It provides homeowners with a loan to bring the mortgage up-to-date, and assistance on the monthly payment for up to 24 months.

"Our goal is to create a long-term, affordable mortgage for our clients through mortgage modification -- turning 12 percent interest rate loans into 30-year fixed-rate loans at about 6 percent ," Williams said.

Dan Sullivan, a foreclosure prevention specialist at Action-Housing, said he has counseled about 30 homeowners, one-fourth of them because they called the 311 hotline.

"We've been able to successfully get the mortgage modified or restructured for about 20 to 30 percent, but the problem we face is that too many are coming in when it's late in the foreclosure process," Sullivan said.

Homeowners have a better chance for success if they get help once they receive notice of default from their lenders, or if they are concerned they may not be able to make future payments, he said.

Lenders are becoming more agreeable to working with agencies to help homeowners modify loans, he said.

At first, the 311 calls averaged about 20 a week, said Wendy Urbanic, manager of the 311 hotline program. But over the past couple weeks, there have been no calls, she said.

"The sooner they get the counseling, the sooner they have a better chance to deal with it proactively," she said.

Calls are referred to one of seven local agencies. Besides Action-Housing and the Urban League, the others are Neighborhood Housing Services, Pittsburgh Community Reinvestment Group, Community Counseling Services of the South Side, NeighborWorks and Fair Housing Partnership of Greater Pittsburgh.

Another program being offered by the state Housing Finance Agency is called HERO -- Homeowners' Equity Recovery Opportunity. The agency purchases the existing loan from the lender, then provides up to 100 percent financing for a new 30-year fixed-rate mortgage at 7.625 percent. The state agency will own and service the new loan.

Of an initial 438 Allegheny County homeowners who inquired about the program, 99 applications are being processed and 10 have been approved, the state Housing Finance Agency's Newton said. Westmoreland homeowners had the next largest number of inquiries -- 114, with 20 being processed and two approved.

Sam Spatter can be reached at sspatter@tribweb.com.

Ron DaParma can be reached at rdaparma@tribweb.com.

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Anti-FiOS cable ads confuse customers

NEW YORK -- Avery Axel was annoyed with his cable company, Comcast, and was considering switching to Verizon's new FiOS fiber-optic TV and Internet service.

The picture on his TV would freeze now and then, and he had heard good things about FiOS. Then the 21-year-old student saw a TV commercial from Comcast that made fun of FiOS and claimed the cable TV company has a larger fiber-optic network.

"I thought to myself: Maybe I don't have to switch, because if Comcast has fiber optics now, that means that they'll be better," said Axel, who lives in Roosevelt, N.J.

But after asking around online, he found that nothing's changed about Comcast's service: It still uses coaxial cable to connect homes. It does use fiber-optic cable further away in the network, as it has for many years.

"From what everyone said ... this is kind of misleading," Axel said.

Axel had fallen for one of a series of commercials run by every major cable company that competes with Verizon's FiOS. Besides Comcast, Cablevision, Time Warner Cable, Cox and Charter have all run ads belittling FiOS.

The ads have a curiously similar message, emphasizing that cable networks "are" fiber-optic, even though none of the companies draws fiber all the way to the home, like Verizon does in most cases when it installs FiOS. This allows for higher Internet speeds and, according to Consumer Reports, better picture quality.

"Cable is deploying the rhetoric instead of the technology," said Verizon spokeswoman Bobbi Henson.

Comcast spokeswoman Jennifer Khoury said the ad was referring to the fact that the company has the largest "residential" fiber network in the nation, stretching for 125,000 miles, and noted that a freezing picture doesn't necessarily have anything to do with the network technology.

"Our ads reinforce the value and scope of our fiber network to our customers," she said, adding that the fact that Verizon uses fiber to the home makes little difference to the services it can provide. Comcast has started upgrading its network to provide FiOS-like speeds in 20 percent of its markets this year.

Comcast has started running newspaper ads with the message: "We already have a fiber-optic network serving ALL our homes" reads one in the Seattle-Post Intelligencer.

Fiber-optic lines have been the main conduit for telecommunications since the '80s. In the late '90s, cable companies upgraded their networks to draw fiber closer to homes, which allowed them to offer broadband, video on demand and other services. The fiber lines end at neighborhood nodes, where the signal is transferred to a coaxial cable shared among as many as 500 households. The shared nature of the coaxial network and its susceptibility to electrical noise limits its capacity.

Verizon's FiOS network shares capacity, but among fewer households, and the fiber itself has nearly unlimited data capacity.

Mike Weaver in Watauga, Texas, saw an ad from Charter Communications Inc. that talked about "advanced fiber optics," and was disappointed when he realized that the cable company isn't drawing fiber to the home. He wants the faster Internet speeds provided by FiOS, he said.

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Ford delays new F-150 pickup, cites declining markets

DETROIT -- Ford Motor Co. will delay introduction of its new F-150 pickup truck by two months and further cut production because of the declining market for pickups and sport utility vehicles, the automaker announced Friday.

Ford said its 2008 automotive financial results this year will be worse than in 2007, when the company posted an overall net loss of $2.7 billion. Its shares fell more than 6 percent in morning trading.

The company said it expects industrywide U.S. sales this year to drop to a range of 14.7 million and 15.2 million units. Ford previously had predicted 15 million to 15.4 million units.

Because of that, Ford said yesterday it will cut third-quarter production by 50,000 vehicles. It plans to produce 475,000 vehicles, 25 percent fewer than the third quarter of last year.

The company says fourth-quarter production will drop 8 percent to 14 percent compared with the same quarter last year.

Most of the production cuts will come from extending the normal two-week summer shutdown at pickup and SUV plants, as well as shift and assembly line speed reductions, the company said in a statement.

Ford said it will introduce the new F-150 model in late fall instead of its earlier target of late summer. The F-150's have traditionally been its biggest sellers and most profitable vehicles.

The Dearborn-based automaker said it will increase production of its Focus small car, as well as the Mercury Mariner and Ford Escape small SUVs.

It will bring production of the next generation European Focus and Fiesta small cars to North America starting in 2010 "as Ford confirms it is revising its product plan to add more small cars, crossovers and fuel-efficient powertrains, including many from Ford's acclaimed European lineup."

Ford expects to detail changes to its restructuring plan when it announces earnings in July. But until then, the company said it would make the following production changes:

• Production of the 2009 F-150 will begin in August at the Kansas City Assembly Plant and in September at Dearborn Truck. Both factories will lose a shift of workers, with Kansas City going from two to one and Dearborn going from three to two.

• The Dearborn Truck plant, which makes the F-150, will be idled most of the third quarter.

• The Michigan Truck Plant in Wayne, which makes the Lincoln Navigator and Ford Expedition large SUVS, will be idled for nine weeks beginning June 23.

• Ford will cut one shift at its Louisville Assembly Plant, which makes midsize SUVs, in the third quarter.

• The assembly line speed will be reduced at the Kentucky Truck Plant in Louisville in the third quarter. The plant makes large pickups. Chicago Assembly, which makes the Ford Taurus and other full-size sedans, will have a third-quarter line speed reduction.

• Production at the Cuautitlan Assembly Plant in Mexico will stop by the end of 2008 so it can be retooled from large pickups to make the new Fiesta small car in early 2010.

• The Oakville, Ontario, plant near Toronto will get a third shift in the third quarter to increase production of the Ford Edge, Lincoln MKX and Ford Flex crossovers.

• The Kansas City plant's assembly line that makes small SUVs will get a third shift in the third quarter.

• Ford's Wayne Assembly Plant, which makes the Focus, will see a third shift in its body and paint shops, and its line speed will be increased in the third quarter.

Production at stamping, engine and transmission plants will be adjusted to handle the assembly plant changes, Ford said.

"We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand," Ford CEO Alan Mulally said in the statement. "For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains -- including more hybrids -- and we will adjust our manufacturing facilities to match our updated product lineup."

Ford shares fell 40 cents, or 6.3 percent, to $5.92 in morning trading.

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Hummer haters: GM still producing the SUV

The music may not have stopped playing for Hummer.

General Motors' decision to keep, kill or sell the brand revered and reviled for its rugged SUVs is less clear-cut than Hummer haters might expect. GM's leaders must evaluate a complex set of economic and emotional factors as they weigh Hummer's fate.

No brand in the auto industry evokes stronger feelings than Hummer. Some people despise it as the embodiment of wasteful arrogance. Others -- not as many, but they're the ones who buy Hummers, so their vote counts more -- love the vehicles' extraordinary capability and styling braggadocio.

Hummer's fate hangs in the balance of those forces, GM's ability to develop more vehicles for the brand, and the legal hailstorm its dealers will call down on GM if their pricey franchises suddenly become valueless.

In the meantime, Hummer soldiers on. The 2009 H3T midsize pickup enters production shortly at GM's Shreveport, La., plant and goes on sale this fall. Eliminating Hummer would endanger the Shreveport plant's future. Hummer's other model, the bigger H2, is produced for GM by AM General in Indiana. AM General developed and builds the Humvee military vehicle that created the brand's mystique.

The H3T is part of GM's longstanding plan to broaden Hummer's lineup and sell the vehicles around the world. With dealers in 37 countries and assembly in South Africa as well as the United States, "the potential for global growth is a huge opportunity. It's one of Hummer's strengths," spokeswoman Joanne Krell said. Developing markets in Asia, Central and Eastern Europe look particularly promising.

"There is global demand for Hummer," said analyst Rebecca Lindland of Global Insight in Lexington, Mass.

The global strategy is contingent on Hummer's ability to develop a multimodel lineup. That's in question as GM accelerates the introduction of small cars and fuel-saving technologies in response to skyrocketing U.S. gas prices.

"In an environment where engineering resources are driven by the need for high-mpg vehicles, can you justify vehicles that don't contribute to that?" asked Jim Hall, managing director of 2953 Analytics, a research and forecasting firm. "Where do you find the money to do a Hummer and do it right?"

Doing Hummer right means that every vehicle it sells must have unparalleled off-road capability. Anything less would gut the brand, making its owners the image-driven poseurs Hummer haters believe them to be.

For that reason, you're not likely to see a gasoline-electric hybrid Hummer -- too much weight and complexity for the backcountry -- but the brand will offer biodiesel-powered versions of all its vehicles by 2010. Biodiesel isn't made from oil and improves fuel economy 30 percent or so versus gasoline-powered versions of the same vehicle.

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