“We know that as a result of weak ad sales this year we will have a challenging revenue line next year,” CEO David Swanson said during a conference call with analysts. “We are taking action now to prepare for that.”

Swanson said a team of as many as 80 employees and consultants will focus on ways “to improve productivity and quality in every function of the company.”

That restructuring includes the company's sales force, which represents about half its more than 4,000 employees nationwide.

Swanson said the company can reduce its sales force without hurting ad sales. Investments in technology have reduced sales agents' administrative tasks, and more efficient routing could enable fewer sales agents to cover the same territory.

“It's likely that we will be operating with fewer salespeople,” Swanson said.

Still, Goldman Sachs analyst Peter Salkowski expects job cuts to fall more heavily on the other half of Donnelley employees who aren't in sales.

“They need an improving economy, and improving ad results, before they are out of the woods,” he said. Donnelley is a Goldman Sachs client.

Donnelley shares closed Wednesday at $1.57, down 13 cents. A year ago, shares fetched more than $60.

Donnelley initiated a round of cuts earlier this year that eliminated at least 240 jobs, mostly through attrition but including some layoffs. The company has about 600 workers in the Triangle.

Restructuring charges for the latest initiative are expected to hit $40 million.

“This is a very large, 40-to-60-week initiative,” Swanson said. “We expect to generate significant savings from the initiative.”

Donnelley reported Wednesday that second-quarter ad sales totaled $678million, an 8.6 percent decline compared with a year ago.

Swanson said softness in ad sales, which a year ago was limited to areas such as Las Vegas and Florida that were hurt by the real estate meltdown, has spread across the company's markets.

Swanson said he sees the downturn in ad sales as cyclical and that sales will recover when the economy does. He noted that advertisers that are prospering today, such as pawnbrokers and bankruptcy attorneys, are spending more money on yellow pages ads.

In addition to being affected by the struggling economy, Donnelley, like other traditional media, is hurt by advertisers shifting their dollars to the Internet.

Although it is beefing up its online business, Donnelley generates the bulk of its revenue from printed directories in 28 states.

The defendants, former chief executive Charles Snipes and former vice president Gary Prewitt, did not admit wrongdoing. The bank, based in Granite Falls, was not involved in the settlement.

The penalties announced by the U.S. attorney for the Western District of North Carolina stem from an investigation by the Federal Deposit Insurance Corp., the FBI and the Secret Service about loans issued for the benefit of a client referred to in court documents as “Customer A.”

Essentially, the government alleged the bank issued a series of loans backed by third parties that actually were for the benefit of Customer A. The bankers got in trouble for not disclosing this in bank records and FDIC reports, as required by law, according to the complaint.

In a statement, Gretchen Shappert, U.S. attorney for the Western District of North Carolina, said laws requiring “truthful and accurate disclosures in banking transactions” are needed to “protect the integrity and stability of our banking institutions and our entire financial system.”

Snipes has agreed to a $200,000 penalty; Prewitt, $25,000. Both agreed that they will not work for Bank of Granite or any other bank insured by the FDIC, without written consent from the FDIC.

Snipes, 75, retired earlier this year. Prewitt retired in 2006, according to court filings. Both declined to comment. Bank of Granite also declined to comment.

According to court documents, the loans were made to Customer A from about 1995 to 2006. Customer A was frequently overdrawn or behind in loan payments.

Among the specific accusations, the government alleges that in 1999, Prewitt recorded a $14,750 loan for Customer B as a business expense, when part of it was actually meant to benefit Customer A.

The government also alleges that, in 2002, Snipes failed to tell the FDIC that payment on one of Customer A's loans was made through the bank issuing a new loan to a Customer C. Snipes “falsely stated that this loan had been substantially ‘paid' when in reality more money had been borrowed to replace the older loan,” the court filing says.

The proposed judgment needs approval from a U.S. District Court judge.

Now there's a new kind of social networking site from outta Charlotte that lets you surf with your friends, and chat in real time, just like you were in the same room. Why ever actually get together? www.browzmi.com/welcome/

Hey, people will do this – to show buddies something hilarious, look at stuff with their out-of-town kids, watch videos, etc. The guy behind it is Charlotte Country Day and UNC grad Travis Parsons, who escaped BofA for the exciting world of start-ups. “We just brought it up, and it's getting a lot of attention,” says Parsons, who has angel investors here in town.

Whitewater Center's whoosh line

The biggest adrenaline booster we've ever seen is about to zip into town.

The Whitewater Center's zip line is almost ready to open. They're aiming for late August. I predict this will be the breakthrough the Paddle Puddle has been seeking. Just my opinion: Developer Crosland, the city and state need to get their act together and open the new road.

Zippers glide 1,200 feet at 35 mph from just behind the restaurant, over the whitewater channel, and onto the big island. (You don't just hang on, Sloopy. There's a harness.) You know guys on their third beer on the patio will watch zippers and go, “We gotta do that.”

Meanwhile, team-building from big-time companies like BofA continues out there, as folks climb the corporate rope ladder. Recently spotted out there: Richard “John Boy” Thomas, in town for “12 Angry Men,” and Rick Schroder, who was filming “Blood Done Sign My Name.”

Big doings at the malls

“July is coming to an end, and soon it will be time for the holidays!” A PR person in Atlanta actually sent me that this week. What do you expect: Atlanta. It was, however, an alert to a big deal at SouthPark: The fifth annual Simon Evening of Giving with the Carolinas Medical Center. That's the deal in November where you get the mall to yourself. Call 704-295-0975 or e-mail nbostic@simon .com.

Of immediate importance: SouthPark and Concord Mills should be packed this weekend, as they extend hours for the N.C. sales tax holiday. I predict this will cause the already sardined Apple Store to explode, hurling trendy young nerds all over the food court. Luckily, they won't even notice, because, OMG! The new iPhone!

QC stars in Ford's TV spots

Drop that remote. There's a reason to watch upcoming TV commercials for Ford cars and trucks: We're in them. Ford just wrapped a series of commercials filmed here for eight of its 2009 models, including the Ford Flex, a new line. The commercials were shot all around the QC, including Phillips Place and Piedmont Town Center, and will be shown worldwide.

And so, as gas prices remain high and economic challenges continue, more businesses are discovering the carts' appeal, says Pete Reynolds, a salesman at Carolina Golf Cars on Wilkinson Boulevard in Charlotte.

Although the 25-year-old company hasn't seen its business spike dramatically in recent months, sales aren't down, either. Given the state of the economy, that's news they can live with, Reynolds says.

“We're staying very busy,” he said. Now, he said, they're seeing more businesses seeking less expensive alternatives to traditional cars and trucks. “When times get tough, they search out other alternatives a little bit more.”

Instead of hauling a few tools or supplies from one end of a business park to the other using a $20,000 pickup truck – which needs insurance and plenty of gas, too – businesses are looking more at industrial golf carts with beds in the back, which do the same job for less money, Reynolds said.

The company's showroom displays everything from basic gray and beige two-seaters to a rugged black-and-gray machine with chrome trim on its hubcaps and elongated steering column. The carts start at about $2,800 and run to about $7,500 for personal models and $11,000 for heavier-duty industrial models.

Long popular with apartment complexes, the carts are also gaining favor with schools and for personal use, often within subdivisions. “There's a lot more applications for our products now than there used to be,” Reynolds said. JEN ARONOFF

The gloomy outlook comes in the wake of the filing for bankruptcy protection on Tuesday by S&A Restaurant Corp., the parent company of Bennigan's and Steak & Ale restaurants. S&A is owned by Metromedia Restaurant Group, a part of billionaire John Kluge's empire. Franchised locations will remain open and are not included in the filing. There are no Bennigan's restaurants or Steak & Ales in the Charlotte area.

S&A is seeking to liquidate its assets and stop operations – a step usually taken in only the most dire financial circumstances. And although Bennigan's may be the highest-profile chain to have filed for bankruptcy protection, it is far from the first this year.

Privately owned Vicorp Restaurants Inc., which operates the Village Inn and Bakers Square chains, cited “substantial debt obligations” when it filed in April for Chapter 11, which lets a company reorganize and remain open. Roadhouse Grill Inc. filed in October, intending to reorganize, but the private company converted to a liquidation proceeding in May.

At least four other chains have filed for bankruptcy protection since the start of the year. That compares with about two during all of 2007 and six in 2004, estimated Ron Paul, president of consumer research company Technomic Inc.

Paul said the number of restaurant bankruptcies this year “could easily surpass” the 2004 number.

The reason is the sharp change in balance between supply and demand, he said.

In the early 2000s, Paul said, credit was easy to come by and many restaurant companies – particularly in the highly competitive bar-and-grill and casual dining segments – took advantage of that by financing ambitious expansion programs.

According to Technomic, the top 20 casual dining chains increased the number of their locations by 45 percent during the past five years. Restaurant sales, meanwhile, rose just 31 percent.

“The lenders were very aggressive in making loans they probably shouldn't have made in financing restaurant expansion,” Paul said. Now, particularly as consumers cut back on eating out, “there's just not enough customers to go around.”

When the economy hit the brakes, consumers followed suit. High gas prices, the weak housing market and inflation have led to far slower consumer spending, especially on indulgences such as a dinner out.

Meanwhile, restaurants have had to face far higher ingredient costs due to spiking commodity prices, which has put more pressure on profits.

Given the consumer spending slowdown and the higher costs, several restaurant chains have scaled back their expansion plans, said Standard & Poor's restaurant analyst Mark Basham.

With sales declining and some locations beginning to underperform, “all the bodies are floating to the surface, so to speak,” Basham said.

One company that has cut back on its openings is Ruby Tuesday Inc. – another popular family restaurant that has seen sales and profits slide.

In fiscal 2007, the company either opened or bought 73 locations, not including those owned and operated by franchises. In the first nine months of fiscal 2008, meanwhile, Ruby Tuesday has opened or acquired 51 locations and plans to open just four more by the end of the year.

Deutsche Bank North America analyst Jason West said in a note to investors that he believes the restaurant industry is at the “beginning of a store rationalization process” marked by restaurant closings and slower growth.

But, he said, that process could take several more quarters – if not many more years – before the cuts turn into profits.

Coffee chain Starbucks Corp. said Wednesday that costs related to its closure of 600 underperforming stores led it to post a loss for its fiscal third quarter.

The Seattle-based company reported a loss of $6.7 million, or 1 cent per share, compared to a profit of $158.3 million, or 21cents per share, a year earlier.

Starbucks said it earned 16 cents per share once the costs for restructuring and closing stores are excluded.

Analysts polled by Thomson Financial expected a profit of 18cents per share on revenue of $2.61 billion.

Starbucks said revenue rose 9 percent to $2.57 billion from $2.36 billion in the third quarter of 2007.

Most of the increase was from sales at the company's international locations and at newer stores in the U.S. Same-store sales, or sales at stores open for at least a year, fell in the mid-single-digits in the U.S. Associated Press

Entertainment

The Walt Disney Co. said Wednesday its third-quarter profits surged nearly 9 percent thanks to revenue growth at ESPN and strong results from its theme park near Paris, where the weak U.S. dollar was helpful.

The family entertainment company reported after the market closed that net profit grew to $1.28 billion in the quarter ending in June, up from $1.18 billion a year ago.

Revenue grew 2 percent to $9.24 billion.

Earnings per share from continuing operations were 66 cents, up from 58 cents a year ago.

The results beat analysts expectations. They forecast 1percent revenue growth to $9.14 billion and a 5 percent increase in earnings per share to 61 cents, according to a survey by Thomson Financial. Associated Press

Retailers are already talking about price increases of up to 15 percent on holiday goods, from staples such as tree ornaments and toys to luxury gifts like European handbags and clothing.

The main cause? It's the same old chestnut: soaring energy prices.

While most consumers are just starting to think about back-to-school shopping, retailers are already preparing for the critical holiday season.

Consumers have seen prices creep up for many products; but now, escalating cost pressures – which are also being fueled by the weaker dollar and higher labor costs in China – are forcing merchants from low-price warehouse clubs to upscale clothiers to pass on more of the burden in the months ahead.

Many stores are still deciding on holiday prices, and receding oil prices in recent weeks could provide a bit of relief. Still, buying that status handbag now might help shoppers save a little – but for some items, it's already too late.

And any big surge in demand could lead to more bad news on the inflation front, serving as a catalyst for prices to spiral.

With bigger price increases, the nation's merchants risk turning off shoppers who may end up buying fewer holiday gifts to keep to their budgets. That could mean a serious hit for the economy, since consumer spending accounts for two-thirds of all economic activity and the holiday period accounts for a huge chunk of merchants' sales and profits.

“Truthfully, I probably won't purchase items that go up that much – especially something like Christmas decorations,” said Marilyn Reese of Cincinnati, who works at an insurance company.

“I will just go with what I have.”

Carl Steidtmann, chief economist at Deloitte Research, says that price inflation will be yet “another factor that undermines consumer purchasing power and will hurt spending even more.”

“This will be a very difficult holiday season,” he said.

The price increases come as stores also must push even deeper discounts this holiday season to attract customers. But 50 percent off may not be as good a deal as last year since the original price could be higher.

Even Costco, which had been one of the bright spots in retailing, warned last week that its profit was getting squeezed by rising energy costs, and it would have to raise prices more. Richard Galanti, Costco's chief financial officer, specifically cited holiday decor and rotisserie chickens, which are popular for holiday meals.

Holiday decor will be as much as 12 percent pricier this holiday season than a year ago, and the price of rotisserie chicken, which had been $4.99 for years, was raised to $5.49 about three months ago and just went up to $5.99 last week.

Toy prices are likely to be about 10 percent higher for the holidays than a year ago, said Sean McGowan, an analyst at Needham and Co.

K-B Toys Inc., which focuses on selling past toy hits at discounted prices, says it isn't increasing prices for now.

The defendants, former chief executive Charles Snipes and former vice president Gary Prewitt, did not admit wrongdoing. The bank, based in Granite Falls, was not involved in the settlement.

The penalties stem from an investigation by the Federal Deposit Insurance Corp., the FBI and the Secret Service over loans issued for the benefit of a client referred to in court documents as “Customer A.” The government alleges that third parties were liable for repaying the loans of Customer A, but Snipes and Prewitt did not disclose this in bank records or to the FDIC, as required by law.

According to court documents, the loans were made to Customer A from about 1995 to 2006. Customer A was frequently overdrawn or behind in loan payments.

Among the specific accusations, the government alleges that in 2002, Prewitt recorded a $14,750 loan for Customer B as a business expense, when in fact part of it was meant to help Customer A pay down overdrawn accounts. The government also alleges that, in the same year, Snipes failed to tell the FDIC that payment on one of Customer A’s loans was made through the bank issuing a new loan to a Customer C. Snipes “falsely stated that this loan had been substantially ‘paid’ when in reality more money had been borrowed to replace the older loan,” the court filing says.

Snipes will pay a $200,000 penalty; Prewitt will pay $25,000. Both agreed that they will not work for Bank of Granite or any other bank insured by the FDIC, without written consent from the FDIC.

Snipes, 75, retired earlier this year.

Prewitt retired in 2006, according to court filings.

Both declined to comment

The course has grown from 20 students to about 350 per semester. In the early 1990s, Shell started a negotiation program for executives. He also has written several books, including “Bargaining for Advantage,” which has been translated into 14 languages, he said.

Shell was in Charlotte this week to work with executives at Wachovia's Evergreen Investments and to speak to business school alumni about his latest book, “The Art of Woo,” which he wrote with colleague Mario Moussa. The book explains how to use persuasion to sell your ideas in the workplace.

Shell, 59, spoke with the Observer about the book, the economy and his next project. Questions and answers have been edited for brevity and clarity.

Q: What's the key to successful persuasion at work?

Essentially, we talk about four steps in a process of selling ideas.

The first is surveying the network you're in and figuring out who you need to talk to and in what order.

The second is analyzing the five barriers. We found that 85 percent of persuasion problems run aground on one of these barriers:

You don't have a relationship with the person.

Credibility, so even if you know them, they don't think you're an expert or trustworthy.

You're proposing something that runs against someone's beliefs.

Conflicting interests, or proposing something that's going to take something away internally, whether it's power or authority or position.

Then finally, speaking to them in the language they understand.

The third step is making the pitch and making it memorable, trying to put it out in a compelling, problem solving-oriented way.

The final stage is securing commitment.

Q: Where did the idea for the book come from?

I had been researching a book on internal negotiations for a couple years, and I was totally frustrated by it. I was thinking, “It's too complicated, every organization is different.”

Then one day I was walking down the hallway at Wharton Executive Education, and I happened to meet up with a colleague. It suddenly clicked: Maybe he'd be the person I could partner with, and I wouldn't have to write it alone.

At that moment, Mario saw me and said, “You know, this negotiation stuff is really fun to teach, but there's a problem: Half the people, their negotiations are internal, and the book doesn't really address that very well.” I looked at him and said, “Well, how would you like to write a book about that?” Three years later, the book comes out.

Q: What kind of employees would benefit most from it?

I think it applies to anyone who's trying to get an idea through an organization. It can be an idea about maybe working at home more, rather than having to come to the office every day. Or it might be an idea related to a promotion or compensation. At a very high level, it works well, because the most important decisions are the most controversial, but even at a middle-management level, everybody's trying to get something done.

Q: Has the economic downturn made negotiation skills more important?

As economic trends change, people shift into and out of different levels of desperation, and so leverage shifts. If a company is in trouble, it loses leverage, because it needs more than the other party. But right at the edge of bankruptcy, leverage shifts back to the person in desperate condition because he's got nothing to lose anymore.

One thing is sure, and that's that the globalization in the economy is going to continue and deepen, so leverage will favor the company that has the ability to build wealth in the global market.

Q: What makes Charlotte's economy unique?

You still have a tremendous amount of building going on. So whatever the credit markets are doing, someone's still financing the construction, and that's a good sign. There also seem to be some people with some innovative ideas, and the city is gaining population while others are losing people. So somebody's doing something right down here.

The weakness is you've got a financial services industry that is challenged.

Q: Any thoughts on this year's presidential election?

We have two perspectives that people often come from when they persuade, the “inside-out perspective” and the “outside-in perspective.”

McCain is the inside-out. He is who he is, “this is my point of view, take it for what it's worth.” He doesn't try to be too slick. The danger is, you can't adjust your message for many different audiences, so the message may not get through.

Obama is much more of an outside-in person. He seems incredibly adept at adjusting his message to his audience. But he's going to suffer a bit from the fact that he's so skillful in this regard. People are going to say, “yeah, well, where does he really stand?”

Q: What do you do when you're not working?

I'm married, and I have two boys. I'm an educator, so the thing I like to do is learn. I'm developing a new course at Wharton on success and am writing a book on how to succeed. My quirkiest habit is I love to listen to books on tape. I have an iPod that's filled with the books everyone thinks they've read or says they've read.

Q: When is your next book coming out?

For me, the process of writing a book is, first, get some ideas; second, make a course about them; third, listen to what I say about the ideas and get smart people to challenge me; and then write a book. I'm still putting the course material together. It's going to be a hard book to write, because there are a million how-to-succeed books, but there were a million negotiation books, too, and mine did OK. I think it's all a matter of figuring out what to contribute that's different and original.

Kirsten Valle: 704-358-5248

The report says that booming trade between this country and China has crippled this state's manufacturing, textile and apparel industries, and is now beginning to claim higher-paying jobs in electronics manufacturing as well as technical fields.

The study repeats allegations long made against China – that the Communist behemoth is able to undercut U.S. workers by suppressing workers' wages and subsidizing national businesses while skirting environmental and workplace safety standards.

The study was prepared by the Economic Policy Institute and is being distributed via advocates for working-class and low-income people. The study says that since China's entry into the World Trade Organization in 2001 opened trading channels, it has cost the U.S. 2.3 million jobs since 2001.

The N.C. Justice Center is distributing the critical report at a time that relations between North Carolina and China are at their highest.

The state is geared to do business with China, which has one of the world's fastest-growing economies.

But China's embrace of capitalism is primarily benefitting American corporations and investors at the cost of this country's workers, said John Quinterno, research associate at the N.C. Budget and Tax Center, a project of the N.C. Justice Center.

China has cost 79,800 jobs, when job gains are measured against job losses, the study says.

The financial impact of the disruptions is hard to estimate, and China's exports should not be greatly affected, because suppliers had months to prepare, analysts and company representatives said.

Still, manufacturers have spent extra to produce and warehouse supplies ahead of the games, or to arrange special transport.

These costs come on top of the $40 billion the government is spending on Olympics venues and improvements to Beijing's infrastructure.

Ordered to shut down its blast furnaces to help clear the air for the 10,500 athletes and 500,000 tourists expected for the games, steel producer Beijing Shougang Group embarked on a massive effort to ensure its customers would not be affected. The company, a key supplier to China's booming construction industry, ramped up output in the first half of the year so it could fill orders during the shutdown, and it shifted some production to a mill outside Beijing.

Once the games and then the Paralympics end in late September, Shougang will ramp up production in the final quarter, said a manager who asked not to be identified by name because he was not authorized to talk to reporters.

Shopkeepers and manufacturers throughout Beijing will suffer from rules that ban trucks from the Chinese capital, making deliveries more costly or impossible. They will have to cut operations or pay sharply higher prices to move goods by van. The city already has banned 300,000 older trucks and other vehicles since July 1.

The controls also are disrupting less-visible industries such as pharmaceuticals, where China is a major supplier of materials such as penicillin used by global producers for drugs sold in the United States, Europe and elsewhere.

“The supply of some raw materials was indeed affected by restrictions during the Olympics,” said Xu Xiaofang, a spokesman for GlaxoSmithKline China. “Since we were informed about the restriction in advance, we have stored appropriate supplies.”

Pollution controls will require more than 150 steel, petrochemical and other industrial facilities to suspend production for the games, the official Xinhua News Agency reported, citing Zheng Jiang, vice chairman of Beijing environment bureau.

The interruption of steel production is expected to have little effect on trade because most of Beijing's output goes into construction, said Linda Lin, a Shanghai-based analyst for the industry newsletter Metal Bulletin.

She said only 15 percent of China's steel production last year was exported.

The moratorium unanimously approved Tuesday is a bid to attract restaurants that offer healthier food choices to residents in a 32-square-mile area of South Los Angeles.

“Our communities have an extreme shortage of quality foods,” city council member Bernard Parks said.

The aim of the yearlong moratorium is to give the city time to try to attract restaurants that serve healthier food.

The California Restaurant Association says the moratorium, which could be extended up to two years, is misguided.

Fast food “is the only industry that wants to be in South L.A.,” said association spokesman Andrew Casana. “Sit-down restaurants don't want to go in. If they did, they'd be there. This moratorium isn't going to help them relocate.”

The proposed ban comes at a time when governments of all levels are increasingly viewing menus as a matter of public health. Friday, California became the first state in the nation to bar trans fats, which lower levels of good cholesterol and increase bad cholesterol.

It also comes as the Los Angeles City Council tackles issues beyond safety, schools and streets. The council last week decided to outlaw plastic bags.

Fast-food restaurants have found themselves in the frying pan in a number of cities. Some places, including Carmel and Calistoga, have barred “formula” restaurants altogether; others have placed a cap on them – Arcata allows a maximum of nine fast-food eateries; others have prohibited the restaurants in certain areas, such as Port Jefferson, N.Y., in its waterfront area.

Most initiatives were designed to preserve a city's historic character. The Los Angeles bid is one of few that cite residents' health.

The mounting pressure has caused chains to insert healthier food choices in their menus. McDonalds offers salads and low-fat dressings; Burger King stocks Kids Meals with milk and apple pieces.

That's why the restaurant industry says it's unfair to blame them for fat people.

“What's next – security guards at the door saying, ‘You're overweight, you can't have a cheeseburger?'” Casana said.

But public health officials say obesity has reached epidemic proportions in low-income areas such as South Los Angeles and diet is the key reason.

According to the Los Angeles County Department of Public Health, 30 percent of adults in the South Los Angeles area are obese, compared with 19.1 percent for the metropolitan area and 14.1 percent for the affluent westside. Minorities are particularly affected: 28.7 percent of Latinos and 27.7 percent of blacks are obese, compared with 16.6 percent of whites.

Council member Jan Perry says that's no accident. South L.A. residents lack healthy food options, including grocery stores, fresh produce markets – and full-service restaurants with wait staff and food prepared to order.

A report by the Community Health Councils found 73 percent of South L.A. restaurants were fast food, compared with 42 percent in West Los Angeles.

Perry wants to lure restaurateurs and grocery retailers to the area.

Rebeca Torres, a South Los Angeles mother of four, said she would welcome more dining choices, even if she had to pay a little more. “They should have better things for children,” she said. “This fast food really fattens them up.”

The challenging “economic climate” for textile makers is forcing the consolidation of the company's spinning operations, said Barry Chambers, vice president of human resources. Employees will be given the option to relocate to other American & Efird facilities. They learned of the coming closing last week.

The company, a subsidiary of Charlotte-based Ruddick Corp., makes industrial and consumer sewing and embroidery thread.

Hannah Mitchell

Garden & Gun magazine is suing the owner of a Charlotte nightclub of the same name, alleging trademark infringement.

The Charleston, S.C.-based Southern lifestyle magazine filed the suit in state court Monday against TwoDalGals, which owns Charlotte's Garden and Gun Club, set to open this summer. The case was removed to federal court Tuesday.

In court documents, the year-old Garden & Gun magazine argued that it owned the Garden & Gun trademark by assignment from its parent company, Evening Post Publishing Co. The company selected the name to exemplify the South's “geniality yet strength,” it said. It alleged that it has spent millions developing, publishing and advertising the magazine and accompanying Web site. Company officials discovered the Charlotte nightclub during an Internet search.

The company said it is concerned that the club's use of the name will lead people to believe the club and magazine are related. The magazine is seeking more than $75,000 in relief, according to court papers. Kirsten Valle

The Charlotte-based company – one of the nation's largest auto retailers – posted a net income of about $10.8 million for the quarter, down from almost $26.4 million a year earlier. Some of that loss was from discontinued operations, including the closure of a Cadillac franchise in California.

Although the results beat analysts' estimates, Sonic – whose chairman and CEO is billionaire Bruton Smith – continues to see declines in new vehicle sales from last year.

Company executives said Tuesday that they expect high gas prices and low consumer confidence to hurt demand for new vehicles, leading Sonic to lower its outlook in that area from a decline of 4.5 percent to one of 7.2 percent this year.

“Looking back on things, our initial guidance for 2008 was fairly aggressive,” said David Cosper, the company's chief financial officer, during a conference call with analysts.

Shares in Sonic closed Tuesday at $10.69, up $1.18, or more than 12 percent, from Monday but down more than 60 percent from early last August – the high point in the past year.

Sonic also lowered its outlook for fixed operations, which includes sales of replacement parts and the company's maintenance, warranty, paint and repair services. After projecting growth of 3.5 percent earlier this year, executives said Tuesday they expect a decline of 0.5 percent in 2008.

Used vehicle sales remain a bright spot, with revenues up 8 percent from last year's second quarter. In the first six months of 2008, used vehicle revenues were up almost 12 percent.

Sonic executives don't expect growth in used vehicle sales to remain that strong all year, noting Tuesday that dealerships were getting fewer trades than in previous months. In addition, the value of sport-utility vehicles and trucks has plunged as gas prices have soared.

Still, Sonic boosted its outlook for used-vehicle sales from 3 percent growth this year to 4.4 percent. In addition, the board of directors declared a regular quarterly dividend of 12 cents – the same as in the previous quarter.

Once known for buying dealerships from coast to coast, Sonic doesn't plan any big acquisitions in the near future, said Scott Smith, the company's president and chief strategic officer.

Smith didn't give an update during the conference call on Sonic's plan to buy Beck Imports of Charlotte, one of the Carolinas' leading Mercedes-Benz dealers.

Shortly after Sonic and Beck Imports announced an agreement in February, Mercedes-Benz USA said Sonic couldn't buy another Mercedes-Benz dealership until it fixes design and appearance problems at other locations. Sonic then sued Mercedes-Benz USA, claiming the firm broke N.C. law by blocking the deal.

Smith said in April that the lawsuit could be settled within two months. Sonic executives didn't take media questions during the call, and messages left at the company's office weren't returned Tuesday

Instead of acquisitions, Scott Smith said on the conference call, the best investments for Sonic right now are training employees and buying existing locations that are currently being leased.

“We are building for the long term,” he said.

Sonic Automotive reported a 59 percent drop in second-quarter profits Tuesday, and executives said revenue from new vehicle sales and parts, maintenance and related operations this year will be worse than initially forecast.

The Charlotte-based company – one of the nation's largest auto retailers – posted a net income of about $10.8 million for the quarter, down from almost $26.4 million a year earlier. Some of that loss was from discontinued operations, including the closure of a Cadillac franchise in California.

Although the results beat analysts' estimates, Sonic – whose chairman and CEO is billionaire Bruton Smith – continues to see declines in new vehicle sales from last year.

Company executives said Tuesday that they expect high gas prices and low consumer confidence to hurt demand for new vehicles, leading Sonic to lower its outlook in that area from a decline of 4.5 percent to one of 7.2 percent this year.

“Looking back on things, our initial guidance for 2008 was fairly aggressive,” said David Cosper, the company's chief financial officer, during a conference call with analysts.

Shares in Sonic closed Tuesday at $10.69, up $1.18, or more than 12 percent, from Monday but down more than 60 percent from early last August – the high point in the past year.

Sonic also lowered its outlook for fixed operations, which includes sales of replacement parts and the company's maintenance, warranty, paint and repair services. After projecting growth of 3.5 percent earlier this year, executives said Tuesday they expect a decline of 0.5 percent in 2008.

Used vehicle sales remain a bright spot, with revenues up 8 percent from last year's second quarter. In the first six months of 2008, used vehicle revenues were up almost 12 percent.

Sonic executives don't expect growth in used vehicle sales to remain that strong all year, noting Tuesday that dealerships were getting fewer trades than in previous months. In addition, the value of sport-utility vehicles and trucks has plunged as gas prices have soared.

Still, Sonic boosted its outlook for used-vehicle sales from 3 percent growth this year to 4.4 percent. In addition, the board of directors declared a regular quarterly dividend of 12 cents – the same as in the previous quarter.

Once known for buying dealerships from coast to coast, Sonic doesn't plan any big acquisitions in the near future, said Scott Smith, the company's president and chief strategic officer.

Smith didn't give an update during the conference call on Sonic's plan to buy Beck Imports of Charlotte, one of the Carolinas' leading Mercedes-Benz dealers.

Shortly after Sonic and Beck Imports announced an agreement in February, Mercedes-Benz USA said Sonic couldn't buy another Mercedes-Benz dealership until it fixes design and appearance problems at other locations. Sonic then sued Mercedes-Benz USA, claiming the firm broke N.C. law by blocking the deal.

Smith said in April that the lawsuit could be settled within two months. Sonic executives didn't take media questions during the call, and messages left at the company's office weren't returned Tuesday

Instead of acquisitions, Scott Smith said on the conference call, the best investments for Sonic right now are training employees and buying existing locations that are currently being leased.

“We are building for the long term,” he said.

The former U.S. Treasury Department official is under contract to buy a home in Charlotte's exclusive Eastover neighborhood, sources told the Observer on Tuesday.

In last week's earnings conference call, Steel, 56, said he has been staying in the Hilton hotel next to the Charlotte bank's uptown headquarters during his first weeks on the job. He had counted his commute as just 31 steps.

Buying a home in Charlotte is the latest sign of Steel's commitment to the bank he's charged with reviving. After announcing an $8.9 billion second-quarter loss last week, he bought 1 million Wachovia shares.

Analysts have speculated that Wachovia could become a takeover target, a potentially grim scenario for Charlotte. Steel, however, has stressed his goal to restore the company. Local officials were pleased to hear he's putting down roots.

“He's given every signal that he and the board are committed to maintaining the independence of Wachovia and keeping the company in Charlotte,” Charlotte Chamber president Bob Morgan said, acknowledging that market forces will ultimately decide the company's fate. “He's putting his money where his mouth is, and that's good for Charlotte.”

A Wachovia spokeswoman declined to comment on the planned purchase.

Steel and his wife, Gillian, are moving to a neighborhood that has long been home to the city's business elite. Current residents include Duke Energy Corp. chief executive Jim Rogers and Steel's predecessor, Ken Thompson.

The home the Steels are buying has about 6,700 square feet and an assessed value of around $2.1 million, according to tax records. They also have homes in Washington and Connecticut as well as a condo in Colorado.

Steel, a Durham native, has said he's excited to be returning to his home state and Charlotte. “My wife, Gillian, and I look forward to becoming involved,” he told employees when he was introduced as CEO.

Prices inched down 0.2 percent for the 12 months through May, according to the S&P/Case-Shiller Home Price Index.

That was, by far, the smallest decline and well below the record drop of nearly 16 percent for the 20 major urban markets studied.

Last month, Charlotte ended a three-month stretch as the only market where values were rising compared with a year ago.

One possible bright spot: May marked the third consecutive month in which Charlotte prices rose slightly when compared with the previous month. Typically, the longer period is more valid for comparisons. However, month-to-month changes can be useful in spotting trends, said David Blitzer, a managing director with Standard & Poor's.

The three small upticks don't herald a turnaround, he said, “but it is very slightly encouraging.”

Nationwide, housing prices have been battered by high foreclosure levels, a glut of available housing and a weak economy.

Tighter lending standards and higher mortgage interest rates also have made it harder for people to buy houses. And many buyers are waiting, hopeful that better bargains might yet come.

The Charlotte area experienced more modest price growth during the frantic housing market of a few years ago and so has not been hit as hard by declines.

However, the decline in the region's new home construction and home sales has been outpacing national rates this year as the housing downturn takes root. The downturn began about a year later in Charlotte than elsewhere.

The index's biggest drops continue in bubble markets where prices shot up and so have had further to fall. Las Vegas led the declines, at 28.4 percent with Miami a close second at 28.3 percent.

Others falling 20 percent or more compared with a year ago were Los Angeles, Phoenix, San Diego, San Francisco and Tampa, Fla. Charlotte is the only Carolinas market in the index.

The index measures changes in values for existing homes but does not report prices. Another measure shows similar price fluctuations.

In the second quarter, the Charlotte area's median sales price for all types of new and existing houses fell 1 percent from the April-June period in 2007, to $184,000, according to Market Opportunity Research Enterprises.

Prices for existing single-family homes, which account for 60 percent of sales, fell 4 percent to a median of $165,000, according to the Rocky Mount firm, which tallies data from public records.

Developers plan homes, shops, restaurants, offices and hotels on 75 acres at Interstate 85 and Poplar Tent Road.

The project would provide services that capitalize on Cabarrus County's residential growth and supply top-of-the line office buildings for companies attracted to the area.

Columnist Doug Smith talks to Concord leaders on why this $125 million development is a potential Next Big Thing.

Pages 4D and 5D.

Alcatel-Lucent's Chief Executive Patricia Russo, who had said two months ago that she understood shareholders' disappointment, did Tuesday what many shareholders had been demanding: She resigned, as did Chairman Serge Tchuruk, her co-architect in the 2006 merger of the French and American companies.

“The time is right,” Russo said in a conference call.

Russo finally succumbed to the failure of the $11.4 billion merger to live up to expectations. Alcatel-Lucent's stock price has fallen by over 60 percent since the merger, the company has yet to post a profit, and already it has tried massive job cuts.

“Ms. Russo ran out of turnaround plans, and Alcatel-Lucent's board ran out of patience,” said James Post, a management professor at Boston University.

At the company's annual meeting in May, Russo – who had been running the AT&T spinoff Lucent before the deal – was greeted with jeers and whistles. Shareholders criticized her not only for the shares' slide, but also for her demeanor, her inability to speak French and her salary.

In 2007, she was paid $2.8 million, including benefits. She will leave the company with a severance package equivalent to two years' salary, or up to $9.4 million, company spokeswoman Regine Coqueran said.

Tchuruk, Alcatel's longtime chairman and CEO before the merger saw him take on the non-executive chairman role, said in a statement that the resignations were aimed at giving Alcatel-Lucent “a personality of its own, independent from its two predecessors.”

The Alcatel-Lucent merger was designed to boost profit margins through savings on expenses and research and development, while improving the joint company's pricing power with telecommunications network operators, its largest customers. The idea was to create a critical mass to compete with the likes of China's Huawei Technologies Co. and Ericsson AB of Sweden.

But because of intense competition in the industry, much of the savings Alcatel-Lucent has generated have been used on discounts to lure customers.

Tchuruk will step down Oct. 1, and Russo will resign “no later than the end of the year,” the company said in a statement.

Alcatel-Lucent shares closed up nearly 6 percent Tuesday as investors applauded the pair's departure.

Charlotte still has work to do to achieve that status, a top London official told business and other local leaders Monday. Among other things, it needs to attract international workers, grow industries besides banking and partner with other countries.

“We've got to work together,” David Lewis told about 100 people during a luncheon at the Charlotte City Club, 30 floors above the uptown square. “It's a global market.”

Lewis is lord mayor of London, a one-year post elected by the city's workers. In a role separate from Mayor Boris Johnson, Lewis presides over London's governing bodies and acts as an ambassador for United Kingdom-based companies all over the world.

He was in Charlotte, a stop on his latest U.S. tour, to discuss U.K. economic connections and promote U.K.-based financial services.

While Charlotte is the second-largest banking center in the U.S., it didn't make MasterCard's recent list of the world's 75 top financial centers, Lewis said.

“That, to me as an outsider, seems a little off,” he said.

Charlotte can learn from London, which topped the list. Lewis said his city's success is largely a result of international influence, pointing out that there are 300 languages represented there and 700 foreign companies on the London Stock Exchange.

Many of the city's workers don't have British passports, he said.

Tough U.S. immigration policies make such a mix more difficult in Charlotte, Lewis said.

“It's not so easy to come and work in the U.S.,” he said. “Dare I say it, not everyone's a terrorist.”

Still, Charlotte should look for “really bright guys” from other countries who can enrich its business climate.

In addition, its companies should work to establish an international presence, and local leaders should partner with leaders from other countries.

According to the Charlotte Chamber of Commerce, there were more than 480 foreign-owned companies in Mecklenburg County last year, up from 380 in 2000.

The U.K. had about 70 firms with operations in Mecklenburg last year, the second-most behind Germany. Some companies with a U.K. presence were represented at the luncheon Monday, including PricewaterhouseCoopers and UK Trade & Investment.

Charlotte should also take a look at the things working to its advantage, such as its quality of life and accessible airport – and the things that might be working against it, such as its infrastructure and tax rates, Lewis said.

London just set up two committees to assess the city's competitiveness in the global market. Charlotte might want to do the same, he said.

Charlotte should aspire to be more than just a banking center, Lewis said. According to the N.C. Department of Commerce, just about 10 percent of Mecklenburg's workers were employed in finance and insurance last year.

Lewis, a tall figure with steel-gray hair and a crisp suit, spoke quickly Monday, drawing a long round of applause. Charlotte Mayor Pat McCrory, who introduced Lewis, said he was impressed with the “dynamic things” going on in London, particularly with its transportation system. He jokingly asked the crowd to begin referring to him as the “lord mayor” of Charlotte.

After the talk, local leaders said they agreed with Lewis' remarks.

“I thought he was right on target,” said Bob Morgan, president of the Charlotte chamber. “It's important for us to succeed, and to succeed, we have to be growing and ambitious. London is considered one of the world's financial centers, and we aspire to that same level.”

Charlotte has taken the right steps in recent years, but it's not quite there yet, said Michael Teden, British honorary consul to the state of North Carolina, who has lived in Charlotte nearly 30 years.

“Charlotte and this region have a lot of work to do,” he said. “That was the message, and it was a positive message.”

Specifically, the city needs to raise its international profile and begin thinking about itself in global terms, said Mike McGuire, Carolinas managing partner of Grant Thornton, which hosted the event Monday. “I think we're doing it,” he said, noting that people from other states and countries no longer confuse Charlotte with other Southern cities. “It just takes time.”

Like Tantillo, market farmers nationwide face exponentially rising costs for fuel, fertilizer and animal feed that could force them to hike prices that are already often higher than grocery stores.

It couldn't come at a worse time for farmers; their customers are also feeling squeezed by inflation.

Tantillo estimates about half the money she takes in on a given day at the market now goes to cover costs related to transportation. She drives a van that carries less but is more fuel efficient than her old panel truck. She even skipped an entire month of selling in the city because she didn't think the returns would be worth the expense.

“I'm a small grower,” she said recently, as she stood at her table laden with $4 quarts of strawberries and other produce from her “Berried Treasures” farm in Cooks Falls, N.Y. “And I'm trying not to raise prices.”

While farmers markets have a long history in the U.S., the Department of Agriculture says the number across the country nearly doubled in the past decade – to nearly 4,400 in 2006 – as more consumers embraced buying locally produced food.

Sometimes housed in a historic downtown building, sometimes a collection of vendors gathered in a city park or parking lot, such markets typically feature seasonal produce, meats and handcrafted cheeses sold by small farmers directly to consumers. The markets often add baked goods and other prepared foods for sale.

Farmers have always faced an array of uncontrollable factors like pests and weather, but this year fuel prices have joined the list.

Rising oil and natural gas prices have hit farmers in myriad ways: dramatic cost increases for fertilizers and animal feed; higher charges for plastic supplies for greenhouses and irrigation systems for fields; larger energy bills for heating greenhouses and soaring prices for diesel used to fuel farm equipment and the trucks that carry their products to the markets. Even the plastic bags they put their products in are more expensive this year.

“To fill up a tractor now is like $300 or $400. It used to be $60,” said Todd Griffith of TG Farms in Newcastle, Okla.

Griffith cut the number of markets he sells at this year to two from four, eliminating drives of 25 miles and 40 miles because the return at the smaller markets was too low.

He also used to drive about 200 miles to Dallas to pick up produce from other farmers to supplement his offerings. “I don't go down there anymore,” he said. “If I don't grow it, I don't sell it.”

Many farmers now have had no choice but to pass the rising costs on to their customers.