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NATION

Connecticut attorney general sues Marsh & McLennan, Ace

The attorney general of Connecticut sued the Marsh & McLennan Cos. and a unit of the Ace Group of Cos. yesterday, accusing them of working together to mislead the state and increase costs on an $80 million contract for workers' compensation insurance.

The lawsuit follows one brought by the New York attorney general in October that makes similar but unrelated accusations of Marsh taking payments to steer business. Marsh is in negotiations with Eliot Spitzer, the New York attorney general, to try to settle that lawsuit.

The Connecticut lawsuit widens the scope of investigations into insurance industry practices with its focus on workers' compensation, one of the largest lines of insurance coverage. Richard Blumenthal, the Connecticut attorney general, said his investigation into concealed payments and increased costs for customers of workers' compensation coverage extended to other major insurance brokers and insurance companies.

Wal-Mart sides with Discover credit cards

NEW YORK » In the latest challenge to the Visa and MasterCard dominance of the American credit card market, Discover Financial Services Inc. announced yesterday that it is teaming up with Wal-Mart to issue a new credit card to customers of the world's largest retailer.

It is Discover's first major card deal since the U.S. Supreme Court last October let stand an antitrust ruling that forced Visa and MasterCard to stop preventing their member banks from issuing rival cards. That made it possible for Discover and the American Express Co. to begin seeking American partners to issue their cards.

New York-based American Express last year announced its first deals, with specialty card issuer MBNA Corp. and Citibank, a unit of Citigroup Inc.

Discover, a unit of New York-based investment bank Morgan Stanley, said its new cards -- to be called Wal-Mart Discover -- will be issued by GE Consumer Finance, which is a unit of the General Electric Co.

Pentagon to fill airline seats

At the slowest time of the year for the nation's struggling airlines, one big customer, the Pentagon, wants to give them more business.

According to a government memorandum circulated this week, the Pentagon has increased its spending by 15 percent so far this year on flights by passenger airlines, with the heaviest traffic expected in February and March.

The memo also said that the two dozen airlines, charter companies and cargo carriers that participate in a program, the Civil Reserve Air Fleet, may also be given the opportunity to fly goods and troops to countries in South Asia that were ravaged by the tsunami, supplementing a relief effort by the military.

The memo, dated Jan. 14, summarized a teleconference involving military officials and participants in the air fleet.

In 2005, the government is "buying at a pace about 15 percent above" what it was spending last year, according to the memo. It estimated spending of $315 million on flights during the first quarter of 2005, compared with the $275 million spent in the first quarter last year.

The memo gave no reason for the increase, but it coincides with the third rotation of troops to Iraq since the conflict began nearly two years ago. A spokesman at Scott Air Force Base in Illinois, where the program is based, had no immediate comment.

US Airways machinists OK cuts

Machinists at bankrupt US Airways' last holdout union voted yesterday to approve pay and benefit cuts that will save the airline almost $270 million -- but cost thousands of union members their jobs.

Yesterday's vote by the machinists union gives the airline a reduction of more than $1 billion in its annual labor costs, the level management said was necessary to be viable in an increasingly cutthroat industry.

"The vote came down to choosing between bad and worse," said William O'Driscoll, president of International Association of Machinists District 142.

Of the three groups voting yesterday, 61 percent of the voting mechanic and related members, 62 percent of fleet service workers and 97 percent of voting maintenance training specialists voted to accept US Airways' final proposal.

The union's vote to accept US Airways' offer should eliminate the threat of a strike, which might have dealt a lethal blow to the airline. US Airways had been prepared to seek a preliminary injunction barring the union from going on strike had the contracts been rejected.

If the unions had voted against the contracts, the contracts would then have been canceled altogether by court order and the airline would have been free to impose harsher terms.

WORLD

5,600 GM workers in Germany accept buyouts

FRANKFURT, Germany » Roughly 5,600 German employees of General Motors Corp. have agreed to accept buyouts offered as part of the world's biggest automaker's efforts to slash jobs in Europe, a labor official said yesterday.

GM announced plans last year it would cut as many as 10,000 jobs at the Adam Opel AG unit in Germany, in an attempt to return the struggling company to profitability.

Workers who have agreed to take advantage of GM's buyout offer, which includes retraining and job placement, are still waiting for contracts to be drawn up, said Klaus Franz, Opel's chief worker representative. Any undecided workers will have until Jan. 31 to sign an agreement, said Franz. A meeting between company heads and worker representatives to discuss the next step is scheduled for late February.

But Franz expressed confidence the buyout offer would prevent the need for any further measures.

"I am confident that we will be able to meet the desired reductions in staff without job cuts," said Franz.

EU ends sanctions on U.S. goods

The European Union announced yesterday that it was lifting sanctions on American products now that Congress has repealed tax cuts for exporters that were declared illegal by the World Trade Organization.

Lifting the sanctions also helps improve the atmosphere for President Bush's visit to Europe next month.

The Europeans couched the announcement as another gesture of goodwill in their trade relationship with the United States. Earlier this month, the two trading giants backed away from suing each other over the billions of dollars in subsidies that both give to their biggest civilian aircraft makers.

The tariffs on $4 billion in American goods were imposed by Europe a year ago and cover more than 1,500 products from steel to clothing. Gooch said the sanctions would be lifted retroactively from Jan. 1.