GM, Chrysler say slashing dealerships necessary

WASHINGTON (AP) ¿ The chiefs of General Motors and Chrysler told skeptical lawmakers on Wednesday they have too many dealers to support their slimmed down operations and sacrifices must be shared as they fight to overcome bankruptcy and survive. They acknowledged that slashing dealerships is causing pain in communities around the country.

Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers, some of whose families have been in the business for decades.

More than 2,700 dealerships are in line to lose their franchise. Two small-town dealers invited to appear before the committee spoke of the anguish ahead.

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Economic data disappoint, indicate slow recovery

WASHINGTON (AP) ¿ A pair of economic reports on Wednesday indicated only slight improvement in the service and manufacturing sectors, suggesting that any economic recovery will be gradual.

The nation's service sector shrank in May at the slowest pace since late last year. And factory orders rose in April. But the improvements fell short of economists' expectations and disappointed investors, who sent stocks lower.

Economic reports earlier this week on home sales and manufacturing had been encouraging, but Wednesday's figures sent a reminder that the economy remains sluggish.

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Worse-than-expected economic data thwarts rally

NEW YORK (AP) ¿ Investors broke the stock market's four-day rally and sold off after data on the services industry and factory orders came in below forecasts.

The Dow Jones industrial average fell almost 66 points, or 0.8 percent, to 8,675.24, while the Standard & Poor's 500 index fell 1.4 percent. The Nasdaq composite index, which has been outperforming the other indicators this year, fell just 0.6 percent.

Optimism about the economy stabilizing has lifted the Dow 32.5 percent from its 12-year low reached in early March. Over those three months, topping investors' expectations meant clearing a relatively low bar.

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Bernanke: Start work now to curb budget deficit

WASHINGTON (AP) ¿ Federal Reserve Chairman Ben Bernanke on Wednesday urged Congress and the administration to cut record-high budget deficits, warning that they could erode investor confidence and endanger the economy's long-term health.

Bernanke's comments came as concerns grow at home and overseas about the United States' mounting red ink.

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year's all-time high.

Bernanke acknowledged that Congress and the administration face "formidable near-term challenges" that must be addressed as they take steps to stabilize the financial system, reduce home foreclosures and spur banks to lend more freely.

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Energy prices slump on surplus of oil in storage

SIOUX FALLS, S.D. (AP) ¿ Oil prices took a dive Wednesday after a government report on unused crude in storage suggested the monthlong rally in energy prices may have been premature.

After rising for seven straight days and threatening to break the $70 barrier, benchmark crude for July delivery tumbled 3.5 percent, or $2.43, to $66.12 a barrel on the New York Mercantile Exchange.

The catalyst was a report from the Energy Department's Energy Information Administration, which said crude in storage rose by nearly 3 million barrels, which is about 20 percent above year-ago levels.

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Carl Icahn claims 2 seats in Biogen proxy fight

NEW YORK (AP) ¿ Activist investor Carl Icahn claimed two victories in his fight to place dissident shareholders on Biogen Idec Inc.'s board Wednesday, but the biotechnology company has not yet finished tallying votes.

Icahn wants to seat four shareholders on Biogen's 13-member board as part of a yearslong dispute with the company's direction. The contentious proxy fight culminated in Biogen's annual meeting in Cambridge, Mass., but the company recessed for most of the day, saying it needed to give shareholders more time to vote.

After reconvening the meeting at 2 p.m., it was promptly adjourned without final results.

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AP Source: AIG agrees to sell 2 NYC buildings

CHARLOTTE, N.C. (AP) ¿ The embattled insurer American International Group Inc. is selling its headquarters building in New York and a nearby building in a deal expected to close at the end of this summer, a person familiar with the matter said Wednesday.

But the person said that AIG is not disclosing the price or who the buyer is. The person asked for anonymity because the sale has not been made public yet.

The building sales are the latest move by AIG, which has received $182.5 billion in financial support from the government since September, to shed assets to repay the loan package.

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Appeals court to hear appeal of Chrysler sale

NEW YORK (AP) ¿ A federal appeals court has halted Chrysler's sale of the bulk of its assets to Italy's Fiat pending an appeal by a trio of Indiana state pension and construction funds.

The U.S. Court of Appeals for the Second Circuit said late Tuesday it will hear arguments in the case Friday afternoon in New York, according to the Indiana treasurer's office. Chrysler LLC had hoped to close the sale by the end of week, pending regulatory approval.

Chrysler has maintained that the deal with Fiat Group SpA is its only hope of avoiding selling itself off piece by piece. If the sale doesn't close by June 15, Fiat has the option of pulling out of the deal.

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SAIC 1st-quarter profit rises 13 percent

WASHINGTON (AP) ¿ SAIC Inc. said Wednesday its fiscal first-quarter profit grew 13 percent as revenue soared on U.S. military spending on defense logistics and cybersecurity.

The San Diego-based contractor also assured investors plans by the Pentagon to restructure the Army's $160 billion modernization plan, known as Future Combat Systems, will not hurt its financial results for the rest of the year.

SAIC says it still expects revenue to grow between 6 percent and 9 percent and earnings to rise between 11 percent to 18 percent.

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Merkel critical of central banks

BERLIN (AP) ¿ German Chancellor Angela Merkel has voiced skepticism about leading central banks' approach to tackling the economic crisis, suggesting that they may be storing up more trouble for the years ahead.

Merkel's comments come as the European Central Bank has faced criticism from some analysts for not being as aggressive as either the U.S. Federal Reserve or the Bank of England, both in cutting interest rates and in promoting measures such as bond purchases to boost the money supply. By The Associated Press

The Dow fell 65.63, or 0.8 percent, to 8,675.24.

The Standard & Poor's 500 index fell 12.98, or 1.4 percent, to 931.76. The Nasdaq composite index fell 10.88, or 0.6 percent, to 1,825.92.

Benchmark crude for July delivery tumbled 3.5 percent, or $2.43, to $66.12 a barrel on the New York Mercantile Exchange.

In other Nymex trading, gasoline for June delivery slipped 2.36 cents to settle at $1.9016 a gallon and heating oil fell by 5.95 cents to settle at $1.7384 a gallon. Natural gas for June delivery tumbled 35.4 cents to settle at $3.766 per 1,000 cubic feet.

In London, Brent prices lost $2.29 to settle at $65.88 a barrel on the ICE Futures exchange.

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