Treasury Department Rejects GM's $10 Billion Request
The potential merger of General Motors Corp. and Chrysler LLC hit an impasse Sunday when the U.S. Treasury Department turned down GM's request for $10 billion to aid the possible amalgamation of the two auto giants. GM asked for a rescue package to support its acquisition of Chrysler from Ceberus Capital Management that would include about $3 billion in exchange for preferred stock in the combined automaker, Reuters reports. The U.S. government also was asked to provide support by taking over some $3 billion in pension obligations.

The $3 billion in equity would be roughly equal to the current, depressed value of GM. Instead of assisting the merger financially, the Treasury Department told GM on Friday that it was reluctant to broaden the $700 billion financial rescue program to include industrial companies or play a part in the merger, the New York Times says. The Treasury Department added that it will shift its focus on the $25 billion loan program for fuel efficient vehicles approved by Congress in September.

And closing out GM/Chrysler news, Nissan Motor Co. and Renault SA dismissed speculations regarding their interest in Chrysler, saying "it did not make sense to risk cash in the current environment to form a strategic alliance," Reuters adds.

Delta Buys Northwest, Forms Largest Airline
In other merger and acquisitions news, Delta Air Lines Inc. and Northwest Airlines Inc. were given the go-ahead to merge by the Department of Justice Wednesday. After a six-month long investigation, government lawyers concluded the merger would likely drive down costs for consumers but does not violate antitrust laws. The merger would create the largest airline by traffic and be the biggest in the U.S. in terms of annual revenue. The two had a combined $31.7 billion annual revenue at the end of 2007. The combined airline would be called Delta and be headquartered in Atlanta, MarketWatch says.

Steel Production Dips
U.S. raw steel production has declined for 10 consecutive weeks to levels not seen in more than two years, the American Iron and Steel Institute reports. The volume for the week ended Oct. 25 was 1.68 million tons, down 3.7 percent from the previous week and 22 percent off the 2008 peak of 2.167 million tons in the week ended Aug. 16.

Adjusted year-to-date production is 88,841,000 tons with a capability utilization rate of 87.2 percent. That is a 0.6 percent increase from the 88,348,000 tons during the same period last year, when the capability utilization rate was 86.4 percent.

U.S. Economy Contracts
The U.S. economy shrank at a 0.3 percent annual rate in the third quarter, its sharpest contraction in seven years, as consumers curbed spending. A Commerce Department report said the drop in spending — which accounts for two-thirds of U.S. economic activity — came even as incomes rose 0.2 percent. This is the steepest drop in spending since June 2004.

Due to the falling consumer demand, rising unemployment and ongoing financial turmoil, the National Association of Business Economists released a report today saying the economy has fallen into a recession that will continue throughout 2009.

To aid the unfreezing of the credit markets, the Federal Reserve cut rates by half a point to 1 percent Wednesday. The economists surveyed are wary of the Fed's programs and latest cut with 58 percent saying the programs are having little impact.

Indeed, hardly anything seems to be effective in getting banks to provide loans to help the American economy. JPMorgan Chase, which received $25 billion courtesy of the U.S. government, has said it would use the money to be more active in acquisitions and growth instead. Alternatively, nine major U.S. banks propped up by the government loan have spent or set aside $108 billion to pay out bonuses to top executives.

Another beneficiary of government loans, American International Group (AIG), is quickly burning through the $123 billion given by the Federal Reserve, which analysts believe is caused by irregular accounting and that AIG must have accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse.

As many as 1,800 publicly-held institutions may be lining up for government investments in the coming weeks as the Treasury Department contemplates the conditions of the government's $700 billion rescue plan.

BPA Debate Continues
The debate on the potential health risks of bisphenol A (BPA) persists as the Food and Drug Administration's Science Board accused the FDA's current assessment of BPA being misleading.

Bisphenol A, a chemical used for soft drink bottles, metal can linings and other plastic products, has been linked to heart disease, diabetes and detrimental effects to infants' brains. While the European Food Safety Authority claims the recent study by the Journal of the American Medical Association (JAMA) had insufficient proof for the link between BPA and health hazards, the seven-member Science Board subcommittee thought otherwise.

The subcommittee reviewed the FDA's assessment of BPA (which agrees with the EFSA's conclusions) and said it found flaws. "This approach creates a false sense of security about the information that is used in the assessment ... as it overlooks a wide range of potentially-serious findings," the report says.

The Science Board accepted the subcommittee's report and gave the FDA until February 2009 to consider additional studies and respond to the report.

Melamine Scare Widens
The toxic chemical melamine, which was the center of the Chinese milk scandal in September, is probably being routinely added to Chinese animal feed, Chinese media have reported (via BBC News). Melamine is high in nitrogen and is used to make food appear to have higher protein content.

"The feed industry seems to have acquiesced to agree on using the chemical to reduce production costs while maintaining the protein count for quality inspections," the state-run China Daily said in an editorial. "We cannot say for sure if the same chemical has made its way into other types of food."

However, it has. Hong Kong's Centre for Food Safety officials found nearly double the certified safe level of 2.5mg of melamine per kilogram from eggs produced by Chinese company Hanwei. Walmart has pulled Hanwei eggs from its Chinese supermarkets but the U.S.-based retailer's steps have not been followed by other retailers in China.

Health officials do not see the egg scare growing to the breadth of the milk scandal citing little risk to human health. "[A] child would have to eat perhaps 20 eggs a day for the melamine to have an effect," Hong Kong health officials said.

In comparison, some children who fell ill after ingesting tainted milk now have developed "crystals" in their kidneys, the World Health Organization reports (via Reuters).