General Motors Corp. announced further production cuts yesterday as well as sweeping new incentives on many 2008 models — a reversal of recent strategy and a fresh sign of how badly rising gasoline prices are hurting auto makers, the Wall Street Journal reported today. GM, Ford Motor Co. and Chrysler LLC have been trying for over two years to back away from heavy incentives, which eat into profit margins and tarnish brands in the eyes of some consumers. But a worsening of the slump in car and light-truck sales this month is forcing the Detroit companies to take difficult steps to halt sales declines. Through the first half of June, normally a strong period, U.S. auto sales were running at an annualized rate of about 12.5 million vehicles, according to J.D. Power & Associates. It was the lowest level for June in decades and a huge drop from the year-ago rate of 16.3 million vehicles.

Hundreds of banks that are accused of playing a role in the collapse of Adelphia Communications Corp. have prevailed in their efforts to strike more than $4 billion in claims in a lawsuit brought by the company’s creditors, Bankruptcy Law360 reported yesterday. The cable company’s creditors, represented by the Adelphia Recovery Trust, are accusing 380 commercial and investment banks - including Citigroup Inc., Deutsche Bank and Bank of America Corp. - of looking the other way while Adelphia’s founding family looted the company of over $2 billion. Their 537-page amended complaint, filed last October, asserted 57 claims against the defendants, including claims to recover billions of dollars in loan obligations owed the banks by Adelphia’s subsidiaries.

Bondholders in Pacific Lumber Co.’s bankruptcy case said that they want to investigate possible fraud in a settlement that calls for the company to abandon its reorganization plan and support a rival proposal, the Wall Street Journal reported today. Bank of New York Mellon Corp., which represents the bondholders, said that it wants to probe several aspects of the agreement. The bank wants to look into whether the deal, a key development in the 15-month-old chapter 11 proceeding, is “the product of fraud or collusion and was forced on” Pacific Lumber, according to documents filed last Thursday with the U.S. Bankruptcy Court in Corpus Christi, Texas. Bankruptcy Court Judge Richard Schmidt will consider approving the agreement at a hearing Thursday.

Meredith Corp. has filed suit against Home Interiors & Gifts Inc. in a dispute over about $385,000 worth of paper that the bankrupt home décor company has argued belongs to its bankruptcy estate, Bankruptcy Law360 reported on Friday. The suit seeks a declaratory judgment that the paper belongs to Meredith and that the company had not violated the automatic stay in Home Interiors’ bankruptcy. It also asks the court to grant Meredith an allowed claim of $79,370.90, the amount the company says is still outstanding on its account for Home Interiors.

Bankruptcy Judge Randall Newsome approved the sale of Aloha Airlines’ contract services division to Los Angeles-based Pacific Air Cargo, Bankruptcy Law360 reported on Friday. The $2 million deal is set to close May 5, provided there are no objections from Aloha’s creditors. The 1,000-employee contract services division handles baggage, ticket agents and customer service for United Airlines and carriers that operate out of Hawaii’s airports. Pacific Air Cargo operates five cargo flights a week between Honolulu and Los Angeles and opened a 65,000-square-foot facility at Honolulu International Airport last year. An auction for Aloha’s cargo division, its most profitable unit, has been extended into next week.

The Italian government will lend Alitalia SpA 300 million euros ($479 million) to prevent the state-owned carrier from running out of cash before Prime Minister-elect Silvio Berlusconi can find a buyer for the state-controlled airline, Bloomberg News reported yesterday. The announcement came after Air France-KLM Group late Monday withdrew its takeover bid for the state-controlled airline, the only concrete offer presented following more than a yearlong search for a buyer. Berlusconi asked the outgoing government to make a bigger loan than originally planned to give him more time to seek a buyer, Prime Minister Romano Prodi said after a Cabinet meeting in Rome. Alitalia is losing more than 1 million euros a day and had less than 200 million euros in cash and credit available at the end of March. The company’s management said that it needs at least 750 million euros of new investment by the middle of this year to stay in business.

With a faltering economy and a tendency among state and local governments to let the market decide which health care facilities survive, attorneys are expecting to see more hospital reorganizations and collapses in the next few years, Bankruptcy Law360 reported yesterday. Among those that have filed for chapter 11 protection in recent years are Brotman Medical Center Inc. in Los Angeles, South Beach Community Hospital in Miami and New Jersey’s Pascack Valley Hospital and Bayonne Medical Center. New York City’s St. Vincent Catholic Medical Centers emerged from bankruptcy last August, after two years in chapter 11. Other hospitals have instead been forced to close down. Holy Cross Hospital in Fort Lauderdale, Fla., for instance, recently announced that it had purchased the nearby, money-losing North Ridge Medical Center and planned to shut its doors. Many of these hospitals have closed because a drop in demand has left too many empty beds, and state governments have often been reluctant to step up and provide funding, attorneys said.

Nearly a year after U.S. Energy Biogas Corp. (USEB) emerged from bankruptcy protection, Judge Robert Drain closed the chapter 11 case, ruling on Friday that the reorganized debtor had tied up all loose ends, Bankruptcy Law360 reported yesterday. USEB filed for bankruptcy protection on Nov. 30, 2006. During its six months in bankruptcy protection, USEB saw liabilities of more than $200 million knocked down to less than $110 million. While USEB’s business was sound leading up to its bankruptcy filing, its loan with Countryside Power Income Fund impaired the company’s capital structure to the point where chapter 11 protection was the best option, USEB said after filing for bankruptcy. USEB and Countryside came to terms in January, with Countryside receiving a $99 million claim that will go to its Canadian subsidiary.

Bankruptcy Judge Richard Schmidt said that he is likely to grant a creditors’ request to throw out Pacific Lumber Co.’s primary reorganization plan during a hearing that starts April 8, Bloomberg News reported yesterday. Judge Schmidt has scheduled a four-day hearing next week to decide which of five competing reorganization plans he will approve. Creditors have proposed two competing plans that strip the company of its equity. The case is Scotia Pacific Co. LLC, 07-20027, U.S. Bankruptcy Court, Southern District of Texas (Corpus Christi).

Delphi Corp. and the U.S. Department of Labor have reached a compromise in a dispute over the agency’s attempt to proceed with a claim in the auto supplier’s bankruptcy case arising out of purported violations of the Employee Retirement Income Security Act, Bankruptcy Law360 reported on Friday. Bankruptcy Judge Robert Drain signed off on the pact on Thursday, which is part of a larger ERISA stipulation agreement tentatively reached by Delphi and various parties a few months ago. The claims involved potential ERISA infractions connected to the ASEC Manufacturing Savings Plan, the plan’s investment in Delphi common stock and Delphi’s restatement of certain of its financial statements in 2005. The Labor Department’s request triggered an objection from Delphi, which argued that the claims were both untimely and insufficiently documented in addition to other complaints. As part of the agreement, Delphi has cleared the way for the DOL’s claim in the amount of $28,000 to move forward, with the claim to be treated as a general unsecured claim against the estate of ASEC.