Lehman was expected to appeal the matter

Lehman Brothers Holdings Inc will appeal a court order upholding the rushed sale of its North American business to Barclays PLC nearly three years ago, a deal Lehman said afforded Barclays an $11 billion (6.7 billion pounds) "windfall."

In court papers filed late Thursday in U.S. Bankruptcy Court in Manhattan, Lehman said it will appeal to Manhattan federal court the February ruling from Judge James Peck, who presides over Lehman's bankruptcy.

Lehman was expected to appeal the matter, aspects of which have already been appealed by Barclays and by the trustee liquidating Lehman's brokerage.

Lehman's creditors' committee also filed an appeal notice Thursday, saying it would seek review of a related order rejecting the committee's objections to the Barclays deal.

A Lehman spokeswoman declined to comment. A Barclays spokeswoman said the company did not have a statement.

Lehman said Barclays got a sweetheart deal in acquiring its U.S. investment banking and brokerage operations in the days following its filing of the biggest bankruptcy in U.S. history. It said Barclays failed to make key disclosures in the $1.85 billion deal, resulting in a windfall of about $11 billion.

Peck called the sale process "imperfect," but said any disclosure lapses were not serious enough to affect the fairness or outcome of the sale.

James Giddens, the bankruptcy trustee for Lehman's brokerage, a week ago appealed a separate aspect of Peck's ruling entitling Barclays to $1.1 billion in money held to facilitate the clearance of securities trading.

A week before that, Barclays appealed still another element of the ruling handing the trustee $4 billion in so-called margin assets, collateral Lehman posted to cover outstanding derivatives trades.

Lehman declared bankruptcy on September 15, 2008, listing $639 billion in assets, six times more than any other bankrupt U.S. company. The filing was a major factor in the financial crisis.

It is scheduled to ask Peck on August 30 for authority to hold a creditor vote on a roughly $65 billion payout plan to exit bankruptcy.

The case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

U.S. automaker hopes to avoid a strike

Ford Motor Co's labor chief said the U.S. automaker hopes to avoid a strike in its talks for a new labor deal with the United Auto Workers union, which officially began on Friday.

"The last thing we want to do is incur a strike," said Marty Malloy at the kickoff ceremony at a Ford truck assembly plant in Dearborn, Michigan. "We work great with the UAW."

At the ceremony at the Ford factory, the UAW negotiating team was dressed in sky blue pullover shirts, while Ford executives wore dark business suits and ties. Despite the sartorial differences, both sides voiced optimism about the talks.

Ford, which has not suffered a UAW strike since 1976, was the last of the three U.S. automakers to open talks with the UAW, following Chrysler on Monday and General Motors Co on Wednesday. While the UAW cannot strike GM or Chrysler, it has no such limitation with Ford.

However, UAW President Bob King reiterated: "I don't think about strikes. We don't collectively think about strikes." He said the UAW might seek the members' permission to strike, but that was routine and had been done many times in the past.

In the four years since the union and the three Detroit automakers last negotiated labor deals, the companies were pushed into crisis by collapsing vehicle demand and the financial convulsion of 2008. Both GM and Chrysler, now controlled by Italy's Fiat , filed for bankruptcy and were bailed out by the Obama administration in 2009.

Ford did not take any bailout money as it mortgaged almost all its assets in late 2006 before the financial crisis hit.

Since then, however, the automakers have returned to profitability, and the UAW has emphasized job security as its top priority. Ford Chief Executive Alan Mulally reiterated that the company plans to hire 7,000 workers in the United States in the next two years.

Mulally said he wanted to make the No. 2 U.S. automaker more competitive in these talks.

One desire of Ford and its rivals is to lower the total labor costs they incur compared with those paid by their foreign rivals at their U.S. plants. Malloy said Ford's total costs were about $58 an hour per hourly worker, $8 more than its foreign rivals.

King saw the numbers differently, however. "We would respectfully do our math a little bit differently, but we'll talk about that at the bargaining table," he said.

King said one of his proposals in the talks will be for the union, which represents about 41,000 hourly workers at Ford's U.S. plants, to get seats on the company's board of directors. That repeats a goal he has laid out for all the automakers.

Ford global manufacturing chief John Fleming said the current economic troubles would not "color" the negotiations.

Merck & Co Inc plans to cut another 12,000 to 13,000 jobs by late 2015

Merck & Co Inc plans to cut another 12,000 to 13,000 jobs by late 2015 to wring out additional annual cost savings of up to $1.5 billion that can be plowed back into research and deal making.

The No. 2 U.S. drugmaker eliminated 12,465 positions last year, offset by almost 6,500 new hires, reducing its workforce to 91,000 employees as of June 30.

The company, which also reported quarterly earnings in line with forecasts, said on Friday it would cut its workforce by an additional 12 percent to 13 percent from the 100,000 employees it had at the end of 2009 after buying Schering-Plough Corp.

A company spokesman declined to peg the planned size of its workforce, saying the job cuts would be substantially offset by new hires in strategic growth areas, such as emerging markets.

"The new phase of restructuring will create an additional $1.3 billion to $1.5 billion in annual cost savings," company spokesman David Caouette said.

Job cuts will come largely from administrative positions, consolidation of offices and sale or closure of manufacturing sites.

Merck is streamlining operations following its $41 billion purchase of Schering-Plough.

"I think we're going to see other firms continue to expand their cost-reduction programs," Morningstar analyst Damien Conover said, pointing to increasingly difficult reimbursement environments in Europe and the United States.

"We have to remember that 10 years ago these firms were extremely bloated and in an entirely different operating mold and it's really shifted to one where you don't need the gigantic sales forces that you once needed," Conover said.

Many other big drugmakers have slashed their workforces in recent years to ensure profit growth as they face patent expirations that will subject them to generic competition, the costs of healthcare reform and efforts by insurers to keep a lid on drug prices.

Eli Lilly , facing one of the industry's biggest "patent cliffs," said in late 2009 it would cut 5,500 employees, or 13 percent of its workforce, by the end of 2011 to create $1 billion in savings. But like Merck, its cuts have been largely offset by increased hiring in emerging markets.

Before Pfizer bought Wyeth in 2009, the world's largest drugmaker said it would cut 15 percent of the combined workforce, or almost 20,000 jobs. The company, whose Lipitor cholesterol fighter goes generic late this year, swung its ax again in February, saying it would lay off more than 2,000 researchers to deliver on a 2012 profit forecast.

Merck, unlike many of its rivals, has vowed to maintain research and development spending at stable levels, rather than slash research costs to meet earnings targets. But the company on Friday shaved the high end of its 2011 research budget by $100 million, to between $8 billion and $8.3 billion.

The drugmaker said it halted development of a treatment for migraine headaches, called telcagepant, after unfavorable data from a late-stage trial. The medicine had been linked to liver toxicity in earlier studies.

With the new job cuts, Merck's restructuring program will yield annual savings of $4 billion to $4.6 billion by the end of 2015, compared with an earlier estimate of $2.7 billion to $3.1 billion by late 2012, Merck said.

The company reported a second-quarter profit in line with Wall Street expectations, helped by big tax gains. But sales handily outpaced forecasts.

It earned $2.02 billion, or 65 cents per share, compared with $752 million, or 24 cents per share, in the year-earlier second quarter, when it took a big restructuring charge for the Schering Plough acquisition.

Excluding special items, Merck earned 95 cents per share, matching the average forecast among analysts polled by Thomson Reuters I/B/E/S.

Global sales rose 7 percent to $12.15 billion, but would have risen only 3 percent if not for the weaker dollar. Sales exceeded Wall Street's expectations by $370 million, helped by strong sales of newer obesity drugs Januvia and Janumet, arthritis treatment Remicade and vaccines.

The company, which slightly raised the low end of its 2011 profit forecast, now expects earnings of $3.68 billion to $3.76 billion, excluding special items.

Merck shares fell 2.3 percent to $34.13 on the New York Stock Exchange, amid a 0.6 percent decline for the drug sector.

lawmakers scramble to close in on a deal

Here is what is happening on Friday as lawmakers scramble to close in on a deal for Congress to raise the U.S. government's $14.3 trillion borrowing limit by an August 2 deadline and avoid a debt default:

* The House of Representatives passed a Republican deficit-reduction plan that had no chance of becoming law but could pave the way for a last-ditch bid for bipartisan compromise to avert a debt default.

The Republican-controlled House pushed through the measure by a partisan vote of 218-to-210 after the party's leaders reworked it to appease anti-tax conservatives. No Democrats voted for it.

As expected, the Democratic-controlled Senate blocked the bill.

* Senate Democratic leader Harry Reid said he will start Senate action on a compromise debt and deficit plan and called on Senate Republican leader Mitch McConnell to work with him. Reid says a short-term debt limit extension is unacceptable. The Senate could vote early Sunday morning.

* The White House urged lawmakers to begin immediate work on a compromise to lift the debt limit after the defeat of the Republican House bill.

* President Barack Obama said earlier that if the United States loses its AAA credit rating it won't be because the country can't pay its bills. It would be "because we didn't have an AAA political system to match our AAA credit rating."

* The U.S. Treasury is preparing an emergency plan for how the government would function and pay its obligations if Congress fails to raise the government's borrowing authority. Treasury officials say they will provide more information on their plans as the August 2 deadline draws near.

* The Treasury is due to announce next week its borrowing needs for the current quarter and its plans for selling debt to meet those needs. The uncertainty over the debt ceiling could jeopardize the plan. Treasury officials met with primary-market dealers and a Treasury official says dealers agree Congress should act quickly and raise the debt limit for as long as possible.

* Investors are growing increasingly alarmed by U.S. lawmakers' inability to reach accord on the debt ceiling and are watching developments in Washington closely. U.S. stock prices remain weak.

Iran is lagging on equipping a bunker

Iran is lagging on equipping a bunker with centrifuges that will enrich uranium closer to weapons-grade but plans to boost output by using more machines than originally planned, diplomats tell The Associated Press.

The diplomats say Iranian officials recently told the International Atomic Energy Agency half of the approximately 3,000 centrifuges to be installed at the underground Fordow site will churn out uranium enriched to near 20 percent.

The rest, they said, will produce less sensitive low-enriched material at around 3.5 percent. Iran's higher-grade enrichment efforts are of particular concern because material at 20 percent enrichment can be turned into fissile warhead material much more quickly than that at 3.5 percent.

The diplomats said no centrifuges had been installed by July 23, the last time that IAEA experts inspected the site, indicating that Tehran was behind on plans to set up the machines by the end of July. Still, the diplomats said, preparations were well under way, with most electrical wiring, pipe work and other preliminary installations completed.

The reason for the delay was unclear. One of two diplomats who discussed confidential information on condition of anonymity suggested it could reflect temporary technical problems with expanding production of higher-enriched material.

He said that to his knowledge, the Iranians also planned to install only present-generation centrifuges currently in use elsewhere instead of more efficient centrifuges they have been developing — another sign that the program may be experiencing short-term technical difficulties.

While Iran insists that it does not seek nuclear arms and is enriching only to make reactor fuel, the United States and other nations worry that Tehran could turn its enrichment program toward making weapons-grade material.

"Enrichment from natural uranium to 20 percent is the most time-consuming and resource-intensive step in making the highly enriched uranium required for a nuclear weapon," British Foreign Secretary William Hague wrote recently in Britain's Guardian newspaper. "And when enough 20 percent enriched uranium is accumulated at the underground facility at Qom, it would take only two or three months of additional work to convert this into weapons grade material."

Beside expanding its low-enrichment program in recent years, Iran has been producing higher-enriched uranium for over a year and is now using 328 centrifuges at its facility in the central city of Natanz for that purpose.

It originally announced that it planned to move all 20-percent production to Fordow and triple output — which would have meant that about 1,000 centrifuges would have been harnessed to make uranium purified to near 20 percent.

Based on the information provided by the diplomats, however, Iran now wants to use 1,500 centrifuges for that purpose, adding to international concerns about the process.

The Islamic Republic disclosed Fordow's existence two years ago, shortly before Western intelligence services were to go public with the secret site.

Tehran refuses to cease enrichment despite U.N. Security Council sanctions. Also of international concern are indications it might have experimented with components of a nuclear weapons program — something Tehran denies.

After initially cooperating with an IAEA probe of intelligence-based allegations of secret nuclear weapons work, Iran stopped answering questions on the issue about three years ago, saying it considers the investigation closed.

The move would "help to reduce its ability

The United Nations on Friday slapped sanctions on the Pakistani Taliban -- thought to be behind last year's failed bombing attempt on New York's Times Square -- for having links with al Qaeda.

The U.N. Security Council said its sanctions committee dealing with al Qaeda had imposed an assets freeze as well as a travel ban and arms embargo on the Pakistani group, also known by its Urdu name of Tehrik-e-Taliban Pakistan, or TTP.

A council statement said the committee, which maintains a list of sanctioned groups and individuals, had also imposed the same measures on the Caucasus Emirate organization, an Islamist insurgent group based in Russia's North Caucasus.

Founded in 2007 as a merger of some dozen groups, the TTP is based in tribal areas along Pakistan's border with Afghanistan and is led by Hakimullah Mehsud, who is already on the sanctions list. A Pakistani newspaper reported this month that Mehsud's control of the group may now be weakening.

The TTP claimed responsibility for a botched attempt by Pakistani-born American Faisal Shahzad to explode a crude bomb packed into a sport utility vehicle in Times Square in May of last year. The bomb failed to go off and Shahzad was jailed for life in the United States.

In Pakistan, the TTP has claimed responsibility for a string of attacks including a 2009 strike on a police academy in Lahore that killed eight cadets and an assault on a Karachi naval base two months ago. It also claimed it carried out a suicide attack that killed seven CIA employees at a U.S. base in Afghanistan in December, 2009.

Both the TTP and the Caucasus Emirate are on the U.S. list of foreign terrorist organizations.

Security Council diplomats said the designation of the TTP on the U.N. sanctions list had been supported by Pakistan's government.

Britain's U.N. Ambassador Mark Lyall Grant said "sends a powerful signal of the international community's solidarity and resolve in the fight against the TTP and international terrorism."

The move would "help to reduce its ability to operate effectively and perpetrate terrorist attacks," he said in a statement.

The Security Council formerly kept a joint sanctions list for al Qaeda and the Afghan Taliban but recently split them into two and took 14 names off the Afghan Taliban list in what envoys said was a bid to entice the group into peace talks.

The Caucasus Emirate, founded in 2007, is led by Doku Umarov, Russia's most wanted Islamist militant. Chechen-born Umarov, who has a $5 million U.S. bounty on his head, claimed responsibility for masterminding a January suicide bombing of Moscow's Domodedovo airport, which killed 37 people.

The top U.S. military officer made an unannounced trip to Afghanistan

The top U.S. military officer made an unannounced trip to Afghanistan on Friday, aiming to reassure a country rattled by a wave of high-profile attacks and assassinations.

Admiral Mike Mullen, chairman of the U.S. military's Joint Chiefs of Staff, said U.S. officials had long predicted the kind of attacks that have shaken southern Afghanistan and Kandahar province in recent weeks.

"We're not surprised at the spectacular attacks. We thought that's where they'd try to go. That's where they're going and we've got to work hard to prevent that," Mullen told reporters before departing for Kandahar province.

A suicide bomber killed the mayor of Kandahar on Wednesday, compounding fears of a dangerous power vacuum in Afghanistan's south in the wake of the assassination of President Hamid Karzai's half-brother, Ahmad Wali Karzai.

Kandahar is the Taliban's birthplace and a focus of efforts by U.S. troops to turn the tide against the insurgency and bolster local government.

The assassinations threaten to undermine that goal. More than half of all targeted killings in Afghanistan between April and June were carried out in Kandahar, according to a U.N. report.

The police chief of Kandahar province, Khan Mohammad Khan, was killed by an attacker wearing a police uniform in mid-April, and the province's most senior cleric was killed by a suicide bomber at a memorial service for Karzai's brother.

Such killings, many claimed by the Taliban, have sent chilling warnings to political leaders about the reach of the militants, who have shown an ability to adapt their tactics even as NATO-led troops have squeezed them in their traditional rural strongholds around Kandahar.

"There are some who believe that this is all they can do ... given the challenges the Taliban have faced over the course of the last couple of seasons," Mullen said on what could be his last trip to Afghanistan before stepping down as Pentagon chief at the end of September.

U.S. DRAWDOWN UNDERWAY

The increase in violence comes as the United States starts drawing down its forces in Afghanistan, with some 10,000 U.S. troops due to pull out by the end of the year. Another 23,000 will come home by the end of next summer, according to plans announced by U.S. President Barack Obama next month.

Mullen noted that even after those withdrawals, there will still be 68,000 U.S. forces in Afghanistan and a growing number of Afghan security forces to help offset the U.S. drawdown.

Afghans are set to take lead security responsibility by the end of 2014, with foreign troops expected to stay on to provide training and support, but no longer in combat roles.

"I'm confident we will have the forces there necessary to reassure the Afghan people," Mullen said.

Suicide attackers killed at least 19 people, 12 of them children, when they targeted government buildings in Uruzgan province on Thursday, the deadliest assault in the south in nearly six months.

Last month, Taliban gunmen and suicide bombers attacked a leading hotel in the capital in a raid which killed 12 people.

Asked how he would reassure Afghans that the Taliban were not gaining the momentum in the nearly decade-old war, Mullen pointed to the "many, many successes we've enjoyed versus the Taliban over the course of the past year, reassure them that continues to be the case."

"And at the same time recognize that this is not completely surprising," he said.