PRESS DIGEST - New York Times business news - July 2

July 2 (Reuters) - The following were the top stories in the New York Times business pages on Thursday. Reuters has not verified these stories and does not vouch for their accuracy.

* June sales figures showed another difficult month for some automakers, yet provided a hint demand for new vehicles in the U.S. might finally be on the upswing.

* General Motors Corp GMGMQ.PK must win approval to sell its best assets to a new government-financed company by July 10 or risk losing its bankruptcy financing, a Treasury Department official testified on Wednesday.

* Federal drug regulators warned Wednesday that patients taking two popular drugs to stop smoking should be watched closely for signs of serious mental illness, as reports mount of suicides among the drugs' users.

* The Federal Deposit Insurance Corp plans to issue new rules that could make it slightly easier for private equity firms to buy failed banks, according to people familiar with the agency's deliberations.

* With thousands of claims still pending, the documented total of cash losses in Bernard Madoff's Ponzi scheme is nearly $3 billion, according to the bankruptcy trustee overseeing the claims process.

* James Davis, the chief lieutenant of Allen Stanford, will plead guilty to fraud and conspiracy after reaching an agreement to cooperate with prosecutors in their case against the Texas billionaire, his lawyer said on Wednesday.

* Federal prosecutors filed fraud conspiracy charges against Beazer Homes USA Inc (BZH.N) but agreed to dismiss them if the firm accepts responsibility for certain wrongdoing and pays millions to victims.

* A group of five public pension funds, including state funds in Ohio and Texas, have won the right to lead investor class-action lawsuits against the Bank of America Corp (BAC.N) over its acquisition of Merrill Lynch & Co.

* After forcing German banks that received state aid to drastically shrink, the European competition commissioner is now causing unease among some of their British rivals by saying that they are next.

* Constellation Brands Inc (STZ.N), the wine and spirits maker, reported a better-than-expected quarterly profit Wednesday as efforts to stabilize its business started to pay off.

* Crabtree & Evelyn, the purveyor of specialty soaps, fragrances and lotions, became the latest retailer to fall victim to the economic downturn, filing for Chapter 11 bankruptcy protection on Wednesday in the United States.

* Under pressure from regulators and investors, the Belgian bank KBC (KBC.BR) has reshuffled its management, replacing the executive who oversaw the bank's disastrous plunge into the securitized credit market and separating the risk management and financial management functions.

* Two Japanese banks backed by American investors said Wednesday that they would merge next year in a bid to recoup large losses on risky investments overseas and bad loans at home.