Universal, GE Getting Acquainted

When General Electric Co. and Universal Studios came together in a $14-billion marriage a year ago, it seemed like an odd pairing. GE likes order and predictability; Universal operates in a world where hunches and high-stakes gambles are the keys to success.

Although the couple has made it to its first anniversary, both are still getting to know each other’s corporate quirks, not all of which have been easy to accept.

Executives throughout the newly merged company have become both ambassadors and teachers, explaining the basics of their businesses to each other.

In January, at a management conference for GE executives in Boca Raton, Fla., Universal Pictures Chairwoman Stacey Snider did her best to educate about 650 executives from such far-flung divisions as medical technology, equipment services and plastics. Her “movie business 101” primer, as she calls it, included explaining such Hollywood jargon as “tent-pole movies” and “franchise strategy.”

Universal Pictures executives have had their own steep learning curve.

Last fall, Snider’s lieutenant, Vice Chairman Marc Shmuger, was the studio’s representative on a three-week GE leadership course. He traveled the country with other GE executives to study “global growth strategies” at an assortment of non-entertainment companies with ties to GE. When the visits were done, the team was required to write up its findings.

“It was definitely different,” recalled Shmuger. “I had to work hard to keep an open mind.”

Top executives say that, for the most part, the integration of Universal with GE and its NBC television operations has gone smoothly and profitably, living up to the theme of the merger’s anniversary: “One Year, One Company, One Vision.”

“I haven’t seen any evidence of a culture clash,” NBC Universal Chief Executive Bob Wright said in an interview this week. But he acknowledged that “there’s always going to be some people disappointed with some aspect of something.”

Most of the wariness and friction has emanated from Universal’s back lot, where GE has implemented cost-saving programs and disrupted long-standing business relationships.

In a bid to get cheaper prices for services, GE has instructed the studio to use the company’s “preferred vendors” for camera rentals, film labs, overnight couriers and air travel, among others. Most purchase decisions that had been handled by Universal’s own production managers and line producers now move through an NBC Universal department headed by GE veteran Marcia Haynes, whose most recent job was as an executive in the company’s advanced materials division.

“Our business is based and built on relationships,” said one unhappy Universal insider, who requested anonymity for fear of jeopardizing his job. “Their plastics business is based on how many contracts they can get in China.”

The change in outsourcing isn’t the only sore point among Universal staff members, many of whom had grown accustomed to the rich perks a job in Hollywood has to offer.

For the majority of executives, GE has ended company-paid car insurance, car allowances and subsidized gasoline from pumps on the studio’s back lot. It also has restricted business- and first-class travel for many executives and no longer reimburses them for the cost of pay-per-view movies in hotel rooms.

The merger also has brought changes to Universal’s severance pay. Employees used to get a month for every year of tenure at the studio if they had been there 10 years or more. For employees hired after the merger, the benefit has been reduced to two weeks.

In the last year, Universal also has cut back on one of the industry’s most cherished rituals -- giving lavish gifts to stars and filmmakers -- suggesting that no present exceed $100. That’s a pittance by the standards of Hollywood, where agents and studio executives frequently send gifts costing thousands of dollars.

Chairwoman Snider said although there had been cost reductions throughout Universal, “there wasn’t a tremendous impact” on her film division.

Snider and her boss, Universal Studios President Ron Meyer, successfully argued to the new brass that if the studio was going to operate as a first-class entertainment company, senior executives should be exempted from some of the travel restrictions and crackdown on perks.

Meyer said he and Snider explained to Wright and GE Chief Executive Jeffrey Immelt “how our business differs from GE and even NBC.”

Meyer and Snider said Universal Pictures had not been forced to slash its production and marketing budgets or make deep staff cuts. Since last May’s merger, most of the 400 eliminated jobs came from Universal’s TV operation after it was combined with NBC’s network and cable units. Other layoffs occurred in the studio’s back lot operations and in professional services areas such as legal and finance.

Snider said although Universal now must estimate costs and revenues on a quarterly rather than yearly basis, GE had not been vetting individual movie budgets, as several sources close to the studio have said.

“They don’t drill down into production and marketing costs,” Snider said. “They have not scrutinized the budget of individual movies.” Instead, she said, movies are evaluated after their release based on how they compared with original projections.

So far, the math has worked in the studio’s favor, leading Wright to say that he has yet to see the kind of volatility that often characterizes the movie industry: “I don’t judge the risk here as very high at all.”

Universal, in fact, has had a solid run with such box-office hits as “Meet the Fockers” and “The Bourne Supremacy.” The box-office haul from those movies not only helped offset such disappointments as “Van Helsing” and “The Chronicles of Riddick” but also helped cushion NBC’s fall from its perch as the No. 1 network among viewers aged 18 to 49, those most coveted by big advertisers.

The question being asked around town, however, is how GE might respond should Universal’s fortunes falter.

“I can’t imagine that they would be prepared for the kind of volatility that you get in the movie industry,” said Jim O’Toole, a professor of management at USC.

One area in which the studio’s executives have felt cultural changes and a geographical shift since the GE takeover has been in the number of meetings they’re expected to attend in New York.

Snider has privately complained to many colleagues about the many presentations she has had to make and the increased demands on her time. “It’s definitely something to balance,” she said, adding that she still has time to focus on her primary responsibilities.

Snider also said that her boss, Meyer, “takes a lot off my shoulders” by spending as much as two weeks each month in New York.

“It’s my responsibility,” he said, “to be the face of Universal.”

And now, the face of GE.

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Times staff writer James Bates contributed to this report.

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(BEGIN TEXT OF INFOBOX)

The cutting room

Here are some of the expense restrictions imposed since GE’s takeover of Universal Studios:

Vendors: Must be selected from GE’s “preferred” list.

Cheap gasoline: Fill-ups from back-lot pumps eliminated for most executives.*

Travel: First-class travel severely restricted.

Free car insurance/monthly car allowance: Eliminated for most executives.

Hotel movies: Pay-per-view movies no longer expensed for most executives.

Gift giving: $100 cap on individual presents suggested.

Los Angeles Times

* Previously, top executives could fill up their tanks and pay only the tax.

Senior executives within movie division are exempt from some new restrictions.