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Under the Gun : ‘Terminator’ Maker Carolco Needs Hero

TIMES STAFF WRITER

At the end of “Terminator 2,” Arnold Schwarzenegger’s cyborg character discovers that blinding brute force doesn’t always ensure survival. Carolco Pictures Inc., the freewheeling production company that made the movie, recently has learned the same lesson.

Carolco has been forced into deep cuts in its operations, despite its success with “Terminator 2" and other audaciously ambitious action movies. Its problems stem from unexpected losses on other projects, a failed attempt to merge with its video subsidiary and internecine warfare between its two top executives.

The Los Angeles company plans to cut production and lay off at least a fourth of its 200 employees as part of a retrenchment plan, according to reports. President Peter M. Hoffman, who has frequently clashed with Chairman Mario F. Kassar over creative and business dealings, is expected to resign within the next four months, when his contract expires.

The usually ebullient Kassar has been described as withdrawn now that he has been forced into the slow lane. The company does not expect to fund any new productions before July, sources say. It also has pulled back from competition for new screenplays after paying a record-setting $3 million last year for the script for “Basic Instinct,” a thriller starring Michael Douglas.

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Carolco, moreover, is expected to undertake more international co-production deals, a common way to share risks.

Sources say the changes, in large measure, have been orchestrated by Carolco’s foreign investors, who saw the company as undisciplined at a time of industrywide belt-tightening.

France’s Canal Plus--the pay-television company that holds a 10% stake--is said to have taken a lead role in pushing the consolidation moves, along with 14.3% owner Pioneer Electronics Corp. of Japan and Italy’s RCS Group, holder of a 10.4% share. Kassar himself holds about 38% of the stock.

Carolco, Kassar, Hoffman and the foreign owners declined comment. But industry executives say further changes may result from a series of meetings planned for next week.

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One priority is finding new sources of financing, since Carolco’s two primary banks--France’s Credit Lyonnais and Bankers Trust of New York--have scaled back their entertainment lending.

Another is establishing a clear direction for the company. Industry sources expect Carolco to scale back to three or four films a year--mostly in the action-adventure genre--from its current schedule of four to six releases annually.

The company will also become more focused on film--perhaps shedding unrelated operations, such as two small record store chains, knowledgeable sources say.

“We’re choosing to get back to basics,” one executive said. “We’ve always been successful at our core business of making movies and selling them overseas. Had we only done that, the company would not be in the position it’s in today.”

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The consolidation is one reason given for Hoffman’s probable departure, since much of his efforts have been dedicated to expanding the company.

“There’s very little room for Peter,” one associate said. “He’s a builder, a guy with vision. What’s he supposed to do there?”

Entertainment analysts have applauded the moves made so far. Jeffrey Logsdon of Seidler Amdec Securities in Los Angeles placed a buy recommendation on Carolco’s stock this week for the first time in months, saying the company should overcome its problems by next year.

Carolco has been a chronic underachiever on Wall Street, especially in light of the success of this year’s “Terminator 2,” which is expected to gross $500 million. The firm’s stock closed at $3.75 a share Friday in New York Stock Exchange trading, down from a 1991 high of nearly $11.

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Its recent poor performance helped kill Carolco’s planned merger with Live Entertainment Inc., the Van Nuys-based videocassette distributor of which it already owns 53%. The deal was supposed to consolidate Carolco’s holdings in a business that gives it a steady source of income. But the falling stock price made the buyout financially untenable.

One analyst said Carolco must become more of a “spend-thrift company.” But while spend is a word that’s long been associated with Carolco, thrift is not.

The company built its reputation on big-budget, pyrotechnics-laden films--"Terminator 2" and the “Rambo” films among them.

The flamboyant Kassar reveled in his reputation for paying the highest salaries and throwing the biggest parties.

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His gambles paid off on movies--including “Terminator 2" and “Total Recall"--that largely were financed through innovative agreements that sold the films overseas before they were made.

But the successes couldn’t overcome the failures, which often occurred when Carolco ventured beyond the action-adventure genre. Critically popular movies such as “Rambling Rose” and “The Music Box” drew little interest at the box office.

The company has indicated that it will continue to make major films.

Even Arnold Hasn’t Saved Them Despite the success of “Terminator 2,” poor performances of other Carolco films have helped cause a severe financial squeeze. “Terminator 2"

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Budget Estimate: $88 million

Domestic Theatrical Gross: $203.3 million

“Rambling Rose”

Budget Estimate: $7 million

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Domestic Theatrical Gross: *$5.8 million

* still in theatrical release “L.A. Story”

Budget Estimate: Not Available

Domestic Theatrical Gross: $28.8 million

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“The Doors”

Budget Estimate: $40 million

Domestic Theatrical Gross: $34.1 million

Source: Budget figures from Baseline; grosses from Carolco

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