TOP 10 STORIES JULY 3-7
1. Jobless Rate Eases: The unemployment rate edged back down to 4% in June as the nation’s private-sector employers added 206,000 jobs, demonstrating slower but still-solid growth in the U.S. economy. The Labor Department report delivered strong testimony that the economy is heading into the so-called soft landing of moderate, low-inflation expansion sought by the Federal Reserve. It also provided assurance that May’s surprisingly sour employment report was more of an aberration than a sign that the economy could be slipping into a serious slowdown. Other signs of modest slowing came in a 0.1% decline in the index of leading economic indicators and virtually flat construction spending in May. Manufacturing expanded in June, but at the slowest pace in 17 months, the National Assn. of Purchasing Management said. But the NAPM’s prices-paid index fell to 61.2--the lowest since August 1999, contrasted with forecasts of 67.5, another sign inflation isn’t accelerating.
2. Consumers Trim Retail Shopping: Major retailers rang up only modest sales in June, and some analysts predicted more sluggishness throughout the year as the economy slows. Stale fashions were cited as one reason for the weakness, but retailers of all kinds suffered as consumers dealt with chilly weather, higher interest rates and higher gas prices. Gap Inc. warned of lower earnings because of disappointing sales, as did smaller clothing chain Pacific Sunwear of California and off-price apparel chain Ross Stores.
3. Sears Boosts Outlook But Is Scorned on Credit Tactics: Sears, Roebuck & Co. bucked the weak sales trend in June, posting a healthy increase that prompted it to boost earnings expectations well beyond analyst forecasts. But that good news came just days after Sears was hit with new accusations of arm-twisting maneuvers to collect from its credit cardholders. Sears, a creditor in a third of all U.S. personal bankruptcy cases, apparently hasn’t changed the high-pressure tactics that led to its conviction for fraud last year, a judge reviewing a personal bankruptcy case said.
4. Auto Sales Slow: U.S. vehicle sales cooled in June from a super-charged performance a year ago, but year-to-date sales hit a healthy level of 19.2 million units. Most foreign auto makers posted big gains in June, though, as the U.S. Big Three chalked up declines, due in part to lighter sales of gas-hungry light trucks.
5. Oil Production Cut Possible: The prospect of sustained relief at the gas pump emerged after Saudi Arabia made a surprise pledge Monday to boost production if oil prices don’t decline soon, breaking ranks with OPEC colleagues. Crude oil prices around the world fell initially on the Saudi announcement, but traders are apparently taking a wait-and-see attitude: U.S. benchmark West Texas intermediate crude ended the week at $30.28 a barrel, up 29 cents on Friday from the day before and up slightly from $32.50 the previous Friday. An OPEC official who declined to be identified said Friday that OPEC ministers agreed on the need to increase the supply soon and will meet in the next few days to negotiate the details.
6. Qualcomm Shaken by South Koreans’ Choice: Shares in Qualcomm sank after three major providers of wireless phone service in South Korea said Friday they plan to use technology developed by Qualcomm’s rivals to bring advanced services such as Web surfing and e-mail processing to their customers. The San Diego company is pushing its code division multiple access, or CDMA, technology for the so-called third-generation, or 3G, technology. But the South Korean companies said they prefer the wideband code division multiple access, or W-CDMA, version that Nokia, Ericsson and other companies are developing. Although South Korea is a major market for Qualcomm, several analysts said investor reaction to the news was overblown. Qualcomm shares fell $5.06 to close at $56.63 in Nasdaq trading Friday. That’s off 72% from a 52-week high of $200 reached early in January.
7. HMO Trimming Medicare Members: PacifiCare Health Systems, owner of the nation’s largest managed-care plan for Medicare recipients, said it will drop 26,600 members and will raise prices and lower benefits for the nearly 1 million Medicare members who remain. Most of the members being dropped live in rural areas--none in California--in which federal reimbursement for Medicare doesn’t provide enough income, the company said.With its announcement, the Santa Ana company is joining most of the nation’s other HMOs, which collectively are planning to drop 700,000 members in 2001 while raising premiums and co-payments for remaining members.
8. WorldCom-Sprint Deal on Death Watch: WorldCom Inc. and Sprint Corp. were expected to call it quits on plans to merge amid regulators’ objections, but the two companies wouldn’t comment. Neither would the Justice Department, which sued to block the deal a week before. Deutsche Telekom reportedly held talks to acquire Sprint, but the cash-rich German company was also rumored to be interested in Qwest Communications International Inc. and Britain’s Cable & Wireless. The prospect of a Deutsche Telekom bid for Sprint sparked a bipartisan group of U.S. senators to urge close regulatory review, citing a law that prohibits foreign companies that are partially government-owned from buying American companies. Deutsche Telekom is 66% owned by the German government.
9. Baby Food Merger Challenged: The government moved to block another merger: H.J. Heinz Co.’s proposed acquisition of Beech-Nut baby-food maker Milnot Holding Corp. The Federal Trade Commission said the combination would result in significant price increases for baby food. Heinz vowed to “vigorously defend” the acquisition in court proceedings, contending that the deal would create a more potent competitor to Gerber, the No. 1 U.S. baby-food producer, with 73% of the market.
10. Napster Shifts Strategy: Napster Inc. filed a rebuttal to a recording industry lawsuit, asserting that what its members do--sharing with each other their own copies of copyrighted materials--is as legal as people using a VCR to watch a borrowed movie. The aggressive defense reflects a strong shift in legal strategy, mapped out by Napster’s lead attorney, David Boies, most recently known for his success as the government’s chief litigator in its antitrust suit against Microsoft Corp. The first preliminary hearing in the suit is set for July 26.
What They Made
The pay of chief executives at the Southland’s 200 largest companies by revenue rose ever higher last year, according to a study by Watson Wyatt Worldwide commissioned by The Times. In a disturbing trend, the three most highly compensated executives--Mark Willes of the former Times Mirror Co., Robert Annunziata of Global Crossing Ltd., and Jill Barad of Mattel Inc.--wound up at the top of the heap because of huge severance packages. Technically, all three “resigned,” either under pressure or because their jobs were eliminated. Willes led all CEOs with total direct compensation at $64.5 million; Annunziata was second, at $40.5 million, and Barad was third, at $38.4 million. In all, 14 Southland CEOs earned more than $10 million each. Among the top 25, no one earned less than $5 million in current pay, which includes salary, bonus and the present value of stock options granted during the year.
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See Monday’s edition for a preview of next week’s events.
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Highest Base Salary Earners
An excerpt from an executive pay list based on a study conducted for The Times by the West Coast offices of Watson Wyatt Worldwide, an international consulting firm that specializes in compensation and human resources. Some executives earned considerably more when bonuses, options and other forms of compensation were figured in.
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Name Company Base Salary Change from Previous Year Frank G. Mancuso Metro Goldwyn Mayer $2,315,331 $294,931 Henry C. Yuen Gemstar Intl. Group 1,534,833 646,033 Angelo R. Mozilo Countrywide Credit Ind. 1,400,000 100,000 Jill E. Barad Mattel 1,307,693 44,228 (resigned in February) Ray R. Irani Occidental Petroleum 1,200,000 0 Jeffrey C. Barbakow Tenet Healthcare 1,091,475 0 Stanley R. Zax Zenith National Ins. 1,023,611 1 Louis L. Borick Superior Industries 1,000,001 0 Roy F. Farmer Farmer Bros. 1,000,000 NA Theodore Waitt Gateway 1,000,000 0
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Source: Watson Wyatt Worldwide
