Week in Review

1. Chevron and Texaco Agree to Merge: Chevron Corp. announced Monday it has agreed to buy Texaco Inc. in a stock swap valued at about $35 billion. This latest in a string of oil-industry consolidations is projected to bring $1.2 billion in cost savings, part of which would come from an estimated 4,000 job cuts. The two companies, which had discussed merging a year ago but couldn’t agree on price, said the merger will give them the financial muscle to explore for energy in far-flung corners of the world. But the deal is expected to face opposition from the Federal Trade Commission for reducing competition in the refining and retailing of gasoline.

(Nancy Rivera Brooks)

2. Ford Passed Up Chance to Bolster Explorer: Ford Motor Co., whose Explorer sport-utility vehicles have suffered a rash of rollover crashes linked to failures of Firestone tires, spurned an opportunity to significantly improve the stability of the vehicles during a major redesign in the mid-1990s, at least partly to hold down costs, internal company documents show. Ford has argued that the tires alone are to blame for the accidents, but auto safety experts say the instability of the vehicles shares some blame. Ford also reported a 7% decline in third-quarter earnings, pulled down by the cost of replacing recalled tires.

3. Bridgestone/Firestone’s Legal Woes Grow: Lawyers in Mexico said 28 people have died in traffic accidents because of the failure of Firestone tires fitted to SUVs and light trucks, the first such reports from Mexico, adding to the worldwide recall and legal woes of Bridgestone/Firestone. Also last week: The U.S. death toll from crashes blamed on Firestone tires rose to 119; the tire maker said it will lay off 450 workers and suspend production at three of its six plants. An investigator for the tire maker said he’s focusing on fatigue cracks that form in the rubber between the steel belts that then spread to the rest of the tire, eventually causing the treads to peel off.

4. IRS Hit With Fallout From Tax Payoff Plan: The IRS’ much-touted plan for settling tax debts is so overwhelmed with applications that the agency is unable to cope. Last year the IRS loosened its criteria for accepting “offers in compromise,” which are formal pleas from cash-strapped taxpayers to pay less than what they owe. But the agency failed to add needed staff to meet the upsurge in demand, partly because of a tight budget. The process is taking so long that some tax preparers are advising their clients to file for bankruptcy rather than attempt to pay any of their tax debts--which was exactly the result Congress was trying to avoid. Most offers aren’t being handled within the agency’s target time frame of six months. Only 40% of offers nationwide get processed that fast, an IRS spokeswoman said.

(Liz Pulliam Weston)

5. Stocks Rally on Profit Reports: Wall Street halted its losing streak at six weeks, thanks to a strong rally that began Wednesday morning and extended through Friday. The Nasdaq composite surged 7.8% on Thursday and added 1.9% on Friday, ending up 166.37 points, or 5%, for the week, at 3,483.14. The Dow industrials gained 1.7% on Thursday, 0.8% on Friday and 0.3% for the week, to close Friday at 10,226.59. A batch of strong earnings reports from major technology companies helped turn the market tide. But many Wall Street pros remain wary about calling the bottom, with Middle East tensions--and thus the threat to oil prices and the economy--still a major worry.

(Tom Petruno)

6. Earnings Focus Shifting to Revenue: Midway through one of the most closely watched corporate earnings seasons in years, investors continue to punish companies that issue disappointing numbers. But a primary focus in this earnings season is revenue. Top-line, or revenue, growth obviously is necessary to generate healthy profits, but it’s also a leading indicator of the direction of the economy. The weakness in sales growth across a wide range of industries has helped strengthen the consensus that the U.S. economy is cooling. Some degree of economic slowing is welcome, given Wall Street’s fear of inflation.

(Thomas S. Mulligan)

7. Laid-Off Workers Finding Better-Paying Jobs: A major Employment Development Department study obtained by The Times found that the majority of workers who lost their jobs in recent years were able to find work quickly, and typically at a higher wage. The study of nearly 124,000 workers found that 77% obtained new jobs within a year after they were laid off. And their average salary was 115.2% of what they previously earned. The report contrasts with what EDD Director Michael S. Bernick called “the conventional wisdom on displaced workers in California--that these workers are going from generally well-paid skilled jobs to lower-paid, lower-skilled service jobs.”

(Jerry Hirsch)

8. Litton Considers Sale of Southland Unit: Litton Industries Inc. said it will explore the sale of its $1.6-billion, Woodland Hills-based military electronics business in an effort to give its sluggish stock a boost. The Advanced Electronics group, which makes everything from night-vision goggles to laser weapons, employs 9,500 people, including about 2,700 in the San Fernando Valley. Chief Executive Michael R. Brown said the company views the military electronics group as “sound and having good business potential.” An industry analyst said that although the unit had been experiencing some cost overruns on two military contracts, Litton should have no problem finding a buyer.

(Peter Pae)

9. Telemundo, Argos in Programming Deal: Telemundo Network, the nation’s second-largest Spanish-language television network, announced a new partnership with Argos Comunicacion, Mexico’s edgiest and most successful producer of telenovelas, to develop a vast array of new, targeted programming for the U.S. market. The deal could further boost Telemundo’s climbing ratings. It also intensified competition between Telemundo and Television Azteca, Mexico’s second-largest network. Azteca is pushing into the U.S. market with Azteca America. After Telemundo snatched Argos from Azteca, Azteca fired back, announcing it is in talks to get new content from Columbia Pictures, revelations that Columbia officials said were premature and inaccurate.

(Lee Romney)

10. Puny Payola Fine Ordered: The Federal Communications Commission levied an $8,000 fine against AMFM/Chancellor Media, the nation’s largest radio conglomerate, for violating payola laws--a slap on the wrist compared with the millions of dollars in recent penalties meted out to broadcasters for airing “indecent” material. The fine marks the first time that the government has acted against what critics say is a growing tactic by broadcasters to skirt payola laws: playing artists’ songs in exchange for free appearances at radio station concerts. The FCC began looking into the practice in 1998 after a series of stories in The Times.

(Chuck Philips)

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Please see Monday’s Business section for a preview of the week’s events.