Job Cuts Increase Productivity by 2.5%

Worker productivity made an unexpectedly healthy jump of 2.5% in the second quarter, after a tiny 0.1% rise in the first quarter, the government said.

The gain came almost entirely from corporate layoffs and cutting of employee hours rather than the use of high-technology equipment, which has been cited as the force behind rising efficiency in recent years.

The Labor Department also revised downward its overall productivity figures for the red-hot growth years of 1998 through 2000 to more modest gains.

Other government figures showed that continued layoffs prompted consumers to cut back on borrowing in June for the first time since November 1997. Consumer credit fell 1.5% as loans for big-ticket items plunged 5.6%, while credit card debt rose slightly.

Meanwhile, California’s unemployment rate fell to 4.9% in July, down from 5.1%, a change achieved not through job growth but because 31,000 discouraged workers dropped out of the labor force.

Times Staff Writers

Layoffs Reach a New High in July

Job-cut announcements hit a new high in July, led by the telecommunications and computer industry sectors, bringing the total so far this year to almost a million, according to a survey by Challenger, Gray & Christmas.

The latest rounds of layoffs prompted new concerns that companies may be trimming work forces so much that they will hurt their ability to recover when the economy turns around.

In the telecommunications sector alone, companies have announced plans to shed at least 175,000 jobs so far this year, Challenger said. Computer companies have said they plan to cut 101,000 jobs this year. Automotive companies have announced 91,800 planned cuts.

Lisa Girion

Pentagon Confirms Minuteman Problems

The Pentagon acknowledged problems with its $4.5-billion program to upgrade Minuteman III intercontinental ballistic missiles, after revelations that the refurbished missiles had been found to be less accurate and to have shorter range than their predecessors.

Test documents obtained by The Times showed that the upgraded missiles, intended to extend the life of the nation’s core nuclear arsenal until 2020, had “miss distances” that were “considerably larger” than their predecessors or had “reduction in range” during several tests last year.

Air Force officials confirmed the classified test results but said they did not “affect the overall weapon system effectiveness.” They said a software change to correct the problem is planned.

Peter Pae

Ovitz Lays Off Nearly Half His TV Firm’s Staff

In a move to shore up his failing television production company, Michael Ovitz laid off nearly half of the staff of Artists Television Group on Wednesday. Although cutting 14 assistants and four other staff members, including the senior vice president of production, is not necessarily a draconian move, it is an indication of serious financial problems in Ovitz’s group of entertainment companies.

Ovitz’s primary company is Artists Management Group, which manages the careers of actors including Leonardo DiCaprio, Cameron Diaz and Robin Williams as well as directors such as Martin Scorsese and writers including Michael Crichton and Tom Clancy.

Ovitz insists that ATG’s troubles have not affected his other companies. However, industry sources estimate that the legendary Hollywood power broker, who has been bankrolling the company out of his own pocket, has lost $50 million to $80 million on the venture.

Claudia Eller and Corie Brown

Microsoft Asks High Court to Intervene

Microsoft Corp. asked the U.S. Supreme Court to hear its appeal of the June 28 ruling that the company violated federal antitrust laws, arguing that the trial judge was biased and improperly discussed the case with reporters.

Experts say it’s unlikely that the high court will step in. A decision is expected later this fall.

In the meantime, Microsoft wants to delay any further proceedings, but the Justice Department said the case should return to court as soon as possible to determine an appropriate punishment for the software company.

Government sources also said last week that they have no plans to seek a preliminary injunction to block Microsoft’s new operating system, Windows XP, from shipping this fall. Critics say Windows XP includes several of the anti-competitive features found improper by the court.

Edmund Sanders

EchoStar’s Hughes Bid Prompts Skepticism

EchoStar Communications Corp. renewed its effort to buy Hughes Electronics Corp., offering $30.4 billion in stock for the No. 1 satellite operator.

But some analysts and industry insiders dismissed the surprise bid, saying it fails to meet key criteria set forth by Hughes’ parent, General Motors Corp., and faces potentially onerous regulatory risks.

GM, which has been in talks to merge the satellite operations with News Corp. for several months, rejected EchoStar’s original offer three weeks ago.

In a letter to GM’s board, EchoStar said it was confident that the new offer could obtain regulatory approval. Investors punished EchoStar’s shares, cutting into the value of the deal and indicating that Wall Street isn’t taking it seriously.

Times Staff Writers

Antitrust Suit Filed Against Clear Channel

Clear Channel Communications, the nation’s biggest radio broadcaster and concert promoter, was sued by a Denver promoter on charges of violating antitrust laws by leveraging its radio playlists to freeze out competing promoters.

The case is believed to be the first antitrust lawsuit filed against Clear Channel since it acquired SFX Entertainment last year. The Justice Department recently signaled it would closely examine additional consolidation in the concert business.

Clear Channel denied the allegations in the suit, filed by Nobody in Particular Presents, and said it plans a vigorous defense.

Jeff Leeds

United Cuts Fares, Drops Stay-Overs

UAL Corp.’s United Airlines slashed air fares and abolished mandatory Saturday night stay-overs for some tickets on some of its key national routes, a dramatic move designed to lure business travelers back into its planes.

United’s decision is particularly bold because it sweeps aside the required Saturday night stay-over for super-saver prices on round-trip tickets. That requirement has been perhaps the most onerous restriction on business travelers since the major airlines first offered super-saver fares in the 1970s.

United’s new prices affect flights from major U.S. cities, including Los Angeles, to its largest hub, Chicago’s O’Hare Airport.

Sam Kennedy

Sony Extends Calley’s Contract to Early 2003

Sony Pictures Entertainment Chairman John Calley, who at 71 was expected to retire at the end of this year, will instead remain head of the studio until early 2003.

The contract extension from Calley’s boss, Sony Corp. of America chief Howard Stringer, is a stop-gap measure that does little to alleviate uncertainty and instability at the studio caused by the nagging question of succession that has plagued Sony for more than a year.

But it buys Stringer--who oversees all of the Japanese electronic giant’s U.S.-based entertainment and technology assets from New York--more time to figure out what the studio of the future should look like in the digital age.

Claudia Eller

Goldman Forces Analysts to Disclose Holdings

Brokerage firm Goldman Sachs Group said it has begun requiring that its stock analysts disclose personal holdings in companies they cover, answering criticism that Wall Street research is tainted by conflicts of interest.

Merrill Lynch & Co. and Credit Suisse First Boston earlier had imposed new rules on analyst stock ownership. Critics say analysts who own shares of companies they follow are unlikely to issue unfavorable reports that could drive down the stock price.

Walter Hamilton