TOP 10 STORIES / Jan. 29 - Feb. 2
1. State Government Becomes New Power Player: California formally entered the electricity-buying business when Gov. Gray Davis signed legislation that authorizes the state to sell up to $10 billion in revenue bonds. The bonds--representing about $300 in debt for every Californian--will pay for electricity that the investor-owned utilities can no longer afford to buy for their customers. Rate hikes, if not a certainty, remained a distinct possibility for most consumers because the measure includes a provision that could raise rates for those who use more than 130% of the state’s “baseline” allotment for electricity consumption. The legislation, which passed by the minimum two-thirds vote needed in the Assembly, is seen as a key first step in the state’s efforts to regain control over a dysfunctional electricity market. The battered utilities defaulted on new rounds of bills in an effort to hoard cash until their finances are back on track. Southern California Edison failed to pay $741 million in electricity bills and other debt, and Pacific Gas & Electric and its parent company defaulted on $726 million in short-term debt.
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2. Slowing Economy Still Shows Signs of Life: The nation’s jobless rate edged up to 4.2% in January, yet the economy created a robust 268,000 new jobs, the government said, capping a week that saw the Federal Reserve slash interest rates half a point to ward off recession. There was a string of worrisome reports during the week, including a January nose dive in consumer confidence, a fourth-quarter decline in gross domestic product to just 1.4%, a slump in manufacturing activity to recession levels and falloffs in consumer and business spending. But the economy kept emitting signs of life. In addition to big job gains in health services and construction, sales of automobiles held up better than expected in January. And new-home sales jumped sharply in December as mortgage rates remained low.
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3. Chrysler Restructures: In the most sweeping cutbacks in the auto industry in a decade, the U.S.-based Chrysler division of DaimlerChrysler announced it’s eliminating 26,000 jobs, closing five factories in Latin America and one in Detroit, and reducing production at seven plants. Deepening losses expected to total $1.7 billion for the second half of last year prompted newly appointed Chief Executive Dieter Zetsche to make the drastic cuts. “These decisions are absolutely necessary--in fact to survive,” Zetsche said. Chrysler reported a 16% drop in U.S. sales for January, the biggest decline among auto makers after an unusually torrid pace of vehicle sales a year ago.
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4. Spy Cameras Snapped Super Bowl Fans: Police secretly photographed every spectator and employee at the Super Bowl last Sunday, snapping pictures of each person’s face as he or she entered the stadium in Tampa, Fla. The photos were then run through a databank of mug shots of known criminals in an effort to head off potential disruptions. Privacy advocates were outraged about the covert photography. No arrests were made--partly, experts said, because the face-scanning technology is unreliable. However, industry backers hope to improve the technology. They expect to make facial-scan identity checks routine at sporting events and in stores soon--a move that civil libertarians said they would resist.
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5. AOL Time Warner Reaffirms Outlook: AOL Time Warner attempted to reassure Wall Street that its newly combined operations remain on track to meet its financial targets, despite a slowing economy and a softening advertising market. The company expects to realize $1 billion in merger-related savings, including as much as $300 million from job cuts and $100 million by reducing some managers’ salaries in exchange for stock options. Fourth-quarter results met forecasts, boosted by AOL’s online revenue growth. The subscription base of the America Online service gained 2.1 million in the fourth quarter, to reach 26.7 million members, and its advertising and e-commerce revenue surged 65%. The company also announced several new marketing alliances, predicted that AOL would begin offering high-speed Internet access on Time Warner cable lines this year and hinted it might hike monthly AOL rates.
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6. Disney’s Go Network Comes to a Stop: Walt Disney Co. decided to shut down its Go Network Internet portal, raising questions about the company’s grow-from- within and buy-it-cheap strategy. In an era of rapid consolidation in the entertainment industry, Disney has largely remained on the sidelines as rivals such as Viacom Inc. and Vivendi Universal have grown up around it. Now, with America Online Inc.’s purchase last month of Time Warner Inc., Wall Street investors wonder whether Disney will make a transforming acquisition that will put the company back on top. Some major Disney shareholders are urging the company to make a run at Yahoo Inc. if the value of the Internet property drops, but many analysts are betting that a more aggressive rival will scoop it up.
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7. Amazon Slashes Jobs, Trims Forecast: Amazon.com Inc. said it will be profitable by year’s end, a goal aided by cutting 1,300 jobs, or 15% of its work force. The company reported earnings for the fourth quarter of 2000 that beat analyst expectations by a penny, but it said it’s reducing earnings estimates for 2001 because of slowing sales. Amazon projects sales this year to be in the $3.3-billion-to-$3.6-billion range, rather than the $4 billion it had previously anticipated. Some hourly workers at Amazon’s Seattle customer service center complained that a big block of job reductions came from the one area of the company that workers were trying to unionize. Amazon had required the laid-off workers to sign an agreement prohibiting them from bad-mouthing the company in return for full severance benefits, but days later dropped the “nondisparagement” clause in response to complaints.
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8. Taps for Bugle Boy: Bugle Boy Industries Inc., the apparel company that first rose to prominence on its parachute pants, filed for Chapter 11 bankruptcy protection, the first step in what looks to be a complete liquidation of the privately held Simi Valley-based firm. Preliminary estimates show the company bogged down by more than $100 million in debt. Bankruptcy attorneys say the garment maker’s approximately 150 retail and outlet stores will be shuttered and its trademarks sold to the highest bidder. Once one of the hottest names in young men’s fashion, with annual sales topping $500 million, Bugle Boy gradually lost its cachet and became a bargain- basement brand.
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9. Gateway Founder Replaces CEO: Gateway Inc. founder and Chairman Ted Waitt resumed day-to-day leadership of the company after a year away, as Chief Executive Jeff Weitzen left abruptly in what the company described as a retirement. The move came less than three weeks after the company posted its first quarterly loss in more than three years. Weitzen, 44, had expanded the company’s offerings beyond personal computers but failed to predict a recent slump in PC sales. Waitt quickly named a new chief financial officer and other senior executives, saying he wants “a faster, more aggressive, more experienced team.”
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10. Buy.com Cuts Back Amid Slowing Sales: Internet superstore Buy.com Inc. reported diminished sales and wider-than-expected losses for the fourth quarter and said it would sharply curtail operations in a bid to conserve cash. The Aliso Viejo company said it laid off 25 staffers, or 10% of its work force, and will shut down or sell operations in Canada, Australia and Britain. The company expects sales to shrink by at least 25% this year. Buy.com executives dismissed concerns by some analysts that the latest results raised serious questions about the company’s ability to endure.
* These and additional stories from last week are available at https://www.latimes.com/business, divided by category. Click on “Money and Investing,” “Entertainment Business” and other topics.
* Please see Monday’s Business section for a preview of the week’s events.
