Top 10 Stories / Jan. 15-19

1. California Deals With Blackouts: The state’s energy crisis moved from threat to reality as rolling blackouts struck Northern and Central California but for the moment spared the Southland. The outages, the first of such magnitude to be ordered since World War II, cut power to businesses, snarled traffic and otherwise brought the electricity crunch to a head for hundreds of thousands of customers. The state’s two biggest utilities, Southern California Edison and Pacific Gas & Electric, together missed several bill payments totaling more than $670 million to cover power purchases, bond principal and interest, and other IOUs. Even as credit-rating agencies further lowered the companies’ debts into junk bond status, power generators that are owed millions by the two utilities held off on threats to take them into involuntary bankruptcy. Gov. Gray Davis signed stopgap legislation appropriating state funds to buy electricity and keep the lights on as the Legislature continued to work on finding longer-term solutions to the mess.

(A Times Staff Writer)

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2. Media Violence Linked to Aggression: The U.S. surgeon general said media violence can cause heightened aggression in children but has a relatively small effect on youth violence compared with factors such as access to firearms and gang membership. Hollywood executives disputed the scientific link to aggression, and some expressed relief that the entertainment industry wasn’t the major target of the report. But Capitol Hill critics of the entertainment industry seized on the findings as potential fuel in their fight to tighten regulation of violent television and video games. Coming on the heels of a Federal Trade Commission report that found movie studios had marketed violent films to kids, the findings on aggression by Surgeon General David Satcher could bolster lawmakers who want to broaden regulators’ power over entertainment advertising.

(Jeff Leeds)

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3. Power Crisis Fuels GM’s ZEV Fight: General Motors Corp., the company that once championed electric cars, told The Times that it plans to use California’s energy crisis as ammunition in a renewed attack on the state’s already watered- down zero-emissions vehicle rules. The auto maker plans to make its case before the California Air Resources Board this week as it considers proposals to ease the so-called ZEV mandate, which in present form would require auto makers to produce 23,000 electric vehicles a year for sale or lease in the state starting in 2003. How the argument will play with the politically appointed air board members is unclear, but staff spokesmen for the board dismissed it out of hand. GM introduced the country’s first contemporary electric car, the EV1, in 1996, but declared the car a failure last year because of its limited range, the high cost of batteries and GM’s inability to market it without heavily subsidizing the cost.

(Jeff Leeds)

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4. Auto Makers’ Profit Weak: Ford said its profit fell 33% in the fourth quarter to $1.2 billion, or 64 cents a share, and full-year earnings declined 2%, hurt by costly product delays and the Firestone tire recall as well as a cooling auto market. The results met analyst expectations that were lowered from 74 cents last month after Ford warned of profit weakness. The No. 2 auto maker’s sales fell 3% to $42.6 billion in the quarter. No. 1 General Motors posted a 51% drop in profit for the fourth quarter to $609 million, or $1.15 a share, and a 20% decline for the year on sagging sales overseas and in the U.S. GM’s quarterly results beat analyst expectations of $1.12 a share, but the company said it expects to be only “marginally profitable” this quarter.

(A Times Staff Writer)

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5. Prosecutors Poised to Indict Credit Lyonnais: One of Europe’s most powerful banks, Credit Lyonnais of France, could be stripped of its U.S. banking license and see some of its top former executives face criminal charges for their roles in an illegal deal that cost policyholders of a now-defunct California insurer billions of dollars, sources said. Prosecutors in the U.S. attorney’s office in Los Angeles are preparing criminal indictments against the state-controlled bank and at least a dozen French nationals who were involved in the 1992 takeover of Executive Life Insurance Co., according to the sources.

(John Dahlburg and Davan Maharaj)

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6. U.S. Warns of Runaway Production’s Toll: Production of an increasing number of feature films and television programs has shifted from Southern California to Canada and other countries that offer tax breaks, weak currencies and lower wages, costing the U.S. economy as much as $10 billion a year, the Commerce Department said. “Runaway film production has affected thousands of workers in industries ranging from computer graphics to construction workers and caterers,” said Commerce Secretary Norman Y. Mineta. “These losses threaten to disrupt important parts of a vital American industry.” The report borrows heavily from an industry-funded study released two years ago that used the controversial $10-billion figure, which does not represent direct production lost but the potential economic ripple from lost production.

(A Times Staff Writer)

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7. Tech Earnings Moderately Upbeat: Microsoft met lowered forecasts for earnings and sales for its fiscal second quarter and said it remained on track to meet annual forecasts, news that cheered battle-weary tech investors. Several smaller tech companies, including online bellwether EBay, reported better-than-

expected results for the latest quarter. Chip giant Intel also bettered Wall Street’s lowered profit expectations but warned of lower sales ahead. Rival Advanced Micro Devices, however, said its profit nearly tripled as it gained market share. IBM bested analyst expectations with a 28% profit jump, as revenue growth from outsourcing services, servers and mainframes for e-business outpaced declining PC sales. Apple Computer posted its first quarterly loss in three years as revenue dropped 57%, but said it would return to profitability this spring.

(Times Wire Services)

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8. Intel to Buy Southland’s Xircom: In its first major Southern California acquisition, Intel said it will purchase Xircom Inc., the Thousand Oaks-based maker

of notebook computer communications devices, for $748 million in cash. The deal values Xircom at $25 a share, a 38% premium to its last closing price before the news was announced. Xircom was trading at $75 a share in December 1999, near the peak of the technology bubble. The deal could set off a wave of bargain hunting for beaten-down tech companies, whose values remain deeply depressed from their highs of last winter, analysts said.

(Jerry Hirsch)

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9. Burkle Buys Kmart Stake: Los Angeles supermarket tycoon Ron Burkle disclosed that he and an associate have acquired a 6% stake in troubled retail chain Kmart. Burkle, who owned the Ralphs and Food 4 Less grocery chains before engineering their sale to Kroger Co., refused to divulge his investment intentions with Kmart, though he hinted that he supports the company’s new CEO and that he isn’t in the stock for a fast profit. Kmart is undergoing a restructuring in which it is closing stores and overhauling its distribution system to overcome weak sales. Before the news of Burkle’s purchase, Kmart shares had sagged by more than 75% in the preceding 2 1/2 years.

(Walter Hamilton)

10. Tax-Deferred Withdrawals Simplified: In a surprise move, the Internal Revenue Service dramatically simplified distribution rules for tax-deferred retirement plans, such as IRAs and 401(k)s, allowing retirees to take less money out of their accounts each year and pay less income tax in the process. The reasoning behind the IRS’ apparent generosity is compliance. The old formula, which offered several options, was so complicated that it was virtually impossible to determine whether a retiree was following the rules. Two options are offered under the new formula. Plan custodians will figure and report how much each retiree ought to take in mandatory distributions.

(Kathy M. Kristof)

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These and other 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.