TOP 10 STORIES / MAY 14-18
Electricity Rates Zoom Under New Structure The California Public Utilities Commission approved a $5.7-billion rate increase that will raise home electricity bills by $4 to $85 a month. Under the plan, which is designed to encourage conservation, average residential rates will increase 47% for Southern California Edison Co. customers who use more than 130% of their baseline allotment. Small-business customers of Edison and Pacific Gas & Electric Co. will see rates rise by about 35%, and industrial customers will get an average 49% rate increase.
The rate plan, which is retroactive to March 27, drew fire from consumer advocates and business groups. Nancy Rivera Brooks
Citigroup to Acquire Major Mexican Bank
Citigroup reached a deal to acquire Mexico’s oldest banking group, Banamex-Accival, for $12.5 billion in a dramatic step toward the financial integration of North America. The largest takeover in Mexican history further consolidates Mexico’s banking system, which is finally recovering after the chaos of a mid-1990s crisis that forced a $100-billion bailout. Citigroup hopes Banamex will help it penetrate the growing Latino market in the United States. The New York-based financial services giant is the only U.S. bank to have entered retail banking in Mexico.
In response to the news Thursday, the peso strengthened by more than 2% to 8.97 to the dollar, the Mexican currency’s highest level since August 1998. The news also powered the Mexican stock market, driving the IPC index up 5.9%. James F. Smith
Fed Issues Rate Cut, Signal of More Ahead
The Federal Reserve cut its key interest rate another half percentage point to 4% and, contrary to what had been expected, left the door open for still more cuts aimed at getting the stumbling U.S. economy moving again. The latest reduction in the so-called federal funds rate was the fifth in five months and continued one of the swiftest rate reductions in Fed history. Peter G. Gosselin
Markets Soar on Tame Inflation News
Wall Street’s immediate reaction to the interest rate reduction was muted, but shares soared the next day with help from a relatively tame inflation report. Yields on long-term Treasury bonds jumped on the Fed’s statement that the rate-cutting campaign might continue but eased by the end of the week. The Dow closed Friday at 11,301.74, up 4.4%. The Nasdaq ended the week up 4.3%.
A Times Staff Writer
Trade Reports Indicate Slowdown Was Sharper
New trade reports provided strong evidence that the economic slowdown in California and the rest of the nation early this year was sharper than previously believed. California’s foreign exports during the first quarter fell 11.6%, in an apparent reflection of the slowdown in technology spending, one report showed. The federal government, meanwhile, said the nation’s trade gap widened to $31.2 billion in March, a bigger-than-expected deficit that economists said could prompt a downward revision in the gross domestic product for the quarter. A Times Staff Writer
Jury’s Punitive Damages Clipped by High Court
In a victory for corporate America, the Supreme Court ruled that large punitive verdicts should receive aggressive, skeptical review by appellate judges. On an 8-to-1 vote, the justices overturned a jury’s $4.5-million punitive award against a toolmaking firm in a $50,000 dispute over the design of a pocketknife.
The U.S. 9th Circuit Court of Appeals, based in San Francisco, had upheld the verdict, taking the view that the judges should not second-guess such verdicts unless the trial judge had bungled. Speaking for the court, Justice John Paul Stevens described punitive verdicts as akin to a “private fine” that expresses “moral condemnation.” Such punishment decisions usually are made by judges rather than juries, he said. David G. Savage
PG&E; Shareholders Call for CEO’s Ouster
Angry PG&E; Corp. shareholders vented their frustration during the company’s annual meeting in San Francisco, blaming management for a bankruptcy filing that could wipe out their investments. Many of the attendees expressed anger at Sacramento lawmakers and Gov. Gray Davis for the state’s energy crisis, but others said PG&E; bore responsibility for backing the state’s 1996 attempt at electricity deregulation.
Dozens of retired company employees and other stockholders cheered at calls for the resignation of Chief Executive Robert Glynn as police barriers kept activists at a distance. Joseph Menn
Palm’s Forecast Shows Tech Slumping Further
Palm Inc. slashed its sales estimates by about half and said losses would be more than double its earlier forecast for the current quarter, in the latest sign that the technology slump has yet to hit bottom. Palm, maker of the most widely used hand-held computers, also surprised analysts by saying it might need to raise funds in the next six months. The announcement, made after markets closed Thursday, pulled Palm’s stock down $2 to close at $5.05 on Nasdaq. Charles Piller
Nissan Revival Plan Yields $2.7-Billion Profit
Nissan Motor Co. posted a $2.7-billion profit for its 2001 fiscal year in a dramatic turnaround that pulled the company back from the brink of bankruptcy. Aided by strong performance by its Torrance-based North American unit, Japan’s No. 2 auto maker reversed a decade of decline that was capped by a $6.4-billion loss last year. The improvement came through a draconian revival plan that has shuttered three factories, laid off 14,000 workers and turned Japan’s system of lifetime employment and cozy business arrangements with suppliers on its head. Brazilian-born Carlos Ghosn, a former Renault executive nicknamed “le cost cutter” for his financial turnaround of the French car maker, designed Nissan’s revival program after being named president of the Japanese company when Renault acquired controlling interest in 1999.
John O’Dell
New Video Games Draw Raves at Expo
The Electronic Entertainment Expo, or E3, which wrapped up Saturday at the Los Angeles Convention Center, kicked off a $1-billion fight for the hearts and minds of video game players as Microsoft Corp. and Nintendo Co. launched set-top consoles to challenge the dominance of Sony Corp.’s PlayStation 2. Microsoft’s Xbox and Nintendo’s Gamecube will be on store shelves this fall and boast sharper graphics and faster play than previous generations of game consoles. E3 is the $6-billion video game industry’s largest show in North America and allows retail buyers and the media to see what’s in store for the year ahead. Gamecube drew raves from convention goers who jammed Nintendo’s booth to see games like “Luigi’s Mansion” and “Rogue Leader.”
Aaron Curtiss
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These and additional stories from last week are available at www.latimes.com/business.
Please see Monday’s Business section for a preview of the week’s events.
