TOP 10 STORIES / MAY 21-25
Firestone Severs Ties With Ford Over Recall
The tire war between Ford Motor Co. and Bridgestone/Firestone Inc. erupted again when the tire maker abruptly announced it was ending its 95-year-old ties with Ford and would no longer sell tires to the auto maker.
The move came after reports that Ford was close to issuing its own recall of 13 million Firestone Wilderness AT tires on Ford vehicles that had not been recalled last summer.
Ford acknowledged that the tires showed very low incidence of tread separation, but said it was taking no chances and recalling all of them--no doubt trying to head off additional accidents of Ford Explorers and other light trucks this summer.
Firestone responded by releasing data that it said showed Explorers roll over 10 times more frequently than Ford Ranger pickup trucks on identical tires. Firestone also released data that shows Explorers flip over twice as easily as any other sport-utility vehicle.
Terril Yue Jones
Maxicare Seized for ‘Unsafe’ Manner
California regulators seized Maxicare Health Plans Inc. in an order that claims the Los Angeles-based health maintenance organization is being run in an “unsafe, injurious” manner “hazardous to enrollees.”
The takeover order also claims that the HMO, which has about 235,000 enrollees in California, has failed to meet state-imposed financial requirements.
The move, which follows similar actions earlier this month by Illinois and Missouri, comes against a backdrop of rising medical costs that have hurt profits at some of the industry’s biggest players and threaten weaker HMOs.
Times Staff Writers
Business World Ponders Shift in Senate Control
The defection of Sen. James M. Jeffords of Vermont from the Republican Party could dramatically affect the drug, HMO, defense, credit card and tobacco industries, money managers and investment analysts said.
A Democrat-controlled Congress could hold damaging hearings or enact restrictive laws, some analysts said. Still, most said it’s unlikely that a change in the balance of congressional power would lead to any “radical anti-business legislation” such as drug price controls.
The clearest winners in the power switch could be lenders Fannie Mae and Freddie Mac, whose status as government-sponsored enterprises is expected to remain intact.
Analysts also said they expect President Bush’s tax cut to remain largely intact but chances for future tax cuts look slimmer.
Josh Friedman
Economic Signs Point to Sluggishness
New statistics showed the nation’s economy trundling along at a painfully slow pace. The gross domestic product grew at an annual rate of just 1.3% in the first quarter, the government said, much slower than the 2% growth rate estimated a month ago. Sales of new and existing homes fell and durable goods orders tumbled, other reports showed.
Fed Chairman Alan Greenspan said the worst of the slowdown might still be ahead and left the door open to additional interest rate cuts.
A Times Staff Writer
Ouster Clears Way for Acquisition of DirecTV
In a stunning twist in the takeover saga of DirecTV, Michael T. Smith, chairman of Hughes Electronics Corp., owner of the satellite TV leader, was abruptly ousted by the board, removing the biggest obstacle to a News Corp. bid to buy DirecTV.
The move is considered a major victory for News Corp., whose eight-month negotiation with General Motors Corp. to buy Hughes has been threatened by backdoor efforts by Smith to derail the deal.
Sources say Smith defied GM’s orders to concentrate on completing the News Corp. deal by rallying support in recent weeks behind the scenes for a rival bid by EchoStar Communications Corp.
Sallie Hofmeister
AOL to Raise Price for Internet Service
America Online, the nation’s No. 1 Internet service provider, said it will hike its monthly subscription rate by 9%, from $21.95 to $23.90, for unlimited use. It’s the first increase in three years.
Consumer groups blasted the hike, particularly because it came so quickly after the company won government approval for its merger with Time Warner. Analysts said the move was part of a growing trend of rising costs for Internet service. Rival EarthLink Inc. said it had not decided whether it would follow AOL’s lead, but Microsoft Corp.’s MSN vowed to keep monthly rates steady.
Wall Street was pleased by AOL’s hike--slated to take effect in July--because it will boost the company’s revenue.
Edmund Sanders
Vivendi to Acquire MP3 for $372 Million
Three years after emerging as a cyber rebel ready to upend the record industry’s corporate establishment, music firm MP3.com Inc. agreed to be acquired by Vivendi Universal, the world’s largest music conglomerate.
San Diego-based MP3 has been handicapped by a series of lawsuits filed against it by record labels--including Vivendi’s Universal Music Group.
It underscores how record conglomerates, which have botched numerous attempts to launch successful online music divisions of their own, are reaching outside for Internet expertise and technology from companies they once derided as pirates.
Jeff Leeds
Studios Shudder Over Payments for Trailers
Sony Pictures quietly made a deal with four theater chains to pay for the placement of previews for upcoming films that previously were shown at no cost to studios, prompting criticism from rivals worried that the free advertising may be in jeopardy.
Sony said it made payments to theaters to ensure that a 60-second trailer for its upcoming comedy “The Animal” would play before showings of “The Mummy Returns” for two weeks during May.
The company refused to say how much it paid, but sources said the payments probably totaled as much as $100,000.
Patrick Goldstein
Avant, Execs Settle Code Theft Charges
Software company Avant Corp., its chief executive and other current and former executives pleaded no contest to criminal charges over the theft of reams of computer code from a rival firm where Avant’s founders had worked.
The company and seven veterans of rival Cadence Design Systems Inc. agreed to pay a record $35 million in fines to Santa Clara County, with potentially much more in restitution to be awarded to Cadence after a hearing next month. Five of the individuals face jail or prison terms of as long as six years.
The surprise settlement came during jury selection for a rare criminal trial over trade secrets, largely ending a San Jose case comparable to the O.J. Simpson murder trial for its complexity and the number of top-drawer defense attorneys involved.
Joseph Menn
Pacific Exchange Closes L.A. Trading Floor
The Pacific Exchange permanently closed its Los Angeles trading floor Friday as part of a planned switch to an electronic stock-trading format.
The trading floor had been based near downtown since it was founded as the Los Angeles Oil Exchange in 1899. But many factors, including improved technology that made electronic trading far cheaper, is prompting the exchange to revamp its floor-based stock business.
A companion stock floor in San Francisco is slated for closure later this year.
Walter Hamilton
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These and additional stories from last week are available at www. latimes.com/busniess.
See Monday’s Business section for a preview of the week’s events.
