TOP STORIES -- FEB. 17-22
Northrop Makes Defensive Move
Northrop Grumman Corp., the largest military shipbuilder, made an unsolicited offer to acquire TRW Inc. for about $5.9 billion in stock and assumption of additional debt to create the biggest defense contractor.
TRW’s automotive unit, which accounts for about three-quarters of sales, would be separated from the company if the transaction is completed.
TRW’s electronics, missile defense and space units are the most attractive to Northrop because they would fit well with its existing businesses. Century City-based Northrop had made about $7.7 billion in acquisitions in the last two years, adding shipbuilding yards as U.S. defense spending rises.
Northrop made its move within days of an announcement that TRW Chief Executive David Cote was resigning to lead Honeywell International Inc. His abrupt departure prompted speculation that TRW either would be split up or acquired.
The proposal is the latest in a decade-long consolidation in the defense industry.
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Andersen Floats Plan to Settle Lawsuits
Accounting firm Andersen has floated a plan to settle dozens of lawsuits from its audit of Enron Corp., a move that represents a savvy strategy to force shareholders and creditors to negotiate jointly so neither gets left out, legal experts say.
Such a tactic also could speed resolution of claims against Andersen and end an anticipated hemorrhaging of clients and staff.
But the initial figures floated--$600 million to $800 million, according to one attorney involved in the case--may be too small to satisfy the claims of the competing interests of shareholders involved in a class-action lawsuit and creditors, who are separately seeking restitution in Bankruptcy Court.
Andersen, which is the target of federal investigations for its role in the failure of the Houston-based energy trader in December, provided little detail about its efforts.
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Another Kinder, Gentler Bush
President Bush, during a three-day visit to Japan, did his best to protect his counterpart, Prime Minister Junichiro Koizumi, who is struggling with a bad economy.
Bush soft-pedaled economic issues and instead focused on the U.S.-Japan security alliance. But when the attention shifted to the economy, Bush was extremely gentle in public and was vociferous in his support of the Japanese leader.
Bush also visited South Korea and China, where he discussed security issues and American values.
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Boeing Setting a Reverse Course
Boeing Co. is preparing for a significant retrenchment this year at its satellite manufacturing operations in El Segundo, starting with a cutback of about 1,000 jobs.
Layoffs could exceed 2,000 this year, or nearly 25% of the company’s work force in what has been one of the most resilient and fastest-growing sectors of the California aerospace industry.
The cutbacks reflect a belated response to the telecommunications bust that has seen the collapse of a number of ambitious efforts to build global wireless communications systems and space-based broadband systems for the Internet.
The El Segundo business, which Boeing acquired last year, had aggressively expanded manufacturing capacity in recent years and developed new generations of more powerful satellites. The investments were based on the outlook for tremendous growth in the communications industry, the same optimism that damaged companies such as Lucent Technologies Inc. and Global Crossing Ltd.
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Mechanics Land Airline Contract
United Airlines, averting a potentially crippling strike by its mechanics, reached a tentative contract with the union, the International Assn. of Machinists.
The 10,600 mechanics and 2,200 utility workers are scheduled to vote on the pact March 5.
The tentative deal--which builds on proposals made by an emergency board convened by President Bush--calls for senior mechanics to get an immediate 37% wage hike to $35.14 an hour, which would give them the top mechanics’ pay in the industry.
The mechanics haven’t had a wage increase since 1994. They were set to strike United, a unit of UAL Corp., on Wednesday had a settlement not been reached.
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Putting a Dent in Trade Deficit
The U.S. trade deficit narrowed by 8% in 2001, its first improvement in six years, as recession-wary consumers trimmed their purchases of imported goods, more than offsetting a drop in foreign demand for U.S. products.
But the improvement in the trade gap didn’t translate into good news for the nation’s export sector, which is being pummeled by a strong dollar and weak overseas economies.
California exports plunged 26% in the fourth quarter of 2001 compared with the same period in 2000. The decrease capped a brutal year for the state’s high-tech manufacturers, whose products account for nearly half the state’s exported goods. Exports of computers and other electronic products fell from a record $16.6 billion in the fourth quarter of 2000 to $11.2 billion in the final quarter of 2001--a 33% drop.
Meanwhile, with energy costs declining sharply, consumer prices rose only 1.1% over the 12 months ended in January, the smallest increase since 1986.
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HMOs Getting the Cold Shoulder
The percentage of Californians enrolled in health maintenance organizations declined last year for the first time in at least eight years, dropping below 50%, the Kaiser Family Foundation and the Health Research and Educational Trust said.
The decline, a significant milestone in a state where managed care was pioneered, reflects growing dissatisfaction among employers and workers with HMOs and their limited choices. It also reflects a paradoxical resurgence in more expensive health plans that offer more medical options, such as preferred provider organizations and point-of-service plans that allow patients to seek treatment outside their regular health-care network.
The report showed a decline in HMO enrollment to 48% in 2001, from 55% in 2000. The percentage had been growing steadily since 1994, when 35.3% were in HMOs. Nationally, HMO enrollment fell to 23% last year from its peak of 31% in 1996.
At the same time, the Kaiser report said, the percentage of Californians enrolled in PPOs rose to 27% in 2001 from 25% in 2000.
Enrollment in point-of-service plans, once considered a dead model by some health-care analysts, rose to 25% from 19%.
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Court Gives FCC Some TV Work
A federal appeals court upended Federal Communications Commission rules about broadcast media ownership, prompting the FCC’s chief to acknowledge it will be harder for the agency to justify its rules.
The court ordered the FCC to reconsider restrictions that no single company can reach more than 35% of the national broadcast TV audience. The court also swept aside a ban on a company owning a cable system and a TV station in the same market.
The court ruling “was a monumental case” that makes it harder for the FCC to keep its restriction, Chairman Michael K. Powell said.
Viacom Inc., owner of CBS; News Corp., which owns Fox; and General Electric Co., NBC’s owner, challenged the 35% ownership cap rule as obsolete.
The appeals court is requiring the FCC to provide additional evidence that other media ownership rules are still needed. The agency is reviewing a ban on a company owning a newspaper and broadcast station in the same market. Several companies already are in violation of that rule, including Tribune Co., publisher of the Los Angeles Times, which owns newspapers and TV stations in several of the same markets.
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Home Is Where the Buying Is
Buyers in the Southland snapped up homes last month at the most hectic rate for a January in 13 years, triggering a steep run-up in prices, according to a report released last week.
In Los Angeles County, 8,087 new and existing condominiums and houses were sold last month, up more than 22% from a year earlier and the biggest volume for a January since the frenzied market of 1989. The median price of homes sold rose 17.5% to a record $235,000, according to DataQuick Information Systems Inc.
Orange and Ventura counties also saw double-digit sales increases last month as consumers moved to lock in low interest rates.
Although the January spike in sales was unusual and not likely to be sustained, analysts said the DataQuick report reaffirmed the enduring strength of the housing market, which has cushioned the blows of an otherwise sluggish economy.
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From Times Staff
For a preview of this week’s business and economic news, please see Monday’s Business section.
