TOP STORIES--MARCH 17-22
Andersen Affiliates Bolt for Rival Firms
The Andersen accounting firm’s efforts to transfer its overseas operations to KPMG frayed when three foreign affiliates bolted for rival companies and a senior Ernst & Young executive launched a campaign to pick off Andersen practices worldwide.
Andersen partnerships in Hong Kong and China said they planned to merge with PricewaterhouseCoopers. The Russian practice plans to merge with Ernst & Young.
Ernst & Young also is interested in the rest of Andersen’s non-U.S. affiliates, Chief Executive Bill Kimsey said.
In the meantime, the proposed takeover of the No. 4 accounting firm by Andersen’s oversight board, chaired by former Federal Reserve Chairman Paul Volcker, hinges on the Justice Department dropping criminal charges and partners approving.
Volcker said he wants an agreement in principle to settle class-action lawsuits over Andersen’s auditing of Enron Corp. before his board takes over the firm.
Federal Reserve Drops Recession Warning
Moving to manage a reviving American economy, Federal Reserve policymakers took a first step toward raising interest rates, dropping their position that a recession is the nation’s biggest economic danger.
As expected, the central bankers left their key, signal-sending interest rate at a four-decade low of 1.75%. But they accompanied their decision with word that they believe the risks no longer are tilted toward recession, but are balanced with the danger of excessive growth.
HP Moving Ahead With Compaq Merger
After claiming victory in a hard-fought proxy battle, Hewlett-Packard Co. appears to have the go-ahead to acquire Compaq Computer Corp., though official results won’t be in for weeks.
What sold many of the large institutional shareholders, which sided with HP Chief Executive Carly Fiorina against dissident director Walter Hewlett, was the unprecedented effort HP and Compaq put into planning how the two firms would mesh.
But execution of the integration will be critical if HP is to avoid the prolonged decline Hewlett and many HP employees fear. Mergers of large technology companies typically do not live up to management expectations.
Panel Calls for New Accounting Watchdog
In one of its final acts before disbanding, an accounting oversight board called on Congress to create an independently funded watchdog agency that would have the power to set accounting standards and punish auditors for wrongdoing.
The proposal by the Public Oversight Board--a private-sector panel created in 1977 to help oversee the accounting industry--presents a challenge to Securities and Exchange Commission Chairman Harvey L. Pitt’s reform package, which seeks an oversight board with greater industry involvement.
Under the board’s rival proposal, a newly created Independent Institute of Accountancy would consolidate all rule-making and enforcement powers in a single agency, operating under SEC supervision.
Memo Says Asbestos Touted for Paper Use
A document recently discovered through litigation describes efforts by Union Carbide to promote the use of asbestos in facial tissues.
The memo, believed to be from the late 1960s, indicates that Union Carbide sold asbestos to at least one paper manufacturer for use in facial tissues.
Paper companies are among the latest targets of asbestos lawsuits. Lawyers representing victims of asbestos-related diseases discovered the memo several months ago in a Union Carbide document repository. They are investigating and have pressed tissue makers to disclose whether they used asbestos in consumer products.
Paper maker Kimberly-Clark Corp. acknowledged that it bought asbestos from Union Carbide but used it in paper for sandpaper backing, not in Kleenex.
Kohl’s to Open 30 Stores in Southland Debut
Kohl’s Corp., the rapidly growing department store chain, will make its long-expected push into Southern California in March 2003, with plans to open at least 30 stores on a single day, according to developers, city planners and retail experts familiar with Kohl’s strategy.
Kohl’s, based in Menomonee Falls, Wis., has declined to give specifics about its plans. But developers and government officials say they have identified about a dozen sites at which Kohl’s is in various stages of permitting and development, including three in Los Angeles County, four in Orange County and three in the Inland Empire.
Kohl’s is building a warehouse in San Bernardino to support the expansion.
Kohl’s operates more than 380 stores in 29 states, but none in California.
Home Sales Surge in Southern California
Home sales surged last month across much of the Southland, lifting prices for almost every type of housing and setting the market on a scorching pace through the early part of the year that is ahead of last year’s record..
Sales of existing homes, condominiums and new homes jumped 21% in Los Angeles County, marking the best February since the previous boom in 1989.
The median price, or the point at which half the homes sell for more and half for less, was a record $237,000, up 15% from a year earlier, according to DataQuick Information Systems Inc.
NBC Is Going Back on the Wagon
General Electric’s NBC television network said it will stop accepting advertisements for hard liquor, returning to network television’s 54-year-old practice of abstaining from such ads.
NBC executives apparently realized that the company had more to lose in breaking this taboo than it had to gain, especially after Congress announced it would hold hearings.
In December, NBC broke ranks with CBS, ABC and Fox to be the first national broadcast network to run hard-liquor advertising. Struggling with the advertising recession, NBC had hoped it could tap more than $100 million in new ad revenue, said Jerry McGee, president of the Los Angeles office of J. Walter Thompson advertising agency, which represents liquor companies.
Disney Confirms Cuts in Animation Staff
Walt Disney Studios Animation President Thomas Schumacher officially informed his senior executives and top creative staff of plans to lay off as many as 265 employees at its Burbank facility over the next year.
The cuts, which will reduce the staff to about 1,000 by May 2003, are part of Walt Disney Co.’s retrenchment of its cornerstone animation business.
The animation industry is redefining itself at a rapid pace as computer-generated movies overshadow those made in the traditional hand-drawn style Disney invented.
EMI Slashes Jobs, Drops 400 Acts
EMI Group announced a massive overhaul, slashing 1,800 jobs and dropping 400 acts to cut costs and stem losses at the struggling British music giant--home to such stars as Garth Brooks and Janet Jackson. Nearly one-third of the layoffs will be in Los Angeles.
The dramatic restructuring, in which about 20% of EMI’s work force will be cut, is expected to deliver annual savings of about $140 million, the company said.
From Times Staff
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For a preview of this week’s business and economic news, please see Monday’s Business section.
