TOP STORIES -- May 4-9
Crash Case Reveals Large GM Settlements
General Motors Corp. has paid out at least $495 million -- an average of more than $1.6 million per case -- to settle lawsuits brought by victims of crashes involving a popular line of pickups.
Revelation of the payouts came last week when U.S. District Judge Donald W. Molloy in Montana released an exhibit in a case brought by the estate of a family killed in an accident. Cases involved C/K trucks that had fuel tanks outside the vehicles’ protective frames. That made them prone to explode in crashes, critics say. Dollar amounts in the document refer to settlements before late 2000.
The Times had asked the judge to unseal the document, which provides a glimpse into confidential payouts by major firms in product liability cases.
GM spokesman Jay Cooney called the judge’s decision “fundamentally poor public policy.”
Cooney said the settlements’ size and number did not mean C/K pickups were unsafe. GM made more than 9 million of the pickups from 1973 to 1987 with fuel tanks outside the frame. It then changed the design.
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Boeing Faces Possible Curb on Military Work
The Justice Department is investigating allegations that Boeing Co. illicitly used documents obtained from Lockheed Martin Co. to win a multibillion-dollar contract to build rockets for military satellites, Boeing said.
In addition, the Air Force is conducting an administrative inquiry that could result in Boeing’s being suspended or banned from certain military work, a Pentagon official said.
Chicago-based Boeing said the company is cooperating fully.
Investors are particularly concerned that any finding of wrongdoing could hurt Boeing’s $25-billion-a-year defense business, which has helped counter sagging commercial aircraft sales during a worldwide slump in air travel.
Federal investigators declined to discuss the scope of the inquiry, but sources said it was focused on documents obtained by a former Boeing employee who was hired away from Lockheed in 1997.
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Fed Leaves Key Rate at Four-Decade Low
Federal Reserve policymakers decided to keep the central bank’s signal-sending interest rate at a four-decade low of 1.25% but indicated that they would order new rate cuts if the U.S. economy continued to show signs of weakness.
Fed Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee warned that the country may face a new threat in deflation.
Analysts said the Fed’s latest action set the stage for as much as a half-point cut in the federal funds rate, the interest that banks charge one another for short-term loans, if the economy doesn’t show signs of snapping back after the war in Iraq.
Fed officials said that although the end of the war had helped lift consumer confidence and stock prices, recent employment and production statistics had proved disappointing.
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FCC Expected to Relax Media Ownership Rules
The Federal Communications Commission is preparing to relax media ownership rules to let a single company own as many as three television stations and one newspaper in large markets such as Los Angeles and New York, according to sources familiar with agency plans.
Current regulations limit companies to two TV stations in a market and prevent cross-ownership of a local newspaper.
In an FCC staff report to be delivered to commissioners Monday, officials also will recommend allowing large TV station groups to expand further by raising the national cap from 35% of households to 40% to 50%, sources said.
A final vote by the agency’s five commissioners is scheduled for June 2.
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Gas Dealers Pump Up Their Feud With Big Oil
The California Service Station and Automotive Repair Assn. accused major petroleum companies of artificially inflating pump prices, which hit a record $2.145 a gallon in the state March 17, by refusing to allow stations to shop around for the best wholesale gasoline deals. The association sent a contingent to Sacramento to lobby for legislation that would significantly ease restrictions on wholesale purchases.
One of the bills endorsed by the association was voted down in the Assembly Business and Professions Committee. The other was approved by the Senate Energy, Utilities and Communications Committee, but political observers said it would struggle for “yes” votes in the full chamber. Similar legislation in recent years never passed.
The service station association charges that lack of competition is the primary reason California’s gasoline prices remain far above the national average.
The Western States Petroleum Assn., an oil industry trade group, says pump prices are determined by market forces.
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Singapore Trade Pact Broadens U.S. Access
The United States signed an agreement with Singapore to lower barriers on $33 billion in two-way trade and provide tougher copyright protection for U.S. entertainment companies operating in the Asian city-state.
The two countries also struck a compromise in the global culture wars. Under the pact, Singapore will maintain control over domestic TV programming but give U.S. companies “full market access” and “national treatment” for other entertainment products and services.
U.S. companies using Singapore as a transmission base for regional TV and cable broadcasting also will be allowed to operate freely.
The U.S.-Singapore trade agreement has touched off little opposition in Congress. More than 1,300 U.S. companies operate in the Southeast Asian nation. In all, U.S. firms have invested $23 billion there.
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State Payrolls Decline a Third Straight Month
California’s job market slumped in April, as employers concerned about sluggish sales and an uncertain recovery slashed net 13,100 jobs, according to figures released Friday by the state Employment Development Department.
It was the third straight month that nonfarm payrolls have fallen in California, with job cuts in industries including manufacturing, trade, construction and business services.
The state’s unemployment rate held steady at 6.7%, where it has been for the last three months. But analysts say the figure probably is understated. The state’s labor force shrank in April, a sign that more unemployed have become discouraged and stopped looking for work and thus are no longer counted in the jobless statistics.
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Cathay Bancorp of L.A. to Acquire Rival GBC
Los Angeles-based Cathay Bancorp Inc. agreed to buy GBC Bancorp Inc., a local rival that has branched out beyond its core base of Asian American clients -- financing construction of Indian casinos, investing in junk bonds and dabbling in aircraft leases and metals trading.
The purchase, for $431 mil- lion in cash and stock, would make Cathay the largest Asian-American bank in the United States.
By combining Cathay Bank and GBC’s General Bank, the deal would create a new company, Cathay General Bancorp, with a network of branches throughout California, as well as in Texas, Massachusetts and Washington state, and offices in Hong Kong, Shanghai and Taipei. Its deposits would total $4.3 billion and its assets $5.4 billion.
Dunson K. Cheng, Cathay’s chairman and chief executive, said that although his bank has lent to the mainstream “all along,” he sees “the potential for more growth there.”
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California May Cut Securities Investigators
Corporations Commissioner Demetrios A. Boutris has proposed meeting a state budget-cutting goal by eliminating his entire investigative staff, a unit with frontline statewide responsibility for combating investment fraud.
The agency still hopes to avoid layoffs, Boutris said, but the decision is in the hands of the state Finance Department, which must pare $855 million from existing state employee contracts for the fiscal year starting July 1.
The proposal calls for the elimination of the Corporations Department’s 13 investigators, including veterans who worked on such high-profile cases as the 1989 collapse of Charles H. Keating Jr.’s Lincoln Savings & Loan.
The investigators typically work on lower-profile frauds, such as pyramid schemes, phony limited partnerships and other scams whose victims tend to be elderly.
Boutris defended his proposal as the “least disruptive” option available to him.
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Corona Drops Plans to Form Municipal Utility
The Corona City Council announced that it was dropping plans to form a full-fledged municipal utility and would no longer attempt to seize Southern California Edison’s power lines and substations by eminent domain.
The council said it asked its lawyers to begin talks with Edison to settle lawsuits the city and utility filed against each other.
SCE, a unit of Edison International in Rosemead, had promised a costly legal fight to block the seizure of its assets. The plan also had triggered sharp debate within the city.
Corona Mayor Jeffrey Bennett said the five council members unanimously agreed to abandon the project in light of budget uncertainty, potential legislative constraints, delays caused by legal battles and a plan by Edison to lower rates 8% to 16% this year.
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For a preview of this week’s business news, please see Monday’s Business section.
