U.S. Economy Expands at Fastest Clip Since 1984
The American economy grew even faster in the third quarter than the government first thought.
The Commerce Department said gross domestic product grew at an 8.2% annual rate from July to September -- a percentage point, or about $24 billion, greater than it estimated last month. It was the most robust quarterly expansion since 1984.
The department attributed most of the increase in the nation’s total output of goods and services to a substantial jump in business spending.
Business investment grew at an annualized rate of 14%, better than the 11.1% rate the government had estimated. Equipment and software investment climbed at an 18.4% pace, its best showing in five years. The buying binge was fueled by corporate profits, which the government said grew at an annual pace of more than 30%.
In a separate report, the Conference Board, a business research group, said its consumer confidence index unexpectedly rose 10 points this month to 91.7, largely because people were finding it easier to land jobs.
Teamsters Halt Food Deliveries to Markets
The Teamsters union ordered its drivers and warehouse workers to honor picket lines at grocery distribution centers in Southern California, disrupting food deliveries in one of the busiest shopping weeks of the year.
More than 8,000 Teamsters will be sidelined at 10 distribution centers in Southern and Central California for the duration of the strike, said Jim Santangelo, president of Teamsters Joint Council 42. “We either end this thing together or we die together,” he said.
Drivers won’t pick up trucks at distribution centers, and warehouse workers won’t load or unload them. Teamsters working at Ralphs, Albertsons or Vons distribution centers are not expected to report for work.
The United Food and Commercial Workers launched the strike Oct. 11 at Safeway Inc.'s Vons and Pavilions. Albertsons Inc. and Kroger Co.'s Ralphs then locked out union workers.
Bronfman Reaches Deal to Buy Warner Music
Edgar Bronfman Jr.'s investment team reached a deal to buy Warner Music for $2.6 billion, closing out Time Warner Inc.'s 36-year run in the industry and putting Bronfman, who in the 1990s built industry leader Universal Music Group, back in the business. The deal would transform Warner Music into the largest privately owned music firm.
Bronfman, former Seagram Co. chief executive and a vice chairman of Vivendi Universal, said, “I think there’s an opportunity to run the business differently than it has been. We have great faith in its potential for growth.”
Under terms of the deal, Time Warner could purchase as much as 15% of the music operation from the Bronfman team over the next three years.
Leveraged-buyout firm Thomas H. Lee is putting in an estimated $600 million, Bain Capital is expected to put in $350 million, and Providence Equity is chipping in about $150 million.
Harassment Ruling Shields Some Employers
In a ruling intended to protect conscientious employers, the California Supreme Court decided that businesses with strong anti-harassment policies may be spared monetary damages when a victim unreasonably fails to promptly report the misconduct.
The unanimous ruling shields employers who would have stopped a supervisor’s harassment if the victim had complained. Before, employers had been automatically liable even if unaware of wrongdoing.
Justice Joyce L. Kennard said the decision was aimed at making “employers the first line of defense against sexual harassment in the workplace.”
The ruling generally allows a jury to determine whether a victim’s failure to file a complaint immediately was unreasonable. A jury may consider a victim’s fear of retaliation and feeling of humiliation, the court said.
Security Trust Is Ordered to Shut Down
In the unfolding mutual fund scandal, regulators ordered the shutdown of a Phoenix financial services firm accused of helping a hedge fund engage in illegal trading. Security Trust Co., which served as a middleman between mutual funds and investors in corporate retirement plans, was ordered by federal banking regulators to liquidate its operations by March 31.
The firm was charged with helping Canary Capital Partners engage in late trading and market timing of mutual funds.
The order by the Office of the Comptroller of the Currency came as New York Atty. Gen. Eliot Spitzer lodged criminal fraud and larceny charges against Security Trust’s former chief executive and two other former executives. The Securities and Exchange Commission brought civil fraud charges. Security Trust said it would work with authorities for an orderly dissolution of the company.
Charges Against Unocal Are Dismissed
A judge dismissed federal charges that accused Unocal Corp. of misleading California regulators and gaining an illegal monopoly over the state’s formula for cleaner-burning gas.
The ruling, issued by an administrative law judge at the Federal Trade Commission, was a setback for rival oil firms, consumer advocates and California Atty. Gen. Bill Lockyer. They had supported the contention that Unocal’s allegedly anti-competitive behavior could cost Californians as much as $500 a year in gasoline prices.
U.S. Administrative Law Judge D. Michael Chappell found that Unocal’s actions were immune from antitrust prosecution, citing a 1961 doctrine meant to protect the ability of companies to lobby government.
The controversy dates from 1990 to 1994, when Unocal and other firms were working with the California Air Resources Board to set a standard for cleaner-burning fuel. In its complaint filed in March, the FTC said Unocal hid the fact that it had applied for patents on key aspects of the new fuel blend.
Court Cuts $290-Million Verdict Against Ford
A California appeals court, responding to a U.S. Supreme Court ruling earlier this year, reduced one of the largest punitive damage awards in a product liability case by more than 90%, continuing a string of rollbacks in jumbo jury verdicts.
The $290-million punitive award against Ford Motor Co. was cut to $23 million by the 5th District Court of Appeal, the same court that had upheld the jury verdict sought by plaintiffs.
The latest Ford case stems from a 1993 accident in the San Joaquin Valley that left three members of a family dead.
In its opinion, the California appellate court cut the verdict to bring it in line with the Supreme Court’s holding in a separate case in April. In that case, State Farm Mutual Automobile Insurance Co. vs. Campbell, the high court held that punitive awards in excess of nine times compensatory damages could be considered unconstitutional.
Shoppers Kick Off Holiday Retail Season
Seeking bargains at any price, consumers kicked off the official start of the holiday shopping season the day after Thanksgiving.
Some Southland malls reported strong traffic, but most were slower than they usually are Black Friday -- as the day after Thanksgiving is called, said Richard Giss, a retail consultant at Deloitte & Touche in Los Angeles. “Discounters, on the other hand, are doing very well,” he said, because they’ve aggressively cut prices.
Last year, the day after Thanksgiving was the year’s fourth-busiest shopping day, according to the International Council of Shopping Centers. The three days following Black Friday accounted for 10.1% of the season’s sales.
Sales results aren’t available until later this week.
Goldwyn to Step Down From Paramount Post
John Goldwyn is stepping down as vice chairman of Paramount Pictures’ Motion Picture Group, continuing the fallout from a prolonged box-office slump at the Viacom Inc.-owned movie studio.
Goldwyn, grandson of legendary movie mogul Samuel Goldwyn, has been at Paramount for 13 years and will remain a producer. Goldwyn, 45, becomes the latest longtime manager at the studio to step down in the last year amid dreary performances by such films as “Beyond Borders” and “The Fighting Temptations.”
In an interview, Goldwyn insisted, “I was not forced out.” He readily acknowledged, however, that “we’ve had a rough couple of years at the company.”
Orbitz Updates Filing for $303.6-Million IPO
Online travel company Orbitz Inc. filed an updated registration statement to raise as much as $303.6 million in an initial public stock offering that was originally proposed in May 2002.
The company, which plans to sell a 28% stake, is owned jointly by AMR Corp.'s American Airlines, UAL Corp.'s United Airlines, Northwest Airlines Corp., Continental Airlines Inc. and Delta Air Lines Inc.
The third-largest online travel merchant, after Expedia Inc. and Travelocity.com, Orbitz posted $3.9 million in net income on revenue of $64.4 million for the quarter ended Sept. 30.
In 2002, it lost $17.9 million on $175.5 million in revenue.
Orbitz executives declined to comment, citing a quiet period required by the Securities and Exchange Commission. The IPO coincides with a market upturn that has lifted the Nasdaq composite index 46% this year.
For a preview of this week’s business news, please see Monday’s Business section.