TOP STORIES -- Oct. 12-17
Both Sides Prepare for a Long Market Strike
Southern California grocers and striking employees dug in for the long haul, as stores said their makeshift operations were showing steady improvement and unions representing everyone from actors to janitors pledged to stock food banks and crank up a campaign to broaden public support.
Vons and Pavilions stores owned by Safeway Inc. were the first target of the strike by the United Food and Commercial Workers union. Kroger Co., which owns Ralphs, and Albertsons Inc. locked out their employees in a show of solidarity.
Both sides view the weekend as crucial. Shoppers may find their sympathy being tested as supplies in cupboards and refrigerators dwindle. And pickets may find their enthusiasm waning as the strike drags on.
Union leaders representing actors, longshore workers, janitors, teachers, hotel housekeepers and others pledged to bolster the strikers’ resolve with a series of rallies and help on picket lines.
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O.C. Register Owner Agrees to Sell Stake
Resolving a three-decade family war over power and money, Freedom Communications Inc. agreed to allow outside investors to buy into the company that publishes the Orange County Register, providing funds that would enable disgruntled members of the clan to sell all or part of their shares.
The deal values Freedom at $1.72 billion. Family members said it represented a middle ground between a sale and keeping the Irvine firm a family affair.
If the family shareholders approve the transaction, the boardroom would be shared with representatives of Blackstone Group and Providence Equity Partners, which are putting up cash to buy out dissident shareholders.
Media companies that had made offers to buy Freedom included Gannett Co., the nation’s largest newspaper owner, and MediaNews Group, owner of the Los Angeles Daily News and Long Beach Press-Telegram.
By giving family members a chance to cash out, the agreement “gives all shareholders the choices they have been seeking,” said Timothy C. Hoiles, who owns 8.6% of Freedom. “This is a great outcome.”
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Justice Department Issues Subpoena to Tenet
The Justice Department has issued a second subpoena to Tenet Healthcare Corp., as part of the government’s investigation into some of Tenet’s billing practices in the Medicare program, the hospital firm said.
The subpoena, issued by the U.S. attorney in Los Angeles, seeks medical and billing records dating back to 1998 from two Tenet-owned hospitals, Tarzana Regional Medical Center and USC University Hospital. It also seeks information about certain managers at those hospitals and data on the hospitals’ charges during the last five years.
“We will continue to cooperate with the Department of Justice regarding this matter,” said a spokesman for the Santa Barbara-based company.
The U.S. attorney’s office in L.A. declined to comment.
The latest subpoena is related to the Justice Department’s investigation into whether Tenet engaged in improper billing to inflate its reimbursements from the government for patients who required more expensive Medicare “outlier” payments.
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Sony Pictures Plans to Cut at Least 300 Jobs
Sony Pictures Entertainment plans to cut at least 300 jobs over the next 18 months, in keeping with a mandate from Tokyo-based parent Sony Corp. to slash overhead throughout the company, sources said.
The layoffs will follow the elimination of 1,000 jobs in the entertainment and electronics giant’s struggling music group earlier this year.
The new cuts are expected to hit across the board at Sony Pictures’ key business units, including its Culver City-based Columbia Pictures movie studio, domestic and international TV operations and Sony Pictures Digital. Sources estimate that the cuts could save the company as much as $75 million a year.
Sony has seen its shares fall almost 20% in Tokyo trading this year, even as the benchmark Nikkei-225 stock index, which includes Sony, is up almost 28%.
In July, Sony reported a 98% decline in profit for its fiscal first quarter, citing a slump in sales of television sets and a disappointing run of summer movies compared with the blockbuster success of last year’s “Spider-Man.”
Sony Pictures Entertainment employs about 6,000 worldwide.
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NYSE to Take Action Against ‘Specialists’
The New York Stock Exchange, reeling from scandals over its governance and executive pay, plans to fine and punish five “specialist” firms over improper trading that may have cost investors millions of dollars.
The announcement was another blow to the image of the 211-year-old exchange.
The alleged violations by specialists -- brokers on the NYSE floor who are supposed to match buy and sell orders -- could make it more difficult for the exchange to fight off angry reformers who argue that the floor trading system is antiquated and open to abuse.
After a nine-month investigation covering 2000 through 2002, the Big Board found that the specialists in some instances stepped in front of customers to make quick profits with their own trades.
Investors were deprived of getting the best prices available, the NYSE said. It promised to seek “substantial fines” and reimbursement of investor losses and said it had put in new surveillance software “to deter similar conduct in the future.”
The exchange, in its announcement, did not name the firms under investigation.
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U.S. Pension Agency May Need Bailout
The government agency that stands behind the nation’s corporate pension plans is suffering mounting losses and could be forced to seek a taxpayer bailout, the agency’s director said.
Likening the situation to the savings and loan crisis of the 1980s, the director of the Pension Benefit Guaranty Corp. told Congress that without structural changes the system would collapse. The agency, which insures retirement plans for 44 million American workers and retirees, is running a record deficit of $8.8 billion -- a big jump from the $5.7-billion shortfall the agency forecast earlier this year.
The prime culprit: a series of major bankruptcies, mainly involving airlines and steel companies, that required the agency to step in and assume the costs of funding the firms’ pensions.
“Pension claims against the PBGC for 2002 alone were greater than the total claims for all previous years combined,” Steven A. Kandarian, executive director of the agency, told the Senate Special Committee on Aging. “At current premium levels, it would take about 12 years of premiums to cover just the claims from 2002.”
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Universal Music Unveils Plan to Reduce Costs
In the latest indication of the music industry’s blues, Vivendi Universal plans a restructuring that would slash $200 million in annual costs by shrinking operations in 71 countries.
The reorganization relies heavily on job cuts and a more cost-conscious approach aimed at reversing operating losses at Universal Music Group, the world’s largest record company.
Universal executives say the company is paying the price for the rise of free Internet file-sharing networks and the emergence of massive counterfeit CD markets worldwide.
For Paris-based Vivendi, the plan would streamline the $7-billion-a-year music unit as it moves forward without ties to Universal’s film studio and other entertainment operations, which are being sold to General Electric Co.
Universal’s international label operations would be scaled back significantly with the company outsourcing some CD distribution and accelerating plans to cut 1,350 jobs worldwide, leaving the workforce at about 10,850.
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Mattel Sales Edge Up Ahead of Holiday Season
El Segundo-based Mattel Inc., the world’s biggest toy maker, said third-quarter profit fell 3.7%, as retailers were cautious about how much consumers would spend in the holiday season and kept their orders lean.
That prompted concern among some in the industry, nervous about tough competition and rocky starts for new toys. Still, some analysts were pleasantly surprised by Mattel’s modest gain in sales.
Net income fell to $270 million, or 61 cents a share, down from $280.6 million, or 63 cents, a year earlier. Excluding profit related to an accounting change and one-time charges, earnings were $265.2 million, or 60 cents a share, up from $256.7 million, or 58 cents. That met expectations of analysts surveyed by Thomson First Call.
Sales rose 2% to $1.7 billion. Domestic sales fell 4% while international sales rose 16%.
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Disneyland President Decides to Step Down
Disneyland President Cynthia Harriss resigned after a four-year tenure marked by the successful expansion of some operations but the disappointing debut of California Adventure.
Her departure set off the first major management shake-up since Jay Rasulo was named president of Walt Disney Parks and Resorts a year ago.
Rasulo was asked to move aggressively to turn around Walt Disney Co.’s struggling theme park operation, hammered by a soft economy, high gasoline prices and security concerns after Sept. 11.
Harriss, who said she was leaving for personal reasons, will be succeeded by Matt Ouimet, president of the Disney Cruise Line. As president, Ouimet will oversee the two Anaheim theme parks, Downtown Disney and three resort hotels.
Harriss, 51, had been with the company for 11 years and at Disneyland for six years.
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For a preview of this week’s business news, please see Monday’s Business section.
