TOP STORIES -- June 5-10
Kerkorian Buys More of GM, Fueling Speculation
Los Angeles billionaire Kirk Kerkorian nearly doubled his ownership in General Motors Corp., heightening speculation on Wall Street about his next move with one of America’s most storied companies.
Kerkorian completed a purchase of GM stock, giving him 7.2% of the firm and making him the third-largest shareholder.
Some analysts suggest that the 88-year-old investor will quietly put pressure on GM to further overhaul its business. There also have been suggestions that GM might spin off part of its financial services division, General Motors Acceptance Corp. GM Chief Executive Rick Wagoner said the company was evaluating GMAC.
Wagoner on Tuesday announced plans to cut GM’s North American workforce by 25,000, or about 14%, with a stepped-up attrition program and the closing of several factories over three years.
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Warner Gets a Jump on Movie Pirates in China
In a groundbreaking response to movie piracy, Warner Bros. Entertainment released its latest movie on DVD in China the same day it premiered in theaters in the U.S.
The goal for Warner is to battle rampant piracy in China by giving movie fans a legitimate alternative to bootlegs. But Warner’s action was tempered by its choice of movie: “The Sisterhood of the Traveling Pants,” a relatively low-budget film that the studio had not planned on releasing in Chinese theaters.
A Warner spokesman said the studio was not necessarily looking to apply the same strategy in the U.S. or other countries.
Hoping to make unauthorized copies of “Pants” less appealing outside China, Warner included no extra features on the DVD. It also added Mandarin subtitles that cannot be hidden, said Yotam Ben-Ami, an anti-piracy executive at the studio.
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Citigroup to Settle Enron-Related Lawsuit
Citigroup Inc. agreed to pay $2 billion to settle a class-action lawsuit accusing the bank of defrauding the University of California and other investors through its work for fallen energy trader Enron Corp.
The deal, the largest to date stemming from Enron’s 2001 bankruptcy, could set the stage for other big recoveries. Suits against other banks that helped fuel Enron’s rise as the company furiously hid mounting debt, including JPMorgan Chase & Co. and Merrill Lynch, are pending.
In the settlement, Citigroup denied breaking any laws. The company said it agreed to the settlement “solely to eliminate the uncertainties, burden and expense of further protracted litigation.”
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Chevron’s Planned Unocal Purchase OKd
Claiming a victory for California motorists, U.S. regulators approved Chevron’s proposed $16.4-billion purchase of Unocal Corp. after the companies agreed to surrender Unocal’s controversial patents on the state’s cleaner-burning gasoline.
The Federal Trade Commission said the pact would save California drivers more than $500 million a year, as competitors would not have to pay royalties to Unocal for making the reformulated gasoline, costs that would be passed on to drivers.
Earlier in the week, a Chinese oil company said it might try to top Chevron’s proposed acquisition of Unocal, raising the possibility of a bidding war for the El Segundo-based oil company.
The disclosure by CNOOC Ltd., a division of state-owned China National Offshore Oil Corp., marked the first time that the Chinese entity had confirmed its interest in the exploration and production company.
In a filing with the Securities and Exchange Commission, CNOOC said it was “continuing to examine its options with respect to Unocal,” which might “include a possible offer.”
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U.S. Reduces Demand for Tobacco Penalty
The Justice Department, in what many called a stunning gaffe, suddenly changed course in closing arguments in its massive civil racketeering case against big tobacco companies, slashing its chief demand for an industry-funded smoking-cessation program by more than 90%.
Instead of seeking a $130-billion campaign that would take 25 years and help every addicted smoker who wants to quit, lawyers asked for a five-year, $10-billion program that would serve only those who become addicted in the near future as a result of industry misconduct.
After a trial that lasted 8 1/2 months, U.S. District Judge Gladys Kessler set a schedule for final briefs and proposed findings of fact to be filed this summer.
Some Democratic lawmakers called on the Justice Department’s inspector general to investigate whether top officials improperly intervened to shield the industry from a major hit.
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Landowner Catellus Accepts Takeover Bid
Catellus Development Corp., one of California’s largest private landowners, has agreed to be sold for $3.6 billion in cash and stock to warehouse and distribution giant ProLogis.
Both companies are real estate investment trusts that develop and operate industrial properties. Catellus also owns Union Station in Los Angeles.
ProLogis will continue to develop Catellus’ properties, including Kaiser Commerce Center, a 588-acre former Kaiser steel mill in San Bernardino County near truck routes that serve the ports of Los Angeles and Long Beach.
Under terms of the deal, ProLogis would pay $33.81 a share or 0.822 share of ProLogis for each Catellus share. The total value of the deal is $4.9 billion including debt.
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Fed’s Greenspan Issues Warning on Mortgages
Federal Reserve Chairman Alan Greenspan warned that new, more liberal kinds of mortgages were helping to drive up home prices and fueling the danger of a sharp price decline, but said the economy overall was on “reasonably firm footing.”
Greenspan said interest-only mortgages in particular were contributing to what he termed “froth in some local markets.” He said he continued to be bewildered by the decline in mortgage rates and other long-term interest rates even as the Fed continued its campaign to raise short-term rates.
But on the whole, Greenspan said, the economy is humming along.
The Fed’s policymaking Federal Open Market Committee next meets June 29 and 30.
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Diller Sells Back Stake to NBC Universal
Studio mogul-turned-Internet entrepreneur Barry Diller severed his remaining ties to Hollywood, agreeing to sell back to NBC Universal for $3.4 billion his company’s minority stake in its movie studio, theme parks and TV cable channels.
Diller’s IAC/InterActiveCorp, owner of the Home Shopping Network and Expedia, was paid $1 billion in cash and got back 56.6 million shares of IAC valued at $1.4 billion that NBC Universal held, the companies said.
The deal firms up control of some of Hollywood’s prized entertainment assets by conglomerate General Electric Co.
Through its 80%-owned NBC Universal, GE controls the Universal Studios film and theme park operations and some cable channels. France’s Vivendi Universal, which sold control of the assets last year to GE for $14 billion, has the remaining 20%.
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U.S. Panel Aims for Digital Medical Records
Health and Human Services Secretary Mike Leavitt announced that he would head a new panel that would push for a national system to exchange medical records electronically.
Leavitt said standardizing, digitizing and connecting all U.S. health records were so crucial to the economy and to patient safety that the effort warranted the leadership of the federal government.
The committee also will recommend priorities for health information technology goals that will benefit consumers, such as improving drug safety and bioterrorism surveillance.
Leavitt said he would appoint as many as 17 members from government and private enterprise to a panel dubbed the American Health Information Community. It will make recommendations to the Health and Human Services Department on how to make health records uniform, digital and interoperable while protecting the confidentiality of patient records.
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SoCal Edison Sues State Energy Regulators
Southern California Edison Co. sued state energy regulators, escalating a battle over whether to keep the public in the dark about the utility’s power needs.
In a complaint filed in Superior Court against the California Energy Commission, the company sought to keep confidential key electricity demand forecasts it must provide as part of a biennial planning process.
Edison, a Rosemead-based unit of Edison International, fears that revealing the figures, which show its estimated peak usage during the summers between 2006 and 2016, could give an unfair market advantage to private power generators and other suppliers.
The Energy Commission, however, contends that information must be available so that California can plan correctly and ensure adequate electricity supplies for the next 10 years.
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For a preview of this week’s business news, please see Monday’s Business section.
