Up Front
Edited by Sheridan Prasso
Talk Show
"We see the same intolerance of dissent, the same mad global ambitions, the same brutal determination to control everyday life, and all of life." -- President Bush comparing al Qaeda to totalitarians and fascists of the past century
ECONOMIC FALLOUT
Return of the Payroll Scrooge
If they aren't cutting the payroll, they're definitely cutting salary increases. Half of all companies, from all economic sectors, are likely to give smaller raises to white-collar employees next year--if any at all, compensation consultants say.
Already, a study by Mercer Consulting finds, 19% of 340 companies surveyed have cut next year's raises, from 4.5% on average to 3%. Another 11% will postpone raises by six months; 2% will scrap raises altogether, with no cost-of-living increases either. And, says Mercer's Steven Gross, who did the study, there'll be more of this if the economy stays soft. "This is definitely a white-collar recession," he says.
It'll be worse at the top. Compensation for CEOs is likely to fall by a third. Consultant Frederick Cook says that's appropriate, since CEOs are well-paid in good times: "Now is not the time to treat execs better. If anything, you might freeze the execs and give 2% to the rest."
By Kimberly Weisul
REALTY CHECK
How Cheap Is My Valley?
Plenty of words have been used to describe Silicon Valley--ostentatious and arrogant among them. But affordable? Surprisingly, the economic downturn is turning the pricey region into a bit of a bargain, relatively speaking.
Consider this: The asking price for Silicon Valley office space in September, 2001, was down 40% from its high in the final quarter of 2000, while vacancies have shot up to 13.5%, says BT Commercial Real Estate. It's the highest vacancy rate since 1995, leaving space seekers with plenty of room to negotiate. Median housing prices in the heart of Silicon Valley, though still steep, are off 3%, while sales have plunged 38% from a year ago, says the California Association of Realtors. Anecdotal evidence suggests that salaries for the growing pool of available hotshot engineers and others in Tech Land have slid by as much as 30%.
The upshot? Some companies, for the first time, are considering Silicon Valley as a place to call home. Notiva Corp., for example, a software startup based in Rochester, N.Y., plans to move its headquarters to the area by early next year.
Company founder Mark Brandt says he can get fully furnished, state-of-the-art office space for about what he pays in Rochester. "A year ago you could say it wasn't feasible to make the move because of the costs," says Brandt. "You can't make that argument anymore." Although housing is still more expensive than elsewhere, Brandt and other entrepreneurs say the rich talent pool, sizable venture capital community, and array of services available for tech startups make the benefits far outweigh the negatives.
By Linda Himelstein
CAR TALK
How Bob Lutz Is Redesigning GM
Only two months into the job as head of product development at General Motors (GM
), car guru Bob Lutz has succeeded in shaking things up. He's rearranged the approval process for new models to give designers greater say and sent a batch of vehicles back to the drawing board. What's more, sources say, Lutz has a handshake agreement with a new design chief with a European background. If it comes off, the handpicked hire would take over from GM's current vice-president for design, Wayne Cherry, even before he retires next year. An official announcement is expected by the end of this year.
The new design chief will have more power than Cherry had for most of his tenure at GM. Before Lutz took over design and engineering operations, final styling for new cars was approved by vehicle line execs. They were typically engineers with MBAs--never designers. Now Lutz and the design chief get the final nod. "I have reempowered design," says Lutz.
Lutz has also heavily edited some concept cars GM will show at the Detroit auto show in January. He's reworking the Chevrolet Bel Aire--GM's answer to the Ford Thunderbird--and asked designers to soften the angular GMC Terra4 SUV and alter the front of the Sky Saturn convertible. Says Lutz: "There were some concepts that were wide of the mark."
By David Welch
THE LIST
Paid to Be in Harm's Way
Here's what those on the front lines can earn. Some also get hostile-environment pay and other allowances:
ARMY RANGERS
Colonel
Head of a combat unit
$79,409
Soldiers
$18,007 to $48,729*
AIR FORCE
Lt. Colonel
Leader of a flying squadron
$67,644
Captain
Pilot in a flying squadron
$41,872 to $50,278
NAVY
Captain
Commander of an aircraft carrier
$83,614
Lieutenant
Pilot on an aircraft carrier
$31,450 to $59,220
U.S. BORDER PATROL
Agent
$21,947 to $43,226**
F.A.A.
Air marshal
$35,100 to $80,800
* Enlisted pay is exempt from income tax
** Some earn more
Data: U.S. Armed Services, U.S. Government Web sites
AFTER 9/11
Where All Those Traders Went
Forced out by the September 11 attacks, more than 30 finance and securities firms found themselves without trading floors. So executives had to get creative. They spread out and set up temporary trading all over: in a warehouse, in New Jersey, at a college, and in offices of a defunct dot-com.
Oil, metals, and agricultural-products trader Refco sent 30 people to Baruch College on Manhattan's East Side. The school had a mock trading floor for MBA students, with live data feeds, T1 Internet connections, and 40 computer stations. When Ref-co Vice-President Jeff Bauml approached his alma mater about lending the space to his traders, Baruch transformed the "virtual" floor into a real one within 48 hours. "If I were building a trading room today, I would model it after Baruch's," says Bauml. Refco stayed for three weeks before relocating to a vacant Seventh Avenue space that until recently belonged to a dot-com.
The New York Board of Trade went to a converted warehouse in Queens to trade cotton, coffee, sugar, and cocoa. "It's very different from Wall Street, but everyone is making do," says a spokesman, who predicts being permanently back in Manhattan within a year.
Others are squeezing into tighter spaces. Investment banker Sandler O'Neill, which lost 66 of 148 New York employees in the attacks, set up makeshift stock and bond trading in its Midtown office--in areas that "would comfortably suit one or two people and are now uncomfortably fitting five or six," says Terry Maltese, head of asset management. Yet even the most crowded of traders seem happy just to be up and running--and alive.
By Julia Cosgrove
AFTER 9/11
Scary Numbers
THE DISPLACED: 16,000 traders, researchers, salespeople, and support staff in more than 30 trading firms
THE REBUILDING: 1 to 2 years
THE COST: $3.2 billion
Data: TowerGroup estimates
HOME ENTERTAINMENT
A Boffo Season for Video Games?
With people hunkering down in the wake of the terrorist attacks, they're spending more time at home--and on home-leisure activities. Already, analysts estimate that home video-game sales will surge 23% this year, to $6.9 billion, the strongest growth in three years. That strength comes, in part, from the hype surrounding the much-anticipated mid-November launches of two new game consoles, Nintendo's GameCube and Microsoft's Xbox.
If bio-scares and the war against the Taliban continue, sales could rocket even higher. "People are looking for safe entertainment and a way to escape reality," says Scott McDaniel, vice-president for marketing at Sony Online Entertainment, which is pulling in revenues of $4 million a month in subscriptions to its Web-based game EverQuest.
If you're assuming there's a new aversion to violence that will slam video games, think again. The industry has shelved or altered little material after the attacks.
That's because violent games, rated "M" for "mature," account for only 7% of the industry's annual sales. Publishers are targeting older audiences, not just 15 year olds. Today's average gamer, like Kent Joseph, a computer programmer from Chapel Hill, N.C., is 28. And they tend to buy sports titles. Joseph recently ordered Electronic Arts' NHL 2002 and Madden 2002, and the new GameCube. His bill: more than $500. And he's not done yet. "I intend to put a lot more money into games this winter," he says.
The industry hasn't been around long enough to have endured a sustained economic downturn before, so what will happen beyond the holiday season is something of a mystery. Yet as we now seek ways to escape, look for home videogames to help us do it.
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Corrections and Clarifications
"A boffo season for video games?" (Up Front, Nov. 19) incorrectly identified the publisher of the games NHL 2002 and Madden 2002 as Sony. Those games are published by Electronic Arts Inc.
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By Arlene Weintraub
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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