In Business This Week
Edited by Monica Roman
HEADLINER
Deborah Hopkins: Winds of Change
"Hurricane Debby" is heading toward Wall Street. On Dec. 17, Citigroup (C
) named Deborah Hopkins head of corporate strategy, making her the sixth woman on the bank's 47-member management committee.
The hard-charging Hopkins earned the nickname in the late 1990s, when she was chief financial officer of Boeing. Brought in from General Motors to stem the flow of red ink, she streamlined the airplane maker's accounting practices. But after only 18 months, she left to become CFO of Lucent Technologies in April, 2000. Just a year later, she was forced out after massive losses and an 80% stock drop.
Hopkins most recently was a senior partner at consultants Marakon Associates. Her appointment comes as Citigroup has been beefing up its management and reevaluating its business practices on the heels of federal and state probes into possible conflicts of interest at its investment bank, Salomon Smith Barney, and Congressional hearings on its dealing with Enron.
By Heather Timmons and Stanley Holmes
Conseco Throws in the Towel
Having failed to shore up its floundering finance businesses and reeling under its $6.5 billion in debt, Conseco filed for Chapter 11 on Dec. 11. With $52 billion in assets, Conseco is the third-largest bankruptcy ever, topped only by WorldCom and Enron. The bankruptcy is a final blow to the reputation of Gary Wendt, who quit on Oct. 3. The ex-CEO of General Electric Capital was brought in to rescue Conseco in June, 2000, with a $45 million signing bonus. He got a further $8 million bonus in July, 2002, a month before Conseco defaulted on its debt. The company says that its insurance units are not part of the filing and that policyholders will not be affected. Finance operations such as the risky mobile-home loan portfolio will be sold off during the restructuring. What is likely to emerge will be a life- and health-insurance company with an investment arm.
History on the Basketball Court
Like lots of other sports moguls, Black Entertainment Television founder Robert Johnson has money, influence, and great love of the game. Still, his winning bid for a National Basketball Assn. expansion franchise in Charlotte, N.C., is special: It marks the first time an African American has been majority owner of a major professional team. Johnson, worth an estimated $1.3 billion, is paying about $300 million for the as-yet-unnamed team, which will begin play in the 2004-05 season. In nabbing the franchise, Johnson prevailed over an investor group led by Boston business executive Steve Belkin and Larry Bird, a Basketball Hall of Famer.
WorldCom Clears the Decks
On Dec. 17, critics of WorldCom got what they've been demanding for a long time: the resignation of 6 of the 10 sitting directors who oversaw the No. 2 telecom during a time when it misstated earnings by $9 billion and filed for bankruptcy. Three of the six--Max Bobbitt, Francesco Galesi, and Carl Aycock--were longtime allies of ousted founder Bernard Ebbers. Also resigning were former board Chairman Bert Roberts and current Vice-Chairman John Sidgmore, who will remain at WorldCom. The departures pave the way for incoming Chairman and CEO Michael Capellas to nominate his own slate of directors. Capellas is expected to seek nominees with squeaky-clean credentials, such as former New York Mayor Rudolph Giuliani.
Red Ink at the Golden Arches
McDonald's (MCD
) supersize woes got even bigger on Dec. 17, when the company warned it would suffer its first quarterly loss since going public in 1967. Fighting a price war with rival Burger King and a rising tide of complaints about bad service, the fast-food chain will take a $390 million charge to close poorly performing restaurants and cut staff. The moves should clear the books for new CEO Jim Cantalupo, who will take over on Jan. 1. McDonald's stock, already trading at an eight-year low, tumbled 8%, to $15.96, in the two days following the news.
Can UAL Jettison its Labor Deal?
United Airlines (UAL
) is taking off the gloves in its battle with the unions. The bankrupt carrier disclosed that it expects to ask the court on Dec. 26 to toss out its labor contracts. United's union leaders had agreed to pay concessions of $1 billion a year--before the airline filed Chapter 11 on Dec. 9. But United's new bankruptcy lenders have given it only until mid-February to trim $2.4 billion from its annual labor bill. If it can't, the lenders are threatening to cut off their loans, which could force the airline into liquidation. The unions say they are hoping to negotiate a deal to save the company.
Et Cetera...
-- Halliburton (HAL
) will pay $2.8 billion and 59.5 million shares to settle asbestos claims.
-- Vodafone (VOD
) CEO Christopher Gent will retire in July, to be succeeded by Arun Sarin.
-- Phillips-Van Heusen agreed to acquire Calvin Klein Inc. for about $700 million.
CLOSING BELL
Not So Boffo
Blockbuster (BBI
) said on Dec. 18 that 2002 earnings could fall 20% below expectations. The culprit: slow videotape and DVD rentals. It blamed the slump on an "unprecedented" number of movies for sale at deep discounts and shoppers pressed for time in a short holiday period. The stock fell 32%, to $13.13.
CLOSING BELL
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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