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In Business This Week: Headliner
Joseph Gorman: Mechanic Needed
Investors applauded when TRW Chairman and CEO Joseph Gorman announced a $7 billion deal for British auto parts maker LucasVarity in January. The company's brake products would fit with TRW's suspension and steering systems and help TRW in modular car assembly.
But so far, instead of synergy, TRW is getting management turmoil. TRW confirmed on Apr. 21 that LucasVarity CEO Victor Rice, who had been named co-chair of the merged company, would leave. TRW President Peter Hellman is departing as well. "We had different ideas and approaches," says Gorman, who insists that other top LucasVarity execs will stay.
Meanwhile, TRW's first-quarter earnings came in 17% below forecasts. Gorman concedes that cost-cutting, including plant closings and 7,500 layoffs, is behind schedule. Analysts are mixed: Kenneth Blaschke of BT Alex. Brown sees "worse to come" but points to "great assets." Gorman says the LucasVarity deal will eventually make TRW "a positive and powerful story."EDITED BY KELLEY HOLLANDReturn to top
FASB Gets Fierce on Good Will
EVERYBODY OUT OF THE POOL! The Financial Accounting Standards Board voted on Apr. 21 to eliminate pooling of interest accounting for mergers, perhaps by the end of 2000. Under pooling, a company that acquires another with stock can record the target's assets at book value. That means the buyer does not have to take charges against earnings to write off "good will"--the difference between the book value of acquired assets and the price paid. To make matters worse, the FASB recently decided to force bigger merger-related earnings hits by requiring most companies to write off good will within ten years. But with the pooling decision, the FASB may drop that plan and stick to the current 40-year standard.EDITED BY KELLEY HOLLANDReturn to top
The Journal Jilts Its Newsroom
WHILE DOW JONES DELVES DEEPER INTO CYBERSPACE, Wall Street Journal employees are unhappy over their compensation for putting out the paper product. At its Apr. 21 annual meeting, the company announced a Web hub called dowjones.com and offered other upbeat reports. But more than 50 Journal employees held a sit-in to protest the elimination of their longtime profit-sharing plan. Washington reporter Bob Davis, who just won the Pulitzer Prize, warned CEO Peter Kann of "anger and resentment in the newsroom."EDITED BY KELLEY HOLLANDReturn to top
Tenneco Takes Another Whack
ON ITS WAY TO BECOMING A MORE FOCUSED PLAYER IN AUTOMOTIVE-PARTS and packaging, Tenneco made another stop. On Apr. 20, it sold its folding-carton business to Austell (Ga.)-based Caraustar Industries. That follows Tenneco's $2.2 billion sale of its containerboard division. Next up may be a split of its packaging arm, which makes such brands as Hefty Bags, and its automotive side. "In restructuring Tenneco, we've unlocked some $15 billion in value that was being lost in the old conglomerate," says Chairman and CEO Dana Mead.EDITED BY KELLEY HOLLANDReturn to top
Rubin's Call for Sharing Risk
CREDITORS OF THE DEVELOPING WORLD BEWARE: Treasury Secretary Robert Rubin said on Apr. 21 that reforms of the international financial system should include provisions to ensure that creditors bear their share of risk when countries are hit by financiAl crises. Specifically, Rubin said, it may be necessary forcountries to renegotiate private debt obligations. And in "truly exceptional cases," he added, countries may have to temporarily suspend some debt payments. It was the toughest language Rubin has used to date to ensure that private lenders participate in what bankers are calling "bail-ins."EDITED BY KELLEY HOLLANDReturn to top