Marketplace: News Archives

Tuesday, October 10, 2000
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It's Tuesday, the 10th of October. I'm David Brancaccio. There's been a shake-up at the top of Bridgestone/Firestone, the U.S. part of the Japanese company that made tires linked to more than a hundred deaths in Ford Sport Utility Vehicle crashes. Masatoshi Ono is out and John Lampe is in. Lampe was executive vice-president of the company and took the lead defending Bridgestone/Firestone during congressional hearings on the tire recall. At a news conference in today, Lampe said he plans to accelerate the recall effort.

Lampe: We acknowledge and accept responsibility that we have some performance issues, and a very small percentage of our tires. But let me tell you why it's so hard to talk about defect. Because defect would indicate that you know what it is. And we've said continuously to Congress that we continue to investigate. We don't know at this point in time what the root cause or the combination of causes is. But we can't look at the tire and say, there's a defect.

Lampe is an American, a fact that will be remarked up within Japanese corporate circles. Earlier today, word came that American International Group, the huge New York-based insurance company, would help restructure Chiyoda Mutual Life, the insurance company that yesterday became Japan's biggest corporate bankruptcy ever. Sheridan Praso is Asia Editor for Businessweek.

Prasso: In Japan there's been essentially no reason for the kind of recession they've had and there's some really deep questioning going on amoung Japanese managers. That's not to say that the Japanese management is out at Bridgestone/Firestone, they've named an American as the head of the U. S. unit but the Bridgestone corporation itself is based in Japan and is still headed by Japanese of course. And the number two person in the U.S. is going to be brought out from Japan as well. So I think there's a bit more flexibility in terms of accepting a more of a change among management structures within Japanese corporations across the board.

Brancaccio: Just by virtue of the fact that an American was appointed to such a senior post is an indication of some new thinking.

Prasso: I think everyone is certainly doing a double-take about this. On the one hand, they realize that deep restructuring needs to go on in corporate Japan, and if entrenched cultural morays have been preventing them from carrying this out so far; they're seeing foreigners as one way to be able to come in; be able to make the kind of changes that need to be made and yet not risk offense within a Japanese cultural context.

Sheridan Praso, Asia Editor for Businessweek. Bridgestone stock closed down in Tokyo today, hours before the management shakeup was confirmed. Bridgestone stock is at this moment down 56 percent from its high of the year.

And that's the top of our news for Tuesday. It it news anymore when the Nasdaq gets clobbered. It closed at 3240 today, down 115 points or three point four percent. The Dow fell four tenths percent. More analysis as our program continues.

In other Marketplace news today.

Would the big internet brand Yahoo become the latest dot-com to scare the daylights out of investors with a wan-looking profits report? Analysts were hoping for the best and their optimism was rewarded after formal trading ended. Yahoo reported profits that work out to be 13 cents per share, a penny higher than the best guesses. Marketplace's Michelle Brier has more on Yahoo and prospects for the online advertising business.

Brier: It could be a recipe for disaster - not only does Yahoo get most of its revenue from advertising, but most of its advertisers have traditionally been other internet companies. And lately, internet companies have taken a serious beating..

Dodge: "There are some dot coms that don't advertise anymore because those Dot coms don't exist."

Brier: E-week magazine editor John Dodge says its true that Yahoo and similar websites will miss the ad money that start ups used to spend so freely. But he says online advertising is still lucrative and he thinks if any company is capable of drawing ad dollars, it's Yahoo..

Dodge: "They have the eyeballs, they have the traffic, they always are number one in delivering the numbers of unique visitors, number one or two, I should say. Yahoo delivers that rich demographic."

Brier: Even with internet companies spending less, online advertising is expected to top six billion dollars this year - almost a 70 percent increase from 1999 . That's because traditional retailers are shifting money from TV and radio to net ads and because internet companies that are making money are also spending more to market themselves online. In New York, I'm Michelle Brier for Marketplace.

Also after the market closed, another company that is a favorite of individual investors, Lucent Technology, said its profits will fall short of expectations as the year draws to a close. Shares of Lucent, a spinoff from AT&T, had fallen two point nine percent ahead of that news.

For many Americans it was a warmer, darker summer as consumers adapted to the high electricity bills that followed tight electricity supplies. In some parts of the country generating capacity was stretched to the limit ... and sometimes beyond ... with rolling brownouts or even blackouts. Power disruptions continue. On Sunday, nine square miles of downtown Chicago were blacked out for six hours as technicians struggled with aging and overtaxed equipment. Marketplace's John Dimsdale reports on a new warning that things won't be any better next summer.

Dimsdale: Cambridge Energy Research Associates has looked at the North American electric transmission system and the picture is a complicated, uncoordinated regional mishmash that threatens to create gridlock for the nation's vital supply of electricity. The transmission system is the network of interstate power lines ... the backbone that sends electric current from generating plants to cities and regions around the country. If electricity deregulation is to succeed, this grid must be able to deliver electricity from places where its plentiful ... Texas for example ... to places where its in short supply ... like California. And Larry Makovich of Cambridge Energy Research Associates says that's not happening.

Makovich: Even within regions we have bottlenecks that prevent us from helping the midwest out for example, with a power plant in Pennsylvania from getting over there.

Dimsdale: Makovich says next summer, New York City and southern California are especially at risk. His colleague, Daniel Yergin, says the lack of coordination in the transmission system could slow down economic growth in the U.S.

Yergin: In so many developing countries in the world, lack of investment in the electric power sector // shows up when your factories don't work four or five hours a day...shows up with lower economic growth and lower standards of living.

Dimsdale: Yergin says the U.S. can no longer afford the luxury of taking its electricity grid for granted. The study concludes electricity managers and regulators must create incentives to attract private investment in the transmission infrastructure ... or else risk a government re-regulation of the system. In Washington, I'm John Dimsdale for Marketplace.

The price of crude oil rose sharply today, up a dollar 32 in New York to 33-18 a barrel, amid concerns about the cold snap in many parts of the country and about oil supplies as tensions in the middle east run high. On Monday, the big oil producer Saudi Arabia had warned that it would not stand by if Israel acting against Lebanon and Syria. But today the news agency Reuters quoting a Saudi source familiar with the Kingdom's official thinking calling it "unthinkable" that the would hold back supplies in retaliation.

There was a lull in violence along the west bank of the Jordan River today, after nearly two weeks of fighting that have left about 90 people, mainly Palestinians, dead. U.N. Secretary General Kofi Annan said today both Palestinians and Israelis share the blame for the unrest. It was the first day of trading on the Isreali stock exchange after four days off for the Yom Kippur observance. They key index there fell more than six percent today and the currency slipped. From London, Marketplace's Stephen Beard has more.

Beard: The bloodshed may have caused horror and alarm around the world with some diplomats fearing a slide into war. But financial analysts in London are still taking a fairly relaxed view of the conflict . There is no need to dump Israeli assets - says Anais Faraj - an economist with the Japanese bank, Nomura.

Faraj: If we approach the sort of crisis conditions that we saw in the Gulf War, then people might become more cautious, but I don't think they'd be worried about Israel's fundamental integrity or economic future. I think they'd be worried about the short term impact on growth if an all out hot war was likely. But I don't think that's on the horizon."

Beard: Israel - says Faraj - has a western-style industrial economy which should be robust enough to weather even the most serious unrest. The country's recent impressive growth has been largely due to a thriving high tech sector. And that - he says - should remain unscathed even if the fighting spreads.

Faraj: These entrepreneurs can fly away and go to New York and be back three months later when things have calmed down. The actual physical plant can be replaced and most of it is weightless. It's ideas and software.

Beard: But there is at least one analyst in London who believes that today's fall in the Israeli stockmarket may be justified. Christi Marta of securities house UBS Warburg thinks there is a distinct danger that the violence could undermine consumer confidence.

Marta: If people start to think "This could be the beginning and it could escalate." In that case I think people would start to postpone big ticket purchases.

Beard0: Tourism could also be hit - says Christi Marta. But - she candidly admits - the situation in Israel is so volatile she can only guess at what the repercussions will be . In London this is Stephen Beard for Marketplace.

The biggest county in the United States is bracing for a big strike tomorrow. Employees of Los Angeles county are preparing for a general walkout that could close everything from libraries to hospital emergency rooms. As Marketplace's Sarah Gardner reports, this is just part of LA's current labor pains.

Gardner: If Hollywood producers made a "Reality TV" show about LA workers right now, there'd be no lack of drama. Despite its laid-back image, Los Angeles has become a hotbed of labor strikes lately and everybody from actors to coroners are angry about their pay. County bus drivers have been on strike for 24 days, with negotiations at a stalemate. Actors are fed up as well. Members of the Screen Actors Guild walked out five months ago in what's turned into the longest talent strike in Hollywood history. Today the union went so far as to boycott Crest toothpaste, Tide detergent and Ivory soap because manufacturer Procter and Gamble uses non-union actors in its commercials. But the actor's strike is peanuts compared to what could occur tomorrow in Los Angeles. A union representing 47-thousand LA county workers is has been striking facilities one day at a time but it's now threatening a general strike in a long-running dispute over pay. Mark Tarnowsky of the Service Employees International Union local 660.

Tarnowsky: "County libraries will close, the department of social services will close. The department of children and family services will be severely affected. Probation, sheriff, the public defender and District Attorney's office. Sewers, flood control, road maintenance."

Gardner: So anybody wanting to get a birth certificate, a welfare check, a library bookor report possible child abuse, among other things, may have a tough time. But the biggest threat is to the county's hospital system, where doctors fear a walkout could create a countywide medical crisis. Late today both sides agreed to get back to the bargaining table but it wasn't clear how much progress would be made. Most of LA's labor problems right now involve wages. The region's economy is booming and union leaders believe the time is ripe to push for more concessions from employers. And that includes the town's actors, who want to be paid more for their performances in commercials. Of course, LA's actors have one thing the bus drivers and county workers lack: celebrities. At a union rally in New York today, actors Tim Robbins and Susan Sarandon protested along with their less-famous colleagues. I'm Sarah Gardner for Marketplace.

Rundown

Boom Or Bust?
Some are declaring the "New Economy" -dot-coms and all- in big trouble, making it sound like pending catastrophe. Commentator Chris Farrell suggests we take the doom-saying in, but hold -off on the panic.


Divorce, Egyptian Style
Men in Egypt have always had the right to declare a divorce from their spouses, but women didn't. A new law allows women legal and religious equality in divorce law, but alimony is still off limits.


Breaking The Mold
In this installment of our series on how women are changing the face of the workplace, Jo Giese takes a look at a woman who is a car designer.


Look Ahead
Coming up on 10/11/00: The Nobel Prize for Economics is awarded tomorrow!