TOP STORIES--JUNE 30-JULY 5

Messier Ousted as

Vivendi Universal CEO

Jean-Marie Messier was fired as chairman and chief executive of Vivendi Universal, two years after sweeping in with grand plans to turn a sleepy French water utility into a global media powerhouse. He succumbed to a coup engineered by investors and board members after the company suffered record losses.

Messier’s attempt to build a European rival to AOL Time Warner Inc. failed on both sides of the Atlantic. Amid poor communications with investors, concerns about the viability of his strategy and the mounting of massive debt, Vivendi Universal shares plummeted to a 13-year low last month.

But Messier’s departure did little to immediately allay investor concerns. Two rating firms downgraded the company’s bonds, which sparked near-panic selling in Paris, where Vivendi shares plummeted to a 15-year low last week. Standard & Poor’s indicated that Vivendi’s financial obligations this year could be $3 billion more than analysts had expected, forcing the company to sell assets.

Named to replace Messier was Jean-Rene Fourtou, deputy head of Franco-German pharmaceutical company Aventis, who immediately vowed to address concerns about the company’s cash needs and to make its accounting more transparent to shareholders.

In Hollywood, speculation swirled over the future of Vivendi’s most influential U.S. executive, Barry Diller, who runs the company’s movie, television and theme-park divisions. Some believe Vivendi may offer to sell him its Hollywood assets.

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Northrop Agrees to Buy

TRW for $7.8 Billion

Northrop Grumman Corp. agreed to acquire TRW Inc. for $7.8 billion in a deal that would create the world’s second-largest arms contractor and heighten competition amid a new era of growth for the defense industry.

The merger would provide Century City-based Northrop with the broadest portfolio of products in the defense industry, including nuclear aircraft carriers, secret eavesdropping satellites, space-based lasers, unmanned spy planes, Navy destroyers, airborne radar, battle management software and thousands of electronic systems.

The proposed acquisition would bring Northrop one step closer to creating a network of weapons and electronic systems across all three military services, a feat that is at the crux of the Bush administration’s push to transform the Pentagon.

The breadth of its businesses would give Northrop elite status among contractors able to provide “system of systems” integration--a complex and lucrative task to oversee multibillion-dollar defense contracts.

The merger also could improve growth prospects for Southern California’s defense industry and result in few if any layoffs, unlike past defense mergers.

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Jobless Rate Rises; Hiring Figures Revised

The nation’s unemployment rate rose to 5.9% in June and employers hired fewer than half the number of workers they had been expected to, the Labor Department said. The figures show the economy recovering at a maddeningly slow pace.

U.S. companies added only 36,000 workers last month, substantially fewer than the 75,000 that had been predicted.

And the government revised previous months’ job gains dating to February, when it was thought that the labor market began to stage a comeback. The department initially said employers added 66,000 that month; it now says they trimmed 165,000.

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U.S. Auto Sales Strong;

2 Firms Unveil Incentives

Auto sales in the U.S. turned in another strong performance in June, declining just 1.7% from last year’s robust level. Meanwhile, Ford Motor Co. and General Motors Corp. announced a new round of sales incentives, which probably will keep sales strong.

The auto sales numbers bode well for the economy as vehicle sales, a closely watched economic barometer, are a key component of consumer spending.

GM managed to increase sales 4.3% last month, while Ford continued its slide, with sales shrinking 10.6% compared with last June.

GM said it is reviving its no-interest financing, offering 0% to 2.9% loans of as long as five years on 2002 model-year vehicles, or as much as $4,000 cash back. Ford announced it is offering $1,500 to $3,000 rebates and low-interest loans on 2002 models.

WorldCom CEO Says

Firm Is Too Big to Fail

Discounting predictions that WorldCom Inc. might file for bankruptcy protection, Chief Executive John W. Sidgmore said the second-biggest U.S. long-distance telephone carrier is too big to fail.

Sidgmore, in his most extensive public remarks since WorldCom disclosed it had uncovered a major accounting fraud, pledged full cooperation with federal regulators and said the company is working with its lenders to avoid a bankruptcy filing.

The Securities and Exchange Commission has accused Clinton, Miss.-based WorldCom of civil fraud for allegedly hiding $3.9 billion in expenses. The company, in a report last week, attempted to blame its bookkeeping lapses on former Chief Financial Officer Scott D. Sullivan, who, according to WorldCom, was fired in June after the accounting irregularities were discovered.

The company’s report was blasted by the SEC as inadequate, and Sidgmore vowed to release everything WorldCom learns about the situation and to “clarify” its explanation of events.

Some of WorldCom’s big corporate customers are scrambling to line up alternative suppliers for systems that transmit company data internally and to business partners and customers, but analysts predict that many firms will suffer one way or another from WorldCom’s problems.

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U.S. to Probe Alleged

Shredding at Global

Global Crossing Ltd. said federal prosecutors in Los Angeles will investigate allegations that two employees shredded documents at the Madison, N.J., offices of the fiber-optic network builder after government investigations began.

Global Crossing has said documents unrelated to government and securities fraud lawsuits were destroyed at five of its U.S. and Canadian offices, but not at its U.S. headquarters. It denied that any sensitive documents were destroyed at any of its offices.

Federal authorities, including the Securities and Exchange Commission, are looking into the Bermuda-based company’s accounting practices as part of investigations of Global Crossing’s collapse.

Meanwhile, little-known Los Angeles financier Tom T. Gores is emerging as a strong candidate to buy Global Crossing’s core fiber-optic network business.

Gores’ Platinum Equity, a private buyout firm that has picked up some big chunks of the telecommunications sector, has the cash, the solid balance sheet and the incentive to grab the bulk of Global Crossing’s business, said people familiar with the bidding process. Potential buyers are scheduled to turn in offers by Thursday, and the company can then start negotiations to bring Global Crossing out of bankruptcy proceedings.

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Martha Stewart Cancels TV Appearance

Martha Stewart canceled her weekly appearance on CBS’ “The Early Show,” saying she does not want to comment further on allegations she used insider information when selling ImClone Systems Inc. stock.

Other than one formal statement and her CBS appearance late last month, Stewart has shunned the spotlight since the ImClone allegations became public.

However, her company, Martha Stewart Living Omnimedia Inc., has hired Brunswick Group, a public-relations strategy firm, apparently to do damage control. She also has hired high-profile attorney Robert Morvillo to help her team of lawyers defend her against government claims that she traded stock on insider information.

Stewart has denied wrongdoing.

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Housing Project Breaks Ground in Hollywood

Construction began on another high-profile real estate project in Hollywood, a $125-million shopping center and luxury apartment complex at one of Los Angeles’ best-known intersections.

Named Sunset & Vine, the project is expected to be the largest multifamily residential development in Hollywood in the last 50 years, according to the builders, Bond Capital Ltd.

Bond Capital’s financial partners include the California State Teachers’ Retirement System pension fund and former L.A. Laker star Earvin “Magic” Johnson’s Johnson Development Corp.

From Times Staff

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For a preview of this week’s business and economic news, please see Monday’s Business section.