MD-11 Program Scrapped
Boeing Co. last week announced that it will phase out the MD-11 jetliner produced in Long Beach, dealing what may prove another serious blow to L.A. County’s aerospace industry.
As of April 30, Boeing had secured orders for only 22 MD-11s that are produced at the former McDonnell Douglas plant in Long Beach. Boeing officials said that amount is not sufficient to justify continued production. The decision leaves in doubt the jobs of 3,000 Boeing employees in Long Beach who work on the program.
Boeing officials said existing orders for the jetliner would be completed within the next 18 months, after which production will cease. Although the company plans to transfer as many workers as possible to other areas, officials left open the possibility of layoffs.
“This MD-11 announcement is not a signal that we are closing the Long Beach facility,” Boeing Commercial Airplane Group President Ron Woodard said in a statement. “We have a skilled and experienced workforce there and our newest airplane the 717 will roll out of the Long Beach factory next week. We’re also using the facility for finishing work on 737s. In addition, we’re considering establishing a next-generation 737 production line there.”
Huge Payout for Orange County
Wall Street brokerage Merrill Lynch & Co. last week agreed to pay $400 million to settle a lawsuit filed against it by Orange County for allegedly contributing to the county’s 1994 financial crisis.
The brokerage will return an additional $20 million in frozen county funds and pay $17 million to settle a suit from an Irvine water district, bringing the total amount of the settlement to $437 million.
Orange County had accused Merrill Lynch of duping former county Treasurer Robert L. Citron into borrowing billions of dollars to invest in high-risk securities. The county was forced to file for bankruptcy protection after interest rates on those loans rose sharply, marking the largest municipal bankruptcy in U.S. history.
The settlement contained no admission of wrongdoing by Merrill Lynch. With the latest settlement and six previous ones, Orange County will have recovered about 39 percent of its $1.64 billion in bankruptcy losses.
MTA Gets State Funding
The Metropolitan Transportation Authority last week passed a major hurdle when the state approved its six-year, $1.9 billion plan for subway construction and other transit projects.
With the approval of the California Transportation Commission in hand, the MTA now must concentrate on lobbying Congress for the federal portion of its spending plan. Funds for the MTA projects are coming from state and federal gas taxes.
In addition to paying for the completion of the North Hollywood subway extension, the funds will be used to pay for the Alameda Corridor project and additional carpool lanes on local freeways.
Hilton Takes Over Honolulu Hotel
Beverly Hills-based Hilton Hotels Corp. continued its growth spurt last week by investing $400 million to take a controlling stake in Hilton Hawaiian Village in Honolulu, half of which it already owned. The seller of the stake purchased by Hilton last week is Prudential Insurance Co. of America.
The 2,500-room hotel is one of Hilton’s top properties in terms of cash flow, according to company officials. Hilton declined to reveal its new ownership stake in the hotel, but analysts say it will own 100 percent of the property once the deal is consummated over the next six to 24 months.
Once the deal is finalized, Hilton will have made $725 million in acquisitions so far this year.
Unocal to Unload Non-Core Units
El Segundo-based Unocal Corp. announced plans last week to divest its non-exploration and production business assets, including its agricultural products, pipeline operations and carbon and minerals units.
Unocal has hired a financial advisor to help continue its restructuring into a company focused on the core business of oil exploration and production in the U.S. Gulf of Mexico, Central and Southeast Asia, Latin America and other areas. Non-core assets may be sold or spun off, company officials said.
Meanwhile, Unocal’s name came up last week as a possible bidder for Triton Energy Ltd., a Dallas oil company on the sales block that could fetch as much as $1.8 billion.
Unocal officials declined comment last week, but analysts pointed to it, along with British Petroleum Co. and French-based Total, as the most likely bidders for Triton, which has been losing money in recent years and is reportedly looking for an acquirer.
Setback for Lockheed, Northrop
In a move that could further jeopardize the efforts by Lockheed Martin Corp. to acquire L.A.-based Northrop Grumman Corp., a federal judge last week barred attorneys for the two companies from seeing key government documents related to an antitrust challenge from the U.S. Justice Department.
U.S. Judge Emmet Sullivan said the government could withhold more than 2,000 confidential Pentagon documents that had been sought by the two companies, which believe the documents would help prove that Defense Department officials believe the merger would not harm competition.
Lockheed officials are considering an appeal of the ruling, but they may have run out of time Sept. 8 has been set as the trial date in the Justice Department’s challenge to the deal.
French Company Buying Calmar
City of Industry-based Calmar Inc. announced last week that it has agreed to be acquired by a U.S. subsidiary of French industrial materials firm Compagnie de Saint-Gobain.
Calmar, the world’s largest manufacturer of non-aerosol fluid dispensing systems for consumer products, has sales in excess of $230 million and more than 2,000 employees around the world. In existence since the 1940s, it was the first company to introduce an all-plastic pump sprayer.
The deal is expected to close this summer pending regulatory approval.
GM Bullish on Hughes
Putting to rest speculation that General Motors Corp. might be considering to spin off its Los Angeles-based Hughes Electronics unit, GM Chairman John F. Smith Jr. last week said Hughes is an important part of the company’s growth strategy.
Smith has been under pressure from investors to sell Hughes as a way of boosting shareholder value. But at a shareholders’ meeting in Wilmington, Del., Smith said Hughes’ importance to GM will only continue to grow as vehicles become equipped with more high-tech equipment, such as navigation systems and Internet connections.
Compiled by Dan Turner