Showing posts with label Business. Show all posts
Showing posts with label Business. Show all posts

U.S. factory work is returning, but the industry has changed









GRIFFIN, Ga. — Giant machines are tearing down the old bleachery, another reminder to Chuck Smith that this old mill town doesn't make much anymore.


Just about everyone he knows was employed at one point making, folding or bleaching towels, until the mills started to close down in the 1990s and 2000s and family members lost their jobs. Like most of this town's residents, Smith can name all the old mills in a slow Georgia drawl.


"There was the Thomaston mill that was here, and the Dundee mill, and the Highland mill, but they tore that one down just like they did this one," he said, watching a bulldozer push piles of metal around what used to be a factory for bleaching towels. "These mills used to employ all the people in this city."








Recently, the town had a reason to be optimistic. Retail behemoth Wal-Mart announced that it would spend an additional $50 billion buying U.S.-made goods over the next 10 years. It cited 1888 Mills, which runs the last mill left in Griffin, as one company that would benefit from this pledge.


Wal-Mart will sell 1888's Made Here towels, manufactured in Georgia, in 600 stores this spring and in another 600 later this year, which enables 1888 to add manufacturing jobs.


The retailer's effort will help businesses and "give them the nudge they need" to bring manufacturing back to the United States, Wal-Mart Chief Executive Bill Simon said in announcing the initiative. It's part of a much-heralded trend of "onshoring," in which companies including Apple, Lenovo, Otis Elevator and General Electric have said that the growing cost of logistics and labor overseas has motivated them to move some manufacturing back to the U.S.


But if Griffin is any example, Wal-Mart's much-lauded pledge isn't likely to do much to turn around a decades-long manufacturing decline here or in the rest of the country.


That's because manufacturing has changed dramatically since it left American shores, replacing workers with machines and reducing the number of jobs that people could get right out of high school. And as much as companies pledge that they're moving manufacturing back to the United States, they're mostly moving just small parts of their larger global operations, to be closer to U.S. markets.


"People talk about manufacturing being a big source of job growth. It's going to grow, but it's not going to be a big source of total employment," said Tom Runiewicz, principal for the Industry Practices Group at IHS Global Insight. "It's just a drop in the bucket."


1888 Mills, for instance, will add just 35 jobs because of the initiative — better than nothing, but a pittance in a town of 23,000. The company will still make 90% of its goods in overseas factories.


"We don't envision the entire industry going back to the United States — low-cost Asian manufacturing will still be the base for volume," said Jonathan Simon, CEO of 1888 Mills. "But for just-in-time service, U.S. manufacturing does make sense."


Some 400 miles away, in North Carolina, computer giant Lenovo is doing the same thing. In October the company announced plans to open a manufacturing plant in North Carolina to make specialty personal computers for the U.S. market. The initiative will create 115 jobs, 15 of which are engineering positions. But the company also is expanding research centers in Japan and China.


"It's a relatively small-volume facility. It's not going to produce millions of units," said Mark Stanton, Lenovo's director of supply chain communications.


The United States lost 6.3 million manufacturing jobs between January 1990 and the industry's low point in January 2010, a 36% decline, according to the Bureau of Labor Statistics. Since that low point, the industry has added nearly 500,000 jobs — an impressive number, but one that barely begins to offset the millions of losses.


"There's a lot of unemployed people here," said Eugene Colquitt, 47, who was wandering the streets of Griffin, looking for work helping people on their yards or homes. He was employed at the mills at one point and says that not much has replaced the manufacturing jobs in town. "There's McDonald's and Wal-Mart, but they're not really hiring," he said.


A walk through the spacious 1888 factory in Griffin shows why job gains have been slow, despite some onshoring. Machines spin threads of cotton into yarn, a process once done by hand; they weave the yarn into thick rolls of fabric, cut the fabric into towels and sew the hems. Where a whole factory was once needed to bleach and color the towels, a Rube Goldberg-like machine does that work with minimal labor; another machine dries the towels.


"It's all automated," Douglas Tingle, founder of 1888 Mills, said during a tour of the factory. "Some of this is the latest technology advancements."


That automation is part of the reason that although labor costs are higher in the United States than in other countries, it can make sense to make towels and other products here. But there are other reasons as well. If 1888 needs to make changes to towels, it can get the finished product to Wal-Mart more quickly from Griffin than it could from China. With the rising price of oil increasing shipping costs, there could also be some cost savings for locally manufactured products.


"One of the things you might see is production coming back here, but not with as many jobs as used to be the case," said Jared Bernstein, a senior fellow for the Center on Budget and Policy Priorities and former chief economist for Vice President Joe Biden.


Whether the jobs returning are good ones depends on whom you ask.





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Pro sports leagues aim to put workers' comp out of play








One would think that we've learned from bitter experience not to trust a word uttered by our major professional sports leagues.


Yet here they are trying to put another howler over on us. This is their assertion that retired pro athletes — many of them from outside the state — are ripping off California's workers' compensation system for hundreds of millions of dollars.


The state Legislature is setting itself up to swallow this one whole: A bill to close this supposed loophole has been introduced by Assembly Insurance Committee Chairman Henry Perea (D-Fresno).






Let's start with the bottom line: This bill would be a total sellout to the major pro sports leagues and their billionaire team owners, who pay the workers' compensation claims won by their workers. Its victims would be athletes whose limbs, joints, backs and craniums were pounded relentlessly on the field of play and who were left with inadequate treatment or support after they retired.


Let's also home in on whose interests are most at stake: It's the National Football League, which is facing a tidal wave of legal claims related to long-term neurological damage suffered by players. Claims from more than 4,000 players and their families have been consolidated in a single immense lawsuit in Philadelphia federal court, where pretrial maneuvering has been lumbering on for months.


Among their allegations is that the NFL suppressed evidence that the concussions caused by its style of play could have long-term health consequences. The league has consistently denied that it tried to mislead players.


Perea's bill serves the NFL and the pro sports leagues and teams in basball, basketball, hockey and soccer. (Apparently lacrosse, rugby and softball leagues didn't have the juice to get their way in Sacramento.) It's purportedly a response to the upsurge in workers' comp claims filed by pro athletes, including many who never played for California teams, that started around 2007.


There were several reasons for the increase. Under state law, you can file a claim if you can argue that you suffered an injury in California, even if your employer was located elsewhere; it's a rare pro athlete who doesn't occasionally play an away game against a California team.


More important, California is one of nine states that allow workers' compensation for "cumulative trauma" injuries, those that build up over time. The most familiar of these are carpal tunnel injuries suffered by typists. But they also encompass knee or back damage from years of blocking and tackling, or neurological damage from repeated concussions.


"The NFL is not terribly worried about cumulative knee trauma," says Frank Neuhauser, a social insurance expert at UC Berkeley. "They understand what they're going to pay for that. But they're terrified of brain injuries, which can cost millions and result in complete disability." The NFL didn't reply to my request for comment on the workers' comp issue.


It's hardly shocking that the NFL and other major leagues would want to shut down this avenue of compensation. Nor is it very surprising that they would resort to disinformation.


"The NFL knows this could be detrimental to their bottom line," says attorney Mel Owens, who played nine years for the Los Angeles Rams in the 1980s and now represents athletes in workers' comp cases. "So they couch it in terms of players abusing the system."


The leagues' bid for sympathy depends on most laypersons having no idea about how workers' compensation works. So here's a primer. To begin with, taxpayers don't pay for workers' comp; employers do, either by buying commercial workers' comp insurance or (if they're big enough) self-insuring. Their premiums are overwhelmingly based on their type of business and their claims record. The premium paid by the employer of file clerks will be very different from that of a skyscraper builder.


Therefore, if California workers'-comp judges take a more liberal view of long-term brain injuries for football players (and as yet there's no evidence that they do), that may drive up premiums paid by sports teams, but it won't affect the premium paid by grocery stores.


The leagues "are trying to make it look like these are costs that will fall on all employers," Neuhauser says. "But it has nothing to do with current rates. Sports teams' premiums will go up, but not those for construction companies or anyone else."


Then there's the notion, also happily peddled by the leagues, that the athletes are getting away like bandits, abetted by aggressive lawyers. A 2012 analysis done for the NFL and the professional baseball, basketball and hockey major leagues by the benefits consulting firm Milliman Inc. estimated the cost of already-filed California cumulative trauma claims by athletes at $747 million.


That sounds like a lot, until you realize that it covers 4,500 players, for an average of $166,000 each, which includes the cost of medical treatment. Is that a lot for injuries that may be crippling for life and include Alzheimer's or other neurological syndromes? For a player judged partially but permanently disabled, the maximum benefit is $270 a week for up to 320 weeks. Long story short: No player is getting rich off these payments.


Nor are the players typically coasting into retirement with superstar nest eggs. Consider Reggie Williams. A standout linebacker who played 14 seasons for the Cincinnati Bengals, including two Super Bowls, he made $45,000 in his rookie year, 1976, and topped out at $445,000 after 14 seasons.


Now 58, Williams has suffered through 24 operations on his right knee, leaving the knee looking like hamburger and that leg 3 inches shorter than his left. "I never played a game where I didn't get hurt," he told me. That includes 14 games in California against the Rams, Raiders, 49ers and Chargers. "Now I wake up every day in extreme pain." Five years ago he had to leave a job with Walt Disney Co. because he could barely stand on his feet.


In 2008, Williams filed for workers' compensation in California, but the Bengals have blocked that claim, for now, arguing that under his employment contract he was required to file in Ohio. If the team wins, he may be out of luck, for the statute of limitations on Ohio workers' comp claims has long passed, and the state doesn't cover cumulative trauma.


"The NFL doesn't want to be liable for any of this," says Williams' lawyer, Owens. He points out that taxpayers bear the ultimate cost if the leagues skate on their obligations. "If the players can't get workers' comp benefits and they can't get health insurance, they end up on Social Security disability and Medicare," Owens said.


Why California legislators should bend over backward to help out franchise-owning plutocrats is a mystery. That's especially true since the reason athletes have to resort to workers' comp in the first place is that the owners have abdicated their responsibility to care for the injured players who have made them rich. Sure, they'll pay lip service to player health, but talk is cheap. It looks even cheaper in light of the NFL's new broadcast contracts, which are worth more than $40 billion over the next decade.


If the leagues want their California problem to go away, that would be easy: reach deals with the players' unions providing lifetime injury coverage superior to what they can get from workers' compensation. That's a very low bar, even when you're trying to clear it while carrying bagfuls of money.


Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.






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Airports big and small may feel effects of federal budget feud









Get ready for longer lines at Los Angeles International Airport, slower delivery of packages and the possible shutdown of small Southern California airport control towers if a resolution isn't reached on federal budget cuts.


The good news is that the biggest effects probably will not take hold until April, giving President Obama and congressional leaders time to hammer out a deal to resolve the budget feud.


But if no agreement is reached, the Federal Aviation Administration will be forced to cut its budget about $600 million. That could force the FAA to close more than 100 air traffic control towers across the country, primarily at smaller regional airports, including in Santa Monica, Victorville and Oxnard.





The night shift for air traffic controllers could also be eliminated at about 70 larger airports, including LA/Ontario International.


The federal agency has also put out the option of furloughing FAA employees for one or two days per two-week pay period, beginning in mid-April.


At Los Angeles International Airport, officials say it is too early to gauge how much of an effect the budget cuts would have on the average air traveler.


But Transportation Security Administration head John Pistole said lines at security gates at major airports across the country could grow longer during the peak spring and summer travel seasons if he is forced to cut overtime pay, which would reduce the number of screening officers.


"The longer it goes, the greater the potential impact," he said of the budget battle.


The National Air Traffic Controllers Assn. expects the cuts to lead to fewer flights and increased delays of as long as 90 minutes during peak hours.


"Safety will remain the top priority, but in order to maintain the appropriate level of safety with fewer controllers, fewer planes will be allowed in the sky, as well as in and out of airports," the group said in a statement.


The FAA has announced plans to shut down towers at airports with fewer than 150,000 landings and takeoffs a year. Santa Monica Airport, which is on the FAA closure list, operates about 105,000 landings and takeoffs a year. Van Nuys Airport, which is not on the list, has more than 250,000 landings and takeoffs.


Still, the effect on smaller airports on the FAA cut list may not be severe because pilots can land and depart without the help of an air traffic controller by keeping track of each other through radio communications.


Joe Justice, who operates Justice Aviation, a company that offers flying lessons at Santa Monica Airport, said he doesn't expect his business to face major changes if the tower is closed.


"We would continue to give flying lessons," he said. "There would be no reason not to. We would depart here and practice at a place where there is an open tower."


Private jet charter companies said they may even get more business if sequestration increases delays on commercial airlines, forcing passengers to charter a jet.


"People who are sitting on the fence about wanting to hire a private jet may spend the extra money so they won't be caught in a situation where they have no idea how long their delays will be," said Ben Schusterman, founder of Los Angeles-based ElJet.


The closure of overnight shifts at the control tower in Ontario could eliminate 12 passenger flights, or 9% of operations, but a bigger effect would be the loss of 73 cargo flights, or 36% of all cargo operations.


Cargo operators at Ontario said they were still unsure of the effect of budget cuts on their businesses.


"UPS is closely monitoring the sequestration proceedings," United Parcel Service Inc. spokesman Mike Mangeot said. "And while we are in communications with the FAA regarding the effects of the possible cuts, it is premature to speculate at this time."


hugo.martin@latimes.com





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Island Air is Ellison's latest buy









How do you follow the purchase of an island in Hawaii?


If you're Oracle Chief Executive Larry Ellison, you buy an airline so you can hop to and from your tropical paradise.


Ellison has been on a shopping spree lately, buying 98% of the island of Lanai in June from Los Angeles billionaire David Murdock and then, in November, buying a beachfront Malibu home from film and TV producer Jerry Bruckheimer.





Ellison's most risky acquisition may be Island Air, which he bought Wednesday through a holding company.


The exact purchase prices of Ellison's recent deals have not been disclosed, but local observers value the 141-square-mile island at more than $500 million and the three-bedroom, three-bath Malibu pad at more than $3.65 million. The details of the airline deal were not announced.


Island Air, a regional carrier serving airports on all major Hawaiian islands, has 245 employees and three turboprop planes, with 224 weekly flights between the islands of Oahu, Maui, Molokai, Lanai and Kauai.


Lanai, the sixth-largest Hawaiian island, was once a pineapple plantation and is still sparsely inhabited. It includes two resort hotels and two golf courses with clubhouses, according to Hawaii's Public Utilities Commission.


But Ellison did not buy the airline just to get to and from his island, airline officials say.


He hopes to expand the businesses to serve locals visiting relatives on the islands and to fly mainland and foreign tourists throughout the island state, airline officials said. The airline plans to retire two 1980s-era planes and expand to four or five new ATR 72 turboprops by the end of the year.


But Ellison should not get his hopes up about pocketing big profits, said Ray Neidl, an aviation analyst for Nexa Capital Partners in Washington, D.C.


"It's a high-risk situation with no significant margins, at least initially," he said of owning an airline.


And if Ellison hopes to expand the business, he should expect to get some resistance from the big carrier on the island, Hawaiian Airlines, Neidl added. "It really depends on what Hawaiian does."


Island Air began in 1980 as Princeville Airways, carrying passengers from Kauai to Honolulu. The history of the carrier has not always been blue skies and soft landings.


"In our 30-plus years, we had our ups and downs, pardon the pun," said Michael Rodyniuk, a senior consultant to the airline.


Like most airlines across the country, he said, Island Air struggled during the economic turmoil between 2008 and 2012 but expects to thrive with a surge in tourism that Hawaii has been enjoying in the past year or so.


The state welcomed a record 8 million visitors in 2012, surpassing the previous high of 7.6 million visitors in 2006.


"All major markets are up," Rodyniuk said.


The previous owner of the airline, California businessman Charles Willis IV, had been looking for a buyer for the airline and had put all 245 employees on notice that layoffs could begin as soon as March 11 if a buyer was not found, he said. "So Mr. Ellison saved 245 jobs," Rodyniuk said.


Forbes ranks Ellison as the third-richest American, with a net worth of $36 billion. He has cut big checks in the past on high-priced properties in Malibu, Lake Tahoe, Rancho Mirage and other locations.


But unlike real estate, air carriers are an investment that can give investors nightmares.


Virgin America, a California-based airline partly owned by millionaire Richard Branson, has been operating for more than five years without recording a profitable year.


California Pacific Airlines is the brainchild of Encinitas businessman Ted Vallas, who has already invested more than $6 million of his own money but has spent the last year trying to clear federal red tape so he can begin selling tickets.


And then there are the 11 other airlines — including American, Delta, United and US Airways — that have filed for bankruptcy since 2000.


"The profit margins on airlines, even though they are improving, are not that attractive," Neidl said.


hugo.martin@latimes.com





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Deficit hawks' 'generational theft' argument is a sham








Here's a phrase you can expect to be hearing a lot in the national debate over fiscal policy, as we move past the "sequester," which is the crisis du jour, and toward the budget cliff/government shutdown deadline looming at the end of March:


"Generational theft."


The core idea the term expresses is that we're spending so much more on our seniors than our children that future generations are being cheated. An important corollary is that the government debt we incur today will come slamming down upon the shoulders of our children and grandchildren.






The generational theft trope has already been receiving a vigorous workout in the press. Earlier this month, the Washington Post gave great play to a study by the Urban Institute stating that the federal government spends $7 on the elderly for every dollar it spends on kids. As we shall see, this is true as far as it goes, but it doesn't go nearly far enough to render an accurate picture of government spending.


The National Journal, another influential publication in Washington, picked up the theme last week by observing that because the sequester exempts Social Security and Medicare from budget cuts, the automatic spending reductions it mandates will fall disproportionately on education and other such boons to the young. This will "deepen the budget's generational imbalance."


This is also a bedrock argument of the anti-deficit organizations, such as Fix the Debt, associated with hedge fund billionaire Peter G. Peterson. For decades he has pursued a wearisome and spectacularly self-interested campaign to cut Social Security and Medicare benefits for the working class so taxes won't go up too much on the wealthy.


One of those organizations, called "The Can Kicks Back," promotes a "Millennial-driven campaign to fix the national debt." But backstopping its twenty- and thirty-something leaders is an advisory board comprising such Peterson frontmen as Morgan Stanley board member Erskine Bowles and former Sen. Alan Simpson (R-Wyo.). These guys are "millennials" only if we're talking about the last millennium before this one.


So here's the truth about the "generational theft" theme: It's wrong on the numbers and wrong on the implications.


Let's start with that 7-to-1 spending ratio on seniors versus children. Among the flaws in the calculation is that the vast majority of government dollars spent on children comes from state and local governments, which pay most of the cost of education. On a per capita basis, state and local spending on kids swamps the federal government's spending 8 to 1.


Moreover, there are twice as many children 18 and under as seniors 65 and over (this 2008 figure also comes from the Urban Institute report). Put the numbers together and you discover that spending by governments at all levels in 2008 came to about $1 trillion on seniors and $936 billion on children. In other words, very close to 1 to 1.


The notion underlying the comparison of spending on seniors and children is that "if you save a dollar on Social Security it would be transferred automatically to children," observes Theodore R. Marmor, an emeritus professor of public policy at Yale and a long-term student of social welfare programs. He traces this notion to deficit hawks and dismisses it as "not naive, but cynical."


That's because most of the spending on seniors is in Social Security and Medicare, and therefore has been largely paid for by those very beneficiaries over the course of their working lives.


Payroll taxes have more than covered what today's average retiree will receive back from Social Security. They won't cover the average payout on Medicare, but that's an artifact of uncontrolled healthcare costs, not of the structure of Medicare itself. Changing the terms of that program, say by raising the eligibility age (currently 65) won't save money and may actually raise costs.


In other ways, treating Social Security and Medicare spending on the one hand and spending on kids on the other as though they're opposite sides of a zero-sum game is just an act of ideological legerdemain aimed at undermining those programs.


If America wants to spend more on children, it's plenty rich enough to do so without eating away at the income of their grandparents. The money can come from the defense budget, farm supports or dozens of other places, even higher income taxes.


Let's not forget, too, that the people who will really suffer from gutting Social Security won't be today's seniors, who will escape the worst of the cutbacks — they'll be today's young people, for whom Social Security would become much less supportive when they retire.


What about the debt load we're supposedly imposing on future generations? This is another transparently Petersonian feat of sleight of hand, based on the assertion that while it's we who incur the debt, it's our children who will have to pay if off.


All the hand-wringing over today's borrowing conveniently assumes that the debt buys nothing, which makes it easier for debt hawks to pretend that it's only an expense and not an investment.


But money borrowed for the stimulus has bought jobs and unemployment benefits, which have helped sustain families through the Great Recession. (At least a few of those families have children, wouldn't you guess?)


In a larger sense, money borrowed by every generation is typically invested in programs and infrastructure — highway, schools, research and conservation, for example — that will add to future generations' wealth.


It's the persistence of the "generational theft" claim, which bubbles up every few years, that exposes its ideological roots.


It's a fundamental piece of a decades-long campaign to distract Americans into thinking that the threat to their way of life comes from a war of old against young, rather than an intra-generational class war in which the vast majority of economic gains from improvements in worker's productivity has flowed to the wealthy, not to the workers.


The economist Dean Baker observes, for example, if the federal hourly minimum wage had merely kept up with productivity growth after 1969 rather than stagnating (and getting eaten away by inflation) it would be more than $16.54, and we wouldn't be arguing about whether the country can "afford" an increase to $9.


The "generational theft" argument is a sham. It's an attempt to get around the fact, so distasteful to the enemies of government social programs, that Social Security and Medicare are hugely popular. As Marmor observes, if you can't put across the case that these programs are undesirable, "you have to make them look uncontrollable, ungovernable, and therefore unaffordable."


The argument has been tried out on several generations in the past, and they've seen through it. Today's generation should see through it too.


Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.






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Yahoo CEO Marissa Mayer causes uproar with telecommuting ban









SAN FRANCISCO — Corporate America's most famous working mother has banned her employees from working at home. Now the backlash is threatening to overshadow the progress she has made turning around Yahoo Inc.


Marissa Mayer, one of only a handful of women leading Fortune 500 companies, has become the talk of Twitter and Silicon Valley for her controversial move to end telecommuting at the struggling Internet pioneer.


From the start, Mayer, who at 37 is one of Silicon Valley's most notorious workaholics, was not the role model that some working moms were hoping for. The former Google Inc. executive stirred up controversy by taking the demanding top job at Yahoo when she was five months pregnant and then taking only two weeks of maternity leave. Mayer built a nursery next to her office at her own expense to be closer to her infant son and work even longer hours.





Now working moms are in an uproar because they believe that Mayer is setting them back by taking away their flexible working arrangements. Many view telecommuting as the only way time-crunched women can care for young children and advance their careers without the pay, privilege or perks that come with being the chief executive of a Fortune 500 company.


"When a working mother is standing behind this, you know we are a long way from a culture that will honor the thankless sacrifices that women too often make," read one email sent to technology blogger Kara Swisher of AllThingsD, who first wrote about the ban.


Hundreds of staffers — including those who work from home one or two days a week — will have to decide if they want to start showing up every day at the office or be out of a job, according to a memo leaked to Swisher.


"To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices," Jackie Reses, Yahoo's human resources chief, wrote in the memo sent out Friday. "Speed and quality are often sacrificed when we work from home. We need to be one Yahoo, and that starts with physically being together."


Mayer, who is trying to reverse Yahoo's long downward spiral, has raised the hopes of investors and sprinkled amenities such as free food and iPhones on battle-weary employees. But after those juicy carrots has come the stick.


"Like a team huddling before a game, there are moments in a company's development when getting everybody to physically huddle together is a very good thing," said Paul Saffo, head of foresight at Discern Analytics. "The question is at what cost."


Sources told AllThingsD that Mayer has grown frustrated because the Yahoo parking lot in Sunnyvale, Calif., was slow to fill up in the morning and quick to empty by 5 p.m. — something not typical of the hard-charging Silicon Valley rivals that Yahoo must beat to regain its perch.


Some observers speculated that Mayer was looking to trim unproductive workers without the costs associated with a layoff and in the process may have gotten more bad publicity than she bargained for.


Yahoo declined to comment on "internal matters."


British billionaire Richard Branson publicly criticized Mayer for being out of step with the modern workplace in a blog post: "Give people the freedom of where to work."


"This seems a backwards step in an age when remote working is easier and more effective than ever," Branson wrote.


The U.S. already lags behind the rest of the industrialized world in flexible work arrangements, said Jennifer Glass, a sociology professor and research associate in the Population Research Center at the University of Texas, Austin.


"It's sad to see a large employer go in this direction," Glass said. "There is no functional reason that people who work from home can't work just as productively as they do from the office."


Still, only a small percentage — about 2.5% — of American workers primarily work from home despite congested roadways, long commutes and the demands of caring for young children or elderly parents. But that number is growing at a rapid clip: up 66% from 2005 to 2010, according to Telework Research Network.


UCLA management professor David Lewin said the telecommuting ban is a risky step that could further damage Yahoo employee morale and performance and undermine recruiting efforts in a hotly competitive job market.


A 2011 study by WorldatWork also found that companies that embraced flexibility had lower turnover and higher employee satisfaction, motivation and engagement.


"This policy certainly goes against the grain," Lewin said. "That's one of the main reasons it is catching so much attention."


Mayer has some prominent defenders. Donald Trump praised her on Twitter, saying she's "right to expect Yahoo employees to come to the workplace vs. working at home."


Ironically, Silicon Valley takes much of the credit for the telecommuting boom. It makes the technology that helps workers plug in from anywhere they have an Internet connection.


But the unwritten rule at major Silicon Valley companies is: Just because you can work from anywhere doesn't mean you should. Most Silicon Valley companies such as Google and Facebook Inc. have informal policies allowing telecommuting, but they champion the concept of closeness. They design their campuses to encourage it with gourmet cafes dishing out free food and inviting, comfortable meeting rooms where employees can lounge and talk.


"The surprising question we get is: 'How many people telecommute at Google?' And our answer is: 'As few as possible,'" Patrick Pichette, Google's chief financial officer, said recently. "There is something magical about spending the time together."


jessica.guynn@latimes.com





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Herbalife is global giant with business model in question









Stock spotlight is a new weekly feature that will profile a notable, public company.


The company: Herbalife Ltd.


Headquarters: Los Angeles





Ticker: HLF


Employees: 6,200 employees and 3.2 million independent distributors worldwide


Revenue: $4.1 billion in 2012


Net Income: $477 million in 2012


Stock Price: $36.79 at Friday's close


52-week range: $24.24 to $73


Annual dividend: $1.20 a share annually, a current yield of about 3%


P/E Ratio: $7.87, based on 2013 estimated earnings


The business: The company sells weight-loss, nutrition, hair- and skin-care products in more than 80 countries, utilizing independent distributors who profit from their own sales and sales from others they recruit into the business. Its top-selling product is cookies and cream flavor Formula 1, a high-protein, meal-replacement shake mix. Herbalife does very little mainstream advertising and does not sell products in retail stores. Instead it relies on a network of independent distributors who recruit customers, counsel them about nutrition and fitness and sell them products. The company recently agreed to a $44-million, 10-year deal to sponsor the Los Angeles Galaxy professional soccer team, one of many professional sports clubs it supports around the world.


The latest: Wall Street veterans say they've never seen a fight like this. Noted hedge fund managers Bill Ackman and Carl Icahn have engaged in a heated debate about Herbalife's business model, with billions of dollars at stake. Ackman has taken a $1-billion "short position" against the company's shares, meaning he'll profit if the stock price drops. In a slick, multimedia pitch on Wall Street, Ackman contended that the company is a well-disguised pyramid scheme. He said the vast majority of the company's independent distributors make little money or lose money, while a fortunate few get rich off commissions they receive for recruiting others into the business. Ackman said he expects Herbalife's shares to hit zero. Icahn said he has purchased nearly 13% of the company's shares and planned to talk to executives about strategies to increase its profitability, including taking it private. Herbalife acknowledged discussions with Icahn but did not elaborate. The company insists its business model is completely legal. Herbalife said it sells products that help people live healthy lives while giving entrepreneurs an opportunity to build their own businesses.


Accomplishments: The company reported record sales and profit in 2012 and said it expects things to improve in 2013. It has mountains of available cash, pays a decent dividend and repurchased 15 million — or more than 10% — of its shares in little more than a year.


Challenges: Herbalife shares have been extremely volatile in the last nine months, plunging more than 40% in the days after Ackman's attack, and falling 20% in a single day in May after hedge fund manager David Einhorn questioned the company's business model. Herbalife has acknowledged it is under review by the Securities and Exchange Commission. The Federal Trade Commission released dozens of complaints it has received about Herbalife in recent years. Neither agency has confirmed an investigation.


Analyst opinions: Seven analysts have the stock as a buy or strong buy, while four have it as hold. The average one-year target price is about $58 a share.


Voices: "Our belief remains steadfast that Herbalife operates a perfectly legal multilevel marketing model that has proven particularly efficacious in the weight-loss category.... Herbalife's sustained growth and 30-plus year history in a highly regulated industry indicate a legitimate business [because] pyramid schemes are unsustainable." — Scott Van Winkle, analyst, Canaccord Genuity;


"Buckle up, it's going to be bumpy.... We are maintaining our overweight, but recognize that the stock is not for the faint of heart. We expect Mr. Ackman to continue to make noise on his short thesis, however, and for the potential for an FTC investigation to be an overhang on the stock for the indefinite future." — Brian Wang, analyst, Barclays Capital;


"It is clear that over time Herbalife is answering the questions that need to be answered and providing greater clarity around their business model — one that we see as simple but effective. We think it logical that, as these questions are finally answered to the investment community's satisfaction, the shares will trade, finally to the premium valuation we believe it deserves. The scarlet letter it wears today in the minds of the short seller community will be removed." — Timothy Ramey, analyst, D.A. Davidson & Co.


stuart.pfeifer@latimes.com





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Jason Bateman gives Ernest Borgnine's estate a new identity

Markus Canter and Cristie St. James, who share the title luxury properties director at Prudential in Beverly Hills, like Jason Bateman's real estate sense. The actor got privacy, potential and a knoll location for $3 million.









Actor Jason Bateman and his wife, actress Amanda Anka, are dropping anchor in the Beverly Crest area with the purchase of the estate of Ernest Borgnine for $3 million.


The gated country English compound sits on a half-acre knoll. The 6,148-square-foot home features a formal entry hall, a grand staircase, a paneled library, an office, a den, six bedrooms and seven bathrooms. There is a guesthouse and a swimming pool.


Bateman, 44, stars in the comic film "Identity Thief," released this month. He is known to generations of TV viewers for his roles in "Arrested Development" (2003-present) and "Valerie," later retitled "The Hogan Family" (1986-91). Anka, 44, has appeared in "Bones" (2008), "Notes From the Underbelly" (2007) and "Beverly Hills, 90210" (1996).








Borgnine, who died last year at 95, is remembered for his Oscar-winning performance in "Marty" (1955) and his work in the title role as commander of a madcap crew in the sitcom "McHale's Navy" (1962-65). Until 2011 he was the voice of Mermaidman on "SpongeBob SquarePants."


The estate came on the market in October for the first time in 60 years priced at $3.395 million.


Billy Rose, Paul Lester and Aileen Comora of the Agency in Beverly Hills were the listing agents. Richard Ehrlich of Westside Estate Agency represented the buyers.


Where pair spent days of their lives


Soap star Peter Reckell and his wife, singer Kelly Moneymaker, have sold their custom-built, eco-friendly home in Brentwood for $3.35 million.


Before building the 3,345-square-foot house, the couple had the existing home on the site torn down, crated and shipped to Mexico for reuse by Habitat for Humanity. Then they designed and built a three-bedroom, four-bathroom contemporary that uses solar power.


Green elements include a photovoltaic system with battery backup, skylights, recycled glass terrazzo floors with radiant heating, recycled denim and organic cotton insulation, bamboo cabinets and doors, a roof garden and a water reclamation system.


A temperature-controlled wine cave and a recording studio are among other features.


Along with an indoor/outdoor koi pond, a meditation fountain and a solar infinity pool, outdoor amenities include a 16th century East Indian temple that was turned into a pavilion.


"This is my sanctuary," Reckell said. It frames views of the Santa Monica Mountains Conservancy.


Reckell, 57, played Bo Brady on "Days of Our Lives" from 1983 through last year. The show began in 1965. He also appeared in "Knots Landing" (1988-89). He is an avid environmentalist and bikes to work.


Moneymaker, 42, is a former member of the music group Exposé. She was inspired to build an environmentally friendly home because the carpet and other elements in the old house bothered her allergies and affected her voice.


Public records show they bought the property in 2003 for $1.14 million.


Daniel Banchik of Prudential's West Hollywood office was the listing agent. Scott Segall of John Aaroe Group represented the buyer.


Another rock owner for home


Hard Rock Cafe co-founder Peter Morton has made his mark on L.A.'s real estate scene of late, buying the old Elvis Presley estate in Beverly Hills at year-end for $9.8 million.


But flying under the radar was his bigger off-market purchase midyear for a property in Bel-Air at $25 million, public records show. Area real estate agents not involved in the transaction say Morton plans to take down the existing home and build another on the site. The estate had belonged to Joseph Farrell, who founded National Research Group Inc. in 1978 and brought market testing to Hollywood. Farrell died in December 2011.





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2013 Mustang GT: Does retro have a future?









A decade ago, as Ford engineers prepared the next-generation Mustang, they stared down an inescapable truth: The best Mustangs were built in the 1960s.


So they set out to build a brand-new 1968 Mustang fastback, wrapping modern technology in retro sheet metal. That strategy carried its own risks, like asking the Rolling Stones to rerecord "Exile on Main Street."


It's clear now that it worked brilliantly, setting off an unlikely second coming of the muscle car era. In a familiar stampede, Chevrolet and Dodge — which scrambled in the '60s to make their own "pony cars" — followed Ford's lead again with refried versions of the original Camaro and Challenger.





Photos: Mustangs through the years


The 2013 Mustang GT we tested recently, a drag-strip beast that could smoke most anything from the '60s, may be among the last of the retro breed. With the Mustang's 50th anniversary approaching next year, the engineers in Dearborn, Mich., are again feverishly designing the next-generation Mustang. They face an even tougher challenge: How do you take a car into the future after you've taken it a half-century into the past?


However wonderful the next Mustang may be, it will be a shame to see this one pass into history, whence it came. The successful remake of the 1967-68 car represents a kind of redemption for dumb decisions Ford made when it abandoned the early Mustangs in the first place, leading to a series of putrid pony cars throughout the 1970s. (Note to Ford: DO NOT bring back the Mustang II.)


A week in the old-school cockpit of the latest GT confirms that its ride, handling and shifting are an upgrade over both ancient and recent Mustangs, which have always been a bit crude — endearingly so.

Ford has also pulled off a subtle but substantial evolution of its retro design. A mid-cycle refresh in 2010 added a sharpened belt line and a rear end pinched in on both sides. For 2013, Ford added a more prominent front grille and other tweaks. The updates somehow made the car look simultaneously less dated and more like the old car.


But only one option really matters on this car: the 302-cubic-inch, 5.0-liter V-8, a direct descendant of the first 302 small-block introduced in the 1968 Mustang, now with a ludicrous 420 horsepower and 390 pound-feet of torque. The first retro Mustang GT, a 2005 model, was impressive enough with 300 horses. Piling on 120 more is like deep-frying bacon in pork fat.


With the optional six-speed manual, it's difficult to launch the GT without roasting enough rubber to set off neighborhood smoke alarms. Shifts into second gear provoke another loud bark from the rear tires. Pushing the 7,000-rpm redline in higher gears requires acres of open highway.


The car's least-expected quality is a near-optimal trade-off between aggressive handling and a comfortable ride, both of which came in handy on the twisty, pockmarked Pasadena Freeway.


The GT has its issues. All Mustangs do. Their point has never been perfection, but rather the proper ratio of performance to price. The car can be a handful to drive in town, and feels a tad too big and heavy. Its center console is awkwardly angled up toward the back seat, making manual shifting an elbow-bumping affair.


Proper flogging of the GT also exposes a drawback to the whole '60s motif. The retro thing extends to the tall, skinny numbers on the circular analog speedometer. They're cool but hard to read, especially in the split second you have to look down, past your white knuckles, as the horizon starts to blur.


The GT dispenses with zero to 60 mph in 4.3 seconds on its way to 12.7-second quarter mile, according to Motor Trend. If you want something just a hair faster, plunk down $190,000 on an Aston Martin DB9.


Our loaded test car came to $40,255, a bit high for the quintessential affordable fast car. But GTs start at $31,545, and the V-6 base model — with a more-than-respectable 305 horsepower — brings the price down to $22,995.


All this sets a high bar for the next-generation Mustang. If Ford has learned anything from history, it will take care to avoid repeating what happened after the 1960s, a textbook case of messing with success. The first Mustang, a 1965 model unveiled on April 17, 1964, at the New York World's Fair, lasted just two model years — even though Ford sold more than a million of the cars. Feeling competitive pressure from Chevy and Dodge, the automaker rushed out two more generations before 1970. They were larger, faster cars, but respectful of the original.


Then Ford drove the Mustang into a ditch. The stretched and bloated 1971 Mustang, stripped of its trademark side-panel scoops, was a misguided attempt to turn the pony car into a luxury coupe. By 1973, as new emissions standards and an oil crisis took hold, horsepower had plummeted to a measly 150 for the strongest available V-8, according to a history of the Mustang by auto information company Edmunds.com.


That mere mistake was compounded by the crime against transportation known as the Mustang II, sold from the 1974 to 1978 model years. The mini-Mustang, which shared a chassis and engines with the lowly Pinto, today ranks second on Edmunds.com's list of 100 all-time worst cars.


The Mustang didn't fully recover until 1985, when Ford finally dropped a respectable version of its 5.0-liter V-8 into the long-running sixth-generation pony car. Horsepower topped 200 for the first time since 1971, and the "five-point-oh" models proved quite popular. (Today's GT gives a nod to this era with a small "5.0" badge just behind the front-wheel hub.)


The history no doubt weighs heavily on Mustang engineers now holed up in top-secret design sessions, walking the line between traditional and innovation. Whatever emerges will be the product of much pride and many arguments, says Jim Owens, a marketing manager for the Shelby line of ultra-performance Mustangs.


"There's a billboard on the plant that builds Mustangs. It says, 'We love taking our work home with us,'" Owens said, describing the factory in Flat Rock, Mich. "We will argue over a single pound of tire pressure and what it means at the apex of Turn 11 at Laguna Seca."





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Foreign tourists' spending in U.S. rises to new record









The U.S. continues to be a hot destination for big-spending tourists, setting a new record of $168.1 billion in foreign visitor spending in 2012.


The country last year welcomed 66 million foreign visitors, whose spending represents a 10% increase over 2011, said Rebecca Blank, deputy secretary of the U.S. Department of Commerce.


The greatest increase in visitors and spending came from countries with a burgeoning middle class, including China, Brazil and India.








Spending by foreign tourists has been on the rise for the last three years, with tourist hubs such as Los Angeles, Las Vegas, New York and San Francisco reaping much of the spending, Blank said.


"The coasts that are close to Asia and South America will see the notable effects," she said.


The federal government and the tourism industry have been paying special attention to foreign overseas tourists because they typically stay longer and spend more than visitors from Mexico or Canada.


Long-haul foreign visitors spend an average of $4,000 per visit, while visitors from Mexico and Canada — although they represent the greatest number of foreign tourists — spend less than $1,000 per visit, according to federal reports.


Visitor numbers from Europe — once the source of most of the U.S. tourism spending — have been dropping in recent years, as Europeans struggle with economic hardships. But the U.S. Department of Commerce predicts continued growth in tourists from Brazil (274% by 2016), China (135%) and India (50%).


To promote more foreign visitors, the Obama administration and leaders of the travel industry launched in 2011 a public-private partnership to promote the U.S. in foreign countries. The campaign, known as Brand USA, is funded by fees charged to visitors applying for visas and contributions from private firms.


The administration has also pushed the Department of State and the Department of Homeland Security to shorten the wait time for visa interviews and expanded a program to speed low-risk visitors through expedited security lines at major airports.


The number of international visitors rose to 62.3 million in 2011, up from 59.7 million in 2010, according to the Department of Commerce. President Obama has set a goal of welcoming 100 million foreign visitors by 2021.


"Our projection is that the travel and tourism industries are going to create over 1 million jobs in the next decade," Blank said.


hugo.martin@latimes.com





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Tesla results renew worries about its long-term viability









Tesla Motors Inc. reported another good-not-great quarter, renewing concerns about its ability to quickly churn out enough electric vehicles to sustain the company for the long term.


The company plans to ramp up the introduction of Tesla Model S cars to consumers worldwide, saying it was "on a journey" this year to expand the line and turn profitable, Chairman Elon Musk and Chief Financial Officer Deepak Ahuja wrote in a letter to shareholders Wednesday.


"Our intention is not to make customers wait six months for a car," Musk said in a call with analysts. "Our focus in Q1 is on production efficiency, improving gross margin and making sure customers are really happy when they receive the car. It's important for us to operate at that steady state for a bit before we try to drive that number higher."





This year, Tesla plans to deliver about 20,000 Model S units, with about 4,500 deliveries expected in the current quarter. The Palo Alto company projected that it would "generate slightly positive net income" in the quarter. That was welcome news to analysts, who have been looking for the company to become more financially stable.


"There have been other electric vehicle car companies that have had numerous problems. So if I compare it to that, they're leaps and bounds ahead," said Ben Kallo, senior research analyst at Robert W. Baird & Co. "Now they have to prove the details around the business model."


On-time delivery of those Model S cars — which sell for $61,000 to more than $100,000 — will be key to the survival of future Tesla products, which have been hampered by delays. The company initially planned to start building the Model X crossover SUV by the end of 2013, but now says production will start in 2014. The X will share its platform and many of its components with the Model S.


Down the line, Tesla hopes to build a more affordable car, which it will need to sell in quantities greater than the S and X to ensure long-term viability.


Regardless of when and how Tesla expands its offerings, the company faces long odds in making a dent in the sales of gas and diesel vehicles. Electric vehicles accounted for just 0.1% of U.S. sales in 2012, and that number is expected to rise to only 2% by 2020.


Many consumers remain wary of a vehicle with a perceived finite range. The cost of the batteries and related technologies in EVs also makes it difficult to price them competitively with comparable gas-powered vehicles.


Tesla found itself dealing with the issue of electric vehicle range in a recent public dispute with the New York Times.


After reporter John Broder detailed problems with the car's range on a trip from Washington, D.C., to Connecticut, Tesla's stock dropped. Musk went on the offensive, calling the article "fake" and railing against the piece in several television appearances. He then released data logs from Broder's test car, saying they backed up his claims.


The Times initially responded by saying the article was "completely factual," and Broder wrote a follow-up piece defending his initial assertions. The Times' public editor, Margaret Sullivan, eventually waded into the controversy with a blog post that offered measured criticism of Broder but defended his motives.


For the three months ended Dec. 31, Tesla reported revenue of $306 million, beating expectations. But it posted a larger-than-expected loss — $90 million, or 79 cents a share.


In the year-earlier quarter, Tesla reported revenue of $39.4 million and a loss of $81.5 million, or 78 cents a share.


Excluding one-time charges, the company posted a fourth-quarter loss of $75 million, or 65 cents; analysts had expected a loss of 53 cents a share.


Tesla said it delivered about 2,400 Model S vehicles during the fourth quarter and sold most of its remaining Roadsters. It ended the year with more than $221 million in cash.


Shares fell 7.3%, or $2.80, to $35.74 in after-hours trading. During regular trading before earnings were released, shares declined 1.9% to $38.54.


Wednesday's release was the first detailed look at Tesla's finances since September. At that time, production delays had forced the company to downgrade its projected 2012 revenue to no more than $440 million, compared with previous estimates of up to $600 million.


Tesla had built just 255 Model S cars at that point, though it hoped to build 10 times that by the end of 2012. The company confirmed in Wednesday's report that it had indeed built 2,750 cars in the fourth quarter.


The company said Wednesday it has more than 15,000 fully refundable deposits on hand.


Now it just needs to deliver the cars.


andrea.chang@latimes.com


david.undercoffler@latimes.com





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Health insurance rate-setting map would raise costs, official says









A proposal to split California into six zones for setting health insurance rates would drive premiums up as much as 23% for some policyholders next year as part of the federal healthcare overhaul, the state insurance commissioner is warning.


These rating boundaries for the individual insurance market are among several items that state lawmakers are debating during a healthcare special session in Sacramento aimed at implementing the federal Affordable Care Act. In January, most Americans will be required to have health coverage or pay a penalty.


Under the proposal for six regions, the lnsurance Department estimates that premiums for similar coverage would increase as much as 22% in Los Angeles and 23% in the Bay Area.





Insurance Commissioner Dave Jones said he's pushing for an 18-region plan that would cap increases at 8%. That and other alternatives are expected to be discussed at state hearings Wednesday.


Overall, many healthcare experts and consumer advocates have expressed concern about the affordability of premiums next year. Rates are expected to rise because the federal law requires improved benefits, and there will be new limits on how much insurers can vary rates based on age.


Now, state leaders are trying to determine what role geography will play in insurance rates. Health insurers currently set their own rating regions, but the federal law allows states to establish their own map.


"There is a lot of interest in doing this quickly," Jones said. "It's important to get it right as well so we can minimize any rate shock."


A spokeswoman for state Sen. Ed Hernandez (D-West Covina), chairman of the Senate Health Committee, said the proposed legislation seeks to keep California in compliance with federal rules that recommend seven rating regions or fewer.


Two industry trade groups, the California Assn. of Health Plans and the Assn. of California Life & Health Insurance Cos., also oppose the six-region plan. Insurers favor a 19-region map that was adopted by state lawmakers last year for the small-employer health insurance market.


Jones has come out against the 19-region plan as well, saying rates could rise as much as 25% under that system.


chad.terhune@latimes.com





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Audit of Fed's gold finds it's safe, more pure than expected









NEW YORK — Turns out the Federal Reserve's gold is secure and a bit more pure than previously thought — or so the government says.


Auditors spent weeks last year in a vault five stories beneath Manhattan counting, weighing and drilling small holes into gold bars owned by the U.S. Treasury.


It was the first time the Treasury's inspector general had audited the department's gold held by the Federal Reserve Bank of New York, which has captured the imagination of Hollywood as well as government skeptics.





The audit's results are in: The New York Fed's operations and controls are up to snuff, and the U.S. gold on deposit is a bit finer than Treasury records had indicated.


Still, the audit probably will not lay to rest questions over whether the New York Fed has secretly lent the gold or otherwise encumbered it in a swap transaction with another government or bank.


"There's no way to prove there's not a secret agreement," said Ted Truman, a former assistant Treasury secretary and top Fed official.


The audit of the Fed gold came after 2012 presidential contender and former Rep. Ron Paul (R-Texas) questioned the central bank's gold holdings.


While he was in Congress, Paul questioned whether the Fed had lent or otherwise encumbered U.S. gold in financial arrangements. At a congressional hearing in 2011, the Treasury Department's inspector general, Eric Thorson, assured Paul that "not one troy ounce is encumbered."


Paul has called for a full, independent audit and assay of the country's gold reserves. But as part of its audit, the Treasury tested a sample — not all — of the government's 34,021 gold bars in the New York Fed's vault.


In three of the 367 tests, the gold was more pure than Treasury records indicated, according to the inspector general. As a result, the government notched up the value of its gold holdings by approximately 27 fine troy ounces — or about $43,500, based on gold's market price Monday.


The assaying process consumed 10 ounces of gold, and the remaining 69 ounces removed for sampling were returned to the Treasury, according to the inspector general's office.


The U.S. gold at the New York Fed has been placed under so-called Official Joint Seals, attesting to the results of the audit.


"At this point, we do plan to conduct this audit annually," the inspector general's office said in emailed responses to questions. "However, since the gold is now under Official Joint Seal, we would not anticipate weighing, counting and assaying unless the seal shows signs of tampering."


The audit also examined internal controls, security and operations at the New York Fed. "Our audit disclosed no material weaknesses and no instances of reportable noncompliance with laws and regulations," the Treasury's audit report said.


The New York Fed holds 99.98% of the U.S.-owned gold bars and coins in the custody of the Federal Reserve. The rest of the gold is on display at Fed banks in cities such as Richmond, Va.; Kansas City, Mo.; and San Francisco.


As of Sept. 30, when the market price of gold was $1,776 an ounce, the Fed banks held $23.9 billion in U.S. gold. (Gold has since declined in value, and on Monday the precious metal was hovering around $1,610 an ounce.) The vast majority — about 95% — of the country's gold reserves is held elsewhere, in Ft. Knox, Ky.; West Point, N.Y.; and Denver.


Truman, the former Treasury and Fed official, was not surprised by the audit's findings.


"I would be flabbergasted if they found some huge discrepancy or even a substantial discrepancy between what they said they had and what they found," Truman said.


Still, the audit won't end conspiracy theories that involve the government's gold held by the Fed, he said.


"I would surprised if anyone's convinced of anything," he said. "They'll conspire now about whether the audit was aboveboard."


andrew.tangel@latimes.com





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Stuntwoman leaps off tall buildings — and makes it look ugly









Before climbing the scaffold, Heidi Pascoe checked the wind — throwing a handful of dirt into the air to see how hard it was blowing. Pascoe, satisfied that conditions were safe, weighed her options.


Should she do a backfall (falling backward), a header (rolling over) or a suicide (landing on her back)?


She settled on the header, then climbed 40 feet, hand over hand, to a small platform overlooking rooftops in the Sylmar neighborhood and the San Gabriel Mountains in the distance. She stood erect at the edge of the platform and stared at the 10-by-15-foot air bag on the ground below.





"Are you ready?" a colleague shouted.


"OK, I'm good," said the 5-foot-2 Pascoe, dressed in black workout pants, a gray long-sleeved shirt and sneakers.


"Three, two, one — action, Heidi!" Pascoe yelled before diving toward the air bag.


If she missed the giant X in the bag's center, she could bounce onto the ground and be seriously injured. If she rolled too far forward, she could break her back.


Pascoe, a veteran of nearly two decades of stunt work, is a rarity in Hollywood. She's one of the few women willing to jump from heights of 100 feet or more.


She has completed about 100 high falls for movies, television shows and commercials, She's jumped from high-rise office buildings, bridges, cliffs, cranes — even an oil rig — often wearing a skirt and high heels and sometimes acting as if she's been shot, stabbed or pushed.


One especially challenging stunt involved falling from an 11-story building in downtown Los Angeles as she played a character trying to prevent someone from committing suicide. It was one of the few instances in which she jumped with the aid of a cable attached to her body, causing her to decelerate in the air rather than land on an air bag.


"Every time I look down, I say to myself, 'What the hell am I doing this for?'" said Pascoe, high-fiving her buddies after the 40-foot practice jump in Sylmar.


So why does she do it? The money is decent. She earns $1,000 to $4,000 a jump. But the real appeal is the sheer joy she gets.


"There are times I feel like I'm floating. There is absolutely a sense of exhilaration when I jump," she said. "I'm happy when I'm in the air and when I'm flying through it. I have no other explanation for it."


In an era when stunts increasingly are created on a computer screen, Pascoe is a throwback to a time when daredevil stunt performers sometimes lost their lives performing falls without safety harnesses or cables.


"There are very few women who can do what she does," said her mentor Banzai Vitale, a stunt coordinator who worked with Pascoe on HBO's "True Blood" series and has hired her for several other productions. "It's a dying art."


Aside from falling off buildings, Pascoe's been clocked in the head, thrown through office windows and rammed by speeding cars.


"I don't get the easy jobs," she said.


Raised in the small Pennsylvania city of Wilkes-Barre, Pascoe was drawn to two things that would be elemental in her career: heights and water.


"When I was a kid, I would wrap a green towel around my legs and swim in the pool," said Pascoe, an only child. "I thought I was a mermaid." She would eventually double for one in "Pirates of the Caribbean: On Stranger Tides."


Her best friend talked her into joining the high school diving team. Pascoe didn't win any state diving championships, but she was good enough to attend Millersville University in Pennsylvania on a diving scholarship.





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G-20 seeks to allay fear of currency war









WASHINGTON — Top finance officials of the world's 20 largest economies sought Saturday to allay fear of a currency war, pledging not to target exchange rates to gain a competitive advantage in trade.


But the joint statement, issued at the end of a meeting in Moscow of the so-called Group of 20, or G-20, did not single out any country, essentially giving a pass to Japan to keep pursuing its economic policies despite a significant slide in the value of the yen since November.


Japan's new government under Prime Minister Shinzo Abe, who will meet with President Obama this week in Washington, had been talking down the yen and has pressed its central bank for more expansive monetary stimulus to break out of its deflationary trap and boost the nation's stagnant economy. A cheaper currency helps a country's exporters sell their goods to foreign markets.





Some analysts said they now expect the yen to dip further, a prospect that could stoke contention over exchange rates and present complications for the United States in its long-running efforts to influence China to make more rapid adjustments in its currency.


"The U.S. could tolerate the yen depreciation, but clearly this is a potential problem in so far as China could interpret it as a possible green light to make its currency weaker," said Domenico Lombardi, a senior scholar at the Brookings Institution in Washington.


American officials were careful not to fault Japan, an important ally in Asia. What's more, the Federal Reserve also has taken extraordinary measures to stimulate its domestic economy, for which the U.S. has come under similar accusations from some G-20 nations that it was aiming to cheapen the dollar to boost exports.


Federal Reserve Chairman Ben S. Bernanke, in remarks Friday at a G-20 session with finance ministers and central bankers, said the United States was simply "using domestic policy tools to advance domestic objectives."


The Fed has been aggressively buying Treasury bonds with the aim of pushing down long-term interest rates to stimulate investment and reduce the unemployment rate, but that has contributed to a weakening of the dollar.


Many economists believe that currency manipulation occurs when a government intervenes, for example, by buying up dollars, specifically to devalue its currency. This, they say, is different from what may be an unintended byproduct of large-scale monetary stimulus to support one's domestic economy.


Intended or not, other analysts said the distinction was not so clear when the result was the same.


Aiming to make that more clear, the G-20 statement said monetary policies should be directed at price stability and domestic growth. "We will refrain from competitive devaluation," it said.


The statement said the G-20 would "monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes," but it did not set any benchmarks or enforcement mechanism.


A weaker Japanese yen isn't likely to have a major effect on the U.S. economy, and certainly not any time soon. American officials are far more interested in the politically sensitive issue of the Chinese currency. Although the Chinese yuan has risen significantly against the dollar in recent years, many in the U.S. still consider it undervalued and harmful to American exporters.


Besides currency fluctuations, G-20 finance officials also took up budget austerity. The Eurozone's debt crisis and deepening recession have prompted some in Europe to rethink the idea of setting tough budget deficit targets.


The Obama administration, fighting at home to avert stringent fiscal cuts that it believes could hurt the nation's economic recovery, has long pressed the G-20 to put more emphasis on pro-growth policies and less on austerity. But Germany and some others have insisted on fiscal consolidation and debt reduction as key pathways to recovery.


A debt-cutting agreement forged at the G-20 in Toronto in 2010 will expire this year, and officials at the Moscow meeting made no announcement on the issue.


Reflecting a reduced sense of urgency as the Eurozone's troubles have eased somewhat and the global outlook has moderately improved, the joint statement noted that risks to the world economy had receded.


Still, it said, growth remains too weak and unemployment too high:


"A sustained effort is required to continue building a stronger economic and monetary union in the euro area and to resolve uncertainties related to the fiscal situation in the United States and Japan, as well as to boost domestic sources of growth in surplus economies."


The G-20 represents the largest industrialized and developing nations, with about 90% of the world's economic output. It was designated in 2009 as the primary international forum for world leaders to address global financial issues and coordinate economic policies.


The finance ministers' gathering, which ended Saturday, was the first with Russia's President Vladimir Putin as this year's chairman of the G-20. Additional sessions are scheduled in the spring and summer before Obama and other heads of G-20 economies meet in September in St. Petersburg, Russia.


don.lee@latimes.com





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Taking aim at the gun industry








We've all heard the saw about California being hostile to industry. Here's an industry that indisputably has grounds for complaint: the gun industry.


Finally, the Legislature is getting something right.


According to many experts, California's firearms regulations are the toughest in the nation. (New York's recently enacted rules may be tougher, but they're still being rolled out.) California may soon get even tougher: a slate of proposals outlined this month by legislative leaders in Sacramento would add new regulations and close a few loopholes in the old.






"There's a lot for folks here to be proud of," Ben Van Houten, managing attorney at the San Francisco-based Law Center to Prevent Gun Violence, told me. "But there's still a lot of work to do. Federal law is astonishingly weak, so it's incumbent on the states to do as much as they can."


Taken together, the state's firearms laws are a model for regulating sales and possession of a dangerous product without banning it entirely — or even necessarily cutting much into the commercial market. More than 600,000 handguns, rifles and shotguns were sold in California in 2011, the latest year for which statistics are available from the attorney general's office. All required background checks, which resulted in denials of fewer than 1% of applications. California remains one of the nation's major gun markets — only Texas and Kentucky (go figure) generated more background checks last year, according to FBI figures.


This dynamic places California in a familiar position, as a bellwether on social and economic change. On issues such as auto emissions, greenhouse gases and tax policy, California has led the country across a Rubicon. Will gun safety be the next frontier?


Consider the most important statistic related to California's gun laws. In 1981, before the most stringent rules were adopted, California's rate of 16.5 firearms-related deaths per 100,000 population was 31st worst in the nation and higher than the national average; by 2000, a decade after the laws started getting tightened, the state ranked 20th, with a rate of 9.18, below the national average. In 2010, the latest year for which the Centers for Disease Control and Prevention offers figures, the state ranked ninth, with a rate of only 7.9.


And this is a big, diverse state with not inconsiderable pockets of gang lawlessness and drug abuse, and sizable populations of hunters, target shooters and other gun fanciers. Many factors may have contributed to the downward trend in firearm deaths since 1990, but the numbers strongly indicate that regulation works.


California's hostility to guns is focused mainly on assault weapons, which are outlawed — all others are legal, but regulated. The assault weapons ban is being extended to the makers of these dangerous products. The state's two largest public pension funds have reviewed their holdings of those manufacturers at the urging of state Treasurer Bill Lockyer, who argues that the funds shouldn't be investing in companies that make guns that can't be legally sold in the state.


The California State Teachers' Retirement System, or CalSTRS, voted in January to sell its holdings in three gun makers — Smith & Wesson and Sturm-Ruger, which are publicly traded companies, and Freedom Group. The latter landed in the CalSTRS portfolio through its investment in Cerberus Capital Management, a private equity firm that owns the gun maker, which made the assault rifle used in the Newtown school massacre in December. Soon after the massacre, Cerberus said it would put Freedom up for sale.


The board of the California Public Employees' Retirement System, or CalPERS, may vote on divestment of its holdings in Smith & Wesson and Sturm-Ruger as early as this week. (CalPERS doesn't own an interest in Freedom.) Lockyer, who sits on the boards of both pension funds, acknowledged that the divestment would be "largely symbolic" — the gun investments are negligible portions of both portfolios. But he's correct that it's important to make a statement that there are investments public agencies devoted to the health and welfare of their beneficiaries shouldn't be making.


It's even more important in this case, since CalPERS and CalSTRS are the two largest state pension funds in the country.


California's history with gun regulation is instructive for the nation. This is the state where the National Rifle Assn. tested its anti-regulation tactics before taking them on the road.


That happened in 1982, when a freeze on handgun sales appeared on the November ballot as Proposition 15. Aware that passage might spread the idea of a freeze on handguns nationwide, the NRA loaded up.


The organization provided roughly half of the $5.8 million spent to defeat the measure (a near record for an initiative campaign at the time), with gun manufacturers accounting for the rest. A key television ad depicted an elderly woman cowering in bed as a faceless interloper turns her doorknob and her 911 call returns a busy signal.


This was a mild foretaste of the organization's modern paranoid approach, which involves portraying daily life as a gantlet to be run dodging bloodthirsty Latin American drug gangs, looters, kidnappers, rioters and terrorists, as paranoia poster child Wayne LaPierre of the NRA wrote in an essay last week.


"When people realized Proposition 15 would affect their capacity to protect themselves," relates Rick Manning, who helped manage the campaign as an NRA consultant, "it was overwhelmingly rejected."


It didn't hurt that the NRA staged an aggressive voter registration drive among gun owners and supporters. The measure lost by a 2-1 margin, an outcome that is widely thought to have helped bring about Los Angeles Mayor Thomas Bradley's narrow loss in his race for governor against George Deukmejian.


That was the low-water mark for gun regulation in the state. In 1989 and 1990, however, state regulations got much tighter. The inspiration was a precursor to the Newtown massacre — the murder of five children and wounding of 29 others in a Stockton schoolyard by a deranged gunman who reloaded his assault rifle twice in the course of firing 105 rounds.


The post-Stockton era yielded an assault weapons ban. The state also extended to hunting rifles and shotguns its waiting period in effect for handguns; the wait is currently 10 days. At the time, an NRA lobbyist scoffed that "people don't follow California in any knee-jerk reaction." But the state's assault weapon ban became the model for the federal ban sponsored by Sen. Dianne Feinstein (D-Calif.) in 1994. The federal measure expired in 2004, and a renewal may be on the table as Congress ponders new regulations in the wake of Newtown.


Today, California law requires that almost all transfers of firearms, including private deals and gun show sales, be made through a licensed dealer and completed after a waiting period. High-capacity magazines are illegal except for those owned before 2000. There's a long list of people prohibited to possess firearms, including felons and people judged to be a danger to themselves or others.


The new proposals include measures to close a loophole in the ban on assault weapons and high-capacity magazines, and to require a background check and a permit to buy ammunition. The package reflects the cat-and-mouse game that unfolds any time an entrenched industry confronts a new regulatory paradigm.


"The gun industry has been very adept at finding loopholes to our existing laws," says Darrell Steinberg, the state Senate president pro tem, who will be spearheading the legislative effort in his chamber. He says the assumption that the bills will pass easily is misplaced: "It's not going to be easy or simple. There's going to be huge pushback certainly from the industry and a very vocal minority that doesn't believe in any law to reduce gun violence."


Indeed, gun-rights advocates sound as if they're already girding for a court fight. "It's just a matter of time before a California case gets out of the 9th Circuit," says Manning, referring to the liberal-leaning federal appellate court with jurisdiction over California. In the Supreme Court, which appeared to strengthen individual gun-possession rights with decisions in 2008 and 2010, "these laws will have some real problems."


It's true that the new proposals won't eradicate gun violence in California, any more than the post-1989 reforms eradicated school shootings in the state. The biggest loophole in California regulations can't be closed by the state — it's the porous regulations in nearby states such as Arizona that leach across the border.


But until and unless federal reforms close that gap, we're on our own.


Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.






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Carl Icahn buys nearly 13% stake in Herbalife as battle heats up









NEW YORK — It's no longer just a war of words.


Corporate raider Carl Icahn has thrown $214 million behind Herbalife Ltd., the Los Angeles-based maker of health foods and nutritional supplements accused of being a pyramid scheme by Icahn's foe, fellow Wall Street tycoon Bill Ackman.


Documents filed with the Securities and Exchange Commission on Thursday reveal that Icahn purchased more than 14 million shares and options in Herbalife, a nearly 13% stake that would make him the company's second-largest investor. Icahn said he would pursue talks with executives about possibly recapitalizing the company or even taking it private.





Icahn and Ackman have been engaged in a rare public battle for the last month, hurling insults at each other about past dealings and their respective positions in Herbalife. The two foes have bad blood stemming from a business dispute.


Ackman launched his assault on the company Dec. 20 by unveiling a $1-billion short position, or bet, against Herbalife. That same day, Icahn began snapping up the company's stock, according to the SEC filing.


"It's pretty obvious Icahn really wants to turn the screws on Ackman," said Chris Stuart, chief executive of Shortzilla, a Boston-area research firm. "He's put his money where his mouth is, for sure."


Investors saw Icahn's disclosure as reassuring that Herbalife was not going to collapse, as Ackman has predicted. Its shares surged more than 24% in after-hours trading after closing up $1.87, or 5.1%, at $38.27 on Thursday.


"I think he is definitely trying to hammer his good buddy Ackman, but he could also make a lot of money in this," said Timothy Ramey, an analyst with D.A. Davidson & Co. "It's an undervalued stock."


Ackman, who heads the hedge fund Pershing Square Capital Management, says that Herbalife defrauds its low-income distributors. His wager against the company pays off if its stock falls.


Herbalife hit back by saying the hedge fund manager was misinformed about the company and made an irresponsible bet with his investors' money. The company pointed to its 32 years in business as evidence that it is not a pyramid scheme.


Icahn sees Herbalife as undervalued and believes that the company has a "legitimate business model, with favorable long-term opportunities for growth," the filing says.


This is just the latest chapter in a long history of Icahn trying to exert influence on companies and their boards of directors in hopes of either motivating a merger or having his stake bought out at a premium.


In the 1980s, he famously took over airline TWA and immediately liquidated most of its assets. Since then, he's taken big stakes or controlling positions in companies including RJR Nabisco, Viacom, Marvel Comics, Blockbuster and Netflix.


Neither Icahn nor Ackman responded to requests for comment. Herbalife also declined to comment.


The battle over Herbalife is becoming a Wall Street spectacle, with money managers supporting either team Ackman or team Icahn.


Robert L. Chapman Jr., managing member of Chapman Capital in Manhattan Beach, who said he has invested in Herbalife, wrote in an email: "Carl Icahn just delivered Bill Ackman a Valentine he'll never forget."


andrew.tangel@latimes.com,


stuart.pfeifer@latimes.com





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American, US Airways approve merger









A long-anticipated merger of American Airlines and US Airways is expected to be announced Thursday after weeks of closed-door negotiations, according to people briefed on the deal. The transaction would create the nation's largest carrier and cap an era of consolidation in a troubled industry.


The marriage of American, based in Fort Worth, and its smaller competitor based in Tempe, Ariz., would form an airline valued at $11 billion. The union would be the latest in a string of mergers and acquisitions in an industry struggling to stay airborne amid fluctuating fuel costs, labor strife and economic turbulence.


The new airline would retain the name American, have its headquarters in Fort Worth and be the biggest carrier in eight of the nation's largest airports including Los Angeles, according to the sources, who were not authorized to speak publicly. The airline is expected to surpass its competitors in revenue, passengers served and fleet size. In the first few years, the merger could generate savings and increased revenue of up to $1.2 billion, according to Robert Herbst, an industry consultant.





Quiz: Test your knowledge about airport security


But critics say another airline merger would only hurt passengers.


With newly merged airlines eliminating overlapping service, fares are certain to rise and carriers will probably stop serving less-profitable markets, some critics argue. Since 2007, the average domestic airfare has increased 15%, according to federal statistics.


"You don't have to be an economics professor to understand that less competition in the market is going to result in consumers paying more, and airfares are certainly not immune from this simple fact," said Brandon M. Macsata, executive director of the Assn. for Airline Passenger Rights advocacy group.


But industry experts predict the merger of American and US Airways won't lead to significant fare increases because the two airlines rarely compete head to head, and because there are enough other airline competitors in the market.


"Out of all of the major airline mergers we've had in the last decade, this merger has the least amount of overlapping of flights and routes," Herbst said.


In fact, the airlines seem to complement each other in several ways.


US Airways now has a large presence in mid-size markets such as Charlotte, N.C., Philadelphia and Phoenix, while American Airlines dominates in some of the nation's largest airports, with more international destinations.


"American likes to be a presence in big markets, and US Airways likes to be No. 1 in small markets," said Seth Kaplan, a managing partner at Airline Weekly, a trade magazine.


The merger must still be approved by federal regulators, but industry experts don't expect opposition.


The deal would mark the latest in a series of mergers and acquisitions that has narrowed the industry to a handful of mega-airlines and several smaller, regional carriers.


In the last five years, Delta has merged with Northwest Airlines, United has merged with Continental and Southwest has acquired AirTran — resulting in a 10% drop in passenger capacity, according to a study by the International Air Transport Assn., an industry trade group.


The odds of a merger increased when American's parent company, AMR, filed for bankruptcy in November 2011. Many analysts and AMR creditors argued that American could compete against other big airlines only by joining forces with another carrier to reduce costs and expand its service area.


For months, US Airways pushed for the merger, with American's top executive initially resisting until it became clear that the carrier's unions and many of its creditors supported a deal.


Another thorny issue that may have delayed a merger announcement was deciding who would run the new company. Board members for the two airlines have reportedly agreed to name US Airways Chief Executive Doug Parker as CEO of the merged airline. AMR's chief executive, Thomas Horton, will be non-executive board chairman.


The ownership of the new airline will be split 72% for AMR creditors and 28% for US Airways shareholders.


One of the toughest parts about pushing through a merger — the integration of unions and their often conflicting contracts — has been already largely ironed out. The merger must still be approved by the Bankruptcy Court.


hugo.martin@latimes.com





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