1991: A Year Worth Forgetting in Business
NEW YORK (AP) _ From IBM to GM to BCCI to JFK, it was a tough year for big business.
How could things get any worse than they were in 1990? Easy.
International Business Machines Corp. and General Motors Corp., two of the nation’s largest enterprises, announced painfully deep job cuts that led a long list of corporate restructurings.
Three major airlines died: Eastern, Midway and Pan Am. Scandal erupted again, on a global scale, with the undoing of the Bank of Credit and Commerce International.
Corporate America even took a blow from the popular culture, which dredged up old conspiracy theories surrounding the assassination of President John F. Kennedy 28 years ago. ″JFK,″ the new movie by Oliver Stone, blames the military-industrial complex, not Lee Harvey Oswald.
1991 was an anti-establishment year all the way around. Behind much of the bad news was the sour economy, which set the tone for everyone’s year, from the boardroom to the unemployment line.
The year wound down this past week much the same way its predecessor expired - with falling interest rates and sluggish Christmas sales - reminders that the flagging economy was still not responding to treatment.
IBM and GM made the biggest news by announcing job cuts in the tens of thousands. What drove the two industrial powers to such measures was the combination of a slow economy and relentless competition.
IBM’s chief John Akers became so frustrated with his troops’ performance that he blasted IBMers for acting ″too damn comfortable.″
Besides the tirade, Big Blue ran through a textbook full of strategies to reverse its fortunes, announcing both a bureaucratic restructuring and a startling collaboration with competing Apple Computer Inc. But IBM stock, once a market leader, still sank to a nine-year low.
GM found itself in an even tighter spot with potential losses exceeding $3 billion in 1991. Experts said that even with its announced cutbacks, the No. 1 automaker might not be profitable again before 1993.
The list of companies that restructured - the euphemism for cutting jobs in 1991 - was long and full of household names, like Citicorp, Sears, Du Pont, Westinghouse and American Express.
No amount of restructuring could help some, like the airlines, which went through a wrenching shakeout. Besides the recession, airlines were hit by rising fuel prices and the fear of flying incited by the crisis and war in the Persian Gulf. Several carriers tried to reorganize under the shelter of bankruptcy court. Eastern, Midway and Pan Am succumbed in various stages of the process. MERGERS: A New Wave in Banks
Mergers, made famous by the mania of a past decade, held out hope for some recession-weary businesses. Banks, although burdened with bad debts from the bygone takeover era, were the most prominent new-wave players.
Manufacturers Hanover Trust Corp. was merged into Chemical Banking Corp. NCNB Corp. and C&S-Sovran Corp. combined in NationsBank. A combination of Security Pacific Corp. and BankAmerica Corp. awaited federal approval.
A reform package, which might have aided some banks by freeing them from Depression-era regulations, failed in Congress, making mergers all the more important to banks’ survival.
Outside banking, mergers were scarce, and most fell into the category of rescue mission (CNBC picked up Financial News Network in bankrupcty court) or strategic buy (American Telephone & Telegraph Co. acquired NCR Corp. for its computers.)
Another big name vanished not by death or merger, but by choice. Shareholders of troubled Western Union Corp. voted to change the company’s name to New Valley Corp., to counter bad publicity about its finances. SCANDAL: Good Names Besmirched
Some names were sullied by the bane of every business year: scandal. BCCI, nicknamed the Bank of Crooks and Criminals, was shut down by authorities in several countries in July after the international bank dribbled financial poison around the world.
Created in 1972 to foster development in the Third World, BCCI became a conduit for fraud, money laundering and arms trafficking.
In this country, the scandal was too abstract to inspire much outrage from average Americans. But it managed to ensnare two big powerbrokers in Washington, law partners Clark Clifford and Robert Altman, who were suspected but never charged with helping the bank gain a foothold in the United States.
By December, the story was mostly history as BCCI’s liquidators agreed to turn over $550 million to settle U.S. racketeering charges.
Scandal also returned to Wall Street, where Salomon Brothers Inc. admitted cheating in the government’s Treasury auctions. The stew was small potatoes compared with BCCI, but it was enough to claim the career of John Gutfreund, the firm’s cigar-chomping chairman who resigned in a housecleaning.
Wielding the broom was Warren Buffett, a squeaky-clean Midwestern billionaire and Salomon board member who took over as temporary chief. PEOPLE: Maxwell, Keating and Trump
One scandal produced a mystery as well as a mess. Robert Maxwell, the British publisher, died at sea off his yacht in November, precipitating the collapse of his international empire.
Evidence emerged that Maxwell looted his own holdings before his death. His watery exit, though, remained a puzzle.
The savings and loan scandal in the United States moved through the courts with the conviction of former Lincoln Savings owners Charles Keating in a California fraud case. Keating was subsequently indicted on federal charges but managed to post bail at year’s end.
Donald Trump, the most familiar of all business celebrities, also was humbled in ’91, by trouble in his love life as well as his once-artful deals. He dumped Ivana for Marla, who hurled her engagement ring at him in a December spat. Even worse, he was forced to surrender many business jewels, including the airline that carried his name even higher than his skyscrapers.
He begged Marla for forgiveness and pleaded with Congress to restore tax breaks for the kind of risky ventures that made him famous. ECONOMY: Greenspan’s Show
Congress and President Bush fielded many urgent calls to fix the economy, but their inaction made it Alan Greenspan’s game to win or lose. The Federal Reserve chairman engineered steady reductions in interest rates.
The last move was the biggest - a full-point drop in the rate charged by the Fed on loans to banks. The cut left the discount rate at a 27-year low and ignited a yearend stock market rally.
Bush, whose re-election chances seemed imperiled by the economy, promised to present a growth plan of his own in January. In the meantime, he tried to instill confidence by venturing out to the mall for a post-Thanksgiving shopping trip.
After that, he pledged not to do ″anything dumb″ that would damage the economy further.
End Adv Weekend Editions Dec. 28-29