|
News
90.3 WCPN®'s award-winning News and Information Department
produces more than five hundred hours of original programming each year.
Though much of it is ephemeral, as one would naturally expect of news,
often the stories have "shelf life" that allows them to resonate beyond
the particular day on which they were broadcast. In the coming weeks,
we expect many of them to show up here, for your enjoyment and interest.
We also welcome your help in suggesting stories at webdirector@wcpn.org.
Weekly Financial Report
With Scott Roulston of Fairport Asset Management
Friday, February 22, 2002
Scott Roulston, CEO of Fairport Asset Management, discusses
the resignation this week of TRW's CEO who departs for a post at Honeywell,
the firing this week of four Lehman Brothers Cleveland employees related
to the misdoings of Frank Gruttadauria, the bid closing this week for
the assets of LTV steel, and the addition of nearly completed downtown
hotel to an already overbuilt lodging market.
April Baer–This week found players in the
steel business doing some shopping in Cleveland. LTV Corp. took bids for
its inactive steel factories. Thousands of former LTV workers who have
been unemployed since the company went bankrupt last year are keeping
watch. As Northeast Ohioans enjoyed mild temperatures, the Securities
and Exchange Commission turned up the heat on Frank Gruttadauria, the
stockbroker who went on the lam last month and then later turned himself
in. Hundreds of thousands of his clients' dollars are missing and more
changes have been filed by the SEC. Also, we have had a changing of the
guard in one of Cleveland's industrial pillars. Joining us to talk about
these stories and the rest of the week's business news, Scott Roulston
of Fairport Asset Management. Scott, good morning.
Scott Roulston–Good morning April.
AB–This week, TRW CEO David Cote surprised
Cleveland by announcing his resignation. It looks like he's going to take
a job at Honeywell. What do we know about the shape that TRW is in?
SR–, first of all, is highly leveraged. They
have 70% debt-to-capital ration. They are still digesting a big acquisition
that they made in the automotive business - the Lucas Varity acquisition
that was actually done on Joe Gorman's watch, Dave Cote's predecessor.
So the company right now has an uncertainty of how they are going to pay
down this debt and can they (well, they probably can anywhere in the short-term)
get into the more rapidly growing defense business, as opposed to being
saddled with the automotive business, which is perceived as being slower
growing and not quite as exciting.
AB–Joe Gorman, where are you now? Is this
the kind of opportune moment for the retired chairman to step back in?
SR–I don't know about that, but the situation
with Cote really doesn't pass the "smell test", as one person said to
me yesterday. It's a little odd that he would leave after only being in
the chairman slot for 7 months. I think that also impinges his ability
to hold onto executives at Honeywell. I mean, how is he going to get those
folks to hold on when he could be accused of job-hopping? I would imagine
that the board and the management at TRW isn't too happy right now with
Mr. Cote.
AB–Scott, this week Lehman Brothers brokerage
fired four people that the company claims shared at least some responsibility
for the misdoings for Frank Gruttadauria. As we mentioned, it looks like
the government is really starting to crack down on Gruttadauria. They
claim that he has stolen millions from clients. Do you think that this
is going to be the end of the firings?
SR–Related to Gruttadauria, I would think
so. I mean, I don't know anything inside as far as what is going on with
the investigation. But I've talked to a couple of people over at the Lehman
office. They tell me that the future of the office is somewhat uncertain,
but I think anybody who had anything to do with Frank is out of there
- at least, in the Cleveland office.
AB–Let's talk for a minute about the LTV auction.
Bids were taken on Wednesday. We'll probably get some more word next week
about who has been accepted. Now local politicians have been saying loudly
and to anyone who will listen that they want responsible tenants in LTV's
old facilities. What do you think the chances are that whichever party
buys LTV's works will be able to provide jobs for everyone who became
unemployed when LTV went under?
SR–Highly unlikely that all those folks are
going to be re-employed. And it depends on just how many can't be re-employed,
in terms of what scenarios play out. My sources tell me that the West-side
mill is probably gone and people who were employed there or that portion
of the employment pool, probably not. The Brazilians are the most likely
buyers over there and they would move the operations out. They basically
take the equipment and move it out of state. On the Eastside, there are
a lot of different players - US Steel, Cleveland Cliffs, the Chinese.
The key thing to keep in mind here is what President Bush does somewhere
around March 8 - 15th, because he is going to have that "201 ruling" on
the dumping. If he puts in a quota on slabs, then the Eastside mill can
make money. Whatever the politicians tell you, that mill has to make money
in order for somebody to really put some money in and invest in it.
AB–It's been a few months since downtown Cleveland
welcomed a few new luxury hotels as their neighbors. There's the Hyatt
at the Arcade, of course. The Windham is a relatively new outfit. And
now I notice that Hilton going up across from the Jake looks like it's
getting pretty close to finished. If one were just looking at the construction
of hotels in Cleveland, it would seem that business is booming. But is
that a fact?
SR–Not in Cleveland. I don't think the hotel
business is doing well nationally nor is it in Cleveland. You really have
two different situations going on here, April. Nationally you see companies
- Boykin Lodging reported earnings and they are starting to see a rebound
nationally. And what's going on nationally is that 2002 is going to be
flat to slightly down. The pipeline is shrinking because banks aren't
loaning on new hotels. 2003 will probably be pretty good. Cleveland is
a lousy market for hotels. It's overbuilt. They have too much supply and
some of these that have come on are going to have a difficult time, especially
when you look at the convention calendar, which is pretty weak for this
year, so there are not going to be a lot of trade groups coming in and
filling those hotels.
AB–Scott, thank you so much.
SR–You're welcome. Have a good weekend.
AB–Scott Roulston of Fairport Asset Management.
He talks to us every Friday about the week's business news.
|
