Top 10 Out-of-Town Employers
From the April 26, 1999 Washington Post:
By Steven Ginsberg
Washington Post Staff Writer
Developments: Reports from McHeadquarters were much rosier this year, as McDonald's moved to put a series of marketing and management flubs, which included the Arch Deluxe line and a 55-cent sandwich promotion, behind them.
The changes started at the top. In May, longtime chief executive Michael R. Quinlan, who was largely responsible for the Arch Deluxe debacle, stepped down and was replaced by Jack M. Greenberg, the former chairman and chief executive of McDonald's USA.
Greenberg quickly implemented a strategy first initiated in July 1997 to decentralize the fast-food chain's domestic operations in an effort to patch up relationships with franchisees and give localities more control. Greenberg split the company into five regions. Each region has its own executive leadership and restaurant owners have been given more autonomy to make decisions concerning new products and promotions. In the wake of the Arch Deluxe flop, the company shied away from major product introductions, though the McFlurry dessert has caught on in many markets.
McDonald's also rolled out its much anticipated "Made for You" food preparation system, which is designed to shorten cooking times and deliver food hotter and faster. The $500 million system is in place in about a third of the restaurants and the company expects it to be in all of them by the end of the year.
The changes were well received by Wall Street. McDonald's shares are up 55 percent for the past year and, in January the company announced a two-for-one stock split.
Developments: In the past year, Giant Food Inc. has gone from being the ninth-largest company in the Washington region and one of the area's most identifiable home-grown firms to one of its biggest out-of-town-owned companies. Way out of town, in fact, as the grocery store chain was purchased by the Dutch firm Royal Ahold.
The $2.7 billion deal was inked in May and received regulatory approval in October after Royal Ahold agreed to sell a handful of stores that competed against one another, including six Giant outlets. Analysts praised the merger, saying it was a good deal for Giant's shareholders and provided Royal Ahold, which owns a number of other U.S. grocery chains, a strong base in the mid-Atlantic region.
Giant will keep its name and much of its long-standing identity, but changes in store layouts, distribution patterns and management are likely. Among the first shake-ups was an offer in February to buy out the contracts of about 4,200 of the chain's highest-paid employees. The buyout offer was an effort by the company to cut costs by replacing the top-tier salaried workers with new employees who would join at significantly lower pay scales.
Giant also announced that it would be opening a financial service center in Carlisle, Pa., in the fall, leading to the loss of an undetermined number of the 150 financial and accounting jobs based in Landover.
In October, just days before the deal closed, Giant chief executive Pete L. Manos announced he would retire, ending a nearly 40-year career with the chain. In November, it was announced that Manos would be replaced by Richard A. Baird, an executive with Royal Ahold's Stop & Shop Cos. subsidiary.
Aside from the merger, Giant had a solid year. Profit rose and the chain was able to recapture many of the customers it lost during a costly strike in late 1996 and early 1997.
An industry survey revealed that Giant's market share rose by 1.4 percentage points, to 44.3 percent, while that of Safeway Inc. and Shoppers Food Warehouse Corp., its nearest competitors, each dropped a percentage point. Safeway controls 26.4 percent of the market and Shoppers 12.8 percent.
In March, Royal Ahold announced it was acquiring Pathmark Stores, a major New Jersey-based grocery chain, for $1.75 billion.
Developments: A year after completing its merger with Nynex Corp., Bell Atlantic continued its unprecedented transformation by announcing plans to merge with GTE Corp. By combining Bell Atlantic's strong hold in the northeastern markets and GTE's presence across the country, the merger would create the nation's second-largest local phone company, providing service to about a third of the nation's local phone customers. The acquisition of GTE also would give Bell Atlantic a foothold in the long-distance market and a strong base in Internet services.
Announced in July, the $53 billion merger must clear a number of regulatory hurdles, including approval from the Federal Communications Commission and the Department of Justice. Virginia regulators have temporarily denied approval of the deal, though officials have requested more information and say they have not made their final decision.
Meanwhile, Bell Atlantic unveiled its much-anticipated plan to provide high-speed Internet access in June, initially providing the service to customers in the Washington, Pittsburgh and Philadelphia markets. The service, called "digital subscriber lines," would provide Internet access on Bell Atlantic's copper lines 250 times faster than with typical modems and represents the company's efforts to out duel cable television firms in the high-speed access race.
More recently, Bell Atlantic has faced a couple setbacks. In January, the Supreme Court sided against the company by ruling that firms attempting to get into the local telephone market could connect to Bell Atlantic's network at fees lower than the company had sought.
Also in January, Bell Atlantic dropped its bid to purchase AirTouch Communications Inc., a cellular telephone company. Bell Atlantic had sought to acquire the company in order to compete on a national scale with more entrenched firms, including AT&T Corp. and Sprint PCS, but ceded the bidding to Vodafone Group PLC, which offered a markedly higher price.
Developments: Amid a year of massive supermarket mergers, in which Giant Food Inc. was gobbled up by the Dutch firm Royal Ahold NV and Albertson's and American Stores joined forces to create the largest grocer in the country, Safeway was restrained, acquiring two lower profile chains.
In October, Safeway acquired Dominick's Supermarkets Inc., the second-largest supermarket chain in the Chicago area, for $1.2 billion. The stock and cash deal added 112 stores to the company and provided its first entry into the Chicago market.
In August, Safeway beefed up its presence in Alaska by buying Carr-Gottstein Foods Co. for $110 million. The transaction added 49 outlets in Anchorage, Fairbanks, Juneau and several outlying areas.
Locally, Safeway reduced its presence by closing two stores in the District and one in Alexandria. Also in Virginia, the supermarket chain shuttered two stores in Fredericksburg and one store each in Winchester and Woodstock. Until last year, Safeway had not closed stores in the Washington market because of poor performance since 1995. Last year the chain opened stores in Reston and Columbia, and in November, the company unveiled a $91 million distribution facility in Prince George's County that will serve 123 stores, primarily in the Washington-Baltimore corridor. The center replaces the company's Landover distribution site.
Despite these streamlining efforts, though, Safeway's share of the Washington area grocery market shrank by one percentage point last year. Safeway remains firmly entrenched as the area's second-largest grocer controlling 26.4 percent of the market. No. 1 Giant has a hold on 44.3 percent of area grocers, while Safeway's nearest competitor, Shoppers Food Warehouse Corp., controls 12.8 percent of the regional market.
Developments: Acquisitions and expansion marked the year for the May Co.
In August, the company announced that it was buying 11 stores from Dillard's. The stores, which formerly operated under the Mercantile name, are spread across several Midwest and Rocky Mountain states. In September, May grabbed another Dillard's store in Bowling Green, Ky. The 12 new stores will be operated by May's Famous-Barr division, bringing its total to 39 outlets.
For May, 1998 marked the second year of a five-year, $3.6 billion effort to open 100 new stores and remodel or expand 100 additional stores. As part of that plan, May added seven new stores, in addition to the 12 Dillard's, expanded seven locations and remodeled 22 outlets.
The expansion hit locally, where May scored a double whammy by opening a Hecht's and Lord & Taylor at the new Dulles Town Center in November. The two department stores are the primary anchors for the shopping center. May also opened a Lord & Taylor in Columbia.
All was not positive, though, for the company last year. In July, May agreed to settle a class-action lawsuit by paying approximately $15 million to about 40,000 customers who unnecessarily paid credit card debts. The customers had charged that May coerced them into repaying debts that were not approved by bankruptcy courts.
Developments: After more than 30 years as a District-based company, in which time MCI Communications Corp. grew from being a tiny upstart to one of the largest telecommunications outfits in the world, MCI merged with Jackson, Miss.-based WorldCom Inc. to form a mighty telecommunications alliance.
The $40 billion deal was finalized in September, following a difficult 10-month regulatory process in which the firms had to gain approval from European and American regulators as well as overcome a lawsuit from rival GTE Corp. As part of that process, MCI was forced to sell virtually all of its Internet business, though analysts said the loss would have little impact on the new company because of WorldCom's mighty Internet presence. The British firm Cable & Wireless PLC bought MCI's Internet assets for $1.75 billion.
Gerald H. Taylor, one of MCI's founding members and its chief executive, resigned when the merger was completed, though he will remain on the board of directors of MCI WorldCom. MCI's chairman, Bert C. Roberts Jr., became chairman of the new company, while WorldCom founder and chief executive Bernard Ebbers became president and CEO.
As a result of the merger, MCI WorldCom announced in December that it was laying off 1,850 employees, including about 170 in the Washington area. In a move unrelated to the merger, the company sold its MCI Systemhouse Inc. computer management business to Plano, Tex.-based Electronic Data Systems Corp. in February. The $1.65 billion deal could affect up to 3,000 local workers who could likely become EDS employees.
In addition to the merger, the company also acquired Embratel, the only long-distance phone carrier in Brazil, for $2.3 billion. The purchase gives MCI WorldCom a virtual lock on the coveted Brazilian market.
In January, the company won a hefty $750 million contract to provide long-distance and data services to the federal government.
Developments: After a tumultuous year, in which CSC had to fend off a hostile takeover bid from Computer Associates International Inc., the company returned to business as usual over the past 12 months. Most notably, CSC garnered several major contracts, the majority of which came out of its Washington area offices.
The biggest of those contracts, and many analysts say the most important of the year coming from the federal government, was a $5 billion, 15-year deal to revamp the computer systems of the Internal Revenue Service. CSC beat out many high-profile competitors for the award and will lead a team of contractors with the daunting task of simplifying the department's notoriously complex and outdated systems.
CSC also was selected as one of 10 firms to provide information technology services to the General Services Administration. The total deal is valued at $25 billion over 10 years.
But all wasn't rosy on the contract front for CSC. In December, the state of Connecticut announced that it was awarding a seven-year $1 billion contract to manage its information to Electronic Data Systems Corp. EDS was chosen over several competitors, including CSC, which had pursued the contract aggressively.
Developments: Like many of its competitors in the volatile telecommunications industry, AT&T was extremely active over the past year.
Just last week, AT&T launched a surprise $58 billion bid for cable TV giant Media One, topping a rival offer in a move to expand its role as the provider of Electronic services to American households.
Before the bid for Media One, the long-distance giant's biggest move was the $48 billion acquisition of Tele-Communications Inc., the nation's second-largest cable TV company. The deal is a risky one for AT&T, as it will invest nearly $2 billion over the next three years to upgrade TCI's cable lines to handle telephone service and high-speed Internet access. AT&T is moving into uncharted waters, betting that cable lines can handle the various networks and their heavy traffic and that consumers will take to the new type of service.
In February, AT&T expanded its effort to opt for cable access instead of local telephone company lines by signing an agreement with Time Warner Inc. to provide telephone and Internet service over its cable wires to 20 million households. Together, the two deals give AT&T direct access to 43 percent of U.S. homes.
In December, AT&T bought IBM's global communications network for $5 billion in cash in an effort to grow its Internet data services for businesses. The pact brought several hundred corporate clients as well as more than 1 million individual Internet customers to AT&T.
To pay for these mammoth deals, AT&T went to the bond markets in March to sell $8 billion in long-term notes -- the largest corporate issue in history. It also increased rates on a number of services. In May, the company added a 95-cent-per-month charge on residential customers to cover the cost of connecting long-distance calls to local networks. And the company announced last month that it would be raising fees on busy line verification, busy line interruption, calling card calls, operator-assisted calls and some collect calls.
Developments: It was largely a transition year for Raytheon as the company continued to reorganize itself in the wake of its 1997 acquisition of Hughes Aircraft Co.
In October, the company announced that it was cutting 5,300 jobs nationwide in an effort to trim costs. The announcement came 10 months after Raytheon cut 8,700 jobs as a result of its merger. The bulk of the layoffs were in Raytheon's Arlington-based systems division, but few local jobs were lost. The company also closed military factories in Texas, Washington, South Carolina and Massachusetts as part of its restructuring.
Change also took place in the executive suite as Daniel P. Burnham, who had served as president and chief operating officer since July, took over as chief executive in December. Burnham replaced Dennis J. Picard, who had served as chairman and chief executive since 1991. Picard remained chairman of the board, though he plans to step down from that position within the year.
Raytheon's largest contract gain was the renewal of a $1.12 billion, five-year pact to provide logistics support to the U.S. Special Operations Command. But Raytheon took a major blow in May when the Pentagon awarded a $5.2 billion missile-defense contract to Boeing Co. Raytheon had joined forces with Lockheed Martin Corp. and TRW Inc. to compete for the contract and most analysts had predicted that the trio would prevail.
Developments: Smooth worker relations allowed UPS to get back to the business of delivering packages and reaping the profits.
After a lackluster 1997, during which time the company lost millions of dollars because of a crippling five-week strike, UPS reported strong earnings in 1998. Revenue climbed more than 10 percent, to $24.8 billion, from about $22.4 billion the previous two years. Its profit nearly doubled to $1.7 billion, from $909 million in 1997. The company also said that unexpectedly low oil prices helped boost earnings.
In June, the company unveiled its highly regarded Internet delivery service. The Web-based system is split into two entities -- UPS OnLine Courier and UPS OnLine Dossier -- and is designed to provide a secure alternative to e-mail, faxes and first-class mail.
The OnLine Courier allows users to send documents around the world, regardless of the e-mail software, operating system or hardware being used by the sender and receiver. The OnLine Dossier is an insured and encrypted site that is designed to handle sensitive global information exchanges.
© Copyright 1999 The Washington Post Company