Ralphs says it will close stores if workers go on strike. Albertsons may follow. [Updated]

The labor fight between union officials and grocery employers spilled outside of the negotiation room  Friday as Ralphs announced that the company would “initially” close all 250 of its Southern California stores if workers go on strike.

How long these stores would remain closed is unclear.

About 18,000 employees are covered by the contract currently being negotiated between Ralphs, Vons and Albertsons and the United Food and Commercial Workers union. Ralphs has an estimated 22,000 employees in Southern California.

“During a strike, it is difficult to create a good shopping experience for our customers and a good working environment for our employees,” Ralphs spokeswoman Kendra Doyel said in a statement Friday. “We will evaluate the situation as it progresses.”

[Updated at 7:54 p.m.  Late Friday, a spokesperson for Albertsons confirmed that it too could shutter some of its stores in the event of a labor stoppage. Albertsons operates 215 stores in Southern California and has about 16,700 UFCW employees.

["We have contingency plans in place in the unfortunate event that there is a strike," the company said in a statement. "One of the lessons we learned during the 2003-04 labor dispute is that it doesn’t make good business sense to try to operate all our stores during a strike. At this point, we believe up to 100 stores could close for some or all of the strike. Any decision to reopen closed stores will be based on the business conditions at that end of a strike. We hope it does not come to this."

[A spokesman for Vons, which is owned by Safeway, said the company plans on keeping its stores open.]

The news came less than a day after UFCW officials gave a 72-hour notice to cancel their labor contract extension with Ralphs, Vons and Albertsons. Such a notice is a mandatory step before a walkout. Once the contract is no longer in effect, grocery workers can strike at any time.

The canceled contract, however, does not mean that workers will necessarily walk off the job Sunday evening.

Union officials said Friday that Ralph’s warning was a scare tactic.

“They’re playing chicken with their customers and their employees,” said Mike Shimpock, a spokesman for UFCW Local 770 in Los Angeles. “They should get serious at the bargaining table and concentrate on getting a deal completed, rather than threatening employees.”

RELATED:

Dunkin' Donuts heads west, but not to California

Grocery workers give notice to end contract extension

Michelle Obama, Olive Garden, Red Lobster vow healthier kids' meals

-- P.J. Huffstutter

Photo: NAACP members participating in the NAACP's 102nd annual national convention at the Los Angeles Convention Center in July join a labor march and rally in front of a Ralphs grocery store. Credit: Kevork Djansezian / Getty Images

Ralphs says it will close stores if workers go on strike. Albertsons may follow. [UPDATE]

The labor fight between union officials and grocery employers spilled outside of the negotiation room  Friday as Ralphs announced that the company would “initially” close all 250 of its Southern California stores if workers go on strike.

How long these stores would remain closed is unclear.

About 18,000 employees are covered by the contract currently being negotiated between Ralphs, Vons and Albertsons and the United Food and Commercial Workers union. Ralphs has an estimated 22,000 employees in Southern California.

“During a strike, it is difficult to create a good shopping experience for our customers and a good working environment for our employees,” Ralphs spokeswoman Kendra Doyel said in a statement Friday. “We will evaluate the situation as it progresses.”

[Updated at 7:54 p.m.  Late Friday, a spokesperson for Albertsons confirmed that it too could shutter some of its stores in the event of a labor stoppage. Albertsons operates 215 stores in Southern California and has about 16,700 UFCW employees.

["We have contingency plans in place in the unfortunate event that there is a strike," the company said in a statement. "One of the lessons we learned during the 2003-04 labor dispute is that it doesn’t make good business sense to try to operate all our stores during a strike. At this point, we believe up to 100 stores could close for some or all of the strike. Any decision to reopen closed stores will be based on the business conditions at that end of a strike. We hope it does not come to this."]

The news came less than a day after UFCW officials gave a 72-hour notice to cancel their labor contract extension with Ralphs, Vons and Albertsons. Such a notice is a mandatory step before a walkout. Once the contract is no longer in effect, grocery workers can strike at any time.

The canceled contract, however, does not mean that workers will necessarily walk off the job Sunday evening.

Union officials said Friday that Ralph’s warning was a scare tactic.

“They’re playing chicken with their customers and their employees,” said Mike Shimpock, a spokesman for UFCW Local 770 in Los Angeles. “They should get serious at the bargaining table and concentrate on getting a deal completed, rather than threatening employees.”

RELATED:

Dunkin' Donuts heads west, but not to California

Grocery workers give notice to end contract extension

Michelle Obama, Olive Garden, Red Lobster vow healthier kids' meals

-- P.J. Huffstutter

Photo: NAACP members participating in the NAACP's 102nd annual national convention at the Los Angeles Convention Center in July join a labor march and rally in front of a Ralphs grocery store. Credit: Kevork Djansezian / Getty Images

Ralphs says it will close stores if workers go on strike

The labor fight between union officials and grocery employers spilled outside of the negotiation room  Friday as Ralphs announced that the company would “initially” close all 250 of its Southern California stores if workers go on strike.

How long these stores would remain closed is unclear.

About 18,000 employees are covered by the contract currently being negotiated between Ralphs, Vons and Albertsons and the United Food and Commercial Workers union. Ralphs has an estimated 22,000 employees in Southern California.

“During a strike, it is difficult to create a good shopping experience for our customers and a good working environment for our employees,” Ralphs spokeswoman Kendra Doyel said in a statement Friday. “We will evaluate the situation as it progresses.”

The news came less than a day after UFCW officials gave a 72-hour notice to cancel their labor contract extension with Ralphs, Vons and Albertsons. Such a notice is a mandatory step before a walkout. Once the contract is no longer in effect, grocery workers can strike at any time.

The canceled contract, however, does not mean that workers will necessarily walk off the job Sunday evening.

Union officials said Friday that Ralph’s warning was a scare tactic.

“They’re playing chicken with their customers and their employees,” said Mike Shimpock, a spokesman for UFCW Local 770 in Los Angeles. “They should get serious at the bargaining table and concentrate on getting a deal completed, rather than threatening employees.”

RELATED:

Dunkin' Donuts heads west, but not to California

Grocery workers give notice to end contract extension

Michelle Obama, Olive Garden, Red Lobster vow healthier kids' meals

-- P.J. Huffstutter

Photo: NAACP members participating in the NAACP's 102nd annual national convention at the Los Angeles Convention Center in July join a labor march and rally in front of a Ralphs grocery store. Credit: Kevork Djansezian / Getty Images

Podcast: The European Crisis, the Guggenheim Family and Online Privacy

The European financial crisis has already roiled markets around the world, but it’s likely that worse is yet to come.

That’s the view of Gretchen Morgenson, who analyzes the effects of the European crisis on the United States financial system and economy in the new Weekend Business podcast, and in her column in Sunday Business.

While central banks and political leaders are trying to ameliorate the crisis, a default by Greece is quite probable, she says, and that is likely to be felt in the United States in two main ways. Credit default swaps insuring against a default will entangle some as- yet- unknown American counterparties, she says, and the shock could lead to another full-blown credit crisis, which would inflict harm on the markets and the economy.

The fundamental mechanism underlying world markets is the focus of Robert Frank’s new book, “The Darwin Economy,” an adaptation of which appears in Sunday Business. In a podcast conversation, he argues that Charles Darwin, the naturalist, was a greater economist than Adam Smith. Darwin’s theory of evolution explains why markets sometimes produce socially unacceptable results — and the reason, Professor Frank says, is intrinsic to competition. Unlike Smith’s “invisible hand” theory, Darwin’s theory says that group and individual interests sometimes conflict, in which case, individual interests trump. Government sometimes needs to step in to correct matters, he says.

In another conversation, Graham Bowley tells David Gillen about the history of the Guggenheim family, and of individuals who are accused of trying to swindle investors running a swindle based on the false claim that they, too, are members of that illustrious clan. The saga of the Guggenheims and would-be Guggenheims is the subject of Mr. Bowley’s article on the cover of Sunday Business.

And, finally, Natasha Singer discusses online ID systems that, she says, may threaten individual privacy. She elaborates on this theme in the Slipstream column in Sunday Business.

You can find specific segments of the podcast at these junctures: Gretchen Morgenson (34:29); news summary (27:03); Graham Bowley (24:38); Natasha Singer (17:32); Robert Frank (10:11); the week ahead (2:06).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Dockworkers forge strategic alliance with Panama Canal pilots

The union representing West Coast dockworkers has formed an alliance with pilots who guide ships through the Panama Canal, a link-up that could boost the bargaining power of both unions.

The International Longshore and Warehouse Union, which represents 50,000 West Coast longshore and other workers, as well as others in the U.S. and Canada, has been concerned about the potential loss of cargo, jobs and collective bargaining power that could occur when the Panama Canal expansion opens in 2014.

The affiliation between the two unions strengthens labor’s hand because the two organizations would honor each other’s job actions, the unions said.

Harley Shaiken, a UC Berkeley professor specializing in labor issues, described the alliance as “a ‘wow’ moment” that could greatly increase the collective bargaining power of both unions.

“There has been a lot of talk about unions needing to have a much more global vision,” he said. “This is one of the few times that the talk has been put into action.”

ILWU International President Bob McEllrath said the affiliation “will provide a new level of strength and unity for workers in both organizations.”

“Our goal is to hold global companies more accountable to workers and their communities,” he said.

Londor Rankin, who serves as secretary general of the Panama Canal Pilots Union, said his group voted “overwhelmingly” in favor of creating a formal relationship with the San Francisco-based dockworkers union.

“We will learn from the dockworkers and they will learn from us, and we will mutually support each other,” Rankin said. “The companies that move cargo are global. We must have the same kinds of alliances and connections.”

The 250-member pilots union represents a profession as old as the maritime industry itself. Pilots are the short-haul navigation experts who usually take control of ships from their sea captains to negotiate the local harbor routes that lead vessels to dock and then back out to sea.

But the Panama pilots have a different task. They negotiate the grueling 12-hour, 48-mile canal route that links the Pacific and Atlantic oceans.

Some inside the dockworkers union have been pressing privately for early talks on its next labor contract with the Pacific Maritime Assn., the negotiating body that represents some of the world's largest ocean cargo lines and terminal operators.

The thought was that West Coast dockworkers needed the next contract in hand early to persuade port customers to continue moving cargo through West Coast ports rather than using the widened Panama Canal to head to East Coast harbors.

The current labor contract expires 2014, and no negotiations have been scheduled on a new contract. Officials from the Pacific Maritime Assn. didn’t return calls seeking comment Friday.

Meanwhile, the dockworkers union is locked in a dispute with a grain terminal operator at the Port of Longview in southern Washington state. The union has accused the operator of reneging on an agreement to hire union labor. The dispute erupted this summer into picket lines and the arrests of some union members.

Shaiken, the professor, said the new alliance wasn’t necessarily an escalation that would lead to more tensions between labor and management. It might help ensure that both sides negotiate in good faith, since neither would hold an upper hand in threatening to shift cargo or stop work.

“It could lead to improved relations rather than to more conflict,” Shaiken said.

RELATED:

Cargo traffic declines in August

Los Angeles heads for record export year

-- Ronald D. White

Photo: At dawn, cranes await traffic at the Evergreen Terminal at the Port of Los Angeles, one of 29 West Coast ports served by the International Longshore and Warehouse Union and the Pacific Maritime Assn. Credit: Bob Chamberlin / Los Angeles Times

California home sales rise in August, but prices dip

Home sales in California jumped in August, but that was mostly due to a quirk in the calendar, with more business days than usual for the month. The state's median home price dropped year-over-year for the 11th consecutive month.

Sales of so-called distressed properties -– homes where the borrower was either in default or where the property was a foreclosure -- continued to make up more than half of California's market for previously owned homes, according to a report by the real estate information firm DataQuick of San Diego.

Sales statewide were up 8.8% in August over July and 10.2% from the same month a year earlier. A total of 34,239 properties in the Golden State sold last month, with Southern California accounting for 52% of those sales.

"The sliver of positive news here is that, no matter how you look at it, last month's sales beat the year-ago numbers, which were pretty lousy," DataQuick President John Walsh said in a statement. "Lower prices and mortgage rates lured some homebuyers off the sidelines last month, but too many others lacked the confidence to step into the game."

The median price, the point at which half the homes sold for less and half for more, declined 1.2% in August from July and dropped 4.2% from the same month a year earlier, to $249,000. The state’s median home price remained 12.7% above the most recent bottom, hit in April 2009.

Foreclosure properties made up 34.6% of homes sold statewide, up from 34.5% in July and down from 35.6% in August 2010. Short sales -– in which a bank allows a property to be sold for less than the outstanding debt on the property -– made up an estimated 17.8% of sales. That was up from 17.3% in July but down from 18.0% in August 2010.

RELATED:

New-home slump keeping door shut on U.S. recovery

White House forecasts high unemployment through 2012

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo
Twitter.com/AlejandroLazo

Sneak video of new Fisker Surf sporty hybrid car [video]

George Shultz on Politics and Budgets

I called George Shultz, the former more-or-less everything, this week to see what he thought of the government now. I discovered that he is rankled by the budget process but impressed by at least one candidate for the Republican presidential nomination.

And I found that a long perspective can serve as a reminder that life is not made up of one disaster after another.

“It’s an interesting thing to look back and see how much turmoil we have in the last 100 years, and how it also has been a period of great progress,” he said, mentioning the reduction in poverty and increase in life expectancy around the world. “In many respects, the U.S. had a big hand in creating a global commons that everyone benefited from, including us.”

On Monday, he will receive the Economics Club of New York Award for Leadership Excellence, and he told me he had no desire to scoop his speech, which will discuss the world as he sees it now.

But he did say the current budget process “is undoubtedly a catastrophe. We are living in continuing resolutions. They don’t have any thought in them. They just continue things.”

He spoke wistfully of the days when the presidents and congresses of different parties were able to reach agreement on budgets. “From what I read,” he said of the current poisoned atmosphere in Washington “it is not recognizable.”

Mr. Shultz was a young White House economist in the Eisenhower administration. He served as secretary of labor, as budget director and as Treasury secretary in the Nixon administration, and as an economic adviser and as secretary of state under Ronald Reagan.

“And,” he told me, “I did things for Kennedy and Johnson.”

When he was not working for the government he taught at MIT, Chicago and Stanford, and was president of Bechtel, a large construction company.

I pointed out that doing things for presidents from the other party was now considered a political liability in some circles, noting the criticism of Jon M. Huntsman Jr., the former Utah governor, for serving as Ambassador to China under President Obama. Mr. Huntsman’s campaign for the Republican presidential nomination has yet to catch fire.

“Why,” asked Mr. Shultz, “don’t we elect somebody who is patriotic, competent, sensible, has experience in government, and has shown that he can manage well?”

He said Mr. Huntsman had greatly impressed people in Singapore, where he was George H.W. Bush’s ambassador before he was elected governor, adding that impressing Singaporeans was not easy.

Mr. Shultz said he was not ready to endorse anybody, but he passed up the chance to volunteer nice things about any of the other candidates.

Of Mr. Huntsman, he said, “He looks a lot better to me than he does in the polls.”

A look at the top 10 Chevrolets ever as automaker turns 100

William C. "Billy" Durant, was an early automotive entrepreneur who melded Buick, Oldsmobile and Cadillac into General Motors Co. at the turn of the 20^th Century. He was tossed from the company in 1910 but regained control a few years later.  In between he founded Chevrolet, which turns 100 years old in November.

Durant teamed with Swiss-born Louis Chevrolet, who was a racer, mechanic and pioneering engineer, to create the company, which developed cars that quickly earned reputations for performance, durability and value, and which sold enough to let Durant get back into GM.

Chevrolet’s first car was the Series C Classic Six, a large motorcar with a six-cylinder engine that produced a whopping 40 horsepower and had a top speed of about 65 mph. GM said it sold for $2,150 --  the equivalent of nearly $50,000 today, when adjusted for inflation.

Auto information company Kelley Blue Book has looked at 100 years of Chevrolet, GM’s most successful division, and come up with what Kelley believes are the auto company's 10 most important cars, starting with the Classic Six. (Click her to see all 10.)

Others include the 1936 Chevrolet Suburban Carryall, considered the first sport-utility vehicle, the 1963 Corvette Sting Ray sports car and the Volt plug-in hybrid.

"For many of us, Chevrolet is an American icon on a par with baseball and apple pie -- a brand deeply engrained in the fabric of our lives," said Jack R. Nerad, executive editorial director of Kelley Blue Book's kbb.com.

Kelley’s staff selected vehicles that offered technical innovation and changed the automotive landscape.

“Each one is a watershed car whose influence is still felt today," Nerad said.

Use the comment section to suggest your favorite Chevrolet.

RELATED:

Was a 1932 Ford the best car ever? 

Will autos keep U.S. from recession? 

Natural gas Ford taxis start rolling in O.C.

-- Jerry Hirsch
twitter.com/LATimesJerry

Photos, from top: The 1963 Corvette Sting Ray; the 1936 Suburban. Credits: General Motors Co.

You feel poorer because you are: U.S. household net worth slips

 
It’s understandable if Americans feel poorer. It’s because they are.

The net worth of American households decreased nearly 0.3% in the second quarter as the value of their homes and stock portfolios slumped, according to data released Friday by the Federal Reserve.

Household wealth fell to $58.5 trillion, as home values skidded 0.5% and financial assets, including stock holdings, slipped 0.3%.

And consumers’ balance sheets may get worse before they get better, courtesy of declining stock prices over the past three months.

“The third quarter will likely be one to remember as the steepest household net worth decline since the early days of the 2007-2009 recession,” Gregory Daco, an economist at IHS Global Insight, wrote in a report.

“The steep stock market losses incurred since early August will combine with the poor housing market for a lethal mix,” Daco wrote. “This is not good news for consumers.”

Here’s the link to the Fed data (all 127 pages of it). The household worth data are on page 113, line 42.

RELATED:

California unemployment rate hits 12.1% as employers slash jobs

Inflation: Consumer prices up 3.8% from a year ago, biggest rise since 2008

Home loans rates drop again in Freddie Mac survey

-- Walter Hamilton

Photo credit: Brian van der Brug/Los Angeles Times

Home sales up in Bay Area while median price declines

Sales of Bay Area homes increased in August from the same month a year earlier but remained below average for the month. Prices continued to drop. The median home price fell in August from the same month a year earlier for the 11th consecutive month.

Sales of so-called distressed homes –- where the borrower is in default or the home is in foreclosure –- made up half of the market for previously owned homes, according to San Diego real estate firm DataQuick.

Sales were up 9.1% from the prior month and 12.2% from the same month a year prior. A total of 7,513 new and previously owned properties sold. The median, which is the point at which half the homes sold for more and half for less, declined 1.1% from the prior month and was down 3.9% from a year prior to hit $370,000.

“The sliver of positive news here is that, no matter how you look at it, last month’s sales beat the year-ago numbers, which were pretty lousy,” said John Walsh, DataQuick president. “Lower prices and mortgage rates lured some homebuyers off the sidelines last month, but too many others lacked the confidence to step into the game."

Sales of foreclosed homes made up 26.4% of the resale market while short sales -– where the bank allows a home to be sold for less than the debt on the property -– made up about 18.6% of the market.

RELATED:

New-home slump keeping door shut on U.S. recovery

White House forecasts high unemployment through 2012

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo

Twitter.com/AlejandroLazo

Photo: San Francisco. Credit: Getty Images

 

Consumer Confidential: New Citi bank fee, grocery strike closer

Here's your flash-in-the-pan Friday roundup of consumer news from around the Web:

-- Another new bank fee? You betcha. Our friends at Citigroup say they'll start charging a monthly fee of $10 on checking and savings accounts with combined balances of less than $1,500, joining a growing list of banks seeking to recoup revenue lost under new financial industry regulations. The fee will be waived if a customer completes one direct deposit and one online bill payment per month through an account, or maintains a balance of at least $1,500 in checking and savings accounts. The change takes effect in December. Under Citi's current fee structure, customers are not required to maintain minimum account balances but must complete five transactions a month through an account to avoid a monthly fee of $8. Citigroup says it will not charge for debit card use or online bill payment. At least not yet.

-- We're another step closer to a SoCal grocery strike. Grocery workers could go on strike as soon as Sunday night in response to inaction on healthcare benefits. Eight months into contract negotiations, Southern California grocery workers issued a 72-hour notice Thursday night to cancel a contract extension and pave the way for a strike. A strike isn't guaranteed for workers at Albertsons, Ralphs and Vons, but canceling the contract removes the final barrier to a strike. In separate statements Thursday, all three grocers said they were disappointed in the union's move and they will remain in active negotiations. Let's hope a last-minute deal can be reached.

-- David Lazarus

Photo: Citi has a new fee for account holders. Credit: Tomohiro Ohsumi / Bloomberg

 

Air France-KLM agrees to buy $12 billion worth of new jets

Air France-KLM, the largest European airline, has agreed to purchase 50 fuel-efficient long-range jets at a book value of $12 billion from the world’s two largest makers of commercial aircraft.

The airline will purchase 25 of Chicago-based Boeing Co.’s 787 Dreamliners and 25 Toulouse, France-based Airbus A-350s. In a press release, Air France-KLM said it had an option to buy up to 60 more.

Both planes have yet to enter service.

The first 787 is set to be delivered to Japanese carrier All Nippon Airways next week, and Airbus hopes to have the A-350 ready by mid-decade.

The planes are made of composite materials (carbon fibers meshed together with epoxy) instead of aluminum sheets, which the jet makers say will require less maintenance than the current generation of aircraft because it will involve fewer parts and sustain less corrosion.

Also, the planes’ newly developed engines promise to burn less fuel than jetliners of similar size, both of which seat between 200 and 350 people.

“These new aircraft will reduce fuel consumption by over 15% and will give rise to a significant reduction in noise and gas emissions,” Air France-KLM said in a statement.

Peter Hartman, president and chief executive KLM, added: “Their integration into the fleet will enable the group to continue to operate one of the youngest and most modern fleets in the world.”

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Television news, political talk to stream live on flights

Century City aircraft leasing firm files for public offering

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-- W.J. Hennigan

twitter.com/wjhenn

Photo: Air France Airbus A-319. Credit: Air France

Jury renders split decision in TCW-Jeffrey Gundlach case [Updated]

Jeffrey Gundlach was found liable Friday for breaching his fiduciary duty to his former employer, asset management giant TCW Group Inc., after it fired him in December 2009. But in what essentially can be viewed as a win for Gundlach, a Los Angeles jury found no malice in that breach and awarded TCW no financial compensation.  

Further, the  jury found that TCW owes $66.7 million to Gundlach and other co-defendants for failure to pay wages owed them before leaving the money-management firm to set up a rival company in 2009.

[Updated at 9:51 a.m.: After the jury was dismissed, a smiling Gundlach was asked how he felt about the decision. "Great," he said. "It's 67-to-zero," he added, referring to the wages owed to him and his co-defendants.]

On a separate issue, the jury of five women and seven men agreed with TCW’s claim that Gundlach had misappropriated the company’s trade secrets in setting up a rival firm in 2009, causing harm to TCW. Any damages on that claim will be decided by Judge Carl J. West.

The jury foreman read the decisions in a packed courtroom, with Gundlach and TCW’s top officers present. The six-week civil trial in Los Angeles County Superior Court had wrapped up on Tuesday afternoon. Jurors took just two days to decide on 37 separate issues on the verdict form.

TCW, which manages about $120 billion in assets for clients, fired Gundlach in December 2009 in a shakeup that rocked the mutual-fund world. One month later the company sued Gundlach, alleging that he and key aides conspired against the firm and stole TCW proprietary information to set up a rival fund-management business, DoubleLine Capital, almost overnight.

Gundlach, 51, then countersued and accused TCW of ousting him after 24 years at the firm to cheat him out of a huge chunk of promised income.

The two lawsuits were combined into one trial, which began in late July and has been closely watched on Wall Street.

The trial was an unusual airing of the financial industry's dirty laundry. Most such disputes are settled quietly to prevent potentially embarrassing or damaging information from becoming public. But in this one there was so much bad blood between the two sides that they were unable to reach an out-of-court deal.

TCW alleged that Gundlach, a bond-market genius who had managed more than 60% of TCW's total assets, was secretly planning all through 2009 to abandon the company. He allegedly wanted to take his entire bond team with him to another firm, or one that he created, and leave TCW in the lurch.

If he had succeeded, he "likely would have destroyed TCW," TCW attorney John Quinn said Tuesday in closing arguments. Instead, TCW said it used the element of surprise to strike first, firing Gundlach and acquiring another bond firm on the same day to take over the assets Gundlach had managed.

Gundlach denied that he wanted to leave TCW, and alleged that Chief Executive Marc Stern and the company's French parent, banking firm Societe Generale, were plotting in 2009 to oust him in a cost-saving move. Gundlach's attorneys pointed repeatedly during the trial to notes taken at a meeting of TCW executives in August 2009 referring to the idea of firing him.

Gundlach wanted nearly $500 million in damages from TCW, claiming that he would have earned that much through this year based on his contract with the company at the time of his ouster. As one of Wall Street's most acclaimed investors in mortgage bonds, Gundlach had attracted tens of billions of client dollars to TCW over the last two decades. He and TCW had shared management fees earned on the assets. TCW calculated that Gundlach’s compensation since 1991 had totaled $239 million.

During the trial, Gundlach estimated his personal net worth at about $90 million, some of which he has sunk into an extensive collection of modern art.

For much of the six weeks of testimony Gundlach found his personality on trial. TCW lawyers and witnesses described him as arrogant, disloyal and even a “disease” on the company. The jury was told that Gundlach encouraged his staff to refer to him as "the Pope" and "the Godfather."

Gundlach has acknowledged his large ego, but has said his investment results spoke for themselves.

His new company, DoubleLine Capital, has attracted $15 billion in assets in less than two years, despite TCW’s legal onslaught against him. The DoubleLine Total Return Bond fund, Gundlach’s flagship mutual fund, has risen 11.7% over the last 12 months, beating 99% of its peer funds, including the one he left behind at TCW.

Barron's magazine earlier this year crowned Gundlach "King of Bonds." During the trial he estimated his personal net worth at about $90 million, some of which he has sunk into an extensive collection of modern art.

Before the trial, Gundlach and his attorneys accused TCW of engineering a public smear campaign against him. When TCW filed suit against Gundlach in 2010, it included allegations that hard-core pornographic magazines and DVDs and drug paraphernalia were found in his TCW offices downtown and in Santa Monica.

Gundlach said at the time that TCW was resorting to "gutter tactics." Later, he said that whatever the company found in his offices were "vestiges of closed chapters of my life."

TCW wanted to have the jury hear about the alleged porn and drugs, but presiding Judge Carl J. West ruled in July that those accusations weren't relevant to the case, which he said was complex enough.

 RELATED:

TCW chief defends firing Gundlach

Gundlach blames rift on TCW broken promises

Greed at center of TCW Group vs. Jeffrey Gundlach trial

--Tom Petruno

Photo: Jeffrey Gundlach testifies at the trial. Credit: Reuters

California unemployment rate rises to 12.1% in August

California's unemployment rate ticked up a notch in August, to 12.1% from 12% the month before, according to new data from the  U.S. Bureau of Labor Statistics. Employers shed 8,400 jobs from payrolls.

The numbers were little surprise to economists, who had anticipated no growth after national data showed that employers added no jobs nationally in August, when the U.S. unemployment rate stayed steady at 9.1%.

"Businesses are very reluctant to hire people," said Sung Won Sohn, an economist at Cal State Channel Islands in Camarillo. "The last thing they want to do is hire people and then fire them again a few months later."

California has the second-highest unemployment rate in the nation, after Nevada, where 13.4% of the people in the labor force are out of work.

California  lost jobs in construction, financial activities and government. Sohn says that California's dependence on the real estate industry is going to continue to cause pain until home-building starts again. But with uncertainty throughout the economy, few businesses in any field seem willing to hire.

"Businesses are adopting a wait-and-see attitude," he said.

Jesse Medel just wants a job. The 37-year-old recently got out of prison, and says his chances of finding work are slim, since there are so many other people looking. It's much different than when he last looked for employment, five years ago.

"It's bad out there," he said. "I'm competing against kids with college degrees for entry-level jobs."

RELATED:

California unemployment rises in July to 12%

It's a bad time for job seekers with criminal records

No job growth in August as unemployment holds steady at 9.1%

-- Alana Semuels

Photo: A job fair for veterans in Culver City. Credit: Francine Orr/Los Angeles Times

The Role of Prices in Health Care Spending

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

The term “health care” evokes different images in people’s minds. To patients who find a miraculous cure, health care may be almost sacred. For physicians, nurses and other health care professionals it is a compassionate human activity. To hard-nosed economists, health care represents just another exchange of favors embedded in a wider market economy that consists of exchanging favors.

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The chart below illustrates this exchange. Some members of society surrender real resources — their time, amplified by their skill or the health care products they produce — to the process of patient care, which is meant to improve the patients’ quality of life. In return, society issues these providers of real health care resources generalized claims (money) on all the things included in gross domestic product.

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Thus, the health care sector of any country always has the dual goals of enhancing the quality of life of patients as well as enhancing the quality of life of the providers of health care, and, charity care aside, patients are at once objects of compassion and biological structures yielding cash.

We express the generalized claims given to the providers of real health care resources either in dollar terms per-capita or as a percentage of G.D.P. The chart below illustrates the fraction of G.D.P. ceded to the providers of health care in a number of different countries over the last three decades.

Although not all countries can be featured in such a chart, the fact is that no other country cedes quite the slice of its G.D.P. to the providers of health care as does the United States. Current projections are that health care will claim every fifth dollar (19.8 percent to be precise) of G.D.P. in the United States by 2020.

It follows from the first chart that the claim on G.D.P. that a nation cedes to its providers of real health care resources does not tell us what real resources patients receive in return, let alone what value these resources have to patients (see, for example, this report).

That is because the size of the claim on G.D.P. depends not only on the quantity of real resources surrendered to the process of health care, but also the price paid the providers per unit of real resource. In theory, it would be quite possible that in two otherwise identical countries exactly the same real resources are surrendered to health care and yet the slice of G.D.P. ceded to the providers of these resources in return could differ.

In this regard, a study by Miriam Laugesen and Sherry Glied, published last week in the health-policy journal Health Affairs warrants careful review. The authors assert:

Higher health care prices in the United States are a crucial reason that the nation’s health spending is so much higher than that of other countries. Our study compared physicians’ fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom and the United States. We also compared physicians’ incomes net of practice expenses, differences in financing the cost of medical education and the relative contribution of payments per physician and of physician supply in the countries’ national spending on physician services.

Public and private payers paid somewhat higher fees to United States primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians’ counterparts in other countries. U.S. primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services or tuition expenses, were the main drivers of higher U.S. spending, particularly in orthopedics.

Other studies point in the same direction. An early one, “U.S. Health Care Costs: The Untold Story,” by the health economist Mark Pauly, was also published in Health Affairs. Professor Pauly showed that a good many nations in Europe actually transferred more real human health-care resources to patients than did Americans – suggesting that the real-resource cost of European health care is higher than it is in the United States (or was, at the time of the study). But these other nations paid physicians and other health personnel less than do Americans.

Higher physician income, of course, cannot explain all or most of the total higher health spending in the United States, as payments for “physician- and clinical services” constitute only about 20 percent to total current health spending ($538 billion out of a total of $2.7 trillion in 2011) and close to half of those payments tend to go for practice expenses, including support staff, malpractice insurance and claims processing.

But prices of other, non-physician health-care services and products in the United States also seem to be higher than elsewhere, as is suggested by the annual surveys of health care prices conducted by the International Federation of Health Plans in their comparative price reports.

None of these cross-national studies are perfect, but together they do suggest that Americans pay more for individual health care services – not only physician services – than do residents of other countries, and that this must contribute to the higher level of health spending in the United States.

What one should make of this finding is another matter. Professor Laugesen and Ms. Glied refrain from going down that route. They merely present the facts as they see them.

Critics of this study will properly point out the enormous methodological hurdles one faces in making cross-national comparisons of this sort. But it is not a compelling argument to suggest that because a study of this sort cannot be done perfectly it should be ignored. My response to the critics: Try to do better!