Sunday, December 26, 1999

'99 Business: Consumers hang on as economy and technology take rocket ride

The Cincinnati Enquirer

        As financial times go, the last year of the last century of this millennium is winding down as a prosperous end to an era. Unemployment shriveled to 30-year lows. The stock market climbed to Alpine heights. And in Greater Cincinnati, residents vied for home ownership at a record pace.

        But 1999 had its flip side. Corporations, seeking ways to increase shareholder value, often merged with compatible rivals and then cut jobs. Suburban development, or sprawl, led to a glut of traffic. And the new owners of all those sport-utility vehicles — the four-wheeled badge of affluence — were filling up with some of the most expensive gasoline since 1991.

        “It has been a very strong year locally in terms of spending, people being comfortable, et cetera, et cetera,” said Dan Hurley, a local historian and founder of Applied History Associates in College Hill. “(But) our responsibility for the people left out of this good economy is something we can't forget.”

        The year that ends this week included some notable high points — headlines that would prove noteworthy not just in the context of 12 months but in history books. Some events will take with them the names that helped define Cincinnati for generations. Some events will forever change the way companies — and the people who run them and work there — operate.

        It's difficult to categorize the year in business when so much growth, consolidation and new technology helped redefine and redirect the way we operate today. But upon reflection, a few themes did emerge.

        • Economy: The Dow Jones Industrial Average stampeded past the 9,000, 10,000 and 11,000 marks in less than three months. Meanwhile, unemployment dropped to record lows, and consumer confidence held. By year's end, retailers were embracing one of the best Christmases of the 1990s.

        • Merger mania: It's not First Central Bank of the World, but Greater Cincinnati's financial institutions grabbed more headlines when it came to mergers. Some Cincinnati companies — Kroger, Procter & Gamble and AK Steel — also were buyers. On the selling side were Comair and Gibson Greetings.

        • Fallout: It's the opposite of the silver lining. With low unemployment, companies began taking creative or compromising measures to find workers. The Federal Reserve raised the federal funds rate three times to ease inflation fears. And some of the mergers and reorganizations will likely leave people without a job as business is pulled from Cincinnati.

        • Technology: While not grabbing as many single headlines, the influx of online services and technological breakthroughs touched our everyday lives. On the consumer front, Americans were expected to spend billions online from Thanksgiving to Christmas this year. In business, Duramed won its years-long battle for government approval to market an estrogen-replacement drug, while Procter & Gamble agreed to end animal testing on 80 percent of its products.

        As we approach 2000, a sense of uncertainty is starting to surface. Fears about Y2K spawn some of it. But a lot of the unsureness relates to the feeling that all good things must come to an end: The stock market must eventually end its run. Inflation might take hold. The job market will fail.

        Even an end to unprecedented prosperity doesn't guarantee hardships. As we look back on the years that helped define Cincinnati business today — good and bad — the results are comforting.

        The city has a history of escaping the economic valleys that plagued other markets dominated by a single industry. We are centrally and desirably located, attracting many relocating businesses. The Ohio River and an international airport are assets.

        And some of the largest competitors in the world — Procter & Gamble, Kroger, GE Aircraft Engines, Federated Department Stores — still call Greater Cincinnati home.

        So long, 1999. You were one for the books.

        Procter CEO steps down
       Jan. 1 ­ John Pepper retired as Procter & Gamble's CEO after three years at the helm and 36 years with the company. He was succeeded by former chief operating officer Durk Jager, who also replaced Mr. Pepper as chairman of the board on Sept. 1.

       Mr. Jager was charged with overseeing goals outlined in the company's Organization 2005 restructuring plan. Mr. Pepper will lead the fund-raising effort for the National Underground Railroad Freedom Center Museum.

       Mister, can you spare a hand?
       February: The unemployment rate dipped to 30-year lows, holding steady in February at 4.3 percent, before declining further.

       In Cincinnati, where business is expanding and the jobless rate is lower than the national average, employers used creative means to attract workers. By April, the number of people employed in the 13-county Greater Cincinnati region topped 1 million for the first time.

       Federated acquires Fingerhut
       Feb. 11 -- Federated Department Stores agreed to buy Fingerhut Cos. Inc., widely known purveyor of kitschy catalogs, for $1.7 billion, or $25 a share.

       The deal surprised the industry until retail wags realized the merger was not about shower radios, but about expanding Federated's direct-to-customer business. Federated got a ready-made distribution system and expansive database.

       Drug breathes life into Duramed
       March 25 -- Pleasant Ridge-based Duramed Pharmaceuticals share price almost doubled after the company announced it received FDA approval for its estrogen-replacement drug Cenestin.

       The approval marked a turnaround for the company, which had tried earlier to get FDA approval for a generic version of American Home Product's Premarin. Cenestin became available by prescription in July.

       The Dow climbs 10,000 points
       March 29 -- The Dow Jones Industrial Average closed beyond the 10,000 mark for the first time, 10,006.78, a couple weeks after the stock index edged past the milestone and retreated. The index of 30 of the country's largest corporations advanced 184.54 points, or 1.9 percent -- traders described the incremental ratcheting as Chinese water torture. But the Dow quickly picked up pace, whooshing by 11,000 in early May.

       Sanctions peel away obstacles
       April 6 -- The World Trade Organization slapped $191 million in U.S. economic sanctions on the European Union, clearing the way for the action pushed by Cincinnati-based Chiquita Brands International Inc.

       The sanctions were levied in retaliation for EU banana quotas Chiquita claimed had cost it $1.4 billion in lost earnings this decade.

       AK Steel and Armco Inc. reunited.
       May 21 -- In a historic move, AK Steel agreed to acquire its former parent Armco Inc. for $1.3 billion, reuniting the two steel companies founded in Middletown in 1900.

       In acquiring Armco, AK Steel expanded its presence in the more profitable stainless steel market. The merger also doubled Middletown-based AK Steel's revenues to $4.1 billion. The deal was finalized in September.

       Kroger makes one big buy
       May 27 -- Kroger Co. finalized its $13.5 billion acquisition of Portland, Ore.-based Fred Meyer announced in October 1998. The deal secured Kroger's position as the largest grocery store firm in the nation in terms of sales, with combined 1998 revenues of $43 billion.

       The company's stock fell to two-year lows. Industry experts and Kroger chalked it up to a slowdown in the entire sector. The December exodus of several Fred Meyer executives landed another blow to Kroger stock, which dropped more than 25 percent to the mid-teens in mid-December.

       Job and cost cuts mark Procter plan
       June 9 -- Durk Jager unveiled details of Organization 2005 to analysts in New York, estimating the restructuring would cost $1.9 billion after taxes and eliminate 15,000 jobs worldwide, including about 1,900 in Cincinnati.

       He promised to introduce 20 new products by the end of the next fiscal year.

       Dim view on government structure
       June 21 ­ Urban planner Michael Gallis, hired by the Metropolitan Growth Alliance to study the region's assets and challenges, concluded that fragmented governments hinder development. Mr. Gallis, of Charlotte, N.C., added that Tristate leaders needed to consider how the region competes globally.

       The Fed pushes rates
       June 31 -- The Federal Reserve raised a key interest rate for the first time since March 1997. Two more small hikes would follow.

       The Fed's policy-making arm advanced the federal funds rate by a quarter-point, to 5 percent from 4.75 percent. Increases of the same amount followed in August and November, when the rate settled for the year at 5.50.

       Major banks responded by twice raising their prime lending rates, to which many consumer loan rates are tied.

       Good hare day: Animal testing cut
       June 31 ­ After two years of protests and boycotts by People for the Ethical Treatment of Animals (PETA), Procter & Gamble said it will end animal testing on 80 percent of products. PETA, whose antics included tofu cream pies in the face of P&G CEO John Pepper, pulled Procter from the top of its most-wanted list.

       Cinergy braces for demand
       July -- A two-week heat wave contributed to 10 deaths and fears of power shortages across the Tristate as temperatures pierced the 100-degree mark after riding in the 90s.

       Cinergy Corp. warned it could impose rolling blackouts, but those were diverted when area companies sent thousands of workers home early to conserve electricity.

       Bell makes $3B acquisition
       July 22 -- In the most dramatic move in its 126-year history, Cincinnati Bell Inc. acquired fiber-optic network provider IXC Communications Inc. in Austin, Texas, for $3 billion.

       The deal more than doubled Bell's revenues to $2 billion, increasedemployment to 5,500 and gave it offices in 37 cities. Bell changed the name of its parent to BroadWing Inc., although it will continue to provide service in Cincinnati under the name Cincinnati Bell.

       P&G makes record purchase
       Aug. 11 -- Procter & Gamble acquired the family owned pet-food maker Iams Inc. of Dayton, Ohio for $2.3 billion -- the largest acquisition in P&G's history. The move was in line with Procter's new strategy, which calls for boosting profits by selling more premium-priced products with higher margins.

       Taking over Mercantile not easy
       Aug. 20 -- Dillard's Inc. discovered acquisition of Mercantile stores in November 1998 may have been a larger task than expected. It reported declining profits in the second quarter, in part to an unexpected glut of Mercantile private-label merchandise moving right to discount. It went on to report continued rising costs and slow sales in the third quarter.

       Chamber president to step down
       Sept. 28 ­ John Williams, president of the Greater Cincinnati Chamber of Commerce since 1984, announced he would retire in 18 months. He worked 15 years at the chamber, overseeing its growth into the fourth-largest chamber in the nation, with 6,800 members.

        Red light: Traffic clogs commerce
       Oct. 3 -- Traffic congestion caught up with businesses on the Greater Cincinnati 100 list, the largest privately held companies as compiled by Arthur Andersen. For the first time in 16 years, traffic congestion hit the list as a significant impediment. Executives complained that at worst, traffic brought higher payroll and equipment costs. At best, it made it challenging to get products to customers and workers to the job.

       Sorry Newport, Starkist to leave
       Oct. 4 -- Starkist Foods Inc., Newport's biggest employer and most prestigious corporate citizen, announced plans to move its headquarters and 425 jobs to Pittsburgh, taking with it more than a half-million dollars in local tax revenue. The move is part of a consolidation by H.J. Heinz Co., Starkist's parent.

       Delta finally buys Comair
       Oct. 18 -- Delta Air Lines Inc. announced plans to buy its outstanding stake of Erlanger-based Comair Inc. for $1.91 billion, or $23.50 a share, including debt. Delta pledges the move should mean little change for Comair's passengers and employees. Under the deal, Comair operates as a subsidiary of Delta. Chief Executive David Siebenburgen continues to run Comair and takes on overseeing Atlantic Southeast Airlines.

       Fifth Third becomes a Hoosier fan
       October -- The parent of Fifth Third became Indiana's third-largest bank. It completed acquisitions of Evansville-based CNB Bancshares Inc. Oct. 29 and Indianapolis-based Peoples Bank Corp. Nov. 19. The deals, which cost Fifth Third about $3.5 billion in stock, gave it assets of $9.5 billion, 181 branches and over 500,000 retail and business customers in the Hoosier State.

       Gibson Greetings cedes ownership
       Nov. 3 -- Gibson Greetings threw in the towel and agreed to be acquired by rival American Greetings for $163 million, or $10.25 a share. The Cleveland card maker said the fate of Gibson's near 400-employee headquarters in Amberley Village will be decided when the deal is approved by regulators. Gibson also employs roughly 500 people in distribution centers in Berea and Kenton County, Ky. CEO Frank O'Connell will resign.

       Crude joke: Gas prices rise
       Nov. 19 -- Crude oil prices were at a near nine-year high after reaching $26.80 a barrel on the New York Mercantile Exchange. The culprit was a decline in U.S. oil supplies -- major oil producing nations in the Organization of Petroleum Exporting Countries cut supply.

       Massive S&L consolidations
       November ­ Centennial Bank, Oak Hills Savings and Loan and Westwood Homestead Savings Bank, all west-side institutions -- agreed to be bought. The deals illustrated how Cincinnati's thrift industry has changed. Ten years ago, there were about 60 thrifts in Hamilton County. Today, there are about 25.

       Home sales continue to build out
       November -- Existing-home sales in the Tristate remained on track to break 1998's record-breaking level. The local board of Realtors -- led by the Cincinnati Area Board of Realtors -- said sales most months of 1999 hit banner levels.

       Is that a mouse in your pocket?
       December -- If 1998 was the year the Internet made its Christmas debut, then 1999 was the year Santa sent Rudolph out to pasture. Consumers were expected to spend $4 billion online from Thanksgiving to Christmas this year, totaling in roughly four weeks the amount spent online in all of 1998.

       F&W empire finds buyer
       Dec. 3 -- F&W, the Evanston how-to publishing empire, was sold to Citicorp Venture Capital Ltd., ending a 10-month search for a buyer by owner Richard Rosenthal. The sale marked a heady two decades of growth. F&W grew from 29 employees and sales of about $4 million in 1978 to $65 million in revenues and 300 employees in 1998.

       Toyota expands presence
       Dec. 19 -- Toyota Motor Corp. an-nounced plans to ramp up production at its plant in Princeton by about 150,000 vehicles -- a move that will create 2,000 new jobs. The expansion at the plant, about 5 miles south of Princeton, will be paid for with an $800 million investment from the company. Princeton beat out efforts by Ohio and Kentucky to win the plant. The $1.2 billion Princeton plant is the sole manufacturer of the new Tundra full-size pickup truck.

'99 Year in Review: Recalling the century's last gasp
'99 Sports: Color the year Red
'99 Local News: Prosperous year punctuated by hard times
- '99 Business: Consumers hang on as economy and technology take rocket ride
'99 Nation/World: A fitting finale to the century
'99 Films: Embarrassment of riches
'99 Pop music: Cincy back on the charts
'99 Television: A million reasons to watch
'99 Classical music: Life imitates opera
'99 Dance: Comings and goings
'99 Theater: A year to remember
'99 Visual art: All eyes on Vontz Center