In the Region AAI parent sells rest of its...

BUSINESS DIGEST

July 27, 2002

In the Region

AAI parent sells rest of its transportation equipment business

United Industrial Corp., the parent of Hunt Valley defense contractor AAI Corp., has sold the last remnants of its transportation-overhaul business to Alstom Transportation Inc. for about $19.2 million.

United Industrial, rumored to be for sale, has long tried to shed its underperforming transportation equipment business, possibly to make it a more attractive takeover candidate. The contracts were with New Jersey Transit Corp. and the Maryland Transit administration.

The company said it plans to focus on its defense and aerospace business, primarily AAI, which accounts for more than 85 percent of the New York-based corporation's revenue. AAI, which makes unmanned surveillance planes and simulation training systems for the U.S. military, has about 900 employees, mostly in Maryland.

Elsewhere

GE chief takes reins of GE Capital Corp., ousting Nayden

General Electric Capital Corp. Chairman Denis Nayden was ousted yesterday as Jeffrey Immelt, chief executive of parent General Electric Co., took direct control of the finance arm and divided it into four units.

GE Capital, whose $461 billion of assets makes it bigger than Merrill Lynch & Co., is to be split into commercial, insurance, consumer and equipment finance divisions. Immelt, who succeeded Jack Welch in September, is eliminating a layer of management and responding to investors' call for more open accounting of the unit's results, General Electric said.

GE Capital's short-term debt ballooned to $117 billion at the end of last year, prompting Moody's Investors Service to say the company didn't have enough backup financing.

Avaya to cut 2,500 jobs, take $150 million charge

Avaya Inc., the biggest U.S. maker of office telephone equipment, said yesterday that it will eliminate 2,500 jobs, or about 12 percent of its work force, amid a slump in demand.

The company said it will take $150 million in fiscal fourth-quarter costs for cutting jobs, closing offices, terminating leases and the declining value of assets.

Avaya had cut 7,200 jobs since June last year because customers reduced spending on phone equipment. On Monday, the company reported a third-quarter net loss of $37 million as sales declined 29 percent. It also said it would pare more jobs and expects a decline in fourth-quarter sales.

Lloyd's investors lose in legal battle over liability

Lloyd's of London, the British insurance market that lost more than 8 billion pounds ($12.6 billion) from 1988 to 1992, won a Court of Appeal ruling that it didn't defraud its members.

The judgment paves the way for Lloyd's to collect debts of more than 50 million pounds from members, said Lloyd's spokesman David Peel. The case began in 1996 when Lloyd's tried to collect money it said was owed by so-called names - wealthy people who invested in the market - after it posted losses because of catastrophe and asbestos-related claims. The names alleged that Lloyd's recruited them without informing them of the risk.

The 215 members who brought the appeal "now have no legal excuse not to pay and it's about time they did," Peel said in an interview yesterday.

KPMG on Calif. probation over Orange County loss

The California Board of Accountancy placed Accounting firm KPMG on a year's probation yesterday for alleged gross negligence and unprofessional conduct that contributed to Orange County's loss of $1.7 billion and its 1994 bankruptcy.

The board also ordered KPMG to pay $1.8 million in fines and costs.

KPMG's lead audit partner, Margaret Jean McBride received three years' probation and 100 hours of community service.

This column was compiled from reports by Sun staff writers, the Associated Press and Bloomberg News.

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