Keith Naughton

Stories by Keith Naughton

  • The Blame Game

    It wasn't long after the World Trade Center had been toppled by a terrorist attack Tuesday morning that Osama Siblani received his first threatening phone call. "You had better pray to God that Arabs didn't have anything to do with this," hissed the unidentified caller, "or your ass will be next, Siblani." Siblani, editor of the Arab-American News in Dearborn, Mich., cursed at the caller and slammed down the phone. He would receive at least a dozen more calls throughout the day, many urging the native of Lebanon to "go back home."Now Siblani worries that Dearborn's large Arab population will be targeted for much worse than just phone threats. In the aftermath of the Oklahoma City bombing-before it was found to be an act of domestic terrorism-Arab-American businesses were burning and homes in Dearborn's Arab enclaves were vandalized. The windows of Siblani's newspaper office have been smashed, and his tires have been slashed after past terrorism attacks around the world. "There are...
  • The Growing Risks Of Fringe Lending

    Flip on the TV at 3 a.m. and you'll see how much banking has changed in the last decade. Slick announcers shouting "Bad credit? No problem!" entice once ignored, debt-laden consumers with the offer of easy credit and quick cash. Since 1995 there has been an explosion in loans to low-income consumers who have spotty credit histories. Banks hail these so-called subprime loans as the "democratization of debt," but it comes at a high cost to borrowers. Subprime loans charge between 10 percent and 24 percent interest rates and carry high fees. Those high interest rates make for fat profits, which is why the $300 billion subprime business has nearly quadrupled since 1995 and attracted the nation's biggest banks, including Citibank, Wells Fargo and, until last week, Bank of America. But critics accuse subprime lenders of preying on financially unsophisticated consumers, who now are struggling with their new debts as the economy slows. "I definitely worry about money more than ever," says...
  • The Split Personality Economy

    Listen to Tim Helton and Jim Hackett talk about the economy, and you might think they live in different countries. Helton and his wife, Michelle, just sold their home in Schaumburg, Ill., in a single day, for $184,000 ($2,000 more than the asking price), and bought a larger house for $245,000. Helton's job as a manager at a database company feels solid, so he's not worried about being the lone breadwinner for his family of four, carrying a bigger mortgage as well as $5,000 in credit-card debt. The economy, Helton says, is still humming along. "There's a lot of people spending money,'' he says.Don't tell that to Hackett. The CEO of Steelcase, the country's largest office-furniture maker, watched his profits plunge by 51 percent in the first quarter, forcing the executive to lay off 10 percent of his work force--1,450 people. He worries that another round of layoffs of as many as 500 workers may be necessary in the fall. "Business has not picked up enough yet to take away that threat,...
  • 'Big Dude' Gets Profiled

    It was one of the coolest moments of his life. Abdullah Al-Arian was finally old enough to vote for president, and George W. Bush, on a campaign hop through Tampa, Fla., had singled him out in the crowd. Bush called the college student "Big Dude" and posed for pictures with his Arab-American family--an ethnic group politicians have long ignored. Al-Arian had registered Democratic, but he was so encouraged by Bush's outreach to the Arab community that he voted for him and took a job this summer as a congressional intern. But his optimism faded his first week in Washington, D.C. During a meeting with Muslim leaders on the president's faith-based initiative last month, Al-Arian was ejected from a White House annex by a security guard, on an erroneous tip that the student had terrorist connections. "I thought with this election we were finally gaining ground," says Al-Arian, 20, a poli-sci major at Duke. "The next thing I know, I'm being profiled by the Secret Service."Al-Arian is not...
  • Car Phones: Dialing &Amp; Driving Don't Mix

    Driving down Manhattan's Ninth Avenue last week, Ray Payano was hard at work. With a client talking to him on Payano's handheld mobile phone and his boss weighing in on the car's speakerphone, the 28-year-old computer consultant was in the middle of a three-way conference call when an e-mail popped up on his mobile-phone screen. He glanced at the message, and then almost hit a car in front and one to his side. He recovered, but then another driver, also on his phone, veered dangerously close to Payano's Pontiac Bonneville. "I got off the phone and said, 'This is ridiculous','' recalls Payano.New York lawmakers couldn't agree more. Last week the state Assembly passed the nation's first statewide law banning the use of handheld mobile phones while driving. The law is likely to provide some momentum to similar bills pending in 38 other states. Such bans may reduce some of the risk posed by multitasking drivers, but mobile phones are only part of a larger problem. With automakers adding...
  • Big Blowout

    When congressman Billy Tauzin opened hearings into unsafe Firestone tires on Ford Explorers last year, he boasted that he was a proud owner of an Explorer. These days the Louisiana Republican is driving a Chevy Suburban, and last week he shot a hole in Ford's latest recall of 13 million Firestone tires. He charged that Ford was replacing the suspect Firestones with tires that had an even worse safety record. Ford CEO Jacques Nasser promised to look into Tauzin's allegations but warned: "Let's not scare the American public."It's a little late for that. After last week's hearing, consumers should have whiplash from all the confusing charges and countercharges between Ford and Firestone. Federal safety investigators now say they will review Firestone's allegations against the Explorer's stability. Bridgestone/Firestone CEO John Lampe testified that the SUV should "pull over, not roll over," after its tires shred on the highway. Congressional sources say Ford might yank some of the...
  • The Confused Economy: Is The Business Cycle Dying

    Something strange happened as recession threatened the American heartland. From their perch high in the gleaming glass towers of the Renaissance Center overlooking the decay of downtown Detroit, Michigan, the top executives of General Motors saw trouble approaching. Having invested billions in new computers and information technology during the boom of the late '90s, GM spotted the coming downturn in weak sales reports from the field. "Undoubtedly, it helped," says GM chief economist Mustafa Mohatarem. "We get much better information more quickly and we can react much more quickly... We could see the slowdown coming."And act. General Motors and the other big car companies slashed production by more than 20 percent, laid off tens of thousands and introduced the biggest discounts and givebacks in history. True, all the discounts cut sharply into profits, but if sales continue at the current pace they will reach 17 million vehicles--second only to the U.S. record set just last year....
  • Fixing Cadillac

    A few years ago, Ron Zarrella, a rising star at Bausch & Lomb, decided to reward himself with an expensive new car. He took several models out for a test drive, including a Cadillac Seville. But it lacked a certain panache and Zarrella instead went with a BMW 850. "I like performance cars and the BMW was just a bit better," he says. Today, Zarrella drives Cadillacs. He doesn't have a choice. He is now president of General Motors North America, maker of Cadillac. His assignment? Persuading fellow baby boomers to ditch their Beemers and Benzes and go home with a Caddy instead. "It's a huge job," he admits, "but we need to make Cadillac cool again." ...
  • Daimler Thinks Small

    While she was vacationing in Italy last year, Judy Law stumbled on a curious thing: a tiny, Popsicle-blue, bubble-topped vehicle, wedged between two large cars in a medieval back alley. "Oh, it's adorable," thought Law, an Atherton, Calif., real- estate agent. Actually, it's Smart--DaimlerChrysler's Smart, the world's smallest car and Europe's latest rage. Soon Law noticed Smarts navigating the narrowest passageways and squeezing nose-first into impossibly small parking spaces. "I don't know if I'd want to drive it back home next to all those SUVs," she says. "But it'd come in handy for shopping in San Francisco." ...
  • Try Lounging In Leather

    It's the end of a busy workday, and the 4:45 p.m. flight from Rochester, N.Y., to New York City is crammed with weary business travelers. But this is no cattle car in the sky. Passengers relax in wide leather seats and channel-surf on live satellite TVs. The silver-haired flight attendant handing out bags of blue potato chips actually turns out to be the airline's CEO. "Don't look at how the market ended," he warns one businessman. "Just tune in to the 'I Love Lucy' reruns." Best of all, a round-trip ticket on this luxurious new jet cost only $98. Is this some kind of blue-sky fantasy? No. This is JetBlue, a new discount airline flying out of New York's Kennedy Airport. ...
  • Fallout For The Bottom Line

    It didn't take long for American business to suffer some collateral damage from the spy-plane standoff. It came last Tuesday when Prescott Bush, uncle of the president, arrived at the elegant Fangshan restaurant in Beijing for a banquet hosted by China's vice minister of civil affairs. Bush, chairman of the U.S.-China Chamber of Commerce, had just arrived in the country as part of an American business delegation accompanying United Airlines' inaugural flight from Chicago to Beijing. But instead of a lavish celebration, Bush and his dignitaries were snubbed: the Chinese vice minister didn't show up to host the dinner because tensions were escalating over the spy-plane incident. "What horrible timing," said Mai Hoang, executive director of the U.S.-China Chamber. ...
  • Who Let The Well-Dressed Dogs In?

    Once the hot house for low-priced fashions, Old Navy is now trying to get out of the retailing doghouse by introducing a line of "canine couture." America's 62 million dogs now have a place to run to for collar-and-leash sets ($6.50) that match their owners' Capri pants. Or Fido can slip into an Old Navy sleeveless T shirt ($6.50) and wrap up in a blue floral bandanna ($3.50). The retailer promises its new line will have man's best friend looking like "a million barks." ...
  • A New King Of The Road

    Good news for the bigger-is-better crowd: here comes the Unimog mega-SUV from DaimlerChrysler. Three feet taller than a Chevy Suburban and a foot longer than a Ford Excursion, the Unimog weighs in at more than six tons. Live large with optional leather seats, walnut trim and seven-speaker stereo. Forget "road hog,'' the Unimog is a motorized mastodon with a price tag--up to $150,000--to match. "This thing makes the Hummer look anemic," says a DaimlerChrysler spokesman. ...
  • Billionaire Backlash

    The rich may be different, but they certainly aren't indifferent. Banking heiress and art patron Agnes Gund irritated some of her wealthy friends last week by going public with her opposition to President Bush's plan to repeal the estate tax. Many well-heeled Americans are eager to do away with the tax that allows the government to claim more than half of their wealth when they die. But Gund is part of a group of nearly 100 millionaires and billionaires who believe abolishing the tax would have a devastating effect on America by shifting the tax burden from the nation's richest 2 percent onto the poor and the middle class. "I've had a storm of people come at me saying, 'How could you be for this?' " says Gund. "They say, 'You're so weird'."Gund and her allies, including investor George Soros and actor Paul Newman, are part of a gold-plated petition drive by rich Americans who advocate that the government continue taxing their estates by up to 55 percent. The campaign is being...
  • Life In The Breakdown Lane

    The job isn't getting any easier for Dieter Zetsche. Ever since November, when Stuttgart-based DaimlerChrysler sent him to Detroit as the Chrysler Group's new CEO, the former Mercedes executive has had his hands full. The U.S. unit lost $1.7 billion in the last half of 2000 alone, and industry analysts say the worst isn't over yet. Wall Street expects losses to exceed $2 billion this year. In an interview last week, Zetsche acknowledged that the company is facing a major overhaul. "This cannot be fixed in one month," he said, with massive understatement.In fact, Chrysler is about to open another barrel of red ink: company sources have told NEWSWEEK the automaker is planning to declare a writeoff of between $2 billion and $3 billion in restructuring costs for plant closings, early retirements and severance packages for laid-off workers. Zetsche declined to confirm the figure, but he admits Chrysler's problems are even worse than he had guessed at first. He told NEWSWEEK: "There were...
  • BUSH'S MONEY POSSE

    The news took George W. Bush completely by surprise. Hunkered down in an Austin, Texas, hotel ballroom with a group of top CEOs last Wednesday, the president-elect received word that Federal Reserve chairman Alan Greenspan had just cut interest rates by half a point. Bush smiled broadly at his top economic adviser, Larry Lindsey, who was sitting nearby. The mood in the room lifted. At the meeting, Bush had listened to the business leaders' concerns about the nation's softening economy. Now, it seemed, Greenspan had delivered just the kind of aggressive quick boost they'd been hoping for. The stock market celebrated; Nasdaq posted its largest one-day gain ever. General Electric chairman Jack Welch and the other CEOs at the table raised their water glasses in an impromptu toast to the Fed chief.The exuberance, as Greenspan might put it, didn't last long. By Friday, stocks were once again diving, and economists continued their gloomy predictions of a coming economic downturn. The...
  • Secret Weapon

    As Nissan's new chief designer, Shiro Nakamura, walked among vintage Japanese sports cars jammed bumper to bumper into the Las Vegas convention hall, it was obvious how he earned the nickname "Fingers": he inspected each one of the sleek machines with respect, intensity and more close physical contact than you'd ever expect to see from a Japanese auto executive. Later that evening he demonstrated another unlikely skill: showmanship. At a dinner hosted by fiercely loyal fans of Nissan's Z-car, who have never stopped hoping that Nissan will resurrect the car it deep-sixed in 1996, Nakamura handed out illustrations depicting a sliver of rear tire, a bit of fender and a gas cap. "It was a tease, says "Mad" Mike Taylor, a Z-club head who organized the gathering. "But it was enough to whet our appetites. Everyone at the convention went crazy." Nakamura stayed late signing autographs.That was six months ago. Next week, at the Detroit Auto Show, Nissan plans to raise the curtain on its much...
  • A Mess Of A Merger

    It was supposed to be a quiet Sunday dinner between the top executive of Chrysler, Jim Holden, and his German boss, DaimlerChrysler chief Jurgen Schrempp. Sure, Chrysler was hitting some hard times, but Holden had just presented a turnaround plan to his top dealers in Detroit, and he was eager to share it with the top executives at DaimlerChrysler's headquarters in Stuttgart, Germany. But he never got the chance. On Nov. 12, Schrempp arrived at the executive dining room with written notes on how Holden had failed in his year as Chrysler's CEO, according to company insiders. "I'm on the hot seat," Schrempp said. "I have to do something decisive." Holden braced himself for the coming blow. "So I'm being fired," he said.With that, American control of Chrysler came to a startlingly abrupt end. When Daimler-Benz and Chrysler Corp. announced their $36 billion "merger of equals" in 1998, it was hailed as a marriage made in heaven. At the time, Chrysler was the world's most profitable and...
  • Motown Slowdown

    Each January in Detroit auto executives in black ties and sequined gowns turn out for a gala to celebrate the opening of the Detroit auto show. Affectionately dubbed the "auto prom," the glittering event is a must-attend affair for the industry's big wheels and rising stars. But as executives now make plans for the big social event, many are discovering they are losing a nice perquisite--their companies are no longer willing to pick up the $350-per-ticket cost. "We said, 'Hey executives, we pay you good money, we think you can afford to pay your own way'," explains General Motors vice president Bill Lovejoy, who will fork out more than $1,000 to take his wife and a few friends to the event. "We want to show our work force that we're tightening our belts. It's that monkey-see, monkey-do effect."After eight years of booming sales, Detroit is reluctantly preparing for the party to end. Thanks to a fast start in the first half of this year, the auto industry is expected to sell a record...
  • Growing A Green Plant

    In its day, Henry Ford's River Rouge manufacturing complex was a showcase of the Industrial Revolution. Huge freighters bearing freshly mined iron ore docked at one end of the mile-long warren of foundries and factories, while on the other end, as if by some industrial magic, shiny black Model A automobiles rolled off the assembly line every 49 seconds. At its peak in the 1930s, more than 100,000 workers labored at "the Rouge," and everyone from American presidents to school kids flocked to Dearborn, Mich., to marvel at Ford's vast creation. Today, however, the 83-year-old Rouge is a rusting relic of a bygone age and an environmental wasteland, its grounds covered with contaminated soil. And while workers still toil there to build Ford Mustangs, their surroundings are bleak and, at times, even dangerous. Last year an aging electrical powerhouse at the complex exploded, killing six workers.Now Henry Ford's great-grandson is initiating his own industrial revolution. But the one waged...
  • Safety First

    Nicole Heisman's car saved her life. Last June, on her way to a job interview in San Jose, Calif., Heisman, 20, swerved to avoid road debris, and her car flipped three times. As the VW Beetle began rolling, airbags in the seat back and steering wheel blew to cushion her, while the seat belt automatically tightened around her. "It was like being on a ride at Disneyland," she recalls. When the crumpled blue bug finally came to rest, passing motorists pulled Heisman out through the sunroof; she was shaken but unscratched. When Nicole's mother, Marleen Brodsky, arrived on the scene, "I thought, 'Oh, my God, how could anyone have survived this?' " Brodsky says. "Nicole's car held her like a cradle."Sound miraculous? You ain't seen nothin' yet. A new high-tech age of auto safety is dawning in which cars will protect us like armor in even the most violent crashes. Long before the Ford-Firestone tire recall mushroomed into one of the worst highway crises ever, safety had become the new...
  • Spinning Out Of Control

    When Lori Lazarus heard about the big Firestone tire recall last month, she was steamed, but not surprised. On Labor Day 1996, while driving home from Disney World, a Firestone tire on her Ford Explorer shredded. Her sport utility vehicle flipped into a drainage ditch along the Florida Turnpike, leaving her trapped underwater. She was saved by passing motorists who pulled her from the submerged SUV, but she still suffers from headaches and balance problems. The 31-year-old teacher is bitter that Ford and Firestone are only now owning up to the problem. "They've known something was wrong for years," says Lazarus, who filed suit against both companies in 1997.As the tire recall spins out of control, Ford and Bridgestone/Firestone have swung into full damage-control mode. Just a month into one of the biggest tire recalls ever, the companies are under mounting pressure to widen the recall of 6.5 million ATX and Wilderness tires. Critics want to know if the companies are guilty of a...
  • Contrarian At The Gate

    A few years ago, long after corporate raider Carl Icahn had amassed a fortune that reached into the billions, he was asked by a television reporter: "Why do you keep doing this?" His tart reply: "It's a way of keeping score."Now at 64, Icahn, the whip-smart kid from Queens, N.Y., who grew up to be one of the most feared predators of the go-go '80s, is shooting for his biggest score yet: General Motors. The company that Alfred Sloan built into the 20th-century model of American industrial power has become just another Old Economy laggard in the 21st century. Its stock price has sunk so low that the world's No. 1 automaker could be bought for around $37 billion, or about one fifth of what AOL paid for Time-Warner. So Icahn, who always had an eye for a bargain, fired off a terse letter to GM on Aug. 16 revealing his intention to buy up to 15 percent of the company.As if in a flashback to the greed-is-good decade, GM's board convened a special meeting to deal with Icahn. But they needn...
  • Throwing The Brakes On Tires That Peel Out

    In the early-morning hours of June 15, Nancy Dudley headed north out of Florida with her son Eric sleeping soundly in the back seat of her Ford Explorer. They were traveling to North Carolina, where 8-year-old Eric was to be ring bearer in a wedding. Suddenly, there was a loud bang from a blown rear tire. The Explorer lurched into the median of I-95 and began rolling over "for what seemed like forever," says Dudley. When it finally came to rest on its side, Eric was no longer inside. His mother found him by the side of the road in a pool of blood, his limbs broken and twisted. Hysterical, Dudley screamed at her unconscious child: "Baby, please hold on." Recalling that horrible sight, Dudley whispers: "He was just so maimed and distorted."Last Tuesday, as Dudley wheeled her brain-damaged son out of a Florida hospital for the first time since the accident, executives from Bridgestone/Firestone, Inc., and Ford Motor Co. announced a recall of 6.5 million tires like the one that blew on...
  • Ford Goes For The Green

    First Ford Motor Co. admits sport utility vehicles foul the planet and are a menace to society. Now it is promising to improve gas mileage by 25 percent on all its SUVs by 2005. Has Ralph Nader suddenly taken control of America's No. 2 automaker? Hardly. "The only thing I have in common with Ralph Nader," deadpans Ford's Lebanese-born chief executive, Jacques Nasser, "is that he has some Lebanese heritage."Ford's pledge last week wasn't driven by altruism alone. With gas prices hitting record highs and SUVs under attack, Nasser sees gain in transforming the image of Ford's models from guzzlers into sippers. He says customers will flock to Ford's promise to save $2,400 in fill-ups and 80 trips to the pump over the life of its SUVs. Not that Ford has any problem moving them. Its SUV sales rose 15 percent this year, and it expectsto peddle more than 1 million next year.But while Ford's success in SUVs is fueling record profits, it has also scuffed the company's reputation. The Sierra...
  • Bring On The Junk Food

    When Philip Morris agreed to pay nearly $15 billion for Nabisco Holdings last week, Wall Street pros were staggered by the price tag. But snack-food king Nabisco can thank diners like Andy Baze for the hefty tab. "Snack foods rock," says Baze, 29, "because they require absolutely no effort." The busy software engineer's idea of a square meal: a Premium Saltine cracker (made by Nabisco) smeared with peanut butter, followed by Chips Ahoy chocolate-chip cookies (also Nabisco), all washed down with a glass of orange juice. "Eating is an inconvenience," gripes Baze. "When I'm strapped for time, I just want to open something, stuff my face and go back to what I'm doing."While Philip Morris talked about "an important scale-enhancing opportunity," this deal is really all about snacking. America has become a Snack Food Nation. More than ever, "meals" are being consumed behind the wheel of a car in what food-industry experts call "dashboard dining." Americans wolfed down $50 billion in snacks...
  • Why Bill Has Become Microsoft's Mr. Rogers

    Bill Gates has a new sideline: company pitchman. During breaks from Shaq's domination of the NBA finals last week, the smiling, sweater-clad Microsoft chairman popped up frequently in television commercials for the software giant. He reassured computer users that "the best is yet to come" and pledged that Microsoft will continue to make "great software" that "will help your children learn." With its jangly folk-guitar soundtrack, high-tech-office backdrop and Gates's enthusiastic delivery, the commercial made it appear that times have never been better in Redmond.But looks can be deceiving. Gates's "Vision" commercial, full of optimism for the future, is part of a public-relations blitz aimed at countering the hard reality the company faces after its long antitrust trial. Two weeks ago Judge Thomas Penfield Jackson branded Microsoft an "untrustworthy" monopoly and ordered the company to be broken in two. Gates's warm and fuzzy new ad aims to convince consumers that Microsoft is not...
  • Living With Less Power

    Jimmy Lee was at the top of his game. Running the booming investment-banking business at Chase Manhattan, Lee worked 17-hour days, keeping six cell phones humming, while pulling together billion-dollar deals for clients like AT&T and General Motors. Nicknamed Jimmy Fee, he pocketed $20 million last year. Forbes magazine put him on the cover, crowning him "The New Power on Wall Street."But two weeks ago Chase chairman William Harrison shocked Wall Street by announcing that Chase was acquiring the small New York investment firm Beacon Group, and installing its founder, Geoff Boisi, as the new head of investment banking, Jimmy Lee's old job. But when Harrison added that Lee would remain Chase's dealmaking king, the shock turned to skepticism. Ceding power on Wall Street has never been viewed as a good thing. In that world of big money and even bigger egos, accumulating power is even more important than amassing wealth. When someone talks, as Lee did, of "spending more time with my...
  • Sofas For The Masses

    For Leslie Wilder, fashion is not just something you wear. It's where you live. In the past three years, she has spent $12,000 decorating her Seattle home with funky furnishings like a red art deco couch, a purple chaise longue and black cube end tables. But with home fashions changing faster than hemlines, the 33-year-old marketing exec hates spending a lot for furniture. So she was thrilled to stumble across a Web site for CB2, the new cheaper sibling of Crate & Barrel. "I like knowing that I won't have to go broke to fix a decorating faux pas."First there was shabby chic; now comes cheapie chic. Inspired by the success of the Gap's high-style, low-price Old Navy chain, Crate & Barrel and Williams-Sonoma, the houseware and furniture merchants that brought class to the masses, are now heading downscale. Crate & Barrel opened its first CB2 in Chicago in January and is planning to expand its flagship store by 60 percent. Next year Williams-Sonoma will roll out Elm Street,...
  • Vw Rides A Hot Streak

    When Carlyn Challgren moved to Los Angeles, she quickly fell into the California lifestyle--rock climbing, mountain biking, Rollerblading. But the one thing she lacked was a cool car. "I used to park as far away as possible so people wouldn't see what I drove," says the 35-year-old paralegal, who cruised L.A. in a rusty 1976 Oldsmobile. But after buying a cherry-red Volkswagen Jetta last fall, she is no longer ashamed to use the valet. An added benefit: "Now cute guys check me out.''Volkswagen is turning a lot of heads these days. Among America's Gen-Xers, VW's cars have become the wheels of choice. And they're not just embracing the cute-as-a-bug New Beetle. The young and fashionable are buying Jettas, Golfs, Passats and Cabrio convertibles, driving VW's sales up 35 percent this model year. That makes it one of the fastest-growing carmakers in the country, while many of its rivals struggle to move economically priced cars. VW connected with the elusive youth market by overhauling...