"...the whole idea that we are independent from [the] banking [division] is a big lie" -- Merrill Lynch research analyst Kirsten Campbell, in an e-mail to a fellow analyst "Brand management" is breathing its last at General Motors (GM). In the '90s, now-departed GM North America boss Ron Zarrella hired a bunch of marketers from packaged-goods industries to boost GM's falling market share. Their task: Find a target group and tailor advertising and, occasionally, the cars to meet the group's desires. Often it resulted in such tricks as making a Pontiac Grand Prix and a Buick Regal--essentially the same car--with different styling.
Those days are over. Zarrella quit last fall, and Robert Lutz, who joined GM as vice-chairman for product development in September, is taking an ax to GM's so-called brand-management system. Over the past few months, GM has quietly sent a number of brand managers to new assignments or early retirement, thinning the ranks from 39 in 1996 to 26 now. More reductions may be coming, GM sources say.
And soon, those remaining will get a new title, possibly marketing director, the sources say. They'll no longer be part of Lutz's development team of engineers, designers, and division managers. Says one GM exec: "They never had much influence, and they'll have even less now." So much for the experiments of the '90s. As China prepares for the demands of the World Trade Organization, MBA and executive MBA programs are being launched across the country. There are 21 degree programs run jointly by Chinese and foreign universities, plus about 40 more by Chinese universities alone.
Execs at China's state-run and private companies, Chinese managers in foreign companies, and midlevel government officials--more than 4,000 people in all--have signed up in recent years. Up to 1,600 more are expected to enroll this year, paying tuitions from several thousand dollars to $40,000--often reimbursed by an employer--to study for nine months to two years. For the joint ventures, foreign institutions--including Harvard and Fordham universities and the European Union--provide much of the curriculum and faculty. Chinese universities supply the rest--and the operating license.
Now, more are opening: Washington University in St. Louis' Olin School of Business is launching one this month at Shanghai's prestigious Fudan University. The maximum 74 students are enrolled; more are on the wait list. "With the level of enthusiasm toward China and the investment being placed here by corporations from around the world, the timing is good," says Mark Wrighton, Wash U.'s chancellor. "Shanghai is a great place to be." Expect more foreign B-schools to share that sentiment soon. New York City mayor and billionaire mogul Michael Bloomberg has been in office for 100 days. But he's still presiding over a conflict of interest: his 80% stake in his financial-data and media company Bloomberg LP. (The mayor gave up CEO-ship when he took office.)
The conflict stems from the fact that his company's biggest clients are the same Wall Street firms that are currently vying to underwrite bond issues for New York City. Proposals were handed in on Apr. 8.
Usually, it's the mayor who picks the investment bank, along with the city comptroller. But now Bloomberg has quietly recused himself from the job. He'll let Budget Director Mark Page, along with the comptroller, do it instead, according to a mayoral spokesman.
If Merrill Lynch (MER) is chosen as a city bond underwriter, there could be an even greater conflict of interest: Merrill is a 20% stakeholder in Bloomberg LP.
Meantime, the City Conflicts of Interest Board has yet to recommend how New York's businessman mayor should deal with his situation. Northrop Grumman (NOC), the Los Angeles defense contractor, is involved in a nasty battle to take over aerospace and auto-parts maker TRW (TRW). And among Northrop's tactics is an assault on several unusual laws in Ohio--where TRW is based--designed to prevent hostile takeovers. In March, Northrop filed suit in federal court in Cleveland, calling the laws unconstitutional.
That's pretty ironic, says John Chevedden, a consultant and shareholder activist who has been trying for the past four years to get Northrop, maker of the B-2 stealth bomber, to drop its own antitakeover defenses. Antitakeover provisions, such as multiyear terms for board members and "poison pills" that allow existing shareholders to buy stock cheaply in the event of a hostile offer, were created in the 1980s as a way to thwart corporate raiders. In recent years, such protections have come under attack from shareholder activists, who say they are a detriment to stockholders. Studies have shown that companies without such protections have better stock market performance.
Chevedden has twice won a majority on proposals to eliminate Northrop's poison pill. But since the votes were nonbinding, Northrop hasn't complied. This year, it convinced the Securities & Exchange Commission that it didn't have to put Chevedden's poison bill proposal up for a vote again, in part because it exceeded a 500-word limit on resolutions. But Northrop shareholders will get to vote May 15 on another Chevedden proposal to wipe out a Northrop requirement that some shareholder initiatives receive 80% of the vote to pass.
Northrop spokesman Randy Belote claims the company's antitakeover provisions are common and very different from the more restrictive laws that Northrop is challenging in Ohio. Still, it seems Northrop wants to have its cake and eat it, too. Companies in need of short-term credit had better be prepared to offer their banks something in return--something beyond interest payments.
Half of corporate finance officers, from companies both large and small, say they are "required" or "strongly encouraged" to use their banks' other services--checking, savings, and investment accounts--if they want a loan for less than a year, according to a recent survey by the Association of Financial Professionals (AFP). That may not be new. But now, 25% say there's also pressure to use their bank for debt underwriting; 16% say the same of equity underwriting and merger advice. Without short-term financing, companies spend more cautiously and make fewer investments.
"I doubt there is a company that isn't facing this," says James Haddad, a board member at the AFP and also vice-president of corporate finance at Cadence Design Systems. Haddad's company actually cut ties with one bank had that demanded too much other business.
A 1999 act of Congress (Graham-Leach-Bliley) is partly to blame, says Jim Kaitz, the chief executive of the AFP, since it lets commercial banks offer services that were once sold only by investment banks.