Reading Chrysler and GM the Riot Act
Who's the most powerful figure in American business today? That's easy: It's President Barack Obama. On Mar. 28 his team, topping its own remarkable interventions in the financial industry, replaced General Motors (GM) CEO Richard Wagoner with Frederick "Fritz" Henderson and said it would shuffle most of the board. It gave Henderson 60 days to come up with a serious revival plan and leaked word that it may favor a "controlled bankruptcy" that carves out GM's clunker assets. It ordered Chrysler to forget about survival as an independent and told it to find a partner in a month. Two days later, with sales still crashing, GM and Ford (F) unveiled a new panoply of buyer incentives.
Streiff Out at Peugeot
Rick Wagoner wasn't the only auto CEO to be handed his driving gloves this week. On the same day Wagoner was forced out, PSA Peugeot Citroën (PEUGY) CEO Christian Streiff got fired after clashes over his aggressive downsizing plans. Although he's credited with slashing $3.2 billion in costs since taking over the French carmaker two years ago, Streiff's abrasive style alienated colleagues, and he angered French President Nicolas Sarkozy by pledging to continue trimming the payroll after a $4 billion government bailout. Streiff has been around this track before: He was ousted as CEO of Airbus in 2006 after his cost-cutting unleashed a political backlash.
See "Why Christian Streiff Got Booted from Peugeot"
A Home Loan Spark?
Fannie Mae (FNM) and Freddie Mac (FRE) may get a new chance to fan the embers of mortgage lending. Despite a surge of homeowners hot to refinance at low interest rates, the paucity of "warehouse" credit from bigger banks has stymied mortgage banks, generally small firms that borrow to make loans and quickly resell them. Fannie and Freddie's regulator, in control of the companies since September, has sought proposals from the industry, and the mortgage bankers' trade group could recommend that Fannie and Freddie guarantee warehouse loans, The Wall Street Journal reported on Mar. 30. The industry hopes new regulations will suffice, rather than a trip "through the legislative meat grinder," one official remarked.
More Climate Action
President Obama already delivered on his promises to take aim at global warming, and now it's Congress' turn. On Mar. 31, House Energy Committee Chairman Henry Waxman (D-Calif.) released a draft of an ambitious 648-page bill that tackles both climate and energy. It mandates more renewable electricity and more efficient buildings and cars, while capping emissions of greenhouse gases at 80% of 2005 levels by 2020 and 17% of 2005 levels by 2050.
See "House Energy Bill Seeks to Cap Greenhouse Gases"
Sound, Fury, G-20
The U.S. wanted more fiscal stimulus. Europe wanted more cross-border financial regulation. Thousands of protesters wanted revolution. At press time, it looked like nobody would get what they wanted. But as the leaders of the world's 20 largest economies gathered in London, agreements were in the works on smaller issues: beefing up the International Monetary Fund and pressuring tax havens to be more transparent. For President Obama, the chief takeaway may turn out to be diplomatic contacts with Iran and Russia.
China's New Bourse
What's a capitalist-communist economy without a stock exchange for young, fast-growing businesses? To fill that bill, China is gearing up to launch its own version of Nasdaq. The country's securities watchdog issued guidelines on Mar. 31 spelling out which sort of companies will be eligible to list on the new Growth Enterprise Market. Candidates must have been in business for more than three years and have turned a profit for two consecutive years. No word yet on when the bourse, which will be based in Shenzhen, will be operational. (China Daily)
Big Tobacco Loses One
Turns out the third time wasn't the charm for Philip Morris (PM). On two prior trips to the U.S. Supreme Court, the tobacco maker had challenged a 1999 jury award of $79.5 million in punitive damages to the widow of an Oregon smoker—and won rulings requiring the Oregon Supreme Court to reassess the result. Both times, the Oregon justices refused to take the high court's hint and upheld the award, prompting Philip Morris parent Altria Group to mount a third attack. Business had hoped the case might lead to greater curbs on punitive damages, but on Mar. 31, the Supreme Court simply declined to review the case again. The award, which with interest has ballooned to roughly $150 million, thus stands, but the nonruling has no broader legal significance.
Fraud at Fairfield?
It looks as if the "I didn't know" defense won't wash with every regulator investigating Bernard Madoff's Ponzi scheme. On Apr. 1, Massachusetts filed civil charges against Fairfield Greenwich Group, the largest of the so-called feeder funds that funneled billions of dollars to Madoff, alleging fraud for failing to do adequate due diligence. Fairfield took in about $7 billion in investor money and delivered it all to Madoff while raking in hundreds of millions in fees. Fairfield said the allegations are "false and misleading."
Even as Google (GOOG) pares some of its own operations, it's constantly coming up with new ones. On Mar. 31 the search king launched a venture capital fund for early-stage startups in everything from the consumer Internet to clean tech and health care. Unlike most corporate venture arms, Google Ventures will pick companies based on its assessment of potential returns, not on whether they mesh with existing businesses. The outfit expects to invest up to $100 million in its first year. Meanwhile, Google opened a music download site in China on Mar. 30 that will allow users to download licensed music for free from more than 140 labels, including the world's biggest. That should help it compete with Baidu (BIDU), the dominant search engine in China, whose users frequently download pirated tunes.
See "Google Forms Venture Group to Find 'Next Big Thing'"
Black, White, and Broke
The curse of the Cubbies seems to have landed on Chicago's newspapers, too. On Mar. 31, Sun-Times Media Group (SUTMK), which puts out some 59 papers and Web sites including the Chicago Sun-Times, filed for Chapter 11 bankruptcy—the second Windy City-based publisher to do so in a few months. Tribune Co. filed late last year. Sun-Times suffered operating losses of nearly a million dollars a day last year on revenues of $324 million. Its biggest liability: a tax bill of $510 million from the days when Conrad Black ran the company.