In Business This Week
Edited by Monica Roman
HEADLINER
Alan Feldman: McDonald's Just Supersized His Order
Alan Feldman may have thought his plate was full before at McDonald's. Now, his boss has just dished him up another task. Head of McDonald's U.S.A. since 1998, Feldman, 49, will become president on June 1 of the hamburger chain's Americas operations.
Feldman's promotion, announced on May 1, was part of a reshuffling by Chairman and CEO Jack Greenberg that saw the retirement of Big Mac's No. 2 man, Vice-Chairman and President James Cantalupo.
McDonald's has been battling slow growth during Feldman's tenure. U.S. sales edged up 5% in the first quarter, after rising 3% in 2000. But operating margins have continued to slip. Analysts blame a new kitchen system for slowing service times. They also say that marketing tie-ins are no longer lifting sales.
Still, those domestic problems are nothing compared with Latin America, where currency devaluations and recessions routinely jinx results. Feldman might want an antacid with his new order.
By Michael Arndt
Going, Going, Gone--to Trial?
The former chairmen of Sotheby's and Christie's International, two of the world's most renowned auction houses, were indicted on May 2 on a price-fixing charge. U.S. prosecutors in New York allege that shopping center magnate Alfred Taubman, who was head of Sotheby's from 1983 until early 2000, and Sir Anthony Tennant, Christie's boss from 1993 to 1996, conspired to rig commissions charged to sellers of art and other valuables. Taubman said he is "absolutely innocent" and says former Sotheby's CEO Diana Brooks acted alone. Brooks and Sotheby's have pleaded guilty. Tennant says he is "completely innocent of any involvement in price-fixing." Christie's is cooperating with authorities. Both companies have agreed to pay $512 million to settle civil lawsuits.
Intermission Time at BMG
The collapse of merger plans with EMI Group because of antitrust hurdles leaves Bertelsmann CEO Thomas Middelhoff in a tough spot. Bertelsmann Music Group (BMG)--like EMI, one of five leading music companies--has lost market share. A merger between any of the five now seems impossible, so there's no obvious way for the German company to get bigger fast. There's speculation BMG will acquire an independent label. Another possibility: manufacturing and distribution alliances with rivals to cut costs without antitrust woes. Meanwhile, expect BMG to keep trying to solve the technical and legal problems holding up Net music sales.
A Bumpy Ride at Evenflo
The Consumer Product Safety Commission and the National Highway Traffic Safety Administration announced on May 1 that Evenflo would recall 3.4 million Joyride infant car seats and carriers. There have been 240 reports of the combination product's handle unexpectedly releasing, causing the seat to flip forward. The Vandalia (Ohio) company will provide a free repair kit to help secure the handle of Joyride, which has caused 97 injuries. This is the latest recall involving failing handles on car seat and carrier products. Since 1998, four manufacturers have recalled nearly 10 million combination baby transportation products. More stringent industry standards that went into effect in February are designed to make the products safer.
Better Chemistry Yields Pink Slips
Increased synergy means a beaker full of layoff notices for employees at Dow Chemical and Union Carbide as they merge into a $30 billion chemical giant. The No. 2 chemical maker is more than doubling its original estimate of $500 million in savings from the merger with Union Carbide to $1.1 billion by the end of the first quarter of 2003. To get those heftier savings, the Midland (Mich.) chemical company says it will trim 4,500 jobs at both Dow and Union Carbide--about 8% of its combined workforce and more than double original estimates.
You Gotta Have a Catalog
The online tortoises are beating the pants off the e-hares. According to an annual study of 550 Net retailers by Boston Consulting Group, catalog companies emerged as the only consistently profitable online retailers last year, thanks to cost advantages from private-label products and existing shipping capabilities. Of those selling online, 72% of mail-order outfits, 43% of store-based retailers, and 27% of Web-only e-tailers made money on an operating basis last year. Catalogers reaped the real benefits last year of the 66% rise in North American online sales to $44.5 billion.
Et Cetera...
-- PepsiCo handed the CEO and chairman's job to Steven Reinemund, as scheduled.
-- MGM wants to raise its stake in four cable channels operated by Cablevision.
-- Citigroup will offer c2it, its online money-transfer service, on Microsoft's MSN.
CLOSING BELL
What a Price
Priceline.com, left for dead by many dot-com investors, has roared back to life. Shares in the name-your-own-price company rose 44% on May 1 and 2, to $6.96, after it reported a lower-than-expected loss of 3 cents a share for the first quarter. Slimmed down by layoffs, Priceline expects to hit its first operating profit this quarter. Still, analysts remain skeptical that the company's travel businesses hold big growth potential.
CLOSING BELL
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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