In Business This Week
Edited by Monica Roman
HEADLINER
Nicholas Scheele: First, Build a Better Car
Ford Motor's (F
) new North American chief, Nicholas Scheele, is setting a fresh agenda--one that looks like an about-face from the strategy his boss, CEO Jacques Nasser, has been pushing since 1999. "We are going back to basics," Scheele told employees recently. "Some actions that we've taken in the past few years maybe distracted us and contributed to a deterioration in quality." Ford execs insist Nasser's basic mission--to make Ford a consumer-driven company--won't change. But Nasser-led moves such as buying dealerships and other auto-related businesses will take a backseat to Scheele's focus on the job of manufacturing quality vehicles. Ford's problems have been building all year, but with cash dwindling to about $3 billion, from $15 billion in mid-2000, there's a rising sense of urgency. The auto maker has already cut executive bonuses and is eliminating 5,000 white-collar jobs. Ford is halving its quarterly dividend to 15 cents per share, saving about $1 billion a year. Expect more drastic actions by yearend.
By Joann Muller
Microsoft's Foes See Hope in Europe
As Microsoft's (MSFT
) competitors grow concerned the U.S. Justice Dept. will go easy on the software giant in its antitrust suit, their attention has shifted to the European Union. The latest draft of the EU's statement of objections against Microsoft's alleged monopolistic practices is giving them reason to cheer. Much of the 70-page statement, distributed to several rivals in August and detailed by The Wall Street Journal on Oct. 10, deals with the ways Microsoft makes it difficult for competitors to run applications that work well with its Windows operating system. That suggests the Europeans may force Microsoft to disclose more information about Windows to competitors.
To make its case in Europe, the company is relying on affidavits from companies and organizations that use its software. Microsoft denies charges that those who signed the affidavits weren't aware they would be used in such a manner, a point the company will include in its response to the EU statement next month. Microsoft "is open to looking for ways to resolve the [EU's] concerns," says the company's European general counsel, John Frank.
In the U.S., Microsoft lost its last bid to overturn the the June 8, 2000, ruling that it violated the Sherman Antitrust Act. On Oct. 9, the U.S. Supreme Court rejected Microsoft's argument that the ruling was tainted by the ethical lapses of the case's then-presiding judge, Thomas Penfield Jackson. The court's decision turns up the heat on Microsoft to reach a settlement. The company has been meeting with the Justice Dept. and state attorneys general toward this end. If they can't reach a deal, federal judge Colleen Kollar-Kotelly is scheduled to appoint a mediator on Oct. 12.
Enron Recharges Its Utility Sale
Enron hopes the second time is a charm in its attempt to unload its Portland General Electric unit. On Oct. 8, the Houston energy-trading giant agreed to sell the electric utility to Northwest Natural Gas for $3 billion. Enron bought Portland General five years ago for $3.2 billion in an effort to break into deregulating power markets, a strategy that it has since backed away from. It earlier agreed to sell Portland General to Sierra Pacific Resources for $3.1 billion, but the deal fell apart in April. Some analysts have blamed Enron's falling stock price partly on investments outside its core natural-gas trading and wholesale electricity sales businesses.
More Competition Is in the Cards
Sixteen months after it started, the Justice Dept.'s suit against Visa and MasterCard is over--for now. U.S. District Court Judge Barbara Jones said on Oct. 9 that the two companies, which control 75% of all credit cards, can't prohibit banks from issuing competing cards from American Express (AXP
) and Discover. Justice fell short of its original intentions, though. It had hoped to prove that Mastercard and Visa had a duopoly, which the court denied. Mastercard said it will appeal the first ruling.
Polaroid Could Be Gone in an Instant
Polaroid's (PRD
) days are numbered. The instant-photography giant could file for Chapter 11 bankruptcy protection as early as Oct. 11, after potential buyers balked at taking on the company's rapidly deteriorating film business and its $900 million in high-interest debt. Sources say that as many as 12 suitors, including large Japanese consumer-products companies, considered participating in a so-called prepackaged bankruptcy plan. But creditors resisted, pushing instead for a straight sale. One likely scenario: Cambridge (Mass.)-based Polaroid could be sold in parts, with its digital and instant-film businesses going to different buyers.
Et Cetera...
-- J.M. Smucker will buy P&G's (PG
) Jif peanut butter and Crisco cooking oils for $670 million.
-- Rupert Murdoch's talks to buy GM unit DirecTV are moving ahead, sources say.
-- AT&T (T
) will purchase the 23% of wireless carrier TeleCorp (TLCP
) that it doesn't already own.
CLOSING BELL
Healthy Risk
Terrorism fears are fueling investor interest in New York-based risk consultant Kroll. Since September 11, its share price has surged 84%, to $13.25 on Oct. 10. Kroll expects its security-services revenues to double this year, thanks to demand for executive protection, building security, crisis management, threat assessment, and political-risk data.
CLOSING BELL
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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