In Business This Week
Edited by Monica Roman
HEADLINER
James Cantalupo: Arch Support
Just 97 days into his new job, McDonald's (MCD
) CEO James Cantalupo vowed to revitalize the hamburger giant. "We took our eyes off our fries and paid a price," Cantalupo admitted on Apr. 7 in New York, where he laid out his plans to Wall Street.
Instead of adding more restaurants, Cantalupo says he will add more customers. He hopes to achieve that by improving the tastiness and variety of the menu and upgrading quality, service, and cleanliness. Cantalupo has cut the company's 2003 expenses by $700 million, to $1.2 billion, by opening fewer restaurants in some countries. Although there were no surprises, investors sent the shares up 6% in the next three days, to $15.50.
Still, Cantalupo's challenges remain supersized. The exec, who was called out of retirement after a struggling McDonald's posted its first ever quarterly loss in January, has to persuade franchisees to get excited about his plan and convince unhappy consumers to come back. He also has to do all this at a time when the world economy is struggling.
By Pallavi Gogoi
The Tax Man Knocks on ImClone's Door
The ImClone Systems (IMCL
) saga continues. The Securities & Exchange Commission is looking into the company's failure to pay up to $60 million in taxes on stock options exercised by former CEO Samuel Waksal, who is facing a jail term for insider trading. Employers are liable for such taxes if employees don't pay them. ImClone said on Apr. 9 that it will delay reporting its 2002 results and will restate those for 2001 to include a charge of at least $23.3 million for taxes owed by Waksal. The SEC has asked for documents relating to the exercise of options by current and former officers.
Rupert Finally Gets His Dish
News Corp. (NWS
) chairman Rupert Murdoch won his three-year-long battle to buy the DirecTV satellite service from General Motors (GM
). On Apr. 9, GM accepted Murdoch's $6.6 billion offer to buy a controlling stake in the auto maker's Hughes Electronics unit (GMH
), DirecTV's parent. Murdoch had pulled out of an earlier bid in late 2001, allowing satellite operator EchoStar to reach an agreement with GM. Regulators rejected that deal, giving Murdoch another chance. With DirecTV's more than 11 million U.S. subscribers, Murdoch adds a key part of a worldwide satellite system to deliver sports, movies, and news. After the deal closes, News Corp.'s 34% interest in Hughes will be transferred to Murdoch's Fox Entertainment Group.
A New Alchemy for Britain's ICI
On Apr. 9, Britain's Imperial Chemical Industries (ICI
) ousted its CEO two weeks after it issued a profit warning. Brendan O'Neill will be replaced by ICI veteran John McAdam. Britain's biggest chemical company has seen its market value more than halve since the start of the year. The company blames the poor performance of its Quest food flavoring and National Starch businesses. ICI has found it difficult to transform from a bulk chemicals company to a specialty chemicals and paints giant. Now ICI says rising oil prices could lead to higher production costs and further job losses.
Is HealthSouth beyond Rehab?
Federal prosecutors may soon get to the bottom of the fraud at HealthSouth (HLSH
), but that won't do much to firm up its shaky financial condition. Prosecutors in HealthSouth's hometown of Birmingham, Ala., persuaded a fourth senior executive to plead guilty and cooperate in the case charging founder Richard Scrushy with overstating earnings by at least $1.4 billion since 1999. Scrushy appeared in court on Apr. 9 but refused to answer questions about his assets. The plea by former CFO Michael Martin came as PricewaterhouseCoopers said that it had uncovered most of the fraud at the nation's largest chain of rehab centers. But the firm said it needs 30 more days to finish. That may be too long for creditors, although HealthSouth is lobbying them not to force it into bankruptcy.
American Rewrites Its Flight Plan
With union employees set to finish voting on $1.62 billion in contract concessions at American Airlines (AMR
) by Apr. 15, the airline and union leaders are trying to make the deals more palatable to workers. Union advisers say workers are expected to get bonuses if certain performance targets -- like boosting credit ratings -- are met during the six-year contracts. Provisions for stock options and profit-sharing would stay in place. The expected changes are the result of employee complaints about the length of the contracts and pay cuts of up to 23% in the first year. If any of the unions reject the concessions, American is expected to file Chapter 11.
Et Cetera...
-- S&P lowered its credit rating on General Motors (GM
) to "negative."
-- Michael Biondi joined Lazard as chairman of investment banking.
-- Embattled Tenet Healthcare (THC
) will split the chairman and CEO jobs.
CLOSING BELL
Lighting Up
With some of the smoke clearing around Altria (MO
), parent of tobacco giant Philip Morris, shares rose 4.4%, to $30.30, in the two trading days ended Apr. 9. Comments from the Illinois judge who rendered a $10 billion verdict against PM helped the stock, though Standard & Poor's downgraded Altria debt.
CLOSING BELL
|
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
