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APRIL 17, 2006
Edited by Deborah Stead Talk Show "I do not believe that companies wake up in the morning just being altruistic." -- Wal-Mart CEO Lee Scott on the company's new plan to move into distressed areas and help local businesses, in part to help win community support, as reported by Reuters STREET SECRETS Cerberus: The Great Unveiling Cerberus Capital Management and its enigmatic boss, 46-year-old Stephen A. Feinberg, have long been viewed as perhaps the most secretive folks on Wall Street (BW -- Oct. 3). But on Apr. 3 the private investment firm -- named for the three-headed dog in Greek mythology who guards the gates to Hades -- emerged from the shadows. For starters, it led a consortium of investors, including Citigroup (C ), in a highly publicized transaction: agreeing to buy a majority stake in General Motors Acceptance Corp., the financing arm of troubled American icon General Motors (GM ). Perhaps even more surprising, Cerberus launched its own Web site at the stroke of midnight on the same day (cerberuscapital.com). The site lists the companies in Cerberus' portfolio -- names, approximate number ("more than 40"), and their combined revenues ($45 billion). It also displays an organization chart and names 47 of the firm's executives, including its global chairman, former Vice-President Dan Quayle. By Emily Thornton   PATENT PUSH Big Pharma Wants More Time Expect a new skirmish between Big Pharma and the generics. Some leading drugmakers are preparing a push for legal changes to extend their period of protection from generic rivals. Industry executives say that Bristol-Myers Squibb (BMY ) CEO Peter Dolan, who now heads the Pharmaceutical Research & Manufacturers of America, an industry association, is likely to make the effort a top priority. A drug's patent protection typically lasts about 20 years. But it runs from the time a compound is discovered rather than when a drug gets FDA approval and comes to market, usually 8 to 12 years later. Generics makers aggressively attack patents on blockbusters, challenges that, if successful, further shorten the patent protection. There's also five years of "data protection," another right to exclusivity based on clinical trial results. This kicks in at approval. Pharma's complaint? Robert Armitage, Eli Lilly's (LLY ) general counsel, says the resulting exclusive periods under this system aren't long enough, given multiyear clinical trials. He wants 15 years of data protection, along with a 15-year patent, also granted at FDA approval. Such a scheme would effectively lock out generics since they would need to produce their own data in costly clinical trials. With the feds paying for Medicare prescriptions, any change likely to raise the bill will be a tough sell. Says Ira Loss, executive vice-president at Washington Analysis: "They are going to be hard pressed to move this very far." By Amy Barrett THE BIG PICTURE 
UNION DUES The UAW's Southern Discomfort Ron Gettelfinger, the beleaguered United Auto Workers president, is in the fight of his career as he struggles to defend living standards at Detroit auto and parts makers. The last thing he needed to hear was that a brother union, the International Association of Machinists, has targeted the 3,000 workers at DaimlerChrysler's (DCX ) Mercedes-Benz factory in Vance, Ala. A furious Gettelfinger has complained to the AFL-CIO, which asked a labor arbitrator to sort out the matter. You'd think the UAW's hand would be the weaker one, since it failed to sign up the Mercedes workers in 1999. But insiders say the AFL-CIO feels pressure to stop the drive by the IAM, which represents just 12,000 auto workers, because it doesn't want Gettelfinger to quit the AFL-CIO. He considered bolting last summer, when a half-dozen unions left to form the rival Change to Win federation. IAM President Tom Buffenbarger says the UAW's complaint is uncalled for. "The Mercedes workers came to us," he says. In the end, the dustup is largely about UAW pride. A union victory at Mercedes would be the first at a foreign-owned carmaker and would help to maintain high wages for all auto workers. By Aaron Bernstein Screen Time Netflix (NFLX ), the online DVD rental startup, has been buying theater distribution rights for indie films, including Cowboy del Amor, a documentary about a cowboy-turned-matchmaker that opened in January. Ted Sarandos, chief content officer, says the goal is to help indies, which do well with Netflix' cinephile clientele, get reviews and buzz. Over time, Sarandos hints, its new distribution role could also change Netflix' business model, at least around the edges. (Its core rental model is at the heart of a patent infringement suit Netflix just filed against Blockbuster.) HBO (HBO ), he notes, went from being a distributor to being a creator. Can Netflix? We'll know in a few reels. By Timothy J. Mullaney BLOGSPOTTING Blinkonomics www.gladwell.typepad.com WHY READ IT For the observations on culture and business that make Blink author Malcolm Gladwell one of the hottest speakers on the conference circuit. NOTABLE POST If, for example, a drug company came up with the best anti-depressant...we would EXPECT that drug to be associated with, say, more reports of suicide ideation. Why? Because it would be prescribed overwhelmingly to the hardest cases....We need to be very careful in how we interpret statistics purporting to show that...one kind of anything, is more dangerous than other things in its class." JOB-SHARING The Family That Flips Together... To help reduce absenteeism and turnover -- chronic problems for fast-food managers -- McDonald's (MCD ) is testing an unusual program at some of its 1,250 British restaurants. Employees from the same immediate family can fill in for one another without clearing it with the boss, a new twist on job-sharing, according to Mercer Human Resources Consulting. The so-called Family Contract is a response to surveys in which workers described juggling work and other duties as stressful. It permits family members -- including same-sex partners -- to sign on in pairs and take each other's shifts. Human resources chief Richard Floersch says if absenteeism or turnover drops by autumn, McDonald's may expand the program to include cousins and even friends. It may also import the Family Contract to some of the other 117 countries with its outlets. About 1.5% of its 60,000 British workers are related to one another, the company says, about the same rate as in the U.S., where McDonald's has more than 600,000 employees. By Michael Arndt GRIPE ALERT Revenge Of The Irate Shopper Caveat vendor: That disgruntled shopper snarling at the manager isn't the problem. It's the customer who complains about the store to friends. A new study shows that people told about a friend's or relative's bad shopping experience are up to five times as likely to avoid the store in question as the original unhappy customer. One reason is that the tales of annoyance tend to be embellished with each telling. By the fifth rendition or so, "the sales clerk who was just unresponsive has become abusive," says Paula Courtney, president of Verde Group, a Toronto retail consultant that conducted the study with the Jay H. Baker Retailing Initiative at the Wharton School. The survey of roughly 1,200 U.S. shoppers in the weeks before and after Christmas, 2005, delivers some particularly bad news to the big-box stores. It seems that customers of mass merchandisers like Wal-Mart (WMT ), Target (TGT ), and Sears (SHLD ) Holding's Kmart share their negative experiences with an average of six people, double to triple the audience sought by customers who've had negative experiences at other retailers. The biggest gripe about the big boxes: difficulty locating merchandise. Store managers at all types of outlets, meanwhile, are left out of the loop because irritated customers are five times more likely to vent to a friend than to a store rep. Says Stephen Hoch, who heads Wharton's retailing initiative: "What retailers don't know can really come back to bite them." By Robert Berner 
By Elizabeth Woyke
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