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NOVEMBER 19, 2007
Inching Closer to $100 Oil It's getting to be an everyday thing: The futures markets hit a new high-oil mark as crude surges toward an apparently inevitable $100 a barrel. On Nov. 7 oil touched an intraday high north of $98 before stepping back on a report that U.S. inventories hadn't shrunk as much as expected. On the same day, the Dow sank 361 points. Meanwhile, the dollar, in an inverse spiral, plumbed new lows against the euro. The $100-a-barrel question is whether the economy will slip on oil prices and fall on its face. The answer is that it probably won't, because America isn't as oil-dependent as it used to be. But oil plus the credit crunch could deal a nasty blow. See "As Oil Nears $100, Look Out Below" Will Merrill Hire Fink? Brokerage giant Merrill Lynch (MER ) parted ways with CEO Stanley O'Neal after the firm swallowed $7.9 billion in losses on securities backed by subprime mortgages. So who better to succeed O'Neal than one of the people who helped invent mortgage-backed paper in the 1980s? According to a Nov. 4 report on CNBC, Merrill has offered the job to Laurence Fink, head of money manager BlackRock (BLK ). CNBC said Fink asked for two weeks to think it over. The parties declined to comment.   Fall of a Prince Critics who have been baying for the hide of Citigroup (C ) CEO Charles Prince finally got what they wanted. Almost four years to the day after he was named to succeed Sandy Weill, Prince quit on Nov. 4 in light of revelations that the bank may have to write off $8 billion to $11 billion in the fourth quarter for subprime losses. Robert Rubin, head of the bank's executive committee, took over as chairman of the board, which formed a search committee led by Richard Parsons, the retiring chief of Time Warner (TWX ). Win Bischoff was named interim CEO. 
Nail-Biting on the Street Who's next? That's what they're asking on Wall Street these days. Analysts are starting to compile estimates of the next round of writedowns. Morgan Stanley (MS ) on Nov. 7 warned of a $3.7 billion earnings hit. Bear Stearns (BSC ) and Lehman Brothers (LEH ) have taken paltry writedowns to date. There's concern that a writedown of more than $2 billion could do serious damage to Bear, which is much smaller than its peers. Exxon Schmexxon State-controlled oil-and-gas producer PetroChina (PTR ) left ExxonMobil (XOM ) in the dust to become the biggest company in the world by market cap. Its shares soared 163% when they debuted on the Shanghai Stock Exchange on Nov. 5 in a secondary listing worth $8.9 billion. That put PetroChina's valuation at more than $1 trillion, while Exxon is worth a mere half that. (True, Exxon's first-half profits of $19.54 billion dwarfed PetroChina's $10.9 billion.) The next day, shares of Chinese e-commerce portal Alibaba.com surged 192% on their first day of trading in Hong Kong in an IPO that raised $1.7 billion, a record for a mainland Web company. The stock fell back by 17% on Nov. 7. See "Next Target for Alibaba: Consumers" Ford Joins the Club Detroit's transformational labor deal is finally done. On Nov. 5, United Auto Workers officers O.K.'d a new contract with Ford (F ) that mirrors those agreed to by rivals General Motors (GM ) and Chrysler. Ford got its handshake without a strike, offering to keep open 6 of 16 factories that had been slated for closure. In exchange, the UAW agreed to take $15.4 billion in cash to set up a health-care trust and to accept lower pay for certain non-assembly jobs. Meanwhile, GM announced a staggering $39 billion loss for the third quarter, its biggest ever, largely because it's dropping deferred tax credits that it could use only if it starts making money. Without the adjustment, GM lost $1.6 billion. Taking Over Time Warner Jeffrey Bewkes' dilemma: What do you do with a media conglomerate at a time when investors hate media conglomerates? In a move long telegraphed, Time Warner's (TWX ) board on Nov. 5 named the COO as successor to CEO Richard Parsons, effective Jan. 1. Bewkes, a Time Warner vet who's credited with putting HBO into tip-top shape, faces intense pressure to get the stagnant stock price moving. He may be more inclined than Parsons to unload units. Diller Changes Channels Another conglomerateur, Hollywood mogul-turned-Internet impresario Barry Diller, is thinking small. After years of what he once called "serial acquisitions," the IAC (IACI ) boss wants to appeal to Wall Street by disassembling his collection of assets that includes Ticketmaster, Home Shopping Network, LendingTree, and Match.com. He'll run one of the five new publicly traded companies, controlling search engine Ask.com, and will be chairman of the others. Still to be heard from: Liberty Media Chairman John Malone, who controls 24% of IAC and is said to want HSN and other assets in return. Facebook's Ad Scheme "This is some really powerful stuff," said Facebook founder and CEO Mark Zuckerberg on Nov. 6. The "stuff" is a new ad platform that allows marketers to target ads to individuals based on the details they share with friends on Facebook—everything from commonly available data, such as location, age, and gender, to more personal info such as work history, relationship status, and political leanings. Google Calling That Google (GOOG ) phone you were coveting as the Next Hip Thing? Forget about it. Google won't be making a phone, at least for now. But on Nov. 5 the company did trumpet an alliance that aims to disrupt the cell-phone industry. Google software called Android will allow developers to write killer Net apps to work on any phone using the system. It's backed by the Open Handset Alliance, a 34-company consortium that includes carriers Sprint Nextel (S ) and T-Mobile (DT ) USA and phonemakers Motorola (MOT ) and Taiwan-based HTC. See "Google's New Cell-Phone Universe" Polishing Toyota With its Prius holding 60% of the U.S. market for hybrid cars, you'd think Toyota (TM ) doesn't have much to worry about on the green front. But its image has been dinged of late—activists have bashed the carmaker for resisting higher fuel-economy standards, for example. On Nov. 5, Toyota launched its biggest ad campaign ever, estimated at $40 million-plus and aimed at making Americans feel warmer and fuzzier about the company. The print, TV, and online blitz is built on the tagline "Why not?" and focuses on three themes: environmental sensitivity, economic impact, and social responsibility. (adage.com) More Snafus at Airbus The costly delays at Airbus aren't confined to the A380. Parent European Aeronautic Defence & Space said on Nov. 6 that a six-month delivery holdup on the A400M, a military transport plane, will cost the company $2 billion. That's on top of $7 billion in lost profit from the A380 double-decker passenger jet, which entered service in October, two years late. With the takeoff of its A350 midsize jet slowed by design changes, Airbus isn't likely to see profits from any of its three latest planes for more than a decade. See "Airbus Subsidies Don't Fly" Dole and Dow Lose One Los Angeles jurors awarded $3.3 million to six Nicaraguan banana plantation workers who were exposed to a pesticide that they say made them sterile. The Nov. 6 verdict against Dole Food and Dow Chemical (DOW ) is a rare example of an American court holding companies accountable for harm occurring to foreign citizens outside the U.S. Four other lawsuits are pending in Los Angeles involving thousands of Central American workers. At press time the jury was considering whether to impose punitive damages. Dole plans to appeal. Dow declined to comment while the trial continues. Greenberg Warns AIG The grudge match between Maurice "Hank" Greenberg and American International Group (AIG ), the insurance giant that ousted him as CEO in 2005, isn't over. In an SEC filing on Nov. 2, Greenberg and his allies, who control 13.6% of AIG's shares, said they are "evaluating strategic alternatives," meaning anything from pushing for a breakup to a call for new management. Is this shot across the bow a prelude to a serious move? AT&T as Watchdog It may seem as if Old Media outfits have gotten Internet religion given their efforts to put movies and sitcoms on the Web. But they usually insist on usage limits or hold back their best stuff, mostly on piracy fears. That's why AT&T (T ) is working to embed an anti-piracy system from tiny Vobile in its network. Sources say the carrier is in talks with NBC and Disney (DIS ), which means it could soon know when you try to download that unsanctioned version of Heroes or Pirates of the Caribbean. To privacy advocates, that smacks of Ma Bell acting like Big Brother. A Close Eye on Imports On Nov. 6, President George W. Bush addressed the threat of unsafe foreign products. "We need to do more to ensure that American families have confidence in what they find on our store shelves," he said in announcing a plan to overhaul the way imports are handled. It grants the FDA new authority to order product recalls, establish penalties for violations, and put U.S. inspectors in foreign nations. Democrats denounced the plan as falling far short of what's needed. Inflation, Begone! Price controls. How quaint, no? Well, not necessarily. As fast growth in some major economies—notably Argentina, China, and Russia—leads to friskier prices, especially for food and energy, governments are starting to clamp down with old-style controls. According to the head of the U.N.'s Food & Agriculture Organization, the trend could spread as more nations feel the pain. (Slate.com) 
Roehm Backs Off When Julie Roehm, a high-flying marketing executive at Wal-Mart (WMT ), was fired last December, tabloid-worthy legal combat ensued. An alleged affair, improper gifts of fancy meals and booze, and a big pink diamond were all part of the mix of charges and countercharges. In a Nov. 3 statement, Roehm acknowledged that some of her allegations were inaccurate and said she was dropping her suit for wrongful termination without getting a dime. In return, Wal-Mart will dismiss its claims against Roehm. Yahoo! Gets Booed Members of the House Foreign Affairs Committee lambasted Yahoo (YHOO ) CEO Jerry Yang on Nov. 6 for his company's role in the jailing of Chinese journalist Shi Tao. Shi was sentenced to 10 years behind bars in 2005 after Yahoo turned over an e-mail, sent from Shi's personal Yahoo account explaining Beijing's response to the anniversary of the Tiananmen Square massacre. Among other things, committee members accused Yahoo of misrepresenting what it knew about Shi's case during an earlier hearing and of knuckling under to repressive regimes. See "Jerry Yang on the Hot Seat" A Spotlight on Fannie New York Attorney General Andrew Cuomo raised the stakes in his nine-month-old investigation of the mortgage industry on Nov. 7, firing off subpoenas to giants Fannie Mae (FNM ) and Freddie Mac (FRE ). Cuomo says he's looking into possible widespread collusion between home appraisers and lenders. Freddie and Fannie buy home mortgages from lenders and have data on the values of about 40% of the U.S. market. Cuomo also indicated that his investigation now goes well beyond Washington Mutual (WM ), a Seattle lender he has been scrutinizing to find out whether it colluded with appraisers to increase home values—and thus mortgage amounts. The Power of Puzzles Keep playing those Sudoku games—they're good for your brain. That's the word from two professors—one business, one psychiatry—at Emory University, who say recent neuroscience research can help executives stay as sharp at 60 as they were at 25. Among their nuggets: Keep pursuing novel experiences, such as travel; cultivate pattern recognition; and work hard at play, particularly with games and activities that involve risk. (harvardbusinessonline.com) Lights, Camera, Walkout Making good on their threats to shut down entertainment production, the Writers Guild of America's East and West Coast locals took to the picket lines on Nov. 5 to protest a lack of progress in winning royalties for work digitally downloaded, streamed, or played on cell phones. Insiders say the strike could last months, when the writers could be joined by the Screen Actors Guild, whose contract is up in June. Meanwhile, Jay Leno and David Letterman went dark, and sitcoms could run out of fresh episodes early next year. A Big New Toy Recall Just as China was desperately working to prove to the world that it's making progress on product safety, an incident surfaced that may be the most alarming yet. At least two children who ingested beads from a Chinese-made crafts set appear to have suffered a temporary coma. Some 4.2 million of the Aqua Dots sets will be recalled, said the toy's North American distributor, Toronto's Spin Master, on Nov. 7. The manufacturer, Moose Enterprise in Melbourne, Australia, says a Chinese factory used a glue containing a toxic solvent that, when swallowed, mimics the action of gamma hydroxy butyrate, known as the "date rape" drug. 
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