In Business This Week: HEADLINER: ALBERT COSTELLO
WRESTLING WITH HERCULES
CEO Albert Costello got an earful at W.R. Grace's annual meeting on May 10 in Boca Raton, Fla. While hailing improved sales and pretax earnings, shareholders fumed over his refusal to discuss a merger between Grace and Hercules, a Wilmington (Del.) conglomerate. Hercules Chairman and former Grace director Thomas Gossage offered such a deal in March. "It doesn't cost to listen," shareholder Stewart Sunness told Costello.
Grace announced Gossage's resignation from the board after rejecting his proposal. Gossage has since publicly mulled a hostile bid for Grace, though he says he prefers a friendly deal. But Costello rejected the idea at the meeting, saying it would create no product synergies and that until Gossage names his price, there is nothing to discuss. "The only synergies with Hercules are cost synergies," said Costello, "and cost synergies are not enough."
Instead of discussing the Hercules bid, Costello said he believes Grace can deliver value on its own. He had better be right: Otherwise, he can expect far more pointed questions next year.EDITED BY KELLEY HOLLAND By Gail DeGeorgeReturn to top
U.S.-CHINA TRADE GETS REALLY UGLY
READY, AIM...THE U.S. AND China have fired their first shots in what could be a blistering trade war. Fed up with Beijing's failure to crack down on piracy of American trademarks and copyrights, Acting U.S. Trade Representative Charlene Barshefsky said the U.S. on June 17 will slap punitive tariffs on $2 billion worth of Chinese textiles, apparel, consumer electronics, and other goods. The choice of goods is aimed at inflicting minimum pain on U.S. consumers--and possibly winning some points with U.S. textile manufacturers this election year. News of the sanctions, due to take effect on June 17, triggered threats by China to retaliate with 100% tariffs on American goods including agricultural products, vehicles, and cameras. No word yet on the level of the U.S. tariffs, but it could top 100%.EDITED BY KELLEY HOLLANDReturn to top
SEXUAL HEALING AT MITSUBISHI?
MITSUBISHI MOTOR MANUFAC-turing of America is hiring a therapist. It has enlisted former Labor Secretary Lynn Martin to review its workplace practices in the wake of Equal Employment Opportunity Commission allegations of sexual harassment at its Normal (Ill.) plant. Martin vows she "will have complete independence" there. But EEOC officials worry that her probe could hinder their work. "Whatever her group is doing, they are not accountable to the judicial process," says John Hendrickson, the EEOC regional attorney in Chicago.EDITED BY KELLEY HOLLANDReturn to top
CORNING SHEDS A FEW MORE POUNDS
YOU CAN NEVER BE TOO RICH or too thin--at least at Corning, which is spinning off its lab-testing unit, Corning Clinical Laboratories. Corning built the unit, which has $1.6 billion in revenues, over the past 14 years. But lately it has had trouble digesting new labs, and Corning decided a tax-free spin-off was the most lucrative option. Corning also is shedding a pharmaceutical services unit with $400 million in revenues. The deals leave Corning 40% smaller, with a focus on communications and technology.EDITED BY KELLEY HOLLANDReturn to top