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Rick Wagoner: Moving Up Gm's Ladder


In Business This Week: HEADLINER

RICK WAGONER: MOVING UP GM'S LADDER

Rick Wagoner and General Motors are enjoying October so far. On Oct. 5, GM announced it recouped more than nine points of market share in September to reach 30.5% of U.S. car and truck sales, recovering neatly from summer's strike. Next day, GM announced a global consolidation that anointed Wagoner, the 45-year-old head of GM's North American auto business since 1994, as COO and president of the newly unified $136 billion domestic and international auto business. That puts him second in line to succeed CEO Jack Smith. Still ahead: Vice-Chairman Harry Pearce, 56, who is being treated for leukemia.

With this shuffling of seats, the odd man out is Louis Hughes, considered Wagoner's main rival. Hughes fell out of favor after prolonged squabbling with GM managers in Europe. As president of GM's domestic auto business, Wagoner boosted net margins from 0.7% in 1994 to 2.7% for the first half of 1998, although GM's U.S. market share fell more than four points in that same period.EDITED BY PAT WECHSLERReturn to top

JUSTICE TRIES TO BUST A CARD GAME

ON OCT. 7, THE JUSTICE DEPT. FILED a long-simmering antitrust suit against Visa and MasterCard International. The allegations include claims that the card networks stifle industry competition. The suit seeks to end Visa and MasterCard rules that bar member banks from issuing cards offered by smaller rivals, such as American Express and Discover/Novus. Justice also contends that Visa and MasterCard don't effectively compete with each other because the same banks own both networks. The government wants banks to have a governing role in only one card company. Some credit-card experts contend that if big banks must drop one card from their rosters, that could lead to customer disruptions and big costs.EDITED BY PAT WECHSLERReturn to top

AMAZON.COM FEELS THE HEAT

GERMAN MEDIA GIANT BERTELSMANN AND BARNES & NOBLE ARE JOINING forces in a bid to unseat leading cyber bookseller Amazon.com. On Oct. 6, Bertelsmann agreed to pay $200 million for a 50% stake in barnesandnoble.com. The bookstore giant retains the other half. Each agrees to contribute $100 million in fresh capital. An IPO for barnesandnoble.com is on hold until 1999's first quarter, and Bertelsmann still plans to launch its own BooksOnline in Europe in November. The deal unsettled Amazon investors: Shares dropped 14% the next day.EDITED BY PAT WECHSLERReturn to top

STATE FARM GETS HAULED INTO COURT

CUTTING CORNERS CAN COST YOU. Just ask State Farm Mutual. The U.S. Supreme Court recently decided that the nation's largest property and casualty insurer will have to defend itself against a $2 billion class action in Illinois next spring. The suit, which State Farm had asked the court to limit in scope, alleges that it violated policy contracts by forciNg customers to accept cheaper parts to repair wrecks, instead of replacing parts with ones identical to the carmaker's. As many as 5 million State Farm policyholders in up to 48 states could join the suit.EDITED BY PAT WECHSLERReturn to top

A SHINY QUARTER FOR MOTOROLA

FEELING A LITTLE MORE CHIPPER? Motorola is giving investors a glimmer of hope that it can recover from its woeful financial performance of late. On Oct. 5, the maker of chips and telecommunications gear released third-quarter earnings that soundly beat Wall Street's expectatIons. Motorola earned $40 million, or 7 cents a share, before special charges, on sales of $7.15 billion. The numbers surprised analysts who predicted earnings of a penny. More important, Motorola--which has said it needs to save $750 million and cut 15,000 workers--bested its own estimate of cost savings of $100 million in the quarter by 40%.EDITED BY PAT WECHSLERReturn to top


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