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"We each have nuclear weapons." -- Robert S. "Steve" Miller, Delphi's CEO, on leverage that he, General Motors, and the UAW can exercise in Delphi's reorganization Wall Street has long been a popular destination for out-of-office Washington politicians. Now, though, the revolving door increasingly leads to private investment firms. The Street's latest recruit is former Democratic Vice-Presidential nominee John Edwards.
Edwards has signed up to work for the New York private investment outfit Fortress Investment Group as a part-time senior adviser. He'll provide "support in developing investment opportunities worldwide and strategic advice on global economic issues," says Edwards spokeswoman Kim Rubey.
Edwards joins a growing line of relocated policy-makers. Former Vice-President Dan Quayle has been sealing deals for hedge fund group Cerberus Capital Management since he dropped out of the 2000 Presidential race. Former Massachusetts Governor William Weld became a principal at Leeds Weld in 2000, although he is now a senior adviser while considering a run for New York governor.
Fortress has about $15 billion in equity under management, nearly half tied up in hedge funds. It has snapped up companies such as assisted-living provider Alterra Healthcare. Edwards should feel at home: In the 2003-04 election cycle, Fortress employees gave $143,650 to Democratic candidates, $4,000 of it to Edwards. They gave $10,500 to Republicans. Soaring energy prices are already stinging consumers. How much? Enough to wipe out any benefits they will get this year from tapping into home equity, according to one investment research outfit. BCA Research estimates that increased consumer spending on energy will burn up an additional 1.2% of aftertax income in 2005. That could add more than $100 billion to total nationwide consumer expenses, according to BusinessWeek estimates.
At the same time, after four years of homeowners pulling ever more cash from the rising value of their homes, the equity gusher is being capped by gradually rising interest rates. The net effect of these two forces will create a drag on aftertax income for the first time since 2000. That shift could be huge. Conversion of home equity into cash has been one of several powerful stimulants -- including low borrowing costs and tax breaks -- driving strong consumer spending in recent years, says Martin Barnes, managing editor of BCA Research's Bank Credit Analyst. Given signs that the housing market has peaked, Barnes believes "a moderation in the pace of consumer spending growth is overdue." Inspired by the success of viral ad campaigns, which try to promote products via word of mouth, some marketers are trying to build their brands by planting "comment spam" onto unsuspecting blogs. These sneaky ads appear more sincere than the typical "Check out my site!" spam. But they're popping up in unlikely places, often using made-up names -- and sometimes they can backfire.
Tom, a London-based blogger who asked that his full name not be used, was hit by one such scheme after writing about renewing contact with his estranged biological father on his popular blog, plasticbag.org. A "Barry Scott" left an empathetic comment that ended: "Drop me a line if I can be of any more help." Tom recognized the name as that of the smarmy, fictional spokesman for Cillit Bang, a European household cleaner with the tagline, "Bang and the dirt is gone!" (The comment also hyperlinked to "Barry's blog," with a photo of the grinning salesman.)
Incredulous that anyone would use his heartfelt post to market a product ("a grotesque act"), Tom tried tracking the commenter's Internet address and calling ad agencies. Soon after, he received a letter from Cohn & Wolfe, part of Young & Rubicam (YNR
), which called the comment "an error of judgement." Tom says he accepts the apology. He doesn't plan on buying any Cillit Bang, though. Despite rising fuel prices, French drivers are in love with SUVs: Sales rose 17% through September and now account for 6% of auto purchases, up from 2% in 1998. But not everyone is so smitten. For the past month a protest group has waged a campaign against SUV owners in Paris and other cities. Calling themselves Les D?gonfl?s (The Deflated), the activists target the environmental impact of gas guzzlers via nonviolent tactics, such as letting air out of tires, smearing mud on windows, and leaving leaflets. "SUVs have become a status symbol in France, so we're showing owners that not everyone thinks they're hot," says the 28-year-old group founder, who goes by the alias Sub-Sergeant Major Madcap. He hopes to expand by working with like-minded groups in Australia and California. How do you find great board members? It has never been easy, but the quest took on more urgency in the search for good governance following the Enron, Tyco (TYC
), and WorldCom scandals ("The Best and Worst Boards," Oct. 7, 2002, Cover Story). One way is to ask board members for the names of colleagues they admire.
That's how the Outstanding Directors Institute, which aims to lift the quality of boards nationwide, compiles its annual list of top directors. Just released, the 2005 ranking includes one surprising name -- former Senator Bill Bradley (D-N.J.), who sits on the boards of Starbucks (SBUX
), Seagate Technology (STX
), and Willis Group (WSH
). Starbucks Chairman Howard Schultz credits Bradley with helping his company to expand globally and design a health-care plan for employees.
Others who made the cut have a knack for supplying leadership without knuckling under to the CEO: John Phelan Jr., who pushed for more disclosure when he chaired the audit committee at Merrill Lynch (MER
); former Smith College head Jill Conway, who pioneered a plan to tie stock option prices to executive performance at Colgate-Palmolive (CL
); Norman Matthews, who helped keep execs from bolting during the Toys 'R' Us sale; and A. Thomas Young, who helped ease the way for new leadership at Science Applications International.
Rounding out the list are Nordstrom (JWN
) director Rick Hernandez Jr.; Joseph Neubauer, a director at Federated Department Stores (FD
) and Verizon Communications (VZ
), among others; Yum! Brands (YUM
) director Andrall Pearson; and Berkshire Hathaway's Walter Scott Jr. "These are not applauders," says institute Chairman Michael Griffin. "These are the people who go into the boardroom and challenge management." Jack Ruther's artwork might have the widest circulation of any living American artist. The lead bank-note designer at the Bureau of Engraving & Printing in Washington, he plays a key role in staying ahead of counterfeiters by updating the look of bills every 7 to 10 years. His new $10 bill, unveiled on Sept. 28 and hitting the street in early 2006, still features Alexander Hamilton. But the design includes new security measures, such as an orange "security thread" in the paper that says "USA TEN" and is visible when held to a light.
His biggest challenge is "to change a currency and still make it look American," says Ruther, 61, who joined the bureau as an apprentice in 1968 and plans to retire soon. Size matters, too. There isn't enough room on a $10 note to display the Statue of Liberty, so her torch is highlighted. As for the $20 bill, redesigned in 2004, Ruther says: "We found if the eagle was too small, it started looking like a seagull or a chicken." The iSymphonic musical massage chair has proved quite a hit with overstressed Americans since it started showing up in Brookstone (BKST
) stores in July. The $3,995 leather throne comes with a built-in CD player, surround-sound synchronized music, and rollers that knead back and leg muscles. But the easy chairs are just a start for their supplier, OSIM, a Singapore company that is Asia's largest specialty retailer. On Oct. 7, OSIM completed a deal to buy a 55% stake in Brookstone, based in Merrimack, N.H., and its 292 stores for $445 million. That gives OSIM and CEO/founder Ron Sim a foothold in the U.S. and a chance to augment the company's network of 540 stores in 26 countries from South Africa to Ukraine.
Sim, 46, thinks the market for "lifestyle products," such as exercise bicycles, heart monitors, and water purifiers, has room to grow. Factories that make the iSymphonic in Japan already are working overtime to meet demand.
Today, Brookstone outlets in upscale malls bring in 90% of the company's annual revenues of $500 million. But Sim, who launched OSIM in 1979 as a 20-year-old with only a high school education, aims to expand Brookstone's catalog and online operations. And he hopes to boost margins with even pricier items, such as OSIM's new $5,000 iDesire full-body massage chairs. You're a starbucks (SBUX
) barista facing a line of 10 customers. One orders an eggnog latte and sighs in exhaustion. It's up to you to guess why.
Those are the rules of Inside Out, a board game Starbucks is sending to 8,000 managers in the U.S. and Canada on Oct. 28. The goal, to be hammered home during training sessions, is to challenge baristas to connect with customers. Roll the dice for the size of the line and time of day. Then pick a card: The front describes a customer, the inside, how the customer feels and why. In this case the sighing customer is doing last-minute Christmas shopping; the eggnog is a pick-me-up.
Spokesperson Sanja Gould calls the game "a tool that can help everyone understand...the connections they make every day." Figure out how to cheer up the customer (you might ask about the bags of presents -- gift cards make nice stocking stuffers!), and everyone's a winner.By Jessi Hempel