Already a Bloomberg.com user?
Sign in with the same account.
A Tonic for DetroitHow many gas guzzlers can Washington lure off the road? A lot, it turns out. The Car Allowance Rebate System, also known as cash for clunkers, has been a roaring success, but will it last? Customers bided their time in July to trade in their old cars for a voucher of $3,500 or $4,500 that they could use to buy a more efficient car. From July 20 to Aug. 4, the program helped sell 157,000 new cars, pushing U.S. sales to their highest rate in 11 months. Buyers traded in lots of Ford (F) Explorers, old pickup trucks, and minivans to buy compacts like the Ford Focus, Toyota (TM) Corolla, and Honda (HMC) Civic. With most of the initial $1 billion in voucher cash run through, Congress at press time was expected to come up with $2 billion more. But even as the Senate was pondering the matter, research firm IHS Global Insight said the buzz, and showroom traffic, was already starting to taper off. Also on the auto front, Nissan (NSANY) on Aug. 2 unveiled its first electric car, the Leaf, which will go into production next year.Slo-Mo RecoveryAnother milestone for the stock market: On Aug. 3 the S&P 500 closed above 1000 for the first time in nine months, as a measure of national factory conditions notched its biggest monthly jump in four years. Despite the rise, factory output is still dwindling, and other economic reports suggest a recovery that's not quite yet a recovery. The advance second-quarter GDP report from the Bureau of Economic Analysis shows the economy shrinking at a slower annual rate: -1%, vs. the first quarter's -6.4%. The BEA also reported that personal income in June fell $159.8 billion, or 1.3%, as effects of stimulus payments wore off. And adjusted for inflation, consumer spending slid 1.8% in June from a year earlier.BofA SettlesTo the countless reasons why Bank of America (BAC) CEO Ken Lewis may rue his purchase of Merrill Lynch last year, add an Aug. 3 lawsuit by the SEC charging BofA with failing to inform investors of Merrill's plans to pay nearly $6 billion in bonuses on the eve of the deal's closing. BofA immediately settled the suit, agreeing to pay $33 million but neither admitting nor denying guilt. The deal for Merrill sparked a shareholder revolt that cost Lewis the chairmanship and prompted regulators to demand a succession plan. Lewis responded on Aug. 3 with a management shakeup that includes the hiring of former Citigroup (C) executive Sallie Krawcheck to oversee wealth management, a move that bolsters BofA's bench.UBS SettlesHow many names will they give up? That's the question agitating banking circles in the wake of the July 31 settlement of U.S. civil charges that financial giant UBS (UBS) abetted tax evasion. Details of the accord will be released on Aug. 7, but it ends months of wrangling over whether the bank should hand over information on 52,000 U.S. clients. American officials had demanded the data but UBS stonewalled, saying disclosure would violate Swiss banking law. At press time, Swiss media reports indicated that UBS might turn over details on 5,000 accounts and pay no fine.Millisecond Mischief?The rival stock trader who beat you to the punch was probably a computer, but it may soon get reined in. On Aug. 4, SEC Chairman Mary Schapiro said her staff would scrutinize "flash orders," a way for select traders on an exchange, using lightning-fast computer programs, to view buy or sell orders fractions of a second before the broader market sees them.A Spying Plot ThickensLike a good cloak-and-dagger novel, the Deutsche Bank (DB) spying scandal is growing more complicated than it first appeared. On Aug. 3 a detective employed by Deutsche told The Wall Street Journal that the skulduggery targeted not just a board member and a cantankerous investor but as many as 20 people—and involved more employees than had been thought. The allegations contradict Deutsche's claim that the spying was limited to four incidents between 2001 and 2007.Stepping in at AIGAmerican International Group's (AIG) buck-a-year man, Edward Liddy, is bowing out. He'll cede the CEO spot at the embattled insurer to Robert Benmosche as of Aug. 10, the company announced. Benmosche's services won't come so cheap: His compensation package will total $7 million to $10 million, according to The Wall Street Journal—assuming the Treasury Dept. goes along. Liddy spent much of his tenure dealing with a political firestorm over pay practices at AIG, which owes its survival to a federal bailout. But industry observers say Benmosche's pay is market rate, and note that you couldn't lure many executives to the job for any amount of money. Benmosche, 65, was CEO of MetLife (MET) from 1998 to 2006.
See "AIG's New Boss: Robert Benmosche"Cheerier ExecutivesThe mood in C-suites continues to brighten, according to a global survey by McKinsey. The poll of nearly 2,000 executives, carried out in late July, shows that the proportion of companies projecting fatter profits this year has climbed to 40%, up from 33% in a survey carried out six weeks earlier. However, managers seem to have nagging doubts. Whereas in March about two-thirds said their company's overall response to the crisis was adroit, less than half now are certain that moves such as paring back investments, restructuring operations, or rejiggering prices have paid off. (McKinsey & Co.)What's Better Than Being Smart? Hanging ToughGenius will get you somewhere, but for the climb to the top you need grit. Recent research indicates that old-fashioned virtues such as conscientiousness and perseverance are a better determinant of success than intelligence, according to an Aug. 2 Boston Globe article, "The Truth About Grit." While IQ tests are widely administered, the science of grit is in its early days. One of its pioneers is Angela Duckworth, a psychologist at the University of Pennsylvania, who has tested cadets at West Point, the elite military academy, and finalists of the Scripps National Spelling Bee. In her study of the class of 2008 at West Point, where about 5% of cadets drop out after the grueling first summer, she found that her questionnaire was a good predictor of which students had the stuff to survive.
Duckworth first became interested in grit after tracking the careers of her classmates from Harvard. She noticed that the most successful were the ones who had identified a goal early on and stuck with it, rather than equally smart folks who flitted from one thing to another. "High levels of achievement require a certain single-mindedness," she says. What's the takeaway for employers? The straitlaced job applicant who has pursued a hobby for years may be a better hire than the renaissance fellow who has dabbled in martial arts, the cello, and paragliding. (The Boston Globe)Apple: Adios, EricOn Aug. 3, Google (GOOG) CEO Eric Schmidt did what many think he should have done long before: resign from Apple's board. Google's Chrome Web browser competes with Apple's Safari. Google also aims for its Android software to power a range of gadgets to vie with the iPhone, and for PC-like devices based on its not-yet-completed Chrome OS to rival Macs. These aren't minor board matters that could be resolved with Schmidt slipping out to get a cup of coffee. In fact, his exit came just three days after Apple spurned a Google app for the iPhone, a move that concerned the FCC. Meanwhile, the FTC praised Schmidt's resignation but says it's still probing whether Genentech (RHHBY) Chairman Arthur Levinson's membership on the Apple and Google boards violates competition rules.Pepsi Buys Its BottlersThe deal nearly went flat over several months of haggling. But on Aug. 4, PepsiCo (PEP) CEO Indra Nooyi said the food and beverage giant will pay $7.8 billion in cash and stock for its two biggest bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS). The price represents a 30% hike over Pepsi's original offer. So why does Nooyi want to move into a capital-intensive, low-margin business? Besides $300 million in annual cost savings, she and her team are promising the deal will deliver growth, too. That's critical to Pepsi, which has been having a tough 2009 as the splashy makeover of its Tropicana and Gatorade brands hasn't produced much fizz.
See "Pepsi Gets Back into Bottling"Bain Blocked in ChinaWhen Bain Capital bought into troubled Chinese electronics retailer GOME in June, CEO Huang Guangyu was languishing in police custody, charged with "economic crimes," and he had resigned in January. But that didn't stop him from torpedoing Bain's plan to boost its stake beyond 10%. Huang subscribed to his full allotment of new shares in a rights offering on July 31, maintaining his ownership just above one-third. Bain will still get three seats on the board.Gunning for Novartis?If animal rights militants have it in for the Swiss drug giant, as the company suspects, they're certainly expressing their dudgeon in a bizarre way. The ashes of CEO Daniel Vasella's mother were recently stolen, and his Austrian holiday home was hit by an arson attack on Aug. 3. "Drop HLS Now," a reference to British animal testing outfit Huntingdon Life Sciences, was spray-painted on the graves of Vasella's parents. Novartis (NVS) says it does not work with HLS, and the group that has led the campaign against HLS, Stop Huntingdon Animal Cruelty, denies involvement.