Bank of America: Lewis quits under pressure
“Fed up with the criticism that haunted him following the takeover of Merrill Lynch,” Bank of America CEO Kenneth Lewis has announced he will step down at year’s end, said Dan Fitzpatrick and Joann Lublin in The Wall Street Journal. Lewis, 62, has been under mounting pressure since the $50 billion Merrill deal was consummated; only after the transaction closed did BofA admit that it paid out $3.6 billion in bonuses to Merrill employees, despite the firm’s massive losses. The BofA board is now frantically seeking a new CEO, interviewing internal candidates and hiring a recruiter to round up outside candidates.
From his base in Charlotte, N.C., Lewis built BofA into America’s biggest commercial bank, said Daniel Gross in Slate.com. But he longed to conquer New York investment banking. Instead of vaulting BofA into investment banking’s top ranks, though, the Merrill deal forced Lewis to seek $45 billion in federal bailout assistance. To make matters worse, New York Attorney General Andrew Cuomo has threatened a civil suit over the bonuses. In the end, Lewis was just “another out-of-towner who had been pickpocketed near Times Square.”
Publishing: Gourmet to fold
Condé Nast said this week it would shut down Gourmet, “a magazine of near-biblical status in the food world,” said Stephanie Clifford in The New York Times. For months, speculation has been rampant in publishing circles that Condé Nast would close either Gourmet or its in-house rival Bon Appétit, but “most bets” were that Bon Appétit would get the chop. Condé Nast, which has suffered from a sharp decline in advertising revenue, also said it would close Cookie, a magazine for parents and children, Modern Bride, and Elegant Bride.
Autos: Saturn runs out of time
General Motors announced that it will close its Saturn division, after Penske Automotive Group abruptly ended talks to acquire the carmaker’s dealer network, said Sharon Terlep and John Stoll in The Wall Street Journal. Penske pulled out of the GM deal when it failed to secure a related agreement with France’s Renault; Penske was hoping that Renault would supply autos for its dealers after Saturns were no longer available. The brand’s sudden collapse “puts at risk 13,000 more jobs in the auto sector.”
Retailing: Instant Starbucks, anyone?
After two decades of “tinkering,” Starbucks has introduced its own instant coffee, dubbed Via Ready Brew, said Susan Berfield in BusinessWeek. Company founder and CEO Howard Schultz says Via, which will be sold at the company’s own stores as well as at selected retailers, is key to reviving Starbucks’ stalled sales growth. “Most coffee drinkers outside the U.S. use instant—a $20 billion global market with no Starbucks presence.” Schultz says he has served Via to friends “on the sly,” and that no one guessed it was instant.
Financial services: CIT’s last-ditch appeal
Hard-pressed small-business lender CIT has presented its creditors with a plan to modify up to $29 billion in debt, said Dakin Campbell in Bloomberg.com. CIT is asking holders of unsecured debt to swap it for preferred stock and secured debt. If they refuse, the company warns, it will file for bankruptcy, possibly wiping them out. CIT, which funds its lending operations with short-term borrowing, has been frozen out of credit markets since last year.