Detroit: GM-Chrysler deal in peril
The U.S. Treasury Department this week rejected General Motors’ request for a $10 billion loan to finance its acquisition of Chrysler, jeopardizing the deal, said Justin Hyde and Tim Higgins in the Detroit Free Press. Chrysler and its suppliers would likely shed 90,000 jobs if the merger went through, and “Treasury is skittish about the idea of pumping billions of taxpayer dollars into a merger resulting in tens of thousands of job losses.”
The companies haven’t given up on federal aid, said Bill Vlasic and Micheline Maynard in The New York Times. But now they’ve turned to the Energy Department, which has $25 billion to lend to Detroit to fund development of energy-efficient cars. “Getting the loans will allow G.M., Ford, and Chrysler to redirect money already budgeted for cleaner cars” to other uses, including a possible merger. The Bush administration is eager to speed up the loan program, but some officials are reportedly reluctant to make any major new funding commitments this close to the end of their time in office.
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Aerospace: The Boeing strike is over
After billions in losses, Boeing last week settled the strike by its machinists union, said Rory Marshall in The Seattle Times. The walkout “clipped profits and stalled deliveries by the world’s No. 2 commercial airplane maker.” The strike, which began Sept. 6, cost Boeing an estimated $100 million a day in lost production and deferred deliveries to customers. The machinists’ new contract “protects more than 5,000 factory jobs, prevents the outsourcing of certain positions, and preserves health-care benefits.”
Consumer electronics: Circuit City closes stores
Beleaguered electronics retailer Circuit City said this week it would immediately close 155 U.S. outlets, about 20 percent of its stores, said Miguel Bustillo in The Wall Street Journal. It has also hired a bankruptcy advisor “as it struggles to survive an increasingly dreary holiday shopping season.” Circuit City has been losing market share to Best Buy for years. The erosion accelerated in 2007 after Circuit City laid off 3,400 of its most experienced sales staff in a cost-saving move.
Soft drinks: PepsiCo bets big on China
PepsiCo said this week it would invest $1 billion in China over the next four years to expand manufacturing capacity, develop new products for the Chinese market, and hire new sales reps, said Joseph Woelfel in TheStreet.com. Pepsi’s investment is “its largest in China in the nearly 30 years the company has been doing business in the country.” Pepsi has been aggressively building its presence in the so-called BRIC countries—Brazil, Russia, India, and China—where sales are growing rapidly, unlike in the U.S.
Banking: JPMorgan to rewrite mortgages
JPMorgan said last week it would modify the terms of more than 400,000 mortgages to prevent foreclosures, said Robin Sidel in The Wall Street Journal. The modified loans would carry “lower interest rates, smaller principal amounts, or other more-affordable terms.” Morgan’s top priorities are so-called negative-amortization loans, which are “structured in such a way that the borrower’s outstanding balance sometimes grows month after month.” Morgan inherited $54 billion of such loans when it acquired failing Washington Mutual in October.
