GM: Is a deal for Chrysler in the works?
General Motors and Chrysler are discussing a merger that “could drastically remake the landscape of the auto industry,” said Bill Vlasic and Nick Bunkley in The New York Times. The talks between GM and Cerberus Capital, which owns Chrysler, began in September but were first reported last week. If the two companies come to terms, “the ramifications would be enormous.” The combined company would command 35 percent of the U.S. vehicle market.
Analysts are skeptical that a merger would help either carmaker, said Tim Higgins and Katie Merx in the Detroit Free Press. Add one struggling auto company to another, says industry analyst Eric Merkle, and what you end up with “is just a big struggling automaker.” But some analysts say a merger might be the only way GM can significantly reduce its costs. If a deal does go through, Detroit would likely be a loser, as the combined company closes duplicate plants and fires redundant workers.
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Banking: Mitsubishi props up Morgan Stanley
Japan’s Mitsubishi this week invested $9 billion in Morgan Stanley, giving the beleaguered bank “some breathing room as it tries to ride out the credit storm,” said John Spence in Marketwatch.com. But Morgan will pay dearly for Mitsubishi’s support, giving the Japanese company a 21 percent stake and paying Mitsubishi a fat 10 percent dividend. To cement the deal, the U.S. government gave assurances that if it later buys a piece of Morgan Stanley, the value of Mitsubishi’s stake won’t be diluted.
Medicine: Congress questions Medtronic payments
Congress last week launched an investigation into allegations that medical technology firm Medtronic improperly paid doctors to endorse its bone-graft product, said David Armstrong in The Wall Street Journal. Former Medtronic employees say the company promoted Infuse Bone Graft, a manufactured protein that aids bone growth, by sending doctors “on lavish trips to resorts, paying them undeserved royalties, and handing out lucrative consulting contracts that required little work.” Medtronic called the employees’ reports “mere allegations” and said that any payments to physicians ended “years ago.”
Retailing: Luxury stores pinched
The economic slowdown is clobbering high-end retailers and boosting Wal-Mart and other low-price alternatives, said Jonathan Birchall in the Financial Times. Luxury retailer Neiman-Marcus last week posted a 16 percent decline in September sales at stores open a year or longer; Saks Fifth Avenue reported a 10 percent drop. Nordstrom, “which targets a more mainstream affluent customer,” saw sales fall 10 percent. At the other end of the price spectrum, Wal-Mart, Costco, and BJ’s Wholesale all reported higher September sales.
Microchips: AMD unloads its plants
Chipmaker Advanced Micro Devices announced last week it would spin off its manufacturing operations into a new joint venture with the United Arab Emirates, said Ed Sperling in Forbes.com. AMD is known for its manufacturing prowess, but with the cost of a new chipmaking plant hovering “somewhere in the neighborhood of $4 billion,” owning a plant “is now too expensive for all but a handful of companies.” Like rivals Texas Instruments and STMicroelectronics, AMD will focus on chip design and leave manufacturing to outside contractors.
