Banking: Europe rescues three shaky banks
Three European governments this week stepped in to prop up failing real estate lenders, said Simon Kennedy in Bloomberg.com. Financial authorities in Britain seized Bradford & Bingley, a bank specializing in apartment-house loans, after it was unable to refinance its debts. The German government lent $35 billion to Hypo Real Estate, Germany’s second largest commercial-property lender, to prevent its failure. And Belgium and the Netherlands bought 49 percent of Fortis, a big real estate lender, to prevent its collapse.
The bank rescues have “raised questions about whether Europe should come up with a shadow version of the bailout deal” like the one taken up by the U.S. Congress, said Matthew Saltmarsh and Landon Thomas Jr. in The New York Times. The need for such a deal could grow in the coming months, as European banks begin to report losses on subprime mortgages and other bad debts. Many banks have denied that they’ve taken big losses, but with global markets in crisis, said analyst Huw Worthington of Barclays Capital, those claims “look somewhat threadbare.”
Consumer electronics: Circuit City spreads the gloom
Electronics retailer Circuit City this week reported a $239 million loss and warned investors that holiday sales could be disappointing, said Andria Cheng in Marketwatch.com. Because of the weak U.S. economy and intensified competition from rival retailer Best Buy, “Circuit City has lost market share and traffic,” causing a plunge in both sales and cash reserves. Acting CEO James Marcum, who last week replaced Philip Schoonover, promised a new marketing campaign “to bolster the company’s holiday performance.”
Medical gear: Cardinal Health gets a makeover
Cardinal Health, a leading maker and distributor of medical supplies, is “changing the way it does business,” said Lisa LaMotta in Forbes.com. Cardinal this week said it would spin off its medical technology business to shareholders, narrowing its focus to surgical gloves and apparel, as well as prescription-drug distribution. The medical technology business, which makes CT scanners, X-ray machines, and other large pieces of medical equipment, “is expected to have revenues of about $4 billion as a stand-alone business.”
Earnings: GE warns on profits
General Electric last week warned of disappointing profits and said it would “clip the wings” of its financial services business, said Paul Glader in The Wall Street Journal. GE told investors to expect third-quarter earnings of 43 cents to 48 cents a share, down from an earlier forecast of 50 cents to 54 cents a share. GE Capital has been hit this year by rising loan defaults and falling real estate prices. CEO Jeffrey Immelt said that the financial unit would scale back its lending activities.
Automobiles: GM commits to hybrids
General Motors said this week that it would build an engine factory in Flint, Mich., offering hope to a region hit hard by car-plant closings, said Tom Krisher in the Associated Press. GM said the 552,000-square-foot plant would build 1.4 liter, four-cylinder engines designed to “extend the range of the Volt,” GM’s new electric hybrid. The plant won’t create any new jobs, but it will give work to about 300 GM employees who would otherwise be laid off. Production is scheduled to begin in 2010.