The news at a glance

Air France–KLM: Buying Alitalia for a song; Forest products: Weyerhaeuser shrinks, IP bulks up; Private equity: More riches for Blackstone’s partners; The economy: Factories fall idle; Autos: Chrysler’s mandatory summer vacation

Air France–KLM: Buying Alitalia for a song

Struggling airline Alitalia agreed to be acquired by Air France–KLM for a bargain-basement price of $216 million, said Kevin Dome and Guy Dinmore in the Financial Times. Air France–KLM has pledged to inject $1.5 billion of fresh capital into Alitalia as soon as the deal is completed. “The bid is a high-risk move for Jean-Cyril Spinetta, chairman and chief executive of Air France–KLM, given Alitalia’s long record of heavy losses and strikes and its reputation as the ‘sick man’ of European aviation.” But Spinetta believes his “restructuring plan could return Alitalia to operating profit as early as 2009.” The deal requires the approval of Alitalia’s unions and the Italian government.

That approval is by no means guaranteed, said Liam Moloney in The Wall Street Journal. The unions, which were not represented at the sale negotiations, fear a buyout will be quickly followed by massive layoffs. And some northern Italian politicians are balking at Air France–KLM’s plans “to dramatically reduce Alitalia’s presence at its Milan hub, Malpensa, and concentrate operations in Rome.”

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Forest products: Weyerhaeuser shrinks, IP bulks up

As part of a dramatic downsizing, Weyerhaeuser this week concluded a deal to sell its containerboard, packaging, and recycling business to International Paper for $6 billion in cash, said Robert Daniel in Marketwatch.com. Weyerhaeuser “has been taking a number of steps to increase its competitiveness and boost returns,” including closing plants and mills and exploring the sale of various divisions. For International Paper, “the deal expands its business in the U.S. and Mexico and diversifies its customer base.”

Private equity: More riches for Blackstone’s partners

They haven’t closed a deal in five months, but the private-equity kingpins at Blackstone Group are still raking it in, said Peter Lattman in The Wall Street Journal. Although the firm’s profits fell 89 percent last year, to $88 million, Blackstone head Stephen Schwarzman nonetheless collected $350 million in 2007, down only 12 percent from 2006’s haul. “A significant portion” of Schwarzman’s take represents his share of future investment

profits. He might have to return some money if those profits

don’t materialize.

The economy: Factories fall idle

U.S. industrial production fell sharply in February, in part because warm weather reduced power demands on electrical utilities, said Robert Schroeder in Marketwatch.com. Overall, industrial output fell 0.5 percent in February, well more than the 0.2 percent decline forecast by analysts. Strong export activity, helped by the weak dollar, partially offset anemic U.S. demand. “Things could be better,” said analyst Ian Sheperdson of High Frequency Economics, “but the industrial economy is, for now at least, holding up much better than in previous early-stage recessions.”

Autos: Chrysler’s mandatory summer vacation

Chrysler Motors will virtually shut down for two weeks in July, said Tim Higgins in the Lansing, Mich., State Journal. “It is common for automakers to shut down plants in July, but this effort would also affect salaried workers,” who will be required to take two weeks’ paid vacation. Chrysler CEO Bob Nardelli defended the arrangement in a message to employees. “A willingness to try something new has proven to be an important catalyst as we transform into the New Chrysler,” Nardelli said.

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