Lyft and Waymo = Carpool; Bud Spending $2 billion to Up Its Game; AIG Bets Big on Latest CEO

Self-less…

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In case you were having trouble envisioning a world with driverless cars, you might want to check out Alphabet Inc.’s company Waymo. Waymo, a self-driving car company,  has just teamed up with Lyft, and that should be enough to make Uber more than a little nervous. You might be wondering why a company owned by Google even needs a much smaller company like Lyft for a partnership. But believe it or not, there’s a little quid pro quo going on because since Lyft has the dubious distinction of being the second largest ride service company, it will allow Waymo’s technology to reach even more people than without it. Isn’t that just beautiful? Uber, on the other hand, is looking to develop driverless technology on its own. If you recall, Waymo sued Uber back in February, alleging that Uber stole Waymo’s self-driving technology to build its own fleet.  But with the way things are going for Uber lately, it might be more prudent for the embattled ride-sharing company to focus on its current crop of legal and publicity challenges instead of driverless cars. For the time being anyway.  By the way, Lyft’s deal with Waymo is not exclusive. Which is super important considering that GM is a big Lyft investor and already has its own partnership in place to develop self-driving cars. It’s like legit double-dipping and everybody wins. In fact, come 2018, Lyft and GM will be set to deploy and test thousands of self-driving cars. Yikes!

Competitive beer…

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It might be hard to believe but the King of Beers is not looked upon as the royalty it once was. And so, its parent company Anheuser-Busch InBev NV is plunking down $2 billion to try and fix that issue. The plan is to make a substantial, lucrative foray into new categories, while at the same time boosting its flagship brands which have been staring down the wrong end of increased competition.  The money will be spent over the next four years, using approximately $500 million per year. In case you were thinking that $2 billion seems like an awfully bloated  – no pun intended – number to spend on improving a beer brand, consider that beer is a more than $107 billion industry and no self-respecting beer company wants to lose ground in a market like that.  And make no mistake, beer has been losing ground lately with not as much of it being consumed like in years past. Hard to believe. I know, but various types of other alcoholic beverages have been flooding the market in recent years and consumers are digging them. Which leaves companies like Anheuser-Busch scrambling to reclaim its foamy territory.

No pressure or anything…

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Maybe the seventh time’s a charm for AIG, which just announced it’s coughing up $12 million – and then some – to pay its newest CEO, Brain Duperreault. By “then some” I refer to an additional 1.5 million stock options and a $16 million pay package all based on the hope that Duperreault will finally be the one to turn AIG around. Did you catch that? He’s getting all that and he hasn’t sat at his new desk yet. The last CEO, Peter Hancock, left in March because he wasn’t feeling the love, or rather investor support, including from the one and only Carl Icahn. But Brian Deperreault just might have what AIG’s been looking for all these years, well at least since 2005. He’s no stranger to AIG, having worked there as a deputy way back when. He’s coming over from Hamilton Insurance, and before that he was at Marsh & McClennan Cos. earning solid reputations at both firms. As for his first order of business: achieve stability in a company that has seen too many high-level departures, four straight quarters of losses and high claims costs. Good luck with that one, Mr. Duperreault. You’re gonna need it.

Choo On This: Luxury Shoe Brand Not in Step with Coffee; Jack Ma Isn’t Feeling the Automation Love; Supreme Court to GM: Too Bad For You

Well-heeled…

Jimmy Choo

Luxury shoe brand, Jimmy Choo, will be getting a new owner now that JAB Holding Co. has decided that the company, wants to focus on its more carb/caffeinated brands. And who can blame the billionaire Reimann family that controls Jab. In the last few years, the company spent billions picking up various other food and beverage entities in the form of Krispy Kreme and Panera Bread, and well, 125 millimeter stilettos don’t really go so well with the stuff that carb dreams are made of. But Jimmy Choo may prove to be a very tempting company to a lot of potential buyers. While a pair of Jimmy Choo’s, whose fashion stock soared thanks to Carrie Bradshaw and “Sex and the City”,  may not hold the same appeal as a fresh hot donut – well, to some anyway – the fact is that shares of the luxury goods company are up 44% since the company’s debut back in October of 2014. JAB had the good business sense to pick up the iconic shoe company for 500 million pounds back in 2011. Revenue for 2016 increased over 14% to $465 million with a 43% profit increase to $54.4 million. Wall Street also digs the idea of a sale as shares of Jimmy Choo, which are traded in London, rose over 10% today.

The Jetson’s it ain’t…

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In case you were in the mood for a downer, then turn your attention to Alibaba founder and chairman, Jack Ma. During a conference hosted by the China Entrepreneur Club, Ma suggested that the future will suck. Because of robots.  He’s convinced that in the next thirty years, “the world will see much more pain than happiness.” Ma expects our automated companions to take over the workplace which might mean fewer work days but also fewer positions that require actual human attention. And the watercolor talk will be decidedly less entertaining. In fact, Ma is convinced that within thirty years, a robot will eventually grace a Time Magazine cover for being the “best CEO.” So if you think your boss has no personality now, just wait. And before you go calling Ma overly-dramatic, consider that according to the World economic Forum, it is estimated that there will be a net loss of 5 million jobs across 15 major economies thanks to automation. Sure technology is great, as long as it’s not taking over your paycheck.

Well at least they tried…

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GM tried to get the Supreme Court to block hundreds of lawsuits over its faulty ignition switches that could end up costing the automobile company billions. But the Supreme Court said no dice and the lawsuits can proceed. The reason: The company’s 2009 bankruptcy. If you recall, those faulty ignition switches were responsible for 125 deaths and more than twice as many injuries. More than 2.5 million vehicles were recalled and $2.5 billion worth of settlements dished out. GM knew about the problem before the bankruptcy so technically, it’s on the hook, since it could have just as easily notified all the owners of the vehicles that had the problem. Of course, that decision did not sit well with GM and a spokesperson said as much saying the appeal “was not a decision on the merits…” Amazingly enough, the appeal denial didn’t even freak out Wall Street – this time anyway – as shares actually rose today, albeit slightly.

VW’s China Redemption; Fitbit Numbers Way too Skinny; Deal Drama: Walgreens/RiteAid vs. Regulators

Emissions Scandal? What Emissions Scandal?

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Volkswagen is in the news yet again. And this time it has nothing to do with poisoning the air we breathe. I know. Hard to believe, right? VW is making headlines because it has been crowned the world’s largest automaker, easily besting Toyota, after reporting that it shipped 10.3 million cars in 2016, a 3.5% increase from the year before. Toyota only managed to sell about 10.2 million cars, giving it just a .2% boost over the previous year. T’was a brutal blow dealt to Toyota’s ego – not that it’ll never admit it – since the Japanese automaker held that top spot for seven out of the last eight years.  Toyota says it’s not concerned with being in in the number one spot as long as it’s making good cars.  Toyota definitely makes good cars but I doubt anybody would believe that it’s not itching to reclaim the top spot next year. So what part of this great big planet was scooping up all those VW’s that helped the German automaker earn this dubious distinction? It certainly could not have been in the United States, where the car company isn’t exactly popular following “diesel-gate” and the on-going saga we call the “emissions scandal.”  Well, look no further than China, which stands as the primary reason for VW’s fiscally historic achievement, despite the negative sentiment against it in the rest of the world. It’s not that China is a smog-loving country filled with emission worshippers. However, it must have helped that VW sold almost no diesel cars to the country. Which probably explains the country’s on-going enthusiasm for Volkswagen. The Chinese just really dig VW’s. And in case you were wondering, GM rounded out the third spot. In fact, GM used to regularly claim the top spot, but along came 2008 and burst that bubble when the US carmaker faced the wrong end of bankruptcy and a federal bailout.

Fit to be tied…

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Fitbit is looking anything but fit these days as the company released a preliminary earnings report, ahead of its February date, showing that the hype for its wearable devices is wearing…thin. For the full year Fitbit expects to pull down revenue for 2017 between $1.5 and $1.7 billion, and is expecting a reorganization to cost approximately $4 million. That reorganization, by the way, involves getting rid of about 110 jobs, or roughly 6% of its workforce. The company has been struggling to find ways to keep sales momentum for the wearable device. CEO James Park is hoping to turn Fitbit into a bona fide digital health company. And that’s a noble endeavor, indeed. However, that plan could literally take years that Fitbit may not have.  The company had slashed forecasts for the holiday season, but a move like that never ever bodes well. Competition from Apple, not to mention companies offering cheaper alternatives, have put a major damper on Fitbit’s sales, with 6.5 million devices sold during the fiscally critical holiday season. Apparently, that number just wasn’t good enough and the data only gets worse. Fitbit is reporting estimated revenue of between $572 million to $580 million. While that number might seem respectable, it’s actually disastrous, if only because the company had initially predicted that it would pull down as much as $750 million in revenue, with analysts forecasting $736 million. As for growth, Fitbit can now expect that figure to come in at around 17%, when initial expectations had been closer to 25%. As for shares, they didn’t just fall – they plummeted. They plummeted the most in three months, hitting its lowest intraday price. Ever.

Deal or no deal…

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A deal has finally been struck between RiteAid and Walgreens. Again. If you recall, and it’s okay if you don’t, this deal has been in the works for the better part of fifteen months. Apparently, RiteAid’s new price tag is now coming in at $2 billion cheaper than its previous $9.4 billion price tag, and the official deadline for the deal has been extended as well. The deal was supposed to have closed back in 2016. But, details, mostly those involving regulatory approval, still need to be hammered out. So now, the new official deadline is July 31. In order for the deal to go through, Walgreens needs to sell off stores in certain regions where competition issues might complicate matters. The company needs to dump between 1,000 and 1,200 stores, but at least it will now only have to shell out between $6.8 billion and $7.4 billion, or roughly $6.50 to $7.oo per share, depending on the amount of stores it ultimately sells.  Once those are sold off, regulatory approval should come swiftly. Naturally, shares of RiteAid took a nasty tumble once investors realized they were losing significant bang on their mega bucks.

GM Invests in US. Trump Takes All the Credit (Again); Tiffany & Co. Credits Trump for Quarterly Loss; No Trump-ing Mattel with New CEO

Pressure cooker…

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GM just announced that it is throwing a whopping $7 billion into several of its U.S. plants in order to bring back thousands of jobs, in addition to the 56,000 hourly workers it already employs here. Naturally, Trump is taking credit for these actions and it’s kind of weird that he would since GM said these plans were already in place for months. Who you choose to believe doesn’t matter because Trump already tweeted about it:”With all of the jobs I am bringing back into the U.S. (even before taking office), with all of the new auto plants coming back…I believe the people are seeing ‘big stuff.'” Nothing says POTUS quite like the term, “big stuff.” But just so you know, GM didn’t exactly deny that Trump didn’t have something to do with its newly announced plans either. Although, General Motors did mention something to the effect of “this was good timing.” Feel free to read into that however you want since it’s no secret that Trump was gunning for GM over its manufacturing of the Chevy Cruze south of the border, and then bringing it back into the country tax-free. Incidentally, GM CEO Mary Barra is part of a panel of CEOs who are advising Trump on economic policy. Also incidentally, Mary Barra is expected to attend the President-elect’s inauguration.

Good fences?

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Guess who else is not happy with Trump? Okay, I guess that list is kind of long so I’ll just tell you: Tiffany & Co. The jeweler, which happens to own a flagship store that is adjoined to Trump Tower, reported a 14% drop in sales at that very store on Fifth Avenue. To be fair, the iconic jeweler was expecting a drop thanks to Trump. Only this one was worse than expected, citing “post-election disruptions.” Roughly translated, that means that in addition to the many many anti-Trump protesters, potential shoppers also had to contend with heightened security, courtesy of the secret service and NYPD, not to mention journalists and hoards of tourists eager to see if they could catch a glimpse of the President-elect. So just how bad were Tiffany & Co.’s sales? Well, in the US, those numbers only came in at $483 million, with comparable store sales down 4%.  And the luxury retailer isn’t very hopeful about those numbers going up in 2017.  But because Trump isn’t everywhere, global sales of Tiffany & Co. came in at $966 million, which was just a tad bit higher than last year at this time.

Don’t toy with her…

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Barbie is getting a new boss as Mattel gears up for its second CEO since 2015. Enter Margaret “Margo” Georgiadis, whose last gig, for the past six years, was over at Google. She was President of Google Americas and oversaw commercial operations and ad sales for the U.S., Canada and Latin America. So, it’s safe to say she’s (over?) qualified for the job. She is among just 27 top ranking female executives at Fortune 500 companies. Georgiadis, who also worked at Groupon and Discover Financial Services, begins her role at Mattel on February 8, where she will also sit on the board of the company. She’ll be tasked with coming up with new, and hopefully ingenious ways to boost sales in a climate that has kids hypnotized by mobile devices. Unfortunately, these nefarious electronic gadgets have been putting a dent into the sales of not only Mattel, but Hasbro and Lego as well. However,  given that Georgiadis has a reputation for successfully building brands, boosting sales of Fisher-Price, Hot Wheels and the American Girl line should be easy as pie. Well, hopefully.

Trump Tweets Threats of Big Taxes to GM Over Small Cars; Ford Rearranges Plants Much to Trump’s Delight; Trump’s Trade Pick China’s Worst Nightmare?

Small-fry…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Trump is tweeting again, this time going after General Motors. The President-elect wants to slap some big ugly taxes on the auto company because it imports Chevrolet Cruzes from Mexico instead of making them in the United States. But here’s where things get dicey: According to GM, only the hatchback version of the car is made in Mexico, and are meant for global distribution. The sedans, however, are made in Ohio. Ohio. In fact, of the 172,000 Cruzes sold last year, only 4,500 of them came from Mexico.  Even the United Auto Workers Union doesn’t care if GM does assemble those cars in Mexico since the Ohio factory isn’t equipped to make the hatchbacks. (Incidentally, over 1,000 employees at this plant are getting laid off soon.)  Besides, it’s alot of fuss to make about a car whose sales were down 18% in November.  The fact is, low gas prices are leading to higher sale of of SUV’s and trucks.  And the Chevrolet Cruze doesn’t figure in very nicely here.  Which all probably explains why this latest Trump tweet didn’t even harm the stock.  While it did lose some juice early on, it rebounded into positive territory very very quickly.

Adios…

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In the meantime, just hours after Trump used his social media account to lash out at GM, Ford announced that it is officially scrapping plans to build a $1.6 billion assembly plant in Mexico. But that doesn’t mean its ditching our neighbor to the south. Instead, Ford will continue making Ford Focus compact cars in an existing plant there while taking $700 million from that budget to upgrade a plant in Michigan for building electric cars. And bonus: 700 jobs would be added to the mix for that Michigan plant. It’s all part of a bigger $4.5 billion plan that Ford had in place to manufacture 13 new models of both electric and hybrid cars. A win-win, no?  There are plenty who think it’s just a win for Trump, who made it clear that he’s not into NAFTA and that manufacturing cars in Mexico only hurts the U.S. economy.  They also think Fields scrapped his original plans in an effort to make nice with the incoming President, not to mention, avoid tariffs. However, Fields said he was planning to make this move anyway, whether Trump was elected or not. Which doesn’t explain why construction on the new plant already started in May. But anyway, you needn’t cry for Mexico…just yet. The existing plant in Mexico will be adding 200 jobs there as well, so that country doesn’t come out a total loser either. While shares of Ford rose on the news today, can you guess what happened to the peso? It took a .9% hit against the dollar.  How do you say “ouch” in Spanish?

In other Trump business news…

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The President-elect has set his sights on his pick for the U.S. Trade Representative post. Enter Robert Lighthizer, a Reagan administration alum, who has spent the last thirty years representing major companies in anti-dumping and anti-subsidy cases. Presumably, he was incredibly successful in that aspect of his career, or else Trump might not have looked in his direction.  According to Trump,  Lighthizer has made some very effective deals that protected significant sectors and industries in the U.S. economy. Yowza. Trump’s banking that Lighthizer will do something about “failed trade policies which have robbed so many Americans of prosperity.” That’s a definite plus for working in the Trump administration. As Trump’s top trade negotiator, one of Lighthizer’s major duties will be to try and reduce that pesky trade deficit and apparently, he has a knack for making deals that do just that. Lighthizer doesn’t care for the trade policies we have in place for China, so be sure to watch the drama that unfolds as he goes after one of the world’s largest economies. You can expect some big changes in that arena and damned be the Word Trade Organization rules if it comes to that. Which it just might considering Lighthizer’s not that into the WTO.

Debt Collectors Are on the Hook Now; Oracle Pays Big for NetSuite; VW’s Surprising Return to the Top of the Heap

Karma time…

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The tables are turning on debt collectors and after forty years it’s about time. The Consumer Financial Protection Bureau (CFPB) has got big plans that involve some major federal oversight for an industry that has plagued tens of millions of Americans for decades. In 2015, the CFPB received a mind-blowing 85,000 complaints against the industry. So you might just find it comforting to know that debt collection agencies had to pay $136 million to the CFPB and several states over debt collection issues and sales of credit card debt. Now, before debt collectors make their first, sometimes-harrassing, phone call, they are required to substantiate the debt and gather information so as not to try and collect anything that they are not entitled to collect. Speaking of harassment, the industry will need to put the kibosh on their “excessive and disruptive” debt collection tactics or face consequences. Consumers will now even be able to request that debt collectors not contact them at work or during certain hours. Debt collectors will also be required to wait thirty days before contacting family members of a deceased consumer from whom they wish to collect. Some of the 9,000 debt collection agencies are pleased with the new regulations because they feel they will clear up ambiguities. But these are, after all, debt collectors we are talking about, and they are primarily concerned with how their costs will go up for compliance. However, they can probably afford a few upgrades given that the industry sees $13.7 billion in annual revenue with about 70 million Americans in the throes of debt collection. You see, sometimes there are happy endings. Sort of.

Silver lining…

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Oracle is throwing down some major cash to pick up cloud computing business, NetSuite. Not that industry experts are particularly surprised. After all, Larry Ellison and his family already own about 40% of NetSuite shares. The deal is valued at $9.3 billion, which comes out to approximately $109 per share with a 20% premium on Wednesday’s closing price.  Larry Ellison will get about $3.5 billion out of it. So no doubt he’s celebrating. It’s one of Oracle’s biggest deals, with one just other ahead of it. NetSuite, which was founded in 1998,  supplies cloud-based business management services for about 30,000 companies in 100 countries. The company is touted as having paved the way for cloud-based computing and was the first company to offer business web-based applications. But the time now was ripe for some change and NetSuite apparently needed a little assistance from Oracle and its global reach to grow even greater. The official press release touted the companies as complementary to each other and that they will coexist in the marketplace forever. And that is just a beautiful and moving sentiment. Naturally, shares of both NetSuite and Oracle rose today, and why shouldn’t they. When the tide is high, all boats rise.

Winner winner…

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Diesel-gate be damned. Volkswagen is now the world’s largest automaker and there’s nothing you can do about it but scratch your head and drop your jaw. Even though sales in the U.S. continue to slump – though not as bad as you might think  – the German automaker sold more cars in the first six months of 2016 than Toyota, who is used to holding the title of world’s largest automaker. Volkswagen was poised to earn the title for the full year except the unfortunate emissions scandal put the kibosh on that goal. For four years in a row, Toyota was the world’s best-selling automaker through 2015. So it’s ego is probably feeling a bit bruised right about now. GM is in third place and experts don’t think it’ll ever win the top slot. Volkswagen sold 5.12 million cars to Toyota’s 4.99 million vehicles. Toyota’s sales were down by .6% over the same period last year while Volkswagen’s sales were miraculously up 1.5%.  To be fair, an earthquake in Japan damaged one of Toyota’s plants and that incident is being blamed for its shortfall in production. But apparently U.S. consumers seem to be more offended by the emissions rigging than the rest of the world with falling U.S. sales by 7%. However, the U.S. is a relatively small market for VW who counts Europe and China as its key markets. The question, though, remains if VW can keep it up and reclaim some glory.

 

 

Game on Oprah! John Oliver’s $15M Giveaway; Fortune 500 Companies’ Latest Surprises; Burberry Boss Paycheck Getting a Whole Lot Smaller

New queen of daytime…

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Move over Oprah. John Oliver just achieved god-status in the television talk show realm after buying nearly $15 million in medical debt and then forgiving it. Poof. Just like that. On his latest show “This Week Tonight with John Oliver,” the talk-show host took on the debt collecting/buying industry, which can be dubbed “shady” at best. Oliver said, “It is pretty clear by now (that) debt buying is a grimy business, and badly needs more oversight, because as it stands any idiot can get into it.” So John Oliver did “get into it,” and spent just $50 to start his very own debt collection company called Central Asset Recovery Professional aka CARP. It’s no coincidence, he pointed out, that the company is named after the bottom-feeding fish. Oliver’s company was almost immediately offered close to $15 million in medical debt from 9,000 Americans, social security numbers, names and addresses included, for just half a cent on the dollar. In case you were wondering, that came out to about $60,000. Then, with the simple push of a red button, John Oliver, forgave the debt, presumably with funds from his own bank account. But most importantly, Oliver easily trumped Oprah Winfrey’s 2004 television giveaway, when she gave out $8 million worth of cars to 276 audience members. And he didn’t even do it for ratings. Sort of.

Rank and file…

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Fortune Magazine’s annual list of the biggest 500 companies by revenue for fiscal 2015 is out and it was Netflix that was making big waves this year. The video streaming site, which launched in 130 new countries in January, and was the top fiscal performer for 2015, ticked up 95 spots to the 379th spot. However, while the climb was quite impressive, there are still 378 companies that rank higher than Netflix. Rounding out those top spots are Walmart, ExxonMobil, Apple and Berkshire Hathaway. No big surprises there. Apple, by the way, which moved up to two spots from last year’s fifth place, was the most profitable company on the list, earning $53 billion for fiscal 2015. Companies including GM, Ford and AT&T also cracked the top ten with Amazon landing at number 18 and Walgreens following close behind at number 19. Microsoft managed to crack the top 25 for the first time ever as Facebook climbed 85 spots this year to claim its 157th ranking. Interestingly enough, more than half of the companies on the list saw a drop in sales, with energy companies taking the biggest beating of all.

Pay raze…

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The CEO of Burberry Group PLC, Christopher Bailey, will now have to switch to generic brands when he goes grocery shopping. After failing miserably to post respectable earnings results, the dapper exec will watch as 75% his paycheck vanishes into thin air. The CEO, who also serves as the Chief Creative Officer – and herein, might lay the problem –  will earn a paltry $2.74 million this year, a far cry from the $10.8 million he scored last year. Shareholders are also withholding his bonus for missing profit targets. That might seem a bit harsh, but shareholders in hundreds of companies are getting fed up with massive executive salaries that are completely at odds with results. Bailey, however, is not the only executive at the company who will be experiencing the fiscal wrath of the Burberry shareholders. Executive directors at the fashion house will also be stripped of their bonuses this year, because after all, it’s not like Bailey was solely responsible for shares of Burberry taking a 35% hit in the last twelve months. Burberry has announced that it will implement a cost-cutting plan – that has little to do with Bailey’s pay cut – in addition to a share-buyback program. Prudent moves when a companies reports disappointing fiscal earnings. But the earnings may not be entirely Bailey’s fault. Consider that 40% of Burberry sales come from the Chinese, who are in the midst of their own fiscal woes.