Is Chrysler about to outsource production of a new midsize fleet to Nissan? That's the scuttlebutt out of Detroit this morning as the Wall Street Journal reports the flagging baby of the Big Three is about to enter "a partnership that would move the U.S. auto maker toward a radical new business model."
Consumer flight away from SUVs and light trucks has hit Chrysler hard. It has just one compact car in its 30-model range, a precarious condition for a company with no overseas market to fall back on. Sales have plummeted about 25 percent this year, prompting the credit markets to question how long privately owned Chrysler can stay in business, says CNN Money. One troubling sign: the company's "finance arm was recently able to raise only $24 billion of the $30 billion it sought." This Nissan partnership makes Chrysler a "marketer and seller of cars made by others," a risky strategy when trying to convince discerning car buyers, says the Journal. But in an auto economy where even Toyota is feeling the pinch, it might be Chrysler's only play.
Freddie Mac set a trend of performance woe that stretched throughout yesterday into this morning with news that Barclays' profits fell by one-third to $5.5 billion, weighed down by subprime impairment charges. Joining a chorus of gloomy chief-exec pronouncements, Barclays CEO John Varley warned it would be wrong "to suggest that the market conditions over the foreseeable future will be anything other than tough," writes the Financial Times.
Squeezed between the Freddie and Barclays reports came news that second-quarter profits for German insurer Allianz fell 36 percent, while U.S. rival and global market leader AIG recorded a $5 billion loss in the same period. With private-equity giants Blackstone and GLG also posting losses and seeing big dents in performance fees, it is perhaps not surprising to hear that "many of the world's biggest banks are proposing reforms that would limit the size and scope of their businesses," as the FT reports. Based on a study by Goldman Sachs managing director Gerald Corrigan, these new proposals would restrict "the number of investors who can buy complex financial products, bring large swathes of the derivatives markets into regulators' sights and call on banks to spend more on technology and risk management."
Here's an admission you don't hear that often. The New York Times reports that Sprint "lost nearly a million customers in the second quarter. But the company says it lost some of them on purpose." The nation's third-largest wireless carrier says it jettisoned less valuable customers as it tightened credit standards. "We are interested in quality, not quantity," said CEO Daniel Hesse, who took heart that Sprint beat admittedly modest earnings targets. But with the company still "churning" hundreds of thousands of customers to rivals AT&T and Verizon, and needing to raise $3 billion to cover its debts, losing any more customers might be considered careless, to paraphrase Oscar Wilde. As Fortune.com put it, Hesse "has his work cut out for him."
Ultimately, companies do need to pay attention to customers' demands. Monsanto has discovered this after failing to foist on the U.S. drinking public milk produced from cows treated with artificial growth hormone. Not that the food giant is admitting as much. It insists that despite putting its Posilic bovine growth hormone business up for sale, demand for the brand remains high. But as the NYT writes, Monsanto's "decision comes as more retailers, saying they are responding to consumer demand, are selling dairy products from cows not treated with the artificial hormone."
Finally, what's an activist investor got to do to get some fair and accurate reporting in today's world of business journalism? If you're Carl Icahn, you go hire your own mainstream media reporter to contribute to your blog. Former Thompson Reuters reporter Dane Hamilton should get up to speed on the Icahn Report pretty quickly. After all, he used to cover his new employer.