United States of America

GM’s good cheer is likely to run out of gas

11 January 2019

Mary Barra juiced the $50 bln automaker’s shares by forecasting 10 pct earnings growth. That pierced the gloom that tariffs, slowing sales and self-driving skepticism have cast over Detroit’s annual show. But relying on cost cuts and new trucks makes profit gains hard to sustain.

Holding: U.S. watchdog is in denial about denials

11 January 2019

As a condition of settling cases, the SEC typically bars alleged wrongdoers from later claiming innocence. This arguably violates free-speech protections. If a lawsuit challenging it succeeds, the financial regulator may finally have to start – gasp! – proving its charges.

Guidance is a two-way street with Fed and markets

10 January 2019

Jerome Powell says the U.S. central bank will be patient in weighing new rate moves. Previous hawkish comments unsettled investors, helping tank stocks last month. The two are learning to read each other, but a data-dependent message may get tricky if the economy starts to turn.

Viewsroom: High anxiety hits SoftBank’s vision

10 January 2019

Rising rates, lower oil prices, wobbly markets and the backlash against Saudi Arabia could put Masa Son’s $97 bln fund on the spot this year. Elsewhere, some Indian tech startups may take the world by storm. Plus, Breakingviews picks three indicators to monitor the world economy.

Investors stop giving U.S. retailers an inch

10 January 2019

Macy’s shares fell by nearly a fifth after weak December sales prompted it to cut forecasts. Target and Kohl’s also felt the downdraft despite more upbeat numbers. Online disruption and the decline of old stalwarts Sears and J.C. Penney have made investors justifiably jittery.

BlackRock is too passive on diversity goal

10 January 2019

The latest top-level promotion suggests a Mark or a Rob will succeed boss Larry Fink. The $6 trln asset manager aims to have women in 30 pct of its most senior jobs by 2020. For now, it’s falling far short of that. It’s a case where good stewardship best starts at home.

Ford’s European repair job may need outside help

10 January 2019

If boss Jim Hackett hits long-term profit targets, the carmaker’s market value could rise by $10 bln. Yet that requires implausible cost cuts. Partnering with or selling to a continental rival might be better. Peugeot’s purchase of GM’s European arm shows both sides can benefit.

U.S. shutdown’s market casualties pile up

10 January 2019

The SEC is operating on a skeleton staff. Would-be public companies like Uber face delayed IPOs. Seasoned firms have to make more guesses about how to comply with laws. And all but the most pressing fraud gets a pass. All three could quickly store up trouble for later.

PetSmart shows lenders need more bite than bark

9 January 2019

Apollo Global helped finance the private-equity-owned company, only to see it transfer part of a key subsidiary to owner BC Partners as a dividend. Now Apollo is suing to get the assets back on leash. Lenders would do better to insist on much tighter covenants from the get-go.

Trump’s crisis powers are a Pandora’s box

9 January 2019

The U.S. president may yet try to bypass Congress to build a border wall by declaring a national emergency. In theory, similar authority could enable him to close CNN or block Facebook. Such scenarios would be tested in court. But there’s leeway, and only lawmakers can reduce it.

Constellation finds pipe dreams and debt don’t mix

9 January 2019

Higher costs and slower shipments hit the Modelo brewer’s earnings. The real driver of value ought to be its 38 pct stake in weed grower Canopy. But valuing its future potential is nigh impossible – whereas the debt Constellation used to fund its cannabis punt is all too real.

U.S. shutdown is bad omen for bigger fiscal battle

8 January 2019

The partial government closure sparked by President Donald Trump’s insistence on border-wall funding hurts some federal workers. But its economic impact will probably be minimal. The real danger comes if the dispute infects looming discussions about the U.S. debt ceiling.

WeWork needs path to profit, not enlightenment

8 January 2019

The cash-burning office-share outfit – now “The We Company” – wants to “elevate the world’s consciousness.” SoftBank is investing $2 bln more, some at a notional $47 bln valuation. But that’s far less than mooted. Broadening its ambitions as backers shrink theirs is risky.

GE aircraft-leasing sale would be $40 bln moonshot

8 January 2019

Buyout firm Apollo may bid for the best bit of GE’s finance arm, testing CEO Larry Culp’s commitment to decluttering the U.S. conglomerate. Unless he can get a knockout price, though, selling a crown jewel could leave Culp looking like he’s out of options.

Guest view: Banks need a culture shock

8 January 2019

Conduct failures from Wells Fargo to Goldman Sachs to Danske Bank have damaged trust in banking, and can have a serious impact on profitability. Reforming bank culture to avoid scandals requires changing behavior and attitudes. It’s a tough job - one that has to start at the top.

SoftBank-WeWork mess exposes cracks in Vision Fund

8 January 2019

Masa Son’s main partners have balked at pouring more cash into the office-space provider, according to the FT. That undermines the idea of him as a visionary tech investor. It also makes it harder for the $97 bln vehicle to negotiate future deals – or set up a second fund.

Activist too quick to take an ax to Dollar Tree

7 January 2019

Pushy investor Starboard wants control of the $23 bln low-price retailer’s board, and could push for a sale of its Family Dollar chain. Dollar Tree has underperformed peers. But Starboard, which only has 2 pct of the stock, may do better holding tight and waiting for a downturn.

World Bank could be a new stick to beat China

7 January 2019

Jim Yong Kim has quit as head of the global lender, and the White House has a big say on his replacement. American officials had already pressured the bank to lend less to China and warned about Beijing’s influence. A hawkish new boss could create a new front in the trade war.

Wall Street’s new bourse effort challenges history

7 January 2019

Citadel, Morgan Stanley and seven others are launching MEMX to rival the big U.S. stock exchanges, hoping to cut costs. Past attempts stalled or were bought by the incumbents. If brokers with serious trading volume can’t give a startup more staying power, they should give up.

Eli Lilly’s $8 bln cancer deal is a worthy wager

7 January 2019

The drug giant reckons it’ll take years to get a good return on its pricey acquisition of Loxo. But the upstart has had startling success figuring out why rare cancerous mutations occur, rather than where. Longer term, that should make for plenty of targets – and sticky prices.