2019年5月28日 星期二

DealBook Briefing: The Long Road Ahead for Fiat Chrysler and Renault

There's plenty of complexity involved in the automakers' proposed merger.
May 28, 2019
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  Jonathan Ernst/Reuters
What you need to know about the Fiat Chrysler and Renault merger
The two companies announced yesterday that they were considering merging. That would create one of the world’s biggest automakers, and could help them survive the shift to electric and self-driving cars.
Together, they would be the third-biggest car company in the world, displacing G.M. and following only Volkswagen and Toyota. This would be a merger of equals: Shareholders of each company would hold 50 percent of the combined business, which would have a market value of $39 billion.
Merger talks began in recent weeks when John Elkann, the biggest shareholder in Fiat, learned that Renault had given up on trying to merge with its current partner, Nissan of Japan, according to the FT. Mr. Elkann spoke with Renault and with President Emmanuel Macron (the French government owns 15 percent of the car maker).
Each has things the other wants. Renault and Nissan were early producers of electric vehicles, where Fiat trails. Fiat could give its French counterpart access to the U.S. market.
But there are big questions:
• Neither company has yet mentioned layoffs. Will the French and Italian governments — not to mention unions — still be happy if and when they do?
• Mergers of equals often turn into ugly power struggles. Fiat no longer has Sergio Marchionne, and Carlos Ghosn is out of the equation at Renault — are their managements now ego-free enough to pull this off?
• Then there’s Nissan: Renault has deep ties to the Japanese carmaker — even if things have become rocky since Mr. Ghosn, once their shared chairman, was arrested. What would happen to that relationship? (There are reasons for Nissan to welcome the deal.)
A potential benefit of a deal for Mr. Elkann: It would give his family, the Agnellis, a way out of the auto sector, the WSJ notes. The family investment firm would own about 14.5 percent of the combined carmaker — as opposed to 29 percent of Fiat — making it easier to sell shares. (Mr. Elkann reportedly wants to invest in other sectors, like tech.)
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
Did McKinsey read its own bankruptcy manual?
The consulting giant has been tied up in legal battles over what information it discloses in bankruptcy cases, arguing that the rules of Chapter 11 are too complex to comply with. It apparently didn’t follow its own instruction manual, Mary Walsh of the NYT reports.
• “For years McKinsey has had a 57-page primer — titled “Bankruptcy 101” — that lays out how to identify possible conflicts and make proper disclosures.”
• “ ‘It is critical that the disclosure rules and guidelines in these materials be followed,’ the document says. It adds, ‘Failure to adequately disclose material connections may result in severe penalties and fines.’ ”
• Bankruptcy advisers like McKinsey help determine how much the various creditors are paid and how a bankrupt business is broken apart, sold off or reorganized — so robust disclosures from them are important.
• “McKinsey’s handbook said that includes both ‘direct’ and ‘indirect’ interests in the bankrupt company and its creditors.”
• But the firm has a number of such interests, including a $25 billion hedge fund with a board mostly made up of current or former McKinsey partners that often invests in distressed debt — which the bankruptcy unit also works on.
  Hector Retamal/Agence France-Presse — Getty Images
A look at Huawei’s checkered past
As the Chinese tech giant struggles under pressure from the Trump administration, the WSJ has taken a look at how the company operates. The report, citing dozens of interviews and reviews of court cases, found a “corporate culture that blurred the boundary between competitive achievement and ethically dubious methods of pursuing it.”
• Huawei has had to fight several accusations of intellectual property theft, starting with one from Cisco in 2003. The lawsuit claimed Huawei borrowed so much from Cisco’s software that it had even “inadvertently copied bugs.”
• A relative of Huawei’s founder was accused of bringing secrets from Motorola, where he worked, to a meeting in Beijing. Another suit claims that Huawei’s deputy chairman, Eric Xu, abetted corporate spying.
• In its Swedish offices, Huawei “turned to scrutinizing the network hardware of rivals.” There, “researchers stashed foreign-made equipment in an electronically secured basement,” some of which was “shipped to China to be dissected by engineers.”
• “In its offices in Texas and elsewhere, Huawei had built spy-proof secure rooms that were off-limits to American employees.” Counterintelligence officials have described it as handling information “like a state intelligence service.” Huawei said the rooms were there “to prevent spying against the company, not enable spying on others.”
More: Erecting a Berlin Wall for tech isn’t as easy as the Trump administration thinks. How the Huawei ban could threaten wireless service in the rural U.S. And the Chinese company says FedEx has been rerouting some parcels.
New York overtakes London as finance’s capital
New York City is now considered the world’s financial center, a survey by the consultancy Duff & Phelps found. Thank Brexit for that.
Just over half of respondents chose New York as the world’s financial capital. But only 42 percent of those surveyed think it will hold that title in five years.
About 36 percent of respondents picked London, down from 52 percent last year. Just 21 percent thought it would be top in five years.
“Last year, Brexit cast a shadow of uncertainty over the United Kingdom’s economy,” Duff and Phelps’s report says. “It has now escalated to a full-blown crisis.”
But other cities are on the rise, the survey responses suggest:
• 12 percent of respondents though Hong Kong would be the financial capital of the future; only 3 percent thought so a year ago.
Shanghai got 9 percent of that vote this year.
Dublin and Frankfurt each got 4 percent.
More: Brexit-related relocations have drawn students away from British private schools, and filled ones on the Continent.
Inside Google’s shadow work force
The tech company has long used contractors, but some employees worry that a growing reliance on temps represents a shifting, less admirable work culture, Daisuke Wakabayashi of the NYT writes.
• “Google’s contractors handle a range of jobs, from content moderation to software testing.”
• “Their hourly pay varies, from $16 per hour for an entry-level content reviewer to $125 per hour for a top-shelf software developer.”
• “Though they often work side by side with full-timers, Google temps are usually employed by outside agencies.”
• “They make less money, have different benefits plans and have no paid vacation time in the United States.”
“A technology company can save $100,000 a year on average per American job by using a contractor instead of a full-time employee,” Mr. Wakabayashi writes, citing estimates by OnContracting.
There’s been pushback. Better treatment for such workers was a demand during protests about sexual harassment complaints last year. And a group of anonymous contractors sent an open letter to Google’s C.E.O., Sundar Pichai, demanding equal pay and more opportunities for advancement.
Google is responding in two ways, Mr. Wakabayashi writes, trying to treat temps better while distancing itself from their management. “Last month, Google said it would require staffing agencies to provide contract and temp workers with comprehensive health care, paid parental leave and an hourly minimum wage of $15.”
What to make of the E.U. elections
The main themes of the elections for the European Parliament were fragmentation and polarization (and, for Britain, Brexit), Steven Erlanger and Megan Specia of the NYT write.
Voters splintered. “Traditional mainstream parties of the center-right and center-left lost seats to smaller, more passionate parties like the Greens and a variety of populist groups,” Mr. Erlanger and Ms. Specia write. That could lead to political paralysis.
Populists did well, but not that well. “Populists and euroskeptic parties increased their share of seats to 25 percent, up from about 20 percent five years ago,” Mr. Erlanger and Ms. Specia write. “The feared populist wave was more of a large ripple,” but populists had good results in Italy, Hungary and Poland, where they’re already in power. Here’s a deep dive into what that looks like.
And Britons voted on one issue: Brexit. A single-issue party that did not exist four months ago, the Brexit Party, “was able to pull votes away from the country’s establishment parties, which were perceived as having badly mismanaged Brexit, three years after a referendum on European Union membership.” That strengthens a push for a no-deal Brexit.
Revolving door
Garth Ritchie is reportedly considering stepping down as Deutsche Bank’s investment-banking chief.
Ryan Graves, Uber’s first employee and briefly its C.E.O., is leaving its board.
Sue Gardner and Jeff Larson have left The Markup, the fledgling investigative news start-up that they co-founded. Julia Angwin, the third co-founder who was fired after disagreeing with Ms. Gardner, is reportedly in talks to return.
The speed read
• Alibaba reportedly plans a secondary listing on the Hong Kong stock market, which could raise about $20 billion. (FT)
• The payments companies Global Payments and Total System Services have reportedly agreed on an all-stock merger. (CNBC)
• Robinhood Markets, the investment start-up, is reportedly close to raising at least $200 million in new financing. (Bloomberg)
• Meredith sold the intellectual property of Sports Illustrated to Authentic Brands Group for $110 million, but still plans to run the magazine and website. (NYT)
• Salon, the online news site, has sold itself to an undisclosed buyer for $5 million. (Subscription Insider)
Politics and policy
• Democrats face a tough challenge in 2020: acknowledging President Trump’s economic boom while highlighting its flaws. (Upshot)
• The Trump administration is sharpening its attack on climate-change science. (NYT)
• New York City lawmakers could undercut one of their gun control regulations to avoid a potential Supreme Court loss that would affect similar laws nationwide. (NYT)
• Mr. Trump is increasingly isolated in his belief that North Korea does not pose a nuclear threat. (Politico)
• “If tariffs expand to cover all U.S.-China trade, and markets slump in response, global G.D.P. will take a $600 billion hit in 2021.” (Bloomberg)
• China’s corporate subsidies, a big U.S. target in the trade war, reached a record $22 billion in 2018. (FT)
• Agricultural tariffs are hurting tractor makers as well as farmers. (WSJ)
• Ireland’s Data Protection Commission has opened 19 investigations based on the E.U.’s General Data Protection Regulation, of which 11 focus on Facebook, WhatsApp and Instagram. (BBC)
• A settlement between Facebook and the F.T.C. has reportedly been delayed by disagreements inside the regulator. Mark Zuckerberg and Sheryl Sandberg will reportedly defy a Canadian subpoena to appear at a hearing about privacy and security. And the social network has refused to remove a manipulated video of House Speaker Nancy Pelosi. (WSJ, CNN, Bloomberg)
• China’s ByteDance, which owns the TikTok video app, is reportedly planning to develop its own smartphone. (FT)
• Automated online censorship is reportedly ramping up ahead of the 30th anniversary of the Tiananmen Square protests. (Reuters)
Best of the rest
• The S.E.C. is reportedly investigating whether Boeing properly disclosed issues with its 737 Max jets. (Bloomberg)
• The jostling to become the European Central Bank’s next president has begun. (WSJ)
• Juul is struggling to fund the scientific research required to convince the F.D.A. that its e-cigarettes offer more benefits than risks. (NYT)
• E-sports might be a bubble. (Kotaku)
• Will China’s push to eliminate poverty succeed? (FT)
• Your instinct might be better than an online star rating. (NYT Op-Ed)
Thanks for reading! We’ll see you tomorrow.
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