I've posted news shorts in the past about companies that I get from a publication that lands in my PC. Since it's the weekend, I thought this would be a good time to see what is happening to some companies that we all are familiar with. So here we go:
■American Airlines is under pressure from the Pension Benefit Guaranty Corp., which has asked the U.S. Bankruptcy Court to force the carrier to reveal certain details about its underfunded pension plans. This could complicate American’s attempt to reorganize in Chapter 11 bankruptcy court. The Pension Benefit Guaranty Corp is represented in the Chapter 11 unsecured creditors' committee.
Meanwhile, there are rumblings that Delta Air Lines and TPG Capital owners of U.S. Airways are considering making bids for American Airlines.
■Bank of America has reportedly told U.S. banking regulators that it's willing to retrench from some markets in the U.S. if its financial condition continues to erode.
The Charlotte, N.C. banking giant mentioned that possibility as part of a list of scenarios that it submitted to the Federal Reserve. While no immediate downsizing plan is in the offing, one possibility would be to sell off some branches if it has to raise more capital to protect itself from its mortgage exposure and other challenges.
Bank of America had expanded aggressively, making large purchases of other companies as part of its nationwide expansion. But that strategy left it more exposed than other big banks to the credit crunch and the subsequent weak economy. The bank has been under pressure to improve its performance, with its share price down by more than half over the past year.
■Best Buy Co., the Richfield, MN electronics retailer, is reorganizing a bit I guess you could say. It will combine some of its retail groups into what it is calling “a connectivity business group”. Once you overcome the corporate wordsmithing(sorry, I'm being snarky!), it appears that Best Buy wants to better focus on its small-wireless-devices operation.
■Carnival's shares plunged on worries about the costs that the cruise-ship company could incur because of the disaster of its Costa Concordia cruise ship recently running aground off the coast of Italy. Carnival provided a $95 million estimate for lost earnings because of the disaster, but investors are worried that expenses could be a lot higher.
■Fazoli's, based in Lexington, KY, is a chain of quick-service Italian restaurants. I’ve eaten there before and I can say it was good.
Fazoli’s says that it reached record sales for 2011 and in fact, it was its best year in more than a decade, with sales up 18% from 2010. Fazoli's is owned by Sun Capital Partners, which is a private equity firm.
Remember that firms such as Sun Capital; TPG Capital and Bain, which Republican Presidential candidate Mitt Romney is a part of, are being demonized by Democrats and the Left and even some Republicans. It’s private equity firms such as Sun Capital; TPG Capital and Bain that assist underperforming companies such as Fazoli’s and U.S. Airways and help them achieve better results and thereby keep employees employed! I know, novel concept in today’s Obamanomics approach to our economy.
■Sun Capital. Speaking of those bad old private equity firms and Sun Capital in particular, it just announced that it has sold Del Monte Canada, the market leader in packaged fruit and tomatoes in Canada, to ConAgra Foods based in Omaha.
Oh, and another bad old private equity firm, EG Capital Group, LLC, a New York-based consumer-focused private equity firm, will also sell its minority stake in Del Monte Canada as part of the transaction.
Here’s the beauty of a private equity firm.
■Del Monte Canada, built from a collection of underperforming, non-core food businesses operated by Kraft and previously known as CanGro Foods, was acquired by Sun Capital in January 2006. Following the acquisition, Sun Capital launched a new business model to reposition operations more competitively as a sales and marketing business with international production facilities.
Contributing to the successful turnaround of the business, company management focused on driving product innovation, including the introduction of roll-up and frozen fruit snacks and transitioning to plastic packaging instead of using metal cans.
Del Monte Canada also started focusing on higher-margin products, and in 2010 adopted its current name to better reflect the repositioned company. As a result of all efforts, Del Monte’s performance dramatically improved over the past five years, from a money losing business to a highly profitable company today.
I did more research and Del Monte Canada employees 190 people. Now, there will be critics out there that will discount it because it only has 190 employees. I’m sure those sitting around each of the respective dinner tables at each of those 190 employees homes each night would beg to differ. And so it goes . . .
■Ford Motor Company is expected to announce strong profits for fiscal 2011. I for one am pleased with this since Ford is the only one of the three American automakers to not be a part of Obama Motors.
Ford does face one significant problem in the form of a growing glut of small cars at its dealerships. The Big Three automakers have often resorted to special sales and other incentives to whittle down excess inventory, but Ford may not want to go that route and company executives have indicated just that.
Instead, Ford might trim production to thin out dealers' lots of small cars. For example, one estimate says that Ford dealers have 1.5 to 2 times as many Focus and Fiesta small cars on their lots than car sellers typically like to have. Keeping high prices has so far kept Ford's profit margins high, but that strategy may also have cut into the volume of sales, which has resulted in the bloated inventory.
I would add that this is how business works. You have a core business plan which provides an overarching guide and philosophy with some flexibility built in to be able to make subtle change as markets warrant. This is the case for Ford. I’m sure GM and Chrysler await CEO Obama’s guiding words of wisdom.
■Motorola Mobility Holdings Inc. For those of you with Droid cell phones, here’s a bit of news.
Motorola came out the winner in a legal dispute with Apple when the U.S. International Trade Commission denied patent-infringement charges that had been lodged by Apple against Motorola.
Apple had asked the commission to block imports of Motorola's Droid phones that operate on Google software, saying that the Droid products infringed on Apple patents. The judge decided that there was no violation involved in any of the three patents at issue.
So there you go. Have a great weekend . . .
