June 2007 Archive
Ford’s recent announcement that it is indeed looking at options for its Land Rover and Jaguar brands is being described in automotive circles as the worst-kept secret in Detroit.
The secret, as such, is hidden in the nuances of a deal struck late last year whereby Ford mortgaged its future to the tune of about $18 billion in secured loans that put up as collateral many of Ford’s domestic properties, and even entire subsidiaries (including Volvo and Ford Motor Credit). The not-so-secret secret lies in what Ford didn’t put into hock — namely Jaguar and Land Rover.
Suspicious minds, well, suspect that Ford CEO Alan Mulally and Chairman Bill Ford didn’t come about this arrangement by accident — they laid plans for a Jaguar/Land Rover exit strategy back in 2006 on purpose.
But why Jag and Land Rover and not Volvo (Ford has already sold uber-lux Aston Martin to rich English racing guys and even richer Kuwaiti investment guys)? The problem is efficiency. Volvo has been more successful at the all-important “creation of synergies” with its Detroit parent. In Europe Volvo shares a platform and parts with Ford models. No such cooperation ever emerged at Jaguar or Land Rover, so ditching them for some quick cash would be logistically less nightmarish.
But who would be interested in buying Land Rover and/or Jaguar? Of course Cerberus Capital Management’s name is being tossed around — the private equity fund that has inked a deal to buy Chrysler. BMW and Hyundai are also supposedly interested; other industry watchers think a billionaire from Russia or Asia could pop up and strike a bargain. Even former Ford CEO Jac Nasser’s name is being brought up (via his association with One Equity Partners).
Whoever buys Jag and Land Rover, watchers tend to agree that the combined sale would fetch about $8 billion. By 2006 standards that will assuage Ford losses for about 8 months.
Up until just a few years ago, “corporate sustainability” was little more than a catch phrase used by environmentalists and a punch line used by executives. More and more, though, companies are warming up to the idea of corporate sustainability as a key profit driver. Many publicly traded firms are including corporate sustainability reports (CSR) in their annual reviews, while others are incorporating the practice into their bylaws. Some states like Minnesota — home to companies like Target, UnitedHealth, and U.S. Bancorp — are even considering legislation to permit corporations to adopt a “triple bottom line” (people, planet, profit), otherwise known as corporate sustainability reporting.
The corporate world can thank Enron for the recent boost in CSR efforts. Shareholders rightfully began clamoring for more transparency, and organizations have answered by implementing sustainability reports. Transparency isn’t the only result, though. Many CEOs are happily discovering that CSR pays dividends.
Wal-Mart is perhaps the best example of corporate sustainability at work. Its Personal Sustainability Project has aimed to decrease solid waste generated by retail locations by 25%, reduce packaging, develop more recyclable packaging, and increase fleet mileage. It has also gotten employees to adopt their own sustainability goals, whether it be riding a bike to work or switching to eco-friendly household cleaning products.
3M’s Pollution Prevention Pays (3P) program has saved that company $1 billion. While the program itself is older than the relatively new concept of corporate sustainability (launched in 1975), it is nonetheless cited by sustainability proponents as an example of what a company can do to reduce waste. 3P manages this by consistently reformulating products, modifying processes, redesigning equipment, and reusing waste materials.
Andrew Savitz and Karl Weber make a case for corporate sustainability and outline six steps toward launching a CSR effort. They point to two good examples. Volvo gauged its customers’ needs when it began to develop enhanced safety features while US automakers balked at the idea. Toyota anticipated industry change — rising gas prices — by introducing the hybrid Prius. Volvo revolutionized vehicle safety and saw increased profits. Toyota revolutionized fuel technology and is now the world’s #1 automaker.
While these are just a few examples, it’s clear that corporate sustainability should no longer be the butt of boardroom jokes. It’s a strategy worth investigating.
The hits just keep on coming for Johnson & Johnson and Boston Scientific, whose drug-coated stents (branded Cypher and Taxus, respectively) may be on their way from blockbuster to just plain bust. The two products lord over the $6 billion worldwide stent market but are facing, well, let’s just say challenging market conditions, after studies turned up safety problems with the devices. To make matters worse, rivals from Medtronic and Abbott Labs loom on the horizon, and according to safety data released by the companies on Tuesday, the new stents are likely to prove superior.
Drug-coated stents, which cardiologists insert during angioplasties to prop open narrowed arteries, emit drugs like paclitaxel that prevent scar tissue from forming and re-clogging the vessel. Considered a leap forward over bare-metal stents (which have no cure for the scar tissue problem), the drug-coated ones have recently come under fire, as studies have emerged indicating that they can cause dangerous blood clots over the long term. As a result, doctors have cut back on implanting the devices, turning to the older bare-metal versions or other remedies (such as drugs or surgery).
The good news for patients and cardiologists is that both Abbott’s Xience stent and Medtronic’s Endeavor (both of which may get FDA approval in 2008) seem to be safer than the previous generation of drug-coated stents. Unfortunately for J&J and Boston Scientific, the approvals would give Cypher and Taxus unwanted company in a market they once had all to themselves.
Oh, and whatever you do, don’t ask J&J about its efforts to introduce a new drug-coated stent of its own. No doubt it’s a sore subject, what with its halt in May of development efforts with CoStar, a product that provided much of the rationale behind J&J’s acquisition of Conor Medsystems earlier this year. The stent failed to beat Taxus in clinical trials, and J&J pulled the product from international shelves where it was already approved for sale.
Ask Hoover’s employees why they love their jobs and you will find an underlying theme: Hoover’s culture. While the editorial staff is eclectic, one thing we have in common is that we are all total geeks about business and industry. Looking back over the years, some companies were impossible to get excited about. Yes, the Enron collapse did drive some of us to drink and Sara Lee always seems to have a reorganization [PDF] on the horizon. But fortunately, there are others that spark imaginative water-cooler conversations about innovation and new products that could drive the future success of their industries.
Are you lacking good water-cooler conversation? Feel free to borrow some of ours this week:
- After investigating why humpback whales make sharper turns than other whales, researchers at Duke University and the US Naval Academy discovered that the whales’ fins hold the key to superior aerodynamic efficiency. Applying nature’s design to wind turbines is sure to increase the ability of companies like AES SeaWest, FPL Group, and Navitas Energy to expand to regions that were once not windy enough to generate power. Other products that may benefit from the energy-saving design include car engine fans, airplane wings, submarines and naval ships, and household ceiling fans.
- The invitation-only TED (Technology, Entertainment, and Design) conference yields the most amazing concepts and ideas. Check out this video footage of Microsoft’s Blaise Agüera y Arcas and his demonstration of Photosynth, an application that allows users to dive into pictures without loss of resolution. Couple this software with Microsoft’s Surface product, and a readable version of the New York Times could find a new home within a square inch on table tops at Starbucks shops around the world.
- While companies like Plug Power and Peabody Energy spend big bucks on developing alternative sources of fuel, it’s ironic that a man from Florida would stumble upon a solution while researching the effects of radio waves on cancer cells (watch the news footage here). While testing his invention on a test tube of salt water, John Kanzius discovered that his machine caused the salt water to ignite. Who knows? One day it might be surf’s up for internal combustion engines.
My favorite quote of the week comes from a speaker at the TED conference:
When I talked to the kind rep from TED and said, “Listen, you know. What should I talk about?” He said, “Don’t worry about it. Just be profound.”
Anyone remember the super-cheesy 1996 Pauly Shore movie “Bio-Dome?” While the lighthearted comedy may be better off forgotten, it jumped into my head when I read about the recent sale of Arizona’s Biosphere 2 project. What was once a futuristic experiment is now slated to become the centerpiece of a commercial development. Looks like the scientific project was as much of a flop as the movie.
Housing investment firm CDO Ranching & Development has struck a deal to buy the biosphere and surrounding acreage for a meager $50 million after two years on the market. The unique climate-controlled facility originally cost $200 million to build (funded by Texas billionaire Ed Bass) in the late 1980s and was designed as a space colonization experiment.
The development company plans to build about 1,500 homes on the property and is contemplating a resort hotel and other commercial facilities that would tie into the biosphere building. CDO seems committed to keeping the building intact, although I have to wonder how much of a scientific purpose it will serve.
The University of Arizona is vying to lease the biodome to conduct climate-change research, though the building is no longer airtight. The purchase announcement says the facility will remain open for tours. (It’s hard to imagine controlled research being conducted under such commercial conditions.)
Tucson, which has gained new development from the likes of Toll Brothers and Centex in recent years, is experiencing a downturn in its housing market (like many other areas of the US). Several homebuilders have delayed projects in the area. But buyers could find living close to the funky bio-structure attractive when CDO begins construction in a year or two.
The whole tale seems like a sad mockery of the biosphere vision. Like the movie, the experiment to determine whether humans could be self-sufficient within a biodome was mired with problems. Both ended up on the bargain shelf. Perhaps the University of Arizona can get some more scientific worth out of the project — on the other hand, maybe it would be better to let it fade into shopping mall heaven.