Apple Faces a Very Small Business Problem

When a business owner gets ready to sell, one of the very first questions a business broker or marketing consultant will ask is "does the business have an image outside of the business owner?" So many businesses completely link themselves to the owner that, if the owner died or was forced to quit, the business would be seen as being in serious trouble.

This is a problem that is typically associated with small to medium business. It is the mattress store that is known by its energetic owner that will "save you money," or the carpet guy who is convinced that his company is the only one that really knows its trade. Big companies tend to have enough products, services, and prestige to stand on their own.

There have been big companies that have lived a little dangerously in this regard. Lee Iaccoca "single handily" saved Chrysler and there was huge concern about the company surviving without him. Ever since Orville Rickenbacker passed away there has been a void in the popcorn company. Old commercials of the now dead founder are designed to remind viewers that the company has not wandered far from its roots. The death of Wendy's founder, Dave Thomas has created a similar void for which the company has yet to recover. The company continues to appear to be interested in being bought by another country. But the situation with Steve Jobs of Apple is creating a situation that we simply have not seen before.

The Seattle Times reports that "for months, Apple's shares have gyrated on rumors and bogus reports that Steve Jobs was in ill health. Recently, Apple said Jobs suffered from a treatable hormone imbalance. But optimism didn't last. Jobs began a leave of absence Wednesday saying his health issues were 'more complex' than thought. Shares opened sharply lower Thursday, and closed down 2.3 percent. On Friday, the stock declined 1.3 percent, finishing the week at $82.33."

Steve Jobs is a cultural and business icon of amazing proportions. We have seen very few like him before and I doubt we will see very more after. This leader has taken many products from idea to best seller and he has had his finger prints on those products. His linkage to the company is so profound that his ill health, could lead to a serious sickness for his company.

The challange for Apple is to determine a way to transfer some of the founder's prestige to the company itself and that seems to be no small challenge.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Christopher Dodd Has to Go

I am not at all sympathetic of the plight of the automobile industry. The Big Three of Detroit have largely brought their terrible situation upon themselves through decades of bad decision making. In spite of this reality, I was offended when Senate Banking Committee Chairman Christopher Dodd (D-CT) informed the CEOs of Ford, Chrysler, and GM that if they wanted money for their companies, they needed to go. This is the same Christopher Dodd who has been on the Senate Banking Committee for years and oversaw the financial debacle of Wall Street that led to an $800 billion bailout at taxpayers expense. This is the same Dodd who has fueled record government spending for years that has led to our debt of trillions of dollars.

As chairman of the Senate Banking Committee, Dodd proposed a housing bailout on the Senate floor in June 2008 that would assist troubled mortgage lenders such as Countrywide Financial. Condé Nast Portfolio reported that in 2003 Dodd had refinanced the mortgages on his homes in Washington, D.C. and Connecticut through Countrywide and had received favorable terms due to being placed in what was later called the "Friends of Angelo" (Countrywide's CEO) program. Dodd received mortgages from Countrywide at allegedly below-market rates on his Washington, D.C. and Connecticut homes. Dodd has not disclosed the below-market mortgages in any of six financial disclosure statements he filed with the Senate or Office of Government Ethics since obtaining the mortgages in 2003. The Senator's home state Hartford Courant reported Dodd had taken "a major credibility hit" from the scandal.

If direct payment has influence, the problem is even more widespread. Countrywide has also contributed a $21,000 total to Dodd’s campaigns since 1997. Dodd has also received $70,000 in campaign contributions from Bank of America, which is buying Countrywide, in the last year-and-a-half before the Countrywide Financial loan scandal surfaced. Senators Barack Obama and Hillary Clinton are the only other Senators who have received more money from Bank of America than Dodd. However, no politician has received more contributions from Fannie Mae and Freddie Mac than Dodd's combined $133,900.

Marcus Cicero, when discussing the Roman Empire, said "the arrogance of officialdom should be tempered and controlled..." Dodd's throwing stones in a glass house and maintaining a straight face in the process, is arrogance at its height. Senator Dodd needs to go and should be a part of a serious "house cleaning" that should be seen in both the US House and Senate. It is true that, in the end, many familiar faces like Dodd would disappear. That would be a face lift the US could afford.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Conditions for an Auto Bailout

It appears that the US Government IS going to give the "big three" their long desired loan, but at a smaller level. Until this past weekend, Congress had been unimpressed. But as if an oracle of God himself, President-Elect Obama has declared that a bailout is necessary and the Congress now seems willing to comply, although with a lighter than expected package. The new package looks like it will be around $16 billion (versus the $25-$35 billion we have heard earlier).

With this bailout, there should be certain conditions that must be complied or there should be no such hand outs (which is my preference). Here are a few of the conditions that should be required:

• End the controversial UAW "Job Bank" program until the loans are completely paid off. This program has paid tens of thousands to be idle at 90 percent of salary. Although the UAW has agreed to make concessions about the program, their current situation could have the practice back in full force within days of the bailout becoming law.


• Bring auto worker wages back to the real world. According to the Heritage Foundation, when it comes to salary and benefits, the average wage of all private sector employees is $25.36 and for American based Japanese auto plants (Honda, Nissan, Toyota) is $42.95 to $47.60 on average. The big three pays $70.51 (Ford), $73.26(GM), and $75.86 (Chrysler) per hour, per employee. These six digit wages for blue collar work should be brought into the real world.


• End the "30 and out" practice. The Detroit auto companies allow employees to retire with very lucrative packages at the young age of 30. If you start working at a plant at 20, you can retire at fifty. You can see where that can be costly. 60 or 65 should have to be the standard retirement age with taxpayers involvement.


• Seven week vacations need to be history. Detroit auto workers receive almost two months off a year. This is another pounding cost on a very weak industry that needs to change.


• Finally, they should require the companies to relocate to a right to work state. This would empower these companies to lower wages and make the other reforms listed above.

I am sure you are saying that such reforms will not be happening knowing the temperament of the auto industry and the lack of courage in Congress. You are, of course, exactly correct, which is among the reasons why the companies shouldn't receive the bailout.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Time Magazine's Best Lists: Worst Business Deals

I have been summarizing my thoughts on Time Magazine's Best Lists over the last several weeks and hadn't even touched their business lists. Until now. I found the magazine's Worst Business Deals" very interesting.

* The Blackstone Group going public. It looked hot after years of some rather amazing deals, but lost 38 percent of its value in no time after going public. In my experience, VC firms are the epitome of feast and famine. It isn't the kind of place one puts the family nest egg in. However, you can't count these guys out yet. The stock market is a long term game. It is only a bad deal if you cash in from the early highs.

* DaimlerChrysler pays to unload Chrysler. After an amazing array of mathematic antics, Daimler actually paid $2 billion to unload the company to Cerberus. With mathematic geniuses like this, is there any question as to why Daimler was going broke?

* Microsoft overpays for Facebook. First it was MySpace and Murdoch, then it was Google and YouTube. Microsoft simply had to get into the social networking phenomenon. The one it bought a stake in was Facebook for $240 million. The deal gives Facebook an implied value of $17 million, but is only expected to make $30 million a year. Time Magazine fears it looks like AOL a few years ago. I agree.

* KKR and Goldman Sach's pull the plug on Harman Industries International. Time notes that "Private equity shop Kohlberg Kravis Roberts & Co. and Goldman Sachs Group's private equity unit pulled out of their $8 billion offer to buy high-end audio equipment manufacturer Harman Industries International, claiming a "material adverse change" in Harman's business. Harman's stock plummeted more than 20%." Harsh indeed!

* Bank of America dumps $2 billion dollars into Countrywide. "Better make that $1 billion — at least that's what B of A's investment was worth as of December 1. Bank of America thought it had picked an opportune time in August to invest in Countrywide's mortgage machine, but the mortgage mess hadn't bottomed out yet." Bank of America was already limping along due to its troubling approach to providing credit to its clients. This situation only makes matters worse.

Some of these stories are not as entertaining or as sexy as some of the others covered, but their implications are far reaching financially. And they are far reaching to investors, customers, and obviously the employees

Toyota: The Rising Sun Continues

Japan is known as the "land of the rising sun" and its chief auto maker, Toyota, continues its towering rise. This morning I was watching the Today Show and it was announced that the car maker has surpassed GM as the largest automobile producer in the world this past quarter. This is something that everyone in business and politics has been expecting for years. That time has come.

A half a century ago, there were a "Big Three" -- GM, Ford, and Chrysler -- that dominated the marketplace and no one imagined Toyota (or any other foreign auto maker) eclipsing any of them. Admittedly it is only one quarter, GM is still number one over all, but the slide for US car builders is expected to continue.

Why the decline of US auto makers? The cause is multi-fold:

* US auto makers are not nearly as nimble as their Japanese competitors. They are typically behind the curve and limping behind Japan when it comes to change.

* Japan has taken a surprisingly safe approach to auto making that gives the consumer assurances of the quality of product. It sounds "boring", but Japan's predictability in style and substance (e.g., engineering) has made it the up and coming "king of the road."

* The devastating impact of Big Labor. Unions have hampered these companies with salary and benefit packages that make it impossible for US companies to successfully compete. This is likely the number one reason.

The above are just a few examples, but Japan will continue to torment US auto makers and I expect its prominence to becomes permanent. That is destined to happen if the US doesn't do the things necessary to be competitive.