Water Cooler Finance: Recalls, Lawsuits and Other News
As companies prepare (with fingers crossed) for a positive quarter, many external forces are coming in to play. Automakers are reeling from a number of recalls and relying on customer loyalty to survive, and the lawsuits in the technology field are a-flyin'! At the end of the day, we're starting to see some sunshine in the financial world. Let's just hope it sticks around for the remainder of 2010.
In Pictures: 7 Ways To Position Yourself For A Recovery
The Good, the Bad and the "Big Three"
General Motors (OTCBB:MTLQQ) has seen its peaks and valleys in the last week. On the downside, the Detroit-based automaker recalled nearly 1.3 million compact cars on March 2 due to an issue in the steering column at low speeds. The problem affects the Pontiac G5, the Pursuit and the Chevrolet Cobalt, to name a few. GM car owners are already skeptical about the brand's quality, following a recall of 1.5 million cars last April due to fire risks. The company also filed for bankruptcy in June, 2009.
However, GM is beginning to see the signs of a silver lining, and has authorized the reopening of 580 dealerships. Almost 1,350 GM dealerships were shut down during the economic recession. Of those, 1,160 filed for arbitration in the hope of reopening. The company will begin sending letters to approved dealerships this week, and dealerships that were not approved to reopen may still have to go through the arbitration process in order to see reinstatement.
Another member of the "Big Three" automakers, Ford (NYSE:F), overtook all others in North American sales. Though this may be partly due to the large number of recent Toyota (NYSE:TM) recalls, Ford asserts that the company's success is riding on the back of high quality and an appealing product line. (For background reading, see Analyzing Auto Stocks.)
Apple Sues HTC
It seems that virtually everyone owns an iPhone - and if you don't, you're horribly outdated and outcast from society on every level. Apple (NYSE:AAPL) knows this, and perhaps that's why the California-based company is holding its patents on the mobile communication device so close to its chest. It's also why the Taiwanese phone maker HTC, and other tech companies worldwide, are scrambling to mimic the iPhone's operating system, touch-screen capabilities, applications and hardware.
On March 2, 2010, Apple filed a lawsuit listing 20 patent violations by HTC in the company's products – specifically, the Nexus One phone, which incorporates Google's Android mobile operating system.
As such, many other phone makers that use Android are feeling the pressure, knowing that the ever-powerful fist of Apple CEO Steve Jobs is floating overhead. (Learn more about the mastermind behind Apple in Hype It Like Steve Jobs.)
Patent infringements in the communications market are not uncommon – often with Apple playing the role of the aggressor. Last year, the company took on Nokia (NYSE:NOK), the world's top cell phone maker, also for patent infringement.
Madoff Investors Thrown a Curve ball
Investors in Bernie Madoff's Ponzi scheme received some more bad news last week when a Luxembourg court ruled that lawsuits against UBS AG would not be honored. The court stated that the investors must instead appeal to the fund liquidator for compensation, which frees the Swiss financial company from responsibility. UBS was used by Madoff as one of many holding firms in his $65 billion scam; this ruling exonerates the company from direct responsibility and protects it from a large number of individual claims. (Don't become a victim. Read How To Avoid Falling Prey To The Next Madoff Scam.)
Madoff is expected to make a statement in 149 years, when he is finished serving his sentence.
No Work For You!
Jobless claims fell drastically in the last seven days - by nearly 29,000! But don't get too excited just yet. First-time claimants are still showing up in droves, and until employers begin adding new positions, this will likely remain the case. Oddly, this comes at a time when economic recovery seems to finally be latching on. The unofficial hiring freeze serves as a precautionary measure, in the event of a double-dip recession. Employers are avoiding the high costs of training, benefits and salaried positions for fear of another economic slump, which many analysts say may be on its way.
The unemployment rate has remained relatively stable in the last few weeks, and currently sits at 9.7%.
Unfortunately, the rate is not projected to drop significantly in the next few months, which could cause unemployment claims to either remain the same, or increase slightly. This time last year, the national unemployment rate was 8.5%. (To learn more, read What You Need To Know About The Employment Report.)
Return of the Gipper?
Republican Congressman Patrick McHenry from North Carolina is gathering names in an effort to have former U.S. President Ronald Reagan's face placed on the $50 bill, replacing 18th President Ulysses S. Grant. McHenry believes Reagan to be the last great president of the 20th century, and feels his domestic economic practices and international relations policies – not to mention that whole Cold War thing – should be enough to secure Reagan's place as one of the country's finest leaders.
Opponents of the bill feel that Ronald Reagan was a short-sighted president, specifically when it came to race relations, the mishandling of the AIDS outbreak of the 1980s and the re-introduction of "trickle-down economics" theory (widely known as Reaganomics). Grant, who was president from 1869-1877, led the North to victory during the Civil War as a general-in-chief, and was the first president to serve two consecutive terms since Andrew Jackson pulled off the same feat 40 years earlier.
To date, McHenry has rallied 13 party members in his cause.
Lawsuits, recalls and political distraction aside, it was a relatively slow week for high-end financial news. The European Union crisis has yet to fully play out, but rest assured that the outcome will affect the global economy to a large extent. A number of precedent-setting merger & acquisition deals are also in the works. But all-in-all, the economic rebound appears to be "taking," and companies and investors are beginning to regain confidence.