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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Rosalee Fleming X-To: robert_pondiscio@BUSINESSWEEK.COM X-cc: X-bcc: X-Folder: \Kenneth_Lay_June2001\Notes Folders\All documents X-Origin: LAY-K X-FileName: klay.nsf Nancy Sheed <nancy_sheed@BUSINESSWEEK.COM< on 03/22/2001 06:00:18 PM Please respond to robert_pondiscio@BUSINESSWEEK.COM To: BWINTERNATIONAL@LISTSERV.BUSINESSWEEK.COM cc: =20 Subject: BusinessWeek's International Alert: 2 April, 2001 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20 BusinessWeek=01,s International Alert=20 A Preview of Major Stories and News Exclusives=20 in Tomorrow=01,s International Editions of BusinessWeek=20 http://www.businessweek.com/=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D THIS WEEK:=20 - Europe and U.S. Cover Story:? Alan Greenspan=01*Feeling the Heat=20 - Asia Cover Story:? Asia=01,s Big Chill=20 - Asia Is Catching The Japanese Disease=20 ALSO IN THE 2ND APRIL ISSUE OF BUSINESS WEEK=20 - Has Germany Jumped the Rails?=20 - Commentary:? The European Central Bank Needs to Cut Rates Too=20 - The White Knight, Domingo Cavallo, Rides Again in Argentina=20 ?=20 Does someone forward BusinessWeek=01,s International Alert to you?=20 Get your own free copy every week: send your name, company name, title and= =20 email address to: robert_pondiscio@businessweek.com=20 ?=20 U.S. and EUROPE COVER STORY=01(ALAN GREENSPAN: FEELING THE HEAT=20 Can he fight off a new economy recession?=20 By Peter Coy in New York, with Rich Miller in Washington, Linda Himelstein= =20 and Jim Kerstetter in San Mateo, Jeff Green in Detroit, Marcia Vickers and= =20 Pete Engardio in New York, and bureau reports=20 Federal Reserve Chairman Alan Greenspan has guided and presided over the=20 longest economic expansion in the history of the U.S.? But now, the=20 75-year-old Greenspan faces an agonizing challenge: an abrupt economic=20 slowdown that neither he nor anyone else fully understands. All of Greenspa= n=01, s training and experience have taught him how to cope with conventional=20 downturns. And so far, he=01,s dealing with this one in the conventional ma= nner=01* by cutting short-term interest rates in quick but measured steps. That may= =20 well prove to be the right course. But there=01,s a risk that this downturn= is=20 different and that far steeper cuts in interest rates are needed to keep th= e=20 New Economy from tumbling into a long and painful recession.=20 In short, Alan Greenspan is feeling the heat of a market in tatters and an= =20 economy that, by some measures, appears to be on the brink. And after ridin= g=20 triumphantly astride the economic boom times, his very legacy is suddenly a= t=20 stake.=20 ?=20 ASIA COVER STORY: ASIA=01,S BIG CHILL=20 Caught between Japan=01,s weak-yen policy and the steep U.S. downturn, the= =20 region=01,s fragile economies may see their recent gains swept away=20 By Brian Bremner in Tokyo, with Frederick Balfour in Bangkok, Michael Shari= =20 in Singapore, Moon Ihlwan in Seoul, and Pete Engardio in New York=20 The U.S. is clearly worried about Japan falling into a catastrophic slide.?= ?=20 But, Washington may not have a clear view of another huge problem: How=20 decisions in Tokyo could undermine the precarious economic state of other= =20 Asian nations.?? In South Korea and also in Southeast Asia, the export-led= =20 recovery of the past two years is starting to slow because of the downturn = in=20 the U.S. economy.?? Growth in Korea, Thailand, Malaysia, Singapore, and=20 Indonesia is expected to slow this year to between 3% and 4%.?? The last=20 thing these economies need is to compete for a dwindling export market with= a=20 Japan now reliant on a weaker yen.?? Many of the economies of East and=20 Southeast Asia are trying to shake off a triple blow: The U.S. slowdown is= =20 putting a dent in exports.? Second, Japan is yanking investment from the=20 region, and now there=01,s the yen threat.? Finally, China is soaking up a= =20 growing slice of foreign investment, a trend that will accelerate once it= =20 enters the World Trade Organization.=20 ?=20 ASIA IS CATCHING THE JAPANESE DISEASE=20 Commentary by Pete Engardio=20 It=01,s a terrible malady for young economies.? The symptoms: banks that ha= ve=20 money but don=01,t lend.? Lots of exports but no profits.? A teaming workfo= rce=20 with dim prospects.? Politicians who know urgent measures are needed but wh= o=20 won=01,t act. Call it Japan disease =01) and it=01,s starting to set in acr= oss the=20 once-booming emerging markets of East Asia.?? Unfortunately, East Asia has= =20 not used the nearly four years since its financial meltdown wisely.? Lulled= =20 by a U.S.-driven export boom and a short-lived bounce in equity markets, th= e=20 region has failed to finish the reforms that could have cleansed their=20 financial system of billions of dollars of nonperforming assets.??? Most of= =20 Asia can arrest Japan disease before paralysis sets in. But politicians see= m=20 to have lost their will to force sales of distressed assets, close failed= =20 banks, and open their markets wider to foreign investors.=20 ?=20 HAS GERMANY JUMPED THE RAILS?=20 Germany=01,s stalled reforms are slowing growth=20 By Jack Ewing in Frankfurt, with Christine Tierney in Frankfurt and Carol= =20 Matlack in Paris=20 Since its last recession ended a decade ago, the Germany economy has=20 struggled to get out of first gear.? Growth averaged a mediocre 1.4% in the= =20 l990s.?? Economists, business people and politicians thought the sorry=20 performance was a temporary product of West Germany=01,s costly and badly= =20 managed reunification with the ex-Communist East.? But what if they are=20 wrong?? There have been worrying economic indicators, including nine months= =20 of sinking business confidence, an uptick in unemployment and a collapse in= =20 car sales.? Germany=01,s 82 million people account for a third of gross dom= estic=20 product among euro countries.? No regional boom is possible without them.?= =20 Optimists think its slower growth is a temporary effect of economic malaise= =20 in the U.S., Japan and other world markets.? Pessimists think the problems= =20 relate to Germany=01,s persistent welfare state, its coddled workers, maybe= even=20 its risk-averse culture.?? Some tough times lie ahead =01) for Germany, and= for=20 the entire Continent.=20 ?=20 RATES: EUROPE NEEDS A LIFT-OFF, TOO=20 Commentary by David Fairlamb=20 The economy of the 12-nation euro zone is slowing, just like its counterpar= ts=20 in the U.S. and Asia. But don=01,t look to the European Central Bank to fol= low=20 the U.S. Federal Reserve with interest rate cuts just yet. The monetary=20 conservatives who dominate its 18-member governing council see their role a= s=20 fighting inflation rather than stimulating growth. So with prices rising at= =20 an annualized 2.6%=01*well above the 2% upper limit the ecb says is consist= ent=20 with price stability=01*the central bankers aren=01,t in a rush to push the= price=20 of money down below the current 4.75 But there are plenty of reasons why it= =20 should. A cut now would give the European economy a much needed boost. Euro= =20 zone growth peaked at only 3.5% last summer and will likely fall to 2.8% fo= r=20 all of 2001.? Tax cuts worth 0.8% of the euro zone=01,s gross domestic prod= uct=20 have bolstered domestic demand a bit, but not enough to make up for the=20 effects of the global slowdown. The ECB insists Europe won=01,t be badly hu= rt by=20 the economic downturn in the U.S. and East Asia. But businesspeople aren=01= ,t=20 convinced.=20 ?=20 THE WHITE KNIGHT RIDES AGAIN IN ARGENTINA=20 But can Domingo Cavallo cure what ails the economy?=20 By Colin Barraclough in Buenos Aires, with bureau reports=20 On Mar. 20, Argentines awoke to the news that the 54-year-old Harvard=20 University-trained economist who rescued their country from hyperinflation= =20 more than a decade ago was back in his old job. Cavallo is the third man to= =20 hold the post of Economy Minister in as many weeks.? To win the support of= =20 opposition politicians, Cavallo must take a different tack than L?pez Murph= y.=20 Cavallo has already abandoned his predecessor=01,s plan to push through=20 draconian spending cuts. Instead, he aims to narrow Argentina=01,s fiscal= =20 deficit by $3 billion this year by rekindling growth, thereby boosting tax= =20 collection. Possible measures include cuts in some corporate tax rates to= =20 promote the reinvestment of profits, and a reduction in banks=01, reserve= =20 requirements, which would free up money for loans.=20 ?=20 WHO=01,S KILLING ERICSSON?? ITS OWNERS=20 Shareholders have no say under its ownership system=20 By Stanley Reed in London, with Ariane Sains in Stockholm=20 Sweden=01,s Ericsson has just two main owners, the Wallenberg family and a = group=20 of holding companies and a fund connected to Handelsbanken, a Stockholm ban= k,=20 maintaining an iron grip with a minimal amount of capital.? They do so by= =20 holding Ericsson A shares, which have 1,000 votes more than the B shares of= =20 which foreign shareholders have a majority.?? Now that Ericsson is struggli= ng=20 in global markets, a quick turnaround is needed.? The current two-tier stoc= k=20 system should be reviewed.=20 ?=20 THE BANK OF JAPAN=01,S REAL MESSAGE: REFORM NOW=20 Commentary by Brian Bremner in Tokyo=20 On Mar. 19, Bank of Japan Governor Masaru Hayami appeared to abruptly rever= se=20 course by announcing measures that will effectively drive the overnight cal= l=20 rate back down to zero and pump up the money supply to push the consumer=20 price index up. Markets are now abuzz with speculation that Japan will=20 deliberately ramp up inflation past 3%, and that Hayami is a convert to the= =20 cause of fast reflation. But Hayami has not given up on the other part of h= is=20 agenda: to press for real restructuring inside the banks and corporations. = So=20 Hayami is signaling that he will ease up on his hard-money ways in exchange= =20 for some real action by the banks: =01&While we are doing our part, we hope= the=20 government and the financial system will do what=01,s necessary on their si= de,=018=20 says Deputy BOJ Governor Yutaka Yamaguchi in an interview with BusinessWeek= .=20 ?=20 RUMBLE OVER TOKYO=20 As Airbus aggressively pitches its superjumbo, Boeing moves to protect its= =20 turf=20 By Stanley Holmes in Seattle, with? Chester Dawson in Tokyo and Carol Matla= ck=20 in Paris=20 For nearly 50 years, Boeing and Japanese airlines JAL, All Nippon, and Japa= n=20 Air System have had a fruitful business relationship, thanks in part to the= =20 aircraft maker=01,s deference to Japanese customs. Boeing=01,s planes now a= ccount=20 for 84% of Japan=01,s commercial fleets, the world=01,s third-largest natio= nal air=20 market after the U.S. and China. From 1970 to 1998, jal alone spent $14.4= =20 billion on those planes. But that lead is now under fierce attack from Boei= ng=01, s archrival, Airbus Industrie. Japan has become the key battleground as the= =20 European aircraft consortium seeks to launch its superjumbo A380 jet, which= =20 can hold 555 to 800 passengers. The Airbus offensive will force Boeing, whi= ch=20 recently announced it will move its headquarters out of Seattle as part of = a=20 major corporate overhaul, to fight like never before.=20 ?=20 IS A NEW WAR BREWING IN THE BALKANS?=20 International Outlook by Christopher Condon in Budapest, with Ren,e Cordes = in=20 Brussels, Heidi Dawley in London, and Stan Crock in Washington=20 It=01,s another Balkans mess, and it could prove to be a dangerous test for= =20 President George W. Bush and the 37,000 NATO troops stationed in Kosovo.=20 After six days of fighting between insurgents and Macedonian forces near th= e=20 city of Tetovo from Mar. 14-19, NATO officials announced plans to bolster= =20 patrols on the Kosovo border with Macedonia.? Both European and U.S.=20 diplomats hope Macedonian forces will subdue the rebels. But if the fightin= g=20 keeps up, pressure will grow on NATO to play a more active role. That could= =20 involve a controversial decision to send NATO troops to combat rebels in=20 Macedonia. Washington, however, wants to avoid an escalation.? Still,=20 strangely, NATO troops could find themselves increasingly under fire from t= he=20 very people they were sent to protect=01*ethnic Albanians. With no quick=20 solution to the latest Balkan conflict in sight, that=01,s not a pleasant p= lace=20 to be.=20 ?=20 SWISSAIR: PINNING ITS HOPES ON =01+SUPER MARIO=01,=20 The new CEO will have tough time fighting the flag carrier=20 By Christine Tierney in Frankfurt and Carol Matlack in Paris=20 It has been a shock to investors to witness Swissair=01,s mounting disarray= .??=20 SAirGroup=01,s CEO Philippe Bruggisser, who had charted the expansion strat= egy=20 that plunged the company into the red last year, has been jettisoned.? Then= =20 Moritz Suter, the airline division chief bailed out, and then 9 of the=20 company=01,s 10 supervisory board members quit, including Chairman and inte= rim=20 CEO Eric Honegger.??? Enter Super Mario.? The new CEO, Mario Corti, is the= =20 chief financial officer of Swiss food giant Nestle and the only board membe= r=20 left at the airline.? It=01,s not that SAirGroup=01,s expansion strategy wa= s=20 totally flawed.? SAirGroup went wrong when it invested heavily in second-ti= er=20 partners, many of which are in trouble.??? Corti is expected to unveil a ne= w=20 strategy in a special shareholders=01, meting in September.=20 ?=20 RUSSIA: A LITTLE-KNOWN PLAYER=01,S GRIP ON NATURAL GAS=20 Gas supplier Itera=01,s clout extends across the old Soviet empire=20 By Catherine Belton in Moscow, with Dan Carney in Washington=20 Western investors =01) especially energy giants =01) are likely to be heari= ng more=20 about a mysterious Russian company called Itera.? It is the fourth-largest= =20 holder of gas reserves on the planet with a virtual monopoly on gas trading= =20 in two key former Soviet republics, Georgia and Ukraine, that lie at the=20 gateway for transporting the region=01,s energy resources to the West.?? It= era=20 President Igor V. Makarov says he holds the key to the Caspian for any=20 foreign energy company wanting to get a foothold in the region =01) conside= red=20 one of the hottest oil plays anywhere.? =01&Today, we are the only company = that=20 can turn joint ventures with U.S. enterprises into real businesses,=018 he = says=20 =01) and that=01,s quite a claim.?? But even as Itera seeks recognition and= funding=20 from the West, law enforcement officials in Europe and the U.S. are=20 scrutinizing Itera's activities for possible money-laundering.?? Itera=01,s= rise=20 from barter trader to global-gas giant is raising questions inside Russia,= =20 too.=20 ?=20 A SOCIALIST WHO=01,S BETTING ON THE NEW ECONOMY=20 President Lagos talks about how to keep Chile on track=20 Q&A with Mexico Bureau Chief Geri Smith and Chile correspondent Louise Egan= =20 Ricardo Lagos, the first Socialist to rule Chile since the 1973 military=20 overthrow of Salvador Allende, recently completed his first year in office,= =20 amid growing concerns that the country=01,s much-vaunted economic =01&mirac= le=018 is=20 losing its luster. Lagos, 63, who holds a doctorate in economics from Duke= =20 University, says that Chile, which led Latin American nations in adopting= =20 free-market reforms two decades ago, must now bet big on attracting high-te= ch=20 industries. He also is pushing hard to seal a free-trade agreement with the= =20 U.S. On Mar. 19, Lagos sat down with Mexico Bureau Chief Geri Smith and Chi= le=20 correspondent Louise Egan in his office in La Moneda, the presidential=20 palace, to discuss his plans for what remains of his six-year term.=20 ?=20 INDIA: DON=01,T LET SCANDAL DERAIL REFORM=20 Commentary by Manjeet Kripalani=20 The Indian government stands on the brink of collapse. The event that did t= he=20 damage: a sting operation by an online magazine, which caught leading=20 politicians and military officials on camera accepting bribes in connection= =20 with what they thought were military contracts. Defense Minister George=20 Fernandes has since quit, along with the head of the Bharatiya Janata Party= .=20 Raucous opposition legislators closed Parliament for six days, insisting th= at=20 the government step down.? The administration should be embarrassed. But it= =20 would be a huge mistake for the opposition to initiate a new era of politic= al=20 turmoil. The principal casualty would be much needed reform.? Yet India=20 desperately needs to get its house in order. Last year, it took in only $2.= 6=20 billion in foreign direct investment.? Most important are the proposed=20 reforms of the labor laws, which for the first time would permit companies= =20 with fewer than 1,000 employees to hire and fire without government=20 permission. Freed from these restrictions, business owners could invest in= =20 promising new ventures, instead of wallowing in sunset industries. So inste= ad=20 of seeking to stall change, the opposition would do well to embrace it.=20 ---------------------------------------------------------=20 BusinessWeek presents:=20 e.biz Live: Europe=20 7-8 June, 2001=20 The Hilton Hotel, Park Lane, London =20 For program details or to register, visit our website at=20 conferences.businessweek.com/2001/ebizeu or call +44 (0) 207 251 2030.=20 Future BusinessWeek Executive Programs:=20 - Telecom Summit 2001: Broadband Connections, April 25 - 27, 2001 =01) The= =20 Fairmont Hotel, Dallas, Texas=20 - The BusinessWeek CIO Summit: Bridging the Technology/Strategy Divide, May= =20 10-11, 2001 --Boston, MA=20 - Breakthrough: A CEO Retreat, June 27-29, 2001 -- Rancho Bernardo Inn, San= =20 Diego, CA=20 For more information see http://conferences.businessweek.com/=20 ---------------------------------------------------------=20 ?=20 INTELLECTUAL PROPERTY: NEW ANSWERS TO NEW PROBLEMS=20 Economic Viewpoint by Jeffrey E. Garten=20 For more than a century, our system for protecting intellectual property=20 rights has fostered the creativity of artists and inventors. But now it is= =20 being challenged by two major global forces: the Internet, which can act as= a=20 gigantic international copying machine, and a global health crisis in which= =20 patented miracle drugs are too expensive for developing countries. It is ti= me=20 to reexamine how the intellectual property rights regime works.?? There are= =20 many issues to be addressed. Is there a way to better codify the space for= =20 private use and experimentation on the Internet? Should governments use the= ir=20 powers of eminent domain to buy up critical pharmaceutical patents and bett= er=20 distribute the underlying products? There may be much better approaches tha= n=20 these, but relying only on relentless enforcement of existing laws isn=01,t= one=20 of them.=20 ?=20 PATIENCE INVESTORS, THE FED IS NOT DONE=20 But economic data, not the stock market, will dictate policy=20 Business Outlook by James C. Cooper and Kathleen Madigan=20 At nine yards long, the Federal Reserve=01,s oval table is too big for poke= r.=20 But on Mar. 20, policymakers entered into a high-stakes game. The pot: an= =20 economic rebound in the second half.? At its second policy meeting of 2001,= =20 the Fed lowered its benchmark federal funds rate by a half-point, to 5%,=20 eschewing Wall Street=01,s clamor for a supersize cut of three-quarters of = a=20 point.? In effect, the Fed made it clear that it will not follow the stock= =20 market=01,s timetable for policy decisions. The Fed=01,s action implicitly = says=20 that economic conditions did not justify a larger, more radical move.?=20 Investors were so focused on the idea that =01&size matters=018 that they= =20 completely ignored the meeting=01,s most obvious positive: The Fed left ope= n the=20 door for more cuts=01*perhaps even before its next meeting on May 15.? The = key=20 remark was: =01&In these circumstances, when economic conditions could be= =20 evolving rapidly, the Federal Reserve will need to monitor developments=20 closely.=018 That language should sound familiar. It is similar to what the= Fed=20 said after its Dec. 19 meeting, prior to the surprise intermeeting cut on= =20 Jan. 3. It=01,s Fedspeak for: =01&We may not wait until May 15.=018=20 ?=20 A DEFINITE =01+SELL=01,?? GIMME 100 SHARES=20 Brokerage calls keep missing the mark =01) and then some=20 By Mara DerHovanesian in New York=20 Who says you can=01,t make money by following a Wall Street analyst=01,s=20 recommendations? Just do exactly the opposite of what they say, and you=01,= ll=20 make out like a bandit.? And we=01,re not talking about the stocks these=20 analysts are plugging, either. Granted, the Street has a tough time telling= =20 investors to sell stocks anyway, but when they do, you=01,d think it would = be a=20 no-brainer to pick a loser in this bear market. Instead, these calls are=20 defying gravity.? BusinessWeek takes a look at how Credit Suisse First Bost= on=20 has fared with its sell recommendations so far this year. First, only 11 U.= S.=20 stocks of 1,328 stocks Credit Suisse covers are on the sell list, according= =20 to Zacks Investment Research. The irony is that many of those stocks have= =20 outperformed the company=01,s buy recommendations. Credit Suisse isn=01,t t= he only=20 one with egg on its face. UBS Warburg has four current =01&reduce=018 ratin= gs on=20 the 1,015 U.S. stocks it covers. Three of those=01*KMart, DaimlerChrysler, = and=20 New Plan Excel Realty Trust=01*are up 64.2%, 9.3% and 17.9% this year throu= gh=20 Mar. 20.=20 ?=20 DON=01,T BET THE BANK ON EARLY-HOURS TRADING=20 Conventional wisdom aside, futures aren=01,t crystal balls=20 By Pallavi Gogoi in Chicago, with Susan Zegel in New York=20 By jumping in early, are fund managers helping to shape market trading that= =20 day? Not really. The small group of big investors around the world who trad= e=20 in stock index futures prior to the U.S. markets opening aren=01,t even set= ting=20 the stage for whether the equity markets will rise or fall in the first 15= =20 minutes of trading. Contrary to the conventional wisdom, repeated daily on= =20 CNBC, Bloomberg Radio, and local TV and radio stations=01*that the futures= =20 predict the day=01,s market performances=01*an examination of the data by= =20 BusinessWeek shows hardly any correlation. That may come as a big surprise = to=20 market players who=01,ve been taking it as an article of faith that the fut= ures=20 offer a solid guide to the day=01,s trading. To some longtime traders, the = lack=20 of predictive power in the futures is not so surprising. They say the numbe= r=20 of investors playing the markets in the big index contracts is small.=20 Nonetheless, some investors swear by them.=20 ?=20 NO CARTWHEELS FOR HANDSPRING=20 Rich rivals race to erase the company=01,s handheld edge=20 By Cliff Edwards in Mountain View, Calif.=20 The handheld market has become one of the fastest-growing corners of techdo= m.=20 Researcher IDC expects sales of the gizmos to soar 52% annually until 2004,= =20 to $10.7 billion from $2 billion in 2000, far outstripping PC growth. And= =20 Handspring is becoming a player to beat. In the past 18 months, the company= =20 has sold more than 1 million of its Visor computers, giving it 28% of the= =20 handheld market in February, up from zilch a year earlier. Now, Handspring= =20 has to deliver a convincing second act=01*something it=01,s attempting with= its new=20 Visor Edge, introduced Mar. 12. Problem is, the company may be losing its= =20 innovation lead. Handhelds are outgrowing their roots as electronic=20 organizers and mutating into Net appliances and wireless communication tool= s.=20 That could tip the advantage to players using Microsoft=01,s PocketPC opera= ting=20 system, a slim variant of Windows that makes the Palm operating system=20 Handspring uses look long in the tooth.=20 ?=20 A GRAB FOR CONTROL OF FORMULA ONE=20 Upfront by Christine Tierney=20 Mercedes and Ferrari, the carmakers with the leading auto racing teams, are= =20 threatening to quit Formula One and form an alternative racing group if the= y=20 can=01,t buy in. The brouhaha comes as control of the Formula One holding= =20 company is about to change hands, from F1 supremo Bernie Ecclestone to Germ= an=20 media magnate Leo Kirch.? But the Euro racers want a stake, too. The group,= =20 also including BMW, Jaguar, and Renault, had been talking to Ecclestone abo= ut=20 getting into the biz themselves before Kirch came on the scene. They worry= =20 Kirch will try to boost his KirchPayTV network by restricting Formula One= =20 races, which are now on commercial channels, to the pay channel. The=20 carmakers have invested billions in Formula One, and they insist the event = be=20 professionally run and freely broadcast to give them maximum public exposur= e.=20 Mercedes chief J_rgen Hubbert expects negotiations with Kirch to begin soon= :=20 =01&We=01,ve sent a clear message.=018? If Kirch balks...well, there=01,s a= lways the 1978=20 precedent in the U.S., when team owners broke from the U.S. Auto Club to fo= rm=20 Championship Auto Racing Teams.=20 ?=20 HANDBAGS, COGNAC =01) AND WATER=20 By Gerry Khermouch=20 What=01,s the latest trend item for your Louis Vuitton bag? Glac,au Vitamin= =20 Water or Fruit Water. The chic-set drinks, which sell for about $1.50, are= =20 made by tiny Energy Brands in Whitestone, N.Y. And they were the? last of t= he=20 up-and-coming =01&healthy=018 beverages available to be snapped up after ot= hers=20 (Gatorade, SoBe, and Snapple) were bought by beverage giants such as=20 PepsiCo.? But now France=01,s lvmh Mo%t Hennessy Louis Vuitton is buying in= to=20 Glac,au=01*its first drinks foray beyond champagne and cognac. Both sides a= re=20 keen for cross-promotions linking the low-cal Waters to Givenchy fashions,= =20 tag Heuer watches, and the group=01,s other luxury brands.? Neither side wo= uld=20 give details, but sources say LVMH put up $5 million for a minority stake a= nd=20 a board seat. The cash will fund Glac,au=01,s expansion to the rest of the = U.S.=20 ?=20 U.S. NEWS IN BUSINESSWEEK=01,S INTERNATIONAL EDITIONS=20 WILL REFIS HELP REFLOAT THE ECONOMY?=20 Equity into Cash=01(So far, homeowners are spending, not paying down debt= =20 By Stephanie Anderson-Forest in Dallas with Ann Therese Palmer in Chicago,= =20 Douglas Robson in Silicon Valley, Laura Cohn in Washington, D.C. and bureau= =20 reports=20 Thanks to competition among mortgage lenders, falling transactions costs, a= nd=20 a push from the Federal Reserve to trim interest rates, mortgage rates are= =20 way down. Rates on 30-year fixed mortgages have dropped from a five-year hi= gh=20 of 8.64% in May to 6.82%=01*near the lowest level in two years. And that=01= ,s=20 spurring a refinancing boom. Though there are risks in the boom=01*overinde= bted=20 homeowners could be taking on too much debt=01*for now, many economists arg= ue=20 that it is offering a much needed boost to consumer spending. And that coul= d=20 give a hand to the ailing economy as well. =01&This is the best way to get = money=20 into people=01,s purses and pocketbooks immediately,=018 says Mark M. Zandi= , chief=20 economist at market forecaster Economy.com Inc.=20 ?=20 SURPRISE=01*THE TECH INDUSTRY IS A CYCLICAL=20 Meltdown Redux: 1985 was bad, but this time more industries are affected=20 By Peter Burrows, with Jim Kerstetter and Linda Himelstein in Silicon Valle= y=20 It=01,s a frightening picture, all right. Hordes of brash high-tech startup= s,=20 all intent on grabbing a 20% share of vast emerging markets, getting=20 massacred, their dreams crashing back to earth. Even the most respected tec= h=20 companies are being forced to lay off staffers and slash spending as earnin= gs=20 fall miles short of analysts=01, projections. The press is stuffed with sca= ry=20 =01&end of history=018 articles about the death of the tech revolution. Ven= ture=20 capitalists, who just months before were throwing around money like so much= =20 birdseed, are nowhere to be found. Sound familiar? All this happened back i= n=20 1985, in what was then the biggest tech meltdown ever. Yes, as the world ha= s=20 again learned painfully, tech can be a very cyclical business.? 1985 offers= a=20 reminder that stretches of tech prosperity have always been sandwiched=20 between deep, painful valleys. Thanks to the cash pumped into everything fr= om=20 fiber-optic parts to huge computers in recent years, this could be the=20 deepest valley yet.=20 ?=20 WHILE WASHINGTON FIDDLES=01(=20 Why the Beltway hasn=01,t gone into panic mode=20 Commentary by Lee Walczak, with Rich Miller, Howard Gleckman, Richard S.=20 Dunham, and Lorraine Woellert in Washington D.C., and Ann Therese Palmer in= =20 Chicago=20 What=01,s Washington doing while the world=01,s financial fabric frays and = risks of=20 a painful U.S. downturn grow? Debating. Mulling. Maneuvering. Even as an=20 increasingly urgent chorus of voices outside the Beltway insists that the= =20 Bush Administration and Congress need to come up with a fiscal stimulus=20 package pronto, few in Washington are acting with anything remotely=20 suggestive of impending danger. Instead, Bush continues to push for a tax c= ut=20 that most agree won=01,t benefit the economy for at least a year, and Congr= ess=20 is content to play political =01&gotcha.=018? Bizarre as it may seem to man= y with=20 business ties, the gulf between the real economy and Washington=01,s insula= r=20 political culture has seldom been greater. Up to now, many of the city=01,s= pols=20 seemed confident that a benign spirit=01*Saint Alan of C Street=01*would wa= rd off=20 the evil of a recession. But over at the Federal Reserve, Greenspan=01,s ha= lo=20 has slipped.?? Bush=01,s advisers are having intense discussions over what = one=20 aide describes as a =01&rifle-shot=018 rate cut that would provide quicker= =20 stimulus. Also being explored: a one-time tax rebate that could put money= =20 into consumers=01, hands fast.=20 ?=20 A =01&FIRST FRIEND=018 WITH CLOUT=20 Commerce Secretary Don Evans=01, longtime ties to Bush give him unusual acc= ess=20 By Paul Magnusson in Washington=20 ?=20 Commerce Secretary Donald L. Evans has two jobs in Washington. The official= =20 one comes with a government limo, a spacious paneled office, a tropical fis= h=20 tank, and a $3 billion budget. The second is a round-the-clock role as Firs= t=20 Friend.? That easy intimacy makes Evans, 54, potentially one of the most=20 powerful Commerce chiefs in many years. As Bush=01,s campaign chairman, he= =20 raised a record-breaking $100 million for his pal, a job that put the Texan= =20 on a first-name basis with many corporate chieftains. But in his first majo= r=20 interview, the Commerce Secretary insists that he=01,s leaving the world of= =20 political fund-raising behind. His new concerns: helping to sell the big Bu= sh=20 tax cut, battling unfair trade practices abroad aimed at industries such as= =20 steel and aerospace, and boosting the government=01,s long-range research= =20 efforts.=20 ?=20 END OF THE CEO GRAVY TRAIN?=20 Surprise! Exec pay seems to be slipping=01*though some underperformers are = doing=20 remarkably well=20 By Louis Lavelle in New York=20 For many of the nation=01,s chief executive officers, 2000 will likely be a= year=20 to forget. After nearly five years of double-digit growth in CEO=20 compensation, early indications are that their pay actually fell last year.= =20 Of the 130 corporate proxies so far available for the biggest U.S. companie= s,=20 the compensation of the 15 best-paid CEOs shows the slowing economy has tak= en=20 a toll on earnings. When salary, bonus, and options exercised last year wer= e=20 taken into account, compensation for those CEOs fell nearly 5% from 1999. T= he=20 reason: The market=01,s nosedive made it a bad time for many corporate king= pins=20 to exercise their options, often the largest part of remuneration.? Accordi= ng=20 to a proxy analysis by Standard & Poor=01,s Institutional Market Services, = a=20 division of The McGraw-Hill Companies, total compensation for the 15 highes= t=20 earners averaged $88.7 million, a $4.4 million drop.=20 ?=20 THE BEST SHAREHOLDERS CAN GET?=20 The AG-Prudential deal isn=01,t sweet, but there=01,s no white knight in si= ght=20 By Emily Thornton, with Pamela L. Moore in New York and Heidi Dawley in=20 London=20 Ever since American General Corp. Chairman and CEO Robert M. Devlin first= =20 announced a stock-swap with British insurer Prudential PLC on Mar. 12, then= =20 valued at $26.5 billion, Wall Street has thought that the Houston insurer= =01,s=20 shareholders were getting the short end of the stick. Prudential=01,s stock= =20 price has tumbled 16% since, and American General=01,s about 4%, thus crush= ing=20 the premium American General shareholders will receive to 5% from 22%. And= =20 that could put the kibosh on the merger.? Clearly, this is not what=20 shareholders hoped for. Still, this deal may be the best shareholders can= =20 get. When the Prudential deal was first announced, Wall Street was abuzz wi= th=20 rumors that heavyweights such as Sanford I. Weill at Citigroup or Maurice R= .=20 =01&Hank=018 Greenberg at American International Group? Inc. might swoop in= with a=20 counterbid. Unlikely, say investment bankers, because American General has= =20 had informal talks with both in the past two years. Devlin insists=20 discussions were never serious enough to reach his board.=20 ?=20 SOUTHWEST: AFTER KELLEHER, MORE BLUE SKIES=20 Southwest=01,s model shone in an embattled industry=01*and it looks brighte= r than=20 ever=20 Commentary by Wendy Zellner=20 In three decades of building low-fare legend Southwest Airlines Co., CEO=20 Herbert D. Kelleher has made nary a misstep. Until Mar. 19, the one chink i= n=20 his armor appeared to be the question of how Southwest would replace him.= =20 Finally, the answer: Two Southwest veterans steeped in the company=01,s=20 traditions will man the controls.? On June 19, James F. Parker, 54, general= =20 counsel, and Colleen C. Barrett, 56, executive vice-president for customers= ,=20 will become CEO and President, respectively. And as Parker and Barrett migh= t=20 tell you, they are inheriting a devilishly simple playbook: Keep costs down= .=20 Focus on customers. Keep employees happy. And keep it simple. While Southwe= st=20 has tweaked its formula over the years=01*adding more long-distance flights= , for=20 instance=01*it=01,s still mainly a point-to-point, short-hop airline that u= ses one=20 aircraft type to simplify training and maintenance.=20 ?=20 BUYING A NEW PC?? NOT SO FAST=20 Upgrading to Microsoft=01,s coming XP system will be such a challenge that = it=20 makes more sense to wait until new computers come with it=20 Technology & You by Stephen H. Wildstrom=20 Microsoft Corp.=01,s Windows XP, which is just entering its final stage of= =20 large-scale field testing, is the most important consumer software product = to=20 appear since the Windows 95 operating system. The prospect of waiting for X= P=20 poses a difficult choice for anyone in the market for a new computer. Nearl= y=20 all consumer PCs sold today are outfitted with Windows ME, the last gasp of= =20 the Windows 95 line. It seems reasonable to buy a new computer with Windows= =20 ME and move to XP when it=01,s available. But I don=01,t recommend it. Why?= The=20 upgrade will be challenging. Even moving from Windows 95 to 98 was often=20 difficult, and going from ME to XP will be a much bigger transition.=20 Microsoft and battered computer makers will hate me for saying this, but I= =20 suggest that you make your old computer last nine more months or so until X= P=20 is ready.=20 ?=20 CAN GM=01,S JOHN DEVINE KEEP HIS PROMISE?=20 The new CFO pledges bigger earnings, but much depends on building sales in = a=20 slowing economy=20 By David Welch in Detroit=20 Only someone as confident as John Devine, the new vice-chairman and chief= =20 financial officer of General Motors Corp., would promise that America=01,s= =20 largest auto maker will earn $2.3 billion this year, about a third more tha= n=20 some analysts predict. And only someone as respected as Devine would be tak= en=20 seriously.=20 Chief Executive G. Richard Wagoner Jr., a 23-year GM veteran, broke with=20 tradition by hiring Devine=01*rarely has GM gone outside to fill a senior j= ob.=20 Devine could even become chief operating officer in the next few years,=20 according to GM insiders. As one board member puts it: =01&You don=01,t bri= ng in a=20 guy like John Devine and expect it to be business as usual.=018 Good thing = for=20 GM. The company that once was regarded as the country=01,s most innovative= =20 carmaker has been in decline for three decades. Its U.S. market share has= =20 fallen from 33% in 1995 to 28% last year.? A lot has to go right at GM=01*a= nd in=20 the economy=01*for Devine=01,s predictions to come true.=20 ?=20 THE SEC IS TOO HUSH-HUSH=20 Commentary by Christopher H. Schmitt=20 When the Securities & Exchange Commission issued rules in January to shore = up=20 the independence of outside directors who oversee mutual funds, some SEC=20 watchers were caught by surprise. Why? One reason: The commissioners didn= =01,t=20 meet in public. Under former Chairman Arthur Levitt Jr., the SEC went out o= f=20 its way to shake up the status quo and avoid donning the mantle of apologis= t=20 for the industry it oversees.? And yet the SEC hasn=01,t changed its own=20 practices much. There=01,s more that needs fixing than the SEC=01,s nonmeet= ing=20 meetings. In a confusing process closed to public view, the SEC handles=20 thousands of exemption and guidance requests each year. It=01,s supposed to= make=20 them=01*and its replies=01*public, though it doesn=01,t always do so prompt= ly. Of=20 course, there is a need for some confidentiality=01*and exemptions and guid= ance,=20 too. But that doesn=01,t mean the SEC can=01,t be more forthcoming about it= s=20 business.=20 ?=20 McLATTE AND CROISSANT?=20 Upfront by Michael Arndt=20 Just when it? seemed McDonald=01,s couldn=01,t possibly cram another restau= rant=20 into the U.S., the burger giant has come up with a new way to expand: coffe= e=20 bars. BusinessWeek has learned McDonald=01,s will open its first,? McCaf,, = in=20 Chicago=01,s Loop in April. It will sell pastries, perhaps prewrapped=20 sandwiches, and premium coffee.? Sound familiar, Starbucks fans? But whethe= r=20 aficionados will give up their grande skim latte for a McCappuccino is a go= od=20 question. McDonald=01,s won=01,t say how many McCaf,s it plans, but based o= n their=20 success overseas, the rollout could be swift and wide. There are 300 McCaf,= s=20 in 17 countries, from Australia and Japan to Brazil and Greece. Each sits i= n=20 or near a McDonald=01,s, with its own staff and equipment. In the U.S., loo= k for=20 comfy couches, too.=20 ?=20 The following stories have been posted on BusinessWeek Online=20 http://www.businessweek.com/=20 ?=20 EURO-TECH: Will Americans Answer This Call?=20 By Stephen Baker=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010321_069.htm Phone service in the U.S. is good. So good that many Americans have little= =20 incentive to embrace wireless=20 with Europe's fervor=20 REPORTER'S NOTEBOOK: What's French for Dimpled Chad?=20 By Carol Matlack=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010321_277.htm Parisians may be right to think Palm Beach can't happen here. Still, you ha= ve=20 to wonder why they ended up counting votes on cell phones=20 ONLINE ASIA: The Curse of Dr. M=20 By Bruce Einhorn=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010319_935.htm Malaysia's Mahathir has been so bad for his nation that his name has become= a=20 verb, meaning "to wreck a country's fortunes"=20 NEWS ANALYSIS: Here Come Talk 'n' Toss Cell Phones=20 By Olga Kharif=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010322_621.htm Sensing a big potential market, two companies are hoping to add a new kind = of=20 disposable to your shopping list=20 STREET WISE: Eight Options for Amazon=20 By Amey Stone=20 http://www.businessweek.com/technology/content/mar2001/tc20010322_039.htm From partnering with Barnes & Noble to bringing in Jack Welch, here are som= e=20 ideas that could help the e-tailer become profitable=20 NEWSMAKER Q&A: Why the Fed Didn't Go Further=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010320_645.htm S&P's Michael Englund explains the probable reasoning behind the half-point= =20 rate cut and says April could see more easing=20 NEWS ANALYSIS: A Downturn in CEO Pay, Too?=20 By Louis Lavelle=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010320_205.htm Early results for 2000 show the slumping market is slowing the growth of to= p=20 bosses' take-home, which might even decline=20 NEWS ANALYSIS: AOL Time Warner: Who's Laughing Now?=20 By Amy Borrus in Washington=20 http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010319_866.htm The newly merged company is -- all the way to the bank -- while its critics= =20 and rivals eat its dust, and a lot of crow=20 ?=20 ---------------------------------------------------------------------------= --- ------------------------------------------------=20 For custom reprints of BusinessWeek editorial (minimum order of 1,000) plea= se=20 contact Alan J. Gallo at (212) 512-3148 or visit our Web site at?=20 www.reprints.businessweek.com.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------=20 ?=20 BUSINESS WEEK=01,s International Alert is a free service.? It is distribute= d=20 every Thursday at 6:30 pm ET and may be forwarded freely.? To join this lis= t,=20 send an e-mail message to LISTSERV@LISTSERV.BUSINESSWEEK.COM.? In the body = of=20 the e-mail message write =01&SUBSCRIBE BWINTERNATIONALALERT=018? To leave t= he list,=20 write "UNSUBSCRIBE BWINTERNATIONALALERT=018=20 BW International Alert is one of several free e-mail previews of=20 BusinessWeek.? Also available are:=20 - TechAlert,? all Information Technology news BusinessWeek and BusinessWeek= =20 Online=20 - FinancialAlert:? all financial industry articles in BusinessWeek and=20 BusinessWeek Online.=20 - AutoAlert:? auto industry news in BusinessWeek and BusinessWeek Online.= =20 - DCAlert:? politics, policy and government content in BusinessWeek and=20 BusinessWeek Online=20 - BWAlert, a comprehensive preview of all major articles and news exclusive= s=20 in US edition of BusinessWeek=20 For more information, or to register for any e-mail alert, please contact= =20 Robert Pondiscio at BusinessWeek at 212-512-6311.? E-mail:=20 robert_pondiscio@businessweek.com ?=20 ?=20 ?
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