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What Carlos Ghosn’s downfall means for his auto alliance
The arrest of Mr. Ghosn yesterday may spell big trouble for the three carmakers he has overseen, Nissan, Renault and Mitsubishi.
He was accused of understating his compensation to Japanese authorities and of other corporate violations. (A Nissan affiliate reportedly bought $17.8 million worth of property for him, according to the Nikkei Asian Review.) “Needless to say, this is an act which cannot be tolerated by the company,” Hiroto Saikawa, Nissan’s C.E.O., said yesterday.
Nissan and Mitsubishi said they would remove him as chairman, while the French government said Renault was arranging interim leadership.
But Mr. Ghosn was instrumental in overseeing the empire — the world’s largest automaker, if considered as one business — and it’s not clear that anyone else could keep it together.
Stephen Wilmot of Heard on the Street explains what could happen instead:
The risk for investors in his downfall is that Renault, Nissan and Mitsubishi go back to being small but mass-market carmakers just as unprecedented technological change is making scale more necessary than ever.
More: This arrest is a warning to C.E.O.s everywhere, the FT editorial board says.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
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Tech drove the stock market slump
The Nasdaq fell 3 percent yesterday, led by Apple and semiconductor manufacturers. Facebook, Amazon and Netflix all ended up in bear-market territory, down at least 20 percent from their peaks in September.
Matt Phillips of the NYT drives the numbers home: “Apple was worth more than $1 trillion at the start of November. Now, it’s valued at $880 billion.”
Tech investors have plenty to be bearish about. Apple’s iPhone sales are in question; Facebook is mired in yet more scandal; and chip-makers appear to be on the brink of a crash. Trade tensions don’t help, either.
But the size of these companies makes their fall everyone’s problem, as Mr. Phillips notes:
The sheer bulk of the technology companies gives them outsize influence over the market — in both directions. The tumult in tech on Monday pushed major stock market indexes into negative territory for November, leaving investors clinging to a gain of less than 1 percent for the year.
Futures markets tracking U.S. stocks suggest that the slide could continue today.
British companies support Theresa May’s Brexit deal
Though the British prime minister’s political allies don’t seem keen on her plan for departing the E.U., she may have the backing of the country’s businesses. She received a warm reception yesterday at the Confederation of British Industry, a trade group, from corporate leaders who were relieved by some certainty and repelled by the risk of a no-deal Brexit.
Benjamin Mueller of the NYT spoke to the audience:
“She put a deal on the table, which is the first time in two-and-a-half years that’s been true,” said Craig Beaumont, the director of external affairs and advocacy for the Federation of Small Businesses, who was in the audience. “Business is accepting she’s in a tough position but appreciating the progress she’s made.”
Some corporate leaders have doubts: Several top financiers, including the investor Guy Hands, have publicly backed a “people’s vote” to reconsider leaving the E.U.
But Mrs. May’s plan may offer more certainty than another possible outcome if it fails: a Brexit led by Jeremy Corbyn, the leader of the opposition Labour Party. The head of the business confederation said there was no time to renegotiate.
More Brexit news: A rebellion against Mrs. May’s leadership within her Conservative Party seems to have fallen short. France and Spain may demand further concessions from Britain. And emails show that a major supporter of the pro-Brexit campaign sought to collaborate with Steve Bannon in 2015.
Coming up
E.U. leaders will discuss their future relationship with Britain. Officials are expected to outline today how they plan to handle talks on issues like data protection, security and trade once Britain has left.
President Xi Jinping of China will sign investment deals in the Philippines. During a state visit to Manila, Mr. Xi is expected to strike billions of dollars worth of infrastructure projects with his Philippines counterpart, Rodrigo Duterte.
BuzzFeed’s fix for new media’s troubles? Mergers
Digital publishers like BuzzFeed, Vox Media and Vice looked for years like the future of journalism — until advertising plateaued. The founder of BuzzFeed, Jonah Peretti, told the NYT that the best way to fix that was for big companies in the sector to consolidate.
Much of the problem is that Facebook and Google dominate digital advertising, reducing media companies’ pull with advertisers. Some start-ups, like The Athletic and The Information, have turned to subscription models. But Mr. Peretti argues that for bigger, ad-driven companies like his own, clubbing together could be the way to gain some negotiating power. And he says he’s held preliminary talks with some competitors.
Large obstacles remain, as Ed Lee of the NYT notes:
Any deal would be difficult to pull off given the number of investors involved and the compounding losses that would result from combining several money-losing start-ups. Staff cuts would be inevitable.
More media news: Traditional media companies are struggling too, as more than 1 million Americans cut the cord last quarter.
The U.S. considers tech export limits
A new weapon in America’s trade wars could include blocking the sale of exotic technologies overseas. The Commerce Department published a request for public comment yesterday about “whether there are specific emerging technologies that are important to the national security of the United States.”
The notice lists dozens of technologies, from quantum computing and A.I. to brain-computer interfaces and micro robots, that could be subject to export curbs. Companies might be required at a minimum to hold a license in order to export sensitive technologies to “countries subject to a U.S. embargo, including those subject to an arms embargo.”
It remains to be seen how wide-ranging any limits might be, but they could affect everything from the sale of supercomputers to increasingly A.I.-powered devices like the iPhone.
“If you think about the range of products this potentially implicates, that’s massive,” David Edelman, the director of the Project on Technology, the Economy, & National Security at the Massachusetts Institute of Technology, told the WaPo. “This is either the opening of a big negotiation with the industry and the public, or a bit of a cry for help in scoping these regulations.”
Bitcoin’s no good, very bad year gets worse
Bitcoin sank below $5,000 yesterday; it was valued at almost $20,000 last December. Several factors have sped its fall:
• Last Thursday, Bitcoin Cash, itself a spinoff of Bitcoin, underwent a so-called “hard fork” to become two separate currencies, after developers couldn’t reach an agreement. That has raised concerns about the dilution of cryptocurrencies.
• Regulatory scrutiny, a large factor driving the steady decline of Bitcoin this year, still hangs over the industry. Last week, the S.E.C. forced two companies to return funds raised via initial coin offerings because the sales weren’t properly registered.
Revolving door
G.E. rehired John Rice, who retired from the conglomerate last year, as chairman of its gas power business.
L Brands hired John Mehas from Tory Burch as C.E.O. for its Victoria’s Secret lingerie division.
The British bank TSB named Debbie Crosbie, the C.O.O. of its rival CYBG, as its C.E.O.
Goldman Sachs and UBS were the most active poachers of bankers from rivals this year, according to Business Insider.
Compass, the SoftBank-backed real estate start-up, hired Kristen Ankerbrandt from the Carlyle Group as its C.F.O.
The speed read
Deals
• As part of Taylor Swift’s new record deal with Universal, the label must give any proceeds from selling its shares in Spotify to its artists. (NYT)
• Saudi Aramco has reportedly scrapped plans to issue up to $40 billion in bonds to fund a takeover of the chemical producer Sabic, making an I.P.O. look more doubtful than ever.
• Chinese regulators approved Walt Disney’s takeover of most of 21st Century Fox. (NYT)
• David’s Bridal, the wedding dress retailer, filed for bankruptcy protection. (NYT)
• The Asian airline industry could use some consolidation. (Breakingviews)
• Warburg Pincus is reportedly raising up to $4 billion for a China investment fund. (Reuters)
Politics and policy
• Sixteen Democrats signed a public letter opposing Nancy Pelosi’s return as House speaker. (WaPo)
• Republicans’ repeal of a popular tax break may have cost them in the midterms. (NYT)
• Ivanka Trump repeatedly used personal email for White House matters last year. (WaPo)
• A federal judge blocked the Trump administration from automatically denying asylum to migrants who illegally cross the U.S.-Mexico border. (AP)
• King Salman of Saudi Arabia publicly backed his son and heir, Crown Prince Mohammed bin Salman, who is accused of playing a role in the killing of the Saudi dissident Jamal Khashoggi. (NYT)
• Senate Democrats sued to prevent Matt Whitaker from serving as acting attorney general. (Politico)
Trade
• Farmers hurt by the trade war are meant to benefit from a $12 billion aid program, but it’s mired in red tape. (NYT)
• Some potential beneficiaries of that trade war: Malaysia, Japan, Pakistan and other Asian countries. (Bloomberg)
• Nvidia must walk a fine line as it supplies A.I. chips to both the U.S. and China. (WSJ)
• How the Trump administration’s trade representative, Bob Lighthizer, is preparing for battle at next month’s Group of 20 meeting in Buenos Aires. (FT)
• American companies don’t want to quit China just yet. (CNBC)
Tech
• What happens to the cities that won’t get a big new Amazon office? (Upshot)
• Uber is headed back to Germany, and this time it’s playing nice. (Also: A look inside the company’s self-driving car testing before it was involved in a fatal accident.)
• Facebook’s profit margin is shrinking, but not just because it’s spending money on privacy and security. (Bloomberg)
• Snap’s board reportedly finds Evan Spiegel’s focus on the long term — and his distaste for short-term thinking — a source of frustration. (Information)
• Read some of the pitches that Definers, the P.R. firm that Facebook fired last week, sent to tech blogs. (TechCrunch)
Best of the rest
• How a predatory lending industry is hurting small businesses, and making some government officials very rich. (Bloomberg)
• Small European countries are better at attracting talent than the U.S. (Bloomberg)
• Why equal paid parental leave for mothers and fathers benefits both families and employers. (Also: Goldman Sachs laid off a 15-year veteran while she was on maternity leave.)
• The opioid industry is trying to fight a New York state effort to make it pay for the addiction crisis. (WSJ)
• The bond market is making less sense. (Bloomberg)
• The Danske Bank whistle-blower says that a big European bank handled $150 billion of the suspicious payments involved in its money-laundering scandal. (Reuters)
• Standing desks might be overrated. (Upshot)
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