BW Chicago: Obama's Powerful Backers

Another terrific issue of BW Chicago, Businessweek's local monthly magazine, is out. If you haven't yet subscribed to BW Chicago, then click here and start receiving this entertaining, provocative and informative magazine for free.
The June issue is highlighted by a cover story written by Roger O. Crockett, who takes a compelling look at the African American business leaders backing Barack Obama's presidential bid. It's an influential group, one that promises to have a huge impact on commerce and politics--in Chicago and beyond--for many years to come.
There's much more, of course.
For instance, how about the skinny on super-investor Warren Buffett's local investment play? Senior Correspondent Judith Crown explores the Oracle of Omaha's strategy behind his $4.5 billion purchase for 60 percent of Marmon Group, a grab bag of industrial companies run by Chicago's Pritzker family.
Meanwhile, Chief of Correspondents Joseph Weber profiles Northern Trust Co. economist Paul Krasriel, who's a little cranky and bearish about the current state of the economy. Also, J. Duncan Moore Jr. reports on the Treasure Island food store chain's expansion plans. The company (which touts itself as "America's Most European Supermarket" )is entering Hyde Park while hunting for more locations.
Contributor Howard Wolinsky writes about family-owned Horween Leather, which once supplied "Black Jack" Pershing's boots and now exclusively produces footballs for the NFL. Horween is an old company facing a new challenge: e-tailing.
And I chip in with my regular opinion column. This month: Why the recently-acquired Wm. Wrigley Jr. Co. will fade away. Click here to read it online.
There's much more.
So if you crave in-depth business news, analysis and information--presented in a bright and informative style-- then make the BW Chicago connection.

Turning Cable Company's "No" Into "Yes"

Among the best pieces of advice I've ever received is this little ditty: "Never take 'no' from someone who can't say 'yes'".
Basically, that means if the person you're dealing with doesn't have the power or ability to grant your request, then don't accept their "no" as the final answer. Move on and find someone who has the capability to say yes and then make your case.
This is especially true when dealing with corporations and their customer service representatives.
One example: My cable TV provider. Last Saturday, the cable guy (we'll assume it's a guy) did not show for a scheduled appointment between 1 PM and 4 PM. At 4:30 PM, I called Comcast customer service and asked what was going on. After some back-and- forth, the customer representative said my appointment would have to be rescheduled.
Not good.
Then, he turned down my request for some type of compensation for my wasted time and inconvenience. I was not entitled to any payback because Comcast had done all it could for me, he harrumphed
Perhaps it was his condescending tone. Perhaps it was waiting an entire Saturday afternoon. Perhaps it was my gut instinct that this guy was clueless. No matter the motivation, I was ticked and not about to take his "no" as the final word. So, I hung up and then immediately called back Comcast, asking this time for a supervisor. I explained my tale of woe to her. After reviewing my situation, she went to work fixing the problem.
The result? A Comcast repair man showed up 20 minutes later and did a fine job that took a mere half hour. What's more, I was awarded a $25 credit (Yes, these exist! Who knew?) on my next cable bill for the missed appointment and inconvenience.
Now, everyone was happy.
Everyone, I dare say, except that first customer rep. Yup, I did rat him out to his boss. Hated to do that, but that's what happens when you just say no.

Taking a Short Blog Break...

Reedbiz will be quiet for the next few days as I tend to some personal and business affairs, including wrapping up a couple of important magazine articles and other editorial projects.
Meanwhile, should you need a quick business news/commentary fix please feel free to check out the "Web Friends" sites, located on the right side of this blog.
Back in a few.
Take care.

Bracing For A Mars Attack on Wrigley

Right now, conventional wisdom says the venerable gum maker Wm. Wrigley Jr. Co. will not get chewed up despite being acquired for $23 billion by candy maker Mars Inc.
In my column for the upcoming Businessweek's BW Chicago magazine, I take a more skeptical viewpoint that's entitled, "Wrigley: Another Great One Soon Gone".
Click here to read the column.
It was posted last Saturday on Businessweek.com.
As the column points out, it's rare when a corporate merger doesn't yield significant cost cuts and major changes for the acquired company. That's especially true when the buyer plunks down a pile of cash, which is what Mars is doing. No matter what assurances are given at the outset of a buyout process, chances are big changes are on the way.
You get the idea.
Many observers and industry analysts are saying the Mars buyout is going to be the exception. That's also what the gents at Mars and Wrigley are saying.
We'll see.
This deal must still be approved by Wrigley shareholders and regulators.
Meanwhile, please be on the look out for the next BW Chicago which is coming out soon.


(Photo courtesy of Betlza Scene Vol. 3 on Flickr.com)

Is Paul Vallas Worth The Wait?

Paul Vallas, former CEO of the Chicago Public Schools and a defeated Illinois gubernatorial candidate, came back to town this week. He's been away for nearly five years, but judging from his personal and TV appearances, Vallas is anxious to get back and take another run at the governor's mansion.
Below is a post from April, 2007, when word came out that Vallas was leaving his job as chief of the Philadelphia school system. He has since gone on to run the New Orleans schools but his contract is up in a year.
To many people, Vallas is an acquired taste. I've always liked him and hope he comes back.
I think the following post holds up. You be the judge. It's been lightly edited for content.

In a fair and just world, Paul Vallas' expected return to Chicago would be cheered by the city's political and business elite. Then again, who said the world is always fair and just?
Vallas, who successfully ran the Chicago Public School System from 1995 to 2001, is apparently ready to come back to Sweet Home Chicago. Vallas isn't sure what he's going to do upon his arrival. He could open a consulting firm, head a non-profit or maybe---just maybe--take another stab at running for public office. (Vallas was beaten by Gov. Rod Blagojevich in the 2002 Democratic gubernatorial primary.)
Vallas has his supporters and a strong track record, but its going to be a tough homecoming if he wants to get back into public life. That's because it's doubtful the city's power brokers will be welcoming him back with open arms, especially if they take their cue (which they usually do) from his former employer, Mayor Richard M. Daley.
The two have had a long but uneasy relationship, partly because of their different styles--Vallas talks a mile a minute and Daley tends to grunt his conversations--but also because Vallas got ample credit and favorable press for Chicago school reform, forcing Daley--who sees himself as an "Education Mayor"-- to share the spotlight.
It would be a real shame if Vallas is frozen out of the city and state's public life because of political pettiness or fear. This is a man with much to offer.
Consider that during his tenure as Chicago Public Schools CEO, he presided over rising test scores, expanded summer school and the growth of charter schools (a device favored by business executives but hated by the teachers'union.)
What's more, he was one of the most engaged CEOs I've ever seen. He knew the Chicago Public School system inside out. He proved to be a formidable foe of its red tape. And he had a real feel for what was going on at the individual school level and for determining which reform measures clicked or failed.
A strong personality, Vallas did not always bend to the pressures of local school councils, which in theory are suppose to act in the best interest of their communities but can also become vehicles for rash and detrimental decisions.
Detractors like to point out that Vallas was a Whirling Dervish, installing new school-related programs that didn't always pan out. And he doesn't suffer fools lightly, which bruised feelings and alienated staff and school board members.
That all may be true. But you know what? I never once heard anyone initmate that Vallas didn't have the best interests of the school kids in mind. Or that he wasn't passionately committed to finding solutions. Or that he was ineffective.
I'll take that type of fire-in-the-belly leader, compared to the cynical political hacks that dominate this town.
Will Chicago's power brokers welcome Vallas back in a meaningful way? Unfortunately, I don't think so.
I suspect he'll land a good private-sector position or be part of a venture that will enable him to provide for his young family, which is and should be his top priority.
As for a political appointment or elected position? It's doubtful. Too many influential people won't move aside, or make way, for him. And since Vallas is not a wealthy person, he's not about to run for office again and rack up a huge debt (The Sun-Times reports he's just paid off a $537,000 gubernatorial campaign obligation in January). Nor does he come back to a town busting with benefactors, who want to bankroll a Vallas campaign for anything.
Upon his return, Vallas will get headlines, the occasional TV interview and have his name mentioned when the political speculation runs high.
But in the unfair and unjust world of local and state politics, there's no room for someone like Paul Vallas.

Mars-Wrigley? Buffett's Sweet Deal

We see a couple of candy companies getting together. Billionaire Warren Buffett sees a replay of the Procter & Gamble and Gillette merger. Allow me to explain.
In 2005, uber-investor Buffett was a big fan of the $57-billion merger of consumer giant P&G and razor blade maker Gillette. He should have been: His investment vehicle Berkshire Hathaway was a major Gillette shareholder and made an estimated $600 million on the day the P&G-Gillette deal was announced. Buffett's firm is now a major P&G shareholder.
While not an exact replica, the Mars-Wrigley deal has many of the same characteristics of the P&G-Gillette marriage.
First and foremost, P&G bought Gillette mainly because it did not have a razor blade business. More than that, Gillette gave P&G inroads into a broader worldwide distribution system, one with a growing presence in Latin America, Europe and the Far East.
Buying Gillette cost P&G a pretty penny but that was cheaper than building its own line of razors and blades--not to mention less expensive than constructing a bigger international distribution network.
Indeed, the purchase price, product synergies and global potential of the bigger distribution network were the major reasons why Buffett described P&G and Gillette's hook-up as a "dream" deal. On top of all this, P&G shares have had an impressive post-merger ride and the maker of Crest, Tide and other household products is considered one of the best run companies in the world--maybe even a growth stock.
One more thing: Unlike many hot-to-trot investors,such as hedge fund manager Edward Lampert, Buffett invests in the management of the companies he backs. Rarely does he come in and clean house.
Back to $23-billion Mars-Wrigley deal.
First and foremost, these two companies' brand lines are complimentary. Mars markets mostly chocolate products (Snickers, Milky Way and my personal favorite 3 Musketeers), while Wrigley hawks gum (Juicy Fruit, Doublemint) and the recently acquired Altoids brand.
Moreover, Mars is in 100 countries while Wrigley has a growing international distribution system. This newly-formed company will be much better poised to take on overseas competitors Cadbury Schweppes (and U.S.-based Hershey Co. if it ever gets its act together).
And while Buffett doesn't have stock in Mars as he did Gillette, the Oracle of Omaha is getting the next best thing.
The billionaire is backing Mars' management's play by putting down some loose change to help finance the Wrigley acquisition. He wouldn't do that if he didn't approve of those running both companies.
Moreover, Buffett's debt will eventually be converted to shares in a newly-configured Mars, which will still be privately-held. At 77 years old, Buffett is still one of the world's most patient investors. So, don't rule out Mars going public one day, enabling Buffett to reap yet another huge payday.
For Mars and Wrigley, there's no better stamp of approval than Warren Buffett.
He did great when P&G bought Gillette. He may do even better with this sweet deal.

(Illustration compliments of Businessweek)

Starbucks Brews Health Insurance Woes

I've had one cup of coffee in my life. Just can't stand the taste of the stuff, nor the aroma. Yet despite my java aversion, I've been a regular at Starbucks, where I'll pick up a cup for my wife or meet people for the occasional meeting. I even have one of those Starbucks debit cards.
But there's another big reason why I like doing business with Starbucks: It's one of a handful of major retailers offering every staff person access to affordable health care insurance, especially part-time helpers, who make up a large portion of the Starbucks workforce.
Just a little over 40 percent of its workforce takes advantage of this benefit, according to the company. Still, the point is that every staffer qualifies for coverage and in this day and age that's a rare and golden benefit,
(I know a young actor who moonlighted at Starbucks. She was hit by a car and required serious medical help and rehab. She was very glad to have the Starbucks coverage.)
Unfortunately, Starbucks is going through some very tough financial times and I'm concerned it may be forced to dramatically curtail, maybe even dissolve, health care benefits for its part-timers.
Not only would that be a shock to the Starbucks culture, but it would be a major setback for employee-based health care coverage in this country. Indeed, Starbucks and Costco, the mega store chain that also provides health care benefits to part-timers, are often hailed as the type of service employer who is doing the right thing. In return, they usually attract more talented and engaged employees.
It would be a huge step backward should Starbucks reverse course and stop providing health care to its part-time baristas, counter help and other workers.
Still, it is within the realm of possibility.
Recently, Starbucks announced declining earnings for this year, while its stock is tumbling.
Things are so choppy that founder Howard Schultz has been forced to return to the executive suite and try to get the franchise cooking again.
Despite his best efforts, investors are getting antsy and that's never good. When management is under pressure it starts looking to quickly cut costs. In Starbucks case, trimming or ending expensive health care insurance would be an option.
Starbucks hasn't brought up the possibility of cutting health care benefits, but it must be on Schultz's mind.
Only a few years ago--when Starbucks could do no wrong--Schultz was already lamenting the escalating price of health care, noting that it was outstripping what Starbucks paid for coffee. Commodity prices are higher now, but I'm betting that's still true.
Schultz is trying to revitalize Starbucks by going back to its roots of exceptional customer service and products. He's also rethinking the company's recent expansion plans and deciding whether it should be an outlet for selling Cd's and other peripheral products.
But that's nibbling around the edges.
If a turnaround does not quickly occur, management may have no choice but to shelve good intentions and rethink its philosophy of providing health care to all workers.
In the short run, cutting benefits may be one of the most effective ways to save money, improve profits and keep investors from pressuring Starbucks into selling or merging.
But in the long haul?
Well, let's just say that would be an unhealthy choice for everyone who works at Starbucks or buys its coffee.


(Photo courtesy of Day 117 on Flikr.com)