This post is part of AOL Money & Finance's Best & Worst in Money 2008 feature.
There have been big hopes for all the nominees in this category at one time or another, but they've also suffered from questionable management moves of various sorts. So what's to root for in any of these companies?
Circuit City was founded in 1949; back then it was known as Wards Company. The big-box format and Circuit City name came as the result of a series of retail experiments, and became official in 1984. The company was listed on the New York Stock Exchange in the same year. In 1991, the company established a bank to operate its private-label credit card, and later offered a co-branded Visa. Big-box used car retailer CarMax (NYSE: KMX) was also owned by Circuit City at one point. In 2005, the company's board rejected a buyout offer; the company was worth a reported $1 billion then. The next year, Philip J. Schoonover became chairman, and ... well, the rest is history. Circuit City is now in Chapter 11.
Citigroup (NYSE: C) was formed in 1998 from one of the largest mergers in history: banking giant Citicorp and financial conglomerate Travelers Group. The company holds over 200 million customer accounts in more than 100 countries, and includes the investment services brands Smith Barney and Primerica. The company owns prominent, renowned buildings in Manhattan and Chicago, and also won naming rights to the new ball park of the New York Mets. But it was the subprime mortgage crisis that was Citigroup's undoing, resulting in the need for the recent federal bailout.
General Motors (NYSE: GM) and Ford Motor Co. (NYSE: F) are two of the Big Three U.S. automakers. Both are headquartered the Detroit area and were founded about 100 years ago. Ford does or did own the Lincoln, Volvo, Jaguar, and Land Rover brands, while GM brands include Buick, Cadillac, Chevrolet, Hummer, Saturn, and Saab. Decades of inefficiencies and uncompetitiveness, as well as increasing debt, have all of the Big Three now facing bankruptcy. Congress recently rebuffed requests for a federal bailout, even though many consider U.S. automakers "too big to fail." As many a pundit has pointed out, nearly every town in America has one or more car dealers and auto mechanics. Many of those towns also have factories related in some way to the auto industry.
Sears Holdings Corp. (NASDAQ: SHLD) was formed by the 2005 merger of venerable Sears, Roebuck, and Co. with Kmart. Many have been looking for the new Sears to became "the next Berkshire Hathaway," which would make Sears chairman Eddie Lampert the next Warren Buffett. But it doesn't seem to have worked out that way. The retail side of the business appears to be neglected, leaving the stores virtual ghost towns. No wonder Sears and Kmart made our recent list of companies in need of a makeover. The question now is, can Sears survive what's shaping up to be one of the worst holiday retail seasons in a long time.
Sirius XM Radio Inc. (NASDAQ: SIRI) was also born out of a merger, the controversial combination of the two biggest satellite radio services in the U.S. Back in 1997, when the FCC granted the initial licenses to Sirius and XM, it stipulated that one couldn't acquire control of the other, in order to maintain competition. It took about a year and a half for the FCC to approve the merger after it was proposed in early 2007. The merger was supposed to cut costs and provide more variety of programming, but the company continues to operate at a loss, and the share price has fallen more than 90% since the merger was completed.
These are all companies with promise -- some are institutions -- but all are on shaky ground now. Who are you rooting for?
Share the reasons for your pick in the comments, or let us know about any contenders we overlooked. Also be sure to see the rest of the Best & Worst in Money 2008.
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Reader Comments (Page 1 of 1)
12-05-2008 @ 1:55PM
Louisa said...
Very interesting post. I am wondering if you can offer me any advice - I just started working with a group of IPs out of Germany, Innoveas (www.innoveas.com) and they seem to offer a great alternative investment opportunity, especially in light of this awful US economy. Any thoughts or advice would be greatly appreciated. Thanks!
12-07-2008 @ 11:34AM
Susan said...
Not one of these companies will EVER realize that their downfall is exactly the greed of their upper management teams. CEO's and top level managers who take home MILLIONS yearly in salary and bonuses, and offset their vulgar salaries by cutting front line jobs. The result is a handful of people who are wealthy beyond decency, and one downgrade in customer satisfaction after the next. I spent years in Sears appliance service. First as a tech router, and after that department was cut in favor of "centralized routing", I was tranferred to customer service until THAT department was cut in favor of "centralized customer service". The first cut resulted in sloppy tech routes, less customers served per day, and less time for the tech to spend per customer due to massive increases in drive times on routes. The second cut resulted in no one who can speak english to help the customer with problems created due to the first cut.
ATTN CEO'S: HERE is the bottom line: When your customers are trying to DO YOU THE FAVOR of spending their money with your company, and they hit one brick wall after the next, because there is no one to deal with but people with accents so thick the customer can't understand them, and a skeleton crew of min wage employees that could give a rats ass if YOUR customer EVER gets satisfaction, they find another place to do business. When enough of them find another place to do business, YOU are no longer necessary. Really all any of you would have to do to improve business would be to TAKE CARE OF YOUR CUSTOMERS. In order to accomplish that, you need to stop taking care of your cronies, upper management and yourselves, and employ people to serve your customers. Cut your ignorant excessive personal incomes, cut out half of your unnecessary middle and upper management staff, and use that money TO TAKE CARE OF YOUR DAMNED CUSTOMERS. Gawd. What is so HARD about that? When did you decide that the way to up your bottom line is to cut jobs? The jobs that you cut are the same people that keep your customers satisfied and keep them coming back. The people you get rid of are the VERY people who were keeping you in business. Obviosly it's not YOU that's doing it, because YOU are still there, and your customers are NOT. That doesn't even touch on the fact that the people whos jobs you yank, are middle class consumers who are also YOUR CUSTOMERS. When you take their jobs, THEY CAN'T SPEND MONEY WITH YOUR COMPANY. *GET A CLUE.*
12-15-2008 @ 3:53PM
bgfred said...
Rooting for: GM. Don't want to bail them out, but when they go bankrupt I'd like them to survive in some form. They are finally building better cars in my experience - 1987 olds was last GM I'd ever buy, until we got a 2008 GMC Acadia. They're on a good path.
Rooting against: SIRI. XM had a better programming concept, but in the merger Sirius won and brought along a programming philosophy that is enchanted with celebrity dreck and shallow, repetitive music playlists geared to an even lower common denominator than FM radio. Only this you have to pay for - who needs that? Selling off the assets after liquidation seems likely to produce a better mousetrap.