Marketplace: News Archives

Friday, September 8, 2000
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It's Friday, the 8th of September. I'm David Brancaccio.

The $183 billion merger between new media pioneer America Online and old media heavyweight Time Warner has killed a lot of trees, the ones for all the newsprint used to cover it. It's a deal that defines an era if it goes through. And that's beginning to look like a big "if". Representatives from both companies have been meeting with European regulators today to respond to concerns that the merger could squash competition and officials are voicing similar concerns on this side of the Atlantic. Marketplace's John Dimsdale has the latest on what's looking less and less like a done deal.

Dimsdale: "These are two giant companies with financial interests in just about every nook and cranny of the Internet and communication industries. The concerns start with AOL's dominance as the gateway for 26 million people to enter the Internet, combined with Time Warner's ownership of so much music, TV programming, cable channels, magazines and films, not to mention control over the cable TV lines that are becoming vital for fast access to the Internet. Consumer groups have asked the Federal Trade Commission to block the merger. At the non-profit Center for Media Education in Washington, executive director Jeff Chester says AOL and Time Warner combined would soon hold all the keys to the Internet and its contents."

Chester: "And AOL-Time Warner will have this incredible ability to shape public perception about what content is valuable and what e-commerce services are the most efficient. They want, in essence, to have this iron grip on this digital media infrastructure."

Dimsdale: "AOL and Time-Warner have assured regulators on both sides of the Atlantic that their lines will be open to all Internet service providers equally. But industry and consumer groups want more than just assurances. Also, regulators at the Federal Trade Commission are said to be looking at requiring Time-Warner to relinquish its ties to the country's largest cable-TV company, AT&T. And European competition officials want to loosen the merged company's grip over online music delivery. At some point, divestitures like that would make AOL and Time Warner walk away from the deal, according to media analyst Jack Myers of The Myers Report. But he doubts the government will go that far."

Myers: "There's a real expectation that the combination of Time Warner and AOL is going to be a catalyst behind the growth of interactive television, the distribution of new technologies, distribution of new cable technologies. I believe the government understands that while they need some concessions, they also need to be realistic about the overall value to the economy of this deal."

Dimsdale: "Myers believes last spring's anti-trust decision against Microsoft brought the high-flying Internet economy back to earth and he hopes the government won't add to the harm by blocking the AOL/Time Warner merger. In Washington, I'm John Dimsdale for Marketplace."

Time Warner shares were down 2.1 percent today and AOL fell 1.8 percent on a day the S&P 500 was down 0.5 percent and the Nasdaq fell nearly three percent.

The Ford Motor Company disclosed today that it's made what it's calling a "preliminary" agreement to cover some of the costs of the Firestone tire recall. Ford says it hasn't figured out how much the company will pay Firestone, maker of the tires that came equipped on some of its models, including the Explorer. But, in a filing with the Securities and Exchange Commision, it says the costs associated with the recall of 6.5 million tires will increase costs and thus reduce its profits.

Ford says it's part of the automaker's focus on taking care of its customers. But James Cashman, a University of Alabama professor and a frequent consultant to the auto industry, says this may be good for business but it could hurt Ford's legal position.

Cashman: "That could be Ford suggesting some level of culpability that they don't want to out-and-out admit to face on. However, it might also represent their attempt to protect another major investment of their own and that's the brand name of Ford and particularly the Ford Explorer. This is a product that has offered them considerable profits over a period of time and one that, I think, have thought of investing in for an even longer period of time to continue that profit stream going. For the price of working with Firestone and working with this problem, I think maybe they're thinking about the enormous and positive impact they can have on that brand as well."

The tire problems have already resulted in close to 100 lawsuits against the Number Two automaker. The tire recall grew today. The French government is ordering the recall of around 2,000 Firestone tires in that country.

A car recall scandal in Japan today led to the resignation of the Mitsubishi Motors president. Over the summer it emerged that Mitsubishi had systematically hidden from the Japanese government shelves full of customer complaints about its vehicles. The executive who resigned will remain on in an advisory board to the company. Also today, DaimlerChrysler of Germany dispatched a senior executive to help overhaul the company's management. Daimler had already agreed to buy more than a third of Mitsubishi for $2.1 billion, but used the scandal to negotiate that price down by about ten percent.

And that's the top of our news for Friday. Today the Dow fell 0.3 percent or 39 points. Details on the 2.9 percent drop for the Nasdaq with broker David Johnson and when we do the numbers.