Sergio Marchionne, auto legend, steps down as CEO of Fiat Chrysler
Replacing him will be the be the former boss of FCA's Ram and Jeep brands, Mike Manley.
The company said in a statement that "unexpected complications arose while Mr. Marchionne was recovering from surgery and that these have worsened significantly in recent hours."
"As a consequence, Mr. Marchionne will be unable to return to work," the statement said.
Marchionne is an automotive industry legend, and is widely credited with rescuing Chrysler after the financial crisis left US car companies limping along. Known for logging long hours at work, he rarely wears a suit and is often seen in black sweaters that have become his trademark.
Marchionne, 66, will also leave his roles as chairman and chief executive at Ferrari, which was spun off from FCA several years ago. The luxury carmaker said Louis Camilleri, a Ferrari board member and chairman of Philip Morris International Inc., will become CEO.
John Elkann, a member of the Agnelli family that founded Fiat in 1899, will become Ferrari's chairman.
Elkann issued a statement saying he was "profoundly saddened" by news of Marchionne's health problems.
"Over the past 14 years together we have lived through successes and difficulties, internal and external crises, but also unique and unrepeatable moments, both personal and professional," Elkann, the chairman of Exor, which owns a large stake in FCA, said in the statement.
When Chrysler emerged from bankruptcy in 2009, there was serious doubt that the automaker could be saved. The Obama administration was in the process of bailing out rival General Motors, but it was debating whether it should just let Chrysler die.
Obama's team eventually decided to bail Chrysler out to avoid another shock to the economy -- and to Chrysler's suppliers -- more than because of any real faith in the automaker's long term viability.
Marchionne was the CEO of Fiat when he brought Chrysler out of bankruptcy in 2009. He rebuilt the company into a debt-free, profitable global automaker.
Chrysler fully merged with Fiat about four years ago.
Last year, the combined company sold 2 million vehicles in the United States, more than double its sales in the dark days of 2009. Globally, FCA sold 4.7 million cars last year.
But even with its current success, FCA still has some big problems.
For one thing, it's pretty small as far as automakers go, and economies of scale are critical when it comes to building cars. Fiat Chrysler is a distant third in US sales and 8th globally.
That's why Marchionne had been looking for a potential buyer for Fiat Chrysler for most of the last ten years.
More recently, Marchionne expressed optimism about FCA's future.
He intended to step down from his role as CEO in April next year, and he laid out a plan for FCA to become the United State's most profitable automaker over the next five years.
"I've become irrelevant in all this," he quipped during a meeting with investors in Italy last month, according to Detroit News.
Analysts described Marchionne's departure as a loss for FCA.
"I would never bet against Marchionne," said Rebecca Lindland, executive analyst at Kelley Blue Book.
Lindland added that Manley, Marchionne's successor, was her top choice to take over as FCA's chief. But she envisioned Marchionne remaining a fixture at the company even after his retirement, helping to steer the company toward his goals for it.
Marchionne's departure will also cause ripple effects through the company's management. Manley will have the be replaced at the helm of FCA's most successful brand, Jeep, which he had been running "masterfully," Lindland said.
Karl Brauer, executive publisher of Autotrader, described Marchionne as a competent leader who took big risks that paid off. Most notably, he pushed for the Fiat-Chrysler merger despite those who said the Italian and American brands would never work as a combined company.
Marchionne "helped illustrate the power of foresight and confidence and being able to make bold moves," Brauer said.
Power outage at GE
Profit at GE Power plunged 58% during the second quarter as orders for gas turbines tumbled, GE said on Friday.
The slump at GE Power, the company's largest division by revenue, underscores the challenges facing GE even as the company breaks itself apart by selling off its rail, health care, light bulb and other businesses.
GE's power struggles drove overall earnings down by 30% last quarter, offsetting strength in aviation and health care. And GE said it expects its 2018 free cash flow to be at the low end of its forecast.
After initially rising, GE shares dropped 4% on Friday. GE has lost about a quarter of its value this year.
"The biggest challenge we face continues to be working through the turnaround of our power business," GE CEO John Flannery said during a conference call on Friday.
Flannery said demand for orders has been soft, pressuring GE's cash flow and working capital.
GE Power has been caught unprepared for the rapid rise of renewable energy. Power plants are switching away from fossil fuels like coal and natural gas in favor of wind and solar.
The good news is that many on Wall Street feared worse results from the company, which was recently kicked out of the Dow. GE managed to grow overall revenue by 3%, driven by strength in aviation and oil and gas. And despite the continued trouble at GE Power, management maintained its earnings outlook for the rest of the year.
GE is also making progress with slashing costs in an effort to stabilize the company. GE said it has already cut $1.1 billion of industrial costs this year and it's on track to exceed its goal to save $2 billion. Much of that belt tightening has occurred at GE Power, which announced plans late last year to cut 12,000 jobs.
Flannery pledged to fix GE Power urgently, but he cautioned that it won't be a smooth or quick turnaround.
"It's going to be a multi-year fix, with some volatility," he said.
Of course, power isn't the only part of GE that's hurting. Profit declined by double digits as GE's locomotive division as well. Even renewable energy, which is primarily onshore wind, suffered a 48% plunge in earnings as orders declined and prices slumped.
The bright spot at GE remains aviation, which makes and services jet engines. Profit, revenue and orders all rose solidly. GE said equipment orders spiked 62% thanks to strong demand for its GEnx and LEAP engines.
GE downplayed concerns about the trade war with China, where the company makes about $7 billion per year in revenue. GE also imports roughly $2.9 billion of parts from China that are ultimately re-exported as MRI machines, jet engines and wind turbines.
"We don't see a major impact yet financially," Flannery said, adding that he's "watching this carefully."
GE estimates that the gross impact from tariffs could be $300 million to $400 million, before the company takes mitigating steps to shield itself. One option: GE said it could adjust its supply chain to avoid tariffs.
While GE is "built for fair and open trade," Flannery said he hopes and expects the trade standoff to "reach a sensible negotiated conclusion."
Last month, GE announced plans to shrink itself by saying goodbye to its health care, oil and gas and locomotive businesses. It was a dramatic shift for one of America's great conglomerates.
GE has promised to use the cash to pay down a mountain of debt and simplify a company that grew far too complex in recent years. At one point, GE owned everything from an appliance business and NBC to one of America's biggest banks.
"We are progressing on our plans to make GE simpler and stronger," Flannery said on Friday.
Merck pledges to cut prices for seven drugs
Merck said it's cutting the price of Zepatier, a drug that treats hepatitis C, by 60% and reducing the price of six other medications by 10% each.
The company also said it will not raise the average price of the drugs it sells beyond the annual rate of inflation in the United States and will continue to "evaluate our portfolio to look for opportunities to further reduce costs."
The six medications targeted for 10% price cuts are:
- Prinivil, treats high blood pressure and heart conditions
- Proscar, treats enlarged prostate
- Remeron, antidepressant
- Sinemet, treats symptoms of Parkinson's disease
- Sinemet (sustained-release)
- Trusopt, treats symptoms of glaucoma and other eye diseases
The move by Merck comes after Pfizer announced price hikes for nearly three dozen drugs only to reverse course amid public pressure from President Donald Trump.
Trump in a tweet earlier this month lambasted what he called Pfizer's plans to raise prices "for no reason."
The company announced last week it would halt raising prices on multiple drugs. The company did not, however, roll back price hikes already implemented this year, including on popular medications like Xanax, Lipitor and Chantix.
Swiss firm Novartis followed, pledging not to raise drug prices in the United States this year. The company plans to "evaluate as the environment evolves," Novartis CEO Vas Narasimhan told Bloomberg this week.
The pharmaceutical industry has been the subject of criticism because of climbing drug prices. Trump has promised to pressure the industry to lower drug prices.
However, his administration did little until May, when it rolled out its 44-page "blueprint" for increasing competition, reducing regulations and changing the incentives for all players in the drug industry.
Merck said in a press release Thursday that it has "a long history of responsible drug pricing." Last year, the average net price of all the medications it sells in the United States declined by 1.9%.
- Charles Riley, Danielle Wiener-Bronner and Tami Luhby contributed to this report.
China's yuan plunges again. Is a currency war coming?
The yuan weakened by nearly 1% against the US dollar on Thursday and continued its slide Friday, hitting its lowest level in over a year. It has now fallen by more than 8% over the past three months amid a global trade spat and concerns over an economic slowdown in China.
Analysts said the yuan's latest dip came after China's central bank indicated that it was willing to accept a weaker currency.
A sliding currency could help China's huge export industry cope with new US tariffs, as it makes Chinese products cheaper for buyers who pay in dollars. That could in turn boost an economy that posted its slowest growth rate in nearly two years - 6.7% - in the second quarter.
Unlike the dollar or euro, the yuan does not float freely against other currencies. Instead, China's central bank - the People's Bank of China - helps guide the currency by setting a daily trading range.
Analysts at research firm BMI noted Friday that the yuan is weakening because investors expect the bank to loosen monetary policy "in a bid to support an economy that is facing multiple headwinds," including a trade war with the United States.
The United States and China have slapped tariffs on billions of dollars of each other's goods, and President Donald Trump is threatening to strike again at even more Chinese exports.
A weaker yuan risks increasing trade tensions with the Trump administration, which has repeatedly accused China of keeping its currency artificially low to support its huge export industry.
The latest declines prompted Trump to complain in an interview with CNBC on Thursday that the yuan was "dropping like a rock" against the dollar.
"Our currency is going up. I have to tell you, it puts us at a disadvantage," Trump added.
Analysts say it's unlikely that China would use the weaker yuan as a weapon in the trade war. They point to the chaos caused in Chinese and global markets by sharp falls in the currency in 2015 and 2016.
"Whether or not China is wittingly undertaking a depreciation policy, the question will increasingly be on investors' minds as the slide deepens," Societe Generale strategists wrote in a note on Friday.
There are other factors weighing on the yuan. Given the strength of the US economy, the Federal Reserve is expected to keep raising interest rates. That makes it more attractive for investors to hold US dollars, prompting them to sell other currencies.
"Gravity is doing its job again as monetary policy diverges further between the United States and China," said Margaret Yang, an analyst at investment firm CMC Markets.
The question is how much further the yuan may fall.
Qi Gao, a currency analyst at Scotia Bank, expects the currency to weaken almost another 2% against the dollar. That would be when it would feel compelled to halt the yuan's descent, he added.
It's a careful balancing act for policymakers.
If the yuan falls too quickly, it could prompt money to flood out of China as investors lose confidence and seek to exchange it for assets in dollars and other currencies.
"Chinese authorities will likely prevent the currency from moving too sharply in any direction," said Hannah Anderson, global market strategist at JPMorgan Asset Management.