DealBook: Bracing for What's Next as Auto Bailout Fails

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Edited by Andrew Ross Sorkin

TODAY'S TOP HEADLINES | Friday, December 12, 2008 M & A: National City Deal Is Approved, With Conditions BANKING: Bank of America to Cut Up to 35,000 Jobs PRIVATE EQUITY: As Buyout Fails, BCE Faces New Hurdles HEDGE FUNDS: Hedge Funds in Retreat From Emerging Markets OFFERINGS: Nortel Faces Possible Delisting from N.Y.S.E. VENTURE CAPITAL: Tumblr Takes $4.5 Million LEGAL: Prominent Trader Accused of Defrauding Clients TOP STORY Bracing for What's Next as Auto Bailout Fails Capitol Hill's failure to pass a $14 billion auto rescue plan has raised the specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month. G.M. confirmed that it had legal advisers -- including Harvey R. Miller of the firm Weil Gotshal & Manges -- to consider a possible bankruptcy, which the company until now has said would be cataclysmic not just for G.M. but for Chrysler and Ford Motor Company as well. "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," the Senate majority leader, Harry Reid of Nevada, said on the Senate floor after it was clear that a deal could not be reached. Go to Article from The New York Times» As odds grow that G.M. and Chrysler will be insolvent by year's end, the hypotheticals about the domino effect of the companies' troubles through the vast network of auto supplier firms are becoming real. Go to Article from The New York Times» Despite calls for the Treasury Department to tap its $700 billion TARP fund to help the auto industry, the department maintains that the TARP is best used to stabilize the financial sector. Go to Article from Reuters via The New York Times» European stocks followed Asian markets sharply lower Friday, after the collapse of the auto bailout plan raised fears of higher unemployment and a further erosion in consumer confidence. Go to Article from Reuters via The New York Times» Read More Add a comment ADVERTISEMENT Back to Top MERGERS & ACQUISITIONS PNC Financial Services Group won Justice Department approval to buy National City with some conditions, making it the nation's fifth-largest bank, the department said on Thursday. Go to Article from Reuters via The New York Times» Go to Press Release from the Department of Justice» Read More Add a comment The drug company Eli Lilly said on Thursday that hefty costs related to its $6.5 billion acquisition of ImClone would force the company to post a loss for 2008 and significantly lower earnings for 2009. Go to Article from The Associated Press via New York Times» Go to Press Release from Eli Lilly» Read More Add a comment Daimler is buying a 10 percent stake in Russian truck maker Kamaz under a $300 million deal signed Friday. Go to Article from The Associated Press via The New York Times» Go to Press Release from Daimler» Read More Add a comment That Verizon Wireless has managed to tap banks for $17 billion in loans to complete its purchase of a competitor, Alltel, shows there are substantial cracks in the lending freeze -- at least for borrowers with good credit, Breakingviews says. Go to Article from Breakingviews via The New York Times» Go to S.E.C. Filing from Verizon» Read More Add a comment Back to Top INVESTMENT BANKING Bank of America said Thursday it planned to eliminate 30,000 to 35,000 jobs over three years as it integrates Merrill Lynch after its acquisition and deals with weaker business activity because of the economic recession. Go to Article from The New York Times» Go to Press Release from Bank of America» Read More Add a comment Jamie Dimon, the chief executive of JPMorgan Chase, said Thursday afternoon that the banking giant was facing "a tough quarter" and that business was "terrible" in November and December so far. Go to Article from CNBC» Go to Video from CNBC» Read More Add a comment The New York City comptroller, William C. Thompson, forecast Thursday that Wall Street's cash bonuses will drop at least 50 percent to their lowest level since 2002. Go to Item from DealBook» Read More Add a comment Setting Wall Street bonuses this year is a tricky math problem. Breakingviews illustrates the point nicely with a spreadsheet that lets users run the numbers at a hypothetical bank. Go to Item from DealBook» Go to Spreadsheet from Breakingviews» Read More Add a comment The Wall Street backlash is under way and if it grows strong enough, it could end with some bankers facing criminal trials, The New York Times's Floyd Norris writes. Go to Article from The New York Times» Read More Add a comment British bank HBOS, due to be taken over by Lloyds TSB, said on Friday that its bad debts and other charges so far this year have jumped by two thirds in the last two months alone, to 8 billion pounds ($11.9 billion), as corporate and home loans soured. Go to Article from Reuters via The New York Times» Go to Article from The Telegraph» Go to Press Release from HBOS (PDF)» Read More Add a comment The trustee handling the liquidation of Lehman Brothers' brokerage unit asked a U.S. bankruptcy court on Thursday for the power to issue subpoenas to obtain documents and information from current and former employees and officers. Go to Article from Reuters via The New York Times» Read More Add a comment Two banking giants, Citigroup and UBS, agreed on Thursday to buy back nearly $30 billion in risky auction-rate securities that regulators said the banks had marketed to customers as safe. Go to Article from The Associated Press via The New York Times» Go to Press Release from the S.E.C.» Read More Add a comment Wells Fargo is likely to take a charge of $40 billion in the fourth quarter related to the acquisition of Wachovia , Ladenburg Thalmann analyst Richard Bove said. He maintained his "buy" rating on the stock. Go to Article from Reuters via The New York Times» Read More Add a comment With the demise of the BCE buyout, the pipeline for leveraged loans shrank to $15.25 billion from $32.1 billion, according to Standard & Poor's Leveraged Commentary and Data. Go to Item from DealBook» Read More Add a comment Timothy R. Pohl, a co-head of the restructuring practice at Skadden, Arps, Slate, Meagher & Flom, is jumping from the law into banking by taking a position at Lazard. Go to Item from DealBook» Read More Add a comment Back to Top PRIVATE EQUITY With the record-setting $50 billion leveraged buyout of Bell Canada all over -- except for the potential litigation -- the company faces what may be a larger issue: reversing the decline of its business. The deal's collapse comes as fears of financial "Armageddon" are starving private equity of fresh funds, The Financial Times reported. Go to Article from The New York Times» Go to Article from The Financial Times» Go to Related Item from DealBook» Read More Add a comment Fidelity Investments has become a major shareholder of Las Vegas Sands, the casino operator controlled by investor Sheldon Adelson. Go to Article from Barron's» Go to Article from The Associated Press via The New York Times» Go to S.E.C. Filing from Fidelity» Read More Add a comment Buyouts may not be as bad for employee morale as some may think, a new study from the Centre for Management Buyout Research at Nottingham University Business School suggests. Go to Item from DealBook» Go to a Summary of the Study (PDF)» Read More Add a comment Back to Top HEDGE FUNDS Hedge funds that focus on emerging markets saw investors pull out $5.2 billion over the four-month period ending Oct. 31, according to new data from Hedge Fund Research. Go to Item from DealBook» Read More Add a comment The bankruptcy of KB Toys is only the latest black eye for its hedge fund owner, Prentice Capital. Go to Article from The New York Post» Read More Add a comment Citadel Investment Group, whose main funds have suffered losses of almost 50 percent this year, will cover "a substantial portion" of its operating expenses this year, a break from passing those costs on to clients. Go to Article from The Chicago Tribune» Read More Add a comment Back to Top I.P.O. / OFFERING Nortel Networks, the long-troubled telephone equipment maker which is reportedly assessing a possible bankruptcy filing, may be delisted from the New York Stock Exchange because its stock price is less than $1, the company said Thursday. Go to Article fro Bloomberg News» Go to Press Release from Nortel via The New York Times» Go to Previous Item from DealBook» Read More Add a comment Marathon Oil postponed a spinoff it proposed in July, saying the matter "requires further evaluation" in light of the seesawing stock and commodities markets. Go to Item from DealBook» Go to Press Release from Marathon» Read More Add a comment Stocks fell Thursday, with the Dow Jones industrial average losing nearly 200 points, as investors were hit by a series of bleak economic reports that signaled further problems for exports and the labor market. Go to Article from The New York Times» Read More Add a comment Back to Top VENTURE CAPITAL Tumblr, a service that lets users publish short, simple blog posts, has raised $4.5 million in a second round of funding. Go to Article from VentureBeat via The New York Times» Go to Article from All Things Digital» Read More Add a comment Transonic Combustion, a Camarillo, Calif.-based start-up working on a fuel-injection system that could help gasoline (and someday biodiesel) cars hit 100 MPG, has hired Brian Ahlborn to replace founder Mike Cheiky as president and chief executive. Go to Article from GigaOm via The New York Times» Read More Add a comment Back to Top LEGAL Bernard L. Madoff, a legend among Wall Street traders, was arrested on Thursday by federal agents and charged with criminal securities fraud stemming from his company's money management business. Go to Article from The New York Times» Read More Add a comment Marc S. Dreier, a prominent New York lawyer arrested this week on fraud charges, will be held without bail on wire and securities fraud charges. Go to Article from The New York Times» Read More Add a comment Companies whose pension funds suffered big losses this year will not have to replenish the money quickly under a relief measure that flew through the Senate Thursday and will next go to the president for his signature. Go to Article from The New York Times» Read More Add a comment A crucial issue facing Congress as it debated a taxpayer bailout of Detroit's Big Three was whether a car czar with uncertain authority will be able to accomplish in a little over three months what no one has accomplished in a little over three decades. Go to Article from The New York Times» Read More Add a comment A handful of General Motors parts suppliers have begun asking for payments in advance, though the embattled auto maker has rebuffed these requests, Bloomberg News reported. Go to Article from Bloomberg News» Read More Add a comment KB Toys filed for bankruptcy protection Thursday, its second Chapter 11 filing in five years. This time, it says it is going out of business. Go to Item from DealBook» Read More Add a comment Eight former traders at Fidelity Investments agreed to pay a total of more than $1 million to settle federal regulatory claims that they had accepted gifts like private jet trips from brokers seeking business with the fund company. Go to Article from Bloomberg News via The New York Times» Go to Press Release from the S.E.C.» Read More Add a comment Time Warner named Jeffrey L. Bewkes, its chief executive, to the additional role of chairman, in line with a succession plan outlined by the current chairman, Richard D. Parsons, earlier this year. Go to Article from Bloomberg News via The New York Times» Go to Press Release from Time Warner» Read More Add a comment Get home delivery of The New York Times for as low as $3.15 a week.

SEARCH DEALBOOK SITE DealBook | E-mail Preferences Help | Advertising Opportunities The Bezzle rears its ugly head, and spectacularly December 12, 2008 Crashed auto rescue causes economic pile-up December 12, 2008 Facebook adds old-media chaperone as a friend December 12, 2008 Blagojevich and the Tribune Angle Tribune and its attempts to sell Wrigley Field figure prominently in the indictment of Illinois's governor. More» Workers Pay for Tribune Debacle Sam Zell literally mortgaged the future of Tribune's employees to close his ill-fated buyout deal. More» Rescue Memo to Vikram Pandit Jack Flack says that Citigroup's chief executive needs to stop surviving and start leading. More» Video: Chrysler's Plea Robert Nardelli, the chairman of Chrysler, urged members of the Senate Banking Committee to approve federal aid for his company. More» What's a Wall Street Chief Worth? With taxpayers' money on the line, creating packages that pay enough -- but not too much -- becomes an even thornier problem. More» Tracking the Bailout The New York Times tracks how the $700 billion Troubled Asset Relief Program is being doled out to banks, insurance companies and more. More» The Deal Professor A blog-within-a-blog that looks at mergers, private equity and corporate governance through a legal lens, written by Steven M. Davidoff, a professor at the University of Connecticut School of Law and a former lawyer at Shearman & Sterling. More» Revolving Door The latest hires, promotions and departures at Kirkland & Ellis, Fannie Mae, BlackRock and more. More» The Rescue Squad DealBook's special section looks at the people reshaping Wall Street and what the new landscape might look like. More» Lehman's Fall Full coverage of Lehman Brothers' dramatic slide into bankruptcy protection. More» The Bear Bailout Full coverage of the proposed takeover of the troubled investment bank -- and the crisis that led to the sale. More» DealBook for BlackBerry Get one-click access to DealBook to read the latest deal news throughout the day. Visit mobile.nytimes.com/bbinstall directly from your BlackBerry or by sending the text message "db install" to 698698. More information on DealBook for BlackBerry. News By Industry Airlines / Autos Basic Industries Consumer Goods Energy / Utilities Financial Services Food & Beverage Healthcare Media Real Estate Retail / Leisure Technology Telecom Tools & Resources GET QUOTES Look Up Symbol RESEARCH SUITE Portfolio Company Research U.S. Markets International Markets Mutual Funds SEND A TIP OR FEEDBACK E-mail us at dealbook@nytimes.com Dealboard

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