General Electric's Alstom Bid Faces Danger and General Motors' Recall Gets Expensive
Dow Jones Industrial Average was trading 36 points higher, or 0.22%, by midafternoon as Federal Reserve officials gathered for a two-day policy meeting. The Federal Open Market Committee is expected to further trim its bond-buying program at the end of this week's meeting. With that in mind, two industrial companies are making big headlines today. Here are the details.
Inside the Dow, General Electric's $17 billion offer to buy the energy assets of French conglomerate Alstom is officially in jeopardy. Siemens yesterday made a counteroffer that involves two of Japan's largest industrial companies, Mitsubishi Heavy Industries and Hitachi, as partners.
Siemens is offering 3.9 billion euros, or $5.3 billion, for Alstom's gas turbines, while Mitsubishi and Hitachi would throw in 3.1 billion euros, or $4.2 billion, for stakes in the power grid, steam turbine, and hydro businesses, according to Bloomberg.
The proposal has Mitsubishi buying 40% of Alstom's steam and nuclear turbines branch and forming a joint venture with the French company. Mitsubish would also have roughly 20% ownership of Alstom's power grid and hydro businesses.
Siemens matched General Electric's pledge to create 1,000 jobs in France. While Siemens proposal is much more complex than General Electric's, it does keep Alstom's energy assets partially in the hands of the French rather than acquired fully by GE.
"Our offer is more attractive from a financial, industrial and political perspective," Siemens CEO Joe Kaeser told journalists, according to Bloomberg. "It retains the Alstom brand to a significant extent and all-in-all is about a billion euros higher."
General Electric has previously said it would not enter into a bidding war for Alstom's energy assets, but investors will wait to see if GE will perhaps make more concessions in its proposal to help win the bid.
In other industrial news, General Motors continues to run up its recall count. GM's latest recall covers an additional 3.4 million vehicles in North America for ignition-switch issues similar to those linked to at least 13 deaths and involved in an earlier recall.
The latest recall puts General Motors' tally this year at 44 individual recalls that cover more than 17.7 million vehicles in the U.S. and more than 20 million vehicles in North America. That staggering recall count is quickly creeping up on the entire automotive industry's recall total last year of 21.9 million vehicles.
In the first quarter, GM took a $1.3 billion charge for costs related to the recall; the automaker has now increased its second-quarter cost estimate from $400 million to $700 million. That $2 billion doesn't include the cost to GM's already battered brand image, and expenses will continue to pile up as lawsuits are worked through.
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The article General Electric's Alstom Bid Faces Danger and General Motors' Recall Gets Expensive originally appeared on Fool.com.Daniel Miller owns shares of General Motors. The Motley Fool recommends General Motors. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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