France Flexes Against General Electric's Bid For Alstom and General Motors Recall Tally Hits 18
The Dow Jones Industrial Average was trading 173 points lower, or 1%, by midafternoon even after the latest Labor Department reported that initial jobless claims fell sharply by 24,000 to a seasonally adjusted rate of 297,000 in the week ended May 10. An explanation for the steeper than expected drop was the late Easter holiday, which makes it more difficult to seasonally adjust the numbers. Even with the holiday partially to blame for volatile numbers, claims have been hovering near post-recession lows throughout 2014, and that's a good sign.
With that in mind, here are two companies making headlines today.
Inside the Dow, General Electric's $17 billion bid for Alstom's energy business is on rocky ground after the French government on Wednesday gave itself the power to block foreign takeovers in industries it believes to be strategic for national health and security. That includes areas such as transportation, equipment, plants, and, of course, energy.
While Alstom has vocally backed General Electric's bid for its energy business, France would prefer that the German company Siemens come back a better offer. Paris would prefer more of an alliance between companies such as Alstom and Siemens, rather than General Electric potentially "absorbing" and perhaps dismantling the business.
"The French government is going to great lengths to intervene," said Bernstein analyst Steven Winoker, according to Bloomberg. "This particular announcement is not a positive one from GE's perspective. At the end of the day, I think you still will have a deal, I just don't know that it will be with GE."
General Electric has since voiced its opinion that the industrial project presented to Alstom is good for the company, its employees, and France. In a statement, GE also said it intends to preserve and even create jobs in France. General Electric investors would be wise to watch this situation -- this is a very valuable deal that would add to earnings immediately, as well as further GE's progress in returning to its industrial and energy business roots.
Outside the Dow, General Motors is making headlines for yet another round of recalls. The automaker today announced an additional five recalls covering 2.7 million vehicles with problems ranging from windshield wipers, to tail lamps, to brakes. That brings General Motors' total recall this year to 18, which covers more than 11 million vehicles.
If you think that number sounds absurdly high, you'd be right. Consider that so far in 2014 General Motors has recalled roughly six times the number of vehicles it has in recent full years. From 2009 to 2013, GM averaged 19 recalls covering 1.8 million vehicles per year, according to Automotive News.
To take it a step further, General Motors has single-handedly put the entire automotive industry on pace for the worst year of recalls ever. The previous record was set in 2004 at 30.8 million vehicles recalled.
General Motors investors, who no doubt hoped to put last quarter's $1.3 billion charge in the past and focus on a more profitable year ahead, will have to digest an additional $200 million charge in the second quarter for costs associated with today's recall announcement.
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The article France Flexes Against General Electric's Bid For Alstom and General Motors Recall Tally Hits 18 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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