Now that we have ushered in 2011, its time to reflect on what I thought were the top business stories of 2010. In rank order, here are my top 3 picks:
1. GM goes public
On November 18th, General Motors stock started once again started trading under its old familiar ticker symbol “GM”. This was the end result of a $23.1 billion IPO that ranks as the largest in business history. There are plenty of aspects to this story that I find remarkable, the first being the undoubted success of its IPO given that it had filed for bankruptcy on June 1, 2009 a mere 1 year and 5 months earlier.
The bankruptcy of GM was truly one of the true low points during the great economic crisis that has griped the worldwide economy over the last 2 years. A $50 billion taxpayer funded bailout, that some had initially hoped would keep the automakers out of bankruptcy court, proved unable to do so. At the time of its bankruptcy filing, GM was still unravelling from its latest $9.6 billion annual loss, another notch in a pattern of losses that had seen it lose a total of $72 billion since 2004. The age of American manufacturing prowess it seemed had truly come to a end.
Fast forward to 2010 and GM seems to be firing on more than just a couple of cylinders. In addition to its blockbuster IPO, the company announced earnings of $4.2 billion for the first 3 quarters of the year, including $2 billion it earned from July to September which was its largest quarterly profit in 11 years. Wall Street seems excited to have a healthier GM back, boosting its stock 7.8% since its IPO, and some analysts predicting that the company will generate nearly $40 million in free cash flow a day for the next five years.
Although taxpayers are yet to be fully reimbursed for the cost of the bailout, the comeback story of this iconic manufacturing company is my pick for the top 2010 business story.
2. BP and the Gulf oil spill
On April 20, 2010 of the Gulf Coast, the Deepwater Horizon drilling rig (principally owned and operated by BP) exploded killing 11 men working on the platform and injuring 17 others. The fatalities and injuries that occurred on that day would probably have been enough to make this one of the worst of oil exploration disasters in history. However, it was the uncontrollable spew of crude oil into the Gulf that occurred over the next 3 months that truly took this story to the very pinnacles of corporate disasters ever witnessed.
To say that BP had a tough year would be a great understatement. The company is expected to pay more than $40 billion in clean up costs, government fines, lawsuits, legal fees and damage claims. In an effort to bolster its finances the company has cut its dividend, issued debt and sold off more than $21 billion in corporate assets.
The reason I found this story so intriguing was how avoidable the calamity of that occurred after the initial explosion really was. As it turns out had a $500,000 remote-controlled device, known as an acoustic trigger been installed, it would have triggered underwater valves or explosives to shut down the well in the event of a catastrophe.
According to the Wall Street Journal, BP actively deploys these devices on rigs around the world, such as Norway and Brazil (which require them) and the U.K. (which does not). BP chose not to equip oil rigs off the coast of the U.S. with acoustic triggers because U.S. regulations enacted in 2003 do not require companies to do so. The original draft of those regulations did require this backup safety measure, however in 2003 after closed-door meetings with energy company executives then-Vice President Dick Cheney lead an effort to scrap this requirement. Surprise, surprise!
Though BP as a company will probably survive this disaster and its aftermath, I chose this story as my 2nd pick for 2010 because of how well it illustrates the impact small measures can have on the long term prospects of any business.
3. Apple’s meteoric rise
In 1997, at the Gartner Symposium and IT expo, Michael Dell (CEO of Dell Computer) told an audience full of IT executives when asked how he would fix a then-troubled Apple Computer, Inc:
"What would I do? I'd shut it down and give the money back to the shareholders".Fast forward to 2010, and a rejuvenated Apple Inc. surpassed its long time nemesis, Microsoft Corp. to become the most valuable technology company in the world with a market cap of $296 billion. As of the end of the year, Apple seems to be headed on a stock trajectory that could perhaps see it challenge Exxon Mobil Corp. as the most valuable company in America (Exxon market cap = $369 billion). For the record, Dell Inc.’s current market cap stands at $26 billion, making Apple 11 times more valuable. Eat that!
I love comeback stories, and over the past decade no company has done as great a job at turning its prospects around as Apple Inc. The Steve Jobs led enterprise has done an almost unbelievable job at revamping and innovating their product line, in the process managing to lift an entire industry with them. Becoming the most valuable company in America would really make this comeback story complete, in the meantime they are my 3rd most compelling business story of the year.
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