Dumbest Moments in Business 2009...midyear edition
GM partners with Segway
It became clear this spring that General Motors was going to have to get smaller to survive, but this was ridiculous. A week after President Obama gave the company a 60 day deadline to avoid bankruptcy, GM took time out from its turnaround efforts to unveil the PUMA, a two-seat vehicle being developed with Segway that looked more like a rickshaw than a car.
The vehicle, capable of going only 35 mph and traveling 35 miles between charges, got lots of attention, but did little to change popular opinion about the company that had ridden large SUVs to the cusp of failure. On June 1, GM filed for bankruptcy.
By Chris Isidore
Tropicana's botched redesign
Tropicana drinkers, it turns out, are as passionate about packaging as they are about pulp. That's why they rebelled when parent company PepsiCo and consultancy Arnell overhauled the juice line's packaging in January as part of a $35 million branding campaign called "Squeeze."
Tropicana fans said the simplicity of the new design reminded them of store-brand generics. And who wants to be mistaken for a generic consumer?
Within a month, the public's flogging by e-mail, phone, and blogs forced PepsiCo to bring back the old straw-in-an-orange cartons. Other parts of the campaign remain, but PepsiCo will probably think twice before it tries updating this icon again.
By Maha Atal
Apple 'shakes the baby'
On April 22, visitors to Apple's iPhone App Store found a new -- and very twisted -- offering: "Baby Shaker." For 99 cents, you could download the "game," the object of which was to silence an animated baby's cries by shaking the iPhone until two red X's appear over the infant's eyes.
"See how long you can endure his or her adorable cries before you just have to find a way to quiet the baby down," the instructions read.
Two days later, and shortly before Apple announced its 1 billionth App Store download, the company took down the app and apologized. No word on any resulting shakeup that may have occurred in Apple's quality control department.
By David Goldman
John Thain's $35,000 'commode on legs'
When Bank of America agreed to buy struggling broker Merrill Lynch, BofA chief Ken Lewis promised to take his customary ax to costs. He soon found targets aplenty, thanks to Merrill CEO John Thain.
Just weeks after BofA completed the Merrill deal in January, with the help of $138 billion in taxpayer-funded promises, it emerged that Thain had spent $1.2 million on a makeover of his Lower Manhattan office -- including an $87,000 area rug and a $35,000 "commode on legs."
Thain later said he'd reimburse the company, but by then he was out the mahogany-paneled door.
By Colin Barr
SEC bars Madoff...just in time!
All hail the Securities and Exchange Commission, the newest inductee in the Fat-Lot-of-Good-That-Does-Us Hall of Fame.
A mere nine years after SEC staffers started getting hit over the head with red flags about Bernard Madoff's fishy finances, the commission finally got around to taking decisive action: In mid-June, the commission barred the Ponzi-schemer from the securities business.
Of course, this investor protection came only after Madoff stole more than $13 billion, pleaded guilty to multiple felonies and went to jail. With regulators like that, who needs regulators?
By George Mannes
Grassley to AIG execs: 'Commit suicide'
Indignation over AIG bonuses was all the rage in March, but no one took more offense than Sen. Charles Grassley (R-Iowa), who infamously told an Iowa radio station that AIG executives should consider committing hara-kiri:
"The first thing that would make me feel a little bit better towards them is if they'd follow the Japanese model and come before the American people and take that deep bow and say I'm sorry, and then either do one of two things -- resign, or go commit suicide."
A spokesperson for Grassley later said the senator was only speaking "rhetorically."
By Jia Lynn Yang
Yankees' $200,000 seats
The New York Yankees opened a new $1.3 billion ballpark in 2009, and were hoping to cover some of the cost with pricey $2,500 tickets, sold in season packages for $200,000.
The Yanks didn't get enough takers, and after a month of empty prime seats dominating the television coverage, the team was forced into an unprecedented and embarrassing mid-season cut.
Now the seats are a bargain...at just $1,250.
By Chris Isidore
U.S. debt is 'safe.' Seriously. Stop laughing
Following a speech at Peking University on his first trip to China as Treasury Secretary, Tim Geithner was asked to share his thoughts about the safety of Chinese investments in the United States. They are "VERY safe," he quickly asserted.
At which point the audience burst out laughing. Apparently, the audience was amused not only by the answer's substance, but by the flat "don't worry your little young heads about it" certainty with which Geithner insisted that China's U.S. debt holdings were A-OK. Because as even a group of Chinese college kids understood, that's just not as clear as the Treasury Secretary insisted it was.
By Bill Powell
Geithner gives few details, tanks the market
In February, President Obama used his first White House press conference to alert the public to a momentous event. "Tomorrow, my Treasury Secretary, Tim Geithner, will be announcing some very clear and specific plans for how we are going to start loosening up credit once again," he said.
But when Geithner appeared at Treasury the next day, on Feb. 10, he offered few plans of any sort, let alone clear and specific ones, which helps to explain the stock market's 5% plunge that day. Since then Geithner has loosened up, with the help of a media trainer -- and the market has bounced back. Coincidence?
By Colin Barr
Obama's spending cuts...a ways to go
You're eight months behind on your $500,000 mortgage, your bank is demanding a meeting, and you respond by telling them there's nothing to worry about. Why not? Because you just saved $40 by canceling your newspaper subscription.
That, essentially, is the kind of fast budget talk President Obama trotted out in April when he made a big to-do out of instructing his cabinet to cut $100 million from their budgets.
$100 million may sound like a big number, but the cut would only reduce the United States' projected $1.8 trillion budget deficit by 0.005% -- less than what you'd save for your mortgage by giving up the daily paper.
By Jon Birger
Credit card crackdown -- and guns
President Obama signed a bill in May making it more difficult for credit card companies to increase fees and interest rates...and easier for people to bring loaded guns into national parks and wildlife refuges.
While Sen. Tom Coburn (R-Okla.), who backed the gun provision, said it wasn't meant to be a "'gotcha' amendment," Democrats in the House and Senate had to push it through in order to pass the high-profile credit card legislation.
An aide of Rep. Carolyn Maloney (D-N.Y.), one of the bill's chief sponsors, summed it up best: "It's just wacky." But don't go waving your firearms at Yellowstone just yet; the bill won't take effect till February 2010.
By Beth Kowitt
We don't need your stinkin' stimulus
Okay, so it's probably only the second-dumbest thing that Mark Sanford has done in 2009: In March, the South Carolina governor boldly announced he was rejecting $700 million of federal stimulus funds for his state, based on his fiscal conservative principles.
Apparently, South Carolina's issues -- the state has the nation's second-highest unemployment rate, for instance -- were somewhat less of a concern for Sanford, who was considered a 2012 presidential hopeful until his recent vacation adventure.
GOP governors like Sarah Palin of Alaska joined Sanford in his stand, but most accepted funds in the end, and in South Carolina, the fight went to the state supreme court, which ordered Sanford to take the money (but not to run).
By Jia Lynn Yang
Not-so-stressful stress tests
Phew: On May 8, the government revealed the results of the `stress tests' and we learned that the nation's biggest banks were in okay shape to handle "adverse" scenarios -- like, say, 8.9% unemployment. Thank heavens for that, because just one day later the Labor Department reported that the unemployment rate hit -- you guessed it -- 8.9%.
Nearly two months later we're at 9.4%...and counting.
By David Ellis
British Airways to staff: Wanna work for free?
Responding to a record $595 million loss in its recently completed financial year, British Airways took the recession-inspired trend of voluntary job furloughs one step further this June and asked its 40,000 employees to work for free.
"The new unpaid work option means people can contribute to the cash-saving effort by coming to work while effectively volunteering for a small cut in base pay," explained CEO Willie Walsh. Perhaps fearing the possibility of involuntary and permanent cutbacks, about 4,000 workers agreed to take unpaid leave, some 1,400 opted to work part-time, and 800 said they would work for free for up to a month.
The chief executive himself -- who made more than $1.2 million last year and received a 6% pay hike for 2009 -- plans to work for free in July. BA's unions pointed out it was a luxury he could probably afford.
By Brian O'Keefe
KFC runs out of chicken
KFC, owned by Yum! Brands, angered millions of customers when a free-chicken promotion in May backfired. The chain recruited Oprah Winfrey to help sell a healthier grilled chicken alternative, but when the talk show host told viewers that anyone who downloaded a coupon within a two-day period would be eligible for a complimentary two-piece grilled chicken meal, patrons clamoring for free chicken overwhelmed KFC restaurants.
The chain gave away 4 million meals before it began refusing coupon-holders, some of whom protested in the blogosphere and staged sit-ins in stores. At least two have sued. KFC, which is trying to shake its fast food image and has even started calling itself KGC -- as in Kentucky Grilled Chicken -- in some commercials, has issued rain checks.
"We apologize to any customers who were inconvenienced and we remain committed to providing a free Kentucky Grilled Chicken meal plus a medium soft drink to those who submitted valid coupons," said KFC spokesman Rick Maynard.
By Suzanne Kapner
Investors selling low and buying high
It's often said that fear and greed drive the stock market -- they also make poor market timers out of most of us. And the behavior of mutual fund investors over the past several months is just more evidence.
From September through December of last year, as the S&P 500 plummeted 30%, investors pulled some $99 billion out of domestic equity funds, according to data from the Investment Company Institute. During the first three months of 2009, they withdrew a net total of $23.5 billion more. And in March alone -- when the S&P 500 bottomed at a value of 677 on March 9 and then rallied 18% to finish at 798 -- investors withdrew $16.2 billion.
Then, just as the market began to rally, they started buying. Since the end of April -- when the S&P 500 closed 29% higher than that March 9 low -- investors have plowed $16 billion back into domestic stock funds. Time to sell?
By Brian O'Keefe
Bonusgate
Hard to know who the award goes to on this one:
1) AIG, which insisted on sticking with $165 million in retention payments to executives, even after the troubled insurance behemoth landed in the arms of the U.S. government, or
2) the U.S. House, which tossed political pitchforks at the hapless one-buck-a-year CEO recruited to clean up the mess -- and then passed a confiscatory 90% tax on Wall Street bonuses.
Fortune's vote goes to No. 2.
By Nina Easton
