5 dumbest things on Wall Street
Airlines turn to fees instead of service to boost profits. Gap slips up by selling 'Made in USA' bags made in China. Starbucks' tormented love-hate relationship with Kraft.
Here's our weekly roundup of the dumbest news in business.
5. High-flying airline fees
According to a report released Monday from the Bureau of Transportation Statistics, U.S. airlines collected about $4.3 billion in fee revenue during the first three quarters of 2010. That's $4.3 billion in fees added to the coffers without airlines having to improve service. It's roughly equivalent to the industry's anticipated total profits for the year.
Still, dreaming up new fees doesn’t seem like a sustainable business model. For customers, it's simply the latest in a long list of disincentives to flying.
4. Drink more lead, kids
The Consumer Product Safety Commission employed the kind of logic this week that would have kept Joe Camel on cigarette cartons. The agency argued that drinking glasses featuring superheroes and "Wizard of Oz" characters that were loaded with lead were intended for adults.
Late last month, The Associated Press found that drinking glasses purchased at the Warner Brothers Studios store in Burbank contained high amounts of lead. The tests, conducted by ToyTestingLab in Rhode Island, found that decorations on the glasses were 16% to 30.2% lead, exceeding the federal limit of 0.03% for children's products.
The CPSC didn't have the glasses before declaring them for children. When it saw the glasses, it said their size, weight and price made them more appealing to adults.
"After thoughtful analysis by child behavior experts at CPSC, it has been determined that the glasses are not children's products," agency spokesman Scott Wolfson told the AP this week.
3. Gap: Made in USA (or China)
In October, Gap (GPS) management decided to quietly introduce a new logo that looked like it had been designed by a middle school art class.
Gap followed up that debacle with another misstep this week. As part of a holiday campaign to fight hunger in the U.S., Gap introduced trendy new bags, telling customers for every bag purchased a $5 donation would be made to school lunch programs. The bags were printed with U.S. maps and American flags and even a little icon that proclaimed them to be "Made in USA." Only one problem: The bags were made in China.
2. Obama, a friend to big business
President Barack Obama chewed the fat with capitalist bigwigs on Wednesday, including the CEOs of Cisco Systems (CSCO), Google (GOOG), American Express (AXP), Honeywell (HON) and Boeing (BA). General Electric (GE) CEO Jeffrey Immelt was also seen breaking bread with the president. The major media said the meeting was an attempt by the president to slough off his "anti-business" reputation. However, if you look at the president's track record, it's clear he has been a friend to business.
Who was the president during the most recent quarter, when the largest corporate profits in U.S. history were recorded? Whose administration oversaw the biggest U.S. IPO of the year, engineering the comeback of General Motors (GM)? Who oversaw the passage of a tax cut package that was widely lambasted as a free lunch for the wealthy?
1. Starbucks can't quit Kraft
Starbucks (SBUX) has been insisting since October that its distribution agreement with Kraft (KFT) is no more. Starbucks has assumed the posture of a boyfriend trying to flee a suffocating relationship. Kraft has been cast as the obsessive, jilted girlfriend who can't move on.
Then this week Kraft went and did something to get Starbucks all jealous, and it looks like it worked. Kraft announced that it would be raising the prices, pushing the price of Yuban coffee above $6.50 a pound. Starbucks responded by saying that their distribution agreement with Kraft -- the one they've been trying to escape -- says that only their coffee can be granted such premium pricing. But Kraft was having none of it.
"Kraft was offering this brand long before we signed our first agreement with Starbucks in 1998," Kraft spokeswoman Renee Zahery told Dow Jones Newswires. "We thank Starbucks for giving Yuban more press coverage than, to our knowledge, it has received since it launched in 1905."
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