Five Days: Shoppers Are Holding Back, But Billionaires Are Buying

A PRIVATE equity fund and some well-known billionaires were in acquisitive moods this week. Less affluent shoppers — consumers, that is — were more restrained, as the results of retailers showed, but Amazon hopes to tempt them with music. Tyco is still bleeding.

A PARTING OF THE WAYS Daimler-Benz and Chrysler have had a troubled marriage almost since the start of their merger nine years ago, and this week they filed for divorce. DaimlerChrysler said it was selling the Chrysler Group to Cerberus Capital Management, the private investment firm, for $7.4 billion, although it is a sale essentially in name only.

DaimlerChrysler is actually paying Cerberus $677 million to take Chrysler off its hands, and has told the United Automobile Workers union that it will give their pension plan a $1 billion guarantee, presumably to protect it if the debt rating of the new Chrysler turns out lower than that of the new Daimler.

The bulk of the sale price, about $5 billion, is money Cerberus is promising to invest in Chrysler over the next five years.

The U.A.W.’s leader, Ron Gettelfinger, shocked the industry by agreeing to support the deal. In the past, he had railed against private equity firms, which he warned could “strip and flip” Chrysler.

Even so, Cerberus may take aim at the $18 billion in pension and health care obligations that Chrysler will owe for current and retired workers. Those benefits are expected to be the subject of talks on a new national contract that begin in July between the union and Detroit’s carmakers. MICHELINE MAYNARD

A TRIO OF INVESTMENTS Billionaire investors helped drive the markets higher as they unveiled major stakes in a bevy of companies.

On Wednesday, an affiliate company of Edward S. Lampert, the hedge fund manager, reported in a regulatory filing that it had bought more than 15 million shares in Citigroup, a purchase worth almost $800 million. That same day, Berkshire Hathaway, run by Warren E. Buffett, revealed in a filing that it had raised its railroad holdings, disclosing that it had acquired stakes in Norfolk Southern and Union Pacific worth a combined $1.4 billion. And on Thursday, an affiliate company of Carl C. Icahn, the activist investor, reported that as of March 31, he held a $122 million stake in another railroad company, CSX.

While the antipodal investment philosophies of Mr. Buffett and Mr. Icahn are well known, Mr. Lampert’s motivation in buying the Citigroup stake remains unknown. It is possible that he may simply find the troubled financial giant’s stock undervalued or that he may agitate for change at the top.

MICHAEL J. de la MERCED

SIGNS OF A SLOWDOWN Consumer spending appears to be slowing. Two of the largest retailers, Wal-Mart Stores and Home Depot, reported lackluster first-quarter earnings. Wal-Mart’s profit climbed 8 percent, to $2.83 billion. Sales, meanwhile, rose by the smallest amount in at least a decade. The results, while disappointing, still matched Wall Street expectations.

The same could not be said for Home Depot, which reported a 30 percent decline in profit for the first quarter. Its earnings declined to $1.05 billion, and overall sales barely edged up. Analysts said the results could portend trouble for retailers in the coming months, as the housing market continues to drag and the economy runs at a slower pace.

The earnings report from Target, scheduled for Wednesday, should help shed some light on just how much consumers are pulling back. JEREMY PETERS

HIGH COST OF EXECUTIVE HELP The tenure of L. Dennis Kozlowski as chief executive of Tyco International gets more and more expensive for the company. When he was running Tyco, the company paid for such things as a $6,000 shower curtain. Now, as he resides in the Mid-State Correctional Facility in Marcy, N.Y., about a four-hour drive from his former Fifth Avenue apartment in Manhattan, Tyco has agreed to pay almost $3 billion to investors who bought Tyco securities from 1999 to 2002.

The investors also get the right to sue, on the company’s behalf, its former auditors at PricewaterhouseCoopers. The claim would be accounting malpractice — essentially an assertion that the auditors should have stopped the company and its management from committing fraud. The Securities and Exchange Commission has weighed in on the job that was done by Richard Scalzo, who was lead auditor on the Tyco account, saying he repeatedly “was faced with facts that raised serious questions about the integrity of Tyco management,” but did not follow up on them. FLOYD NORRIS

AMAZON.COM, which has haltingly moved toward selling digital music for years, said that it would start a new service that sells songs and albums without the copy-restriction software used by most online retailers.

The foray by Amazon is seen as a challenge to Apple, which dominates the sale of digital music with its iTunes service. It is also seen as a potentially serious blow to digital-rights management software, which limits copying of music. The recording industry’s biggest companies have long required retailers to include such restrictions to protect their music copyrights. But the winds may be shifting.

The EMI Group, the smallest of the four big record companies in United States sales, said it would make its catalog available for sale on Amazon’s service. The Universal Music Group, the biggest company, has also been talking about offering at least some music on the service. Apple itself has been pressing for a move away from protected music, potentially undercutting one of Amazon’s selling points.

Apple, which has a deal to sell D.R.M.-free music from EMI, is expected to start selling unprotected songs as early as next week, according to people briefed on the company’s plans. JEFF LEEDS

MOST POPULAR Following are the most-popular business news articles on nytimes.com from May 5 through May 11:

1. Is It the Woman Thing, or Is It Katie Couric?

2. A Contrarian on Retirement Says Wait

3. Chrysler Group to Be Sold for $7.4 Billion

4. The Greatest Mystery: Making a Best Seller

5. In Bid for Better Care, Surgery With a Warranty

Links are at nytimes.com/business.

Tag Cloud

External Information

Additional Information

Where Am I?