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Transportation equipment industry

Market Rebounds After London Terror Attacks

Strategic Insights

— 2 min read

The global market momentarily reacted to the devastating London terror attacks, with a surge in oil prices before plummeting to a record low after the attacks. The US automotive industry intensified its competitive price-cutting, with General Motors, Ford, and Chrysler all aligning their prices to that of employee discounts. Meanwhile, UnitedHealth acquired PacifiCare Health Systems for $8.14 billion, a significant move in the Medicare-related business market. Boeing made significant management changes, hiring W. James McNerney Jr. as its new CEO and locking him in with a generous pay package.

Key Takeaways:

  • The London terror attacks initially unnerved financial markets, causing a brief downturn, but major indexes recovered about half their losses by the end of the first trading day.
  • UnitedHealth's acquisition of PacifiCare Health Systems for $8.14 billion solidifies its position as the second-largest health insurer in the US, with an estimated 25.7 million subscribers.
  • The acquisition is expected to bring increased leverage for UnitedHealth with its suppliers and is seen as a likely catalyst for further consolidation in the industry.
  • Boeing's hiring of W. James McNerney Jr. as its new CEO is aimed at restoring its reputation after several controversies, including a multibillion-dollar no-bid Pentagon contract and subsequent scandal.
  • The company is offering McNerney a generous pay package of $1.75 million in salary, a $4 million bonus, $25 million in restricted stock, and $22 million in supplemental retirement benefits.
  • In the US automotive industry, General Motors, Ford, and Chrysler have all aligned their prices to match employee discounts, letting customers buy all but the most popular models at discounted prices with cash rebates.
  • Chrysler rehired its former CEO and chief TV pitchman, Lee A. Iacocca, to create new commercials touting the brand, ending in the famous slogan: ''If you can find a better car, buy it.''
  • Analysts warn that deep discounts in the automotive market could lead to a future glut of used cars, depressing prices and diminishing consumer savings.

Statistics:

  • Oil prices plummeted from a record high of over $62 a barrel after the London terror attacks.
  • The number of people eligible for Medicare-related services is expected to grow by over 30% to nearly 50 million in the next decade.
  • UnitedHealth offered $8.14 billion for PacifiCare Health Systems, the largest acquisition in its history.
  • Boeing's new CEO, W. James McNerney Jr., will receive $1.75 million in salary and a $4 million bonus this year.
  • Chrysler will offer cash rebates of several thousand dollars on select models as part of its price-cutting promotion.
  • The US automotive market is expected to see a significant increase in sales due to the competitive pricing, potentially leading to a future glut of used cars.
  • The S.E.C. lawsuit against Richard M. Scrushy, founder of HealthSouth, is seeking $785 million in civil fines and restitution to shareholders.

Sources:

  • Associated Press
  • Bloomberg
  • The New York Times
  • Wall Street Journal
  • Reuters
  • Press Association

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