RUNNING HEAD: AMERICAN AIRLINES American Airlines and US Airway’s Merger By Aveon Sims Strayer University BUS 508 Contemporary Business Professor Jean Fonkoua August 24, 2014 Abstract American Airlines has suffered tremendous profit losses over the last few years. The losses have been so great that the company filed Chapter 11 bankruptcy. The news for the Chapter 11 bankruptcy protection was a shock to many, considering the fact that they had enough money to operate and cover their losses through the following year. The merger indeed was a great decision on behalf of American Airlines. The merger itself was questionable.
Quincy Terrell Mrs. Stevens English III 10 December 2010 American’s Greed Leads to Poverty Republican nominee Herbert Hoover shared some hopeful words with Americans in 1928. He said that the day was in sight “when poverty will be banished from this nation.” This turned out to be was wishful thinking. One percent of the richest families in America during this time received one fourth of all U.S. income (Brinkley2). Buying stocks on margin became very popular during the 1920s. People began to abuse this system to invest huge amounts of imaginary money that only existed on paper, which back fired when the prices of stocks began to fall and they did not have money to pay for the stocks purchased (Lonkevich4).
CalPERS vs. JC Penney Overview CalPERS investment program began on February 22, 2000 when they included JC Penney on their annual Focus List. CalPERS further exclaimed that due to declining sales and a deteriorating customer base they had lost confidence in Penney’s management. Subsequent to the release of their focus list JC Penney made numerous strategic decisions to revitalize and boost the value of the company. Penney forced their current CEO James Oesterreicher to retire. Next instead of promoting from within, they searched for new blood and hired former Barney’s CEO Allen Questrom.
In May of 2011 The SEC filed suit alleging massive fraud against Brooke Corporation’s senior management. The SEC suit alleges that during the fiscal year of 2007 and the first and second quarters of 2008 senior management at Brooke Capital misrepresented the health of their business and its subsidiaries. Brooke Corporation’s business growth strategy relied heavily on its finance subsidiary and franchise fees. The average franchise fee was $165,000 which would have been financed through Brooke Credit Corporation; in the first quarter of 2007 a third of Brooke Corp’s operating revenue was from interest and franchise fees (Phillips, 2007). The same store sales for the first quarter of 2007 were down 3% from the previous year and in the fourth quarter of that year the recession officially started.
Unfortunately, it did. On October 29, 1929, the stock market crashed, and the United States once again found itself in economic turmoil. Prior to this, many people had begun purchasing stock on margin, or in other words, on credit. When the market crashed, the stock brokers called the loans they gave out back so that their companies may survive, except the loans couldn’t be paid back by the debtors. Many of the nation’s banks soon went under because they too had paid into the stock market and had lost much of their money.
The whole luxury goods industry in the U.S. dropped over 14%, and R&R revenues declined 10%. Although R&R suspended new-store opening, and hiring, still the business not good as before. So, now the CEO of R&R, Linda Watkins, not only has to cope with the SPH lawsuit, but also fix the reputation damage during this hard time. Beginning in 1992, Rosse introduced the firm’s “Ownership Culture” program- a set of initiatives and policies to creat a more entrepreneurial and accountable environment. Among other things, R&R changed the hiring profile for its sales associates, shifting away from experienced sales prosessionalsto recruiting college graduates.
In 2002 the SEC lodged a complaint against Xerox saying that the company played with the records of the revenues during signing the contracts. It recorded the revenue not for entire the contract. Xerox did not deny about that case and paid $10 million penalty, and it extracting again the financial results. Some of Xerox senior executives were accused of securities
President Roosevelt was there every step of the way after the crash during Hoover’s presidency. The start of the crash began with “Bull Markets”, meaning, stocks were becoming overpriced and not based on the actual value of the company. A stock market crash was bound to happen but at that time people didn’t care. People were buying loans like crazy in order to buy stocks, over 10 billion dollars was loaned to these people. In a lecture by Professor Newman, it was made known of the concept “selling short”, meaning, big businessmen would try to make more money on a market they knew was going down, and with that came a lot of common people losing money.
However during bad times there was an access of inventory which led to problems. Another issue in the auto industry is the interest rates as high interest rates led to a decrease in consumer demand for vehicles due to higher monthly payments. Eaton’s strategy to counteract a downturn was to set aside built up cash balance of $7.6 Billion or $21.13 per share as a cushion for the next downturn. Eaton’s move had critics but results showed that Chrysler’s pension was fully funded for the first time in almost 40 years and their credit rating was also upgraded to single A by major credit agencies. Without the implementation of Eaton’s strategy Chrysler’s credit rating would be poor.
There can be a lot of factors as to why companies file for bankruptcy and closure. In the case of Enron, the first set of problems in the company manifested when traders reluctantly gambled with company assets in the oil market. They lost $90 million in a period of five days. Since then company reserves disappeared and auditors saved the company by reporting fake net worth and imprecise trading revenues resulting to accounting scandals in the company. Due to the company’s compound business model and unethical practices, they required that the balance sheet is to be modified accordingly to illustrate satisfactory