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BA GT ANWR Updates
December 1, 2003

Boeing, Boeing, Gone

The ouster of Boeing (NYSE:BA) Chairman Phil Condit was not expected but seems long overdue. The latest series of scandals to explode from the aircraft manufacturer is indicative of weak corporate governance and even weaker business prospects.

We hear that Boeing officials have been spending a lot of time in Japan of late, groveling in front of the major carriers in that country in an effort to secure a lead customer for the as yet conceptual 7E7 aircraft. We are told by one close observer that Boeing offered to move most of the assembly to Japan in order to win an order, but the Japanese led by Mitsubishi Heavy Industries said �no thanks.�

When BA�s board meets in December to consider the 7E7 project, the lack of a real paying customer may cause yet another project cancellation. Stay tuned.

Goodyear�s Slow Leak

Reports that the auction of Goodyear Tire�s (NYSE:GT) in-house chemicals unit is essentially busted has again raised questions about the survival of the largest tire maker in North America. The struggling tire maker is obligated to raise $325 million in new money by the end of 2003, but reports that the SEC is conducting an informal inquiry into the company�s earnings restatement last month have put the road show on hold.

The new capital was intended for investment in the company�s US operations, but it is increasingly clear that Asia is the best place to build tires. It looks as though GT may be forced to renegotiate its agreement with lenders and the unions � again. Part of the reason that prospective buyers for the US chemicals business are reluctant is that it is clear that GT will soon be moving most or all of its tire production operations offshore.

Legislative Risk

If you want to understand the corporate governance problems plaguing Wall Street, all you need to do is look at the energy bill that was defeated before Thanksgiving, what Public Citizen called �a smorgasbord of tax breaks and giveaways to Bush�s friends in the oil, coal and nuclear industries,� is a case in point. �The energy bill is a hopeless muddle if you look at it from the perspective of national policy� one Washington insider told us last week. �Only if you see the legislation as the agglomeration of local interests all bribed for their support does it make any sense at all.� The insider relates how Alaska Governor Frank Murkowski worked with other local interests around the country to built a mosaic of subsidies and tax giveaways benefiting every state. The story goes that Murkowski wanted to replenish his state�s oil trust fund by drilling in the Artic National Wildlife Refuge. The new oil money would enable him to write the voters back home a big check and happily retire as the emperor-for-life of the Alaskan oil kingdom.

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