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The Biz Roundup January 22

This guy ain’t afraid to pick a fight.

“President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency,” Mr. Geithner wrote. He stopped short of charging that China is manipulating its currency intentionally to gain an unfair trade advantage, as the 1988 law requires for an official citation of currency “manipulation.”

Even so, the Obama administration’s restatement of that position in writing on its second day was immediately seen as significant. The Bush administration purposely did not use the term “currency manipulator” to avoid antagonizing the Chinese, even when it was criticizing China’s trade policies. . . .

“It’s huge,” said Simon Johnson, a former chief economist at the International Monetary Fund who is now a professor of economics at the Massachusetts Institute of Technology. “I’m very supportive in general and I think China needs to be called to account and the I.M.F. has not done it,” he said.

(“Geithner Hints at Harder Line on China Trade ,” New York Times, January 22) Here’s one area where the Bush administration does deserve credit; Henry Paulson delicately managed the issue and got a bit of give from the Chinese. 20% give, to be exact. But for global free markets to really work, currencies must trade freely. But, boy, the change in tone in Washington sure is a relief.

Just remember: red soda pop goes with beef and white soda pop goes with chicken.

This year, 12,000 to 18,000 restaurants are expected to close, sending the net total down by 2% to 3%, says Mr. Pawlak. The National Restaurant Association reported its lowest numbers on record for its Restaurant Performance Index, a complex formula that incorporates restaurateurs’ reports of their traffic, sales, labor and investment expenditures as well as their expectations for coming months.

Currently, consumers appear to be “trading down,” choosing lower-priced restaurants than they used to. The National Restaurant Association projects that sales, adjusted for inflation, will decline by 2.5% in full service restaurants in 2009, while it predicts quick service will grow by 0.4%

(“What’s Not Cooking,” Wall Street Journal, January 22) So what are restaurants doing to scare up business? Offering discounts, of course. I’ve said it many times before, you don’t win by giving away the store. One plus minus-one equals?

“A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful new global competitor,” Bob Nardelli, chairman and chief executive officer of Chrysler, said in a statement. The deal offers “Chrysler a number of strategic benefits, including access to products that compliment our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing, and sales and marketing,” Nardelli said in the statement.

But big questions remain about how the two companies will fund development of jointly built vehicles. In the agreement, Fiat made no commitment to give Chrysler cash now or in the future.

It will be tough to get cash assistance from Fiat. Fiat’s industrials division, which includes the carmaker, had $2.9 billion in cash on Sept. 30, 2008, down from $7.4 billion a year ago. And it carries almost $4.4 billion in debt, which rose sharply last year from just $470 million at the start of 2008. In December, Standard & Poor’s lowered the outlook on Fiat’s debt rating from “stable” to “negative.” Similarly, Moody’s on Jan. 15 placed Fiat rating “under review” for possible downgrade.

(“Fiat Won’t Be Chrysler’s Savior,” Business Week, January 20) Or maybe, just maybe, Fiat wants to get its mitts on some of that bailout money?

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