Word: mobilization
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...Mobil spent millions of dollars trying to convince us that it had the cleanest gasoline, one that made your engine run smoother. Union Camp spent millions of dollars trying to convince us that it had the cleanest paper, Great White, that made your copier run smoother. In the end, few consumers were willing to pay more for a particular brand of either common commodity--gasoline or plain white paper. Now both companies are succumbing to longtime rivals, Exxon and International Paper, in deals that were unthinkable just a short time ago. Suddenly, neither Mobil nor Union Camp could be assured...
Union Camp and Mobil had simply lost control of their fate. For years these commodity companies had gone through booms and busts along with the world economy they played in. But for the past decade it has been nothing but bust. The new economy, with its focus on cost cutting and price competition, has tamed inflation to the point that each year Mobil and Union Camp faced progressively lower real prices for their products. Both companies had done pretty much everything they could to wring out costs, but it still wasn't enough...
...Mobil, by dint of its huge cash flow, was always able to offer a steady stream of dividends, and Union Camp rewarded shareholders with a greater than 4% yield before the merger. But in a stock market mad for the kind of raw growth delivered by the likes of Cisco, Intel and America Online, both Mobil and Union Camp seemed like vestiges of a capitalist era past...
...winners from the demise of Mobil and Union Camp will be the remaining players--assuming the deals are approved by shareholders and regulators. The only way to get pricing under control is to take out capacity. Exxon's takeover of Mobil could lead to somewhat higher gas prices, as a price-cutting competitor gets vanquished. And International Paper's stock looks that much better, knowing it won't have to compete with Union Camp. Both companies can strip sales, marketing and technology spending out of the budgets of their prey. It is remarkable how much duplication and overlap can exist...
...Total number of anticipated layoffs announced last week at Boeing, Exxon-Mobil, ITT, Kellogg, Johnson & Johnson, Smurfit-Stone, Courtaulds, United Dominion, Volvo, Deutsche Bank and Amway...