The globetrotting Carlos Ghosn was in Yokohama this morning to announce that Nissan will buy a 34% stake in scandal-plagued Mitsubishi Motors for $2.2 billion, creating a new Nissan-Renault-Mitsubishi alliance that will approach global auto leaders Toyota and Volkswagen in its scale. Mitsubishi had lost nearly half its market value since admitting last month it overstated the fuel economy of its vehicles, but shares jumped after the Nissan announcement. The purchase would give Nissan a stronger presence in emerging Southeast Asian markets, where Mitsubishi’s small cars do well.
The biggest deal of the day, however, is yet to be made. Donald Trump and Paul Ryan will meet at Republican National Committee offices later today for a showdown over who runs the Republican party. I’m backing Ryan, both for his pro-growth agenda and on style points. But Trump has the stronger hand. Polls in the last few days – see here and here – have challenged political conventional wisdom that Trump can’t beat Hillary Clinton in November.
Meanwhile, schoolyard etiquette has also infected international diplomacy. The Chinese state run newspaper called the British media “barbarians” after Queen Elizabeth was caught on tape calling some Chinese officials “very rude.”
Enjoy the day. News below.
• Theranos: COO out, Firefighters in
Theranos’ president and chief operating officer Sunny Balwani is leaving the company, a month after the Securities and Exchanges Commission and state attorneys launched investigations into whether it misled investors about its technology and operations. Balwani said he’ll “continue to be the company’s biggest advocate,” while The Wall Street Journal cited a spokeswoman for the company as saying that the company doesn’t blame Balwani for its regulatory problems. Also Wednesday, Theranos said it has appointed three new outside board members: Amgen veteran Fabrizio Bonanni, ex-Wells Fargo CEO Richard Kovacevich and William Foege, an ex-director of the Centers for Disease Control and Prevention.
WSJ, subscription required
• Dilma Clears Her Desk
A majority of Brazil’s senators (55 out of 81) voted to impeach Dilma Rousseff for abuse of budget funds, effectively sealing her departure from the presidency and ending 13 years of rule by the leftist Workers’ Party (PT). Rousseff will initially be suspended from office for up to six months while her trial in the senate runs. Vice-president Michel Temer, from one of the smaller centrist parties, will take over on an interim basis. He’s faced with the task of turning round Latin America’s largest economy, and the world’s seventh-largest, which the IMF expects to shrink by nearly 4% for the second year in a row this year. Since January, when the drive to impeach Rousseff first started to gain traction. Brazil’s currency has strengthened nearly 20% against the dollar in anticipation of a more market-friendly government.
Financial Times, metered access
• Brands Revolt Against Alibaba
Western luxury brands are up in arms over an anti-counterfeit body’s decision to admit Chinese e-commerce giant Alibaba into its ranks. Since Alibaba joined the Washington D.C.-based International Anti-Counterfeiting Coalition last month, first Gucci America and Michael Kors quit the group, the latter calling Alibaba “our most dangerous and damaging adversary.” Now the anti-counterfeiting group (IACC) with more than 250 members including Apple and Nike is facing mass defections because of Alibaba’s acceptance, according to the Associated Press, which reported an anonymous email sent yesterday to the group’s board members. “The majority will not continue on as IACC members if you continue to allow membership to Alibaba,” the AP reported the email saying. Alibaba, of course, runs Taobao, an eBay-like selling platform in China with 9 million small sellers. The degree of counterfeiting on the site is staggering.
• The Disappearing Middle Class
Most Americans are aware that the U.S. middle class is under siege, even if they aren’t familiar with the statistics that prove it. On Wednesday, the Pew Research Center published a study of the middle class across 229 U.S. metropolitan areas, finding that the share of middle class households fell in 203 of those cities between 2000 and 2014. Economists have many theories about why middle class incomes have stagnated for years, from the increasing global nature of the economy to the decline of unionization to the rise of technology and automation that is killing what were once good paying manufacturing jobs for folks with less than a college education. But on a local level, the economic forces at work can be very different.
Around the Water Cooler
• Are There Wolves in Kuala Lumpur?
Riza Aziz, the stepson of Malaysian leader Najib Razak allegedly funnelled over $50 million of funds from state development fund 1MDB into luxury real estate purchases in New York and Los Angeles, according to The Wall Street Journal. It’s the latest twist in a spreading scandal around the sovereign wealth fund that’s under investigation in both the U.S. and Switzerland for suspected corrupt activities. Investigators are also looking into whether Goldman Sachs misled investors when it sold three bond issues from the fund. The fund has since been declared in default by one of its debt guarantors. Mr. Aziz, you will remember, is a movie producer who happened to stump up much of the money for The Wolf of Wall Street, a tale of greed and corruption. Neither he nor Goldman has been accused of wrongdoing.
WSJ, subscription required
• Cameron’s Corruption Crackdown
On the subject of corruption, David Cameron is expected to outline new legislation in the U.K. today that will hold banks liable if rogue employees fail to comply with anti-money laundering regulations in future, in an effort to make the U.K.’s often-criticised financial sector take its responsibilities more seriously. Other new rules expected to be announced will force disclosure of beneficial ownership in the London real estate market, which has been the investment vehicle of choice for many anonymous offshore companies in recent years (including one controlled by none other than UN women’s right ambassador Emma Watson).
• Nike’s Minorities Are a Majority
Nike has revealed that ethnic minorities now make up a slight majority of the athletic-gear maker’s U.S staff. In a broad business report focusing on sustainability and staffing, Nike said that in fiscal year 2014/2015 for the first time ever, the percentage of Nike employees who identify as non-white in the U.S. rose above 50%. For fiscal year 2015, 15,326 members of the U.S. staff identified as white, roughly 48% of the 31,977 total. Black/African American employees make up 21% of Nike’s staff in the U.S., while Hispanic/Latino workers were 18%. Asians were 7% of the domestic employee base. In an opening letter to the Nike report, CEO Mark Parker said the company believed that diversity “fosters creativity and accelerates innovation.” He added that different perspectives can fuel ideas and noted that for Nike to achieve a diverse workforce, the company has made efforts to recruit, promote, and retain diverse talent globally.
• Trump’s Tax Returns
Mitt Romney is keeping up the pressure on Donald Trump to release his tax returns. The 2012 GOP presidential nominee is suggesting the real reason Trump is not releasing his tax returns is that the billionaire is hiding “a bombshell of unusual size” in the documents. Trump is currently on course to be the first GOP nominee not to release his tax returns since Gerald Ford in 1976. Romney’s accusation came in a pointed Facebook post Wednesday after more criticism from the likely Democratic presidential candidate Hillary Clinton. Trump said in an AP interview Tuesday that he doesn’t believe he has an obligation to release his tax returns and won’t release them before November — unless an ongoing audit of his finances is completed before Election Day. He said he wouldn’t overrule his lawyers and instruct them to release his returns if the audit hasn’t concluded by then.