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CEO Daily: Monday, April 25

Ted Cruz and John Kasich are teaming up to try and stop Donald Trump, with Kasich giving Cruz a clear path in Indiana, while Cruz stays out of Kasich’s way in Oregon and New Mexico. The two men hope to deprive Trump of the delegates he needs to win the nomination on the first ballot at the Republican convention.


Meanwhile, at Fortune, we’ve taken a step back and asked some corporate turnaround experts for advice on how to resuscitate the Grand Old Party. Their tips, in the May issue of the magazine, include:


Admit you have a problem. “The CEO and the board have been somewhat in denial about the problem they are facing,” says Bob Nardelli, former CEO of Home Depot and Chrysler.


Replace the management team. “There are not a lot of examples of companies that have gone through a successful transformation that have kept the same management, “ says Sydney Finklestein, author of Superbosses.


Start from scratch. “The worst place you could choose to develop a new business model is within the old,” says Harvard’s Clayton Christensen.


More news below.


Alan Murray

Top News

You Too Can Bank With Goldman

Goldman Sachs, the bluest of Wall Street’s blue-bloods, is holding its nose and going downmarket. It’s launching, a platform for retail deposit-taking, in an effort to source a bigger part of its financing from what more stable sources. Offering a pretty chunky 1.05% on savings accounts, it’s looking to add to the 145,000 accounts that it bought from GE Capital earlier this year. New financial regulation since the 2008 crisis has sharply increased incentives for banks to attract ‘stickier’ funds from retail depositors. But Goldman’s move may also owe a lot to its expectations for interest rates and the structure of the finance industry in general. A solid deposit base reduces its exposure to market interest rates, which could rise sharply in future, as the Fed ‘normalizes’ its monetary policy stance, while an online presence is becoming as important for banks as it is for retailers. Financial Times, subscription required

After Styming Brexit, Obama Focuses on TTIP

Barack Obama appears to have needed all of 48 hours to warn British voters off leaving the E.U. The U.K.’s biggest bookmakers now give the Remain camp a 73% chance of a victory in the June vote, after some sharp warnings that Britain would be less influential, and less of a U.S. priority, if it leaves. That problem solved, Obama has moved on to Germany to try to salvage the Transatlantic Trade and Investment Partnership, a far-reaching trade deal between the U.S. and E.U. that has lost its way while the administration focused on the Trans-Pacific Partnership. Europe has been resisting TTIP ever since the extent of NSA spying on Europeans  became clear, an issue that that has overshadowed talks over access to the E.U. digital services market for Silicon Valley companies. But Obama’s hand has been strengthened in recent months by the VW scandal, which has undercut the high moral tone of much anti-TTIP sentiment in Germany. WSJ, subscription required

• China’s Debt Problems

China’s total debt rose to a record 237% of GDP as of the end of the first quarter, according to new estimates from the Financial Times. That compares with around 270% for the Eurozone and 248% for the U.S. (based on the latest Bank for International Settlements figures). While there’s nothing extraordinary  in the direct comparison, what stands out is how fast China’s debt has risen: by ninety percentage points of GDP since 2007 alone, due to huge stimulus programs to keep the economy going since the collapse of Lehman brothers. Corporate debt has risen faster than nominal GDP for most of those years, and the prices companies can charge have been falling for the last four years. It’s clear there is a big problem. What’s less clear is how it ends–with a spectacular credit crisis, or with a prolonged spell of Japan-style stagnation. Financial Times, subscription required

How Strong Is Mitsubishi’s Weakest Link?

The Mitsubishi crisis is giving Japan’s conglomerate model another stiff challenge. Mitsubishi Heavy Industries, which makes military aircraft, rail infrastructure and luxury cruise ships, said earlier Monday it was too early to decide whether to offer support to its sister Mitsubishi Motors, in which it is the biggest shareholder with a 12.6% stake. Mitsubishi Motors is facing a financial hit and a government investigation after admitting to falsifying fuel economy data on four vehicle models sold in Japan. The automaker on Monday said it would hold a media conference the next day to provide an update on the issue, only to cancel it hours later citing scheduling conflicts.   Reuters


Around the Water Cooler


Will Airbus Get Money From ExIm?

And another big twitch of the needle on the irony-meter. Airbus will become eligible for financing from the U.S. Export-Import Bank on Monday when it delivers its first jet from a new factory in Alabama. It’s not likely to get help from the U.S. taxpayer in the near term, as all of its immediate deliveries are destined for U.S. customers. But ExIm chairman Fred Hochberg has said the bank would consider financing any future exports proportionate to the amount of local content sourced to the Mobile plant. That’s likely to make more than just the ears of Boeing executives pop, given its travails with Congress to keep a key source of cheap finance open in recent months. WSJ, subscription required

Novartis Asks Questions of Roche

Some more fuel for the long-running pharma merger frenzy: Novartis is reportedly looking for banks to manage the sale of its stake in Swiss rival Roche, valued at some $14 billion. That would bolster reserves for acquisitions that would help it overcome some recent disappointments with in-house drugs (sales of its expensive heart treatment Entresto have lagged expectations in the key market of the U.S., due to the controversy over drug pricing). Novartis holds 6% of Roche’s total shares, but 33% of its voting shares, so any decision on a sale will have a big impact on future control of Roche–something that may prod management into changing its mind on its long-held reluctance to buy the stake back itself.  Fortune

•   A Dire Outlook for Malls

The bloodletting in bricks-and-mortar retail still has a long way to run, according to a new report from Green Street Advisors. The consultancy reckons that department stores may need to close around 800 outlets, or about 20% of all the anchor space in U.S. malls, to regain the productivity levels of a decade ago, The Wall Street Journal cites the report as saying. Sears appears to be the worst positioned, needing to shutter 43% of its existing stores, while at the other end of the spectrum, Green Street say Macy’s only needs to cut 9% (although that’s still 70 stores nationwide). That goes badly against the grain of the department story mentality, but with the rise of online retail channels, the onus is on the chains themselves to prove the research wrong. And as ever, a report this gloomy begs questions about the outlook for commercial real estate in the U.S. (and all the debt issued against it).  WSJ, subscription required