In Showdown at Gucci Gulch, Jeff Birnbaum and I compared the progress of the 1986 tax reform bill to the Perils of Pauline—the 1914 melodramatic film serial in which Pauline reached the edge of death in every installment. The journalistic establishment declared tax reform dead on at least a dozen different occasions between 1984 and 1986—only to have it miraculously rise again.
So CEO Daily is going to withhold making judgments on the fate of this year’s tax reform effort, at least until Brünhilde sings. But it’s worth noting that even in the best of times, the fundamental trade-off inherent in tax reform—which is to cut tax rates in the general interest while closing loopholes benefitting special interests—is extremely difficult to pull off. That’s because special interests are always more focused than the general interest. Moreover, when it comes to the political and legislative environment in Washington, these are clearly not the best of times.
As for the plan itself, the devil is in the details, which have not yet been fully released. But the general thrust—reducing taxes for struggling families, cutting the corporate tax rate, and holding the affluent at roughly the same level of taxation—is laudable, and reflects what a bipartisan approach might look like, were bipartisan approaches possible in today’s politics. Moreover, after listening to Gary Cohn and Paul Ryan defend the plan on CNBC yesterday—you can watch them here—I came away convinced they see an historic opportunity in front of them, and are in it to win it. Ultimately, the effort will determine the success of the Trump administration’s first year, and possibly the Republican party’s future. So this one is worth watching.
Separately, I went to an event in New York last night to hear Walter Isaacson talk about his new book on Leonardo da Vinci, out later this month. Isaacson has previously written best-selling books about Steve Jobs, Albert Einstein, Ben Franklin, and Henry Kissinger. Asked why he chose da Vinci, Isaacson replied: “Smart people are a dime a dozen. They don’t always amount to much. You have to be smart and creative.”
News below. Enjoy the weekend.
• Parker Declares Victory Over the Business Cycle
American Airlines CEO Doug Parker said his company won’t “ever lose money again,” saying the world had changed “dramatically, permanently” for the airline business. Parker told CNBC that lower costs from fleet renewal and higher contributions from things like its premium cabin class meant it now had a business that would make money in both good and bad times. “Timestamp,” said investors who have seen generations of airline shareholders wiped out over the years. The market took the message with a pinch of salt but the company’s stock still rose 1.4%. Fortune
• China Cuts Detroit and Germany a Little Bit of Slack
China slightly watered down its mandate for minimum sales of electric vehicles. Automakers will now have to ensure that hybrid, fuel cell, and battery technology must account for 10% of annual sales by 2019, a year later than first planned, under a complex system of credits that will means the actual requirement is a little under 10%. Beijing had initially mandated an 8% minimum from 2018, but has now dropped that requirement. Ford, GM, and others swallowed hard and said they would “strive” to meet the targets. Fortune
• Chevron Joins the Downstream-First Trend
Chevron said its next CEO will be its current Vice Chairman Mike Wirth. Wirth will take over when John Watson retires next year. As with Darren Woods at Exxon, Shell’s Ban van Beuerden, and Total’s Patrick Pouyanne, an integrated oil major has chosen a downstream man as CEO, a testimony to the shifting priorities of the business in a world awash with the basic commodity. Drastic investment cuts have helped Chevron turn the corner this year—its share price is now up 50% from the dark days of 2015. Even so, Wirth inherits stiff challenges in Venezuela and at the company’s LNG projects in Australia. Fortune
• IKEA Goes Down the Rabbit Hole
Swedish home furnishings chain IKEA bought TaskRabbit for an undisclosed amount, an intriguing investment in the gig economy that will bolster the intelligence it gets on customer habits. One of the most popular jobs advertized on TaskRabbit, which connects customers with independent contractors, is for the assembly of IKEA furniture. IKEA currently offers the same service for a price. What happens next will be a teachable moment in how to capture the full value of ancillary services. Fortune
Around the Water Cooler
• An After-Treatment Aftershock for VW
Fixing Volkswagen’s diesel exhausts is an expensive business. The company announced another $2.95 billion in provisions Friday against the cost of refitting its 2-liter cars in the U.S. That takes the total charge from the scandal comfortably past the $25 billion mark. It’s been a bad 24 hours for the German company: Wolfgang Hatz, who formerly headed engine development at both Audi and Porsche, was arrested and held in pretrial detention by German police Thursday. Fortune
• Twitter Fails to Impress Congressional Hearing on Russian Meddling
Twitter briefed Congress on manipulation of its platform by suspected Russian agents during last year’s election campaign, but left lawmakers unhappy at the scant amount of detail they provided. The company pocketed $274,000 in ad purchases from RT, a state-backed English-language broadcaster which is a prominent provocateur on social media, but that is probably the least of Twitter’s issues. The company’s continued indulgence of anonymity and pseudonymity among its users means it is a long way behind Facebook in tracking down manipulators and bots. The 201 fake accounts it claimed to have found yesterday are most likely the tip of the iceberg. Fortune
• The Other Rocket Man
For some Friday fare, we offer you Elon Musk’s new project—Earth-to-Earth rocket travel, taking you from New York to Shanghai in less than an hour. That raises the tantalizing prospect of waiting twice as long at immigration in Newark than you actually spent in transit. As regards the Shanghai landing, well, it may be best in the current climate to skirt the area covered by the Terminal High Altitude Air Defense system that the U.S. recently deployed in South Korea. Fortune
• A Rite Beating
Shares in Rite Aid fell 10.5% to a four-year low after a miserable set of third-quarter figures that it blamed on the half-executed sale to Walgreens. Rite Aid has been left in an unenviable position by the FTC’s decision to approve only a partial sale. What’s left of the company is dwarfed by both Walgreens and CVS and is, naturally, also challenged by the march of online commerce. As a consolation, it announced Walgreens veteran Kermit Crawford as its next president and chief operating officer. Fortune
Summaries by Geoffrey Smith; email@example.com