Profile: Majora Carter

Urban crime, poverty, and joblessness are surprisingly intertwined with environmental degradation. The challenges they share are widespread—and stubborn. Yet in the U.S., public authorities and nonprofit agencies typically tackle each malady separately, and with only limited success. More police might help dampen crime, but that doesn't help solve unemployment. And boosting welfare payments for the jobless cannot do much to fix pollution hot spots. Majora Carter decided to tackle all of these challenges at once.

Her panacea? Home-grown green jobs and eco-companies. Her holistic approach has fundamentally altered the way planners think about regenerating impoverished, environmentally blighted cities here and abroad. In 2005, the MacArthur Foundation recognized Carter's work for "profoundly transforming the quality of life for South Bronx residents" by awarding her one of its "genius" grants.

It began in 2001 when Carter, then 34, was working with art-focused nonprofits in the Bronx, her New York City childhood home. Her focus switched to green activism when she learned the city planned to add yet another huge waste-processing facility to the neighborhood.

Garbage Overload

For Carter, that was the last straw. At its height, the borough handled more than 40% of New York's solid waste despite having just 16% of the city's population. Likewise, the area is home to two sewage-treatment plants and four power plants. With some 60,000 trash trucks passing through every week, stray garbage and diesel fumes contributed to asthma rates that are among the nation's highest. The toxic environment discouraged physical activity. Obesity and diabetes rates soared.

Carter formed Sustainable South Bronx (SSBx) not just to defeat the garbage depot, which she did. She also wanted to harness what she recognized as a dormant passion among her neighbors to improve their environment. "Who would want to go outside?" she recalls. "There were no trees. It was dirty and dangerous. These people didn't not have a connection to the natural world."

Simply cleaning up weed-strewn lots and planting trees wasn't enough to overcome such distrust. "I was watching the city bring in contractors from outside to do cleanup work," she says. "It was basic work that local people could do as well, and they needed the jobs. That made no sense." Carter concluded jobs could both green up the neighborhood and create a sense of investment if local people helped with the process.

With a small grant, Carter set up a training program for local residents, including many ex-convicts and others with dim employment hopes. The Bronx Environmental Stewardship Training (BEST) program puts those chosen though a multi-month training program. BEST trainees learn specialized eco-skills, such as green-roof installation and maintenance, urban forestry, brown-field cleanup and, more recently, how to retrofit buildings to boost their efficiency. Think: window caulking and insulation. The workers are also given guidance in life skills, such as punctuality, effective communication, how to handle disagreement, and even clothing. "Many of these men have grown up with no reference in their lives for how to behave in a formal job situation," says Carter.

Cleaning Up Lives

Creating jobs was just one benefit. By engaging local residents to do the work, Carter discovered a strong desire for clean, green space, and she helped build trust in the community—believing that if locals did the clean up, parks would be better cared for. Among their first projects: cleaning up the banks of the long-neglected Bronx River to create a new park and new public access to the waterway. After two years, the program has placed over 85% of its more than 100 graduates in jobs. None of the ex-convicts has returned to prison, despite a high rate of recidivism under normal circumstances. Around 10% have gone on to college.

Job One for McCain or Obama: Jobs

Exxon's Production Falls as Profits Soar

ExxonMobil's (XOM) third-quarter earnings demonstrate the mixed universe occupied by Big Oil as a whole today—the company reported record profits but its lowest production volume in almost a decade. The Irving (Tex.)-based corporation says it earned $14.8 billion in the third quarter, an increase of 58% from the same period last year. Exxon is on track for a third straight year of record earnings—in both 2006 and 2007, the company earned some $40 billion. In each year, that was the most ever for any company on the planet.

Despite the breathtaking profit, however, the report weighed on Exxon's share price on Oct. 30. Exxon closed up 0.5%, at 75.05, after falling as low as 71.44 during the trading session. One of the main reasons was its reported production volume. The company produced just 3.6 million barrels of oil per day, an 8% drop from the same period last year. It's the lowest production since Exxon bought Mobil in 1999. Since then, Exxon's production has mostly fluctuated between 3.8 million and about 4.2 million barrels a day.

Some of the third-quarter drop was attributable to seasonal hurricanes, maintenance outages at Exxon facilities, and production-sharing contracts that reduce volume it receives when oil prices rise, but that accounted for just three percentage points of the 8% decline. The other 5% was independent of special factors. In prior quarters, the company has noted that it has considerable production increases coming online in the next two years. But the decrease seemed to worry Wall Street, nonetheless.

Stroking Investors

In an unusual statement in the earnings report, Exxon Chairman Rex Tillerson sought to calm any worries about the company's strength amid the global financial meltdown and reassure investors that the company's capital spending plans remain intact. Some smaller energy companies have trimmed capital spending as oil prices have plummeted from a high of about $147 a barrel during the summer to less than $70 a barrel now.

"Despite the continuing uncertainty in world financial markets, ExxonMobil has maintained a strong financial position," Tillerson said. "We plan to continue our disciplined capital investments with our full-year capital and exploration expenditures projected to be about $25 billion, consistent with previous guidance."

Revenue for the quarter was $13.7 billion, 34% higher than the same period last year. The company earned $2.59 a share excluding special items, or 20 higher than the $2.39 expected by analysts.

Exxon Mobil: A Great Big Buy

Alcatel-Lucent: Verwaayen's Plan

No one said Ben Verwaayen's job would be easy. But the difficulties facing the new chief executive of Alcatel-Lucent (ALU) were underscored on Oct. 30 when the French-American telecommunications-equipment maker reported quarterly results below analysts' already low expectations. Operating profits fell 43% year-on-year, to $51 million, as revenues from its core business, sales to fixed-line and mobile-phone carriers, slumped 13%, to $3.5 billion.

In an interview with BusinessWeek, Verwaayen promised to deliver a plan by early December to streamline the company's operations and product portfolio, while sharpening its focus on lucrative new businesses such as services. He also hinted at a shakeup in top management, which has changed little since Verwaayen, the former boss of British telco BT Group (BT.L), took over from former CEO Patricia Russo six weeks ago (BusinessWeek.com, 9/2/08). "We have truckloads of things to do but great opportunities in front of us," he says.

Despite what Verwaayen agrees are "unsatisfactory" profits, the Dutch-born CEO noted that Alcatel-Lucent is generating positive cash flow from operations, some $134 million during the quarter. And he said the company is sticking with its earlier guidance for 2008, which calls for operating margins in the low to mid-single digits and revenues flat to slightly down vs. 2007. Investors seem reassured: Alcatel-Lucent shares soared 22% in early trading on Oct. 30, though they're still down some 80% since the company was created by a transatlantic merger two years ago.

Behind Its Rivals

Alcatel-Lucent's results also continued to lag those of its closest rivals. Sweden's Ericsson (ERIC) beat analyst estimates when it reported third-quarter revenues on Oct. 20 of $6.36 billion, up 13%, though its net income fell 28%, to $384 million. Nokia Siemens Networks, a joint venture of Nokia (NOK) and Siemens (SI), reported third-quarter revenues down 5%, to $4.38 billion, on Oct. 16, with a small operating loss of $1.26 million.

Verwaayen, who won plaudits for his stewardship of BT, is already signaling he'll be a stringent cost-cutter. He's selling off Alcatel-Lucent's fleet of corporate jets. And rather than hiring consultants to diagnose the company's woes, he has invited customers and employees to e-mail him with criticisms and suggestions. "Engaging in direct dialogue is a better way than bringing a consultancy in. You hear it from the horse's mouth," he says.

Verwaayen says he sees opportunities for "massive cost savings" by eliminating duplication in operations and in the merged company's product portfolio. But he downplays the possibility of major job cuts, beyond the 16,500 positions—nearly 20% of its workforce—already set for elimination under an earlier restructuring plan. "Everybody immediately jumps to job cuts," he says. "I think it is the wrong focus to start from."

Sirius XM Radio Faces Sky-High Debt

Exxon’s Production Falls as Profits Soar

CEO and Chairman Out at Alcatel-Lucent

Sirius XM Radio Faces Sky-High Debt

Exxon’s Production Falls as Profits Soar

CEO and Chairman Out at Alcatel-Lucent

GM's Latest Retooling: The Chrysler Merger

General Motors (GM) is getting closer and closer to taking Chrysler off the hands of its owner, private equity giant Cerberus Capital Management. If GM can come up with funds—perhaps as much as $10 billion—from the government (BusinessWeek.com, 10/28/08) to solve its problems and help restructure the smallest of the Big Three, it could be a done deal.

Assuming it happens, show 'em what they won, Vanna. It's an 83-year-old car company that's badly in need of restructuring. That's the problem. GM has been lousy at restructuring.

GM's strategy all along has been to grab Chrysler and its $11 billion in cash and estimated $35 billion to $40 billion in yearly sales, and then slash overhead, dump unwanted products and plants, and remake the combined company into a profitable business. Industry sources say the two sides still have many issues to settle. There's some agreement on how to resolve them, but ironing out the remaining details could take a week or more.

GM's Losses Soar in 2008

You would think GM executives would be good at this sort of thing by now. The company has decades of experience at it. GM had 215,000 union workers in 1998. After 10 years of retiring union workers and buying others out, GM now has about 64,000. But in all of that time, GM has only occasionally made real money selling cars in North America.

In the past three years, GM bought out 52,000 workers and bragged that it cut $9 billion in structural costs. But in 2006 and 2007, GM lost about $2.3 billion in North America on an adjusted basis. That happened before the mayhem of this year's fuel price spike and credit crunch kicked in. This year's losses have topped $15 billion.

Under the Hood of a GM-Chrysler Merger

A Strange Detour for Chrysler

Under the Hood of a GM-Chrysler Merger

Google Settles with Authors

After more than two years of negotiation, Google (GOOG) has settled lawsuits filed by the Authors Guild and five publisher members of the Association of American Publishers against a Google program that has scanned millions of library books.

The agreement, subject to approval by the U.S. District Court for the Southern District of New York, provides for the establishment of a book-rights registry, through which scanned books can be viewed in part or in whole and payment made to copyright holders. As part of the deal, Google will pay $125 million to rights-holding plaintiffs and to cover legal fees. Of that amount, $30 million will go to set up the registry.

Google ran afoul of book publishers and authors when some of the libraries participating in its book-scanning program opted to scan full texts of copyrighted books (BusinessWeek.com, 10/20/05). Publishers argued that scanning an entire book without permission, and storing it on a Google server, violates copyrights. Google argued that because it's creating what amounts to a massive card catalog and would let users view only brief excerpts of books, it shouldn't have to get express permission to scan the books.

"A 21st-Century Solution"

All parties to the agreement expressed enthusiasm about the settlement during a conference call with reporters. "This could be the biggest book deal in U.S. publishing history," Authors Guild Director Paul Aiken said. "Millions upon millions of books will find a new home among readers online."

"This is an innovative, 21st-century solution," added Association of American Publishers Chairman and Bertelsmann Co-Chairman Richard Sarnoff. "The registry will function as an authoritative rights-holder database, distribute money, and mediate disputes."

David Drummond, Google's chief legal officer, noted that "7 million books are now searchable through Google Book Search, and we're looking forward to many times that number."

Payments Split Three Ways

The registry will manage two types of online book searches. Individuals will continue to view samples of in-copyright books much as they can today, and purchase the work online. Institutions such as colleges and universities can pay for subscriptions to the registry and have complete digital access to millions of scanned books. Participants in the conference call noted that the program will make it possible for small colleges and universities to have access to the trove of books in major research libraries at such institutions as the universities of California, Michigan, and Wisconsin, and Stanford University.

In all cases, payments will be split three ways, with Google getting 37% of the revenue and, after the subtraction of an administrative fee by the registry, the publisher and author splitting the remaining monies. Certain advertising revenues will also be shared with the rights holders, Drummond said, according to the same proportional split. But no ads will appear in the actual pages of books, he noted.

The registry is several months away from being a reality. Overall, the development seems likely to encourage the sale of books in bits and pieces, or "chunking," as the practice is coming to be known among book publishers, along with "transforming," or delivery of books in a variety of formats, including downloads to e-book readers or for print-on-demand. "The real victors are the readers," Google co-founder Sergey Brin said in a prepared statement. "The tremendous wealth of knowledge that lies within the books of the world will now be at their fingertips."

Lawsuits Date to 2005

The publisher plaintiffs, who filed suit against Google in October 2005, included Pearson Education, Penguin Group, John Wiley & Sons (JWA), Simon & Schuster, and the McGraw-Hill Companies (MHP), publisher of BusinessWeek. The Authors Guild class action was filed in September of that year.

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Marcial: FPL Group, an Attractive Power Play

Who among the beleaguered investing community would be so bold as to predict the market's bottom at this point? Not very many, that's for sure. It's foolish, at best, to make such a prediction amid the current financial and economic turmoil, argue many of the best strategists on Wall Street.

But several stouthearted pros don't buy that, and they're now placing their money behind their forecasts that the market is finding a floor. (While it may not be a sure signal that stocks have touched their bear-market lows, the Dow Jones industrial average posted its second-biggest point gain ever—889 points, or nearly 11%—on Oct. 28.) "We have become more aggressive in buying stocks because we strongly believe the market is beginning to turn around and starting the process of pulling ahead to much higher ground," says Carl Birkelbach, president of Birkelbach Investment Securities.

Birkelbach has made several prescient market calls in the past. In September 1981, when the Dow was hovering at around 800, he placed ads in newspapers calling himself the "Lone Bull" and predicting the market had hit bottom and would rise to much higher levels. His forecast: The Dow will hit 8,000. Birkelbach did not specify the timing of the market's move, but 10 years later, in 1998, the industrial average shot up to 8,000—and then surpassed that level some months later.

Signs of a Bottom?

Birkelbach uses both fundamental measures and technical indicators in gauging the direction of the Dow. In September 2002, when the Dow stood at 7,900, he made another daring prediction: The Dow would hit 14,000 in the years ahead. True enough, in early October 2007, the benchmark index soared to more than 14,000. (Birkelbach, however, didn't predict whether stocks would retrench after such big moves.)

That brings us to October 2008 and the market's stunning fall from its year-earlier peaks. Here is Birkelbach's brief analysis of why he assumes stocks are reaching a trough. He notes that the European and Asian markets have retreated from their highs by about 40% to 50%, and the Dow has lost nearly 40% this year. In the past, he says, such huge declines presaged a market bottom. "Much of the financial distress and economic meltdown have already been discounted by the market, given such a massive market decline worldwide," he says.

If the worst of the bear's rampage is behind us, as Birkelbach figures, what is he buying? His current favorite: FPL Group (FPL), a public utility company that generates, sells, and distributes electric energy using natural gas, nuclear energy, and wind power. "It is the best and safest bet in these times of economic dislocation and financial stress," he says.

FPL's Florida Power & Light unit is the largest utility in Florida, serving about 4.5 million customers in the southern and eastern parts of the state. Its other unit, the unregulated FPL Energy, is the largest producer of wind power in the U.S., with a 30% share of the market at the end of 2007, generating 5,077 megawatts of wind power. FPL Energy is one of the largest U.S. independent power producers, generating roughly 16,000 Mw.

Core Holding

One other thing Birkelbach likes about FPL: its dividend yield of nearly 4%. "That is a comforting payout to shareholders" amid the current turmoil, he says. So the stock deserves to be a core holding in every portfolio, he says.

The stock, which climbed to a high of 72 a share in 2007, has been clobbered along with other equities and struck a low of 37 on Oct. 10. It has since edged higher, to 45 on Oct. 28. The company posted a 45% jump in earnings in the third quarter, to $774 million, on revenues of nearly $5.4 billion, in spite of the deteriorating economy, housing slowdown, and hurricane conditions in Florida that adversely affected its utility operations there.

But the stock's drop may indicate investors have discounted the weakness in the Florida market, where the growth in electric usage has slowed. "The stock is attractive for total return," says Justin McCann, an analyst at Standard & Poor's Equity Research, who recently upgraded his recommendation on FPL to a buy from a hold, although he reduced his earnings estimates by 5 a share for both 2008 and 2009. He now projects earnings of $3.84 a share for 2008 and $4.15 for 2009. (S&P, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP).)

"At the current share price, we consider FPL to be an attractive buying opportunity for investors with a 12- to 18-month time horizon," says Timothy Winter, senior analyst at investment firm Jesup & Lamont (JLI). He figures the shares are worth 55 a share. FPL has added 499 Mw of wind power generation capacity so far this year and continues to expect 1,300 of new wind capacity in operation by yearend 2008, Winter notes. However, the company scaled back its growth plans for 2009 because of the poor capital-market and economic conditions. Its approach to the problems will be to maintain flexibility to quickly ramp up projects should conditions improve and further reduce investment should conditions deteriorate, says Winter. He believes the annual dividend of $1.78 a share is "secure and growing."

Because of the economic and housing problems in Florida, says Winter, investors should "look beyond the valley of the next 12 months." They will be rewarded, he figures, when the economy improves. Given the company's growing investments in renewable energy, FPL "is the best-positioned power company to capitalize on the long-term macrodynamics of a future green-energy world," he says.

With the shares down some 40% from their all-time high of 73.75, the prospect of the stock recovering a lot of lost ground is part of FPL's appeal at its current price. You might say it's poised for regeneration.

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Testing for Tech Literacy

On a recent Monday morning, the eighth graders in Chris Malanga's technology class at Riverhead (N.Y.) Middle School were hard at work constructing Web pages. Scattered across computer screens in this classroom about 75 miles east of Manhattan were Web pages reflecting students' distinct personalities and interests. One blared rap music. Others boasted purple text over garish background images. These were no mere MySpace (NWS) profile pages, constructed with a few clicks of the mouse from a menu. These students built their pages from scratch, writing pure HTML in a text file. "They like that it's something they learned in school that they can take home and use to jazz up their MySpace [pages]," Malanga says.

Before they embarked on Web pages, the students crafted tiny cars complete with bumpers, airbags, and seat belts designed for an especially fragile passenger—an egg. They watched videos on auto design, drafted 3D models of their cars using Google (GOOG) Sketchup, a free online application, and spent hours gluing together pieces of wood, cardboard, rubber bands, and balloons.

Technology classes like this are entering the curriculum in schools around the country, but they're not common enough, say educators, company executives, and policymakers. In a bid to make technology literacy more widespread, the National Assessment Governing Board this month announced plans to develop the first nationwide assessment of technological learning in U.S. schools. NAGB, a government-commissioned independent council, awarded nonprofit WestEd, a 40-year-old educational research and service group, a $1.86 million contract to work with educators, school officials, the business community, and the public on constructing the test, set to hit schools in 2012.

Laying a Foundation

NAGB officials and others hope the test will help reverse the slide in U.S. test scores and enrollment in such subjects as science, math, and engineering, and ultimately address the more generally waning competitiveness of the U.S. in technology. "If you look at the business community and post-secondary work, those sectors really need students who have science, technology, and engineering backgrounds to fill jobs in these new and dynamic fields," says NAGB Executive Director Mary Crovo.

Enrollment in graduate-level computer science and engineering is dropping, says the National Science Foundation. The number of full-time graduate enrollments in computer science and engineering courses decreased 11%, to 29,800, in 2004, the last year for which data is available, since peaking in 2002, according to the foundation. The number of foreigners with bachelor's degrees holding jobs in U.S. science and engineering almost doubled, to 19%, from 1990 to 2005.

No standardized test alone can reverse those trends, but backers hope it will lay a foundation for renewed and deeper emphasis on science and engineering at the earliest levels. To ensure the test's efficacy, San Francisco-based WestEd in December will convene a panel of advisers that includes instructors and representatives of such tech bellwethers as Intel (INTC) and Google as well as other yet-to-be-named companies in manufacturing, civil engineering, and other areas. "Our world is changing, the way we do business is changing, our reliance on each other is changing," says Paige Kuni, worldwide manager of K-12 education for Intel's Education Initiative and a member of the panel. "Kids have to be able to master those types of skills to be ready for a U.S. economy when they come out of the school system."

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