Brands We Loved and Lost in 2009

by Ben Rooney

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Popular auto makes, magazine publishers and retailers were among the businesses laid to rest in 2009. Here's a list of familiar names you won't see in the future.

1. Circuit City Retail Stores

Circuit City became one of the largest retailers to go out of business this year, after the 60-year old electronics chain declared bankruptcy at the end of 2008.

The fall of Circuit City was mainly a result of the prodigious belt tightening that took place in households across America during the depths of the recession. But the company's demise had its roots in poor management decisions dating back several years.

In 2007, for example, Circuit City laid off several thousand experienced sales people and replaced them with cheaper but less knowledgeable workers. That took a toll on customer loyalty, and ultimately benefited rivals like Best Buy.

Circuit City also found itself in the unfortunate position of having to compete with Wal-Mart as the world's largest retailer aggressively moved into the electronics market with low prices.

Meanwhile, the Circuit City brand has been resurrected online. Systemax Inc., a direct seller of consumer electronics, acquired the trademark and Internet domain name for Circuit City in April.

Courtesy: General Motors

2. Saturn

GM dubbed Saturn "a different kind of car company" when it launched the brand in 1990. Alas, it was not different enough.

Saturn was one of four GM brands orphaned when the largest U.S. automaker went bankrupt early this year. The brand was originally intended to help GM compete with smaller, imported cars. But sales were generally tepid and the Saturn languished as Americans became increasingly fond of big SUVs.

After a protracted, and ultimately futile, courtship with car dealership operator Penske Automotive Group, GM announced in October that the 2010 model year would be Saturn's last.

Courtesy: General Motors

3. Pontiac

Gear heads across the nation mourned the loss of Pontiac, when a bankrupt General Motors decided to discontinue the long-standing brand earlier this year as part of a restructuring plan.

Pontiac, best known for muscle cars such as the GTO and Firebird, had been a staple of GM's product line since it began production in 1926. But it didn't make the cut when the automaker emerged from bankruptcy in July with a new focus on its "core" brands.

In April, after an effort to salvage it as a "niche brand" failed, GM officially announced that Pontiac would be dropped, and that all remaining models would be phased out by the end of 2010.

Courtesy: Kodak

4. Kodachrome

When Kodak introduced Kodachrome in 1935, it became the first commercially successful color film.

But demand for traditional films evaporated over the last decade as digital photography became increasingly available. At the time it was retired in June, sales of Kodachrome were less than 1% of Kodak's still picture film revenue.

Kodachrome was also difficult to manufacture and process. In fact, there was only one processor left in the United States that still developed Kodachrome when it was discontinued.

The Kodachrome brand, however, may be best remembered as the subject of a 1973 song in which Paul Simon begged, "Mama, don't take my Kodachrome away."

5. Home Depot Expo

Home Depot, the No. 1 home improvement chain, announced plans early this year to shutter its Expo Design Centers as demand for granite countertops and custom window treatments withered.

Launched in the early 1990s, Expo offered a variety of upscale home decor items and custom-installation services. The brand was aimed at homeowners who wanted a luxury remodel without having to hire an interior designer.

Home Depot officially pulled the plug on Expo in January as part of a plan to focus on its "core" stores. While the weak economy, sluggish housing market and lack of available credit were the final nails in Expo's coffin, the company acknowledged that it had never performed well financially.

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No Checks Please, We’re British

UK Banks Vote to Phase Out Paper Checks—Will the US Follow?

Somewhere in my files, there are photos of me holding up those giant checks that foundations love to hand out to charities. It was 1995 and I was raising money in Los Angeles for victims of the Great Hanshin Earthquake that leveled Kobe in Japan. Over the course of a few weeks, I lugged shopping bags full of checks—more than 10,000 donations amounting to millions of dollars—over to our accounting firm. The giant checks were great, but the bags of small, individual donations were like offering of personal prayers written on each slip of paper.

I’m not sure I would have felt the same sentimental satisfaction holding up a printout of a large electronic debit.

This week, the British banks governing the UK Payments Council decided to phase out their check clearing system by October 2018. In effect, they set an expiration date for the use of paper checks (or “cheques” as they prefer). In a statement, the group’s chief, Paul Smee, noted: “There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement.”

Like letters of credit, demands for payment and bills of exchange, bank drafts can trace their history to Roman times, when checks were known as “praescriptiones.” Paper drafts analogous to today’s checks were in use in the Islamic world in the 9th century and as early as the 12th century Templars honored pilgrims’ checks from one chapter house to the next. In England, clearing houses have had responsibility for settling checks since the early 1800s (before that they were often cashed in coffee houses).

Bankers complain that many British retailers don’t accept checks anymore, that young people don’t even have checkbooks, and that it’s costing them as much as a pound (about $1.63 today) to process every check. But the decision certainly has its critics—especially advocates for the elderly and small business owners. On one hand, a generation uncomfortable with electronics will be forced to risk carrying and handling more cash. On the other, mom and pop stores have one more disadvantage against giant competitors (some of whom are starting to act as banks themselves). The move will also put the “unbanked”, who have to pay fees to cash checks but also lack access to accounts capable of electronic payments.

Will the US Follow?

The cost of cash keeps going up while the cost of using credit cards and electronic payments keeps going down. More retailers accept credit cards than checks these days. But while US banks also worry about the costs of handling cash and checks, they aren’t likely to echo the UK decision any time soon. Yes, paper checks are increasingly rare in high-tech countries—whether advanced Scandinavian nations or developing/modernizing regions such as Africa—but the US doesn’t rate as high-tech when it comes to personal finance (present company excepted of course). It has lagged dramatically in the modernization of its financial traditions, such as implementing electronic payments, even compared to Britain.

Instead, US banks such as Bank of America and Chase have been investing in new ATMs that make it easier for customers to deposit checks without envelopes, deposit slips or extra keystrokes. In fact, a law known as “The Check Clearing for the 21st Century Act,” which took effect in 2004, made it easier for banks themselves to settle checks by exchanging scanned images electronically instead of physically managing and transporting paper.

The use of paper checks in the US may have peaked, but they aren’t evaporating in proportion to the explosive rise of electronic payments. According to Federal Reserve statistics, the number of checks written in the US has fallen—but only slightly—from an average of 112 per person in 1971 to 102 in 2006. While the number of checks written in the UK is only a third today of what it was in 1990, the decline isn’t quite as stark here in the USA. British check-writing peaked in 1990 at about 10.8 million drafts. Compare that to some 70 billion written annually in the US by 2001.

Perhaps one reason they aren’t falling more significantly here in the colonies is that we all seem to have so many more monthly bills and accounts these days? Inevitably some of those new store credit cards, nifty home utilities and specialist medical providers still have to be paid by check. And credit cards, electronic debits and automatic payments are easier but often come with service fees, interest charges or “gotcha” surprises. Also, many government institutions, landlords, utility companies and others still preclude (or penalize) electronic payments. It can cost hundreds of dollars to use a credit card to pay your income taxes. Meanwhile, many of us hate walking around with cash anymore, and wouldn’t want to keep more around for house cleaning and home repairs.

The federal government isn’t likely to encourage a return to an uncounted cash economy, either.

A Generational Issue

Using paper, plastic or electronics instead of cash is a generational issue, too. McKinsey & Co. found in a 2006 study that 54% of consumers still pay most of their bills by putting checks in the mail. Another study by Forrester Research found that 71% percent of people who don’t like to pay bills online would rather write checks and receive paper statement for their record keeping. The biggest group of such “traditionalists” is retirees, but regardless of age, most people consider paper to be safer for both security and accounting reasons. (Although a younger sampling might point out that a paper check reveals a lot of personal information, such as address and driver’s license number.)

The idea that electronic fund transfers are more prone to fraud may be more than just perception. As of last year, 76% of US banks reported losses due to debit fraud compared to only 56% losing money to check fraud.

Once, crossing a downtown parking lot on a rainy night, my eye caught two pieces of paper blowing across the concrete. They were checks, that appeared to have been endorsed, deposited and apparently in the process of being transferred from one institution to another. One was for only pennies, but the account belonged to a well-known celebrity. I didn’t recognize the name on the other, but the amount was for something like $55,000. The security department of the bank where the checks had been cashed took little interest, so…

Steve Barth blogs about work, play, society and politics at Reflexions.

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Bank of America names Moynihan next CEO

NEW YORK/CHARLOTTE, North Carolina (Reuters) - Bank of America Corp on Wednesday tapped insider Brian Moynihan as its next chief executive, ending months of speculation about who would succeed Kenneth Lewis to lead the largest U.S. bank.

Moynihan, who heads the lender's retail bank, will take over as CEO and join the board after Lewis' retirement on December 31. He will move to Charlotte from Boston, easing fears raised during the search that the bank's headquarters might move.

Moynihan said in an interview with Reuters late Wednesday his primary mandate is to carry out the business plan arranged by his predecessor, and the Charlotte, North Carolina-based banking giant must block out the distractions created in the wake of the financial crisis.

"We need to put the last 18 months behind us," Moynihan said. "Now is the time to execute."

Analysts said the new CEO is well positioned to turn around Bank of America, whose massive acquisitions in recent years became a millstone.

"Brian has been a fixer. He's good at getting everyone moving in the right direction," said Nancy Bush, a bank analyst at NAB Research, in Annandale, New Jersey.

Many of Wall Street's elite, including Bank of New York Mellon Corp Chief Executive Robert Kelly, had been widely considered to be prospects for the post after Lewis announced plans in late September to retire.

Speculation about Moynihan's ties to the soon-to-be open CEO post ebbed and flowed with the two-month search.

Initially considered a strong contender by analysts and other bank outsiders, he was considered by some outside observers as a long-shot choice after his U.S. Congressional committee testimony on November 17 about Bank of America's Merrill Lynch purchase was widely criticized by analysts and even the committee's chairman.

U.S. House Rules and Oversight Committee chairman Edolphus Towns, D-NY, said after the hearing that Moynihan "didn't show the kind of leadership a company would seem to need."

Investors appear relieved to have the matter of Lewis' successor settled.

"I'm sure there will be a lot of people that would have preferred to see them go outside the company, to see them have a clean break from everything that happened," said Walter Todd, portfolio manager for Greenwood Capital Management.

"At the end of the day, I think it is good they have got somebody in place."

Moynihan takes over a company that is the largest retail bank in the United States -- with 6,000 branches, 18,000 ATMs and nearly $1 trillion in total deposits -- but is undergoing sweeping changes in its other businesses.

As the new CEO, he must finish the integration of mortgage lender Countrywide Financial and investment bank and wealth manager Merrill Lynch into the company.

He must also steer the bank -- which has reported two quarterly losses within the last year, after posting nothing but profits for the last two decades -- back to profitability.

Moynihan offered the advantage of "a smooth transition," Bank of America Chairman Walter Massey, who led the search for the new CEO, said.

"The board decided after listening to shareholders, regulators and others that Brian's experience was commensurate with or better than any of those candidates," he said in a statement.

Moynihan said he believes the bank's so-called financial supermarket model -- offering a cornucopia of financial services to consumers and businesses -- will work, as some are calling for the break-up of the biggest U.S. banks.

"The way we're arranged, we can do a better job for our customer," he said. "To me, its logical."

FINDING A SUCCESSOR

Bank of America publicly identified the heads of each of its five major businesses, and its chief risk officer, as potential successors, with no external candidates ever formally named.

Yet according to some media reports, the bank struggled to field enough interested outside candidates -- Kelly said on Monday he would not take the job -- while some investors chafed at the possibility of an internal candidate replacing Lewis.

The bank missed one self-imposed deadline of naming a new chief by the U.S. Thanksgiving holiday on November 26.

During the search, the bank's board relaxed a requirement that the CEO be based in Charlotte, and considered retaining Lewis beyond his December 31 retirement date if a successor could not be found.

Moynihan will move to Charlotte to assume the top job, which has brought some relief to a Southern U.S. city anxious about the possibility of losing a key point of prestige.

"This sends the signal that a short-term candidate was not an option, and the board clearly wants someone to lead the bank in a post-TARP world," said Bob Morgan, president of the Charlotte Chamber of Commerce, who added he planned to meet with Moynihan as soon as possible.

FALLEN STAR

Lewis, whose acquisitions transformed Bank of America into one of the dominant U.S. banks, was heralded in 2008 as one of the saviors of the financial system as the bank agreed to purchase Merrill Lynch after a whirlwind negotiation.

But he became a CEO under siege at the end of his tenure, as critics berated the bank's deal to buy Merrill Lynch in September 2008.

Bank of America and some of its executive team and board from that time, including Lewis, are the subject of probes by regulators and state attorneys general concerning billions in bonus payments made to Merrill Lynch employees before the deal closed and billions in fourth-quarter losses run up by the investment bank.

Neither was disclosed to shareholders before the deal was consummated, critics argue, while the bank states nothing improper was done in the course of the deal.

Lewis did meet one of his primary goals, however, repaying $45 billion in aid Bank of America received from the government, as he had said he aimed to do before he left.

Earlier this month, Bank of America sold $19.3 billion of shares and repaid the United States.

(Reporting by Paritosh Bansal, Dan Wilchins, Joe Rauch, Steve Eder and Clare Baldwin; Editing by Gary Hill and Muralikumar Anantharaman)

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