General Motors Corp. CEO Fritz Henderson drives a Cadillac with Tom Stephens, vice president of product development. GM and Chrysler are among the companies that have emerged as winners thanks to federal bailouts.
Timeline: A Year Of Financial Crisis
The financial crisis left a trail of victims in its wake, but there have also been some economic winners. Some companies have done well despite the economic turmoil; others because of it.
The corner of 43rd and Brooklyn in Seattle's university district used to be home to a Washington Mutual bank. Today, the name of the bank is Chase. WaMu, as it was known, suffered huge loses from far too many subprime loans, and, "Bam! It was gone," says Alan Hess, a professor at the University of Washington's Foster School of Business.
JPMorgan Chase bought WaMu for pennies on the dollar. Other big-name financial firms have also disappeared.
Emerging From Financial Wreckage
"We essentially went through the 100-year flood in financial services," says Fred Cannon, chief equity strategist at Keefe, Bruyette & Woods. "Some people are still floating, and there's a lot of wreckage as the water moves out."
Cannon says three nationwide banks have emerged, including JPMorgan Chase, Wells Fargo and Bank of America.
Right now JPMorgan Chase and former investment bank Goldman Sachs are two of the strongest players in the financial world.
Bear Stearns, Wachovia and Merrill Lynch have all been taken over by bigger companies. Lehman Brothers failed outright.
Cannon says the government played a role in determining winners and losers in part by propping up financial institutions deemed too big to fail.
"They said, 'Here are 19 banks — over $100 billion — we are going to stress-test them, but we are also going to ensure they have enough capital to get by,' " Cannon says. "They chose the winners: Each of those 19 is around today; they are all survivors."
And, they have less competition than they used to.
Who's Left Behind The Wheel?
The competitive landscape in the auto industry has also changed. Last December, then-President Bush announced he would bail out Chrysler and GM. "In the midst of a financial crisis and a recession," the president said, "allowing the U.S. auto industry to collapse is not a responsible course of action."
Together GM and Chrysler got tens of billions of dollars from the federal government, and that allowed them to stay in business, says John Paul MacDuffie, an associate professor at the Wharton School at the University of Pennsylvania. According to MacDuffie, the biggest losers are the dealers who were discontinued by the Detroit Three and the communities that have closed assembly plants.
"No matter how well the industry comes back, the prospects for those dealers or plants opening again are poor," he says.
But at Kirkland Ford, the largest Ford dealer in Washington state, business is strong. Owner Jim Whalen says Ford has gotten a boost by not taking bailout money. "It's big, really big," he says.
All the talk of the bailout has made more people aware of Ford and its products. Various surveys suggest more people feel positively toward the automaker now than a year ago.
Whalen says sales are up year over year and not just because of the government's recently discontinued Cash for Clunkers program. "We're seeing increased traffic levels, trade-ins we've never seen before and shoppers that hadn't considered us before — a lot of import buyers," he says.
Shopping For Deals
The auto and finance industries make headlines. But there are other winners and losers too. Consumers are shopping at Walmart, not at Neiman Marcus. They're buying alcohol, but not eating out in expensive restaurants. And they're traveling less.
Alphy Johnson, the chief operating officer of Candela Hotels, a high-end-hotel operator, says five-star resorts have suffered the most, in part because of the stigma associated with AIG. Shortly after the government bailed out the insurance giant, the company entertained clients at a very fancy resort. It didn't sit well and Johnson says "that hotel lost 90 percent of their group bookings the next day."
Johnson says revenues at high-end hotels are off by about 25 percent compared with last year. The winners, he says, are the consumers: "There are some great bargains out there. It doesn't matter where you look."
On the other hand, some would-be travelers are skipping hotels altogether and just pitching tents.
At Cascade Designs in Seattle, workers are putting bright green covers over specialized foam to make Therm-a-Rest self-inflating mattresses. Cascade Designs' Ken Meidell says more people are hitting the trails or going camping.
"Some of that is probably a desire to get back to basics — and things that people remember doing in their in their youth or in their 20s," he says. "They're looking to rediscover that in an uncertain time."
Camping equipment is selling well. Add some outdoor gear companies to the list of firms doing fine in these tough and uncertain economic times.