Milwaukee Biz Blog

I have never played poker with Harley-Davidson Inc. chief executive officer Keith Wandell. But if I did, and he went "all in" with his chips on a crucial hand, I'd look him in the eyes. And then I'd probably fold.

Wandell is "all in" with Harley. The stakes are high, and he's playing his hand accordingly.
As they say, drastic times call for drastic measures. Harley's core customers - people willing to plop down $40,000 or so for a new motorcycle - have been steadily dwindling. And even if they are willing to fork over that kind of coin, good luck obtaining the financing.

Harley's earnings have fallen for nine consecutive quarters.

Wandell, who built a track record of squeezing efficiencies out of operations in his years as an executive at Johnson Controls Inc., was brought in last year to do the nasty, painful hatcheting at Harley.

So far, he's been up to the task.

Wandell is laying off thousands of people and closing plants. He recently ended the Buell Motorcycle line.

Wandell is divesting Harley's MV Agusta venture in Varese, Italy.

He's threatening to close Harley's plant in York, Pa., unless the company receives the right concessions from the employees there and the right incentives from the local governments there. That decision will come in December.

With all of that chaos and all of that carnage, you might think Wall Street would be skeptical about Milwaukee Iron. You would be wrong.

Stock analyst Craig Kennison of Robert W. Baird & Co. Inc., is downright bullish on Harley, raising his outlook for the company to "outperform." Kennison is predicting a "cyclical rebound and turnaround story" for Harley.

"We expect shipments to bottom in 2009 following efforts to slash dealer inventory. Meanwhile, we see a dynamic turnaround story led by a bold CEO driving better performance. We see an opportunity to earn $2.25-$2.50 per share at modest production levels as Harley exits unprofitable brands, renegotiates York, and expands internationally. At 11-12x that expectation, we consider Harley the best value in our recreation space," Kennison wrote.

"Operations meet expectations. Harley reported a noisy quarter, reminiscent of bar-time at a Harley rally. Beyond the noise, however, key operating metrics met our expectations … Focus on post-restructuring earnings power. We see the potential to earn $2.25-$2.50 per share on a modest improvement in shipments (250K bikes) as the restructuring plan unfolds. New CEO Keith Wandell is taking bold action to refocus the business and build around the Harley-Davidson brand," Kennison stated.

Kennison is predicting that much of Harley's new growth will come from overseas, as the company plans to add 100 to 150 international dealers to drive shipments to 40 percent of bikes sold by 2014.

So, Wandell's legacy at the Harley helm awaits him. He could go down as a cruel butcher who cut the life out of one of America's proudest brands. Or he could follow in the footsteps of predecessor Richard Teerlink as a corporate savior and a turnaround genius who pulled Harley out of the scrap heap.

Either way, it will be a painful, bumpy ride.

Steve Jagler is executive editor of BizTimes Milwaukee.

The Midwest Airlines web site (www.midwestairlines.com) still lists the address of the company's headquarters as 6744 S. Howell Ave., Oak Creek.

But changes made to Midwest Airlines, which was acquired by Indianapolis-based Republic Airways Holdings in July, have rendered it a "virtual airline," according to airline industry consultant Michael Boyd, president of Evergreen, Colo.-based Boyd Group International Inc.

"(Midwest Airlines) is a brand," Boyd said. "It exists as a brand. That may be the wave of the future, I don't know."

Republic has been replacing the Midwest Airlines flight crews and aircraft. Midwest Airlines' final group of Boeing 717 jets and the crews that operate them will be replaced by Republic crews and aircraft on Dec. 1. With the changes, Midwest will lay off 120 pilots and flight attendants, along with about 50 other employees.

"While there will still be airplanes flying with 'Midwest' written on them, there will no longer be any of the pilots who truly provided 'The Best Care in the Air' operating them," said  Capt. Anthony Freitas, chairman of the Midwest Airlines unit of the Air Line Pilots Association International. "All of the original Midwest flight crews are being outsourced in the final phase of dismantling our airline. Midwest's new owner hopes that if they keep the same paint scheme and cookies, no one will notice that the crews who helped build our airline's well-deserved reputation for award-winning customer service are gone."

The replacement of the flight crews and the aircraft is why Boyd calls Midwest a virtual" airline.

"You don''t have a hometown airline anymore because all of the flights are being operated by Republic Airlines crews and will be on Republic Airlines planes," he said.

But James Reichart, director of advertising and brand for Midwest Airlines, points out that the company continues to have 1,100 to 1,200 employees in the Milwaukee market.

"Some corporate functions have naturally begun to align with our new parent company, Republic Airways Holdings, to eliminate duplication," Reichart said. "'Virtual airline' is a nice catchphrase, but the reality is kind of tied up in the arcana of the airline biz. There is still a corporate entity called Midwest Airlines, a wholly owned subsidiary of Republic Airways Holdings. What's in transition is which aircraft in the combined Republic fleet will be on the Midwest routes. We're retiring the Boeing 717's as part of our overall restructuring begun last year, which leaves that FAA operating certificate without aircraft to accompany it, since the routes are being flown with Republic E170's/E190's, which are already on their own operating certificate. What's important to customers, travel agencies, etc. is that the Midwest brand, our YX airline code and other assets of the airline continue without interruption, just in a slightly different way behind the scenes. All of these changes, along with work we're doing with our sister airline, Frontier, will enable us to provide customers with the service they need, at the low fares they expect to pay, and still make a profit."

With all of the changes under Republic, Boyd says Midwest Airlines employees would have been better off if the company's board of directors in 2007 had approved the hostile takeover attempt a few years ago by AirTran.

"Many of them would probably still have their jobs," he said.

The Midwest board rejected the AirTran bid and instead opted sell the company to TPG Capital, a private equity group based in Fort Worth, Texas, for about $450 million in 2007, with Northwest Airlines owning a 47-percent share of the deal. The acquisition turned out to be a really bad investment for TPG and Northwest, because Republic bought Midwest this year for just $31 million.

In March, AirTran chief executive officer Robert Fornaro said he was happy that his company had failed in its hostile takeover bid of Midwest Airlines. AirTran has been slowly adding flights in Milwaukee and building a mini-hub at Mitchell International Airport.

Boyd said the decision by Midwest to reject the AirTran takeover offer was, "I think misguided management that did not recognize the Midwest product was gone and didn't work any more."

However, to be sure, the decision to sell for a higher price to TPG provided a splendid windfall for investors in Midwest's stock, including the members of Midwest's board and management team.

Meanwhile, AirTran has assumed a much higher profile in the Milwaukee community. For example, Bryan Bedford, chief executive officer of Republic, recently agreed to be nominated to serve on the Metropolitan Milwaukee Association of Commerce (MMAC) board of directors.

Republic Airlines recently acquired Denver-based Frontier Airlines through the bankruptcy process. Republic executives say the company may consolidate its operations that could result in the shift of hundreds of jobs from Denver and New Mexico to Indianapolis or Milwaukee. Officials in Denver, Milwaukee and Indianapolis are hoping to convince the company to place those jobs in their communities.

However, Boyd said Milwaukee's chances of landing those jobs are slim because Republic is headquartered in Indianapolis and it has significantly scaled back its business operations in Milwaukee.

"If it's going to go anywhere it's going to go to Indianapolis," Boyd recently told the Indianapolis Star.

Republic might move "something else" to the Midwest Airlines offices in Oak Creek, Boyd said.

"In terms of (the Oak Creek office complex) being an airline headquarters, that role is gone," he said.

"With due respect to our old friend Mr. Boyd, he's flat wrong on the jobs question," Reichart said. "While Republic's corporate headquarters are in Indianapolis, the types of jobs we're talking about require large specialized facilities which we already have in Milwaukee, which means those jobs could legitimately end up here. What we're doing is looking at the whole Republic enterprise, which has three geographic locations (Indianapolis, Milwaukee, Denver), and determining which functions can most efficiently be performed in each location."

Andrew Weiland is the managing editor of BizTimes Milwaukee.

Milwaukee is an eager and enthusiastic partner with Chicago in its bid for the 2016 Olympics, with its potential to bring in billions of dollars in revenue for our region. Nevertheless, we have a long way to go before the International Olympic Committee's (IOC) final vote on Oct. 2, 2009.

Public transit, both its availability and access, has surfaced as a key factor in the decision-making process. This is evidenced by initial reports from the IOC's evaluation commission which ranked Chicago third among the other four cities on the ballot, particularly, because access between other critical venues, such as Milwaukee, is inadequate. This comes in light of the fact that both Madrid and Tokyo boast excellent transportation systems, both of which are currently ranked above Chicago as possible host cities.

Many see the potential for a Chicago-hosted Olympics as a golden ticket for funding highway and transit projects in our region. However, this perspective is flawed in its reasoning. Rather than being a trigger for the 2016 Olympics, this opportunity should be capitalized upon to construct a coordinated, efficient and affordable link between Chicago and Kenosha, Racine and Milwaukee, as well as other communities in between, as a long-term investment in our region's economic vitality and viability.

Ready to go is the KRM commuter rail project, which can provide access to a more talented workforce, a larger base of successful and growing businesses and a competitive position in the growing global economy. Public transit also offers advantages for low-income families, reducing their costs of commuting by as much as 65 percent. This not only lifts a major burden from property tax payers and citizens, but also strengthens the local economy through these families' increased purchasing power.

As a region, we must not miss out on the opportunity to fully fund new and existing transit initiatives. The Olympic bid is just one example of the many potential economic benefits of connecting the Kenosha-Racine-Milwaukee region with Chicago. However, these opportunities will pass us by if we wait too long to take action. The time is now for our state and region to embrace a dedicated public transit funding mechanism and invest in our region's future.

Bob Mariano, a Chicago native, is chairman and chief executive officer of Milwaukee-based Roundy's Supermarkets Inc.

With the recent "demonization" of legitimate business travel and hundreds of thousands of jobs at stake, the nationwide hospitality and tourism industry - an economic juggernaut - is working in a unified lobbying effort to promote business travel in the United States.

In fact, key leaders of the national travel industry met recently with President Barack Obama to discuss the unique role that travel can play in strengthening the American economy. Participants at the meeting discussed the need to maximize the benefits of business meetings and events, which generate more than $100 billion in spending and create more than 1 million jobs that are the lifeblood of local communities, including Milwaukee.

The travel industry employs 7.7 million Americans and generates more than $740 billion in spending annually. Closer to home, tourism in the greater Milwaukee area generates $2.6 billion annually, employs 65,000 people and contributes more than $400 million in state and local taxes.

Important business is still conducted at face-to-face meetings, and useful information is learned and imparted at industry conventions and tradeshows. It's important that we work as a community to protect beneficial meetings, conventions and incentive travel.

Our message is simple: don't cancel your meeting or convention because of the recession or concern that your event might become the lead story on the evening news. Meeting in Milwaukee is good for the bottom line! You can get down to business in Milwaukee and still enjoy the many amenities visitors expect in a first-class destination - a safe, walkable downtown, friendly people, first-class hotels, fine restaurants and a vibrant arts and cultural scene.

Milwaukee was, is and always will be a value destination where visitors can convene productively. In fact, Runzheimer International, the national consulting firm specializing in transportation, travel and living costs, ranked Milwaukee the most affordable city for food and lodging when compared with its competitive set of cities it competes with for visitors. Milwaukee ranked 60th-least expensive major city out of 69 cities on the Runzheimer Meal and Lodging index report. Hotwire, the travel website, ranked Milwaukee in its top 10 "2008 Best Places for Value Vacations."

Many of our local community and business leaders have long been champions of keeping their meetings in Milwaukee - they are to be applauded. Let's work together to keep more of our meetings in Milwaukee and leverage our affiliations with professional and charitable organizations to bring more national and regional meetings and conventions to our city. Taking these steps is an easy way to grow our local economy and keep people working.

And for those cynics that insist on high-end "resort" cities, remind them that Milwaukee has golf, gaming and beaches too!

For help in scheduling a meeting in Milwaukee, go to www.visitmilwaukee.org and for more information on the importance of the meeting industry, go to www.meetingsmeanbusiness.com.

Doug Neilson is president and chief executive officer of Visit Milwaukee.

Wouldn't you like to know what's going through Jeffrey Immelt's mind these days? You remember Immelt, who used to oversee General Electric Co.'s Healthcare division in Waukesha.

Immelt became legendary Jack Welch's hand-picked successor to be the chief executive officer of GE in 2001.

Since then, Immelt and GE have navigated through some good times and some not-so-good times.

Welch pretty much threw his boy under the bus in April, when Welch curtly remarked on CNBC's Squawk Box, "I'd be shocked beyond belief and I'd get a gun out and shoot him (Immelt) if he doesn't make what he promised now. Just deliver the earnings. Tell them you're going to grow 12 percent and deliver 12 percent … Here's the screw up: You made a promise that you'd deliver this and you missed three weeks later. Jeff has a credibility issue. He's getting his ass kicked."

Nice. Thanks for nothing, Jack.

Welch can talk big because he presided over GE when the company - and the economy - were booming. Welch took his golden parachute and skipped out of Fairfield, Conn., just as the wind was letting up behind the economy's sails.

Timing is everything. And it isn't getting any easier for Immelt. GE's stock recently fell to its lowest level since 1996, trading at around $16 per share.

Immelt temporarily stopped the bleeding by announcing that GE would apply to participate in the new temporary liquidity-guarantee program operated by the Federal Deposit Insurance Corp. (FDIC), backing up $139 billion in GE Capital debt. (Keep a wary eye on any company with a credit division these days.)

To his credit, Immelt has kept a cool public persona, even when Fox News' Bill O'Reilly directed one of his producers to ambush him with a microphone and a camera at a posh restaurant, as O'Reilly sought revenge for comments made by lefty commentator Keith Olbermann of MSNBC. Remember, GE owns both MSNBC and CNBC.

Once again, Immelt was caught in a crossfire, through no deeds of his own.

Immelt must have found some relief on Nov. 4. MSNBC dominated Fox in Nielsen ratings during election week.

Furthemore, Immelt isn't flinching. He had the audacity to purchase 50,000 shares of GE stock on Nov. 13 to show his confidence in the company. Hey, even legendary investor Warren Buffet is buying GE shares these days.

So, Immelt, 52, will try to ride out the storm, at least until GE holds its 2009 annual meeting of shareowners on April 22, 2009, in Orlando, Fla. GE gathers shareowners in a different city each year. The company employs more than 18,000 people at 14 sites across Florida, where GE Energy Infrastructure, Technology Infrastructure, Capital, Industrial and NBC Universal each operate facilities.

Hey, Jeff. Wisconsin must seem like light years away in your rearview mirror right now. But hang in there. And presuming you're still at the helm, how about bringing GE's 2010 annual shareholder meeting to Milwaukee? We promise not to ambush you at a restaurant.

Steve Jagler is executive editor of BizTimes Milwaukee.

When Gov. Jim Doyle launched the state's new fall tourism advertising campaign earlier this month, Wisconsin took its first steps towards a unified competitive branding strategy, opening the door to collaboration and partnership that crosses all economic sectors and government agencies.

Gov. Doyle first introduced the brand, which celebrates the originality and creativity of Wisconsin's people, at our annual tourism industry conference last spring. Now residents and visitors alike are getting their first taste of how this new brand strategy for Wisconsin will play out.

Last year was a milestone year at the Department of Tourism as we set out to unearth, once and for all, the attributes that make the state's tourism experience different from and better than our competitors. After industry and consumer research, led by a panel of brand experts from many walks of Wisconsin business, we landed on this brand statement: "Because of the passionate nature of our state's people to create fun, express themselves in original ways and feel more comfortable doing it here than anywhere else, in Wisconsin originality rules."

We discovered that the people of Wisconsin are perceived as incredibly loyal, proud, passionate, and having extraordinary fun with life. That translates to Wisconsinites being warmer, more spontaneous, more imaginative and more fun to be with. We felt strongly then and continue to feel strongly today that this positioning, based on the characteristics of our people and the original experiences they create for others, could become the foundation for an overarching Wisconsin brand.

Our new fall campaign puts two sets of Wisconsin originals in the spotlight - the BoDeans and the Leinenkugel brothers - to tell the story of what autumn means to them.

Each ad asks, "What does fall in Wisconsin mean to you?" and encourages travelers to visit www.TravelWisconsin.com to discover the state's fall travel opportunities. The ads can also be viewed on TravelWisconsin.com.

As you can imagine, our list of original people, places and possibilities is growing by the day. 

Now, let's go back to the attributes of Wisconsinites listed above, and consider this: What business contemplating relocating to Wisconsin wouldn't find those traits relevant and attractive? What potential employee wouldn't feel the same? The fact that we have so many "originals" hailing from every region of the state and every sector of the economy is proof that cheeseheads and America's Dairyland can co-exist with stem cell research and the arts.

We're serious about this initiative, so much so that we've assigned Sarah Klavas from the Department of Tourism the duties of brand manager. Successful corporations have brand managers, and we're taking a page from their best business practices. Our brand manager will be responsible for looping in other state agencies, like the Departments of Natural Resources, Agriculture and Commerce; business organizations; even the University of Wisconsin system.

In so doing, we'll put ourselves in a position to turn up the volume on the message that Wisconsin is the place to live, work and recreate, ultimately creating more loyal customers, retaining talented employees, attracting new business, and giving the state a strong return on investment and competitive presence in the national landscape.

That's how good brands work. And we believe we have landed on a good brand for Wisconsin.

Kelli Trumble is secretary of the Wisconsin Department of Tourism.

It's a rough month to be a football fan for many people in Wisconsin. On Aug. 30, the Wisconsin Badgers will kick off their 2008 campaign with a home game against Akron, but for most people in the state, the season won't start until two weeks later.

That's because the first two games on the Badgers schedule - against Akron and at home to Marshall on Sept. 6 - are being shown on the Big Ten Network, which still isn't offered by the state's biggest cable providers. 

But the pain doesn't stop there for Wisconsin football fans. The Jets/Redskins game on Aug. 16 - Brett Favre's first start for New York - was broadcast on the NFL Network.  Unfortunately, cable subscribers who were looking forward to seeing how Brett did with his new team were probably disappointed, because the NFL Network also isn't offered by either Charter or Time Warner.

Sadly, this isn't a new problem for cable customers. In 2007, five of the Badgers' 12 regular season games were broadcast on the Big Ten Network, and the Packers' Nov. 29 meeting with Dallas was broadcast on the NFL Network.

Yet despite the public outcry, neither Charter nor Time Warner have added the two sports networks to their lineup.

Why? Up until recently, Charter and Time Warner have enjoyed monopolies over their respective service areas. With no competition, the companies have been free to raise prices and offer minimal customer service with virtually no repercussions.  So while consumers may be irate about not being able to watch the football they want to see, they have had no real alternatives for cable services.

Thankfully, since the passage of the Video Competition Act late last year, a number of new cable providers have moved into or expanded their services in Wisconsin. 

In all, 14 providers have applied for, and received, statewide video franchise permits, and many offer the Big Ten Network and NFL Network as part of their service packages. As new infrastructure is put in place and competition continues to spread, more and more Wisconsin residents are getting a real choice in cable providers.

Ultimately, increased competition will give consumers the option of choosing providers offering the channels they want to see - whether from the incumbent providers Time Warner or Charter or from any of the new entrants into the market. 

But until the benefits of competition reach everyone in Wisconsin, it's going to be like 2007 all over again for the Badger fans and Brett Favre fans alike.

Thad Nation is the executive director of TV4US Wisconsin, a nonprofit organization advocating for increased cable competition in Wisconsin. Additional information is available at www.wewantchoicewi.com.

On a recent July Saturday, an army of volunteers poured through the streets of Shorewood in between pouring rain, and by the end of the day, virtually every household - including rentals - had received a free, reusable, bright-green shopping bag.

By the end of the day, Boy Scouts, young families with children and other Shorewood residents pitched in to place over 6,900 green bags on the doorsteps of every Shorewood home.

Perhaps a small step in combating the tons of plastic shopping bags that head into the landfills every day, but a smart step nevertheless. This is a case where, rather than talking about the environment, something was done about it. No doubt this will lead to other actions.

The Associated Press picked up on the program and by the weekend, people from Phoenix were calling their relatives in Shorewood asking if they had gotten their free shopping bag.

This program was created and led by the Shorewood Conservation Committee, a group appointed by the Shorewood Board of Trustees. The main feature of the shopping bag drop was a number of local businesses provided the financial support for this effort, including Sendik's.

When I was approached by the committee, I immediately felt the idea was a no-brainer from a business standpoint.

As a longtime business owner in Shorewood - in fact I own two of them - I can't help but notice how the European style community of Shorewood is able to come together in accomplishing goals. Over the last few years we have seen a revival of the Fourth of July celebration; the establishment of a number of other community events such as Showcase Shorewood, the Holiday Walk and the Garden Walk; and recently and most visibly the massive renovation of the Shorewood football/track field largely through private donations led by the D2D (Drive to Distinction) citizen's group.

The ambitious Shorewood Master Plan for the Village's Central Business District has been a model of resident involvement and transparency on the part of citizen boards, government officials and the consultants connected with the project. 

The Shorewood Shopping Bag project is the latest of these efforts.

The plastic bags you routinely accept in the stores are great advertising and a convenience for our customers, but a major contributor to landfills. The bags can take decades to degrade, plus are a major user of petroleum.

Here's where the green bags make good business sense. In my store, we pack groceries into an average of $700 worth of these bags every week. Grocery stores, even a specialty retailer such as Sendik's, have notoriously low profit margins, and if even 25 percent of our customers brought in their reusable bags, the reduction in our plastic bag costs would be a nice contribution to our bottom line.

This reusable bag program is a good example of how communities should work - businesses, government and citizen groups cooperating on a worthwhile project. And now even the residents of Shorewood are pitching in, as with every day I see more of these green bags crossing our register stands.

John Nehring and Anne FinchiNehring are owner of Sendik's and JP's Cafe in Shorewood, V Richard's in Brookfield and Groppi's in Bayview.

A few months ago, a blog about rats in Milwaukee's Historic Third Ward generated quite a bit of chatter and feedback.

Consider this to be the Wildlife in the Ward Blog: Part II.

I see ground hogs.

Soon after Small Business Times moved into our new offices in the Warehouse #1 building at 126 N. Jefferson St. last December, we discovered some creatures scurrying about in the vacant gravel lot near the corner of Polk Street and Harbor Drive.

Viewing them from a distance of a couple hundred yards, we initially thought they were cats. But they were bigger than cats. And they didn't move like cats.

Eventually, some of our staffers were approached by the sociable critters south of the parking lot of the Italian Community Center. It was then that we learned that they are, in fact, ground hogs (see photo).
Over the past several months, whenever I happened to gaze out my office window, I often saw this Third Ward ground hog colony frolicking about, chomping at the grass and the dandelions. There are at least four of them. And they are well-fed.

We have adopted the ground hogs as our unofficial mascots here at SBT.

I'm sure Summerfest executive director Don Smiley and his crew have more important things to worry about, but Vanessa Serkowski, SBT production director and self-acknowledged animal lover, is very concerned about our little friends.

As Summerfest approaches, the commotion along Harbor Drive has been intense. Skid loaders, semi-trucks, cars, golf carts, commercial vans and construction crews are omnipresent as Milwaukee gears up for its Big Gig.

We have not seen our furry mascots this week, and Vanessa did not like my joke about Summerfest's newest culinary delight being ground hog on a stick.

I took the initiative to ask a Summerfest parking lot security attendant near the lot about the ground hogs Tuesday. She was surprised to learn that the ground hogs lived there.

"Really? Well, I did see some big hairy thing over there yesterday, but I didn't know what it was," she said. "That was a ground hog?"

I have no idea if all of the Summerfest commotion has driven the ground hogs away to a more peaceful setting, like maybe The Shops of Grand Avenue or the Milwaukee Theatre. But if you see one of the Summerfest ground hogs this week, have some sympathy. They thought they had settled into a much quieter neighborhood.

And if you're so inclined, I am told that ground hogs are herbivores. So, don't bother offering them the mozzarella marinara.

Steve Jagler is executive editor of Small Business Times.

When you are no longer an independent company, you sometimes have to put up with the trials, tribulations and drama of your corporate benefactors.

Such is life these days for Midwest Air Group, the Oak Creek-based parent company of Midwest Airlines, which is attempting to navigate through some extreme turbulence in the airline industry.

The provider of "the best care in the air" was bought out by Midwest Air Partners LLC, an affiliate of Fort Worth, Texas-based TPG Capital, on Jan. 31. Northwest Airlines Inc. of Eagan, Minn., is a minority investor in the deal, which shunned a hostile takeover bid by AirTran Holdings Inc.

Northwest has been going through a corporate soap opera of its own in recent weeks, as Atlanta, Ga.-based Delta Air Lines Inc. has agreed to buy Northwest for $3.63 billion in stock. The conglomeration would create the world's largest air carrier and may kick off another round of consolidations in the industry.

Members of the Air Line Pilots Association's chapter at Midwest Airlines are worried that the U.S. Department of Justice could require Northwest to sell off its stake in Midwest to another party as a way of appeasing concerns over antitrust issues. Such fears seem unfounded in an era in which antitrust regulations have become almost quaint memories of distant days gone by. Where have you gone, Teddy Roosevelt?

While Midwest Airlines executives keep their eyes on the fate of Northwest Airlines, they had some drama of their own this week when their No. 2 guy, chief operating officer Joseph Kolshak, resigned "to pursue another opportunity," just four months into the job. Kolshak had been hired only four days after Midwest Airlines was acquired by TPG Capital.

Then another corporate soap opera involving TPG Capital bubbled up later this week.

In addition to owning the majority of Midwest Air Group, TPG Capital and a unit of the Goldman Sachs Group had acquired Alltell Corp. in a $27.5 billion leveraged buyout seven months ago.

Verizon Wireless announced this week that it has engaged in talks to acquire Alltel for about $28.1 billion in a venture that would create the world's largest cell phone company.

Why would TPG Capital agree to turn around and sell its share of Alltel so quickly with so little return on its investment?

The answer is that TPG Capital wants to pay off the debts it acquired with Alltel as quickly as possible at a time when investment banks have been battered by big losses in credit markets, forcing many to sell their assets to raise cash and stay afloat

Under the agreement, Verizon Wireless would pay about $5.9 billion in cash for Little Rock, Ark.-based Alltel and assume $22.2 billion in debt.

Looking from afar, Joe Sweeney, managing director at CFA-LLC Investment Banking in Milwaukee, is doubtful TPG Capital's balance sheet heartburn with Alltel will have any carryover effect on its investment in Midwest Airlines.

Lined up next to Alltell, Midwest Airlines is but a blip on TPG Capital's radar.

Still, Sweeney says companies in the transportation sector are "hunkering down," trying to stay in business while absorbing skyrocketing fuel costs.

Investment banks are not eager to call in overdue notes on distressed airlines, because the banks then incur the losses, Sweeney says.

"A lot of banks are becoming partners with businesses in the transportation industry," Sweeney says.
On a smaller scale, CFA's business is booming, negotiating nine transactions at this time, Sweeney says.

What's driving that local merger and acquisition activity?

According to Sweeney, many small business owners are cashing in their chips now before the November presidential election. The next president will inherit a fiscal budgetary nightmare.

Sweeney believes Democrat Barack Obama and Republican John McCain are both likely to be in favor of raising the federal capital gains tax from its current 15-percent rate.

"That's the fastest and easiest way to gain the most money," Sweeney says.

So, business owners on the fence about selling their companies this year should consider the ramifications of waiting to 2009, Sweeney says.

For full disclosure, it should be pointed out that it would be in Sweeney's best interest to say just that.
Turbulent times, indeed.

Steve Jagler is executive editor of Small Business Times.