NEWS

The Michigan Daily - Thursday, November 18, 2004 - 3A

ON CAMPUS
Summer orientation
~ leaders called to
mass meeting
The Office of New Student Pro-
grams is holding a mass meeting for
summer orientation leader positions
tonight from 7 to 8:30 p.m. Past ori-
entation leaders will also attend. For
more information, contact Erika John-
son at 764-6413.
Prize-winning poet
to read in Davidson
Pushcart Prize award-winning poet
Tony Hoagland will read from his
work tomorrow at 5 p.m. in Davidson
Hall room 1270. Hoagland's poems
-' and critical writings have appeared
' in publications such as Ploughshares,
Agni, Threepenny Review, Gettysburg
Review and Harvard Review. For more
information, contact Reed Twiss at
615-3710.
Mockumentary to
be screened
The Native American Student Asso-
ciation will screen "Babakiueria," a
mockumentary detailing how things in
Australia might have turned out differ-
ently if the roles of colonizers and:the
Aborigines had been reversed. The free
screening will take place in the Michi-
gan Union at noon. Contact Nickole Fox
at (586) 260-0877.
Workshop gives
students tips on
meditation
University Unions Arts & Programs
will hold a workshop to teach students
meditation and offer tips for regular prac-
tice. The event will take place tonight in
the Henderson Room of the Michigan
League from 6 to 8.
CRIME
NOTES
Interactive display
catches law's eye
A Red Cross vehicle set up an interac-
tive display across from Rackham Grad-
uate School Tuesday, and Department
of Public Safety officials are unsure
whether the display has a permit.
Standing water
prompts call
0 Two inches of standing water in a
lab yesterday morning spurred a call to
DPS about accidental property damage
at Medical Science Unit 1 at 1301 Cath-
erine St. No report was filed.
Bike stolen from
Newberry racks

A bicycle was stolen from the racks
in front of Helen Newberry Residence
Hall within the last two days, a caller
reported to DPS Tuesday.

CEO says innovation key to Mills success

By Alex Garivaltis
Daily Staff Reporter

A simple reason that the brands of
General Mills Corp. have been around
since the 1930s and can be found in 98
percent of American households is a
result of General Mills' culture of inno-
vation, maintains Chief Executive Offi-
cer Stephen Sanger.
The company, whose brands include
Pillsbury, Yoplait, Betty Crocker and
Haagen Dazs, is the world's sixth-larg-
est food corporation, serving up more
than $12 billion annually in more than
100 markets worldwide.
To preserve profitability and mar-
ket share in the face of American
"store brands," General Mills is con-
stantly forced to broaden the reach of
its franchises, Sanger said during a
lecture in the University's Hale Audi-
torium last night.
One way General Mills accomplishes
this strategy is by making its products
more convenient to use.
"The cooking skills of the average
American have decreased significantly
in the past few years," he said. Sanger,
who holds an MBA from the University,
said one angry customer wrote to the
company complaining of a ruined stove
after greasing the "bottom" of the pan
as per the cooking directions of a Gen-
eral Mills product.
Sanger spoke of the company's suc-

cess in transforming its Cheerios brand
from a children's cereal recommended
by pediatricians into an expansive fran-
chise encompassing apple-cinnamon,
honey-nut and frosted versions.
"Many times when varieties are
introduced, they cannibalize the fran-
chise," he said. But Sanger maintained
the original Cheerios brand is just as
popular today as it was when it was
introduced decades ago.
He said creative packaging and
advertising were another key element
of the company's success. Sanger dis-
cussed the traditional sports-themed
Wheaties packaging and drew a laugh
from the crowd when photographs
of two different Wheaties boxes
appeared on his PowerPoint presen-
tation: one proclaiming the Boston
Red Sox World Series victors and the
other showing a St. Louis Cardinals
series win.
An audience member asked wheth-
er Sanger thought obesity-related
lawsuits might be a problem for the
company, the same way the tobacco
companies were damaged by class
action personal injury suits. Singer
pointed to differences between tobac-
co and food companies.
"You don't have to be a user of tobac-
co, but you have to be a user of food or
else you'll die." He said the company
has also bolstered the nutritional con-
tent of many of its franchises, including

the offering of low-sugar and whole-
grain cereals.
Speaking in a lecture titled "Innova-
tion at General Mills: Trix of the Trade,"
Sanger said over the past 75 years, shares
of General Mills have grown 7.5 percent
annually compared with 4.8 percent for
the Dow Jones Industrial Average.
Sanger said his company continues to
create value for shareholders because it
is constantly striving to create new and
innovative products. Although 15 per-
cent of General Mills's revenue comes
from rapidly growing international
markets, 85 percent of the company's
business is conducted in the mature
domestic market.
Sanger said although his company's
products can never become obsolete,
domestic revenue growth is limited by
the growth of the US population.
"Our rate of growth internationally
is more than double the national rate,"
Sanger said. He said the company's
businesses in booming Asian markets
are in the range of 30 to 40 percent.
When asked whether Wal-Mart's
position as the largest retailer of Gen-
eral Mills's products would squeeze the
company's profit margins, Sanger said
he didn't think the "Wal-Mart Squeeze"
would land a raw deal for General Mills.
"Wal-Mart cares a great deal about
General Mills for just one reason - the
people that walk through their doors
every day buy our products."
Sears
Tout
ters, but will maintain a "significant
presence" in Troy, Mich., where Kmart
is based.
The deal marks a remarkable come-
back for Kmart, which filed for Chapter
11 bankruptcy protection in early 2002,
leading to the closing of about 600 stores,
termination of 57,000 Kmart employees
and cancellation of company stock.

General Mills CEO and University alum Steve Sanger presents "Innovation at
General Mills: Trix of the Trade" in Hale AudItorium yesterday.

Kmart to acquire

NEW YORK (AP) - A resurgent
Kmart, home of the blue light special,
is buying the once-dominant Sears
department store chain in a surprising
$11 billion gamble it is counting on to
help both better compete with Wal-
Mart and other big-box retailers.
Led by Kmart Holding Corp. chair-
man Edward Lampert, the new Sears
Holdings Corp. would be the nation's
third largest retailer. Both chains would
survive, but several hundred stand-alone
Kmarts throughout the country are
expected to be transformed into Sears
stores. The goal: a quick kick-start to
sales away from Sears traditional base
of shopping malls.
Lampert and Sears chairman and
CEO Alan Lacy, in announcing the deal
on Wednesday, promised up to $500
million a year in savings within three
years from store conversions, back-
office job cuts, more efficient buying of
goods and possible store closings.
Shares of both Kmart and Sears,
Roebuck and Co. surged on the news,
but some analysts are skeptical that it
amounts to a home run.
"Both have been broken in some
sense," said Dan Hess, president and
chief executive of Merchant Forecast, a
New York-based independent research
company. "Kmart has to learn to sur-
vive in a Wal-Mart world and Sears
needs to learn to survive in a world of
Home Depot and Lowe's."
Lampert, 42, was as an assistant to
Robert Rubin at Goldman Sachs & Co.
before leaving to form a hedge fund at
the age of 25. He orchestrated the deal
and will lead a new board that will be
Michigan
October
jobless
rate at 6.6
LANSING (AP) - Michigan's unem-
ployment rate improved slightly to 6.6
percent in October, the state announced
yesterday.
But the change leaves the jobless rate
within a range that Michigan has been
stuck in for most of the year.
The seasonally adjusted statewide
jobless rate was 6.8 percent in Septem-
ber. Total employment increased by
25,000 last month, the third consecutive
month of employment growth in Michi-
gan, state officials said.
Michigan still has one of the worst
jobless rates in the nation. The national
unemployment rate for October was
5.5 percent.
But there were some positive signs in
yesterday's report, state officials said.
Michigan's total employment, about
4.745 million people, was at its highest
level of the year in October.
"The increase in total employment
and the increase in payroll jobs - that is
significant," said Jim Rhein, an econom-
ic analyst with the Michigan Department
of Labor and Economic Growth.

dominated by Kmart directors.
"We need to have a low-cost
structure to compete with bigger
retailers," said Lampert, whose
Greenwich, Conn.-based investment
firm controls Kmart and is Sears's
largest individual shareholder, with a
15.8 percent stake.
For Sears, the merger allows the

company to move
more quickly to
where it believes
its strongest base
of customers are.
"Off mall is where
we need to move
very aggressively,"
said Lacy, who
will become vice
chairman and chief
executive of Sears
Holding.
Lacy said he
and Lampert have
known each other
for four years. The
idea for a com-

The new company
is expected to
have $55 billion in
annual revenues
and 3,500 outlets.
That will mean
it will trail only
Wal-Mart Stores
Inc. and Home
Depot Inc. among
U.S. retailers.,

Lampert
gained control of
Kmart when the
retailer emerged
from bankruptcy
in May 2003
through the con-
version of his
debt holdings
into equity. In
March, Kmart
posted its first
profitable quarter
in three years.
While same-
store sales
have contin-
ued to decline,
Lampert has
maximized

bined

company


first arose when
they were in talks

about Sears's pur-

chase of 50 Kmart stores earlier this
year, he said.
The new company is expected to
have $55 billion in annual revenues
and 3,500 outlets. That will mean it
will trail only Wal-Mart Stores Inc. and
Home Depot Inc. among the biggest
U.S. retailers.
It will be headquartered in the north-
western Chicago suburb of Hoffman
Estates, where Sears has its headquar-

cash flow in part by selling off some
of the stores to Sears and Home
Depot.
Yesterday, Kmart said it earned
$553 million, or $5.45 per share,
in the third quarter ended Oct. 27,
compared with a loss of $23 mil-
lion, or 26 cents per share, for the
same period a year ago. Its stock
price has risen more than sevenfold
from $15 a share when it emerged
from bankruptcy.

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THIS DAY
In Daily History
Wolverines lose
to Ohio State,
squander bowl bid
Nov. 18, 1984 - In front of Ohio
Stadium's largest crowd to date, 90,286,
the Wolverines dropped to 6-5 in a 21-6
loss to Ohio State.
The Buckeyes improved to 9-2 over-
all, 7-2 in the Big Ten, and earned their
first trip to the Rose Bowl in five years.
At 6-5, Michigan's bowl hopes
appeared to be dim.
The game was close until the fourth
quarter, at which point Ohio State
pulled away.
"I'm disappointed because I concede
nothing to this game," Michigan coach
Bo Schembechler said. "We should have
i won the game, God damnit."

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