October 31, 2016 Updated: October 31, 2016 10:33pm
Republican presidential candidate Donald Trump acknowledges the crowd before speaking at the Macomb Community College, Monday, Oct. 31, 2016, in Warren, Mich.
WASHINGTON (AP) — Donald Trump avoided paying potentially hundreds of millions of dollars in taxes in a way even his own lawyers considered questionable, The New York Times reported Monday.
Billionaire Peter Thiel said Monday he is not the only person in Silicon Valley who supports Donald Trump, claiming that his very public endorsement of the Republican presidential nominee has “surfaced a small number of those people who all feel that they can’t say it in public.”
“They’ve been conjured out of the ether,” he said in prepared remarks at the National Press Club in Washington, D.C., adding that “No matter what happens in this election, what Trump represents isn’t crazy and it’s not going away.”
“When the distracting spectacles of this election season are forgotten and the history of our time is written, the only important question will be whether or not that new politics came too late,” he said.
Related: Silicon Valley Is Having a Hissy Fit Over Donald Trump
While Silicon Valley is largely Clinton territory, PayPal co-founder Thiel has stood alone as Trump’s most high-profile supporter.
His recent donation of $ 1.25 million to the Trump campaign and various pro-Trump Super PACs ignited a firestorm of discussion among other high profile techies. Some ostracized Thiel, while others noted not tolerating different political opinions could create a dangerous precedent.
“I really didn’t think that there would be this sort of a visceral reaction,” Thiel said Monday. “It’s surprising to me that anybody would say that you’re beyond the pale for taking a position that’s held by half the country.”
Sam Altman, president of Y Combinator, a start-up incubator where Thiel is a partner, said he wouldn’t sever ties with the billionaire, as some had suggested he do.
“Peter is a part-time partner at YC, meaning he spends a small fraction of his time advising YC companies, does not have a vote in how YC is run, and in his case waives the equity part-time partners normally get,” Altman wrote. “This has been a strain on my relationship,” he wrote, noting that he believes Thiel is “completely wrong” in “supporting this man.”
Ellen Pao, a former interim chief executive of Reddit who is now working to tackle diversity issues in tech at Project Include, announced the organization would no longer work with Y Combinator.
“Giving more power to someone whose ascension and behavior strike fear into so many people is unacceptable,” she wrote in an essay on Medium. “His attacks on Black, Mexican, Asian, Muslim and Jewish people, on women and on others are more than just political speech; fueled by hate and encouraging violence, they make each of us feel unsafe.”
For his part, Thiel acknowledged he doesn’t “agree with everything Donald Trump has said and done — and I don’t think the millions of other people voting for him do, either,” he said. “It’s not a lack of judgment that leads Americans to vote for Trump; we’re voting for Trump because we judge the leadership of our country to have failed,” he said.
Asked whether he had received personal assurances that Trump would not roll back LGBTQ rights in the White House, Thiel said he had not. However, he added that he believed Trump represented “a sea change from the Republican Party of Bush ’43” on LGBTQ equality.
“He will be quite expansive on gay rights,” Thiel said of Trump. Yet not everyone would agree.
After making historic overtures to LGBTQ voters for a Republican presidential nominee, Trump has little to show for the effort besides the support of Thiel — who has repeatedly distanced himself from the political agenda of most LGBTQ Americans. At the Republican National Convention, for example — where Thiel made history as the first speaker to proclaim he was “proud to be gay” — he also angered many LGBTQ rights advocates for calling the pressing legal question of which bathroom transgender people should be able to use “a distraction.”
Trump, too, has shown little regard for the LGBTQ community from a policy standpoint. Though he said publicly that sexual orientation should not be a reason for letting employees go and that transgender reality star Caitlyn Jenner should be allowed to use whichever bathroom she chooses, Trump also vowed to appoint justices to the Supreme Court who would reverse nationwide marriage equality and picked a running mate known for signing one of the most controversial anti-LGBT laws in recent memory.
Those positions have hurt Trump with LGBTQ voters.
Seventy-two percent of registered LGBTQ voters said they supported Hillary Clinton in a recent NBC News|SurveyMonkey Weekly Election Tracking Poll, while 20 percent said they supported Trump.
And earlier this month, the Log Cabin Republicans — the nation’s largest organization representing gay conservatives — declined to endorse Trump due to his anti-LGBTQ advisers and support for a federal “religious freedom” bill.
It has been a provocative six months for Peter Thiel. That is the way he likes it.
Mr. Thiel, a tech billionaire, was exposed in May as a benefactor funding a lawsuit to destroy the gossip website Gawker. That sent tremors through the media world, especially when the suit proved successful. Then Mr. Thiel revealed in mid-October that he was giving money to the candidacy of Donald J. Trump, which infuriated many people in the anti-Trump hotbed of Silicon Valley.
Eight days before the presidential election, Mr. Thiel went to the National Press Club in Washington on Monday to defend his contrarian positions. He made the case for Trumpism beyond Trump, journalism without malevolence and Silicon Valley shorn of overweening hubris. It was the latest step in his unusual journey to becoming a prominent critic of politics, the media and technology, as well as a lightning rod for criticism.
Given a chance to celebrate the Republican presidential candidate in a significant setting, Mr. Thiel did not mention Mr. Trump until the eighth paragraph of his prepared text, and then he quickly denounced the candidate's comments about women as "clearly offensive and inappropriate."
As endorsements go, this was somewhat less than full-throated. "We're voting for Trump because we judge the leadership of our country to have failed," Mr. Thiel said.
He argued that both the Republican and Democratic elite in this country have for decades been inflating and promoting bubbles. "The trade bubble says everyone's a winner; the war bubble says victory is just around the corner," he said. "But these over-optimistic stories simply haven't been true. And voters are tired of being lied to."
The 13-minute speech was covered like a major Washington event in a room filled to capacity. A dozen television cameras were set up in the back with bright lights flooding the stage. A dozen photographers sat behind a red velvet rope in front of the stage. More than 100 reporters, some who had come from Silicon Valley, sat in the audience. Many held up their smartphones to take videos and photos of Mr. Thiel.
Bracing for the possibility of a confrontation with protesters, Mr. Thiel brought extra security beyond the usual number of guards who follow the billionaire during travel. Before his speech, two members of Mr. Thiel's security detail stood at the entrance of the National Press Club building. During his speech, personal guards with matching gray suits, neatly cropped hair and ear pieces stood scanning the audience, one at each corner of the room.
"No matter how crazy this election seems, it is less crazy than the condition of our country," said Peter Thiel, explaining his support for Donald Trump.
Photo by CNBC. Watch in Times Video »
The event was low key. This was not a political rally. These were journalists. Even the applause was muted. After the speech, delivered in front of a large American flag, Mr. Thiel spent about 40 minutes answering reporters' questions that were presented by Thomas Burr, the press club president.
Silicon Valley has been incredibly successful over the last decade, said Mr. Thiel, who was the first outside investor in Facebook and a co-founder of the data-mining company Palantir. But he says he thinks that claims for the supremacy and influence of the tech world have gotten out of hand.
"The story people in Silicon Valley always want to tell is one in which their specific success, as individuals and as companies, gets conflated with the story of general success and general progress in the United States," he said. Silicon Valley, he said, believes this: "We're doing well, therefore our whole civilization is doing well."
As opposed to this upbeat narrative, Mr. Thiel said, "I think the truth has been more one of specific success but more general failure." Silicon Valley, in other words, is not doing much to improve the welfare of people who are not in Silicon Valley.
Mr. Thiel's battle with the website Gawker began nearly a decade ago, when one of its affiliates outed him as gay at a time when his sexual orientation was not generally known. He then secretly funded the wrestler Hulk Hogan's suit against Gawker for posting a sex tape involving Mr. Hogan, whose real name is Terry Bollea. The resulting judgment in a Florida courtroom was large enough to send Gawker into bankruptcy. Gawker.com shut down in August, and the company's other sites were sold.
Despite his victory, Mr. Thiel was still angry. He characterized the pro-Gawker arguments this way: "If you make a sex tape of someone with their permission, you are a pornographer. If you make it without their permission, we are told now, you are a journalist."
That, he said, "is an insult to journalists."
As for his future, Mr. Thiel was ambivalent, or at least noncommital.
"I always have a somewhat schizophrenic view of politics," he said. "It's a horrible business, incredibly destructive. A lot of it is like trench warfare on the Western Front — crazy amounts of carnage and nothing ever changes."
But, he added, "Some problems can't be solved outside of the political arena." So he might keep his hand in.
Continue reading the main story
The same day that Halliburton Co. and Baker Hughes Inc. called off their $ 28 billion deal, Lorenzo Simonelli fired off an e-mail to Baker Hughes' Martin Craighead.
The head of the oil and gas business for General Electric Co. was reaching out to the chief executive officer for the world's third-largest oil services company to introduce the various ways the two contractors in the oil world could work together, Simonelli said Monday in a phone interview, along with Craighead and GE CEO Jeff Immelt.
“I was pleased,” Craighead said of the message from Simonelli. “We had a whole plan ahead of us, things we had to do, but we kind of hit it off at the first meeting and things started to take off from there.”
Craighead's early enthusiasm about working with GE contrasts with the testy exchanges that characterized negotiations with Halliburton CEO Dave Lesar. At one point before the deal was clinched, Craighead released letters he wrote to Lesar in which he said he was disappointed with Lesar's “complete unwillingness to show any flexibility” on valuing Baker Hughes. He chastised him for “intransigence” and “coercive tactics.”
GE's deal to combine its oil and gas division with Baker Hughes will create an industry giant with $ 24 billion in annual sales next year, the companies said Monday citing analyst estimates. GE will own 62.5 percent of the "new Baker Hughes," which will be publicly traded. The deal is expected to close in the middle of next year.
When completed, the new Baker Hughes would become the world's second-largest oil services and equipment company, based on expected sales next year, Andrew Cosgrove, an analyst at Bloomberg Intelligence, said in a phone interview.
Baker Hughes terminated plans to be acquired by the current No. 2 oil services provider Halliburton on May 1 after failing to win antitrust approval from regulators. GE has acknowledged in the past that it had held talks about possibly bidding for parts of Baker Hughes that Halliburton was seeking to unload for the deal.
Over the past couple months, Immelt said he and Craighead met a number of times, both in Baker Hughes' home city of Houston and in New York near the headquarters for the industrial-equipment behemoth. “Even late-night phone calls,” Craighead said.
By joining forces, Baker Hughes and GE are betting they can compete more effectively with the world's top oilfield-services provider, Schlumberger Ltd., which recently bought equipment-maker Cameron International.
"We felt like the oilfield service space was a gap in the portfolio," Immelt said.
Oilfield contractors are increasingly forming partnerships to help cut costs and expand their offerings and distribution channels during the oil market downturn. An hour after the GE-Baker Hughes announcement, Nabors Industries Ltd., the world's largest land-drilling contractor, announced a joint venture with Saudi Aramco to own, manage and operate onshore rigs.
GE and Baker Hughes first started talking earlier this year to see how they could offer a joint technology package that marries GE's digital prediction operating system with the oil service company's equipment to target jobs being done in the oilfield. They've already reached an agreement with a large, onshore natural gas explorer in North America, said Craighead, declining to name the company.
“After the failure of Halliburton-Baker Hughes, I took the opportunity to reach out to Martin and really start to look at ways in which we could collaborate to provide the customers what they were asking for, which was productivity and a lower cost per barrel,” Simonelli said. “What resulted was really an understanding of how the two businesses were very much complementary in the portfolio.”
Simonelli will serve as CEO of the merged company, while Immelt will be chairman and Craighead will be vice chairman. GE will contribute $ 7.4 billion to fund a special dividend of $ 17.50 a share to Baker Hughes stockholders.
The positive chemistry between the two companies gives Craighead confidence in the new entity, he said.
“People are finishing each other's sentences,” Craighead said. “You really can't tell by the end of the day who's on what side of the table.”
General Electric Co (GE.N) said on Monday it would merge its oil and gas business with Baker Hughes Inc (BHI.N), creating the world’s second-largest oilfield services provider as industry competition heats up to supply more-efficient products and services to the energy industry.
The deal to create a company with $ 32 billion in annual revenue will combine GE’s strengths in making equipment long-prized by oil producers with Baker Hughes’s expertise in drilling and fracking new wells.
GE is already the world’s largest oilfield equipment maker, supplying blowout preventers, pumps and compressors used in exploration and production. GE also has invested heavily in large data processing services just as the oil industry eyes its potential to boost oil recovery.
Baker Hughes, by contrast, is seen as one of the world leaders in horizontal drilling, chemicals used to frack and other services key to oil production.
“Both of them are quite complimentary in terms of their skills set,” GE Chief Executive Jeff Immelt said on CNBC on Monday. “Our oil gas customers are going to want more productivity solutions.”
Still, shares of Baker Hughes were down nearly 3 percent, a drop that Immelt and Baker CEO Martin Craighead said likely was due to the deal’s complicated structure.
The new company will vault Baker Hughes’s market share ahead of rival Halliburton Co (HAL.N), which tried and failed to buy Baker until the deal collapsed last May, and also compete heavily with Schlumberger NV (SLB.N), the world’s largest oilfield service provider, for customers.
GE will own 62.5 percent of the new publicly traded company. The deal is expected to close in mid 2017.
Analysts said there was little overlap between the businesses of GE and Baker Hughes that would worry regulators.
GE and Baker Hughes will reach out to the Justice Department and European antitrust enforcers on Monday, according to a source close to the company. They have not yet determined how many jurisdictions they will need to file in.
GE will argue to antitrust enforcers – who stopped the deal between Halliburton and Baker Hughes just months ago – that their deal is complementary, and that they are committed to any remedy needed to win deal approval, the source said.
A small part of GE’s business is selling equipment to Baker Hughes’ competitors and they will continue those sales, the source said.
One expert knowledgeable about the oil business said General Electric and Baker Hughes had largely different businesses.
“I don’t see any overlaps, significant overlaps,” said Tom Seng, a veteran of the energy business who teaches at the University of Tulsa.
OIL PRICES NEAR $ 50
The deal comes at a time when North American oil and gas producers are putting rigs back to work after a near-freeze in activity caused by a slump in oil prices that began mid-2014.
But the deal is predicated on a forecast for oil prices to rise to $ 60 per barrel by 2019, GE’s Immelt told investors on Monday morning.
“This is a very compelling time for the deal,” Immelt said, noting he expects $ 1.6 billion in annual cost savings by 2020.
Global oil prices LCOc1 have risen by a third this year to trade near $ 50 a barrel.
Activist investor Nelson Peltz, whose Trian Fund Management owns about 0.8 percent of GE as of June 30, told CNBC the new company would be able to go “nose-to-nose” with Schlumberger.
Oilfield service providers including Schlumberger, which bought oilfield equipment maker Cameron in April, are trying to broaden their offerings to meet demand from customers for better but cheaper ways to more oil out of the ground.
GE said last week it believed the oil market had bottomed, but that demand for the equipment it makes would take longer to recover, probably until after the first half of next year.
The company has been refocusing on its industrial roots after its financial business, GE Capital, ran into problems during the 2008 financial crisis.
MOLECULE TO MEGAWATT
The combined company should help GE attract more users to its internet-based operating system, Predix, which is designed to optimize production.
Shareholders of Baker Hughes, which had a market value of about $ 26 billion as of Friday, will get a special one-time cash dividend from GE of $ 17.50 per share – or a total of $ 7.4 billion – after the deal closes.
The new company, to be listed on the New York Stock Exchange, will have dual headquarters in Houston and London. It was not immediately clear if the new company will retain the name “Baker Hughes.”
Baker Hughes shares rose as much as 5 percent in morning trade before reversing course to trade down 3.3 percent at $ 57.14. Shares of GE rose 0.5 percent to $ 29.35.
Centerview Partners and Morgan Stanley are advising GE, while Shearman & Sterling is its legal adviser. Goldman Sachs & Co is Baker Hughes’s financial adviser, with Davis Polk acting as legal adviser.
(Reporting by Ernest Scheyder in Houston, Swetha Gopinath and Ankit Ajmera in Bengaluru and Diane Bartz in Washington; Editing by Ted Kerr and Nick Zieminski)
Consumer purchases climbed in September by the most in three months as incomes grew, signaling momentum in the biggest part of the U.S. economy.
The 0.5 percent advance in spending, which accounts for about 70 percent of the economy, followed a 0.1 percent decline the prior month that was revised lower, a Commerce Department report showed Monday. The median forecast in a Bloomberg survey called for a 0.4 percent gain.
While the results indicate a solid handoff into the final quarter of 2016, disposable income, or the inflation-adjusted money left over after taxes, was little changed for a second month, indicating wages will need to pick up to boost spending even more. Such support is needed to drive faster economic growth, which picked up last quarter despite softer household purchases.
"We entered the holiday quarter with good support from the consumer," said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. "As long as we continue to see employment growth and wage growth, that'll put more money in people's pockets and give them the ability to spend at a faster pace."
Nominal incomes rose 0.3 percent after a 0.2 percent gain. Rising inflation, however, is taking a bigger toll. Disposable incomes were up 2.1 percent in September from a year earlier, the weakest advance since January 2014.
Inflation-adjusted spending rose 0.3 percent in September after a 0.2 percent decline. The advance in purchases included a 1.8 percent jump in durable goods.
The September figures provide more perspective on how consumer spending was doing toward the end of the quarter. Gross domestic product climbed at a 2.9 percent annualized rate in the third quarter after a sluggish first half, data showed Friday. Household purchases grew 2.1 percent, or about half the pace as in the previous three-month period.
For September, forecasts for consumer spending ranged from no change to an increase of 0.6 percent, according to the Bloomberg survey. The previous month's reading was initially reported as little-changed.
The Bloomberg survey median for incomes was 0.4 percent, after a previously reported 0.2 percent gain.
The saving rate decreased to 5.7 percent from 5.8 percent. Wages and salaries rose 0.3 percent.
The report's price gauge based on the personal consumption expenditures index, the Federal Reserve's preferred measure of inflation, rose 1.2 percent from a year earlier, the most since November 2014.
The core price measure, which excludes food and fuel, increased 1.7 percent from September 2015. Inflation hasn't reached the Fed's 2 percent goal since 2012.
The Fed's rate-setting committee meets on Nov. 1-2, and investors see a slim chance for a rate move this week, with a higher probability for December.
The renewed FBI interest in Hillary Clinton’s emails, which pressured stocks on Friday, is an “October surprise” that could throw the electoral race off course, according to a team of Citi analysts. (CNBC)
The FBI obtained a warrant to search emails related to the investigation of Clinton’s private server that were discovered on ex-congressman Anthony Weiner’s laptop, the estranged husband of top Clinton aide Huma Abedin. (NBC News)
Senate Democratic leader Harry Reid said FBI Director James Comey’s actions so close to the election may have violated the Hatch Act, a law bars government officials from using their authority to influence voting. (NBC News)
Federal agents are getting ready to parse through roughly 650,000 emails on Weiner’s computer to try to determine how many relate to the private server Clinton used while serving as secretary of State. (WSJ)
Clinton campaign manager Robby Mook, appearing on NBC’s “Meet the Press” Sunday, called on the FBI to share any unreleased information relating to the Clinton email investigation.
With at least 21 million early votes already cast, the fallout from Clinton’s new email woes may be mitigated. In some swing states like Florida, Colorado and Nevada close to a quarter of the electorate has already voted. (NY Times)
Donald Trump said at a Las Vegas rally held in one of conservative casino magnate Sheldon Adelson’s ballrooms: “We never thought we were going to say thank you to Anthony Weiner.” (NBC News)
Billionaire Peter Thiel plans to defend his support of Trump in a speech and Q&A with reporters today at the National Press Club in Washington. Thiel’s endorsement of Trump and recent $ 1.25 million donation has drawn the ire of his Silicon Valley peers. (NY Times)
By Hiroyuki Kachi
The dollar was slightly higher against the yen and the euro during Asia trade Monday, as the U.S. currency gained some ground following Friday’s selloff after the FBI said it was reviewing newly obtained emails linked to Hillary Clinton.
The Mexican peso, which has been highly sensitive to developments in the U.S. presidential race, was nearly unchanged at 18.96 a dollar midday in Asia session compared with late Friday in New York.
The WSJ Dollar Index, a measure of the U.S. dollar against a basket of major currencies, was up 0.03% at 88.65.
After hitting its fresh three-month high of Y105.54, the dollar slid Friday to Y104.46 after it emerged that the Federal Bureau of Investigation was reviewing recently discovered emails linked to an earlier investigation of Mrs. Clinton’s handling of classified information as secretary of state.
Many investors say they think a Clinton election victory will provide greater policy clarity and less uncertainty on trade negotiations. According to some polls, Mrs. Clinton’s lead over rival Donald Trump has narrowed in the last stretch of the presidential campaign, prompting investors to buy the Japanese currency, a haven asset traditionally sought out in periods of geopolitical and financial instability.
In early Asia trade Monday, the dollar fell further to Y104.20. But the U.S. currency rebounded to come close to the Y105 threshold, with buying kicking in from Japanese importers and other corporate players related to their regular commercial trade settlement at the end of the month.
“Buying from Japanese corporate players helped provide a downside support,” said Yuzo Sakai, manager of foreign- exchange business promotion at Tokyo Forex & Ueda Harlow. However, weakness in the benchmark Nikkei Stock Average and uncertainty over the U.S. presidential election weighed down the dollar’s upside just below the Y105 mark, said Mr. Sakai.
“Investors have found it difficult to make moves,” after seeing the headlines on the new investigation, said Mr. Sakai.
“It seems [the dollar's at] Y106 looks a bit distant away,” as the latest developments related to Mrs. Clinton had thrown cold water on the market, he said.
In other currency trade, the euro was lower at Y114.92 midday from Y115.06 late Friday.
Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT Latest Previous %Chg Daily Daily %Chg Dollar Rates Close High Low 12/31 USD/JPY Japan 104.80-81 104.72-73 +0.07 104.94 104.69 -12.88 EUR/USD Euro 1.0966-69 1.0985-88 -0.17 1.0987 1.0961 +0.99 GBP/USD U.K. 1.2188-90 1.2185-87 +0.02 1.2201 1.2176 -17.28 USD/CHF Switzerland 0.9875-79 0.9875-79 0.00 0.9889 0.9875 -1.43 USD/CAD Canada 1.3403-08 1.3394-99 +0.07 1.3425 1.3397 -3.13 AUD/USD Australia 0.7608-12 0.7597-601 +0.14 0.7615 0.7584 +4.43 NZD/USD New Zealand 0.7153-59 0.7162-68 -0.13 0.7165 0.7141 +4.73 Euro Rate EUR/JPY Japan 114.91-95 115.03-07 -0.10 115.20 114.86 -12.13 Source: Tullett Prebon
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
(END) Dow Jones Newswires 10-31-160134ET Copyright (c) 2016 Dow Jones & Company, Inc.
General Electric Co. is nearing a roughly $ 30 billion deal to combine its oil-and-gas business with Baker Hughes Inc., creating an energy powerhouse that would give GE a cost-effective way to play any recovery in the industry.
GE plans to contribute its oil-and-gas business and some cash to the new entity, which would have publicly traded shares and be majority-owned and controlled by GE, people familiar with the matter said. The transaction is to be announced Monday morning, the people said.
Exact terms of the deal couldn't be learned.
Baker Hughes on Friday confirmed it is in discussions with GE, a day after The Wall Street Journal reported the companies were in talks about a potential transaction. A GE spokeswoman said Thursday the company was pursuing "potential partnerships" with Baker Hughes, but GE wasn't exploring an "outright purchase."
A combination would create a company with more than $ 25 billion in revenue that could cut costs to better compete with rivals such as Schlumberger Ltd. to provide equipment and services to oil rigs and wells. It would enable GE to benefit from an expected recovery in the industry without having to pay for a full acquisition of Baker Hughes. It would also enable the companies and their shareholders to benefit from cost and other synergies from putting the two businesses together.
After two brutal years, GE and some of its rivals in the oil-and-gas business have begun to see signs of hope. Crude prices, which plunged to $ 30 a barrel this year from more than $ 100 in 2014, have rebounded to around $ 50 recently.
GE provided glimmers of improvement from the third quarter, noting that U.S. rig and well counts remained down 50% from the previous year but had ticked upward in the previous three months. Still, orders for services were down across all of GE's oil business, the company said.
In recent public comments, GE has said it is still committed to the oil and gas unit for the long term, but GE said operating profit in the unit will be down by 30% for the year. GE is cutting more than $ 1 billion in costs out of the company over two years.
The companies' shares have reacted well to the possibility of a deal. GE's shares ended 2.1% higher at $ 29.22 on Friday, while Baker Hughes shot up 8.4% to close at $ 59.12.
The deal would be the latest blockbuster tie-up to be announced in recent days, after AT&T Inc. agreed to buy Time Warner Inc. for $ 85 billion and Qualcomm Inc. agreed to buy NXP Semiconductors NV for $ 39 billion. Other large deals are in the works including a potential combination of business-telephone companies CenturyLink Inc. and Level 3 Communications Inc.
The recent speedup in what has already been a strong year for mergers and acquisitions defies conventional wisdom, coming less than two weeks before the presidential election. The fact that companies are inking mergers at a breakneck pace without knowing who the next president will be shows how strong the imperative to consolidate across industries is, bankers say.
There is no guarantee a GE-Baker Hughes deal will be completed. The last merger agreement Baker Hughes entered into—a $ 35 billion proposed union with Halliburton Co.—was rejected by anti-trust regulators this year amid a tough environment for deals in Washington.
Before Baker Hughes and Halliburton had to abandon their merger plans, the companies held talks with GE to sell a package of assets valued at more than $ 7 billion to help win regulatory approval.
Houston-based Baker Hughes is one of the largest oil-field-services companies in the world by revenue. Such companies help energy producers, from Texas wildcatters to national oil companies, find and extract oil-and-gas deposits by selling them equipment, renting tools, supplying labor and building worker camps in far-flung drilling fields, all of which have helped power the U.S. drilling boom.
Baker Hughes, which had a market value of about $ 27 billion at Friday's close, had revenue of $ 15.7 billion last year. GE, which had a market value of more than $ 250 billion, had $ 16.5 billion in revenue from its oil-and-gas business last year.
Boston-based GE, which makes a range of industrial equipment from jet engines to MRI machines, also produces heavy equipment like blowout preventers, pumps and compressors used in petroleum exploration and production.
In the fall of 2014, GE assured investors that its assumptions of growth were based on oil prices around $ 100 a barrel—just in time for the bottom to fall out of the crude market, triggering cutbacks in capital spending that have hammered GE's sales and profits. Earlier this month, GE cut its full-year sales forecast after reporting declining third-quarter orders in the segment.
A combination with Baker Hughes would be among GE Chief Executive Jeff Immelt's biggest deals. The company has done more than $ 14 billion of acquisitions since 2007 to build its oil-and-gas business.
Mr. Immelt has pledged to be opportunistic about acquisitions in the segment and predicted that GE would exit from the oil downturn with a lean organization and a strong position against competitors such as National Oilwell Varco Inc. and Schlumberger.
Activist Trian Fund Management LP last year took a $ 2.5 billion stake in GE and has said the company must be more "disciplined" in its deal making. GE shares had done little since then and are still well below their high of more than a decade ago.
Baker Hughes has its own activist holder. ValueAct Capital Management LP purchased a stake after the Halliburton deal was announced that is now at 7%. ValueAct had suggested Baker Hughes could sell at least some of its businesses.
—Ted Mann contributed to this article.
Write to Dana Cimilluca at dana.cimilluca@wsj.com, Dana Mattioli at dana.mattioli@wsj.com and David Benoit at david.benoit@wsj.com
The U.S. economy grew at its strongest pace in two years in the third quarter, according to government data released Friday morning, helping to allay fears that the world's largest economy might be stalling after a sustained period of weakness.
Between the months of July and September, the nation's gross domestic product expanded at an annualized rate of 2.9 percent, slower than before the financial crisis, but fast enough to create new jobs and pare down the unemployment rate, economists said. The reading surpassed expectations of economists surveyed by Bloomberg News, who had forecast growth of 2.6 percent.
The data showed the nation's economy bouncing back following months of stubbornly sluggish economic growth. Growth in GDP — a broad measure of America's economic activity — has remained below 2.7 percent for the previous seven quarters.
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"It's a sigh of relief after just over barely 1 percent growth in the first half of the year," said Stuart Hoffman, chief economist at PNC.
The report, released by the Commerce Department, combined strong exports with middling consumer spending and weak business investment. Overall, it was steady enough to lift expectations that the Federal Reserve will raise interest rates before the end of the year.
Economists, however, cautioned that the recovery shouldn't be overestimated, as growth in the quarter was driven by several events unlikely to be repeated in the near future.
One of those events was a surge in shipments of American soybeans to South America, which suffered from a bad harvest. That helped lift exports 10 percent in the third quarter, the biggest increase in nearly three years.
Growth was also buoyed as businesses made new purchases to restock their inventories, after struggling to draw down on large stockpiles of goods in previous quarters.
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"Obviously, the headline number, 2.9 percent, was better than we've seen in several quarters," said Michael Feroli, chief U.S. economist at J.P. Morgan. "But as we looked at the details, they weren't as encouraging as the headline might suggest."
Ben Herzon, an economist at Macroeconomic Advisers, called the third quarter GDP figure "solid" but "not a sign of persistent strength." Businesses that restocked inventories in the third quarter are unlikely to make as many purchases in the fourth. And the surge in exports is unlikely to be repeated, especially if the Fed raises interest rates, putting upward pressure on an already strong dollar.
"While it's pretty good news for the third quarter, it's not as good for the fourth quarter," he said.
The data comes a little more than a week before many Americans go to the polls in the presidential election. It's unclear whether the GDP data will be enough to sway voter opinions toward either political camp at such a late date.
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Democratic nominee Hillary Clinton is likely to seize on the figures to bolster her case that President Obama's efforts are helping to revive the U.S. economy. At the same time, the sluggish economic growth of past years is likely to leave Republican nominee Donald Trump plenty of room to continue to criticize Democratic policies.
The growth figures, combined with an uptick in consumer inflation, raised expectations for an interest rate hike in December, though not at the Federal Reserve's upcoming Nov. 1-2 meeting. Inflation remains below the Fed's target rate of 2 percent but is creeping closer to that level.
"On the margin, this report should support the argument that the economy could handle a very small rate of increase," said James Marple, senior economist at TD Economics.
Economists cautioned that the GDP data is a preliminary reading and will be revised twice more in coming months. These revisions can often give a substantially different picture of the economy.
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For now, the picture is one of cautious optimism. Consumer confidence remains reasonably high, and the economy's long-run pace of growth appears to be slightly above 2 percent, economists say — enough to add new jobs to payrolls and slowly raise wages.
However, the data also revealed a few sources of lingering weakness. Construction of new houses and government spending at the state and local levels were sluggish, while American businesses still seemed hesitant to invest in new equipment.
Economists said the weakness in business investment continues to be a concern, since that type of expenditure helps expand the economy in the long run. Still, some expect it to rise in coming quarters. Businesses may be temporarily withholding investment because of uncertainty about markets and the election, they say.
In addition, the U.S. energy sector is showing signs of a nascent rebound that could help revive investment. A recent uptick in oil prices, from historic lows of less than $ 30 a barrel earlier this year, appears to have boosted drilling, mining and energy production, data show.
Consumer spending, which accounts for about two-thirds of the U.S. economy, also remains a mixed picture, with spending moderating in the third quarter after surging in the second. Buyers remain relatively cautious, with fairly high levels of saving, said Feroli of J.P. Morgan.
Prime Minister Justin Trudeau of Canada, Donald Tusk, the president of the European Council, and Jean-Claude Juncker, the president of the European Commission, spoke glowingly of a trade agreement signed on Sunday.
Photo by Adrian Wyld/The Canadian Press, via Associated Press. Watch in Times Video »
BRUSSELS — The European Union and Canada signed a far-reaching trade agreement on Sunday that commits them to opening their markets to greater competition, after overcoming a last-minute political obstacle that reflected the growing skepticism toward globalization in much of the developed world.
Canada's prime minister, Justin Trudeau, had been forced to call off an earlier trip to sign the deal after Wallonia, the French-speaking region of Belgium, used its veto to withhold Belgium's approval of the deal. The pact required the support of all 28 European Union countries.
On Friday, Wallonia, which has been hit hard by deindustrialization and feared greater agricultural competition, withdrew its veto after concessions were made by the Belgian government, including promises to protect farmers. Hours later, the European Union announced that the deal was back on track.
Mr. Trudeau signed the pact on Sunday, joined by Donald Tusk, the president of the European Council, which represents the leaders of the member states; Prime Minister Robert Fico of Slovakia, which holds the rotating presidency of the body that runs the bloc's ministerial meetings; and Jean-Claude Juncker, the president of the European Commission, the bloc's executive arm.
The deal will help to demonstrate that "trade is good for the middle class and those working hard to join it," Mr. Trudeau said at a news conference in Brussels. Mr. Trudeau said he wanted to "make sure that everyone gets that this is a good thing for our economies but it's also a good example to the world."
But the Walloon intransigence has underlined the extent to which trade has become politically radioactive as citizens increasingly blame globalization for growing disparities in wealth and living standards. Across Europe and the United States, opposition to trade has become a rallying point for populist movements on the left and the right, threatening to upend the established political order.
A compromise among the regions of Belgium, which persuaded Wallonia to drop its veto, called for language to clarify the handling of trade complaints brought by Canadian or European companies.
Belgium pledged to refer the arbitration system to the Court of Justice of the European Union, where judges can assess its legality.
Nonetheless, several dozen anti-trade activists held a rowdy protest on Sunday outside the building where Mr. Trudeau signed the pact, the Comprehensive Economic and Trade Agreement. The protesters splashed red paint on the forecourt of the building and condemned a planned Transatlantic Trade and Investment Partnership between Europe and the United States.
That much larger deal, known as T.T.I.P., has already stalled amid opposition from large numbers of Europeans, including many Germans and Austrians. The protesters see the Canadian deal as a warm-up for a much larger battle.
The spectacle of tiny Wallonia with just 3.6 million people holding up a deal that affects more than 500 million Europeans and 35 million Canadians and prompting European Union leaders to delay a summit meeting has rattled Western leaders.
"In the end, people who favor free trade survived to fight another day," said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.
"Now that we see the Canadian deal has made it over the finish line, the Atlantic trade deal still has a fighting chance," he said. "But it won't be easy. T.T.I.P. could similarly threaten traditional farming interests and arouse knee-jerk European suspicions about common trans-Atlantic health and environmental standards."
As a legal matter, the member states' legislatures still need to ratify the Canadian agreement. That could mean more hiccups before it goes into effect.
Mr. Tusk, of the European Council, said he was cautiously optimistic that the deal would survive the ratification process and could send a positive message about globalization.
"Today's decisions demonstrate that the disintegration of the Western community does not need to become a lasting trend," Mr. Tusk said. "Free trade and globalization have protected hundreds of millions of people from poverty and hunger. The problem is that few people believe this."
"The European Union is not yet in the group of hard protectionist and state-controlled economies like China or Russia," said Hosuk Lee-Makiyama, the director of the European Center for International Political Economy, a research organization in Brussels. "Instead, the E.U. is carving out a new middle ground between those two countries and the United States."
Europe, Mr. Lee-Makiyama said, is pivoting to a position as "neither an ally of East nor West."
Once ratified, the Canadian deal would cut many tariffs on industrial goods and on farm and food items, according to the European Commission. The deal also would open up the services sector in areas like cargo shipping, maritime services and finance to European firms, the commission said.
The Canadian deal is also regarded by trade advocates as a template for advanced, industrial economies by making it easier for their regulators to recognize each other's rules, and by updating the rules on how companies can make sure governments protect their investments.
If the Obama administration has its way, the next major regional trade accord to make it over the finish line will be the Trans-Pacific Partnership, which includes the United States, Canada, Japan and Vietnam.
The Pacific deal — largely because it involves a number of emerging economies — is a more traditional trade accord aimed mainly at cutting tariffs and knocking down impediments to trade.
But like the Europeans, many Americans do not want to make concessions that would lower wages or threaten jobs at home. The Asia-Pacific deal has become a hot issue in the United States presidential election; both major-party nominees, Hillary Clinton and Donald J. Trump, oppose it.
Mr. Funk Kirkegaard, the fellow at the Peterson Institute, said he gave the Pacific deal about a 30 percent chance of being concluded while President Obama still is in office. "Beyond January," he said, "it's all dependent on the results of the election and who's the next president."
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Further broadening its reach beyond electric cars, Tesla Motors says it’s going to sell solar roof tiles that are customizable and meant to look like a traditional roof. The energy-generating tiles would be a joint product with SolarCity, although the two companies have yet to complete a proposed merger.
The glass tiles, which come in four styles (for example, Tuscan Glass Tile), contain photovoltaic cells that Tesla says are invisible from the street. They’re meant to power a home when integrated with Tesla’s Powerwall, energy storage units for homes that are mounted on the wall or kept on the ground. The new version of Powerwall costs $ 5,500 but there was no price announced for the tiles at an unveiling Friday night .
Tesla Chairman and CEO Elon Musk reasons that many of the people who want to drive electric vehicles have an inherent interest in setting up cleaner energy systems in their homes and offices. He has estimated that one-fourth of Tesla owners currently have solar energy panels.
“The whole purpose of Tesla is to accelerate the advent of sustainable energy,” Musk said at the event. He said the future he wants consists of the solar roof, energy storage and electric cars. “It’s an obvious three-part solution.”
In June, Tesla proposed buying SolarCity, the largest home solar-panel installer in the U.S., in an all-stock deal worth around $ 2.45 billion. Shareholders are expected to vote on the deal on Nov. 17.
The merger is controversial. Musk is also chairman of SolarCity, which is run by his cousins. Neither company has achieved sustained profitability, and both are operating in markets where demand is uncertain. Plug-in electric vehicles make up less than 1 percent of U.S. sales, and less than 1 percent of U.S. electricity generation comes from solar power, according to government data.
Earlier this month, Goldman Sachs downgraded Palo Alto, California-based Tesla’s shares from “buy” to “neutral” and lowered its price target, saying the potential merger could delay the release of Tesla’s next vehicle, the Model 3. The $ 35,000 car, which is critical for Tesla if it wants to become a mass-market car maker, is due out at the end of next year.
Some shareholders have even sued, claiming that the merger is an attempt by Musk to use one company to bail out another. Musk owns 26.5 percent of Tesla and 22 percent of SolarCity.
But Musk has called the deal a “no brainer.” He says SolarCity’s installation network and Tesla’s global stores could provide customers with a one-stop shop for sustainable energy and transportation. If the deal goes through, San Mateo, California-based SolarCity will adopt Tesla’s name and sell its solar panels alongside Tesla’s power-storing batteries, which it has been marketing to homes and businesses since last year.
Earlier this week, during a conference call to discuss Tesla’s third-quarter earnings, Musk said he’s confident SolarCity would be cash-neutral or even a cash contributor in the fourth quarter if the companies merge. Tesla reported a $ 22 million profit in the third quarter; it was the company’s first quarterly profit in three years. SolarCity lost $ 250 million in the second quarter. It reports third-quarter earnings in November. Tesla is scheduled to provide additional financial details about the merger on Nov. 1.
When AT&T Inc. Chief Executive Randall Stephenson addressed hundreds of employees last month, he surprised them with his topic: a nuanced discussion of the Black Lives Matter movement and racial justice in America.
"Our communities are being destroyed by racial tension and we are too polite to talk about it," Mr. Stephenson told the crowd in Dallas.
The heartfelt remarks, which were captured on video by an employee's smartphone and went viral, were a bold move for a buttoned-up CEO, showing he can step out of his comfort zone.
Weeks later, Mr. Stephenson proved once again he is a man of surprises, striking an $ 85.4 billion deal to acquire media giant Time Warner Inc. The marriage, if it passes regulatory muster, sets up the telecom honcho to oversee a range of content businesses in which he has little or no experience, including cable networks like HBO and CNN and the Warner Bros. film and television studio.
The lanky, 56-year-old Oklahoman with a membership at Augusta National Golf Club is an unlikely supporter for the Black Lives Matter movement. He is also an unlikely media mogul: an executive with a finance background who climbed the corporate ladder.
Since striking the deal last Saturday, Mr. Stephenson has been on a whirlwind tour of Time Warner's key units. He visited the HBO and Turner offices in New York City on Monday. Some executives said they made it a point to watch the Black Lives Matter speech in advance.
On Tuesday, he flew out to Burbank, Calif., to hold court in the famed building on the Warner Bros. lot that housed Jack Warner's office. Accompanied by Time Warner CEO Jeff Bewkes, Mr. Stephenson talked with about 15 movie and television executives over a buffet lunch, according to a senior Warner Bros. executive who attended the meeting.
Mr. Stephenson laid out his vision of how Warner Bros. content, paired with AT&T distribution platforms, would better prepare both companies for a future in which the consumer will have more command over how and what content they consume, the executive said.
After the meetings, a senior Time Warner executive said: "He said all the right things." But he was quick to add, "It's day one."
Before Mr. Stephenson gets to integrate Time Warner, he will have to win over regulators. Wall Street is skeptical, with Time Warner's shares trading about 19% below AT&T's offer price. Mr. Stephenson, a Republican donor who runs one of Washington's biggest lobbying operations, will be making his case with Time Warner executives who are well connected in the Democratic Party.
Given that failure and unpredictability are often the norm in the movie and television business, Time Warner executives are wondering whether Mr. Stephenson and AT&T will have the stomach for all the risk that comes with making content. The movie and television industries also tend to make up the rules as they go along and pride themselves on being the antithesis of a buttoned-up environment.
Mr. Stephenson, whose father ran a feedlot in Moore, Okla., started working for the phone company in 1982, doing night shifts changing magnetic tapes on huge mainframe computers.
He continued the job, obtained with the help of his older brother, while he worked on his master's degree at the University of Oklahoma. When a manager in St. Louis, the home of Southwestern Bell, called to ask him to interview for a job in the tax department, the cash-strapped Mr. Stephenson was concerned: Would they reimburse him for the trip?
They did and he got the job. He moved with his wife, his former high-school sweetheart, to the headquarters of the regional Bell company. His brother, Kevin, still works at the company as a technician in its landline business.
Mr. Stephenson has spent his life working in the American telecom industry, a former monopoly that was broken up by the government in 1984 and slowly put itself back together through a series of blockbuster deals that formed the core of both AT&T and Verizon Communications Inc. Those deals, which ended around 10 years ago, were about gaining scale and cost savings.
Soon after talking over as chief executive in June 2007, Mr. Stephenson's first big challenge was dealing with the gains and pains from AT&T's exclusive deal to carry Apple Inc.'s iPhone. The arrangement would speed AT&T's shift away from its legacy landline business but also tarnish its brand, as its wireless network struggled to manage the flood of customers.
Mr. Stephenson spent billions improving the network and tried unsuccessfully to buy smaller rival T-Mobile. But in the last two years he has steered the nearly 140-year-old phone company in a different direction.
The $ 48.5 billion deal for DirecTV last year made AT&T the country's biggest pay-TV provider. With the acquisition of Time Warner, he would be in direct competition with media titans such as Rupert Murdoch, Bob Iger and John Malone.
"Randall is a very farsighted kind of guy," said Mike White, the former CEO of DirecTV. "He has a different background than larger media moguls."
Mr. Stephenson was eager to jump into the media fray. Mr. White took him to the Allen & Co. conference in July 2014 for the first time, introducing him to some media players that he didn't already know. Mr. White described him as being right at home at the swanky annual retreat in Sun Valley, Idaho, where major media deals are often hatched.
"Acquiring a new company not directly in his business won't be new to him," thanks to the DirecTV deal, said Dan Hesse, the former CEO of Sprint Corp. Mr. Hesse clashed with his rival when he led the charge to oppose AT&T's attempt to buy T-Mobile in 2011, the biggest black eye on Mr. Stephenson's nine-year tenure at the top. "He's got the experience."
Mr. Stephenson also stepped into unfamiliar territory when he moved his family to Mexico in 1992 to be AT&T's top finance executive in the country, working under telecom tycoon and billionaire Carlos Slim.
Mr. Stephenson would wake up early every morning to work with a Spanish language teacher for two hours, but after three months still struggled because people in his office would speak to him in English. He finally forbade anyone to speak anything but the native language. Now he speaks fluently.
Mr. Stephenson's approach to his career has been traditional, but his public positions on social issues have been surprising for a corporate executive. He has called for immigration reform, including revamping the visa system and offering a path for undocumented workers to gain citizenship. As a board member of the Boy Scouts of America, he publicly supported changing the group's policies to make it more open at a time when the organization banned openly gay scouts and leaders.
Mr. Stephenson, who avoids using social media such as Twitter and Instagram, has also used his position to challenge Silicon Valley over its attitudes toward national security and privacy. Earlier this year, he criticized Apple Inc. for adding encryption to iPhones that make it more difficult for governments to access the contents.
"I understand Tim Cook's decision, but I don't think it's his decision to make," he said in January.
He took the stage at The Wall Street Journal's D Live conference this week to lay out his rationale for the Time Warner deal. He said the combined company would bring more competition to cable business and challenge the dominance of Google and Facebook Inc. in online advertising. But Mr. Stephenson admitted he is no Hollywood insider.
"I'll be the first to tell you, I've never run a movie studio," he said. "I don't know the first thing about it."
While AT&T seems to have made all the right moves with Time Warner in early meetings, that doesn't mean people there don't have their doubts.
"This company is going to be so big and unwieldy it's going to be hard," one Time Warner unit head said.
At the same time that he was secretly meeting with Mr. Bewkes to hammer out the Time Warner deal, Mr. Stephenson was also working on his Black Lives Matter speech.
AT&T's Dallas headquarters are just blocks from where five police officers were killed during a July protest. In his speech, Mr. Stephenson called the recent shootings of black men and police officers "troubling" and urged his 270,000 employees to begin a conversation to find common ground.
Mr. Stephenson shared the story of an African-American physician and veteran whom the telecom boss described as one of "his closest friends in the world." Mr. Stephenson said he was stunned to learn recently of the racism his friend faced growing up in Louisiana and throughout his life.
He dismissed calls for tolerance as falling short of what is needed. "Tolerance is for cowards," he told the crowd. "Being tolerant requires nothing from you but to be quiet and not make waves, holding tightly to your views and judgments without being challenged."
"Do not tolerate each other," he added. "Move into uncomfortable territory and understand each other."
—Ryan Knutson contributed to this article.
Write to Thomas Gryta at thomas.gryta@wsj.com and Joe Flint at joe.flint@wsj.com
Corrections & Amplifications:
AT&T Inc. Chief Executive Randall Stephenson has a membership at Augusta National Golf Club. An earlier version of this article incorrectly stated his membership was at Augusta Country Club.
These would seem to be heady times for Elon Musk. Recently, he announced that SpaceX, his space exploration and tourism company, has developed plans to colonize Mars and save humanity. A little more down to earth, the billionaire mogul reported this week that Tesla, his boutique electric car manufacturer, had turned a modest profit in the third quarter. On Friday, at a press event staged in a neighborhood of solar houses, he revealed that SolarCity, a solar roof company where he serves as chairman, has devised new less bulky solar panels. Were these announcements relevant pieces of news released to inform the consumer or were they merely diversions meant to distract from the serious problems brewing at Musk's three enterprises?
Early in his career, Musk, now 45, made so much money that Silicon Valley viewed him as a visionary. He sold his first startup, Zip2, to Compaq for $ 305 million, earning him $ 22 million; he then helped found PayPal, which sold to eBay for $ 1.5 billion, netting him $ 180 million. But with the three companies he now runs he has proven to be, as a businessman at least, ineffective at best, cynical at worst. All three companies are beset by debt and cash flow issues. Yet each time it appears as if his house of cards may collapse, Musk makes a move — often a splashy announcement of a new product — to change the conversation from his impending financial doom.
Normally, Musk enjoys glowing media coverage — even after his rockets and "auto-pilot" navigation cause lethal crashes — but this month he was called out by Robert E. Murray, CEO of Murray Energy Corporation, the largest privately-held coal producer in America, who claimed on CNBC that Tesla is a "fraud" because the company "has gotten $ 2 billion from the taxpayer" and "has not made a penny yet in cash flow." The charge got Musk's attention. "Real fraud going on is denial of climate science," Musk responded on Twitter. "As for 'subsidies,' Tesla gets pennies on the dollar vs coal. How about we both go to zero?"
Currently, Musk has a net worth estimated at $ 13.2 billion, making him the 87th-richest person in the world, but along the way his companies have received, according to a report published last year in The Los Angeles Times, $ 4.9 billion in government subsidies. So what would happen if Tesla did "go to zero" on subsidies? It could be catastrophic, actually, because ever since 2004, when Musk invested $ 6.35 million in Tesla and became its CEO, the company has relied heavily on government support.
First of all, any customer who buys an electric car receives a $ 7,500 tax credit on his or her federal income tax — an incentive that gives Tesla a distinct competitive edge over manufacturers that make traditional vehicles. In addition, some states supplement the federal tax credit with tax breaks of their own. Nevada went much further than that. When Tesla started searching for a site on which to build a battery factory, Nevada offered $ 1.3 billion in cash and tax breaks if Tesla located it in Reno. The federal government will subsidize the batteries produced there by awarding tax breaks to consumers who buy them.
The government has also given Tesla loans. In 2010, the Department of Energy provided a $ 465 million loan, which Tesla repaid three years later. Yet despite all of this assistance, Tesla is still plagued by problems — missed deadlines, underperformance on production quotas, and blown budgets. It has also produced relatively few cars.
Through 2015, Tesla sold 106,000 vehicles since it started delivering cars in 2008. Granted the company was in a startup phase for much of that time, and is projected to produce 80,000 cars in 2016, but it seems unlikely it will hit its goal of selling 500,000 cars a year by 2018. Because of the tepid production schedule, Tesla has been losing money. In 2015, the annual loss was $ 889 million. The company's total debt has climbed from $ 401 million in June 2012 to $ 3 billion in June 2016. The announcement of a third-quarter profit for 2016 — a modest $ 22 million — was only the second time in the company's history it turned a quarterly profit; it did not result from increased productivity but from Tesla selling $ 139 million worth of pollution tax credits to other car manufacturers. Because of its questionable financial health, Goldman Sachs recently downgraded Tesla's stock from buy to neutral.
Exxon Mobil Corp. warned that it may be forced to eliminate almost 20% of its future oil and gas prospects, yielding to the sharp decline in global energy prices.
Under investigation by the U.S. Securities and Exchange Commission and New York state over its accounting practices—and the impact of future climate change regulations on its business—Exxon on Friday disclosed that some 4.6 billion barrels of oil in its reserves, primarily in Canada, may be too expensive to tap.
Exxon is facing near- and long-term threats as it seeks to exploit the full value of a vast oil and gas portfolio that stretches from Texas to the Caspian Sea, and deliver the handsome dividends that its shareholders have come to expect since it was part of John D. Rockefeller's Standard Oil.
Today, the company is suffering amid a two-year plunge in oil prices that has a barrel trading for around $ 50, a level Chief Executive Rex Tillerson believes may linger as U.S. shale producers ramp up at the first uptick in prices, prolonging the current glut and putting a ceiling on any price upswing.
Earlier this year, Exxon lost the triple-A bond rating it had held from Standard & Poor's Rating Services since 1930, a standing of creditworthiness shared with just two other companies, Microsoft Corp. and Johnson & Johnson. Last year, it failed to find enough new oil and gas to replace what it produced for the first time in 20 years. Its profits in the last 12 months are the lowest since 1999, before it merged with Mobil Corp.
Exxon is alone among major oil companies in not having written down the value of its future wells as prices fell. It has said it follows conservative practices in booking reserves. It now plans to examine its assets to test, under rules governed by accounting standards, whether they are worth less than carried on its books.
The company said the 20% reserves reductions, which are governed separately by SEC rules, may be necessary based on the average 2016 price by the end of the year, though higher prices in November and December could mitigate the extent of the decline. It added that any reserve reductions could be added back if prices recover.
In an investor call on Friday, Exxon declined to discuss potential reserve write-offs or accounting write-downs in detail beyond its statement. The SEC declined to comment on Exxon's disclosure.
"Exxon has long been the best at what they do, but these external constraints are putting them more in line with everyone else, forcing them to the level of their competitors," said Sean Heinroth, a principal in the energy practice at management consultancy A.T. Kearney.
Though Exxon didn't mention climate change or regulators in its disclosure, most of the assets it said may not be economic are among the most scrutinized by climate change activists: Canada's oil sands.
Since 1999, energy companies have invested more than $ 200 billion in Alberta's oil sands, which has the third largest oil reserves behind Venezuela and Saudi Arabia, says the Canadian Association of Petroleum Producers.
Nine of the world's top oil companies, including Exxon, Chevron and Royal Dutch Shell PLC, have been counting on wringing more Canadian crude from the ground in the coming decades. Combined, Canadian crude accounts for 23% of the firms' proven reserves, according to data from investment bank Peters & Co.—up from only 5% in 2006.
New investments in the oil sands may be much harder to come by after Exxon's announcement, said Andrew Logan, director of the oil and gas program at Ceres, a Boston-based nonprofit that has pushed Exxon and other companies for better disclosure on the potential impact of climate change on the energy business.
"Why would any company invest billions of dollars in a new oil sands project now, given the near certainty that the world will be transitioning away from fossil fuels during the decades it will take for that project to pay back?" Mr. Logan said.
The potential loss of reserves has broad ramifications for Canada, which depends on the development of its crude stores to support its economy, but like other western countries has been moving to strengthen regulations to address climate change. Canadian Prime Minister Justin Trudeau earlier this month unveiled a national carbon-pricing proposal, sparking an immediate clash between the national government and the province of Alberta.
The Liberal government's proposal to charge a price for carbon emissions compounds the headwinds energy companies already face if they want to mine Canada's oil sands for decades to come.
Amy Myers Jaffe, executive director for Energy and Sustainability at University of California, Davis, said Exxon's warning signals that it doesn't believe oil prices will rise significantly in the near future.
"This company had positioned itself for growth and oil sands were a key part of its strategy," she said, adding: "If lots of companies have to do write downs on their Canadian reserves, it sends a gloomy message about the oil sands," she said.
Longer term, Exxon faces headwinds from regulations aimed at reducing carbon dioxide and other greenhouse gas emissions, measures that are widely expected to fall most heavily on its industry.
Exxon's other major obstacle: U.S. competition. Advanced shale drilling techniques have unleashed a new wave of American oil into world markets. Those drilling and fracking techniques have made smaller American companies the industry's new "swing producers," or those most able to ramp up output quickly.
Exxon's Mr. Tillerson acknowledged that prospect in a recent speech at a conference in London where other energy executives were forecasting a sharp supply shortfall in coming years.
"I don't necessarily agree with the premise," he said.
Exxon shares fell 2.5% to $ 84.78 at 4 p.m. in Friday trading after reporting a quarterly profit that declined 38% compared with a year ago.
Write to Bradley Olson at Bradley.Olson@wsj.com and Lynn Cook at lynn.cook@wsj.com
