Archive for April 2009

Taking One For The Team

April 30, 2009

Today is the deadline.  Chrysler’s stakeholders have to agree to a restructuring plan or a threatened Chapter 11 will occur.  There appears to be a good chance that the name Chrysler and its brands will survive although under totally new ownership.  The final hours, however, could hold surprises.

The unknowns are whether the hedge funds who hold about 30% of Chrysler’s debt will agree to a haircut.  The large banks have already agreed to steep cuts in their loans and the same is expected of the Hedge Funds.  If they do not then a Chapter 11 proceeding will take place and most likely, the hedge funds will be order to take less.  The Chrysler “phoenix” will then rise again.

There are several troubling aspects of this deal.

First, the UAW, who shares in the responsibility for the Chrysler mess, will become the majority stock owner of Chrysler.  While a certain amount of common stock was certainly due the union in return for healthcare and other concessions, a majority position makes you wonder why, and whether there will be room for an independent management team to run the company?

Second, Fiat is suppose to take a 30% share of the company, take the overall management lead, and in return infuse new models significantly boosting Chrysler’s position in fuel efficient automobiles.  But Fiat?  This is a company well known over the years for small, technically sound automobiles that do not sell all that well in a protected market like Italy.  It was only a few years back that GM almost bought a near bankrupt Fiat.  And yes, Fiat is said to be the new managing partner.

Third, the transition of Chrysler’s model line up from its present heavy, low gas milage, truck/SUV dominated one to a much more fuel efficient line up will require a lot of money.  Where will it come from?  I am pretty sure you will not find the Banks in a hurry and hedge funds will certainly take a lot of coaxing.  I wonder whether Uncle Sam will be asked to throw more money into the pit?

For the Big Three team, however, there is a framework now upon which they could expect UAW and debt concessions.  The UAW will ultimately need to offer the same deal to both Ford and GM, and it will be difficult for the debt holders to say no.   Chrysler will soon have a new CEO and management team and their workers will have a chance to continue with less rich, but still very good jobs.  The former Chrysler owners and senior management have taken one for the team.

The Prophesy of Arlen Specter

April 29, 2009

Yesterday, Senator Arlen Specter announced he was changing political parties and would exit the Republican Party in favor of the Democratic Party.  Was this the beginning of the end for Republicans?

Unlikely in my opinion but probably the end of being a main stream party with a legitimate chance to govern from a majority position any time soon.  A political party that is ready to eat its own if they should stray from the doctrine is on dangerous ground if it wishes to appeal to a majority of Americans.  “Party discipline” is an oft used term to describe how party leaders attempt to get their members voting in the same direction.  If you cross the leaders, you get the discipline.  Senator Specter faced just such a situation.

Discipline seems to make sense to a point.  What if, however, the majority of voters do not or no longer accept many of the tenets of the party?  How can the party appeal to a majority of voters if it continues to narrow its views to those lying far to the right?

In the short run, Specter’s party change bodes well for the Country and the Democratic Party.  The Republican Party and their pursuit of their conservative goals has driven the country into the ditch.  As a result, President Obama has received a large mandate to put in place other more progressive policies.  With Specter in the Democratic column, Obama should expect much less effective opposition from Republicans.  It is the longer term that I worry about.

America has thrived upon a two party system, largely counter balancing each other, and keeping the ship of state centered over the long haul.  A semi permanent shift to one party or the other for an extended period of time, will not be good for the Country.  We need a healthy (and sane) opposition party.

“Lower or no taxes” as the answer for every situation is clearly as wrong as increasing taxes (that is more spending) in every case.  The abortion and intelligent design litmus tests have no place in sensible governance.  The advent of globalism has opened whole new areas where one party can differentiate itself from the other, and contribute mightily to the future progress of America.  Continuous improvement of all government programs as well as the departments providing them (citizens receiving more services for the same amount of tax dollars) would be a tremendous party platform plank.  Fiscal and monetary responsibility along with a balanced social agenda would be also attractive to most Americans.

It is possible that what is left of the Republican Party is so far gone that it will need to vanish politically before a new opposition party can rise from these ashes.  But we can not begin yet to ignore the Republican Party.  What is left is so ideologically driven, it could easily become a black hole of all the odd balls who do not necessarily know when to stop if their positions are ignored.  I hope this is not the prophesy of Arlen Specter.

Woman Beating, Anyone?

April 28, 2009

Senate Republican leaders are taking aim once more at their feet, and it seems Governor Kathleen Sebelius may be in the way.  Sebelius has been nominated by President Obama to become the next Secretary of Health and Human Services.  Kansas Governor Sebelius who was elected twice by Kansas voters, who usually vote Republican, has received high marks for even handed leadership.  What could be the reasons to threaten to derail her nomination?

Leave it to Republicans to rise high on their horse and cite Sebelius’s support of a womans right to reproductive health.  They posture and strut around, and then say things like, “we need to know about her views on abortion and her association with a late term abortionist?”  It makes no difference what Governor Sebelius thinks about either of these questions, she is being nominated to run a Government agency and is bound by the laws of the land.

There has not been a single issue around whether Governor Sebelius can lead the sprawling department.  There is also no argument that it is important to fill the Secretary position and get on with business, especially with a world pandemic raging with its ultimate impact still uncertain.

The Catholic Church has, on its own, spoken out against Governor Sebelius citing her pro-choice position as the litmus test.  How an organization that contains an estimated one thirds homosexuals (and denies it… gays must not tell!), continues to experience pedophilia (and claims it is just a few bad apples), and has consistently denied woman priesthood (and kept woman in as lowly roles as possible), can continue to speak on denying a woman a non-sectarian government role for her private views, is a lot to swallow.

This is an issue that the Obama Administration should fight to the end.  While Governor Sebelius is well qualified, she is not the only person for this job.  Rather, this type of obstructionism based upon sectarian views is wrong and dangerous to our Country’s future.

Preening and Posturing

April 27, 2009

“Preening and Posturing” writes Bill Kristol in a May 4th dated article which I read in the on line Weekly Standard.  “Throwing those who guard us while we sleep to the wolves”, Kristol explained.  Kristol, who as a leading neoconservative, provide plenty of space and ideas for the Bush “chicken hawks” and goaded them into the invasion and occupation of Iraq as well as other excesses such as Abu Ghraib, the NSA spying, enhanced interrogation, and the shameful Guantanamo detainment center.

Rather than move on to new themes having seen the abject failure of the policies he had championed in the early 2000s, Kristol is set on building a defense for his role by encouraging readers to worrying about the CIA and the protection of the American public.  What all the neoconservatives failed to realize was that their idea of protecting America was worthwhile but achieving this protection by any means was not.  “Might makes right” and  “ends justify the means” were the real themes of the neoconservatives.  Strangely people like Kristol were willing to ask us to trust our Government on matters like this but that Government could not be trusted on matters such as social security, healthcare, or any other progressive idea.

The “extreme” preening and posturing that is in full display these days in not limited to the Democrats (as Kristol would have his readers believe) but in fact is the hallmark of the Republican apologists who oppose everything President Obama proposes.  When it comes to the “torture memos”, the subject strikes too close to home.  The right wing, conservative elements of the Republican party (and not the Libertarians like Ron Paul) see an unlimited executive as both necessary and as a model of efficiency.  President Bush and his sidekick, Dick Cheney (or was it the other way around?) have shown us clearly how to misuse this power.  What more do we need to see why in order to appreciate our Constitution’s checks and balances.  It separates the US from all other countries and has been probably the most responsible factor for the security of all Americans?

Automotive Sickness

April 26, 2009

The current drama, no it is a tragedy, that is playing out with the US automotive industry is extremely sad to see.  You may be reacting and thinking that these companies more than deserve their fates.  You may be thinking that the dinosaurs had their chance to evolve but did not.  In the past they sold lousy cars and ignored the new entries from Japan even though Americas were buying these “small and inexpensive” cars in volumes.

The sickness, I think, is more dangerous and wider spread than we would think.  I would described it as the combination of success coupled with management getting too full of itself.  Here’s how it works.  An earlier company management generation, through both hard work and technical or procedural innovation, gradually built the company into a position of success.  Time passes and a new generation of senior leaders take charge.  The fatal mistake occurs when these new leaders attribute their business success to their personal contributions without giving adequate recognition to the contributions of early management teams.  (You know, times have changed and new times call for new ways).

Unless the company is fortunate to have been built on rock solid principles and values which are centered on the customer and respect for all employees, the new management team will focus upon the need of shareholders and their personal wealth accumulation.  You can see this pattern in the desolation that once was the American rail industry and the American steel industry, as well as the current situation with the automotive industry, and large banks and investments firms.  (It is true that the banks and investment industries have been down this path before and may be chronically susceptible to greed.)

It is important to understand this illness because the good life Americans lead came from someplace.  If we forget, or loose the moral compass that leads to innovation and productivity, we will certainly seal our children’s future with the prospect of a lower standard of living.

GM and Chrysler Pensions

April 25, 2009

News reports have said that the Obama team has promised the UAW that their pensions and healthcare will be protected in whatever manner the current restructuring efforts end.  This is both troubling and admirable, depending upon the definition of “protected”.

GM and Chrysler have been asking the UAW to match the work rules and the union contract provisions (pay and benefits) that the non-union workers at Toyota (US) and Honda (US) enjoy in order to create an even playing field.  This will represent a “give back” for union workers.  This should be straight forward since these cost are present expenses and directly comparable to competitiveness.

Retiree pensions and healthcare are a little different.  GM and Chrysler’s obligations reflect years of bloated employment where cuts in employee levels was strictly prohibited by the UAW.  When the UAW finally consented to reductions, they negotiated very sweet benefits for their members.  Both the pension payment and the healthcare provided per retiree are more generous (and of course more costly) than normally found in like industries and far more than the US average.

On the other side of the coin, retirees were promised these benefits and have constructed their lives around these supports.  Further, for many, they have adjusted the style of living to these legacy benefits.  To have them slashed in half would likely cause a lot of hardship.

If fairness is too rule, however, both the pension payout and the healthcare cost must be reduced.  The size of the reduction should be mediated with the goal of reaching a parity with like industries, that is bringing the UAW benefits closer to other similar workers.  My guess is that would leave retired UAW workers with about 80% of their current benefits.  While troublesome, this level would be still more generous than the Federal pension insured level of about 50%.  Healthcare of a straight 80/20 and a similar drug plan will come as a shock to people who have known almost no healthcare costs.  (If the healthcare is transferred to the UAW responsibility as planned, the value of GM’s contribution should reflect this reduced amount.)  These agreements would, of course, be applied to the white collar employees too.

Following this agreement (or, if necessary, court order reductions), the GM Board and senior level management (company officers) of both car companies must be forced to resign.  The sacrifice of GM and Chrysler employees is the ultimate responsibility of inadequate company management.  There can be no winners and no losers but both management and the workers must contribute together to put these two companies back on a path to successful operations.

Was Biden Right?

April 24, 2009

I do not mean “right” in the usual sense of being conservative.  I mean it in the sense of being correct about US foreign policy during the last Administration.  The detour through Iraq is looking like it will continue to be a costly and dangerous mistake (aside from its illegality under International Law).  The danger Afghanistan posed for its neighbor Pakistan were obvious to those who looked and accepted reality.  US policy makers took their eye off this dangerous region and now we must pay.

In one of the early Democrat Party Presidential debates, Joe Biden interrupted the sand box argument amongst the other candidates on how tough they were going to be with Iran.  Biden laid out their mistaken focus (which was also the previous Administration’s) and explained the place they should be concerned about was Pakistan.  Pakistan was of questionable stability and it already possessed nuclear weapons!

Today President Obama finds himself with his first real and untimely problem.  The Taliban are having their way in the northwestern provinces of Pakistan in open defiance of the Pakistani Government.  It has been reported that the local inhabitants see no alternative and would prefer some type of order to the lawless rules that exist today.  It may still be a stretch to foresee the Taliban taking over the entire country of Pakistan but it makes you wonder about the functioning capability of the Pakistani Government and whether their existing nuclear weapons and technology remain safe.

The answer to this dilemma is not obvious.  The Taliban’s acceptance of al Qaeda and allowing the use of Taliban controlled territory for planning, training, and staging terrorist activities makes it clear that they can not be allowed a safe haven either.  But I have read no reports of any weapons or munitions factories within Afghanistan or the border regions of Pakistan.  So where are the Taliban’s heavy weapons coming from?

President Obama must move this situation to a place of high US Government priority even though other domestic issues would be preferred.  I suspect that his already started initiatives with Iran, Russia, and China could prove very helpful since the Taliban with nuclear weapons would be in no ones best interest.  A coordinated effort to reduce (and best eliminate) the flow of funding and weapons to the Taliban would go a long way to bringing this situation under control.