Tuesday, September 26, 2006

Ed Murrow Lives!

Keith Olbermann from MSNBC has posted the best political essay that I've seen/heard in a long time. The topic: Bill Clinton's ass-whooping of Chris Wallace, the designated spitter for Fox News. Bill may be forever known as the president with the penis, but Bill also showed that he had the nads to go with it, as he exposed Fox in all of its Harper Valley hypocracy. To tell you the truth, Olbermann's essay, in print here and video here, is only nominally about Clinton. It's really about how Clinton re-energized resistance to right-wing reality distortion tactics. Specifically, he says why Bush's "free pass" should be revoked. He also tells us what he thinks of George W. Bush, and why.
China in Auto News 1
Daimler Chrysler to bring in Chinese-made car?


Daimler is hinting that it may find a Chinese partner for an upcoming small car. Well, that's got to go over well in middle America.

Chrysler in Auto News 2
China to Tax Large Engines - Support Turbos


In the international press, China is all about "free trade", but at home, China requires foreign car makers to enter into (50-50) partnerships with local companies. It seems inevitable that one way or another, once the local company has built up capital and knowhow, the foreigner is going to be told to hit the bricks.

There is one area where China is equal to, and maybe ahead of the West, and that is (surprisingly) emissions and fuel economy policy. China imposes high taxes on automobiles, and on large-displacement engines in particular. As a substitute, China has been progressive about turbochargers. See the Automotive News article on China and Turbochargers.

Friday, September 22, 2006

It's the Dependency Ratio, Stupid

Robert Farago has a very good article at thetruthaboutcars today titled GM: Kicking the Habit. It's about dependency ratios. In 2005, General Motors had 143,000 employees to take care of 453,000 retirees, a ration of 3.2/1. Actually, when you look at total dependents, it's worse than that. The active workers usually have spouses and kids. The retirees generally have at least a spouse. Moreover, the ratio probably was made half-again as large due to the employee buyouts this year. The buyouts created more retirees and fewer active workers. At some point, you just can't be productive enough to take care of the burden. Farago makes an excellent illustration:


Economists use dependency ratios as an analytical tool to examine national economies. ItÂ?s a pretty simple concept. Imagine a single man bringing down $100k a year. Mr. ManÂ?s got sufficient liquidity to buy a brand new Corvette. Now imagine the same guy making the same money married with 2.3 kids. He can only read about the joys of Corvette ownership (probably here, for free).

The single guy's supporting one person with one income, creating a one-to-one dependency ratio. Assuming his wife doesn't work, the married manÂ?s living not-so-large at three-point-three-to-one. The more dependents a productive worker/economy must support, the less profitable and thus, financial viable, he/it is.


If this suggests to you that there is an inherent limit in the doctrine of "shrink to survive", that's the whole point. The only way to improve the dependency ratio is to survive until retirees die off (Since some of these retirees are only 50 years old, it'll be awhile), or shed the pensions through Chapter 11 bankruptcy.
Could One Transmission Sink Both GM and Ford?

This fall marks the debut of a new 6-speed automatic transmission that was co-developed by General Motors and Ford. Working from a common design, the automakers are producing their transmissions in separate plants with minor variations as their products require.

If everything works well, the 6-speed will at least match the competition, and in some cases the transmission will be a competitive advantage. Nevertheless, new transmissions have historically been the cause for some massive recalls and bad public relations. Most recently, Toyota has run into problems with its 6-speed automatic, a transmission that is featured in the V-6 versions of the redesigned 2007 Camry.

In the late 1980s Chrysler Corporation had a problem with its then revolutionary computer-controlled 4-speed automatic transmission called the Ultradrive. From 1989 to 1999, the Center for Auto Safety reports at least 50 technical service bulletins on various models of the Ultradrive transmission. Descendants of the Ultradrive power most of Chrysler's U.S. products to this day, but reports of failures have apparently decreased to unremarkable levels. Chrysler's 6-speed transmission debuts with this fall's 2007 Chrysler Sebring. Chrysler's 6-speed carries over much of its design from the 4-speed Ultradrive and is built in the same plant in Kokomo, Indiana.

If the new GM/Ford transmission proves to be smooth, reliable and economical, it could contribute to the revitalization of both companies. That being said, neither company is in a position to take a hit like the Ultradrive levied on Chrysler. The competition is too fierce, so the margin for error is small.

Thursday, September 21, 2006

Rate Your Judges
therobingroom.com

Ah, therobingroom.com, this is one that I've been waiting for. Time to get even. Judge Snider has had it in for me ever since I almost ran over his dog. Well, replace the word "dog" with "child", and replace the word "almost" with "repeatedly". (Stolen from Lionel Hutz. God rest your soul, Phil Hartman.)
Rate Your Judges
therobingroom.com

Ah, therobingroom.com, this is one that I've been waiting for. Time to get even. Judge Snider has had it in for me ever since I almost ran over his dog. Well, replace the word "dog" with "child", and replace the word "almost" with "repeatedly". (Stolen from Lionel Hutz. God rest your soul, Phil Hartman.)

Friday, September 15, 2006

Details Announced on Ford Restructuring Plan
a/k/a "Have you driven by an unemployed Ford worker lately?"


I posted yesterday about Ford's way forward. Today more details were announced. In addition to laying off 1/3 of the salaried workforce, Ford has targeted for buyouts approximately the same percentage of the hourly workforce. Buyouts will likely be similar in magnitude to those offered by GM, with cash payouts up to $140k per worker. Ford's stock went down $.51 per share yesterday, but I don't see why. It's not like this was a surprise. If investors lose their shirts on Ford and GM it's because they were asleep at the switch. Management has all but said that they are going to give large portions of the paper equity of the company to the hourly employers in exchange for buying out their contracts. In both cases, the cost of labor peace may be more than half the book value of the companies. In some ways, this may be labor's last hurrah. At least it's a hurrah.

No Luck for Norfolk, Its Trucks are Shucked

In addition to the layoffs disclosed earlier, Ford will be cutting two additional plants, one in Ontario and one in Ohio. It will be closing the Norfolk Virginian F-150 plant in 2007 instead of 2008. Ford is reducing capacity at the Ranger plant in St. Paul, Minnesota. According to Minnesota Public Radio, perhaps the only reason that Ford has kept the St. Paul plant open this long is that it relies on hydroelectric power from the Mississippi river, and since Ford owns the dam, it can essentially power its factory for free and sell the excess power on the grid. The Ranger pick-up is older than the hills, but since competitors have mostly deserted the market for small no-frills trucks, the Ranger lives on as a relic long after it should have been redesigned. St. Paul may be the assembly site for the Ranger's successor in 2009, but it appears that the plant will be idled for a significant period of time regardless of new product plans.

All of the Former Visteon Plants may be living on Borrowed Time
Plants are to be sold or close by the end of 2008


Ford has had the "For Sale" sign out on its former Visteon plants for a year or so now, but it's a buyer's market. At least it would be if there were any buyers. Ford reiterated that it plans to either close or sell all of it's Visteon plants by 2008. Personally, I'm skeptical of that date. Collectively those plants sell too many of Ford's parts for Ford to line up contingent suppliers in time to make to do production planning for 2008. Nevertheless, over the long term, it would behoove the local union leaders to be working with state business incubators on plans for local ownership. Otherwise, the workers at these plants can bid their jobs bye bye.

Where does this put AFSCME 3357? It looks like between the Ford cuts and the GM cuts, we're looking at the active worker base going down 1/3 or more during the next contract period, but the number of retirees may go down by only half that number. Caseloads for our attorneys may swing from high to low and back again as offices shrink and are consolidated.

Wednesday, September 13, 2006

Ford's Way Forward Part Deux
"This time we really mean it"


Ford is about to unveil it's 2nd "Way Forward" plan. The first plan fizzled faster than Mentos dropped in Diet Coke. The new plan is said to include an early retirement/buyout plan for hourly workers similar to that offered by General Motors and a not-so-generous boot out the door for about 30% of the white-collar work force. The dealer network and the product lines will be pruned as well.

Note that this plan comes just days after the appointment of a new CEO, Ford's (nee Boeing's) 35 millon dollar man, Alan Mulally. (For the life of me, I can't seem to remember that guy's name. Every time I want to use it, I have to look it up.) Since the guy just got there, it's hard to believe much of the $35 million invested will result in any improvements to the turn-around plan.

Ford still plans on shrinking itself to prosperity like um, well, um . . . . Well, there has to be someplace where it worked. Oh yes, Boeing. Of course a manufactured war, bumbles by its main competitor, and a multi-billion dollar investment in new products helped Boeing just a little bit.
Et tu Chrysler?
Dodge & Chrysler go Subprime with 0% 72 Month Financing


DaimlerChrysler has joined Ford & GM in relaxing the standards for its 0% 72 month financing. The dealers like it because it allows them to sell cars to customers they would otherwise walk. The accountants should hate it because it will be hard not to book a high bad debt reserve. Although Chrysler brass may look at the program as an alternative to further discounts. In reality subsidized subprime loans are a ticking timebomb waiting to explode.

The Detroit News profiles the new customer that Chrysler is looking to hook up:

"How could it not work?" asked John Berry, a sales manager at the Hollywood, Fla., dealership. "Just today we had a customer that we would have missed if the new rules weren't in place."

A single mother of five with subpar credit drove off Tuesday in a new Town & Country minivan because she qualified for the financing deal, Berry said.


What do you think the odds are that nothing bad will happen over the next six years to that "single mother of five" that will keep her from making $600/month car payments? A lot of these cars will be coming back as repos. They could trash the resale values for years down the road. Don't believe me? When was the last time you heard of someone buying a Mitsubishi Galant retail? Easy credit policies put Mitsubishi's US operations on life support, and the patient will be in the hospital for the foreseeable future.

Friday, September 08, 2006

Why So Quiet

I'm back from the land of the living dead, so I can catch up on the potential blog entries that have accumulated over the alst two weeks. Issue #1 New Ford CEO . . .

Alan Mulally to Make at least $10 Million/year

While I was incapacitated, Bill Ford took it upon himself to take advantage of the low scrutiny and step down as CEO, appointing former Boeing executive Alan Mulally as CEO. Say what you will about Bill Ford, he worked cheap(ly). Ford declined to take a salary. Not so for Mr. Mulally, he's expected to make at least $10 million per year. When you pay your executives 8 figure salaries, it makes it hard to justify concessions to people who work on the production line.