The Least Competent Balloonist/Skydiver
Back in February 2006, I blogged about Michael Fournier's planned attempt to break the altitude record for skydiving. Mr. Fournier's dream may have come to an end because his balloon took off without him. He spent his life savings, over $200,000 on the attempt. The balloon was filled with helium and attached to the capsule, but apparently wasn't attached to anything else as it majestically rose into the sky sans the Frenchman. How do you say "D'oh!" in French?
This calls for another barely relevant Monty Python clip.
Tuesday, May 27, 2008
GM's CPA Firm Just Says No
2 Billion loss from Strikes - tip of the iceberg
GM's annual report was released on Friday, just in time for the Memorial Day weekend. If you want to bury bad news, that's the best time to release it, and it appeared to work this time, because as far as I can tell, the Wall Street Journal has not even picked this up yet. I got it from thetruthaboutcars.com. General Motors' outside auditing firm, Deloitte & Touche, refused to give the typical approval of the company's financial statement. According to the auditors: “In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Corporation has not maintained effective internal control over financial reporting as of December 31,2007." That's basically saying they don't know what the deal is with GM's books.
Separately, news came that the American Axle strike is expected to cost GM over $2 billion. During the weekend, GM's stock plunged about 5% in over-the-counter trading, falling to a 26 year low.
2 Billion loss from Strikes - tip of the iceberg
GM's annual report was released on Friday, just in time for the Memorial Day weekend. If you want to bury bad news, that's the best time to release it, and it appeared to work this time, because as far as I can tell, the Wall Street Journal has not even picked this up yet. I got it from thetruthaboutcars.com. General Motors' outside auditing firm, Deloitte & Touche, refused to give the typical approval of the company's financial statement. According to the auditors: “In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Corporation has not maintained effective internal control over financial reporting as of December 31,2007." That's basically saying they don't know what the deal is with GM's books.
Separately, news came that the American Axle strike is expected to cost GM over $2 billion. During the weekend, GM's stock plunged about 5% in over-the-counter trading, falling to a 26 year low.
Thursday, May 22, 2008
For Chrysler, 1998 Was a Very Good Year
2008 -- Not so much
Allpar.com has a good article about the Chrysler Corporation of 10 years ago. The year 1998 was a very good year for Chrysler. The company made profits of $2.74 billion that year. It had a line-up of new or newish trucks and cars.
Fast forward to 2008 - not so great gravy. Daimler abandoned Chrysler with a line-up of aging (Chrysler 300) or hopeless (Sebring/Avenger) cars, no small cars whatsoever, a mish-mash of out-of-fashion SUVs, thirsty trucks, poor supplier relations and staggering retiree liability. Chrysler has a new halo car, the Challenger that is just hitting the dealership now, but it's a 25,000 unit/year model that can't save the company from its current 20+% year-to-year sales slide. After the Challenger, the only significant new product that's slated to hit the streets in the next year and a half is a redesigned Ram pickup. The new Ram will be going toe-to-toe with a brand new Ford F150. The F150 is only the best selling motor vehicle model in the United States. At best the new Ram will maintain current market share in a shrinking market.
Chrysler has emergency plans to get new product into the showroom in about two years. They have arranged to get a small car from Nissan, import a really small car from China made by Chery, and they have a balls-out program to improve the Sebring and Avenger. There's some chance that Chrysler's distribution network is attractive enough for a foreign company to buy Chrysler lock-stock & barrel in order to get a ready-made network of dealerships. Possible buyers include Renault, Fiat and several Chinese manufacturers. Just this week, Chrysler ruffled some feathers by introducing a plan to reduce supplier costs by 25% within 3 years. It doesn't take a genius to see that the most likely way that 25 percent reductions would take place is by off-shoring to low-wage countries.
All in all, about the only thing that you can count on for Chrysler is that the Chrysler of 2018 (if there is such a thing) will look very different from the Chrysler of 2008. What is currently perhaps the most American of the old Big 3 manufacturers is likely to be exactly the opposite a decade from now.
2008 -- Not so much
Allpar.com has a good article about the Chrysler Corporation of 10 years ago. The year 1998 was a very good year for Chrysler. The company made profits of $2.74 billion that year. It had a line-up of new or newish trucks and cars.
Fast forward to 2008 - not so great gravy. Daimler abandoned Chrysler with a line-up of aging (Chrysler 300) or hopeless (Sebring/Avenger) cars, no small cars whatsoever, a mish-mash of out-of-fashion SUVs, thirsty trucks, poor supplier relations and staggering retiree liability. Chrysler has a new halo car, the Challenger that is just hitting the dealership now, but it's a 25,000 unit/year model that can't save the company from its current 20+% year-to-year sales slide. After the Challenger, the only significant new product that's slated to hit the streets in the next year and a half is a redesigned Ram pickup. The new Ram will be going toe-to-toe with a brand new Ford F150. The F150 is only the best selling motor vehicle model in the United States. At best the new Ram will maintain current market share in a shrinking market.
Chrysler has emergency plans to get new product into the showroom in about two years. They have arranged to get a small car from Nissan, import a really small car from China made by Chery, and they have a balls-out program to improve the Sebring and Avenger. There's some chance that Chrysler's distribution network is attractive enough for a foreign company to buy Chrysler lock-stock & barrel in order to get a ready-made network of dealerships. Possible buyers include Renault, Fiat and several Chinese manufacturers. Just this week, Chrysler ruffled some feathers by introducing a plan to reduce supplier costs by 25% within 3 years. It doesn't take a genius to see that the most likely way that 25 percent reductions would take place is by off-shoring to low-wage countries.
All in all, about the only thing that you can count on for Chrysler is that the Chrysler of 2018 (if there is such a thing) will look very different from the Chrysler of 2008. What is currently perhaps the most American of the old Big 3 manufacturers is likely to be exactly the opposite a decade from now.
Tuesday, May 20, 2008
Visteon CEO to Receive $2.5 million Severance
Automotive News reports that Visteon's outgoing (outgoing - as in "don't let the door hit you in the ass on the way out") CEO, Michael Johnson, will be receiving a severance package amounting to $2.5 million. His total compensation last year was $8.9 million, so you know he needs the bucks. What kind of severance to we receive when we're laid off? Is it jack squat or diddly squat?
Automotive News reports that Visteon's outgoing (outgoing - as in "don't let the door hit you in the ass on the way out") CEO, Michael Johnson, will be receiving a severance package amounting to $2.5 million. His total compensation last year was $8.9 million, so you know he needs the bucks. What kind of severance to we receive when we're laid off? Is it jack squat or diddly squat?
Sunday, May 18, 2008
American Axle & Union Have Tentative Deal
American Axle and the UAW have completed a tentative contract. The UAW struck the company after American Axle demanded an almost 50% paycut from the production members. In the new contract, the workers will get more, but . a lot. Base pay for production workers will be $18.50, down from $28.00 per hour pre-strike. Nonproduction workers will start at $14.35, and skilled trade members will make $26.00. The Detroit News article reporting the settlement could be clearer on the details, but apparently the workers will receive a $90,000 one time buy down payment at least $90,000.
The American Axle strike had the potential to be disastrous to General Motors, but as luck would have it, the axles and suspension components made by AA mostly went into truck models that already were in excess supply. For other models affected by the strike, the General was able to secure enough parts from other suppliers (and presumably American Axle's non-US plants) for production to resume after brief interruptions.
American Axle and the UAW have completed a tentative contract. The UAW struck the company after American Axle demanded an almost 50% paycut from the production members. In the new contract, the workers will get more, but . a lot. Base pay for production workers will be $18.50, down from $28.00 per hour pre-strike. Nonproduction workers will start at $14.35, and skilled trade members will make $26.00. The Detroit News article reporting the settlement could be clearer on the details, but apparently the workers will receive a $90,000 one time buy down payment at least $90,000.
The American Axle strike had the potential to be disastrous to General Motors, but as luck would have it, the axles and suspension components made by AA mostly went into truck models that already were in excess supply. For other models affected by the strike, the General was able to secure enough parts from other suppliers (and presumably American Axle's non-US plants) for production to resume after brief interruptions.
Thursday, May 15, 2008
Wednesday, May 14, 2008
Youtube Video of the Day:
Hardball Made Easy with Carlos Zambrano
Baseball season is in full swing right now. My son is playing Little League, so I've taken it upon myself to learn all the fundamentals of the sport. The Hardball Made Easy series gives you the skills you need to make it as a baseball player. Today's episode: Taking One For the Team
Hardball Made Easy with Carlos Zambrano
Baseball season is in full swing right now. My son is playing Little League, so I've taken it upon myself to learn all the fundamentals of the sport. The Hardball Made Easy series gives you the skills you need to make it as a baseball player. Today's episode: Taking One For the Team
2009 Ford Focus Coupe Goes Public on Idol Tonight
Tonight's American Idol elimination episode will determine the final two. Smart money is on the two Davids battling it out for the most forgettable Idol season ever. (Personally, I'd like Syesha to stay.) Ford hopes to take advantage of the high ratings of AI to introduce the 2-door Coupe version of the Ford Focus.
When the 2008 Focus sedan came out last year, it seems like Ford tried to evoke pleasant memories of The Rainbow Fish, with a reflective cheek implant emulating the newly humble fish's single shiny scale. Instead, the styling cue reminded me of Rosanne Rosannadana's commentary in response to Mr. Richard Vader of Fort Lee New Jersey. "It's like when you get something stuck between your teeth, and it's like a bone, but it's not a bone. . . ." Ford has had the last laugh though, sales of the Focus have been strong, and because the company didn't spend a bunch of money on a complete redo, the car might even be profitable to build.
Anyway, the coupe does away with the bony thing. It has the Sync music system that lets you play artist Michael Bolton. It gets good gas mileage. It's made by the UAW in the United States. What more could you want?
Tonight's American Idol elimination episode will determine the final two. Smart money is on the two Davids battling it out for the most forgettable Idol season ever. (Personally, I'd like Syesha to stay.) Ford hopes to take advantage of the high ratings of AI to introduce the 2-door Coupe version of the Ford Focus.
When the 2008 Focus sedan came out last year, it seems like Ford tried to evoke pleasant memories of The Rainbow Fish, with a reflective cheek implant emulating the newly humble fish's single shiny scale. Instead, the styling cue reminded me of Rosanne Rosannadana's commentary in response to Mr. Richard Vader of Fort Lee New Jersey. "It's like when you get something stuck between your teeth, and it's like a bone, but it's not a bone. . . ." Ford has had the last laugh though, sales of the Focus have been strong, and because the company didn't spend a bunch of money on a complete redo, the car might even be profitable to build.
Anyway, the coupe does away with the bony thing. It has the Sync music system that lets you play artist Michael Bolton. It gets good gas mileage. It's made by the UAW in the United States. What more could you want?
Tuesday, May 13, 2008
2007 Consumer Law Attorney Fee Survey
Making Progress in the Private Sector
Ron Burdge has published the Second edition of his Consumer Law Attorney Fee Survey. The results should be of interest to AFSCME 3357 members, because many of us practice consumer law with UAW Legal Services Plan, albeit on a salaried basis.
Those attorneys that "eat what they kill" and seek and recover third party contingent attorney fees have seen a significant increase in rates. When I quit my private practice 10 years ago, the highest rates were somewhere around $200.00 per hour, with $150 being more common. They have increased markedly since then. According to the Burdge survey, in 2007 in Indiana, for example average hourly rates for a small firm were $323.00 per hour, up 182% since 2000. In Ohio, the average small firm rate in 2007 was $269, a 151% increase since 2000. In Ohio, big firm lawyers did better, with an average rate of $412, a 209% increase over the 7 years.
What does that mean for UAW-LSP attorneys? There is life after the plan. There's an old saw that says you have to bill three times what you take home. How many hours would you have to bill (and collect) to make a typical $55,000 UAW LSP salary? At $269, to generate gross revenue of $165,000, you would have to generate 613 billed and paid hours, just under 12 hours per week.
Making Progress in the Private Sector
Ron Burdge has published the Second edition of his Consumer Law Attorney Fee Survey. The results should be of interest to AFSCME 3357 members, because many of us practice consumer law with UAW Legal Services Plan, albeit on a salaried basis.
Those attorneys that "eat what they kill" and seek and recover third party contingent attorney fees have seen a significant increase in rates. When I quit my private practice 10 years ago, the highest rates were somewhere around $200.00 per hour, with $150 being more common. They have increased markedly since then. According to the Burdge survey, in 2007 in Indiana, for example average hourly rates for a small firm were $323.00 per hour, up 182% since 2000. In Ohio, the average small firm rate in 2007 was $269, a 151% increase since 2000. In Ohio, big firm lawyers did better, with an average rate of $412, a 209% increase over the 7 years.
What does that mean for UAW-LSP attorneys? There is life after the plan. There's an old saw that says you have to bill three times what you take home. How many hours would you have to bill (and collect) to make a typical $55,000 UAW LSP salary? At $269, to generate gross revenue of $165,000, you would have to generate 613 billed and paid hours, just under 12 hours per week.
Monday, May 12, 2008
From the cars we CAN drive to work file:
2009 Mazda 6
Here's a link to an Autoblog article on the unveiling of the 2009 Mazda 6. The 2009Mazda 6 will go on sale in the fall with new engines and a streched platform. To me, it looks a lot like the Ford Mondeo sold in Europe. Even though it's a Mazda, we should be able to drive it to work, because it will be built in the UAW-staffed Flat Rock, Michigan plant Mazda shares with Ford. It's ironic, because our contract prohibits us from driving the Mazda6's platform-mates, the Ford Fusion and Mercury Milan, because those cars are assembled in Mexico.
Sunday, May 11, 2008
General Motors and the Perfect Storm
I'm trying to get back into the whole blogging thing after making time for doctors and dentists and kids and work and you name it. A lot of things have happened in the past two weeks since I last posted. For General Motors, there hasn't been a lot of positive news. It seems like the entire world is conspiring to take the General's limited supply of cash much faster than Herr General wants (or needs) to give it up.
First thing's first: April's car sales were up, but truck sales were down by double digits. The way GM is set up right now, truck sales are where the profit lies. Things aren't expected to turn around anytime soon with gas prices staying high, or going higher. Already, GM has announced that it will stop producing most of its trucks and SUVs for 2008 at least a month before usual.
Delphi continues to be a problem for General Motors. Delphi is back to square one. Even though Delphi CEO Steve "The Pompatus of Bankruptcy" Miller just released a book touting himself as the turnaround king, the company is still a basket case. Delphi is still in Chapter 11 bankruptcy after a financing plan fizzled. Delphi lost $589 million in the first quarter of 2008. General Motors may have to come to the rescue to the dune of billions of dollars just to fund the continuing unfunded pension liabilities that Delphi has been ignoring since the bankruptcy. Ted Evanoff of the Indianapolis Star wrote an excellent piece on history and current status of the Delphi mess. It's linked here.
Rescap, the mortgage lending part of GMAC may be headed towards its own bankruptcy. Flow throw losses hurt GM's finances last quarter. Rescap lost almost $900 million last quarter. Bloomberg News reports that GMAC may be forced to loan Rescap $3.5 billion to avert a bankruptcy. With GMAC's junk-bond debt level, this means that the $3.5 billion will have to come in the form of capital infusions from GMAC's investors, General Motors (49%) and Cerberus Capital Management (51%). Cerberus Capital Management, GM's partner in GMAC has its hands full with Chrysler. Chrysler is even sicker than GM. If it's possible, Chrysler is even more dependent on trucks than GM. Chrysler's trucks get worse gas mileage than GM and Chrysler has fewer competitive models on the floor or in the pipeline. Moreover, Chrysler doesn't have General Motors' healthy international sales. Rescap lost $4.3 billion in 2007. Only half of that (49% actually) flows through to General Motors, but $2 billion is real money
American Axle strike continues. The AA UAW workers seem intent on dying on their shields rather than taking a huge paycut. GM offered to kick in $200 million in transition payments, but the offer was turned down by the union. So far GM has done a good job minimizing the effect of the AA strike. Shutdowns at plants selling hot-selling cars have been brief. I suspect that there are still some smart industrial engineers at GM who can program their way around American Axle products. With modern numerically controlled machinery, it's probably not that hard to send digital plans for commodity parts to an internal plant or alternate supplier.
So, what we have is an overall lousy economic climate for automakers in general, and added to that, General Motors has three cash sucking problems not shared by other automakers (or not to the same extent), specifically: Delphi, Rescap, and American Axle. Each can be expected to take billions from GM's bottom line this year. How much cash does GM have to weather the storm? According to Fortune Magazine on April 28, the answer was $34.6 billion. That is actually more than the company had last year at this time. It's enough to see GM through the end of this year. Things could get dicey in 2009 if the economy doesn't turn around.
Oh yes, did I mention the $30 billion that GM has to contribute to its VEBA by 2010?
I'm trying to get back into the whole blogging thing after making time for doctors and dentists and kids and work and you name it. A lot of things have happened in the past two weeks since I last posted. For General Motors, there hasn't been a lot of positive news. It seems like the entire world is conspiring to take the General's limited supply of cash much faster than Herr General wants (or needs) to give it up.
First thing's first: April's car sales were up, but truck sales were down by double digits. The way GM is set up right now, truck sales are where the profit lies. Things aren't expected to turn around anytime soon with gas prices staying high, or going higher. Already, GM has announced that it will stop producing most of its trucks and SUVs for 2008 at least a month before usual.
Delphi continues to be a problem for General Motors. Delphi is back to square one. Even though Delphi CEO Steve "The Pompatus of Bankruptcy" Miller just released a book touting himself as the turnaround king, the company is still a basket case. Delphi is still in Chapter 11 bankruptcy after a financing plan fizzled. Delphi lost $589 million in the first quarter of 2008. General Motors may have to come to the rescue to the dune of billions of dollars just to fund the continuing unfunded pension liabilities that Delphi has been ignoring since the bankruptcy. Ted Evanoff of the Indianapolis Star wrote an excellent piece on history and current status of the Delphi mess. It's linked here.
Rescap, the mortgage lending part of GMAC may be headed towards its own bankruptcy. Flow throw losses hurt GM's finances last quarter. Rescap lost almost $900 million last quarter. Bloomberg News reports that GMAC may be forced to loan Rescap $3.5 billion to avert a bankruptcy. With GMAC's junk-bond debt level, this means that the $3.5 billion will have to come in the form of capital infusions from GMAC's investors, General Motors (49%) and Cerberus Capital Management (51%). Cerberus Capital Management, GM's partner in GMAC has its hands full with Chrysler. Chrysler is even sicker than GM. If it's possible, Chrysler is even more dependent on trucks than GM. Chrysler's trucks get worse gas mileage than GM and Chrysler has fewer competitive models on the floor or in the pipeline. Moreover, Chrysler doesn't have General Motors' healthy international sales. Rescap lost $4.3 billion in 2007. Only half of that (49% actually) flows through to General Motors, but $2 billion is real money
American Axle strike continues. The AA UAW workers seem intent on dying on their shields rather than taking a huge paycut. GM offered to kick in $200 million in transition payments, but the offer was turned down by the union. So far GM has done a good job minimizing the effect of the AA strike. Shutdowns at plants selling hot-selling cars have been brief. I suspect that there are still some smart industrial engineers at GM who can program their way around American Axle products. With modern numerically controlled machinery, it's probably not that hard to send digital plans for commodity parts to an internal plant or alternate supplier.
So, what we have is an overall lousy economic climate for automakers in general, and added to that, General Motors has three cash sucking problems not shared by other automakers (or not to the same extent), specifically: Delphi, Rescap, and American Axle. Each can be expected to take billions from GM's bottom line this year. How much cash does GM have to weather the storm? According to Fortune Magazine on April 28, the answer was $34.6 billion. That is actually more than the company had last year at this time. It's enough to see GM through the end of this year. Things could get dicey in 2009 if the economy doesn't turn around.
Oh yes, did I mention the $30 billion that GM has to contribute to its VEBA by 2010?
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