The Code Nazis got a hold of my last post. I can't remember what the post was about. Something about the theoretical value of General Motors. At any rate, GM is set to file Chapter 11 before the markets open tomorrow. Play us out Keyboard Cat.
Our Mailbag
Hey Steve
Do you know the difference between Lebron James and the Boston Strangler?
A. - The Boston Strangler never choked in May.
(Editor's note: I checked, he didn't. Stabbed yes, choked, no.)
After receiving preorders exceeding 100,000 units, Toyota announced that it is boosting production of its Prius hybrid from 43,000 per month to 50,000. Multiply that by 12 months, that's 600,000 units per year. Multiply that by an average selling price of $23,000 per unit, and that makes $13.8 billion dollars in revenue from this model alone. That's not too far off Chrysler's total revenue projection. The Prius is only manufactured in Japan for now. Toyota was planning on assembling the Prius in a new factory in Mississippi in 2010. Even though the production plant was 90% complete, the project was mothballed in December 2008 due to the worsening economy. I wonder if current sales projections will give the Toyota brass enough confidence to restart the Mississippi project.
I'm still trying to comprehend the details of the deal reached between GM and the UAW. Officially, it's a restructuring of the 2007 collective bargaining agreement, but to make the deal work, the government had to put billions worth of sweetening on the table. The UAW keeps their base wage, keeps their pension, gives in some on healthcare, and gives in a lot on work rules. An increased government cash outlay makes the GM healthcare and pension less at the mercy of future GM stock valuations, and in return, the government will own as much as 80% of the stock of the corporation. There will be cutbacks in plants, and buyouts. It looks like GM will be bringing part of Delphi back as a wholly owned subsidiary, but that's contingent on getting teh deal approved in the Delphi bankruptcy, and there may be some snags there. GM committed to building a small car in the United States. It's not clear whether they are talking about the Cruse or a different one. GM might still import some cars from China, but there will be limits. For complete coverage of a deal including a pdf of the agreement itself, check out the Detroit Free Press coverage at freep.com.
A Simple Bad Used Car Sale - Or Is It?
I don't even remember how I came to read this story on the shreveporttimes.com website. At first blush, this appears to be a typical consumer reporter story about a woman who couldn't get her car title from a used car dealer. When you actually think about the facts as described in the story, they don't add up. Why would this woman aquiese in having her son trade cars in her name several times without her signing or seeing any paperwork? What was the real relationship between the parties? After you read the story, read the comments left by readers. I don't have any idea what the true objective facts are here, but this case reminds me of so many cases I worked when I was in private practice where I thought I had an iron clad case only to find that there was a secret backstory that only became known when I was too far into the case for a graceful (and cheap) exit.
Saturday, May 23, 2009
The Pressing Question of the Day Penguins? or Squirrels?
Penguins
Squirrels
Friday, May 22, 2009
Alec Baldwin wants to "Pull the Plug" on Detroit
I didn't actually read his whole tirade, but actor Alec Baldwin thinks we should "pull the plug" on the Detroit 3 automakers. Alec, buddy, I admit that the Detroit 3 aren't what they could be, aren't what they once were, but if deterioration is grounds for euthenasia, then you and I would both be soylent green by now.
GM Bankruptcy Plans Take Shape GM Reaches Pre-Bankruptcy Deal with the UAW
All signs point to a GM Chapter 11 filing by the end of next week. Is the GM bankruptcy good news, bad news or no news? I'll let you know next week. One of the big impediments is now out of the way. GM came to general terms with the UAW on a restructuring of the 2007 contract. The new deal would be implemented in the course of the bankruptcy. Terms are still secret until the UAW members vote on the contract, but like the Ford contract, job classifications would be strictly narrowed, and there would be some benefit cuts. Up to 1/3 of the UAW jobs could be eliminated, but there would be some type of buyout plan.
Other housekeeping measures went forward. GMAC received over $7 billion in new money from the government in the form of preferred stock. It is expected that the government will inject around $30 billion in the new GM post-bankruptcy. Surprisingly, with a GM bankruptcy expected around May 27 or May 28, Delphi, long a thorn in GM's side has until June 2nd to reach a deal with its creditors, GM and the government. You'd think that Delphi's deadline would be before the GM bankruptcy so whatever the Delphi outcome , that outcome gets incorporated into the GM plan.
There are some signs that GM has learned from Chrysler's experience. Chrysler's abrupt cutting of dealers, effective June 9 was a public relations disaster and promises to result in a fire sale of excess vehicles that will last all summer. On the other hand, GM is stretching its dealer reduction out for more than a year, is allowing appeals and the return of inventory. In other words, GM is taking a kinder, gentler approach.
The GMAC capital infusion is as much to allow financing of Chrysler buyers and Chrysler dealers as to buoy General Motors. Under the Treasury Department Stress test, GMAC was determined to be undercapitalized by $11 Billion, and it's not clear to me whether Chrysler obligations were considered in that evaluation. The bottom line is the taxpayer infusion of $7 billion appears to be just the beginning, with more government money coming down the road.
(Multiple sources)
Thursday, May 21, 2009
I think I just got a bad Flash
I got my main current computer, an Apple iMac G5 in 2005, and it has been steller. But lately, my browsers keep crashing on me. Safari 3.2.3 crash. Firefox 3.0.10 crash. Both seem to crash mostly with pages with Adobe Flash. I tried a less popular browser, Omniweb, and it appears to be more stable, but still crashes some. Come on Adobe, the ball's in your court.
Two TV Hosts - Two Electric Cars Showcasing the Volt and the Aptera
As it so happens, I saw two comedian/television hosts checking out the latest electric cars. Both Jay Leno and David Lettermen are bona-fide "car guys" Jay Leno is famous for collecting every bizarre and interesting car under the sun (sometimes literally, as we'll see). David Letterman is also interested in the technical bits, but he's a sucker for fast. In the first video below, on Jay's Garage, Jay Leno checks out the Aptera, a three-wheeled electric vehicle. (None dare call it a car, because it's licensed as a motorcycle in most states.)
Jay goes on and on about the aerodynamics. With a drag coefficient of .15 it has half the drag coefficient of a good conventional car, but it's really not quite that good. The total drag is the drag coefficient multiplied by the frontal area. Since a certain portion of the frontal area of the Aptera breaks the wind just for the podded wheels, there is more frontal area than there would be on a conventional vehicle of the same size. Still, it's a damn efficient car. I can imagine commuting in one of these. (By the way, Jay parenthetically mentions his 1908 Baker Electric car. Here's a link to his video on this fascinating 100 year old electric car.)
The second video is GM's Bob Lutz showing off the preproduction Chevrolet Volt on Late Night with David Letterman. David had criticized the Volt earlier this year when he had Elon Musk and the Tesla Model S on his show. (Apparently Letterman bought a Tesla Roadster.) In the spirit of equal time, Letterman invited maximum Bob and the Volt on the show, and David was surprisingly accommodating and civil. Nice tan, Bob. I really hope the Volt makes it to market. I'd like to drive one.
An Unexpected Bonus in the Credit Card Bill = We can Pack Heat While We Pack Our Tents
Congress sent the long-awaited credit card fairness (or whatever they're calling it now) bill to President Obama with an unexpected bonus. If the bill passes, we'll once again have the right to carry concealed weapons in national parks. It looks like Yogi is going to be in for a little surprise if he touches MY pic-a-nic basket.
For a marginally relevant video - I'm taking you in the way back machine to the very first episode of NBC's Saturday Night from 1975. The show didn't even become Saturday Night Live until Saturday Night Live with Hoard Cosell show bit the dust sometime later. The biggest legacy of SNL with Howard Cosell, the Bay City Rollers, a Scottish band named after a city in Michigan.
PTFOA, Where are you? President's Auto Task Force is Incommunicado, and Ralph Nader is Right - To a Point
Where is, repeat, where is, the Presidential Task Force on the Auto Industry? The World Wonders. At the risk of sounding too much like Admiral Chester Nimitz, and making Admiral Halsey roll over in his grave, this is a question that I've been asking lately. This all started when I though I'd like to write a letter to Steven Rattner, the chairman of the commission. So I googled the Presidential Task Force on the Auto Industry. Result: nothing, no official contact information at all. I tried the White House website. I tried the Department of the Treasury website. I tried looking at Thomas.gov. I searched the Federal Register. All searches resulted in 0 results.
I dare you to find an official contact person, address or phone number for the President's Task Force on the Auto Industry. I tried, friends, I tried.
After trying to find a public contact, I decided to go through official channels. I figured, as a public agency, they would have to post instructions on procedures for Freedom of Information Act requests. (Hence the check of the Federal Register. Nothing was there, so I emailed the good folks at the open government program of Public Citizen. They emailed me back and confirmed my suspicion, President Barack Obama's Auto Industry Task Force exists in the same shadowy underworld that Dick Cheney's Energy Task Force made famous. It was June 2004 that the Supreme Court punted the issue of accountability in the case of Cheney v. United States District Court. (In case you forgot, that's when Cheney and Scalia went hunting, a lawyer ended up in the hospital, and Scalia got all friendly-like.)
Until the Cheney decision, if a President convened a panel that included anyone but current executiveProxy-Connection: keep-alive Cache-Control: max-age=0
ppointees, under the Federal Advisory Committee Act (FACA), the Committee was expected to meet certain minimum standards of open meetings, access to information and screening for bias. Cheney and Bush flouted the law. The Supreme Court looked the other way, and now it appears the Obama Administration isn't even paying lip service to FACA.
In other words, ladies and gentlemen, here we have a group of government officials with the power to spend tens of billions of our dollars with very little oversight, accountability or even accessability to public input. I started paying significant attention to the problem about three weeks ago. Other folks were way ahead of me including, wait for it, Ralph Nader. Ralph used to be really high on my list of admired folks until he, uh, exercised poor judgment relating to the 2000 election. That being said, even though he doesn't know when to stay out of a presidential race, Ralph Nader has probably forgotten more law and policy regarding open records and public access than I'll ever know.
Citizen Ralph (with Robert Weissman) on Monday made public an open letter to Congress in which he takes the Presidential Task Force on the Auto Industry (PTFOA) to task on numerous issues. In addition, he points out that the PTFOA has made and end run around all of the procedural safeguards of the Federal Advisory Committee Act. At this point, the Task Force isn't just advising the President, it's spending tens of billions of dollars and directly affecting the workings of one of the country's largest industries. The position it is taking as a lender and bankruptcy super creditor has the potential for upsetting bond markets in unrelated industries. In his letter, Nader asks Senator Chris Dodd and Barney Frank to exercise greater supervision over the PTFOA. I don't really agree with the recitation of the Task Force's sins which, in Nader's letter read like Martin Luther's Ninety-five Theses, but I do agree with Nader's main theme, that if Obama's task force is going to act like Cheney's task force, then Congress has to get serious and exercise supervision.
Tuesday, May 19, 2009
George W. Bush in Retirement "Can Timmy come over to play?" and more
Judging from this Newsweek.com article, George W. Bush appears to be settling into private life in Midland, Texas, and he's more than a little board. He's even inviting neighborhood kids to come over and hang out with him. (Here's a tip from Michael: it helps if you have a chimp and an amusement park.) I wonder if his experience in reverting to private life is anything like his father's was way back in 1993?
Maybe he'll invite his buddies Harold & Kumar to hang out with him.
Ironically, Kumar (to be specific, actor Kal Penn) is back at the White House. He's Undersecretary for Public Affairs for President Obama. If there's a wet towel under the door, don't come knocking. Harold is now getting really high. Actor John Cho is Sulu in J.J. Abram's Star Trek. Penn and Cho are set to reunite for a second sequel, A Very Harold and Kumar Christmas, to be shot next summer for a Christmas 2010 release.
Monday, May 18, 2009
Congratulations AIG, You are the Worst, You Are the Worst
It's Finally Here ! CHARLIE THE UNICORN, Episode 3
Sunday, May 17, 2009
The Doctor will Gag You Now
The May 2009 issue of Angie's List Magazine (online here) has an interesting article about a new phenomenon in the New Patient Agreements that you have to sign when you see a doctor. "Gag" provisions in these contracts can prohibit patients from commenting publicly on the treatment they receive, with liquidated damages and attorney fees payable if the patient gets uppity.
Angie's List is a fast growing firm that lets members rate service providers and obtain rating reports submitted by other members. Informally, the company mediates disputes between consumers and service providers in some situations. I've been an Angie's List member for years, and I think they provide a very useful service. In recent months, Angie's List has started publishing ratings on medical professionals, so if these gag provisions catch on, the nacient medical rating service may never really meet its potential.
The author of the Angie's List article, Daniel Simmons, traced the medical gag provisions to a company in Greensboro, North Carolina called Medical Justice Corp. Medical Justice Corp. is run by a neurosurgeon named Dr. Jeffrey Segal. According to the article, medical offices that affilliate with Dr. Segal's firm pay between $350 and $1990 per year, and besides the gagging contracts Medical Justice's affilliates get up to $100,000 in "assistance" in countersuing medical experts who testify against the member. Gee, it sounds a lot like INSURANCE to me. I wonder if the INSURANCE COMMISSIONER knows about this assistance.
Hey, I'm all for free speech, and I think the doctors are wrong for putting in these gag provisions. I think the gag clauses will eventually be found to violate public policy and be therefore void. That being said, I can understand why the doctors are upset that patients can criticize them anonymously, but they can't comment back due to both traditional patient privacy rules and HIPPA. I think this is an area where the legal profession is ahead of the medical profession. The ABA Model Rules of Professional Responsibility, specifically Rule 1.6(b)(5) specifically allows a lawyer to disclose client confidences when the lawyer believes it is reasonably necessary to
(5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client;
So the lawyer can disclose information when needed to defend himself/herself from false client allegations. But wait, this allows the lawyer to "respond to allegation in any proceeding concerning the lawyer's representation. . ." What is a proceding? Does this rule out the court of public opinion, specifically ripoffreport.com? Maybe Rule 1.6 could stand to be touched up a bit.
Perhaps I'm slow, but I just realized that we are now officially halfway through with If You Buy a New Car, You're Crazy month. You're crazy if you buy a new car in May 2009 because, chances are, you can get a deal in June that's enough better than May that you can pay to rent a car the entire month with the difference.
There are many reasons why. Chrysler is in Chapter 11. GM is just a couple weeks away. Between GM and Chrysler, almost 2,000 dealers with 120 days of inventory apiece will be losing their franchises and dumping their cars on the market. If the average car dealer sells 785 cars per year, let's say these "underperforming" dealers sell 500. Math time: 120/365 * 500 * 2000 = 328,767 extra cars stuffing the channels, and that's just the new cars. Many of these dealers will be liquidating their used cars also, so you can double this figure.
The economic malaise continues, foreclosures are still going up. Money is still tight. Buyer resistance due to bankruptcies and lack of local dealer support thanks to dealer reductions should reduce demand for Chrysler and GM products to the point where even more incentives are necessary to drive enough demand to support minimal operations.
Add to this uncertainty over the cash for clunkers law. If you are looking to upgrade your old car, you have every reason to wait until Congress passes a cash for clunkers law, otherwise you are throwing away $3,500 to $4,500.
All of these factors suggest that May sales could be shockingly low, significantly below the 9-10 million annual rate that has prevailed the past few months.
I hope I'm wrong, but I can imagine sales over the next couple months at an annual rate of 7-8 million units/year. If this ends up being true, then summer plant shutdowns will last well into fall. I don't have all the answers, but I have one suggestion: decouple the cash for clunkers bill. You need to separate the distinct policy goals of stimulating the auto market and that of getting inefficient polluting cars off the street. Give buyers a tax-credit that is based upon the EPA rating of the car, regardless of whether you buy it before or after the credit is in place, and have a separate program that rewards vehicle owners if they scrap a clunker. By making it clear that the incentives will be paid whenever the vehicle is bought/scrapped this year regardless of the enactment date of the new legislation, you will reduce the number of fence-sitters.
Thursday, May 14, 2009
Chrysler Axes 789 Dealers (GM to cut 1,000 Dealers by Friday)
Chrysler published a list of 789 dealers whose franchises are being terminated effective June 9. The list is posted here at Autonews.com. Among the excised dealers will be Palmer Dodge Chrysler Jeep, the Dodge dealer closest to my office. In other words, I know don't have a bat's chance in hell at getting my car into the shop and getting to the office in a reasonable time. I don't understand the logic of thinking that you can sell more cars with fewer dealers. Granted too many dealers is a problem, but it's not nearly as bad as not having ENOUGH dealers.
I can understand the argument that if a company is going to go in and out of bankrutpcy within a short period of time (2 months), it has to act decisively in cutting dealer ranks down to a sustainable level. After all, bankruptcy may be the only way to cut dealers without paying them huge compensation. This rationale is less compelling when the bankrupcy process is not going to be quick. Yesterday it was disclosed that Chrysler's 2 month bankruptcy plan is looking more like a 2 year plan.
This Chrysler bankruptcy seems to be turning into a fiasco of major league proportions, Saving the company in name isn't saving jobs at the dealer level, isn't keeping suppliers from filing bankruptcy and laying off employees, and isn't saving employees from being financially ruined as their plants close temporarily and permanently. Chrysler is using our taxpayer money to advertise vehicles that don't exist and to try to preserve sales channels for imported Fiats. In the meantime, huge Chrysler discounts are contributing to an incentive war where 25% of the vehicles are being sold below dealer cost. Although it's good for current buyers, this kind of discounting is unsustainable.
Wednesday, May 13, 2009
Office Fridge Sends 7 to the Hospital
Is your office fridge a toxic waste zone? USA Today reports on an office in San Jose, California that can do you one better. Seven people went to the hospital due to noxious fumes when a coworker finally decided to clean the office fridge. Take it, Weird Al
Lull in the Action
We are in a lull period regarding auto industry news. Even so, here are some quickees. Links when I have the time. GM is going to import cars from China. Ford is riding a "dead cat bounce", at least its stock is, so Ford did a quicky public stock offering to generate some cash. Chrysler's bankruptcy could take 2 years to complete. Delphi could face liquidation due to plummeting orders of its parts. Visteon is facing a "going concern" report from its accountants, despite a small quarterly profit. Nissan reported its first loss in a long time.
According to ttac.com, Chrysler's lawyers tried to pull a fast one on the secured creditors with a Tora Tora Tora sneak attack on the non-TARP secured lenders. Chrysler filed a motion to have all of Chrysler's valuable assets transferred into a new company. They filed the motion at 7:30 Sunday evening and asked for a hearing Monday morning at 10:00 AM. Talking about SOB litigators! Can you imagine if one of us tried the same stunt? The secured creditors were ready and filed a reply, making sure the important stuff won't be heard on the rocket docket.
The non-TARPees came out swinging with some pretty interesting arguments as to why Chrysler's (and the government's) plan is illegal and prejudicial to the secured creditors.
This one promises to be a real slugging match.
Sunday, May 03, 2009
Why There Aren't More Consumer Lawyers - Michigan Supreme Court Guts State Consumer Protection Act
You'd think that a consumer that when you go to a car dealer and buy a certified used car described as a "demo" that it wouldn't be made of the front and back ends of two different wrecked cars welded together. According to this Detroit Free Press article, that was too much for Paulette Day to expect when she paid $20,350 for a 2004 Chevrolet Monte Carlo at Rowan Pontiac GMC. You'd think that if you get such a Frankenstein mobile, you might have a remedy at law against the folks that sell it to you.
Nay, Nay says the Michigan Supreme court. The Michigan Supreme Court has gutted the 1976 Consumer Protection Act by ruling that any company regulated by state or federal law is exempt from the Act. Now new and used car dealers, mortgage brokers, debt collectors can engage in outrageous practices free from liability under the Consumer Protection Act. The practical effect of this is that private attorneys are robbed of the principal tool they could use to get attorney fees payed by the deceptive business. Without a general consumer protection act, an attorney might be able to sue for breach of contract or a common law tort, but any business can successfully ward off such suits by wasting the plaintiff attorney's time and thereby making it uneconomical to pursue the suit.
You'd think that Michigan Governor Jennifer Granholm, a former Attorney General with eyes on higher political office, would be able to lead an effort to get the law strengthened. You'd think.
Michigan lawyers and consumers, you have my sympathy. Indiana's law isn't much better. Indiana's Deceptive Consumer Sales Act has a one year statute of limitations and lots of loopholes.
Sterling Heights, MI. (Sebring & Avenger) Detroit Axle Conner Avenue Assembly (home of the Viper) St. Louis North (Ram) Kenosha, WI (engines) Twinsburg OH (stamping)
Altogether these plants employ about 5,000 workers. By my reckoning, the closed plants account for half or so of Chrysler's (USA-based) final assembly capacity. Two assembly plants in Canada and two assembly plants in Mexico are not set for closure.
Despite the efforts of the PTFOA to ferret the bullshit out of Chrysler plans, there seems to still be quite a bit of fantasy in Chrysler's bankruptcy plan.
Don't be surprised if this plan gets more scrutiny in the bankruptcy court than Chrysler and The PTFOA are anticipating. You can't ignore the April sales figures, with car sales down more than 60% compared to last year. For example, the Sebring & the Avenger only sold 16,875 units combined through April. That's a third of a year. That puts them on a yearly pace of 50,000 units, or roughly a fourth of a two shift modern assembly plant capacity. They only reached that level with Employee Pricing Plus Plus. In other words, each car is apparently being sold at a loss. Why wait until 2010 to put these cars out of their misery? There's not much difference between having a gaping hole in the middle of your lineup and having a couple cardboard cutouts trying to hide the gaping hole in your lineup.
Chrysler is maintaining that almost no more jobs will be lost with this diminished plant capacity. I find this hard to believe. Even if it's technically true, the workers won't be relying much on Chrysler for their daily bread.. The workers making cars that aren't selling will be surviving on unemployment and sub-pay for 8 months a year at the current rate of sales. The pay coming from Chrysler will basically be coming from Uncle Sam's bankruptcy financing. When their plants close in a year or so, there will be about 5,000 people that will have to find work in another town, mostly another state, making Chrysler's new generation of cars (mostly Fiats) that will have no track record of reliability or dependability, and that's assuming the jobs don't go to Mexico and Canada.
Friday, May 01, 2009
April 2009 Sales Numbers - Industry Down 1/3 Ford & GM Better than Expected - Chrysler Sales Plummet
Ford sales were down 31% from last year, but for the first time this year, Ford outsold Toyota, because Toyota was down 42%. Ford continues to gain market share by having its sales go down by a lower percentage than the sales of rival makes.
GM sales were down 34%, roughly even with the industry average. Given all the negative publicity over GM's finances, average is probably a win.
Chrysler sales were shockingly bad. Chrysler cars were down 61% compared to last year, and Chrysler trucks were down 44%. (Remember, this is with Employee Plus Plus pricing, that is, the employee price, cash back and 0% financing.) Total Chrysler sales were 48% below last year. Last year was no great shakes. Sales in April 2008 were 28% below 2007. In other words, prior to filing bankruptcy, Chrysler's sales were only 37% what they were two years ago, and two years ago Chrysler was already in bad enough shape that Daimler was bailing out and effectively paying Cerberus to take over the company.
Afscme's Webrider's Blog regarding the law, the auto industry, and popular culture, for Local 3357's members. The Webrider is Steve Hofer, staff attorney in the Indianapolis West Office.
