September 30, 2006

Weekend Question 1: How Bad Have Things Gotten Inside Venezuela?

Filed under: MSM Biz/Other Ignorance,Taxes & Government,TWUQs — Tom @ 3:36 pm
ANSWER: VERY BAD, and the Free World’s press is ignoring it, as it has studiously ignored the evils in Cuba for decades..

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In a subscrption-only op-ed in the Wall Street Journal earlier this week, Alvaro Vargos Llosa takes a tour through modern-day Venezuela that the analogizes to the nine concentric circles of evil in the Inferno of Dante’s “Divine Comedy”:

Dante’s first circle is for those who lack faith. In Chávez’s Inferno, the first circle is made up of those who lack food. Cendas, a research center, maintains that 80% of Venezuelans cannot meet the cost of a basic daily diet.

….. Dante’s second circle is for those unable to control lust. Chávez’s second circle is for those unable to control homicidal instincts. His government has degraded social coexistence so much that there have been more homicides in Venezuela during his seven-and-a-half years in office than there have been deaths in any single armed conflict around the world in recent years. Between 2001 and 2006, the number of homicides in Venezuela has been three times the number of victims in Afghanistan.

Dante’s third circle is for gluttons who leave us with no food. Chávez’s third is reserved for corrupt authorities who leave Venezuelans with no wealth.

….. Dante’s fourth circle is for misers. In Chávez’s Inferno, the fourth circle is made up of bureaucrats who claim to provide social services but use funds to pay people to attend rallies or bust up opposition gatherings.

….. Dante’s fifth circle is for those who succumb to wrath. Chávez’s fifth is for political persecution. Venezuela’s human rights record is atrocious. Two violent incidents involving Chavista henchmen with many fatalities have gone unpunished, including the killing in April 2002 of 12 people who were protesting near the government palace.

Dante’s sixth circle is for heretics. Chávez’s sixth circle is for heretic journalists who try to tell the truth. In December 2004, a “gag law” was imposed making it easy to prosecute journalists. The president continually threatens to withdraw TV and radio licenses — the reason why there are no opinion programs on network TV. Government-controlled mobs called Bolivarian Circles, formed with the help of the Cuban intelligence apparatus, harass journalists.

Dante’s seventh circle is for the violent. Chávez’s seventh circle is another name for imperialism.

….. Chávez buys influence through oil. It is a form of blackmail: At OPEC, Chávez fights for increasing prices, making life hard for poor countries that import oil, and then offers those very nations oil subsidies they have no choice but to accept.

….. Dante’s eighth circle is for those who commit fraud. Chávez’s eighth is fraudulent anti-Americanism. Chávez exports 1.5 million barrels of oil a day to the U.S. Since oil makes up half the government’s revenue and the U.S. is the principal destination of Venezuelan oil, he pays daily homage to U.S. capitalism. Moreover, Venezuela imported $18 billion worth of goods and services from the U.S. in 2005. He may have signed 20 trade deals with Iran’s Ahmadinejad, but what he really lusts for is U.S. capitalism. (Another type of fraud involves the electoral system. Chávez has manipulated the voter registration rolls, adding two million phantom voters, including 30,000 who are 100 years old and citizens named “Superman.” Four out of five members in the Electoral Council are Chávez lackeys.)

Dante’s final circle is for traitors. Chávez’s ninth is for traitors, too — and the place is getting crowded.

….. At the end of Dante’s Inferno is the center of the earth, where Satan is held captive in the frozen lake of Cocytus. In Venezuela’s Inferno, Satan is frozen in oil-rich Lake Maracaibo, a metaphor for astronomical wealth squandered by tyrannical populism. The journey through hell is now complete.

Car Dealership Oversaturation Revisited

Filed under: Business Moves,Taxes & Government — Tom @ 12:01 pm

Forbes covered the topic this week (link requires subscription), confirming a problem mentioned in this previous BizzyBlog post (The Car Dealer-State Government Racket”), but with more numbers and research:

Having too many showrooms is bad for car dealers and the brands they sell. So why don’t carmakers do something about it?

….. Detroit is going through a wrenching contraction. The Big Three’s share of the U.S. market, 74% a decade ago, is down to 54%. Hence the cutting of tens of thousands of workers. But the vast, overpopulated dealer network is scarcely budging. The main sticking point is a collection of state and federal laws that make it difficult for car companies to terminate a dealer franchise.

General Motors still has 7,100 dealerships (some with multiple franchises, for example, Buick-Pontiac-GMC). That count is down from 8,434 ten years ago. Ford Motor has 4,400 dealers and Chrysler Group 3,900.

Contrast Toyota, with 1,215 franchises. These sell an average 1,613 new vehicles a year apiece. Chevrolet has 4,111 franchises selling an average 643 vehicles. Ford showrooms sell 696, and Dodge stores (Chrysler’s largest division) sell only 408. The situation is disastrous for the smaller brands: Buick franchises sell only 102 new cars a year, Jeep franchises 170.

Manufacturers can only watch as their dealers carve one another up by advertising giveaway prices. Worse, at least for the manufacturer, is that a lot of these dealers own competing franchises. A Buick dealer, that is, may also have a Toyota dealership down the road. Naturally, they shift their best salespeople and capital to the most profitable brands, leaving their Buick or Ford store looking shabby and staffed by inept or green sales agents.

Why don’t the weak dealers just fold on their own? Two reasons. They can still make money on service and on selling used cars. And the dealership provides jobs for the owner’s friends and relatives.

….. Carmakers can’t just shut down marginal dealers. Under state franchise laws car companies must show good cause to terminate a dealer’s franchise agreement. A federal law gives a terminated dealer the right to sue for “bad faith” by the car company. Try telling a jury that putting two dozen workers on the unemployment line was done in good faith.

These laws aren’t going to change. Dealers have traditionally been prominent businessmen with political clout in state legislative chambers. (Ever wonder why you can’t buy a car online?)

….. As long as the automakers have their checkbooks out–doling out billions of dollars to entice unionized workers to leave–why don’t they pay off some of their dealers to close up shop, too? Ford is quietly offering some dealers as much as $300,000 to encourage mergers that would streamline its network, a sum one dealer called “chicken feed,” according to Automotive News. It cost GM $583 million to compensate its 699 Oldsmobile dealers after it decided in 2000 to phase out the brand. That’s $840,000 per.

….. Don’t bet that anything like this will happen overnight. When a company eliminates a job, labor costs go down. When a company loses a dealer, its overhead costs stay the same and–at least in the short term–it loses a few hundred car sales.

The article goes on to say that Mercedes Benz endured the financial pain of paying off marginal dealers and a temporary dip in sales when it bought out about 20% of the dealers in the early 1990s. But with a stronger remaining contingent of dealers, the brand’s unit sales more than tripled from 1991 to 2000.

But Ford’s, GM’s, and Chrysler’s dealership count needs to be reduced by a lot more than 20%. Do the companies even have the capital to commit to this? Will Wall Street demonstrate any kind of patience with the inevitable but hopefully only temporary sales drop when the dealer roster is trimmed? Even worse, can the companies afford a temporary sales decline in the midst of employee buyouts and other serious capital drains?

It took about 50 years for the old Big Three to create this mess, but they probably have less than a decade, and maybe as little as 5 years, to solve it or go by the wayside.

Positivity: Geno’s Raises Money for Scholarship Fund

Filed under: Positivity — Tom @ 7:06 am

Apparently Joey Vento, owner of Geno’s Steaks in Philadelphia (yeah, THAT Geno’s), is in the habit of doing these kinds of things:

Philadelphia – Police Officer and Pa. Army National Guard Reservist Gennaro “Gerry” Pelligrini, Jr,. of the 26th Police District in Fishtown and North Philadelphia, died while serving in Iraq last year. In his memory, Geno’s Steaks owner Joey Vento will donate all sale proceeds over two days to a scholarship fund to cover private and parochial school tuition costs for low-income Catholic families.

The drive for the scholarship began yesterday and will end tomorrow night. Local Philadelphia WPHT 1210 radio host (and Evening Bulletin columnist) Dom Giordano will broadcast his program from Geno’s Steaks in order to boost publicity for the drive while encouraging listeners to add their support.

“We want to thank Joey Vento. ‘Thank you’ isn’t enough for his contribution for this fund. Thank you to everyone who comes out,” said Kim Petaccio, Gerry’s sister, on behalf of her family at the drive’s opening.

Captain Lou Campione of the 26th Police District, who helped initiate the fund, said that the scholarship honors Gerry’s love for Iraqi children. After an exchange of letters with Gerry, local Fishtown and North Philadelphia school children collected flip-flops and sent them to Gerry to give to young Iraqis.

“He had a tremendous love for children, which is why we developed the scholarship fund so we can continue to support children in his memory,” Capt. Campione said.

“He’s a true hero in all this,” Joey Vento said. “He gave his life so we can stay safe, to give a guy like me the opportunity to prosper. So I’m giving back because I can. God has been very good to me and my family.”

….. Gerry Pelligrini was 31-years-old when he died on August 9th, 2005. He served as specialist in Company A of the 1st Battalion of the 111th Infantry.