November 12, 2008

On the Idea of Bailing Out GM: NO

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 1:20 pm

Kate at Small Dead Animals graphically shows why not.

Being graphically challenged at the moment, I’m tempted to hot link to her chart, but I’ll resist. Here are three of the key numbers:

Total Compensation Per Hour, 2007-2008 (includes wages and all benefits):
Big Three automakers — $73.08
Toyota — $48.00
All workers — $28.48

We’re supposed to bail out the ones with the highest cost structure, so they can keep it in place? Surely you jest.

The Big Three have had cost-structure problems for at least 30 years, and refused to adequately address them. If you look at the financial statements of GM and Ford (Chrysler is private, and arguably suffering the most), you see that they are burning through money at rates that would make 1990s dot-com companies blush.

If the sales performance of past few months continues, GM is a year or less — maybe a lot less — from bankruptcy. Ford? Maybe — maybe — eighteen months.

Oh, and in case you didn’t notice, after avoiding such practices for years, Toyota is getting very aggressive in its rebate and special financing deals, making the Big Three’s climb-out that much more difficult, if not impossible.

The bailout money from Washington would mostly, if not entirely, subsidize current operations, would have almost nothing to do with the wonder car of the future, and would extend the companies’ lives by a few years. It is overwhelmingly likely that Uncle Sam will never get his money back if he does the lending, and will have to pay up if the deal is structured as a subsidized bank loan guarantee.

Even lefties (example here; HT NixGuy) are having a hard time with the idea of keeping GM alive. I sense that there is almost no support for this outside the state of Michigan. It shouldn’t be done.

2008 Weblog Awards Site Has Been Active Since November 3

Filed under: General — Tom @ 9:06 am

Who knew?

Their home page is here.

I have nominated a several deserving SOBers in a few of the various categories.

Obama Needs to Make the Fuel-Price Stimulus, and the Current Tax System, Permanent

Filed under: Economy,Taxes & Government — Tom @ 8:35 am

Oil is below $60 a barrel, representing an almost 60% drop from its high in low $140s less than four months ago.

Metro Cincinnati gas prices are as low as $1.70; the current local average of $1.84 is down 55% from over $4 less than two months ago.

This $2-plus a gallon reduction represents a $120-plus a month cost savings for someone who drives 1,500 miles a month in a 25 mpg vehicle (60 gallons a month x $2). You have to back into the number from this story, but assuming additional cutbacks in driving since April, Americans drive about 75 billion miles a month. If drivers average 25 mpg, that means consumers are saving over $6 billion a month (3 billion gallons times $2), or over $72 billion a year if prices stay at or slightly above where they are.

The stats just presented appear to be for just cars and SUVs, and to not include commercial trucks and other diesel vehicles. Diesel fuel costs are down by about 40% from their peak. The savings in this area probably push the total annual fuel-price reduction economic stimulus to $100 billion or more, which is more than the $94 billion in stimulus payments the IRS distributed earlier this year.

That should be plenty of stimulus for an economic recovery — if incoming president-elect Obama would just:

  • Promise to postpone for several years, or better yet permanently shelf, any and all impending automatic and planned tax increases.
  • To keep prices down and to ensure future supplies (i.e., to make the fuel-price reduction stimulus permanent), resist the urge to restore the bans on Outer Continental Shelf and Alaskan offshore drilling lifted by Congress and President Bush, respectively. Let ‘em drill.
  • Abandon cockeyed plans for “windfall” profits taxes on oil companies.

If Obama doesn’t currently signal and then carry through on forgetting about his punitive tax plans and/or foolishly locks up fuel resources, the fuel-price stimulus just noted will go away. Any other so-called stimulus coming out of Washington won’t be of much ongoing value to the long-term health of the overall economy. If fuel prices will head back up, or if Obama’s campaign tax promises are carried out, businessmen and entrepreneurs will continue to play it close to the vest by avoiding hiring and capital investment.

The new president and his party have worked tirelessly to talk down, and take down, the economy for years. They finally succeeded doing so sometime in June, creating the current POR (Pelosi-Obama-Reid) Economy — soon to be known, barring an unlikely fourth quarter turnaround, as the Pelosi-Obama-Reid Recession. Unlike them, I want the US to prosper no matter who’s in charge. Following the suggestions just outlined will bring prosperity back.

Positivity: Inside a U.S. hostage rescue mission

Filed under: Positivity,US & Allied Military — Tom @ 7:11 am

From Afghanistan:

Spec ops conducts night raid in Afghanistan mountains
Posted: Monday Nov 10, 2008 20:18:42 EST

The American businessman lay shackled in a mud hut 8,000 feet up a remote mountain in Afghanistan, armed captors posted inside and outside to prevent any escape attempt.

Earlier in his captivity, he had made a run for it, but — barefoot and much older than the insurgents who held him — he was snatched back before he could get far.

After nearly two months in captivity and out of contact with anyone who cared about him, the hostage reviewed what his fate might hold — whether ransom negotiations or rescue efforts or a miracle might bring him freedom.

“One option was for the money to arrive and be ransomed,” the 61-year-old engineer from Ohio told Military Times, speaking on the condition that he remain anonymous. Another was “that they’d just get tired of me and let me loose.” A third was “some kind of military intervention,” he said. “In my mind I’d given a military intervention a one out of a hundred chance. Not that they couldn’t do it, but they’re busy and I’m not that important a fellow.”

On an airstrip many miles away, however, several twin sets of Chinook helicopter rotor blades were starting to turn as about 60 of America’s most elite troops prepared to prove him wrong. Members of a task force that Military Times agreed not to name, the commandos had been hunting for the businessman since soon after he went missing. Now they were ready to act.

This is the story of one of the most daring and successful U.S. hostage-rescue missions in years.

Stopped on the road

The American businessman and his Afghan partner in an engineering firm that employed 15 locals were driving home Aug. 20 from a funeral in Wardak province when they were stopped along the road by an armed man.

“Initially, there was one armed man who stopped us and demanded papers from my partner,” the American businessman said in a Nov. 6 telephone interview.

“That happens fairly often in Afghanistan,” said the businessman, who had worked in the country for nine years. “I didn’t think too much about it. … Then he wanted to see my papers.”

After the gunman took an inordinate time examining his documents, the American realized something was wrong. “Things weren’t going the way they normally went,” he said. “We were taken to a local hiding place” and then to a more remote location.

The hostage-takers were no mere criminals, but members of the Hezb-i-Islami (Party of Islam) militant group of Gulbuddin Hekmatyar, a special operations officer familiar with the mission said.

A radical Islamist warlord, Hekmatyar was a principal beneficiary of U.S. covert aid during the war fought by Afghan mujahidin against the Soviet and Afghan communist forces in the 1980s but is now relentlessly hunted by U.S. forces along the Afghan-Pakistan border.

The American’s wife, who worked with him in Afghanistan, realized something had happened to her husband when he failed to return home. At first, she and others close to him tried to negotiate through third parties with the kidnappers. Within about five days, the engineer’s Afghan partner was released when the duo’s company paid a ransom for him, but the kidnappers didn’t seem interested in exchanging the American for cash. …..

Go here for the rest of the story.

Post-Election News Business Layoffs Begin; Time and Current Lead the Charge

Well, they held out as long as the could.

But now that the presidential election is over, layoffs in the news business have begun.

Newsosaur predicted as much on the Sunday before the election, and pointed to a major reason:

Public confidence in the mainstream media has been eroding for at least a decade.

The Pew Research Center for the People and the Press reported that only 19% of respondents trusted their local newspapers in 2006, as compared with 29% in 1998. In the same period, trust in national newspapers slid to 21% from 32%, broadcast news fell to 22% from 27% and cable news slipped to 25% from 37%. Confidence in the National Enquirer, however, doubled to 6%.

Job losses announced at Time Inc., which went through a significant shrinkage just two years ago, and Al Gore’s Current Media are among the first in what will almost certainly be a long line of similar reports in the coming months.

Here, from Ad Week, is a capsule of what’s going down at Time:

…. Time Inc. is moving to the rank-and-file as it, like other publishers, seeks to reduce its workforce in the face of dropping ad revenue.

Some of Time Inc.’s biggest magazines have put out the call for at least 83 volunteers to take buyouts, according to memos and staffers at the company. The news comes as part of the company’s previously announced restructuring and plan to cut its headcount by about 600, or roughly 6 percent of the Time Inc.’s worldwide workforce of 10,200.

Sports Illustrated said it is looking for about 40 Newspaper Guild and non-guild volunteers from the editorial side. People is seeking 23 volunteers and Time magazine about 20. Fortune and Money are also looking for volunteers from guild members, but did not specify a number.

Volunteers are asked to come forth by Dec. 1 to avoid involuntary layoffs.

Other, non-Guild cuts are expected to be made throughout the company’s 24 U.S. titles today.

Here’ a bit of what CNet reported on the situation at Current:

A source close to Current told CNET News on Tuesday that 20 percent of the staff has been cut, and that some of the layoffs will take place now and others in January. Current had announced less than a day ago that it had partnered with the Canadian Broadcasting Corp. to bring its network to Canada.

A statement from Current indicates that the number of employees cut is lower than the 20 percent that our source provided: “Approximately 60 positions have been eliminated in the company’s three U.S. offices, and approximately 30 new positions created,” the statement read. “Many of those whose positions were eliminated have been placed in the new positions. Current will have approximately 410 employees (after these staffing adjustments).”

….. “Not only was this uncalled for, but there was continuous deliberation during the last two or three months,” the former employee said. “Every meeting we’ve had with the VP of our department has been a lot of ‘Don’t worry, your positions are secure.’ And that has been repeated for the last two to three months.”

….. (Just last week, Al Gore) gave a speech at the Web 2.0 Summit in which he touched upon how he hopes Current will solve some of the problems plaguing the television news industry.

Whatever problems Current intends to solve, it’s evident that it plans to do so with fewer people.

Whether it’s 30, 60 or 100 jobs lost, the irony of management at Al Gore’s pet project fooling employees into thinking their positions are safe — a classic complaint lodged against “evil corporations,” should not be lost on anyone.

Cross-posted at NewsBusters.org.