GM & CHRYSLER ANNOUNCE NEED FOR BAILOUT AT THE EXPENSE OF NEARLY 50,000 JOBS

http://www.foxnews.com/politics/first100days/2009/02/17/gm-chrysler-billion-bailout-cash/

DETROIT -- General Motors and Chrysler said Tuesday their request for federal aid ballooned to a staggering $39 billion -- only months after receiving billions in loans -- in new plans that envision massive job losses and intense restructuring to survive a deepening recession.

General Motors Corp. presented a survival plan that calls for cutting a total of 47,000 jobs globally and closing five more U.S. factories, a move that represents the largest work force reduction announced by a U.S. company in the economic meltdown. Chrysler LLC said it will cut 3,000 more jobs and stop producing three vehicle models.

The grim reports came as the United Auto Workers union said it had reached a tentative agreement with GM, Chrysler and Ford Motor Co. on contract changes. Concessions with the union and debt-holders were a condition of the government bailout.

GM said it could need up to $30 billion from the Treasury Department, up from a previous estimate of $18 billion. That includes $13.4 billion the company has already received. The world's largest automaker said it could run out of money by March without new funds and needs $2 billion next month and another $2.6 billion in April.

"We have a lot of work to do," GM Chairman and Chief Executive Rick Wagoner said. "We're still going at this with a great sense of urgency."

GM's request includes a credit line of $7.5 billion to be used if the downturn is more pronounced than expected. But the automaker claimed it could be profitable in two years and repay its loans by 2017.

The requests pale in comparison to what it might cost taxpayers if GM or Chrysler go bankrupt, said Aaron Bragman, auto industry analyst for the consulting firm IHS Global Insight in Troy, Mich.

"These are not small, insignificant organizations," he said. "These are the lifeblood of American manufacturing."

The company looked into three bankruptcy scenarios, all of which would cost the government more than $30 billion, GM Chief Operating Officer Fritz Henderson said. The worst scenario would cost $100 billion because GM's revenue would severely drop, he said.

Although little is known about whether people would buy cars from a bankrupt automaker, some research "suggests that sales fall off a cliff," Henderson said.
Chrysler LLC requested $5 billion in new loans on top of the $4 billion it received in December. That's $2 billion more than expected.

Both requests were part of restructuring plans the two automakers owed the government in exchange for earlier loans.

Treasury Secretary Timothy Geithner, who will lead an Obama administration task force reviewing the plans, said his team would meet "later this week to analyze the companies' plans and to solicit the full range of input from across the administration."

Dearborn, Mich.-based Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help.

GM and Chrysler plan to reduce the number of models they offer. GM raised the possibility its Saturn brand could be phased out and said its Swedish-based Saab unit could file bankruptcy this month.

The restructuring plans must be vetted by the Obama administration's new autos team. President Barack Obama's top spokesman told reporters aboard Air Force One on Tuesday that he wouldn't rule out bankruptcy for the Detroit automakers.

The GM job cuts include 10,000 salaried and 37,000 blue-collar positions, amounting to 19 percent of its current global work force of 244,500. Jobs outside the U.S. account for 26,000 of the reductions.

The cuts would take place by the end of this year, and more would follow: The new plan has the U.S. work force declining from about 92,000 hourly and salaried employees at year-end 2008 to 72,000 by 2012.

Wagoner said the new plan was "significantly more aggressive" than the one presented to the government on Dec. 2 because the global economy and auto sales had deteriorated swiftly.

Chrysler had 54,007 employees at the end of 2008, so Tuesday's cuts would equal about 6 percent of its work force.

Auburn Hills, Mich.-based Chrysler said it now projects that automakers will sell 10.1 million vehicles in the U.S. this year, the lowest level in four decades.

"We have continued to see an unprecedented decline in the automotive sector," Chrysler Chief Executive Bob Nardelli said.

Chrysler will eliminate the Dodge Aspen, Durango and Chrysler PT Cruiser, company president Jim Press said. The Aspen and Durango, both large sport utility vehicles, have sold poorly while the PT Cruiser, released to much fanfare in 2000 due to its retro look, has also slumped in sales.

Detroit-based GM said it plans to sell or spin-off its Saturn brand. If those attempts are unsuccessful, GM will phase it out by 2011. GM is discussing the sale of its Hummer division and could complete the talks by March.

The automaker has also sought buyers for its Saab unit. Selling or eliminating those brands would leave GM to focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models.

GM would also reduce the number of vehicle models, dropping the nameplates from 48 in 2008 to 36 by 2012, four fewer models than in the December plan.

All of GM's major U.S. vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers.

Details were unveiled the same day President Barack Obama signed into law a massive economic recovery plan. Signs that the recession was deepening were more immediate for investors, however, and they dumped stocks and pushed oil prices sharply lower.

The UAW said discussions were continuing regarding the union-run trust fund that will take on retiree health care expenses starting next year.

Terms of the union deal were not announced, but they were expected to eliminate the jobs bank in which laid-off workers get most of their pay, as well as changes that make the companies' labor costs competitive with their Japanese counterparts that have U.S. factories.

"The changes will help these companies face the extraordinarily difficult economic climate in which they operate," UAW President Ron Gettelfinger said in a statement.

GM Chief Financial Officer Ray Young said the company hopes to exchange two-thirds of its roughly $28 billion in unsecured bond debt by the end of March. Bondholders, he said, signed a letter saying that they were making progress with the company.

House Speaker Nancy Pelosi, D-Calif., said she was hopeful the plans would help lead to the "transformation of our domestic automobile industry into a viable, technologically advanced, and globally competitive manufacturing force."

Step One: Stabilize Banks

Government has been attempting to stabilize the banking industry with swift and immediate action since September of 08’ with the help of Henry Paulson and Ben Bernanke. Their plan, or so called the Bailout Plan, called for massive government intervention into the economy with the injection of $700 billion of capital into banks and troubled companies. On October 14, 2008 the program began to purchase preferred stocks in the nine largest banks, and was renamed Trouble Asset Release Program (T.A.R.P). T.A.R.P. sounded a lot better to the public then Bailout plan. The T.A.R.P. money was distributed to these banks but with no real guidelines to capital allocation, most of the money is now lost in the accounting records of the government and banks. The markets reacted very quickly to this new injection of capital as a rise in the market provided a positive outcome.

It has been some time now since the initial T.A.R.P. and markets have shredded all their previous gains. Unemployment is up to 7.6% and the markets are in desire need of more government help to stop this spiraling decent. As of February 5, 2009, Senate has approved changes to the T.A.R.P. II, where another $900 billion will be injected into the banking system.

There are many worries with the potential outcome of these banks. Some believe that the new T.A.R.P. II program will call for the nationalization of banks. Others believe that the government will provide a “Bad Bank” to store bad assets till the mature. Each has their shortfalls. If nationalization of the banks occurs, this will cause shareholders to lose their investments over the preferred shares of the government. Bank of America’s CEO, Ken Lewis, provided comfort stating that he's talked to members of Congress, regulators and government officials and that "it's not even a remote possibility and no one has mentioned nationalization." He has also said it the T.A.R.P. money will be repaid as humanly possible.

The end result is that the current economic situation is looking a lot more positive. With the government intervention of over $2 trillion dollars being planned on shorting our economy. It is almost impossible for things not to return to its natural state soon. Other things that provide stimulus are gas prices below $40 a barrel, average gallon of fuel of $2, and mega discounts for anything purchasable. It just up to us now to boost our confidence in the market and begin to spend again. Until then, we will be at the mercy of the government to provide an outcome.
Oscar A. Garcia

Kellogg Drops Phelps

http://blogs.reuters.com/mediafile/2009/02/06/kellogg-drops-phelps-after-photos/

As many of you have probably already heard this week, Michael Phelps was dropped by Kellogg as his sponsor because his actions were "inconsistent" with their company image.

Most people did not think Phelps deserved to lose any of his sponsors over this ordeal. Most believed that after his public apology, it should have ended there. Yet, many parents demanded that a tougher punishment be given to him so that their children would see that no matter how famous you are, there are still consequences for your actions.

Speedo, Omega watches, Visa, Subway, and many other sponsors kept their deals with Phelps after his apology. Kellogg however, was the only one to end their deal. It is nice to see a company take a responsible position and respond to the demands of the few parents who were still angry with Phelps. I don't believe that they are sending the right message about forgiveness though. Someone should not be persecuted even after they have publicly apologized for their actions.

Besides, believing that one photo can make your child begin to smoke pot is ridiculous. Parents should feel confident that they've taught their children to think for themselves and not be so easily influenced. This entire event can be best summarized by SNL's weekend update skit from this past weekend.

http://www.videosift.com/video/Really-With-Seth-Meyers-SNL-Mike-Phelps-Kellog-Situation

Corporate Social Responsibility: Don't bite the hand that feeds you.

There have been many articles on corporate responsibility lately due to the ill judgment of the CEO’s of the U.S.’s largest companies. For instance, John Thain, the CEO for Merrill Lynch, had invested more then 1.22 million dollars in renovating his office with such luxuries as a $87,000 area rug or curtains for $28,000. Many people would consider this as a waste of money, but what is considered a waste, Thain spent $1,400 on a waste basket, therefore it can’t be considered anything but trash. The argument is how much is too much when it comes to expenses for such large companies. This type of expenditure seems reasonable if a company is brining in multi-million dollar profits, but with a forth-quarter net loss of $14.31 billion, this type of spending is anything from considerable. I don’t blame him, with an estimated income of $50 million dollars; it is really hard to gain an understanding of money when it is as available as air. One may not appreciate something that is so readily available to him.

With millions of dollars being thrown around to supply company executives with such luxuries as privet jets and exotic vacations, it is a must to remember where it all came from, the consumer. The consumer provides the capital to fund such extravagant luxuries just to find that they are paying premium for their product. Shouldn’t such luxuries be returned to the consumer? Yes! That is why corporate social responsibility or C.S.R. for short is an important property to look for when analyzing a company. CSR provides a great opportunity to give back to the precious consumers that fund their business.

But again, I don’t blame corporations that don’t believe in returning the favor of business. Capitalism is the main economic system of the United States. Capitalism brings rise to entrepreneurship due to the perusal of such lavish luxuries. Who doesn’t have a dream to make millions of dollars. I know I do. The problem is when people get to greedy to give thanks for what they have and place any additional cost to their customers rather then accepting the cost themselves. Eventually the well will dry up and so will their pocket books.

In conclusion, don’t bit the hand that feeds you. Rather make sure the relationship between the supplier and consumer offer equal benefits to ensure a lasting relationship.

STEVE JOBS HEALTH AND THE END OF APPLE

With Steve Jobs health facing major crisis, many are now skeptical over the future of Apple. Who would have thought that the man who represented the major turn around of a failing company would also represent the company's greatest threat of doom. Some believe that the company has focused too much of their success over Steve Jobs shoulders and now they are facing one of their toughest moments since Steve Jobs appointment to CEO of Apple. Maybe Apple's only solution is to publicize another CEO and have Jobs endorse him and make people believe he will still be involved in the companies day to day decision making.

UNEMPLOYMENT FACING DOUBLE DIGITS?

As absurd as that may sound, some economic specialists are terrified at the possibility of the greatest economical superpower of the world, the United States of America, reaching double digits of unemployment rate. How can businesses overcome or at least delay this rise in unemployment?

I believe that as a country we should unite during this time of great crisis. Many people have lost their jobs while others are overwhelmed with the amount of work accumulated over them due to major lay-offs. My main suggestion to companies who are issuing major lay-offs is to reduce full time employee’s hours to part-time. This could decrease the amount of lay-offs by over 80% as well as decrease the state unemployment rate companies now have to pay due to these major layoffs.

INDENTITY THEFT

Identity theft has become a great concern throughout our newly technological advanced nation. Although the government has increased their attention on this matter, little legislation has been passed to ensure people their personal information located in important databases of small companies such as personall tax preparers, or accountants, is safe and protected. There has been legislation passed towards punishing people who are negligent in protecting their clients information, however, there has been little legislation towards requiring a certain level of security of anyone who chooses to store data from clients on their own servers. The government has not invested enough money into protecting people's information and tracing hackers over the internet and tracking people who perform such crimes. Please place your comments about some of your ideas of areas the government should be investing on in order to avoid indentity theft.

Companies going green

Companies going green often see a great impact on their overheads as well as on the environment. Think of GMs hesitation to move towards fuel efficient automobils and the effect it had on their company. Their failure to adjust to this change in society and customer demand nearly cost them their business.