aFlickringLight weblog

Are You Ready?.
Originally uploaded by DownTown Pictures

As is tradition every spring, March has come to an end. April has begun and baseball is abound. Roster decisions are being argued upon for virtually every team and the gates open Monday for the start of the 2009 Major League Baseball season.

This offseason has been one of economics for many as free agents found it the most “interesting” offseasons to find themselves a job. Many players held out looking for higher paying offers, and many took paycuts entering the season. Organizations are aware of the economic recession, and ticket prices have largely remained the same from last season. Regardless of the financial climate the world has found itself in, baseball has always offered fans an escape from the world’s problems and offered a form of entertainment, relaxation, and thrills.

Baseball is back for the start of a new season. 162 games of successes, of more failures, and of a common competition to the holy grail of baseball, the World Series. It is only April, and still a day ’til gates open for Opening Day at ballparks across the country (and Canada), but the race has begun for October baseball.

Are you ready?

It was only 11 years ago that family became corporate in Los Angeles. The O’Malley family, who had long-stood as the owners of the Dodgers baseball organization, both in Brooklyn and in Los Angeles, had sold the team to Rupert Murdoch and the media moguls at Fox News Corp.

Family became corporate.

The attitude of doing it right was lost for doing it for dollars. And the first move Murdoch and Co. made while at the helm – trading Mike Piazza towards the end of his contract to the Florida Marlins, along with two other Dodgers, for, get this, broadcasting rights. Yes, Murdoch scored his company, Fox, broadcasting rights to the Florida Marlins.

And so began business as a corporation.

Gone are the days when Peter O’Malley took over for his father, Walter. Gone are the days when the O’Malleys would serve ice cream to the office staff at 2 o’clock in the afternoon, everyday that the Dodgers were in first place. In are ratings, merchandising, branding, and cash cow advertising machines.

I remember going to Dodger games and seeing a beautifully illustrated outfield fence, silhouetted with images of Dodger greats and team accomplishments. Today, I count thirty-six, yes, thirty-six individual ads on and around the outfield fence, not including two video screens that change every so often to add more companies into the mix. This was opening day 2008.

The team has returned to a family ownership, run by the McCourts, real estate gurus from the Boston area as I recall. But the game still has a business smell to it.

Players are demanding absurd contracts worth tens of millions of dollars. Their egos continue to rise. And it is all to play this great game of baseball – a game that many only dream of playing. And it is agents like Scott Boras – the scum of professional sports agency – that have fed these egos with above-market value contracts and salaries.

Scott Boras, of Scott Boras Corporation, runs his agency out of, of all places, Newport Beach, California. He has a client list of over 50 baseball players and has an ego himself just as big as his clientele combined. He is what the New Yorker has called an extortionist.  He represents all that is wrong with baseball today. The business atmosphere. The cash-cow, money producing organizations that demand year-over-year increases in returns like a publicly-trading company would to appease its stockholders.

But there are no stock-holders in baseball. There are investors. And there are fans. Sadly, the investors have taken precedence over the fans, and what used to be an enjoyable event out to the ballpark with friends and family has become an advertisement with $10 beers, $5 hot dogs, $6 water bottles, and $20 parking. This, of course, is all after you buy your ever-rising costly tickets.

But what can I do, what can anybody do about it? Change has to come from the top – and currently, the top just got paid $17 million last year, even given the current weak economic times. The NFL Commissioner has taken a 20% pay cut. The NHL has instituted salary caps. The MLB – has done nothing. There are several players demanding pay over the $20 million mark per season. And Bud Selig, the Major League Baseball Commissioner seems fine with that.

Success is unfortunately defined by money, and lots of it, in todays game of baseball. The commissioner likes to see that he gets a substantial amount of monetary return from his work. Meanwhile, fans pay more year after year for tickets, concessions, and parking. Where does it all end?

Steve Jobs has an annual salary of $1. One dollar. And that is to stay on the payroll. That is how executives used to run businesses. If their company prospered, they succeeded. Today, that is far from the case. Executives at oil-giants like Exxon-Mobile, Shell, Chevron, to name a few, bring in over $50 million a year in pay, plus bonuses. The big three CEO’s in Detroit have recently taken pay-cuts in wake of stark criticism over corporate luxury while their auto manufacturing companies face filing for bankruptcy – one of them reducing their salary to $1.

Gone with the family, in with the corporate. This is baseball today, and unfortunately, there is no end in sight. With scum like Scott Boras demanding outrageous amounts of money to perform in a game that used to be a childhood dream is only the beginning of the problem.

Forget your financial advisers, and forget your lavish expenditures. Why can’t athletes return to a modest salary, bring the game back to the family atmosphere of the 80′s and before. If the game continues on its current path, it will suffer, and it will falter.

[photo by 7D7 Studio, Unsportsmanlike comment]

Business as usual, right? Unfortunately, it is. Sports today are not the sports of yesterday. Teams are run like Fortune 500 Organizations rather than, well, sports teams. The majority of the 20th Century brought sports teams that were the face of communities. Today, our professional athletes change team colors more than some players use to in an entire career.

The likes of Garrett Anderson, Tim Salmon, Sandy Koufax, among others, spent their entire careers with their respective teams. What players used to call families, fans call organizations now. Salaries are through the roof, and performance has suffered. The face that represented the sport of baseball in its untainted form, Alex Rodriguez, just admitted to using performance-enhancing drugs. So in an era of tainted performances, what reason do we have to stay loyal to our teams, to our players, and to our sport.

These feelings extend beyond just baseball. Athletes in all sports have become figures above the law. NFL and NBA athletes have been convicted of drug use, possession, of illegal firearm possession and use. And yet, their salaries continue to rise. Yet, their performance continues to decrease; along with it goes their work ethic and dedication to the “team.”

These superhuman attitudes have raised the athletes’ egos and their asking price. Take Manny Ramirez. An undisputed great baseball player, with an undisputed horrible attitude. He has faked injuries, spoken out against his team, talked down teammates, and thrown around his paychecks like they were chump change. Arguably one of the highest paid players in the sport, Ramirez is asking for a career- ending contract that lasts at least four or five years, at Alex Rodriguez pay – the equivalent of between $25-30 million a year.

His performance speaks for itself – when he is on, he is on. In the roughly two months he spent last season with the Los Angeles Dodgers, he exceeded his teammates in most categories, matching their season- long performances. But Ramirez was motivated. He was out of Boston, in a new town where fans and citizens not only gave their respect, they left him alone. But he was playing for a contract the next season, a free agent at the end of the season. His parting words as he ascended the players’ elevator for perhaps the final time at Dodger Stadium in Dodger Blue – “May the highest bidder win.”

The Dodgers organization has been more than willing to pony up the money. The team has placed three generous offers on the table – all of which Ramirez’s representatives quickly turned down. It is worth mentioning that Ramirez is represented by the infamous Scott Boras Enterprises. All emotions aside, this sports agency represents the scum of the scum. Boras is known for his ability to squeeze every last penny out of teams when negotiating the contracts of his clientele (and when I say penny, I am speaking on a scale of millions).

The point I am trying to make is that sports have become outrageously defined by money, salaries that rival those of some CEO’s. In such tough economic times, why should players be given so much money? It inflates their ego, and often times degrades their performance. With the comfort of a long-term, multi-million dollar contract, players lose the incentive to perform to their highest ability. And sports teams are no different – they try to run themselves like efficient, profit producing machines.

Salary negotiations are still ongoing with Ramirez, as talks between the two parties continue. Spring Training has already begun, Ramirez remains unsigned, and teams are looking for closure. Given the state of the economy, the financial burdens teams are facing currently will more than likely prevent Ramirez from getting the length of contract he desires. But, the money has been thrown out there by the Dodgers organization. We will see what happens. But for baseball’s sake, something needs to happen. And it needs to happen from the top. The Office of the Commissioner needs to make changes, and they need to be made soon. Whether it is a salary cap or tighter rules and restrictions on contracts, Bug Selig needs to take steps to bring baseball back to what it used to be – a sport, not a business.

[photo by Zkonedog]

Facing increasing pressure from Congress and the American people, the auto industry is having to start cleaning up its act. It has been given a December deadline to regroup and approach Congress with a detailed plan, one that outlines drastic restructuring and operating measures and one that offers some definitive answers to lawmakers how money from a potential bailout package will be spent.

Below is a poll from OrangeCountyGasPrices.com on consumer reaction locally to the possible government bailout of the American Auto Industry.

And here is a recent commercial from Ford, advertising Employee Pricing programs for customers. The video has a clear message – help us.

“These are the keys to what America needs right now.”

Some months ago, two reporters for MarketWatch reported on the way in which oil and gasoline was traded on the open market. Upon investigation, four energy analysts reported back in June of this year to the House Energy and Commerce Committee that the price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of the passage of a law that would limit speculation in energy-futures markets.

Fadel Gheit of Oppenheimer & Co. testified that -

“Record oil prices are inflated by speculation and not justified by market fundamentals. Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel.”

Something that oil industry insiders don’t want you to know, something that allows them to make billions in profit at the expense of the consumer and the world economy. Because of record oil prices at the pumps this past summer that drove the cost of gasoline in the United States to over $4.50 a gallon in some areas, and over $4 a gallon on the national average, demand for energy and oil has severely dropped off. The economy has changed drastically since this past summer as well, leading to less travel and less spending.

And what do I see at the pumps this week? I just paid $1.84 for a gallon of gas in Tustin, California. And the national average is back under $2 a gallon. What has changed? Gas prices for the past few months have slowly been on the decline, but in the past two weeks have seen night-to-day decreases over over 20-30 cents at stations locally and across the country. Finally, we are seeing some relief at the pumps.

But what is really beginning to scare oil producers such as the Organization of the Petroleum Exporting Countries (OPEC) is the lack of a significant increase in demand with prices reaching five year lows. OPEC is wanting to cut oil production by 1.5 million barrels of oil per day to try and bring the cost of oil back up. But the latest weekly U.S. Department of Energy report on energy stockpiles showed a significant drop in fuel demand across the Untied States. Even emerging nations such as China and India are seeing cooling effects with regards to energy demand.

The oil companies have been caught red handed. They have been caught inflating the price of oil through speculative trading. The weakening economy was the catalyst that forced the major oil companies to finally drop the cost of oil at the pumps to realistic levels.

Photo Credit: The Gas Station and Facebook

Will there be a Sequel for General Motors Corporation (GM)? Its stock dipped to dangerously low levels today, trading under $3 for a short period before closing at $3.06 for the day. Investors are concerned over the looming possibility of bankruptcy as GM’s cash balance nears below the needed amount to operate month-to-month.

Updated 11/26/08 – with stock chart YTD:

General Motors Corporation’s (GM) stock has seen dropped significantly Year-To-Date (YTD), trading as of press time between $4 and $5 a share, closing at $4.81.

Original Blog Continued -

The cash-strapped company is seeking economic relief from the federal government in the form of an auto-industry bailout package that would assist competitors Ford and Chrysler as well. But with any assistance being put on the back-burner for the time being, GM is having to resort to holding dealership payments, rebates, and sales-incentive packages for a two-week period, delaying dealer payments until December 11th, two weeks further than the November 28th payout date.

GM is not saying how much these delays will save the company, but it proves to be significant enough to solve, at least temporarily, severe cash-flow problems. The three major auto companies hopefully are spending these next couple of weeks reorganizing the company, coming up with the required business plans demanded of Congress before the Big Three meet again for economic aid. These companies can not continue to operate in the same way they have been, it is partly to blame for their respective economic blunders.

After the Congressional hearings held a week ago, and amid stark criticism, GM has put up two of its private jets from a line of several others for sale, in an effort to regain public trust and sympathy as well as to regain capital, in a monetary form. It has laid off over half of its air travel staff and continues looking for other ways to save money. The luxuries that the Big Three executives afford can simply not continue. They are burning away millions in corporate and executive bonuses and benefits, spending far too much on private jets, and not producing greener vehicles that consumers are demanding. The time for change has come and something must be done. Whether or not the auto industry receives any form of economic aid will largely depend on management – are they willing to ditch the operating procedures and corporate fluff that has, in part, brought the demise of the American auto industry? We will find out soon enough.

ReutersVideo reports:

Photo Credit: CarType

In the midst of financial bailouts and failing economies, the Pentagon has revised its request for funding from the United States government. It is now asking for $524 billion in funding, a $9 billion increase in its baseline request for next fiscal year. This does not include added expenses for keeping troops overseas fighting the wars in Iraq and Afghanistan. This is likely to add a few more billion to the budget.

What does this mean for the nation? President Bush entered the Oval office back in 2000 with a relative surplus in the National economy. Fast forward nearly eight years later, and this country is trillions of dollars in debt. Most of that debt comes from costly wars and defense budgeting. These are the tax payers dollars and supplementals to Congress.

Should we be spending this much on defense? We are talking over a half trillion dollars for one year! Surely there must be some inefficiencies that could be eliminated to bring down this dollar amount. When President-Elect Barack Obama takes office January 20th, among the many other issues on his plate, he needs to take a serious look at government spending programs. He needs to evaluate their effectiveness and appropriateness, and make changes accordingly.

The United States Dollar can not be the open, readily-available resource that it has been to government spending programs the past eight years. Military officials expect the Pentagon budget requests to reach a plateau in the next couple of years as the wars are dialed down and research on new weapons technologies advances to the production stage.

Photo Credit: CNN

As the “Big Three” teeter with collapse, three million workers around the nation face the looming possibility of job loss. They have not seen economic success in several years, and are treading dangerously close with having no financial capital with which to operate their respective companies.

Why? They have resisted change. Body designs, amenities, and features in automobiles certainly have changed in recent years. But the business practices have remained largely the same. Japanese and other foreign auto industries have successfully dealt with changing needs and consumer demands. The environment is becoming a growing concern. Oil is a unstable commodity that we are hoping to steer ourselves away from holistic dependance on.

It was not until the past few years that American automotive makers began to realize they needed to change. American’s were opting to buy foreign-made cars that were more fuel-efficient over the design and muscle of American vehicles. Jumping on the ship so late has cost General Motors (GM), Ford, and Chrysler billions in expenses, and put their corporations in danger of bankruptcy.

Questions have been brought up during Congressional hearings with American auto industry executives as to the necessity of such bailout measures. Would bailing out another industry in hard economic times prove fruitful? According to the auto industry, the alternative would be far more catastrophic. Not offering $25 billion in economic stimulus aid would result in a sure collapse of the industry. The loss of an industry that comprises approximately 4% of this country’s GDP would be catastrophic. The loss of jobs would be in the millions, the loss in American income in the billions. The economy – even worse off.

The problem is – we can not trust these companies based on their past business practices. Shelling out billions of dollars in economic aid is not the answer. The government should rather devise a package in which it offers these companies a chance to turn themselves around, and reward these companies for doing so, with government loans that are required to be paid back.

The government has bailed out an auto manufacturer before. In 1979, Chrysler received $1.2 billion in government loans as it faced bankruptcy. And less than four years later, Chrysler paid the government back every dollar, with interest. Chrysler used the bailout funds to restructure and get their act together. And in doing so, they were able to turn profits to such a degree that they were able to pay back the government all money owed.

We can not issue a blank check to the auto industry today. Giving them a $25 billion economic stimulus aid package will only go towards operating expenses and cover purchasing capital. It will not go towards restructuring or reworking their business models. The government has recognized this, and will not simply issue out a blank-check aid package. The best result out of this situation, for the American people, for the economy, and for the auto industry, is a rewards-based aid package which offers financial aid to the companies who have proven they can dig themselves out of their current sleuths of messes.

And to put things simply, Governor Arnold Schwarzenegger called out the Detroit auto manufacturers at a luncheon speech, calling on Detroit to “get of [their] butts.”

Photo Credit: New York Times Archives and American Elephants

Banks, financial institutions, AIG, American Express, and now, the auto industry. What’s being called “The Big Three Bailout,” the major three auto manufacturers have been visiting Washington, pleading Congressional leaders for a share of the bailout which has become a trend of late. How much money are we talking about here? $25 billion shared amongst General Motors (GM), Ford, and Chrysler.

But unlike the $700 billion financial banking bailout that the government began dishing out a couple of months ago, the aid the auto industry is asking for is being met with staunch resistance. Flying in on private company jets, top executives from the top three U.S. auto manufacturers lobbied and begged for economic aid. On the verge of filing for bankruptcy protection, fears are spreading that GM, among the other two companies, is running out of operational capital.

“Our industry … needs a bridge to span the financial chasm that has opened up before us,” General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee.

Wagoner blamed the auto industry’s economic woes not on management failures but on the deepening global financial crisis. And Robert Nardelli, CEO of Chrysler LLC, told the panel the bailout would be “the least costly alternative” when compared with damage from bankruptcy. The companies are reaching out to its consumer base to put pressure on Congress to grant financial support.

The fear of course is that the collapse of the auto industry, and the financial protection of bankruptcy would have a trickle-down effect on not only the American economy, but on the world economy. With the failure of the auto companies, many supply companies would suffer from a sudden decrease in demand. Job losses at all levels would result. And if these auto companies file for bankruptcy, studies show that consumers, by an overwhelming majority (roughly 80%), would not purchase vehicles from a company in bankruptcy. Fears of insecure warranties top the list of reasons causing this consumer thought.

Failure of the auto industry “would be catastrophic,” Wagoner said, resulting in three million jobs lost within the first year and “economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis.”

Just how much money do these companies have left? And how much money do they need to operate each month? GM CEO Wagoner faced direct questions from Rep. Paul Kanjorski in Congressional hearings.

If Congress does grant a bailout stimulus package to the auto industry in some form, what does this say to other industries and organizations? Is our government becoming a fail-safe bailout group that lends an excuse to mismanaged companies and corporations to seek aid in tough times? That is the fear of many on Capital Hill. Had the auto industry focused more research and resources to bringing more economical and green cars to the market, perhaps they would not be bleeding red so much economically. Toyota and Honda both have faired well in the recent economic downturn.

Can some blame be placed on lavish Union contracts of the auto workers, guaranteeing large portions of wage earnings after retirement or layoff? Can some blame be placed on management and organizational factors of the auto industry? The executives would answer that its the economy, stupid. And in part, it no doubt is. But if a bailout package were to be issued, it in no way can be a blank check. Oversight is essential. Stipulations must be abundant. And responsibility must be present. Good faith loans will not cut it. The government, if leaning towards an auto industry bailout, must make it clear to the auto executives that they must change their business models, and show proven change, in order to be rewarded with government funding, funding that comes with a return expectation.

GM has compiled a video they circulated on the company’s YouTube channel explaining the need for government financial assistance. It’s clear that the American auto industries are deeply intertwined in the American and global economies. The fear of a total failure would result in catastrophic economic fallout’s.

Photo Credit: 2405.com and CNN

With the economy in shambles, for the past seven years we have seen gasoline prices rise uncontrollably, and somewhat unexplainably at the pumps. It’s been no secret that oil prices are in large part based upon speculation and future forecasting. It’s also been no secret that when barrels of oil are sold at rising prices, those rises are exponentially reflected at the pumps almost immediately – though the gas you are pumping was sold and refined on average of a few weeks prior. It takes a minimum of two weeks, and sometimes up to two months, for a barrel of oil to reach the pumps once it is purchased on the international market. But why then do we as consumers see a rise at the pumps almost instantaneously? And why has there not been any oversight into this matter?

Oil conglomerates such as ExxonMobil, Shell, and virtually every other oil company in America today have seen record profits. As each previous quarter ends, and a new quarter begins, we continue to hear of record profit earnings during quarterly earnings conference calls. And this last quarter proved to be no exception.

ExxonMobil was pleased to report record third-quarter profits – over $14 billion in PROFIT! The largest American oil company flew past expectations and estimates with a posted net income of $14.83 billion on revenue totaling $137.7 billion in the third quarter. That breaks down to $1,865.69 in net income attained PER SECOND of operation in the third quarter.

During peak demand times, we saw the price of a barrel of oil reach astronomical prices upwards of $145/barrel. It was not until the past few weeks we began to see any sign of relief, as a barrel of oil was trading down in the range of $70-$80 per barrel, and currently sits at roughly $65 a barrel. This translated into gas prices dipping below $3 per gallon for the first time in over a year, and much needed relief for American consumers who have already been suffering because of the waning economy.

What can you be sure of in times like these? Oil companies are making record profits at our expense. This practice of raising the cost of gasoline at the pump just as soon as the cost of a barrel of oil increases translates into instant profit with no overhead. The product has already been shipped, refined, delivered, and pumped into consumers automobiles. The only difference is the electronically changed price per gallon paid at the pump.

There needs to be some kind of oversight into this matter. It only hurts the economy when the oil companies make windfall profits like those seen over the past few years. Demand dramatically decreases, and the travel industry suffers as a result. Less money is spent in worsening economic times such as that which we are living through currently, and rising costs of oil do not help. It has been a welcome sigh of relief being able to fill up my car for $100 again. But in such an unstable market, the oil industry needs some oversight – oversight perhaps the IEA could provide and institute, an organization created after the first oil shock in 1973 as a result of the Arab-Israeli war. The IEA has flexed its power twice since its creation, opening up reserve oil into the supply chain during the Iraqi-Kuwait war as well as during Hurricane Katrina, in efforts to stabilize the cost of gasoline.

Whatever is done, something needs to happen. Someone needs to take total power away from OPEC and create an international oversight committee to regulate such affairs. After all, we are nearing peak oil production and there remains an uncertainty about the future state of oil reliance. More resources MUST be invested in researching, developing, and implementing alternative energy sources. Sure ethanol is cleaner burning than gasoline, but if someone has an E-85 Chevrolet Tahoe in Southern California, they have to commute to either Camp Pendalton or Northern California to fill up using ethanol from an ethanol station. The infrastructure just is not there like it is in energy dependent nations such as Brasil.

This quarters record profits postings from all major oil companies is an outcry – a plea – for regulation.

Editor’s Note: I have posted the relevant 45 second snippet of the above video on my other site as it won’t embed properly on WordPress. [Linked]

Photo Credit: A Guy with a Camera – Flickr