Archive for November 2008
The Auto Industry – Served
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.”
Relief at the Pumps
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
GM Stock Now a Joke
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
The Future of the GOP
Much talk has been generated after the results of the 2008 Presidential election as to the fate of the GOP after it suffered a fatal blow. Losing the White House by a wide margin, the Republicans are also in danger of a fillibuster-free Senate as Democrats inch closer to a majority presence.
This election proved many things. This country was tired of the current administration and the past eight years of missteps and wrongdoings. This country, and for that matter, the world, is becoming increasingly interconnected via the world wide web, and the social interaction of the Web 2.0 culture has a huge impact. President-Elect Barack Obama realized this from the beginning, embracing technology as he has done even in his Senate days. The Republican Party on a whole steered shy of utilizing technology though – their largest falter in this election.
And unfortunately for them, the GOP is only now realizing this. A website has sprung up recently calling for change – the same slogan that Barack Obama used to win the White House – a change in their standard operating procedures, and a change in their interactions with others. Rebuild the Party outlines a 10-point action plan to modernize and strengthen the Republican Party from the grassroots up. The site calls for a grassroots first policy, encouraging new candidates, with new strategies, and the embracing of new technologies. A snippet below explains the organizer’s mission statement and touches on what they believe the problems of the party to be.
The time is now to set in motion the changes needed to rebuild our party from the grassroots up, modernize the way we run campaigns, and attract different, energetic, and younger candidates at all levels.
We must be conservative in philosophy — but bold in our approach. We don’t need a slight tweak here or there. We need transformation. We can’t keep fighting a 21st century war with 20th century weapons.
The site calls for the use of the Internet, calling it the party’s number one priority. Organizers have an internal goal of trying to recruit five million new Republican online activists – which will engage grassroots participants and help to create the most creative, engaging, and compelling political messages. The site points out a political ideology that the Obama team has used – the Politics of Us – as his greatest strength. If the GOP can adopt this policy of putting the people first, giving the power to accomplish things to the people, the Republican Party will survive. And that shouldn’t be too hard, given that Obama’s winning strategy is an inherently conservative idea – the people, acting together outside of the government, can accomplish great things. The Yes We Can concept in action.
But who will be the one that can successfully put a face to the party? It is widely thought that Governor Sarah Palin (R-AK) has such ambitions, wanting to put her rock star diva together in 2012 to run for office and resurrect a Republican president. But this is also widely thought to be a laughing matter, and a further detriment to the Republican Party. The GOP does not want Palin. So who do they want? Former Massachusetts Governor Mit Romney seems a likely candidate. He brings with him the independent wealth that he used to jump start and finance his Republican nomination bid over a year ago, and the swagger and following of many within the party. But he will have some hurdles to overcome if he were to succeed in 2012 as the Republican front runner. Romney needs a clear message, one that he believes in and not on that is generated to please potential voters.
Whoever the Republicans pick to be their front runner for office in a couple years, they now know that change is needed. The candidate that can successfully merge technology with policy and speech and can invigorate a grassroots system similar to the millions that President-Elect Obama had mobilized during his campaign will emerge with the party nomination.
CNN’s Anderson Cooper 360 reports on the recent Republican Governor’s Association conference in Florida and includes commentary on what Republican Governor’s view as the needs and directions the party must take to succeed in the future.
Photo Credit: No RNC Poster Project, CNN, and Rebuild the Party
Prop 8 Will See It’s Day In Court
Making the news rounds today is a brief coming out of San Francisco, California, where the Supreme Court of California announced they will hear the case of those against Proposition 8 and its prohibition of same-sex marriages. The court did state that, in accordance with the passage of the proposition, until any decision is made in the opposition of Prop 8, the issuance of same-sex marriage licenses will be suspended.
This echoes the Governors words for opponents of the proposition to fight on. What this proposition has done is take away a civil right, signaling a huge setback to the advancements that had been made earlier in the year by a 4-3 vote of the California Supreme Court.
If past history carries any prevalence, we must not trust these civil rights issues in the hands of voters. Proposition 8 is just a present-day example. Think about if we had put the issue of slavery to a vote a couple hundred years ago. As the majority of wealthy, voting Americans owned and used slaves for labor and services, a vote to abolish slavery would have had trouble even making it on a ballot, let alone passing.
As Apple Inc. said in a public statement regarding Proposition 8:
Apple is publicly opposing Proposition 8 and making a donation of $100,000 to the No on 8 campaign. Apple was among the first California companies to offer equal rights and benefits to our employees’ same-sex partners, and we strongly believe that a person’s fundamental rights — including the right to marry — should not be affected by their sexual orientation. Apple views this as a civil rights issue, rather than just a political issue, and is therefore speaking out publicly against Proposition 8.
This is just that, a civil rights issue, not just a political issue, and it is truly saddening that personal religious beliefs have been successful in pushing Prop 8 to the California Constitution. Hopefully, the California Supreme Court Justices, will uphold the civil rights it past earlier this year and squash this proposition once and for all.
Two possibilities exist as to avenues of killing this proposition. One argument could be made that Proposition 8 is more than a simple addendum to the California Constitution, but a full amendment, in which case, the proposition would need a majority two-thirds vote to pass. Pop 8 won by a margin of roughly 52% Yes, and 48% No – not a clear majority and not by any means a two-thirds majority.
The second possibility is that, upon hearing the case of opponents to Proposition 8, the Supreme Court justices find Prop 8 itself to be unconstitutional and find in favor of granting the civil rights of same-sex marriage couples.
Either possibility will gladly be taken, but the latter will be preferred. It will set precedent for future law in the State of California and abroad. It will put to rest any question the stance of the State of California on this matter and grant the civil rights that should be had of same-sex couples.
The Pentagon Wants More Money
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
At What Cost?
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