Looks like AIG is up to it’s usual tricks again. This time paying out large bonuses to executives with bailout money. Here is a quick excerpt from CNN Money:
Anger over $165 million in bonuses doled out to American International Group senior employees reached a fevered pitch on Monday, prompting the Obama administration to vow to recoup the money and a New York prosecutor to subpoena the firm for recipients’ names.
President Obama said Monday that he has asked Treasury Secretary Tim Geithner to use the government’s role as a majority owner of the troubled insurance company and “every legal avenue” to stop the bonuses.
“It’s hard to understand how derivative traders at AIG warranted any bonuses,” Obama said.
So AIG doles out $165 million of OUR money and now what? AIG has been a black hole for tax dollars since the bailout began. Too much money in, not enough transparency, and not enough accountability. While these guys are paying out bonuses, the company itself is continuing to hemorrhage money and no one can seem to close the wound.
Barack Obama needs to come down hard on this. This is the type of corporate bullshit that cannot be tolerated during these times. AIG states that these are existing contracts that they must honor in order to stave off legal battles and maintain their reputation, however we all know that too is bullshit. GM union workers were forced to renegotiate their contracts during this time, and frankly AIG shouldn’t be any different.
Sadly, we are majority shareholders AIG and President Obama and Tim Geithner are our representatives on the board so to speak. Find these bonuses, stop them from happening again and make sure that this money is returned back to the company.
UPDATE: In between my moments of sleep this morning, CNN reported that most of the people who given the bonuses left the company shortly there after. People infuriate me sometimes.
Congress has basically abandoned any chance of bailing out rescuing GM and Chrysler, who are both teetering on the brink of full on bankruptcy. This after Republican party members have, yet again, decided to vote down a plan to ensure that 1.2 million people don’t lose their jobs, and that our economy will continue to spiral downward towards it’s ultimate end. I can’t help but feel a little deja vous, like if some how we have gone through this before.
Republicans axed this proposition because they feel that the plan agreed upon by the Democrats and The White House won’t work.
The Republican leader, Senator Mitch McConnell of Kentucky, said: “We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves.”
Mr. McConnell added: “The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work.” [NY Times]
Overall the Republicans feel that GM and Chrysler (Ford can stand on it’s own…for now) are victims to the high wages and benefits of the UAW, and feel like they should be paid according to what the japanese automakers pay their workers in their U.S. factories. I read somewhere that it would be something like a $3 dollar difference, where UAW works make on average about $29 per hour as opposed to $26. This would save about $800 million dollars a year on top of eliminating lucrative benefits, pensions, and severance packages.
Where I would agree, that yes, UAW do make a bit more than others, we can’t deny the fact that these people are still employees. They still have families they need to support, mortgages they need to pay, and kids they need to put through college. I cannot stress enough of what a bankrupt Chrysler or GM would do to our economy on life support. A sudden loss of 1.2 million jobs would hit this economy very hard. Not to mention businesses that provide these companies with capital goods would also suffer greatly and in some cases even go bankrupt themselves.
So far this bailout has been one big, toxic mess. Companies like AIG, who is about as transparent as a brick wall when it comes to how it’s using it’s bailout funds, are perfect examples. But this time around, we are not bailing out banks, we are bailing out institutions that form part of the backbone of this economy. Managerial irresponsibility is not a good enough reason to let these companies go bankrupt. The cost of bankrupt GM or Chrysler (or both) would far exceed whatever amount Congress was considering. Do they need to restructure and make products that are innovative and meet demand? Yes. Do they need to renegotiate lower contracts, or eliminate unionization all together and structure themselves similar to Japanese automakers in the US? Sure. But they need the money NOW so that next year there will be a company left to restructure.
As always a great commentary by Jon Stewart. This time around it’s about the Auto Industry bailout and how congress is dragging it’s feet when, and turning a blind eye to the massive repercussions of a bankrupt auto industry.
“Now Congress, I think I know what this whole thing is about. You gave the financial industry $700 billion but you may not give the car industry $35 billion because you don’t really know what the finance industry does, do you?…See here’s the problem. The auto industry has a product that is tangible and easy to complain about. I should know, my first car – this is true – was an AMC Gremlin…It’s a car that existed so that Pinto drivers would have something to **** on…but it got me from here to there and while I was doing it, it preserved my virginity along the way. That’s the thing about cars. Even the crappy ones are useful. But you won’t bail out the people who make cars. You’ll only bail out the people who make car loans. Not even car loans! The people you bailed out make derivitive paper transfers speculating on the future value of enormous groupings of said loans to China. Fine! Detroit’s business model is bad. We know they lose $2,000 for every car they sell. Wall Street lost $7 trillion without selling anything! At least when Detroit loses money we get cars. So give them the money! And by the way, if you see my Gremlin, tell her I ended up getting laid when I got a Mustang.” – Jon Stewart
He is absolutely spot on. These companies, as poorly managed as they are, are VITAL to this nations economy. We may grill the CEOs for flying private jets and gas guzzlers all we want. In the end, we need swift action, we need regulation, and we need to stop this showboating and demand restructuring and give them this money.
I am sitting here today, browsing the NY Times, reading article after article about the auto industry each with it’s own opinion. Some are for saving it, some for allowing it to fall. But I just can’t seem to pick a side on this. It’s rough…
On one hand we have three massive companies, Ford, Chrysler, and General Motors. These companies have been poorly operated for a VERY long time now. They have been in bed with the oil companies for so long, producing products that don’t meet demand, that are harmful for the environment, and extremely dependant on foreign oil. Look, I go blue in the face saying how awesome that new Dodge Challenger is, but I sure as hell wouldn’t buy one. Especially not at a time when gas prices can go from $2.20 to $4.60 on a whim. The big three have always regarded green vehicles as something of an afterthought. Sure the Chevy Volt is very nice, but at this point, it’s too little too late.
The government has already bailed out these companies over and over again. Providing that very low interest loans and orders for government vehicles. Even this this cash flow, these companies have not restructured, have not focused on research for new technologies, and have not analyzed their manufacturing habits. All this while the workers continue to take wage cuts while CEOs continue to make their lucrative salaries. At what point can we say “enough is enough, you are on your own.”
On the other hand, the collapse of any (or all) of the big three would hit the economy harder, or as hard as the collapse of “too big to fall” Lehman Brothers. Experts believe that if the government had bailed out Lehman Brothers that DOW would be above 10,000. But that’s neither here not there. A collapse of any of these companies would result in a catastrophic economic situation. Close to 1.2 million hard working employees would lose their jobs, in towns where those are the only types of jobs available. Local economies revolving around factories would suffer as well. The government would have to pay out anyway, guaranteeing pension plans and such.
So where as most articles out there are screaming for a bailout, or screaming for a downfall, mine is different. I am screaming for a sound, informed, decision. If it is best for this country to let these fixtures of our nation, these historical companies that have been the backbone of our economy for so long fall then so be it. If it is better to rescue them, despite their errors, and despite their problems, then sign the check and mail it out Monday morning.
No. Should we give it to them despite that? Sure, why the hell not. This bailout, as slippery of a slope as it is, is very much a necessary evil at this point. Where the housing and banking crisis had guilty parties on both sides, the auto industry has only itself to blame.
GM, Chrysler, and Ford have been plagued by many problems. These companies have been managed extremely poorly. They have held to this notion of the “invincibility” of the American auto industry for so long, completely ignoring the writing on the wall. This wasn’t a sudden event, there was nothing catching them by surprise here. This was poor planning, poor management, and poor spending at it’s most apparent.
Another problem is the American auto industry’s failure to realize the fairly obvious environmental movement, and the sudden rise in oil prices. The “Big Three” rode the profitable wave of demand for large, gas guzzling SUV’s for way too long. I think some one did see this coming, but was hog tied and gagged so as to not spoil the fun. When you dedicate your production to a product that runs counter to demand, and is dependent on the price of oil, then you are eventually going to have a problem.
Finally I think the American auto industry has been a bit half assed in the design and development department. Having recently been car shopping (and settling on a 2009 Honda Accord Coupe), I think American cars have this very simplistic design that doesn’t appeal to too many people. I do think they are trying to change that, especially with new, eco-friendly vehicles like the Chevy Volt, and the sheer bad asses of the Cadillac CTS-V and the Dodge Challenger. But it might be too little, too late.
In the end, the “Big Three” car makers are guilty of supreme negligence and poor business sense. However, letting these companies fall would be even more negligent on the part of the U.S. Government. These companies are the manufacturing back bone of this nation. A collapse of any of these could deal a major blow to the economy. Give them their $25 Billion, but make sure it comes with a swift kick in the ass and a couple of new CEOs.
This story is courtesy of the New York Times. A pretty shocking story at that:
Apparently, for the past month GM and Chrysler (owned by the Cerberus Capital Group) have been discussing a possible merger. Seeing as though both companies are clinging to the straws that their respective stocks are worth, it makes sense…sort of. Sources close to the talks say that a deal is “50-50″ Here is an excerpt from the article…
A merger would be a historic event, with two of the most iconic names in American industry coming together to survive in an increasingly difficult environment. Both have roots dating back decades in Detroit and, with Ford, long dominated the auto industry — until Japanese and other foreign car makers began making inroads into the American market.
If Hell, does indeed freeze over, and this comes to fruition, this would make GM/Chrysler (gulp) the biggest auto manufacturer in the world (yes bigger than Ford), controlling 35% of the U.S. market share. I am pretty shocked. Crazy times man. This is definitely a sign of how bad things are out there. I am sure we haven’t heard the end of this. Peace Out!
YES! GM is finally making cars that satisfies the demand for economic, efficient vehicles. The best this of all, it’s 100% Plug-In Electric, it has a unique iPod-like interior, and DOESN’T look like a Prius, or a Honda (that looks like a Prius). GM seems to be learning from the mistakes that cost it so much. Transitioning from big trucks, to cars like these, with the economy the way it is, the world literally melting, seems to be a positive move.
Since I was younger I was always a Ford guy. My love affair with the Mustang started when I was very young. I watched Bullitt a thousand times cause of it, and have sworn my undying allegiance to Carol Shelby a long time ago. But deep down I had a hidden respect for General Motors too. Sure one could argue that for the most part they sucked at making money. I mean the 70’s and 80’s produced some amazingly mediocre stuff, but I think GM has tried really hard to turn that around. But despite this, GM has churned out a couple of hits. The Chevy Corvette, the Camaro, and the Silverado just to name a few. And I have to give GM credit for reinventing Cadillac completely and transforming them into a suitable competitor for BMW and Benz. Despite that, GM (and for the most part the entire American auto industry) is suffering big time, as 2008 could be without a doubt the worst year in the company’s history. Profits are shockingly down, sales are down 18%, and the stock is tanking. The American automotive industry has finally received a wake up call that was a long time coming.
American cars have gotten a bad rep for being powerful, gas guzzling dragsters. And to an extent yes, that’s true. General Motors and Ford’s bread and butter sales are trucks and work horse vehicles. Ford’s baby was the F-150, which for a good period of time was not only their best seller but the best selling pick-up in it’s class. But like all of the vehicles in it’s class, they are massive gas guzzlers. Fine and dandy for a period where gas is $2.50 a gallon, but for a period where political and economic factors are causing gas prices to shoot to $4 a gallon it’s not. So it comes to no surprise that the big three (GM, Ford, and Chrysler) are posting record losses while companies like Toyota and Honda are posting record gains. The American automotive industry had focused all their efforts at selling a vehicle that was appropriate for a time that has come and gone. Now people are desperately trading in their SUV’s and Pick-Ups for Hybrids and Crossovers. Because of this now the industry is in a panic. Suddenly the product they produce is now obsolete, replaced not by new technology, but a new consumer need for efficiency and a high MPG rating.
So now Ford, GM, and Chrysler (who was suffering long before all this) are now cutting costs, closing factories (and companies such as Hummer) and laying off workers left and right. They are refocusing resources (a very costly process) once dedicated to mass producing large engined SUVs and trucks to smaller, more efficient automobiles. But my question is, couldn’t they see this coming? Gas prices have been steadily climbing (mind you not as drastically as recently) for decades now. It seems as though the American auto industry tried to exploit the high demand for these vehicles well beyond reasonable means. Anyone could have seen that eventually, consumer taste would change after gas prices increase, and the search for alternative means of energy would become a priority. All the while GM and Ford continued to produce these type of cars, companies like Toyota and Honda thought ahead. They produce and sold gas efficient vehicles, which left little impact on the environment and were practical. I guess that paid off, considering that Toyota is now the leading car company in the United States, and the American car companies are now cutting programs and posting record losses.
Everyone says that the auto industry is the heart beat of this country’s economy. That whatever they are suffering from, so is the country suffering from. I agree with that one hundred percent. They are suffering because the American people are suffering, trying to gas up their SUVs and diesel trucks. People are sick of paying $100 plus at the gas pump so they are looking to the Japanese and the Germans for relief. And until they adapt, they will continue down the rocky road. Hopefully it’s not too little too late.
Gas is the blood of this nation. Since the 1970’s, when the average family owning a car or two became common, America has been purchasing and consuming large quantities of fuel. Without it, no one gets to work, no one makes money, no one eats. Whichever way you look at it, this nation is hooked on the black gold, and something needs to be done about it. As of 2:28 pm today, crude oil is trading at $129.29 (with a high of $136.40). I don’t know about you but, gas prices like the ones pictured above makes me want to consider squeezing into a SMART car for the rest of my life (and investing in the Jaws of Life to get out of it).
Recently, President Bush lifted a ban on off shore oil drilling primarily in the continental shelf area. Though his actions are merely symbolic without congressional approval, this has spawned a heated debate on both sides of the isle. Republicans want to begin immediate drilling off the cost of our nation in order to help alleviate gas prices for the consumer. Democrats don’t want to spend the money on drilling off shore, stating that it would take too long for oil drilling off the coast to be productive and the environmental impact would be devastating. Even states are taking sides. Governor Arnold Schwarzenegger (insert Terminator theme here) has been, and continues to be staunchly against off shore drilling in the state of California. After being briefed by his aides, President Bush is going to have to take it back. Honestly, the Democrats have a point. We would be spending money on something that won’t start paying out till much later down the road and be affecting the environment now. The question shouldn’t be “Where should we start drilling?” But rather, “When should we stop?”.
Some argue that money that would be used to start drilling in the Continental Shelf, or the ANWR province, should be instead used to research and develop alternative methods for energy. Al Gore today called for this nation to switch electricity to renewable resources in 10 years time.
“The survival of the United States of America as we know it is at risk.” He emphasized that meeting this goal is critical, and needs to be seen as something past the elections. He went on to say, “A political promise to do something 40 years from now is universally ignored because everyone knows that’s meaningless.” and that “Ten years is about the maximum time that we as a nation can hold a steady aim and hit the target.”
Note: Al Gore basically has described the collective attention span of this nation.
While most of the critics say that renewable resources are still years away, it’s a switch we as a nation must take. Our dependence on foreign oil is hazardous to this nation. Oil affects everything we buy, everything we do. The fact that most of our oil comes from other nations (primarily other nations that don’t view us favorably) makes it a huge national security issue as well. The fact of the matter is that drilling off shore or in ANWR will solve nothing except give us a temporary (and according to some experts a VERY temporary) fix. Our nation needs to, in essence, go to rehab. Technology is constantly changing around us, yet we have been depending on gas for decades. Gas is something finite, one day, no one will have gas (see. Mad Max). Renewable resources such as biofuels, wind, hydroelectric, and solar energy are quirky and new yes, but with proper funding and research can become mainstream and vastly alleviate America’s dependence on foreign oil. Even this much will push this nation in to a sort of renaissance of research and development of new energy solutions. The private sector is eager to explore alternatives to fuel. Companies like Tesla, who is known for developing high performance electric cars, is planning different, every day cars powered solely by plug-in electric engines. Toyota, GM, and Honda are all planning plug-in, long range electric vehicles. GM is introducing the Chevy Volt, a fully production ready PHEV (Plug-in Hybrid Electric Vehicle), Toyota has plans to switch the Prius to PHEV as well, and Honda is going the Hydrogen route with it’s FCX Clarity.
I recently got my mom a Macbook Pro. She was very hesitant to use something she didn’t know about, being comfortable with the old, beat up, malfunctioning VAIO she had been using for a while. I basically dragged her into the 21st century by tossing her old laptop and now she can’t live without her Mac. The same thing needs to happen in America. Too many people are comfortable with oil. Whether they are comfortable using it, or comfortable profiting from it, our nation has grown lethargic to change. Everything is evolving around us, except for oil. We need to be dragged kicking and screaming in to the 21st century. It’s time to leave the old ideas that we cling to so much, which are hurting us, and embrace something better.
Welcome to The Jorge Zone! This is my blog, my mental exhaust pipe, slowly filling the atmosphere with my opinions, favorite links, news and the like. This blog is all about the political and social issues we face today. Current events, political & economical happenings, religion & faith, global warming, stuff like ... Continue reading »
