31 March 2009

Spartan Basketball Helping Depressed Detroit

Originally Posted to USA Today

As the lower-seeded team in Saturday's first NCAA men's national semifinal, Michigan State will be wearing its road uniforms against Connecticut. But UConn coach Jim Calhoun knows appearances will be deceiving.

"I'm very aware of the fact that there will be a little bit of noise for the guys in green," Calhoun said Monday, five days before his Huskies take on the Spartans in Detroit, 92 miles from Michigan State's campus in East Lansing.

Approximately 71,000 fans are expected, according to the NCAA. That would break the tournament record of 64,959 set at the Louisiana Superdome in New Orleans in 1987. How many will be rooting for the Spartans?

"I'm sure there will be 50 or 60,000 Michigan State fans there," Calhoun said.

Maybe not quite that many.

As Spartans coach Tom Izzo pointed out, the Final Four is attended by fans from all over the nation.

The NCAA's Greg Shaheen said about 24,000 tickets were sold to the general public for $150 to $300; 10,000 go to the organizing committee; about 18,000 are divided among the four schools, and the rest to the NCAA, schools, coaches and CBS.

The Final Four is sold out, but getting tickets is possible. RazorGator, the NCAA's official ticket and hospitality package provider, has been listing tickets on the secondary market from about $600 each to $40,000 for a premium suite.

While overall prices have been down from last year because of the economy and the stadium size, demand has increased because of MSU, RazorGator vice president Scott Roback said: "That's had a major impact. Michigan State's participation is definitely pushing the price up."

Ford Motor Offers Job-Loss Insurance

As Originally Posted at Bloomberg

Ford Motor Co., adjusting incentives as the U.S. recession deepens, said it will cover payments for as long as 12 months on new vehicles for buyers who lose their jobs.

The program will also offer no-interest financing through Ford Motor Credit Co., the Dearborn, Michigan-based automaker said today in a statement. The offers start today and run through June 1, covering Ford, Lincoln and Mercury autos.

“Consumers remain anxious about the economy and their own outlook for the future,” Ken Czubay, vice president of sales and marketing, said in the statement.

General Motors Corp. plans a similar program as both automakers struggle with a 39 percent decline in U.S. auto sales this year through February. GM will allow people who lose their jobs to return autos without penalty, people familiar with the matter said yesterday.

Hyundai Motor Co. started offering payment-protection incentives in January.

Ford also said it will work through its dealers to provide support to local charities because of the recession, with details to be announced in April.

Some Hard Data On Michigan's Uninsured

priority health michigan health insuranceOriginally Posted at ABC12 News

The number of people without Michigan health insurance coverage is expected to grow exponentially in the future.

As we wind down Cover the Uninsured Week on ABC12, HealthFirst reporter Leslie Toldo has some of the hard facts about the state of health care in Michigan.

There are many people who qualify for free or low-cost insurance coverage, but don't know that it's available.

Fortunately, one Fenton woman found that out, quite literally, before it was too late.

The number of people without insurance in our state is high and the number of people who are actually on some type of public assistance is even higher.

Today we go back to a town hall meeting held in Flint on Thursday to get some insight from the state's top experts.

Right now, one-in-six Michiganders and one-in-three children are on Michigan Medicaid insurance. One-in-four people in the state is covered by some type of public assistance.

According to the director of Michigan's Department of Community Health, one quarter of the state's general fund goes to Medicaid coverage.

Janet Olszenwski is the director of the state Department of Health. "That's a tremendous amount of investment. That's money that can't be used for education, that can't be used for other needs the citizens have. But it's money that goes to protecting children, the elderly, the disabled and Michigan womens' health."

The resulting good news, according to our panelists, is Michigan has the ninth-lowest number of children who do not have health coverage.

Sadly, according to the Marianne Udow-Phillips, the director of the Center for Healthcare Research and Transformation in Ann Arbor, there are still 150,000 kids who are not covered and the number is going up. "In one year we saw a very large increase in the percentage of our children who are uninsured. We went from having 4.7 percent of our children who are uninsured to 6.2 percent who are uninsured."

Finally, our panelists pointed out that those on public assistance and those without a Michigan health insurance company are not the only ones feeling the pinch.

"Increasingly, those who have private coverage are having great difficulty in affording that coverage and affording care because all of us have seen increases in our co-pays and our deductibles. And you see that in our data a 25 percent increase in a relatively short period of time," Udow noted.

Uncompensated care equates to costs hospitals have to eat because unpaid or underpaid bills increased by 68 percent last year.

We have a link to more of Michigan's specific stats at abc12. com, as well as more information about how to get help finding coverage.

Michigan Clinics Receive Stimulus Money For Uninsured

michigan womens health at priority healthOriginally Posted at WZZM13

At least 2 health centers in West Michigan will get a portion of new stimulus money coming to the state.

More than $8 million dollars will be divided between 29 federally qualified community health centers. The Cherry Street Health Services and Saint Mary's Heartside Clinic are two of them.

"The amount of money that we are getting right at this time is $604,000 and with that we will be able to add 13 new staff members. Those include two dentists, a hygienist a physician and medical assistants, dental assistants and others," said Chris Shea, the executive director of Cherry Street Health Services.

The agency operates 13 clinics in Kent County where low income residents can get help with health, dental and counseling services. Shea said last year the clinics served 45,000 people but says there were many more they could not help.

"We estimate there are as many as 4 times that number of people who have limited access to health care primarily due to income. It is right on time. It is coming to us quickly it certainly is not in the amounts that are needed to serve everyone, but it is at least a good boost to get us moving in the right direction," he said.

Shea said the money will allow the clinics to provide care for more people who have lost their jobs or Michigan health insurance.

Nationally clinics will use the funds over the next two years to create or keep about 150 jobs and provide care for nearly 54 thousand new patients.

St. Mary's Health Care is receiving stimulus money to the tune of $194,000. A spokesperson for the center says it will use it's money to extend hours and services offered at it's Heartside Clinic.

Each year about 8,000 homeless people visit the clinic. These are generally people without a Michigan health insurance company. The grant money will allow the clinic to provide 2,500 more visits to the homeless or destitute.

30 March 2009

A Shotgun Wedding For Chrysler, Fiat

Originally Posted to Forbes

Time is running out for Fiat and Chrysler to become fast friends.

The U.S. government has threatened to suspend federal aid for Chrysler unless it secures a deal with the Italian carmaker within 30 days, senior administration officials told Forbes. (See “Obama Takes The Wheel In Detroit.”) Chrysler, along with General Motors, has already received $17.4 billion in federal loans and has asked for billions more.

Fiat and Chrysler announced in January that the two were entering a partnership in which Fiat would take 35.0% of Chrysler in return for sharing its technology and product platforms with the firm, and not pay any cash toward the investment, with a final accord between the two to be announced in April.

Chrysler is expected to tap into Fiat’s product line of smaller cars. (See “The Steal Of The Century.”)

But analysts were cautious about whether the carmakers would meet the 30-day deadline. "I give a potential deal a 50.0% probability,” said Martino de Ambroggi, an analyst with Equita SIM. “It depends on the agreement with U.S. aid, trade unions and suppliers. Fiat is like a spectator right now. The deal will go ahead in the case of the survival of Chrysler, which is not in the hands of Fiat.”

Fiat has been cautious about a potential partnership with debt-laden Chrysler. The Italian automaker said earlier this month that it would not take on Chrysler's debt, current or future. The company said it "intends to make absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness to Chrysler." (See “Fiat, Chrysler Clash Over Debt.”)

“I would not rate it as a "good deal" but as a "good opportunity" because the capacity of Chrysler to become profitable has to be checked in the medium- to long run,” Ambroggi said.

Fiat CEO Sergio Marchione has said that in order to survive, a carmaker needs to sell between 5.5 to 6 million units per year. But Fiat and Chrysler are still well below this level by more than 2 million units, Ambroggi added. “The deal would allow Fiat to become larger and to take advantage of geographical diversification and common platforms, but it’s not a secret that Fiat is looking for a third partner to join the venture."

Shares of Fiat (nyse: FIA - news - people ) fell 6.3%, or 33 euro cents (44 cents), to 4.94 euros ($6.51) in Milan.

Wagoner Out But Not Empty-Handed

AP Story As Posted to Mercury News

When General Motors Chairman and CEO Rick Wagoner leaves the automaker, he'll take with him a financial package worth an estimated $23 million.

The terms of General Motors Corp.'s government loans prevent it from giving executives severance pay, but they don't affect earned pensions.

As of Dec. 31, Wagoner's accumulated pension was valued at $22.1 million, but he'll receive that in payments over the rest of his life, so the actual amount he collects might be different.

According to GM's latest annual report, Wagoner also will receive about $367,000 in stock awards and about $535,000 in deferred compensation.

Wagoner announced his resignation today. Obama administration officials asked him to step aside as part of the government's plan to assist the struggling automaker.

Granholm: Wagoner Was Sacrificial Lamb

As Originally Posted to The Wall Street Journal

The governor of Michigan says Rick Wagoner, the General Motors chairman and CEO forced out of his job in the Obama administration’s final effort to revive the ailing U.S. auto industry, is a “sacrificial lamb.”

Interviewed Monday on NBC’s “Today” show, Governor Jennifer Granholm noted that Wagoner has worked for GM for more than 30 years and was trying to turn the company around.

She said that Wagoner agreed to step aside for the good of the car maker and its workers.

The Obama administration announced late Sunday that neither GM nor Chrysler has come up with acceptable business plans to merit receiving additional federal bailout money. The two automakers were each given a brief deadline to try one last time to persuade Washington they’re worth saving.

President Obama Wants To Shake Up GM, Chrysler

Originally Posted at Politico

In surprising findings to be outlined at the White House on Monday, President Obama has concluded that neither GM nor Chrysler as they now exist deserve more bailouts. But the White House is sparing them for a month or two, and is promising American consumers that the government will stand behind warranties if the automakers fail.

Most remarkably, the administration demanded that GM CEO Rick Wagoner resign so the company could remake itself “with a clean sheet of paper.” And he did, effective immediately. The administration also said GM has been given a “goal of replacing a majority of the board over the coming months.”

The administration found that both carmakers had failed in their viability assessments as required under the terms of the massive government loans they’ve already received, and determined that neither should receive another bailout. [ Chrysler viability assessment ]

“We have unfortunately concluded that neither plan submitted by either company represents viability, and therefore does not warrant the substantial additional investments that they requested,” a senior administration official told reporters on a conference call Sunday night.

Obama is to deliver his “remarks about the American automotive industry" at 11 a.m. ET.

Under the hard-nosed “Obama Administration New Path to Viability for GM & Chrysler,” GM is getting 60 days of “working capital” – money to pay bills during the restructuring. The administration did not specify an amount.

Chrysler is getting just 30 days to reach a long-discussed deal with Fiat, the Italian carmaker. The government would lend the new venture as much as $6 billion.

“Chrysler is a more difficult situation,” the official said. “Chrysler is unfortunately not viable as a stand-alone company. … If [Chrysler and Fiat] cannot come to a satisfactory agreement … and if no other viable partnership emerges for Chrysler, we will not be able to justify investing additional American tax dollars into Chrysler.”

The administration said both companies may need to restructure using the protection of courts, under a form of bankruptcy.

The White House held a Sunday night conference call with members of Congress from auto-producing states, and the lawmakers were far from satisfied.

"Tough love hurts," said a source familiar with the discussions. "The members received the briefing with a sense of anxiety.” The source said the timeline and funds to be announced Monday are "not good enough."

The shove to Wagoner, a 30-year GM veteran, came from the Treasury-led Presidential Task Force on the Auto Industry, which Obama named in February in lieu of a “car czar.” It is the most vivid example so far of the extraordinary new role that the government, as controller of the bailout purse strings, is playing in American business.

A senior administration official said there was no “quid pro quo” for Wagoner’s departure: “The task force asked, and he agreed to leave GM.”

The warranty program, a surprise offering, is designed to encourage consumers to buy cars without having to worry about whether or not the manufacturer will be out of business by the time something breaks. The administration is promising to “stand behind new cars purchased from GM or Chrysler during this period … of uncertainty.”

“No American should worry in buying a car from Chrysler, GM over this next period of time,” said the official, who added that the administration has no cost estimate for the “Warranty Commitment Program.”

The administration also announced that to help the affected communities, it is naming a Director of Recovery for Auto Workers and Communities. The post will go to Edward Montgomery, a labor economist and former Deputy Secretary of Labor, whose job will be to “work to leverage all resources of government to support the workers, communities and regions that rely on the American auto industry.”

In stark language, the administration’s five-page “Determination of Viability” for GM spells out the harsh findings: “General Motors has not satisfied the terms of its loan agreement. … It is strongly believed, however, that … a substantial restructuring will lead to a viable GM.”

The five-page findings for Chrysler say: “Chrysler has not satisfied the terms of its loan agreement. … The Chrysler plan is not likely to lead to viability on a standalone basis.”

Obama plans very tough rhetoric in his remarks Monday, with aides saying he will say explicitly that even greater sacrifice will be required from everyone involved with the auto industry.

“That’s just the unfortunate fact of life,” the official said. “It doesn’t make any of us happy. But we view ourselves as the custodians of taxpayer dollars, and we really want to be sure that when they are put to work, they are put to work in a thoughtful way, with every expectation of recovery.”

The companies can expect little leeway in the future.

“Look, we are not trying to delay the outcome of this process,” the official said. “The president has established very firm, very clear, unambiguous, unchangeable deadlines and guidelines for which the government will invest new money. And we intend to stick to those. … I hope everyone on this call gets the fact that this is not business as usual. This is a new approach that we are very emphatic about. Having said that, we want to give these companies every opportunity to succeed.”

Officials made it clear that Chrysler is much worse off than GM.

“If you even look at Chrysler’s own viability submission, you’ll see that based on their own assumptions, they kind of eke it along,” the official said. “They really never generate positive cash flow. They’re never in a position, really, to pay down their debt. It’s not … a very realistic or workable place for a company to be.”

The official said that the administration views GM, on the other hand, as “a much substantial collection of assets, a much more substantial collection of brands.”

“If you look at things like Consumer Reports’ ranking of cars, you’ll see very great differences between those two companies,” the official continued. “General Motors' Malibu won the car of the year award last year. Chrysler has zero cars – no cars – that are recommended by Consumer Reports.”

The official added: “There are certainly lots of fine Chrysler cars out there and we’re not trying to dissuade anyone from buying them. But we are attempting to make these viability assessments.”

Obama To GM, Chrysler: Plans Not Acceptable

Original Post from MSNBC

WASHINGTON - The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.

President Barack Obama is sending a blunt message to Detroit automakers: To survive — and win more government help — they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler’s restructuring plans.

Obama is set to elaborate on that message Monday when he announces what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money.

Obama is scheduled to speak on the government’s plans to help the automotive industry at 11 a.m. ET.

GM chairman Rick Wagoner became the most conspicuous casualty of that decision, forced out Sunday as the White House indicated Detroit must make management and other changes if it hopes to survive — and that the Obama administration will have a hands-on role in those changes.

Michigan Gov. Governor Jennifer Granholm said Wagoner “clearly is a sacrificial lamb” who stepped aside “for the future of the company and for the future of jobs.” She spoke on NBC’s “Today” show Monday.

Obama said the companies must do more to receive additional financial aid from the government.

“We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge — at the other end — much more lean, mean and competitive than it currently is,” Obama said on CBS’ “Face the Nation” broadcast Sunday.

Frustrated administration officials, speaking on condition of anonymity ahead of Obama’s announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off.

Shawn Morgan, a Chrysler spokeswoman, declined to comment ahead of Obama’s announcement.

For GM, the administration offered 60 days of operating money to restructure. Officials say they believe GM can put together a plan that will keep production lines moving in the coming years.

New directors will now make up the majority of GM’s board. Fritz Henderson, GM’s president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

“The board has recognized for some time that the company’s restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience,” Kresa said in a written statement.

The Obama administration move comes amid public outrage over bonuses paid to business leaders and American International Group executives — set against a severely ailing economy.

GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more. The White House balked and instead started a countdown clock.

Two people familiar with the plan said bankruptcy would still be possible if the automakers failed to restructure. Those officials spoke on condition of anonymity because they were not authorized to make details public.

An exasperated administration official noted that the companies had not done enough to reduce debt; in some cases, it actually increased during this restructuring and review process. GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands — Chevrolet, Cadillac, GMC and Buick.

Wagoner Agrees To Step Aside

Original Post at Detroit Free Press

President Barack Obama's rescue plan for Detroit automakers will be unveiled Monday, but one condition became clear today: the resignation of General Motors Corp. Chairman and Chief Executive Rick Wagoner.

As a condition for additional government aid to GM, the Obama administration asked Wagoner to step aside, which Wagoner agreed to do today, people familiar with the plan said. Wagoner’s move, effective immediately, ends a 31-year career with GM.

Not since President Franklin Roosevelt considered taking control of Ford Motor Co. in 1943 from a failing Henry Ford has the federal government pushed for such sway in the management of Detroit’s automakers.

The tack suggests a hard-nosed approach from the Obama administration toward the automakers, bondholders and the UAW, all of whom have yet to reach agreements on key concessions, despite months of talks.

Obama will unveil the new rescue plan for GM and Chrysler in a White House ceremony this morning.

It was not clear who would replace Wagoner; chief operating officer Fritz Henderson would appear to be the most likely candidate. GM declined to comment.

A tumultuous 31-year career ends

“It’s time to stop whining and play the game.”

That was Wagoner six years ago, laying out a vision of a booming market for GM’s vehicles around the world and defending an aggressive campaign of rebates that spurred GM’s sales.

But his resignation on Sunday put an abrupt close to his 31-year career with the automaker.

Even though Wagoner had overseen a company that’s lost $82 billion over the past four years, he had faced few serious challenges to his leadership, the exception being a drive in 2006 by billionaire investor Kirk Kerkorian for an alliance with Renault-Nissan than Wagoner blunted.

“I’m disappointed but not surprised,” said David Cole, chairman of the Center for Automotive Research. “One of the things we recognize is that any kind of aid for industry, whether it is the financial or the auto industry, is quite politically unpopular. If you are in the government’s position, you need to be able to show the heads that have come from this.”

News of Wagoner’s departure caught many in Detroit off guard, especially after his determination to stay in office despite what seemed like continuous pressure from some corners of Wall Street and Washington to step down.

Asked about the development late Sunday, one top GM executive confided: “You know as much as we do.”

The change comes as GM is undergoing sweeping restructuring efforts, which include cutting 47,000 jobs by the end of the year, scaling back its dealer network by about 25% by 2012 and eliminating brands and models.

“I’m not necessarily sure it’s the best idea” for Wagoner to leave now, said Aaron Bragman, an industry analyst from IHS Global Insight. “You’re changing captains in the middle of the rapids here.”

It wasn’t clear today who would replace Wagoner, or why the government had asked him to leave. The most obvious candidate to step into his roles would be Chief Operating Officer Fritz Henderson, with Chief Financial Officer Ray Young also possibly moving up.

The news sent new rounds of anxiety through the workforce. GM hourly worker Randy Halazon, 51, of Vassar, near Flint, has spent a combined 31 years at GM and the automaker’s parts spinoff Delphi. He said he is more concerned than ever about the GM’s future, fearing the change in leadership might mean a greater likelihood of bankruptcy.

“I think it would be a bad deal,” Halazon said.

While Wagoner will likely be remembered as the CEO at the helm when GM required at least $13.4 billion in government aid to stay alive, some of successes under his watch include development of the Chevrolet Volt, an electric-drive vehicle slated for the market in late 2010, and a renewed partnership with the UAW that brought about a 2007 labor agreement that significantly changed the company’s cost structure.

Early in his tenure as chief executive, Wagoner outlined a strategy for GM to focus on developing countries where the auto industry still had large potential growth, such as Brazil, Russia and China. By 2005, GM was selling more vehicles overseas than in North America and GM was the No. 1 car company in China, with the Buick brand in China outselling its U.S. base.

But Wagoner could never halt the steady decline of GM’s market share in the United States, fueled by rising foreign competition and GM’s higher costs, which eventually allowed Toyota Motor Co. to surpass GM as the world’s largest automaker last year.

When he took over as chief of GM North America in 1994, the company held 33% of the U.S. market. Last year, GM’s sales fell to 22% of the market.

The declining market share foretold of GM’s bleak future. The company last made money on an annual basis in 2004, and recorded a $38.7 billion loss in 2007.

Wagoner’s friends and associates always described him as a naturally friendly man who could summon the edge needed to run an enterprise the size of GM when necessary. He only rarely showed emotion in public; once cursing a writer for a Los Angeles newspaper who had written that Wagoner did not like the Pontiac Aztek.

The Aztek debacle in 2000 became a touchstone for Wagoner’s tenure, and the off-base vehicles that GM was building earlier in his career. While Wagoner defended the vehicle and the GM process that created it, he also went looking for someone to rework the company’s product line.

The search ended when Wagoner hired former Chrysler executive Bob Lutz out of retirement in 2002. Lutz eventually succeeded in giving design a higher priority, generating models such as the Chevrolet Malibu that were competitive with the top Japanese models.

Several industry observers today said Wagoner would do what he thought was best for the company – including stepping down if needed. Duane Paddock, a New York Chevrolet dealer who is the co-chair of GM’s national dealer council, said he believed Wagoner could have fixed the company.

“But if his decision, for whatever reason, is to move on then I feel he is making the decision because it’s the right decision for the long-term viability for General Motors,” he said.

29 March 2009

Obama Says Car Industry Must Change To Receive More Aid

Originally Posted to The New York Times

President Barack Obama says General Motors Corp., Chrysler LLC and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future.

Obama, in an interview with CBS' ''Face the Nation'' broadcast Sunday, said the companies must do more to receive additional financial aid from the government.

''They're not there yet,'' Obama said.

The president was set to announce a plan Monday for the government to provide more money in exchange for tough concessions from union workers, bondholders and others.

''We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge -- at the other end -- much more lean, mean, and competitive than it currently is,'' Obama said.

GM and Chrysler are surviving on $17.4 billion in government loans. They have been hard hit by the economic downturn and the worst decline in auto sales in 27 years. GM is seeking $16.6 billion more; Chrysler wants $5 billion more.

Obama said the government would require a ''set of sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers. Everybody's gonna have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road.''

Both companies are trying to reduce their debt by two-thirds and persuade the United Auto Workers union to accept several cost-cutting measures.

Under the terms of a loan agreement reached during the Bush administration, GM and Chrysler are pushing the UAW to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care. They also want labor costs from the union to be competitive with Japanese automakers with U.S. operations.

Neither GM nor Chrysler have deals with the union on the trust funding or concessions from their debtholders and the administration has been trying to accelerate those efforts.

GM and Chrysler employ about 140,000 workers in the U.S.

Members of the president's auto industry task force have said bankruptcy could be an option for GM and Chrysler if their management, workers, creditors and shareholders failed to make sacrifices. The conditions could be more stringent than the loan terms set by the outgoing Bush administration in December, officials have said.

GM and Chrysler face a Tuesday deadline to submit completed restructuring plans, but neither company is expected to finish their work. The administration's plan would be designed to accelerate those efforts.

GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

In February, GM said it intended to cut 47,000 jobs around the globe, or nearly 20 percent of its work force, close hundreds of dealerships and focus on four core brands -- Chevrolet, Cadillac, GMC and Buick.

Chrysler issued two scenarios in its February plan: one, as a distinct company, and the second, in an alliance with Italian automaker Fiat SpA. Fiat executives have talked to the task force about a proposal to acquire a 35 percent stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8 billion to $10 billion.

Chrysler said in its February report that it would cut 3,000 workers and eliminate three vehicle models, the Dodge Aspen, Dodge Durango and Chrysler PT Cruiser.

25 March 2009

Teen Asking Online Community For College Money

alternative student loans at studentlendingcorpOriginally Posted to The Detroit News

MUSKEGON TOWNSHIP -- The name of Rachel Harris' Web site says it all.

The 17-year-old high school senior recently launched IWantToGoToNotreDame.com to help her raise money to pay for an education at the school. The site includes copies of her Notre Dame application form, letters of recommendation and her high school transcript.

Harris has applied for admission to the Roman Catholic school in South Bend, Ind., and expects to be accepted. The problem is the more than $46,000 annual cost of tuition, fees, room and board. These high costs frequently lead students to seek either private student loans, or alternative student loans.

She hopes her Web site will generate enough in donations to help cover at least part of it. She has applied for at least 10 scholarships, she said.

"Last year, I saw the power of the Internet, as President (Barack) Obama did some very successful fundraising for his presidential campaign," Harris said. "I decided to try and use the power of the Internet to help me pay for my college education."

Internet Startup In Troy Finds Best Consumer Drug Prices

Originally Posted in The Detroit News

A Troy-based startup has turned surfing the Web for discount prescriptions into a new business that helps budget-conscious consumers better locate deals in their neighborhoods.

Medtipster.com allows users to enter their ZIP code and a prescription, and within seconds lists pharmacies nearby selling the medication at a discount -- and the price.

"We came to the realization that there are many $4 drug programs out there and Wal-Mart got a lot of the hoopla when they introduced them," said Bruce Liebowitz, Medtipster's acting chief operating officer.

Liebowitz saw a need to put all that information together on a single site.

"We decided to start a site that would allow people to maneuver their way through the information," said Liebowitz, a pharmacy industry veteran who used to own a pharmacy benefit management company, 4D Pharmacy Management Systems in Troy. Another pharmacy benefit manager also is a major investor in the Web site.

Medtipster launched a beta version of the site in February and hopes to go live with the final version within the next month and reach consumers nationwide.

Right now, the company gathers its pricing information by scouring chain drugstore ads for the latest deals and posting them to its Web site. Ultimately, Medtipster plans to charge pharmacies a monthly fee to list pricing information on the site, Liebowitz said.

He acknowledges that one of the drawbacks to the beta version of the site is that there aren't many independent pharmacies included.

The company, Liebowitz said, is trying to change that and hopes it can give independent drugstores better exposure for marketing their discount drugs through the Web site.

The concept, however, isn't a new one.

Michigan's Department of Community Health offers a similar site called "Rx Price Finder," which allows users to type in a drug name and ZIP code, and pull up pricing information for nearby pharmacies.

The state's Web site is more inclusive, listing independent pharmacies alongside chain establishments. It compiles its information by tracking Medicaid prescription prices reported to the state's Medicaid program.

At the same time, the prices aren't updated daily at Rx Price Finder and some listing can be up to a month old, a disclaimer on the Web site warns.

Leibowitz said Medtipster offers a more user-friendly interface and has other features that make it more of an interactive hub for medical information. It features a live chat tool which allows users to instant message questions to a pharmacist and receive questions in real time. And the drug prices on the Web site go beyond Michigan to include pharmacies nationwide.

Medtipster also hopes to release a mobile-version of its Web site shortly.

Having an informed consumer does have its benefits, said Larry Wagenknecht, CEO of the Lansing-based Michigan Pharmacists Association. But after reviewing the site's test version, he had some concerns, namely that it doesn't include many independent pharmacies and that he'd like to see it disclose upfront where it's gathering its information.

"If you're not including all the information of all the pharmacies out there, I question the value of the site," Wagenknecht said.

He also worries the site focuses too heavily on drug pricing and not enough on promoting the role of the pharmacist. The association advocates that patients stick with one pharmacy or pharmacists to ensure that their medical information is kept in one spot.

"It is not a safe situation running around from pharmacy to pharmacy to find the cheapest price," Wagenknecht said, adding that it limits a pharmacist's ability to track patient prescriptions and monitor for potential drug conflicts.

Liebowitz, however, said the site doesn't advocate "pharmacy hopping." Rather, it strives to educate consumers on their options, so they can make an intelligent decision about where to buy discount drugs. And in a declining economy, those savings could help patients better comply with taking their medications, Liebowitz said.

"There is a hierarchy of problems to consider," he said. "The first one is that people can't afford their medications and they're choosing between food and drugs."

Shrinking Wages For Middle Class Americans

Originally Posted to Detroit News

WASHINGTON -- The dream of a comfortable middle-class lifestyle is slipping further out of reach for many Michiganians as they've watched household incomes barely grow over the past three decades.

The phenomenon is being experienced across the country, but is more pronounced in Michigan, according to a Michigan State University study, which found that those in the bottom half of the middle class have been hit particularly hard.

Little improvement in recent decades for middle-income households falling between $30,000 and $90,000 has raised alarms for the Obama administration, which has pledged to restore the middle class.

That help can't come quick enough for Dave and Deborah McCreless, who, like about half of Michigan households, fall in the middle-income range.

Dave, a 38-year-old stay-at-home dad in Dearborn, says his family is struggling to keep up with bills -- old student loans, credit card debt, gasoline and electricity, and prescriptions. Deborah, 44, the primary breadwinner who is a personnel officer at Wayne State University, last received a big pay jump seven years ago, he said.

"My father-in-law helps us with the mortgage. Otherwise, we could have lost the house last year," Dave McCreless said.

"It's one thing on top of another, and you can't catch up. There isn't a middle-class dream anymore."

Adding to the unease is the uproar over $165 million in bonuses for executives of troubled financial giant AIG, which hints at the kinds of "class warfare" fights that likely lie ahead over what the federal government can or should do to address income growth disparity.

Nearly 2 million households in Michigan fall into the middle-income range of $30,000 to $90,000 a year, said Charles Ballard, an economist at Michigan State University. Ballard and MSU economist Paul Menchik are studying the embattled middle class.

Those on the lower end of that middle-income spectrum have fared especially poorly.

The lower end of the range in Michigan saw inflation-adjusted incomes only go up 1 percent between 1976 and 2006, Ballard and Menchik found.

In the United States overall, the bottom end of middle-income households saw an inflation-adjusted income growth of 20 percent over the three decades, Ballard said.

The higher end of the middle-income spectrum has increased 22 percent in Michigan, versus 40 percent nationally over three decades, he said.

"Basically, if you are at the bottom (of the middle-income spectrum), incomes haven't changed at all, adjusting for inflation," Ballard said of national and Michigan household incomes between 1976 and 2006.

"It used to be lower-middle-class folks saw increases in their real income in the '40s, '50s and '60s, if you had a high school degree," he added. "But that stopped about 30 years ago."

The wealthy -- those in the top 5 percent of all households -- have seen their income jump almost 60 percent nationally, and in Michigan, more than 40 percent, Ballard said.

The White House's Middle Class Task Force is looking for policy solutions that might include, for example, ways to boost college graduation rates, reduce health care and education costs, bolster labor unions and create "green" jobs that are less likely to be sent overseas.

"This is not something the government can fix all by itself," said economist Jared Bernstein, the executive director of the task force.

"But the government can help to create certain conditions that balance out some of the excesses that helped to get us where we are."

Vice President Joe Biden, who is leading the effort, says the task force's goal is "to get the middle class -- the backbone of this country -- up and running again."

On the other end of the political spectrum, U.S. Rep. Thad McCotter, R-Livonia, agrees middle-class families are struggling, but offers different solutions

"The demise of the manufacturing base is the No. 1 reason for the continuing erosion of middle-class prosperity," said McCotter, who wants the Obama administration to focus more on ways to strengthen and save manufacturing jobs.

"We have to get back to the basics of decentralized entrepreneurial opportunities for people, and the necessity of having a manufacturing base in this country. Those are the two big things that we really need to do," McCotter said.

While not all experts agree on the causes, Ballard and other economists say a number of factors have contributed to stagnating middle-class incomes:

• An economy that rewards education, particularly college graduates, at the same time that college graduation rates in the United States have risen slowly.

• Huge salaries and bonuses of top company officials.

• Competition from lower-wage countries, such as China and India, that has pushed U.S. wages down.

• Declining labor union clout.

• Drop in manufacturing jobs.

In the eyes of economist Timothy Bartik of the Kalamazoo-based W.E. Upjohn Institute for Employment Research, getting a higher education is critical to climbing the ladder and earning a bigger paycheck.

Bartik is alarmed by the relatively slow growth of U.S. college graduation rates over the past three decades.

In 1975, nearly 22 percent of those age 25 to 29 had a bachelor's degree or higher. In 2007, 29.6 of that age group had college degrees.

"Technology has changed in such a way that for workers with a high school diploma or less, their skills are less valuable in the work force," Bartik said.

Terrell Dubose, a 48-year-old shuttle bus driver in Detroit, said he's never had the resources to do more than take a few college courses, so he feels stuck financially with having only a high school diploma.

"The price of everything has shot up, so it feels like you have less," Dubose said. "The rich are taking more of the pie."

Tom Clementson, 57, a laid-off road construction worker in Indian River, said he's staying afloat until he gets back to work because of having unemployment checks, dipping into savings and having paid off his house.

But, as he looks back over the past 30 years, he feels he ran hard to end up pretty much in the same place.

"My income gradually went up, but it got to a point where it just stopped," Clementson said. "You think you are working all those years, and you get three or four years from 60 and you don't know if you will be able to retire."

60% Of Americans Say No More Money For GM, Chrysler

Originally Posted to Detroit Free Press

More than three in five Americans oppose more government loans to General Motors Corp. and Chrysler LLC, according to an R.L. Polk survey released today that is consistent with other recent opinion research.

A clear majority – 61% — told the Southfield-based auto research firm they are against more loans.

The Polk results came one day after President Barack Obama told CBS “60 Minutes” interviewer Steve Kroft that “the only thing less popular than putting money into banks is putting money into the auto industry.”

In the Great Lakes region, where auto manufacturing is more prevalent, 16% “strongly agreed” when asked by Polk if they supported loans for GM and Chrysler. That compares to only 4% in the New England region.

Lonnie Miller, a Polk analyst, declined to share the level of opposition and support from other regions because the number of respondents was not large enough to be statistically significant.

Despite the high level of opposition, it was lower than in other surveys.

In a USA Today/Gallup poll conducted between Feb. 20 and 22, 72% opposed a second round of loans for the automakers. A mid-February survey by Rasmussen Reports reported that 64% were opposed.

Opposition in the Polk survey was lower than the 72% who opposed a second round of loans in a USA Today/Gallup poll conducted between Feb. 20 and 22. It’s also slightly lower than the 64% reported in a mid-February survey by Rasmussen Reports.

In the Polk survey, about the same percentage of people who opposed more loans — 60% — also recognized that denying them would have dire economic consequences.

Miller said the data reveals an attitude of “it’s a problem, but it’s not a problem for taxpayers to fix.”

GM and Chrysler expect a March 31 decision by the president’s auto task force on their latest loan requests.

“Right now the public doesn’t want to give anything to anybody, but they’re in the same boat,” said George Magliano, director of research at HIS Global Insight. “What matters are the turnaround plans, and concessions from the union and the bondholders. The task force and Congress will then decide if they can be viable.”

While GM did not respond to the survey results, Chrysler said it expects many viewpoints.

“We are completely focused on working with the automotive task force to ensure the viability of an industry and a company that provides economic benefits to communities across the country,” Chrysler said in a statement.

“For example, Chrysler purchases more than $30 billion (2008) in automotive parts from more than 6,000 suppliers in all 50 states, and partners with more than 3,200 dealers that employ more than 140,000 people in local communities throughout the U.S."

20 March 2009

In Motown, Hotel Project Hits A Sour Note

As Originally Posted at The Wall Street Journal

Few cities have been hit harder by the recession than Detroit, and few property types have suffered more than hotels.

So the odds were stacked against an effort to revive the city's Hotel St. Regis by a group of investors, some with ties to Motown's recording industry. Indeed, that effort has fizzled.

The group, led by Detroit entrepreneur Herb Strather, defaulted on its $8.7 million construction-and-mortgage loan made by Chicago-based ShoreBank, which provides loans in inner cities and underserved communities. The 124-room hotel has received shutoff notices from utilities, has failed to pay taxes and insurance and has missed some payroll payments, according to court papers.

The St. Regis "is in imminent danger of ... going dark," ShoreBank said in papers to persuade a U.S. district court judge to appoint a receiver. The judge granted the bank's request. AlixPartners, a Southfield, Mich.-based firm that specializes in corporate turnarounds, took control of the property last month and is now trying to revive it.

The receiver faces a challenge. With Detroit struggling with a myriad of urban problems and the automobile industry in shambles, the metropolitan area's hotel occupancy rate was at 40.6% in January, compared with a national rate of 46%, according to Smith Travel Research. The region's average daily room rate fell to about $87 compared with $101 nationally in January.

The St. Regis, which has no connection with the St. Regis brand properties run by Starwood Hotels & Resorts Worldwide Inc., has been hurting even more than other Detroit hotels. Its occupancy rate was below 35% at the end of the 2008 and room rates were below $80 a night, according to one of its owners.

The St. Regis opened during the 1960s, across from what was General Motors' headquarters. During its heyday, such notables as Mick Jagger, Michael Jackson and Martin Luther King Jr. stayed there, according to its owners.

But as the city deteriorated so did the hotel. In 1996, GM began moving its corporate headquarters from the New Center building to the Renaissance Center in Detroit's nearby downtown, hurting the hotel's business with itinerant auto-industry executives. While the state government offices are located in the complex, now called Cadillac Place, the hotel never regained its luster.

Mr. Strather's investment group, which also includes Detroit-area ministers, purchased the property in 2006 for $6 million and closed it for a roughly $4 million renovation during which rooms were updated and plumbing problems fixed. Mr. Strather said in an interview that some of the hotel's struggles may have stemmed from the decision to close down during the renovation. Instead, the group should have fixed it in stages, maintaining a revenue stream.

This month, the court-appointed receiver hired Alliance Hospitality Management LLC, a hotel-management and development company based in Raleigh, N.C., to improve its bottom line. Alliance plans to raise the hotel's profile on travel Web sites and bolster its ties to local businesses and citywide events. The goal: raise its occupancy above 50% in the next six months.

The property's central location in the city's so-called New Center area remains a prime draw, says Joseph Smith, president of Alliance. The property also had successes during some citywide events and its rooms are sold out for the NCAA men's basketball championship to be held at Detroit's Ford Field April 4-6, Mr. Smith says.

The court gave the receiver the power to sell the property, though Mr. Strather's group has the first right of refusal on any offer. Mr. Strather said the group is talking to the lender and hoping to work out a way to retain ownership.

19 March 2009

State News In Brief

Countrywide Settling, Gannet Punishing, Luggage Missing
As Originally Posted to The Detroit News

AG: Countrywide pays $6.7M of settlement
DETROIT -- Nearly $10million from a state settlement with mortgage lender Countrywide Financial Corp . will go to about 3,700 borrowers who lost their homes to foreclosure, Michigan Attorney General Mike Cox announced Tuesday. Cox said at a news conference in Detroit that he and six other state attorneys general negotiated settlements with Countrywide. He said 3,697 people, with sub-prime and pay-option adjustable rate mortgages between Jan. 1, 2004 and Dec. 31, 2008 and later, who lost their home each will receive
$1,800. The $6.7 million makes up two-thirds of the settlement with Countrywide. The state worked with Bank of America Corp ., which now owns Countrywide, to identify the borrowers for the payments. "It's meant to provide real money, real relief, for some of the practices Countrywide engaged in," Cox said.
Gannett slashes CEO bonus by 50 percent

Gannett Co ., the publisher of the USA Today newspaper and the Detroit Free Press, slashed CEO Craig Dubow's bonus and salary amid plunging advertising revenue. The McLean, Va.-based company cut Dubow's bonus for his 2008 performance by 50 percent to $875,000, according to a proxy filing Tuesday. The CEO on Nov. 1 voluntarily reduced his annual salary by 17 percent to $1 million, effective for the final two months of 2008 and all of this year. The company also halved CFO Gracia Martore's bonus to $300,000, while keeping her $700,000 salary.

Airlines - Luggage mishandling on the rise at airlines

Airlines' luggage mishandling increased 24 percent to 42 million bags worldwide in 2007, with

about 1.2 million items irretrievably lost, the Air Transport Users Council said. The number of checked bags

arriving late, sent to the wrong destination, damaged or lost entirely may increase 67 percent to about 70 million a year by 2019, based on annual passenger numbers that are

estimated to double in the next decade, the London-based consumer group said Tuesday.

Carriersneed to improve compensation to people whose bags are lost, the group said.

Michigan Tax Breaks Lure New Developments

peak positions michigan seoGovernor Announces $28M In Tax Credits For Firms That Plan to Invest $151M and Create 1,254 Jobs
Originally Posted at The Detroit News

Tax breaks for 11 projects -- including a new $10 million hybrid vehicle technology research center for Daimler AG in the Ann Arbor area -- won approval of a state economic development panel Tuesday.

The projects would create 1,254 direct jobs and spur $151 million in state investment. The tax credits amount to $28 million over seven to 10 years.

"The scope of these projects, including four IT companies choosing to expand in Michigan, shows that our plan to diversify the state's economy continues to produce results," Gov. Jennifer Granholm said.

The Michigan Economic Growth Authority board approved a $7.5 million tax credit "to help convince (Daimler) to expand in Michigan over a competing southern state" for a 65,000-square-foot research and development center in Washtenaw County that would employ 223, mostly engineers and technicians, at an average wage of $1,210 a week, according to a Michigan Economic Development Corp. memo.

Asked why the company chose Michigan over South Carolina, David Trebing, Daimler general manager of state and local relations, said, "it was the Detroit workforce."

Other tax abatements approved by the MEGA board included:

- Secure-24 Inc. would invest $3.7 million and create 263 jobs to locate a data center in Plymouth Township. The state tax credit would be $7.1 million over 10 years.

- Magna Electronics would invest $20 million in an expansion project and create 90 jobs in Rochester Hills over the next five years. The state tax credit is $3.4 million.

- Peakpositions.com is a Michigan SEO provider that is just plain working its darned tail off with no tax breaks forthcoming.

- Emergent Biodefense Operations Inc. would invest $10.9 million to expand its operations in Lansing, creating 93 direct jobs.The state tax break is $3 million over 10 years.

- Meijer will invest $27 million to expand its distribution center in Monroe County and create 190 direct jobs. The tax break is $1.6 million.

- Billhighway.com intends to invest $5.7 million and create 43 jobs over five years in Troy. The tax abatement totals $1.1 million over 10 years.

17 March 2009

Two Michigan Health Systems See Gains And Losses

Originally Posted To The Detroit News

Two major Detroit hospital systems -- the Detroit Medical Center and Henry Ford Health System -- made money on operations in 2008, despite huge losses incurred from unpaid medical bills and a deepening recession that's causing more people to lose their jobs and Michigan health insurance.

The DMC reported making $39 million on operations in 2008, an increase from the prior year and the largest one-year gain on operations since 1997, said CEO Mike Duggan.

Across town, Henry Ford also made money on operations in 2008, netting about $53.5 million, according to its unaudited financial results. That profit, however, was a drop from 2007 when Henry Ford made about $100.2 million from operating activities.

Operating income is an industry yardstick for measuring hospital performance absent investment income and other non-operating items.

Warren-based St. John Health, which has its flagship hospital in east Detroit, doesn't release its year-end financials until after June 30, when its fiscal year ends.

Despite the gains, Henry Ford and the DMC lost hundreds of millions of dollars last year on uncompensated care -- unpaid medical bills they don't expect to collect payment on -- and in the investment market, which plummeted last fall, putting millions of dollars in unrealized losses on their books. Many of the losses are due to newly unemployed workers who are no longer insured by a Michigan health insurance company.

Henry Ford, which has its headquarters on West Grand Boulevard in Detroit, saw its uncompensated care costs rise from $132 million in 2007 to $161 million last year. The seven-hospital health system also lost about $45 million on investments, dragging down its net profit to $8.5 million by the year's end.

Similarly, the DMC, which has its main hospital campus in Detroit's midtown, booked $47 million in unrealized investment losses in 2008, causing the organization to post a net loss of $6.5 million in 2008 -- the first red ink the hospital has seen since it began making money again in 2004 after nearly a decade of losses.

Duggan said the medical center doesn't usually focus on unrealized investment gains or losses, because the stock market is constantly in flux and those figures aren't directly related to operating performance.On uncompensated care, the DMC did better, reducing its losses from $266 million in 2007 to $255 million last year. The reduction came largely because the medical center made a better effort at enrolling its Medicaid-eligible patients in the Michigan Medicaid insurance program, Duggan said.

"We consider it to have been an excellent year," Duggan said, adding the city's long-term economic problems have forced the DMC to make cuts ahead of some industry rivals. "What other people are going through right now, the DMC went through in 2003 and 2005," Duggan said.

Duggan added the DMC hopes to begin construction on a $30 million outpatient center for its Children's Hospital of Michigan this year, but is waiting for the bond market to improve.

Other Metro Detroit hospitals have faced a challenging year.

In Oakland County, Beaumont Hospitals -- a historically strong financial performer in the region -- lost $29 million on operations in 2008 and has had to lay off staff.

And a report by the Michigan Health and Hospital Association released earlier this year found that 60 percent of Michigan hospitals reported a negative operating margin in the third quarter of 2008, following huge investment losses and last fall's Wall Street meltdown.

In that same quarter, the average margin had fallen to minus 2.9 percent, from plus 2 percent in 2007, the report found.

15 March 2009

U.S. Jobless Rates Continued To Soar In January

As Originally Posted at The Wall Street Journal

Unemployment rates rose in nearly every state in January, illustrating that no region has been immune to the recession that has grown broader as it has deepened.

Jobs remain hardest to find in the areas that were first hit by the economic slowdown: The highest unemployment rates were in manufacturing-heavy states in the Midwest, and in states that suffered the most from the housing bust, including California, Nevada and Florida. States in the Northeast and South that had been less affected by the housing bust continue to be generally better off.

Between December and January, nearly half of states saw unemployment rates rise a full percentage point, a remarkable jump. Georgia, where unemployment rose to 8.6%, and Rhode Island, at 10.3%, have the highest unemployment rates since at least 1976, when the government data begin.

"It really puts the exclamation point on how this recession, which is rooted in large part in financial markets, touches all sectors and touches them quickly," said Luke Tilley, a senior economist at forecasting firm IHS Global Insight.

The lowest unemployment rate was in Wyoming, with 3.7%, followed by North Dakota, Nebraska and South Dakota.

The steep rise in state unemployment rates is the latest indicator showing how consumers and businesses essentially froze at the end of 2008, and have yet to resume meaningful spending. In the last three months of 2008, gross domestic product fell at a 6.2% annual rate, the fastest since the depths of the 1982 recession, and much faster than the government had previously estimated.

Likewise, state employment data show job losses were much worse than originally thought. In California, for instance, the government previously estimated that the state's economy had shed 257,000 jobs in 2008. Wednesday's revision showed the state actually lost 443,000 jobs.

A number of export-heavy states, where until recently overseas demand had offset U.S. weakness, have seen their unemployment rates skyrocket as the recession spread overseas.

South Carolina, host to many international companies and other exporters, saw its unemployment rate rise 4.7 percentage points in the year ended January, tied for second fastest in the nation. (Unemployment in North Carolina, which has a large banking and manufacturing presence, also rose 4.7 percentage points over the year.)

Several economists believe the unemployment rate will hit 10% by the time a recovery is under way, but four states have already eclipsed that level. California, Rhode Island and South Carolina had unemployment rates between 10.1% and 10.4% in January. In Michigan, where the economy was teetering even before two of the Big Three auto makers sought emergency loans from the government, the unemployment rate jumped to 11.6%.

Cities V States In Battle Over Stimulus Money

As Originally Posted to The Wall Street Journal

SEATTLE -- As the first money from the federal economic-stimulus package begins to flow, a showdown between Washington-state lawmakers and Seattle officials over road projects could augur a wave of battles around the country over how stimulus dollars are spent.

The fight started earlier this week, when Washington legislators unveiled a plan for spending the state government's $341 million share of the combined $492 million in federal highway aid that will go to state and local jurisdictions in Washington. The list -- long on smaller projects such as road repaving and replacement of traffic cameras -- didn't include funding for projects in the city of Seattle, the heart of the state's economy and population.

Seattle Mayor Greg Nickels blasted state lawmakers for omitting two major road projects in the city that he argues are "shovel ready" and that he said will create more construction jobs and continuing economic benefit to the state.

"This is not what the president intended," Mr. Nickels said Tuesday in a speech to a Seattle business group. "This is bad policy and bad economics. It disrespects the voters and taxpayers of this great city and is an insult to the companies that contribute so much to the state's economy."

Mr. Obama has repeatedly warned governors and mayors that they must spend money from the federal stimulus package quickly and efficiently, and not use it for questionable pet projects.

Most states already have a long list of projects eligible to receive federal stimulus money, which the Department of Transportation says it may start distributing as soon as Tuesday if governors certify that their states will use the funds properly. But the process of coming up with a final roster varies among the states; in some, a transportation commission makes the final decision, while in others, like Washington, state legislatures get more directly involved.

Tension has been rising -- especially between big-city mayors and state officials -- in locales such as New York, Florida, Missouri and Michigan over how to spend the roughly $200 billion of stimulus money that will flow through the states and over what role the legislatures will play in divvying up the funds. Across the country, local officials are disappointed that projects in their areas -- such as a new highway in Laredo, Texas -- haven't been included on the stimulus list.

"We want to make sure that the metropolitan areas are getting their fair share," Los Angeles Mayor Antonio Villaraigosa told reporters in Washington, D.C., last week. "What we don't want is states building roads that connect the ducks to the geese, and not people to goods, the way metropolitan areas do."

Nowhere does the fight so far seem as fierce as in Washington state, which ultimately will get about $492 million from the $26.8 billion of highway funds included in the stimulus package. Of that, $151 million will go to local jurisdictions, including roughly $70 million that is specifically set aside for the Seattle region under a provision that directs money to urban areas.

But Seattle was counting on roughly $75 million more to help fund two projects that the city argues will create 1,300 jobs, including the rebuilding of a congested road called Mercer Street into a major thoroughfare leading to the city's expanding South Lake Union neighborhood. The area is home to new facilities for the Bill & Melinda Gates Foundation, a University of Washington School of Medicine research facility and other employers.

In an interview in his Seattle office, Mr. Nickels said the state can get more-lasting economic value for federal dollars in the city than it can with the projects it announced elsewhere. "I'm not saying they're made-up projects, but resurfacing or chip-sealing streets that carry 7,000 cars a day just doesn't match up in terms of what value it's returning," he said.

Critics contend that many of the small projects on the legislature's list will be handled by government road crews, and so will not create much in the way of economic stimulus. "They'll be using existing resources, especially for the small ones," said Michael Ennis, director of the Center for Transportation at the Washington Policy Center in Olympia. "I question whether it will create any jobs."

Judy Clibborn, chairwoman of the state's House transportation committee, which put the list of transportation projects together, said the legislature has always intended to use its portion of federal aid for state projects. She questions whether Seattle's projects are close enough to being shovel-ready to meet requirements for such money. With its $341 million in federal funds, the state said it can create 3,300 jobs. Ms. Clibborn, a Democrat from Mercer Island, said "paving projects are not glitzy" but still essential. "This is a good, fast way to get money on the ground," she said.

David Postman, a spokesman for Vulcan Inc., a company owned by Microsoft Corp. co-founder Paul Allen that is a major landowner in the area around the proposed Mercer Street project, said state lawmakers have "essentially turned transportation planning on its head by declaring all these small repaving and pothole-filling projects as state projects." Meanwhile, Mr. Postman said state lawmakers are classifying as local proposals the two major Seattle road projects.

Washington Gov. Chris Gregoire said she is working with the legislature to put Seattle road projects on the list of funding from the state's share of the federal stimulus package, but lawmakers said they won't budge on the issue. "The list will not change," Ms. Clibborn said.

GM, Chrysler Lobbying In Focus

As Originally Posted at The Wall Street Journal

Lobbyists will report next month how much they spent in Washington, D.C., in the first quarter, and recipients of government help like General Motors Corp. and Chrysler LLC are likely to come under scrutiny.

Spending on lobbyists by banks, auto makers and other companies that have participated in the Treasury Department's Troubled Asset Relief Program, or TARP, has become an increasingly sensitive issue in recent weeks.

GM, for example, spent more money last year on lobbying than any other TARP-funds recipient, according to OpenSecret.org. Chrysler ranked fifth overall, according to figures complied by the site, which tracks donor and lobbyist spending, among other things.

"It's very much become an issue," said Peter Peyser, a principal at Blank Rome, LLP, a government affairs firm. "Those are very hefty investments."

The next round of quarterly reports on spending on lobbying are due to the Senate Office of Public Records in mid-April.

Both GM and Chrysler increased their spending late in the year. Their CEOs and the head of Ford Motor Co. testified before both houses of Congress in November to make the case for a federal bailout, and then appeared again in December.

The money GM and Chrysler spent last year was on par with some of the big financial institutions like Citigroup Inc. and insurer American International Group Inc. that have also received substantial amounts of federal assistance, however.

According to OpenSecrets.org, GM spent $14 million in 2008, $4 million more than insurance giant American International Group, which spent $9.7 million, for example. Chrysler spent $5.8 million, according to the site, which tracks donor and lobbyist spending, among other things. That is around $2 million less than the $7.7 million spent by Citigroup.

Still, roughly three-quarters of the money Cerberus Capital Management – known for the former politicians in its ranks – spent on lobbying was on Chrysler. The private-equity firm's spending on lobbyists more than doubled between 2007 – when it acquired Chrysler – and 2008.

"There is significant, ongoing demand from legislators and government officials for education and information on Chrysler, its operations, products and future plans, including promoting advanced technology that responds to the nation's energy needs," a company spokeswoman said Friday.

Comment from GM wasn't immediately available.

Mr. Peyser said it is no surprise companies with so much at stake are spending so much. Moreover, the backlash to bailout spending had grown by the time auto makers arrived in Washington, D.C., to plead their case in November. They were too slow to realize they had a serious fight on their hands and are "probably ramping up on a weekly basis" right now, he said.