29 June 2009

No Bull: Mulally Plans For A New Taurus Rising

Story from the Wall Street Journal

Ford Motor Co. is launching a revamped Taurus this summer, a big bet by Chief Executive Alan Mulally that he can revive an ailing model that once defined the American family sedan.

In late 2006, Mr. Mulally took Ford's helm in part because of his respect for the onetime success of the Taurus. But Mr. Mulally was shocked, he said, that the company had decided to pull the plug on the brand by the time he arrived, and he quickly reversed the move.

"I have a personal interest in this car," Mr. Mulally said in an interview. He added that he had been impressed with the Taurus product-development team when he met its members while working at Boeing Co. in the 1980s. "It was the flagship then, and it's the flagship now."

The revamped Taurus is set to go on sale in August. On the outside is a sleeker, more muscular design, while on the inside it offers an array of technological options, from cruise control that adapts to traffic to a collision warning system to a voice-activated entertainment setup.

"It's a proof-point of the new Ford," Mr. Mulally said. Ford will spend hundreds of millions of dollars on the new Taurus, from its design to marketing and ads, said a person familiar with the matter.

But analysts say it's highly unlikely the Taurus will be as big a hit as the original version, which once was the most successful Ford car and at its peak sold more than 400,000 copies a year.

Analysts say the new Taurus is too expensive to attract a mass market, especially in the current economic climate. Prices start at $25,995 but can top $40,000 for a loaded version. That's more than the large-car segment's leader, the Chevrolet Impala from General Motors Corp. Others about the same size include Toyota Motor Corp.'s Avalon and the Chrysler 300 from Chrysler Group LLC.

With memories of high gas prices still in consumers' minds, this also could be a tough time to persuade U.S. buyers to purchase a large, heavy sedan.

And Ford must convince customers that the revamped Taurus isn't the same vehicle as the bland sedan once encountered at airport rental lots.

"I think Ford is chasing the original Taurus fans with this car, all of which are much older than when that car was at its peak," said Karl Brauer, editor in chief at Edmunds.com, an auto-sales Web site. "The new model seems more like a Ford Town Car targeted at 45-plus drivers rather than a high-volume family sedan."

When Taurus debuted in December 1985, there was nothing like it from a U.S. maker. Building on Ford's recent success with aerodynamic design in Europe, the Taurus made slick styling available at an affordable price.

"This was an American sedan that felt European," said John Wolknowicz, a former product planner at Ford who now is an automotive analyst at IHS Global Insight, a forecasting firm.

In 1996, faced with redesigning the Taurus, Ford product planners hung a big sign -- "Beat Camry" -- in their studios and engineering spaces, targeting Toyota's hugely successful sedan. But Mr. Wolknowicz said the strategy meant the cost of the restyled Taurus "escalated to the moon," putting it out of the reach of many.

The 1996 Taurus used Ford's blue oval logo as a motif, replicating it in the shape of the rear window, interior controls and exterior design. But critics panned the look -- Mr. Mulally called it "a football" -- as did many customers. Families also gravitated to sport-utility vehicles.

Ford's branding further muddied the matter. In 2004, Ford came out with what was supposed to be Taurus's replacement but called it the Five Hundred. The company kept selling the old-style Taurus as well, marketing it only to rental and corporate fleets. A few years later, under Mr. Mulally, Ford reverted to the Taurus name for the Five Hundred.

The new Taurus could be aided by the fact that its main competitors, the Impala and Chrysler 300, are aging and their parents are financially strapped.

While some analysts forecast up to 120,000 Taurus sales a year, Jim Farley, Ford's global vice president of sales and marketing, said the company expects only an increase from the outgoing model, which had sales of 52,667 in 2008.

"We have humble expectations," Mr. Farley said.

Louisiana Plants Added To GM's Closing List

Story from the Wall Street Journal

General Motors Corp. on Wednesday said it will close its vehicle assembly and metal-stamping plants in Shreveport, La., by 2012, a move that came as concerns surfaced over what will become of unprofitable assets and liabilities being offloaded by the company.

GM builds small pickup trucks and some Hummer models at the plants. Sales of the trucks have fallen sharply, while GM early this month announced plans sell the Hummer line to a Chinese manufacturer.

The plants join a list of nine others the auto maker plans to close permanently.

Separately, Chrysler Group LLC said it will permanently close its St. Louis North assembly plant effective July 10. The company had planned to shut the plant in the third quarter but accelerated the move because of declining demand. Production of the Dodge Ram pickup made there will be moved, as planned, to a Warren, Mich., assembly plant.

GM by Tuesday is expected to make public by next week a list of which assets will go to "old GM" under the company's proposed bankruptcy plan and which to the surviving "new GM." Not all idled factories will go to the old company, as some sit on valuable land and could turn a profit for GM.

Also Wednesday, a committee representing GM's unsecured creditors asked the bankruptcy court in Manhattan to require GM to make some changes to the sale proposal, citing concerns over what will become of discarded assets and liabilities.

The creditor committee wants GM to permit lawsuits stemming from activities of the "old GM" to be filed against the "new GM" after that company emerges from bankruptcy. GM has said those lawsuits would have to be filed against the old company, which will have limited assets and resources to cover judgments from suits.

Despite the concern, the group said it is satisfied that there are no viable alternatives to restructure the ailing car maker other than the company's proposed bankruptcy sale.

GM's bankruptcy plan, called a 363 sale, separates the company's more attractive assets, such as strong brands, from bad assets that are dragging the company down. Bad assets will be wound down or sold in a lengthy liquidation.

The "new GM" assets would be transferred to an entity owned by the U.S. and Canadian governments, the United Auto Workers union and the company's unsecured creditors.

The company hopes to emerge from Chapter 11 in mid-July, sooner than earlier projected.

As part of the plan, the company is looking to eliminate 10,000 to 16,000 hourly workers with retirement incentives and buyouts by Aug. 1, people familiar with the plans said. GM ultimately hopes to cut an additional 14,000 factory jobs by 2010, bringing total hourly-worker employment to 40,000.

GMAC Cutting Off Lending To Chrysler Dealers

Story from the Wall Street Journal

GMAC LLC is suspending wholesale financing for certain Chrysler Group LLC dealers it considers to be too risky to lend to, GMAC and Chrysler confirmed Wednesday.

The move could ultimately push more Chrysler dealers out of business and hurt the company's ability to sell vehicles. During its bankruptcy restructuring, Chrysler shed 789 dealers.

GMAC, formerly the captive lending arm of General Motors Corp., recently took over financing of Chrysler dealers' inventory after Chrysler's own lending arm stopped doing so.

About 60% of the roughly 2,400 dealers who survived Chrysler's bankruptcy applied for interim wholesale financing with GMAC, according to Chrysler. So far about 6% -- more than 80 -- have been informed that their wholesale financing has been temporarily suspended, the company said.

GMAC declined to say how many of the dealers so far have been vetted to continue to receiving loans, and refused to confirm the number of dealers it has suspended. The company said it will need about six months to complete the vetting process.

GMAC said the process was part of normal due diligence. GMAC's goal in part is to avoid doing business with dealers who are too big a financial risk, Mike Stoller, a company spokesman said.

The lender earlier provided interim financing to all Chrysler dealers who applied for it. It received billions in government aid to do so, including $7.5 billion in late May.

But surviving Chrysler dealers always were set to be vetted later, said Mr. Stoller. "The next step was always to go back and look at each of the dealerships individually," he said. Mr. Stoller said GMAC wasn't working with Chrysler on this effort and that it had "no particular goal in mind" for the number of dealers to continue to receive loans.

According to GMAC, suspended dealers typically have 30 days to improve their balance sheets or they must find another company to provide them wholesale lending.

But few Chrysler dealers GMAC rejects are likely to gain the additional capital to get back on board, or find another lender, such as a large bank, willing to take on their loan needs, given the current lending market.

"This definitely puts them [Chrysler] at a disadvantage," said Mark Rikess, founder of Rikess Group, a California-based dealer consulting firm. "They've got a very weakened distribution channel right now."

The car maker still has too many dealers, he said, but for the moment it needs those it has to survive and buy its vehicles.

Chrysler and GM both rely on GMAC for much of their retail-customer and wholesale financing. Chrysler Financial has been forced to wind down its lending due to a lack of capital.

This leaves Chrysler as the only major U.S. auto maker without a finance firm with which to work closely.

Chrysler expects to have most of its surviving plants running again by July, and will need dealers to buy cars so the company can begin generating revenue.

26 June 2009

In Life And Golf, Traps Abound

Story from the Wall Street Journal

You think it's easy being a teen-age sports phenom? Just a few weeks before she became an Olympic champion in 1976, Dorothy Hamill confided to me that, for about three years in her teens, she used to throw up before every figure-skating competition. At the time we spoke she was 20 years old, was practicing six days a week, six hours a day, and was living 1,600 miles from her parents so that she could be with her coach. Fast forward 25 years: I'm watching television, and there's Dorothy Hamill -- doing a Vioxx pain-medication commercial.

We don't know -- maybe we don't want to know -- what being a champion as a kid does to you. For young Dorothy it was physical ailments. For aspiring young female gymnasts, with voices that sound like Munchkins, there is a delayed womanhood. And for Michelle Wie, who has been among the most famous women golfers in the world since she barely reached puberty and is now all of 19 years . . . well, there is an early version of faded glory. One can even earn a PGA golf degree. After phenomenal teenage wins and Tiger Woods-like hopes for greatness, Ms. Wie has missed cuts in major tournaments and, because of either missteps or bad manners, has earned the dislike of other players on the women's tour. Will she survive emotionally? More important to golf lovers, will she recover her game?

It is a question raised -- but not answered -- in "The Sure Thing." This well-researched, journalistic book by Eric Adelson is a little like playing two rounds in a day: Sometimes you get exhausted chasing the ball. But Mr. Adelson can be lyrical, too: "In a full swing, her torso twisted and turned as if on a swivel and her shoulders rotated around her spine like a propeller."

Would that this child's life had been so easy to describe. Of course, there are the parents -- not in the background but front and center. That's where they usually are when there's a budding superstar. Mr. Adelson describes how Michelle's parents, both born in South Korea, have been intimately involved in her career. Her mother, Hyun-Kyong, who goes by Bo, was a Korean amateur golf champion and was named Miss Korea in 1985; she then married Byung-Wook, or B.J., an engineer, and the couple moved in the late 1980s to Honolulu, where Michelle was born. B.J., a domineering presence during Michelle's career, uses his engineering background to plot the dips and quirks of the greens where his daughter will be putting.

Here is Michelle at age 11: "During the summer, I play 18 holes and then practice. I start at 9:30 a.m. and play until 8 p.m." At 12, she became the youngest player to qualify for the Ladies Professional Golf Association; at 13, the youngest to win a United States Golf Association tourney; and at 14, in 2004, Michelle became the youngest woman to enter a Professional Golfers Association tour event -- the teenage girl was playing against the men of the PGA.

Her appearance at the PGA's Sony Open in Hawaii, where she missed the cut by a stroke, was marked by perhaps the height of the Michelle Wie media frenzy. She could hit 300-yard drives, had the good looks of her beauty-queen mother, her father's long, lean frame, and a cheerful, outgoing personality. But, as indicated by the subtitle of Mr. Adelson's book -- "The Making and Unmaking of Golf Phenom Michelle Wie" -- it didn't last.

Her putting, never a strong point, worsened, and even her once-beautiful swing from the tee deteriorated. By 2006, Michelle was posting mediocre scores but still appearing in high-profile tournaments around the world, thanks to sponsor invitations. Mr. Adelson vividly describes how her seeming indifference to golf-course etiquette, her occasional rules infractions and her father's antics on courses while she plays have offended other golfers. The author also recounts how suspicions have been raised by varying explanations for a wrist injury that seemed to keep her from playing one day but not the next. Mr. Adelson observes that as Michelle's game declined, her "easy swing became as forced as her smile."

Michelle Wie turned pro at 16. She hasn't won anything since she was 13 years old. Yet she is earning a fortune -- not from her winnings, but from her endorsements. In 2007, she made the Forbes list of the highest earners under the age of 25. It placed her earnings at $19 million a year. It is the big money of professional golf that Mr. Adelson ultimately indicts for the "unmaking" of Michelle -- or, rather, it is her parent's thirst for it that he assails.

"The root cause of her decline, the force that contributed to all the factors that brought her down, was greed," he writes. Her parents pushed her into too many tournaments, too many promotional appearances, and meddled too much with her game and even her treatment of injuries, Mr. Adelson says, in pursuit of the riches and fame that their "money machine" daughter could provide. Still, as he notes, the great Annika Sorenstam -- who as far and away the best women's golfer during period of Ms. Wie's rise -- "didn't win her first LPGA tournament until she was 24. Michelle Wie doesn't turn 20 until October 2009."

With Michelle's golf career seeming to hang in the balance right now, I can't help but wonder whether she will fall victim to what has become an American syndrome: Build 'em up, tear 'em down. I'm not talking about celebrity of the Paris Hilton variety. We demonize those who have fallen from the straw pedestals we have constructed for them. And, of course, we forget that they are children. At least Michelle doesn't seem to have the chronic physical ailments of young gymnasts or ice skaters. Golf, apparently, does not mess up your growth. But it can mess with your hips, your wrists and -- as any adult golfer can tell you -- your head.

Mr. Eskenazi, a retired New York Times sportswriter and the author of 15 books, lectures on sports, media and society.

24 June 2009

Tesla, Ford, Nissan To Get $8B Federal Loan For Green-Car Development

Story from Mercury News

DEARBORN, Mich. — The Energy Department said today it would lend $5.9 billion to Ford Motor and provide about $2.1 billion in loans to Nissan Motor and Tesla Motors, making the three automakers the first beneficiaries of a $25 billion fund to develop fuel-efficient vehicles.

Energy Secretary Steven Chu announced the loan recipients at Ford's Research and Innovation Center in Dearborn.

Tesla, based in San Carlos, would get $465 million in loans to build electric vehicles and electric drive powertrains in California. The company will use $365 million for production engineering and the assembly of the Model S sedan, an all-electric vehicle that is expected to travel up to 300 miles per charge and go on sale in 2011. It will use $100 million for a powertrain manufacturing plant expected to employ 650 workers.

Tesla CEO Elon Musk said the automaker would use the loan "precisely the way that Congress intended — as the capital needed to build sustainable transport.

The loans to Ford will help the company upgrade factories in five Midwest states to produce 13 fuel-efficient vehicles.

Nissan was receiving $1.6 billion to retool its plant in Smyrna, Tenn., to build advanced vehicles and build a battery manufacturing facility.

The loans were designed to help auto manufacturers meet new fuel-efficiency standards of at least 35 mpg by 2020, a 40 percent increase over current standards.

"These loans will help the auto industry meet and even exceed the president's tough fuel standards," Chu said. "This is part of President Obama's commitment to a new energy strategy for America. ... This means the most fuel-efficient cars in the world must be made right here in America."

Dozens of auto companies, suppliers and battery makers have sought a total of $38 billion from the loan program, which was created last year to provide low-interest loans to car companies and suppliers retool their facilities to develop green vehicles and components such as advanced batteries.

Ford had been seeking about $5 billion in loans by 2011 and a total of $11 billion from the program to invest $14 billion in advanced technologies over the next seven years. The company said it will transform plants in Illinois, Kentucky, Michigan, Missouri, and Ohio.

Ford CEO Alan Mulally said in an interview with The Associated Press that the department approved the company's entire proposal through 2011 and it would help Ford meet the new fuel efficiency standards.

"This is a tremendous development," Mulally said.

He said the loans would help Ford further its strategy to build a wide range of fuel-efficient cars.

"We want to be in every market segment in the U.S.," Mulally said. "Every year forever we want to continue to improve fuel efficiency."

Ford expects to begin repaying the loans in 2012, with an interest rate based on the current U.S. Treasury rate hovering between 3 and 4 percent, said Ford spokesman Mike Moran.

"If it were at market rates it would be in the double digits," he said. "That's a huge thing for us."

Ford can draw from the loan for work done to retool its plants going back to late last year, Moran said. The plants must build cars that improve fuel efficiency by 25 percent.

General Motors Corp. and Chrysler Group LLC have received billions of dollars in federal loans to restructure their companies through government-led filings for bankruptcy protection, but Ford avoided seeking emergency aid by mortgaging all of its assets in 2006 to borrow about $25 billion.

Mulally said the loans Ford would receive from the Energy Department were part of a government-industry partnership and "had nothing to do with the emergency loans to keep General Motors and Chrysler in business."

Ford has said it intends to bring several battery-electric vehicles to market. The automaker has discussed plans to produce a battery-electric vehicle van in 2010 for commercial use, a small battery-electric sedan developed with Magna International by 2011 and a plug-in hybrid vehicle by 2012.

General Motors has requested $10.3 billion in loans from the energy program, while Chrysler has asked for $6 billion in loans. Energy officials have said the loans could only go to "financially viable" companies, preventing GM and Chrysler to qualify for the first round of the loans.

Elizabeth Lowery, GM's vice president of environment, energy and safety policy, said GM still must pass the Energy Department's financial viability test before it can receive loan funding and the company hoped to get the money shortly after it emerges from Chapter 11 bankruptcy protection.

Chu said the Energy Department has started discussing details of the loans with Chrysler and has begun reviewing the "technical side" of the loan requirements with GM.

Nissan said the $1.6 billion loan would be used to modify its Smyrna, Tenn., plant to produce zero-emissions vehicles and lithium-ion battery packs to power them. The Japanese company has previously outlined plans to develop an all-electric car with 100 miles of pure battery range for release in late 2010.

"This loan is an investment in America. It will help us put high-quality, affordable zero-emissions vehicles on our roads," said Dominique Thormann, Nissan North America's senior vice president for administration and finance.

Marinas Staying Afloat In Stormy Economy

Owners get creative with pools, parties as enticements while boat lovers reel in their spending
Story from the Detroit News

michigan boat docksHigher gas prices the past few years, coupled with a slow economy, have forced southeast Michigan marinas to rethink the way they do business -- from making capital improvements to providing packaged deals to ramping up customer service -- in a bid to attract boaters.

Boating, like most industries, is feeling the impact of layoffs, reduced pensions and tight credit, said Van Snider, president of the Michigan Boating Industries Association, a trade group with 350 members. People aren't buying as many new boats and those trying to unload their boats aren't able to sell.

Although boat sales are down, Snider said, those who already have boats still are docking them at marinas. Gas prices have been higher during the past three years, but they're lower this summer, also helping marinas stay afloat.

"If (marinas) are doing as well as they were last year, they should be pretty pleased," he said. "It's still a challenge."

Marinas will have to be creative in order to compete, Snider said. Many are adding amenities such as swimming pools and hosting events such as fireworks displays to give their boat docks more of a vacation atmosphere to attract families.

That's what Jefferson Beach Marina in St. Clair Shores did.

Knowing this year would be a tough sell, managers made some major improvements, including remodeling the fuel dock and bathrooms and offering packages like the use of the pool and discounts at the restaurant. The marina also is offering new amenities including wireless Internet access, more cable channels at the dock wells and special pricing to attract customers, general manager Semo Post said.

The marina, which is under new management, has ramped up customer service, Post said. Management hired a new staff of experienced workers who understand the business and go out of their way to help customers.

The improvements appear to be working: The 750 wells are 80 percent occupied so far, with many weeks still left in the summer; last year the boat wells never reached more than 80 percent occupancy, Post said.

Business is "better than expected, even with all the economic uncertainty," he said. "It's a lot of hard work with a little bit of luck."

With 1,194 square miles of inland waters and the Great Lakes' 38,575 square miles, Michigan boat docks and boating are just a part of life here, said Mike Litt, owner of Kean's Marina in Detroit.

"In Michigan, people are always going to have boats," he said. "They will still do what they love to do. It's in our blood."

He said business is off about 10 percent from this time last year, but he's not worried -- he expects things to pick up during the winter, when boaters put their watercraft in storage on the property. Unlike last year, Kean's customers don't have to pay for winter storage up front; they can wait until the end of summer to pay.

There are 260 wells at the marina. So far, nine fewer wells have been rented out, compared to last year.

"When we close the books at the end of the year, we'll be a smidgeon ahead," Litt said, adding that he's not requiring customers to sign a one-year contract for well rental and storage this year if they can't afford both right now. "We're working with customers so they can still do one thing besides working and watching the news."

At St. Clair Boat Harbor, a municipal marina in St. Clair, its 120 wells are 99 percent occupied this year, but higher gas prices during the past few years hurt business, said Avery Armstrong, director of operations.

During the past few years, expensive gas kept boaters away from the marina's fuel dock and clubhouse, he said. Last year, he sold 60,000 gallons of fuel, compared to 100,000 gallons a few years ago and there are fewer parties at the clubhouse because people aren't traveling to the marina from other cities as much.

"It has affected us," Armstrong said of gas prices. "But if (the price of) gas stays where it is, we're anticipating a better year this year."

Justin Baxter of Redford Township bought a 26-foot Sea Ray cruiser last year, when gas prices hovered around $5 a gallon at the fuel docks. Now that fuel is in the mid-$3 range, he plans to get more use out of his boat.

"I won't be taking it on long trips because of gas (prices), but I'll still be taking it out on the water," said Baxter, 28.

23 June 2009

Small Farmers Experi-Mint With Crop Diversification

Story from the Detroit News

As Crosby Mint Farm prepares for its 98th harvest of the fragrant herb, siblings Jim and Linette Crosby, fourth-generation growers, are busy forming business partnerships they hope will keep the family farm operating for many years.

With the cost of farming going up and the price of mint oil increasing only $8 per pound since 1925, Jim Crosby said it was crucial to look for new ways to make the farm -- the oldest mint producing operation in the United States -- profitable. But, when the farm in St. Johns, near Lansing, recently came under the threat of foreclosure, diversification became a matter of survival.

"I had to do it," he said, "because I wanted to keep the farm going."

Right: Double The Fun -- Jim Crosby, right, has partnered with Dr. Eugene Watkins, who owns Pure Herbs Ltd. in Sterling Heights. The firm recently bought 200 gallons of spearmint oil. (Pure Herbs Ltd.)

New products boost business
Crosby, who goes by the nickname "Peppermint," started looking for a mint oil distributor 25 years ago, but couldn't find one who shared his commitment to improving the quality of customers' lives.

So, he diversified the 130-acre farm in other ways, including opening the farm to tourists in 1998 and developing a mint-based cleaner and a mint-based compost, which he began selling in 1997. In the past year, Crosby formed partnerships with a candle company, a candy company and a honey producer that use the mint oil in their products.

Before him, his parents and grandparents sold the mint and oil wholesale to a broker. During the 1940s and 1950s, mint farming was profitable, Crosby said, but markets changed and the price of mint held steady while expenses went up; smaller growers lost contracts because larger farms could do it cheaper. Crosby could see he was going to have to do things differently if he wanted to keep the farm viable.

Jim Crosby said it was crucial to look for new ways to make the farm -- the oldest mint producing operation in the United States -- profitable

His dad died in 2005, and his uncle, who helped maintain the farm, had a stroke a year later, leaving Crosby on his own. He was so busy taking care of the everyday operations that he let the business aspect slip away. Four years ago, he had taken out four loans, but wasn't able to repay them all.

That's when the lender Greenstone Farm Credit Services started the foreclosure process. Shortly after that, all the partnerships Crosby had begun forming crumbled because no one wanted to do business with a farm that wouldn't be around for long.

"We had done a lot, but it goes back to wearing all the hats," he said.

Pete Lemmer, an attorney for Greenstone, said the agency is working with Crosby and they have agreed on a repayment plan.
Interest in mint oil increases

Crosby has since formed new partnerships with candymaker R Candies in Bellevue, Soy-Beam Candle Buffet in Owosso and Frantz Honey in Davison to use the mint oil in their products. Henry Ford Hospital also is buying the oil for medicinal uses, he said.

The partnerships have generated more income for the farm and give the mint oil international exposure, Crosby said. Business is up 125 percent since the partnerships were formed, he said, and customers all over the country and as far away as Europe are interested in buying the oil and mint.

"We're able to offer more products people are asking for or wanting to buy," Crosby said.

R Candies began using Crosby's mint oil in its candies a year ago and it's getting rave reviews from customers.

"My strongest impression is that they love the freshness of the mint," said Ed Baker, whose family operates the company. "It makes a humongous difference."

Pure Herbs Ltd., an herbal manufacturing company in Sterling Heights, just bought its first shipment of 200 gallons of spearmint oil from Crosby Mint Farm last week, fulfilling Crosby's wish 25 years ago to partner with a business that shared his philosophy. Pure Herbs plans to sell the oil to its 6,500 active U.S. distributors.

The company bought the oil after owner Eugene Watkins tried it and loved it, said Al Pfund, production manager. The staff also liked the fact that it was 100 percent natural.

"We were very, very impressed," Pfund said. "We don't want the kind of oil that's made for food or has anything synthetic in it."

Even with all the financial trouble Crosby and his sister have faced during the past couple of years and their ongoing struggle to save the farm, he still believes in what they are doing and vows to continue growing mint and educating the public.

"Every day is a challenge and every day is a test of faith," he said. "It's always easy to walk away, but when you're doing what your heart believes, there are no obstacles."

Attention Men: A Gui1ty P1ea From The Sp@m K1ng

Story from the Detroit News

Detroit -- A West Bloomfield man identified by a federal prosecutor as "the world's most notorious illegal spammer," pleaded guilty Monday to federal fraud and money laundering charges.

Alan M. Ralsky, 64, known as the "Spam King" for his years as a prolific and sophisticated e-mailer for hire, entered pleas before U.S. District Judge Marianne O. Battani to crimes that could cost him $1 million and put him behind bars for more than seven years.

Ralsky also agreed to help the government in future investigations in return for a possible reduction in his sentence.

For years, Ralsky has flooded the Internet with unsolicited promotions for everything from mortgages to male enhancement pills.

He pleaded guilty to being the mastermind of a scheme that boosted the value of "pink sheet" Chinese penny stocks by spamming tens of millions of Internet e-mail addresses with promotional messages.

When the prices rose, Ralsky and his co-defendants unloaded their stocks at a profit, according to government investigators.

It was alleged that Ralsky made about $3 million from illegal spamming in the summer of 2005 alone.

Also pleading guilty Monday were Ralsky's son-in-law, Scott K. Bradley, 48, of West Bloomfield; and co-conspirators James E. Fite, 36, of Culver City, Calif.; John S. Bown, 45, of Fresno, Calif.; and William C. Neil, 46, also of Fresno.

When indictments were handed up by a grand jury in January, the case was described by federal authorities as the largest criminal spam and Internet fraud action in American history.

"Using the Internet to manipulate the stock market through spam e-mail campaigns is a serious crime," U.S. Attorney Terrence Berg, the prosecutor in the case, said in a statement released Monday.

"This case serves notice that federal law enforcement has both the capacity and the will to successfully investigate, prosecute and punish cybercrimes."

The defendants from China, Canada, Russia and throughout the United States were accused of using elaborate software to send millions of spam e-mail messages daily between 2004 and 2006. Federal agents raided Ralsky's $750,000 home and other locations in September 2005, seizing computer equipment.

At that time, Ralsky told The Detroit News he wasn't a spammer, but described his work as "a commercial e-mailer."

...the case was described by federal authorities as the largest criminal spam and Internet fraud action in American history

But, John Mozena, a Grosse Pointe Woods resident and co-founder of the Coalition Against Unsolicited Commercial E-Mail, said it's the illegal actions of Internet buccaneers like Ralsky that clog e-mail boxes with junk mail and cause untold expenses for legitimate businesses.

"We are all paying the 'Spam Tax' because of spammers like Ralsky," said Mozena who helped law enforcement when it launched a three-year investigation of Ralsky.

"A huge percentage of e-mail is spam, which loads mailboxes and causes money to be spent on teams of experts bent on stopping it.

"Your computer can be hijacked and used in a 'botnet,' like a zombie, to send more e-mail without you even knowing about it until your service provider suddenly cancels your service.

"There is a large added cost to being on the Internet and we are all having to pay this cost for unscrupulous unethical people who are trying to hijack it to make money."

Ralsky is a former insurance agent who lost his license in Illinois and declared bankruptcy. He served three years probation for a felony conviction of falsifying bank records.

In the late 1990s, he sold his car to buy computers and launch a business sending bulk e-mail messages.

In 2002, Ralsky agreed to an undisclosed cash settlement to end a lawsuit against him by Verizon Internet Services, which alleged he twice paralyzed the network in 2000 with massive e-mailed pitches for items like diet pills and vacations.

He boasted of getting offers from colleges to lecture on his Internet practices.

Federal laws enacted in 2004 making electronic mail fraud a crime describe signs of illegal spam as including efforts to disguise the source and nature of e-mails, and using techniques to evade spam filtering programs.

"He was one of the bigger guys out there, but it's so hard to figure out who is actually doing this because of hidden identities, shell companies and offshore servers," Mozena said.

"In the end, I believe it was old-fashioned police work that caught up to Mr. Ralsky. The feds followed the money. They tracked his profits and that's a lot easier than trying to convince a judge and jury of the details of network topography in China."

Prior guilty pleas were taken from Judy Devenow, 56, of East Lansing, Francis Tribble, 41, of Los Angeles, Calif., and How Wai John Hui, 50, of Vancouver, Canada, and Hong Kong, China. No date has been set for sentencing. Ralsky and the others will remain free until then.

Michigan's Sparton Awarded Sonobuoy Contract

Story from Market Watch

JACKSON, Mich., Jun 22, 2009 (BUSINESS WIRE) -- Sparton Corporation is announcing award of a $19.3 million subcontract to manufacture sonobuoys for the United States Navy as part of the ERAPSCO joint venture.

Under an ERAPSCO subcontract, Sparton will produce sub-assemblies for more than 7,320 AN/SSQ-101A (Q-101A) sonobuoys to support United States Naval Antisubmarine Forces. The AN/SSQ-101A Air Deployable Active Receiver (ADAR) sonobuoy is an A-size, expendable, acoustic signal receive array. With on-board digital signal processing and a Sparton Digital Compass for bearing determination, target localization and tracking by Navy Maritime Patrol Aircraft is achieved.

"Sonobuoys are vital to the defense and security of our nation," said Cary Wood, president and CEO, Sparton Corp. "We're proud to have won this new contract, which validates the technology we use in our sonobuoys and to again be working with the U.S. Navy. We're also very pleased to be teaming via ERAPSCO on this contract."

Production and testing will be performed at Sparton's DeLeon Springs, Fla., facility and is expected to be completed in May 2011.

Currently headquartered in Michigan, Sparton is the only U.S.-owned designer and manufacturer of sonobuoys for the U.S. Navy.

Sonobuoys are vital to the defense and security of our nation

About Sparton Corporation

Sparton Corporation /quotes/comstock/13*!spa/quotes/nls/spa (SPA 2.67, 0.00, 0.00%) now in its 109th year, is a broad-based provider of electronics to technology-driven companies in diverse markets. The Company provides its customers with sophisticated electronic and electromechanical products through prime contracts and through contract design and manufacturing services. Currently headquartered in Jackson, Mich., Sparton has five manufacturing locations worldwide at this time. The Company's Web site may be accessed at http://www.sparton.com.

ERAPSCO, a joint venture between Sparton Electronics Florida Inc., DeLeon Springs, Fla., and Undersea Sensor Systems, Inc. (USSI), Columbia City, Ind., is a designer and manufacturer of expendable underwater transducer and sensor products for the U.S. Navy and its allies. ERAPSCO, serving as the prime contractor, was awarded the $31,316,120 firm-fixed-price contract for the procurement of the ADAR units. The balance of the work under this prime contract will be performed by USSI.

Safe Harbor and Fair Disclosure Statement
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: To the extent any statements made in this release contain information that is not historical, these statements are essentially forward-looking and are subject to risks and uncertainties, including the difficulty of predicting future results, the regulatory environment, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission (SEC). The matters discussed in this press release may also involve risks and uncertainties concerning Sparton's services described in Sparton's filings with the SEC. In particular, see the risk factors described in the Company's most recent Form 10K and Form 10Q. Sparton assumes no obligation to update the forward-looking information contained in this press release.

SOURCE: Sparton Corporation

State Medicaid Cuts: This Will Hurt You More Than It Will Me

Story from the Detroit News

michigan medicaid insuranceAutomotive retirees aren't the only ones rushing to get dentist appointments this month.

Medicaid patients are swarming dental offices, too, hoping to get last-minute work done before the state-run medical program stops paying for cleanings, fillings, partials and dentures at month's end as a part of broader cutbacks announced in May to help balance the state's distressed budget.

The cuts affect adults age 21 and older covered by Medicaid, the federal-state program that provides health care coverage for certain low-income individuals and families.

Of Michigan's 1.6 million Medicaid enrollees, about 610,000 are adults. The budget cuts also eliminate other benefits, such as vision care, chiropractic services and podiatry, and reduce by 4 percent across-the-board Medicaid payments to physicians, hospitals and other providers, including dentists.

The cuts begin in the fourth-quarter of Michigan's fiscal year and will save about $53 million for the three-month period, state officials said. The cuts could extend into the 2010 fiscal year, which starts in October.

Dentists in urban areas such as Detroit, where there are a high percentage of Medicaid patients, fear the cutbacks will devastate business, delivering another blow to practices reeling from the recession. Dentists also worry more offices will reduce hours or close, further eroding options for low-income people living in the city and neighboring communities.

"It's a really distressing thing for all those concerned," said dentist Thomas Veryser, executive director of Michigan Community Dental Clinics, a nonprofit that specializes in treating Medicaid patients. Veryser said the cuts will further strain the organization's budget, prompting staff layoffs and halting construction of new offices.

Many health experts argue that any cuts to Medicaid will prompt costlier treatments in the future as patients rush to emergency rooms when their problems worsen.

The Michigan Medicaid insurance program will continue paying for emergency dental visits, such as tooth extractions, dentists say, but not for dentures or partials.

"They have access to emergency care but no access to care to replace those teeth," said Mert Aksu, dean of the School of Dentistry at University of Detroit Mercy.

Failing to replace absent teeth could lead to such as problems as shifting teeth and an inability to chew properly, Aksu said.

Michigan isn't alone in trimming Medicaid coverage in response to strained budgets.

Coverage for such services as dental, vision and podiatry are typically the first axed because they are considered optional, which means states aren't required to provide them to participate in Medicaid, which gets matching funds from the federal government, said Robin Rudowitz, policy analyst for the Kaiser Commission on Medicaid and the Uninsured, a part of the California-based Kaiser Family Foundation. It's up to each state to decide whether to offer optional services.

Michigan could also lose some federal matching funds by cutting optional services, Rudowitz added.

But compared to other states, Michigan has largely protected its Medicaid program from cuts, despite the state's high unemployment rate and dismal economic climate, Rudowitz said. And Michigan is likely to restore benefits once the economy rebounds, as has been the case in many other states, she added.

Still, for Mount Clemens Medicaid patient Caroline Lawrence, 37, the possibility of her dental benefits returning was of little comfort as she sat in the waiting room of a Detroit dental clinic, squirming from the pain throbbing in her cheek.

Lawrence set up an appointment with dentist Jerel Owens, one of the few oral surgeons she could find who takes Medicaid patients, to get her teeth pulled and would return for a denture.

But Lawrence fears she won't be able to get the denture before June 30 and may have to wait until dental coverage resumes.

"There is nothing I can do," she said, holding her hand to her cheek trying to soothe the pain. "I'll just have to suffer."

16 June 2009

Hydrogen Powered High-Speed Detroit-Lansing Mag-Lev Line Proposed

Story from World Car Fans

A new proposal to help alleviate the problem of heavy traffic in the state of Michigan is under way. A company called Worldwide Hydrogen Super Highways says it has designed a magnetic-levitation (maglev) rail line to run near existing highways between Detroit, Lansing and Ann Arbor. Interstate Traveler Co. LLC, the company that is pitching this project is made up of 200 international investors.

Trains would not run on the line but only special maglev cars built by Detroit's automakers. These cars would be powered by hydrogen batteries and recharge using solar energy. The proposed speeds for the maglev train is up to 200mph (322km/h) although the Shanghai maglev easily reaches 268 mph (431 km/h) but hardly its full potential. The highest recorded speed of a maglev train is 361mph (581 km/h) which occured in Japan 2003 while the theoretical potential exceeds 4000 mph (6437 km/h) if deployed in an evacuated tunnel.

The estimated cost of the project is around 15 million USD per mile which would make the total cost about 2.3 billion USD. Fortunately the taxpayer will not be asked to fund this project as all funds for construction will be borne by the investors. Additional revenue would be generated from leasing the rail lines to utility companies and advertising revenues placed all over the vicinity of the rails including at stations along its route. Of course ride fares would be charged to commuters as well.

A Michigan State House is currently reviewing the proposal to see if it meets financial and technological feasibility goals. Should it approve the plan, construction could commence by next year.

High-Speed Rail System Coming To Michigan?

Story from Forbes

EAST LANSING, Mich. -- A company developing a plan to build a hydrogen-powered high-speed rail system in Michigan says private investors have stepped forward with enough funding to build a prototype.

Connie Murry Cole of Whitmore Lake-based Interstate Traveler Co. LLC said at a hearing Monday in East Lansing that the prototype could be built within a year, but a location has not been determined.

The hearing is the first of four state Rep. Bill Rogers, R-Genoa Township, and others have scheduled.

The next hearing is July 10 in Ann Arbor.

Interstate Traveler has said the multibillion-dollar magnetic elevation train system would be privately financed. It aims to start with lines linking Detroit to Ann Arbor and Lansing that could move passengers at 200 miles per hour.

15 June 2009

A Giant Falls

The Economist for June 6th-12th published an editorial regarding the ultimate fate of General Motors

SINCE the start of the year it had seemed probable, and for several weeks inevitable. General Motors’ application on June 1st for Chapter 11 protection from its creditors, triggering the biggest industrial bankruptcy in history, was nonetheless a momentous event.

The filings lodged at 8am with a court in Manhattan were testimony to the size and complexity of the 101-year-old company and to the scale of the problems that had finally overwhelmed it. Until 2008, when it was overtaken by Toyota, GM was the world’s biggest carmaker, producing well over 9m cars and trucks a year in 34 different countries. It has 463 subsidiaries and employs 234,500 people, 91,000 of them in America, where it also provides health-care and pension benefits for 493,000 retired workers. In America alone, it spends $50 billion a year buying parts and services from a network of 11,500 vendors and pays $476m in salaries each month.

Amid the huge numbers, one comparison stood out: against assets of $82.2 billion, GM has liabilities of $172 billion. A year ago, realising that GM was running out of cash, Fritz Henderson, then the chief financial officer, sought to raise $3 billion through a sale of bonds or shares. When it became clear after the collapse of Lehman Brothers in September that there was no chance of success, he attempted to sell some non-core assets. That too failed. Mr Henderson, who became chief executive when Rick Wagoner was ousted in March, says in an affidavit that no one expressed any interest in lending to GM or buying its assets at a price that would have kept it operating. (This week GM managed to find a Chinese buyer for its Hummer SUV brand, but the price is thought to be far below GM’s $500m valuation.) In November GM’s share price fell to $3. The only route still open led to the federal government.

An autumn’s warmth does not endure

Yet as recently as the autumn of 2007 Mr Wagoner’s stock had been high. There was hope both inside GM and among industry commentators that after three years of huge losses and painful downsizing the carmaker was at last on the road to viability. The chief cause of optimism was a deal with the United Auto Workers (UAW) union to transfer health-care liabilities to a union-run trust fund and to reduce the pay and benefits of newly hired workers to rates similar to those at the “transplant” factories of rivals such as Toyota and Honda. That October the price of GM shares rose to nearly $43, the highest for more than three years.

Better still, independent surveys were reporting that many of GM’s factories had closed the efficiency gap with Toyota. And guided by Bob Lutz, a quintessential “car guy” whom Mr Wagoner had appointed in 2001 to oversee product development, GM was also making some pretty good cars, among them the fast-selling Buick Enclave and the award-winning Chevrolet Malibu and Cadillac CTS. The Chevrolet Volt, a revolutionary electric car with a “range-extending” internal-combustion engine, due to be launched in 2010, made Toyota’s Prius hybrid look a bit dated. In late 2007, after years of decline in North America and despite cuts in dealer incentives and sales to car-rental firms, GM’s market share was edging up.

The final element of this cheery prognosis was GM’s success outside North America, especially in fast-growing emerging markets. For all his sometimes plodding approach at home, Mr Wagoner had proved surprisingly fleet of foot abroad, where GM was making 65% of its sales (see chart 1). GM had long been big in Latin America, but in China and Russia it was reaping the rewards from being among the first foreign firms to set up factories. In China, with its joint-venture partner, SAIC, GM now has 12% of a market that will soon surpass America’s.

But, as at other times in GM’s recent troubled history, the promise of that autumn turned out to be false. By the end of 2007, the weakness of the American housing market was infecting sales of cars. Falling house prices caused many people to put off getting a new car, while willing buyers with below-average credit ratings were finding it increasingly hard to finance prospective purchases, new or used.

On top of that, petrol prices nearly doubled. With a gallon costing $4, demand for the big pickups and SUVs that provided most of Detroit’s profits evaporated. In the scramble to swap gas-guzzlers for smaller vehicles, residual values collapsed, leaving GM’s finance arm with huge losses on cars returned after lease. After Lehman failed, car markets were clobbered around the world, but America’s was hardest hit. Sales of cars and light trucks in December 2008 were 35.5% lower than the year before. After four years of restructuring efforts during which it had lost more than $80 billion, GM was too enfeebled to stagger on.

Where did it all go wrong?

In some ways, GM’s problems can be traced to its origins a century ago. Between 1908 and 1920, its founder, Billy Durant, bought 39 companies including Cadillac, Pontiac, Oldsmobile, Chevrolet and several parts-makers, but ran them as separate entities. In 1923, after narrowly avoiding bankruptcy, Alfred Sloan, a ball-bearing magnate, took over the running of GM. Sloan imposed tight financial controls and brought order to the chaotic model line-up. Yet even as GM expanded abroad, establishing factories in 15 countries and buying Vauxhall in Britain and Opel in Germany, Sloan made little attempt to forge a unified company at home. The different divisions were run almost as independent fiefs that fought among themselves and against any interference from the centre.

Still, GM was doing well enough after the second world war to accede to the deals with the UAW that, much later, were to become an insupportable burden. It agreed in 1948 to annual cost-of-living pay increases and in 1950 to free health-care coverage for life and generous pensions. With hardly any foreign competition in America and its main Detroit rivals, Chrysler and Ford, forced to offer their workers similarly gold-plated benefits, GM’s sheer scale masked any inefficiencies. By the early 1960s, with its market share at over 50%, its bosses were more worried about avoiding antitrust action and a possible break-up than reducing costs or improving GM’s cumbersome, committee-bound way of making decisions.

Only in the 1970s, after the first oil shock, did faults start to become visible. The finned and chromed V8-powered monsters beloved of Americans were replaced by dumpy, front-wheel-drive boxes designed to meet new rules (known as CAFE standards) limiting the average fuel economy of carmakers’ fleets and to compete with Japanese imports. As well as being dull to look at, the new cars were less reliable than equivalent Japanese models.

By the early 1980s it had begun to dawn on GM that the Japanese could not only make better cars but also do so far more efficiently. A joint venture with Toyota to manufacture cars in California was an eye-opener. It convinced GM’s management that “lean” manufacturing was of the highest importance. Unfortunately, that meant still less attention being paid to the quality of the cars GM was turning out. Most were indistinguishable, badge-engineered nonentities. As the appeal of its products sank, so did the prices GM could ask. New ways had to be found to cut costs further, making the cars still less attractive to buyers.

Respite came with the decline in oil prices from the late 1980s and an anomaly of the CAFE regulations that allowed passenger vehicles classed as light trucks a much slacker standard. Rather than invest in low-margin cars, GM and the two other Detroit firms concentrated on building profitable pickups and SUVs. After recovering from losses of over $30 billion in the early 1990s, the company was in trouble again at the beginning of the next decade. Its market share had been steadily falling (see chart 2), while higher interest rates and an economic downturn led to a pensions and benefits crisis. However, thanks to Mr Wagoner’s first efforts at restructuring, by 2003 GM’s market share in America had stabilised at 28% and it was making profits of nearly $4 billion.

It could not last. Every year the cost of retired workers’ health care diverted billions of dollars from developing new models and added $1,400 to the cost of each car compared with those made in Asian and European transplants. Mr Wagoner had little choice but to generate cash to feed the beast. That meant keeping production high and sustaining sales with costly dealer incentives, cheap credit and heavily discounted fleet sales. That in turn hammered residual values and damaged GM’s brands. It is easy to say with hindsight that Mr Wagoner should have done more to prevent the slide. But had a more confrontational manager forced an earlier showdown with the union, downsized faster or tried to hack back a sprawling dealer network protected by state franchise laws, he might merely have hastened bankruptcy. It may be fairer to say that, dealt a rotten hand, Mr Wagoner tried to do many of the right things, but ran out of luck and time.

The car-industry task-force appointed by Barack Obama to save GM and Chrysler quickly concluded that neither could be viable without the pressure of bankruptcy to force stakeholders to renounce most of their claims. But it also recognised that a long period in Chapter 11 could be fatal. Not many people want to buy something as expensive and durable as a car from a company that may not be around next year. The task-force is therefore forcing through “quick rinse” or “pre-packaged” bankruptcies to separate the good assets from bad assets and liabilities speedily. The idea is to allow a new, cleansed company to emerge in a matter of weeks (as with Chrysler) or at most a few months (GM).

New beginnings?

At Chrysler, everything seems to be going according to plan. Fiat, which will take over the running of the business, will have 20% of the new company, rising to 35% on reaching certain goals. A union trust will have 55% and the government 10%. This week the judge handling the bankruptcy, Arthur Gonzalez, cleared the way for a spruced-up Chrysler to exit the court soon after the good assets are transferred to Fiat. An appeal by some Chrysler creditors may delay this by a few days.

Although GM’s bankruptcy will be more complicated and drawn out, a new entity should emerge before September. The government, which is putting $30 billion into GM on top of the $20 billion it has already handed over, will receive 60.8% of the stock. The Canadian government, which is providing $9.5 billion, will get 11.7%. The UAW’s trust will have 17.5% and the bondholders 10%. Despite the size of its stake, the government is adamant that it is a reluctant shareholder and will stay out of managing the business. It hopes that within 18 months GM might become a publicly traded company again.

The new GM will shed about 14 factories, 2,400 dealers, 21,000 hourly-paid jobs, 8,000 white-collar jobs and, crucially, $79 billion in debt. The aim is for the company in North America to be able to break even in a domestic market with annual sales of 10m vehicles. Today’s extremely depressed market is running at about 9.5m. A recovery is forecast to start next year, but it may take time for sales to return to the 15m-17m seen between 1995 and 2007.

No one believes that GM will return to its former glory. The question is whether the new, smaller GM can succeed on its own more modest terms. Without doubt, its structural costs will be much lower: $23.2 billion in 2010, against $30.8 billion in 2008. With fewer brands and dealers it will be able to focus marketing and advertising more effectively. GM also retains the design and engineering resources to develop competitive cars, although the good ones are still outnumbered by the dross. The new-model pipeline has enough in it to keep buyers interested. Its successful operations in China should continue to grow rapidly with the market there.

But several doubts remain. The first is that although Mr Wagoner has gone, there has been no cull of GM’s leaders—who helped to get it into this mess. Mr Henderson is an experienced financial manager, but GM may need someone more inspiring to shake it out of its consensual, bureaucratic ways. Senior members of the auto task-force found Chrysler to be better run in some ways than GM.

Second, although GM’s cost base will be more in line with that of its transplant rivals, it will still be handing about $600m a year to the UAW in the form of dividends on preferred stock to comply with the revised health-care agreement. On the rather rosy assumption that GM sells 2m vehicles a year in America, each one will have to carry $300 in health-care costs. Unresolved questions remain about the firm’s pension fund, which at the end of 2008 was underfunded by about $13 billion.

Third, GM’s market-share forecasts still look optimistic. It expects its share to stabilise at around 18.5%, only one percentage point below its figure for this year. But GM will have fewer brands and dealers, and rivals will be eager to exploit its withdrawal from parts of the market. Volkswagen, for example, is planning an assault. It is building a new factory in America with the capacity to turn out 250,000 cars a year and is aiming to triple its market share from 2% to 6% by 2018, with sales of 800,000.

Fourth, there is a danger that with the government as its biggest shareholder, GM will be pushed into making the kind of cars—smaller and more fuel-efficient—that Mr Obama approves of rather than the sort Americans want to buy. Although new CAFE standards should encourage the shift away from the thirstiest models, trucks still get off too lightly and the administration seems to have no appetite for the one thing that would radically change buying habits: a big increase in petrol taxes or a more widely applied tax on carbon.

Finally, as Max Warburton, an analyst with Bernstein Research, notes, GM has suffered as much from a price problem as from a cost problem. GM’s vehicles sell for between $3,000 and $10,000 less than Toyotas of the same size. “This is a brand issue”, says Mr Warburton, “and the brands won’t be fixed by Chapter 11.” Most younger buyers have simply never considered a GM car. The new Malibu medium-sized saloon is just as good as the Toyota Camry, Honda Accord and Nissan Altima, yet is still shunned by many drivers because it is a Chevy. If anything, bankruptcy and subsidies from the taxpayer will tarnish GM’s brands even more. The few Americans who buy cars for patriotic reasons are more likely to head for a Ford showroom to reward the company for its dogged fight to avoid the fate of its Detroit rivals.

When GM emerges from bankruptcy, it will have shed some of its burdens, but the damage done by decades of mismanagement and union intransigence will still weigh heavily. The new GM will not be quite as new as either it or the government would like Americans to believe.

11 June 2009

Chrysler sells good assets to Fiat, new company formed

Alisa Priddle and David Shepardson / The Detroit News

The long-awaited tie-up between Chrysler LLC and Fiat SpA has been finalized, and now the company must get back to the business of building and selling cars and trucks.

The two sides signed off on a partnership this morning that creates a new automaker to be known as Chrysler Group LLC, allowing the new company to emerge after a 40-day stay in bankruptcy.

It begins operations immediately under new chairman Robert Kidder and Chief Executive Officer Sergio Marchionne, who is also CEO of Fiat. The vice chairman of the former Chrysler, Jim Press, has been appointed Deputy CEO and Special Adviser, reporting to Marchionne and responsible for restructuring the company to create a "new leaner, flatter" organization, Chrysler said.

Former Chrysler chairman and CEO Robert Nardelli returns to former employer Cerberus Capital Management LP and sent employees a farewell letter Wednesday.

"I am pleased to report that we have closed the alliance agreement between Chrysler Group LLC and Fiat SpA and have emerged from bankruptcy in record time," Nardelli wrote. "Chrysler Group now is a leaner, healthier and more robust company ready to compete in the challenging economy as an important player in the global automotive industry."

Marchionne in a statement said today was "a very significant day" for Chrysler and its employees, but also "for the global automotive industry as a whole.

"From the very beginning, we have been adamant that this alliance must be a constructive and important step towards solving the problems impacting our industry. We now look forward to establishing a new paradigm for how automotive companies can operate profitably going forward."

The White House also praised the deal.

"This morning's closing represents a proud moment in Chrysler's storied history. The Chrysler-Fiat alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker," the White House said in a statement.

The way for the deal was cleared when the U.S. Supreme Court put an end to the appeals of a group of Indiana pensioners late Tuesday.

Chrysler and Fiat wasted no time consummating the deal to get the new company up and running.

The new Chrysler combines the most valuable assets of the bankrupt automaker with small-car and engine technology from Fiat, which is not putting cash into the deal.

Fiat has an initial 20 percent stake in the company, which will grow to 35 percent if Fiat meets three benchmarks. Fiat can buy a majority stake in Chrysler -- only after $6 billion in government exit financing loans are repaid. But Chrysler isn't required to pay back the more than $7 billion that Chrysler received earlier.

Some of the bad Chrysler assets remain under Chapter 11 protection pending liquidation.

"We intend to build on Chrysler's culture of innovation and Fiat's complementary technology and expertise to expand Chrysler's product portfolio both in North America and overseas," Marchionne said.

The new CEO said the Chrysler plants, which have been idled since Chrysler filed for bankruptcy April 30, "will soon be back up and running, and work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward."

Most Chrysler plants are expected to resume operations later this month. Chrysler has been burning through $100 million a day while in bankruptcy.

Marchionne will bring Fiat management style to Chrysler, and the Italian automaker also offers its international distribution network to sell Chrysler vehicles in Europe, Latin America and Russia.

From the start, the company is being reorganized around the four key brands: Chrysler, Jeep, Dodge and Mopar parts, and each division is accountable for its own profits and losses, with back office functions being put in place to support this new way of doing business. The changes will also affect how the new automaker develops, builds and sells vehicles.

Among the personnel announcements for day one: Michael Manley is appointed president and CEO of the Jeep brand; Michael Accavitti heads up Dodge; Peter Fong will oversee Chrysler; Pietro Gorlier will be the Mopar chief; Joe ChamaSrour will continue to lead Chrysler de Mexico; and Reid Bigland will continue to lead the new company's operations in Canada. Peter Grady is appointed to lead the Network Development & Fleet organization, which means continued oversight over dealers whose ranks were thinned by 789 as of today.

Steven Landry, head of sales, service and marketing, is retiring, as is head of product development Frank Klegon.

Overseeing product engineering will be Scott Kunselman.

The heads of design, manufacturing, quality, suppliers and human relations remain unchanged.

The new company will be governed by a nine-member board including Marchionne and two more Fiat appointees. Four directors will be appointed by the U.S. government; one will come from the Canadian government and one from the United Auto Workers' retiree health trust fund.

U.S. Rep. Sander Levin, D-Royal Oak, said he is pleased the deal is done.

"Now this new company can get about the business of selling cars and stepping up a full alliance of advanced technologies essential to the future of the auto industry," Levin said in a statement. "The completion of the restructuring in just over 40 days while difficult was a much preferable outcome than liquidation of this iconic company, which would have had devastating impact on jobs, our communities, and among the entire auto supply and industrial base of our country."

Chrysler has a history of bailouts, mergers and assorted owners. This latest reincarnation is likely its final chance to succeed.

Nardelli said he thinks it has the wherewithal to do so.

"What I have learned along the way is that Chrysler people also have the resolute heart of a scrappy underdog. This is a company that has been knocked down many times, but never knocked out," the outgoing CEO told employees in his farewell letter.

He also praised the community.

"I also want to express my deep appreciation to the entire Detroit-area community for welcoming and accepting me during my time with Chrysler. In my many years in business, I have worked in 14 different cities," he said. "Detroit and the auto industry have done so much to shape our country's history, and I feel tremendously proud to have been a part of this dynamic community and a company so committed to its revitalization."

09 June 2009

Fiat's Bid For Chrysler Put On Hold By U.S. Supreme Court

Story from Indystar.com

MILAN (AP) -- The Italian automaker Fiat says it won't walk away from a deal to acquire a controlling stake in Chrysler despite a U.S. Supreme Court stay on the sale.

Fiat has the legal right to walk away from the deal if the sale is not completed by June 15. But a spokesman for Fiat said today that the automaker will stay on board despite the new delay.

The U.S. Supreme Court decision on Monday to hear a challenge by three pension and construction funds could scuttle the sale. But the delay could also only be temporary. Justice Ruth Ginsburg could decide on her own to end the stay, or ask the full court to decide.

If Fiat were to walk away, Chrysler would have little option but to liquidate.
EARLIER: Indiana at center of Chrysler sale delay

Thousands of Chrysler autoworkers in Kokomo and across the nation were left in limbo Monday when Indiana Treasurer Richard Mourdock won a bid to get the U.S. Supreme Court to slow down and possibly overturn the sale of the struggling automaker to Italian carmaker Fiat.

The development raised questions over how soon the court will resolve the matter and whether the deal might be scuttled if it is not settled quickly.

Chrysler has said the sale must close by June 15 or Fiat has the option to walk away, leaving the Michigan company with little option but to liquidate. That scenario would throw enormous uncertainty over 6,000 Chrysler workers in Kokomo and tens of thousands nationally.

The sale hit a roadblock Monday when Supreme Court Justice Ruth Bader Ginsburg issued a delay just minutes before 4 p.m., when the deal was to become official.

She didn't indicate how long the delay would be. Her one- sentence order said the sale is "stayed pending further order," indicating the delay may be temporary. She could decide on her own whether to end the delay, or she could ask the full court to decide.

Some legal scholars said they doubted the court would resolve the issue within a week, as Chrysler wants.

"If the court goes ahead and asks for a hearing, it would be hard to see how they could do it quickly," said Gerard Magliocca, who teaches constitutional law at the Indiana University School of Law-Indianapolis. "The court isn't known for rushing these kinds of things."

Mourdock, the state's Republican treasurer, has been fighting the sale, claiming it unfairly favors Chrysler's unsecured stakeholders ahead of secured debt holders such as the state's pension funds. Indiana has funds worth $42.5 million in Chrysler's secured loans, making it a small player among bondholders who own $6.9 billion in secured loans.

Mourdock previously failed to convince the bankruptcy judge and an appeals court that the carmaker's spinoff plan is illegal. But now he has another shot at pressing his case.

In an interview Monday afternoon, he said his "heart goes out" to all the Chrysler workers whose future is now uncertain. But he said he had no choice but to challenge the deal because the law says secured bondholders should be favored ahead of unsecured bondholders, such as unions. He added that the deal would cause havoc in the bond market if investors saw that their investments suddenly were given unfavorable status.

"When one of the most liberal justices on the Supreme Court (Ginsburg) says, 'Time out,' I think it says a lot about this issue," Mourdock said. "The question is whether the law is going to be obeyed."

Mourdock has picked up support from some consumer groups, including Public Citizen and the Center for Auto Safety. They oppose the bankruptcy sale for their own reasons, saying it would allow a "new Chrysler" to emerge from bankruptcy without taking any responsibility for people hurt by defective Chrysler vehicles.

The Indiana Democratic Party called Mourdock's move a "partisan campaign" that threatens the future of Chrysler jobs.

City and economic development officials in Kokomo said the court's decision only extends the uncertainty in the north-central Indiana city, where four Chrysler plants employ about 6,000 workers.

"Delays probably are not going to be in the best interest of Kokomo," said Jeb Conrad, president of the Kokomo/Howard County Chamber of Commerce. "We've got facilities and people ready to go to work. It can be detrimental to not have a resolution."

Kokomo City Councilman Mike Karickhoff expressed hope the issue could be decided quickly.

Chrysler claims the agreement with Fiat is the best deal it can get for its assets and is critical to the company's plan to emerge from bankruptcy protection. The company said it has no other offers and would be forced to liquidate if the deal hits a roadblock.

But some business law observers said they wonder whether Fiat and Chrysler really would walk away from a deal at this point.

"If Fiat likes Chrysler for strategic reasons, and under these terms, then I don't think they would walk away because of a month delay for a Supreme Court hearing," said Nicholas L. Georgakopoulos, a law professor specializing in mergers and bankruptcy at the IU School of Law here.

Indiana also is challenging the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority.

06 June 2009

Candidates Talk Taxes In Initial Gubernatorial Sparring

Story from Crain's Detroit Business

MACKINAC ISLAND -- In an exchange long on civility and sometimes short on specifics, Michigan gubernatorial candidates on Thursday made pitches of tax-cutting, government restructuring and budget fixes to business executives gathered on Mackinac Island.

The candidates, appearing at a fundraiser for the Detroit Regional Chamber’s political action committee, sought to distinguish themselves in an early skirmish for the 2010 governor’s race.

Michigan Attorney General Mike Cox said he was focused on “what kind of Michigan will attract and retain jobs.” He said he would cut the Michigan Business Tax in half, roll back Michigan’s 2007 income-tax increase and institute an additional $600 million in MBT reductions – adding up to a $2 billion tax cut that he said he would “do the first thing” when taking office.

Cox said Michigan must look at what it does in the wake of auto industry bankruptcies and restructuring, and said “we have to make ourselves attractive to business.”

Other candidates also hit on taxes; Secretary of State Terri Lynn Land said Michigan needs to address its tax structure, and U.S. Rep. Peter Hoekstra, R-Holland, said Michigan needs to reduce taxes and make the tax system fairer and simpler.

Cox was the only candidate to support a no-tax-increase pledge; others, like state Sen. Tom George, R-Kalamazoo, indicated such a pledge was ill-advised in light of the fact that no one knows what the future holds for Michigan.

Tax incentives got attention, with George saying “total disarmament” against other states would be a mistake, but items like Michigan’s 42 percent film credit need change.

State Rep. Alma Wheeler Smith, D-Salem Township, said “what we need for all the businesses in Michigan is to create a level playing field…not pick winners and losers.” She said Michigan needs to examine its tax exemptions.

Hoekstra said most important is that Michigan has a tax structure that allows all of its industries to thrive. Cox said “tax policy matters” and said that lowering taxes overall would give “everyone the opportunity to prosper.” Land said she would simplify the MBT and “make it better for our state.”

Linking a part-time Legislature to expanded term limits drew various opinions. Smith said a part-time Legislature “would put more power in the governor’s office” and take it away from citizens, but she said she would support a change in term limits.

Hoekstra said he originally supported term limits but has changed his mind, and said he does not support a part-time Legislature. Cox, who said he voted against term limits, said he would also probably vote against a part-time Legislature.

Land said she supports term limits but believes more in “time limits” – setting a specific amount of days in which the Legislature must do its job.

George, a practicing anesthesiologist, said he would favor a part-time Legislature because it “gives people an opportunity to serve and still have their hand in another profession, career.”

In the area of bringing Michigan’s state budget under control, George targeted controlling the state’s health care spending. Cox said savings could come through requiring state employees, whom he said have the some of the richest health care benefits in the country, to pay more of their insurance premium, going from a current 5 percent to a national average of 23 percent of premium.

Smith hit on corrections, although she added that Michigan won’t balance its budget through the corrections department. But several candidates were wary of a plan to release 3,400 inmates by this fall, saying doing so should be done with caution and discretion and should not be driven as a budget decision.

As for replacing Michigan’s 19-cent gas tax with a percentage tax on the wholesale price of gas as a means to raise money for Michigan roads and bridges, candidates were mixed. George said he would not support it, while Smith said she supported the shift in concept. Hoekstra said he would not support it if it increased taxes overall, and Cox said he would instead look at using Michigan’s sales tax for additional road funding.

In closing remarks, Cox said he’s “willing to do the bold things that are needed to change Michigan around.” Land said her time as secretary of state gives her “background and ability to take on this challenge,” while George said “having legislative experience is going to be important in the next governor.”

Smith cited her years of elected experience and service on state appropriations committees as important qualities, while Hoekstra said he would be a governor who puts “everything on the table” to turn the state around, including tackling bureaucracy and taxes.

Ann Arbor business executive Rick Snyder, who was at the chamber’s Mackinac Policy Conference but declined to participate in the debate as he has not decided whether to enter the race, said he would “look at state government from the bottom up,” tackling services, regulations, tax structure and other elements.

“We need smaller, faster, cheaper, better government,” said Snyder, who is exploring a Republican run for governor. He is chairman and CEO of venture-capital firm Ardesta L.L.C.

05 June 2009

Penske To The Rescue For Saturn Workers

Story from CNNmoney.com

NEW YORK (CNNMoney.com) -- Bankrupt automaker General Motors Corp. announced Friday that it will sell its Saturn unit to car dealership operator Penske Automotive Group.

Penske (PAG, Fortune 500) is owned by former race car driver Roger Penske, who owns NASCAR and IndyCar racing teams.

The deal gives Penske the rights to the 19-year old brand including its five different models. GM would continue production of only the three highest-selling models, including the Aura sedan, and the Vue and Outlook cross-over SUVs, for the next two years. The Saturn Sky and Astra models will be discontinued.

The deal, which GM expects to be completed in October, would save more than 13,000 jobs at Saturn and its roughly 350 dealers nationwide. All of Saturn's dealerships sell only Saturn vehicles, so they are reliant on the brand's continuation for their survival.

"There has been a groundswell of support for Saturn, with our retailers and owners urging us to save the brand," said Jill Lajdziak, Saturn's general manager. "We heard their call loud and clear, and it inspired us as we worked to secure Saturn's future."

Saturn's 51 Canadian dealerships are not part of the deal.

Penske said he wants Lajdziak to stay on at the company. He also offered former Chrysler President Tom LaSorda a top spot at Saturn, according to the Detroit News. Penske hired LaSorda in May as a consultant for the Saturn deal.

Lajdziak would not yet say if she would accept the position.

"My total focus every waking minute has been to get to this point, to get a memorandum of understanding," she told CNNMoney.com.

The sale is part of GM's strategy to shed its four "non-core" U.S. brands -- Saturn, Hummer, Pontiac and Saab -- as it restructures the company.

On Tuesday, GM (GMGMQ) announced a deal to sell its Hummer line to China's Sichuan Tengzhong Heavy Industrial Machinery Company Ltd.

The Saturn brand has been highly rated in customer satisfaction surveys for its no-haggle policy. Though Saturn sales have slumped badly this year, the brand actually far outsold Buick and Cadillac in 2008, when it was GM's fourth highest-selling unit. GM has sold more than 4 million Saturns since 1990.

Roger Penske told CNNMoney.com that he's "happy" to get Saturn's 3.5 million customer base, though it's too soon to start talking about global growth for the company.

GM has said it would stop producing Saturn vehicles by 2011. To replace GM as the brand's manufacturer, Penske is in discussions with several global automakers. One likely replacement is Renault Samsung Motors of Korea, Automotive News reported.

"We have been in discussions on a worldwide basis with many people that have an interest in this marketplace," Penske said.

Penske Automotive is one of the world's largest auto dealer groups, and it would be the first ever to own a brand that it sells. The company is the exclusive U.S. dealer for Smart cars, and currently sells over 40 brands at its 310 dealerships, half of which are in the United States. Shares of Penske rose 3% in morning trading.

02 June 2009

Michigan Economy Gets Another Hard Blow To Absorb

Story from Detroit Free Press

NEW YORK -- Half of the 14 General Motors Corp. factories slated to be closed are in Michigan, another devastating blow to communities throughout the region that have endured cutbacks for years.

The Michigan facilities employ an estimated 9,000 salaried and hourly workers, according to GM's Web site.

A bright spot for the state, however, is that one of the assembly plants slated to be idled -- Orion Assembly -- is being considered for retooling to make a yet-to-be named small car that was promised as part of the most recent round of labor negotiations with the UAW.

Orion was one of several plants placed on standby status by GM, which is considering bringing new work to three sites. The others are an assembly plant in Spring Hill, Tenn., along with a recently closed facility in Janesville, Wis.

"Those will be the three plants we will consider," said Tim Lee, GM North America vice president of manufacturing.

The plants that do not receive the future small-car project likely will be closed.

Erich Merkle, an auto industry analyst, said the Orion plant has the benefit of being close to the auto industry's supplier base in Michigan. He said the Janesville plant is probably too old to get the work.

"Spring Hill is your toughest competition," he said. "It's the newer plant, and they make engines there, so it's not just an assembly facility."

Four assembly plants were targeted for closure or standby in addition to the Spring Hill and Orion facilities.

GM's Orion assembly plant, which builds the Chevy Malibu and Pontiac G6 midsize cars, is to be put on standby in September and the Pontiac facility, where the Chevrolet Silverado and GMC Sierra pickups are built, is to be closed by October.

The Orion plant has about 3,400 hourly and salaried workers, while the Pontiac plant had 1,470 workers this spring, the company's Web site said.

The fourth assembly plant on the closing list is in Wilmington, Del., where the Pontiac Solstice and Saturn Sky are built. The plant employs about 1,000 people.

Four stamping plants were slated for closure or standby status.

The Grand Rapids stamping plant, which already was slated for closure, is to close this month. It had 800 workers at last count. The Pontiac stamping plant, which has nearly 1,300 workers, is to go to standby in December next year. The company also announced six powertrain facilities are to be closed.

In Michigan, the Livonia Engine, Flint North Components and Willow Run plants are to close next year. The three facilities employ more than 2,100 people.

"Under this plan, the new GM will achieve full capacity utilization of its assembly operations in 2011, two years ahead of what was scheduled in its Feb. 17 viability plan submission," the company said. "This will result in lower fixed costs per vehicle sold, and lower and more efficient capital investment."

In addition to the 14 plants being closed, GM's Service and Parts Operations will end operations at parts distribution centers in Boston, Columbus, Ohio, and Jacksonville, Fla., by Dec. 31.