State Drug Use on the Rise Among Teens

Battle Creek Enquirer

Michigan teens are following the national trend of increasing pot, alcohol and prescription drug abuse, but Calhoun County’s abuse rates won’t be clear until late summer, officials said today.

The Associated Press reported that the Partnership for a Drug-Free America released a study on Monday showing teen alcohol use rose to 39 percent in 2009 from 35 percent in 2008 and marijuana use jumped to 25 percent from 19 percent. Before last year, those statistics had been on a steady decline since 1998.

Monitoring the Future, a survey of teen drug use sponsored by the National Institute on Drug Abuse and the University of Michigan, showed Michigan’s teens followed those trends, according Suzanne Horsfall, executive director of the Michigan Substance Abuse Council of Calhoun County. In a release, Horsfall said she found troubling the increasing acceptance of drug use, which climbed about 4 percentage points from 2008 to 2009.

Horsfall said most local schools are participating in a Michigan Department of Education survey on drug abuse, which was untrue in past years, and that more detailed local data, previously unavailable, should be ready by late summer.

General Motors to Reinstate 661 Dealerships

LA Times

In a move that could provide economic relief for hundreds of communities nationwide, General Motors Co. said it would reinstate nearly 700 dealerships that it had planned to drop from its sales network.

The automaker sought to shed what it considered excess dealers as part of a bankruptcy reorganization last year, an effort to bring its franchise network into better balance with its declining car sales. Closing unprofitable and poorly performing franchises was expected to channel business to the stronger dealers.

But 1,160 dealers took the automaker to arbitration, and on Friday GM said it planned to let 661of them keep their franchises as long as they meet "standard" performance criteria for their facilities and financial status, among other factors.

Bill Hatfield, owner of Hatfield Buick GMC in Redlands, hopes he is on the list.

His dealership has been selling cars since 1913 but received a letter back in May saying the franchise would not be renewed.

On Friday, Hatfield said his phones were "ringing off the hook" as local customers eagerly hoped that the dealership would be saved.

"We're kind of in a waiting situation. We'll either get the letter or we won't, but I'm sitting here on eggshells just waiting to see what they do," Hatfield said of his dealership. "We're still profitable, and we've worked all along with the idea that we'll get the franchise back."

GM, which did not provide a list of the dealers or locations that would be reinstated, said it planned to call the franchise owners it will keep next week and to follow up with formal letters.

"We are eager to restore relationships with our dealers and get back to doing what we do best -- selling cars and taking care of customers," said Mark Reuss, president of GM North America. "The arbitration process creates uncertainty in the market. We believe issuing these letters of intent is good for our customers, our dealers and GM."

It also might help defuse a thorny public relations issue. After GM and Chrysler Group, which also went through a bankruptcy restructuring last year, disclosed plans to close a combined 3,000 franchises, dealers and their supporters complained, arguing that such businesses were important to the economies of their local communities.

The average dealer employs close to 50 people and pumps $16.5 million a year into the local economy, including payroll, taxes, payments to vendors, advertising and charitable giving, said Paul Taylor, chief economist of the National Automobile Dealers Assn.

Congress stepped in and passed legislation requiring the automakers to set up an arbitration process that would be completed by July 15.

That deadline created a certain expediency to reinstating the hundreds of dealers, GM officials said.

"It would have been virtually impossible to arbitrate 1,100 cases in a 120-day period," Susan Docherty, GM's U.S. marketing chief, said in a conference call announcing the decision.

GM has not come anywhere close to its goal of dramatically slashing its dealer network. The company had about 5,500 dealership locations as of Jan. 31 -- just 700 fewer than at the end of 2008, prior to the auto industry's sales plunge.

But maintaining hundreds of dealers more than it expected is unlikely to hurt GM's financial performance, said Jeremy Anwyl, chief executive of auto information company Edmunds.com.

GM is likely to make a profit this year after years of massive losses, its CEO, Edward J. Whitacre Jr., predicted in January.

"It doesn't really cost GM that much to have a dealer that is not very successful," Anwyl said.

Incidentally, the impetus for closing dealerships came from the example of Toyota Motor Corp., which because of its millions of recalls in recent months is now losing sales to GM and other U.S. automakers.

"Everybody looked at how Toyota has only 1,500 dealers and that those dealers are more profitable," Anwyl said. "Ideally, that allows those dealers to invest in nicer facilities and hire better salespeople because they sell more cars per store," he said.

But, Anwyl said, terminating hundreds of dealers doesn't automatically produce those advantages and may actually create some disadvantages.

"A large number of dealers gives you coverage in rural America," he said. "Where are those people supposed to buy vehicles?"

Changing Fortunes Within VW

Auto Week

Each year on the eve of the Geneva motor show, the Volkswagen Group stages a preview, showing vehicles that will debut at the show the following day. The event takes place in a large, specially built building in the middle of the city. It is a chance for VW Group execs, board members and brand leaders to get up and talk about their latest projects.

[Photo: Porsche 918 Spyder Hybrid]

Journalists are invited to see the new cars and drink in the prowess of the ever-growing VW empire, not to mention bottles of fine German beer. And it's a pretty impressive lineup--the cars, that is: Audi, Bentley, Lamborghini, Bugatti, Seat, Skoda, Scania, along with Volkswagen, including VW's commercial-truck division. VW has a partnership with Suzuki in Japan that began last year. And, oh, I left one out: Porsche.

After Porsche's failed attempt to take over the VW Group a little more than a year ago--think guppy trying to eat a whale--well, the whale swallowed the guppy, and Porsche is now a VW brand.

At this year's VW Night, the big news was a Porsche concept, the 918. A 500-hp hybrid that veteran rally ace Walter Rohrl said is faster around the Nordschleife than the vaunted Porsche Carerra GT, the 918 rolled on stage and stole the show.

But what struck me was how quickly things change in the auto world. Certainly no one needs to remind Toyota of how one's fortune can turn in a heartbeat. But no more than two years ago, Porsche was held up as the shining example of how to make money in the car business. Porsche was touted as the most profitable car company in the world and its leader, Wendelin Wiedeking, the kind of guy you'd want leading your company--any company, not just an automaker. Wiedeking left Porsche this past July and helped speed up the VW takeover.

But on Monday night in Geneva, Porsche took the stage at VW Night as just another brand in the ever-growing VW stable, right there along with Seat and Skoda. Granted, the Porsche 918 received a bit more attention than the Seat IB-E electric car or the Skoda Fabia RS, but nonetheless, it was clear--Porsche is now one of the VW brands.

No mention was made as to how profitable Porsche was, and it received no more special attention than any of the other VW brands.

Porsche's future is now part of VW's future, and as a group, VW brands will launch 70 new vehicles this year. VW boss Martin Winterkorn said that by 2018 VW will be the No. 1 automaker in the world, both "economically and environmentally." Porsche hybrids will certainly be a part of that.

And here's something to remember if the 918 concept strikes your fancy: Porsche has never produced a concept vehicle that it didn't ultimately build.

Ford Beats GM in Sales for First Time Since 1998

Bloomberg

Ford Motor Co., buoyed by redesigned cars and a rebound in truck demand, posted a 43 percent jump in U.S. sales in February to beat General Motors Co. in monthly deliveries for the first time since 1998.

Ford’s tally was 142,285 compared with 141,951 for GM, the automakers said today. The Dearborn, Michigan-based automaker hadn’t topped GM in domestic sales since a strike idled the biggest U.S. automaker almost 12 years ago, and the last time before that was during a 1970 walkout, based on Ford data.

“This is huge because it’s the classic rivalry like Pepsi and Coke, the Red Sox and the Yankees,” said John Wolkonowicz, an analyst at IHS Global Insight in Lexington, Massachusetts. “They’re doing it with the stuff that matters -- quality, products and reputation. It could be a turning point.”

Three hours after announcing February sales, GM created separate arms for North American sales and marketing in its second such shuffle since December. Ford’s results topped analysts’ estimates while GM’s 12 percent gain trailed projections as snowstorms damped showroom traffic.

Toyota Motor Corp. sales fell 8.7 percent to 100,027 as it struggled with global recalls that halted sales of some models. Chrysler Group LLC rose less than 1 percent to 84,449, exceeding estimates and posting its first increase since December 2007. Honda Motor Co. and Nissan Motor Co. reported gains that lagged behind a projection from industry researcher Edmunds.com.

Ford Gains

Ford said sales of its Fusion more than doubled, passing the Focus for the top spot among the automaker’s cars, and Taurus sales almost doubled. Both sedans were redesigned in the past year. Pickup and sport-utility vehicle deliveries rose.

North American production for the second quarter will increase 32 percent from a year earlier to 595,000 vehicles, Ford said. Chief Executive Officer Alan Mulally has slashed costs, developed new models and kept Ford out of bankruptcy last year.

“Ford is certainly riding momentum right now,” said Jeff Schuster of J.D. Power & Associates in Troy, Michigan. “GM is still in a state of flux, trying to settle on an image for the brands that remain and shuffling the management team.”

GM Shuffle

Today’s executive changes at GM include shifting Susan Docherty, vice president for sales, service and marketing, to handle only marketing. Steve Carlisle, most recently executive director of Southeast Asia operations, was named vice president of U.S. sales operations, the company said.

Docherty was given her previous duties on Dec. 4 when CEO Ed Whitacre shook up the leadership ranks, including the naming of engineering chief Mark Reuss as president of North American operations. Carlisle and Docherty will report to Reuss, GM said.

GM’s sales trailed the 20 percent average of 5 analysts’ estimates. The results showed the effect of GM’s plans to sell or shut four U.S. brands -- Saab, Hummer, Saturn and Pontiac -- as part of its government-backed bankruptcy last year. Those four vehicle lines plunged 86 percent to 3,102, GM said.

Deliveries for the four brands being kept, Chevrolet, Cadillac, Buick and GMC, rose 32 percent from a year earlier, GM said. Volumes more than doubled for the Buick LaCrosse sedan and Chevrolet Equinox SUV.

Chrysler, based in Auburn Hills, Michigan, beat analysts’ average projection for a decline of 18 percent, based on 5 estimates.

Asian Automakers

Deliveries for Tokyo-based Honda Motor Co. rose 13 percent to 80,671 vehicles. Nissan Motor Co. sales climbed 29 percent to 70,189, Al Castignetti, vice president of the Yokohama, Japan- based company’s U.S. sales unit, said in an interview.

Industry researcher Edmunds.com projected Honda would rise 24 percent and Nissan would climb 38 percent. Santa Monica, California-based Edmunds.com estimated a 10 percent drop for Toyota. Seoul-based Hyundai Motor Co. probably will show a 25 percent increase, according to Edmunds.com.

The seasonally adjusted annual sales rate for cars and light trucks may have reached 10.3 million, the average of 8 estimates compiled by Bloomberg. That would be a fourth straight gain from a year earlier. February 2009’s pace was 9.1 million, the lowest since 1981.

Manufacturers, dealers and investors use the annualized rate to compare monthly totals by taking into account seasonal buying patterns. February is typically among the lowest sales months of the year, while June is one of the highest. Annual U.S. sales averaged 16.8 million last decade through 2007.

Fleet Sales

Business and government buyers drove growth at GM and Ford.

While Chevrolet had a 32 percent gain, deliveries through dealers were up only 1 percent, said Detroit-based GM, which gets 70 percent of U.S. volume from Chevrolet. Ford said fleet sales rose 74 percent. Those transactions are less profitable than retail sales because of discounts for bulk purchases.

The drop for Toyota City, Japan-based Toyota was the second in a row for the world’s largest automaker, which recalled about 8 million vehicles for flaws tied to unintended acceleration and suspended U.S. sales of 8 models, including Camry and Corolla sedans, starting Jan. 26. Dealers resumed sales once repairs were made.

Snow in the eastern U.S. paralyzed car dealers and other businesses last month in cities such as Washington and Philadelphia, while Dallas had its biggest one-day accumulation in a storm that moved across Texas and the South.

“The entire market could be softer than what people thought,” said Michael Robinet, chief forecaster for CSM Worldwide Inc. in Northville, Michigan. “The weather may have had a deep impact. When you are buried in snow, buying a car is not top of mind.”

February economic data may be disrupted by the storms, making it difficult to gauge the extent of the U.S. recovery. The Conference Board’s consumer confidence index fell to the lowest level in 10 months in February, a sign that Americans may limit spending on concern that the job market remains weak.

Quicken to Bring More Employees Downtown

The Detroit Free Press

Founder wants more space in detroit as mortgage company grows

Quicken Loans would like to move another 500 to 700 employees to downtown Detroit from Livonia within the next year, in addition to the initial group of 1,700 coming to the Compuware building in May or June, Dan Gilbert, Quicken's chairman and founder, said in an interview Monday.

"We're very excited about it. We can't wait to get down there," Gilbert said.

Gilbert also said the online mortgage firm more than doubled its loan volume to $25 billion in 2009, from $12 billion a year earlier.

Quicken announced in November 2007 that it would build a new Detroit headquarters, but switched gears a year later when the nation's banking crisis hit, opting to first lease four floors in Compuware's building and delay construction of a new headquarters building until 2013.

Now Quicken is looking to lease more space and move more people downtown as it gains market share, thanks in part to a wave of bank and mortgage company failures nationwide.

Gilbert, who is majority owner of the Cleveland Cavaliers basketball team, also ruminated on the possibility of a joint arena for hockey and basketball in Detroit.

To survivors like Quicken go the spoils

With home prices still sagging and foreclosures still rampant in many parts of the country, how is it that Gilbert can say, "We had a record year, by far, in every category in 2009 -- revenue, mortgage volume, profitability, everything"?

For one thing, the law of the jungle applies. To the survivors go the spoils, in what has been a brutal period for the housing and mortgage lending markets.

Second, mortgage interest rates have stayed low, prompting a wave of refinancing by homeowners who are not upside-down on their loans. And Quicken, with what Gilbert calls its "geographically agnostic" position as the nation's top online mortgage lender, is active in all 50 states.

In a wide-ranging telephone interview Monday from Ohio, where his Cleveland Cavaliers basketball team was playing the New York Knicks, Gilbert reflected on Quicken's performance and the still-shaky housing sector.

Quicken's mortgage volume reached $25 billion last year, up from $12 billion in 2008 and a previous company record of $19 billion in 2007.

Total employment at Quicken is currently 3,013 people, up from 2,700 in late 2008, but still below the peak of 3,600 when the firm first declared its intent to build a new headquarters and move 4,000 people to Detroit.

Still, the trend is promising enough that Quicken now is scouting for more space than it already has agreed to lease from Compuware for its initial move of 1,700 staffers.

"We could probably put at least 500 to 700 more downtown," Gilbert said, if room in nearby buildings can be located. "We're just deciding what to do in the first year down there. So we're kind of looking around. It probably wouldn't happen in May or June, but maybe the end of the year."

The federal government's efforts to stabilize the troubled housing market have met with limited success. Federal programs intended to help struggling owners stay in their homes have failed, Gilbert said, because they work through mortgage loan servicers ill-equipped to deal with consumers.

"It's like an automobile recall similar to what Toyota's got going," Gilbert said, "where the government would tell the consumer to skip the dealership and take their cars directly to the manufacturing plant to get fixed."

Whatever happens, Quicken appears poised to prosper. If housing gets better, all boats are lifted. If the market stays in turmoil, more mortgage lenders and banks will fail, and Quicken will snap up more market share.

In Restructuring Mode, Ford Motor Cuts 1,900 Jobs

Bloomberg

Ford Motor Co.’s finance unit said it is eliminating 1,000 jobs this year, a 20 percent reduction, after the automaker announced plans last week to cut 900 positions at a Mustang factory amid weak demand.

Ford Motor Credit Co., which provides loans to car buyers and dealers, told employees yesterday about the job losses, a spokeswoman, Margaret Mellott, said today in an interview. Ford Credit plans to get rid of most of the jobs by March 31, trimming U.S. employment to 4,000, Mellott said.

Dropping the 1,900 jobs shows Chief Executive Officer Alan Mulally is still chopping the payroll even after Ford avoided bankruptcy last year and slashed the number of North American workers by 47 percent since 2006. Ford’s share of U.S. auto sales slid to 16.1 percent last year from 25 percent in 1998.

“Ford is going to be in restructuring mode for a long time, even after the business gets better,” said Joe Phillippi, president of AutoTrends Consulting in Short Hills, New Jersey. “Mulally’s charge to the troops is to keep the pressure on relative to the efficiency of human resources.”

Ford, which still has 600 U.S. employees on indefinite layoff, said Feb. 16 it will redeploy most workers losing their jobs when the Mustang plant in Flat Rock, Michigan, goes to one shift in July. Sales of the sports car fell 27 percent in 2009, topping the 15 percent drop for Dearborn, Michigan-based Ford.

No Hiring

The second-largest U.S. automaker said it has no plans to hire workers even as it spends $1.6 billion retooling domestic factories to make more fuel-efficient models like the Focus small car.

Ford rose 13 cents, or 1.1 percent, to $11.73 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 17 percent this year after surging more than fourfold in 2009.

Ford Credit’s job eliminations will come at business centers and collection centers in seven states, Mellott said. While some of the positions will be eliminated with retirements and attrition, most will be involuntary dismissals, she said.

“This is an effort to meet current and projected business conditions,” Mellott said. “Auto industry and Ford sales are down, and we are continuing to transition out of Jaguar, Land Rover, Mazda and Volvo financing business. Our focus is on supporting Ford Motor Co. brands of Ford, Lincoln and Mercury.”

Mulally is selling off the foreign luxury units to focus on Ford’s namesake brand. Dearborn, Michigan-based Ford posted 2009 net income of $2.7 billion to end three years of losses. Ford Credit had net income of $1.3 billion, compared with a $1.5 billion loss in 2008.

Shrinking Ford to reflect its current market share would make the automaker much more profitable when demand recovers, Phillippi said. Ford gained U.S. market share last year for the first time since 1995 on redesigned models such as the Fusion and Taurus sedans.

“If you can get your staffing levels down to a 16 percent share and still manage to deliver good products, you could make a hell of a lot of money when you start to grow,” Phillippi said. “This company is not afraid to skinny down to the point where people are stretched.”

Former Kmart Chief Ordered to Pay Over $10 Million

Business Week

Former Kmart Corp. Chief Executive Officer Charles Conaway must pay more than $10 million in a penalty and loan repayment for misleading shareholders before the retailer filed for bankruptcy in 2002, a judge said.

The U.S. Securities and Exchange Commission sued Conaway in 2005, accusing him of duping investors in the management discussion and analysis, or MD&A, portion of a third-quarter 2001 securities filing and during a Nov. 27, 2001, conference call. Conaway failed to tell investors that Kmart faced a cash shortage and was delaying payments to vendors in the months before it filed for bankruptcy, the SEC said.

A federal jury in June found that Conaway hid information about Kmart’s cash shortage, aiding and abetting the company’s misstatements. U.S. Magistrate Judge Steven Pepe in Ann Arbor, Michigan, upheld the finding last month and today fined Conaway $2.5 million and ordered him to return a $5 million retention loan, plus interest of almost $2.7 million.

“I find that the $5 million retention loan was not like salary earned by past services,” Pepe said in his 70-page opinion. “It was not money to which the defendant would have been entitled irrespective of his fraud.”

Harmed Investors

The SEC also asked Pepe to bar Conaway from serving as an officer in a public company. Pepe denied the request, finding that “the disgorgement and the penalty, the damage to his reputation will be enough to deter any future securities violations.”

Conaway’s action harmed investors, Pepe said.

“Had there been no securities violations by Mr. Conaway and Kmart on November 27, 2001, a substantial number of institutional and some individual investors would have sold their Kmart stock and avoided the financial loss that came to many when Kmart went bankrupt in January 2002,” he said.

Scott Lassar, Conaway’s lawyer, didn’t immediately return a call for comment.

Kmart sought bankruptcy protection on Jan. 22, 2002, subsequently shedding 599 stores and firing about 57,000 workers. Conaway was fired in March 2002.

Delayed Payments

The company exited bankruptcy in May 2003. Kmart Holding Corp. later bought Sears, Roebuck & Co., creating Sears Holdings Corp., based in Hoffman Estates, Illinois.

The SEC said Conaway was responsible for the company’s failure to disclose that delaying vendor payments was a primary source of working capital.

Conaway hid the company’s financial situation from the Kmart board and “was never honest with the vendors,” SEC lawyer Alan Lieberman told the jury in Ann Arbor at the beginning of the civil trial in May.

Kmart began delaying payments because of a cash crunch set off by an “extraordinary” $850 million purchase of inventory in the summer of 2001 by the company’s chief operating officer, “made without the approval or knowledge of other senior managers of the company,” the SEC said in its complaint. Kmart didn’t disclose the “inventory overbuy,” the government said.

In the third-quarter conference call, Conaway blamed slow payments on a new system that had caused invoices to be dropped, the SEC said in its complaint. “These statements were false and misleading,” the government said.

Cash Crunch

Conaway testified at a hearing in September that he didn’t withhold any important financial information.

Kmart did experience a cash crunch in late 2001 and used payment slowdowns to help deal with it, Conaway testified.

“We reversed and corrected it and it worked,” he said.

Conaway testified that Kmart faced a new liquidity crisis in January 2002 as a result of slow sales and a tight credit market. This was compounded by an analyst’s report that month saying the company was heading for a strategic bankruptcy, he said. The report set off “the proverbial run at the bank,” Conaway testified.

Pepe said that Conaway kept “the relevant facts” about the overbuy and subsequent economic crunch from Kmart’s board of directors, which “deprived them from urging Kmart’s executive to find other ways than stretching vendors to deal with the liquidity crunch and to take alternative steps to obtain secured financing when it was still possible.”

Taking action in September, October or November 2001 “may well have enabled Kmart to have weathered the harsher storms that came in December with poor sales and the Enron bankruptcy impact on credit availability,” Pepe wrote.

The case is Securities and Exchange Commission v. Conaway, 05-cv-40263, U.S. District Court, Eastern District of Michigan (Ann Arbor).