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Is It Time To Drop Income Taxes?

by Reuters on January 7, 2012

Huffington Post…

(The author is a Reuters columnist. The opinions expressed are his own.) By David Cay Johnston Jan 6 (Reuters) – This is America’s 100th year for individual income tax, a system as out of touch with our era as digital music is with the hand-cranked Victrola music players of 1912. It is also the 26th year of the Reagan-era reform for both personal and corporate tax, a grand design now buried under special-interest favors. With U.S. elections in November, and the George W. Bush tax cuts due to expire at the end of 2012, it’s time for a debate that goes beyond ginning up anger over taxes and the superficial issue of tax rates. It’s time to consider whether to get rid of income taxes, personal and corporate. What are the strengths and weaknesses of our current system? Should we tax individual and corporate income — or something else? We need to think about it. Whatever systems we consider, we should weigh up what it takes to raise the necessary revenue along with such other attributes as minimal compliance cost, leakage and economic distortion. Times change. Tax systems must change with them or else their lubricating effect turns to sand, wearing down the gears of commerce. Just as the Industrial Revolution transformed a nation of farmers and mechanics into a land of factory hands and office workers, so too the digital revolution and globalization are fundamentally remaking society. We need for our tax system to serve our 21st century civilization and its needs, including the costs of aging infrastructure and an aging population, costs that will be borne one way or another. 5 PRINCIPLES Five ancient principles that have survived the test of time and are, therefore, profoundly conservative, should guide us. The first is the moral principle of progressive taxation — that the greater the gain you manage to attain, whether through hard work or luck, the greater your duty to pay back the society that made your riches possible so that it will endure. This concept is 2,500 years old, coming to us along with its civil twin, democracy, from ancient Athens. The second is horizontal equity. Each person, or business, with the same ability to pay should pay the same tax. We must not tolerate a system in which one family or company pays far more than another with the same income, thanks to all the fine print in the tax code. Simplicity, transparency and ease of payment should be the last three of the five guiding principles, as Adam Smith taught more than two centuries ago. So what do we do? Narrowly defining what constitutes income for tax purposes bloats the tax code. To the vast majority who earn a paycheck, defining income is simple. For the very rich and for corporations, it is a game. Too many of our most elegant and rigorous minds design techniques for tax avoidance and tax deferral instead of producing new wealth, imposing a huge cost on society. In ancient agrarian societies the ruler took a share of the crop. In the cash economies created by the Industrial Revolution the state taxed incomes. But is income the right tax base for the 21st century, when computer software makes it possible to wrap economic income in a cloak of tax invisibility? And why, in our digital era, must Americans file 140 million tax returns? Digital technology could eliminate 120 million of those tax forms, saving billions of dollars in both private and government spending. QUESTIONS ARISE In a global economy, is taxing corporate profits smart? Or could we devise rules that both promote investment and job creation while preventing the accumulation of unproductive fortunes — the great risk if corporations are tax-exempt. Look at the same question in reverse — is our tax system encouraging unproductive or even counterproductive activities? What else should we call a system that lets hedge-fund and other financial speculators defer paying taxes for years or decades on their carried interest, while discouraging investment in long-term projects that may not pay off for a decade or more? How else to explain our gross overinvestment in housing? And what about corporate tax accounting costs? Under President Barack Obama, business has been able to immediately write off 50 percent of new investment one year and 100 percent in two other years. We need to examine the long-term benefits and costs of full expensing. The White House says full expensing lowers the average cost of capital for business investment by 75 percent. But what other effects are there? More broadly, we need to debate why corporations must keep two sets of books, one for shareholders and one for the IRS. How much more efficient would taxation, and commerce, be with one set of books? With the individual income tax in its 100th year, it’s time to fundamentally rethink how we tax ourselves. Even if we end up keeping the income tax, personal and corporate, surely we can make the system easier and fairer. (Editing by Howard Goller and Eddie Evans)

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Is It Time To Drop Income Taxes?

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Whistleblowers Earn Record Amount Of Money In 2011

by Reuters on January 7, 2012

Huffington Post…

* Cases relate to False Claims Act * Numbers boosted by Glaxo whistleblower payout * Record numbers expected to attract more whistleblowers By Aruna Viswanatha Jan 6 (Reuters) – Whistleblowers earned more than $532 million in 2011 through lawsuits alleging fraud against the U.S. government, a record for such payouts, according to a law firm study published on Friday. Private parties suing on the behalf of the government collected $140 million more than they did the previous year, even as the Justice Department’s total civil fraud sanctions remained consistent, the law firm Gibson, Dunn & Crutcher said. The DOJ recovered some $3.02 billion last year through cases under the False Claims Act – the third-largest recovery ever, just shy of the $3.09 billion it won through cases in 2010. But for the whistleblowers that helped bring them, 2011 was an even better year. “The bounty provisions are so attractive,” said Andrew Tulumello, who helps lead Gibson Dunn’s Washington office and worked on the report. “When you look at $540 million going to basically the plaintiffs bar, that is going to attract more and more interest.” The Justice Department has used the Civil War-era law, designed to root out unscrupulous contractors, to aggressively go after healthcare providers and pharmaceutical companies for overcharging Medicare and Medicaid. The law provides for whistleblowers to earn up to 30 percent of any recovery and in recent years such tipsters – referred to as relators in False Claims parlance – have helped bring an increasing number of the government’s cases. Eighty-four percent of such cases opened last year were brought by whistleblowers, up from 75 percent the year before. Twenty-five years ago, only 8 percent of the government’s cases were based on lawsuits from relators. The record payouts in 2011 come amid the ramp-up of a new whistleblower bounty program created by the Dodd-Frank financial regulatory overhaul to encourage individuals with information about securities law violations to come forward. That program has yet to provide its first award. The 2011 numbers – based on the government’s fiscal year from October through September – are helped by one of the largest payouts ever, to a former GlaxoSmithKline Plc employee. In October 2010, a GSK quality manager won $96 million for exposing manufacturing defects at a plant in Puerto Rico. The company paid $750 million to settle the charges. Whistleblowers earn a cut based on how far they advance a case before the government takes over. In cases where the Justice Department declines to intervene, they can win an even greater share of any eventual settlement. The vast majority of the 2011 awards – some $490 million – came in cases where the Justice Department joined the case. Another $42 million came from cases the government declined to pursue. (Reporting By Aruna Viswanatha; editing by Andre Grenon)

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Whistleblowers Earn Record Amount Of Money In 2011

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The Most Popular American Companies In China

January 7, 2012

The primary reason, it is often argued, that China is an important market for many large U.S. companies is that its population has doubled since the early 1960s. But the whole picture is actually more complex than that. China’s real appeal to American corporations is that the huge population growth has been coupled with a sharp expansion of the middle class. As a result, the Chinese market probably will become more important to consumer goods and technology companies in the next few decades than the U.S. is today. Read the whole story: 24/7 Wall Street

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Mortgage Giant Changes Policy To Assist Unemployed Homeowners

January 6, 2012

In an effort to assist unemployed homeowners, Freddie Mac has doubled the length of time that an unemployed borrower’s mortgage payments can be reduced or suspended, according to a statement released Friday afternoon by the company. Freddie Mac has traditionally allowed its servicers — the mortgage companies hired to handle the day-to-day management of the loans — to offer reduced or suspended payments to help unemployed borrowers weather financial hardships. But there used to be more red tape. Previously, anytime a servicer wanted to “forbear” payments, that is suspend or reduce them, beyond three months, the servicer had to ask Freddie Mac for permission. Now the servicer has the authority to offer such an arrangement without Freddie Mac’s approval for as long a period as six months; plus the extension could be up to 12 months (instead of the prior maximum of six) with the agency’s approval. “These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies,” said Tracy Mooney, a senior vice president at Freddie Mac. Nearly 10 percent of the company’s delinquent loans are in some way related to borrower unemployment issues, according to the company. Fannie Mae, the other government-owned mortgage giant, said that it intends to implement a similar program, according to Andrew Wilson, a company spokesman. Freddie’s announcement comes just as America’s unemployment numbers are starting to improve. Last month, the U.S. economy added 200,000 new jobs, according to the Bureau of Labor Statistics. Additionally, the unemployment rate dropped to 8.5 percent. “This is a positive development for the large number of people who are unemployed and struggling in the foreclosure process,” said Kevin Stein, associate director of the California Reinvestment Coalition, a consumer advocacy organization. “At the same time, if Freddie really wants to make a difference in the foreclosure crisis, they should offer loan modifications with principal reductions,” Stein said. “Or, they should offer yearlong leases for tenants living in foreclosed properties, which is something Fannie Mae happens to be doing and Freddie is not and which would make a big difference in this market.”

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More Defendants Would Admit Guilt Under New SEC Policy

January 6, 2012

In a change of policy that comes after more than two years of public and embarrassing scoldings by a federal judge, the Securities and Exchange Commission will now force some defendants to do something they’ve never had to do in order to settle their case: confess. Companies and individuals that settle a civil case with the SEC that also have admitted to or been convicted of criminal violations in a related matter will no longer be allowed to say that they “neither admit nor deny” the agency’s charges, according to the agency. The policy would end a practice that allowed such celebrated villains as Bernard Madoff — who was sentenced to 150 years in prison for masterminding the biggest financial con job in history — to settle charges with the SEC without admitting wrongdoing. However, it wouldn’t affect most SEC settlements, which come independent of any criminal charges. Prior to the change, the SEC, which has the power to file civil, but not criminal charges, included the boilerplate disclaimer in every settlement deal reviewed by the Center for Public Integrity in an analysis last year. “This is a logical updating of the commission’s enforcement policies” said Thomas Gorman, a Washington partner at the law firm Dorsey & Whitney, who writes the SEC Actions blog . “But it doesn’t signal a fundamental shift in policy that will affect the typical civil enforcement action.” That means that high-profile civil defendants will still be able to settle charges without admitting to any wrongdoing. Some recent examples include: Michael Dell, founder of the giant computer manufacturer, who agreed to pay $4 million to settle accounting fraud charges; Steven Rattner, the Obama administration’s one-time auto czar, who agreed to pay $6.2 million to settle pay-for-play charges involving the New York state pension fund; and Paul George Chironis, a broker-dealer at a now-defunct firm, who paid $350,000 to settle charges that he defrauded a group of elderly Sisters of Charity nuns in the Bronx. It also probably won’t do anything to lower the temperature in a public spat between New York Federal District Judge Jed Rakoff and the SEC over whether agency settlements are fair to the public. In a 2010 ruling, the judge “reluctantly” approved a $150 million agency settlement with Bank of America over its Merrill Lynch acquisition, after having rejected an earlier, smaller deal. He said that allowing defendants to walk away without admitting guilt is a “palpable” disservice to the public interest. “Here an agency of the United States is saying, in effect, ‘Although we claim that these defendants have done terrible things, they refuse to admit it and we do not propose to prove it, but will simply resort to gagging their right to deny it,’” he wrote. More recently, Rakoff rejected a proposed $285 million settlement with Citigroup Inc. over charges that it sold risky mortgage-backed securities without telling investors that it was also betting against the debt. Once again, Rakoff said the “neither admit nor deny” language left him no way to determine whether the settlement was fair. The SEC is now appealing Rakoff’s decision in the Citigroup case. The SEC’s traditional explanation for including the boilerplate language had been that defendants will not agree to settle a case if they have to admit wrongdoing because doing so would expose them to future lawsuits from whoever might claim to have been harmed by their actions. But this explanation didn’t make much sense in instances where that same defendant was already admitting to wrongdoing in a criminal case. For example, the SEC and the Justice Department announced on the same day last year that Wachovia had agreed to pay $148 million to settle charges that it rigged bids in the municipal securities market. The bank said it “admits, acknowledges and accepts responsibility for” manipulating the bidding process in the Justice Department deal. But it didn’t admit any wrongdoing in the SEC settlement. For its part, the SEC seems to be downplaying the significance of the change in policy and also serving notice that the change doesn’t mean it is kowtowing to Rakoff. “This policy change does not affect our traditional ‘neither admit nor deny’ approach in settlements that do not involve criminal convictions or admissions of criminal law violations,” the agency said in a press release. “In particular, it is separate from and unrelated to the recent ruling in the Citigroup case, which does not involve a criminal conviction or admissions of criminal law violations.”

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BCS Title Game Produces Record Ticket Prices

January 6, 2012

Monday’s Bowl Championship Series title game between LSU and Alabama is already a blockbuster — in ticket sales. StubHub, the ticket-resale site, reported late Friday that the median price for a ticket to the college football championship was $1,565, compared to $925 for last year’s Auburn-Oregon matchup. This year’s game is trending toward generating the highest ticket prices in college football history, StubHub spokeswoman Joellen Ferrer said. So much for one official’s opinion that the economy is hurting college bowl-game ticket sales. “Fans don’t have the money to travel to see a game,” Tom Starr, executive director of the TicketCity Bowl, told CNN . The exorbitant prices are due to a combination of factors, Ferrer said. The game is in New Orleans, a festive tourist destination near Baton Rouge-based LSU and even Tuscaloosa-based Alabama, just 266 miles away. Plus, the two teams generated extra publicity after a much-hyped 9 to 6 LSU victory over Southeastern Conference rival Alabama during the regular season. The 2008 BCS game between Ohio State and LSU — one of the most expensive title games — had a median single-ticket cost of $1,150 on the secondary market while generating a high of $4,300 and a low of $275. The absolute cheapest ticket for this year was sold for $500, Ferrer said. The most expensive ticket went for a whopping $9,600 on Jan. 5. That makes it easy to predict the winner of the big game: scalpers.

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Anna Cuevas: Is Your HAMP Loan Modification Process Leaving You Feeling Like You’re in a Scene from Twilight

January 6, 2012

Has the long, complicated HAMP loan modification process left you in the dark, confused or, even worse, without a clue about what’s going on and what’s expected of you? If so, you’re not alone. The truth is, the HAMP loan modification process is complicated, time consuming, and yes, frustrating for homeowners, who don’t understand the process or feel overwhelmed with the paperwork and continual demands made by their lenders. The good news, though, is that while homeowners might feel that banks are sucking the blood and life out of them, they aren’t defenseless in the process. Homeowners are not entirely subject to every whim and decision their lender makes. It is possible to win approval in the HAMP Loan Modification Process, and to do so with your sanity intact. Knowledge is the first weapon in your victory–perseverance is the second. Use these steps to survive and win the HAMP loan modification process: 1. Learn everything you can about HAMP and its requirements for approval. Make sure you meet those requirements and have the supporting documentation and verification to satisfy the bank’s requests. 2. Contact your lender early and often, verifying and confirming receipt of documents and signatures, as well as inquiring about the next step and what is expected of you. Document the date, time, and purpose of each communication, who you spoke to, and the details of each conversation. 3. Get organized. Gather and organize your supporting documentation so that it’s readily available when requested. Include your income tax returns, proof of income, insurance verification, a current list of your debts with verification, bank statements, etc. Make duplicate copies of each. Reply to each request for documentation or information on a timely basis. Document the date you submitted each document to the bank and the person you submitted it to. Keep copies of FAX transmittal sheets and certified or registered mail receipts. 4. Crunch your own numbers. Once you know the requirements for HAMP loan modification approval, crunch your own numbers, using the most recent year’s income and debts. It’s not uncommon for lenders to use the wrong figures in calculating eligibility–performing your own calculations and being ready to submit them to the bank in support of your position can make the difference between saving your home or losing it. Be persistent! If you know that your lender is using incorrect figures, do not back down! Ask to speak to a supervisor or another loan representative until you’re finally able to make your case. 5. Ask questions. If you feel like you’re in the dark or don’t understand what is being requested or why, ask for clarification or explanation. Follow a journalist’s creed: Who, what, where, when, why and how. 6. If you’ve been denied for a HAMP loan modification, don’t give up! If you’ve been denied, ask why and ask to receive the explanation in writing. Then get to work to eliminate or correct the reason(s) for denial. That could mean providing updated information or documentation, increasing your income, or reducing your debt. Once you’ve done that, reapply as soon as possible. Repeat this process until you’ve satisfied and met all criteria and become victorious in the fight to save your home. Remember, you are not defenseless when you are armed with information, preparation, and persistence. You have the power. Use it wisely. David vs. Goliath Anna Cuevas, known as “America’s Loan Modification Guru,” has guided thousands of Americans in keeping their homes from foreclosure. A popular blogger ( askaloanmodguru.com ), Cuevas has been called a “superhero of the loan modification industry” and has been nominated for CNN’s Heroes. She is the #1 bestselling author of SAVE YOUR HOME Without Losing Your Mind or Money .

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Shannon Schuyler: Making Sense of Our Economic Uncertainty

January 6, 2012

2011 is behind us and we are entering 2012 with certainty and optimism. Yet, with bills to pay from a happy holiday, compounded with financial markets fluctuating daily, today’s only certainty is that our financial future remains uncertain. That’s why financial literacy is more important than ever. A Depressing Back Story Right now, though, our general understanding of finance scores a D — as in dismal. The typical college senior, upon graduation, has already racked up more than $4,100 in credit card debt, reports a Sallie Mae study . A vast majority of students — 84 percent of undergraduates in the same study — recognize they need to learn more about managing their finances. Sixty-four percent of those respondents say they would have liked to participate in some type of formalized financial literacy program. Parents who sent their kids off to college this year probably have asked or are asking themselves such questions as: Can I count on my son or daughter to be financially responsible while away from home? Does my child know how to balance a banking account or save money? Did I teach my child enough? Unfortunately, statistics suggest the answer is no. This lack of financial smarts continues into adulthood. A June 2011 working paper by the National Bureau of Economic Research found that half of adults surveyed said they have trouble keeping up with monthly expenses and bills. And when given a basic set of questions on economics and finance in everyday life, fewer than 10 percent answered all questions correctly. The New Reality While society believes fiscal responsibility starts with individuals, we haven’t given them the necessary tools to make smarter financial decisions. We want our children to understand the dismal economic condition of the country and how that plays out in their household, but at the same time we are still giving them holiday gifts and allowances with little oversight. We are continuing to contribute to an already flawed perception of reality. The old adage holds true even in these times: we cannot teach our children to fish without teaching them to reel in the line. Some states are positioning themselves to address the problem head on by mandating financial literacy curriculum by the time of high school graduation. Thirteen states now require this type of training — far less than the need to embrace this national crisis. Moreover, a study by the University of Wisconsin-Madison revealed that more than half of teachers consider themselves unqualified to use their state’s financial-education standards, and few (less than 20%) feel “very competent” lecturing a class on such topics such as risk management and debt. Piecemeal legislation and teachers who have not been given the tools to teach create an imperative to solve this detrimental education gap. Corporations, nonprofits and private institutions can do something, however. They must join together and, collaboratively, bolster and supplement classroom offerings. Through our expertise and employee base, businesses can help provide access to tools and resources. We can train teachers to master the financial literacy curriculum. We can help students become financially literate. In essence, we can help close this chasm in our education system through bringing together financial literacy knowledge with education expertise.

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Groupon Shares PLUMMET

November 28, 2011

‪ ‬ By Tricia Duryee, Groupon Stock Now Half Off Many retailers are enjoying a Thanksgiving shopping spree lift from investors, but not Groupon. Its shares closed today down nine percent , settling at $15.24 after bouncing off a new low of $14.85. That’s less than half the $31.14 that some investors paid at the stock’s high point, just after it went public in early November. More recently, it has been trading in the low to mid-$20s. The drop is especially painful because it puts the company’s market valuation below $10 billion. The high-flying media darling was once the talk of the town, quickly snubbing Google’s $6 billion buyout offer and then rumored to be seeking a public valuation of $25 billion. But the Chicago-based company faced several controversies in its lead-up to the offering. It lost high-ranking executives and more than once was forced by regulators to change the way it reported its finances. Still, on IPO day, all the fuss seemed to be over and done. Groupon priced its shares at $20, several dollars above the expected price range of $16 to $18, and ended up raising $700 million at a valuation of close to $13 billion. That was just shy of its initial goal of raising $750 million. Today’s stock dive during one of the headiest times of the year for shopping may show that the enthusiasm was misguided, although some of its social media peers are also trading down . However, since its public debut, Groupon has failed to make a big splash of any kind. A major new feature, which is key to delivering relevant offers to the right consumers, was lamely supported by an amateurish YouTube video featuring two product guys. And today, the company didn’t really feature anything special for Cyber Monday except for offering discounts on a few recommended gifts . Meanwhile, its next closest competitor, LivingSocial, pulled out all the stops by offering gift cards to major online retailers, such as one from Blue Nile that gave shoppers the opportunity to spend $200 for $100. If anyone felt today’s drop it was Groupon CEO Andrew Mason, who did not return emails seeking comment. Mason, who was at least temporarily worth around $1.3 billion back on Nov. 4 when the company went public, is now worth somewhere closer to $715 million. Via Groupon Stock Now Half Off , on AllThingsD . More from ATD: iPhone 4S Surges in Battle of Britain Google Looks Forward to an Early Christmas Present From Washington: An Okay for Admeld Will Marc or Won’t He? Andreessen Mulling Yahoo Leadership Role in Bid

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Fiat 500 By Gucci: Jennifer Lopez Stars In Automaker’s New Campaign

November 19, 2011

Jennifer Lopez is taking yet another spin in a Fiat 500, but this time she’s doing it with even more style. The new J.Lo commercial for the Italian automaker brings the movie and pop star downtown from her native Bronx to the ritzier streets of Manhattan to show off a new collaboration between Fiat and the storied Gucci fashion label. The Turin-based auto manufacturer, which is the parent company to Chrysler, says the Fiat 500 by Gucci represents an “important partnership between two brands that have always expressed Italian genius and creativity across the world.” The small car boasts “true Italian style” and is “brimming with fashion references,” the company says, including chrome accents, a Gucci-logoed Frau leather interior and a simulated velvet dashboard. Gucci and Fiat are also pushing the car’s connection to the 150th anniversary of Italy’s unification, though we don’t think we’d see Giuseppe Garibaldi riding shotgun around Manhattan with J.Lo. The car, which will be available in U.S. dealerships early next year , starts at $23,500. That’s less than a Gucci crocodile tote ($29,900). What do you think? Does a fashion partnership make sense for Fiat? Let us know in the comments. CORRECTION: An earlier version of this article stated Fiat is based in Florence. It is based in Turin.

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Matt Cohen: Design by Committee Is Dangerous: How Too Much Input Can Kill Any Good Idea

October 4, 2011

If you ever work as part of a committee, team, or task force, you may want to circulate the following case study: According to the masthead, the artists and writers for MAD Magazine are collectively known as “The Usual Gang of Idiots.” In the interest of full disclosure, I am obliged to tell you that I am one of MAD’s writers. As a member of that gang, I can personally verify that all of the members are indeed complete idiots. But even idiots can be smart sometimes. For example, back in 1959, MAD Magazine ran a classic article that specifically dealt with market research. The article, written by Sy Reit and featuring art by Bob Clarke, was called “America’s Dream Car.” The premise was that people were dissatisfied with the current state of car design and therefore a little market research would produce some innovative new vehicles that everybody would love. According to the introduction to the article, … MAD took a nationwide poll, asking people what changes they wanted–and here are the results of that poll. Using a composite model of typical American cars, we’ve indicated below what the public wants included in America’s Dream Car. Here’s their picture of the average American car (remember, this was published in 1959.) The boxes with arrows contain 22 suggestions that they gathered through their market research. Obviously, they’re all made up by writer Sy Reit, but many of the requested changes seem like things that could have plausibly been said by somebody completing a survey, including: Increase head and leg room. Shorten over-all hood length to improve driver’s visibility. Simplify dashboard instruments. Eliminate excessive and gaudy chrome. Re-design body shell to raise doors for better clearance at curbs. Re-design and reduce size of tail fins. That sounds like sensible feedback, right? Any sane marketing department would tell the design division to make those changes happen ASAP. The article goes on to say that after conducting their market research, …We took all of those ideas, sat down at the drafting board, and went to work. And on the following page you’ll find the results of our labors. Yes! Here at last — based on your suggestions — is America’s Dream Car! Here’s what they came up with: That one image is the perfect visual representation of the dangers of design by committee. There’s no denying that this “new” design takes all of the feedback into account: There’s more headroom, the hood is shorter, the dashboard isn’t cluttered with too many instruments, the tacky chrome and dated tail fins are gone, and the doors won’t bang into the curb. But nobody in their right mind would say that the Model T is an improvement on, say, the 57 Cadillac. You’d have to be a real idiot to think that. And yet, you’ve probably seen otherwise intelligent coworkers fall into the same trap that MAD warned us about over 50 years ago. Sometimes the trap springs when market research is misinterpreted, misapplied, or simply accepted as gospel without any further investigation. At other times, the trap lurks in a committee meeting full of people willing to water down a design or a strategy in the name of compromise. Whatever the case, the next time you see design by committee happening at your office, ask everybody if they want to build the visionary car of the future or the consensus-driven car of the past.

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House Dems Accuse Issa Of Shilling For ‘Corporate Interests’ With NLRB Subpoena

August 12, 2011

This item has been updated with comment from Issa’s office. House Democrats accused Rep. Darrell Issa (R-Calif.) on Friday of overstepping his bounds in subpoenaing documents from the quasi-independent National Labor Relations Board (NLRB), as well as going to bat for “corporate interests” in his role as House oversight chairman. On Sunday, Issa’s office issued a subpoena to the labor board seeking documents relating to a highly publicized complaint issued against the Boeing Company by the agency’s acting general counsel earlier this year. The complaint has put the future of a Boeing plant in South Carolina into limbo, and Republicans have repeatedly seized on it to attack the labor board and President Obama as anti-business job killers. In a letter to Issa’s office, Democratic Reps. Elijah E. Cummings (Md.), George Miller (Cal.), and John Conyers, Jr. (Mich.) urged Issa to drop the subpoena, accusing him of merely carrying out the wishes of Boeing in his fight with the labor board. “You may personally disagree with the laws Congress enacted to protect workers against discrimination,” the Democrats wrote. “You may also disagree with the judge’s decision in this case upholding those laws. But it is not a legitimate use of the Committee’s authority to circumvent those laws on behalf of corporate interests.” In response to the Democrats’ letter, Issa spokesman Jeffrey Solsby said in an email, “The committee has issued a lawful subpoena and it expects NLRB to comply.” In its original complaint, the board’s general counsel accused Boeing of breaking labor law when it established a production line for its 787 Dreamliner in South Carolina. The complaint alleged that the move was retaliation against unionized workers in Washington state for having gone on strike in the past. If the parties cannot settle and the board sees merit in the complaint, it’s possible the Boeing production line will be moved to Washington. Labor advocates and many Democrats have praised the agency for issuing the complaint, while Republicans — particularly in the South — have called it an attack on right-to-work states, where unions have a weaker presence. Although the complaint delves into the minutiae of labor law, it has blown up into a much broader argument about workers’ rights and the federal government’s role in protecting and interpreting them. The labor board has clearly pivoted away from a more laissez-faire attitude under the Bush administration, and Republicans and business interests like the U.S. Chamber of Commerce have pounced on its actions and rulings in recent months, accusing it of catering to unions and workers at the expense of corporations like Boeing. Issa issued the subpoena after the NLRB declined to turn over internal documents relating to its Boeing deliberations, which Issa requested back in May. Democrats have called the subpoena an “overreach” that meddles in a quasi-judicial, independent process. “We are aware of no precedent for your actions, and we are particularly concerned that they are taking us down a dangerous path of interfering directly with the decisions of prosecutors and even of judges who are charged with carrying out the laws Congress enacted,” Democrats wrote in Friday’s letter.

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WATCH: The Wood-Powered Car That Runs On Any Organic Material

July 28, 2011

We’re all aware that, if we don’t shift to more renewable sources of energy, we’ll eventually deplete the reserves of fossil fuels that power our vehicles today. If only there was a car that could run on any organic material…and took its name from an adorable semiaquatic North American mammal.

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The UAW’s New Target

July 3, 2011

CHATTANOOGA, Tenn. — After decades of getting the cold shoulder from automakers in the South, the United Auto Workers union is courting the region’s newcomer, Volkswagen. UAW southern region director Gary Casteel told The Associated Press that the Wolfsburg, Germany-based automaker has traditionally had an organized work force globally and that makes executives and employees at the new Chattanooga assembly plant “more willing to talk to unions about representation.” Volkswagen has started sending 2012 Passats to dealers for test drives and displays until the cars built by some 1,900 employees at the $1 billion plant go on sale in late September. Casteel said the UAW has had some VW workers in Chattanooga reach out to them and there have been discussions with VW executives. “Any decision on representation belongs to our employees alone,” Volkswagen said in a statement. Casteel said no official organizing effort has started. “We have dialogue with them,” Casteel said. He said VW, unlike Asian and some other European automakers, welcomes applicants who have worked in union jobs. “One of Volkswagen’s core values is the basic right of employees to have a voice in the company,” Chattanooga VW spokesman Guenther Scherelis said in the automaker’s statement Friday. “We value the diversity of experience of our employees and welcome applicants from all backgrounds. We do not consider or track past union affiliation at all in our selection process.” Volkswagen previously operated a New Stanton, Pa., assembly plant with union workers that closed in 1988 following disappointing sales. Scherelis declined to speculate about any possible future relationship with the UAW or any other third party but said in the statement that Volkswagen is “open for communication with groups from different backgrounds.” Casteel said the UAW has never had success trying to organize an auto assembly plant in the South. It has union locals at auto parts plants and in number of other industries in the region. But it has been repeatedly voted down by employees at Nissan, which in 1973 started production as the first Japanese automaker in the South. The UAW several months ago made an unsuccessful attempt to initiate an organizing effort at the Hyundai assembly plant in Montgomery, Ala., but found no enthusiasm in individual contacts with workers at their homes. Hyundai Montgomery spokesman Robert Burns acknowledged the union’s attempted home visits but declined to elaborate. “The problem is there is so much intimidation and fear out there,” Casteel said. “Who is willing to face the intimidation? That is the key to it.” He said workers at some auto plants are now getting paid as little as $12 an hour. Mike Goss, a Toyota spokesman in Erlanger, Ky., said Toyota has been on the UAW’s “radar screen for 25 years. We know we are on their radar screen. We are not seeing any unusual activity and as always it is up to our team members whether or not they need representation.” In a 2010 U.S. Department of Labor filing, the UAW said it had 376,612 members. That was up 6 percent from 2009 and the first time since 2004 that the union added members. “The perfect scenario is to have a company agree to a fair election,” Casteel said. “Let the workers decide on an agreement conducive to the company, where the workers have representation and the company continues to function. It doesn’t have to be a fight. It can be the workers engaged in the success of the company. That is the relationship we are working for.” He said the UAW later this summer plans to start a global organizing effort aimed at one automaker, likely one with a plant in the South. He declined to say which automaker might be the target but predicted it will not be Volkswagen. “We look at them as a model of what car companies should be,” Casteel said. Mike Randle, editor and publisher of Southern Business and Development, a publication based in Birmingham, Ala., said auto workers no longer need union representation. He said auto assembly plants typically start workers at $15 an hour. “What’s the point? Organizing is a `50s, `60s and `70s model,” Randle said. “It’s outdated. They (auto workers) are already being paid higher than anybody else. “We’ve got folks who do not have a college degree and making $50,000 to $75,000 a year working in an auto plant,” he said. “What do you need a union for?”

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Subprime Auto Loans Growing In Popularity

May 31, 2011

NEW YORK (David Henry) – Ally Financial Inc, the United States’ largest maker of car loans, hopes that people have forgotten the time when “subprime” became a synonym for “disaster.” Ally, once known as GMAC Financial Services, is getting ready to go public this year, and is making the case that subprime loans for used car buyers are not about to produce the same results that they did in the housing market a few years ago — a near-collapse of the financial system. Auto loans performed relatively well during the downturn, and demand for cars is up, so auto lending is one of the few types of consumer debt that is growing. Ally wants to show investors that this makes it different from many other banks, which are struggling with weak loan demand and their own soured mortgages. The company is making more loans to subprime borrowers, and financing more purchases of used cars, both steps with higher risk. It has said it wants to raise the percentage of auto loans on used cars that it makes to 50 percent from its current 20 percent. Subprime car lending is “a very attractive business today,” Ally President William Muir told analysts on May 3. Profit margins on the loans more than cover the cost of expected losses from borrowers who fail to repay, he said. Plus, providing loans on used cars endears the company to dealers. That may sound like a great plan now, but similar arguments about subprime mortgages were common in 2003, analysts said. And, Ally and its competitors may follow the pattern of past credit cycles, where lenders make increasingly risky loans at lower interest rates until waves of defaults and losses swamp them. Loans that seem safe can sour quickly. Some banks, including JPMorgan, are already tapping the brakes on auto loans because profit margins have become too slim given the risk. Ally needs to stretch. Its funding costs are several percentage points higher than most of its banking rivals, which puts it at a disadvantage. Ally also uses a lot of money from the fickle credit markets. And General Motors is making more of its own loans, which could make Ally’s future revenue less dependable than it is now. Ally is the kind of company that “will likely need to call for the government’s financial ambulance at some point in the future,” said James Ellman, a hedge fund portfolio manager at Seacliff Capital in San Francisco. “I don’t know if it is sooner, or later, but it will happen.” In a written comment for this story, company spokesman James Olecki said, “Ally Financial’s strategy is to extend credit using sound underwriting criteria and responsible financing practices.” “We accept retail auto contracts through the full credit spectrum — including nonprime — as a normal part of our business,” he said. “We place greater emphasis on the higher end of the nonprime spectrum and we only approve credit for qualified customers who demonstrate the ability to pay.” TOUGH COMPETITION The government’s ambulance came for Ally three times during the financial crisis as Ally’s book of subprime mortgages collapsed. Taxpayers injected more than $17 billion into the company, which had assets of $287 billion in 2006 before loan values collapsed. Those bailouts left the government holding a 74 percent stake in Ally, which the Treasury plans to sell, starting with the company’s initial public offering. The deal could seek about $5 billion from investors in what may be the biggest IPO by a U.S. lender in more than a decade, according to Renaissance Capital, an investment advisory firm. Ally filed its initial prospectus with regulators in March, and stock sales often come within three months of such a filing. Public companies face much more pressure to boost profits, which is where things could get tough for Ally. “If Ally wants to achieve the kind of growth shareholders will be looking for, it has to look beyond the business of prime loans,” said Gimme Credit analyst Kathleen Shanley. “This segment of the market is extremely competitive; hence the company’s increased focus on used cars and nonprime buyers.” To many analysts, those steps make sense. Used car rates can be several percentage points higher than new car rates. Subprime lending adds more. Loans on used cars to borrowers with subprime credit scores paid lenders more than 9 percent, compared with 5 percent or less for used car buyers with solid credit, according to data from credit bureau Experian. “The risk-adjusted returns in the used car market look very favorable,” said Credit Sights analyst Adam Steer. Used car buyers taking out loans tend to be less credit-worthy than new car buyers. Borrowers buying used cars in the first quarter had average credit scores of 663, compared with scores 766 for new car buyers, according to Experian. That may seem worrisome, but subprime auto lending is not as risky as subprime mortgage lending, said Steer. Car loan payments are smaller and more manageable for borrowers than mortgage payments, he said. Plus, the money is scheduled to be repaid faster, and the loan collateral, the cars, is more easily seized and resold than are houses. The average used car loan in the first quarter was made for $16,636 and required monthly payments of $343 for 58 months, according to Experian. “A lot of consumers chose to default on their mortgage, but remain current on their car loan,” said Kirk Ludtke, an analyst at CRT Capital LLC in Stamford, Connecticut. Default rates for auto loans were relatively low from May 2007 through October 2010, according to David Blitzer, managing director at Standard & Poor’s. The peak rate for auto loan defaults was 2.75 percent in February 2009, which was less than half of the peak rate experienced by first mortgages and less than a third of the rate seen in bank-issued credit cards. The lower default rates make car loans attractive for other lenders, not just Ally. Banks including TD Bank Group, which bought Chrysler Financial in December, and Spanish banking giant Santander, which bought auto finance units from Citigroup and HSBC, are piling into the market and squeezing profit margins as they offer borrowers more choices. Copyright 2011 Thomson Reuters. Click for Restrictions .

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Randal O’Toole: Transportation: From the Top Down or Bottom Up?

May 25, 2011

Should transportation be funded and planned from the top down or bottom up? Top-down advocates, such as the Brookings Institution’s Robert Puentes (writing in the May 23 , 2011 Wall Street Journal ) argue that only central planners can have a “clear-cut vision for transportation” that will allow them to target spending “to make sure all those billions of dollars help achieve our economic and environmental goals.” Advocates of bottom-up funding, such as the Cato Institute , Reason Foundation and Heritage Foundation , respond that public and private transportation providers better serve our needs when they are responsive to the fees people pay for various forms of transportation. In fact, most of the problems with transportation today, from an antiquated air-traffic control system to deteriorating bridges to empty transit buses, are due to top-down planning. Fifty years ago, America’s transportation system was almost entirely funded from the bottom up. Airlines, railroads and most transit systems were private and funded out of fares and fees. Airports and highways were public but funded out of user fees such as ticket fees and gas taxes; highway managers knew bridges to nowhere would not generate any fees, so they had no incentive to waste money on unnecessary projects. Transportation deregulation in the late 1970s and early 1980s further improved this system by making airlines, freight railroads and, most recently, intercity buses more innovative and responsive to user needs. The bottom-up paradigm began to break down in 1964, when Congress started funding urban transit. In 1973, Congress allowed cities to use federal gas taxes for transit projects for the first time, and in 1982 Congress dedicated a share of those gas taxes — initially 11.1 percent, now 15.5 percent — to transit. By the 1990s, the whole idea of a user-fee-driven system was forgotten as Congress used transportation earmarks, which didn’t exist before 1982, to divert billions of dollars of gas taxes to politically favored projects — which often had nothing to do with transportation — and dedicated increasing shares of the remainder to non-highway programs. The results of this increasingly top-down system have been huge increases in congestion and massive waste as cities and states today focus scarce transportation funds on urban monuments rather than improvements aimed at increasing mobility. According to the Texas Transportation Institute , congestion today costs the average commuter five times as much as it did in 1982, the year Congress first dedicated gas taxes to transit. Motivated by a “we-know-better-than-you” mentality, growing numbers of cities are just letting congestion get worse in the hope that a few people will stop driving their cars. Rather than relieving congestion, the mantra is giving people “transportation choices” in the form of expensive rail transit. Central planners’ fascination with trains is a wonder to behold. A group called Reconnecting America laments that only 14 million American jobs — about 10 percent — are located within a quarter mile of transit, by which they mean rail transit. The group advocates spending a quarter of a trillion dollars to increase this to 17.5 million jobs, or 12.5 percent. Simply putting transit close to jobs, however, doesn’t mean people will ride it. The Brookings Institution recently ranked San Jose as the second-most transit-accessible urban area in America, while Chicago was ranked 46th. Yet the Census Bureau says only 3.4 percent of San Jose commuters use transit, compared with 13.2 percent in Chicago. Since 1970, taxpayers have spent some $500 billion subsidizing transit, including building rail transit lines in more than twenty different urban areas. Yet the number of transit trips taken by the average urban resident has remained virtually unchanged even as per capita urban driving has more than doubled. No matter how well intentioned, top-down transportation planning quickly turns into a combination of social engineering and pork barrel. It is time to return to a bottom-up funding system that rewards transport agencies and companies for reducing costs and increasing mobility. One way would be to have states take over federal gas taxes as proposed by New Jersey Representative Scott Garrett. To the extent that the federal government distributes any transportation funds to states at all, it should use formulas, not grants, because formulas are much harder to politically manipulate. Ideally, the formulas should give heavy weight to the user fees collected by each state to reinforce, rather than distract from, the bottom-up process. Top-down planners waste tens of billions of dollars a year on barely used transportation projects that do little to relieve congestion, save energy or reduce auto emissions. A bottom-up, user-fee-funded transportation system will save taxpayers money and increase mobility, which should be the real goals of any transportation policy. Randal O’Toole ( rot@cato.org ) is a senior fellow with the Cato Institute and author of Gridlock : Why We’re Stuck in Traffic and What to Do About It.

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Toyota Announces Social Network For Drivers

May 23, 2011

TOKYO — Toyota is setting up a social networking service with the help of a U.S. Internet company and Microsoft so drivers can interact with their cars in ways similar to Twitter and Facebook. Japanese automaker Toyota Motor Corp. and Salesforce.com, based in San Francisco, announced their alliance Monday to launch “Toyota Friend,” a private social network for Toyota owners that works similar to tweets on Twitter. In a demonstration at a Tokyo showroom, an owner of a plug-in Prius hybrid found out through a cell phone message from his Prius called “Pre-boy” that he should remember to recharge his car overnight. When the owner plugged in his car to recharge it, the car replied, “The charge will be completed by 2:15 a.m. Is that OK? See you tomorrow.” The exchanges can be kept private, or be shared with other “Toyota Friend” users, as well as made public on Facebook, Twitter and other services, the company said. The companies did not give details of how the technology, such as the content of the talking car’s dialogues, will be managed. But officials said the answers will be automated through sensors in the car. If your car is up for an inspection, for example, the owner will be notified through “Toyota Friend,” which will in turn automatically link to a dealer to set up an appointment. Toyota is investing 442 million yen ($5.5 million), Microsoft Corp. is investing 335 million yen ($4.1 million) and Salesforce.com 223 million yen ($2.8 million) in the project. Many cars are already equipped with navigation and other network-linking capabilities, and can function as a mobile device just like an iPhone or a Blackberry. Toyota’s service, built on open-source cloud platforms that are the specialty of Salesforce.com, as well as on Microsoft’s platform, will start in Japan in 2012, and will be offered later worldwide, initially with electric vehicles and plug-in hybrids, according to Toyota. Such next-generation cars need to be recharged and so drivers may need real-time information, such as the battery level of their cars and locations of charging stations, more than regular gas-engine cars. Toyota President Akio Toyoda, a racing fan, said he always “talks” with his car when he is zipping around on the circuit. With the popularity of social networking, cars and their makers should become part of that online interaction, he said. “I hope cars can become friends with their users, and customers will see Toyota as a friend,” he said. Salesforce.com chief executive Marc Benioff said social networks can add value to products and companies. It can also help Toyota gain massive information not only about their buyers but about how the car is working or not working, he said. “I want a relationship with my car in the same way we have a relationship with our friends on social networks,” he said. Toyoda, who has always been interested in telematics, or the use of Internet technology in autos, has been aggressive in forging alliances with new kinds of companies, including one with U.S. luxury electric carmaker Tesla Motors that he announced last year. Partnerships with dot.com types have been a bright spot in Toyoda’s bumpy career as president. He has faced growing doubts about reliability and transparency because of the massive global recalls that began two years ago, shortly after he took office, and which now affect more than 14 million vehicles. Toyota is also battling parts shortages after the March 11 earthquake and tsunami in Japan destroyed key suppliers, hampering production.

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GM Will Become World’s Biggest Automaker This Year

April 22, 2011

DETROIT — General Motors is almost certain to claim the title of world’s biggest automaker this year, retaking the top spot from Toyota, which has been hurt by production problems since the Japanese earthquake and still can’t escape the shadow of major safety recalls. The No. 1 title, a morale booster for the winner’s employees and managers, would cap GM’s remarkable comeback from bankruptcy. GM’s sales are up, mainly in China and the U.S, the world’s top two markets. Its cars are better than in the past, especially small ones. But even though GM came within 30,000 sales of Toyota last year and began strong in 2011, any sales victory this year has more to do with Toyota’s problems. First, a series of big recalls has ballooned to 14 million vehicles worldwide and damaged Toyota’s reputation for reliability. That has spurred loyal buyers to look at other brands. Second, a March 11 earthquake and tsunami in Japan curbed Toyota’s car production. On Friday, Toyota Motor Corp. said its factories worldwide won’t return to full production until November or December. That means buyers across the globe may not be able to get the models they want. Already the crisis has cost the company production of 260,000 vehicles. Last year, Toyota sold 8.42 million cars and trucks, barely ahead of a resurgent GM, which sold 8.39 million. GM held the No. 1 spot from 1932 until 2008. Here’s why GM is almost a lock to retake the lead this year: A BETTER GM: General Motors Co. was dysfunctional three years ago, hobbled by enormous debt and a giant bureaucracy. Its quality was suspect, it lost billions, and it had few products other than pickups that buyers found appealing. After a government bailout, a leaner GM emerged from a 2009 bankruptcy with new vehicles and a focus on Chevrolet, Buick, GMC and Cadillac. Since then, GM has come up with hits including the Chevrolet Equinox small SUV, the Buick LaCrosse luxury car, and the Chevrolet Cruze compact. Its quality is better. Sales so far this year are up 25 percent in the U.S. and 10 percent in China. The efficient Cruze compact and Chevrolet Volt car both hit the market as U.S. gasoline prices started rising. TOYOTA TROUBLES: Bad publicity from the recalls, mainly for cars that can accelerate without warning, was hurting Toyota long before the earthquake. The recalls began late in 2009, and came just as GM, Ford, Hyundai, and others introduced more competitive cars and trucks. With a bunch of nice alternatives and doubts about quality, customers who once dutifully returned to Toyota started considering other brands. Many Toyota models look old and need upgrades. Despite rebates and low-interest financing, Toyota was the only major automaker with lower U.S. sales last year. Sales are up 12.5 percent so far in 2011, but only at half the growth of GM. Toyota is scrambling to keep factories open after the earthquake, and U.S. dealers expect to run out of some models. Already dealers are reporting shortages of the Prius gas-electric hybrid, a high-demand model because of gas prices. Merle Gothard, general manager of North Park Toyota in San Antonio, says he’s not worried about GM retaking the title because it still has a tarnished image from bankruptcy. “It’s important from a marketing standpoint,” he says. “But Toyota has other things going for it.” He notes that Toyota is still profitable and never took a dime of stimulus money from the government. THE CHINA FACTOR: Toyota has nowhere near GM’s presence in China, now the world’s largest auto market. Through March, Toyota sold 208,000 vehicles there, but GM and its joint ventures sold more than three times that number. Growth in China by itself probably would have moved GM ahead of Toyota in worldwide sales. Toyota’s lead was only about one day’s worth of sales for GM. CAVEATS: Toyota still has a loyal customer base that believes the cars are safe and will last forever. Many Toyotas run for hundreds of thousands of miles with little more than routine maintenance. It also has a reputation for fuel efficiency, led by the Prius. GM would have to run into major problems to let No. 1 slip away this year. So far it has not been seriously hurt by parts shortages, but if some key electronic components from Japan can’t be made elsewhere, the company could run short of models. A new management team also is pushing to speed up introduction of new models, and that could hurt quality. If GM takes No. 1 this year, it won’t crow much, says Jesse Toprak, vice president of industry trends and insights for TrueCar.com, an auto price tracking website. “It’s because of (factory) capacity restrictions, and that’s not something they want to brag about,” he says.

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Kit Yarrow, Ph.D.: Soaring Prices No Match for Empowered Consumers

April 19, 2011

Americans are paying more for just about everything these days. The double whammy of higher oil prices and poor weather conditions have resulted in rising manufacturing costs, which are passed along to consumers in the form of price jumps (often Olympic-sized). As the U.S. economy strengthens, many fear these price increases will snuff out the fragile flame of consumer optimism and spending. However, in my research I’ve found the recession has created a more resilient and rational consumer — one that is still wary but much more empowered and informed than before the Great Recession. Weather Woes Volatile weather wreaked havoc on harvests, which in turn has affected the price of fruits, vegetables, wheat, grains and cotton — otherwise known as groceries and clothing. It’s also resulted in higher insurance premiums for consumers. Fruits and vegetables cost about 23% more today than they did three months ago. And that means everything from juice to ketchup will cost more too. Higher grain prices make it more expensive to feed a cow, so beef and fast food are pricier too. Clothing manufacturers are trying things like sewing cotton garments with synthetic thread to keep prices down. Still, consumers can expect a 10% increase in apparel prices this spring. The price of cotton has doubled in the past year because of poor weather conditions in China and restrictions on exports from India. Oil Increased international demand and political unrest in the Mideast have increased the price of oil, which means transportation and anything that requires shipping costs more. The average American drives 13,476 miles a year in a vehicle that gets 24 miles per gallon. The average cost of gas a year ago this week was $2.86 — today it’s $3.81. That means the average car owner is paying about $45 a month more for gas today than they were a year ago. Pricier gas is also partly responsible for a 22% increase in airfare and public transportation fares in the past six months. The Big Question The big question, of course, is whether these inflationary trends will drive down consumer spending. Since the economic health of the country is so firmly tied to consumer spending, it’s a serious question. I believe, the the answer is a qualified “no.” While many will certainly cut back on discretionary spending to compensate for higher priced basics there will not be an irrational “freak out.” Why? American consumers have been through a huge learning curve over the past several years while the recession rolled through the economy. Rather than be felled by the recession, the American consumer has emerged empowered. They have new ways of shopping and more resilience than ever. They’re more conscious of how they spend, more resourceful, and more demanding of retailers. In interview after interview consumers told me that they felt better about their spending habits following the recession. “Control” was the theme I heard more often than any other. “I feel more in control of my finances and so my future,” and “I’m never going to let my credit card debt get out of control again.” New Tricks Consumers shop differently now than they did before the recession. What might have started as a desperate hunt to get more for less turned into greater mastery of the marketplace. Aided by technology, consumers learned new research, bargaining and bartering skills. For example, many bid adieu to familiar retailers in favor of small online merchants they found on eBay and Etsy. Others explored things like online coupons and mobile price comparison shopping. And they’ve come to rely on each other more than the assumed expertise of businesses. Consumer reviews, blogs and ratings sites have skyrocketed in popularity. Which is why despite higher prices for groceries and apparel, retail sales increased last month for the ninth month in a row. Historically, gas prices are linked to consumer confidence. But not this time around. Consumer confidence actually rose this month despite a 5.6% increase in gas prices. This time around our newly empowered consumers have decreased their gas consumption 3.6%. It took consumers nearly a year to adjust their driving habits the last time we had a spike in prices. When consumers drive more slowly, keep their tires inflated and think twice about when they use their cars, they gain some control over what they pay at the pump. Mastery = Control = Confidence = Less Reactivity It’s time to reconsider the economists’ view of the American consumer as fragile, irrational and fickle. It’s going to take more than price increases to fell the American consumer. There are plenty of things that will, like unemployment. But that’s hardly irrational. Bonus Stat: With all these price increases is anything that’s less expensive? Computers and hotel stays.

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Erik Rasmussen: Green Growth: Buzz Word or a New Sustainable Economy?

April 19, 2011

Since the old economy broke down in 2008, presidents, prime ministers and mayors have been promising their electorate “green” or “sustainable growth” — and that is good news. In order to confront “the epidemic” of global warming and shape a safe economic future, we need to combine green and growth. The bad news is that nobody knows what “green growth” is. The term has risen to stardom despite a very fragile fact base and almost no academic understanding of how, e.g., reducing emissions of CO2 can actually create jobs and additional activity in the economy. And that is a very dangerous situation. Without firm definitions and a body of evidence to support policies and investments, there is a great deal of risk that green growth will not happen. It will be too easy to argue against. This is why a new study on green growth by researchers at UC Berkeley, released last week in Copenhagen by the organization Green Growth Leaders, is so important. The study, “Shaping The Green Growth Economy,” provides a foundation and qualification for the global discussions on how to shape a greener economy. The researchers have gone through the literature and evidence behind green growth, and offer some fascinating and provoking ways of looking at the green economy. The fact that it is probably the first study in the world to investigate the concept of green growth is in itself amazing — and it underlines the importance. It concludes, first of all, that that green growth is possible. Economic growth can be compatible with reductions of emissions of CO2. Basic as it seems, this is a fundamental piece of know-how. The dichotomy that environmental progress will be at the expense of the economy — often used by skeptics — is, in other words, false. In fact, evidence show that green strategies can drive growth. When the EU, President Obama and governments in Korea, China, Germany and the UK propose economic growth driven by emissions reduction, it is a viable strategy. They are not dreaming. Their views can be substantiated. This does not mean, though, that the best argument for sustainable growth is that it creates green jobs in the energy or clean tech industry. Actually, one should be careful about pointing to very direct, short-term links between green and jobs or GDP since it very quickly becomes a tricky discussion on causal relations and on how many brown jobs are lost when creating green jobs. The experts recommend us to see “green growth” as something bigger. Much bigger. Something that grows out of a system transformation like that of the railroad in the 18th century or the internet in the 1990es. Achieving green growth will require capitalizing on the advantages created by a new energy system — but the gains could be enormous. Sustainable, long-term green growth will depend on identifying and capturing the economic opportunity in three domains: new sources of renewable energy; smarter power grids and more efficient means of distributing energy; and better means of managing and optimizing energy consumption. And growth might very well happen outside the energy and clean tech sector, through innovations, services, and products, we cannot even imagine today. Identifying today the growth caused by the new energy system in 2020 is like guessing in 1992 what kind of activity the internet would create in 2002. Nobody could foresee Facebook or Amazon, and nobody today can foresee how intelligent energy systems will transform our houses, our cars, or our work places in the future and what new businesses will be created on the back of this evolution. But history tells us that this will happen — and that this will lead to a new economy and a new kind of wealth, which should be the starting point of long term decisions today.

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April Rudin: This Is My Detroit — Here’s What The Motor City Means To Me

February 26, 2011

This is the 20th anniversary of my move from Detroit to New York City. I traveled on a one-way ticket from Detroit’s Metropolitan Airport to New York’s LaGuardia airport. I left behind the city that had been my home for my first 30 years. I did not look at what I was leaving behind in Detroit, but I was focused on my future in NYC. The city of Detroit that I left behind 20 years ago was burned out and bruised, and since then, it has declined even further. Brad Anderson recently filmed a movie, “Vanishing on 7th Street,” in Detroit and claimed, “If you are doing an apocalyptic movie, Detroit is the place to go. The streets are devoid of people and the vacant buildings are endless.” In fact, there are no longer traffic reports within the city of Detroit. There are simply not enough cars and people to fill the large geographic expanse that is the City of Detroit. Sadly, I read the negative press as Detroit wrestles with itself to figure out how to reinvent itself through rezoning, bringing in new industries like filmmaking and trying to figure out how to retrain its workforce. It was with much pride that I watched the Chrysler commercial with Eminem during the Superbowl and saw the familiar images of Detroit as they flashed across the screen. The commercial itself was lauded because of its spirit of renewal. But for me, the images of Detroit reminded me of my Motor City soul. Although it was Eminem who first made “8 Mile” widely known, for me that was simply where my grandmother lived; 8 Mile Road is the imaginary dividing line between the city of Detroit and the surrounding northern suburbs. There were some images in the commercial that resonated with me, as they represented my Detroit — for example, frescos from the Detroit Institute of Arts. These famous frescos were created by acclaimed artist Diego Rivera and feature images of Henry Ford, Thomas Edison, Edsel Ford (who commissioned the work) and William Valentiner (Director of the DIA at the time). These men were contemporaries and influential on the artistic, technological and industrial roots of Detroit. Cars define the Motor City, not because Henry Ford invented the car there but rather because he invented the method of efficient manufacturing: the assembly line. His goal was to mass-manufacture and mass-market his cars so that his workers could each drive a Ford car. Although most people know that Detroit has one of the largest Arab populations outside the Middle East, the reason is not widely known. It was Henry Ford who brought them to Detroit: because Muslims did not drink alcohol, they were more reliable as assembly line workers. Growing up in Detroit as the daughter of a Teamster attorney, I was keenly aware of the car/industrial culture as well as the management/labor tension. The Big Three automakers (Chrysler, Ford and GM) were like big battleships, almost unstoppable and unable to easily change course. They were strong and mighty. During the MidEast oil crisis of the ’70s, each of the Big Three automotive companies had two parking lots for their vendors: a near parking lot for those driving American cars, and a far parking lot for those driving foreign cars. The first car that I had was a Plymouth Duster with an awesome stereo and eight-track tape player. This is my Detroit! Another important part of Detroit is the African-American cultural imprint. Detroit was the last stop on the Underground Railroad — the escape route for slaves during the Civil War — before Canada. Many African Americans stayed in Detroit without ever crossing over to the border (the only place where the U.S. is north of Canada.) The Fist of Detroit—”Brown Bomber” Joe Louis’s fist was shown during the commercial. Downtown Detroit is also home to the Joe Louis Arena where the Red Wings play hockey. Another important image in the Chrysler commercial showed a gospel choir, central to the culture in Detroit, from which Motown music was an outgrowth. Aretha Franklin was the daughter of a preacher. Many Motown artists grew up attending large churches with active choirs and were influenced by the music they heard. The original home of Motown Records, “Hitsville USA,” was also located downtown near Wayne State campus. I would drive by it almost every day in my car with my Motown music blaring! The soundtrack of my Detroit years is a combination of Motown music including Marvin Gaye, Al Green, Stevie Wonder, Aretha Franklin, The Supremes, et al . But I also listened to the music of homegrown Detroit Rock ‘n’ Roll artists like Bob Seger, Alice Cooper, Mitch Ryder, Ted Nugent and Grand Funk Railroad. This is my Detroit! There is also the food of Detroit — the longtime rivalry of the next-door Coney Island restaurants: hot dogs with “skin” slathered in “loose” chili, onions and mustard. American Coney Island and Layfayette Coney Island battle today for the top dog and “loose” hamburger (chili in a hamburger bun). In Detroit’s Greektown, you can yell “oompah” to saganaki — cheese grilled in brandy and lit on fire! If you are thirsty, there is the famous “pop” (soda) of Detroit — Vernors Ginger Ale (the oldest soft drink brand in America) and Faygo Red Pop. Or even drink a Stroh’s beer! Also, pizza is a Detroit staple ith two successful chains beginning there: Little Caesar’s and Domino’s. Fondly, I remember going to Sander’s, which was an old-fashioned fountain shop, when I was growing up. Typically, they served water in paper cones that fit into the tin bottoms. Sander’s was famous for their Hot Fudge cream puff! It’s a pastry filled with cold vanilla ice cream and hot Sanders Fudge poured on top! Mmm… and I almost forgot Sander’s bumpy cake — chocolate cake and frosting with “bumps” of buttercream between the frosting and cake! While I was growing up in Detroit, fall meant going to the cider mills for freshly squeezed apple cider and piping hot greasy donuts. You could smell the apples a mile away! Hudson’s (now Macy’s) was my favorite destination for shopping and lunch. Usually on Saturdays, we would go to the mall, Northland Mall (the first mall in the country and the location of my first job!). We would go to Hudson’s for their famous Maurice Salad with its creamy dressing, slivered pickles and turkey. It was often imitated but never duplicated. And then there was the classic Detroit/Chinese dish: almond boneless chicken. I have never seen it served anywhere else except Detroit! This is my Detroit! I could go on and on, but here is a random list of things that I think of in my Detroit: Ambassador Bridge to Canada, going Up North, water skiing on the lakes, the Detroit Zoo, Greenfield Village, ice-fishing in a shanty, tobogganing and sledding, Bob-Lo Island, Tiger baseball and the 1968 World Series, the Detroit Pistons, cruising Woodward Avenue in the summer with the windows down and the music blaring, Hudson’s Thanksgiving Parade, Freedom Festival fireworks, summer nights at Pine Knob open air music theater, Pontiac Trans-Am, the “mile” roads, short humid summers and long snowy winters. This is my Detroit ! For 20 years now, I have been living my life, working in NYC and raising my own children in metropolitan NYC. I have never much thought of myself as an “ex-pat” or what it meant to leave Detroit. Until now.There was something about seeing that commercial that triggered a flood of great memories and nostalgia for my Detroit. I realize that my Detroit lives on in my memory and that the future city will be a newfangled version of what I remember, perhaps even unrecognizable to a former hometown girl. Although they can change the physical borders and the types of industries that support the state, I think that the soul of Detroit will remain. Cue the Temptations’ “I’ll be Doggone” and bring on the Coneys! Let’s sit back and watch Detroit, like its own Tiger baseball team, come roaring back.

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Nicholas Carroll: The Broken Covenant Between Rich and Middle Class

February 15, 2011

Henry Ford did not invent the middle class; it had been around a long time in the form of artisans and shop-keepers. Nor did Ford single-handedly drive the expansion of the American middle class; the Industrial Revolution was already doing that. What Ford did accomplish on January 5th, 1914 — when he unilaterally raised workers’ salaries from a minimum of $2.34 a day to $5 a day — was to hugely undermine the tradition of industrial worker exploitation embraced by the robber barons of the late 1800s. He had several reasons, reducing employee turnover being one of them, but the Earth-shaker was, “So they can afford to buy my cars.” Ford wanted more customers, and to get them he needed a bigger pool of Americans with discretionary income: that group called “the middle class.” To get that — in a leap of thought — he was willing to reduce worker exploitation to sell more cars. Coming from a noted union-hater, Ford’s action and reasoning crystallized a new concept in the distribution of wealth, a concept that would have lacked the same credibility coming from workers or unions. In fact it was so radical that one commentator observed even the Wobblies were momentarily stunned into silence. It wouldn’t last long. In 1929, the combination of financial fraud and folly knocked the workers back into the mud, putting a temporary end to the growth of the middle class. Whether Federal intervention or World War II (or neither) ended the Great Depression is a moot point; what WWII did do, we are assured by people who lived through it, was “pull the country together” in a way that had not been seen before or since. Out of that heady atmosphere of cooperation and technical advance came streamlined cars, air conditioning, television, a housing boom, and the GI Bill sending blue-collar workers off to college in unprecedented numbers. By the mid-1950s, Ford’s personal dream was realized, because there were a hell of a lot of Americans who could afford to buy a car. The radical idea Ford articulated had become a covenant — and there was so much new wealth that the rich hardly seemed to object that much of it was going to the growing middle class. Where the slide started is arguable. If it didn’t start with the war in Vietnam, it unquestionably did by the early 1980s, when big business received both tacit and blatant messages from Washington that they could flout Federal regulations with relative impunity. At the same time there were increases in manufacturing and wholesaling efficiency, more outsourcing of work offshore (now called “globalization”), and the probably-unexpected bonus that women entering the workforce would allow businesses to pay everyone less. The covenant was eroding, and by the mid-1980s the middle class was beginning to need two incomes per family to stay middle class. So one could point the finger at the manufacturing sector for beginning to chew away at the gains of the middle class. But it would be Big Finance that was destined to bring us to the Great Recession, leading off with the 1980s Wall Street “bonfire of the vanities,” hitting the news with the fall of Drexel Burnham , and creating the first widespread bank crisis since the Great Depression in the form of the late 1980s savings and loan crisis. With too few executives going to jail in the S&L crisis, the financial sector retained its chutzpah, and opened the road to ruin in 1999 by lobbying through the gutting of the 1933 Glass-Steagall Act — a law that among other things limited the relationship between Big Finance and local banking. It is worth a brief detour here to consider the fundamental difference between producers and financial people. Producers need customers who buy goods and services. Financial people don’t, exactly; they live on taking a slice of transactions between producers and customers. One might call a mortgage a real product, but it’s not — it’s an enabler to the real transaction, the real transaction being where the producer (home builder) sells a home to the customer. Psychologically this means there is a huge gulf between producer and financier. The first produces or delivers a more-or-less real thing for real people. The latter takes a slice of the financial pie as it flies by; the psychology is all “take” and no “make.” (And local banking stands somewhere in between — not exactly producing, but providing some services of actual value such as checking accounts.) This is not to suggest that producers are without sin. A day never passes without news of tainted food, poisoned water, phony shortages, exploding cars, or carcinogenic drugs. Likewise there is no hard-and-fast line between business models. Automakers have become hugely dependent on financing. Major telephone companies and cable networks seem to focus more on selling contracts than providing service. But at the end of the day, good or bad product, sterling or shoddy service, the producer has to sell their product or service, or they go bankrupt. Further, they have a limited market to sell it to. Shoe companies with $100 sports shoes cannot sell them in the Third World; they need customers with $100 in discretionary income. Producers are also more accountable. Ford Motor Co. is by most reckoning on track towards a level of reliability that rivals Honda — but they have to sell those cars to an audience where some are old enough to remember Ford Pintos exploding into flames when rear-ended. Telcos stand tall in their arrogance towards customers, yet AT&T has become known for inferior cellular connections, and they are paying the price as customers ranging from individual consumers to Apple Computer vote with their feet. Big Finance is more fluid than producers in its “product packaging,” as Wall Street demonstrated by selling the worthless dregs of subprime mortgages (ersatz goods) not only to Deutsche Bank, but to the investment funds of small Norwegian towns. Big Finance is also more nimble. While Wall Street financiers don’t have the physical mobility of boiler-room online fraud operations, they don’t have factories tying them down either. The executive who can no longer find buyers for CDOs can freely move into selling bison ranching shares or tulip bulb futures to buyers from Kansas to Kenya. The bottom line is that by any sane person’s reckoning, the question “Who caused the Great Recession?” leads to the financial sector — and the certainty that, left to themselves, the financial sector will “do it again” — and again and again, leaving nothing of the covenant that “the rich shall allow the middle class a passably decent lifestyle.” So regardless of their individual politics, middle class Americans who want to remain middle class should make note of the fundamental difference between producers and big finance, and accept — or insist — that Big Finance once again be closely regulated at the Federal level. Because no matter how it is packaged, the combination of deregulation and lax regulation means “no rules” for Big Finance — and that doesn’t bode well for the remnants of the middle class.

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Nicholas Carroll: The Broken Covenant Between Rich and Middle Class

February 15, 2011

Henry Ford did not invent the middle class; it had been around a long time in the form of artisans and shop-keepers. Nor did Ford single-handedly drive the expansion of the American middle class; the Industrial Revolution was already doing that. What Ford did accomplish on January 5th, 1914 — when he unilaterally raised workers’ salaries from a minimum of $2.34 a day to $5 a day — was to hugely undermine the tradition of industrial worker exploitation embraced by the robber barons of the late 1800s. He had several reasons, reducing employee turnover being one of them, but the Earth-shaker was, “So they can afford to buy my cars.” Ford wanted more customers, and to get them he needed a bigger pool of Americans with discretionary income: that group called “the middle class.” To get that — in a leap of thought — he was willing to reduce worker exploitation to sell more cars. Coming from a noted union-hater, Ford’s action and reasoning crystallized a new concept in the distribution of wealth, a concept that would have lacked the same credibility coming from workers or unions. In fact it was so radical that one commentator observed even the Wobblies were momentarily stunned into silence. It wouldn’t last long. In 1929, the combination of financial fraud and folly knocked the workers back into the mud, putting a temporary end to the growth of the middle class. Whether Federal intervention or World War II (or neither) ended the Great Depression is a moot point; what WWII did do, we are assured by people who lived through it, was “pull the country together” in a way that had not been seen before or since. Out of that heady atmosphere of cooperation and technical advance came streamlined cars, air conditioning, television, a housing boom, and the GI Bill sending blue-collar workers off to college in unprecedented numbers. By the mid-1950s, Ford’s personal dream was realized, because there were a hell of a lot of Americans who could afford to buy a car. The radical idea Ford articulated had become a covenant — and there was so much new wealth that the rich hardly seemed to object that much of it was going to the growing middle class. Where the slide started is arguable. If it didn’t start with the war in Vietnam, it unquestionably did by the early 1980s, when big business received both tacit and blatant messages from Washington that they could flout Federal regulations with relative impunity. At the same time there were increases in manufacturing and wholesaling efficiency, more outsourcing of work offshore (now called “globalization”), and the probably-unexpected bonus that women entering the workforce would allow businesses to pay everyone less. The covenant was eroding, and by the mid-1980s the middle class was beginning to need two incomes per family to stay middle class. So one could point the finger at the manufacturing sector for beginning to chew away at the gains of the middle class. But it would be Big Finance that was destined to bring us to the Great Recession, leading off with the 1980s Wall Street “bonfire of the vanities,” hitting the news with the fall of Drexel Burnham , and creating the first widespread bank crisis since the Great Depression in the form of the late 1980s savings and loan crisis. With too few executives going to jail in the S&L crisis, the financial sector retained its chutzpah, and opened the road to ruin in 1999 by lobbying through the gutting of the 1933 Glass-Steagall Act — a law that among other things limited the relationship between Big Finance and local banking. It is worth a brief detour here to consider the fundamental difference between producers and financial people. Producers need customers who buy goods and services. Financial people don’t, exactly; they live on taking a slice of transactions between producers and customers. One might call a mortgage a real product, but it’s not — it’s an enabler to the real transaction, the real transaction being where the producer (home builder) sells a home to the customer. Psychologically this means there is a huge gulf between producer and financier. The first produces or delivers a more-or-less real thing for real people. The latter takes a slice of the financial pie as it flies by; the psychology is all “take” and no “make.” (And local banking stands somewhere in between — not exactly producing, but providing some services of actual value such as checking accounts.) This is not to suggest that producers are without sin. A day never passes without news of tainted food, poisoned water, phony shortages, exploding cars, or carcinogenic drugs. Likewise there is no hard-and-fast line between business models. Automakers have become hugely dependent on financing. Major telephone companies and cable networks seem to focus more on selling contracts than providing service. But at the end of the day, good or bad product, sterling or shoddy service, the producer has to sell their product or service, or they go bankrupt. Further, they have a limited market to sell it to. Shoe companies with $100 sports shoes cannot sell them in the Third World; they need customers with $100 in discretionary income. Producers are also more accountable. Ford Motor Co. is by most reckoning on track towards a level of reliability that rivals Honda — but they have to sell those cars to an audience where some are old enough to remember Ford Pintos exploding into flames when rear-ended. Telcos stand tall in their arrogance towards customers, yet AT&T has become known for inferior cellular connections, and they are paying the price as customers ranging from individual consumers to Apple Computer vote with their feet. Big Finance is more fluid than producers in its “product packaging,” as Wall Street demonstrated by selling the worthless dregs of subprime mortgages (ersatz goods) not only to Deutsche Bank, but to the investment funds of small Norwegian towns. Big Finance is also more nimble. While Wall Street financiers don’t have the physical mobility of boiler-room online fraud operations, they don’t have factories tying them down either. The executive who can no longer find buyers for CDOs can freely move into selling bison ranching shares or tulip bulb futures to buyers from Kansas to Kenya. The bottom line is that by any sane person’s reckoning, the question “Who caused the Great Recession?” leads to the financial sector — and the certainty that, left to themselves, the financial sector will “do it again” — and again and again, leaving nothing of the covenant that “the rich shall allow the middle class a passably decent lifestyle.” So regardless of their individual politics, middle class Americans who want to remain middle class should make note of the fundamental difference between producers and big finance, and accept — or insist — that Big Finance once again be closely regulated at the Federal level. Because no matter how it is packaged, the combination of deregulation and lax regulation means “no rules” for Big Finance — and that doesn’t bode well for the remnants of the middle class.

Read the full article →

Ernan Roman: Manipulating Customer Service Ratings… What’s Going On?

February 9, 2011

I wanted to share two recent experiences with my family’s automobiles and the ensuing manipulation of the Customer Satisfaction process. A few months ago, we had one of our cars serviced. We were then told to fill out the Customer Satisfaction form with perfect scores for the Service department! Recently, we bought a new car. The experience left something to be desired, and I said so in the Customer Sat survey. Yesterday, the sales rep left a message on our home voicemail stating that she was very upset that I had not rated her well. She then blamed us for ruining her day! What’s going on? Do these major automotive companies have so little faith in their cars, dealers and service departments that they have to manipulate the process? Surely the manufacturers know this is going on. So why aren’t they taking action? Do manufacturers and dealers have a common goal of making the customer satisfaction ratings look good for advertising purposes? Back to my story. In the first instance, we had the car in for routine maintenance. The next day, we received a call from the dealer asking if everything went well. We said yes. The rep then told us that a survey was coming in the mail and that we should answer all the questions with a “5″ for satisfaction, as that would really help out the dealer. So much for the value of the service department customer sat data! Now for the story about the new car purchase. Everything was fine except when we picked up the car. This is always an exciting moment, but it was spoiled for my wife and I. First, our sales rep could not show us how to operate the brand new, high-tech navigation, climate control and surround-sound music systems, all of which were major selling points for this car. No one else was available to help. That left us frustrated and disappointed. Then, as we were at her desk signing the final documents, our sales rep and her associate had a heated argument about some office issues that had nothing to do with our purchase. We sat there in the middle of their verbal crossfire. Two weeks later, when the customer satisfaction questionnaire arrived by mail, it seemed to offer an anonymous response since my name wasn’t on it. I answered the questions and explained that this had not been an optimal experience. However, because our sales rep had emphasized that she wanted to get good ratings, I was much more diplomatic than I should have been. Imagine my reaction when my wife played the voicemail from the sales rep thanking me for having ruined her day and her ratings. How else can these companies improve except though customer feedback? And what about the implied confidentiality of the survey I returned? The Takeaways: Take a careful look at your customer satisfaction process. Are the questions the correct questions? Will they get you the “right” answers or the real answers? Are there opportunities for employees to manipulate the process, to get the “right” results? What is done with the results? Are they used internally to ask the tough questions and make changes, or are they fodder for advertising slogans and sales brochures? If your customer sat questionnaires say or imply that responses will be confidential, then honor that, so customers won’t feel punished for taking the trouble to submit honest feedback. Ernan Roman is President of the marketing consultancy, Ernan Roman Direct Marketing. Recognized as the industry pioneer who created three transformational methodologies: Integrated Direct Marketing, Opt-In Marketing, and Voice of Customer Relationship Research. Clients include Microsoft, NBC Universal, Disney, Hewlett-Packard and IBM. Ernan was named to “B to B’s Who’s Who” as one of the “100 most influential people” in Business Marketing by Crain’s B to B Magazine. His latest book on marketing best practices was published in October, 2010, and is titled: Voice of the Customer Marketing: A Proven 5-Step Process to Create Customers Who Care, Spend, and Stay . Ernan is also the co-author of “Opt-In Marketing: Increase Sales Exponentially with Consensual Marketing” and author of “Integrated Direct Marketing: The Cutting Edge Strategy for Synchronizing Advertising, Direct Mail, Telemarketing and Field Sales.” www.erdm.com ernan@erdm.com

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Nissan Recalling More Than 600K Vehicles

November 11, 2010

DETROIT — Nissan Motor Co. is recalling more than 600,000 vehicles in North and South America and Africa due to steering or battery cable problems. The Japanese automaker said Thursday that the steering recall affects 303,000 Frontier pickup trucks and 283,000 Xterra sport utility vehicles in the U.S., Canada, Mexico, Argentina, Brazil and other Latin American countries. Nissan said a corrosion problem with the lower steering column joint and shaft can limit steering movement, making the vehicles difficult to steer. In some cases the corrosion can cause the joint to crack. Nissan also is recalling 18,500 Sentra sedans because of a battery cable terminal connector problem that can make the cars difficult to start or stall at low speeds. The company says no injuries or accidents have been reported because of either issue. The Frontiers covered by the recall are from the 2002 through 2004 model years and were made from July 9, 2001, to Oct. 20, 2004, in Smyrna, Tenn., for the North American market, Nissan said in a statement. Frontiers made from Nov. 30, 2001, to June 26, 2008, in Curitiba, Brazil, for South and Central American markets also are in the recall. The 2002-2004 North American Xterras in the recall were made from July 9, 2001, to Jan. 6, 2005, also at the Smyrna plant. Xterras made from Feb. 17, 2003, to June 13, 2008, in Curitiba, Brazil, for South and Central American markets also are affected. Nissan also said it will replace the positive battery cable terminal on affected Sentras. The vehicles were built at the Aguascalientes, Mexico, plant from May 22, 2010 to July 8, 2010. The automaker said it will notify owners in early December when parts are available, and dealers will fix the problem at no cost to the owners. Nissan said the steering problem was discovered from cases in Brazil and Canada, and there have been no field reports in the U.S. “The isolated field reports from Brazil and Canada are likely related to some unique environmental conditions not commonly present in other areas, combined with a greater percentage of off-pavement usage,” Nissan spokesman Colin Price said in an e-mail. “Nevertheless, out of an abundance of caution, we have decided that field action is appropriate in all the potentially affected markets.” About 240,000 Frontiers, 261,000 Xterras and 14,000 Sentras are affected in the U.S.

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Don McNay: Will our new leaders encourage consumers to save?

November 6, 2010

After the recent election, are going to have a bunch of new people running the show. I wonder if they will encourage consumers to focus on saving. I once heard an economist say, Rich people accumulate wealth. Poor people accumulate things,” he said. He had a trickle up theory of economics. He felt that money burns a hole in a poor person’s pocket while wealthy people will sock it away. Poor people often spend all their income just to survive but there are some who are broke simply because they can’t handle money. There is a financial dividing line that separates savers and spenders. The savers wind up with wealth and the spenders wind up with debt. Debtors can only get bailed out if they are Wall Street banks who are “too big to fail.” Working Americans aren’t deemed “too big to fail.” The line between affluence and poor is getting bigger. For years, poor people wanting to spend had plenty of help from credit card companies, payday lenders, “buy here, and pay here” car lots and subprime lenders. Many people got in over their heads and couldn’t make payments. Companies like Citigroup bet that the fun would never stop and kept lending. They were both wrong. The economy tanked because companies and consumers put too much faith in a system of endless spending and borrowing. People on their way to wealth usually have good savings habits. People on their way to a lifelong struggles blow money on stuff they don’t need. Spending is an instant gratification, like snorting cocaine. One shopper told me that she got a high from shopping like a high from drugs. When I was growing up, I used to think some people didn’t have good jobs. They lived in run down houses and often had their cars repossessed I found out that they made as much money as my parents. The people who lived in run down houses spent money on things they didn’t use and motorboats that never made it in the water. They lent money to “family and friends” even though they should have paying their own bills first. They had no sense of long term planning. Ultimately, they had no money. Spending beyond your means is an addiction. A spending addiction is probably as hard to cure as a drug addiction. It requires changing your lifestyle. Money is a leading cause of divorce. The stress of debt pushes people to escape reality with booze or drugs. When the economy slowed down, the addiction became a crisis. People keeping the balls in the air suddenly couldn’t. They had no backup systems. I’ve frequently hired a casual laborer. He is good at his craft and for 20 years, he made really good money. None of which he saved. Whenever I saw him, he talked about skiing trips, his bass boat or his brand new trucks. Now the economy has turned. His house is being foreclosed on and they repossessed his trucks. He has no savings or credit. His focus was on accumulating possessions. Now he doesn’t have those possessions. Or any money either. If our next set of leaders truly wants to make an impact, they need to get America focused on saving.

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Josh Sawislak: Dubious Distinctions

October 26, 2010

Washington D.C. residents, listen up: You all may know it’s true, but now you have the evidence to prove it. D.C. is a black hole for bad drivers — they get sucked in and can never leave. Last month, Allstate published its sixth annual national Best Drivers Report. Guess what? D.C. is dead last. That’s right, number 193. In case my friends in Baltimore are snickering, you are number 192. So unless you live in or plan a move to Ft. Collins, CO or Chattanooga, TN, numbers 1 and 2, respectively, I suggest you check your insurance deductible and stay alert. Just to add on another accolade, how about the recent study by a company called INRIX, which found that D.C. has the fourth worst traffic congestion in the nation. INRIX collects and sells traffic data around the country, so they probably have a pretty good picture of what’s moving and what’s all jammed up. Bottom line is that if you get in your car in D.C. (or one of our other major cities for that matter), you have a much better than average chance of sitting in traffic and getting into an accident. To add insult to injury, Telework Exchange research finds that Americans spend more time in traffic than on vacation. Boy that sounds like fun, sign me up. Well, there is another idea. How about if we spent less time driving? After all, it’s National Work and Family Month. Lets all spend time doing something that is more important. Getting off the road is good for the environment, good for our wallets, and may keep us out of the emergency room and the body shop. Here’s the magic word in it all…telework. Teleworkers spend less time in their cars and for those of us in major metropolitan areas that may keep our car and human bodies in better shape. Speaking of better shape, I have been on a little fitness kick this summer. Well, it started last year when I saw myself in a video (that’s me about 40 seconds in, closest to the screen) and asked a colleague, “who is that fat guy sitting next you?” Oh no, it was me. Well, I started eating less (gee, my doctor was right; it is arithmetic – calories in/calories out). That got me part way to my goal, but exercise is a big part of getting fit, so I started doing something I hate, but can do almost anywhere — running. When I started, I couldn’t make it a quarter mile without stopping, out of breath. Today, I run about 20-25 miles a week. Now, I don’t run fast and I probably won’t ever run a marathon, but I do run almost that far in a week. So why am I talking about this? My built-in excuse for not exercising was always, I don’t have time or I don’t have my stuff to work out, or [insert your favorite excuse here]. Now that I work at home, I have no excuse. I have my workout stuff, I have my shower and all my clothes right here, and I even have the time I used to spend getting to and from work. The other day, I went for a run about 5:00 in the evening. I started out from my house and headed up the hill along a major commute route near my house. The cars were backed up almost half a mile and as I ran alongside, I could see the frustration and defeat in the faces of everyone one of those commuters (I told you I run slow). And these were the people who left early. So instead of sitting in my car getting frustrated and stressed out (or in an accident), I was doing something healthy and stress relieving. This is the part of the telework value proposition that is hard to quantify, but is very real. If you are a teleworker, you know it. If you are a manager contemplating telework as a productivity tool, remember, stressed out employees are not as productive and tend to make more mistakes. Some food for thought as you are sitting in traffic this evening. If you want to continue the dialogue on telework, write to me at jsawislak@teleworkexchange.com or visit my blog at TeleWorkExchange.com .

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Steve Parker: Toyota/Honda Recall — What’s Really Happening?

October 23, 2010

This past week, as the sun came out after several rain-plagued days, the areas around my Southern California neighborhood were filled again with the usual suspects. They were the runners from all over the city (I’m near one of those “domestic canyons”) including walkers, joggers and their pets, all planning to revel in the welcome early-morning warmth – and poop on my lawn – but soon we were all knocked back into the realities of daily life. Knocked back by, of all things, Honda and Toyota. Why, we So Cal-types love Honda and Toyota! It’s in the handbook and the contract you sign when you head west across the 405 Freeway! How could this happen – yet again? New vehicle sales in California, both import and domestic, are not booming yet, but have been on a solidly upward trend in the midst of this “recovery.” That dancing should have been found, especially, at the national headquarters of both Toyota and American Honda, barely a quarter-mile away from each other. Easy walking distance. 2005′s Toyota Highlander; many will visit their birth dealerships over the next month or so. As you read this, it may be the weekend: so for those of you near the 110 and 405 Freeways, start the eggs, play with the kids, take Fido and Fluffy for a stroll… and warm-up the engines. Specifically, the engine in the Honda and/or Toyota minivan/crossover you’ve been driving faithfully since you bought it between 2004 and 2007 (depending on the model). Why? Because you’re going back to your dealer. You see, there’s another, uh, recall. Pack the little ones, too, because you’re probably going to stop at some fast food place. Heck, the dealer might even have fast food in his store! You know how eager they are to please these days! But, yes, you’ve guessed it. Some of the people who engineer our massively complicated cars and trucks seem to have blown it… again. Both Toyota and Honda consider their respective situations serious enough that they are instituting “voluntary recalls,” which are basically what a smart car company does right before the National Highway Traffic Safety Administration decides to do it for you. And here are the recall totals (announced so far): about 1.5 million worldwide for Toyota (728,544 in the US). Honda? They’re saying about a half-million total Odyssey minivans and Acrua RL sedans will get caught-up in the excitement. There are a bunch of other vehicles from these two which might be involved as well. Here’s the Miami Herald list as of October 21 of the affected cars sold by Toyota and Honda in the U.S. (the number of cars on either list might shrink or grow). What might happen this time out for two of the world’s top auto companies? And their customers? Your brakes could fail. From the Department of Irony: last recall time, on the Toyotas, the cars would not stop accelerating. Now, the accelerator works fine, but the braking could be seriously, even dangerously, degraded. So why all the hubbub for something which seems (and is, in reality) a list of very simple symptoms, fast diagnosis and fix? Any 17-year-old high school auto shop student should have been able to spot this one coming down the road (even smell it coming — no joking). Brian Lyons, Toyota’s Director of Safety and Quality Communications, told me that both the Toyota and Honda problem, as similar as they seem, could be related to the same parts coming from the same supplier. This weekend is only the most recent of 16 recalls for Toyota garnering worldwide attention. And while nothing has been officially announced, don’t be surprised if a company called “Advics” in Aichi Prefecture (state), Japan, becomes water cooler talk over the next few weeks (then just magically goes away); they might supply both Honda and Toyota with the same offending parts. Here’s what they think causes the trouble for both companies (based on, Lyons told us, the research they’ve done so far, and from Toyota’s point of view): Brake fluid is bubbling and leaking out of the brake system’s master cylinder, degrading the fluid, making the brake pedal feel spongy (you know that feeling) and possibly robbing stopping power from the system as a whole. Has Toyota gotten a little “once bitten, twice shy” when it comes to their own in-house investigations? That fluid is the single key ingredient vital to stopping the car; it needs to be as free as possible from any air and/or other contamination. Brake fluid (aka hydraulic fluid) is created with special properties (“Straight to the laboratory, Igor!”), including the ability to not absorb moisture. When water gets in, braking ability gets out. Around five years ago, the first reports of “spongy brake pedals” started trickling into Japan’s Toyota dealerships. Then more and more reports, though there’s been a slowing in the most-recent time period. This 2006 Acura RL is feeling the Call of the Congress… well, maybe not yet Toyota says that’s probably because dealers and/or customers have been making their own “fix” and/or owners are pouring in upgraded, thicker brake fluid on their own, which can work for a time. It’s like using thicker engine oil to cut back on leaks out of an engine’s top end… but kids, please don’t try this at home. Toyota, it must be said, stepped right up to the plate (once, that is, they felt they actually had something to say). Toyota was using different brake system parts and fluids from one supplier. The problem was showing up in one of the master cylinders on the cars, using a specific, single type of brake fluid (of the two Toyota was using in these cars). This time out, Toyota found the fluid in one kind of cylinder contained polymers (extremely sophisticated lubricants) of a certain type and quality. After a time following purchase, this brake fluid’s level was dropping, the brake warning light came on, some people visited their dealers and a fix was developed. And all was well with the world and master cylinders. Ignore the light (admit it — you’ve done that!), and the fluid leaked more and dropped to a point where the pedal gets spongy and the potential for a failing hydraulic system is possible. This all gets very complicated as there are questions about all the cars affected by the recall. Do they merely lose their anti-lock brake systems, whereupon everything reverts back to simple, safely-working hydraulics? And what about the high-techy brake-by-wire systems? All this will come to light as the story unfolds. One thing in Toyota’s favor: they got right out in front of this one, taking the lead in “coverage” of “their problem.” Toyota’s Safety Communication Manager Lyons told me right off the bat during our lengthy conversation that, “We never stop investigations in our systems,” and even if it’s ultimately found the problem lies with the brake system or fluid manufacturer, these types of things are “not supplier based, but ours.” And there will be stories. Remember when Toyota felt it necessary to trot out 54-year-old Akio Toyoda, grandson to company founder Kiichiro? Even his kind of money and power could not fully protect him from the wrath of a vengeful U.S. Congress just wanting to talk! Again, the fix takes two hours, is absolutely free and involves new fluid, one small part and odds and ends. All dealers ask is you make a reservation with them; you and the dealer should determine absolutely that your car is among the damned… uh, I mean, recalled. Registered owners will begin getting those dreaded recall notices within the next two weeks. Don’t wait; be aggressive. Call today or go to www.NHTSA.gov , armed with your vehicle’s VIN. If you don’t know what that is, Google “Finding VIN” and you’ll get more info than you need (or want). Then follow the instructions. More than a hint of arrogance was, unfortunately, whiffing through the campfire the past two days, familiar to any journalist who has spent 45 minutes, much less 45 years, covering the worldwide auto industry. Some reports today (Saturday) said PR reps from both Toyota and Honda essentially blamed the entire problem on the car-owners: ( from Chris Woodyard, USA Today ): “…this recall was unusual in that both automakers said the problem wouldn’t occur if owners had simply followed automakers’ recommendations to use only their branded brake fluid.” So now they’re telling us where to shop, too? I don’t care if it might even be true. It’s a stupid thing to say and way below the standards to which both these companies have adhered that have allowed them to lead the way. Saturn used to throw BBQs at their recalls. Whatever happened to those days? Oh, yeah… there’s no more Saturn.

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Robert Zevin: Addiction

September 28, 2010

Addiction Corrupt regulatory oversight, cutting corners to save costs, plus citizens and politicians chanting “Drill, baby, drill” — is the BP Deepwater Horizon catastrophe really any surprise? The spill in the Gulf of Mexico, the worst man-made environmental disaster in the U.S., is a consequence of our addiction to oil. Like an addict resorting to riskier and riskier behavior to get a “fix”, we have adopted riskier and more desperate measures to feed our addiction to oil such as drilling in deeper water and extracting oil from sand. Some of us have the luxury of saying we weren’t completely aware of the effect of our lifestyles on the environment; certainly prior to the BP spill we could hop into our cars and drive to the store and buy cheap goods and eat strawberries during a snowstorm without seeing the images of the impact of our collective actions. In fact, it is only fairly recently that we have irrefutable data that shows the environmental and health impacts from smog, carbon dioxide and other byproducts of our oil consumption. While BP project managers who cut corners and regulators who didn’t do their job are directly to blame for this spill, our collective hands are not clean. It is our addiction to oil that led to an environment in which this spill could happen. Talk is cheap In a June speech President Obama paid lip service to reducing our dependence on oil. Starting with Richard Nixon, U.S. presidents have talked about the need to reduce our reliance on oil. The most effective way to curb our appetite for oil would be to cut the subsidies to oil companies and implement a carbon tax which would more accurately reflect the cost to society of the “collateral damage” associated with oil production. In addition, politicians should materially increase subsidies to alternative energy, and make these subsidies reliable and consistent without short-term expiration and renewal concerns. Taking these steps has always been difficult because of massive vested interests in the economic status quo. Critics of alternative energy subsidies complain that alternative energy will never be as cheap as coal, oil and natural gas, however, in the United States, no source of energy was developed without subsidies; between 1973 and 2003, the federal government spent $74 billion subsidizing nuclear power and fossil fuels, during this same time frame renewable energy and spending on energy efficiency research received $26 billion from the federal government. It is easy to point the finger at politicians, to say they have not done enough to help us conquer our addiction to oil, and certainly they haven’t. Politicians have acted as enablers, allowing us to continue our addiction, and making it cheaper and easier to do so. Watching Al Gore’s movie, An Inconvenient Truth , reading about ground water contamination from natural gas drilling, or looking at pictures of oil spills; it’s easy to get angry and point fingers at the deepwater oil drillers, the natural gas drillers, or the executives at car companies that pushed SUVs. However, if Americans are asked to drive less, buy smaller cars, or turn down their thermostats, few are willing to do so. The roots of our addiction are deep Over 150 million years ago, marine plants blanketed the sea floor and sedimentation created sufficient pressure to convert the unoxidized carbon into oil. Over the past 150 years oil products have fueled the fastest growth in material wellbeing in human history. Especially with the invention of the gasoline-fueled car in 1901 and the incredible mobility it provided, oil became our drug of choice. The cost of our addiction has escalated, driving us literally to the ends of the earth to uncover more. Estimating the economic cost of our addiction is difficult; direct subsidies to oil and oil using systems are often complex and artfully concealed but estimates calculate the subsidy at around $20 per barrel of oil; but what “cost” should we add for a child who develops asthma from breathing in smog? What percent of the hundreds of billions of dollars we spend on defense is indirectly or directly a result of our oil addiction? What is the cost of the environmental damage from the BP spill and from the thousands of spills prior? We do not need to come up with an absolute number to know that the true cost of the gas we fill our tanks with is much, much higher than the $3 per gallon we pay at the pump. How do we finally break this addiction? The first step for addicts going through a recovery program is to admit that they are powerless over the substance they are addicted to and their lives have become unmanageable as a result of their addiction. We can talk objectively about the problems we face as a result of our oil addiction but without the realization that our lives have become unmanageable we cannot begin the process of recovery. We are engaged in a counter-productive war in Iraq whose real purpose is apparently to control more oil, we are facing increasing global warming, and we are assaulted by an immense environmental disaster with far reaching ecological implications. Our lives have become unmanageable. After this first step we need to begin to take concrete action to break our addiction. There is no shortage of energy in the world beyond oil, gas and coal. From the sun and the wind to biomass, geothermal and ocean currents, energy and the means to capture it exist; what we lack is the infrastructure and scale to support the economics of alternatives. We need to demand change. Automakers made SUVs because consumers wanted them. Ask for (and buy) hybrid cars, electric cars and fuel-efficient vehicles and the auto industry will make them. Conserve energy. Realize the implications of driving a few blocks and change ingrained habits. Speak up — tell lawmakers you do not want cheap gas, you want money spent on viable alternatives and efficiency improvements. The BP spill is no longer front page news and now we are left with a choice: move this disaster to the back of our minds and continue on as before, albeit slightly wiser about the negative consequences of our addiction, or choose to let the BP spill be the proverbial “hitting bottom” that propels us to finally break our addiction to oil.

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Peter Diamandis: Congratulations to the Winners of the $10 Million Progressive Insurance Automotive X PRIZE

September 16, 2010

For those who have followed the Progressive Insurance Automotive X PRIZE , today has been a long time coming.  Our vision from the start was to reinvent the paradigm for cars the public can drive. We wanted to ensure that these cars were fast, affordable, safe and achieved more than 100 MPGe (miles per gallon equivalent) — a new way to directly compare the efficiency of gasoline to electric and other alternative fueled vehicles.  This adventure began in early 2006, when we first developed the concept for this Incentive Prize.  It was officially announced in March 2008, with Progressive Insurance as the competition’s title sponsor.  More than 130 vehicles from around the world registered to participate.  This past summer, we tested the finalist at Michigan International Speedway, all competing for a $10 million purse and one shared goal: to develop viable and super, fuel-efficient vehicles that meet or exceed 100 MPGe. We spent this morning in the nation’s capital at The Historical Society of Washington, D.C. to announce the three winning vehicles among others that will impact our future driving experience.  Joining us on stage were Speaker of the House, Nancy Pelosi; the President’s Science Advisor, Dr. John Holdren; Senator Mark R. Warner; Representative Edward Markey; Deputy Secretary of Energy , Daniel Poneman; and of course, Progressive Insurance CEO Glenn Renwick.  While our event backdrop was all about history, we came together to celebrate the future and the innovations of companies that have advanced their own automotive technologies because of their role in this competition. We awarded $5 million to the competition’s Mainstream Class (seats four) category winner and $2.5 million each to the two Alternative Class (seats two) winners, one with tandem seating and one with traditional side-by-side seating. Edison2 LLC , based in Charlottesville, Va., won the $5 million mainstream class with its Very Light Car.  This forward-looking, truly aerodynamic vehicle weighs less than 750 pounds and boasts a drag coefficient that is half of what is considered the best today.  In the competition, the Very Light Car achieved just more than 100 MPGe and passed all safety and emissions criteria- made even more remarkable with the knowledge that the car runs on E85 ethanol. Li-ion Motors , based in Mooresville, N.C., won the $2.5 million alternative side-by-side class with its Wave II vehicle.  This battery electric urban car was built on a lightweight aluminum chassis and includes a highly efficient battery package and aerodynamic features that enabled it to achieve 187 MPGe in on-track testing. X-Tracer , based in Uster, Switzerland, won the $2.5 million alternative tandem class with its E-Tracer 7009 vehicle.  The E-Tracer features two stabilizer wheels that automatically drop at low speeds or during sharp turns.  It includes room for two in-line passengers and weekend baggage, and held the record high for efficiency in the competition, coming in at 197 MPGe. While some may consider the competition over, for the winning teams the journey has just begun. Indeed, they will immediately begin leveraging their winning status, prize money and connections made over the course of the competition to catapult their vehicle into the consumer market.  It will not be easy, but I know these teams can, and will, make it happen.  Just like Burt Rutan and Paul Allen were able to take their winning vehicle, SpaceShipOne, from the Ansari X PRIZE and move it forward into commercialization through a $250 million commitment from Sir Richard Branson to create Virgin Galactic, so too, do we wish these winning teams great success in their next steps towards commercialization. We’ve seen a shift in the market since we first launched this competition, and a greater awareness by the American people to think more seriously about the actions we take, and how they affect our environment.  We have also seen a rise in acceptance of the MPGe model used in our competition, a new benchmark in measuring fuel economy. MPGe has the advantage of public familiarity. That is why our partner, Consumer Reports, has joined us in championing MPGe as a robust, transparent and fuel neutral standard that consumers can use to make apples-to-apples comparisons of such next-generation vehicles to the cars they drive today. Edison2, X-Tracer and Li-ion Motors will have the greatest impact.  Their vehicles are set to revolutionize fuel efficiency, as well as the auto industry, because the beauty of this X PRIZE is not just the cars – it is also the technology. Working together, the X PRIZE Foundation and Progressive Insurance have strived to change the paradigm of “mainstream” vehicles by providing a global platform focused on engine efficiency, increased vehicle power, acceleration, safety and increased fuel economy. The innovative technologies brought forth in this competition were astounding and further proved the purpose behind prize competitions — to make the impossible possible. We were not looking for incremental changes or long-term strategies.  The competition’s structure demanded breakthrough thinking that would literally disrupt the industry and produce an accelerated wave to push it ahead in leaps and bounds.  To quote Bob Marley, “it takes a revolution to make a solution.” Congratulations to the winners of the Progressive Insurance Automotive X PRIZE and to all the participating teams.  Even those teams who achieved 80 or 90 MPGe will also make a huge impact in the marketplace.  Personally, I’m looking forward to driving these vehicles in the near future and hope you will as well!

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Peter Diamandis: Congratulations to the Winners of the $10 Million Progressive Insurance Automotive X PRIZE

September 16, 2010

For those who have followed the Progressive Insurance Automotive X PRIZE , today has been a long time coming.  Our vision from the start was to reinvent the paradigm for cars the public can drive. We wanted to ensure that these cars were fast, affordable, safe and achieved more than 100 MPGe (miles per gallon equivalent) — a new way to directly compare the efficiency of gasoline to electric and other alternative fueled vehicles.  This adventure began in early 2006, when we first developed the concept for this Incentive Prize.  It was officially announced in March 2008, with Progressive Insurance as the competition’s title sponsor.  More than 130 vehicles from around the world registered to participate.  This past summer, we tested the finalist at Michigan International Speedway, all competing for a $10 million purse and one shared goal: to develop viable and super, fuel-efficient vehicles that meet or exceed 100 MPGe. We spent this morning in the nation’s capital at The Historical Society of Washington, D.C. to announce the three winning vehicles among others that will impact our future driving experience.  Joining us on stage were Speaker of the House, Nancy Pelosi; the President’s Science Advisor, Dr. John Holdren; Senator Mark R. Warner; Representative Edward Markey; Deputy Secretary of Energy , Daniel Poneman; and of course, Progressive Insurance CEO Glenn Renwick.  While our event backdrop was all about history, we came together to celebrate the future and the innovations of companies that have advanced their own automotive technologies because of their role in this competition. We awarded $5 million to the competition’s Mainstream Class (seats four) category winner and $2.5 million each to the two Alternative Class (seats two) winners, one with tandem seating and one with traditional side-by-side seating. Edison2 LLC , based in Charlottesville, Va., won the $5 million mainstream class with its Very Light Car.  This forward-looking, truly aerodynamic vehicle weighs less than 750 pounds and boasts a drag coefficient that is half of what is considered the best today.  In the competition, the Very Light Car achieved just more than 100 MPGe and passed all safety and emissions criteria- made even more remarkable with the knowledge that the car runs on E85 ethanol. Li-ion Motors , based in Mooresville, N.C., won the $2.5 million alternative side-by-side class with its Wave II vehicle.  This battery electric urban car was built on a lightweight aluminum chassis and includes a highly efficient battery package and aerodynamic features that enabled it to achieve 187 MPGe in on-track testing. X-Tracer , based in Uster, Switzerland, won the $2.5 million alternative tandem class with its E-Tracer 7009 vehicle.  The E-Tracer features two stabilizer wheels that automatically drop at low speeds or during sharp turns.  It includes room for two in-line passengers and weekend baggage, and held the record high for efficiency in the competition, coming in at 197 MPGe. While some may consider the competition over, for the winning teams the journey has just begun. Indeed, they will immediately begin leveraging their winning status, prize money and connections made over the course of the competition to catapult their vehicle into the consumer market.  It will not be easy, but I know these teams can, and will, make it happen.  Just like Burt Rutan and Paul Allen were able to take their winning vehicle, SpaceShipOne, from the Ansari X PRIZE and move it forward into commercialization through a $250 million commitment from Sir Richard Branson to create Virgin Galactic, so too, do we wish these winning teams great success in their next steps towards commercialization. We’ve seen a shift in the market since we first launched this competition, and a greater awareness by the American people to think more seriously about the actions we take, and how they affect our environment.  We have also seen a rise in acceptance of the MPGe model used in our competition, a new benchmark in measuring fuel economy. MPGe has the advantage of public familiarity. That is why our partner, Consumer Reports, has joined us in championing MPGe as a robust, transparent and fuel neutral standard that consumers can use to make apples-to-apples comparisons of such next-generation vehicles to the cars they drive today. Edison2, X-Tracer and Li-ion Motors will have the greatest impact.  Their vehicles are set to revolutionize fuel efficiency, as well as the auto industry, because the beauty of this X PRIZE is not just the cars – it is also the technology. Working together, the X PRIZE Foundation and Progressive Insurance have strived to change the paradigm of “mainstream” vehicles by providing a global platform focused on engine efficiency, increased vehicle power, acceleration, safety and increased fuel economy. The innovative technologies brought forth in this competition were astounding and further proved the purpose behind prize competitions — to make the impossible possible. We were not looking for incremental changes or long-term strategies.  The competition’s structure demanded breakthrough thinking that would literally disrupt the industry and produce an accelerated wave to push it ahead in leaps and bounds.  To quote Bob Marley, “it takes a revolution to make a solution.” Congratulations to the winners of the Progressive Insurance Automotive X PRIZE and to all the participating teams.  Even those teams who achieved 80 or 90 MPGe will also make a huge impact in the marketplace.  Personally, I’m looking forward to driving these vehicles in the near future and hope you will as well!

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Automotive X Prize Winners REVEALED — See Which Cars Took Home Multi-Million Dollar Prizes

September 16, 2010

DETROIT (AP) — An ultralight, gas-powered car that can get 102 miles per gallon is among the winners of the $10 million Automotive X Prize, a contest to develop highly efficient, production-ready vehicles. While it’s not likely to go on sale in its current form, Edison2′s “Very Light Car No. 98″ was cited for its innovative use of lightweight materials, its superior aerodynamics and its very low production cost. Oliver Kuttner, the founder of Lynchburg, Va.-based Edison2, said his target price is $20,000. The “Very Light Car No. 98″ seats four and is built on a steel frame of mostly aluminum parts. That keeps the weight at 830 pounds, around a quarter of the weight of an average car. It has a space-age, race car look and a tear drop shape, with the wheels set far out from the car to help deflect crashes. Kuttner, a real-estate developer and race-car driver, said a team of around 100 people – including many racing veterans – developed the car. They opted for a one-cylinder, ethanol-capable engine instead of an electric car because batteries add weight and gas is readily available. But the team said its innovations in aerodynamics and the use of lightweight materials could apply to any kind of vehicle. “We’ve been working on these types of solutions, really, all our lives,” Kuttner said. “In racing, fuel is a precious resource. One less pit stop is the difference between winning and losing.” Edison2 won $5 million, the bulk of the prize money. Kuttner said Edison2 spent more than that to develop the car, but we wouldn’t give an exact figure. Some of the prize money will go into development of the next generation light car, Kuttner said. He said the team is now focused on making the car more consumer-friendly and “easier on the eyes” but without adding to its weight or hurting its fuel economy. Once Edison2 is convinced the car is ready, Kuttner plans to find partners to manufacture and distribute it. Two other car makers will split $2.5 million each: Mooresville, N.C.-based Li-Ion Motors Corp., which made the Wave2, a two-seat electric car that gets 187 miles on a charge, and X-Tracer Team of Winterthur, Switzerland, whose motorcycle-like electric mini-car, the E-Tracer 7009, gets 205 miles on a charge. Both of those companies are taking orders for their cars. X-Tracer Team says the electric E-Tracer will be available to U.S. consumers next year. The X Prize, which is funded by Progressive Insurance, gave 111 teams 30 months to develop their vehicles and then put them through driving, safety and efficiency tests. All of the winners are now eligible for a U.S. Department of Energy program that will help ready the vehicles for introduction to the U.S. market.

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David Isenberg: What If?: The Battle That Did Not Have to Happen

September 6, 2010

Now that the United States has declared an end to the combat stage of its operations in Iraq, as if that is stopping IEDs from going off and deterring insurgents from attacking, it is time to start the inevitable process known as what if.” All historians and pundits sooner or later do this. For example, what if someone had stood up to Dick Cheney and prevented him from browbeating the U.S. intelligence community into giving the Bush administration the intelligence analyses that suited its preconceptions. What if the U.S. military had planned for a prolonged insurgency? What if Paul Bremer hadn’t disbanded the Iraqi army? And on the subject of private security contractors, what if the U.S. military had done something different after four Blackwater contractors were killed in Fallujah in 2004? Recall that on March 31, 2004 Iraqi insurgents in Fallujah ambushed a convoy containing four Blackwater contractors who were guarding a convoy carrying kitchen supplies to a military base, for the catering company Eurest Support Services The four contractors, Scott Helvenston, Jerko Zovko, Wesley Batalona and Michael Teague, were dragged from their cars, beaten, and set ablaze. Their burned corpses were then dragged through the streets before two of them were hung over a bridge crossing the Euphrates. Photos of the event were released to news agencies worldwide, causing a great deal of indignation and moral outrage in the United States, and prompting the announcement of an upcoming “pacification” of the city. Fallujah was already a hotbed of discontent, thanks to past U.S. screw-ups. In April 2003, just a month after the initial U.S. invasion, US forces opened fire on a group of unarmed demonstrators, claiming they were fired at. Fallujah’s mayor, Taha Bedaiwi al-Alwani, said that two people were killed and 14 wounded. Although the majority of the residents was Sunni and had supported Saddam Hussein’s rule, Fallujah was one of the most peaceful areas of the country just after his fall. There was very little looting and the new mayor was pro-United States. Although people knew at the time and have said many times since, it still deserves mentioning that sending U.S. troops into Fallujah after the killing of the Blackwater contractors was the wrong thing to do. It led to a failed siege of Fallujah in April 2004 ( Operation Vigilant Resolve, also known as the First Battle of Fallujah, done by US Marines) Thus, the intended Marine Corps strategy of foot patrols, less aggressive raids, humanitarian aid, and close cooperation with local leaders was suspended on orders to mount a military operation to clear guerrillas from Fallujah. 27 American servicemen were killed in and around Fallujah during the battle, as well as hundreds of Iraqis, both civilians and insurgents. After months of counter-insurgency activity this was followed by a joint U.S.-Iraqi-British offensive of November 7, 2004 named Operation Phantom Fury, also known as the Second Battle of Fallujah. In retrospect these battled were not fated to happen. The might has been avoided if the Bush administration had actually listed to the voices of its commanders on the ground, which, by the way, is something it always claimed it did. But it appears that was more rhetoric than reality. Nowhere is this better detailed than in the book New Dawn: The Battles for Fallujah by Richard S. Lowry, published this past May. Let me quote from the foreword: Violence was down during the first three months of 2004 because of Saddam’s capture, but that changed on March 31 when insurgents in Fallujah dragged four Blackwater contractors from their SUVs, beat them savagely, and set them on fire. The brutal desecration of their bodies–pictures of which were infamously broadcast around the world–prompted some leaders to advocate immediate retaliation. Although a response was justified, hindsight tells us a more carefully considered reaction would have better served our short- and long-term goals. And from the first chapter: Within hours of the Blackwater ambush on the last day of March 2004, the Marines moved to cordon off the entire city. Inside, the enemy prepared for the inevitable assault. Major General James Mattis and Lieutenant General James Conway, however, recommended restraint. The Assistant Division Commander, Brigadier General John Kelley, sought to temper America’s response in the Division’s daily report. As we review the actions in Fallujah yesterday, the murder of four private security personnel in the most brutal way, we are convinced that this act was spontaneous mob action. Under the wrong circumstances this could have taken place in any city in Iraq. We must avoid the temptation to strike out in retribution. In the only 10 days we have been here we have engaged the “good” and the bad in Fallujah everyday, and have casualties to show for our efforts. We must remember that the citizens and officials of Fallujah were already gathering up and delivering what was left of three victims before asked to do so, and continue in their efforts to collect up what they can of the dismembered remnants of the fourth. We have a well thought out campaign plan that considers the Fallujah problem across its very complicated spectrum. This plan most certainly includes kinetic action, but going overly kinetic at this juncture plays into the hands of the opposition in exactly the way they assume we will. This is why they shoot and throw hand grenades out of crowds, to bait us into overreaction. The insurgents did not plan this crime, it dropped into their lap. We should not fall victim to their hopes for a vengeful response. To react to this provocation, as heinous as it is, will likely negate the efforts of the 82nd Airborne Division paid for in blood, and complicate our campaign plan, which we have not yet been given the opportunity to implement. Counterinsurgency forces have learned many times in the past that the desire to demonstrate force and resolve has long term and generally negative implications, and destabilize rather than stabilize the environment. The Marine commanders did not want to further disenfranchise the people of Fallujah. They told their corps commander, U.S. Army Lieutenant General Ricardo Sanchez that they could find the perpetrators of the ambush and bring them to justice within two weeks. Sanchez passed on the Marines’ recommendation. Secretary of Defense Donald Rumsfeld, however, was not impressed with the suggestion for a tempered response and ordered the Marines to attack Conway and Mattis had delivered their recommendation as to how they thought they should respond, but when they received their orders, they–like any good Marines–unflinchingly obeyed them.

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Jared Bernstein: Chrysler Emerges From its Dark Days

August 23, 2010

When it comes to the auto companies, we often focus more on the lake than the streams and rivers. That is, much of the attention to how this critical sector is faring focuses on the end-of-the-line assembly plants, and less on the suppliers that provide the parts to be assembled. You might think that’s because in employment terms, the end-of-the-line is most important. But in fact, for every worker in the assembly plant, there are three workers in the supply chain. So if you want to assess the health of the auto industry, you’ve got to look beyond the factories that build the cars and trucks and examine how the suppliers are doing. With that in mind, Vice President Biden traveled to Toledo, Ohio, today to hold a Middle Class Task Force event at the Chrysler Toledo Assembly Complex. This state-of-the-art complex houses the main assembly plant producing the Jeep Wrangler, surrounded by three of the plant’s suppliers. It’s one impressive complex and a great example of how the industry in general, and Chrysler in particular, is emerging from its dark days leaner, stronger, and with new-found efficiencies. In fact, this facility twice received the Harbour Award as the most efficient assembly plant in North America. They achieve these efficiencies by locating their major suppliers right next door, providing direct and uninterrupted flows from their assembly lines right into the plant. Such intimate flow control means much less down time — simply put, workers at the Wrangler plant don’t spend time waiting for parts. The Vice President’s remarks emphasized these and other aspects of the supply chain. To help make the point, he displayed this visual, showing the suppliers which provide parts directly to the Wrangler assembly plant. These top-tier suppliers alone represent 3,000 American jobs. Other suppliers, one link down the chain, create additional jobs across the country supplying parts to the top-tier folks. So when a plant like the one we visited runs two shifts, as is currently the case, that doesn’t just mean jobs in Toledo. It means jobs all along the supply chain, in places like Grand Rapids, Michigan; Dry Ridge, Kentucky; Greensburg, Indiana; and other communities all over the country. As I watched the Vice President meet with workers at this great manufacturing plant in the heart of the heartland, I couldn’t help but flash back to the early days of our auto task force. Back then, it was by no means certain that these men and women would be able to keep their jobs making cars. But even while some in government and from the pundit class urged the President and Vice President walk away from this industry, they wouldn’t turn their backs. Instead, they bet on the American worker, on the uniquely American spirit of renewal, and on the faith that the key stakeholders would do what was needed to once again make this industry a global contender. And that bet is paying off. In the year before we took office, the auto industry shed 431,300 jobs. But in the 13 months since GM and Chrysler emerged from bankruptcy, auto industry employment has increased by 76,300, a huge reversal — one we’d never have seen had we listened to those urging us to walk away. Of those 76,300 new jobs, close to 40,000 come from the suppliers. That’s the fastest year over year growth that they’ve seen in a decade. They’re good manufacturing jobs, right here in America, staffed by highly productive men and women doing two important things: they’re building great new vehicles, and they’re writing a new chapter in the history of the American auto industry. It’s a story of hard work and sacrifice by the companies, the workers, the unions, investors, and others over the last year. It’s a story of a bold new President and Vice President standing by a core American industry in its time of need, carefully structuring a temporary intervention designed to get them back of their feet. And it’s a story that is by no means over. The industry, much like the overall economy, is moving solidly in the right direction, but it’s still got a ways to go. Vice President Biden and the Middle Class Task Force were happy to be a part of the story today, and we’ll continue to watch it and tell you about it as it evolves. Jared Bernstein is Chief Economic Advisor to the Vice President

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Toyota, Channeling James Bond, Makes Big Play For Sports Car Market

August 19, 2010

As the world’s largest carmaker tries to rebuild its reputation for quality following record recalls, President Akio Toyoda, a racing fan, has said he wants to add more fun to his cars. Under Toyoda, who became president in June 2009, the company has taken orders for the Lexus LFA $375,000 supercar, is readying an “affordable” rear-wheel drive coupe and may even add a sporty version of the Prius.

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Inder Sidhu: Profiles in Doing Both: The Missing Link in Electric Vehicle Technology

August 11, 2010

Would you pay $41,000 for an electric car that has a range of just 40 miles per charge? That’s what a lot of car pundits are wondering, now that GM has put a price on its much anticipated Chevrolet Volt . But instead of focusing on the hefty price, critics are wondering if ” range anxiety ” will prompt consumers to buy something more traditional. If only there was a solution to this 21st century condition. Actually, there is: recharging stations where electric car owners can plug in their cars or swap out their batteries for replacements. The company behind these stations is Better Place, the brainchild of multimillionaire software entrepreneur Shai Aggasi. Unlike most companies working to provide environmentally friendly transportation, Better Place has focused its energies not on the electric vehicles themselves but on the oft-overlooked infrastructure they require. By addressing this part of the market, Agassi may wind up a hero to environmentalists and investors alike. Business leaders, too, may one day sing his praises, albeit for a different reason. In addition to that what he is doing, Agassi is worth studying for how he does things. Take the way his company leverages global resources to fast-forward its agenda. It’s a very different approach than the norm. Most technology startups set out to build advanced products for sophisticated customers in established countries. More often than not, these companies rely on a tightly knit team of engineers who focus on building the most refined solutions they can. Afterwards, they typically water down their innovations for sale to customers in emerging countries. Agassi has dispensed with this model and is instead focused on building simple solutions that can be deployed anywhere around the world simultaneously. That’s a daunting challenge that requires a high level of engineering horsepower and significant amount of local market knowledge. To achieve its goals, thus, Better Place is leveraging multiple inputs from around the world. That includes ideas from both established and emerging economies. Though just three years old, Better Place has already developed partnerships in places as diverse as the U.S., Japan, Denmark and China. That’s right: China. While some view China primarily as a market in which to seek out new customers or source cheap labor, Better Place believes it is an ideal source of new inspiration. In April, Better Place signed an agreement with the Chery Automobile Co. of China to co-develop prototype vehicles and charging stations that could advance the work the company is doing in established nations. To collect even more ideas on markets and innovations, Better Place has helped spur the creation of electric car enthusiasts groups in Eastern Europe, South America, India and Africa, too. As interest and momentum for electric vehicles builds in one part of the world, Better Place believes it will multiply in another–many times over. By leveraging the best ideas from both the established and the emerging world, Agassi hopes to move quickly–before the next wave of first-time car buyers choose gas- or diesel- powered vehicles. This is especially true in emerging countries such as China and India, where car ownership is below 5 percent but growing quickly. Over the next five years, Chinese and Indian consumers are projected to buy as many as 70 million vehicles–more than all of the cars that exist in the UK and Germany today. If Better Place and electric car makers can persuade just 25 percent of these consumers to choose an emission-free vehicle, they would effectively reduce carbon emissions by an amount equal to what all the cars in Canada produce annually. This explains why Agassi and others are so passionate about overcoming “range anxiety.” To truly make the world a better place, they believe you can’t waste time debating about pursing ideas from this established market or engaging customers in that emerging one–you have to commit to doing both. Nothing less than the fate of the environment depends on it. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco , and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu .

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Toyota Profit Hits $2.2 Billion Despite Recalls

August 4, 2010

TOKYO — Toyota reported a quarterly profit of $2.2 billion, reversing from red ink a year earlier as the world’s top automaker benefited from a global sales recovery that offset lingering doubts about the safety of its cars. The company, which makes the Camry sedan and Prius hybrid, raised its full year earnings forecast Wednesday, and said it now expects to sell 7.38 million vehicles worldwide for the year through March 2011, up from 7.24 million the previous year. Previously it forecast sales of 7.29 million vehicles. The numbers show that Toyota Motor Corp. is on a recovery track from the sales battering it took from the global financial crisis two years ago and the blows to its image from massive recalls that began last October. Toyota acknowledged uncertainties lie ahead, including the surging yen, which erodes the value of overseas earnings, but is expecting sales to expand in Asia, South America, and other emerging markets. Still, Toyota’s car sales remain far lower than the 9 million-plus vehicles it was selling globally while on its way to overtaking General Motors Co. as the world’s No. 1 automaker. At that time, an ambitious Toyota, which had appeared unstoppable as U.S. rivals GM and Chrysler stumbled, had set a goal of reaching global sales of 10 million vehicles within several years. Toyota’s revenue for the April-to-June quarter surged 27 percent to 4.87 trillion yen ($57.3 billion) as car sales jumped in North America, Japan and other parts of Asia including Thailand and Indonesia. The only trouble spot was Europe, where auto sales were lagging partly because of concerns about Greece’s debt crisis, according to Toyota. Its quarterly profit of 190.47 billion yen ($2.2 billion) was achieved despite worries that Toyota’s recalls of popular models would hurt sales. The result was a sharp improvement from a loss of 77.8 billion yen the year before when the global recession crushed car sales. Toyota said cost reductions of 50 billion yen ($588 million) also helped its latest results, offsetting the damage from a stronger yen, estimated at 30 billion yen ($353 million). The car maker raised its profit forecast for the year through March 2011 to 340 billion yen ($4 billion) from 310 billion yen ($3.6 billion), underlining the staying power of the automaker amid fears about quality control. It increased its annual sales revenue forecast to 19.5 trillion yen ($229 billion) from 19.2 trillion yen ($226 billion). Revenue the previous year was 18.95 trillion yen. Toyota had long been lauded for creating a manufacturing system that ensured a consistently high standard of quality. But the automaker has recalled about 10 million vehicles globally since October for various problems including faulty floor mats, sticky gas pedals, braking software glitches and steering malfunctions. Its reputation has also taken a hit from more than 300 lawsuits it faces in the U.S. claiming damages for deaths and injuries suspected of being linked to acceleration problems and from owners claiming the value of their cars has diminished because of alleged defects. North American auto sales have turned around from a 30-year low in 2009, but the recovery could be fragile. Toyota’s U.S. sales in July jumped 20 percent from June because of the generous rebates being offered to appease customers worried about safety recalls. But they were 3.2 percent lower than the same month the previous year, which was before the recall crisis struck. Tsuyoshi Mochimaru, analyst at Mitsubishi UFJ Morgan Stanley Securities Co., said Toyota may lose some market share to rivals because of the recall but many consumers will see them as routine. “For most people, they are just regular recalls,” he said. “Many people will accept them as part of life.” Senior Managing Director Takahiko Ijichi acknowledged it was difficult to assess what effect the recalls had on Toyota’s latest earnings. He said Japanese government-backed incentives for green vehicles like the gasoline-electric Prius hybrid are set to end in September, and that could hurt sales in Japan. He declined to detail plans for North America, including how long rebates will last, merely expressing hopes for more growth. “We will try to regain trust from our customers as quickly as possible and we will continue our effort to improve sales,” said Ijichi. Toyota shares edged down 1.6 percent to 3,090 yen in Tokyo. ___ Associated Press Writer Mari Yamaguchi contributed to this report.

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The 10 Cars Most Likely To Be Stolen (PHOTOS)

August 3, 2010

AP — The blinged-out Cadillac Escalade SUV, a favorite of A-listers like Tiger Woods, is once again the vehicle voted most likely to be stolen, according to an insurance industry group. The F-250 crew cab pickup, Infiniti G37 two-door car, Dodge Charger with its high-power HEMI engine and Chevrolet Corvette Z06 round out the list of the top five vehicles most likely to be the subject of insurance theft claims. Least likely targets of thieves are family vehicles like the Volvo S80, Saturn Vue and Nissan Murano, Honda Pilot and Subaru Impreza. The Highway Loss Data Institute, which is part of the Arlington-based Insurance Institute for Highway Safety, calculated theft claim rates for vehicles from the 2007-2009 model years. The data reports thefts per insured vehicles on the road. Check out the Highway Loss Data Institute’s list of the cars most likely to be stolen:

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Geithner Tells Bankers Not To Fear Financial Reform

August 2, 2010

NEW YORK– Treasury Secretary Timothy Geithner traveled to New York City on Monday to tell bankers and the financial industry that new financial regulations are a good thing for business. Geithner explained to an audience at NYU that while the law’s regulations would be a “foundation of a stronger economy,” the Obama administration would seek a balance that would safeguard business. The treasury secretary’s pitch was the opening salvo in what the administration says will be an extensive outreach effort to educate the public about the new law. The Washington Post reports: “Our system allowed too much freedom for predation, abuse and excess risk,” the Treasury secretary told a crowd of 150 business executives, lobbyists and others during a speech at New York University’s Stern School of Business. “But as we put in place rules for those mistakes, we have to strive to achieve a careful balance and safeguard the freedom, competition and innovation that are essential for growth.” Even as Geithner spoke to the mostly friendly crowd in Greenwich Village, scores of people in nearby skyscrapers were looking for ways to maintain large profits despite the new rules…. At J.P. Morgan Chase, for example, more than 100 project teams are hard at work trying to anticipate the implications of the new rules and to adjust the firm’s businesses accordingly. Similar efforts are underway at other firms, with lawyers in Washington and New York scouring the legislation for their corporate clients. Geithner promised to implement the overhaul quickly and said that a top priority will be simplifying the complicated forms that consumers have to fill out to get credit cards, auto loans and mortgages. “We will move as quickly as possible to bring clarity to the new rules of finance,” Geithner said in a speech to Wall Street executives and students at New York University’s Stern School of Business. “The rule writing process traditionally has moved at a frustrating, glacial pace. We must change that.” Geithner said that officials from all the government agencies involved in financial reform including Treasury, the Federal Reserve, the Securities and Exchange Commission and various banking regulators, will set target deadlines for writing the new rules. He said that the Financial Stability Oversight Council, the new panel that will oversee the process, will develop an integrated road map for implementing the overhaul at its first meeting in September. “We want to move quickly to give consumers simpler disclosures for credit cards, auto loans and mortgages so that they can make better choices, borrow more responsibly and compare costs and services,” Geithner said. He said that one of the first things that will be done in this area will be to get input from financial firms and consumer advocates on how to combine the existing two separate and inconsistent federal mortgage disclosure forms into one new, easy-to-understand federal disclosure form. Geithner said another top priority will be to move forward with the overhaul of mortgage giants Fannie Mae and Freddie Mac, saying the administration will meet the target set in the overhaul law of presenting Congress with a plan early next year. Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. The government took over both institutions in September 2008 when they came close to collapse under the weight of rising mortgage defaults. Republicans were highly critical that the administration did not include significant reforms of Fannie and Freddie in the overhaul legislation. Geithner said the administration will address the problem, starting with a Treasury-sponsored conference on the issue on Aug. 17. Geithner said the information gained at that conference would help the administration develop significant changes to how Fannie and Freddie operate. “The system we have today is not tenable for the future,” Geithner said during a question-and-answer session. “We are going to have to bring about quite dramatic reforms.” The financial overhaul bill gives the government new powers to break up companies that threaten the economy, creates a new agency to guard consumers in their financial transactions and stiffens regulation of complex financial instruments such as derivatives. Congress and the administration were prompted to move in an effort to prevent a repeat of the 2008 financial meltdown that pushed the country into a severe recession. Geithner said one of the most important areas that the administration will address in getting the new law up and running will be in establishing in conjunction with other countries higher standards for the capital that banks must hold to provide a cushion against losses. “Capital requirements are the financial equivalent of having speed limits on our highways, antilock brakes and air bags in our cars,” Geithner said. “Part of what made this crisis so severe was that capital requirements failed to keep up with risks and failed to force firms to prepare for the possibility of a very severe recession with a substantial reduction in house prices.” Geithner said that using the powers provided by the new law, U.S. regulators will make sure that financial firms hold a lot more capital than they did before the crisis. ___ Crutsinger reported from Washington.

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Steve Parker: GM Sets Volt Price While Toyota Delays US-Built Prius

July 28, 2010

There was big electric vehicle and hybrid news Tuesday, as General Motors stuck by their guns, but Toyota seems to be acknowledging that they expect sales of all their cars, including Prius, to slow for quite some time. First, GM has announced the their “extended range hybrid EV” low emission/high mileage Chevrolet Volt will sell for $41,000 when it is introduced later this year –and that’s just the base price. We can be certain that in the great car dealer tradition, there will be a good amount of options available for the car (dealers make a lot of money on those extras and car-makers like to keep their dealers happy). That $41K tab is in somewhat stark contrast to Nissan’s recent announcement that their Leaf EV will cost under $33,000. That’s an amount which, with federal, state and local incentives, might see its true base price drop to as low as near $25,500 after those credits are applied (the incentive amount all depends what state and municipality you’re living in). Former GM vice-chairman Bob Lutz introduces the first version of the Volt to be presented to the public at the Detroit Auto Show So a base Volt, even given a buyer being able to take advantage of the full $7,500 federal incentive, and let’s say $1,500 from the state and, perhaps, county or even city, will still tip the money scales at a price very near $32,000. And that’s near the base price of Leaf before any incentives are applied. But GM, apart from Volt’s high technology, edgy styling and oh-my-gosh interior, will be depending on one main thing to draw buyers to Volt from less-expensive “pure electrics” (like Leaf and Mitsubishi’s i-MiEV), and it’s called “range anxiety.” It’s a new term in the auto world, but it means just what it says: people driving cars which use any fuel other than gasoline worry about how far they can go without running out of that fuel. Volt’s gee-whiz interior, gauges and controls should impress buyers Here’s where Volt starts to sound like a great idea: While Nissan predicts a 100-mile range per charge-up for Leaf, GM says their car will have a range of around 600 miles per gasoline tankful, that gasoline powering an engine which keeps Volt’s battery charged. Volt will also have the ability to charge its battery by plugging into an electric outlet, so it appears an owner would have a tough time running out of range in Volt. Most car-makers plan on their initial EVs being second or third commuter-type cars. And because the average American’s round-trip work commute is said to be 40 miles or under, a 100-mile range should allay any range anxiety. But Volt, at its price, size and features, is clearly being aimed at buyers as a primary family car. That $32K which an incentivized base-level Volt may actually cost, is right smack dab in the middle of the biggest part of the marketplace, where Taurus and Camry and Accord are located. GM first called Volt an “extended-range hybrid” because Volt has a small on-board gasoline engine which is used to keep Volt’s battery charged. Because there is no direct connection between the gasoline engine and the electric drivetrain, GM decided they could legitimately call Volt an electric vehicle. It seems they’ve gotten their way even though in many minds the issue is still somewhat confused. GM has seen the media pick up on the EV claim (probably because “extended-range hybrid” is long and hard to explain in articles), making their EV claim, so far, successful. Volt, which, with its small gasoline engine and electric motor and drivetrain, seems more-or-less an interim vehicle until GM comes up with their own pure EV and we’d love to see that product. Now that we know more about Volt’s price, it makes it easier to see where GM is aiming this new car and gives the competition some fodder when it comes to the cost of ownership. Prius Won’t Be Built in US In addition to GM’s pricing announcement for Volt, Toyota said on Tuesday that plans for building the Prius in the US, the car’s biggest market, have been delayed. Delayed for possibly as long as (get this) six years! The Los Angeles Times reports that, “Toyota had intended to let a thousand Priuses bloom from its new Mississippi plant. The new plan is to wait until the car is remodeled and, more to the point, to wait until the global economy is a bit more sales-friendly.” Sure, but six years!? Putting-off the Prius being built in the US is no big surprise; the very Mississippi plant where Toyota planned on putting these cars together has seen its own construction stop-and-start due to the worldwide recession and a very uncertain car market (last month, on June 17th, Toyota announced construction has resumed on the plant and the factory will produce Corollas starting in Fall, 2011). Toyota’s plug-in Prius has yet to become a reality In May, 2008, Toyota announced sales of over 1,000,000 Prius gas/electric hybrids worldwide. Sales began in 1997 in Japan and in 2000 throughout much of the rest of the world. North America was by far the largest Prius market, with almost 600,000 of those initial million being sold here. So slowing the ability to build those cars in the US shows Toyota’s worries about the future; and not only their own future specifically, but that of the entire industry. Beginning in the 1980′s, the largest import car companies decided to “build ‘em where we sell ‘em” and in theory it was a good idea. It would cut all sorts of costs from building the vehicles and get them to markets much less expensively than shipping them across an ocean. Car-makers went on a tear, opening plants all over the world (and experts say the average car-making plant costs about $1 billion). In the US, import companies have set-up shop in what the industry calls “greenfield” areas of the country like Mississippi. But now they are seeing their rapid growth through the 1980′s and ’90s and early part of this century challenged by the realities of the worldwide economy. Interior of the new 2010 Prius Greenfield describes, to car makers, an area low on jobs and as devoid of unions as much as possible, mostly in our nation’s Southeast and Midwest. For instance, Toyota has plants in, among other places, Indiana and Texas, Honda is a major economic force in Ohio and Nissan builds many of the cars and trucks it sells in the US in Tennessee. Some may remember that even Volkswagen had a plant (which they’d bought from Chrysler) in the US during those years in Pennsylvania which built their ill-fated pickup truck. The plant closed in 1987 but now they’re coming back to build in the US –in Tennessee. But many of these plants are now being seen possible future white elephants. As the world gets greener, but the recession hangs on (and maybe comes back), even the building of the world’s most popular low emissions/high mileage car has been put on hold in its largest market.

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GM’s Chevy Volt Electric Car Will Cost $41K

July 27, 2010

DETROIT — General Motors Co. said Tuesday its Chevrolet Volt electric car will cost $41,000 when it goes on sale in November. While the price is about $8,000 more than its closest rival, the Nissan Leaf, GM said it will offer a $350-per-month lease deal that’s essentially equal to the Leaf’s. That will put the battery-powered Volt within reach of many people, GM said. Both cars also are eligible for a federal tax credit that will cut their prices by $7,500. The Volt’s price would fall to $33,500 while the Leaf’s would drop to $25,280 from $32,780. Some states, such as California, Georgia and Oregon, offer additional tax breaks that lower the price further. The Volt, a 4-door sedan, runs on battery power for up to 40 miles but has a small gasoline engine to generate electricity once the battery runs down. The gas engine can generate power to run the car another 300 miles. That’s a big selling point because some drivers worry about the battery going dead during trips. This so-called “range anxiety” dogged GM’s experimental EV-1 electric car in the 1990s. To give the car wider appeal, drivers must know “they’re not going to get stranded,” said Joel Ewanick, GM vice president U.S. marketing. Nissan’s Leaf, which goes on sale in December, can go up to 100 miles on a charge. The car doesn’t have a gas engine and must be recharged once its battery is depleted. Nissan spokeswoman Katherine Zachary said the Leaf itself emits no pollution and is designed for people whose daily travels are within its range. GM’s $350-a-month lease deal is for 36 months with $2,500 down. Nissan’s lease plan is $349 a month over the same period with $1,995 down. The lease deals are particularly appealing because they are close to those offered with conventional cars. But depending on how far they drive, drivers would not have to pay for gasoline. GM said it would cost about $1.50 worth of electricity to fully recharge the Volt each night. GM earlier this month offered an eight-year, 100,000 mile warranty on the Volt’s battery to allay fears that owners could get stuck with the hefty price of replacing the power pack. Nissan matched that warranty Tuesday, a day that saw competing electric car announcements from the two automakers. GM will sell the Volt first in California, then move to New York, New Jersey, Connecticut, Washington, D.C., Michigan and Texas. Orders are being taken at 600 Chevrolet dealers in those states. But in 12 to 18 months, dealers nationwide should offer the cars. Nissan said Tuesday that 17,000 people have placed orders for the Leaf so far in the U.S. Buyers in California, Washington, Oregon, Arizona and Tennessee will get the first Leaf deliveries in December. The Leaf will go on sale in other markets through 2011 and be available nationwide by the end of next year.

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George Lakoff: Save, Baby, Save: A Barrel Saved Is a Barrel Not Needed — Ever

July 14, 2010

The Death Gusher in the Gulf should tell us to end offshore drilling forever. The reason is simple: Systemic risk ! Better regulations won’t end what went wrong: Corporate greed, cutting corners to save money, lack of coordination among subcontractors, unforeseen factors, and just plain incompetence in private industry. Add that to isolated deep drilling sites in deep ocean where no human being can go, bad weather, and oil exploding out at 10,000 pounds per square inch, and you will virtually guarantee more Death Gushers. Do we really need that oil? Could we make do with none of it? With money, “A penny saved is a penny earned,” as Ben Franklin noted. But saving oil — not needing or using it — is a much better deal: it is cumulative. An alternative exists, though it is badly named: “energy efficiency” and “conservation” miss the general point. A high percentage of oil and fossil fuels are wasted. Huge efficiency gains per barrel are immediately possible with the right investments. What is missed is the most basic of truths. Oil savings keep accumulating. Take insulating a building. It will save a certain number of barrels of oil this year. And the same number next year. And the year after that, and after that, year-after-year! The barrels of oil saved multiply! Without the insulation, those barrels of oil would have to be drilled year-after-year, drill and drill and drill versus save and save and save. Every year, as energy is saved, fewer barrels are needed. Moreover, offshore drilling is very expensive, even without death gushers. And it takes time – year after year. What if that cost and that time were invested cumulatively in NOT using oil? Suppose we ended offshore drilling and re-invested the equivalent amount of money and time in forms of “energy efficiency.” Would that offset the number of barrels drilled? The Mismeasure of Energy Efficiency The Department of Energy has misframed the energy efficiency issue. The calculation made is in money, not in barrels of oil saved. How many barrels of oil will the 2010 energy efficiency programs save not only in 2010, but in 2011, 2012, and so on … for, say, the next 30 years. And if we putting the drilling investments into all the job-creating ways of saving energy, how many barrels will be saved on 2011′s energy efficiency programs over the following 30 years. And so on. Will those multiplied, accumulated savings tell us that we don’t need to do offshore drilling after all? Or that we can cut it down significantly? And how many jobs will be created? Real, good-paying, non-exportable jobs! We need to know. As soon as possible. It may be the case that ending offshore drilling is good, not bad, for the economy – and the future of the world. Secretary Chu, please add up our energy efficiency savings in terms of barrels of oil saved, with cumulative estimates over the next 30 or so years. I make this suggestion with the greatest respect for programs already in motion from energy efficiency and conservation funding. Development of an energy efficiency and conservation strategy Building energy audits and retrofits, including weatherization Financial incentive programs for energy efficiency such as energy savings Performance contracting, on-bill financing, and revolving loan funds Transportation programs to conserve energy Building code development, implementation, and inspections Installation of distributed energy technologies including combined heat and power and district heating and cooling systems Material conservation programs including source reduction, recycling, and recycled content procurement programs Reduction and capture of greenhouse gas emissions generated by landfills or similar waste-related sources Installation of energy efficient traffic signals and street lighting Installation of renewable energy technologies on government buildings Any other appropriate activity that meets the purposes of the program and is approved by DOE Add to that all the many ways that oil is used in agriculture and could be saved — fertilizers and pesticides could be eliminated by organic farming methods, as well as transportation fuel that could be eliminated by the localization of food production. Instead of investing in offshore oil, we should be investing in not needing oil . Think about greening our long-term infrastructure — our buildings, our cars, our public transportation, our industry, our military bases, our homes. It saves a certain number of barrels of oil right away, barrels that need not be drilled the first year. And it keeps saving that many barrels of oil every year. That means that the yearly oil-barrel savings accumulate; and less and less oil has to be drilled. Meanwhile, good meaningful jobs increase here, green jobs that cannot be outsourced. The economy does not lose, it benefits. And so do we all — no risk of future offshore oil-drilling disasters, a serious move to lessen climate change and abate future climate disasters (e.g., hurricanes), a cleaner environment. This, of course, means a decrease in oil company profits. Unless the oil companies seriously invest in the development of alternative fuels and oil-saving industries. The Gulf Oil-drilling Disaster should teach us many things, among them: Corporations are too greedy, too powerful, and all too often incompetent. We cannot depend on oil companies to protect us and our environment. There is no way around it; oil is dirty, morally as well physically. We are told that oil from offshore drilling is necessary, as we transition to new forms of energy. But that estimate does not include the cumulative year-after-year savings of not needing oil . Imagine this: Instead of investments in the cost of drilling in the deep ocean and subsidizing oil companies, instead of paying for oil year after year, invest in jobs that would eliminate oil needs, as suggested by the energy department programs listed above. Money is fungible: A penny saved is a penny earned. Oil is cumulatively fungible: A barrel saved is a barrel not needed, year after year after year. The lesson of the Death Gusher is clear: SAVE, BABY, SAVE!

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Steve Parker: Why Is Ford So Successful?

July 2, 2010

During the past year, General Motors went bankrupt, Chrysler found itself owned by Italy’s Fiat. Yet Ford seems to be hitting home runs, knocking them out of the park with regularity. In fact, all of Detroit fared alright in the recent J.D. Power Initial Quality Study (IQS), the benchmark for quality in the auto industry. It measures “problems per 100 cars” as reported by owners who have had the cars for 90 days. New 2009 vehicles sold by Chrysler, Ford and GM’s domestic brands have improved in initial quality by an average of 10 percent, compared with 2008, surpassing the 8-percent rate of improvement by the industry overall. Imports still garnered the most segment awards from Power, but the IQS shows that the quality gap is still closing between domestics and imports, and things are moving in the right direction for Detroit. This is pretty remarkable considering the miserable, nightmarish condition of the industry the past two years. For quality to continuously improve speaks volumes about parts suppliers, assembly line workers, the factories where they toil and the stylists, engineers and designers who have all come up with some of the best cars and trucks the marketplace has ever seen. All new Taurus Ford won three of the IQS segment awards, the Mercury brand one. Ford’s unique Edge tied for first place with Chevy Trailblazer and Toyota 4Runner in the Midsize Multi-Activity Vehicle segment. In the Midsize Sporty category, Ford’s 2009 Mustang got the highest marks and in large pickups, the ubiquitous Ford F-150 took home the top honors for the Dearborn, MI-based car maker. While Ford did best among the domestics in the 2009 IQS, another announcement they made this past week also spoke to the company’s recent success. That news was Ford will pay about $3.8 billion in cash to a union health-care fund, a sign the automaker is confident that CEO Alan Mulally’s focus on the namesake brand will produce profits. Ford sales rose 13% in June of this year over June, 2009. There are signs, though, that consumer confidence may be getting shaky again and the industry overall might be in line for another recession-based loss of sales and profits. But in the meantime Ford is flying relatively high, and it’s not just all about the product. 2011 Ford Fiesta In late 1989, Ford paid nearly $2.5 billion to acquire Jaguar, then a long-suffering car maker whose future looked none too bright. Legendary poor quality had dogged Jaguar for decades, and they didn’t have the money or the technology to make a fresh start with all-new models. Ford also bought Aston Martin (1994) and Range Rover (2000). All three companies improved in quality and customer service after their purchase, though a friend of mine still describes Range Rover interiors as looking like “an unfinished high school metal shop project”. In fact, in one of the first Power IQS surveys in the early ’90s, Jaguar was named the top brand in the world based on its improvement in the study, while the company had been near-last before the Ford purchase. Those buys by Ford came in handy before the worst of the recession hit. In mid-2008, Ford got $2 billion while off-loading both Jag and Range Rover to India’s Tata, maker of the super mini Nano which has gained much attention worldwide for its small size and even smaller price. Ford was also able to sell Aston Martin to a consortium of engineers and racers (and banks). Jaguar’s brand win was the first time people took a very serious look at the Power IQS and helped establish the J.D. Power brand with the public just as Power’s survey results created a new life for Jaguar. Power had developed a method which, for the first time, quantified quality, giving the public a one-stop shop for determining the likelihood of problems with a particular car or truck. Ford’s 2010 Super Duty F-250 Power does not test cars; it uses registration rolls from every state to survey a set amount of owners of most all makes and models sold in the U.S. For this IQS, Power says they just spent nearly six months sifting through more than 80,000 surveys conducted with verified owners of 2009 model year vehicles. Ford’s Fusion line-up (which includes a hybrid), the all-new Taurus and Euro-bred Fiesta and of course that F-150 truck are keeping Ford on the up side. Creative marketing (such as their tie-in with American Idol and the company giving new models to under-30 types before they’re on-sale) have also been top drawer, currently some of the best in the business. Ford had one other win in the Power IQS. That was the Mercury Sable, the gussied-up version of the Taurus. It won in the Large Car segment, gaining traction with the 2009 model from 2008, when it placed second in class. Of course the irony is that Ford has officially killed their Mercury division, slating it to be gone within the next two years. Ford Transit Connect

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Tesla Unveils The Roadster 2.5 (PHOTOS)

July 2, 2010

Two days after it’s much-ballyhooed public stock offering , Tesla has released details of the company’s latest electric car model, the ” Roadster 2.5 .” The Roadster 2.5 boasts a 250-mile maximum driving range, a new front bumper and grille with diffusing vents, a rear air diffuser, “directional” forged wheels and a modified power control system that permits “spirited driving” in even exceptionally hot climates. But Fortune’s Adam Lashinsky is skeptical of the company’s “save-the-world” campaign that has gained so much attention from investors and the media. Says Lashinsky: “While Tesla drivers may pat themselves on the back because their cars don’t emit foul greenhouse gases, half the electricity needed to charge the batteries that make the cars run comes from burning coal.” According to Lashinsky, if this country were to embrace electric cars in a big way, we’d likely make our emissions situation worse, not better, for all the coal we’d need to burn. Ok, maybe Tesla has yet to figure out how to eradicate the automobile’s carbon footprint, but the car is visually impressive. Check out pics of Tesla’s newest model, the Roadster 2.5:

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David Isenberg: The Perils of LOGCAP Job Seeking

June 30, 2010

I have often mentioned the logistics side of private military contracting. It would be difficult not to, as it constitutes the overwhelming share of the industry And when you talk about logistics work, at least for the American military, you can’t avoid talking about LOGCAP , the mother of all logistics contracts. Although it has been awarded to DynCorp in the past it is primarily associated with KBR, which has been implementing the contract in Iraq, Afghanistan, Kuwait, Djibouti, and Georgia. Currently LOGCAP is split between KBR, DynCorp, and Fluor Corporation. Over the years, there have been lots of problems with LOGCAP contracts, ranging from cost over runs to flagrant examples of fraud waste, and abuse, not to mention things like rapes of various LOGCAP workers. One has only to go to a site like Ms. Sparky to get the latest on various misdeeds by KBR and other contractors. Is this the result of inept workers or indifferent mismanagement, or something else? I frankly don’t know but it is worth taking a moment to ponder the process LOGCAP job seekers go through in their quest to get employed. According to Bruce Diggs, who runs the LOGCAP 4 JOBS site this is not an industry for the naive. There have been countless scores of ill-prepared people seeking to better their lives, who whether by naïveté or wide-eyed innocence, have come onto the LOGCAP project with the misguided notion that there would be an atmosphere of patriotism, camaraderie, or esprit-de-corps of cooperation and professional consideration. An environment in which one would interact with colleagues and enjoy support, mutual collaboration — even friendship. One team, one fight… that sort of thing. LOGCAP is not this kind of environment Anyone who arrives on the project with this Pollyanna attitude is an ingénue in denial and will quickly discover that, for the most part, the stark reality on LOGCAP is totally the opposite of a collaborative environment. Unquestionably, these people are destined to become fodder for the blood-thirsty opportunists who will step on the backs of whoever is necessary, in order to climb what they perceive as the corporate ladder. Are you feeling me? Be Warned — You Will Deal With Very Difficult People. You will encounter people in positions of authority who could never be in comparable positions back in the so-called “real world” , as they use bluff and bluster to cajole, threaten and intimidate those around them in an attempt to conceal their own ineptitude and inability to perform the job. Compounding the problem is a system rife with favoritism, quid-pro-quo (this for that), back-stabbing, under-handedness and nepotism, in which those who possess genuine talent and leadership skills are dubiously viewed as a threat to be eliminated. This posse is popularly known as ” the good ‘ol boys .” Now, with the domestic economy being what it is, dismal, more people than ever are looking to get a LOGCAP job. Diggs writes: In a bid born primarily of financial necessity, ten’s of thousands of American citizens increasingly apply to scores of Logistics Civil Augmentation Program (LOGCAP) companies contracted to provide logistical support to U.S. and Coalition troops deployed to the war-weary nations of Iraq and Afghanistan. Especially so for Americans, the risk of living and working in a war zone where dangerous and potentially life-threatening conditions exist and are dealt with on a daily basis, are offset by the promise of unrivaled compensation packages in their respective career field, clearly unattainable in the U.S.A. For example, a truck driver struggling to bring home $40,000 a year in the states can more than triple their income by working on LOGCAP starting at $130,000 a year. With unemployment in the United States at the highest rate in more than two decades, competition for these high paying jobs has only intensified, as hundreds and even thousands of applications are received for each advertised position, particularly with regard to LOGCAP employers known as the Big 3, namely Fluor, KBR, and DynCorp. …. Now, with the current economic downturn in the U.S., people are clamoring to get onto the LOGCAP project, sometimes in a desperate bid to simply hold on to everything they have worked for their entire life – their house, their land, their cars – all of their physical possessions. Consequently and because of the sheer overwhelming number of applicants, the recruiters tasked with matching candidates with job requisitions can afford to be extremely selective as applicants vie for the tantalizing financial carrot of economic prosperity dangling before them. Interestingly enough, there seems to be no demarcation of applicants in terms of political affiliation. Democrats, Republicans, Independents, Libertarians, doves, and hawks alike are found in equal numbers working on LOGCAP, as the common bond shared among them all is their elusive quest for financial solvency, or at the very least, equilibrium. “Back in the day”, if you had a pulse and a passport and were brazen enough, you had a relatively good chance of being hired – but this is not your fathers LOGCAP anymore. Now, you nearly need a Hollywood agent to promote you, and that is where the crucial importance of having a laser-focused resume designed to make one standout from the crowd comes in. Of course Diggs is promoting his own self-interest by mentioning the resume, as part of what he does for a living is helping people write the type of resumes which LOGCAP recruiters look for when screening potential candidates. Still, his basic point is correct; it is all about the money and the LOGCAP environment allows for all sorts of manifestly unqualified people to have management jobs they would never have in civilian life. Thus, maybe it is not a surprise that there are many scandals associated with LOGCAP. This, by the way, is not a slam on the average LOGCAP worker. I believe the vast majority do the best job they can in difficult conditions. But they unquestionably deserve better leadership than many of them get.

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From Fluor to Booms to Costner, BP Cleanup Means Some Clean Up

June 18, 2010

By Mark Drajem and Katarzyna Klimasinska June 18 (Bloomberg) — Michigan’s depressed economy nearly toppled Grand Rapids-based awning maker Prestige Products. In April, the company’s fortunes changed when executive Brian Rickel got a phone call from an old contact at BP Plc . It was 10 days after the BP-leased Deepwater Horizon rig had exploded, and the company needed help containing the gush of oil. Six weeks later, Prestige has rented a factory, filled it with millions of dollars of new equipment, and hired 74 workers, up from six in April. Using material similar to the vinyl in awnings, Prestige is churning out 12,000 feet a day of booms, the floating barriers that help contain oil slicks. Prestige hopes to double its output, if it can hire 50 additional workers. “We’re in Michigan,” Rickel said in an interview. “The economy has been horrible for everybody here. But the expertise is here and we cashed in on it.” The spill in the Gulf of Mexico will inflict billions of dollars’ worth of damage on the economies of Louisiana, Alabama, Mississippi and Florida by destroying fisheries, halting oil drilling, and scaring off tourists. But for scores of businesses — from small fry like Prestige to construction giant Fluor Corp. — there’s money to be made in the aftermath of the worst oil spill in U.S. history, Bloomberg Businessweek reports in its June 21 issue. Help Wanted Signs It’s a dichotomy present across the Gulf region. A sign on a shuttered seafood shop in Grand Isle, Louisiana, blames BP and President Barack Obama for its woes. Nearby motels and repair shops display Help Wanted signs for maids and mechanics to help with the crush of cleanup activity. Local caterers are aggressively advertising, trying to persuade BP to hire them to feed spill-response workers gathering on the coast. Rene Vegas, owner of Bridge Side Cabins & Marina, also in Grand Isle, says his summer sport fishing season is lost due to the fast-expanding oil slick. So, like many area businesses, he’s shifting his focus. Vegas has begun stocking rubber boots, hard hats and ropes to sell to cleanup crews. Troy Petrovich, co-owner of T+T Boat Rentals in Buras, Louisiana, has seen demand for his marine-related services spike. Before the spill, “I kept calling, putting out more phone calls” in search of oil-company customers, Petrovich said. “Now my phone is ringing pretty steady; everybody is looking for boats.” T+T has rented out all 10 of its boats to oil companies and raised the daily rate to $450 from $325. ‘Mop Up Oil’ Plenty of other companies aren’t waiting for business to come to them. Shortly after the spill began, MOP Environmental Solutions Inc. , a Bath, New Hampshire-based maker of a substance it claims absorbs up to 30 times its weight in oil, sent four employees to the Gulf to conduct demonstrations for cleanup officials. The MOP workers came armed with fish tanks, oil and the absorbing material in the trunks of their cars. Some of the company’s shareholders hired a local pilot to fly around the region with a banner reading, “We mop up oil.” After weeks of being pestered, BP purchased its first three truckloads of the oil-absorbent material for $155,000, MOP President Charles Diamond said. The company didn’t have to wait as long to get a full hearing as actor Kevin Costner . Costner’s company, Ocean Therapy Solutions Inc., uses barge-based turbines to separate water from oil. He first demonstrated the centrifuges to BP officials at a technology conference 10 years ago, but wasn’t given the go- ahead to test the gear in open water until earlier this month. Now Ocean Therapy says it has sold 32 of the centrifuges to BP. Corexit, Skimmers Another beneficiary of the cleanup is Nalco Holding Co. More than one million gallons of Nalco’s chemical dispersant Corexit, which breaks up oil slicks, have been used in the Gulf. The company sold $40 million of Corexit to BP through the week of May 15, according to spokesman Charlie Pajor . Some faraway businesses are profiting from producing or deploying equipment to get rid of the oil residue. The Slickbar Products division of Finland’s Lamor Corp. sent employees to Mississippi to help install its skimmers, which collect oil from the water, onto shrimp boats. Its oil-boom plant in Seymour, Connecticut, is operating at a pace not seen since the Exxon Valdez spill in 1989. Slickbar has made more booms in the past month than it had in the previous 12 months, Chief Executive Officer Stephen Reilly said. There’s activity on land as well. Irving, Texas-based Fluor has a contract to supply BP with workers to clean up tar on Alabama and Florida beaches. So far it has hired 1,200 workers in Alabama and 2,400 in Florida, all of them off unemployment rolls in those states, said spokesman Brian Mershon . Fluor plans to increase its Florida workforce to 4,100. Birds, Shipwrecks The Shaw Group Inc., a Baton Rouge-based power-plant builder that has a $360 million contract to construct barrier islands along the Gulf Coast, is hiring staffers to count birds on nearby islands and map shipwrecks. The cleanup rush isn’t generating just blue-collar work. The Pensacola, Florida, law firm of Levin Papantonio Thomas Mitchell Echsner Rafferty & Proctor has hired an airplane to fly a banner over beaches reading “Prosecute BP” and is offering free claims evaluations. “There are probably hundreds of lawyers who are working to generate claims on the BP spill,” said Fredric Levin, a partner in the firm. Washington’s K Street lobbying crowd also stands to benefit as federal regulators crack down on drillers. Transocean Ltd., owner of the Deepwater Horizon rig, has hired former Oklahoma congressman Bill Brewster ’s firm, Capitol Hill Consulting Group , to represent its interests, according to a regulatory filing on May 10. BP Employees Litigation or legislative changes may generate years of billings. For now, businesses in the affected area are taking advantage of the spill work while they can. Marina owner Vegas says he has as many as 60 BP employees and contractors staying at his marina, which normally caters to sport fishermen and beachgoing families. “The motel is booked, the motel is doing fine,” he said. “But when they leave in January or December, we’re in trouble.” To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net

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Steve Parker: Another U.S. car division bites the dust: Mercury

June 4, 2010

It’s official: another U.S. car brand has been killed. Going the way of Saturn, Oldsmobile, Pontiac, Hummer and Saab (so far), this time it’s Mercury, part of the Lincoln-Mercury Division of Ford Motor Company. Some of the above have been sold-off, but still killed in the U.S. , though. This past week, with Ford flying high and dealers relatively happy with their products, Alan Mulally and other top Ford execs figured it was a good time to kill the Mercury division and pay-off their dealers. Most all Mercury stores are also Lincoln dealers, so no one will be missing any meals. From musclecar days comes this 1968 Mercury 428 Cyclone; at one time Mercury was big into NASCAR Someone tell me what a ‘Mercury” is, what are its values, its reputation? In other words, what does the name Mercury mean to the car-buying public? I contend it’s been a long, long time since Mercury had its own solid, well-defined image. But was it an upscale Ford or a downscale Lincoln? No one seemed to know since Mercury was founded in 1935 by Edsel Ford and came to market in 1939. After WWII, when sales of all cars were booming, Mercury was incorporated into a single division with Lincoln, and then the customer confusion really began. Bad-boy Mercury’s were all the rage throughout the 1940s and ’50s with their customized gangster look and appeal and an overall sinister-appearing exterior. Mercury gained its own acceptance into the world of custom cars through the work of customizers and body-builders throughout the country who saw special potential in the cars. A “lead sled” Mercury owned by Bob Hirohata (the Hirohata Mercury) is one of the best-known and still-extant custom cars of any kind. A Bad Boy 1949 Mercury Though some of the facts about the Hirohata Merc may have been lost to history (as often happens with custom cars), the Mercury was built by Sam Barris, brother of the well-known George Barris, who to this day calls himself, “The King of the Kustomizers.” So Mercury had a shot to differentiate itself from boring Fords and expensive Lincolns, but the division never capitalized on the vast numbers of young people, potential future customers, who liked the Mercs they saw at car shows and in movies and TV shows. But the window closed in the mid-’50s and since that time no one really knew what a Mercury was. Mercury’s been foundering around for the past 20 years or so, offering nothing more exciting than gussied-up versions of existing Ford products; Mercury has no one model specific to their division alone. Just a few years ago, actually for what seemed like five minutes, Ford scion Bill Ford Jr. ascended to the top level of corporate management and put a large emphasis on ecologically friendly cars and trucks. It didn’t take long for someone at Ford to remember that until EVs are here and common on roadways, the company still needed to build cars, the kind people had been buying since Ford was created in 1903. 2010 Mercury Milan hybrid Then, recently, Elena Ford, a great-great granddaughter of Henry the First, and the only female Ford to ever work directly for the company, was put in charge of Global Marketing for the company as a whole, and she was also supposed to work some special magic with Mercury. Well, she didn’t work the kind of magic the Board of Directors had in mind, because not long after she took over the Mercury responsibility the rumors were flying about the end of the division. After Henry Ford’s son Edsel started Mercury so many decades ago, perhaps the height of irony was that after the failure to thrive of the car called the Edsel, which happened in just three years in the mid-’50s, it was folded into Lincoln-Mercury and the division was known for a short time as the Mercury-Edsel-Lincoln division. A very short time. The trouble for Mercury all started because in the early ’50s, the Ford family decided the company could use a cash infusion to help them develop and build more new models and be more similar to G.M. So company stock, which had been owned exclusively by the Ford family until that time, was offered to the public and you can imagine the excitement about the chance to buy part of a great American industrial corporation. Yet rather than taking that new money and making Edsel a winner (the company definitely undelivered on what they’d promised Edsel would be) and create a strong image for Mercury, Edsel bombed and Mercury was as lost as ever. And that single missed opportunity branded Mercury as the “What the hell is it?” division for all time. It’s a lesson other car-makers have learned the hard way, too: buyers want a car that makes a definite statement, which knows its place in the market. A perpetual question mark like Mercury has absolutely no chance of survival in a marketplace that’s smaller and more focused than ever before. Mercury, we still hardly know ya’.

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Gilbert B. Kaplan: Let’s Move the iPad Back to America

May 28, 2010

Corporate citizens like Apple have a greater responsibility than just making money for their shareholders. They have a responsibility to the future of this country. Given the problems that are occurring at the Foxconn plant where they have been subcontracting iPad production, they should fulfill their responsibilities and move the production of the iPad back to the United States. Let’s first look at what’s gone wrong at Foxconn, the sprawling subcontracting plant where iPads and other high tech products are made in Shenzhen, north of Hong Kong. Let’s look at the most fundamental point first, at least as it relates to the United States. That is that the workers at Foxconn’s plant are paid $130 a month. Assuming that they work four fifty hour weeks a month, this translates to a wage of 65 cents an hour. That is basically a slave labor wage, at least as compared to the wages in western markets where the iPad is sold. How can we continue to tolerate a trading system that not only allows this, but in fact encourages it? It is true that workers in China seem to want these jobs because the alternative is even worse, but even that conclusion has now been thrown into doubt. If it’s such an ideal career path, why have ten workers thrown themselves off buildings at the Foxconn plant (nine died and the other suffered severe injuries), why have their been reports of security guards abusing workers, and why has the work been described as relentless, as “making people numb,” as turning them into machines? It is a scandal that this is where the high tech goods that people across America are enjoying are being made. And Apple does not need to make them there. The classic economic argument that the very low wages are economically necessary for a product like the iPad simply makes no sense at all. iSuppli, a well respected international economics firm, estimates that the cost of manufacturing including labor in the iPad, is about $10 in a product that retails for about $600, in other words less than 2% of the price. And the profit Apple makes on the iPad is over $300 an item. Even if this $10 manufacturing cost (which includes such other things as factory overhead and energy costs) were doubled or tripled or quadrupled by paying a U.S. worker a reasonable wage and helping restore the U.S. economy, Apple’s profits would still be enormous. About 100 years ago Henry Ford realized you cannot have a sustained industrial economy if the people who make goods don’t have enough money to buy them. So he paid his workers enough money that over time they could buy his cars, buy their homes and move into the middle class. Apple, now the largest technology company in America, is trying to squeeze every penny it can out of the U.S. consumers, and give nothing back, not even a manufacturing job in Silicon Valley or somewhere else in the United States for people making the iPad. 65 cents an hour is a better wage from their point of view. I’m a lawyer and I like to make a good income. I guess I should try and figure out how to pay my employees 65 cents an hour too. One of the saddest footnotes, to me, in the whole Foxconn suicide story came from a nonchalant comment made by one of the Foxconn employees who an AP reporter interviewed next to the company swimming pool. The pool was supposedly built for the workers. But the worker commented that the pool closes at 9 pm, and she gets off too late to ever use it. It was sad both because this is just part of the whole Foxconn picture, unending routine, depersonalization, and migrant workers coming to Shenzhen with no way out. But it was also sad because it appears that Foxconn has built a Potemkin village, a fake façade, to appeal to U. S. outsourcers and U. S. journalists, and until recently, we all bought it.

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Daimler, Buffett-Backed BYD Set Up China Venture to Develop Electric Cars

May 27, 2010

By Chris Reiter May 27 (Bloomberg) — Daimler AG , the world’s second- largest manufacturer of luxury cars, and BYD Co. , the Chinese automaker backed by billionaire Warren Buffett , set up a 50-50 joint venture to develop electric cars in China. “Our new joint venture is well positioned to make the most of the vast potential of electric mobility in China,” Daimler Chief Executive Officer Dieter Zetsche said in an e-mailed statement today. Daimler and BYD plan to invest 600 million yuan ($88 million) in the venture. Daimler is pushing into electric-vehicle production as part of a challenge to Bayerische Motoren Werke AG for leadership in the luxury segment. BMW will introduce an electric-powered city car by 2013 and is working with partner Brilliance China Automotive Holdings Ltd. on battery-powered models for the country, which became the world’s biggest auto market last year. China’s government may announce subsidies in 2010 to encourage the use of cleaner vehicles. The country is likely to account for at least 25 percent of global demand for battery- powered models in 2015, according to a forecast by J.D. Power & Associates. “China is seeking to make itself a global leader with this technology,” Ben Asher, an analyst with J.D. Power in Bangkok, said in a phone interview before Daimler and BYD’s announcement. “Other countries don’t have the ability to strong-arm volumes like China.” Part-owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., BYD began mass production of the world’s first plug-in, gasoline-electric hybrid vehicle in 2008. The manufacturer, which has its headquarters in the southern Chinese city of Shenzhen, signed an agreement with Volkswagen AG in 2009 to explore cooperation in areas including hybrid cars and lithium-battery electric models. E6 Electric Car BYD plans to start selling the E6 electric car in the U.S. this year and in Europe next year. The company said on May 20 that it has an agreement to deliver at least 560 E6s to a taxi operator in Shenzhen in 2010, with 40 of the cars already in use as taxis in the city, as part of an effort to encourage individual purchases. Daimler ’s electric-vehicle strategy includes large-scale production of a battery-powered version of its Smart minicar starting in 2012. The company began assembling about 1,000 electric versions of the urban two-seater in November 2009. Daimler also plans to build more than 500 electric-powered Mercedes-Benz A-Class cars this year. The carmaker will make lithium-ion automotive power packs in a joint venture set up in late 2008 with Evonik Industries AG, Germany’s largest specialty-chemicals maker. Daimler also holds a stake in Tesla Motors Inc., the Palo Alto, California- based maker of electric sports cars and the battery supplier for the electric Smart. — Tian Ying in Beijing and Liza Lin in Singapore. Editors: Chad Thomas , Kenneth Wong To contact Bloomberg News staff for this story: Chris Reiter in Berlin at +49-30-70010-6226 or creiter2@bloomberg.net ; Tian Ying in Beijing at +86-10-6649-7571 or ytian@bloomberg.net .

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Ian Gary: Will Chevron Heed the Call for Transparency?

May 25, 2010

Hundreds of Chevron shareholders will descend upon Houston this week to participate in the oil company’s annual general meeting. In the past year, we’ve seen the Huffington Post cover the oil industry and how it affects consumers – from the rise and fall of volatile gas prices to the most recent devastating Gulf of Mexico oil spill. Reading these stories, we can see how this billion-dollar industry has benefited Americans with jobs and fuel to heat their homes and run their cars. But the oil spill has us wondering, what about the adverse effects of the oil industry itself? Who truly benefits from its riches and who suffers the consequences of exploitation? Many communities along the Gulf Coast are yet again facing a threat to their livelihood as oil spreads across the ocean and begins polluting the shoreline. The spill shows us just how dearly local people and the environment can pay for the consequences of nearby oil projects that provide little local benefit. We must stand with these communities to support their right to a full recovery — first from Katrina and now from an oil company. But if corporate neglect and inadequate government response is the story line in the United States, what about the communities overseas that have little or no support from their governments? In 2008, Chevron paid more than $40 billion in taxes to governments around the world. At the same time, more than half of the world’s poorest people live in countries rich in oil and mineral resources, including many countries where Chevron operates. Vulnerable communities are dealing with the environmental and social effects of oil and mining projects, but they are often not benefiting from the revenues coming into their country. Managed properly, oil revenues can contribute to economic growth and poverty reduction. However, history has shown that oil company payments to governments are often kept secret, leading to embezzlement, corruption, and revenue misappropriation, which in many cases, has prevented oil revenues from contributing to economic development in these countries. This is a tragic paradox that must be addressed. Americans have a stake in seeing oil wealth overseas used well. In countries such as Nigeria, grievances over corruption and environmental degradation have led to protests and conflict. American oil workers have been kidnapped, and last year, one million barrels of oil were not produced because of instability in the Niger Delta. This means lost energy and lost jobs for many Americans. The shareholder meeting in Houston is an opportunity to help shed some light on secrecy in the oil industry. A group of shareholders filed a proposal with Chevron calling for a policy of publicly disclosing payments made to governments where the company operates. By publishing this information, Chevron would promote the rights of citizens in oil-rich countries by providing them with vital information, so they could hold their governments accountable for using these revenues for essential services like jobs, education, and healthcare. Chevron can be a leader in the oil industry by supporting transparent and accountable practices that would not only help these vulnerable communities, but also protect company investments and stabilize energy prices for consumers. This effort would go a long way toward improving Chevron’s relations with host communities and, in the long run, strengthening Chevron’s capacity to obtain legal and social “license to operate.” Unfortunately, Chevron management has failed to recognize the benefits of being a leader on payment disclosure and advised shareholders to vote against the shareholder proposal. We encourage Chevron shareholders to join us in support of transparency to break the cycle of secrecy that has undermined development, democracy, and human rights for decades. For more information about Oxfam America’s work to promote transparency in the oil, gas, and mining industry, visit www.oxfamamerica.org/rights-resources.

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