Workshop In An Alternate Homepower Environment

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<snip>

Unfortunately there may be no solution in the sense of "saving" GMC, Ford, American, Delta, Northwestern, Boeing, Lockheed, etc. etc. etc. All appear to be in the same situation as were the steel companies, i.e. terminal H.I.V. patients. Like the typical HIV patent, these companies sought immediate gratification at the expense of their long-term survivability, using credit to support their "lifestyle," using derivatives as their "crack cocaine."
Congress is currently nibbling around the edges of this critical problem by holding hearings into the possible impact on the PBGC if one or more of these companies/sectors should collapse. The problem is that it is a question of "when," and "in what sequence," *NOT* if.
Most of the underlying real assets such as physical plant, tools and dies, knowledge base, customer base, and production/operation expertise appear to be largely intact although obsolescent. However, these have been "submerged" under mountains of debt and neglect while "management" chased the latest fad, dissipating any real income while not paying stock holder dividends nor reinvesting in new products, equipment, etc. in their core/foundational business. Additionally, these "assets" have significant value only for an on-going business.
While automobile/truck manufacturing, and the design, production and operation of jumbo civilian aircraft appears to be economically viable in the United States, it does not appear the existing cadre management (and corporate culture) of these organizations is capable.
"Desperate situations demand desperate remedies" is a time-proven adage. Given the disastrous impact that the cascading failures of these major players will have on the U.S. economy/society, I propose a "super bankruptcy court" be created to establish the likely economic viability of these organizations, with immediate liquidation (Chapt. 7) [not reorganization (Chapt. 11)] of those unlikely to survive, with a 10 year suspension from any management position of the current and previous corporate executives and directors. (The stockholders have already lost all their equity, although they might not yet realize this.)
The PBGC should have priority claim on any assets for full pension funding, and any trust-fund/lockboxes established for management retirement benefits and/or "differed compensation" should be recaptured on the basis that this was an attempt to conceal corporate assets.
The choice is not between a "good" and better" solution, but between a "bad" and a "worse" solution.
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How about making the share holders liable for the debt. They are after all "owners" of the companies :-)

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<snip>

This simply echos a legal fiction. In fact 'shareholders' have almost no control, otherwise the corporations would have been forced to declare dividends rather than hording cash, and the executives would have received human salaries. While there is more than ample "blame" to go around, the major enablers were the financial institutions that handled the IPOs, made the loans, audited the books, created the "special purpose entities," managed the pension funds, etc. As such, these should be the people that get the big "hair cut" [like down to their knees] rather than the employees or taxpayers [who tend to be the shareholders when the music stops].
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"F. George McDuffee" wrote:

No fiction, fact. All you have to do is to get a majority to agree w/ you, go to annual meeting and vote w/ you, and you can do whatever you want...
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On Thu, 16 Jun 2005 10:56:39 -0700, F. George McDuffee

The neocons have a planned fix for this. Default on Social Security (worthless junk bonds, like T bills) and force the new money into stocks & T bills ... where, if needed (and it will), it is all handy to be taxed again ....
Australia used to tax unrealized capital gains. Stock went up? Pay taxes on it ... they still may for all I know .....
--
Cliff

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I have received many emails on this.
I will repeat that it is a legal fiction that the stockholders control a corporation. If this were not the case, corporations would not be allowed to hoard cash (rather than paying dividends), squander profits on extraneous and unrelated business ventures of doubtful potential, and pay exorbitant executive compensation and perquisites. Additionally, some stockholders are more equal than others. Different classes of stock have been introduced so that control is no longer proportional to ownership.
The real controllers of corporations are their financers as they can fund or not fund the operations, issue or not issue their IPOs, etc. Note that in making " secured " loans, operational [policy] control is achieved without any concurrent/concomitant risk. As most of the problems of the basket case corporations have been created, maintained and exacerbated by the availability of " easy money, " it is only reasonable the people that supplied the " easy money " [and earned enormous profits] should be forced to stand the resulting losses.
When a corporation goes bankrupt and is either reorganized [chapter 11] or liquidated [chapter 7] the stockholders generally lose their entire investment. In too many cases the employees are also the stockholders where the company has crammed their defined contribution plan [401k] with the company stock. When a corporation is reorganized, new stock is issued and may be used to " pay off " the unsecured creditors. Stock in the old corporation is worthless. Another typical scam is to create an ESOP or employee stock ownership program, where the employees may own stock but have no voting rights. It is this " vapor paper " that several corporations are proposing to use to pay their obligations to the PBGC.
While it would have not affect on the terminal corporations we have been discussing, it would be worthwhile to force the remaining major US corporations to distribute 50% [or more] of all claimed annual earnings as dividends. This would prevent the pyramiding of phantom profits from year to year, flush out bogus acquisition assets such as " good will " and capitalized R&D, frustrate attempts to create cash hoards to be squandered on CEOs " pipe dreams " [generally with kickbacks] and force any real corporate profits into the mainstream economy. DRIPs [dividend reinvestment programs] would allow any stockholder that still believe they are better served by having their share of the [claimed] earnings to be " retained " by the corporation for " reinvestment " to do so.
===========================On Thu, 16 Jun 2005 10:56:39 -0700, F. George McDuffee

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Jeez, you're brutal. <g> I'm going to wait to hear if John has a solution that's less drastic.
-- Ed Huntress
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Let me offer you a little encouragement in the interim Ed. 65 million dollars per year worth of manufacturing will be back in the US from Korea beginning in October of this year and the customer involved will be able to reduce their price, improve their margin and put a little sugar on it for me and my guys. The meeting ended an hour ago and before you ask me where we found the capacity let me just tell you that we did, and we did it without pushing any capacity envelopes.
I realize this is a small sum in the grand scheme of things but you know what they say -it does add up. I also have to say that pulling something like this off is better than sex -it lasts longer as well. I will probably be bouncin' off the ceiling for a day or two at least.
--
John R. Carroll
Machining Solution Software, Inc.
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That's great news, John! When you get to it, let us know how general you think this approach can be for the rest of us. <g>
-- Ed Huntress
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<snip>

line as a result because is concealed as higher taxes, and/or quality of life issues such as higher crime rates with increased insurance and alarm costs. It is also displaced in time, in that you may see an immediate benefit now, but much higher costs later. Think about changing the oil in your car. Don't change it now, save a little money now, pay a lot more later or do without a car.
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This isn't a problem at all. Calculating the value in manufacturing is a reasonable precise and very doable exercise. It is not much of an art but does require a thougough understanding of every element involved.
--
John R. Carroll
Machining Solution Software, Inc.
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On Thu, 16 Jun 2005 02:42:11 +0100, Andy Dingley

market" for the rondo.
People go out and drink too much even though they know they will have a hang over the next day. The major difference in this case is that the people who are enjoying the party are not the ones who will suffer the hangover (and have to pay the bar tab).
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    Greetings and Salutations...
On Thu, 16 Jun 2005 07:01:33 -0700, F. George McDuffee

    Yea, I have held for QUITE some time that the biggest problem with America's businesses is that the MOMENT they suck up to that investor money tit, they lose sight of the ORIGINAL purpose of the business (to produce a goods or service, sell it, and, make a decent profit off it) and become focused completely on the idea of sucking as much money out of the customer's pockets as possible, and producing the bare minimum product to get this to happen.

making bad decisions. The best we can do is try to make better ones...and hopefully, learn from our mistakes before the crisis gets so bad that we cannot survive.     Keep your powerder dry.     Dave Mundt
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<snip>

Major problem about learning from your mistakes [other than you may not live to learn] is that from the perspective of the decision makers these were excellent decisions resulting in wealth for themselves beyond the dreams of avarice.
From the perspective of everybody else: the first major mistake was letting these people get into and stay in their position of power; the second one is letting them keep any of the money they looted. [RICO anyone?] There is however there is a deeper problem. In a line originally used about politicians, "they are like cockroaches - its not what they carry off, its what they fall into and spoil."
Conventional national defense considerations by themselves should be enough to justify the retention of our basic manufacturing capability, cadre and infrastructure.
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On Thu, 16 Jun 2005 20:19:43 -0500, Scott Willing

USA is an island in Japan.

IIRC He also has part ownership ...
--
Cliff

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Cliff wrote:

Why would the Japanese devalue their product by putting "Made in USA" on it?
Pete C.
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Because it wouldn't.

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Several people have indicated the Current Accounts Ballance of Payments [trade] deficit was meaningless.
Among other problems, accumulation of U.S. dollars allows the purchase of U.S. companies, and the transfer of U.S. jobs. See Reuters article below for details of how the jobs at Maytag were traded for cheap imports. Another example is the sale by IBM of their line of personal computers.
The problem is not with the Chinese, they are just good business men and take an opportunity when it is available. The problem is with the people who made the opportunity available.
How much tax revenues will be lost to the U.S. and how much of a hit will the taxpayer take through the PBGC on the pensions?
========== Reuters article follows ======Haier, equity firms bid for Maytag
By Doug Young 36 minutes ago
SHANGHAI (Reuters) - Top Chinese appliance maker Haier and private equity giants Bain and Blackstone have bid $1.28 billion for Maytag Corp., trumping Ripplewood's offer for the ailing U.S. corporation.
Haier's global ambitions would be boosted with the addition of Maytag, the maker of washing machines and Hoover vacuums that has fallen on tough times amid rising costs and competition from low-cost makers.
Maytag said in a statement released late on Monday in New York that it had received a preliminary bid of $16 a share from a consortium comprising Haier Group, Bain Capital and The Blackstone Group.
That would be about 14 percent higher than a $14 per share offer by U.S. buyout firm Ripplewood Holdings LLC., part of a consortium whose members include Goldman Sach's GS Capital Partners and the J. Rothschild Group.
Under the Haier proposal, due diligence is expected to take six to eight weeks to complete, Maytag said in its statement. The group would look to Merrill Lynch to provide debt financing, it added.
"We continue to support the Ripplewood transaction," Howard Clark, Maytag's lead director, said in a statement.
"However, we also believe that it is incumbent on us to pursue this possibility of achieving a higher price for our stockholders."
No official counter offer had been submitted yet, a source familiar with the matter told Reuters. Bain and Blackstone declined comment. Haier has said it was interested in Maytag, but a spokeswoman would not comment further on Tuesday.
"Chinese companies don't have brand equity outside of China," a Tokyo-based analyst said.
"To build that themselves, in the same way the Toyotas of the world do it, is pretty hard. It's the intangible assets they're buying."
THE LONG HAUL
Their competing bid would also mark the first major attempt at an international acquisition by Haier Group, a state conglomerate that controls Shanghai-listed Qingdao Haier Refrigerator Co. Ltd. and Hong Kong-listed Haier Electronics Group Co. Ltd.
Haier Electronics had climbed 2.6 percent to HK$0.198 by 0611 GMT, vastly outperforming the market's 0.21 percent dip.
Haier is probably willing to pay a premium for Maytag because it could keep the company over the longer term for its brand, while Ripplewood would be more likely to sell in the long run, the Tokyo-based analyst said.
The consortium, whose Haier component came from Haier America Trading LLC, had expressed its interest in the run-up to a deadline last Friday for competing offers.
Maytag shares closed up 7 cents at $15.23 in Monday trading in New York. Its shares are up about 5 percent since word first emerged last week that Haier and others were considering rival bids for the company.
Haier is a well-known name in China, commanding 26 percent of the domestic refrigerator market and 17 percent of the air conditioning market at the end of 2003.
It is also one of the nation's few brands to make headway in foreign markets, cornering nearly half the U.S. compact refrigerator market and more than half that for wine coolers.
OVERSEAS M&A
Haier's foray would follow similar moves by some of China's biggest firms as they look beyond their domestic strongholds.
Generally, Chinese companies have picked up struggling businesses in mature industries, hoping to use their growing prowess as low-cost manufacturers to turn those assets around.
Earlier this year, Lenovo Group Ltd. purchased the PC-making unit of IBM for $1.25 billion. It later brought in private equity firms Texas Pacific Group, General Atlantic LLC and Newbridge Capital LLC, which contributed $350 million as part of the deal.
TCL Corp. has also been active, buying the cellphone-making assets of France's Alcatel S.A. and the TV-making assets of France's Thomson
But the Chinese move abroad has also included some stumbles, such as an aborted takeover of struggling British carmaker MG Rover by top car maker Shanghai Automotive Industry Corp.
Oil company CNOOC Ltd. has expressed possible interest in U.S. oil company Unocal Corp., and China's Minmetals Corp. has expressed interest in Canadian mining firm Noranda Inc.
(Additional reporting by Godwin Chellam in Shanghai, Chawadee Nualkhair in Tokyo and Michael Flaherty in New York)
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And the doomsayers were saying this about Japan when a Japanese businessman bought pebble beach in the 80's. He subsequently sold it back to an American consoritium for a significant loss.
scott
(Note that quoting an entire article from reuters is not considered fair use. An excerpt, yes, but for the entire article you should have just included a URL.)
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<snip>

One problem with this approach/attitude is that it ignores the human costs. This is actually 1,600 well paying manufacturing jobs affecting 1,500 or more families, and 14.8 million dollars in local tax revenues.
Second problem is that this gives the Chinese an opening wedge into the U.S. major appliance market with an existing brand and dealer network, directly threatening #1 Whirlpool with all the jobs and local taxes revenue they represent.
Third problem will not be come apparent for a few years when anguished messages are posted to these news groups lamenting that blanking and forming die tool makers and press set-up men are unavailable.
If this were an event that affected only a few players, I would be selling tickets. Unfortunately, this almost entirely affects only the average person with roots in their community and many years invested in learning a trade.
See these URLs for additional/background info
http://www.jobsillinois.us/news/contentview.asp?c 3669
http://www.iasb.com/files/nb0604.htm
http://www.cfoss.com/maytag.html
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