Everyone is out hat in hand looking for a bailout, so let me throw in my two cents. Bail out bloggers. Pick the million most serious bloggers in the US and give loan them $500,000 each. This would be the last big bailout the economy needed. It would fix everything.

1. It’s cheaper than TARP, the standard by which all such boondoggles will be judged in the future, and no worse for the economy.
2. Instead of a million bloggers complaining about how the bailouts favored the rich or the well connected or the corrupt, you’d have a million bloggers singing the praises of the bailout.
3. Instead of a million bloggers saying the economy was doomed and the bailouts only make it worse, you’d have a million happy bloggers blogging about all the new things they were buying.

Read the rest of the article HERE.

It’s that day again. The day that the retail branch of corporate America wants you to go out and buy shit. It’s like the high holy day in the church of consumerism. You always hear about how every year in some other part of the world, some pilgrims of some other religion trample each other to death while racing to some holy thingamagiggy or other. Well it’s no surprise that it’s finally happened here, and it’s no surprise that the place it happened was in one of the grand cathedrals of everything that is wrong with American consumerist society.

A worker died after being trampled and a woman miscarried when hundreds of shoppers smashed through the doors of a Long Island Wal-Mart Friday morning, witnesses said. [full story]

Wake up, America! It’s just the mall, not a Who concert in Cincinnati. Was one day at home with your family so much to bear that you need to ditch them to go shove through throngs of strangers the very next day, devolving into wild animals on the hunt for your consumable prey?

Read the rest of the article HERE.

In 1993, back when I was sailing commercially, my ship anchored in Back Bay to the West of Bombay (the name of Mumbai at the time). We arrived into the bay in the early evening and started doing cargo operations. Unfortunately, the crane aboard ship had a cable fail, halting operations for the evening. Due to the delay, a handful of us from the ship decided to go ashore for the evening.

In the dark, you could see the Gateway of India rising up from the water, glowing in the night. The launch (small boat) from the ship to shore dropped us off down near the monument. We walked along the streets, checking out the local shops and the nightlife, gradually making our way up to the Taj Mahal hotel. From the sidewalk outside the hotel, the ornate structure dominates the skyline, with the classic Indian architecture creating a unique look compared to other hotels I’ve seen before. At the front door, a doorman in colonial dress would greet hotel guests arriving by limo and taxi alike, highlighting all the touches of luxury.

However, walking along the right side of the hotel along the street was a totally different story. For even though Bombay was the growing financial center for the nation, there was still many living in poverty. Built up along the side of the hotel were little shanty huts, with many poor people hoping for handouts from the tourists. I remember one kid running up to me with his hands out asking for money. His eyes were wide open and excited, seeing a group of Americans walking around, almost as if he was thinking to himself that he hit the jackpot. Needless to say, he did walk away a richer person, though I know it was hardly enough to make a major change in his position in life.

Bombay was just one of the three Indian cities I would visit on that trip (the other two being Madras to the South and Visakhapatnam to the East), but I distinctly remember my night there. Watching this magnificent hotel burn in the dark is a distinctly different image than what I remember that night. To hear that one wing of the hotel is severely damaged, and the thought of what additional damage all that water is doing to the structure, makes me wonder what the future holds for the building. I hope and pray that the local authorities are able to bring the current crisis to a quick resolution with no further loss of life.

If I can find my photos from Bombay, I will upload them for you to see.

On a personal note, I want to give thanks to all of you for making the past two years worth while.  I noticed this week was the first time my Feedburner count exceeded 20 readers.  There has also been over 300 comments on the site to date.  Thank you for your mature and constructive responses, and allowing me the opportunity to expand the discussions on the issues facing our nation.  And lastly, I want to thank you for allowing me to raise funds through the site to donate $40.00 towards the Arthritis Foundation this year.  Only you can generate that level of funding since I am not allowed to click on the Google Ads on my own website.

Again, may you have a wonderful day with friends and family, and my this be the start to a wonderful holiday season.

How did the three companies arrive at this point? I can think of a few. For starters, a sense of complacency existed within the US industry. This isn’t to say that the companies failed to develop new products or try to compete. What I am saying is that they felt that foreign manufacturers were not going to compete on the US Auto manufacturers level domestically. Just a few decades ago, 90% of the cars sold in the US came from the Big Three. So the companies felt that they could charge more for the product and the consumers would buy it. And when the foreign auto manufacturers began to enter into the US market with lower costs, the US manufacturers lowered their price by decreasing basic options to make up the difference.

The labor contracts made with the United Automobile Workers union have also had a hand in the financial crunch facing the auto manufacturers. With labor contracts roughly twice as high as rates being paid to US workers for Toyota, the increased costs must be covered somehow. On top of this, there are extensive benefit packages under the labor contracts that also are incorporated into the costs of new vehicles.

Low fuel prices in the US also added to the current situation. For years, unleaded gas in the US was under $1.00/gallon, meaning there was no real incentive for the manufacturers to develop more fuel-efficient vehicles. Even when gas passed $1.00/gallon, the “gas guzzling” SUV’s started to become popular in our country. One would have to wonder if it were for fuel efficiency standards being passed by Congress over the years if there would have been any serious development in this area by the manufacturers. But that is only in the US.

Overseas operations for the auto manufacturers are fairing better. With cheaper labor, different fuel efficiency standards, and partnerships with European and Asian companies, the Big Three have been able to expand their operations and tap growing markets. Additionally, with fuel normally costing twice as much in many overseas markets compared to the US, foreign produced cars by the Big Three are more fuel efficient than in the US. Under the Corporate Average Fuel Efficiency (CAFE) standards, these foreign produced cars would exceed the domestic standards if the models were imported.  Unfortunately for the US auto manufacturers, there is a history of the foreign-made models not selling well domestically. On the other hand, the Asian manufacturers have been able to sell their models in the US, and with their 30+ mpg fuel efficiency, they easily exceed the CAFE standards where as the US manufacturers tend to end up paying civil penalties (up to the tune of $500 Million) whereas the Asian manufacturers have yet to pay any penalties.

So what are the US manufacturers suppose to do? In your Microeconomic class, a generic company facing a lack of cash and high overhead expenses would typically file for Chapter 11 bankruptcy protection. This would allow the company to restructure the operations, have their debts reduced or eliminated, have contracts voided or renegotiated, and create a plan to resurface from bankruptcy as a more viable operation. In 2008, on the other hand, the first option seems to be to ask for a bailout by the government. This would be a quick injection of cash to sustain operations until the company becomes more profitable. This wouldn’t be a first for the automotive industry as Chrysler sought and received funding from the government back in 1980 (who later repaid the funds with interest).

While Congress debates what approach to take, I have one of my own that I would like to recommend. 

1. Bankruptcy: The auto manufacturer must file for Chapter 11 bankruptcy to be eligible for $10 Billion in US funding. Without bankruptcy, the pressure to make significant change within the business model would not exist, and therefore the potential for a change in course would not exist.
2. Model line reduction: The auto manufacturer must choose one van, one truck, one coupe, and two sedan models they wish to produce, and structure their operations around those five models. Of the sedans, one model must have a fuel efficiency of at least 30-mpg.
3. Overhead: Non-essential plants will be shut down or leased to another company.
4. UAW: All labor contracts will be voided through the courts. The company will then have the option to renegotiate contracts with the UAW or to hire non-union personnel. If contracts are renegotiated, Congress must approve the contracts and the rates are to be in line with industry standards. Additionally, contracts will be for only two years in length to ensure the company has the flexibility to reduced the number of union positions as the positions become obsolete. 
5. Pensions:  Existing pensions for retired employees will be taken over by the Pension Guarantee Fund.  Pensions for existing employees will be capped at current levels and become the responsibility of the union.  From the time of the bailout, future pension benefits will be replaced with 401(k) plans.

These changes will free financial resources for the company to restructure.  It isn’t a guarantee that the companies will be able to fully recover, but it will spark the change needed to at least keep them solvent.  But a bailout isn’t a necessity until existing business options are attempted.  Let’s not try to shortcut the process because of a sharp economic downturn.  Additionally, Congress needs to address existing federal regulations and guidelines in place, such as CAFÉ, to see if they need to be revised or removed, giving the companies additional flexibility to compete and prosper.

Recommended articles:
Killer Buffalo - “General Motors and the Free Market: Why bankruptcy is in order”
US News & World Reports - “What Will Happen If We Don’t Bail Out the Auto Industry?”
Houston Chronicle - “Letters: Should we bail out Big 3?”
The Moderate Voice - “Don’t Bailout The Big 3″
CNN Money - “Detroit bailout: 7 key questions”
Seeking Alpha - “Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?”
CNN Money - “Ford chief denies claims of mismanagement”
CNN Money - “Heated debate over auto bailout”
CNN Money - “How to fix the Big Three”
New York Times - “Let Detroit Go Bankrupt”
Wall Street Journal - “Auto Makers’ Rescue Drive Stalls”
Financial Times - “America must now wean itself off cheap petrol”
NHSTA - “CAFE Overview - Frequently Asked Questions”
Left Lane - “Domestic automakers accept 35 mpg CAFE fuel standard”
CNN Money - “Retired from GM: One worker’s fears”

US elected officials scored abysmally on a test measuring their civic knowledge, with an average grade of just 44 percent, the group that organized the exam said Thursday.

Ordinary citizens did not fare much better, scoring just 49 percent correct on the 33 exam questions compiled by the Intercollegiate Studies Institute (ISI).

“It is disturbing enough that the general public failed ISI’s civic literacy test, but when you consider the even more dismal scores of elected officials, you have to be concerned,” said Josiah Bunting, chairman of the National Civic Literacy Board at ISI.

“How can political leaders make informed decisions if they don’t understand the American experience?” he added.

The exam questions covered American history, the workings of the US government and economics.

So, I decided to take the quiz.  It covers many aspects of government and philosophies.  Of the 33 questions asked, I missed four:  questions 10, 13, 14, and 27.  With my score of 87.88%, I am twice as smart as the elected officials mentioned in the article.  How smart are you?  Take the quiz and post your results below!

Thank you.

How did Dallas quarterback Tony Romo spend his free time this week? He went to the movies. But his date was not Jessica Simpson. It was a homeless man. According to the Dallas Morning News, Romo paid for a homeless man to see Role Models, and then sat with him through the movie.

The homeless man, who gave his name only as “Doc,” was cashing in change at a Dallas movie theater when Romo walked up to the counter and bought Doc a ticket. Romo then invited Doc to sit with him and a friend inside the theater. (When Doc warned Romo that he hadn’t showered in a few days, the QB replied, “Don’t worry about that, I’m used to the locker room.”)

While I am a New York Giants fan, I tip my hat to Tony Romo for his act of kindness. 

While we might not be in a position to take complete strangers to the movies, there are acts of kindness that we can do every day, even if it is as small as opening the door for someone or being less aggressive on the road. If you can show financial kindness, providing funds or foods to your local food bank or church makes a big impact on your community, especially as we head into the holiday seasons.