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Behold Patrick Fitzgerald, scourge of neo-cons. He just indicted odious Canadian newspaper publisher Conrad Black--a.k.a. Lord Black of Crossharbour.
Posted by dan at 01:11 PM
My latest in Slate, on housing options.
Posted by dan at 01:08 PM
It's hunting season in Michigan. And Delphi CEO Steve Miller is taking aim at the UAW. Jeremy Peters reports in the New York Times:
"Delphi, the auto parts manufacturer, has proposed eliminating about 18,000 jobs in the United States as it reorganizes under bankruptcy protection, but its unions are balking at the plan.Delphi's largest union, the United Automobile Workers of America, said Wednesday that it did not think it could reach a pact with the company outside of bankruptcy court.
Richard Shoemaker, the U.A.W.'s vice president and the chief negotiator in the talks with Delphi, called the company's proposal a "road map for confrontation."
This week, in what the union said was the company's final offer, Delphi proposed laying off all but 10,000 of the U.A.W.'s 28,000 Delphi workers and cutting wages by more than two-thirds, to between $10 and $12.50 an hour. . .
Ron Gettelfinger, president of the U.A.W., said Wednesday that Delphi's offer to its unions left little room for compromise outside of bankruptcy court. "We do not believe that they want to reach an agreement," he said, surrounded by officials from Delphi's other five unions at a news conference in Detroit.
Without an agreement with its labor unions, Delphi would have to ask a bankruptcy judge to approve the job cuts and the wage reductions. . .
Time is running out for the two sides to reach a deal. Delphi's chief executive, Robert S. Miller, has said that if the company cannot reach a compromise by Dec. 16, it will file a motion to void the company's collective bargaining agreement with the U.A.W.
Posted by dan at 10:13 AM
New Orleans is drowning -- in paperwork. In today's New York Times, Elizabeth Olson reports on the glacial pace at which the Small Business Adminisitration is processing loan applications from businesses affected by Katrina.
But as of Tuesday, the Small Business Administration has approved only 1,082 small-business or economic injury loans, while denying 1,946 applications. According to the agency, 24,542 business-related loan applications are still being processed.
Anger at the slow pace spilled over at the hearing last week, before the Senate Small Business and Entrepreneurship Committee.
"Our businesses were wiped out by a wall of water, while S.B.A. help is coming in at a trickle," said Senator Mary L. Landrieu, Democrat of Louisiana, a committee member. The committee's Republican chairwoman, Senator Olympia J. Snowe of Maine, said when she announced the hearing that she had "growing doubts about the agency's management and leadership."
Posted by dan at 10:18 AM
As the economy-wide reduction in benefits and wages continues, workers are starting to push back. By busting unions, terminating pension plans and generally seeking changes that undermine workers security, many companies seem like they want to turn back the labor relations clock to the 1930s. Now it looks like unions are returning the favor.
Kris Maher reports in the Wall Street Journal:
The number of work stoppages in the U.S., including strikes by unions and management-sponsored lockouts, is on the upswing as tensions rise between workers and companies that are seeking to cut wages and benefits.The trend extends beyond the troubled auto and airline industries, as continuing strikes by telecom workers at Sprint Corp. and machinists at Boeing Co.'s rocket division attest. Last week, graduate teaching assistants at New York University walked off the job and musicians at Radio City Music Hall remain locked out by Cablevision Systems Corp. Unions representing copper workers at Asarco LLC, meanwhile, finally reached a tentative agreement with the company to end a four-month strike.
It remains to be seen if a surge in strikes will exacerbate labor's battered image, experts say. At a time when many workers question the relevance of unions in a mobile service economy, such increases could reinforce stereotypes of militant industrial workers. And yet, workers could be drawn to unions willing to strike to resist cuts to health-care benefits, in particular. . . .
Work stoppages, including both strikes and lockouts resulting from deadlocked negotiations and other labor disputes, are up 14% this year, according to Bureau of National Affairs Inc., a Washington, D.C., publisher of legal and regulatory information. There were 231 work stoppages initiated through the end of August, compared with 202 in the same period last year, with the vast majority being strikes. The group tracks work stoppages at companies of all sizes mainly from government reports, union publications and news reports. (The U.S. Bureau of Labor Statistics, by contrast, only tracks work stoppages involving 1,000 or more employees.)
The United Auto Workers, the International Brotherhood of Teamsters, the Service Employees International Union, the International Association of Machinists and the United Steelworkers of America have all engaged in more work stoppages through August than they had last year, according to BNA data. The Teamsters were involved in 47 work stoppages through August of this year, far more than any other union, up from 38 the prior year.
Posted by dan at 09:07 AM
This week's backseat driver award goes to Barry Sternlich, the creator and former CEO and Chairman of Starwood Hotels. In May, Sternlicht stepped down, wanting to spend more time with his family and do his own deals. At the time he assured investors that he wouldn't be missed much. After all, the company had hired Steve Heyer, a former top executive at Coca-Cola and AOL Time Warner. "I believe we have a talented executive team led by Steve Heyer and the Board of Directors in place to execute the strategy to maximize shareholder value," Sternlicht said.
Heyer returned the compliment. "Barry has been a terrific, collaborative partner, and I look forward to realizing our shared goal of moving our brands from some of the best in the hotel business, to some of the most admired in business period."
What a difference six months makes. Yesterday, Starwood announced it was selling off a portfoio of 38 hotels to Host Marriott Corp. for $3.3 billion. And Sternlicht went bat****.
Peter Sanders reports in the Wall Street Journal:
"This is a very black day for Starwood shareholders and its board," said Mr. Sternlicht. "I am 100% certain that private-equity interests would have paid more for these assets," he added. He called the deal "amateur hour" and said an open auction would have brought as much as an additional $1 billion for the assets.Mr. Sternlicht, who said he is Starwood's largest individual shareholder, also accused his successor as CEO, Steven Heyer, of being "an absentee CEO who doesn't know the real-estate markets." Mr. Heyer came to Starwood from Coca-Cola Co. and continues to live in Atlanta while commuting to Starwood headquarters in White Plains.
Dan Gibson, Starwood's senior vice president for corporate affairs, said the "transaction was unanimously approved by a board of directors put in place during Barry's tenure here as CEO, and 50% of those people are very long in real-estate experience." Mr. Sternlicht handed over the reins to Mr. Heyer in October 2004.
Posted by dan at 08:59 AM
You would think it would be pretty difficult to lose money selling cans of Coke, frozen sandwiches, and bags of chips to train passengers. After all, you've got a captive audience, since passengers don't hop off at stations to buy snacks. You've got a monopoly, since outside vendors don't troll the aisles. You buy standardized, non-spoiling packaged goods in bulk, so you should be able to keep costs down.
And yet somehow Amtrak managed to lose a trainload of cash on its food--excuse me, dining--service.
Daniel Machalaba reports in the Wall Street Journal:
"Amtrak said it is renegotiating its contract with catering company Gate Gourmet in a push to save millions of dolars a year on the unprofitable dining service aboard its passenger trains.""Amtrak's food operations had a loss of $83.8 million in fiscal 2004, which ended Sept. 30 of that year, on revenue of $80.4 million, according to the Government Accountability Office, the investigative arm of Congress."
Posted by dan at 08:52 AM
Thomas H. Lee Partners got taken for a nasty ride with its investment in Refco. Now, a lawsuit details just how much money the private equity firm spent on professional services to give it the confident to make the investment in the first place.
Jenny Anderson reports in the New York Times:
The lawsuit outlines extensive due diligence efforts taken by Thomas H. Lee Partners. Over more than 10 months, Lee executives spent more than $10 million employing a number of firms - including the accounting firm KPMG and the law firm Weil, Gotshal & Manges - to evaluate Refco before it invested.The private equity firm also hired the consulting firm McKinsey & Company to conduct customer surveys and to assess growth in the futures business; the insurance broker Marsh & McLennan to study risk management and the adequacy of insurance; Mercer Human Resource Consulting to look at human resource issues; and a private investigative firm to do background checks on Mr. Bennett and some of the company's other top officials.
Thomas Lee executives also worked closely with a number of leading investment banks, including J. P. Morgan Chase, HSBC, Harris Bank and Goldman Sachs, all of whom had lent Refco money in the past, according to the suit, and Credit Suisse First Boston which represented Lee Partners in its acquisition of Refco. Goldman Sachs and Credit Suisse First Boston underwrote the company's 2005 initial public offering.
Posted by dan at 08:48 AM
This is troubling. Edmund L. Andrews previews the Bernanke confirmation hearings in the New York Times:
"Would Mr. Bernanke lend his authority to Mr. Bush's goal of making his tax cuts permanent, even if that increases the federal budget deficit? Here, Mr. Bernanke may end up providing even more support to Mr. Bush than Mr. Greenspan has.As a White House adviser, Mr. Bernanke has already joined the call to make the tax cuts permanent. And unlike Mr. Greenspan, Mr. Bernanke has not argued that Congress should be required to offset the cost of tax cuts with savings in other areas.
"Low marginal tax rates are supportive of economic growth," Mr. Bernanke told the Joint Economic Committee earlier this year. "I would submit that we would want to look very hard at government spending - make sure it's controlled - before we raise taxes, which, in turn, would have negative impacts on the economy."
Too late for that. Taxes are already going up, in the form of the Alternative Minimum Tax.
Posted by dan at 08:45 AM
The FT's "Lex" column isn't buying the hosannahs surrounding the revival of Wal-Mart's stock:
On the face of it, the world’s largest retailer has grown into its valuation. It may still lack a catalyst, obviously remains exposed to the pinch on consumer budgets from oil prices and will need to catch up with faster-growing rivals such as Target in lucrative clothing. But, the bulls argue, its risk/reward profile is starting to look tempting.As long-term investment advice, this ranks on a par with “the more you buy, the more you save”. Wal-Mart’s market capitalisation is $206bn. Last year, it generated net cash flow of $2.7bn after investments, while cash provided by operating activities fell. This year’s dividend, which costs $2.2bn, yields just over 1.2 per cent. The bulk of its share buy-backs have lately been debt-financed.
On pretty generous assumptions, Wal-Mart would need to grow dividends by 10 per cent for another 30 years – and pay out $100bn a year afterwards to justify its current share price. That looks unlikely, if recent same-store growth rates and the fact that indebted US consumers will eventually need to rebuild their balance sheets are any guide.
Posted by dan at 08:43 AM
The "Lex" column also has some important details on the booming truffle market.
Is excess liquidity distorting the price of every asset class? Last week, an investor paid $41,311 a pound for a white Italian truffle "the size of a small handbag". The auction, which featured celebrities and live video links from Hong Kong and Shanghai, had the key characteristic of speculative excess: both the product and the bidders were perishable and of unclear fundamental worth.The previous record of $27,000 a pound was set in 2004 by a syndicate including Gwyneth Paltrow. Nevertheless, there is a strong case that truffles have in fact joined other semi-edibles - including birds' nests, tiger penises and sharks' fins - in a culinary "super cycle" that will be familiar to most base metals investors.
Posted by dan at 08:40 AM
Vice President Cheney to the contrary, energy conservation isn't just a sign of personal virtue. It's smart business--for corporate users of energy, and for retailers.
Lowe's turned in an excellent quarter, in part because of its ability to tap into the growing market for energy-efficient products. Andrew Ward reports ($ required) in the Financial Times:
Energy-saving products such as insulation and thermostats experienced double-digit growth as consumers sought to contain surging fuel prices. Demand for wood-burning stoves and heaters also increased, suggesting that some home-owners are seeking alternatives to costly central heating.Lowe's held energy conservation classes in all its stores throughout October, tutoring customers on how to reduce their heating and power bills. Growing interest in energy conservation shows how this year's record fuel prices have caused some US consumers to reconsider their traditionally gung-ho attitude towards energy usage.
While investors have focused on the challenges posed to retailers by high fuel prices, Lowe's results highlighted the business opportunities that exist to help consumers conserve energy.
Posted by dan at 08:35 AM
My latest in Slate, on Knight-Ridder's possible sale. The Ken Auletta New Yorker article on the Los Angeles Times cited in the piece can be seen here.
Posted by dan at 08:24 PM
This is funny. The people who write sitcoms and tv dramas--many of them former English majors and frustrated novelists--are complaining that they're being pressured to sell out. Sharon Waxman reports in the New York Times:
"A group of show business unions are denouncing the creeping practice of "stealth advertising," the integration of commercial products into the story lines of television shows, which they say deceives audiences and forces writers and actors to do jobs they were not hired for.The Writers Guild of America, West, and the Writers Guild of America, East, with the support of the Screen Actors Guild, will hold a news conference Monday calling for a code of conduct to govern this latest twist in the world of advertising, in which product placement has become increasingly central to plotlines.
Reality shows like "The Apprentice," soap operas like "All My Children" and even prime-time scripted hits like "Desperate Housewives" have all adopted the practice of writing products into the shows as a way of attracting ad dollars that have faltered in the age of TiVo and hundreds of cable choices.
One episode of "Desperate Housewives" last season on ABC, a division of the Walt Disney Company, involved one of the characters getting a job as a spokeswoman for Buick's LaCrosse, in which she extolled the virtues of the car. Buick is owned by General Motors. WB has a deal with Procter & Gamble for inserting its products in "What I Like About You." But reality shows are the most popular vehicles for product placement, with everything from contestants on NBC's "The Apprentice" being required to write a new Burger King jingle, to "The Restaurant," also on NBC, which mentions an American Express credit card numerous times in a number of episodes."
Um, isn't selling out the whole point of writing for TV?
Next, lobbyists will start expressing horror that their clients want them to influence legislation.
Posted by dan at 09:27 AM
On Saturday, Jon E. Hilsenrath and Peter Sanders reported in the Wall Street Journal on the success some companies are having in passing on higher costs to consumers.
"The Waldorf-Astoria in Manhattan has long been among New York's pricier hotels, and it's getting even more expensive: A standard room in the middle of the week fetches $569 a night, up about $100, or more than 20%, from last year.The hefty increase shows that the hotel industry is gaining pricing power, the ability to raise prices without scaring away business. Pricing power like this was unheard of a few years ago, and relatively tame nationwide inflation figures indicate that it still is far from universal.
But anecdotal evidence suggests that in hotels and many other sectors, from home appliances to Broadway shows, an increasing number of companies have gained some leeway to pass on higher prices to customers without sending them fleeing. Among the drivers of the trend are elevated raw material and energy costs, the reduction of excess capacity in some industries and the spending might of high-end consumers.
Procter & Gamble Co., based in Cincinnati, says it has been able to beat back the pressure of soaring raw-material costs by pushing up prices for products like Prilosec, the over-the-counter heart-burn drug, and detergents like Gain and Era. Hertz Corp., based in Park Ridge, N.J., recently boosted car-rental rates by $3 per day, just two months after a $5-per-day increase. 3M Co., in St. Paul, Minn., last month reported a 10% increase in earnings, thanks in part to price increases for products like Scotch tape and Post It notes."
Posted by dan at 09:24 AM
Last year, when momentum was mounting to dismantle Social Security, advocates frequently cited Chile's experiment with privatized pensions as a model to follow. John Tierney of the New York Times seemed particularly enthralled with the idea. Of course, his research was less than rigorous. It consisted of talking to a friend of his who was an economist and seemed to like the new scheme just fine. Well, holding up Augusot Pinochet's private pension plan as a fine model for Americans was bunk then. And while Tierney and the rest of the privatizers have gone silent, it's worth pointing out that it's bunk now. But don't take it from me. Take it from the Economist (the link is here, but $ is required):
"While academics have long noted various flaws--not least the high profits raked off by the six pension-fund administratos (AFPS)--it nevertheless came as a shock when a recent study suggested that over half of the Chileans affiliated to the system might not get a decent retirement income. . . .In fact, almost half of the 6.3m-strong workforce is not currently contributing, including around 95% of the 1.4m self-employed, for whom contribution is voluntarily. Many workers, especially women with family responsibilities, have big gaps in their contributions. . .
Posted by dan at 09:14 AM
I'm not sure what it means, but I know it must be economically, socially, and culturally significant in some way. From an article by Marc Cooper on slot machines in the current (and very good) Atlantic Monthly.
"America now has twice as many publicly available gambling devices that take money--slot and video-poker machines and electronic lottery outlets-as it does ATMs that dispense it. In the past fifteen years the number of such devices has grown five-fold, to more than 740,000, and it's still mounting."
Posted by dan at 09:11 AM
Many of the calls to privatize vital government services ring hollow, because there's comparatively little evidence that the private sector can do a better job of delivering health insurance, or retirement security, or military defense than the government can.
But despite the government's profligacy, there's one thing that the private sector can do way better than the government: give money away to deserving causes.
Consider this nugget from Celia Dugger's report in the New York Times over the weekend.
"President Bush's signature foreign aid program was created to transform the economies of some of the world's poorest countries, but as John J. Danilovich, a businessman and former ambassador, took over its leadership this week, his first challenge is to change its reputation for moving at the pace of an ox cart.The Millennium Challenge Corporation has spent only 2 percent of the $2.5 billion appropriated in its first two years and has signed accords with only five countries for less than half the total. Republican leaders in Congress recently halved the president's request for $3 billion next year.
Mr. Danilovich said the 21-month-old corporation had had the growing pains of an ambitious start-up, but he promised to speed its work by setting deadlines for proposals from poor countries and offering guidance.
Unlike traditional programs that help countries in crisis or those that are strategically important, the goal of the corporation is to give grants on merit only to well-governed poor countries for projects that create economic growth and reduce poverty."
Only 2 percent out of $2.5 billion appropriated? That's about $50 million by my count. Just imagine if the cash had been turned over to a private-sector group like, say, the Gates Foundation, or if it had given $50 million each to 50 different private-sector charities, foundations, and non-profits. No, not all of the money would have been spent wisely or efficiently. And not every effort they backed would have led to success. But it would have gone to groups that actually specialize in putting capital to work in constructive ways.
Posted by dan at 09:04 AM