The things in my head go 'round and 'round

I have family who used to work in the auto industry. My Mothers family all live in the Westland, Canton areas which are communities surrounding Detroit. Of 11 brothers and sisters, a couple worked on the line. And retired from them.

My Uncles didn’t live outrageously. They had modest houses, in modest areas. Their kids went to college, got married, and moved out of their parents homes into their own. There were no $70 an hour retirees in my Mothers family. They were the middle class, who worked, took care of their families, saved money for retirement, and when they did retire, they lavished love on their kids and their grandkids.

That was a huge run-on sentence. Sorry.

Part of the $17.4 billion we are giving the Big3 is tied to GM funding their pension package with stocks. You can read about it in todays Detroit Free Press:

Strings on auto loans risky for retirees
Stocks would be used for half of health-care trust

BY KATIE MERX • FREE PRESS BUSINESS WRITER • December 25, 2008

Retirement health care for as many as three-quarters of a million Americans will be placed at high risk if conditions proposed as part of auto rescue loans are enforced by the incoming Congress and Obama administration, labor experts say.

At issue is a condition of the federal loans that calls for General Motors Corp. and Chrysler LLC to use company stock or the equivalent to pay half, or $10.5 billion, of the cash owed to a union retiree health-care trust.

“It’s as if we, as a nation, learned nothing from Enron, essentially risking the health care of retired and active workers in such a cavalier fashion,” said Harley Shaiken, a professor at the University of California, Berkeley who specializes in labor issues. “The great Enron lesson was: Don’t put all your eggs in one basket. … Putting half your eggs in the trust-fund basket is still a high level of risk.”

Enron workers lost the lion’s share of their retirement savings when the company’s once fast-gaining stock became virtually worthless. Enron workers received their matching contributions in Enron stock — then were prohibited from selling it until they were 50 — and many invested their own 401(k) contributions in company shares.

Since Enron’s collapse, many corporations have limited the amount of company stock their employees can hold in 401(k) accounts. Legislators and shareholder advocates argued for tougher regulations to protect individual investors.

That is why, Shaiken said, it is shocking that President George W. Bush “apparently bowed to political pressures from the Republican right in the Senate” and called for the retiree health care of so many Americans to be placed in jeopardy.

Shaiken says he believes the new Democratic Congress and President-elect Barack Obama will revisit conditions placed on the UAW, and particularly on the funding of the VEBA (voluntary employee beneficiary association), when they take office next year.

But others say it may not be possible for the automakers to achieve the degree of restructuring cost-cutting required to meet conditions of the federal loans by the end of March without abiding by the terms set by the Bush administration.

The White House agreed to provide as much as $17.4 billion in loans to carry GM and Chrysler through the first three months of 2009. But the automakers must demonstrate viability by March 31 or they will be forced to immediately pay back the loans or file for bankruptcy. As part of the loan agreement, the federal government set targets for restructuring that include union wage concessions, the change in VEBA funding and cutting the company’s bond debt by about two-thirds.

While the automakers can deviate from these targets, “absent a near-term economic recovery,” Citigroup auto analyst Itay Michaeli wrote in a note to investors this week, “we believe it would be difficult to deviate significantly from these targets and still demonstrate viability.”

Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that while the changes to VEBA funding are not optimal for the approximately 750,000 people for whom the new fund was supposed to provide health coverage beginning in 2010, it still may ensure more benefits than they otherwise would have received in retirement.

“I think this makes the best of a bad situation,” Chaison said. “If they pay a portion of the VEBA now, they might have enough to pay for the health-care benefits of the current retirees and they might get more later.”

But, Chaison said, his impression even from the time the UAW and automakers agreed to the VEBA in late 2007 was that it was questionable whether the health-care trust would last long enough to keep the commitments the UAW and automakers made.

Although the UAW described the VEBA as a solid plan to provide benefits to retirees and workers who were active as of the contract agreements last year, it was in part a defensive maneuver intended to protect workers from corporate bankruptcies that typically wipe out retiree benefits.

And it might not even have come to that, the UAW said when it pitched the VEBA to members. The automakers could have sought court approval to simply terminate retiree medical benefits.

At the time the UAW agreed to it, workers and analysts believed a VEBA would protect them from the risk of bankruptcy. While an automaker’s default seemed possible, just a year ago, few thought it would happen before the VEBA was funded and took effect in 2010.

But with the risk of illiquidity now an imminent possibility, the UAW on Dec. 3 agreed to postpone until 2012 the VEBA payments that were due from GM and Chrysler in 2010.

Now the government is asking the trust to accept half cash and half stock.

A UAW spokesman declined to comment on the proposed conditions for changing VEBA funding.

GM retiree Ralph Herndon of Otisville said he isn’t worried about getting half of the VEBA funding from GM stock — he has faith the company will rebound and survive — but he is worried about the management of stocks on Wall Street in general.

“GM stock doesn’t bother me,” Herndon said. “I’m not going to worry about the VEBA, because all the worrying we do is going to change nothing. I’m cautiously optimistic it will work out. … But if you expect me to save for my own retirement, someone needs to manage the managers on Wall Street better.”

Herndon said his 401(k) has dropped by half in the past year or so.

But many industry experts said the bet on GM stock is a risky one.

Several analysts this week cautioned that current GM equity investors could find the value of their holdings wiped out either by bankruptcy or by dilution from new government stakes in the company.

“The stock may go down to zero,” Chaison said. “My view of the VEBA is it was on shaky ground already. Now, if I were a retiree I would be hoping to come out of this with health-care benefits for the short-run. If I were a present employee, I wouldn’t count on the VEBA for health care. I would hope I would get a buyout or keep my job. The name of the game right now is to save jobs. Everything else is secondary.”

The auto lending arm of GM, known as GMAC has been granted status of bank holding company by the Federal Reserve. More from The Detroit Free Press:

Fed’s bank ruling buoys GMAC, GM
Dealers rejoice as bank status lets lender tap bailout funds

BY BRENT SNAVELY and JEWEL GOPWANI • FREE PRESS BUSINESS WRITERS • December 25, 2008

The Federal Reserve granted a request Wednesday from GMAC LLC to become a bank holding company, a designation that helps General Motors’ lending arm avert a potential bankruptcy, significantly improves GM’s chances of survival and provides an immediate sense of relief to auto dealers.
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“I just got the best Christmas gift in the world,” said Joe Serra, who owns 37 automotive franchises.

The Federal Reserve Board said it made the decision under “emergency conditions,” and is requiring both of GMAC’s owners — GM and Cerberus Capital Management L.P. — to give up control of the company.

GMAC’s future has been viewed as a wild card in GM’s restructuring plan. A bankruptcy by GMAC could have wiped out the main lender to GM dealers, potentially derailing a turnaround at the Detroit automaker.

The Federal Reserve’s move offers GMAC a lifeline, opening the door to GMAC for several funding options to lend money to dealers and consumers during a time of frozen credit markets brought on by the meltdown of the nation’s financial institutions.

“General Motors is pleased that GMAC has won bank approval,” Steve Harris, GM’s vice president of communications, said late Wednesday. “Over time, if this makes credit for GM customers and dealers more available, it is obviously a good thing for GM.”

GMAC spokeswoman Gina Proia said Wednesday, “We’re very pleased about the news. It’s a significant positive step for the company and really marks a turning point in our history.”

Becoming a bank makes GMAC eligible to tap the $700-billion Troubled Asset Relief Program. GMAC has applied separately to the U.S. Treasury for money and is awaiting approval. Congress passed the TARP in October in an effort to bail out the nation’s financial institutions and unfreeze the credit markets.

In addition to applying for money from TARP and being able to accept deposits, as a bank GMAC also plans to apply for a program to sell bonds that are backed by the Federal Deposit Insurance Corp.

“It provides GMAC with what we think is the best long-term solution for us to support the automotive finance business both for consumers and dealers,” Proia said.

GMAC, which lost $2.52 billion during the three months that ended Sept. 30, is in such bad financial shape that it is having difficulty funding auto loans to consumers as well as financing dealer inventory plans. In November, GMAC warned that Residential Capital LLC, its mortgage lending unit, could default on its loans by year’s end.

Without approval to become a bank, analysts said GMAC faced a bankruptcy filing that would have cut off financing to the roughly 85% of GM’s North American dealers with which it does business.

Most of GM’s auto dealers rely on GMAC for “floor planning,” an industry term that refers to a loan that allows dealers to buy vehicles from the manufacturer until they are purchased by consumers.

Serra said he got the news while in church on Christmas Eve. About 65% of Serra’s dealerships are GM franchises. Several months ago, Serra, president of Serra Automotive, said he put his vehicle inventory financing out for bid to other banks.

“But with what was going on recently …no other lenders were interested in taking all of my inventory,” he said. “Without floor planning, you cannot conduct business.”

Losing loans from GMAC could have snowballed into a steep sales decline for GM, which already has been pushed to the brink of insolvency by the financial meltdown, frozen credit markets and national recession.

Allowing GMAC to fail potentially would have undone progress GM could make with the $13.4 billion in loans it is getting from the federal government, announced by the Bush administration last week.

One of the biggest immediate consequences is that the plan requires Cerberus and GM to give up most of their ownership stakes in the financing arm.

Cerberus, which owns 51% of GMAC, would cut its ownership stake to as little as 33%, maintaining voting interest of as much as 14.9%. To cut its stake, Cerberus would distribute its stock in GMAC to its investors. GM, which owns 49% of GMAC, would cut its stake to less than 10% of GMAC.

The news was released after the market closed Wednesday. Shares of GMAC dropped 36 cents or 6.6% Wednesday to close at $5.11.

Another interesting take on what the collapse of the Big 3 Automakers is going to mean to everyone in Michigan, and the nation.

From Mlive.com

Want a gripping reality show? Check out Michigan
Posted by Jo Mathis | The Ann Arbor News December 12, 2008 22:08PM

The news Friday that the $14 billion bailout for the Big Three died in the Senate left me, like most Michiganders, numb.

After tossing $700 billion – just like that – at the fancy folks and criminals on Wall Street, the shortsighted, anti-union, stubborn fat cats in Washington had the nerve to balk at a $14 billion loan to automakers?

Really?

The struggle for survival of the Big Three automakers reminds me of grounding teenagers for a series of grievances. Mistakes were made. You know they need to suffer the consequences. But if you ground them, everybody in the house suffers, too. So because they’re showing promise and progress and a whole lot of people will benefit from their success, of course you send them a lifeline.

So now what? We wait for the Bush administration to take a chunk of Wall Street’s $700 billion and send it our way. And we keep on keeping on.

Back in January, The News printed a letter to the editor from a Whitmore Lake woman who wrote:

Six months ago my life was great, but it was all taken away in an instant when I lost my job last August. By October, I was moving out of the house I was trying to buy on land contract and since November I have been living in my aunt’s basement with my husband and two children.

I remember sitting at work reading about all these “people” who lost their jobs and feeling sorry for them. Now I am one of those “people.” …

I saved a copy of that letter because it was a reminder to not get smug or complacent about anything, including my job. And that was months before the stock market meltdown, when fears of Big Three bankruptcies were real but still remote and before the latest rounds of massive layoffs.

We journalists are experiencing many of the same problems we’ve written about for years: Buyouts. Layoffs. Cutbacks. Downturns.

My friend Sarah just lost her reporting job during a round of layoffs at The Cleveland Plain Dealer, and is staying with me for a few days to get her mind off things.

She’s 38 and talented and has no spouse she can depend on financially until she finds something else. She’s also stuck with a house in a city with a dearth of both jobs and home buyers.

“I’m worried that my life is going to become the same as a nursing home patient: Wake up. Eat. Watch TV. Go to bed,” she said, smiling on the outside, desperate on the inside.

We admit we’ve both had fleeting moments when we wished we were senior citizens comfortably retired and living peacefully on a pension.

Even Sarah’s mother is counting the days until she’s 65 and eligible for Medicare.
When did old age become the holy grail?

It’s further proof that everything’s spinning out of control and the world has gone mad.

And this is why I’m proposing that Hollywood dump its reality shows based in Atlanta and Beverly Hills and on deserted islands and move crews into the state of Michigan right away. Tomorrow.

They want drama and angst? We got ‘em en masse.

Wouldn’t you like to see an insider look at Borders? How about a reality show about Hillary Swank making a movie here? The Zingerman’s staff is a funky, friendly, colorful bunch. I sniff a reality show with the word pastrami in it.

What the heck. The Ann Arbor News newsroom has its share of characters and might make interesting reality show fodder right about now, too. You think I won’t act out a scripted fight with a copy editor or photographer if the price is right (and the lighting’s good)? Think again.

This is survival, baby.

And reality bites.

The much bally-hooed bailout of the Big 3 Automakers has brought attention of the parts of detroit that have been in the background. Its abandoned houses, and factories.

This was written in The Michigan Messenger:

Big Three bailout spotlight reveals Detroit’s decay
By Minehaha Forman 12/12/08 1:12 PM

Now that the Big Three car companies that made Detroit the “Motor City” are reduced to begging for federal life support, a national spotlight is on Detroit’s decaying infrastructure.

On Sunday, Bloomberg.com reported that “General Motors Corp., Ford Motor Co., and Chrysler LLC are fighting for their lives. Large stretches of Detroit are already dead.”

The article highlighted areas of Detroit that are brimming with natural growth, a mix of urban and rural living. City lots are being recycled back to farms and vacant lots without cultivation are becoming stretches of prairie.

Similar coverage of Detroit’s return to a rural habitat was posted in Michigan Messenger earlier this year.

Both highlighted Detroit’s >urban farming and natural overgrowth in urban decay.

Adding to the more recent national attention was Time.com, which recently published a photo essay, shot in March 2008, of Detroit’s gutted old factories and train station. The photos offer a glimpse of a haunting, abandoned block.

“On many occasions,” said photographer Sean Hemmerle, “I had the feeling I was working in a post-Apocalyptic environment.”

Everyone knows the automotive industry was born in Detroit. Now national news organizations are realizing that it is—and has been for some time—dying here.

Hemmerle said he came to Detroit to take photos of “derelict” buildings as part of a project exploring “how far America has fallen”. He didn’t have to look hard. Leave the immediate downtown area and you’ll see signs of industrial decay. Tall office buildings, factories and historical homes stand slashed and gaping black holes rimmed with sharp broken glass mark the windows. On my street, on the East side of the city close to Eastern Market that was once an industrial community thriving on auto plant employment, there are multiple abandoned buildings, full of rust and still water or ice.

When I first moved from the suburbs to the inner city, I looked at the ruins in shock. I couldn’t believe a First World industrial country could have vast parts of a major city looking that neglected. But after living in Detroit for more than a year, I have come to the point where I often overlook the broken glass, the gutted factories and the piles of ruin and charcoal where there were once houses and factories. Detroiters have been forced to accept the gruesome neglect of city infrastructure or move. Many consider moving out of Detroit as a sign of success.

While some argue that the auto industry will fail without a bailout, a look at Detroit’s corroding infrastructure will tell you the damage cannot be undone by a mere $14 billion.

Michigan voters, according to The Detroit Free Press, have voted yes on Michigans Medical Marijuana Proposal 1. This makes it legal for patients suffering from cancer, glaucoma, HIV/AIDS and other conditions can be authorized to cultivate, possess and use marijuana without fear of prosecution under state law.

This does not eliminate the fact that the Federal Government stills views marijuana as a dangerous drug, and people possessing it can be arrested and jailed under Federal law.

That all being said: Good job, Michigan. You took a huge step forward in helping people manage their pain and suffering without putting billions of dollars in the big pharma companies.

You did good this time.

namaste.

This was posted on the Detroit Free Press blog today:

“Good judgment makes good presidents.

A chief executive’s ability to be steady yet decisive, and thoughtful when bravado might be enticing, can be the difference between success and disaster in the Oval Office. It’s more important than experience, which can be mistakenly equated with wisdom.

So the choice Americans face in the Nov. 4 presidential election is a clear one: between the relatively inexperienced Democratic senator from Illinois, Barack Obama, who has shown a knack for developing well-reasoned solutions to the nation’s many critical problems, and John McCain, the longtime Republican senator from Arizona, a genuine American war hero with a creditable streak of political independence, who has shown himself to be erratic, impulsive and bullheaded as a political leader.

At a time when America clearly needs some changes, Obama is not only proposing better ones but is also better suited to the job of getting them done. The Free Press endorses Democrat BARACK OBAMA for president.

Despite his relatively short time in public office, Obama, 47, has over the course of the general election campaign steadily articulated a progressive, pragmatic vision for this country, keyed to opportunities for the middle class, and demonstrated time and again that his approach to things is grounded in deliberation and reflection. He’s a man clearly open to ideas and willing to search for the right answer to a problem rather than pursuing the expedient one.

His mantra of “change” is rooted in a well-grounded perspective on governing and leadership.

These qualities will serve well a country that’s hungry for a unified, hopeful vision.
Issue No. 1: Economic recovery

On the economy, issue No. 1 for most Americans, Obama’s recovery plan more openly acknowledges the reality of the current situation: that it won’t be fixed easily, or without sacrifice. He proposes massive investment — in infrastructure, education and alternative energy development — to create jobs, but also to better position the American economy for global competition.

While promising a tax cut for most Americans, Obama also has been clear about the need to raise taxes on the richest Americans, and to reprioritize spending in Washington. He is a disciple of the pay-as-you-go approach to federal spending that helped produce a budget surplus in the ’90s, and he supports targeted spending cuts rather than the broad freeze proposed by McCain — a scalpel instead of hatchet, as the candidates put it in their final debate Wednesday.

As the current economic crisis burst on Washington and Wall Street last month, Obama’s response was measured, rather than panicky, and insightful where it needed to be. He has focused on correcting the massive deregulation of the financial markets that figured in the Wall Street meltdown, while also promising to provide relief to home owners threatened with foreclosure.

Notably, while McCain made a show of suspending his campaign and even asked to call off their first debate so he could rush to Washington for the Wall Street bailout debate, Obama stayed on the campaign trail, offering solutions and correctly pointing out that a president must be able to juggle multiple tasks.

On other key domestic issues with direct impacts on Michigan, Obama’s health care plan is also crafted around a cautious reality that Americans won’t accept a government-run system. He would augment private insurance with a government-funded plan for those who don’t have coverage. On trade, he promises to be a better, tougher negotiator for American products. Obama also has come around on federal assistance and encouragement for U.S. manufacturing, especially the auto industry, which has emerged as a key player in his big plans for a 10-year project to increase the country’s energy independence.
More reasoned on foreign policy

Foreign policy was supposed to be Obama’s weakness, given his newness to the Senate and lack of other service that would have given him first-hand exposure.

But he has emerged as the more sophisticated thinker on the subject and would set a course for the nation that balances humility and humanity with strength, leadership and collaboration.

Obama would pursue a more certain end with the war in Iraq so the American military can focus more on Afghanistan and other nations with more direct connections to terrorism.

He would abandon the hard-line stonewalling adopted by President George W. Bush toward America’s enemies, saying an open approach to negotiations will be more effective. Obama’s stance here strongly reflects his belief that dialogue and openness, even with those who are virulent or violently disagree, don’t equate with weakness. Failure to recognize that has been one of Bush’s most abject failures.
McCain takes disappointing turn

McCain, 72, a surprise victor in the Republican primaries, has been a disappointing contrast to Obama almost from the start of the general election campaign.

His run for the presidency was launched with not only his compelling personal story but McCain’s strong credentials as an independent Republican legislator. But since late summer, the campaign has been marked by stunts and gimmicks, gaffes and shifts that call into question McCain’s temperament and, most of all, his judgment.

One of his greatest miscalculations was the selection of Sarah Palin as his running mate, a pick McCain made after just two meetings and a phone call with the Alaska governor, not yet two years into her first term.

Palin was exciting initially, a potential voice for change, and someone who shared McCain’s “maverick” sensibilities.

But in the weeks since her selection, she has been revealed as not much more than a sideshow, someone with very limited range on issues and almost none of the depth expected in a cabinet secretary, let alone vice president, or president.

McCain has also shown his impulsiveness on policy matters.

Foreign affairs were supposed to be his strong suit, but he has embraced an icy Cold War mentality that could prove dangerous in a world rocked by a more modern political and cultural volatility. He famously joked about bombing Iran. He has resisted admitting that the Iraq war is a costly distraction from the real business of fighting terrorism, vowing to stay until “victory” is achieved. He irresponsibly reduced former Russian President Vladimir Putin to a caricature, saying he saw three letters, “K-G-B,” when he looked into his eyes.

And during the first debate, which was focused on foreign affairs, McCain was nearly bellicose in his saber-rattling, talking very tough but without much context or nuance about America’s place in the world, and its needs going forward.

The Free Press has twice endorsed McCain for the Republican presidential nomination, in 2000 and this year. The McCain running against Obama in this general election has not been the same candidate; he has been nastier, less consistent and, since his acceptance speech at the GOP National Convention, frankly uninspiring.

His campaign suggests McCain would be a president given to instinct, good or bad, and the shunning of advice and consensus.

Senate colleagues quietly agree, describing McCain as quick-tempered — although his outbursts rarely last long — and inclined to make instant decisions, then backfill to defend them.

Obama, by contrast, is said to hear out all points of view and deliberate, sometimes too long, before drawing a conclusion. Each style has its advantages in given situations, but in the White House, where executive decisions can have instant, global impact, Obama’s way will be less risky more often — and a welcome change after eight years of a president who proudly relies on gut instinct.

That Obama would be the first African American elected president is of no policy import, but would be a symbol of American progress, to people in this country and around the world. That he is relatively young and a gifted speaker is also of little substantive importance, though his soaring rhetoric and hopeful outlook could be beneficial in rallying Americans to face today’s challenges together.

But his judgment, across the board, is what makes BARACK OBAMA the stronger candidate to be America’s 44th president.”

Moderate Republicans are jumping off of the McCain ship at this point like rats off of a burning vessel.

Namaste.

I have been looking around for more newspaper stories concerning Michigan Proposal 1 that concerns Medical Marijuana. Haven’t found any. I looked at the online issues of the Detroit Free Press, Mlive.com, The Grand Rapids Press, The Lansing Journal, and the Kalamazoo Gazette. Haven’t found anything new.

What is going on out there? I know that the the opposition group isn’t sitting still. Silence is concerning when you are looking at an issue such as this one.

Makes me nervous. Don’t lose your focus, group.

namaste.