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The Roundup June 18

Godzilla 98
Ford unveils its new hybrid.

Get ready for Bailout 3: Found On Road Dead

With GM (GMGMQ) and Chrysler using the bankruptcy process to shed much of their own debt cheaply and quickly, Ford has gone from the automaker with the most cash on hand to the one with the most debt on its books.

GM will have only about $17 billion in debt if it can follow its planned emergence from bankruptcy. Chrysler left bankruptcy with about $11 billion in debt, and a new partner, Italian automaker Fiat, it did not have previously have.

Ford also hasn’t been able to cut its manufacturing capacity or its bloated dealership network as Chrysler and GM through bankruptcy reorganization.

(“Ford’s bumpy road ahead,” CNN Money, June 18) I have a rule about bad employees. If you get rid of your worst employee then . . . another employee becomes your worst employee. You didn’t know that person was a problem but now that your worst problem is gone, now you know about your new problem employee. Journalism works the same way — it only covers the really scary stuff. Once it looked like GM and Chrysler were sailing into calm harbors, suddenly we see just how bad off Ford is. But it is true that GM and Chrysler have a significant competitive advantage over Ford that they didn’t before: a big equity stake by the U.S. government. It’s what the Steve Forbes ofthe world get all apoplectic about: when government steps in, sometimes it doesn’t pay to manage your company well.


So, if it works in China . . .

The World Bank raised its growth forecast for China this year and advised policy makers to delay until 2010 any additional stimulus plan to boost the world’s third-largest economy.

China’s economy will expand 7.2 percent in 2009 from a year earlier, up from a 6.5 percent forecast in March, the Washington-based lender said in a quarterly report released today in Beijing. Stocks gained after the announcement. . . .

“The massive monetary impulse will fuel economic growth in coming quarters,” said Louis Kuijs, the World Bank’s senior economist for China in Beijing. “I don’t think China will see a V-shaped recovery back to high single-digit growth rates.”

(“World Bank Raises China Growth Forecast, Says Stimulus Adequate ,” Bloomberg News, June 18) You know, ladies and gentlemen, this stimulus stuff really does work (though there are important factors that China is missing). So what’s going on here? One of the reasons the stimulus package in America has been so, well, unstimulating, is that only some 2% of the money approved by Congress has actually been spent. “Why?” you may ask? Because, in the great untold story of this year, Republicans in the Senate are stonewalling Obama administration appointees through dilatory, obstructionist tactics. He’s got the cash but not the staff. I’m telling you: Republicans are serious when they say they want Obama to fail. That’s kind of like wanting the captain of the Titanic to fail — we all go down to an icy grave if that happens.


Here’s one for the record books.

“Colleagues are being urged to help the airline’s cash-saving drive by signing up for unpaid leave or unpaid work,” read an article in BA News, the carrier’s in-house newspaper. Chief executive Willie Walsh, who has pledged to forgo his $100,000 monthly salary in July, said the airline was caught in a “fight for survival.”

(“Tumbling passenger numbers and a soaring fuel bill pushed BA to a pretax loss of $656 million in the 12 months leading to last April. The year before, BA made $1.5 billion.,” Time, June 18) Many, many years ago, a young Dustin Hoffman starred with Laurence Olivier in the William Goldman thriller, Marathon Man. Hoffman, method actor that he is, went out every morning and ran long distances to get the character down. He would come into makeup exhausted and pale, with deep bags under his eyes. One morning, Olivier leaned over from his makeup chair and said, “My dear boy, why don’t you just act? It’s so much easier.” Well, my message to Walsh is “Why don’t you just manage your company well? It’s so much easier than what you’re doing now.” However, lest you feel bad for the stewardesses and pilots, keep in mind that the average BA stewardess works about 11 days a month and the average pilot about 5-6 days a month (of course, they are loooooong days). And they make huge paychecks. So a one month leave every six months is actually skipping about a week or two worth of work. It’s just that they’re not going to get paid for the vacation they take for the rest of the month.

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