Electric Car Company, Says Yoda to G.M.

I was sitting around thinking about what I would do if I ran General Motors and faced bankruptcy and had to come up with a plan. (Actually, I was sitting around alternately watching tv, playing poker, eating cake, texting, walking out to the soda machine, eating chicken on white rice, and wishing I hadn't given a bag of cookies away to a visitor earlier... and G.M. kind of slipped into the thought stream). 

Ultimately getting the financials sorted out with bondholders is the difficulty, while also obtaining the right sort of concessions on healthcare obligations and benefits (from the unions) 

G.M. won't be bold since they have had several eons to do something different and opted otherwise. Their announcement on Monday should be interesting, if somewhat "been there, heard something like that before."

What I would do? I would devote probably 70% of production to electric cars. The remainder would be targeted toward hybrids and high mileage vehicles. Maybe five to seven models spread over three or four brands. 

We would use the existing (or remaining) dealerships to become our "charging stations" where drivers could get their fillups. I would cut deals with Costco, Walmart and maybe McDonalds to offer some sort of electric gas depot on their properties. 

And I would price a few of the cars cheap enough to attract new drivers.  

Moving completely toward the new technologies would be the type of niche that could make G.M. the Apple Ipod of car companies.  They really have to do something unique and create branding that will turn the cars into must have items (while offering true value in cost or construction or features). 

Archway Cookies and Target: Contrasts in Repelling Unwanted Advances

We were never huge fans of Archway cookies, though they were often in the household growing up. If recollection is accurate, they did make a tasty lemon flavored soft cookie that the male parental authority unitoften brought home and munched on between reading the Wall Street Journal and determining the exact moment to spank us for misdeeds earlier in the day. (Thanks moms everywhere for keeping fathers in the discipline loop).

This is no cookie ode being written; rather, another small contribution to our ever continuing disappointment in how a fundamentally good concept--in this case, the private equity firm--can be used for complete evil and thus erode the stability of capitalism.  Archway was sold to one such firm, who, through lack of oversight, managed to break the company into crumbs, sans apology or recognition of misdeeds. They are in court now.

Thus, the New York Times tells us:

ALMOST as soon as he arrived at Archway in October 2007 as its director of finance, Mr. Roberts was putting out fires. Having spent the last decade working for various troubled manufacturers that private-equity firms had lassoed, he was used to the day-to-day struggle needed to keep weak companies afloat.

“I had plenty of experience with private-equity firms that highly leverage the companies they buy. The financial person is expected to keep a million balls up in the air,” he said. “There are days when you wonder if you can keep the doors open another week and then something happens and, suddenly, you’re making a profit.”

(N.Y. Times)

It is this sort of thing that makes the initiatives by people like Bill Ackman toward Target, with his desire for them to do his bidding, rather suspect. Thankfully, he failed in his efforts to take control of that company.
In the proxy fight, which cost the two sides an estimated $21 million, none of Ackman's five director candidates were elected, despite getting some support from RiskMetrics, the largest proxy research firm. Preliminary results showed that the percentage of votes in favor of Ackman's candidates ranged from the high single digits to the low 20s.

"I just look forward to refocusing," said a relieved Gregg Steinhafel, Target's CEO. Ackman, for his part, decided to declare victory, proclaiming the results "a great day for shareholders," whom, he said, would find more receptive corporate governance in other companies as a result of his campaign.

In any event, Ackman's actions mean he will not have the influence he had hoped for at Target, where he is a holder of stock and options totaling 7.8% of shares outstanding, an investment originally worth over $2 billion that has plummeted by 80% since he bought the shares in 2007. How do Ackman's investors feel about his battle? "I've been too busy to ask them," he joked after the meeting.

(C.N.N./Money)

I guess the question is whether Ackman is some sort of benign anomaly, who would buck the habits of so many firms and not attempt to suck value out of Target via financial engineering. Given his massive losses, we highly doubt it. Fortunately shareholders showed consumate wisdom. Not so much for CNN, who end their reporting with a brief ode to the "important issues" raised by the outvoted Ackman, while not being as critical as they should be.

Bottom line is Ackman got caught on the wrong side of the economy in a massive bet on Target, and having been turned down at the bank (meaning his investment in Target), he attempted to rob the banker (meaning, force Target to help him recoup his losses).

Green Day Suffering in the American Desert Three Feet from the Well (and McDonald's)

Green Day has a new album, and in servitude to the whims of others who are great enthusiasts of the band, I've been forced to take a listen. I am not a fan at all philosophically or politically, though every now and then one of their slower tunes catches my attention; I think specifically of "Boulevard of Broken Dreams" and more recently, "21 Guns" and "Restless Heart Syndrome" off the newly released 21 Century Breakdown.

Unfortunately enjoying Green Day for the slow tunes is like enjoying McDonald's for the salads. Further, when  I look at the huge stack of music in my media player I am annoyed, not wanting music I am holding for the use of others to taint the esthetic sensibilities of my wider collection. I am not a radical, or particularly concerned that America is headed for (or exiting) some great abyss. As long as I can find the newest Green Day album at my local Target, I hardly think we are in any sort of totalitarian, chaotic "end of all things." Further, if you are going to go there, you had better at least be specific enough and consistent enough to have a clear target for your rants, along with an inkling of a solution. Generally speaking, musicians don't know their  ass from their economics, so it's shaky ground all the way around.

But that's where Green Day wants to take you, getting you ready for some ill defined revolution without answers.

Rather than tie my brain down on the tracks trying to pinpoint the pointless, I refer you to Sputnik.com, which has a nice review, including this:

"...Seventy minutes of material gives plenty of opportunity for Billie Joe Armstrong to make a strong statement of any kind, but seventy minutes of material also provides plenty of evidence that in all probability, Billie Joe doesn’t know what he’s talking about. There are a lot of lines about the government and religion in here, along with plenty of references to a vaguely defined “you” that Armstrong perpetually finds problems with, but trying to follow along with what Armstrong’s idea is will soon leave one without enough breadcrumbs to get home."

(Adam Downer, Sputnickmusic.com)

Yes, it's probably wrong of me to seek out the review that best supports my sensibilities, especially when the bulk of the reviewers have their critical lips firmly attached to Green Day derriere, but so be it. You won't ever find me a huge fan of armchair complainers and revolutionaries. If you are in Cambodia, or Sudan or someplace truly lacking loveliness, opportunity, and comfort, then I will hearken to your powerful three chord protest.

Otherwise, pretty much shush and keep me comfy with the slow tunes. 

Killing Vulcan, Reviving Star Trek

I, we, are stunned. Star Trek, the new movie released last week, is not a bombastic, cinematic scribble. Rather, it obliterates the known conventions of the series and movies, while maintaining a tether to the nature and soul of the original characters.

The story itself was not the most pleasing, but rather just a foundation upon which to expand the series. Time travel usually never works for any movie viewer with an ounce of skepticism. Often it creates more questions than it answers. You osit wondering, "If time travel thus created an alternate reality or world, why am I not watching THAT movie, because this one rots." 

But here it was a handy tool to allow the director (and particularly future directors) the freedom to create.  We got re-introduced to all our favorite characters, but with new young faces.  And, as we all suspected during many a late night watch of the original Star Trek, someone had tapped Lieutenant Niota Uhura's. That it was Spock here fleshed out what the first series merely implied. 

I don't know that I would see the movie again, as I've read some have done, but I was pleasantly surprised at how closely the characters matched the originals while still managing a fresh take. 

So many films hue to formula, and this one is no different. But it works and thus the Star Trek franchise has new life that should carry it to the next film; I actually have a desire to see "what happens next" to the characters. 

Frankly I am stunned someone could obliterate Vulcan and that I would be okay with that. 

Arby's Pulls Down Wendy's Pants

We moaned and groaned about the buyout of Wendy's by Triarc's Arby's in the past. It was a self-serving deal to begin with, assuming the average shareholder is not part of Nelson Peltz's Id*. Shareholders have suffered. The next time some billionaire or high powered private equity firm comes your way talking about synergies and enhancing value, take it with the seriousness it deserves... very little.  There will be more destruction than creative destruction.

You cannot meld a struggling firm (Arby's) to a misguided but better franchise (Wendy's) and hope to create some magic mountain of junk food delight, with a combined stock hitting grand heights. 

Thus, with earnings released, we see Arbys a drag on Wendy's, as we knew it would be:

In North America, system wide same-store sales were up 1% while Arby's fell 8.7%, although that key metric was down only 2.5% in March following the launch of its new "Roastburger" sandwiches. 

Meanwhile, margins at company-operated Wendy's restaurants for the quarter tweaked up to 11.1% from 10.1% a year ago, reflecting reduced labor and other costs. Arby's margins, though, fell to 14.2% from 17.1% in the year-ago period, "due primarily to sales deleverage," the company said.

(Marketwatch)

Peltz will no doubt blame the times we are in, while ignoring the basic fact that Arby's had nothing to offer Wendy's, except a spare apostrophe. Cost synergies are no stand in for good management. 

*Wiki: The id is responsible for our basic drives such as food, water, sex, and basic impulses. It is amoral and egocentric, ruled by the pleasure–pain principle; it is without a sense of time, completely illogical, primarily sexual, infantile in its emotional development, and will not take "no" for an answer. It is regarded as the reservoir of the libido or "instinctive drive to create".

N.Y. Times and Others See Bright Money At the End of the Dark Vault

Here the New York Times reports what we have known, that we are entering a period when the banking sector will no longer be a major recipient of government bailouts  and that things are turning. They don't say bottom exactly, but it's basically what they are saying, and it's a conclusion that they should have reached a while back. Or they should have at least pinned the "bottom" to a period further in the past. Maybe a month or five ago. Maybe last October?

All of this assumes that the economy does not take another turn for the worse, which would result in even more losses at the banks — and the need for even more money to prop them up. But hopes that the tests will be a turning point in this financial crisis electrified Wall Street on Wednesday. Financial shares soared, lifting the broader stock market to its highest level in four months. The Dow Jones industrial average rose 101.63, or 1.2 percent, to close at 8,512.28.

(N.Y. Times)

More importantly, and in the same paper, we see smart money (like private equity types), trying to pick up assets--financial assets-- on the cheap:

For all the talk of the banking crisis, Mr. Flowers and other giant private equity players are circling distressed banks around the country, competing to buy into the industry. Bidding wars are now breaking out among private equity firms, including the Carlyle Group, which is going up against Mr. Flowers’s firm for a stake in BankUnited of Florida. 

They and other investors see banks as the recession’s biggest prize: potential money machines that could one day generate fabulous returns, particularly after the federal government eats the losses of failed banks, then heavily subsidizes their sale. But like Mr. Flowers, some of them would prefer to take over the banks completely, replace their managements and take all the profit.

(N.Y. Times )

Daily Update: Superfriends Edition

Our credit markets seem much improved--meaning, that no entity is on the verge of collapse or suffering to get access to capital. The results of the Obama Administration's stress tests for banks with over $100 billion in assets will be released Thursday night after the stock market's close.

This is probably the last real chance to see certain bank stocks dip down, and we doubt any dips will be large. If you are still waiting for the bottom in banking, then you missed it.

*

Remember the quality 1970's Saturday morning television that was the Superfriends?

You watched and wished that you too had friends so loyal, so capable, so nearly naked (Wonder Woman). Well now you can get a reprise and can see the Friends rise again... in Asia.

Yes a bunch of Asian economies are deciding that they must band together and support one another in ways the Western world never could, or would.

According to Reuters, "Japan, China and South Korea have finalized details of an emergency $120 billion liquidity fund for 13 Asian nations." In the event of a financial crisis in one of the counties, this fund would be available to provide assistance.

There is a temptation to compare this new facility to the IMF, but that analysis would miss the move toward a financial alliance that will help serve to bring Asia together as a single, loosely formed economic entity lead by China and Japan, two of the four largest countries in the world as measured by GDP. The program makes the region financially stable, probably more stable than Europe is now with its rising unemployment, stagnant economies, and sovereign debt which faces downgrades in many cases.

(via Time Magazine)

Alas they are only fighting villians in that part of the world, so we are on our own with our cartoon friends. 

*

Why Obama's tax loop-hole closing efforts should bother anyone who is not a tax cheat or major corporation is somewhat baffling.  Corporations manipulate the tax collectors in the regions where they do business, so some harmony in matching expenses booked to profits reported (in the U.S.) would be worthwhile. But don't expect this to go down without a big brusing battle, and spun as some sort of semi-socialist IRS money grab.  Obama wants your money now, and your daughters later. 

*

And finally, does Fiat seem a little ... I dunno, economically horny? It wants parts of Chrysler. It wants parts of G.M. (the European Unit).  And it does not want to pay for it:

As in the Chrysler deal, Marchionne (Fiat Big Head) wants to accomplish all this without Fiat having to put down any cash or assume any of GM Europe's debt. Moreover, he wants European governments to kick-start the new company with billions in loans and loan guarantees.

(Business Week)

And all I want is someone to love. 

Souter and Kemp: True to Self, True Vision

May has rolled in fast. Soon the kids will be out of school, the Phoenix heat will turn blistering, and some of us will tuck indoors, with little money for vacations. The end of days for some. 

It is also the end of a career  for Supreme Court Justice David Souter, that lonely, lean, shy legal mind from New Hampshire who never totally adjusted to the life Washington has to offer. A friend of his in the Washington Post says that Souter "never unpacked" his things for the 19 years he was there, leaving them in boxes.

It reminds me of my time here in Phoenix after arriving from the East Coast. While happy to get out of New Jersey, coming to the Arizona desert was not my ideal choice. I loved places like Minneapolis (with its clear lakes and friendly folks) , Tennessee and Virginia or perhaps New England. You go to the desert to die, or because you like the sun, but have enough money to maintain a more comfortable residence in another cooler (and cooler) state when the Arizona sun turns blazing and falls into kill mode.

I can see Souter wanting to return to some ideal place that made him feel comfortable. At the time he was appointed by George Bush senior, I thought he was sufficiently conservative and most of all, he reminded me of a version of myself.  Souter was the man with a small group of friends, and with a solitary life filled with books in beautiful New Hampshire.  As it turned out, he was not consistently conservative at all, and more his own man, and while I am probably disappointed in some of his judicial opinions, there is something about him that I admire in his quiet loyalty to his own way.

We learn that he keeps a diary, that he is the wealthiest justice via good investments and frugal living, and that he eats an apple and yogurt each day. 

When he departs this summer in his Volkswagen sedan -- he dislikes flying and always drives himself to and from Washington, leaving at odd hours to game the traffic -- Souter will cross the Piscataquog River, drive past country stands selling maple syrup and fresh eggs, and turn down a narrow, unmarked dirt road.

(The Wasington Post)

Souter was picked for the high court out of an attempt by Republicans to place a conservative strict constructionist on the bench, but one without a paper trail that could be sabotaged by liberals, as happened with Judge Bork. Two sides of the political spectrum getting tricky with each other. Turns out even the people who thought they knew Souter's judicial heart had it wrong, and he was not the guy Republicans had hoped he would be. 

Which brings me to another thought. The Republicans are scrambling hard to recast themselves, and debating whether to become more hardcore and singular in their vision, or more open and fuzzy. The hardcores--those who view the current president as a socialist seducer of the stupid--are also the loudest voices, so one cannot be certain that the Republicans will get this right any time soon.

But if they need a reminder of the direction to go, they need only look at former congressman Jack Kemp, whose death from cancer this weekend added a note of sadness to a fast fading spring season. He was George HW Bush's housing secretary, among other things, and an advocate for tax reform, growth, and urban outreach. 

Through his political life, Kemp's positions spanned the social spectrum: He opposed abortion and supported school prayer, yet appealed to liberals with his outreach toward minorities and compassion for the poor. He pushed for immigration reform to include a guest-worker program and status for the illegal immigrants already here.

(AP)

If Republicans and conservatives are looking for how to regroup, taking a look at the life and ideas of Kemp would be a good start. They also need to examine how they ended up with Souter in an attempt to game the appointment process (in response to liberal shenanigans). 

Conservatives have to stick with a consistent vision of what they are about, and not hope to be all things to everyone or replicate the Democratic Party. But, they also need to jetison any preconceived notions and ideology that do not fit with reality of the world we live in. The language and tactics have to be changed.  

Here then with Souter and Kemp we have men who have been true to themselves and have offered singular vision.