A Better Deal for Delaware

Entries from January 2007

Chrysler In Newark: How much longer?

January 29, 2007 · 5 Comments

By now everyone knows that Chrysler has mentioned the possibility that the Chrysler plant could be closed. Sure, there is speculation in many circles but for my part I think the writing is on the wall.

Here is why. Chrysler’s market share has declined from 14.5% in 2000 to 12.9% in 2005. When five plants were closed in the early part of Dr. Dieter Zetsche’s era at Chrysler, he clearly has admitted he didn’t go far enough to cut costs in 2003 when negotiations with UAW. He vowed he will not make this mistake again.

The problem is simple, Chrysler is built to be a auto maker with 15-16% of the auto market, but it isn’t. The reliance on extensive discounts to fleets and the average of four months to sell an auto does not bode well for Newark. The Durango has lost about one third of its market share and 90% of it suppliers are in the Midwest. A great product built by good workers that is facing the realities of fuel prices and corporate difficulties.

Possibly, Chrysler can do a better job of how it provides cars to buyers. Unbelievably, Chrysler decides the mix by using a formula to maximize profits not customer satisfaction. Funny thing but thinking that corporate minds can determine the best cars to order rather than letting Dealers order for a customer is revealing.

What can Delaware do? The gross receipts tax could chop only a couple million dollars off the bottom line and it appears any action on Health Care is way too late and the recent energy increases did not help either. No, it appears that the time for action has come and gone. Workers and families deserve better.

Lastly, “the Marriage of Equals” between Daimler and Chrysler seems to need counseling.

Categories: Automotive Industry

Automakers In America…It Isn’t Just Chrysler in Newark

January 29, 2007 · Leave a Comment

There is no bigger and deeper tailspin in industrial America than the auto industry. I went through something similar with the airline industry from 2001-2006 and we had it bad, real bad. The auto workers are in for much, much worse. Let me mention that the average Airline Pilot lost about one third of his/her pay and all of their pensions.

Let me mention two facts; it is not economically viable for an auto plant to operate on a single shift and a reduction of one third in your model sales is profound and deep. Both of these apply to the Chrysler Plant. Still, even if the plant survives in the short run it is doomed in the long run.

In 2006 all three major US makers are going to be in the Red, big time. Ford lost $12.7 billion for the year, GM has had to restate earnings because of “accounting errors” and Chrysler is in the red and will launch a restructuring plan that will go deep.

There will be some tough times for auto workers and we will offer some thoughts on how to “save” the industry from itself and from the government.

A few parting points;

GM says it has $26.4 billion in cash, the PBGC says it has an unfunded pension obligation of about $30 billion.

Ford doesn’t foresee a profit until 2009.

All are losing market share.

Your thoughts?

Categories: Automotive Industry

Iraq: The View from Iran

January 19, 2007 · 2 Comments

The Iraq war has turned into a duel between the United States and Iran. For the United States, the goal has been the creation of a generally pro-American coalition government in Baghdad — representing Iraq’s three major ethnic communities. For Iran, the goal has been the creation of either a pro-Iranian government in Baghdad or, alternatively, the division of Iraq into three regions, with Iran dominating the Shiite south.

The United States has encountered serious problems in creating the coalition government. The Iranians have been primarily responsible for that. With the death of Abu Musab al-Zarqawi in June, when it appeared that the Sunnis would enter the political process fully, the Iranians used their influence with various Iraqi Shiite factions to disrupt that process by launching attacks on Sunnis and generally destabilizing the situation. Certainly, Sunnis contributed to this, but for much of the past year, it has been the Shia, supported by Iran, that have been the primary destabilizing force.

So long as the Iranians continue to follow this policy, the U.S. strategy cannot succeed. The difficulty of the American plan is that it requires the political participation of three main ethnic groups that are themselves politically fragmented. Virtually any substantial group can block the success of the strategy by undermining the political process. The Iranians, however, appear to be in a more powerful position than the Americans. So long as they continue to support Shiite groups within Iraq, they will be able to block the U.S. plan. Over time, the theory goes, the Americans will recognize the hopelessness of the undertaking and withdraw, leaving Iran to pick up the pieces. In the meantime, the Iranians will increasingly be able to dominate the Shiite community and consolidate their hold over southern Iraq. The game appears to go to Iran.

Americans are extremely sensitive to the difficulties the United States faces in Iraq. Every nation-state has a defining characteristic, and that of the United States is manic-depression, cycling between insanely optimistic plans and total despair. This national characteristic tends to blind Americans to the situation on the other side of the hill. Certainly, the Bush administration vastly underestimated the difficulties of occupying Iraq — that was the manic phase. But at this point, it could be argued that the administration again is not looking over the other side of the hill at the difficulties the Iranians might be having. And it is useful to consider the world from the Iranian point of view.

The Foundation of Foreign Policy

It is important to distinguish between the rhetoric and the reality of Iranian foreign policy. As a general principle, this should be done with all countries. As in business, rhetoric is used to shape perceptions and attempt to control the behavior of others. It does not necessarily reveal one’s true intentions or, more important, one’s capabilities. In the classic case of U.S. foreign policy, Franklin Roosevelt publicly insisted that the United States did not intend to get into World War II while U.S. and British officials were planning to do just that. On the other side of the equation, the United States, during the 1950s, kept asserting that its goal was to liberate Eastern Europe from the Soviet Union, when in fact it had no plans, capabilities or expectations of doing so. This does not mean the claims were made frivolously — both Roosevelt and John Foster Dulles had good reasons for posturing as they did — but it does mean that rhetoric is not a reliable indicator of actions. Thus, the purple prose of the Iranian leadership cannot be taken at face value.

To get past the rhetoric, let’s begin by considering Iran’s objective geopolitical position.

Historically, Iran has faced three enemies. Its oldest enemy was to the west: the Arab/Sunni threat, against which it has struggled for millennia. Russia, to the north, emerged as a threat in the late 19th century, occupying northern Iran during and after World War II. The third enemy has worn different faces but has been a recurring threat since the time of Alexander the Great: a distant power that has intruded into Persian affairs. This distant foreign power — which has at times been embodied by both the British and the Americans — has posed the greatest threat to Iran. And when the element of a distant power is combined with one of the other two traditional enemies, the result is a great global or regional power whose orbit or influence Iran cannot escape. To put that into real terms, Iran can manage, for example, the chaos called Afghanistan, but it cannot manage a global power that is active in Iraq and Afghanistan simultaneously.

For the moment, Russia is contained. There is a buffer zone of states between Iran and Russia that, at present, prevents Russian probes. But what Iran fears is a united Iraq under the influence or control of a global power like the United States. In 1980, the long western border of Iran was attacked by Iraq, with only marginal support from other states, and the effect on Iran was devastating. Iran harbors a rational fear of attack from that direction, which — if coupled with American power — could threaten Iranian survival.

Therefore, Iran sees the American plan to create a pro-U.S. government in Baghdad as a direct threat to its national interests. Now, the Iranians supported the U.S. invasion of Iraq in 2003; they wanted to see their archenemy, former President Saddam Hussein, deposed. But they did not want to see him replaced by a pro-American regime. Rather, the Iranians wanted one of two outcomes: the creation of a pro-Iranian government dominated by Iraqi Shia (under Iran’s control), or the fragmentation of Iraq. A fragmented Iraq would have two virtues. It would prove no danger to Iran, and Iran likely would control or heavily influence southern Iraq, thus projecting its power from there throughout the Persian Gulf.

Viewed this way, Iran’s behavior in Iraq is understandable. A stable Iraq under U.S. influence represents a direct threat to Iran, while a fragmented or pro-Iranian Iraq does not. Therefore, the Iranians will do whatever they can to undermine U.S. attempts to create a government in Baghdad. Tehran can use its influence to block a government, but it cannot — on its own — create a pro-Iranian one. Therefore, Iran’s strategy is to play spoiler and wait for the United States to tire of the unending conflict. Once the Americans leave, the Iranians can pick up the chips on the table. Whether it takes 10 years or 30, the Iranians assume that, in the end, they will win. None of the Arab countries in the region has the power to withstand Iran, and the Turks are unlikely to get into the game.

The Unknown Variables

Logic would seem to favor the Iranians. But in the past, the Iranians have tried to be clever with great powers and, rather than trapping them, have wound up being trapped themselves. Sometimes they have simply missed other dimensions of the situation. For example, when the revolutionaries overthrew the Shah and created the Islamic Republic, the Iranians focused on the threat from the Americans, and another threat from the Soviets and their covert allies in Iran. But they took their eyes off Iraq — and that miscalculation not only cost them huge casualties and a decade of economic decay, but broke the self-confidence of the Iranian regime.

The Iranians also have miscalculated on the United States. When the Islamic Revolution occurred, the governing assumption — not only in Iran but also in many parts of the world, including the United States — was that the United States was a declining power. It had, after all, been defeated in Vietnam and was experiencing declining U.S. military power and severe economic problems. But the Iranians massively miscalculated with regard to the U.S. position: In the end, the United States surged and it was the Soviets who collapsed.

The Iranians do not have a sterling record in managing great powers, and especially in predicting the behavior of the United States. In large and small ways, they have miscalculated on what the United States would do and how it would do it. Therefore, like the Americans, the Iranians are deeply divided. There are those who regard the United States as a bumbling fool, all set to fail in Iraq. There are others who remember equally confident forecasts about other American disasters, and who see the United States as ruthless, cunning and utterly dangerous.

These sentiments, then, divide into two policy factions. On the one side, there are those who see Bush’s surge strategy as an empty bluff. They point out that there is no surge, only a gradual buildup of troops, and that the number of troops being added is insignificant. They point to political divisions in Washington and argue that the time is ripe for Iran to go for it all. They want to force a civil war in Iraq, to at least dominate the southern region and take advantage of American weakness to project power in the Persian Gulf.

The other side wonders whether the Americans are as weak as they appear, and also argues that exploiting a success in Iraq would be more dangerous and difficult than it appears. The United States has substantial forces in Iraq, and the response to Shiite uprisings along the western shore of the Persian Gulf would be difficult to predict. The response to any probe into Saudi Arabia certainly would be violent.

We are not referring here to ideological factions, nor to radicals and moderates. Rather, these are two competing visions of the United States. One side wants to exploit American weakness; the other side argues that experience shows that American weakness can reverse itself unexpectedly and trap Iran in a difficult and painful position. It is not a debate about ends or internal dissatisfaction with the regime. Rather, it is a contest between audacity and caution.

The Historical View

Over time — and this is not apparent from Iranian rhetoric — caution has tended to prevail. Except during the 1980s, when they supported an aggressive Hezbollah, the Iranians have been quite measured in their international actions. Following the war with Iraq, they avoided overt moves — and they even were circumspect after the fall of the Soviet Union, when opportunities presented themselves to Iran’s north. After 9/11, the Iranians were careful not to provoke the United States: They offered landing rights for damaged U.S. aircraft and helped recruit Shiite tribes for the American effort against the Taliban. The rhetoric alternated between intense and vitriolic; the actions were more cautious. Even with the Iranian nuclear project, the rhetoric has been far more intense than the level of development seems to warrant.

Rhetoric influences perceptions, and perceptions can drive responses. Therefore, the rhetoric should not be discounted as a driving factor in the geopolitical system. But the real debate in Iran is over what to do about Iraq. No one in Iran wants a pro-U.S. government in Baghdad, and blocking the emergence of such a government has a general consensus. But how far to go in trying to divide Iraq, creating a pro-Iranian government in Baghdad and projecting power in the region is a matter of intense debate. In fact, cautious behavior combined with extreme rhetoric still appears to be the default position in Tehran, with more adventurous arguments struggling to gain acceptance.

The United States, for its part, is divided between the desire to try one more turn at the table to win it all and the fear that it is becoming hopelessly trapped. Iran is divided between a belief that the time to strike is now and a fear that counting the United States out is always premature. This is an engine that can, in due course, drive negotiations. Iran might be “evil” and the United States might be “Satan,” but at the end of the day, international affairs involving major powers are governed not by rhetoric but by national interest. The common ground between the United States and Iran is that neither is certain it can achieve its real strategic interests. The Americans doubt they can create a pro-U.S. government in Baghdad, and Iran is not certain the United States is as weak as it appears to be.

Fear and uncertainty are the foundations of international agreement, while hope and confidence fuel war. In the end, a fractured Iraq — an entity incapable of harming Iran, but still providing an effective buffer between Iran and the Arabian Peninsula — is emerging as the most viable available option. (SOURCE: Author: George Friedman; http://www.stratfor.com)

Your thoughts?

Categories: Iraq

Your Health Care Dollar- Isn’t There a Better Way?

January 16, 2007 · 1 Comment

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Categories: Health Care

The Plan for Healthcare?

January 15, 2007 · 4 Comments

The Medical Society of New York did a survey of 1,363 Physicians to get an idea on their priorities for agendas on health care and public health. Read on:

Question 1: If you had one issue for Congress and the President to work on, which would it be?

35% Expanding Coverage for the uninsured

30% Reducing Health Care Cost

18% Improving Medicare Part D

10% Improving quality and reducing errors

6% Reduce spending on Government Health Care Programs

Question 2: Same question but what do you want addressed for Public Health?

67% Increase spending for medical research such as cancer, diabetes and cancer.

13% Do more to prevent AIDS/HIV

5% None of the above

1% Don’t know

What do you think??

Categories: Health Care

At a minimum…

January 12, 2007 · 2 Comments

Knowing that minimum wage legislation will hit a Republican roadblock in the Senate, some Democratic senators support attaching a package of small-business tax breaks to the Senate’s version of the bill, says Investor’s Business Daily (IBD).

Some of the proposals include:

Letting businesses with fewer than 100 employees offer “association health care plans” on a nationwide basis, shielded from state regulation, which would give small relief from rising insurance costs by spreading risk over a larger pool of employees.
Repeal of both the Alternative Minimum Tax and the Estate Tax, which hurt small businesses disproportionately.
Increasing the small-business expensing limit to $200,000; it’s now at $100,000 but will revert to $25,000 after 2009 if Congress fails to act.
Eliminating the “temporary” Federal Unemployment Tax Act unemployment surtax, passed in 1976, by cutting FUTA taxes themselves and scrapping the wasteful federal-state unemployment insurance system those taxes pay for so that responsibility for unemployment benefits can return to the states.

Small business has been the engine for the spectacular job growth under Bush and the GOP Congress, says IBD, and some Democrats do realize this. In Senate Finance Committee hearings, new panel chairman Max Baucus (D-Mont.) noted:

Businesses with fewer than 500 employees represent more than 99.9 percent of all American businesses.
They pay nearly half of the total American private payroll.
They have generated 60 percent to 80 percent of the new jobs annually over the last decade, and they employ 41 percent of high-tech workers.

Categories: Middle-Class

What’s Up With The Middle Class?

January 2, 2007 · 2 Comments

Robert Samuelson writing in The New York Times in late December commented on a survey by the liberal think tank, Economic Policy Institute. It appears 2% of Americans say they are “upper class and 8% say they are lower class. 17% say they are “upper middle class”, 45% middle class and 27% say they are working class”.

The EPI poll was done to focus on the perceived middle class anxiety on jobs, health insurance and retirement income. Look at those two statements:

Most people today face increasing uncertainty about employment, with stagnant incomes, paying more for health care, taxes, and retirement while those at the top having booming incomes and lower taxes.

Or

Our economy faces ups and downs but most people can expect to better themselves, see rising incomes, find good jobs and provide security for their families.

As reported 61% to 34% chose the first statement. Plus, they don’t like:

66%-13% oil companies
49%-25% drug companies
35%-18% corporate CEO’s
59%-32% Globalization

The key item Mr. Samualson pointed to was the middle class may not be, but there is a huge gap between people views about the economy and their own personal situation.

- 32% rate the economy as excellent or good
- 53% rate their own personal situation as excellent or good
- 70% of Americans say they have or will attain the “American Dream”
- over 50% say success comes from a good education and hard work not from connections (18%) or being born wealthy (13%)

Mr. Samualson says both “Conservative and liberal elite” are out of touch with typical Americans. Conservatives he says focus on overall economic performance (GDP) and minimize individuals “hard work”. Liberals underestimate American emphasis on personal responsibility and over estimate the degree to which people see themselves as victims.

I couldn’t agree more.

In some cases we are our own worst enemy. Our personal productivity increases has raised corporate profits but have job growth and lets admit it the price of being middle class is higher than it used to be with bigger homes, cell phones, computers etc.

What can government do? Spending more money is not smart because every man, woman and child has $100,000 in unfunded government liabilities. No, making things more simple like taxes and access to health care. Maybe freedom and opportunity to save more.

Categories: Middle-Class

Taming the Middlemen

January 2, 2007 · Leave a Comment

Wall Street Journal (WSJ) – 30 Dec 2006 – As health Middlemen Thrive, Employers try to tame them.

Businesses use “Middlemen” to bargain with Doctors, Pharmaceutical companies and hospitals. As reported, “ A lot of the money spent goes to health care middlemen is well spent. But a lot of the money goes more to fattening middlemens bottom lines than toward improving the quality or efficiency of American Health care.

“At the end of the day, the only reasonable conclusion is that we waste a huge amount of money on the most ? cumbersome administrative system in the world”
Henry Aaron-Brookings Institute

“There is more money to be made monitoring cash flow than monitoring patients”,
David Cutter of Harvard University

The three largest pharmaceutical benefit managers had net income of $1.9 billion last year, a sum larger than the annual operating budget of Sloan Kettering Cancer Center in New York – WSJ

Ingenix – a software firm sells software to hospitals to “optimize every aspect of a facility’s revenue cycle” and to doctors to achieve optimal reimbursement. Their revenues are running at over $1 billion a year – WSJ

Normal payment for bills is 60-70 days. WSJ

Most of the inside money that grows and grows is in the Pharmacy Benefit Management (PBM). PBM’s make a lot of money as sources which are not disclosed: drug maker rebates, margins or drugs sold via the pharmacy counter or the PBMs own mail order operations.

Why not:

1. Pay PBM’s the cost of a drug plan an admin fee and any rebates go back to the purchaser (employer/employee) not the PBM.

2. Support the coalition of 56 companies sponsored by the HR Policy associates who want more transperancy, keep drup rebates for employers/employees and when a PBM pays a pharmacy for drugs dispensed the PBM can pass on only that amount – not tack on a margin.

Using these actions participating employers have reduced drug spending 3.5%- 6.2 % when others are seeing drug cost rise.

The PBM trade association president said “Transparency in a vague term”.

Categories: Health Care

Long-Term Health Care – Are we prepared?

January 2, 2007 · Leave a Comment

The New York Times reported December 30th, 2006 about the difficulty of most Americans to plan and understand long-term health care.

“To care for the ailing 97 year old father over the last three years one woman had borrowed against her 401k, sold her house and depleted nearly 20 years of savings”.

You might thing this person was uninformed or uneducated – in fact she is Elizabeth Rodriquez, Vice President of the Federal Reserve Bank of New York.

A few facts:

AARP reports that the majority of Americans have no idea how long-term care works and mistakenly thing Medicare pays for it, which it does not.

Assisted living costs about $35,000 a year

Full nursing care cost about $74,000 a year.

The average American stays 3 ½ years in some form of care facility and spends about $135,000.

For spouses expenses are tax deductible if they exceed 7.5% of adjusted gross income. Children can not claim parental expenses unless they pay for more than half of a parents support.

49% of Medicaid dollars cover long term care.

While our politicians do nothing – Eldercare costs are depleting the savings of a generation and younger workers are not planning.

Why not?

1. Make individual long term health care premiums 100% deductible or eligible for a tax credit.

2. Allow individuals to create their own pre-tax Freedom Fund for long term health care. A nursing home 401k of sorts – max of 5% with a mandatory 1 ½% unless the individual has private long term insurance.

Categories: Health Care