Squeaky Car Dealers

Although some car dealers are not complaining about the delay in getting the cash in the Cash for Clunkers ($4C) program, others are whining like little kids whose parents changed their minds about letting them stay up late. It is hard to find sympathy these pouters because the program moved hundreds of thousands of cars out of their inventory and the delay is not a big burden. Furthermore, the dealers had the choice to take the “clunkers” as trade-ins for $4,500 and resell them. In many cases, the clunkers could have been resold for that amount or more.

Close to $3 billion was pumped into the U.S. car market by $4C, facilitating the sale of between half and three quarters of a million cars. This has to be a mega-Red Bull for the retail car business. My wife and I bought a car under $4C. We went to several showrooms to look at cars and everywhere the sales agents were talking about how high the demand was. Considering that many of the most popular car models would not qualify based on the difference in gas mileage between the trade-in and the new car, there must have been many ancillary sales, in addition to $4C deals. Dealers complain about the paperwork, but there will be forms to fill out any time government money is involved.

The effective date of $4C was July 1, 2009, but many dealers did not process any $4C deals until more than three weeks later. Less than 60 days after the first deals were consummated, many dealers are complaining that they have not been paid yet. The Obama administration is promising that the payments will be made by the end of this quarter, but even if dealers have to wait until the end of the year, they have little to complain about. This is not the price of the new car they are waiting for, it is just the trade-in on some of the deals they wrote in July and August.

Car vendors generally see their money within a few days, so they are spoiled. They are not used to waiting for money. However, they have much better access to credit and much bigger cushions than many people who have to wait for government money. When I was representing assigned appellate cases and being paid by the county, I often had to wait more than a year to get paid. Furthermore, the amount private defense attorneys were paid for representing indigent defendants was, and is, pitiful. Nursing homes are required to wait for Medicaid approval for residents who are eligible for the program. In Wayne County, here in Michigan, it is common for a Medicaid application to take more than a year before the worker is satisfied and the case is opened. If car dealers see their money this year, they have no legitimate complaint.

Finally, it must be remembered that many of the clunkers traded-in were not worthless. The car buyer just decided that he or she could not get more than the program would pay or did not want the bother of selling the clunker. In order to qualify for $4C, the trade-in had to have been registered to the car buyer and insured for at least a year and it must have been driven to the dealership. I could have sold the 1999 Blazer I traded in for $3,000 to $4,000. If I could have realized that much, I am sure a dealer could have done that well or better. Therefore, the dealer had a choice: He could have taken the car as a clunker, knowing he would have to wait awhile to get $3,500 or $4,500, depending on type of car purchased, or he could have given me that much as a straight trade-in and peddled the car at the auction or put it on a used-car lot. The fact that he took my Blazer under $4C was a business decision. To whine now that he has to wait too long to get paid is immature.

Vista is Misery; Will Seven be Heaven?

An Open Letter to President Obama and Congress:

For the past year and a half I have been plagued with computer problems due to Windows XP and Vista. I couldn’t get my new Gateway running Vista to operate properly. I had the OS re-installed three times. Finally, I abandoned it and replaced it with a Lenovo with XP. When the Lenovo’s XP OS started crashing to a blue screen, I had the hard drive wiped clean and the Vista Ultimate OS that came with the machine was installed. I found out that Vista Ultimate has a very limited range of view and is not the ultimate of anything good. This operating system has more faults than California’s geology and the defects are obvious at every stage of trying to work on my computer.

First I wait for the computer to boot up. This is an inordinately long process–five minutes or more. There is no reason for the boot-up to be so slow; I limit the programs running in the background to the absolute minimum and I do not use Instant Messenger or music-sharing programs. Furthermore, this is a very new computer–especially since the OS was installed less than a month ago. Sometimes it boots and freezes.

Once this turkey is launched and lurching skyward, I wait to see if the laptop connects to my wireless router. Sometimes it does; sometimes it doesn’t. Often, I have a 10- to 20-minute process of “diagnosing” and “repairing” the wireless network connections, switching the wireless modem off and then on.

Having survived the ordeal of booting up and logging in, my computer works pretty well, although one program or another will suddenly stop working properly or crash. This happens with Microsoft programs–Outlook, Internet Explorer, Excel–as well as non-Microsoft applications. Sometimes it seems as if I have been transported back in time to the days of Windows 3.1. I switched from Mozilla Thunderbird and Firefox, which I really like, to Outlook and Internet Explorer because it was suggested that Microsoft programs should work better with the Windows OS. I have not found that to be the case.

Fortunately, Windows Seven is just around the corner. As soon as that becomes available, I can upgrade and my problems will be over, I am told. Yeah. Sure. We are talking about the company that inflicted Windows ME, XP and Vista on us. We are also taking about the company that transformed its office suite from a set of straightforward menu-driven programs to ones with weird “ribbons” that are not even consistent within the suite. I have no confidence that Microsoft is getting it right this time.

I am not a Luddite. I love new technology that works and I know when something works. Windows 2000 Professional was a jewel of an operating system and a huge relief from Windows 3.x. However, I am really getting tired of Microsoft’s screwed-up operating systems and wonky program upgrades; especially since the company forces computer users to purchase the new versions through its PC monopoly.

I will soon have to abandon Windows 2000 Professional on my desktop and workstations because so many programs have been engineered not to run under it. For example, I had to purchase an XP machine in order to use Microsoft Money to do my banking. Microsoft cut off internet accessibility for Money 2006 and later versions require XP or Vista. This is oppressive and monopolistic market manipulation.

If Microsoft’s OS and programs worked properly, the situation would be tolerable, but they don’t. Over the last year and a half, it has been necessary to wipe my computer and re-install the OS and applications five times! This is not due to viruses; just crappy Microsoft XP and Vista. Each reinstall cost me a week of productivity. Conservatively speaking these OS problems cost me at least $5,000. Multiply that by the hundreds of thousands of Microsoft customers who have been suffering through similar problems and you get a figure that approaches the cost of the toxic assets crisis or the real estate mortgage bailouts.

Microsoft XP and Vista are causing severe economic losses and it is extremely unlikely that the introduction of Windows 7 will solve anything. This country cannot afford another screwed-up version of Windows.

I call on you, President Obama, and Congress to hold hearings and consider legislation to curb Microsoft’s abuses. The government cannot enforce a requirement that Microsoft create a reasonably trouble-free OS, but it can require Microsoft and other software producers to build in backward compatibility and to continue to support programs that work. I am a small business person and the cost burden of software upgrades and OS re-installs is crushing me. Microsoft won’t care a fig about its customer’s problems until Steve Ballmer, the CEO, sits in a caucus room and is asked by members of Congress why his products are costing America’s small business operators billions in lost productivity.

We Can’t Wait Until We Can Afford It

It looks as if health care reform is going to cost $1.6 trillion over the next ten years. If that is not enough to scare the pants off you, think about all of the government programs that run hugely over budget. However, this cost does not mean we should not implement a public health care plan that ensures that everyone–that is, everyone, EVERYONE, not just most people–has an adequate health care plan. This is something we need to do, as much as we needed to invade Afghanistan and Iraq. When something must be done, you start doing it.

How many families would get started if women waited until they could afford to raise children to get pregnant? Nobody, except the very rich, can afford to have children. Parents do not wait until they can afford children; they have children and stretch their means to raise them.

This is what the United States must do, now. We must implement a universal health care system and then go about finding the means to support it.

World’s Best Health Care System

It is really aggravating when people claim, without stating their basis, that the United States has the World’s Best Health Care System. In the first place, this is just cheerleading. No matter what school it is, the coach and the student council president will proclaim “We’re number one” at the Friday night pep rally. It doesn’t make any difference if the school is U.S.C. or Eastern West Virginia Polytechnical Institute, which hasn’t won a game in any sport since an opponent was disqualified during the Carter Administration. Depending on how the different countries’ health care is measured, the United States’ is undoubtedly better that Zimbabwe’s, but whether it is better than Sweden’s or Canada’s or France’s is less sure. Furthermore, the quality of the care is beside the point for 100 million uninsured and underinsured U.S. residents. They don’t get it.

Secondly, the United States does not have a “health care system.” We have a medical service industry. Then we have a health insurance industry that rations medical services based on insured status and rakes off 15 or 20 per cent. If we really had a system, one third of the nation would not lack adequate health care.

We need a public health care system like Medicare that everyone can buy into at a reasonable price. Medicare has been a wonderful success, despite all the criticism from the political right, the American Medical Association, and the health insurance industry. There are problems, but they are manageable and susceptible to reform.

Health insurance executives are whining that they cannot compete with a public health care system. What better argument could you find in favor of establishing it? They cannot compete because a public system would be fairer, more efficient, and less expensive than the private insurance industry. These executives are like muleskinners a century ago whining that the internal combustion engine will put them out of business. True, but is that a reason to outlaw gasoline?

We need an inexpensive public alternative to private health insurance. That it will hurt the insurance industry is no excuse for leaving 100 million Americans without adequate health insurance. A fair health care system is a fundamental part of the social infrastructure. It is time to fill that void in the United States.

Let Some People Go!

There was discussion on the radio today about reducing Michigan’s prisoner population—and no, it wasn’t Neo-Cons pushing wholesale capital punishment. It was the director of the Department of Corrections talking about early release for low-risk prisoners. I hope this idea gets some legs; reducing our prison population is way overdue.

We could save $150,000,000 per year by reducing the prison population by 20%, without compromising public safety. The parole board automatically denies consideration for parole for many classes of prisoner. Our incarceration rate is too high and climbing. The parole board routinely denies parole despite solid evidence that most first-offenders who are convicted of CSC, Murder 2, VCSA, and many other crimes have very low recidivism rates. A conscientious parole board would sort out the good risks from the bad ones, not refuse to consider anyone who was convicted of certain crimes. “Life means life” is not sound public policy it’s a political mantra. For more information visit sites such as:
http://www.justicepolicy.org/
http://www.capps-mi.org/
https://www.mackinac.org/article.aspx?ID=35

If we cut our prison population from 50,000 to 40,000, the savings would be $300,000,000 at $30,000 per prisoner. Pour half of that savings into prisoner re-entry programs and we would still save $150,000,000–and greatly improve the social fabric in our state.

Think about it: In 1984 Michigan had 15,000 prisoners and the population was 9.2 million. Today we have 50,000 Michigan prisoners and the population is 10.2 million. Do you feel three times as safe as you did in 1984? I think we could reduce the prison population by two thirds without compromising public safety, but let’s start with a modest 20%.

Unfortunately, our parole board members are gutless bureaucrats who refuse to do the job they were hired for and our legislators are knee-jerk jerks who can’t see beyond the next election. They are afraid to tell the public anything it does not want to hear.

I don’t have much hope that Michigan will adopt any sane corrections policies in my lifetime; but if you are educated far above average, and are capable of understanding what our government cannot, you might want to give this some thought.

John B. Payne, Attorney
Dearborn, Michigan; Pittsburgh, Pennsylvania
(800) 220 7200
FAX (313) 562 3340
©2008 John B. Payne, Attorney
www.law-business.com

Chainsaw Management

Too many employees in too many companies are quivering in their cubicles or at their workstations, waiting to face the HR hangman.  This is partly the result of slumping auto and home sales, but it is more the result of poor management.  Large corporations are no longer run by entrepreneurs.  They are run by bean-counting nebbishes who only have one answer to a reduction in business–layoffs.  The results of this human-resource belt-tightening are A) the employees who remain are stressed and overworked to the breaking point and B) the company’s skilled workforce is no longer available when business picks up again.  An entrepreneur should exploit the opportunity presented by excess employees, not shed them like dead batteries from an over-indulged child’s electronic toys.
Albert “Chainsaw Al” Dunlap is the mismanagement poster boy of Downsizers Syndrome.  He killed Sunbeam in 1996 by cutting payroll by 50%, closing 18 of 26 factories and simulating profits by “channel stuffing.”  Channel stuffing is over-producing merchandise and jamming the distribution network with the excess, then reporting the merchandise as sold.  Like a Ponzi scheme, this only works in the short term and it soon became apparent that Sunbeam was headed for the graveyard of failed companies.
Chainsaw Al is only an extreme example of the Little Johnny One Notes of corporate governance.  The current crop of CEOs seem hardwired to respond to any problem with pink slips.  The bigger the problem, the more pink slips get handed out.
Publicizing layoffs often results in an escalation of the stock price.  However, that is only a speedbump in the stock’s slide and seldom has a lasting effect.
In 1996, Robert Reich, then Secretary of Labor, said “I do think it’s unfortunate to view a company’s employees as costs of production rather than assets.”  A skilled workforce is the engine that powers the organization.  Chopping away parts of the engine in response to reduced demand for products or services is foolish.  A creative, entrepreneurial management team sees excess workers as an opportunity, not a problem.
I was the chair of the board of directors of a community mental health provider when its budget was cut by 25%.  This was a situation where layoffs would impair the organization’s ability to provide services, resulting in a vicious cycle of reduced budgets causing reduced delivery of services and reduced delivery of services causing further budget cuts.  Calling the employees together, I pledged that there would be no layoffs.  As it turned out, there were some unpaid leaves taken by managers and employees and there were a couple of “pay holidays,” but no one was laid off and we survived the cut-backs until our budget was restored.  What was crucial was that the organization made it clear, as soon as the budget restrictions became known, that it would stand by its employees.  This improved morale and gave the staff the determination to weather the crisis.
The budget dilemma faced by our non-profit was the opposite of that faced by home builders and car makers.  We were expected to maintain production despite budget cutbacks.  In the for-profit world, companies may find that they have too many workers for the production demand.
There are also those managers who want to lay off employees to show how tough and frugal they are; so they cut the number of staff without regard to productivity or merit.  These are managers who think that if 100 employees can get the job done, 90 should be able to handle it.  Then they decide that if 90 can do the work, 80 employees are enough.  They are like tax-cut maniacs for whom no tax cut is ever deep enough.
What would a canny manager do instead of cutbacks?  Put supernumerary employees to work in new areas and on new products.  A car company CEO should consider moving employees into green initiatives–working on hyper-efficient vehicles.  The latest gas crisis will not be the last and sooner or later, the U.S. public will decide that they don’t need 5,000-pound SUVs to commute to work or to drive to the bodega.  If the U.S. Big Three want to stay in the game, they should stop designing the cars that they think are the most profitable and start developing the cars that are adapted to the uses people put them to.
A company that produces products for the home-construction industry does not have to cut back, just because there is a slump in new housing starts.  The CEO should think outside the big box and use the excess production capacity to start new ventures.
Many of the laid-off employees walk off with a severance package equal to several months of salary and benefits.  Figuring that cost, added to the company’s investment in those workers, it becomes apparent that a huge amount of the company’s assets are walking out the door.  These employees could work on new products or services for up to a year, at no cost to the organization!
The stock market has lost half of its value in the past year.  So what?  The money is not gone, as I recently pointed out.  Depressed stock prices and tight credit make it difficult for corporations to raise capital.  This will lead 99 out of 100 CEOs to cut back operations and lay off employees.  However, one in 100, or maybe even one in 1,000, will see the opportunities in the current market.  Instead of cutting off the hands that produce the wealth of the nation, they will find ways to keep those hands busy.  Instead of bemoaning the trouble U.S. businesses are in, they will take over troubled businesses and turn them around.  This is still the Land of Opportunity and CEOs who see that will lead their companies to unguessable prosperity.

John B. Payne, Attorney

Dearborn, Michigan & Pittsburgh, Pennsylvania

(800) 220 7200

FAX (313) 562 3340

©2008 John B. Payne, Attorney

www.law-business.com