Monday, December 29, 2008

The Joy of Christmas Past

You don’t have to be much of a curmudgeon to appreciate the pleasures that come with the end of the Christmas season on December 26. The palpable slowing down of pace after the last minute frenzy of gift buying, wrapping, and delivering. The slackening of traffic on the roads, combined with the ability to get a parking spot at the mall. The chance to rest up after the round of Christmas festivities, and gather strength for the onslaught of New Year’s Eve. But for me, this year, there is one special blessing, post holiday.

They’ve stopped playing “Christmas Shoes” on the radio.

You know the song. It’s the one about the guy who’s in the store when he sees a little kid who needs money to buy a pair of shoes for his dying mother. The poor sap rediscovers the true meaning of Christmas when he forks over the dough for the kid to get the shoes. Just in case you forgot, here are the lyrics to the refrain.

“Sir I wanna buy these shoes for my Momma please
It's Christmas Eve and these shoes are just her size
Could you hurry Sir?
Daddy says there's not much time
You see, she's been sick for quite a while
And I know these shoes will make her smile
And I want her to look beautiful
If Momma meets Jesus, tonight.”


What a batch of hooey! What a load of hogwash! The pathetic absurdities of this song beggar the imagination. Consider the baloney you’re being asked to accept when you listen to this load of rubbish.

First, the kid knows his mother’s shoe size. What? I don’t know my mother’s shoe size, and I’ll bet you don’t either. Hellfire, I was well into my twenties before I could have reliably stated that my mom had feet. It just never entered my consciousness.

Second, what kind of shoes are these? Jimmy Choo’s? Manolo Blahnik’s? I mean, seriously, what kind of little kid pays attention to shoe fashion? The only reason I know those names is from watching “Sex and the City” reruns on cable, and I had to Google the names to get the spelling right.

Third, the song posits that what a dying woman wants most before she passes away is a new pair of shoes. Now, you usually can’t go wrong betting on the shallowness and materialism of the American consumer, but the woman is going to die, for cripe’s sake! If I was dying, that sure wouldn’t be the top of my Christmas list. A miracle cure, that’s what I want Santa to drop down my chimney. Or maybe just more morphine to keep the pain pump fully stocked up. But shoes?

What kind of store is this, anyway? Probably a department store, because the narrator isn’t there to buy shoes, he is just there to “pick up a few things.” That raises another question. The kid is described as “dirty from head to toe.” In most upscale stores, the staff wouldn’t let a dirty street urchin wander around, pawing through the merchandise and panhandling from the customers to pay for shoes. The staff would call security, assuming they didn’t just give the kid the bum’s rush on their own. I can picture the response when the kid first walked into the store: “Hey, kid, keep your grubby hands off. That’s cashmere!”

Here’s my theory: the kid and the salesclerk are running a scam. The store overstocked on cheap Chinese knockoffs of designer shoes. The kid spots a mark, turns on the waterworks, and the sucker pays for them. The suddenly overjoyed scamster goes out the front door, and comes around and in through the back door, ready to resell the same pair of shoes with the next mark to walk in. Meanwhile, the clerk cleans up on commissions. Hellfire, the clerk is probably the kid’s real mother! They probably share a good horse laugh over the suckers they rooked when they get home.

Cheating sentimental saps, all in the service of pure commercialism. There’s a Christmas anthem for you. At least we’re all done with that now. That song is off the playlists.

At least until next year.

Wednesday, December 17, 2008

Closing Down

Chrysler has announced that starting tomorrow, they are closing all thirty of their manufacturing sites for a month. This is being billed as a cash conserving move on their part. This is being treated as a major news story, getting coverage on the networks and all the major newspapers. Of course, I have a reaction to this story. Ready? Wait for it.

Big, fat, hairy deal. Do they want us to think that this is a last ditch effort to save the company, because they didn't get their Federal bailout check?

My company shut down operations for the entire week of Thanksgiving. We came back to work on December 1, worked production until December 9, then closed up and sent the production associates home until January 5. Our maintenance crews are going home at the end of this week, and they'll be off for two weeks. So between November and December, we've taken four weeks off, just like Chrysler. We're doing this because orders are down, and you cannot keep building product when your customers aren't buying, just like Chrysler.

The difference is that we didn't issue a press release just because we are closing down for inventory reduction at the end of the year. We would rather be running production, but in today's environment, it is just a sound business decision, to cut production to balance inventories. You don't see us threatening the economy of Tennesse with collapse if we don't get a bailout.

In their campaign to get hold of Federal bailout money, the domestic car companies and the UAW have consistently presented the worst case scenario to support their claim on Federal money. "If you don't give us $30 billion, RIGHT NOW, we are going bankrupt, one out of every five Americans will be unemployed, and a new Great Depression will sweep the country."

It is the industrial equivalent of extortion. And it's getting old.

Monday, December 15, 2008

Investment Scam of the Year

The latest shock to come out of the financial industry on Wall Street is the Bernie Madoff scandal. Mr. Madoff has been involved in Wall Street business for almost fifty years. He was the head of NASDAQ for several years, and his securities firm occupies three floors of a downtown skyscraper.

The primary business of his firm was to act as a market maker, taking orders to buy and sell a number of stocks. However, he also ran an investment advisory firm, taking in money and investing it for people and institutions. At the beginning of the year this arm of his business reported holding $17 billion in other people’s money.

It now appears that the investment advisory part of his business was actually running like a giant Ponzi scheme, where the money that new investors put in was used to pay dividends to older investors. Hit by requests for $7 billion in redemptions by investors this quarter, the house of cards came tumbling down. Mr. Madoff’s own estimate of total losses to investors was $50 billion.

This is an amazing story, and it is only starting to unfold. From what little has been revealed so far, several aspects of the situation boggle the mind.

First, how did one guy pull this off? From all reports, only a couple of dozen people worked on the floor of the building where the investment firm was located. Most of the employees were on the two floors where the legitimate business was located. How did Mr. Madoff handle the mundane details like keeping everyone’s theoretical balance straight, or mailing out statements and dividend checks? Normally, managing billions of dollars takes hundreds of people. Of course, it is a lot easier when you aren’t actually managing the money. Still, the logistical details of a fraud this size must be daunting.

How do we know that Mr. Madoff was acting alone? Because he says so. At this point, if Bernie Madoff said the sun came up this morning, I would have to look out the window to check. I suspect this morality play has more villains than just Mr. Madoff.

The other astonishing part of this story is the victims of the scam. Some of the investors were relatively wealthy individuals who were taken in, and are now ruined. Mr. Madoff’s reputation and longevity, as well as his charm, had to help in duping his victims. But the big money came from other Wall Street investment firms, as well as a slew of international banks. How did these guys fall asleep at the switch?

It apparently never crossed their collective mind that Madoff was scamming them. I can just picture the due diligence meeting. “Bernie? Bernie Madoff? I’ve known the guy for years. We take steam together down at the club. Twice a week, regular as clockwork. He says he needs another billion? So send him a check. Electronic transfer would be even better.”

Then again, these were some of the same sharp guys who were buying subprime mortgages up until a year ago, so I guess we shouldn’t be too surprised that they got taken.

I’m sure that the “Law and Order” screenwriters are already working on a “ripped from the headlines” story.

Sunday, December 7, 2008

The 5% Solution

As part of the news coverage concerning the Federal bailout of the Big 3 domestic automakers, I have seen stories about how the president of the United Auto Workers, Ron Gettelfinger, has been meeting with other leaders of the union to discuss how labor is going to have to put some cost saving ideas on the table to help the Big 3 avoid bankruptcy. Obviously, it is the union's interest to avoid a Chapter 11 filing, because a bankruptcy trustee could unilaterally make changes to union contracts to preserve the value of the business for the creditors. It's better to volunteer givebacks before they are imposed upon you.

First and foremost should be the Jobs Bank. That is the part of the contract that says laid off UAW workers get to receive 95% of their hourly pay and full benefits while waiting for another job position to open up. Since the domestic manufacturers have been cutting headcount for years, the new job positions never do open up. The UAW members merely collect full wages and benefits, while doing no work for the company. The Jobs Bank has been bleeding the car companies for years now. The union says that the Jobs Bank is not that much of a problem, since there are only about 3500 employees currently in the program.

Only 3500! Wages and benefits for the average Big 3 autoworker are $75 per hour (compared to $45 per hour for Japanese transplants like Toyota and Honda). Simple math tells us that $75/hour times 1800 hours/year time 3500 equals $472 million dollars a year in potential savings. Now I've gotten kind of numb from listening to all the big numbers thrown from all of the different Federal bailouts so far this year, but $472 million sounds like a lot of money to me.

But I've got another idea for changing the UAW contract with the domestic automakers. This won't help stave off bankruptcy in the short term, but in the long run could help them regain some of their lost competitiveness. I call it the 5% solution.

The concept is simple, change the contract to allow management to fire up to 5% of the UAW workers every year, no questions asked. That means no seniority, no grievances filed, no arbitration. Management would have to follow Federal law, which prevents firing people based on their membership in a protected class (race, gender, age, etc.). Other than that, pull whoever you want and give them the boot. Management would not be required to exercise this right, they would merely have the option.

In Right to Work states, employment law features a doctrine known as employment at will. Employment at will assumes that the work relationship is mutually agreed upon, and that either party has reciprical rights to terminate that relationship at any time. Simply put, you can tell the boss to take this job and shove it. The boss can give you the boot. All I'm proposing is to apply this doctrine to the UAW contracts, subject to a limit of 5%.

Consider the effect this change would have. As things stand now, to terminate a union worker requires cause, and proving cause requires evidence that will stand up in a legal proceeding. Being lazy and inefficient doesn't qualify as just cause. But if you could fire 5% without having to show cause, think about the impact that would have on the organization.

You could let the maintenance worker go who has a lot of seniority but can't fix equipment, and keep the newer guy who can actually keep the machines running. Or how about the stock handler who has spent his years finding the best places to hide, and always shows up five minutes after he has been paged. Or the assembler who sends parts with a quality problem down the line instead of raising the flag about the issue. "Not my problem" the assembler says. Think about what it would do to efficiency to get rid of the shirkers and malingerers who drag down the whole team.

Management would not even have to use the option for it to have a salutary effect on the organization. Whe they know they can be fired, almost everyone will hustle harder to impress hte boss. The worst will pick up the pace significantly, and even the best will put out a little extra effort. When they see the bar being raised, employees will be more focused throughout the organization.

Some will complain that my idea will mean the end of job security, and will shift the balance of power away from labor and deciviely towards management. Well, right now the industrial workers with the most contractual rights on job security are the UAW workers. That's what the Jobs Bank was all about. But you have to ask yourself: How much job security do you have if your employer is on the brink of bankruptcy?

The only real job security is when the company is winning in the marketplace. It's time for a change in how the unions do business.

Thursday, December 4, 2008

The gurus have spoken!

Well, it's official.

The National Bureau of Economic Research came out Monday and announced that the US economy was in a recession. Their statement said that the economy had been contracting since December 2007. That means this recession has already gone longer than the post World War II average, which is ten months.

Yup, it's official: the economy has been contracting for a whole year now. This makes me want to channel the late, great "screamer" comedian, Sam Kinnison:

WELL, WHAT WAS YOUR FIRST CLUE?! WAS IT THE 50% COLLAPSE IN HOUSING STARTS? THE TRIPLING IN THE FORECLOSURE RATE? MAYBE IT WAS FACT THAT THE BIG THREE DOMESTIC CARMAKERS ARE ON THE VERGE OF BANKRUPTCY? OR COULD IT BE THE COMBINATION OF HUNDREDS OF BILLIONS IN BANK LOSSES, THE FAILURE OR FORCED MERGER OF MAJOR INVESTMENT BANKS, AND THE TOTAL FREEZE UP IN THE CREDIT MARKETS?

The business I work in has been hunkered down in survival mode all year, but the official announcement is just now being made. It hardly seems worth calling a news conference to announce the finding. What great finding will be announced next? Water is wet? Gravity pulls you down? Oh, I know: The Earth revolves around the Sun!

Now, if somebody knew when the recession would end, and the economy start growing again, that would be news you could use.