Asinine Automakers Go to Washington (Part II)
They're back. And now they want $9 billion more.
The CEOs of the nation's three largest automakers returned to Washington on Thursday to lobby for a $34 billion bailout package, having been laughed back to Detroit two weeks ago for requesting $25 billion in taxpayer dollars after arriving in private planes.
GM is seeking a total of $18 billion in loans, up from an estimated range of $10 billion to $12 billion two weeks ago. Cerberus-owned
is seeking the same $7 billion. Both say they badly need government aid, and quickly.
, which borrowed billions against its plants and facilities before the credit markets collapsed, says it wants a $9 billion credit line but can survive through 2009 without tapping it.
So as not to repeat their last public relations debacle, the Motor City muckety-mucks left the jets on the runway and drove energy-efficient vehicles to Washington bringing something they forgot to pack last time:
All three CEOs pledged this week to work for $1 a year if they receive federal assistance. GM's Wagoner received $15.7 million in compensation last year, while Ford's Alan Mulally received almost $22.8 million. Since Chrysler is privately held, CEO Robert Nardelli's pay package is not publicly available.
On the specifics front, all three promised to work with the United Auto Workers union to rein in costs. GM's plan, for example, foresees annual costs falling to $23.2 billion in 2012, down from $30.3 billion today.
That's all well and good, but if these companies have such brilliant cost-cutting schemes, shouldn't they be asking for less money, not more? How can GM slash $7 billion in costs in the next three years, while raising its request to Congress by $8 billion after just two weeks?
"We're here today because we made mistakes," Wagoner told the Senate Banking Committee in prepared testimony.
Yeah, and it doesn't look like you're done yet.
Dumb-o-meter score: 95 -- Drop the $1 salaries. They're not worth a dime.
Dr Pepper Promo Falls Flat
Welcome to the bungle,
The soft-drink maker opened up a can of worms last week when it botched a soda giveaway linked to the release of the new Guns N' Roses album, upsetting lead singer Axl Rose so much that he is demanding an apology and threatening a lawsuit.
The idea was born in March, when the brain surgeons at Dr Pepper Snapple Group decided to give a free soda to everyone in the country if Guns N' Roses released the album
this year, 14 years after the group began recording it in 1994.
Guns N' Roses made deadline, and the album went on sale Sunday. But Dr Pepper is struggling to hold up its end of the bargain. The company's Web site malfunctioned during the 24 hours it offered the freebies, much to the dismay of soda drinkers and, according to the band's lawyer Alan Gutman, Guns N' Roses fans.
In a letter to the company, Gutman called the redemption scheme an "unmitigated disaster which defrauded consumers and, in the eyes of vocal fans, 'ruined' the day of 'Chinese Democracy's' release."
To right the perceived wrong, Gutman wants more time to redeem the soda, an undisclosed sum for the "unauthorized use and abuse" of the band's intellectual property rights and, most hilariously, full-page apologies in major newspapers including
The New York Times
and, for all those hard rockers in Manhattan's financial district,
The Wall Street Journal
A Dr Pepper spokesman dismissed Gutman's attack like so much flat soda, declaring the promotion "one of the largest responses we have ever received for a giveaway."
We think the good doctor's management should have their heads examined for getting involved with a headbanger like Axl Rose in the first place.
Dumb-o-meter score: 90 -- Dr Pepper had an appetite for its own destruction.
Lampert's Latest Folly
As if Wall Street wunderkind Eddie Lampert hasn't screwed up
enough, now he is looking to a
alum to do the job.
The struggling department store chain announced Tuesday that former Lehman Brothers executive Scott Freidheim will be its new executive vice president of operating and support businesses. Freidheim served as chief administrative officer at Lehman prior to the investment bank's collapse in September.
Yes, that's exactly what Sears needs, another investment banker with a deep-seated desire to sell Craftsman tools and Kenmore appliances.
The timing of Freidheim's hiring could not have been more perfect, coinciding with Sears' biggest
golden boy turned dry-goods peddler Edward Lampert combined Sears and Kmart into one retail company. For the quarter ended Nov. 1, Sears posted a net loss of $146 million, compared with year-earlier net income of $4 million. Sears shares are down 63% this year to $38.
Look, we at The Five Dumbest Lab understand that the economic downturn is not helping the once venerable retailer return to glory. Obviously, consumers are cutting back across the board, maximizing every retail dollar they spend.
Nevertheless, Lampert's ham-fisted management has been sinking Sears since well before the recession started. Instead of spending on store upgrades, the Warren Buffett wannabe has chosen to buy back $558 million in stock this fiscal year -- all of it at much higher prices. And he's not done yet, as the company announced on Tuesday a new authorization to purchase $500 million more.
Moreover, Lampert has not only ignored his stores, but he has also neglected to find a permanent chief executive to replace Aylwin Lewis. Since Lewis' departure last February, the company has ostensibly been operating under the less than watchful eyes of Interim CEO W. Bruce Johnson and Lampert himself.
If Lampert really wants a former Wall Streeter to run Sears into the ground, we say he should forget about small fish like Freidheim and bring in his former boss at Lehman Brothers.
If Dick Fuld can't wipe Sears off the map, nobody can.
Dumb-o-meter score: 85 -- Eddie has been less than steady. And certainly not Warren.
Relax everybody, it's finally safe to say the 'R' word now. Unless, of course, you are in the Bush administration. Sure, the current leadership down in Washington has given us the TARP, the TSLF, the TAF, the CPFF and a host of other creative and tongue-twisting programs meant to salvage the economy, but they certainly are reluctant to utter that one particular word, presumably so that the people don't get unnecessarily concerned about the state of things.
Here's where we are now. The U.S. economy has been
in a recession
since December 2007, according to the National Bureau of Economic Research. The private, nonprofit research firm that determines business cycles made it official on Monday. Thanks for the breaking news, boys. Now tell us something we don't know.
Many say a recession takes place when gross domestic product, the total output of the nation's goods and services, contracts for two consecutive quarters. That has yet to occur in 2008 due to increases of 0.9% and 2.8% in the first and second quarters, respectively.
However, the NBER, which is made up of more than 1,000 economists and university professors, uses broader economic measures, including employment, to make a recession call. So it's hard to understand why the group was so late to the game considering job losses have been piling up since January.
The private sector lost 250,000 jobs in November, according to Wednesday's ADP National Employment Report, the largest monthly decline in six years. Employers have now announced more than 1 million job cuts in 2008, says labor consultancy Challenger Gray & Christmas. And December's cuts have yet to hit the books.
But the problem here isn't as much about the tardy NBER as it is about the lame ducks down in Washington. They still won't come clean and admit the recession is here at all, let alone that it started last year.
White House spokesman Tony Fratto acknowledged the NBER's role in determining "the start and end dates of business cycles," before generically adding "what's important is what is being done about it."
Treasury Secretary Paulson, who is supposedly the guy doing something about it, followed the party line on Monday. When asked if the nation was in a recession, Paulson responded, "I am not the decider there."
Which leaves us wondering: How can he fix the problem when he can't even say the word?
Dumb-o-meter score: 75 -- You know who should lose their jobs? Economists who call recessions.
Apple's Immune Response
It doesn't matter if you can successfully attack a Mac.
is paranoid just the same.
Apple proved once again the insane lengths to which it will go to protect its reputation as the king of hip computing after it pulled a note on its Web site this week advising users to install "multiple anti-virus utilities" in Macintosh computers.
While thousands of viruses have targeted
Windows, Apple has always prided itself on the superior security of the Mac OS. The "Get a Mac" section of the company's Web site, for example, heralds the Mac's ability to "resist most viruses," something that featured prominently in the firm's PC-bashing TV ad campaign.
An Apple spokeswoman said Thursday that the article was removed because it was "old and inaccurate," adding that the Mac is designed to withstand "security threats right out of the box."
Funny, though, that they noticed it was old and innacurate so soon after the bloggers picked up on the topic.
The spokeswoman conceded that anti-virus software could still be useful. "Since no system can be 100% immune from every threat, running anti-virus software may offer additional protection," she wrote in an email to TheStreet.com.
While Apple watchers shook the trees for clues of a strategy shift, the reality is that Apple's note was an
that added newer versions of Intego, Symantec and McAfee's software to a similar note from 2007.
It's understandable that Apple wants to protect its brand, especially when Mac sales are growing while traditional PC demand is slowing. Apple sold 2.6 million Macs during its recent fourth quarter, representing revenue growth of 17%.
That said, if the additional warning could save Mac users from hack attacks, then we'd rather be the dork with the warning label than the cool kid who loses all his files.
Dumb-o-meter score: 75 -- Apple could be setting itself up to be not just hip, but tragically so.
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.