GM Reneges Opel Deal, Angers Magna and Reveals Major Flaw of Governmental-Capitalism

By Joe Brown

Without full details or even a reasonable explanation from General Motors, many people are scratching their heads as to why the all-but-signed deal to sell their subsidiary, Opel to parts-maker Magna, fell through.

Was it driven by the report that came out today stating October was the carmaker’s best year over year in a long time? I hope not. Regardless of the dynamics of the decision, I think this will go down as a key lesson in future business textbooks and case studies about the dangers of mixing Wall Street with Capitol Hill.

At this moment, our friends in Germany fall somewhere between annoyed and completely miffed. The thought–at least according to German workers–is that GM will likely make more cuts than Opel would have. Further, officials orchestrated a “bridge loan” to ensure Opel’s solvency while a buyer was found which they thought was finalized when Magna’s aspirations to become an even bigger player than it already was.

My concern lies with the solid relationship America had fostered with Germany may be strained slightly. The U.S. government is now the majority owner of GM (although they immediately issued a statement attempting to wash their hands of having any input in the decision) and their close ally is Germany’s Chancellor, Angela Merkel.

The Chancellor and her cabinet had strongly supported and worked feverishly on doing whatever it took to make this deal happen. Now, her office felt completely blindsided by this and I bet only stronger and more critical comments will be out from them in the coming days. One official from Merkel’s office stated that she is considering a call to President Obama to voice her displeasure.

“After many promises and months of negotiations, GM has left workers out in the cold. This attitude from General Motors shows the ugly face of turbo capitalism. It is completely unacceptable,” according to the Chancellor’s deputy leader, Juergen Ruettgers.

True to the old adage, you can’t please them all; the US finds itself smack in the middle of a situation they probably didn’t realize before becoming a majority shareholder of a giant company. Even Russia–strong supporters of the Opel-Magna deal–released a statement from Prime Minister Vladimir Putin’s office calling the decision, “absolutely astonishing.”

I worry that it may be difficult for our government to save face despite the best public relations money can buy stating they had no influence on this decision (which I do believe) yet they are technically the majority owner of the company. When’s the last time you heard of a group with a controlling interest (51 %+) in an organization not have any influence on a decision of this magnitude? It just doesn’t happen and is quite the conundrum.

Now, GM execs are scrambling to update a new restructuring plan for Opel and Vauxhall.

Joe Brown

The Pope Pontificates: Offshore Outsourcing Is Amoral

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By Richard McCormack
richard@manufacturingnews.com

 

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Outsourcing has run amok, driven by multinational corporations’ disregard for everything other than maximizing profits for shareholders, according to Pope Benedict XVI.

 

In an “encyclical” letter issued this past summer, Benedict uses such phrases as “democracy at risk,” “dysfunctions and deviations,” and “grave imbalances” to describe the current system of maximizing profits through outsourcing of production from high-priced developed countries to low-cost developing nations. Globalization has developed at a “ferocious pace” that is leading to “new forms of economic marginalization” caused by tens of millions of people losing their jobs or being employed in deplorable conditions. “The current [financial] crisis can only make this situation worse,” according to Pope Benedict.

The growth of multinational companies and international financial institutions has led to an “economic scene marked by grave deviations and failures” and requires “a profoundly new way of understanding business enterprise,” writes the Pope. “Without a doubt, one of the greatest risks for business is that they are almost exclusively answerable to their investors, thereby limiting their social value….Outsourcing of production can weaken the company’s sense of responsibility toward the stakeholders, namely the workers, the suppliers, the consumers, the natural environment and broader society — in favor of shareholders, who are not tied to a specific geographic area and who therefore enjoy extraordinary mobility.”

The Catholic Church’s “growing conviction” is that business managers must not only look out for the interest of “proprietors” but must “assume responsibility for all the other stakeholders who contribute to the life of the business” — workers, suppliers and local communities in which they operate.

The Pope says that governments have contributed to growing social and global inequities by providing tax incentives and by lowering environmental and labor standards to attract companies to locate production in their countries. These inducements have led governments to “downsize social security systems as the price to be paid for seeking greater competitive advantage in the global market,” writes Benedict. The result: “grave dangers for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social state.”

Citizens have grown to be “powerless” in the current economic system, the Pope states. Workers’ unions are in decline and workers are losing their proponents. As such, the Catholic Church says the promotion of unions that can defend the rights of workers from being exploited by companies and governments “must therefore be honored today even more than in the past as a prompt and far-sighted response to the urgent need for new forms of cooperation at the international level as well as the local level.”

The Pope says the “dignity of the individual” is being compromised by the “systemic increase of social inequity both within a single country and between the populations of different countries.” These growing inequities caused by the corporate pursuit of profits are “placing democracy at risk,” writes the Pope. “Progressive erosion of ‘social capital’ — the network of relationships of trust, dependability and respect for the rules, all of which are indispensable for any form of civil co-existence — [are] at risk.”

Business executives’ focus on short-term profits, even at the expense of the long-term viability of the corporations they run, requires “further and deeper reflection on the meaning of the economy and its goals as well as a profound and far-sighted revision of the current model of development, so as to correct its dysfunctions and deviations,” writes Pope Benedict. Without some type of modification — without the guidance of “charity and truth” — globalization as it is currently practiced “could cause unprecedented damage and create new divisions within the human family.”

Benedict says that “commercial logic” must now be redirected away from the investment class “towards the pursuit of the common good.” For this to happen, politicians must step in. “It must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.”

Caterpillar Cuts 2,500 Jobs

However 500 furloughed employees will be returning to work

Caterpillar said on Oct. 26 it was cutting about 2,500 jobs and had started to bring more than 500 laid-off employees back to work, in a sign of improving economic conditions.

About 550 furloughed U.S. employees have returned or will return to work before the end of 2010, including support, management and production employees, the company said.

“We are pleased that signs of recovery in the global economy allow us to return a selected group of laid-off employees to work,” said Caterpillar CEO Jim Owens. “But it’s important to remember that we are not close to the record-breaking demand we experienced from 2004 through 2008.”

Also on Oct. 26, Caterpillar began notifying about 2,500 laid-off U.S. employees that they would not be returning to work, without giving details. “The company is offering a separation package for those employees. A breakdown of impacted employees by location will not be provided.”

Since 2008, Caterpillar cut 18,700 jobs during the economic downturn.

Caterpiller reported third-quarter earnings of $404 million this is  down 53% from a year earlier, as revenue fell 44%.

Hot air pencil for under $20

Here’s a project from back in 2001 that might be of interest to some of you. It is a guide on how to build your own hot air pencil for SMD soldering.  He is using a super cheap 45W soldering iron from “the shack” combined with a pump type desoldering tool and an aquarium pump. He says it works pretty well, and we don’t see why it shouldn’t. This is a pretty elegant solution. There are also some more recent versions of this mod, but the idea is basically the same.
buy CNC related books and tools

Record Quarter Wind Turbine Installation for U.S

This is Keith Johnson’s article from The Wall Street Journal’s Blog:

Like the “Jaws” character in the old James Bond movies, it seems nothing can stop the U.S. wind power industry.

This was supposed to be the year that wasn’t for wind power, thanks to the economic meltdown and credit crunch. Yet the industry keeps on trucking—third-quarter U.S. wind-power installations topped 1,600 megawatts, which was more than in the same quarter during the record-setting 2008. That was largely due to the impact of U.S. stimulus funding, the American Wind Energy Association said.

So far this year, the U.S. has installed 5,800 megawatts of wind power—again, more than at the same time last year (4,200 megawatts). That’s nearly as much as the industry initially expected to install during the entire year.

That brings total U.S. wind power installations to more than 31,000 megawatts, which leads the world. (That’s the equivalent of 31 nuclear power plants on paper, and about 10 nuclear plants in reality.)

The U.S. wind industry is still nervous, though, and expects fourth-quarter performance will—finally–fall short of last year’s pace. The industry wants more help from Washington: “A firm, long-term national commitment to renewable energy” is still needed to boost wind-turbine manufacturing, said AWEA chief executive Denise Bode.

One American wind-power company seems to be doing alright at least. General Electric dominated the third quarter, supplying the turbines used in 10 of the 23 wind farms that were built.

Of the 51 farms currently under construction which have announced tbeir turbine maker, GE has 21. Other manufacturers in the hunt are Siemens and Vestas, with 8 farms each. Notably absent from the current pipeline—Spain’s Gamesa, one of the global heavyweights

Auto suppliers urge Senate to do more to help industry

Thanks for the tip to http://toolanddieing.com/

David Shepardson / Detroit News Washington Bureau

Washington — The nation’s auto suppliers urged the Senate Friday to boost credit to the struggling industry.

Dave Andrea, vice president, industry analysis & economics for the Original Equipment Suppliers Association, testified today before the Senate Banking, Housing and Urban Affairs Subcommittee on Economic Policy urging Congress and the Obama administration to take new steps to help suppliers.

The administration created a $5 billion supplier support program for General Motors Co. and Chrysler Group LLC Tier 1 suppliers in March — a program since whittled down to $3.5 billion that many argue is inadequate and doesn’t cover enough suppliers.

Andrea urged the Senate to assure sufficient capital for restructuring, consolidating, and diversifying the industry; address specific needs of small suppliers for sufficient capital for ongoing operations; and create technology funding programs that support long-term innovation.

“Bankruptcies are happening and will continue to happen,” said Neil De Koker, president and CEO of the Original Equipment Suppliers Association. “Suppliers continue to struggle under the weight of this economic crisis, and we are eager to work with the members of the Subcommittee in a coordinated effort to preserve the industry’s employment base and technology innovation going forward.”

But officials in the administration note that there haven’t been as many bankruptcies by suppliers in recent months as forecast. The Motor & Equipment Manufacturers Association had predicted 50 to 60 additional supplier bankruptcies in the months following GM’s bankruptcy filing.

But MEMA notes at least 47 suppliers sought bankruptcy protection this year — including Visteon Corp., Metaldyne Corp. and Lear Corp.

And suppliers have for the most part been able to get private financing during bankruptcy — though some have relied on automakers for part of their bankruptcy financing.

Last month, GM said it would speed payments to suppliers. Starting Nov. 1, it will pay suppliers weekly rather than every 47 days.

Michigan Gov. Jennifer Granholm met with top Obama administration economic advisers in early August, seeking $1 billion for a program to help suppliers obtain credit to diversify into other businesses. The state has a $12 million pilot program to offer loans to Michigan suppliers on a much smaller scale.

But so far the administration has shown no appetite to do more to help suppliers.

One area for which suppliers might get help is if the administration agrees to their request to increase the limits for loan programs within the Small Business Administration as current limits typically do not cover the investments suppliers make to assist with the design, engineering and tooling for a component on a new vehicle program.

Automotive suppliers are the largest manufacturing employers in eight states: Indiana, Kentucky, Michigan, Missouri, Ohio, Oklahoma, South Carolina and Tennessee. They employ more than 500,000 people directly.