Thread: $73 an Hour
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F. George McDuffee F. George McDuffee is offline
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Default $73 an Hour

On Sun, 14 Dec 2008 12:49:16 -0500, wrote:
The banks, Accounting firms, stock traders, automotive management, and
UAW share quite evenly the blame for the collapse of the north
american auto industry (and north american manufacturing on the

And GM has been standing with one foot in the grave and the other on a
bannana peal since about 1973.

Indeed, but the thrust of what I was posting was to identify the
people directly responsible, i.e. that had both the authority and
responsibility [accountability] to prevent this catastrophe.

#1 of course is the management/directors, as this is what they
are paid the big bucks for, not to be "statesmen" of industry
and/or "feather their own nests."

#2 were the regulators at all levels. There were enough "red
flags" for a May Day parade showing at every level. Every
financial regulatory agency both those directly involved with the
companies such as the SEC, and those indirectly involved through
the lending institutions such as the FDIC, FRB, Comptroller of
the Currency, etc. were industry lap dogs, not watch dogs.

When you run/expand a business by continually expanding the debt
with no intention/hope of repayment it is called a Ponzi scheme
and it is illegal. [Only the Federal government is allowed to do
this.] This can lapse over into another fraud called "fraudulent
conveyance" or "bust-out scam" where goods/services are obtained
on credit, with no intention of payment, sold at a discount for
quick cash, and the company files for bankruptcy or blows town.
This is generally a shorter term/smaller grift, although the
later stages of the Ponzi scheme may involve elements of this
when the vendors are stiffed.

#3 the last line of defense was the independent outside auditors,
who, as their reason for existence and the big bucks they earn,
are expected to vet the companies for dodgy book keeping,
excessively creative accounting, and as indicated issue an annual
"going concern opinion."

The other groups such as the stock traders and UAW simply went
along for the ride, and in the case of the UAW members stand to
lose considerable amounts money that were promised for labor done
in the 1960-1990s that is now due for pensions/medical benefits.

The UAW members were stiffed again when agreement was reached on
the so-called VEBA to allow the automotive companies to get the
health-care and pensions off their books, but as with most
Detroit promises, when it came time to pay management said "we
don't have the money right now -- can you come back in 2011?"

FWIW - both the blue and white collar retirees have already been
"stiffed" on their medical benies, which have just been dumped on
the taxpayers via medicare, albeit with much reduced coverage and
higher co pays.

FWIW #2 -- standard Detroit vendor terms are now payment in 45
days after receipt of invoice. This means that the vendor has
*AT LEAST* 15% of their yearly *GROSS* income from that product
at risk, effectively making a zero interest, zero collateral
loan. Blogger information indicates that the payment times have
been gradually increasing above the 45 day standard, leading to
the assumption of a final "bust out scam" on top of the long-term
Ponzi scheme. [Why leave any money on the table?]

GM and Chrysler are unique in that their grift has lasted so long
and reached such size relative to the economy.

They are also unique for a private company for the wide verity of
"investors" they managed to rope in, from their stock holders,
their secured and unsecured lenders, their employees (who were
paid in part with worthless promises of pensions and health
care), and their vendors (who are about to be stuck with huge
amounts of worthless "accounts receivable" and special
tooling/equipment) to their dealers who they are about to stick
with worthless franchises and huge amounts of "distressed"

Look for a GM and/or Chrysler B/K filing just before Xmas late on
a Sunday as this will eliminate the need for holiday pay for the
hourly employees. Probable electronic filing date is 11:45 PM
Sunday Dec 21st.

It was to avoid a abrupt "stealth" B/K, ala Lehman Brothers, that
the interim funding was so important. The additional 90-120 days
would have allowed a more in-depth analysis/evaluation and more
orderly liquidation, e.g. a GM consisting only of Chevrolet and a
Chrysler consisting only of Jeep. When this grift is allowed to
blow uncontrolled in the middle of the night look for "nuclear
winter" with extensive "collateral damage" to result and few
survivors with any major connection to the domestic auto

I hope the major states involved such as Michigan have made
contingency plans to process the huge spike in unemployment
claims and other requests for social services that is sure to

Unka' George [George McDuffee]
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).