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Posts Tagged ‘Bailout’

money_stackBarack said yesterday that I should sacrifice, but I need to ask myself to what extent am I willing to go.  And as it turns out the ultimate discretionary item — Harley-Davidson — is in the same situation…determining how willing they are to sacrifice or jeopardize their company! 

I previously blogged about Harley’s inability to securitize motorcycle loans HERE the delinquency rates HERE and the five quarter earnings decline HERE.  Obviously not good times for the company.

But, like a lot of things these days related to financial issues they change weekly.  On behalf of Harley-Davidson, Sen. Bob Casey Jr. (D-Pa.,) wrote a letter on Jan. 16th to the Federal Deposit Insurance Corp. chairman Sheila Blair, saying Harley-Davidson recently inquired whether its financing company and subsidiaries — Harley-Davidson Credit Corp. and Eaglemark Savings Bank — are eligible for the Temporary Liquidity Guarantee Program (TLGP).  The TLGP guarantees a corporation unsecured debt against defaultA bailout?

The Harley Springettsbury Township plant is the largest of the company’s manufacturing facilities and employs more than 2,800 workers as well as supports approximately 1,500 jobs at Harley dealerships in Pennsylvania.  It’s easy to see why Sen. Casey is supporting the eligibility for TLGP due to the potential negative impact to his state’s economy.  And it’s “pile on” season in reference to the challenging economic environment, lower consumer confidence and banking sector meltdown so why not jump on board.

Demonstration Against UK Gov Bailout

Demonstration Against UK Gov Bailout

This sounds a bit like the ‘ol… “It’s not my fault” redirect the blame to the economy trick?  Do you think this a problem of people not being able to get loans to buy motorcycles?  I have no insider information, but I’m inclined to believe it has more to do with delinquency rates and processing bad loans on the part of Harley-Davidson Financial Services (HDFS).  Sure the economy and financial markets being reluctant to fund higher risk loans contributed, but don’t forget about the MV Augusta acquisition which has been described as an over reach by the company execs. 

Also we should not forget the sudden “personal” decision of Sy Naqvi (HDFS President) two weeks ago to immediately resign.  Mr. Naqvi was HDFS president for 23 months when Harley announced that Tom Bergmann (CFO Harley-Davidson) would assume the the additional responsibilities of HDFS president.  Naqvi joined HDFS from DeepGreen Financial, Inc., an online home equity lender, where he was CEO.  DeepGreen was acquired by Lightyear Capital and had a somewhat sorted history with operations in Cleveland while Naqvi worked out of Chicago.  Efforts to turn DeepGreen into a brick and mortar bank failed.  Is HDFS next?

But let’s think positive.  If Harley obtains eligibility status from the FDIC it (really taxpayers) will guarantee unsecured corporate debt against default.  In addition, Harley would get federal funds if a customer defaulted on his or her motorcycle loan.  Nice!  How do I sign up?

It will be hard to calculate Naqvi’s impact on/at HDFS or what role if any he played in its current set of troubles.  I wonder if the company is “positioned appropriately” for the faltering economy or if it’s another bailout on the list of so many?

Harley-Davidson is expected to report fourth-quarter results this Friday and I’m not hopeful of Q4’08 results.

Photo courtesy Flickr.

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g20_summitOn Monday (December 8th) the Wall Street Journal reported that Merrill Lynch CEO, Jeff Thain requested a $10M bonus. 

I was speechless!

Mr. Thain believes he deserved this bonus for “holding-the-loss-line” at Merrill to a staggering $11.67 BILLION melt down and then astutely arranging the pennies-on-the-dollar sale to Bank of America.  Sheez, I could have done that with one eye closed and never do balance my check book!

Jeff Thain

Jeff Thain

Being ever so “wise” and picking up on the backlash “buzz” he announced the very next day a sudden humbleness-change-of-mind (do you think the public anger and condemnation helped?) and retracted the request for this $10M taxpayer subsidized bonus!  Has Mr. Thain ever once put his (mis)management and chicanery into human terms?  We don’t need to be an economist to understand the games.

It’s getting harder and harder to underestimate the executive management intelligence in the financial/banking sector.

Photo courtesy AP.

 

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1965 Corvette

1965 Corvette

The most recent example of Corporate America “desperation marketing” is below.  Emailed from GM’s Troy A. Clarke, Group Vice President and President GM North America.   Customers are getting these because they own a GM car, but it’s really in poor taste for GM to try and use customer personal information for the purposes of political lobbying.  Sure the “loan” is a complicated situation and whether or not GM ends up in Chapter 11, I don’t think they should be SPAM’ing their customers with email.  What do you think?  Would you respond differently if it was a letter from Harley-Davidson?

Dear [Customer Name],

You made the right choice when you put your confidence in General Motors, and we appreciate your past support. I want to assure you that we are making our best vehicles ever, and we have exciting plans for the future. But we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid.

The U.S. economy is at a crossroads due to the worldwide credit crisis, and all Americans are feeling the effects of the worst economic downturn in 75 years. Despite our successful efforts to restructure, reduce costs and enhance liquidity, U.S. auto sales rely on access to credit, which is all but frozen through traditional channels.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

  • One in 10 American jobs depends on U.S. automakers
  • Nearly 3 million jobs are at immediate risk
  • U.S. personal income could be reduced by $150 billion
  • The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking for your support in this vital effort by contacting your state representatives.

Please take a few minutes to go to www.gmfactsandfiction.com, where we have made it easy for you to contact your U.S. senators and representatives. Just click on the “I’m a Concerned American” link under the “Mobilize Now” section, and enter your name and ZIP code to send a personalized e-mail stating your support for the U.S. automotive industry.

Let me assure you that General Motors has made dramatic improvements over the last 10 years. In fact, we are leading the industry with award-winning vehicles like the Chevrolet Malibu, Cadillac CTS, Buick Enclave, Pontiac G8, GMC Acadia, Chevy Tahoe Hybrid, Saturn AURA and more. We offer 18 models with an EPA estimated 30 MPG highway or better – more than Toyota or Honda. GM has 6 hybrids in market and 3 more by mid-2009. GM has closed the quality gap with the imports, and today we are putting our best quality vehicles on the road.

Please share this information with friends and family using the link on the site.

Thank you for helping keep our economy viable.

Sincerely,

Troy Clarke

Shame on GM!

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ford_logoFord Motor reported last week a $3 billion quarterly loss while burning through $6.3 billion in cash and cutting another 2,600 hourly workers.

Ford’s press release said something about…blah, blah, blah…cut salaries…blah, blah, blah…reducing bonuses…who believes any of this now days?  At the same time executive management was meeting with Congress to push their double-down request on the $25B (yes that’s BILLION) low-interest loan program approved previously – BEFORE – they got any money from the first loan!  Automakers must think the car buying public is stupid?  They want us to believe it’s all about energy legislation and the help they need to convert over to more fuel-efficient vehicles while meeting the demands of buyers and new federal mileage rules.   So, that would explain Ford’s new 2009 Harley-Davidson F-450 Truck called “Big Hog DaddyHERE, right?! So, I wrote Ford a letter… 

Dear Mr. Alan Mulally (Ford CEO),

The taxpayers don’t want to reward Auto companies or their management for lack of vision and insight.  We don’t want to carry your cash hemorrhaging burden.  This is not a one off event that will be contained by a blank check from the tax payer.  This downward spiral has been brewing for decades while you profited from high margin SUVs. And now that the public no longer wants or values bigger SUV’s you want the tax payer to come up with the “mother of all bailouts!”  You’ve got nerve Alan.  After all, your organization doesn’t stand out as an ethical oasis in today’s corporate desert!  Isn’t this just another example of big corporations exploiting the little guy, and keeping all the money for themselves?

Signed – The Little Guy

Intermittent Windshield Wiper

Intermittent Windshield Wiper

But, let’s go back to the future…it was 1962 and Bob Kearns was driving his Ford Galaxie through a Detroit rain storm.  He had the inspiration to ask “Why can’t a wiper work more like an eyelid?”  He knew the human eye blinks at different speeds when needed – so why can’t a windshield wiper do the same thing – move quickly in heavy rain and slowly in light mist. WHAM!  The idea for an intermittent windshield wiper was born.

Kearns is one of the more famous independent inventors in the U.S., but it hasn’t been an easy road.  After showing his invention to Ford, and believing he had a contract to manufacture the item for the auto company, Kearns watched Ford cancel their deal and bring out their own intermittent wiper, which incredibly looked like the one he had provided them.  Thirty years of legal action followed.  I’m sure Ford thought they had the time, money and ability to pay high-profile attorneys to wait out or steam-roll Kearns.

Kearns won every “lawyered-up” automobile legal battle and obtained millions in settlements.  They even released a movie last month about it called Flash Of Genius starring Greg Kinnear (“As Good as it Gets”, “Little Miss Sunshine”) which was based in large part on the New Yorker profile.  But, Kearns wasn’t interested in the money…he wanted justice.

Isn’t it ironic that Ford’s arrogance or attitudes of the past likely helped them get into trouble today.  And a movie about a big auto company exploiting the little guy while keeping all the money/credit for themselves clearly doesn’t bode well for any bailout cause now does it?!  Clearly Ford is in it to make money.  Any allusion to the contrary is disingenuous.  Their actions are no different than any other company defending their turf and using all available means to get or keep their disproportionate share of the pie

But, still… shame on Ford.

Ford logo and drawing courtesy of company web sites.

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