DrMyers’s Blog

April 30, 2009

Day 101: Bankrupt or A New Lease on Life?

 

 

chrysler_logo1

Yesterday news stations around the country dug through their stock piles, and played everything from Obama’s inauguration speech, to seeing the Commander in Chief running alongside the new family addition.  Conservative stations rallied around many missteps made by the young administration, while more liberal stations cracked open the Champaign, and heralded the President as the “New Deal” of the 21st Century.  Report cards were given in an interactive report between news pundits and watchers.  Finally, the President gave a speech, being very honest about his opinion of the work accomplished by his administration, but far from content or satisfied.  The milestone of 100 days seemed to scoot by, only with the shadow of the flu lingering steadily over head…that was until today!

Day 101 marked a loss of profits for Exxon Mobil, which sent economic advisers into an analytical frenzy, while Wall Street took comfort in a lower jobless claim.  Then, shareholders at Chrysler were offered a deal that they had to refuse.

Shareholders were offered over a 60% loss, which the minority overwhelmingly weighed their distaste, causing Chrysler to file for bankruptcy.  For months, Chrysler maneuvered around bankruptcy, grasping with the fact that as of November 2008, their sales had fallen over 34%.  Speaking with its competitors, Chrysler was included in the “Big 3” auto bailout, where American Taxpayer Dollars were pumped into the auto makers, with hopes that it would stimulate faith in their product, and faith in their leadership.  

The American Government stepped in even more, and from the White House, newly elected President Barack Obama, obligated the Government to stand behind the warranties given by Chrysler.  A very bold move, but a move that gave the appearance that the recent actions could work, as the long going negotiations with Fiat continued, and a deal seemed to be eminent.  With the President issuing his statement today, how does this bode for GM, Ford and the trust within the American people?  When first mentioned, approval ratings for the Auto Bailout under Former President Bush, waned at best, while Americans who had been forced into bankruptcy within their own lives, were forced to watch the government step in, and as of today, not save Chrysler from going down the same route.  Why did Chrysler not want bankruptcy, and how will this affect our already shaky economy, and our pocket books?

Maybe we should ask, “What is Bankruptcy?”  Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors.  Plain and Simple!  You owe it, you can’t pay it, you now declare to the government that you are unable to meet your obligation.  One would ask, why on earth Chrysler would, or any other of the auto makers, be hesitant to simply tell the truth.  As the “Big Three” sat on Capitol Hill, they asked for tax payer dollars because of their inability to pay their debts, while the tax payers were struggling to pay their own debts.  The only reason, one could imagine that a company would avoid bankruptcy could be found in the following statement.  In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor’s unsecured creditors. In exchange, the debtor is entitled to a discharge of some debt; however, the debtor will not be granted a discharge if he or she is guilty of certain types of inappropriate behavior(e.g. concealing records relating to financial condition).  In Chapter 11, unless appointed for cause, the debtor acts as trustee of the business.   This means, if within the bankruptcy investigation, Chrysler if found to have varying types of inappropriate behavior, the Federal Government would have been enablers, by using American Taxpayer Dollars, to keep the improprieties of auto leaders covered, by keeping their business running without an outside examination of their practices and books.

One may ask, “Who else will admit their problems were too great for the American Taxpayer to save”, and one may wonder if conservatives were right, if the American Government put taxpayers at risk by interfering within the free market economy.  What is evident is that this decision will likely set the tone for similar discussions with bondholders of General Motors Corp — which is now on the clock to restructure its operations by the end of May, which taxpayers also have a vested interest in.

 

President Barack Obama

President Barack Obama

 

Today, President Obama ensured that he is confident that his auto taskforce will be able to work with GM in restructuring their operations and making it a more viable company.   The President also reassured America that he agreed with Chrysler’s decision to file for bankruptcy, and that it would reemerge stronger because of it.  

It is unmistakable that the number 100 can mark monumental success in grade and age, but when dealing with the tax payer dollars and a shaky free market society, Barack Obama just took a course in “Challenges in Negations 101” taught by the American People.  Perhaps Alexander Hamilton said it best:

In framing a government which is to be administered by men over men the great difficulty lies in this: You must first enable the government to control the governed, and in the next place, oblige it to control itself. 
~Alexander Hamilton


Board Decides Fate: Shuffle – Step – Money – Entertainment!

 

 

 

Bank of America CEO Ken Lewis

Bank of America CEO Ken Lewis

Wednesday night, I had the privilege of meeting with friends I have not seen together since the Inauguration.  After working closely with each other in Southwest Florida, a bond had developed that can be shared with no one else; through our collective experience, we shared something that can only be relived in memories, and we did just that!  Sitting around a small table, we relived our time in Robert E Lee County Florida, and of the many people that we met.  Our time spent together was not by happenstance, but it was destiny.  Where else could people from across the globe meet each other, fall in love with each other’s personality, and keep genuine concern about the each other’s well being.  

Our time together was ended after the country made its decision.  The bond we had built, pushing toward a common goal, was then cemented in posterity, and we then went on our separate ways.  I drove back to Texas, while another boarded a plane for Switzerland.  One decided to stay around an extra week to get some rest, while the last person drove back to the DC Metropolitan Area.  It is a weird feeling when ones future, at times, lye in the hands of a majority vote or when a group decides to go in a different direction.  Many of our lives are dependent upon the consensus of others, and we are not even aware of it.

This realization came abruptly to Kenneth Lewis, CEO at Bank of America, during a board meeting Wednesday.  Mr. Lewis was removed by a majority vote from his position as Chairman of the Board, but was unanimously supported, by the board, in being kept on as CEO.  With the recent downturn in the economy, his steady hand and judgment was examined by the way he handled the acquisition of Merrill Lynch.  Several shareholders stood to their feet, and freely expressed their anger, disappointment, and personal loss due to the banks mismanagement by Lewis.

It appeared that the root of his alleged bad judgment call, came from his willingness to support and push for the acquisition of Merrill Lynch, after becoming aware of its current losses.   Shareholders expressed, with good reason, the disclosure of this information would have weighed heavily against their support of the deal: which cost one shareholder $27,000.  Mr. Lewis defended himself by stating, “It [the acquisition] was “good value” and that abandoning the deal would have caused “serious harm” to Bank of America and other banks.”  According to Lewis, “as a legal matter, there was no duty” to disclose the bank’s talks with the government.”  Undoubtedly, the decision is viewed as a precursor of a similar decision regarding his current position at B of A.  

In this case, one can not overlook the amount of trust placed upon an Executive, System, Administrator, or Liaison to the People/Members/Boards.  Time and time again, history shows that once these players lose faith in their leaders, all that was certain, in respect and protocol, becomes uncertain and shaky at best.  In 1867, congress enacted the Tenure of Office act, because they suspected the President would misuse the power of his office.  As predicted, he (in their eyes) abused that said power, and they proceeded with the Impeachment of President Andrew Johnson.  The same thing happened when TV Evangelist Jim Baker was accused with the mismanagement of funds and infidelity while overseeing the PTL Club.  Jerry Falwell took over as Executive Director of the operations, and publically denounced his fellow brother in the ministry, thus ending the credibility of Jim Baker and his family.

Although the people hold their leaders accountable to certain standards, and when violated, take measures to oust them: What happens when the leaders decide that “They” must go a different direction from their employer?  

You can currently watch this being played out in the interesting merger of William Morris and Endeavor.  These two “Hollywood Rivals” decided on Monday to merge, creating the quintessential Hollywood Powerhouse that is already speculated to dominate the industry, while other smaller agencies cope with the Recession.  With William Morris signing Grammy Award Winner Mary J Blige on Wednesday, one would think this upcoming merger would be viewed positively by all players involved.  Not So!

 

Literary Agent Richard Abate

Literary Agent Richard Abate

 

Representing Endeavor on the other coast, Richard Abate boasts a loyal and faithful clientele, while having a clear track record of scoring his clients healthy deals.  After fighting his way in court to work at Endeavor, it became apparent that the literary focus of these two powerhouse agencies was waning…at best.  But, with a 114 year history, William Morris’s literary department has stronger roots and is much bigger than that of Endeavor, leaving an obvious decision for Mr. Abate to make, which was to not join his employer in the final merge as William Morris Endeavor.

Parting ways, under any circumstance, isn’t a sought after component to any relationship.  When choosing professions, one weighs his options by choosing what he can see himself doing for the rest of his life.  When choosing a place to live, one envisions himself content and happy there until his dying days.  When reciting marriage vows, we end each solemn oath by stating “Till Death Do Us Part”.  Unfortunately, with a bad economy forcing people out of their jobs, homes, and marriages, one can only hope that recovery is sweet and swift.

Perhaps, the great playwright understood all the more when he penned these famous lines:

“Good night, good night! Parting is such sweet sorrow, That I shall say good night till it be morrow.” 

~William Shakespear

William Shakespeare

William Shakespeare

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