Deal or…Not so Much

I've taken my time to study, and to try to comprehend, the deal the Government is pushing to revive Chrysler from bankruptcy.  Its not the classic deal one would see negotiated between heavy weights, like John Malone or John Chambers, one that would create a significant return on investment or entry into a new market.  Plain and simple, when you cut through the muck, its a deal being sculpted to pander to a constituency that helped elect the current President.  If you are a citizen of the USA whose tax dollars were invested in Chrysler you have received a pathetic return on your recent investment.  Let me explain.

The deal being crafted gives the Union, or a Trust on its behalf, 55% the new company and 1 board seat.  This equity stake is, theoretically, to be used to fund an underfunded pension plan for existing and retired workers.  The citizens of the USA, via their goverment appointed negotiators, will receive 8% of the company, will be asked to eventually invest another $6B + or - and will appoint 4 Board members.  And thanks for the initial $6B you invested, its now gone.  The Canadian government will invest $1.4B in the new Chrysler, will appoint 1 Board member and require that 20% of the production stays in Canada.  So far, of the 9 Board seats, two governments and the union will appoint 5 members, or a majority.  Are you seeing the light?  And, best of all, and perhaps the saviest deal maker at the table, Fiat will invest $0, thats rights $0, will "transfer technology" for the development of fuel efficient autos and will manage the business.  Let's see, I put no money in, I use my company's technology to attempt to expand my business into the USA and Canada, I get to run the company, AND I eventually can own up to 33% of the entity if it succeeds?  Where do I sign?  How much Chianti or Sangiovese was served during these discussions?  By the way, how profitable has Fiat been in its existing markets competing against the likes of BMW, Mercedes Benz, Toyota and other global automobile manufacturers?  And why did none of these other companies want a piece of this action?  Ask the Chairman of Damler Benz, who couldn't sell Chysler fast enough.

Fast forward to the labor negotiations.  The entity that owns 55% of the company will negotiate against itself?  How do you think they might turn out? 

If my recollection of GAAP accounting serves me correctly if an entity owns more than 19.99% of a business it must be reported in the investments section of its financials.  If it owns more than 50% of the entity its a subsidiary that has to be included in the consolidated financial statements.  Thus, the UAW will consolidate Chrysler's results into its own financial statements?  How will that work? Will it show an elimination for the union dues paid by Chrysler workers that account for all of its revenues?

This deal, plain and simple, is not so much a deal as it is an edict from the current administration to structure the business for the most benefit to the union and its members.  You, American taxpayers, got a bad deal.  You received no return on your initial investment ("we all must share the pain") and the existing bankruptcy laws of this country were usurped to create the structure that is now being proposed for Chrysler.  Lawsuits from previous senior creditors have already been filed.

Were the same considerations given to the Steel industry?  The Airline industry?  These proud USA industries, which had similar uncompetitive cost structures and employee benefit packages as the auto industry, were forced into bankruptcy court to sort out their outdated business models and cost structures.  They exited and survived to fight another day.  I have my doubts the deal being structured by the governement will allow Chrysler to do the same.  And you can bet if the company finds itself in financial distress your hard earned tax dollars will be used once again to save a dinosaur from extinction.

Cablevision’s Deceptive Business Practices

I live in SW CT where my only option for cable TV service is through Cablevision.  I have a friend with connections to a senior executive at Verizon FiOS who confirms my residence is unable to subscribe to their service at this time.  Too bad.  I'd be on the phone in a second after the latest attempt by Cablevision to wring yet more dollars out of their existing subscriber base.  I believe they call this "monetization". 

You see, I woke today to find 16 cable channels removed from Family Cable package to which I subscribe.  Only a brief note on my most recent cable bill indicated this would occur.  I visited the Cablevision web site to search for any information about this action but nothing was listed on the home page, or anywhere else of logic for that matter.  It was only when I clicked on the Customer Service tab AND searched on the proper phrase that my query was answered.  Cablevision is "removing the duplicate analog feed of select channels. While these channels will remain in your current package, they require a digital cable box or CableCARD-equipped device to receive them on your television*".  Notice the asterick?  This takes you to the fine print that states you have to pay additional monthly fees for the digital cable box or a cable card, assuming your TV is cable card ready.  All in the name of adding more HD channels and "monetization".

I'm a digital savvy guy who has an HDTV with an HD Cable box, but I also have several analog TVs in other rooms in my home.  And I understand why Cablevision might wish to take these steps.  Why transmit duplicate channels and incur incremental costs to do so?  But as a consumer I have entered a contract with Cablevision for a certain service package.  That package does NOT state that I have to have a digital cable box or a cable card to receive analog signals on my "low tech" TVs.  It simply states the channels that are delivered to my home for a specific fee per month.  These channels are no longer available, hence Cablevision has broken the contract.  Should I still be required to pay a fee for services that are no longer rendered or provided?  I am still being billed for a cable programming package that includes almost 50% of the channels to which I originally subscribed for my analog TVs.  The message from Cablevision is clear.  Upgrade or else.

Its like going to the supermarket to buy your favorite item.  When you get there you notice the packaging has been changed but hope that, inside, the content is the same.  But something looks different.  While the package may be the same size, or slightly less, something has changed.  One glance at the weight tells the story.  The manufacturer has put less in the box, fancied up the packaging and kept the price the same.  It called a price increase folks.  Less product for the same amount.  This is EXACTLY what Cablevision is doing to its analog cable subscribers.  The "package" offers less but is the same monthly price.  The message is clear.  One way or another, if you remain a Cablevision customer, you are going to pay more for your cable programming service.  Its taking steps to move customers from the analog system, slowly but surely.  But the method they are using will surely drive a large percentage of these customers to alternative services.  While the number of TVs per household is still around 3, I doubt all of these TVs are digital or cable card ready.  I'm a business guy so I understand the simple economics of this transition.  I just hate the way Cablevision is going about it.  Its sneaky and deceptive.  FiOS can't get here fast enough for me.