What had Stuart and others neglected to put into their formulas?  Was it the exact nature of the stimulus spending?  Where did that money actually go?  I’m not certain of this fact, but the last I heard the stimulus money was stilll not half spent.  What we do know is that the stimulus money went to the pet projects of influential Congressmen and Senators.  What else has transpired?  Businesses are already writing down profits in anticipation of the Health Care Plan.  Taxes are going up dramatically after the first of the year, and investors and business are gearing up to avoid paying as much of it as possible.  I have not read any of the Financial Regulation bill, but you can rest assured that some of its provisions are onerous to business.  I’ve seen bits and pieces of commentary from the Appraisal Institute which is feeling pretty positive about it. 

All things considered, the economy is in for a battering in the coming months from all of these sources.  So, Humpty Dumpty Sat on the Wall.  Humpty Dumpty Had a Great Fall.  All the Kings Horses and All the Kings Men Couldn’t Put Humpty Together Again.  We had the Bush Hope Now program, the Barney Frank Hope for Homeowners and the Obama HAMP Program.  And still, housing is in a free fall.  After well over  One Trillion Dollars in stimulus spending all we have to show for it is a declining economy, high unemployment and a mounting debt that will rival Greece in the not-too-distant future. 

So where am I going with this you ask?  Good question.  The WSJ Editorial Page today suggested that the forces of supply and demand are finally being left alone for a little while to “do their thing”.  Perhaps there is a wipeout period underway where a real bottom is being made up.  Hopefully, soon we’ll all be able to do a big exhale from that wonderful sense of relief that this Congress can do no more harm than they have already done.  With the elections looming, perhaps they will go to an early recess and stay out of Washington till the first of next year.  There’s always hope. 

If you’ve been reading my earlier blogs you’ll notice that this is my first posting of a simple message.  All of the previous blog postings have been my E-Newsletter which goes out to about 1,000 people who I hope might some day order an appraisal from me.  My internet consulting firm, Kinetica Media, suggested one day that they post my newsletter to a blog and see what the reaction might be.  Today I finally took the time to look at the comments and there were amazingly a lot of them.  A lot of people have been reading my newsletter.  This is not a newsletter, but I will be writing one in the next week or two, so stand by.  Keep your cards and letters coming and the very best to each of you. 

Regards,

Bob Domini, MAI

Now is the time to have a checkup to see whether your property value is lagging behind the assessor’s tax value.  Why?  It is because commercial real estate has suffered from the same maladies as the rest of the economy, persistent unemployment and a lackluster level of economic
activity.  In Ohio we have just entered a new triennium, a three-year period with all-new tax values.  If you are able to successfully lower your
tax value this year, you will be able to enjoy that reduction for at least a
couple of more years.   The timing couldn’t be better than now to have
your commercial property value checked. Assessment officials tell me they will do an informal appeal almost anytime.  That would be for the 2010 taxes.  In Lucas County they like to have those wrapped up by October.   A formal tax appeal needs to be filed any time from the first of the year till the end of March.  For 2010 taxes, the formal appeal process begins January 1, 2011.  Your appraised
value needs to be as of January 1, 2010. If you’re going to file a formal appeal, there’s no time like the present to (a) determine that you have a good case and (b) have an appraisal ready to go with a date of value of January 1, 2010.

For the 2009 tax year, some of those Board of Revision hearings are taking place right now.  If
you have filed a notice of appeal and your hearing date is coming up, an appraisal would be a good idea.  After the appraisal is complete, we will attend the Board hearing with you to present
the appraisal, and answer any questions they may have.

Lebron, Why did you leave us? Lebron James along with his team of MBAs, CPAs and Doctors of Jurisprudence have collectively decided the best place to do business is on the pristine shores of Miami Beach in the shadows of the Fountainbleu, not Ohio.  I believe he was being represented by the legendary firm, Wade & Bosh, LLP.  Why did he leave us?  His 14,000-square-foot mansion happens to be located in Bath, Ohio,with an income tax rate of about 7%, while in Miami it is zero.  According to a WSJ story on Saturday, Ohio has lost almost half of its Fortune 500 companies since 1990, due presumably to higher taxes. We all know that it’s all John Elway’s fault.

Read My Lips, No New Taxes Beginning on January 1, 2011, your taxes are going up across the board.  That includes not only income taxes on just about everyone, but it also includes capital gains and the death tax which were set to disappear. The top tax rate will go to 39.6% from 35%.  The estate tax rate will top out at 55%.  Long-term capital gains go from 15% to 20%.  As everyone knows, raising taxes is a great way to raise tax revenue. Stock dividends will no longer be taxed at the 15% capital gains rate, but as ordinary income.  Charitable contributions will no longer be deductible to certain individuals.    Medicare taxes will rise 62% for some.  There will be a 3.8% surtax for investment income.  Medical Savings Accounts will be limited to $2,500.  For those who are paying more than $10,200 for health insurance, a 40% tax will be levied.  This should be a great benefit to those who have a loved one who badly needs specialized care. Generally speaking, business people have an aversion to higher taxes, especially when they perceive them to be unfair or onerous.  They sometimes go to extremes to avoid them.  Imagine that.

Did the $787 Billion Stimulus Work? The $787,000,000,000 stimulus bill was passed into law during February 2009.  The legislation passed through Congress in record time with the idea being that it would be deployed immediately on shovel-ready infrastructure projects for maximum effect.  In January 2009, our economy had already shed 2% of its jobs since the beginning of the recession January 2008.  Most countries in the world were either holding their own or losing jobs at that point.  Chile and Brazil had lost 2-3% of their jobs as they entered the starting gate.   At this time, after eighteen months, how are the various countries doing with regard to employment?    Chile is up 7%.  Brazil +5%, Australia +3%, S. Korea +2%,  Taiwan +2%, and Canada +1%.  Germany and Hungary were down big, but are now back to even.  Japan and UK are -2%,  and the U.S.  at  -3% is lagging the rest of the industrialized world.

Stock Market Up Big The week ended July 9, a holiday week with just four days when most people were still cleaning up the fireworks wrappers from their yards, the market decided to rise 5.3% on the Dow.  Why? Big multinational corporations are taking advantage of global growth.  The foregoing article should illustrate  why.  In many parts of the world a genuine recovery is underway, and in some countries, a vigorous one.    Big-corporation earnings are leading the way with Alcoa and Caterpillar up over 9% for the week.  What does the smart money know that we don’t know?  That’s an interesting question.  Our office is beginning to see a slight increase in transaction volume. In some locales building permits are beginning to lead the way. It’s always darkest before the dawn.  When you’re down and feeling low, cheer up, things are usually not as bad as they seem. Within a few months, the whole world could change from where it is now.  Taxes and spending could be brought under control.  The smart money will see this coming from miles away.

Scuttlebutt Off the Web Surfing the web I came across an interesting article by Dan Weil.  In it he said Sam Zell, who became a billionaire betting on down-and-out real estate, sees a similar scenario developing right now.  He believes that commercial real estate was never in a gross oversupply situation like some sectors of residential real estate were. The bottom dropped out of the demand side for commercial, and he believes that as we see somewhat of a recovery there will be a shortage of commercial real estate.  Nothing has been built since July 2007.  What about Florida condos I say?  My prediction is that with Lebron moving to Miami, there will be a big surge in demand for South Beach condos.  There was a ten-year supply of those before the bubble burst. Perhaps the law firm Wade & Bosh, LLP, can earn some commissions on all those condo deals.

Class A Properties On the Move Oh yes, for investment-grade properties the market is booming.  Class A properties in Boston, New York, Washington, DC, San Fransisco and Southern California are alive and doing well.  The buyers?  It’s REITs, pension funds, insurance companies, and private equity funds.  Below the Class A level, it’s not nearly as busy.

This Update Brought to You by Robert Domini, MBA, MAI This review is brought to you by Bob Domini.  Please call our office for your appraisal needs.   We are especially interested in working with you to help determine the value of your assessed real property to make sure it’s not above market.  We also have been working with a wide variety of lending institutions and governmental agencies to provide numerous real estate appraisal, research and analytical services.   Yours truly and our company also enjoy working with private individuals and business entities to provide appraisals for a variety of purposes ranging from litigation, divorces, corporate mergers and dissolutions and eminent domain takings.  Our licensed and certified appraisers are at your disposal.  Give us a call. Respectfully, CONTINENTAL VALUATIONS, INC. Robert D. Domini, MBA, MAI President Certified in OH, MI, FL and PA (pending)

]]> http://www.continentalvaluations.net/blog/?feed=rss2&p=20 6 http://www.continentalvaluations.net/blog/?p=19 http://www.continentalvaluations.net/blog/?p=19#comments Mon, 17 May 2010 14:40:19 +0000 bob781 http://www.continentalvaluations.net/blog/?p=19 Hot Greece Boiling
Over

For months now Greece has been in financial turmoil.  Why? It’s because they have so much debt they can no longer make their
payments.  In 2009, they elected a
Socialist government which embarked on a big-time spending program.  I love European governments.  They call their parties liberal,
conservative, socialist, communist, whatever they are.  In the U.S. we are Democrats and Republicans.  Over the weekend the International Monetary Fund and the European Union
agreed to a bail-out package totaling $955 billion.

As a condition to the loan, Greece has agreed to cut
the budget by $40 billion and massively increase taxes.  I think we all know that if
you raise taxes the government will bring in less revenue.  Secondly, for months the markets have taken
none too kindly to Greek debt.  There has
been almost no demand for Greek bonds which has resulted in soaring interest
rates.   When the bond issues fail to sell, the
money to pay interest and principal is not available.  Greece is just plain running out of money.  Fearing loss of jobs, the public-employees
unions have gone on strike.

What effect has this had here in the U.S.?  The Dow lost 225 points on Tuesday, May 4.  The Greek strike went national on Wednesday
causing killing and riots.   We also know that Spain and Portugal are at
the tipping point.   The Euro is dropping
like a rock.  Yet today, Monday, May 10th, the markets were off to the races on the news of the massive bailout.

The Greek public debt is currently 113% of GDP, and expected to climb to
149% of GDP by 2013 when the bailout loans are due and payable.  Government spending amounts to more than 50%
of GDP, and their workers are very unproductive.  This just may be one of those cases where a
country is unable to tax and spend their way out of trouble.  Yet for now, the markets are euphoric that the crisis has been abated, (at least temporarily).

How Does the U.S. Compare? From information publicly available on the web I obtained our deficit, GDP and National Debt for the U.S. as compared to that of Greece as of about one month ago.  The results are as follows: U.S. Greece Percentage National Debt/GDP 92% 113% Percentage Deficit/GDP 10.6% 12.5% As you can see, although we are not in quite as dire straits as Greece, we are approaching it.  Having said that, our financial obligations are going to be rising rapidly in the coming years with the health care plan kicking in 2013-2014 and with the baby boomers just now beginning to collect Social Security.

Who is John Galt? There once was a mighty railroad known as the Taggart Transcontinental.  There was also a steel company known as Rearden Metal, an oil company called Wyatt Oil,  and the d’Anconia Copper Mines.  All of these were under relentless attack by the inefficient producers who were politically connected.  Those who created the highest quality economic goods became the victims of those who were incompetent.  The government slowly took control of the economy and finally most of the businesses. They even put the great Richard Halley, the composer, out of business.  One day all the producers, the inventors, creators and builders of the best products were criticized, taxed and regulated out of business.  One day they all just vanished.  Without them there was no one to pump the oil, no one to make the steel, no one to run the trains, and no one to mine the copper. Without them being a convenient scapegoat to criticize, regulate, tax and otherwise, loot, the engine of the economy slowly came to a halt.  The trains stopped running, the steel mills quit producing, the oil wells stopped pumping. Where had they all gone?  To be with John Galt, their leader, of course. He was the inventor of a revolutionary new motor which was never accepted by the government regulators.  He was the first to disappear.  The rest of the story is yet to be told . . .

Who is John Maynard Keynes? In truth Keynes was a unique man.  He wrote a book on mathematical probability, and he also made a fortune in international currencies and commodities.  He was a Cambridge economist, the chairman of a life insurance company, a collector of modern art and a noted collector of Newton’s writings.  He ran a theater, and he became a Director of the Bank of England. He knew Roosevelt, Churchill, George Bernard Shaw and Picasso.  He was born in 1883, and his first real job was as a government servant in India.  He stayed on the job for two years and went back to Cambridge where he wrote a book on Indian currency and finance. Soon he was appointed to the Royal Commission on Indian Currency.    Shortly thereafter he became editor of the Economic Journal, where he stayed for 33 years.  After WWI he held an assistant Secretary of the Treasury position in France. In 1923 he wrote a Tract on Monetary Reform  and in 1930 he wrote a Treatise on Money which dealt with boom and bust in the economy.  He believed that prosperity was not a measure of physical assets or past glories, but of present accomplishments.  He talked endlessly about saving  and investment as the cycle of money that produces prosperity.  He noted that in 1929 Americans saved $3.7 billion, but in 1932-33 they saved nothing. He believed that saving was a luxury for the good times.  He also believed that the economy hung on the amount of investment business made.  The economy was sometimes helpless to fix itself, so the government had to step in, he thought. Then as Roosevelt embarked on his “First Hundred Days of the New Deal” Keynes began to admire and relate to what was happening.  He saw a flood of social programs to “help” people.   But more importantly he saw the government making investments to get consumption going again.  He never stopped thinking about the pendulum swinging from saving to investment.  He died in 1946, at the age of 63, and will forever be remembered as the father of government spending.

Herbert Hoover as compared to George W. Bush Herbert Hoover and George W. Bush presided over the two most severe economic collapses in the history of our nation.  One was in the 1920s and the other was in the 2000s, 80 years later.  The 1920s were years of great prosperity.  In 1921, there were 21 millionaires and in 1927 there were 15,000.  The stock market was surging.  Real GNP grew at a rate of 4.2% for the decade, but by the summer of 1929 the party was over.  Unemployment started the decade at 5.2% then increased to 8.7%.  It finished the decade in 1929 at 4.6%. What caused the demise of Hoover and the U.S. economy?  First, the United States was carrying a massive debt following World War I when debt increased from $1.3 billion to $24 billion in three years.  In 1929, the Smoot-Hawley Tariff act was passed which was a major tariff on imported goods.  Much of our national debt was taken on so that loans could be made to foreign governments for the war.  With the passage of Smoot-Hawley not only did we lose most of our trade, but we also lost any hope of collecting on the loans.  Smoot-Hawley was passed by Congress, but signed by Hoover.  He could have vetoed it, but he chose not to.  The act killed the auto industry and caused the stock crash.  A bank panic ensued and the rest is history. During the decade of the 2000s, real GDP grew at a steady rate after a slow start in 2001 because of 9/11.  Other than a spike in the third quarter of 2003, growth was steady in the 3% to 4% range. Unemployment was also relatively low and inflation was under control during seven of George Bush’s eight years. What caused the demise of George W. Bush and the U.S. economy?  It was the subprime loans and the packaging of those loans into MBS, (mortgage backed securities).  Mortgage loans were being made to people without verification of their income or assets. The loans were an accident waiting to happen, so when oil prices went up and inflation spiked forcing rates up, the bubble burst.  Was this G.W. Bush’s fault?  He was at the helm.  It happened under his watch.  Fannie and Freddie were the leaders in making those bad loans and packaging those rotten securities.  Soon, Merrill Lynch, Lehman Brothers, Bear Stearns and others followed suit.  George Bush is a Harvard MBA, and he should have seen this coming and put a stop to it before it ruined his Presidency and the world economy.  He should have used the bully pulpit to stop it.

Roosevelt’s Beliefs Roosevelt felt strongly that the era of the 1920s was beneficial to the rich and not the average citizen.  This was contrary to the facts.  He felt that capitalism was failing and that government needed to step in to appoint experts to manage the economy, to promote spending and to redistribute wealth.   He felt that the government had to step in to fix the damage that business had done.  During the 1932 campaign, he promised to cut government size by 25% and to balance the budget.  As it turns out Roosevelt was not a budget balancer, he was a government reorganizer according to a book by Folsom.  For example, with his NIRA program four or five companies from each industry were chosen to set prices and wages for their entire industry.  In Ohio a small tire producer almost went out of business because they relied on their business acumen to produce a better product for a lower price.  Henry Ford was a notable exception.  He refused to cooperate and in the end he and Ford were survivors, just like they are today.

In Support of Tom Cousino I count myself as a long-time friend of Tom Cousino, just as half of Toledo likely does.  We first met as freshmen at Central Catholic High School. I cannot imagine how a person who has been a pillar of the Toledo community all his life could possibly be treated like a criminal.  When The Docks were just an idea for Don Monroe and Carty Finkbeiner, who was first to step up and invest his hard-earned capital?  Tom Cousino.  I can remember visiting his father’s restaurant at the foot of the Fassett Street Bridge on Miami Street.  I can remember when Tom was a young man he and Paul Krasula worked day and night to make the Steakhouse what it was to become, an East Toledo icon.  And now after all that, he’s unceremoniously indicted and portrayed as a criminal because he is in arrears with his taxes!  Do you have any idea how many people are having difficulty paying their taxes?  Why aren’t they all on the news? I propose that we make the first weekend in June Tom Cousino Weekend.  I want everyone who counts himself as a FOT to visit one of Tom’s restaurants and pay cash.  This will be a vote against dumping on a friend who is being unfairly maligned.

About the Author This update is brought to you by Robert Domini, MAI, real estate appraiser and market analyst. Remember that we are a full-service real estate appraisal and market analysis company.  We serve local banks, law firms, accounting firms and the general public in various capacities.  We also serve governmental agencies.  For the last ten years Continental Valuations has worked throughout the State of Ohio on right-of-way projects, as well as throughout the northeastern United States and Florida.  Remember, “IT’S NOT TOO EARLY TO START LOOKING INTO A TAX APPEAL APPRAISAL”.  I will provide a free consultation to discuss your options.  Give me a call. Regards, Robert D. Domini, MBA, MAI Continental Valuations, Inc. President Certified in Ohio, Michigan and Florida

]]> http://www.continentalvaluations.net/blog/?feed=rss2&p=19 0 http://www.continentalvaluations.net/blog/?p=16 http://www.continentalvaluations.net/blog/?p=16#comments Wed, 31 Mar 2010 19:12:31 +0000 bob781 http://www.continentalvaluations.net/blog/?p=16

Overall Rates or Cap Rates as most people call them reached a low point in mid-2007 with an overall average of 6.87%.  After two years of recession and turbulence the rates appear to have topped out at 8.49%.  This quarter, Korpacz reports, the average rate has actually declined slightly to 8.42%.  Please be reminded that these are aggregate rates for all property types, and those involved in the Korpacz survey are institutional investors.  Some properties in NW Ohio are in this class, but many are not, and so Cap Rates will be higher for most properties here.  Although there has been stress and duress, it has not reached epic proportions as did the sub-prime crisis.  Delinquent CMBSs (commercial mortgage-backed securities) have risen from $20 billion in October 2008 to $65 billion in November 2009.  Those are the securities which were used to buy commercial real estate mortgages.  Default rates for commercial real estate nationwide have risen from 1.6% in 2008 to 3.8% in 2009.  Still, Korpacz feels that the fallout has not been nearly as bad as predicted.  A recovery appears to be underway.

LoopNet Sees Commercial Real Estate Prices Increase

LoopNet is reportiong that Moody’s/Real Commercial property Price Index has risen for the third straight month.  In fact prices according to that index rose 4.1% in December.  They remind us to fasten our seatbelts because the ride will be bumpy.  Overall, prices are down 38.7% from January 2008 and 40.2% from October 2007.

Manhattan Luxury Condo Sells for $33.2 Million

Think the recession is over?  For some people it is.  Someone paid $6,000 a square foot for a 5,500-square-foot condo with 20′ ceilings, overlooking Central Park.  The property was in receivership, but was owned by an Italian film producer who paid $10.4 million for it in 1997.  Donald Trump paid $5 million for it in 1997 and sold it to the Italian guy.

First Solar Hitting a Speed Bump?

A Wall Street Journal story in March 22, 2010 issue started with the sentence that the company’s reign as the sun king could be coming to an end. Harold McMaster started the company right here in Perrysburg, but then sold it to a Tempe, Arizona firm.  Their only U.S. plant is right here in Perrysburg, Cedar Business Park.  According to the story, First Solar has relied upon the German government subsidized market for at least 65% of their sales.  With Germany on an austerity program, First Solar sales have declined.  The stock is now down more than 40% in the last two years.  Shifting sales from Germany to the U.S. could mean lower prices.  Solar electricity sells for around $.15 per KWH here in the U.S. while in Germany it sells for $.35 per KWH.

Since some of our good friends are in the solar energy business, I thought it would be a good idea to dig a little deeper.  A white paper was written by he Enterprise Florida and GTM Research by Shayle Kann entitled, “Emerging Trends in the U.S. Solar Market”.  I’m just going to quote directly from the introduction.  “The U.S. is rapidly emerging as one of the world’s leading markets for solar power.  Installed costs for PV systems have fallen on average 3.6%/year for the past decade, making solar more affordable by the day.  Simultaneously, electricity prices have been rising and acknowledgment of the external costs of fossil fuel-based generation have been growing.  As a result, the U.S. PV market has grown at an average rate of 71% per annum since 2000, significantly outpacing global PV demand growth of 51% per annum.”

Feed-in tariffs (FIT) are fixed-rate contracts by countries and communities for solar electricity.  Germany and Spain have the highest which has encouraged their PV (photovoltaic system) market to grow from 44 MW in 2000 to 1260 MW in 2007.  In the U.S. the first to offer a FIT was Gainsville, FL, which offers a 20-year fixed rate contract as high as $.32/KWH.  Their capacity is 4 MW per year, and this is completely sold out till 2014.  The FIT starts at $.32 in 2009, and decreases to $.23 in 2016.  Seven states have FITs.  California is the largest, supporting 750 MW.  Their rate is also the lowest ranging from $.08-$.19/KWH.  Meanwhile, Texas, Vermont and Wisconsin have rates in the $.25-$.30 range.

Without getting too heavily into the details, the solar power market is said to be heavily handicapped by the global recession.  Project financing is a real problem.  So, although the long-term trends are extremely positive, the short-term does have some bumps in it.

To Get Away From it all, Try Chile

Did you wonder why the death and destruction toll in Chile was so minor as compared to Haiti when Chile’s earthquake was about ten times as strong.  The airport and many stores were open for business on Monday after the weekend quake.  Unlike Greece, Portugal and the good old USA.  Chile’s GDP has grown by 8% throughout the 90s and averaged 5-7% during the 2000s.  Up through 2006, Chile was reaping big profits from copper.  Rather than squandering the windfall on big-time spending initiatives, President Michelle Bachelet salted away the money for a rainy day.  When recession hit in 2008, money was available for a big stimulus plan.  They paid cash for their stimulus, what a novel idea.

Chile is a really free market with spending discipline which has resulted in outsized economic success.  Sounds like a winner to me.

Ohio Jobs Ready Site

Just so you don’t forget, there is a site on the south side of U.S. 20, and on the west side of Pemberville Road in Troy Township, Wood County, at a brand new interchange linking this site to I-280 and the Ohio Turnpike which has rail, First Energy/Troy Energy electricity, Columbia Gas/Dominion Gas natural gas, water and sewer proposed for installation in 2010 at the JRS site by Northwest Water & Sewer District.  People talk about what a great location we have here in Northwest Ohio being on the Great Lakes, being a major rail center, having an excellent freight airport and being at the confluence of I-75 and I-80/90.  This is THE site.  Joe Rutherford and Bob Mack of Signature Associates have a listing of a smaller parcel just adjacent to the JRS, so if you know someone who is interested in up to 2,000 acres, I’m sure they could help you.  So could Brian McMahon of Danberry National who also works that territory.

This Update is Brought to You By Robert Domini, MAI

Thanks for taking the time to read my newsletter.  We appreciate your business, and we are grateful that our business has held up pretty well in this difficult market.   Continental Valuations routinely performs appraisals for the lending industry, corporations, governmental agencies and private individuals.  This past year we have had the honor to have worked on some very major industrial appraisals.  There has been a fair amount of activity in the hospitality industry, and one of those was a trophy property in one of Ohio’s larger cities.

Again, Continental continues to work with various governmental agencies on highway projects.  My associate, Pamela Casper, specializes in review appraisals throughout the state.  I am certified in Ohio, Michigan and Florida, but have done appraisals in several other states on a temporary license.  This year we have worked in New York, Pennsylvania, Indiana, Illinois, West Virginia and Florida.  Please give us a call next time you have a need for appraisal services.  Continental is in the real estate research and reporting business.

]]> http://www.continentalvaluations.net/blog/?feed=rss2&p=16 8 http://www.continentalvaluations.net/blog/?p=13 http://www.continentalvaluations.net/blog/?p=13#comments Fri, 20 Nov 2009 18:04:14 +0000 bob781 http://www.continentalvaluations.net/blog/?p=13

Meanwhile, Chrysler appeared to be a lost cause.  The only ray of hope was the interest of Fiat
and its feisty president, Sergio Marchionne. 
Again, fast forwarding, each of the companies spent a brief month or two
in bankruptcy.  The Chrysler deal was
almost sealed to avoid bankruptcy, but a few bond holders wouldn’t agree.  In negotiations the bond holders were offered
$2.25 billion, but after bankruptcy, they received $2 billion.  The UAW was able to recover about 50% on the
overall deal with the reasoning that the company could not do without workers,
suppliers and customers.  GM’s debt and
related liabilities were reduced from $120 billion to $55 billion, and $8
billion a year of operating expenses were eliminated.  In the final analysis, the U.S. had to put up
$50 billion for GM and $12 billion for Chrysler. 

Now, GM no longer has Pontiac and a couple of thousand
dealers.  Chrysler has a new operating
company, Fiat.  Fast forward to November
10, 2009, with Ed Whitacre saying that GM would pay the U.S. back in full, that
is, $6.7 billion in cash.  The other $50
billion was taken in stock.  The U.S. is
hoping to some day sell the stock to recover the money.  The jury is still out on Chrysler, but in
Toledo we recently received news that Jeep will play a major role in the new
Chrysler.  The Jeep will be made more
reliable and more energy efficient.  The
brand still has enormous worldwide appeal, and the Toledo plant is still state
of the art in the world of auto manufacturing. ]]> http://www.continentalvaluations.net/blog/?feed=rss2&p=13 36 http://www.continentalvaluations.net/blog/?p=1 http://www.continentalvaluations.net/blog/?p=1#comments Thu, 15 Oct 2009 14:19:19 +0000 admin http://72.240.126.227/continentalvaluations_blog/?p=1 Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!