Marty Whitman on GM, American Engineers, Apple Computer, Ron Burkle & Yucaipa

* Marty Whitman of Third Avenue Funds recommends bankruptcy for General Motors. Reading through the first quarter letter, which is a short and informative read (particularly for his explanation of "net-nets"), it is striking to see Whitman consider both a restructuring and bankruptcy, and decide that the latter is a better option:

"There are two ways a distressed company can reorganize, i.e., restructure its obligations — voluntary exchanges, or Chapter 11 of the Bankruptcy Code.

Though not without business risks (who wants to buy a car from a bankrupt company?), a Chapter 11 case probably would be the easiest way for General Motors to solve its legacy cost and labor cost problems. In Chapter 11, General Motors would likely be able to unload a large amount of pension obligations on the U.S. Government’s Pension Benefit Guaranty Corporation; and a bankruptcy court, relying on Section 1113 (e), might be able to impose new labor contracts on the United Automobile Workers union."

Ed sez: the future of American manufacturing is bright indeed!

* Robert Stevens, Chairman and CEO of Lockheed, issues a warning about America's educational priorities:

One in every three of Lockheed's employees is over 50. To sustain our talent base, we're hiring 14,000 people a year. In two years, we're going to need 29,000 new hires; in three years, 44,000. If this trend continues, over the next decade we will need 142,000. We're not alone; industry-wide, some 19% of employees are eligible for retirement.

Yet Department of Education data suggests U.S. colleges and universities are only producing about 62,000 engineering BAs a year -- fewer than the visual and performing arts graduates -- and that figure hasn't grown in a decade.

Nope, no problems here! Besides, working as an intern for MTV is just so much kewler than working for Lockheed. Maybe Lockheed should just produce music videos.

* Apple goes after lowly bloggers:

Apple's ... lawyers say in court documents that Web scribes are not "legitimate members of the press" when they reveal details about forthcoming products that the company would prefer to keep confidential.

"Unlike the whistleblower who discloses a health, safety or welfare hazard affecting all, or the government employee who reveals mismanagement or worse by our public officials, (the Macintosh news sites) are doing nothing more than feeding the public's insatiable desire for information," Kleinberg wrote at the time.

So, because Apple is upset about leaks, they decide to risk alienating consumers, who practically worship their company and its products. Frankly, Apple's biggest problem right now is that in the absence of exciting new products, we simply stop caring. Why not feed the Apple-product web-hype machine? I don't get it...

* Institutional Investor (December 2005) notes:

"Hedge fund managers have been taking 20% of the profits since former journalist Alfred Winslow Jones invented the modern hedge fund in 1949. What most people don't know is that Jones didn't charge a management fee.

Today's managers [typically] pocket a management fee of 1-2% of assets and a performance fee of 20% of investment gains [...]

'One manager wanted to charge us fees on the leveraged money' reported [a pension manager.] 'It struck me as unconscionable. I could borrow money all day long to make my fees go up.'"

* A University of Wisconsin study finds: Male mammals gain about 10% in body weight when their mates are pregnant. The researchers theorized that the animals - and perhaps humans - gain weight in preparation for the challenge of fatherhood. (IBD)

* The Page-Six, Ron Burkle Rabbit Hole: Mickey Kaus has been actively blogging on Burkle-gate, following the seemingly innocuous Page Six extortion scandal (which I clearly called incorrectly.) Turns out, there's a whole web of connections between Burkle and Clinton/Gore, using public money from CalPERS and New York Public Pensions invested with Yucaipa to "pay" the two for their work supervising "investments" in such "lower-income urban and rural community" businesses like Current TV and Sean Jean clothing:

NY Post: "CALPERS, the huge California public-employee retirement fund, has agreed to commit $500 million to Yucaipa, and the California State Teachers Retirement System (CALSTRS) another $150 million. Millions more are to come from the New York State Common Retirement Fund.

Clinton's job, when he joined Yucaipa in April 2002, wasn't just to help make the rich richer: These were to be "investment funds that specialize in lower-income urban and rural communities," as The New York Times reported. Yucaipa managing partner Carlton Jenkins told Black Enterprise magazine that the funds were seeking out "urban-based minority or female-owned businesses." [...]

The Yucaipa Corporate Initiatives Fund has already poured millions into Al Gore's new cable channel, Current Television. Gore's venture is headquartered in a tony neighborhood of San Francisco, which certainly doesn't seem to fit the definition of a "lower-income urban" community. Nor is it minority-owned — indeed, all the major investors [and upper management] are white males. [...]

One of the few significant minority-owned busi nesses that [Yucaipa] has invested in is Sean John, the clothing enterprise run by that struggling representative of the "lower-income urban community," rap mogul Sean "Puffy" Combs.

Independent Sources notes Current TV's choice of San Francisco as headquarters, and notes:

"In [Current TV's] defense — most cable channels in California are headquartered in LA, so perhaps the Bay area is under-served."

Yuppie careerist politicians - gotta love 'em! - Ed

Comments

[eli]

IN response to the Lockheed comments, it's the very culture of places like Lockheed that makes engineering an unattractive career path for young people. They tend to reward people who have one successful project with lifetime employment, making it difficult to get ones foot in the door right out of college. Why would anyone graduating from college want to take a chance in engineering when there are all these old-timers making it impossible to advance?