Changeover at Delta Airlines
We noted awhile back that Delta, under a charismatic CEO with the unlikely name of Gerald Grinstein, was the only airline around to treat its workers with respect, the only airline around to give its employees a large part of the credit for turning it around and bringing it out of bankruptcy, and the only airline around to reward its employees as well as its management. Well, Grinstein is retiring, and in his place Delta’s board has hired as its new CEO a guy named Richard Anderson who comes with a reputation for ruthless cost-cutting.
Incoming Delta Air Lines CEO Richard Anderson is a friendly and approachable leader whose easygoing manner often masks a shrewd and cunning lawyer’s mind, say Northwest Airlines workers and former associates of the one-time Texas prosecutor.
Anderson, 52, oversaw the heavily unionized Minnesota-based carrier from 2001 to 2004, a tumultuous period that pitted rank-and-file workers against management during a series of cost-cutting initiatives.
Despite his reputation, Northwest’s union chief suggests Delta’s workers could do worse.
Union leaders at Northwest give Anderson high marks for his “open-door” policy toward organized labor, but point out that he departed in 2004 before the worst of the bloodletting at the carrier, which was carried out by his successor, Doug Steenland.
“We had our issues with Richard, but overall we did OK with him,” said Ted Ludwig, president of Local 33 of the Aircraft Mechanics Fraternal Association.
“If we felt we had a concern we could not get resolved at the lower levels, he would always listen. He might not agree with us, but he would listen and seemed to empathize with you and he really seemed like he tried to put himself in your shoes.”
The last thing Delta needs right now is an anti-union, cost-cutting boss. Unlike American Airlines, Delta’s employees have been well-treated and well-rewarded for their efforts, and are perfectly aware that is was those efforts that were responsible for getting the airline out of a hole. They aren’t likely to take kindly to a CEO who wants to take it all away from them in the name of cutting costs after they’ve sacrificed so much. Just last week, the PBGC announced that Delta pilots’ pensions will be a little heftier than they thought.
The Pension Benefit Guaranty Corp., a quasi-government agency that insures workers’ traditional pensions up to certain limits, said it expects to cover a greater share of the pilots’ pension benefits because it also received more valuable stock and other assets than expected as part of Delta’s bankruptcy reorganization. The agency pays pensions above its guaranteed limits when it recovers enough assets to do so.The PBGC received a $225 million IOU and a $2.2 billion unsecured claim as part of a settlement for taking over Delta’s pension plan last year, which was underfunded by $3 billion at the time. Those claims were converted into Delta stock when the airline emerged from bankruptcy in April. The PBGC now has about 50 million Delta shares worth about $800 million, and expects to receive more as remaining disputes in the bankruptcy case are settled.
Many retirees will see a “significant increase in benefits” as a result of the additional money coming into the plan, Joan Weiss, chief valuation actuary for the PBGC, told about 120 Delta pilots and retirees Monday.
If Anderson screws around with that, he’s in trouble. So’s the airline. And he may have to. Why? Because he has negotiated a potentially humungous salary package with the Delta board.
Anderson’s base salary is just below his $612,307 base salary with Minnesota-based United HealthGroup in 2006, where he served as an executive vice president before accepting the Delta job. His total 2006 compensation at United HealthGroup was about $4.3 million, according to a database of U.S. executive compensation.
The Delta package would pay Anderson at least $900,000 a year — 150 percent of his base pay — in 2008 if he meets or exceeds key goals in Delta’s business plan. Meeting those goals would also trigger profit-sharing for other employees, said Delta spokeswoman Betsy Talton.
Anderson will get a “long-term incentive award” valued at an estimated $11 million in 2007. This would be awarded as 55 percent restricted stock, 25 percent in stock options and 20 percent in the form of performance shares. For 2008, Anderson will be eligible for long-term incentives valued at $4 million, according to the SEC filing.
At least his raise is tied to his performance – more than many CEO’s are saddled with – but even so, $15Mil in bonuses is considerably more than Grinstein got, and he’s the one who turned everything around. That money has to come from somewhere. Wouldn’t be that it turns out the employees pay for it, would it? It sure won’t be the investors.
Lay-OffsNYT: “Lehman Closes Subprime Unit and Lays Off 1200“
The mortgage crisis is deepening and as it does, a lot of hard-hit lenders are going to be lightening their load by firing people – always the corporatocracy’s first line of defense when managers’ bad decisions threaten their companies.
Lehman Brothers, a leader in packaging subprime mortgages into securities, said yesterday that it would shut one of its home lending units and lay off 1,200 employees. The bank said it would take a $52 million charge to third-quarter earnings.
“Lehman Brothers announced today that market conditions have necessitated a substantial reduction in its resources and capacity in the subprime space,” the firm said in a news release.
Lehman, of course, is not the only one.
In recent weeks, several mortgage companies that specialized in risky home loans have stopped making loans, shut down or encountered other distress. Accredited Home Lenders, a subprime lender based in San Diego, stopped making loans through brokers and laid off 1,600 people, more than half of its staff.
The mortgage unit of HSBC Holdings announced yesterday that it would close an office in Carmel, Ind., and lay off about 600 workers; Delta Financial in Woodbury, N.Y., and Impac Mortgage Holdings, based in Irvine, Calif., both announced layoffs.
There will undoubtedly be more to come.
AJC: “SunTrust announces layoffs“
Apparently untied to the looming subprime disaster, the rest of the financial industry is looking to cut its payrolls as well.
Atlanta-based SunTrust Banks Inc. kicked its cost-cutting program into high gear Monday, saying it will cut 2,400 jobs by the end of next year and record a one-time charge of $45 million in the current quarter.
The cuts amount to 7 percent of the Southeastern financial services company’s work force. About 1,600 of them will be made this year, including 300 in metro Atlanta.
Of this year’s planned cuts, roughly 1,000 employees will be let go with a severance package. SunTrust did not disclose details of the packages, which will be covered by the special charge. The remaining 600 are vacant posts that won’t be filled, SunTrust spokesman Barry Koling said.
Eight hundred jobs are slated to be eliminated next year, and some of those will likely be in the Atlanta area, he said.
The announcement is part of SunTrust’s “Excellence in Execution” initiative, dubbed E2 and is unrelated to the current mortgage crisis affecting the broader financial industry, Koling said.
The moves come after years of criticism of the company’s stock performance and the perception that its management has been slow to react to changes in the industry. Analysts said SunTrust is now making the necessary moves to remain competitive.
Boston Globe: “Tufts-New England will trim staff”
A local hospital famous for the quality of its care will be laying off 35 workers, but that’s just the beginning.
At a time when most Boston teaching hospitals are thriving, Tufts-New England Medical Center is laying off about 35 employees, less than 1 percent of its staff, because it hasn’t met targets for increasing the number of inpatients.
The hospital began informing affected employees last week, after a series of staff meetings in which chief executive Ellen Zane and chief operating officer Ed Schottland told employees the nonprofit hospital was falling short of financial goals.
“In some areas, we are not meeting our volume and financial targets, yet we are staffing and buying supplies as if we were meeting or beating our volume goals,” Zane and Schottland said in a May 31 e-mail. “Our staffing per bed is significantly higher now than it was last year. This is not how a successful hospital must run.”
A hospital spokeswoman said the staff cuts would affect nurses and administrators. Besides the layoffs, Tufts-New England Medical Center is looking for other ways to reduce costs but said it won’t cut any services.
This is a side of the health care crisis we rarely see. Whether Tufts is an anomaly or not remains to be seen.
One of the strongest – and best – internet providers is on the ropes. Earthlink used to supply a faster and more reliable internet connection through your phone line at a rate considerably cheaper than AOL’s exorbitant fees. But with the internet business moving to wireless and cable, Earthlink hasn’t been able to compete. The result of their inability to respond to the changing market is predictable: lay people off.
Shares of the Internet service provider EarthLink climbed sharply Tuesday after it said it would cut 900 jobs — about half its work force — and close four offices in an effort to reduce operating costs.
The company will also repurchase $200 million worth of stock, said Rolla P. Huff, the president and chief executive.
More cuts could be announced before the end of the year, he said.
The company will close offices in Orlando, Fla.; Knoxville, Tenn.; Harrisburg, Pa.; and San Francisco. EarthLink also said it would “substantially reduce its presence” in Atlanta and Pasadena, Calif.
EarthLink said it expected the revamping to save it $25 million to $35 million through the rest of the year. The company currently employs about 1,900 people.
The Atlanta Journal-Constitution (Atlanta is one of Earthlinks’ main HQ’s) explains a little more about what’s been happening to the company.
EarthLink Inc., one of the few survivors of Atlanta’s tech wave of the 1990s, said Tuesday it will slash its work force nearly in half in an effort to stabilize its business after a string of losses.
Buffeted by change in the industry and bleeding cash from new ventures, the company will focus on providing Internet access while cutting 900 jobs — 562 of them in Atlanta, said Rolla P. Huff, EarthLink president and chief executive officer, in an interview at the company’s headquarters.
Huff, who arrived just two months ago from the outside to run the troubled firm, said the cost-cutting will have to be followed by tough choices about which other lines of business to pursue — or jettison.
“This is the first step in a multistep process to get EarthLink repositioned to be a company that gets good returns for its shareholders and is a good place for our employees to work,” he said.
The company has poured money into a wireless venture called Helio and a series of Wi-Fi networks in five cities — with neither of the efforts producing a profit. EarthLink’s core business of providing Internet access continues to pump out revenue — but not enough to offset the other projects.
So, costs are being slashed to match that core business, Huff said.
This is too much. Dig it: after 20 years of outsourcing our tech jobs to India because labor costs were cheaper, an Indian tech company is going to open a branch in the good ol’ US of A. Why? Because labor is cheaper in America than it is in India!
The Wipro announcement is the latest globalization wave to hit U.S. shores â€“ the so-called “in-sourcing” of jobs that the United States lost over the last decade and didn’t expect to regain.
Blue-collar work was the first to go as the auto, steel and textile industries shifted jobs to China, Korea and India. A tsunami of white-collar, back-office jobs â€“ information technology, software design, call center operations â€“ have disappeared from the United States since the turn of the 21st century, again finding low-wage homes in Asia, primarily India.
Now, the Indians are repaying the favor. Altruism, though, plays no role.
Stung by wage inflation for engineers in Bangalore, and no longer beneficiaries of a cheap rupee, India is now acquiring U.S. firms and establishing manufacturing and research centers across the country.
Premji, Wipro’s chairman, said the company chose Atlanta for its first new global software development center after considering 600 locations in the United States.
“We got a little carried away,” he said. Wipro weighed the presence of colleges, airline access and retired military personnel with valued technological skills as key factors.
“For a center in the United States and Europe to build efficiencies, it must have a minimum critical mass of 500 people,” Premji said, adding that Wipro already has other smaller centers working for individual customers in the United States.
Golly. Looks like globalization didn’t exactly work the way the corporatocracy thought it would. And till they’re doing it. Adam Lipscomb’s tech company (Adam of A Violently Executed Blog fame) is laying him off along with a bunch of others in order to outsource their tech to India when even the company’s VP doesn’t think it will work. Apparently somebody didn’t check into the wage inflation in Bangalore before they made the decision.
American business blindness at its finest.
Boston Globe: “P&G plans $50m for update of Gillette plant”
Not exactly job creation but interesting as an example of the way corporations think – if you call that thinking.
Proctor & Gamble is willing to spend $50 Mil to move 500 Gilette employees from one place in Boston to another place in Boston because it thinks having everybody in the same place will be “cost-effective”. Um, $50Mil worth?
The Cincinnati consumer products conglomerate, which bought Gillette in 2005 for $54 billion, is planning to convert about 123,000 square feet in the South Boston plant into offices, conference rooms, and other uses. A 4,400-square-foot, two-story glass lobby is planned along One Gillette Park off Dorchester Avenue. The project also calls for an expansion and renovation of the employee cafeteria, fitness center, and retail space, according to a filing this month with the Boston Redevelopment Authority.
“P&G Gillette is committed to maintaining its manufacturing facility in South Boston. Repositioning those personnel associated with blade and razor manufacturing into available space in the [South Boston plant] facilitates P&G’s corporate objective to maintain its Boston presence cost efficiently though the consolidation of employees,” Brian Hodgett, Gillette’s director of government and community relations wrote in an Aug. 3 letter of intent to the Boston Redevelopment Authority.
In January, P&G said it planned for Gillette to vacate its Prudential Tower headquarters and move employees into the shaving firm’s South Boston factory. Gillette employees now located in the Back Bay will finish moving to South Boston when the Prudential lease expires in 2009. About 1,800 people currently work at the South Boston factory, according to Gillette spokesman Mike Norton.
South Boston and Back Bay are maybe 20 mins apart (except at rush hour, of course). If that. The move itself is going to cost them between $10Mil and $20Mil, exclusive of the $50Mil in improvements. That’s a cost of $60-70Mil to “cut costs” from a conglomerate that hasn’t given its workers a raise since it bought the company two years ago.
American business priorities at their finest.
Boston Globe: “Canton firm faces fine in fatal explosion”
Wanna know what your life’s worth? Less than $5K.
Federal regulators have fined a Canton electrical subcontractor $4,900 for an underground explosion that killed a worker in Waterbury, Conn., earlier this year.
The Occupational Safety and Health Administration cited American Electrical Testing Co. for “serious” safety violations that caused the underground explosion, which killed one of its electricians.
Boston Globe: “Ex-Wendy’s operator accused of not paying wages”
As Wal-Mart’s greasy tricks spread through the corporatocracy.
The former owner of 13 Wendy’s restaurants in Western Massachusetts has been arraigned on charges he failed to pay his workers.
The restaurants, from Pittsfield to Palmer, closed abruptly last month, leaving hundreds of employees without paychecks.
NYT: “Non-Profit Payday Loans”
The loan sharks who run seemingly legal usury lending operations may finally be getting some competition (see next story as well).
This city of 70,000 has five McDonald’s franchises, three Pizza Huts, four Starbucks shops — and 19 payday loan stores, brightly lighted storefronts with names like EZ Money and Check Into Cash that offer two-week loans without credit checks.
Kevin J. Miyazaki for The New York Times
Peggy Truckey, 53, knows the allure. Last year she owed nearly $1,300 to four of those stores, and was paying about $600 a month in finance fees alone. “I thought I was going to have to take a second job just to pay off the interest,” Ms. Truckey said.
Then she heard about a new nonprofit program operated out of a Goodwill thrift store, one of several hundred lower-cost payday loan products that are now being tried by credit unions around the country. She got a payday loan, at half the finance charge, but also something more: help converting all her two-week payday debts, which charged the equivalent of more than 500 percent annual interest, to a one-year loan at 18.9 percent, bringing her monthly payments down to a manageable $129. A few dollars from each payment go into a savings account, the first she has had in years.
The agency doing the lending is called GoodMoney, and is a collaboration between Goodwill Industries and Prospera Credit Union, and it’s intended to help people who thought a payday loan was a stopgap when they got into trouble only to find out later that it was a bear trap.
For Ms. Truckey, as for most payday borrowers, the loans began as a stopgap. After losing her job in 2002 she borrowed $500 from a payday store, which charged $22 per two weeks for every $100 borrowed, or the equivalent of 572 percent annual interest. When the loan came due in two weeks, she could repay only the $110 finance charge, so she rolled the loan over, adding another finance charge.
Soon she took a second loan, from another store, and eventually two more, which she rolled over every two weeks, multiplying the cost of the loans. Even after she found a full-time job, she said, “I wasn’t able to pay my electric bill on time or my other bills on time, because half my paycheck was going to finance charges.”
That’s pretty much the standard story, and – unbelievably enough – the standard loan fee. Activists have been trying to get these shark outfits regulated for years, but the Republicans weren’t interested and now that the Dems have taken over, it’s fairly plain they aren’t either. A single program like GoodMoney, though, isn’t going to put a dent in the $$$BILLIONS$$$ extorted from people in trouble every year. Regulation is clearly called for but as far as I know, there’s none even on the horizon.
Our health care system is so broken thanks to Republicans’ unwavering support of the insurance industry that doctors are being forced to fight back by financing their own patients’ medical care.
Zero-interest financing, a familiar sales incentive at car dealerships and furniture stores, has found its way to another big-ticket consumer market: doctors’ and dentists’ offices.
For $3,500 laser eye surgery, $6,000 ceramic tooth implants or other procedures not typically covered by insurance, millions of consumers have arranged financing through more than 100,000 doctors and dentists that offer a year or more of interest-free monthly payments.
The Bad News is that big financial credit companies and banks have noticed the trend and are preparing to get a slice – a BIG slice – for themselves, and it won’t be no-interest.
Of course, going into debt to pay for medical procedures is nothing new for many people. And this type of financing is still only a fraction of the nation’s $900 billion market for consumer revolving credit.
But as the price of health care continues to rise and big lenders pursue new areas for growth, this type of medical financing has become one of the fastest-growing parts of consumer credit, led by lending giants like Capital One and Citigroup and the CareCredit unit of General Electric.
Big insurers, too, are devising new financing plans with various payback options. Upstart players have also aggressively cut deals with doctors.
Which means that in no time high-interest loans will be all that’s available and patients will be in an even bigger bind.
American corporate greed at its raunchiest.
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