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Another Blunder by the Detroit 3

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Nov 21, 2008 2:10 am

YHWY, totally agree.  If the automakers come back December 2nd, have a real plan, bust the unions, then I think they could do this either way. 

But seriously, after all the crap the senators/congressmen/etc., got for “bailing out wallstreet” (‘and look how well that is going’, the pundits like the say), I think that, theatrically (as in, stage presence), the unions have a huge advantage here. 

That is what scares me a little. 

Nov 21, 2008 2:14 am

So, basically, the auto execs. “deserved” to fly to DC with, essentially, nearlt the last of the companies petty cash to beg for taxpayer bailout money that you do not think they should get based on the “value of their time”??? Hey, I agree it’s a petty bitch, but their coming to beg for my (and your) money, it was simply bad theater and they should have known better (Even politicians understand the importance of (meaningless) appearance).

Nov 21, 2008 2:21 am

 Agreed 100%. I didn’t say I wasn’t scared.

Nov 21, 2008 2:53 am

[quote=YHWY]Re: Delta,
 Please enlighten us all about how and
why Delta filed for Bankruptcy, emerged, restructured and grew the
business to where it is today, having agreed to absorb Northwest to
become the world’s largest carrier. I’m a little sketchy on how
re-negotiating labor (and other supplier) terms were not crucial in
that process.


Delta came to the brink of bankruptcy years ago, primarily because they
assumed too much debt with the acquistion of Pan Am and a desire to
maintain all of Pan Am’s routes.  Fortunately they were able to
steer clear that time.

Back in the late 1990s a guy named Leo Mullin took over–he came from
Commonwealth Edison, Chicago’s power company and knew close to nothing
about running an air line.  He then surrounded himself with a
bunch of yes men and women who did not come out of the Delta
system.  The lone exception was a woman who
had (rumor has it) slept her way from flight attendant to senior vice
president in charge of flight attendants. She was tapped by Mr. Mullin
to be head of all operations that interacted with the
public–ticketing, gates, flight attendants, food service.  She
was despised by the rank and file.

Anyway that team decided that they could save signficant money if they
no longer hedged the price of oil when it was in the twenties.

As oil skyrocketed so did the price of jet fuel and Delta’s profits
began to shrink and roll over to quarterly losses.  The rating
agencies downgraded the huge number of bonds that were
outstanding–mostly from the Pan Am purchase, although they buy planes
with bonds too—remember Equipment Trust Certificates from Series 6 or

Anyway, in the light of the credit downgrades they were no longer
credit worthy enough to be allowed to engage in the huge number of oil
contracts that were necessary to successfully hedge.  As it turns
out all airlines were unable to hedge EXCEPT Southwest, which gave LUV
a major advantage during the late '90s.

In 2001 the nation was attacked–it was in all the papers.  People
stopped flying for more than a year at the same time jet fuel was
soaring–a receipe for disaster.

Mullin was fired, replaced by a guy in his 70s named Gerald
Grinstein.  He was the retired CEO of Burlington Northern, who was
also a member of the Delta Board.  In fact he was the chairman of
the committee that recruited Mullin and he seems to have been
embarassed by that screw up so he took on getting the ship righted with
a missionary zeal.

It was not possible in spite of all that he did and in (I think) 2005
the company entered Chapter 11–shedding hundreds of millions of
dollars in obligations to the companies that had financed the aircraft
as well as other debts.

The workforce voluntarily took a 25% pay cut in return for promises of
good raises later–this had happened at least once before.  In the
late 1960s employees took a large paycut in return for promises.

My wife is a retired Delta Flight Attendant.  One day, back around
1973 she called me from the airport.  She had just heard that they
gave the flight attendants a raise.  I asked “How much?”  She
said $3,000.  I said, well that’s $250 per month that we can
use.  She said, "No, it’s not $3,000 per year it’s $3,000 per

Delta has been very good to their employees which is why the unions are
as popular out there as a case of crab lice.  When the first
L-1011 Tri Stars came out the employees contributed enough to buy an
entire plane to express their gratitude to the company and its
leadership.  It flew for years with “The Spirit Of Delta” painted
on the side.  Now it’s in their museum at ATL.

Anyway, back to Grinstein.  He shephered the company into
bankruptcy and then brought it out about six months sooner than he had
promised.  They did NOT hand their pensions over to the Pension
Benefit Guaranty Corporation nor did they attempt to bust the pilot’s

When the company emerged Mr. Grinstein retired from Delta.  He had
earned $1 per year for the three years that he was the CEO.

His replacement was hired from Northwest Airlines.  Now that the
two have merged it is pretty clear that Mr. Anderson was brought in
from NWA to orchestrate the marriage.

I am not sure what was done about the unions at NWA–I should look into
that.  I suspect that what might have happened is the combined
firm agreed to allow mechanics in Minneapolis to be unionized while
those in Atlanta are not, and so forth.

Over time the company will move lock, stock and barrell to Atlanta and the unions will disappear.

Nov 21, 2008 12:02 pm

Those execs showed excellent judgement in flying their jets to DC. Maximizes the use of their time and allows them to multi-task. They could have driven to DC, but then the ass wipe senator who was making an issue of the private Jets would have made the same issue over what type of vehicle they showed up in. Unless they showed up in a Chevy Colbalt their asses were cooked.

  As some here know prior to being in this biz I owned a helicopter company. The math to operating machines that at the time cost as much as a $1000 dollars an hour to fly was that time had to be more valuable than money. Whether it was flying time critical computer parts, cancelled checks, or ferrying PSE&G engineers between their head quarters and their nuclear power plant the equation was always the same-time was more valuable than money. Well, except for delivering Santa Claus to the local malls.   On another note contractors can buy a F150 for 15k   Fumo is finally getting what's coming to him. His butt is so cooked its charred. OPM, by the way, is an old term co-opted by Fumo. He did have it down to a corupt science.
Nov 21, 2008 1:01 pm
Spaceman Spiff:

I had a client tell me the same thing about the Big 3 CEO’s trip to DC.  Would it be too much for them to drive one of their own cars up there?  Or fly coach?  Stupid people. 

  Spiff, are you kiddin'? This was a very important meeting, they thought this thing out and wanted "reliable" transportation.
Nov 21, 2008 1:41 pm

delta sucks and they couldn’t run an airline if their life depended on it.

Nov 24, 2008 9:37 pm

So, basically, the auto execs. “deserved” to fly to DC with, essentially, nearlt the last of the companies petty cash to beg for taxpayer bailout money that you do not think they should get based on the “value of their time”??? Hey, I agree it’s a petty bitch, but their coming to beg for my (and your) money, it was simply bad theater and they should have known better (Even politicians understand the importance of (meaningless) appearance).

  They don't deserve anything. But then again neither does Citi.   These execs are contractually obligated to use their corporate aircraft. They have no choice. Security, safety ,and corporate conituity dictate this need. As for the math, if any one doesn't get that it is far less expensive for a company to fly a plane than pay the exec for time lost, OK, but that's the reality. While the corporate jets may seem extravagant, they are not. They are an effective tool to maximize management's time in dealing with far flung global enterprises. And the senate knows that. Making an issue of it was bad theater. The senators made it out to be something it's not, waste.   As for congress or the senate pointing the finger and exclaiming "waste!" isn't that an irony?
Nov 24, 2008 11:26 pm

I agree Citi doesn’t deserve the buyout, but then I feel guilty. Have you ever sold a Citibank corporate bond and told your clients how good that 6% would be when they got their check?

Nov 25, 2008 3:08 pm

Citi, no.  GMAC, CIT Group, Bear Stearns…unfortunately, yes.