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Checking Under The Hood Of The Chrysler Deal


Even though it has been 30 years since I worked for Chrysler (DCX), the auctioning off of the division by Daimler deeply offends me ("A deal that could save Detroit," News & Insights, May 28). The idea that Daimler (DCX) has been dragged down and German investors have somehow been cheated is a myopic vision of the situation.

What happened to the $8 billion survival fund Chrysler had in the bank when the merger occurred? Was it used to buy Detroit Diesel Corp. outright and Mitsubishi Motors shares? Why did Daimler get rid of competent American management at Chrysler and install "sock puppets"?

Also, should Robert J. Eaton, former Chrysler chairman, be forced to repay the $79 million golden parachute payment and his $30,000 per month Chrysler pension plus interest?

These are serious questions. They deserve objective reportage and serious answers. Soon!

John E. Golden

Southfield, Mich.

Perhaps the best "deal" that could save not only Detroit but many other U.S. companies, large and small, would be to alleviate the burden of providing health care for their employees. Either through the private sector, private insurance companies, or government action, basic health care should be provided to all U.S. workers and citizens.

In Europe, health benefits are provided as a matter of course to all workers and citizens and have portability should any downsizing be necessary. To follow this model would be not only a humane course of action but would also enhance the global competitiveness of U.S. businesses. I can't understand why Corporate America is not more supportive of this policy.

F. John Paul "Scotty" Andrews

College of Business

East Carolina University

Greenville, N.C.

The union's health-care costs have generated a lot of buzz. However, the daunting health-care problem overshadows a bigger and deeper problem: lack of killer models, which results from poor management and lack of vision.

For years Detroit has been bringing to market cars they believe American people would like with belief that auto executives know more about customers than customers themselves do. They are wrong, and customers keep telling them they are wrong by putting money in someone else's pocket.

Unless Cerberus can bring new blood and fresh air to the management of Chrysler, a deal with the union, even one favorable to Cerberus, will only slow the death spiral--Cerberus can surely make money, but Chrysler will be a dead man walking.

Wentao Zhao

Quincy, Mass.

Good article on Colombia ("Extreme Investing: Inside Colombia," Cover Story, May 28), albeit narrowly focused on financial markets. Colombia's real strength is its well-balanced economy of such diverse sectors as manufacturing, services, agriculture, commerce, and natural resources. Equally important is the natural business inclination of the Colombians. Inside of every one, you'll find a budding entrepreneur.

Michael Wynne

International Management Consulting

Naperville, Ill.

"Put investors in their place" (Outside Shot, May 28) rightly notes that managers who focus on short-term increases in shareholder value (read stock price) often direct their efforts so intensely at improving quarterly results that their company's long-term prospects are jeopardized.

The culprits responsible for this situation are compensation committees that use short-term stock prices as an easily measurable proxy for harder to define but more meaningful metrics of performance. Tying executive pay to stock price sends an explicit signal to managers as to what they have to do to maximize their own value to the company.

Warren Buffett biographer Roger Lowenstein noted the Oracle of Omaha disdains those who "studied what was measurable, rather than what was meaningful." Compensation committees that use short-term stock price to set executive compensation are doing just that.

Charles M. Cohon

President

Prime Devices Corp.

Glenview, Ill.

I agree that managers are foolish and resources are wasted if they try to please short-term speculators. I Do not, however, entirely agree with the solution to include employees and communities as those in whose interest decisions should be made.

Making decisions for the benefit of employees and their communities could reinforce the status quo and undermine just the sort of long-term value building innovations the authors call for. It would be better to utilize a concept from John Argenti, who argues that you do want to treat employees well and be a good community citizen not because they are whom you serve but because you want to engage them in the pursuit of the organization's purpose.

Eric Craymer

President

Growth Management Consulting

East Lansing, Mich.

Your story on Peabody Energy Corp. (BTU) ("Coal? Yes, Coal," The Corporation, May 7) missed the point regarding the company's position on carbon dioxide. Peabody is progressive on the issue, and our position is shared by most Americans.

When it comes to reducing carbon dioxide, we recommend that the attention turn from those who merely call for a limit to CO2 toward those who are actually tackling the technology to reduce emissions.

Peabody continues to support efficient new plants, coal gasification, and carbon offsets toward a vision of near-zero emissions from coal. We encourage major investments in carbon management technologies vs. carbon caps or other laws that would simply damage the economy. According to recent Harris (HPOL) polling, 76% of Americans support this position...hardly the "lonely" position described by BusinessWeek.

New, clean plants to produce electricity, synthetic natural gas, and transportation fuels are also essential to halting the rolling energy shocks that jolt families and businesses. And that's critical to the 95% of Americans that list energy independence as a top-five U.S. priority. Peabody's position is practical, popular, and achievable. In our view, that is the "sure bet."

Vic Svec

Senior Vice-President

Peabody Energy Corp.

St. Louis


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