What is Good for GM?

In 1955, General Motors’ then-Chairman, Charlie Wilson, said “What is good for General Motors is good for America.” Now 54 years later you can pretty much tuck that little saying into the history books. I spoke several months ago about my concerns about government involvement in the car business (http://crisispost.com/2009/03/29/gm-and-chryslers-new-non-executive-chairman-b-obama-takes-action/). I also reiterated my view that the “tough love” approach to the car companies appeared necessary.

Now we are there. An enormously historic moment for the US of A. A giant, a symbol of America’s power and strength throughout the 20th Century, will request assistance from the bankruptcy courts on Monday. One hopes the process will move swiftly, as it appears to be with Chrysler. We have all watched that power erode over a 30 year period as foreign carmakers successfully challenged GM’s dominance in the US and the world.

Was it just the economy? Are the unions too powerful, causing erosion of profits to their benefit vs. foreign countries where labor costs are much cheaper? Was it lazy management thinking the company always too big to fail and always able to borrow its way out of any recession? Did their arrogance cause their demise vs. Ford which humbly socked away huge amounts of cash during the good times? Was it failing to modernize their car designs? The answer: probably some of all of the above.

I think even GM is shocked that Obama didn’t continue to step up ad infinitem and keep pumping money into the thing. I give the President credit for not accepting whatever deal GM thought was OK and letting it hit bankruptcy. Now the big question: who wins and loses in the reorganization? That we also don’t know, but looking at Chrysler, there may be a similar result with a nice chunk of the company going to the labor unions, and the creditors, many of whom are now owned by the USA Government, having to go along with whatever Obama thinks is OK and probably getting somewhat of the shorter end of the stick. Oh yeah, and you and I are going to own a really big chunk that will go to the Government.

And then….we need to get the Government out. As soon as humanly possible. Maybe when things improve we will get nice chunks of the money poured into suffering behemoths back to help offset the tremendous debt we have taken on to get that money. Maybe.

Your Humble Blogger Expands Direction

Reprinted from our sister blog at www.reversemergerblog.com.

I am very pleased to announce that my existing law firm is changing its name and expanding its capabilities as a result of a separation with several partners who are terrific but whose practice representing investors in public companies created too many potential conflicts with the part of my practice of taking companies public and representing them thereafter.  We complete our very amicable parting effective June 1 and will remain in our current space together. Call me if you are interested in learning more! Our joint press release is below. Look forward to hearing from you!

All the best,

David

AVOIDING CONFLICTS MAIN IMPETUS

The partners of New York 21-attorney firm Feldman Weinstein & Smith announced today that a group led by partners Eric Weinstein and Joseph Smith has started a new firm called Weinstein Smith LLP, and that founder David Feldman will continue operating the existing firm, which will be renamed Feldman LLP. The two firms will continue to maintain offices in New York’s Graybar Building, and expect to continue to refer appropriate business to each other. The change will be effective on June 1, 2009.

Said founder David Feldman, “The group starting Weinstein Smith are all fabulous lawyers, and have been great to work with. However, representation of investors and placement agents in PIPE transactions by the practice group led by Joe Smith and Rob Charron created too many potential conflicts with my practice of representing companies in the process of going public and thereafter. This is an extremely amicable separation and I look forward to continuing to see them every day and working together.” In addition to securities partner Scott Miller, litigator David Birdoff, and technology and digital media specialists Dov Scherzer and Larry Langs, associates Melanie Figueroa and Charles Phillips and several others will remain with the firm. Feldman also will retain attorneys specializing in blue sky law, trusts & estates, tax matters and broker-dealer regulation. Feldman is the author of Reverse Mergers: Taking a Company Public Without an IPO (Bloomberg Press, 2006), has many years of experience handling reverse merger transactions and other alternatives to traditional initial public offerings, and is a frequent speaker on the subject. He is also active in mergers & acquisitions and private equity transactions.

Joseph Smith added, “We have enjoyed our years with this firm and wish David and his team all the best; we plan on continuing to work with them. There will be no interruption in our client service.” Also co-founding Weinstein Smith are litigators Eric Weinstein and Yong Hak Kim, Saul Finkelstein (secured financings and mergers and acquisitions), Peter Cohen (employee benefits, executive compensation, ERISA and employment law), and transactional and securities partners, Rob Charron and Mike Nertney, and associates Heather Levenson and Jennifer Hall..

The firms have arranged for their pre-existing Feldman Weinstein & Smith emails to continue to function and forward to their new addresses for some time.

For more information about Feldman LLP, please contact David Feldman at 212-931-8700 or dfeldman@feldmanllp.com. For more information about Weinstein Smith LLP, please contact Joseph Smith at 212-931-8719 or jsmith@weinsteinsmith.com or Eric Weinstein at 212-931-8701 or eweinstein@weinsteinsmith.com.

Adios Analog TV…and a Simpler Time

Another era bites the dust. When my generation was growing up, our TVs had “rabbit ears,” small antennae on top of the set. Fancier folks had a larger antenna on the roof of their house which was wired to the individual TVs in the house for better reception. We relied on the roof devices as lightning rods (what are we using now? no one knows), and of course they were the first thing to fall in a major storm. We watched all the channels, 2,4,5,7,9,11 and 13. That was it. And some lousy UHF stuff.

Most families have moved to cable or satellite TV, but many still remain on the old over-the-air free signal. As of June 12, all broadcast stations will send their signal digitally, and a converter box will be necessary for those not hooked up to cable or satellite. Apparently you will still need the antenna, but with the converter as well. Old analog sets will need even more additional equipment. So hopefully your sets are already digital if you are one of the few dinosaurs still using an antenna.

I remember we used to have a little TV we took on our boat. It got one channel, sometimes. We even used it in the back seat of the car. Which got zero channels. But snow was more interesting that being annoyed by my sister.  Now every boat has satellite TV and even some cars now have the dish.

Our TV economy has moved from a simpler time of 7 channels and over-the-air TV to 24-hour news cycles and 700 channels. We used to mail things to each other taking days. Now we instantly email, tweet, text, etc., and expect an equally instant response. In the business world that has been both a blessing and a curse. The fact that most business people now find themselves accessible on a 24/7 basis is much different from the world of, say, the great 60’s TV show “Mad Men.” No question things can be done more efficiently, and with less personpower. But occassionally, I think back to the days of my childhood lying on the grass, looking at the sky and simply wondering about things. Neither today’s kids nor today’s grownups take much of that time. Maybe we should try a little.

Optimism Increases for Small Business Owners in the US

Small and medium-sized businesses (SMBs) may be the most optimistic group in America with regard to the economic recovery, although they would appreciate more support from government, according to a study released today at National Small Business Week. In fact, one out of four SMBs expects the turnaround to begin in late 2009. The study, Understanding Growth Priorities of Small and Medium-Sized Businesses, was conducted by the Economist Intelligence Unit and sponsored by Verio Inc., the leading provider in delivering online business solutions to SMBs worldwide.

Despite the global economic downturn, 83 percent of small business executives stated they are optimistic about their company’s long term ability to rebound when the economy improves. However, 48 percent of respondents stated that local government is “unsupportive” or “not at all supportive” of their efforts and 39 percent say the same of national government, with almost a third of the respondents citing that “mid-size businesses do not attract enough attention” as a primary reason behind the lack of support. Larger enterprises garner greater media attention due to their size putting smaller companies at a disadvantage. In fact, 28 percent of SMBs said that the public at large perceives large enterprises as more important.

“While it is not clear if small and medium-sized firms believe they would benefit from a greater focus from governments and non-profit agencies, the data suggests a call to action for the public sector to think about programs that may offer greater aid to these companies during this difficult economic period,” says Debra D’Agostino, Deputy Director in the Americas, Industry and Management Research at the Economist Intelligence Unit.

SMBs demonstrated great optimism in their own employees and leadership to ensure survival in the current economic climate with nearly three quarters of respondents indicating that employees are their greatest supporters. In addition, technology is a critical component to the success of SMBs as the study shows 57 percent “agree or strongly agree” that technology will be a critical competitive advantage to bring them out of the recession.

“Show me the opportunities!” – That’s what SMBs will be focusing on during these turbulent times,” said Laurel Delaney, president and founder, GlobeTrade.com (a Global TradeSource, Ltd. company), of the report’s findings. “Whether they get help or not, they will continue to push boundaries and improve their business processes. It’s not a matter of surviving; it’s a case of extreme thriving. After all, they’ve come this far successfully by understanding what they have, what they know about and what their customers want. Now it’s just a case of relentless pursuit of opportunity and delivering results.”

Other findings in the study include:

• Once the economy improves, 65 percent of respondents expect their firms will enter into new geographic markets.
• 51 percent of respondents say their technology efforts will focus on improving processes and new ways to improve their business.
• 52 percent of respondents said Internal IT departments will be most important to helping firms achieve success. External or outsourced service providers are also key, with one-third of respondents stating outsourced providers of managed IT services and external technology consultants (systems integrators, value added resellers or application developers) as most important in achieving IT objectives.

Sotomayor: Good Choice?

Former House Speaker Newt Gingrich yesterday called Obama Supreme Court choice Sonia Sotomayor, a Latina woman raised in the projects in the Bronx a ”racist.” Presumably that relates to a 2001 speech in which she said, “I would hope that a wise Latina woman with the richness of her experience would more often than not reach a better conclusion than a white male who hasn’t lived that life.” Sotomayor was describing how life experience can inform judicial opinions. Gingrich commented, according to CNN, or shall I say “tweeted,” as follows:  “Imagine a judicial nominee said ‘my experience as a white man makes me better than a latina woman.’ new racism is no better than old racism.” (sic)

We care here because our Supreme Court makes major decisions that affect business and the economy. Thus the makeup of the court is critical in that regard. Whether there are antitrust decision, patents and intellectual property and the like, they have significant impact on we business types. Some believe more right wing justices are more pro-business, but history has not always shown that to be the case. Plus I’m a lawyer so sorry, I’m interested in this stuff.

I think absent some kind of significantly disastrous thing that was previously undiscovered, each party when in control of the White House should get the major benefit of the doubt in judicial selections. Unfortunately at times both parties have been guilty of stalling judicial nominations of the other party and, at times (read: Bork) even hold up Supreme Court nominations. The left talk about “compassion” and “empathy” as indicators of a great judge, the right talks about “not legislating from the bench.” Hey, to some extent maybe both are important.

The minorities in our country have had it real tough. Sotomayor’s story is an amazing one. The fact that she felt strongly for her type well, you can decide if the above comment is “reverse racism” or just pride in her quite abused minority group. Was she chosen in part because she was a woman and Latina? There is no question at all, and the Administration, rather than denying it, should embrace it and talk about the importance of diversity on the Court.

But no one can argue that Sotomayor has the judicial qualifications and background. Short of some undiscovered crime or significant moral failure, I don’t know that personality or even original background should matter. She is replacing another left-leaning justice, so not much should change in the balance on the Court either way.

Online Learning Builds Economic Empowerment for Low-Income Workers

Making online learning more available and accessible to low-income working adults was the focus of a Capitol Hill briefing by the Communications Workers of America, the Alliance for Digital Equality, and the Alliance for Public Technology.

The briefing spotlighted a new report that stresses that the innovative use of information technology – personal computers and high speed broadband – can be a cost-effective way to helping working adults expand their skills and move beyond entry-level jobs.

That report, “Online Learning for Low Skill Adults,” was authored by Heather McKay at the Rutgers University Center for Women and Work. The report is being released by the Rutgers University Center for Women and Work and Speed Matters, a public policy initiative of CWA.

Since 2002, the Sloan Center on Innovative Training and Workforce Development at Rutgers has been working to develop online skills training and credential programs for working adults. There are now programs in place in more than 21 states.

President Obama’s economic recovery plan includes $7.2 billion to provide grants for programs that “facilitate access to broadband service by low-income, unemployed, aged, and otherwise vulnerable populations in order to provide educational and employment opportunities to members of such populations.” This first-ever public initiative to help bring broadband access to citizens and communities now not served is a big step toward improving citizens’ lives and livelihoods. This report gives important guidance about how to structure these programs for success, based on actual experience in New Jersey and Texas.

For example, the report documents that participants were most successful when they had access to high speed broadband. In New Jersey, the majority of participants in a pilot program did not have access to high speed Internet connections and in fact had to use “dial-up” services. This caused many problems, including the slow loading of websites and especially graphics, and frequent disconnection, and prevented many participants from completing their coursework. When participants were given access to faster connections, their online learning experiences were much more successful, the report found.

Happy Memorial Day from Crisis Post

Will Law Firms Embrace Billing Alternatives?

The ABA Journal online is reporting that a partner at a major law firm thinks all the talk about major law firms beginning to move away from charging clients by the hour is just a bunch of  overblown “hulabaloo.” This partner suggests that this is their clients’ comfort zone with regard to billing and it is nowhere near on its death bed.

I think that is a shame. For 15 years I have been a strong advocate for billing alternatives such as flat fees. My clients think it’s great and acknowledge the benefits. My concern is that billing by the hour creates a potential conflict of interest between my client and me. Of course my moral and business incentive with respect to my client relationship is to keep the billable hours low on their matters. But the financial incentive, frankly, is to get the bill as high as possible without upsetting the client. These two incentives constantly collide. The fact that associates (and even to some extent partners) in major law firms are compensated in part by how many hours they bill only serves to enhance the temptation to maximize time spent on a matter.

The vast majority of lawyers I know deal with billing by the hour most honorably. The problem is, even when they do, many clients still suspect that they are not. This is where the conflict comes in.  When we charge a flat fee for a transactional matter, my client’s interests and mine are aligned. Our common goal and incentive, both moral and financial, is to complete the matter quickly and efficiently.

And of course we are as careful and thorough as always. But it manifests subtly. For example, we tend to prefer fewer lengthy conference calls or meetings among lawyers to go over documents, encouraging exchange of multiple drafts before doing so. We tend to look for ways to simplify and streamline a transaction, rather than seek additional “bells and whistles” which may or may not be necessary.

Suddenly, the client calls me more. Why? Because the clock isn’t ticking every time he or she does. I like that. When I have 3 lawyers on a call with them, suddenly they’re happy about it rather than complaining about over-staffing.

There is a bit of an art to learning how to price flat fee matters, and to build in protections for the lawyer in the event of major unexpected events. I am hopeful that more of my brothers and sisters before the bar look harder at the client benefits of billing alternatives, which in turn will lead to happier, more loyal clients.

Five Tips to Help Small Businesses Find the Upside in a Downturn

While many small businesses struggle to survive, a new degree of optimism and openness to risk-taking is emerging. That’s the sentiment heard from about 30 small business owners – and countless others on the Web – during a series of Intuit Town Hall meetings held on Thursday at the company’s Mountain View campus.

Moderated by small business author and expert Gene Marks and Intuit executives, participants shared their views on how to survive and thrive despite the economic climate. And in the end, they received tangible tips and advice on how to save and make money.

“While small businesses are still concerned about finding and keeping customers, obtaining credit and retaining employees and their benefits, there’s a shift happening,” said Marks. “Now more than ever owners are tapping their entrepreneurial spirit by getting more creative and taking chances.”

As a result of the Town Hall, Marks and Intuit offered five tips to find the upside of the downturn:

• Follow the money. President Obama’s stimulus package paints a clear picture of where the money’s going to flow over the next few years. Review the tax code to ensure you’re taking full advantage of tax breaks. Apply for one of the new 7(a) loans backed by the Small Business Administration. The volume of these new loans has risen more than 20 percent since mid-March. Intuit’s Small Business United Stimulus Package resource page has more tips and information.
• Make getting paid easy. Small businesses are owed more than $33 billion in overdue payments. Start asking customers for down payments, or even full payments, up front. Accept credit card payments and offer electronic invoicing.
• Turn big businesses’ loss into your gain. Hundreds of thousands of smart people have been let go by big companies within the past year. Hire them now, tap their knowledge and help your company get ready for inevitable growth. Join social networks like LinkedIn or Facebook to find new talent within your own circles.
• Take calculated risks. While the recession makes most business owners cost conscious, now is actually the time to invest. While prices are low and tax breaks are high, buy new equipment or stock up on inventory. If your competitors are struggling, target their customers or buy up their assets.
• Rethink compensation. Take another look at employee compensation. Develop creative bonus plans that reward results and discourage losses.

Americans Making Tough Choices to Reduce Their Healthcare Costs

As job losses continue across America, concerns about meeting mortgage and credit card payments are only two of the financial issues weighing heavily on the minds of the average American.  Almost half of respondents polled in the newly established ‘Under the Skin’ series from ORC Guideline said they would be unable to afford healthcare coverage if they became unemployed.

Healthcare appeared to be a top priority for respondents, with 85 percent indicating they had seen a doctor in the last 12 months. But while they may be visiting the doctor, many are not following orders. Cost-cutting is widespread, as more than 71 percent of respondents who had seen a doctor in the last 12 months reported taking one or more measures to reduce their medical expenses. Twenty percent said they had delayed a recommended treatment due to cost, 23 percent reported selecting a lower cost option for a recommended test or treatment, and 16 percent said they decided against treatment altogether due to cost.

The study also found that 13 percent of Americans have no health insurance, and the same percentage have had to borrow to pay for existing healthcare bills. As the future of health insurance continues to be discussed in the Oval Office, 58 percent said that the government should be required to pay health insurance for individuals unable to obtain insurance through an employer.

“As this study shows, many Americans are making tough choices with respect to their healthcare in the face of the current recession,” said Regine O’Neill, Vice President at ORC Guideline. “The heightened unemployment rate and job insecurity is changing the reality in terms of access to healthcare for both consumers and the providers that serve them. These factors, combined with the increased focus of the current administration on healthcare costs, are likely to mean significant changes to the way healthcare is delivered and paid for in the future.”

To help reduce the cost of their healthcare bills, survey respondents pointed to the following measures they reported taking in the last 12 months:

Switched to generic prescriptions							50	%
Avoided going to the doctor when they should have							25	%
Delayed recommended treatments due to cost							18	%
Decided against recommended treatments due to cost							17	%
Took medication less often than prescribed							17	%
Did not fill prescriptions when needed							16	%
Switched to a plan with higher deductibles/co-pays							13	%
Dropped healthcare coverage entirely							7	%

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