UPS Bailout Opposed by FedEx Express

(BUSINESS WIRE)--United Parcel Service – the 100-year-old company that operated for decades as a parcel-delivery monopoly – is quietly seeking a Congressional bailout designed to limit competition for overnight deliveries, leaving Americans with less reliable next-day delivery network for critical goods like medicines and essential inventory, according to "BrownBailout.com” and a public-education campaign launched today by the creator of the overnight delivery, FedEx Express.

The focus of the campaign is the 230-word bailout to UPS written into the voluminous FAA Reauthorization Act of 2009 currently before Congress that would force FedEx Express – UPS’ primary competitor for next-day deliveries – to operate under a law not designed for airlines and express companies.

“In 1997 UPS experienced a system-wide strike that crippled business and commerce across America. Now it wants Congress to expose FedEx Express to that risk,” said Maury Lane, FedEx Express spokesperson. “America relies too much on the reliability and dependability of the FedEx Express overnight-delivery network, and we can’t allow this bailout to pass only because UPS wants to harm its main competitor.”

UPS and FedEx Express are fundamentally different companies. UPS – the largest political giver to Congress over the decades – is a trucking company, shipping 85 percent of its parcels on the ground. FedEx Express is an airline, flying 85 percent of its packages in the air.

“The operations of an overnight airline and that of a traditional trucking company are radically different. You can’t shoehorn an airline into trucking company’s rules and still expect critical packages to arrive within hours on the other side of the country,” Lane said. “UPS is making a problem where one doesn’t exist. This is a bailout, plain and simple, and the American people won’t stand for it.”

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Detroit Bailout: Many Questions Remain, Says Finance Expert

As the Big Three automakers defend their restructuring plans before Congress this week, finance professor Ray Hill of Emory's Goizueta Business School points out that many Americans remain skeptical that a Detroit bailout is anything more than rewarding a failed status quo.

The automakers are promising that with federal loan help, "they will have gotten out of their health care obligations to retirees, and that they will be able to realize compensation costs savings from new hires," says Hill. "But if you look at their data, it's not clear that, three years from now, they still won't be paying their workers more than the international auto companies operating in the U.S."

"The first question is a question of equity: Why are taxpayers being asked to fund the Big Three autoworkers and not other autoworkers in the U.S.?" asks Hill.

The Big Three project that with government help, "in four or five years they could make cars more or less competitively with other companies that make cars in the United States," says Hill. "The question is why should taxpayers finance four or five years of inefficiency, higher wages and benefits for one segment of the population? Carmakers can project future viability on paper, but is anyone going to want to buy those cars four or five years from now?"

Hill questions the efficacy of GM's proposal to eliminate some lines of business. "When they eliminated Oldsmobile, because of state franchise laws, they had huge financial obligations to franchisees when they tried to exit that line of production. Are we actually going to be putting up money to pay car dealers so that the Big Three can meet their obligations under an antiquated system of selling cars?"

Hill also is critical of the two-fleet system, in which American automakers are not allowed to import into the United States the more fuel-efficient cars they make overseas to help meet current U.S. fuel economy standards. "Are we going to continue to have a two-fleet rule, which makes U.S. auto companies unable to make their fuel economy standards, but does help preserve UAW jobs?"

Hill, who is assistant professor in the practice of finance, is a former investment banker who teaches managerial economics and finance.

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Big Three Auto Makers Compared To Toyota and Honda by ProCon.org on New Research Website

/PRNewswire/ -- ProCon.org, a nonpartisan 501c3 nonprofit research organization, created the new website bigthreeauto.procon.org to explore the question "Should the Big Three auto makers be bailed out by the US government?"

Pro and con statements addressing this question come from President-Elect Barack Obama, former Massachusetts Governor Mitt Romney, Nobel Prize winning economists Paul Krugman and Gary Becker, General Motors CEO Rick Wagoner, former US Energy Secretary and US Senator Spencer Abraham, and several others.

Also included on the site are:
-- Chapter 11 bankruptcy laws explained,
-- Contracts between the Big Three and the United Auto Workers,
-- Analysis of "legacy" employees and their impact on profits, and
-- 144-point chart comparing GM, Ford, Chrysler, Big Three combined,
Toyota, and Honda.


Some interesting points from this chart comparison include:


* General Motors, Ford, and Chrysler had a combined US market share of 51.8% in December 2007. As of Oct. 2008, their market share declined by 5.1% to 46.5%. Toyota and Honda, during that same nine-month period, increased their US market shares by 3.1% to a combined 28.4%.

* In 2007, the Big Three sold 18 million autos for $387.5 billion. In 2007, Toyota and Honda sold 12.2 millions cars for $304 billion.

* In the US, the Big Three directly employ 242,000 people and an estimated 2.5 to 3 million indirectly.

* Ford received a $1.29 billion tax refund in 2007 while General Motors paid $37.16 billion in 2007 taxes.

ProCon.org made its Big Three research publicly available for free and without advertising on the website bigthreeauto.procon.org.

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Highlights of Chrysler LLC Plan Submitted to the Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services

PRNewswire/ -- -- Chairman and CEO Robert Nardelli looks forward to testifying before the
committees later this week.

-- Chrysler will urge the immediate adoption of legislation that will allow domestic automakers to weather the current national economic crisis and continue to invest in industry-leading products, technologies and vehicles of the future.

-- The first question is, what changes has Chrysler made to help itself?

Since Chrysler became an independent company in 2007:
-- We eliminated over 1.2 million units of capacity, or 30 percent;
-- We reduced fixed costs by $2.4 billion and, separated over 32,000
employees - including 5,000 on the Wednesday before Thanksgiving.
And at the same time ...
-- We invested in product improvements - over half a billion dollars
in our first 60 days;
-- We improved our latest JD Power quality scores, and reduced our
warranty claims by 29 percent;
Part of our business model transformation includes alliances and
partnerships - for example - the agreements to produce vehicles
for VW and for Nissan. As a result, through the first six months
of the year, Chrysler met or exceeded our operating plan, ending
the first half with $9.4 billion unrestricted cash.

-- Why does Chrysler need the funding?

We need to address the unprecedented drop in vehicle sales caused by the financial crisis.
U.S. sales are down from a 17 million unit selling rate in early 2007, to an estimated 11 million unit selling rate for the fourth quarter of 2008 - a 38 percent decline. We lost 20 percent of our sales virtually overnight when the financial market crisis forced us out of the consumer lease business. With customers not buying ... with dealers not ordering ... with our plants not producing ... Chrysler's cash inflow has suffered.

-- So how will the bridge loan be used?

Cash will support ongoing operations as we continue to restructure the business, including in the first quarter alone:
-- $8.0 billion in payments to parts suppliers
-- $1.2 billion for other vendors
-- $900 million in wages
-- $500 million in healthcare and legacy costs
-- $500 million in capital expenditures

Without an immediate working capital bridge, Chrysler's liquidity could
fall below the level appropriate to ensure operations in the ordinary
course by the first quarter of 2009.

-- So, who is contributing to saving Chrysler?

First and foremost, Chrysler and its extended enterprise will. That starts with me. I receive a salary of $1 a year. I have no employment contract, no change of control agreement, no "golden parachute," and receive no health care or life insurance benefits from the company. We are committed to negotiate concessions from all of our constituents.

-- The next question - Does Chrysler plan to build cars and trucks that
consumers want to buy, and that support the country's energy security
and environmental goals?

Our product plan features 24 major launches from 2009 through 2012. For the 2009 model year, 73 percent of our products will offer improved fuel economy compared to 2008 models. We plan on launching additional small, fuel-efficient vehicles. ENVI is our breakthrough family of all-electric ... and range - extended electric vehicles - similar to the one parked outside. Chrysler's product plan includes the introduction of the Ram Hybrid and our first electric-drive vehicle in 2010 with three additional models by 2013.

-- Does Chrysler have a viable plan?

With our requested bridge loan - absolutely! I also believe that further partnership, restructuring and consolidation would make the U.S. auto industry even more viable and competitive in the long run. Further opportunities for technology sharing would provide fuel-efficient cars and trucks more cost effectively and faster to market. The three-company alliance that developed the dual-mode hybrid is a good example. As a Country, we should not trade our current dependence on foreign oil for a future dependence on foreign technologies.

-- The final question is, when will Chrysler pay back this loan?

We believe we will be well positioned to begin repayment of the federal loans -- in 2012. I recognize that this is a significant amount of public money. However, we believe this is the least costly alternative considering the depth of the economic crisis and the options we face.

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