Monday, April 20, 2009

When is $100 million a lot of money?

The U.S. Federal budget for next year is over $3.5 trillion.

Obama campaigned on cutting the many wasteful programs within the gov't.

It appears his estimate of 'waste', now that he is in power, is that there is possibly $100 million not being used effectively, and he is 'challenging' his cabinet to find these poorly spent funds.

My calculator tells me that $100 million out of $3.5 trillion is .00003% .

Which means he now feels that $3.5 trillion is a very lean budget and that the gov't is performing at virtually 100% efficiency.

The budget passed had over 10,000 earmarks amounting to several tens of Billions of dollars and this was deemed insignificant in the context of the overall budget also.

When AIG executives gave themselves hundreds of millions in bonuses this was also deemed insignificant within the context of over $150 billion in bailout money.

If workers were given raises amounting to several hundred million dollars this would be seen as inflationary and causing American industries to be less competitive against workers elsewhere in the world. That is, several hundred million dollars suddenly becomes a very large amount, having a disproportionate effect on the whole world economy, not just the U.S.

If hundreds of thousands of workers get $10 more per week this upsets the economic apple-cart but if 100 execs get $1 million a year this makes economic sense to retain 'talent' , even in failed corporations.

Ridding a $3.5 trillion budget of $100 million is equivalent to buying one less coffee per year for the average worker.

Is $100 million a lot of money ?

Absolutely, at least to most people outside of the Washington beltway, large corporations and Ivy League Universities.

To this group it all depends..... on who is receiving it.

Obama to gather Cabinet, seeking $100 million in cuts

  • Story Highlights
  • Two top administration officials say president wants $100 million in expenses cut
  • Agencies would have to report how they saved on expenses after 90 days
  • House and Senate returns from recess this week to work on $3.67 trillion budget
  • Obama to also offer examples of how agencies are already planning to save
By Suzanne Malveaux

WASHINGTON (CNN) -- President Obama returned to Washington on Sunday night with his eye back on his domestic agenda and a plan to save government money.

On Monday, Obama will gather his full Cabinet together for the first time as president and challenge it to cut a total of $100 million in the next 90 days, two senior administration officials said.

The officials spoke anonymously because the announcement had yet to come from the president, who returned Sunday from the Summit of the Americas in Trinidad and Tobago.

The agencies would have to report how they saved on expenses after 90 days, the officials said.

A senior administration official described the edict as part of Obama's "commitment to go line by line through the budget to cut spending" and "reform the government."

As House and Senate lawmakers return from recess this week, they are expected to start reconciling their versions of the fiscal 2010 budget resolution. The president's budget request is $3.67 trillion.

In context of the federal budget, $100 million in savings is a small amount, but the White House wants to demonstrate fiscal responsibility.

On Monday, Obama will offer examples of how various agencies have started cost-cutting measures, including:

• The Department of Homeland Security's plan to save an estimated $52 million over five years by purchasing office supplies in bulk.

• The Department of Agriculture's effort to consolidate 1,500 employees from seven locations into a single facility in 2011. It's estimated to save $62 million over a 15-year lease.

• The Veterans Affairs Department's move to cancel or delay 26 conferences, saving nearly $17.8 million. Veterans Affairs also will use video-conferencing to cut costs.

Thursday, April 16, 2009

A corporate lemming ?

This is similar to actions that Circuit City took which wound up greatly acceleraing it's downfall ...

Circuit City fired and replaced their experienced salespeople who were earning more, with new, less experienced people at minimum wage . Which turned out to be exactly the wrong thing to do at the time. Probably the wrong thing to do at ANY time.

Best Buy actually reported decent results , considering the world economy, the past quarter.

Now it's gonna fire 1000 assistant store managers? This is a typical corporate reaction, layoffs ... who knows what the effect will be, but probably not much for the future growth and health of the company. Just standard operating procedure.

But decreasing the salary of 'Senior Sales Associates' by 25-50% (YIKES!!) .... this is similar but MUCH worse than the Circuit City action ... they have decided not to fire their experienced people but instead keep them around at newbie wages ....

In today's economy it may be that those affected will have to grin and bear it as there are not many job alternatives out there. But, for the medium and long-term effects on Best Buy once the economy comes back, this has got to be a gigantic negative .

I would think that they will suffer the 'Circuit City effect' within the next year if this report is true.

April 16, 2009
Best Buy Cuts Wages, Jobs in Its Stores
Filed at 7:31 a.m. ET
RICHFIELD, Minn. (AP) -- Thousands of Best Buy store employees will see pay cuts and others will lose their jobs as the consumer electronics chain reorganizes.

Best Buy Co. Inc. would not disclose the number of people affected. A spokesman said the move will put more sales people in front of customers. Many store managers and senior-level sales people will go to jobs where they'll interact more directly with shoppers.

New York investment firm Sanford Bernstein said in a research note Wednesday that as many as 1,000 assistant store managers would lose their jobs. Up to another 8,000 senior sales associates would be demoted to jobs paying 25 percent to 50 percent less.

The numbers are estimates by Sanford Bernstein. Best Buy won't confirm or deny them.

Tuesday, April 14, 2009

Disney hi-tech

Disney employs a middle-aged woman to figure out what young teenage boys like?

...... and her background? :

The people on Ms. Peña’s team have anthropology and psychology backgrounds, but she majored in journalism and never saw herself working with children. Indeed, her training in consumer research came from working for a hotel operator of riverboat casinos.

And her methodology ? paying the kids family to rummage through his private things and talk to him ... the headline says '... Uses Science ...' .... that's a broad definition of science!

Who does she know to get a job like this for which she has absolutely no relevant experience or training?

And imagine if they employed a middle-aged man to figure out what 12-yr old girls like ... cries of sexism would echo in the press !!

It's also interesting that Disney, a company catering to children for 80 years suddenly doesn't know what children like?
Have kids changed that much in 80 years?
Their toys have, but have they ?

April 14, 2009

Disney Expert Uses Science to Draw Boy Viewers

ENCINO, Calif. — Kelly Peña, or “the kid whisperer,” as some Hollywood producers call her, was digging through a 12-year-old boy’s dresser drawer here on a recent afternoon. Her undercover mission: to unearth what makes him tick and use the findings to help the Walt Disney Company reassert itself as a cultural force among boys.

Ms. Peña, a Disney researcher with a background in the casino industry, zeroed in on a ratty rock ’n’ roll T-shirt. Black Sabbath?

“Wearing it makes me feel like I’m going to an R-rated movie,” said Dean, a shy redhead whose parents asked that he be identified only by first name.


Ms. Peña and her team of anthropologists have spent 18 months peering inside the heads of incommunicative boys in search of just that kind of psychological nugget. Disney is relying on her insights to create new entertainment for boys 6 to 14, a group that Disney used to own way back in the days of “Davy Crockett” but that has wandered in the age of more girl-friendly Disney fare like “Hannah Montana.”

Children can already see the results of Ms. Peña’s scrutiny on Disney XD, a new cable channel and Web site ( It’s no accident, for instance, that the central character on “Aaron Stone” is a mediocre basketball player. Ms. Peña, 45, told producers that boys identify with protagonists who try hard to grow. “Winning isn’t nearly as important to boys as Hollywood thinks,” she said.

Actors have been instructed to tote their skateboards around with the bottoms facing outward. (Boys in real life carry them that way to display the personalization, Ms. Peña found.) The games portion of the Disney XD Web site now features prominent trophy cases. (It’s less about the level reached in the game and more about sharing small achievements, research showed.)

Fearful of coming off as too manipulative, youth-centric media companies rarely discuss this kind of field research. Disney is so proud of its new “headquarters for boys,” however, that it has made an exception, offering a rare window onto the emotional hooks that are carefully embedded in children’s entertainment. The effort is as outsize as the potential payoff: boys 6 to 14 account for $50 billion in spending worldwide, according to market researchers.

Thus far, Disney’s initiative is limited to the XD channel. But Disney hopes that XD will produce a hit show that can follow the “High School Musical” model from cable to merchandise to live theater to feature film, and perhaps even to Disney World attraction.

With the exception of “Cars,” Disney — home to the “Princesses” merchandising line; the Jonas Brothers; and “Pixie Hollow,” a virtual world built around fairies — has been notably weak on hit entertainment franchises for boys. (“Pirates of the Caribbean” and “Toy Story” are in a type of hibernation, awaiting new big-screen installments.) Disney Channel’s audience is 40 percent male, but girls drive most of the related merchandising sales.

Rivals like Nickelodeon and Cartoon Network have made inroads with boys by serving up rough-edged animated series like “The Fairly Oddparents” and “Star Wars: The Clone Wars.” Nickelodeon, in particular, scoffs at Disney’s recent push.

“We wrote the book on all of this,” said Colleen Fahey Rush, executive vice president for research of MTV Networks, which includes Nickelodeon.

Even so, media companies over all have struggled to figure out the boys’ entertainment market. News Corporation infamously bet big on boys in the late 1990s with its Fox Kids Network and a digital offering, Boyz Channel. Both failed and drew criticism for segregating the sexes (there was also a Girlz Channel) and reinforcing stereotypes.

The guys are trickier to pin down for a host of reasons. They hop more quickly than their female counterparts from sporting activities to television to video games during leisure time. They can also be harder to understand: the cliché that girls are more willing to chitchat about their feelings is often true.

The people on Ms. Peña’s team have anthropology and psychology backgrounds, but she majored in journalism and never saw herself working with children. Indeed, her training in consumer research came from working for a hotel operator of riverboat casinos.

“Children seemed to open up to me,” said Ms. Peña, who does not have any of her own.

Sometimes the research is conducted in groups; sometimes it involves Ms. Peña’s going shopping with a teenage boy and his mother (and perhaps a videographer). The subjects, who are randomly selected by a market research company, are never told that Disney is the one studying them. The children are paid $75.

Walking through Dean’s house in this leafy Los Angeles suburb on the back side of the Hollywood Hills, Ms. Peña looked for unspoken clues about his likes and dislikes.

“What’s on the back of shelves that he hasn’t quite gotten rid of — that will be telling,” she said beforehand. “What’s on his walls? How does he interact with his siblings?”

One big takeaway from the two-hour visit: although Dean was trying to sound grown-up and nonchalant in his answers, he still had a lot of little kid in him. He had dinosaur sheets and stuffed animals at the bottom of his bed.

“I think he’s trying to push a lot of boundaries for the first time,” Ms. Peña said later.

This kind of intensive research has paid dividends for Disney before. Anne Sweeney, president of the Disney ABC Television Group, noted it in her approach to rebuilding Disney Channel a decade ago.

“You have to start with the kids themselves,” she said. “Ratings show what boys are watching today, but they don’t tell you what is missing in the marketplace.”

While Disney XD is aimed at boys and their fathers, it is also intended to include girls. “The days of the Honeycomb Hideout, where girls can’t come in, have long passed,” said Rich Ross, president of Disney Channels Worldwide.

In Ms. Peña’s research boys across markets and cultures described the television aimed at them as “purposeless fun” but expressed a strong desire for a new channel that was “fun with a purpose,” Mr. Ross said. Hollywood has been thinking of them too narrowly — offering all action or all animation — instead of a more nuanced combination, he added. So far results have been mixed.

Disney XD, which took over the struggling Toon Disney channel, has improved its predecessor’s prime-time audience by 27 percent among children 6 to 14, according to Nielsen Media Research. But the bulk of this increase has come from girls. Viewership among boys 6 to 14 is up about 10 percent.

“We’ve seen cultural resonance, and it doesn’t come overnight,” Mr. Ross said.

Which is one reason Ms. Peña is still out interviewing. At Dean’s house her team was quizzing him about what he meant when he used the word “crash.” Ben, a 12-year-old friend who had come over to hang out, responded, “After a long day of doing nothing, we do nothing.”

Growing self-conscious, Ben added, “Am I talking too much?”

Not even close.

Wednesday, April 1, 2009

Race to the bottom accelerates

The most important part of the article is the very last paragraph:

The steps taken by Honda will have the effect of reducing hourly wage costs at its U.S. factories just as GM and Chrysler face pressure to bring their own compensation levels in line with the pay of workers at U.S. plants run by Honda, Toyota and Nissan.

This is an example of the lowering of wages in the West and the U.S. in particular, a trend that has been happening for a while and will now accelerate in this deep recession. Even after the recession 'ends' wages will continue to fall.

Economists are very worried about deflation. Falling wages drives deflation.

The flip side is that the excessive creation of dollars will also cause inflation.

What happens when wages decrease and the dollar in turn buys less? Loss of buying power deepens the recession and if this cycle is not stopped a severe and prolonged depression results.

Honda to cut North American output, pay

Japanese automaker to shut down six factories for nearly two weeks to cut production by 3.4%.

TOKYO (Reuters) -- Honda Motor Co., Japan's No. 2 automaker, said it would cut production in North America by temporarily shutting factories from next month and will reduce pay for workers as sales in the United States plunge to multi-decade lows.

Honda (HMC) will shut down six factories for 13 days, starting in May, to cut production by 62,000 vehicles. Honda does not provide a production forecast, but the reduction would be equivalent to 3.4% of what it built in the region in the year to March.

The decision by Honda comes amid a sharp downturn in auto sales that is threatening the survival of General Motors Corp. (GM, Fortune 500) and Chrysler.

Data due out later are likely to show U.S. auto sales at the weakest monthly rates in more than 27 years.

"U.S. sales look set to fall about 40% in March, and there's no signs of a recovery beyond April either," said Okasan Securities analyst Yasuaki Iwamoto.

"When sales are this bad, it's natural that production is going to be weak," he said, while adding that there was no change to his view that the worst was over for production cuts after Japanese automakers made deep reductions in January-March.

Japan, Korea sales slide

Sales in Asia are also suffering.

In Japan, industry-wide auto sales fell 25% in March from a year earlier to 546,098 vehicles.

Sales at South Korea's five automakers in March fell 19% to 402,563 vehicles, with exports down 20%.

Shares in Honda gained 6.7% in Tokyo on Wednesday along with jumps in other auto stocks.

Market participants cited reasons ranging from the dollar's gradual rise this week to hopes for some resolution for GM and Chrysler, which the New York Times reported might involve some form of controlled bankruptcy.

Honda said it would cut pay for salaried and factory workers and also offered buyouts and early retirement incentives to most of its 32,400 workers in the United States and Canada.

It is the most sweeping program to reduce payroll costs offered by Honda, a spokesman said.

Honda has trailed Japanese rivals Toyota Motor Corp. (TM) and Nissan Motor Co. in reacting to a buildup of unsold cars in the United States, and executives have said it would likely take until the summer to bring inventory back to appropriate levels.

The slow pace is also partly due to Honda's policy of limiting sales incentives, which erode cars' resale value as well as profits. According to research firm Autodata, Honda's average spending on incentives per vehicle in February was the lowest among mass-market brands, at just over $1,300 versus nearly $1,600 for Toyota and $2,900 at Nissan.

Nissan Chief Operating Officer Toshiyuki Shiga said earlier in Tokyo he expected global production at Japan's No. 3 automaker to be 10% higher in the first half of the new business year that started on Wednesday compared with the previous six months.

Honda has assembly plants in Indiana, Ohio and Alabama in the United States, as well as in Canada and Mexico. It also operates two engine plants and two transmission plants in North America.

Pay hit

Like Toyota, Honda previously paid its non-union hourly workers even when it shut down factories to reduce inventory. But Honda said this time hourly workers would not be paid for six of the 13 days, to be scattered between May 1 and July 31.

Salaried workers will also see compensation reduced this financial year, said spokesman Ed Miller.

Miller said Honda told employees it expected bonus payments for both hourly and salaried employees to be reduced or eliminated this year.

The steps taken by Honda will have the effect of reducing hourly wage costs at its U.S. factories just as GM and Chrysler face pressure to bring their own compensation levels in line with the pay of workers at U.S. plants run by Honda, Toyota and Nissan. To top of page