America's Best Companies

Small Business Brief for 11/18

Politics and Government

What Change Really Means to Small Business?

Many small business owners are skeptical of President-elect Obama's tax proposals and the long-term direction he wants to take with the economy.

Paulson, Bernanke Defend $700 Billion Bailout
WASHINGTON (AP) - Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke waged a stout defense of their management of a $700 billion financial bailout on Capitol Hill Tuesday, just one week after the administration abandoned the original strategy behind the rescue.

Bernanke: Borrowing Conditions Still Far From Normal

Federal Reserve Chairman Ben S. Bernanke said lending in the U.S. is “still far from normal,” even after emergency federal programs expanding credit have helped reduce interest rates for some borrowers.

Paulson: Bailout is Not a Panacea

Treasury Secretary Henry Paulson rejected using the government's financial-rescue program as a ``panacea'' for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners and automakers.

Politics and Recession Equals Tax Cuts?

Thanks to our economic troubles, there may be some financial relief coming as the idea of tax cuts begins to make a cross-party comeback.

Economics and Labor Issues

October wholesale prices plunge record 2.8 percent
WASHINGTON (AP) - Wholesale prices plunged a record amount in October as energy prices fell by the largest amount in 22 years. The Labor Department reported Tuesday that wholesale prices dropped by 2.8 percent in October, the biggest one-month decline on records that go back more than 60 years.

U.S. Economy Shrinking, Some Credit Markets Firming Up

According to Federal Reserve Bank of Cleveland President Sandra Pianalto, the U.S. economy is shrinking and will probably suffer more than a usual downturn in growth.

Fed Has Done All it Can to Revive Economy, Says Hoenig

Federal Reserve Bank of Kansas City President Thomas Hoenig said the central bank has “done about as much as it can do” to revive the economy, which has worsened faster than he expected.

Weak Economy Signaling a New Dot-Com Bust?
The tech sector has seen more than 49,000 layoffs since late August, while startups are being warned of more difficult times ahead.

Law and Regulation Enforcement

"Vexatious" ADA Litigant Rejected by Supreme Court
The Supreme Court has rejected the case of a paralyzed man labeled as a "vexatious litigant" by California's federal courts after filing 400 lawsuits against businesses over alleged violations of the Americans With Disabilities Act.

New Guns-at-Work Laws Raising Concerns
A growing number of states permit employees to bring guns to work and leave them in their cars. Companies risk civil and criminal penalties for not complying with the new law, but how do you balance that with employee safety?

Federal Contractors Must Use E-Verify
All c ompanies with a federal contract of more than $100,000, and all subcontractors with contracts of greater than $3,000, must enroll in the employee eligibility verification system within 30 days of the award.

Doing Business

Coping in The Real Economy

How the world’s most basic industries are coping with the crash

For Small Business, There is Still an Upside to This Crisis

Fox Business spoke with Columbia B-School Professor Amar Bhide on the outlook for entrepreneurs in this shaky environment.

Sales and Marketing

What is Your Human Asset Strategy
Here are four lessons from Barack Obama's campaign to grow the value of your customer database.

Focus on the Customer, Not the Competition, for Success
Managers who are more concerned with their competition than customers pose special problems in organizations because of the role they play in strategic decision-making. The problem comes when executives see themselves as successful because they have beaten a competitor instead of using the best practice to ensure customer loyalty.

The Employee Free Choice Act and You

It is very likely that the Employee Free Choice Act (EFCA) will become law in the first 100 days of the Obama presidency, and when it does, the balance between labor and management will be altered, and not likely for the better. That is, unless you are a union.

The union movement has been more and more marginalized, retaining strongholds in only a few places, like the Big Three automakers, but shrinking to insignificance over most of the country. It should be no wonder that they have pushed for this legislation, and no wonder that their creatures in the democratically-controlled Congress plan to deliver.

The EFCA

The following summary of the legislation comes from the House Committee On Education and Labor:

1. Certification on the Basis of Signed Authorizations (majority sign-up): Provides for certification of a union as the bargaining representative if the National Labor Relations Board finds that a majority of employees in an appropriate unit has signed authorizations designating the union as its bargaining representative. Requires the Board to develop model authorization language and procedures for establishing the validity of signed authorizations. Under current law, employers can require unions to go through one-sided, time consuming elections as a condition of being certified as bargaining representatives. Such elections become the focal point of employer efforts to frustrate the right of workers to organize.

2. First Contract Mediation and Arbitration: Provides that if an employer and a union are engaged in bargaining for their first contract and are unable to reach agreement within 90 days, either party may refer the dispute to the Federal Mediation and Conciliation Service (FMCS) for mediation. If the FMCS has been unable to bring the parties to agreement after 30 days of mediation the dispute will be referred to arbitration and the results of the arbitration shall be binding on the parties for two years. Time limits may be extended by mutual agreement of the parties. Under current law, employers have a duty to bargain in good faith, but are under no obligation to reach agreement. As a result, a recent study found that 34% of union election victories had not resulted in a first contract.

3. Stronger Penalties for Violations While Employees are Attempting to Organize or Obtain a First Contract: Makes the following new provisions applicable to violations of the National Labor Relations Act committed by employers against employees during any period while employees are attempting to organize a union or negotiate a first contract with the employer:

Under current law, remedies are limited solely to make whole remedies: backpay (minus any additional interim wages the employee did or should have earned), reinstatement, and notice to that the employer will not engage in violations of the NLRA. Many employers conclude that, even if caught, it is financially advantageous to violate the law and pay the penalties rather than to comply.

What the EFCA Means

Aside from the arbitration on first contracts and the various monetary provisions, which work to prop-up and enforce the first provision, the most important aspect of this legislation—and the most troubling—is the fact that instead of an election to certify a union that rests upon a secret ballot, union votes under the first provision of the bill would be public. This is the card check system that folks have been talking about and it is specifically designed to make it easier to unionize a business.

The current system, where these cards are used to show interest, allows for a vote when 30% of the employees have signed the cards. The votes in this election are cast in secret with neither the employer nor the union knowing who voted to unionize or not. This protects the individual workers from retaliation from either side since no one knows who voted for or against. The unions say that this election becomes the focal point of anti-union activity by the company, making it harder for the union to come into a business.

That may be true. On the other hand, if employees have the right to unionize, which they clearly do by law, then doesn't it follow that the employer, who usually has a vested interest in remaining non-union, has the right to resist that move? Right now, if you go by the elections won by organized labor, the balance is tipped slightly in their favor already. Unions win about 60% of the elections. By allowing this bill to become law, and there is little doubt that it will, the costs for America would be frightening.

The Cost of Organized Labor

According to the National Center for Policy Analysis, the cost of unionization in this country is already staggering:

While there are no doubt many individual members of labor unions who feel they have benefited from collective bargaining, the overall evidence is overwhelming that labor unions in contemporary America have had harmful aggregate effects on the economy.

• The economic cost of unions (determined by combining lost income and output over the period 1947 to 2000) exceeds $50 trillion, according to estimates by economists Richard K. Vedder and Lowell E. Gallaway.

• Unionization lowers incomes for all, albeit more in the relatively higher income states that on average have higher levels of unionization.

• A state with a 10 percent unionized work force can expect a 0.7 percent increase in its unemployment rate.

• For each four additional workers who become unionized, one less person works.

In the final years of the 1990s, the decline in union density in the private sector has been sharp, adding to the vitality of the economy at the beginning of the new century. As a result, there has been renewed economic growth and a rising proportion of the working age population that actually works.

Consider for a moment the United Auto Workers and the millstone-like drag they have exerted on the Detroit automakers. Union workers at GM make over $81.00/hour in salary and benefits, including a retiree healthcare plan that is destroying the company. If the company pays its share of that, as per the union contract, GM will, for all practical purposes, be bankrupt. If it doesn't pay, union problems. The UAW answer to that little problem? Ask Washington for a bailout of the automakers. Heaven forbid they give up anything.

The Bottom Line

The Employee Free Choice Act will affect businesses of all sizes and as a small business owner you need to know what you can do protect your business. Small business creates jobs, and that needs to be encouraged as much as possible. Unions ultimately cost jobs and drive up the price of employment. It is bad for businesses that might be affected by the increase in unionization and it is bad for employees—both those who don't want to be union members and those who do. Neither side in this has a monopoly on strong arm tactics.

Before it happens, though, there is one thing you can do to head off troubles. You can, in a word, union-proof your business, but how do you arrange that without running afoul of the law? Here are some pointers from labor relations strategists Adams, Nash, Haskell & Sheridan:

Employers often ignore the early warning signals of union organizing… huddles that disperse when a manager approaches, an increase in union oriented terminology – seniority, work load, equalization of overtime – new friendships forming or old ones dissolving, increased complaining about long-standing issues. Untreated union organizing is not like good red wine. It does not get better with age.

• If addressed early on potential organizing can often be averted. You cannot lose an NLRB election that never happens.

• Well-trained and comfortable managers are the best defense. They must be confident in their understanding of legal boundaries and how to communicate with their subordinates within them.

• The appropriate application of information is the art of the game. Poorly designed or executed plans can often create interest in the union.

  • After the threat passes you can put in place The Union Free Privilege™ to make sure it never returns.

  You can play offense too:

• If you have a union you can create an environment to make it become unnecessary.

• If your employees are tired of paying dues you can explain the deauthorization process to them that allows them to stop.

• If they want out of the union the NLRB has a process known as decertification. It’s not easy but it can be done.

Remember employees become the victims in any labor relations conflict. It is a noble process to protect them from unwittingly putting everything on the line.

ABC Offers 2,000 New Job Opportunities

Although the nation is experiencing the worst economic crisis in the last seven decades, America’s Best Companies (ABC) responds to the dire need of employment. The national, small business organization actively searches across the nation in a year long campaign to expand its Sales team with 2,000 new employees.

The future of small business depends on the commitment of independent business owners joining together. ABC Account Executives are responsible for increasing membership and providing small business owners with the necessary education, information, and benefits to help small businesses succeed in today’s marketplace.

“We are ready to hire an Army,” said Jim Tracy, President and Founder of ABC.

America ’s Best Companies launches a vast advertising campaign through radio ads this month. Radio announcements on “Bubba the Love Sponge Show” targets many loyal listeners during the evening rush hours. Over two million people tune into the Sirius satellite radio program daily where ABC positions 60 second live spots and banner ads ready to release this afternoon.

“We want to set a new precedent on the way people are hiring on the radio,” Jim said. “There is a whole new, talented group out there we can acquire.”

Spam Holiday! Where is Hallmark When You Need Them

I am happy to report some good news on the spam front. After several weeks of investigation by the Washington Post, two Internet service providers, Global Crossing and Hurricane Electric, pulled the plug on McColo, a notorious hosting service responsible for housing as many as 70% of the spam email operations on the Web. As reported by the BBC:

"It is an unprecedented drop but will be a temporary outage as the networks move from North America to places where there is less scrutiny," said Jason Steer, a spokesman for Ironport.

The Washington Post has been gathering data on McColo for the past four months and passed the information to its Internet service providers, Global Crossing and Hurricane Electric.

Both decided to pull the plug on the firm on Tuesday.

It is believed that it hosted gangs running botnets - networks of computers that have been taken over by criminals to send malicious software and spam.

According to MessageLabs, botnets are responsible for over 90% of spam.

Ironport, an anti-spam company, has seen spam email levels drop by 70% since McColo was taken offline on 11 November. This isn't the end of spam, however. It is merely a respite. Given that spammers can make a profit on 1 response in 12.5 million emails, you can bet that they won't be down long. As Steer said in a piece by the BBC, watch for these operations to go to hosts overseas, to countries where the oversight and concern are considerably less than they are here in the US.

Spam and Malware

Spam does more than simply fill up your inbox with offers of male enhancement, quick riches in the world of multi-level marketing, true love and, of course, free laptops for filling out a simple questionnaire and completing certain credit card offers. These can be nullified by following a simple rule: If it shows up unasked for in my email or rides in on a pop-up window, then it is a scam. Delete it. True, not all of them are scams. Some are real businesses with mindless, ham-handed marketing techniques that sap their credibility by allowing them to come across as scams. If that is the case, then I don't want to do business with them anyway.

As irritating as these can be, spam is also a vector for one of the most pernicious maladies of the modern age: Malware. Viruses and trojan horses, spyware and adware and worms and all manner of little nasties that can corrupt your data, spy on you, turn your computer into a zombie, steal personal information, and since many of these spammers are actually criminal organizations running scams, the chances of them trying to infect your machine to their own purposes is really pretty high. The primary use of malware in spam? To take over your machine so that it sends out spam, too.

The technology community is beginning to take action—and it has only taken them fifteen years to do it—but if governments around the world don't get involved to eliminate these problem organizations, then they will be able to skip around those places with real regulation and find safe-harbor in places where the government has other things to worry about and stopping scam operations is a low priority.

What YOU Can Do

It is sad but true: The only one you can rely upon in your fight against spam is yourself. It is useful to be able to identify spam email, but there is also some free technology that you ought to have handy. Firefox 3 and Opera 9.5 are the browsers of choice here in that they use constantly updated blacklists of malicious websites to warn you when you are about to encounter trouble. This is a personal opinion, but for my money, Gmail has probably the best anti-spam protection available. Accounts are free and once you configure your email client to download Gmail, you won't see the spam their system catches, and it gets most of it.

All the technology in the world, however, is no protection if you don't follow some common sense rules of Internet safety. The following list comes from Sophos, a Web security firm that caters to business.

To help combat spam, email users should follow these recommendations:

• Never make a purchase from an unsolicited email
  If spamming weren't economically viable, it would be obsolete. Not only can an email user fall prey to a potentially fraudulent sales scheme, but his or her email address can also be added to the numerous email lists that are sold within the spamming community, further compounding the number of junk emails received.
  

• If you do not know the sender of an unsolicited email message, delete it
  While most spam is usually just annoying text, a spam email message could actually contain a virus and/or other exploit that could damage the computers of all who open it.
  

• Never respond to any spam messages or click on any links in the message
  Replying to any spam message, even to "unsubscribe" or be "removed" from the email list only confirms to the spammer that you are a valid recipient and a perfect target for future spamming.
  

• Avoid using the preview functionality of your email client software
  Many spammers use advertising techniques that can track when a message is viewed, even if you don't click on the message or reply. Using the preview functionality essentially opens an email and tells spammers you are a valid recipient, which can result in even more spam.
  

• When sending email messages to a large number of recipients, use the blind copy (BCC) field to conceal their email addresses
  Sending email where all recipient addresses are "exposed" in the "To" field makes it vulnerable to harvesting by a spammer's traps.
  

• Think carefully before you provide your email address on websites, newsgroup lists or other online public forum
  Many spammers utilise "web bots" that automatically surf the internet to harvest email addresses from public information and forums.
  

• Never give your primary email address to anyone or any site you don't trust
  Share it only with your close friends and business colleagues.
  

• Have and use one or two secondary email addresses
  If you need to fill out web registration forms, or surveys at sites from which you don't want to receive further information, consider using secondary addresses to protect primary email accounts from spam abuse. Also, always look for a box that solicits future information/offers, and be sure to select or deselect as appropriate.

The Bottom Line

Like gun control, anti-spam laws have mostly affected the law-abiding. It was through the direct action of the industry itself that we have seen a victory and so can take a breather from much of the spam we have been forced to deal with. That, however, is all it is—a breather, a time to take a good look at our anti-spam efforts—that all important combination of technology and best practices—and make some changes to minimize the deluge when the spammers are up and running again. The spammers will be back. Will you be ready?

Small Business Brief for 11/17

Politics and Government

Major Challenges for Obama Health Reform Plan
With declining employment and a tough economy, Presid ent-elect Obama's health care reform plan is facing mounting challenges—more people to losing coverage; baby boomers signing-up for Medicare; rising prescription drug prices—even as PricewaterhouseCoopers estimates the cost of Obama's plan to be around $75 billion in 2009 and rising as more people are covered.

Southern Senators From States With Foreign Carmakers Oppose GM, Ford Rescue
Senators from southern states with Asian and European car manufacturers oppose bailing out U.S. automakers, claiming that the industry can thrive without The Big Three.

Advocates: Small Business Stimulus Could Boost Jobs
Business groups are lobbying the incoming administration and Congress for economic-stimulus incentives, reminding both Democrats and Republicans just how important small business is in creating new jobs.

Hill Sources: Treasury Won't Use Full Bailout
WASHINGTON (AP) - The Bush administration has told top lawmakers it does not plan to use at least half of the $700 billion bailout fund that Congress approved this fall to aid the financial industry, congressional officials said Monday.

Auto-aid Plan Prospects Dim in Partisan Stalemate
WASHINGTON (AP) - Prospects dimmed Monday for enactment of a $25 billion bailout for the faltering auto industry before year's end, as congressional Democrats and the Bush administration seemed headed for a stalemate.

Economics and Labor Issues

As Spending Falls, U.S. Recession Will Extend Into 2009

According to a survey of business economists, the US recession will continue into next year, and economies around the world will follow suit.

Obama Vows to Revive Economy

President-elect Barack Obama stated that the U.S. government will do “whatever it takes” to revive the economy, meaning that we “shouldn't worry about the deficit next year or even the year after.”

Good Money After Bad as Slump Defeats Stimulus

President-elect Barack Obama and House Speaker Nancy Pelosi could easily throw as much as half a trillion dollars at the economy to stimulate it, and yet get little or no growth to show for the money.

Small Businesses Need Help Now
Small business advocates say the government needs to act on President-elect Obama's small business rescue proposal either by making banks lend them money or by making direct loans. Since the proposal, lending has tightened, more jobs have been cut and more small businesses predict failure in the next six months.

Law and Regulation Enforcement

FMLA Final Rule Published

The U.S. Department of Labor has published a final rule to update the regulations under the 15-year-old Family and Medical Leave Act (FMLA)--a measure that will help workers and their employers better understand their rights and responsibilities, and speed the implementation of a new law that expands FMLA coverage for military family members.

Doing Business

Keep Your Employee Standards High
Paul Glover, president of the Glover Group, offers you a process for developing high standards for employees and enforcing them.

Surviving A Business Slowdown

Small businesses are often hit the hardest during economic downturns, and this one is no exception. When credit dries up, consumer and business spending does too. What can you do? How can you make it through the coming months? Here are some ideas.

Save Jobs by Cutting The Cost of Doing Business

This White Paper shows you how to upgrade what you’re already using in order to save money and get more done.

Balancing Productivity and Flexibility
Working through a holiday season affected by an economic crisis can be tough. Tension is high this time of year, more so when the economy is bad. Experts recommend that employers be careful not to act hostile, let employees know as quickly as possible if they are not going to get year-end bonuses and be flexible about letting workers have time off.

Sales and Marketing

Winning Marketing Tactics in an Uncertain Economy
Web site investments to make to optimize your search engine marketing initiatives. First in a series.

Small Business Brief for 11/14

Politics and Government

Bush Warns Against Abandoning Capitalism

President George W. Bush met with leaders of the world's biggest economies, urging them not to abandon free- market capitalism as they seek an escape from the financial crisis, calling it the “best system” for delivering growth.

Paulson's Credibility Drops Again as Asset-Purchase Plan is Abandoned

Like many others who have served in President George W. Bush's administration -- among them former Secretary of State Colin Powell and former Treasury chief Paul O'Neill – Henry Paulson will leave office casting a smaller shadow than when he arrived.

Obama Seeks $50 Billion for Automaker Rescue and a Czar to Oversee their Operations

President-elect Barack Obama is pushing Congress to approve as much as $50 billion to save U.S. automakers and appoint a czar or board to oversee their activities, a move that insiders say would need President Bush's support.

SBA Tries to Increase Available Loan Capital
The U.S. Small Business Administration is changing loan programs to increase the amount of funds available to small businesses from SBA's lending partners.

Obama's Tax Plan Needs a Better View of New Deal

President-elect Barack Obama is using the New Deal as his model for how to deal with economic crisis. He might want to distinguish between what worked and what didn't.

Economics and Labor Issues

Based on Patent Activity, Small Businesses are the Most Innovative

In this third study in a series that examines small business patent activity, the authors demonstrate that small businesses that innovate are indeed special and that the technology they create helps define the cutting edge in a number of industries. The report presents a convincing case that small firms in emerging industries are one of the greatest engines of American economic growth.

Testimony of Interim Assistant Secretary for Financial Stability Neel Kashkari before the House Committee on Oversight and Government Reform, Subcommittee on Domestic Policy

In his remarks, Kashkari provided an update on the Treasury Department's actions to stabilize our financial markets and restore the flow of credit to the economy.

Consumers Cut Back Sharply on Spending
WASHINGTON (AP) - Consumers, taking a beating from the worst financial crisis in seven decades, cut back sharply on their spending in October, pushing retail sales down by a record amount.

Ongoing Jobless Numbers at 25-year High
Unemployment claims last week reached the highest level since the 2001 terrorist attacks and the number of people continuing to draw jobless benefits reached at a 25-year high.

Law and Regulation Enforcement

New Family Leave Provisions Called "Stingy" by Labor Advocates
Labor Department revisions to the Family and Medical Leave Act announced on Thursday drew criticism from labor advocates, who called the changes "stingy," though they did applaud the addition of military families to the law.

Obama Team on the Trail of Bush's `Midnight' Rules Rush

The Obama transition team is tracking the “midnight” regulations coming out of the White House during the final days of the Bush administration.

Doing Business

Where's the best place to put new 401(k) contributions now?
Managing a 401(k) involves two decisions: Where to invest your current balances, and where to invest future contributions.

HP's New Small Business Product Consolidates Storage
Hewlett-Packard's Simply StorageWorks helps small businesses by consolidating file serving and application data, backup and recovery continuity, and optimization for specific IT applications.

Saving Cash by Bartering
Saving cash is becoming more and more important, so more and more small businesses are turning to barter exchanges such as International Monetary Systems, Itex Corp. and U-Exchange.com, in order to save their cash in a credit-strained recession.

Sales and Marketing

Preparing Your Website for the Holidays: Quick Fixes You Can Make
Polish-up your website for the season so it can better convert holiday browsers into buyers.

Google AdSense: Tips for Success
Working in the Google content network is different from working in a regular search campaign. Here is how.

No, Spider-drawings are Not Legal Tender

With all the doom and gloom coming out of Washington these days, and with thanks to the good people at geekologie.com for bringing this little gem to the surface, it is nice to see that creativity is still alive and well in the world of commerce. True, the creativity involved is somewhat out of place, but you have to admire David Thorne and his gumption in trying to pay a past due bill with a drawing of a spider; and you can’t help but applaud billing representative Jane Gilles for her measured and professional response throughout.

To see the whole, hilarious exchange, visit geekologie.com. It’s worth it and that is the bottom line!

Bankruptcy vs. Bailout: Which is Really Better for the Taxpayer

Where does it end? Honestly, where do we draw the line? I have come to terms with not being a bank holding company, thereby being denied a bite of the $700 billion bailout. I can live with that. Like most Americans, including every small business owner I know, I can live with having to stand on my own two feet. I can live with being responsible for my decisions and my actions and I can live with the consequences of those actions. I am not saying it is always easy and I am not saying that a little help now and then when things are tough isn't appreciated. All I am saying is that this is what it means to be a responsible adult. That is what my parents taught me and that is what I am teaching to my kids.

Pity our society is not echoing such lessons.

Take, for example, the Big Three Automakers. Since Bush's Treasury Secretary, working closely with the Pelosi/Reid/Dodd/Frank Congress opened the money spigots earlier this year, all sorts of companies have gotten in line for their cut, including the automakers. Why? Because they are on the verge of bankruptcy and they want to be rescued. Congress has already promised them $25 billion, but the question is whether the automakers and the public would be better served with congressional oversight of GM, Ford and Chrysler, or with the judicial oversight that would come with bankruptcy.

Chapter Eleven is Not the End of the World

The implicit message coming from the pro-bailout crowd is that if the automakers are allowed to go into bankruptcy, they would vanish from the world, throwing hundreds of thousands of people out of work, sending the economy into a tailspin and throwing us into a new Great Depression. The only dire consequences we have not had to listen to include blood, frogs, gnats, flies, diseased livestock, boils, hail, locust, darkness and the death of the firstborn; but wait, there is still time.

What would happen if the automakers filed for bankruptcy?

There are two kinds of bankruptcy the Big Three could consider, Chapter 11 and Chapter 7. If the automaker in question, say, General Motors, actually wants to stay in business, they would opt for Chapter 11. This would reorganize their business in an effort to become profitable again. Day-to-day operations would continue, however management would have to seek court approval for major business decisions through a committee of court-appointed trustees. With Chapter 11, contracts, assets, liabilities—everything—is on the table and the goal is to restructure the company so that it can go forward once it emerges from bankruptcy.

On the other hand, if GM simply wished to pull the plug and cease to exist, then it would file Chapter 7 and a trustee would be appointed to liquidate the company's assets to pay off as much of the debt as possible, which may include debts to creditors and investors. Chapter 7 bankruptcy is usually an option only when the business has no future, it has no substantial assets or qualities that cannot be reproduced after bankruptcy, or the debts are so overwhelming that restructuring them is not feasible.

Clearly, these companies have a substantial number of assets, a future, and their debt does not preclude restructuring into something leaner, healthier and more competitive. The fact that the overseas sections of these companies usually do very well when the overall economy is healthy is very telling. The fact that American plants not associated with the Big Three, like Honda, also do well, leads us back to the center of the American Auto Industry, Detroit.

This is Not a Problem You Can Solve With Money

As much as I hate to say this, the problems facing the Big Three are not external, like the collapse of mortgage-backed securities or competition from some new company that can produce autos at much lower prices. No, the problem with Ford, GM and Chrysler is the same problem that drove Studebaker to Canada and many other fine automakers out of business. The problem is labor and weak management.

For a long time, the United Auto Workers have had the automakers over the proverbial barrel, and with an average hourly salary of $73.20, it shows. Throw in health benefits, retirement benefits, surviving spouse benefits and everything else the Union has been able to finagle or strong arm out of the self-serving, strike-fearful, top-heavy management of the automakers and you have to wonder how these companies stayed in business this long.

Throwing money at this situation will only perpetuate the existing problems, not solve them. $25 billion dollars is 25 billion reasons to keep things as they are. Sure, Congress might put a couple of strings on the money, like demanding new CAFE standards or vehicle design changes that would turn my HHR into a large, luxury vehicle, but unless the underlying problems of the automakers are addressed, including the weak management and the impossible burden imposed on the companies by insane union contracts, the automakers will be back for another $25 billion before you know it. You would imagine that people smart enough to get where they are in Washington would understand these things, but why are still pushing for the bailout anyway?

The Case Against Bailing Out Detroit

Politics, politics and more politics. That is the only real explanation. By giving the automakers this money, Congress can do two things: It can take a level of control over the automakers themselves and pressure them to build the kind of cars that they and their radical environmentalist supporters think best and it can payback the unions, which may be an even more important thing than greening the nation's fleet of passenger vehicles.

Once the bankrupt automakers are in the hands of a judge, then the unions will have to do something inconceivable: accept less money, less benefits and in all sorts of other ways come down to where the rest of us are. The alternative would be the removal of the UAW, leaving the auto workers at the Big Three scrounging out an existence at Honda and Toyota pay rates, which run about $48.00 per hour and are still $20 per hour higher than the wages of the average hourly worker. More than that, the management of these lumbering, corporate throwbacks will have to change the way they do business on every level, no longer relying on their inherited dominance in the marketplace and actually working to earn the business of the American people, something that they cannot do now while under the thumb of Big Labor.

These are changes that could be imposed upon the industry by a bankruptcy judge, changes that folks in Congress with big political bills to pay and the incoming administration, which wants to increase the amount to $50 billion, are trying to stop by offering this bailout.

The Bottom Line

With no oversight, we have already seen recipients of Paulson's bailout behaving badly, not using the money as intended. We have seen foreign banks step in line for a piece and we have seen companies change their businesses into bank holding companies to get some. The stock market has seen historic declines, unemployment is on the rise, credit is tight and now Paulson is changing the rules on how the money is to be spent. Why would he do that? Because it isn't working and rather than admit it and shut off the money spigot, he is trying to finesse the problem. There is $60 billion left unspent already and the clamoring crowd wants more. It's like the little chickens at some petting zoo when a little kid has food for them—it's a mob and the Congress wants more. They have political ends to meet, not fiscal ones. They have donors to pay back, not citizens to protect.

I think we have spent enough tax money on this ideological boondoggle and I think it is time for it to stop. I think it is time to recall the money the Wall Street firms are using for end of year bonuses and AIG is using for executive holidays; the money the banks are spending on T-bills rather than loans, the money they are using to buy-up their weaker competition. It is time for the politicians to get out of this and stop trying to use this mess to their personal or party advantage. If you agree with me, then get in contact with your representatives and senators and let them know that it is time for hard market economics. Remember, as a small business owner, you will pay for much of this, reap little if any benefit, and if it doesn't come out all right in the end like they're hoping it will, you will likely be left holding the bag.

Get in touch with your congressional representative and senator at the following links:

www.house.gov and www.senate.gov.

Small Business Brief for 11/13

Politics and Government

Obama Ought to Look at the Effect of Entrepreneurial Immigrants
According to U.S. News & World Report's Matt Bandyk, immigration will be an important small business issue for the next administration. Immigrants are 30% more likely to start businesses and they make up 16.7% of all new business owners in the country.

Democrats at Work to Tap Bailout for Automakers
WASHINGTON (AP) - Congressional Democrats are marshaling support for a rescue package to pump $25 billion in emergency loans to U.S. automakers in exchange for a government ownership stake in Detroit's car companies.

Economics and Labor Issues

Bush: Economic Crisis Not a Failure of Free Market
NEW YORK (AP) - President George W. Bush asserted Thursday that the global financial crisis is "not a failure of the free market" and urged world leaders to adopt modest financial reforms that stop short of the tighter regulations Europeans favor.

Stocks Embark on Massive Rebound
NEW YORK (AP) - Wall Street launched a massive rebound Thursday, sending the Dow Jones industrial average up more than 400 points after driving it below the 8,000 mark, as investors decided they did not want to miss out on buying stocks at cheap prices.

Consumer Spending Drop Worrying to Small Business
Entrepreneurs are more worried that people are spending less than they are about whether the federal bailout will help them directly or how much in taxes they will pay under the new administration.

Jobless Claims Surge While Trade Deficit Narrows
WASHINGTON (AP) - Applications for unemployment benefits soared to the highest level since just after the Sept. 11, 2001, terrorist attacks while the trade deficit shrank more than expected as demand for imports plunged, further evidence of the struggling U.S. economy.

Law and Regulation Enforcement

Campaign to End 2-year Insurance Gap for Disabled
WASHINGTON (AP) - Congress and the Obama administration should end the two-year wait that people deemed too sick to work by the government face before qualifying for Medicare, lawmakers and leading advocacy groups said Wednesday.

Baucus Wants to Overhaul Healthcare in '09
WASHINGTON (AP) - The chairman of the Senate Finance Committee intends to push Congress to overhaul the nation's health care system during the first six months of next year. Sen. Max Baucus, D-Mont., said "now is the time" for Congress to move on health care.

Global Gap on Costs Narrows for US Manufacturers

WASHINGTON (AP) - Costs that hamper the competitiveness of U.S. manufacturers have fallen in recent years compared with those of foreign producers, but high corporate taxes and other expenses still put domestic products at a distinct disadvantage in global markets, an industry group said Thursday.

Doing Business

SBA Announces New Ways to Improve Small Business Access to Capital

In response to the credit crunch, today SBA’s Acting Administrator Sandy K. Baruah announced important loan program changes to help the agency’s lending partners increase access to capital for small businesses.

Microsoft Small Business Package Gets Update
Small businesses now have the option to use multiple servers, mobile, a business applications platform and integration of small-business infrastructure with online services with Windows Essential Server Solutions, which includes software designed for companies with up to 300 personal computers.

Guard Against Organized Cyber Crooks

Crooks and spies are using the Internet to commit crimes against American businesses and they are becoming more sophisticated. Here are some tips on protecting your business.

Sales and Marketing

Your Envelope May be Killing Your Direct Mail Response

A boring package could be the problem if your direct mail efforts seem to be flopping. Discover how dimensional mailers can dramatically improve your direct mail response.

Leverage E-mail Even in a Recession
Unlocking revenue through the use of a customer analytics program for e-mail campaigns.

The Online Dollar Store
Take a look at your business and think about the McDonald's $1 menu. What would that look like if you could deliver it?

Why Invest in Digital Marketing in Today's Market?
Nine reasons smart companies invest in digital marketing and advertising when budgets get tight.

Small Business Brief for 11/12

Politics and Government

Anti-immigrant Perception Trouble for Candidates
According to a study released by the pro-immigration advocacy group America's Voice, taking a hard "enforcement-only" line on immigration reform cost 18 of 20 candidates the election. Anti-immigrant candidates lost five races in the Senate, for example.

Economics and Labor Issues

What can Employers Learn from The Biggest Loser?
The hit TV show, which can be viewed as a kind of wellness program, offers insight into how support groups, incentives and education can help people lose weight. What can it teach employers?

Law and Regulation Enforcement

Latest fact sheet helps small businesses avoid incorrect deductions for retirement plans

Avoiding Incorrect Self-Employed Retirement Deductions, offers help to prevent incorrect deductions for small business retirement plans .

IRS's Latest Hot Product: 2009 Small Business Tax Calendar

Go to IRS.gov or call the National Distribution Center at (800) 829-3676 for a free IRS 2009 Small Business/Self-Employed Tax Calendar.

Don't Blog Your Way to a Lawsuit
Company blogs can expose a business to liability lawsuits, says corporate law specialist Nina Yablok, who offers tips in this article on how to stay out of the courtroom.

Doing Business

Customer Complaints May Be Just What You Need
Customer complaints may seem discouraging, but they actually provide information a company needs to make improvements and, ultimately, more money.

The Benefits of Going 100% Microsoft
The benefits most often cited for using all Microsoft software are the ease of user adoption, the safety of a big, powerful brand, and the virtual guarantee that technical support will always be there for you. They sound like compelling reasons, but how true are they? The answers are in today's—and they may surprise you.

Tips on Staying Cool Under Pressure
Forbes offers advice from psychologists and sports stars on how to stay cool under pressure and cope with stress.

Sales and Marketing

Go Slow With Video Ads in Social Media
Communities are where people go to connect, learn, and vent. So overt advertising could get the cold shoulder.