January Sales

It's called a service economy.

 

Yes, because the largest number of people employed in the service sector are serving lattes, folding towels, asking if you want fries with that, or picking up your garbage every Tuesday. Of course, a huge amount of money is generated (or consumed) by legal and health care services, but long long long gone are the days when a single provider with a menial job could provide for an entire family, and long long gone are the days when two bread winners holding down lower level jobs could provide shingles and three good squares a day.

 

People need to start taking responsibility for their own stupidity. No matter how hot the coffee or how wet the poodle, you don't sit with a cup of coffee behind the wheel and you don't stick your poodle in a microwave to dry it.Society in general has become way too trigger-happy and litigous. Everybody knows about their rights, none about their duties. Generally, the view on what makes the world go round has become very skew.

 

Not really. You buy a cup of coffee with the expectation that it won't weld your nether regions together via months of pain and scar tissue if you accidentally spill it on yourself. Everything else that happened after that is not an issue.

As for SRT_Mike., I invite you to a re-enactment of the issue. Let's bring a cup of coffee to 180 degrees Fahrenheit and let a neutral outsider dump that 180 degree Fahrenheit liquid onto your testicles. Are you game?

 

Same thing as trying some embroidery on a roller coaster. When the needle ends up sticking in your thumb, are you going to sue the manufacturer of the fabric, the nedle and the roller coaster ride exploitant as well as the manufacturer of same?

The world has gone nuts. Utterly and totally nuts.

 

Actually, I DO expect that. It's coffee and it's dang HOT!

I also expect to be cut by knives, shot by guns and burned by acid.

 

If you'd like to see what the actual facts of that case are, I suggest this:

http://www2.bc.cc.ca.us/gdumler/Eng%201A%20Online/Editorials%20&%20Articles/mcdonalds_coffee_lawsuit.htm

For those of you who are too lazy to read the 10 - 25 pages of that, let me summarize: McDonalds served their coffee at 195 degrees. Industry and home standard, about 140 - 160. The difference is that it takes about 3 seconds of contact at 195 degrees to get a 3rd degree burn, 15 seconds at the lower temperature. At the time of the incident, McDonalds had had 700 complaints. That is right 700 plus.

Read the article, it takes a lot of the b/s and political issues out of the argument and presents the facts, and the various legal arguments, some of those theories are at least a 100 years in use, and applies them to this instance. Good reading, and a short education on why the case ended up where it did, and how it ended up there, and why certain elements of our society decided to politicize it.

Art

 

For $7 million I'd consider it... safe in the knowledge that at least I wouldn't get 3rd degree burns.

On the other hand, I know that if I try to drive and put coffee between my legs as I do so, I run the risk of spilling hot liquid on myself and getting hurt.

The award was punitive... they should have assigned a large portion of the blame to the woman and made her responsible for her portion of the incident.

 

Ah yes, that too, and McDonalds could have countersue'd her for a couple 100 million in damages.

If there are 700 complaints, there's something wrong. There is indeed, coffe doesn't belong in a motorcar. It's idiotic.

Now, for USD 7 million I'll volunteer to undergo the test at that temperature, heck, I'll even make the coffee myself. Any preferred bean?

This is all very much off topic, apologies for that.

 

Some might say that her injuries themselves were her portion.

 

I see what you're saying - and just to note, I am not in the car business, so I don't know all the machinations - but how do you pay back the floorplan bank?

Yea, discounting is a short term strategy, but isn't that better than being out of business? I suppose you could claim bankruptcy, not sure how that works with a floorplan bank, but a post from me (and some others) implies that dealers are still being hard headed and untrustworthy. If you want to move inventory, I only see discounting as a way that happens.

The issue isn't the car itself, it's the fear of the consumer to spend money in an uncertain time. Cash is king, so you won't part with that dollar unless there is significant value in parting with it. Unless buying a new car is absolutely necessary, I can't see many people going to a dealer to buy anything "regular" pricing.

FWIW

 

Have I got a girl for you!

 

But she was compensated for her portion as well as not her portion.

 

Excuse my playing the Devil's advocate
I think that there is no doubt that in this case, as in others, juries are looking to send a message to what they see as large and otherwise oblivious companies and to make them pay for all of the wronged individuals who did not have recourse.
IMO this is an abuse of the legal system but may be the rationale behind some of these huge awards.

 

This is going waaay off topic but I'll just add this...

First, I accept this woman was genuinely injured and was entitled to compensation for her bills as well as additional compensation for pain and suffering. I also accept that McDonalds was culpable - that much is clear.

My problem with these situations is two-fold

First, it encourages people to bring frivolous lawsuits hoping for a payday

Second, it denies access to the justice system when there is no payday involved.


Art has often championed these awards by saying that without them, these cases would never be heard. But that is precisely what is happenning. Lawyers tell people with good cases against not-rich defendants to take a hike, and lawyers also actively solicit people to become plaintiffs, but only for rich defendants.

I don't see any rationale for the plaintiff receiving the monies from punitive damages. It's not compensation to them, because that is awarded seperately. I think that punitive damages should go into a central fund and be used to provide access to the legal system to people who would not otherwise get it. This would more than adequately address the supposed fears of lawyers who say that without big awards, lawyers wouldn't have the incentive to bring cases... this would ensure that MANY more legitimate cases could be brought.

But I am sure lawyers would be against it. Why? Well, first it would deny them their big pay-days and second it would make it harder to solicit plaintiffs if they couldnt' tell them about the big pay-days they could receive if they agree to sue MegaCorp. But it would be good for society in general, especially disadvantaged folks who've been wronged. And the lawyer contingent is all about "whats right and what's good for society" when it comes to suing the doctors and suing corporations. So, is their money where their mouths are?

I already know the answer. They would scream bloody murder if they could not claim a % of punitive damages awards and instead they went 100% into a centrally admistered fund.

 

Other than the fact that the last bit sounds a bit socialist we agree.

 

When dealerships needs inventory we use a number of different sources to buy cars, like the auto auction, a broker, a wholesaler, or a couple of different dealer trading networks. Dealers in most cases use what is called a “floor plan” line of credit. A floor plan is a system of financing that permits a dealer to borrow money to buy inventory, which becomes the security for the loan that is repaid when the car is sold. Thus the floor planning lender places a “lien” on all stock inventories, until the loan is repaid! Normally floor plans are short terms notes 90-120 days full curtailment! If you go to the dealership, and you purchase a new car, and you trade your old one in, the dealer would have to pay down the note at the bank on that one car they just sold, and re-floor your trade, pay off any liens you might have, out of the funds coming from financing or cash in the deal, have a clear title to the customer, and a clear title on the trade for resale!

The real question is selling the car for less then the ACV or the floor amount. Lets say a dealer has a car they ACV for $100,000, and sell it to a retail buyer for $80,000? The dealer would not have the funds to give the buyer a free and clear title, unless the dealer themselves pay the difference to floor plan. If the dealer doesnt pay..the buyer would not get a free and clear title and the dealers floor plan would still have a lien on the car, the new owner could not title it!

 

Mike, I am a personal injury attorney and with regard to your first point, while it may encourage some people to file a claim, the McDonald’s verdict has been a boon to defendants. When I question prospective jurors, they all know about the McDonald’s case. They, like many here, believe it to be the norm. As a result, when the plaintiff starts their case the jury’s initial impression of the plaintiff is that he or she is more likely to be just another person bringing a frivolous lawsuit hoping for a payday. This impression can be overcome, but it is a significant handicap. It is for this reason that in my county, which is one of the few counties in Texas with a majority of Democrats, that it is the defendants/insurance companies which request jury trials. The problem is that if a thousand cases are tried in one day and in 999 of them the defendant was speeding and rear ended a plaintiff causing significant injuries, but in each of these cases the jury found for the defendant, and then in the one remaining case McDonald’s gets stuck for millions, guess which case you will read about. It is usually only the cases where the jury awards the plaintiff millions in damages that get the press. If the plaintiff has a valid claim and gets screwed, it is never in the papers. Therefore, relying on news accounts as a barometer of the state of our judicial system is likely to lead you to a number of false assumptions. If you were a Martian and relied on our news media you would never want to swim for fear of getting eaten by a shark.

 

+1

 

Ok - that makes sense. Even discounting heavily would eventually catch up as you wouldn't have enough to have title released.

So discounting wouldn't be a dealer only strategy. Again, makes sense as in my business it's much the same (we have a similar go-to-market). Someone, somewhere in the value chain, has to be realistic about survival, and with cash not flowing in the economy, it's only going to get tougher.

Begging our government for money isn't the answer. Meanwhile, the dollar sinks to new lows and the Fed responds by proposing "quantitative easing" - a move that will surely devalue the dollar FURTHER!!! BRILLIANT!

 

Discounting makes since as long as the dealer sells at or a few $$ above the ACV. Like margin calls the $20k is a real loss and a real check has to be writen...In car sales, the inventory is set by how many cars the dealerships sells detraimed by how many Up's a dealer has (3 out of every 10 should by a car) , less cars on the lot means less cars sales, it's called inventory congruncy mix, the number of "up's" vs. the number of cars you have instock based on the square footage of the lot. If a dealership sells 55 cars per month they have to stock 75 cars in inventory.

But lets look at this another way... Lets take a Ferrari that a dealer has a ACV of $100k and lets say the floor plan interest rate is 6.00%..how long would that car have to sit before the dealer would lose $50k, just paying the interest?

 

The Cadillac dealer that I drive past every day went out of business over the weekend, or so the newspaper said. They never seemed to make any actual effort at, you know, selling cars or anything. Driving past it this morning, it looked exactly the same except the lights were off.

It must be cheaper to just return the cars to the manufacturer than try to liquidate them?

 

Prob going back to GMAC.

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY&refer=home

From the article:
Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

If federal officials fail to get a consensual agreement to change their position regarding repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.

Comment: I'm not sure how they could move up in line on the earlier loans, but perhaps the government realizes their demise is inevitable? If so they also have a bit of leverage on the banks that hold debt on GM/Chrysler and would get their turn picking at the carcasses first.

Maybe they insist the two pay back the $17.4B in loans, this forces them into bankruptcy using what little cash they have left, then the government gives them more loans as the demand for bankruptcy is satisfied.

This of course does a few things:
*Puts hundreds of thousands in the industry in a very precarious employment situation where the government may end up supporting them.
*Basically breaks the UAW for good.
*Screws the banks, but then the government will have to give them even more bailout to support the additional "toxic asset" of now worthless GM/Chrysler debt. How that ends up cheaper for the government is beyond my peabrain though.

At some point, it would be cheaper to just give a tax deduction of 200% of your mortgage payments for three years as well as revising bankruptcy laws where walking away from homes is very undesirable, even if you are upside down. Expensive yes, but probably a fraction this fiasco is currently projected to cost. Use the next three years to reform the banking system and get the trade imbalance to managable levels.