Friday, February 25, 2011

A Bold Prediction Becomes a Happy Reality

About a year ago, the WSJ posted a story about a very, very bold prediction: the folks over at GM were predicting 2010 would be a "profitable year" for the company.

It was a very bold prediction because GM had not seen a profit since 2004. 2009 saw the forced exit of its leader, Rick Wagoner, a man who'd occupied various positions in the C-suite at GM for nearly 20 years. Under his leadership, GM ended up a recipient of a massive and unpopular government bailout, and then filed for bankruptcy soon after.

So for a company that had been so buffeted by terrible leadership and the headwinds of our grim economy, its prediction of profitability in 2010 seemed a bit of a reach.

But apparently, its predictions of success have become reality. According to a story in the Wall Street Journal, GM posted its "strongest annual performance in more than a decade" in 2010.

And a profit of $4.7 billion.

However, they're not out of the woods yet. Higher gas prices seem inevitable. They still have billions in unfunded pension obligations and the economy needs to continue to improve. But it's nice to see a Motor City icon having a comeback, at least in 2010.

Thursday, February 24, 2011

When the private sector places "undue burden" on government

If you need yet another reason to understand why healthcare reform is desperately needed, check out this story in today's Chicago Tribune with this alarming headline:

Illinois Blue Cross settles allegations that it denied sick kids coverage.

Here's what happened, according to the Trib:

"The cost of the medical care, which included so-called private-duty nurses for sick children and other ill patients, should have been covered by Illinois Blue Cross, but instead was shifted to Medicaid at a cost of nearly $12 million, prosecutors said. The claims were denied based on 'internal, undisclosed guidelines that were more restrictive than the language provided to patients in plan policy materials,' Madigan’s office said."

As a result of the lawsuit, the company will "pay $25 million to settle allegations that it denied coverage to sick children in need of nursing care by 'fraudulently' shifting their claims to Illinois’ Medicaid program, state and federal prosecutors said this morning."

The case against BCBSIL was initiated by the Illinois Attorney General's office after "years of complaints" from consumers. These are consumers with children who are seriously ill - in need of medical services that included at-home nursing.

Imagine that you are those consumers - imagine that you are a parent of a desperately sick child - and in addition to taking care of your seriously ill child, you are concurrently fighting your insurance company to pay for covered services.

Lisa Madigan, Illinois Attorney General, pulled no punches when talking about the settlement:

"'Blue Cross Blue Shield’s inappropriate denial of legitimate claims placed an undue burden on the state’s finances,' Madigan said in a statement. 'My office is committed to holding health care insurers accountable on behalf of the people of Illinois for this type of deception and fraud.'"

Blue Cross denies the allegations that it engaged in "inappropriate conduct." Of course they deny the allegations. Because for an insurance company, diminishing claims payouts improves their medical loss ratio. So why not "fraudulently" deny coverage to sick children until a regulator cracks down on them for doing it?

Here's a link to the Illinois Attorney General's press release.

BCBSIL does not have a press release on this. However, in the Trib story, they offer this explanation for the situation:

"'This dispute began many years ago when we reviewed certain claims and determined that the benefits sought were not covered by the applicable insurance plans and policies,' Illinois Blue Cross spokesman Jack Segal said. 'These plans and polices determine which benefits are covered and which are not. Several years ago, in cooperation with the state attorney general, we expanded our explanation of benefits to ensure that our members understood what nursing benefits are covered under their plans.'"

But why would a company like BCBSIL pay out this $25 million settlement if they did nothing wrong? Has the Illinois Attorney General's suit inspired them to be nice and pay for services that were not covered?

Or is this yet another example of of a company privatizing profit and socializing loss?

Thursday, February 17, 2011

From the city that works to the city that shrinks...

As Richard M. Daley wraps up his reign, one thing is certain. The city's population shrank dramatically during his tenure. According to the 2010 census, Chicago's population is the lowest its been since 1920, the year Prohibition was enacted.

A key factor in the decline: black flight. The next mayor of "the city that works" may want to think about investing outside of the Loop - in ways that revitalize the neighborhoods. Education and affordable housing are two key areas to explore.

The population decline of Chicago is the most read story in the WSJ online edition today.

The Chicago Tribune and the Sun-Times also cover the story.

Friday, February 11, 2011

On the magical thinking coming out of Chrysler

If you watched the Superbowl, you probably saw the Chrysler ad (AKA one of two Eminem Superbowl ads.) If not, you can watch it here:

Beautifully filmed, beautifully edited, it's a love song to Detroit. Told by Eminem. And it starts with a question:

What does this city know about luxury?

And I've got some stats that indicate the answer would be "not much." The lead in a 2009 Wall Street Journal story goes like this:

They call this the Motor City, but you have to leave town to buy a Chrysler or a Jeep.

The Journal goes on to note that Borders had just closed its last Detroit store, and that Starbucks, "known for saturating U.S. cities with its storefronts, has only four left in this city of 900,000 after closures last summer." The story then points out that there are no national grocery stores in Detroit.

That was then, in 2009. What about now?

Well, the good news is that unemployment decreased in 2010 (according to preliminary data) to just 11.1 percent, down from 14.9 percent in 2009.

Still, an 11 percent unemployment rate is higher than the high national average and does not signify the return from hell mentioned in the Chrysler ad.

And Starbucks looks like it has reduced its Detroit offerings to just three stores in the metropolitan area. Those lucky few with the money to splurge on affordable luxuries will have more luck finding a Starbucks over the Canadian border in Windsor.

And what of Chrysler's presence in the Motor City? The company headquarters can be found in Auburn Hills, a Detroit suburb. Its CEO is Italian-born Sergio Marchionne, who also heads up Fiat, based in Italy. However, according to the Chrysler website, there IS a Chrysler dealer within the city limits!

But though Detroit has its very own Chrysler dealer, it remains, as the ad acknowledges, "no one's Emerald City." It is in fact a city still firmly situated in the hell of high unemployment, poverty and abandonment. In 2010, the Wall Street Journal ran a story about the latest hit to the city: black flight:

Today, frustrated by plummeting property values and high crime, many diehards have hit their breaking point. Their exodus is consigning borderline neighborhoods to full-blown blight and putting prime residential areas at risk.

When the black middle class abandons you years after the white middle class fled, what remains? Vandalism, poverty and blight. So when Eminem ends the ad with "This is the Motor City. And this is what we do," I really don't know what they mean. Because the Motor City is in terrible shape right now, even worse than our economy at large.

Which makes Chrysler's tag - "imported from Detroit" - all the more prescient. The film shows us Detroit as we once knew it, our Motor City, our Motown, the center of the American auto industry. But that once proud American city is fast becoming a third world entity in the middle of America, a place stricken by poverty and lack of leadership. The Chrysler ad that heralds the great American city of Detroit is also a reflection of our utter blindness to the reality of today's economy.

Let's hope Chrysler pulls its head out of the sand, puts its money where its mouth is, and invests wisely in its business and in Detroit. Let's hope that Chrysler can recover - thanks in part to its second federal bailout - and reclaim its once proud heritage as a great American auto manufacturer. Otherwise Chrysler's message, as conveyed by this very expensive Superbowl ad, is utterly meaningless.

Monday, February 7, 2011

Note to Fox and the NFL: TONE DOWN THE RHETORIC!

Yesterday, much to the disappointment of my young children (who wanted to watch Horton Hears a Who on FX), I commandeered the remote and switched over to the Superbowl pregame show. I realize the pregame show goes on for much of the day, but we switched over at 5pm (CST) - just in time to watch Colin Powell and someone from the NFL school us on the Declaration of Independence.

Huh? What's that got to do with football?

Why we needed such a civics lesson just moments before the start of Superbowl XLV, I'm not quite sure. The video was filled with stirring music, employed bunches of people (mostly men) to recite bits and pieces of the Declaration of Independence, used a range of locations as backdrop for the speakers, and included lots of people in military garb.

[It was at this time that my children demanded (unsuccessfully) a return to Horton Hears a Who.]

Yes, the Superbowl is part of the American fabric. Though I watch few football games throughout the year, even I make a point of watching the Superbowl. And this year, I forced my Horton-loving children to watch it as well.

But when we switched from Horton ("a person's a person no matter how small!"), to the Superbowl pregame show on Fox, we were expecting info on the two teams, not an over-the-top presentation of the Declaration of Independence.

The stirring recitation of the Declaration of Independence ends; we wonder at its inclusion in the pregame hype; and then Fox cuts to the Michael Douglas piece called The Journey.

I watch, astonished, at images of suffragettes and Iwo Jima and 9/11, and the space shuttle and Katrina, and wonder if the creators of that video REALLY want us to believe that the sacrifices of Americans on all the many "darkest days" we've experienced as a nation (the Depression, Pearl Harbor, 9/11, Katrina, etc. and so on) are simply stepping stones on the journey to Superbowl XLV. Did suffragettes march to gain the right to vote so men and women could sit down together to watch the Superbowl? Did Martin Luther King's dream include a match up between the Packers and Steelers in 2011?

Please, dear God, I hope not. Contrary to the message of the video, the Superbowl is NOT bigger than a football game. It is a football game. It is JUST a football game.

Which makes it entertainment. Mega-hyped entertainment. Fun, yes. Important at shaping the the future of our nation, no.

Despite what Fox and the NFL think, entertainment is not history. The events depicted in The Journey are simply far bigger, far more important and significantly more influential in our lives than whatever happened on the field during Superbowl XLV. The sacrifices that overpaid pro football players make to get to the Superbowl are pathetic and irrelevant when compared to the sacrifices our troops and citizens have made during our "darkest days."

And honestly, if the Superbowl takes us to one of those moments that is "bigger than football," please let us remember the words to the National Anthem!