Wednesday, November 19, 2008

A Second Crisis in Detroit: Failing Suppliers?

(NEW YORK) — The financial woes of U.S. automakers have grabbed Washington's attention, but similar problems at auto suppliers have the potential to set off a cataclysmic chain of events in the industry if key parts makers run out of cash and fail.

As with the automakers, auto suppliers' sales have tumbled this year because of the steep drop in demand for new vehicles. (See TIME's pictures of the week)

That has forced suppliers to burn through their cash reserves and slash their costs to stay in business, said Craig Fitzgerald, an automotive analyst with Southfield, Mich.-based Plante & Moran PLLP, which advises about 400 small and midsize auto suppliers.

Meanwhile, banks and other credit providers have become dead-set against lending to any company in the faltering automotive industry, making it difficult and expensive for suppliers to get needed financing.

But if the companies at the bottom of the supply chain don't find a way to recapitalize, Fitzgerald warned, numerous bankruptcies and liquidations among the small companies will set off a string of parts shortages that could reach all the way to the vehicle assembly line.

The resulting disruptions could negate any help the government might give General Motors Corp., Ford Motor Co. and Chrysler LLC.

"Either they deal with the liquidity issues at the lower tier, or these problems have the potential to just devastate the Detroit OEMs and the other automakers," Fitzgerald said, referring to so-called original equipment manufacturers GM, Ford and Chrysler. "It's an issue equal to what's going on at the Big Three, they just don't have the heft, so it doesn't get quite the play."

In most cases, auto suppliers have their own suppliers, who in turn receive their parts from other companies, meaning that many automotive components pass through a chain of several companies before they're sold to an automaker.

"The fragility of the whole thing is very much like a house of cards," said Bob Viswanathan, an assistant professor of operations management at the University at Buffalo School of Management. "Everybody knows that the finance markets are so interconnected, but the auto industry is worse."

Tom Wiethorn, co-owner of Craig Assembly, said orders for his St. Clair, Mich., company's hose connectors — used in radiators that end up in GM and Ford vehicles — have fallen significantly in recent months.

As a result the company, which has $12 million in annual sales, has cut its work force by 20 percent to about 60 people and is worried that it could end up violating its debt agreements.

"This is very serious," said Wiethorn, who also serves as a manufacturing representative setting up contracts for other auto suppliers. "Some of the suppliers I know are teetering on bankruptcy."

The Motor & Equipment Manufacturers Association is hoping to win a piece of a proposed rescue package that would use $25 billion of the $700 billion financial industry bailout to help GM, Ford and Chrysler.

"We are all connected by some very thin threads and if any piece of the chain from the manufacturers to the small suppliers fails, the whole thing could fail," said Ann Wilson, the association's vice president of government affairs.

Top Republicans, however, have said the Wall Street money should not be used for the auto industry and would only postpone its demise. Sen. Richard Shelby of Alabama on Sunday called the industry "a dinosaur."

Yet even foreign automakers that build cars and trucks in the United States could be affected. Companies like Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co., with plants scattered throughout the South and Midwest, get their parts from the vast, multilayered network of U.S. suppliers that employs about 800,000 people.

Dave Andrea, vice president of industry analysis and economics for the Original Equipment Suppliers Association, a division of the Motor & Equipment Manufacturers Association, said that's why lawmakers need to be looking at the U.S. auto industry as a whole.

"We need to be talking about this at the U.S. level, not talking about the Detroit Three and then putting the other automakers in another bucket," he said. "If we have major failures of suppliers, the foreign automakers are going to be affected as well."

Automakers generally only have a one- to two-shift supply of some key parts, Andrea said, making them very susceptible to supply chain disruptions.

The nearly 3-month-long strike at American Axle and Manufacturing Holdings Inc. this spring crippled truck production at GM, showing how fast a parts shortage can shut down assembly lines.

GM's production cuts led to millions in lost sales at other suppliers such as Lear Corp., Superior Industries International Inc. and Magna International Inc.

Andrea noted that automakers have contingency plans for sourcing their parts should one of their suppliers shut down. But those plans can come with hefty hidden costs, such as the expense of importing parts from overseas, he said.

"It's really the logistics part you don't see," Andrea said. "And those are the kinds of costs the industry can't bear in these troubled times."

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Obama's Use of Complete Sentences Stirs Controversy

In the first two weeks since the election, President-elect Barack Obama has broken with a tradition established over the past eight years through his controversial use of complete sentences, political observers say.

Millions of Americans who watched Mr. Obama's appearance on CBS's 60 Minutes on Sunday witnessed the president-elect's unorthodox verbal tick, which had Mr. Obama employing grammatically correct sentences virtually every time he opened his mouth.

But Mr. Obama's decision to use complete sentences in his public pronouncements carries with it certain risks, since after the last eight years many Americans may find his odd speaking style jarring.

According to presidential historian Davis Logsdon of the University of Minnesota, some Americans might find it "alienating" to have a president who speaks English as if it were his first language.

"Every time Obama opens his mouth, his subjects and verbs are in agreement," says Mr. Logsdon. "If he keeps it up, he is running the risk of sounding like an elitist."

The historian said that if Mr. Obama insists on using complete sentences in his speeches, the public may find itself saying, "Okay, subject, predicate, subject predicate -- we get it, stop showing off."

The president-elect's stubborn insistence on using complete sentences has already attracted a rebuke from one of his harshest critics, Gov. Sarah Palin of Alaska.

"Talking with complete sentences there and also too talking in a way that ordinary Americans like Joe the Plumber and Tito the Builder can't really do there, I think needing to do that isn't tapping into what Americans are needing also," she said.

Andy Borowitz is a comedian and writer whose work appears in The New Yorker and The New York Times, and at his award-winning humor site,

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Report Faults All Parties in War in Georgia

Joao Silva for The New York Times

Fires burned Aug. 12 in a Gori apartment where an attack had killed civilians. Gori is in Georgia just south of South Ossetia.

MOSCOW — Russian, Georgian and South Ossetian forces failed to protect civilians, and in some cases singled them out for attack, during the war in Georgia, according to a report released Tuesday by Amnesty International.

The report calls for an independent investigation into “serious violations of international humanitarian and human rights law” that Amnesty International contends were committed by all sides during the war in August.

The conflict has been muddied by exaggeration and prejudice from its first hours, said John Dalhuisen, one of the report’s authors. But he said, “The truth will out, eventually.”

Amnesty International, a London-based human rights group, studied satellite imagery of damage around the separatist enclave of South Ossetia and interviewed witnesses and victims during four visits to the region.

The report said that in attacking Tskhinvali, the South Ossetian capital, on Aug. 7 and 8, Georgia fired Grad missiles that seemed to miss their targets and hit civilian areas. It also criticized Russia for bombarding Georgian territory later and for allowing South Ossetian forces to loot ethnic Georgian villages for weeks.

Both sides, the report concludes, used cluster bombs.

Russian and Georgian officials could not be reached for comment early Tuesday.

The report makes no attempt to determine who started the war, noting that “all sides have declared their actions to be ‘defensive,’ even when civilians bore the brunt of their military operations.”

Researchers in Tskhinvali concluded that Georgian forces had aimed Grad rockets at military targets — a Russian peacekeeper base, fuel depots and munitions stockpiles, among others — but that the targets were adjacent to civilian areas. The impact of the rockets had a radius of as much as 500 feet, and in some cases missiles struck a third of a mile away from what appeared to be their targets, the report said.

The researchers also found that several thousand civilians were in Tskhinvali the night of the attack, Aug. 7, and that 182 structures in the city were damaged, mostly in the first hours of the war.

Unlike the Georgian attack — described as “a fixed, localized incident that took place over eight hours” — the Russian bombardment that followed was sporadic and lasted for days, Mr. Dalhuisen said. The Georgian authorities commented on their military strategy to Amnesty International’s researchers, but Russian leaders did not.

The report found that Georgian towns, villages and civilians were hit during Russian bombing raids, sometimes “in the apparent absence of nearby military targets,” which would violate international law.

Russian infantry treated civilians in a disciplined fashion, but the Russians allowed South Ossetian forces to loot and set fires in the ethnic Georgian villages north of the separatist capital, the report determined. Amnesty International’s researchers “documented unlawful killings, beatings, threats, arson and looting” by armed South Ossetian groups, the report said.

“It is clear that the Russian authorities singularly failed in their duty to prevent reprisals and serious human rights abuses carried out by South Ossetian forces and militia units,” the report said. In South Ossetia in late August, it said, researchers observed “scenes of total destruction, with houses pillaged, burnt and many in ruins.”

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Obama to pick Holder as Attorney General: report

WASHINGTON — President-elect Barack Obama has decided on Eric Holder, a former senior official in the Clinton administration, to be attorney general, Newsweek said on Tuesday.

The magazine, citing two legal sources close to Obama's transition team, said on its website that the 57-year-old Holder, who served as deputy attorney general under President Bill Clinton, "still has to undergo a formal vetting review" before the selection is final and announced.

If the appointment is confirmed, he would be the first African American to head the Justice Department.

Newsweek said that in discussions over the last several days, Obama had offered Holder the job and he had accepted.

"The announcement is not likely until after Obama announces his choices to lead the Treasury and State Department," the magazine said.

Officials with Obama's transition team declined to comment.

Holder helped to vet candidates to become Obama's vice presidential running mate and has been a senior legal advisor for Obama's presidential campaign.

A partner at law firm Covington & Burling in the District of Columbia, Holder could not be immediately reached for comment.

Holder has said that the United States must reverse "the disastrous course" set by the Bush administration in the struggle against terrorism by closing the detention center at Guantanamo Bay and must declare without qualification that the United States does not torture people.

Obama has announced several White House staff appointments since his victory in the November 4 presidential election, but so far has not publicly announced any picks for cabinet positions.

(Reporting by Andrew Quinn, Editing by Sandra Maler)

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Obama advisers: No charges likely vs interrogators

WASHINGTON – Barack Obama's incoming administration is unlikely to bring criminal charges against government officials who authorized or engaged in harsh interrogations of suspected terrorists during the George W. Bush presidency. Obama, who has criticized the use of torture, is being urged by some constitutional scholars and human rights groups to investigate possible war crimes by the Bush administration.

Two Obama advisers said there's little — if any — chance that the incoming president's Justice Department will go after anyone involved in authorizing or carrying out interrogations that provoked worldwide outrage.

The advisers spoke on condition of anonymity because the plans are still tentative. A spokesman for Obama's transition team did not respond to requests for comment Monday.

Additionally, the question of whether to prosecute may never become an issue if Bush issues pre-emptive pardons to protect those involved.

Obama has committed to reviewing interrogations on al-Qaida and other terror suspects. After he takes office in January, Obama is expected to create a panel modeled after the 9/11 Commission to study interrogations, including those using waterboarding and other tactics that critics call torture. The panel's findings would be used to ensure that future interrogations are undisputedly legal.

"I have said repeatedly that America doesn't torture, and I'm going to make sure that we don't torture," Obama said Sunday on CBS' "60 Minutes." "Those are part and parcel of an effort to regain America's moral stature in the world."

Obama's most ardent supporters are split on whether he should prosecute Bush officials.

Asked this weekend during a Vermont Public Radio interview if Bush administration officials would face war crimes, Senate Judiciary Chairman Patrick Leahy flatly said, "In the United States, no."

"These things are not going to happen," said Leahy, D-Vt.

Robert Litt, a former top Clinton administration Justice Department prosecutor, said Obama should focus on moving forward with anti-torture policy instead of looking back.

"Both for policy and political reasons, it would not be beneficial to spend a lot of time hauling people up before Congress or before grand juries and going over what went on," Litt said at a Brookings Institution discussion about Obama's legal policy. "To as great of an extent we can say, the last eight years are over, now we can move forward — that would be beneficial both to the country and the president, politically."

But Michael Ratner, a professor at Columbia Law School and president of the Center for Constitutional Rights, said prosecuting Bush officials is necessary to set future anti-torture policy.

"The only way to prevent this from happening again is to make sure that those who were responsible for the torture program pay the price for it," Ratner said. "I don't see how we regain our moral stature by allowing those who were intimately involved in the torture programs to simply walk off the stage and lead lives where they are not held accountable."

In the years after the Sept. 11, 2001, terror attacks, the White House authorized U.S. interrogators to use harsh tactics on captured al-Qaida and Taliban suspects. Bush officials relied on a 2002 Justice Department legal memo to assert that its interrogations did not amount to torture — and therefore did not violate U.S. or international laws. That memo has since been rescinded.

At least three top al-Qaida operatives — including 9/11 mastermind Khalid Sheik Mohammed — were waterboarded in 2002 and 2003 because of intelligence officials' belief that more attacks were imminent. Waterboarding creates the sensation of drowning, and has been traced back hundreds of years and is condemned by nations worldwide.

Bush could take the issue of criminal charges off the table with one stroke of his pardons pen.

Whether Bush will protect his top aides and interrogators with a pre-emptive pardon — before they are ever charged — has become a hot topic of discussion in legal and political circles in the administration's waning days. White House deputy press secretary Tony Fratto declined to comment on the issue.

Under the Constitution, the president's power to issue pardons is absolute and cannot be overruled.

Pre-emptive pardons would be highly controversial, but former White House counsel Arthur B. Culvahouse Jr. said it would protect those who were following orders or otherwise trying to protect the nation.

"I know of no one who acted in reckless disregard of U.S. law or international law," said Culvahouse, who served under President Ronald Reagan. "It's just not good for the intelligence community and the defense community to have people in the field, under exigent circumstances, being told these are the rules, to be exposed months and years after the fact to criminal prosecution."

The Federalist Papers discourage presidents from pardoning themselves. It took former President Gerald Ford to clear former President Richard Nixon of wrongdoing in the 1972 Watergate break-in.

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As children starve, world struggles for solution

By John Blake
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(CNN) -- Some mothers choose what their children will eat. Others choose which children will eat and which will die.

A Haitian boy begs for food. One child dies from hunger every six seconds, an aid agency says.

A Haitian boy begs for food. One child dies from hunger every six seconds, an aid agency says.

Those mothers forced to make the grim life-or-death choices are the impoverished women Patricia Wolff, executive director of Meds & Food for Kids, encounters during her frequent trips to Haiti.

Wolff says Haitians are so desperate for food that many mothers wait to name their newborns because so many infants die of malnourishment. Other Haitian mothers keep their children alive by parceling out food to them, but some make an excruciating choice when their food rationing fails, she says.

"It's horrible. They have to choose among their children," says Wolff, whose nonprofit group was formed to fight childhood malnutrition. "They try to keep them alive by feeding them, but sometimes they make the decision that this one has to go."

The Rev. Martin Luther King Jr. declared in his Nobel Peace Prize acceptance speech that "I have the audacity to believe that peoples everywhere can have three meals a day for their bodies." Four decades later, King's wish remains unfulfilled. The global food market's shelves are getting bare, hunger activists say -- and it will get worse.

Food riots erupted across the globe this year in countries such as Egypt and India. Food pantries in the United States also warned that they were running out of food because of unprecedented demand. The news from the World Food Programme is even grimmer: A child dies of hunger every six seconds, and hunger now kills more people every year than AIDS, malaria and tuberculosis combined.

As World Hunger Relief Week is marked, more people are asking: Why are so many people starving and what, if anything, can be done to eradicate hunger?

The end of food?

Wolff thinks hunger can be conquered. Her group produces "Medika Mamba," energy dense, peanut butter food that's designed to ensure Haitian children survive childhood. Medika Mamba is easy to make, store, preserve and distribute, she says.

"It just takes the will to do it," she says of eliminating hunger. "Look at what we did for Wall Street. We didn't have enough money for infrastructure, schools, but all of a sudden, we had all of this money for Wall Street."

Raj Patel, author of "Stuffed and Starved: The Hidden Battle for the World Food System," says the right to food should be seen as a human right. But, he says, powerful corporate food distributors control too much of the world's food supply to ensure a robust global food supply.

Patel says "2008 was a record year in terms of harvest. There's more food per person in 2008 than there's ever been in history. The problem is not food, but how we distribute it."

Other causes for the rise in global hunger have been documented. They include:

• Surging oil costs have made it more expensive to harvest, fertilize, store and deliver food.

• The rise in droughts and hurricanes worldwide has wiped out crops and made farming more difficult.

• The world is running out of the raw materials -- water, oil, good farmland -- needed to keep the food system intact.

"A lot of people have begun to understand at various levels that the food system, as it is, can't go on," says Paul Roberts, author of "The End of Food."

Every time an American bites down on a steak or hamburger, they're contributing to global hunger, Roberts says. As other countries become more affluent, they're copying our meat-heavy diet. The problem: It takes so much grain and other resources to produce meat, he says.

"If the rest of the world were to eat like we do, the planet would collapse," Roberts says. "There's been this unspoken assumption that the rest of the world won't eat meat like we do. That doesn't go over well in countries like China."

Fixing our food system would be similar to weaning ourselves of our addiction to oil, Roberts says. It's going to require innovation, heavy business involvement and changes in public policy.

People are going to have to find ways to grow food with less fertilizer and water, and use less energy to store and transport food, he says.

Much of this innovation will have to be driven not just by activist and aid workers, but by savvy business people, he says.

"It's going to have to be profitable or the market won't be interested in it," Roberts says. "And if the market isn't interested in it, it's not going to happen."

In the meantime, Wolff offers some of her own solutions. She says the practice of big foreign aid agencies shipping in food to poor countries like Haiti needs to be modified. Food has become too expensive to produce, ship and store, she says.

"You can't count on big aid agencies showing up to save everybody," she says. "Not everybody can do it, and when they do it, it's not soon enough and not long enough."

She suggests that more groups teach local farmers in poor places how to produce their own crops. In Haiti, for example, her group employs 22 Haitians who make Medika Mamba and teaches other farmers how to grow crops for the mixture.

"Instead of throwing fish in the crowd, we should be teaching people how to fish," she says.

Until that day takes place, Wolff, who is a pediatrician in St. Louis, Missouri, will continue to make her trips to Haiti, where mothers are forced to make their grim choices.

"It's the most difficult thing I've ever done," she says. "You realize how absolutely blessed you are by the fate of your soul coming down the chute in the United States of America," she says. "You wonder: Why did this happen to me and not to them?' ''

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