NetNews Usenet Archive 1992 #27/NN_1992_27.iso/spool/mn/general/633

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From: [e-mail] (Tom Brusehaver)
Newsgroups: mn.general
Subject: Re: Northwest layoffs
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Date: 23 Nov 92 19:10:55 GMT
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In article <[e-mail]> [e-mail] (Russ Anderson) writes:
>
>In article <[e-mail]>, [e-mail] (Pete Palmer) writes:
>>
>> The other night on the news it was reported that Northwest  has now
>> terminated 2100 positions in 1992.  Many of these positions were
>> high paying, including upper mid-management and pilots.
>>
>> Does anyone know how many new jobs they have promised with the Airbus maintenance
>> bases in the Duluth area?
>
>1500.
>>                             I'm trying to see if there will be any net gain
>> in jobs for the state, or are we already in the red?
>
The state was in the red the minute Al stepped in.  He starts asking
questions, and the state spends money to find out answers.  Al watched
the movie "Wall Street" just enough times to realize what eveyone else
knew.  Northwest had more assets than debt.  Northwest weathered other
hard times as a result, so it was still around for Al to make a
darling deal for the stock holders.

Al at this point owed major money, so he took all the aircraft and
sold them off to a leasing company (yes, Northwest Airlines owned
everything before Al showed up).  This netted Al some healthy $$, bonus
as it were, after all the "corporation" owes them billions.  Al is
sitting pretty, lotsa cash, and the airline might just be able to keep
paying the debt owed.  Al really doesn't care, his salary (not the
Northwest salary, but the consulting company) will keep him quite nice
for years to come.  If he gives away Northwest (to maybe some other
airline, maybe KLM?) they assume ALL the debt, and Al still gets some
money perhaps a consulting contract, but doesn't really care.

>At this point, the question is whether NWA survives (saving some jobs) or
>not.  It's clear that for NWA to survive, they must become "more efficient"
>(cut jobs).
>
This move toward efficiency is very short sighted.  In any layoff
situation, the "inefficient" are let go, and unfortunatly some good
folks too.  Shortly after, the hard workers see this is a less than
ideal situation (punishment for doing a good job, doing more!), and
they move on.  So now you have a company full of middle of the road
types.
>> Obviously they needed to make these cuts to compete with the big guys,
>> but why was this never mentioned to MN residents when the
>> legislature was debating the MAC bonds last year?
>
Al and his croanies wiggled the books around, and infused some of
their own cash until all the financing got approved.  Once approved,
and they had a chance, they quit infusing money.

The NWA that was a public company (the had stock 'fairly' traded) had
less debt (virtually none).  This low debt situation provided
additional cash that didn't have to go toward paying interest.
Interest is money that cuts hard into the bottom line especially at
this scale.

>Because if the public knew the truth, NWA would never get the money.
Absolutly!  Much of the public knew it.  Just some folks liked the
idea of adding $$ to the Iron Range (I do too, but not these $$).
>
>>                                                     Is the competitive
>> environment changing so fast that they didn't know they would
>> be cutting back or did the state do a bad job in assessing NWA's
>> position in the market?
>
>Yes.  I don't think even NWA thought they would lose money this fast (from
>fare wars), but it was also clear that NWA was in big trouble (due to the
>huge debt from the LBO) before the bailout package, er, "incentives" were
>passed.
>
I don't think Al cared.  Al figured if he got the money, and the state
did all the work, it would be easier to get rid of the airline.  If Al
were to sell stock in the airline as it was 5 years ago, this would be
penny stock, VERY risky, and difficult to sell.  I think S&P (Standard
and Poors) the bond rating company downgraded the Northwest airlines
loan to one notch above junk bonds a couple weeks ago (I heard it on
the radio i think).

>I've also heard that the MN constitution is clear that public money cannot
>be used to fund private buisnesses.  Does anyone have an on-line copy of
>the MN constitution?
>
Other ventures have been financed with state money (Landmark brewery
is one).  I think there is a $30million dollar bond that needs to be
posted before the supreme court will hear the case testing its
constitutionality (sp?).
>> --------------------------------------------------
>> Pete Palmer
>--
>Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
>------------------              upon my employer or anyone else.  (c)1992
I am quoting, I hope I don't get in any trouble with your copyright, I
give you full credit for your work and mine.  Much of my work is
conjecture, and is mostly uninformed.  If you believe any of this,
your stupider than I am!

Tommy B

Don't blame me, I call 'em as I see 'em.  These are only mine.