It is no secret that our economy is in a backslide, the financial deficit has caused many things around the U.S. to change. Unfortunately due to the economic state many well known and established business are being threatened to close for bankruptcy and other financial issues. One of which we all know well is Chrysler LLC. It is truly unfortunate the changes that are being made in companies across U.S.
According to the Phoenix Business Journal Chrysler, a favorite car dealership has plans to pick up rid of 789 dealerships in the U.S. This makes for a total of 25% of the companies dealerships and will include 5 in the State of Arizona alone, up to 12 Chrysler dealers will be closing in Washington, eight in the northern area of Texas and 11 in the Kansas City area. It has been said that Chrysler had filed for a Chapter 11 bankruptcy early in April and the closure of these dealers was discussed in the court proceedings. According to Chrysler in their court filing, their dealers we’re not as competitive as some of the other foreign car brands. Chrysler says that on an average they were able to sell 303 vehicles per dealer in the year 2008, which is a 46% drop in their sales from previous years. On the other hand, car brands such as Honda sold an average of 1,200 vehicles per dealer, and Toyota topped that with nearly 1,300 of their vehicles sold per dealer
Sadly the dealers were notified in the A.M. hours through UPS letters if their dealership would be one of the ones to cease open or on the closure list. A list of dealers that are due for closure across the United States can be found at this link. The closing dealerships do have the option to appeal, but because most of them are in a struggle anyway to make ends meet the option may be a fluke.
The trouble with Chrysler closing down so many of its dealers are the number of men and women who will be without jobs and taxes are not paid. It’s hard enough to find a job in this economy and with major companies continuing to go out of business it’s getting harder. Unfortunately until the economy picks encourage up these are the changes that we must face.
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Filed under llc bankruptcy by on Jan 31st, 2012. Comment. 
Everyone knows that America has one of the worst health care systems in the world. But Americans are starting to feel the sentiment a lot more with the unusual swine flue epidemic scaring people into getting their flu shots. I suppose it would be worse to not have a health care system at all, or would it? Over 46 million Americans today are living without health insurance, and the majority of these people are working but can’t afford the high premiums or co-pays most insurance companies are charging hard working Americans. So people with children risk their well fare, their physical well being and pray for a healthy life instead of paying over half of their paychecks to the lofty insurance companies whose prices unprejudiced support getting higher. Those prices and those of the entire medical field are the reason why most Americans are a mere health emergency away from financial debt. That’s factual, most Americans are a surgery away from filing bankruptcy and we wonder why our economy is in the shape it is today. The rich can not support the dreadful when the number of those that are below the poverty line is growing while those above it are horrified fast. America is in a sinking ship, as more and more people sink below the water line of poverty, the worst our country becomes, both economically and as a superpower. The price of the dollar is the lowest its been in years and it keeps sinking as the solution to our economic problem has become to just print more money, not solving anything at all really.
According to Senator Max Baucus’ opinion piece published in Politico yesterday our healthcare system is the main reason why our economy is in that shape it is in today. In 2007, alone, our economy lost $200 billion dollars because of the poor health and shorter life span of the millions of uninsured Americans nationwide. Due to our economic crisis at least 14,000 people lose their health care coverage daily. If that’s not a crisis, then I don’t know what is. Even those with health insurance face extra fees due to “uncompensated care totaling up to $1,100 a year” (Baucus). Also during 2007 and 2008 premiums rose nearly 78 percent while incomes were raised a mere 15 percent. Is it any wonder how people can lost their health insurance? Also, it’s a known fact that wages have not been equal to inflation forcing families to sacrifice lavish necessities such as health care for simpler necessities such as food, clothing, and housing. If it came time to make a choice between feeding your children or providing them with health care is it a wonder which one was sacrificed?
Also, in this poor state over one and a half million families are losing their homes to foreclosure, because of their rising medical bills, and no insurance to help. A well-liked prediction of the near future of our country is that in seven years most Americans will spend nearly half of their total income on health insurance (Baucus). That’s ridiculous, and that also takes away funds from other areas of your life such as food and housing. While the latter of the two has gone down in this recession, due to the high numbers of foreclosure, the price of the former, food, has risen and will only get higher as this recession continues. At this point in our economic lives, our country would be helped by the starting of small businesses and the creation of jobs, but with the rising cost of health insurance, “an increase of 114% in 10 years”, small businesses can’t afford to give their employees insurance (Baucus). And most people will not work for a company without some form of health benefits.
This Senator of Montana and chairman of the Senate Finance Committee realizes the importance of our health care in solving our economic crisis and is working with President Obama to fix our ailing health care system. He states that never in his thirty plus years as a United States Senator has he faced such a daunting, or more important task. But he sees the blueprint to attain this goal as being compromise, something that few of the big wigs in this arena have failed to do. The way he sees things health care reform needs to lower the costs of health care in the long run while also improving the quality and ensure every American regardless of income has the kind of adorable health care they deserve as U.S. citizens. The emphasis should be on better care not more care which is what the emphasis is on today, which as he sees it is the reason why costs are through the roof (Baucas).
Howard Dean, the venerable governor of Vermont and Presidential candidate and practicing physican, believes that an “investment in health care technology and a comprehensive nationwide system of medical health records” need to be instituted for health care reform to be successful (Dean). Not only would this serve in the early detection of infectious diseases, a worry we are facing today, but also lower costs, medical errors will be prevented, less paperwork, and widespread access to affordable care will result from this belief. Dean, whose wife is a part of a small private practice, recognizes that this thought needs to include a more cost effective option for smaller practices who can not afford the advances in electronic records. He goes on to space that if the health record system proposed existed today, then the swine flu could be accurately documented as well as predicted and even the spread of the virus could be prevented.
The Obama administration is in full agreement with this thought funding health care information technology through the stimulus package. Funds in the sum of $19 billion dollars over five years to this portion of health care. But this is not enough needed to move our entire paper heath record system to an electronic platform. To put this in reference to other funds, the banking and insurance companies site aside anywhere from 6 to 8 percent of their budgets on information technology, which totals to about $50 billion a year in health care. The money isn’t enough, but what money there is, like anything else, needs to be spend wisely, if there is to be any hope for health care reform. Dean chooses to focus on the smaller, private practices who he says are not resistant to new technology. But this technology needs to have “minimal effort and won’t disrupt their practice environments” (Dean). Our focus should at first be electronic ordering in labs, medicine and radiology, which are the three things that are ordered the most habitually. He purposes incentives directed toward these smaller practices to improve the “continuity of care and clinical decision support” (Dean).
He also purposes the need to budget what money is given to this section of health care not only to go to research and development of the modern technologies but also the implementation of these technologies. It is through this that health care reform with be most successful. In order for small private practices to receive the savings possible create an entirely electronic medical record system they need to assist in designing the system. The need is for a universal program that is all ready based on existing technology to ensure that they receive the maximum benefits from the purposed system and that the system will be implemented correctly.
Works Cited
Baucus, Max. 2009. “Baucus on health care: ‘Crisis’ not too strong a word.” Politico.
Capital News Company LLC. http://www.politico.com/news/stories/0409/21939.html.
Dean, Howard. 2009. “Dean: Improvements must take small practices into account.” Politico. Capital News Company LLC. http://www.politico.com/news/stories/0409/21954.html.
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Filed under llc bankruptcy by on Dec 28th, 2011. Comment.
1. STAKEHOLDERS IN THE MERGER
Stakeholders played an critical role in the merger. These were entities that could critically influence any decisions in the merger. The major stakeholders were the two companies, the workers union and the majority Fraction holders. Table 1. Daimler Chrysler Statistics in 1997, gives information about the two companies.
Table 1. Daimler – Chrysler Statistics in 1997 (Schulten Thorsten, 28 May 1998)
Revenues, profits and employment of Daimler-Chrysler, 1997
Daimler-Benz AG Chrysler Corporation Daimler-Chrysler AG (pro-forma)
Revenues USD 68,917 million USD 61,147 million USD 130,064 million
Operating profit USD 2,404 million USD 4,723 million USD 7,127 million
Number of employees 300,168 121,000 421,168
1.1 Daimler – Benz AG
Daimler Benz or Daimler Mercedes Benz (DMB) was incorporated in 1926 after a merger of Daimler and Benz companies. The new company made the famous Mercedes cars that have dominated the market for premium, luxury and racecars since the past few decades. The company has drastically changed the arrangement in which cars are made and driven and have brought in a number of technology changes in areas such as the engine, transmission, safety and in providing a rich riding experience. The company has introduced innovations such as safety crumple zones, anti lock brakes, airbags, seat belts pre-tensioners and many more. The carmaker has manufacturing facilities in a number of countries and Mercedes cars and sold throughout the world. The company also makes racecars, trucks, buses and SUVs.(Waller David, 2001)
1.2. What Daimler Benz brought into the merger
DMB brought into the merger, world class engineering and top of the line premium and luxury cars through its M and E class series. The company has a worldwide dealer and after sales network and has a very strong brand identity as an unusual and prestigious cars and owning a Mercedes cars is considered as a region symbol. DMB also brought in its excellent research and development lab that is highly regarded and very well equipped to develop high speed and high performance cars with a high level of safety (Waller David, 2001).
1.3. Chrysler Corporation
Chrysler Corporation (CC) was founded in 1925 in America by Walter Chrysler. The company had created a strong reputation with its well-engineered cars that were targeted for the middle class. In 1965, CC entered the European market and challenged the market with cars such as Plymouth Road Runner, Plymouth GTX, Dodge Charger and a few others and these were called as the muscle cars. It also introduced the idea of minivans that became highly successful. It also had a stable of well received Jeeps such as Commander, Compass, Vast Cherokee, Liberty, Patriot and Wrangler and these were in the 15000/ 30000 USD price range. Over the years, the company had peaks of high revenues followed by fall in sales and the US Government has bailed it out on a few occasions. At the time of the merger with Daimler Benz, the revenues were 61, 147 million USD. Faced with increasing competition from the Japanese carmakers, CC was seeing falling sales and was not in a dominant position in the merger (Waller David, 2001)
1.4. What Chrysler brought into the merger
CC had a great acceptance with the middle class Americans. It had an superior marketing strategy in place and the cars were categorised to screen different market segments such as Town and Country. Cruiser, Convertible, Jeep, mid size, full size, sports and SUV. It brought its expertise in marketing in recession struck economies, very good effect identity, an excellent and skilled work force and a huge sales network made of many dealers and sales agents. The car was identified with the blue-collar worker, middle class segment and people who required value for money and with people who shopped on a tight budget (Waller David, 2001).
1.5. Workers Union
The merger was not only a merger of two companies but also of the workers unions. Daimler Benz had a workers union of 300,168 who were affiliated to IG Metall while Chrysler had 121,000 workers affiliated to the American United Auto Workers. The merger would beget the largest group of workers, a total of 421,168. The German workers union leaders were not taken in by the assurances given by Jürgen E Schrempp, president of Daimler-Benz that there would not be any layoffs and job cuts. The leaders wanted the management to extend the job guarantee agreement that was valid till 2000, to be extended to 2002. The management was not ready to give a written guarantee and this caused increasing unrest among the German workers. Since the merger was registered as German company, as per the German laws, 10 workers would be given a place on the supervisory board. But after the merger, the management announced that five members would be from Chrysler. The German workers felt that since this was a deemed German company, the members had to be elected from the workers union and the elected members could in turn sit on the board. Since the Germans outnumbered the Americans by three times, the Americans were not ready to accept this procedure. This snort was to be settled amicably by mutual discussions, but the strain had already set in (Schulten Thorsten, 28 May 1998).
1.6. Major Shareholders
Kirk Kerkorian (Auto Talk, June 1998) was the single largest private shareholder in Chrysler Corporation. Kirk was a billionaire from Beverley hills. He had bought a 10% stake in 1990 in Chrysler and this grew to more than 15%. In 1995 he attempted a hostile takeover of the company but had to abort it due to governments intervention. He then offered to sell a part of his shares in exchange for a site on the Board of Directors. It is reported that it was this hostile takeover bid that made Chrysler judge of a merger with Daimler. He sued the Daimler Chrysler in 2000 claiming that he had lost billion of dollars due to the merger. His case was turned down since the company was registered in Germany and German rules do not allow for stock options. On April 2007, he has again made a bid of 4.5 billion USD for Chrysler (Kerkorian, 5 April 2007).
2. LITERATURE REVIEW
Many researchers and scholars have written about the care to be taken for organisational changes and change management policies that occur when international companies merge. Taylor (Taylor, 2000) has written about the manner in which companies need to communicate effectively. He argues that when dealing with cross cultural changes, societal and cultural forces have to be addressed effectively. These forces can severely effect organizations and restrict their functioning.
Johnson (Johnson et all, 2004) have argued that in the early 1980s, if employees would follow a predetermined set of corporate values then they could be allowed to bring in innovation. This would mean that shared values would help to encourage employees to make better than ever. But this approach has its own disadvantages. By placing importance on shared values, the employees may feel that they are being manipulated and this can create distrust and cynicism. Another famous fact that Johnson has pointed out is regarding slogans and the vision statement. These things need to be followed and reflected in the behaviour of managers. So slogans such as people are our greatest assets become meaningless when job cuts are looming ahead and the whole exhaust is derailed. Johnson has also written about Change Levers and the issues that change agents face in organizations. There are a number of levers and interventions that need to be used. Organizations have a number of interdependent subsystems and these need to be aligned to each other. The subsystems cannot work in isolation and any change that is brought should be effected at the organization level. If this does not happen then other units in an organisation will start a counter carry out. Johnson speaks of the cultural web of an organisation that centres around an explicit paradigm. There are various factors such as Stories, Symbols, Power Structures, Organisation Structures, Control Systems and Routines and Rituals. All these perform a part of the social fabric and any change management policies must ensure that these elements are included.
Bloomgarden (Bloomgarden, 1999) suggests that there are four phases in a merger. In the first phase, the merger is announced and in the second phase covers the time frame between the initial announcement of the merger and the final approval. A lot of questions need to be answered about finance, workers and staff status, market caps and others. The management needs to be honest about certain things that they are not sure of. If any job cuts are planned, then it is best if this is mentioned as a possibility. In the third phase, the merger is signed and the merger needs to stay away and ahead of the rumourmongers. The management needs to make regular announcements about any plant closures or job losses. In the fourth and the final stage, the change management policies from the merger are implemented.
3. WHAT THE MERGER WAS SUPPOSED TO DO
The merger between Daimler Chrysler was supposed to obtain a great automobile manufacturing company that would create a virtual monopoly in all market segments. The market cap was supposed to be more than 130 billion USD. Daimler had a very good presence in the premium and luxury car market while Chrysler had a good acquire in the middle level car market segment. While Chrysler had managed to gain it operation from bankruptcy on more than a few occasions, it was financially vulnerable. Daimler on the other hand had a sound business model and had enjoyed stable growth. Both these companies were expected to expend their knowledge in a proactive and cooperative way to increase their business. (Surowiecki James, 15 May 1998).
The merger was also supposed to produce huge savings in the form of reduced development cost, sharing of resources and reduction in procurement and outsourcing costs. US Suppliers to Chrysler were looking forward to sales in the European market while the German suppliers looked for similar opportunities in US, South America and Canada. The market was supposed to include OEM sales as well as the spare parts market. As the editorial board of WSES put it “If Daimler Chrysler were a country, it would dismal 37th in the world in terms of Gross Domestic Product, objective slow Austria, but well ahead of six other members of the European Union–Greece, Portugal, Norway, Denmark, Finland and Ireland” (WSWS, 8 May 1998).
4. WHAT WENT WRONG
A number of reasons have been attributed to the failed merger and these cantered around certain cultural perceptions, work methods, technology and other issues. These are discussed in this section
4.1. Clash of Cultures
Though Schrempp had announced that this was a merger of equals, this was actually not the case. Daimler has paid 37 billion USD in a stock swap exchange and it wanted good value for its money. When the merger was to be signed, the Americans had the impression that the Germans were simpletons, hard working but brilliant who had a extreme profile and kept to themselves. The Germans on the other hand had imagined a ‘Cowboy’ image of the Americans and were expecting a gung ho team. But the reality was very different as the German leader, Jürgen Schrempp, had a different background. It is reported that in one of the first meetings held on 11 December 1998 in Spain called the ‘Top Management Meeting’, the Germans outnumbered the Americans by two to one. It was positive that Schrempp was in charge as he rushed about, talking from the podium and shouting around. When the time came for drinks, everybody joined in the fun and it was Schrempp who sang the loudest and probably drank the most. The Americans were expecting a sober German, but they were facing someone who seemed to be more fun than their serious CEO, Eaton and it was clear who was in charge. This incident created a new paradigm shift in the relations and it was understood that the Germans with their money and genuine cars would be in a dominant position. They looked down at the Americans as rather awful cousins who made small and inexpensive cars for the middle class (Vlasic et all, 5 June 2000).
4.2. Disparities in Wages
There were wide disparities in wages between the US and the German workers. It was felt the US workers were being a larger amount when compared to the amount the Germans were getting much lesser. According to Orr (Orr Deborah, 17 May 1999), Eaton, the head of Chrysler was getting about 11.7 million USD while his counter part, Schrempp was being paid about 2 million USD. The company had filed a declaration with the Securities and Exchange Commission and had declared that only 17 managers and board members were paid a total sum of 40.4 million USD. The big question that was being asked was if the US workers would have to rob a pay cut or would the Germans be given a massive pay hike. The US workers would not agree to any pay cuts while the increasing the wages all around for a 440,000 workforce would mean certain financial ruin. Certain changes were made and bonus paid to the Daimler staff and the options given to the Chrysler staff disappeared when the merger came into conclude. This issue continued to cause severe strain in the interactions between the US and German employees, but incidentally before the issue became very serious, the merger itself was doomed.
4.3. Different Business Models
There was an apparent clash of business models and ethics for the stakeholders. The Germans catered to the high and premium market segment and consequently followed the high cost, low volume-manufacturing model. The value proposition it offered to its customers was brand identity and exclusiveness. Chrysler on the other hand had to skim off each cent it could save and provide low cost models to a price sensitive and fuel economy minded customers. It had adopted a low cost, high volume-manufacturing model that relied on mass production techniques. Mixing and integrating these two models unfortunately did not pay off and was not handled well (Sandoz, June 2002).
4.4.Adverse Media Reporting
The media, which had initially applauded the merger, started damming the merger and everyone from lay journalists to authors had a field day in bashing the merger. This created a very bad publicity and may have hastened the failure of the merger. An excerpt from the book by Vlasic says
“But the union didn’t turn out to be a merger made in heaven. When the dust settled, Daimler was firmly in control of Chrysler, and the shock waves were reverberating on both sides of the Atlantic. An American icon would lose its independence, and a German giant would grow in power and influence. Daimler chief Jurgen E. Schrempp grabbed the wheel of DaimlerChrysler. His co-chairman from Chrysler, Robert J. Eaton, took a back seat. And Thomas T. Stallkamp, Chrysler’s president, got caught in between.” (Vlasic et all, 5 June 2000)
Such writings were published day in and day out and caused much anger and distrust among the Americans who believed that they had been ‘conned’ and ‘taken for a ride’ by the wily Germans
4.5.Technology Issues
Chrysler had distinct technologies that could have helped the German company. Chrysler had always used the front wheel drive transmission that got power from the New Venture gearbox that had been developed along with General motors. This was supposed to relieve the Daimler cars, which were always rear drive vehicles. Mercedes on the other hand had the famous 5 hasten automatic transmission that are standard features in its cars while this technology was not used at all by Chrysler. While Chrysler always led in the 2 stroke petrol engine that has been termed as more powerful but ‘gas guzzling’, Germans had advance in the field of 4 stroke direct injection diesel engines. If the Mercedes engine could be adapted to the Chrysler vehicles and vice versa, then a very competitive model could have been developed for Chrysler in the 4 cylinders to 12 cylinder automobiles. Daimler cars were well-known for certain safety measures that were built into the cars and these included features such as anti lock braking systems, smart baby seats, ultrasonic obstacle detectors, seat belt pre-tensioners, safety air bags and others. Chrysler did not implement these systems in their cars since they felt there was no need for these innovations, cost of the car would go up and finds lesser takers. Chrysler had primitive aluminium and impact resistance composite materials in the body panel construction. This could have been used by Daimler to improve the fuel economy of their cars since the German company had always used gage steel sheets for the body panel work. Both the companies had developed prototypes of hybrid vehicles that could run on alternative fuels such as electricity, bio diesel, fuel cells, hydrogen based fuel cells and so on. But common projects were never taken up to develop these vehicles. Unfortunately deep distrust and ‘we are better’ attitude acted as sound barriers for knowledge sharing. The benefits in engineering knowledge remained isolated in their respective companies (Herman Don, June 1998).
4.6. Cost Cutting Measures
With reducing sales and increasing overheads, there was an urgent need to control costs. The management decided to cut about 13,000 jobs and close a number of plants and factories. This was deemed necessary since sales were down and there was excess capacity, so closing down idle plants was the immediate solution to control costs. This has created a lot if unrest in the workforce and the labour unions (Hawranek Dietmar, 19 February 2007).
4.7. Market Segments Issues
Chrysler had an upper hand in the gas-guzzling card such as the SUVs and the minivan. While these vehicles were accepted in the early 1990s, the market demand for these cars fell in the early 2000’s. While there was a demand for fuel efficient, compact cars, Chrysler did not have any good car model to meet this question. Consequently, Chrysler lost about 1.5 billion USD in 2006. There have been increasing demands from major shareholders such as the Deutsche Bank to sell off the ailing unit (Heading For Divorce, 4 April 2004).
4.8. Where the merger stands now
Daimler had reportedly spent 36billion USD to acquire Chrysler. With steeply falling sales, Chrysler is worth only about 14 billion dollars and it has a pension and health liability of 12 billion USD. This leaves a very limited operating margin. Daimler has announced that it wants to sell of the company and is reportedly seeking buyers (Hawranek Dietmar, 19 February 2007).
Daimler on the other hand has shown steady growth and increased sales. In 2006, Daimler showed an operating income of 7.28 billion USD up from 8.84 billon USD in 2005. The earning per share of the company have also gone up to 4.17 USD from the 3.7 USD of 2005 (Isidore Chris, 14 February 2007). The credit rating company, Standard & Poor’s, have brought down the rating of the company from BBB+ to BBB and have given it a negative outlook since they have strong doubts about any possible recovery by the company. This downgrade is a strong blow as it would make credit companies and banks think twice before involving themselves on this company or backing any investor who would be interested in it (Harnischfeger et all, 22 October 2003).
5. CONCLUSION
The Daimler Chrysler Merger is an example of how technologically advanced and financial strong market leaders manage to bring down a merger that should have worked wonders and turned the merged entity into a global giant. There was a cultural mismatch, poor support from the management and political issues that played a negative role in bringing down the merger. Both companies had some intrinsic strength and trustworthy, non-competitive car models and between themselves they stood a chance to cut a wide swathe in the full spectrum of the car market. Mutual distrust, bad market conditions, increased competition, hostile labour, indifferent management and many other factors caused the merger to fail. The paper should serve as a learning document for any future mergers and acquisitions that companies may undertake.
7. REFERENCES
Auto Talk, June 1998, ‘Kerkorian, Eaton are Deal’s Biggest Winners’. Ward’s Auto World, Volume 34, Issue 6
Bloomgarden, 1999, ‘Unhappily married’, PR Central, Retrieved 27 April 2007 from http://www.prcentral.com/
Editorial Board, 8 May 1998, ‘The merger between Chrysler and Daimler-Benz: what it means for workers’, World Socialist Web Site, Retrieved 27 April 2007 from http://www.wsws.org/news/1998/may1998/merg-m8.shtml
Harnischfeger Uta Roberts Adrienne, 22 October 2003, Daimler hit by S&P downgrade after profits fall, Financial Times. London, pp. 29
Hawranek Dietmar, 19 February 2007, ‘Daimler Ponders How to Divorce Chrysler’, Spiegel Online International, Retrieved 27 April 2007 from http://www.spiegel.de/international/spiegel/0,1518,467117,00.html
Heading For Divorce, 4 April 2004, ‘Daimler Confirms Chrysler Sell-Off Talks’, Spiegel Online International, Retrieved 27 April 2007 from http://www.spiegel.de/international/business/0,1518,475718,00.html
Isidore Chris, 14 February 2007, ‘For sale: A smaller Chrysler’, Jones Report, Retrieved 27 April 2007 from http://www.jonesreport.com/articles/140207_chrysler_13000.html
Johnson Gerry, Schools Kevan, 2004, ‘Exploring Strategic Chang’, Published by Prentice Hall
Kerkorian, 5 April 2007, ‘Kerkorian in $4.5bn Chrysler bid’, BBC International News, Retrieved 28 April 2007 from http://news.bbc.co.uk/2/hi/business/6531629.stm
Orr Deborah, 17 May 1999, ‘Safe haven’, Forbes New York, Volume 163, Issue 10, pp. 207
Sandoz Paul Strebel, June 2002,’Cross-Border Lessons from the DaimlerChrysler Merger’, Perspectivesfor Managers: International Institute for Management Development, Retrieved 27 April 2007 from www01.imd.ch/documents/pfm/persp_2002/pfm_0209.pdf
Schulten Thorsten, 28 May 1998, ‘Industrial relations aspects of the Daimler-Chrysler merger’, European Industrial Relations Observatory on-line, Retrieved April 27, 2007 from http://www.eurofound.europa.eu/eiro/1998/05/inbrief/de9805264n.html#contentpage
Sherman Don, June 1998, Mutual Engineering Society, Ward’s Auto World, Volume 34, Affirm 6
Surowiecki James, 15 May 1998, ‘The Daimler-Chrysler Collision’, Washington Post.Newsweek Interactive Co. LLC, Retrieved 27 April 2007 from http://www.slate.com/id/2654/
Taylor M, 2000, ‘Cultural variance as a challenge to global public relations: a case gaze of the Coca-Cola scare in Europe’. Journal of Public Relations Review, Volume 26, Issue 3, pp: 277-293.
Wallace Bob, 23 November 1998, ‘Now its Cost Cutting Time’ Computerworld, Volume 42, Issue 47
Waller David, 2001, Wheels on Fire: The Incredible Inside Story of the Daimler Chrysler Merger. London: Hodder & Stoughton
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Filed under llc bankruptcy by on Nov 6th, 2011. Comment.
- The members of an LLC are not personally liable for the obligations of the LLC.
- LLCs are constituted according to state law and not federal law.
- Members who are individuals include earnings from the LLC on their individual tax returns.
What is an LLC?
A Petite Liability Company (LLC) is a business structure that combines aspects of a corporation and a partnership. The owners are called members and not partners or shareholders. The number of members is normally not subject to any limit, and the members can be individuals, corporations, or other limited liability companies.
Advantages
One of the main advantages of an LLC is that it is treated as a separate legal entity, similar to a corporation, and the members are not personally liable for the company’s debts or obligations. There are two exceptions to this limited liability: when a member grants a personal guaranty for an obligation of the LLC, and when a court determines that the company is actually an alter ego of the owners themselves, in which case the members could be held personally liable.
In general, there are no restrictions on the persons or entities that can be members of an LLC. It may be necessary to obtain written consent from the members prior to admitting unusual owners, unless the articles of organization (see below) provide otherwise.
The majority of states and the Internal Revenue Service (IRS) recognize an LLC with a single member as a legitimate business structure.
LLCs generally require fewer formalities than a regular corporation or an S corporation. For example, the shareholders’ and directors’ meetings that are required for corporations are normally not required for LLCs.
There is flexibility in how LLCs are managed and how earnings are distributed. All the income and losses of an LLC pass through the company to the individual members. This avoids the double taxation of having to pay income tax on the company’s earnings and then again having to pay individual income tax on the company’s distributions. The LLC may have to file a tax return, but the individual owners include the company’s earnings in their individual tax returns and pay tax on them.
Disadvantages
A corporation can have an indefinite life, but LLCs normally have a fixed duration. Generally, the articles of organization must establish the date on which an LLC will end. In the absence of a provision to the contrary in the articles of organization or in the operating agreement, an LLC will also be dissolved when one of the members dies, retires, resigns, is expelled, or declares bankruptcy, unless within 90 days a majority of the other members vote to continue the LLC.
Forming and operating an LLC require greater formalities than a sole proprietorship or a partnership.
Forming an LLC
An LLC is formed according to state law and not according to federal law. All 50 states in the U.S. now allow the formation of LLCs.
There are two main actions that need to be taken to form an LLC: articles of organization and an operating agreement.
Articles of Organization:
The articles of organization have to be drafted and presented to the corresponding Secretary of Station, paying the required charges. These articles will have to be in the form required by the Secretary of Region. Among the information normally required is the date on which the LLC will be dissolved and a statement regarding the administration of the LLC, for example whether the LLC will be managed by one administrator, more than one, or whether the members themselves will be in charge of the administration.
Operating Agreement:
Although in many states it is not an obligation, it is advisable to have an operating agreement for the LLC. This agreement can be made before or after the presentation of the articles of organization. This agreement can establish the way in which earnings will be distributed and can define the owners, how the ownership can change, and the responsibilities of the members.
You should contact the office of the Secretary of State in the state where you are planning to set up an LLC to find out the specific requirements for formation.
Registered Agent
Almost all the states require that a registered agent be named for the LLC. In the majority of cases, this agent can be any person who has a domicile in the state in which the LLC is constituted.
The registered agent acts as the LLC’s representative for purposes of accepting the serving of process, or notification of legal action; that is, for acknowledging any legal proceeding, or receiving notification of any legal or official communication from the government that is presented to the company.
Federal Income Tax
LLCs are established according to the laws of each state, and the federal government has no classification for LLCs. Therefore, for purposes of the U.S. federal income tax, an LLC must file a return as a corporation, a partnership or a sole proprietorship.
LLCs with a Single Member
In general, when an LLC has only one member, the fact that it is an LLC is ignored for purposes of filing a federal income tax return, but that does not change the fact that legally it continues to be an LLC.
When the only member is an individual person, the LLC’s income and expenses are reported on that person’s individual income tax return on Form 1040, Schedule C (Profit or Loss from Business), Schedule E (Supplemental Income and Loss), or Schedule F (Profit or Loss from Farming), as applicable.
When the only member is a corporation, the income and expenses of the LLC are included in the corporation’s income tax return on Form 1120 (for a normal corporation) or Form 1120S (for an S corporation). In the case of a normal corporation (1120), the income and expenses are not transferred to the shareholders. For an S corporation (1120S), each owner or shareholder declares his or her portion of the earnings, credits and deductions declared on Schedule K-1 (Form 1120S).
LLCs with More than One Member
LLCs with more than one member must file a tax return as a partnership, using Effect 1065. Then, the members include their portions of the earnings, credits, and deductions from the LLC, as reported on Schedule K-1 (Form 1065), on their individual income tax returns.
Form 8832
In order to choose the way an LLC will be treated for tax purposes, you can file Compose 8832, Entity Classification Election. If this originate is not filed, the LLC will be treated as indicated above. If you do not want to change this treatment, there is no need to file Form 8832.
An LLC with only one member can elect to be treated as an association subject to tax as a corporation, instead of a sole proprietorship, and an LLC with two or more members can elect to be treated as an association subject to tax as a corporation or a partnership.
Do 8832 is also old when you want to subsequently change the arrangement the LLC is considered for federal income tax purposes.
Self-Employment Tax
When a business formed as an LLC has net earnings of over $400, it may be necessary to file Schedule SE, Self-Employment Tax, which is the equivalent of the social security and Medicare taxes.
Generally, when an LLC has only one member, who reports the LLC’s earnings on Schedule C or F of his or her individual income tax return (Form 1040), Schedule SE will also have to be filed and the self-employment tax paid.
When an LLC files a tax return as a partnership (Form 1065), the members pay the tax on self-employment income (Schedule SE) on their portion of the partnership (LLC) earnings. But if there are members who are the equivalent of limited partners, they would pay this tax only if the LLC pays them for their services.
When the LLC Has Employees
When the LLC has hired employees, it needs to withhold, characterize, and deposit the corresponding payroll taxes: the social security and Medicare taxes, federal income tax, and the dwelling or local income taxes that may apply, and pay the employer’s portion of the social security and Medicare taxes.
Form 941, Employer’s Quarterly Federal Tax Return, needs to be filed (Form 943 in the case of a farming business). After the close of the year, W-2 forms have to be prepared and sent to the employees and to the IRS, reporting the compensation paid for the year and the taxes withheld. Also, Form 940 or 940-EZ, Employer’s Annual Federal Unemployment (FUTA)Tax Return, must be filed when the LLC paid salaries of $1,500 or more in any quarter during the calendar year, or had one or more employees working at least part of a day in 20 different weeks during the year.
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Filed under llc bankruptcy by on Oct 30th, 2011. Comment.
July 26, 1946, is a day that will remain dear to many Hawaii residents because that’s the day Aloha Airlines, then called Trans-Pacific Airlines, had its first revenue flight. It was a day that would note the birth of Hawaii’s second largest flagship airline. It would also be a day that would be celebrated for years to come by generation’s o families that shared a part of this airlines great lineage over the next six decades. Stories of “bare bones” operations, noisy flights, hula performances by the “stewardesses” and the picturesque conception from the DC-3’s that took your breath away, these are the stories our grandparents remember about their flights on Trans-Pacific Airlines (TPA). They suppose at the lack of comfortable accommodations and decor within the aircrafts and just smile as they remember those carefree days long gone.
Bill Wood states in his book “50 Years Of Aloha, The Chronicle of Aloha Airlines”, the airline was the brainchild of a considerable man named Ruddy Tongg. Mr. Tongg owned a publishing company and was an affluent Chinese who was familiar with the frustrations of the ethnic minorities in Hawaii. Back then, in spite of being in Hawaii, the Caucasians who flooded to Hawaii enjoyed many of the benefits not extended to those not of the Caucasian race. Money wasn’t so much an issue when it came to the inequities but rather just the stigma of racial prejudice that was not a part of Hawaiian culture. So it was a time of growth and new discoveries for the Hawaiian Islands. Mr. Tongg wanted to create his mark in Hawaii history and represent the strength and independence of the minority races that were treated unjustly. So, with a dream of social equality and the drive to manufacture it work, Ruddy Tongg and a group of associates, who remain unnamed, embark on their first steps towards creating an airline that will span over 60 years and help define the financial landscape of the Hawaiian islands.
The early years of TPA were difficult and grime. Many of the aircrafts that TPA acquired were surplus aircrafts from the military so they lacked the comfortable and aesthetically elegant atmosphere passengers are familiar with today. The planes seating configuration consisted of seats facing inward and lining up along the fuselage, or the interior walls of the plane. Many times the passengers and cargo were flying side-by-side. The aircrafts were not pressurized so they couldn’t skim very high. It was commonplace to coast along the island chain and look almost up close the beautiful waterfalls and lush mountaintops of Maui, Kauai and the Big Island of Hawaii.
Ruddy Tongg’s dream of a “kama`aina” airline was coming true. The “stewardesses” were beautiful and provided each passenger with flowers, drinks and a hula show onboard. With the flights between islands lasting anywhere from 45 minutes to 2 hours long. Many employees of TPA performed various tasks when asked to “fill in”. No such thing as “not on my job description” during these early days and the employees didn’t mind helping out because that was the Hawaii culture back then.
Then TPA changed its name to TPA Aloha Airlines later to plunge the TPA and become simply Aloha Airlines. Two names synonymous with the airline are Dr. Hung Wo Ching and Mr. Sheridan Ing. These two men help to orchestrate a turnaround for Aloha Airlines and help to foster the “spirit of aloha” within the ranks of the employees. However, despite the creative and courageous efforts of the two men, Aloha Airlines continued to see fewer good days and more bad days financially. Eventually, Dr. Ching and Mr. Ing would become the private owners of Aloha Airlines and would do all they could to continue helping the airline. Under their tutelage, the airline would expand and behold morale increase despite the looming financial issues. However, Aloha was always considered to be the more stable of the two Hawaii flagship airlines. Whenever a Hawaii resident would ask which of the two airlines do better and is more
In 2005, Aloha Airlines would, in practice, by owned by a new company, Yucaipa Cos. LLC, because they bailed Aloha out of bankruptcy by investing $100 million. “The families”, Chings and Ings, as they were fondly and reverently referred to, would still have interest in the airline and would have seats on the board of directors. Many employees were conflicted about this “buyout” because of the uncertainty of what it would hold for the company in the future.
Unfortunately the addition of Go! Airlines, subsidiary of Mesa Airlines, into the Hawaii inter-island airline industry would explain to be more than just a pesky nuisance. In 2006-2008, Aloha Airlines suffered the biggest losses financially than ever before. It was rumored that Yucaipa was writing checks to the tune of $8million per month to cover operating expenses including payroll, airport taxes and rent, from January 2007 until now. No one can say how honest that rumor is.
What does the future hold for Aloha Airlines now that it has filed for Chapter 11 Reorganization Bankruptcy again? The consensus is the airline may not last much longer but it would be a sad day if Aloha had to close its doors.
So great history and memories surround this carrier and its dwelling in the evolution of the state of Hawaii. Its history is a part of the many successes that abound in the place. People remember their parents and grandparents working hard at Aloha to pay their way through school. Now many of these people are successful doctors, lawyers, business owners who have this little airline in Hawaii to thank for being a part of their personal success. Students who attended mainland colleges were able to sail home because family members worked at Aloha and many others benefited because of scholarships provided by Aloha and the various unions representing Aloha employees. Victims of Hurricane Iniki and Iwa were helped because Aloha sent over supplies to help rebuild the devastated areas. When a coworker needed help, the other employees of Aloha were there to help. The generosity of the employees helped to foster the sense of “ohana” at Aloha, and that will missed most of all according to some. Many have watched their coworkers families grow and flourish while at Aloha. Aloha is more than just an airline. It’s a testament to the power of sheer will and determination of one man, Ruddy Tongg, and to Dr. Ching and Mr. Ing and their investments emotionally and financially into an airline that they knew would encourage benefit the island residents. Aloha is a symbol of the strength and kindness the “kama`aina” possess and has secured itself as one of the pillars that gain up the foundation of Hawaii’s state history and, no matter the outcome, will always represent the “Spirit of Aloha” that is Hawaii!
Bill Wood, 1996 “50 Years Of Aloha: The Narrative of Aloha Airlines”, Aloha Airlines, Inc.
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Filed under llc bankruptcy by on Oct 2nd, 2011. Comment.