The breakdown of two of Detroit's Big Three is bringing a new urgency to the scramble among the world's automakers to forge alliances with former rivals, carve inroads into new markets and shop for well-known brands.
The turmoil has led to a flurry of deals that is realigning the automotive playing field. Italian automaker Fiat's bid to become a truly global player by acquiring control of Chrysler and eyeing General Motors Corp.'s European operations is only the most obvious move. There have been several others -- some in the works, others only rumored -- spanning Europe, Asia and North America.
The goal for automakers, analysts say, is to survive the worst climate for vehicle sales in decades by getting bigger and broader. To do that, they're looking to either acquire distribution networks in new markets for their own cars or bid for the brands that have come up for sale as a result of Chrysler and GM's struggles.
But it's still not clear how much your local auto-dealer row will have changed a decade from now.
"The GM and Chrysler restructurings are going to trigger a major shift in the way the automaker landscape looks over the next five to 10 years," said George Peterson, president of Tustin consulting firm AutoPacific. "There could be so many permutations and combinations that you can't really predict what will happen."
Chrysler, which also sells the Dodge and Jeep brands, filed for bankruptcy protection April 30, the same day it struck an alliance with Fiat that ultimately could give the Italian company a controlling stake in the onetime American auto stalwart. GM is trying to avoid bankruptcy in part by unloading its Saturn and Hummer brands in the U.S., its Opel division in Europe and its Swedish car marque Saab. It's also killing its Pontiac brand.
Striking the deal for Chrysler will give Fiat, which fled the U.S. market in the 1980s, an instant dealer network to sell small, fuel-efficient cars built in North America and based on models such as the Fiat 500, popular in Europe. The Italian company is also in talks with GM to take over Opel and has expressed interest in Saab.
Completing all those deals could vault Fiat into the top five among the world's auto companies in terms of sales. (It currently ranks 11th.) But others are angling for Opel -- Canadian auto parts maker Magna International Inc., for instance -- and reports have surfaced that Chinese automaker Geely Automobile Holdings Ltd. is interested in Saab. Geely denied that report.
Other reports have Penske Automotive Group Inc., the Bloomfield Hills, Mich., dealership chain, in talks with GM about acquiring Saturn's distribution network. GM said Monday that it was in talks with two bidders for Hummer.
Not everyone is in the hunt. Renault-Nissan, the Franco-Japanese alliance that some point to as a model for global auto hookups, said this week that it had no plans to bid on Chrysler's or GM's dangling assets.
Germany's Volkswagen, the world's third-largest automaker behind GM and Toyota Motor Corp., also is sitting this one out -- for now. VW already is a mini-U.N. of transportation, fielding an international portfolio of nameplates that includes Audi in Germany, Seat (pronounced say-aht) in Spain, Lamborghini in Italy, Skoda in the Czech Republic, Bugatti in France and Bentley in Britain. And it is in the process of merging with its majority shareholder, German sports-car maker Porsche.
Rather than buy more brands, VW appears intent on shoring up its presence in the United States, where it has a paltry 2% market share.
The globalization gambit is nothing new, of course. Auto companies have been forging cross-border alliances in recent years to share technology, which has become increasingly complex and expensive to develop, notes Ron Pinelli, president of AutoData Ltd., which compiles industry sales figures.
Some foreign affairs have foundered. The marriage of Chrysler and Germany's Daimler (parent of Mercedes-Benz) famously failed, as did a dalliance between GM and Fiat earlier in the decade.
And Ford Motor Co.'s decision to give up on collecting foreign auto marques kicked off the worldwide auto swap meet in 2007, when it began dismantling its Irvine-based stable of foreign luxury brands, eventually selling off Aston Martin, Jaguar and Land Rover. The last piece, Swedish automaker Volvo, is on the auction block.
Ford is concentrating on simplifying its vehicle lineup and using some of its popular European models, such as the Fiesta and the Euro-version of the Focus, as the basis for small cars that it hopes will be profitable sellers in America.
Other liaisons have been more successful. Paris-based PSA Peugeot Citroen has teamed with Japan's Mitsubishi Motors Corp. to build a PSA-badged crossover SUV based on the Mitsubishi Outlander.
The question remains how markedly the reshuffling will alter the global auto market.
Barring a complete collapse of GM, the upper ranks of the world's auto companies aren't likely to change significantly in the near future, analyst say, despite repeated predictions that waves of Chinese and Indian cars are about to flood global markets. Fiat, if it succeeds in its multiple acquisitions, might be the only car company to dramatically raise its international profile.
In the meantime, South Korean automaker Hyundai Motor Co. -- which also controls the Kia brand -- continues to solidify its position in the United States, still the world's most important car market. Based on sales last year, Hyundai-Kia ranks No. 5 globally and No. 7 in the U.S.
And Toyota, despite recent struggles, isn't likely to be displaced by Fiat any time soon.
There are more than 100 Chinese auto companies, and it's unclear which ultimately will rise to true prominence.
In the coming years, "you'll see new badges, you'll see new companies from China and India," said Dan Cheng, head of consultant A.T. Kearney's North American auto practice. "But they'll be niche players.
"I would not expect to see 12 different full-line [automakers] offering a full range of vehicles."
Monday, May 11, 2009
Governor to release plans for what will happen if budget measures fail
Gov. Arnold Schwarzenegger told legislative leaders Monday the state's annual income tax collections are expected to fall this year for the first time since 1938, punctuating a budget shortfall that he said will reach $21.3 billion if voters reject a slate of ballot measures next week.
With passage of the measures appearing unlikely, Schwarzenegger announced that he would release plans Thursday -- five days before the May 19 special election -- to show Californians the devastating consequences for government if the propositions fail.
State finance officials have been drafting plans for cuts in fire services, prisons, schools and other areas in the event that Propositions 1A through 1E, which plug a $6-billion budget hole, cannot overcome strong voter opposition reflected in recent polls.
The second scenario, if the measures pass, will still be devastating: The state budget will still be $15.4 billion out of balance since Schwarzenegger and lawmakers approved it in February, administration officials said Monday. That is nearly double recent projections.
In a letter to legislative leaders, Schwarzenegger explained why state finances have plunged so quickly since February, when he signed a spending plan intended to keep the state solvent through June of next year. Collections from personal income -- which the state relies upon heavily -- are expected to be lower this year than last, something that has not happened in more than 70 years, the governor wrote.
Schwarzenegger had postponed the unveiling of his revised budget from May 14, when it normally would have been released, until May 28, nine days after the special election. But in a visit to a senior center in Culver City on Monday, Schwarzenegger said he would release a summary for the two alternatives on the original date "so that people see what the difference is."
"The way it is right now, severe cuts will happen," he said. "And it's important also for people to know this is not a scare tactic. This is just to let you know what could happen. "
Some of the harsh contingency plans have already leaked out and been the focus of media reports in recent days.
Jon Coupal, president of the Howard Jarvis Taxpayers Assn., which is leading the opposition to the ballot measures, said it appeared that the governor was trying to politicize the budget process.
"It strikes me that the timing certainly raises the appearance of being wholly politically driven," Coupal said, predicting the strategy would backfire. "They're clearly trying to persuade voters to vote in a certain manner."
Schwarzenegger used the phrase "severe cuts" nine times to describe what could happen.
He spoke of closing fire stations and reducing engine crews, releasing nearly 40,000 prison inmates, slashing $3.6 billion from education and laying off tens of thousands of school employees, borrowing billions from local governments and making further cuts to healthcare programs.
"None of those options are pleasant, that is the important thing for people to know," he said.
The May 19 propositions are intended to have a direct impact on this year's budget by changing the lottery and redirecting voter-allocated funds for early childhood education and mental health programs. They also would affect the state's finances over the next several years, by extending recently enacted tax increases for an additional period.
The only measure that appears likely to pass is Proposition 1F, which would prevent elected state officials from receiving salary hikes in deficit years.
latimes
With passage of the measures appearing unlikely, Schwarzenegger announced that he would release plans Thursday -- five days before the May 19 special election -- to show Californians the devastating consequences for government if the propositions fail.
State finance officials have been drafting plans for cuts in fire services, prisons, schools and other areas in the event that Propositions 1A through 1E, which plug a $6-billion budget hole, cannot overcome strong voter opposition reflected in recent polls.
The second scenario, if the measures pass, will still be devastating: The state budget will still be $15.4 billion out of balance since Schwarzenegger and lawmakers approved it in February, administration officials said Monday. That is nearly double recent projections.
In a letter to legislative leaders, Schwarzenegger explained why state finances have plunged so quickly since February, when he signed a spending plan intended to keep the state solvent through June of next year. Collections from personal income -- which the state relies upon heavily -- are expected to be lower this year than last, something that has not happened in more than 70 years, the governor wrote.
Schwarzenegger had postponed the unveiling of his revised budget from May 14, when it normally would have been released, until May 28, nine days after the special election. But in a visit to a senior center in Culver City on Monday, Schwarzenegger said he would release a summary for the two alternatives on the original date "so that people see what the difference is."
"The way it is right now, severe cuts will happen," he said. "And it's important also for people to know this is not a scare tactic. This is just to let you know what could happen. "
Some of the harsh contingency plans have already leaked out and been the focus of media reports in recent days.
Jon Coupal, president of the Howard Jarvis Taxpayers Assn., which is leading the opposition to the ballot measures, said it appeared that the governor was trying to politicize the budget process.
"It strikes me that the timing certainly raises the appearance of being wholly politically driven," Coupal said, predicting the strategy would backfire. "They're clearly trying to persuade voters to vote in a certain manner."
Schwarzenegger used the phrase "severe cuts" nine times to describe what could happen.
He spoke of closing fire stations and reducing engine crews, releasing nearly 40,000 prison inmates, slashing $3.6 billion from education and laying off tens of thousands of school employees, borrowing billions from local governments and making further cuts to healthcare programs.
"None of those options are pleasant, that is the important thing for people to know," he said.
The May 19 propositions are intended to have a direct impact on this year's budget by changing the lottery and redirecting voter-allocated funds for early childhood education and mental health programs. They also would affect the state's finances over the next several years, by extending recently enacted tax increases for an additional period.
The only measure that appears likely to pass is Proposition 1F, which would prevent elected state officials from receiving salary hikes in deficit years.
latimes
Europe Imagines Its Suburbs Without the Car
VAUBAN, Germany — Residents of this upscale community are suburban pioneers, going where few soccer moms or commuting executives have ever gone before: they have given up their carsStreet parking, driveways and home garages are generally forbidden in this experimental new district on the outskirts of Freiburg, near the Swiss border. Vauban’s streets are completely “car-free” — except the main thoroughfare, where the tram to downtown Freiburg runs, and a few streets on one edge of the community. Car ownership is allowed, but there are only two places to park — large garages at the edge of the development, where a car-owner buys a space, for $40,000, along with a home.
As a result, 70 percent of Vauban’s families do not own cars, and 57 percent sold a car to move here. “When I had a car I was always tense. I’m much happier this way,” said Heidrun Walter, a media trainer and mother of two, as she walked verdant streets where the swish of bicycles and the chatter of wandering children drown out the occasional distant motor.
Vauban, completed in 2006, is an example of a growing trend in Europe, the United States and elsewhere to separate suburban life from auto use, as a component of a movement called “smart planning.”
Automobiles are the linchpin of suburbs, where middle-class families from Chicago to Shanghai tend to make their homes. And that, experts say, is a huge impediment to current efforts to drastically reduce greenhouse gas emissions from tailpipes, and thus to reduce global warming. Passenger cars are responsible for 12 percent of greenhouse gas emissions in Europe — a proportion that is growing, according to the European Environment Agency — and up to 50 percent in some car-intensive areas in the United States.
While there have been efforts in the past two decades to make cities denser, and better for walking, planners are now taking the concept to the suburbs and focusing specifically on environmental benefits like reducing emissions. Vauban, home to 5,500 residents within a rectangular square mile, may be the most advanced experiment in low-car suburban life. But its basic precepts are being adopted around the world in attempts to make suburbs more compact and more accessible to public transportation, with less space for parking. In this new approach, stores are placed a walk away, on a main street, rather than in malls along some distant highway.
“All of our development since World War II has been centered on the car, and that will have to change,” said David Goldberg, an official of Transportation for America, a fast-growing coalition of hundreds of groups in the United States — including environmental groups, mayors’ offices and the American Association of Retired People — who are promoting new communities that are less dependent on cars. Mr. Goldberg added: “How much you drive is as important as whether you have a hybrid.”
Levittown and Scarsdale, New York suburbs with spread-out homes and private garages, were the dream towns of the 1950s and still exert a strong appeal. But some new suburbs may well look more Vauban-like, not only in developed countries but also in the developing world, where emissions from an increasing number of private cars owned by the burgeoning middle class are choking cities.
In the United States, the Environmental Protection Agency is promoting “car reduced” communities, and legislators are starting to act, if cautiously. Many experts expect public transport serving suburbs to play a much larger role in a new six-year federal transportation bill to be approved this year, Mr. Goldberg said. In previous bills, 80 percent of appropriations have by law gone to highways and only 20 percent to other transport.
In California, the Hayward Area Planning Association is developing a Vauban-like community called Quarry Village on the outskirts of Oakland, accessible without a car to the Bay Area Rapid Transit system and to the California State University’s campus in Hayward.
Sherman Lewis, a professor emeritus at Cal State and a leader of the association, says he “can’t wait to move in” and hopes that Quarry Village will allow his family to reduce its car ownership from two to one, and potentially to zero. But the current system is still stacked against the project, he said, noting that mortgage lenders worry about resale value of half-million-dollar homes that have no place for cars, and most zoning laws in the United States still require two parking spaces per residential unit. Quarry Village has obtained an exception from Hayward.
Besides, convincing people to give up their cars is often an uphill run. “People in the U.S. are incredibly suspicious of any idea where people are not going to own cars, or are going to own fewer,” said David Ceaser, co-founder of CarFree City USA, who said no car-free suburban project the size of Vauban had been successful in the United States.
In Europe, some governments are thinking on a national scale. In 2000, Great Britain began a comprehensive effort to reform planning, to discourage car use by requiring that new development be accessible by public transit.
“Development comprising jobs, shopping, leisure and services should not be designed and located on the assumption that the car will represent the only realistic means of access for the vast majority of people,” said PPG 13, the British government’s revolutionary 2001 planning document. Dozens of shopping malls, fast-food restaurants and housing compounds have been refused planning permits based on the new British regulations
In Germany, a country that is home to Mercedes-Benz and the autobahn, life in a car-reduced place like Vauban has its own unusual gestalt. It is long and relatively narrow, so that the tram into Freiburg is an easy walk from every home. Stores, restaurants, banks and schools are more interspersed among homes than they are in a typical suburb. Most residents, like Ms. Walter, have carts that they haul behind bicycles for shopping trips or children’s play dates.
For trips to stores like IKEA or the ski slopes, families buy cars together or use communal cars rented out by Vauban’s car-sharing club. Ms. Walter had previously lived — with a private car — in Freiburg as well as the United States.
“If you have one, you tend to use it,” she said. “Some people move in here and move out rather quickly — they miss the car next door.”
Vauban, the site of a former Nazi army base, was occupied by the French Army from the end of World War II until the reunification of Germany two decades ago. Because it was planned as a base, the grid was never meant to accommodate private car use: the “roads” were narrow passageways between barracks.
The original buildings have long since been torn down. The stylish row houses that replaced them are buildings of four or five stories, designed to reduce heat loss and maximize energy efficiency, and trimmed with exotic woods and elaborate balconies; free-standing homes are forbidden.
By nature, people who buy homes in Vauban are inclined to be green guinea pigs — indeed, more than half vote for the German Green Party. Still, many say it is the quality of life that keeps them here.
Henk Schulz, a scientist who on one afternoon last month was watching his three young children wander around Vauban, remembers his excitement at buying his first car. Now, he said, he is glad to be raising his children away from cars; he does not worry much about their safety in the street.
In the past few years, Vauban has become a well-known niche community, even if it has spawned few imitators in Germany. But whether the concept will work in California is an open question.
More than 100 would-be owners have signed up to buy in the Bay Area’s “car-reduced” Quarry Village, and Mr. Lewis is still looking for about $2 million in seed financing to get the project off the ground.
But if it doesn’t work, his backup proposal is to build a development on the same plot that permits unfettered car use. It would be called Village d’Italia.
excerpts..the newyorktimes
As a result, 70 percent of Vauban’s families do not own cars, and 57 percent sold a car to move here. “When I had a car I was always tense. I’m much happier this way,” said Heidrun Walter, a media trainer and mother of two, as she walked verdant streets where the swish of bicycles and the chatter of wandering children drown out the occasional distant motor.
Vauban, completed in 2006, is an example of a growing trend in Europe, the United States and elsewhere to separate suburban life from auto use, as a component of a movement called “smart planning.”
Automobiles are the linchpin of suburbs, where middle-class families from Chicago to Shanghai tend to make their homes. And that, experts say, is a huge impediment to current efforts to drastically reduce greenhouse gas emissions from tailpipes, and thus to reduce global warming. Passenger cars are responsible for 12 percent of greenhouse gas emissions in Europe — a proportion that is growing, according to the European Environment Agency — and up to 50 percent in some car-intensive areas in the United States.
While there have been efforts in the past two decades to make cities denser, and better for walking, planners are now taking the concept to the suburbs and focusing specifically on environmental benefits like reducing emissions. Vauban, home to 5,500 residents within a rectangular square mile, may be the most advanced experiment in low-car suburban life. But its basic precepts are being adopted around the world in attempts to make suburbs more compact and more accessible to public transportation, with less space for parking. In this new approach, stores are placed a walk away, on a main street, rather than in malls along some distant highway.
“All of our development since World War II has been centered on the car, and that will have to change,” said David Goldberg, an official of Transportation for America, a fast-growing coalition of hundreds of groups in the United States — including environmental groups, mayors’ offices and the American Association of Retired People — who are promoting new communities that are less dependent on cars. Mr. Goldberg added: “How much you drive is as important as whether you have a hybrid.”
Levittown and Scarsdale, New York suburbs with spread-out homes and private garages, were the dream towns of the 1950s and still exert a strong appeal. But some new suburbs may well look more Vauban-like, not only in developed countries but also in the developing world, where emissions from an increasing number of private cars owned by the burgeoning middle class are choking cities.
In the United States, the Environmental Protection Agency is promoting “car reduced” communities, and legislators are starting to act, if cautiously. Many experts expect public transport serving suburbs to play a much larger role in a new six-year federal transportation bill to be approved this year, Mr. Goldberg said. In previous bills, 80 percent of appropriations have by law gone to highways and only 20 percent to other transport.
In California, the Hayward Area Planning Association is developing a Vauban-like community called Quarry Village on the outskirts of Oakland, accessible without a car to the Bay Area Rapid Transit system and to the California State University’s campus in Hayward.
Sherman Lewis, a professor emeritus at Cal State and a leader of the association, says he “can’t wait to move in” and hopes that Quarry Village will allow his family to reduce its car ownership from two to one, and potentially to zero. But the current system is still stacked against the project, he said, noting that mortgage lenders worry about resale value of half-million-dollar homes that have no place for cars, and most zoning laws in the United States still require two parking spaces per residential unit. Quarry Village has obtained an exception from Hayward.
Besides, convincing people to give up their cars is often an uphill run. “People in the U.S. are incredibly suspicious of any idea where people are not going to own cars, or are going to own fewer,” said David Ceaser, co-founder of CarFree City USA, who said no car-free suburban project the size of Vauban had been successful in the United States.
In Europe, some governments are thinking on a national scale. In 2000, Great Britain began a comprehensive effort to reform planning, to discourage car use by requiring that new development be accessible by public transit.
“Development comprising jobs, shopping, leisure and services should not be designed and located on the assumption that the car will represent the only realistic means of access for the vast majority of people,” said PPG 13, the British government’s revolutionary 2001 planning document. Dozens of shopping malls, fast-food restaurants and housing compounds have been refused planning permits based on the new British regulations
In Germany, a country that is home to Mercedes-Benz and the autobahn, life in a car-reduced place like Vauban has its own unusual gestalt. It is long and relatively narrow, so that the tram into Freiburg is an easy walk from every home. Stores, restaurants, banks and schools are more interspersed among homes than they are in a typical suburb. Most residents, like Ms. Walter, have carts that they haul behind bicycles for shopping trips or children’s play dates.
For trips to stores like IKEA or the ski slopes, families buy cars together or use communal cars rented out by Vauban’s car-sharing club. Ms. Walter had previously lived — with a private car — in Freiburg as well as the United States.
“If you have one, you tend to use it,” she said. “Some people move in here and move out rather quickly — they miss the car next door.”
Vauban, the site of a former Nazi army base, was occupied by the French Army from the end of World War II until the reunification of Germany two decades ago. Because it was planned as a base, the grid was never meant to accommodate private car use: the “roads” were narrow passageways between barracks.
The original buildings have long since been torn down. The stylish row houses that replaced them are buildings of four or five stories, designed to reduce heat loss and maximize energy efficiency, and trimmed with exotic woods and elaborate balconies; free-standing homes are forbidden.
By nature, people who buy homes in Vauban are inclined to be green guinea pigs — indeed, more than half vote for the German Green Party. Still, many say it is the quality of life that keeps them here.
Henk Schulz, a scientist who on one afternoon last month was watching his three young children wander around Vauban, remembers his excitement at buying his first car. Now, he said, he is glad to be raising his children away from cars; he does not worry much about their safety in the street.
In the past few years, Vauban has become a well-known niche community, even if it has spawned few imitators in Germany. But whether the concept will work in California is an open question.
More than 100 would-be owners have signed up to buy in the Bay Area’s “car-reduced” Quarry Village, and Mr. Lewis is still looking for about $2 million in seed financing to get the project off the ground.
But if it doesn’t work, his backup proposal is to build a development on the same plot that permits unfettered car use. It would be called Village d’Italia.
excerpts..the newyorktimes
Lawyer Pleads Guilty to Running Ponzi Scheme
A prominent New York lawyer whom prosecutors have called a “Houdini of impersonation and false documents” pleaded guilty on Monday to leading what the authorities have called a Ponzi scheme that bilked hedge funds and other investors out of at least $400 million.
The lawyer, Marc S. Dreier, a graduate of Yale University and Harvard Law School, sold $700 million worth of bogus promissory notes to investors, a federal indictment charged.
He then used the proceeds to maintain a lavish lifestyle, according to the authorities, which included owning a $10 million apartment on the Upper East Side, beachfront properties in the Hamptons, a valuable art collection, expensive cars and an $18.5 million yacht, documents show.
“He has disgraced the honorable profession of law,” the judge, Jed S. Rakoff of Federal District Court in Manhattan, said after Mr. Dreier entered his plea.
His decision to admit guilt was not a surprise, as his lawyer, Gerald L. Shargel, had been saying for months that his client intended to plead guilty. Last month, Mr. Shargel told Judge Rakoff that Mr. Dreier felt “profound remorse,” accepted full responsibility for his crimes and had been cooperating with the authorities as they attempted to untangle his scheme and track down assets that might be returned to victims.
But Mr. Shargel and a federal prosecutor, Jonathan R. Streeter, clashed over whether Mr. Dreier, who turns 59 on Tuesday and could face up to life in prison, should be allowed to remain in his Manhattan apartment under highly restrictive conditions of home detention until he is sentenced on July 13.
“There are 100 good reasons why Mr. Dreier should be” jailed, Judge Rakoff said. “By his own admission here today, he has shown that he is to be ranked with those who have committed some of the most egregious frauds in history.”
But Judge Rakoff ultimately ruled that Mr. Shargel had met the legal standard for his client to remain out of jail, by demonstrating that Mr. Dreier, who no longer controls the millions of dollars he obtained, had neither the ability nor the resources to flee.
The lawyer, Marc S. Dreier, a graduate of Yale University and Harvard Law School, sold $700 million worth of bogus promissory notes to investors, a federal indictment charged.
He then used the proceeds to maintain a lavish lifestyle, according to the authorities, which included owning a $10 million apartment on the Upper East Side, beachfront properties in the Hamptons, a valuable art collection, expensive cars and an $18.5 million yacht, documents show.
“He has disgraced the honorable profession of law,” the judge, Jed S. Rakoff of Federal District Court in Manhattan, said after Mr. Dreier entered his plea.
His decision to admit guilt was not a surprise, as his lawyer, Gerald L. Shargel, had been saying for months that his client intended to plead guilty. Last month, Mr. Shargel told Judge Rakoff that Mr. Dreier felt “profound remorse,” accepted full responsibility for his crimes and had been cooperating with the authorities as they attempted to untangle his scheme and track down assets that might be returned to victims.
But Mr. Shargel and a federal prosecutor, Jonathan R. Streeter, clashed over whether Mr. Dreier, who turns 59 on Tuesday and could face up to life in prison, should be allowed to remain in his Manhattan apartment under highly restrictive conditions of home detention until he is sentenced on July 13.
“There are 100 good reasons why Mr. Dreier should be” jailed, Judge Rakoff said. “By his own admission here today, he has shown that he is to be ranked with those who have committed some of the most egregious frauds in history.”
But Judge Rakoff ultimately ruled that Mr. Shargel had met the legal standard for his client to remain out of jail, by demonstrating that Mr. Dreier, who no longer controls the millions of dollars he obtained, had neither the ability nor the resources to flee.
Obama’s Push for Health Care Cuts Faces Daunting Odds
President Obama engineered a political coup on Monday by bringing leaders of the health care industry to the White House to build momentum for his ambitious health care agenda.Mr. Obama pronounced it “a historic day, a watershed event,” because doctors, hospitals, drug makers and insurance companies voluntarily offered $2 trillion in cost reductions over 10 years. The savings, he said, “will help us take the next and most important step — comprehensive health care reform.”
Robert Gibbs, the White House press secretary, said Mr. Obama had told the health care executives, “You’ve made a commitment; we expect you to keep it.”
If history is a guide, their commitments may not produce the promised savings. Their proposals are vague — promising, for example, to reduce both “overuse and underuse of health care.” None of the proposals are enforceable, and none of the savings are guaranteed. Without such a guarantee, budget rules normally stop Congress from using the savings to pay for new initiatives to cover the uninsured. At this point, cost control is little more than a shared aspiration.
But the event was still significant. There was something in it for Mr. Obama, and something for the industry — though not necessarily the same thing. Their interests overlap but do not coincide.
For Mr. Obama, Monday’s White House meeting was an opportunity to showcase his consensus-building approach, in contrast with the confrontational style of Hillary Rodham Clinton, who at this point in her husband’s first term attacked “price gouging, cost shifting and unconscionable profiteering” by the industry in a speech to union members.
Mr. Obama is not cracking the whip on the health care industry so much as wooing it, just as he said he would in the campaign.
For the health care and insurance executives, the savings initiative helps them secure a seat at the table where many decisions about their future will be made in the next year. They also ingratiated themselves with Democrats in the White House and Congress who are moving swiftly to reshape the nation’s health care system.
“We came together in a serious way a couple of weeks ago,” said David H. Nexon, senior executive vice president of the Advanced Medical Technology Association, one of the six health care industry groups that promised to lower costs. “Health care reform is moving very fast. We want to make sure it comes out in a way that’s workable and sustainable.”
Dennis Rivera, coordinator of the health care campaign of the Service Employees International Union, led efforts to bring the industry groups together, with help from Nancy-Ann DeParle, director of the White House Office of Health Reform.
The consensus-building approach has already yielded some results. Insurance executives have promised to end discriminatory underwriting practices, like refusing to cover individuals with pre-existing conditions or charging women higher rates than men, and they invited Congress to impose stringent, uniform federal regulation on their industry. But even as insurers and health care providers stand shoulder-to-shoulder with Mr. Obama in vowing to slow the growth of health spending, they oppose him on other fronts. For example, insurance companies are adamantly opposed to a new government-sponsored health plan, which Mr. Obama supports but insurers fear could drive them out of business.
Senator Charles E. Schumer of New York, the third-ranking Democrat in the Senate, welcomed the industry’s cost-cutting commitment as “a good-faith gesture.” But he said, “It does not mitigate the need for a public plan option in our health care reform bill.”
In addition, insurers and health care providers are lobbying strenuously against cuts in their Medicare payments that would produce savings of the type they profess to want. Insurers are fighting Mr. Obama’s proposal to cut payments to their private Medicare Advantage plans by a total of $176 billion over 10 years. Doctors are pleading with Congress not to cut costs at their expense, in particular by allowing a 21 percent cut in their Medicare fees scheduled to occur in January. Pharmaceutical companies and makers of medical devices worry that new products might have to pass a cost-benefit test before being approved for coverage under Medicare.
To fulfill Mr. Obama’s campaign promise of offering affordable coverage to all, cost control is a political, as well as an economic, necessity. By their own account, Democrats will have difficulty financing coverage for more than 45 million people who are uninsured. The task would be virtually impossible - - and new social insurance programs would be unsustainable - - if health spending continued to increase at the currently projected rate of 6.2 percent a year for a decade.
The industry says it can shave 1.5 percent off the annual rate of growth through voluntary efforts. But similar efforts to control health costs have been rolled out in the past, without much of a long-term effect.
Henry J. Aaron, a health economist at the Brookings Institution, said that when he heard the industry’s promises on Monday, “I had a Rip van Winkle moment, as if I had fallen asleep in 1977 and woke up again this morning.”
Mr. Aaron served in the administration of President Jimmy Carter, whose proposal for hospital cost controls prompted the industry to undertake a short-lived “voluntary effort.”
After President Bill Clinton proposed a sweeping overhaul of the health care system in 1993-94, the growth of health spending slowed, only to surge again a few years later.
Drew E. Altman, the president of the Kaiser Family Foundation, offered a historical perspective spanning nearly four decades.
“Neither managed care, nor wage and price controls, nor regulation nor voluntary action nor market competition has had a lasting impact on our nation’s health care costs,” Mr. Altman said. “Reformers should not overpromise.”
Industry groups sounded constructive and positive on Monday, but the real test will come in a few weeks when lawmakers unveil detailed legislative proposals. “Will they still be supportive?” Mr. Altman asked. “Or will they revert to form and protect their turf?”
Rather than gambling on the answer, some lawmakers want to establish an enforcement mechanism, which would take effect if the industry’s voluntary steps did not slow health spending by a specified amount.
Such cost-control devices have proved spectacularly ineffective in limiting the growth of Medicare spending on doctors’ services.
Robert Gibbs, the White House press secretary, said Mr. Obama had told the health care executives, “You’ve made a commitment; we expect you to keep it.”
If history is a guide, their commitments may not produce the promised savings. Their proposals are vague — promising, for example, to reduce both “overuse and underuse of health care.” None of the proposals are enforceable, and none of the savings are guaranteed. Without such a guarantee, budget rules normally stop Congress from using the savings to pay for new initiatives to cover the uninsured. At this point, cost control is little more than a shared aspiration.
But the event was still significant. There was something in it for Mr. Obama, and something for the industry — though not necessarily the same thing. Their interests overlap but do not coincide.
For Mr. Obama, Monday’s White House meeting was an opportunity to showcase his consensus-building approach, in contrast with the confrontational style of Hillary Rodham Clinton, who at this point in her husband’s first term attacked “price gouging, cost shifting and unconscionable profiteering” by the industry in a speech to union members.
Mr. Obama is not cracking the whip on the health care industry so much as wooing it, just as he said he would in the campaign.
For the health care and insurance executives, the savings initiative helps them secure a seat at the table where many decisions about their future will be made in the next year. They also ingratiated themselves with Democrats in the White House and Congress who are moving swiftly to reshape the nation’s health care system.
“We came together in a serious way a couple of weeks ago,” said David H. Nexon, senior executive vice president of the Advanced Medical Technology Association, one of the six health care industry groups that promised to lower costs. “Health care reform is moving very fast. We want to make sure it comes out in a way that’s workable and sustainable.”
Dennis Rivera, coordinator of the health care campaign of the Service Employees International Union, led efforts to bring the industry groups together, with help from Nancy-Ann DeParle, director of the White House Office of Health Reform.
The consensus-building approach has already yielded some results. Insurance executives have promised to end discriminatory underwriting practices, like refusing to cover individuals with pre-existing conditions or charging women higher rates than men, and they invited Congress to impose stringent, uniform federal regulation on their industry. But even as insurers and health care providers stand shoulder-to-shoulder with Mr. Obama in vowing to slow the growth of health spending, they oppose him on other fronts. For example, insurance companies are adamantly opposed to a new government-sponsored health plan, which Mr. Obama supports but insurers fear could drive them out of business.
Senator Charles E. Schumer of New York, the third-ranking Democrat in the Senate, welcomed the industry’s cost-cutting commitment as “a good-faith gesture.” But he said, “It does not mitigate the need for a public plan option in our health care reform bill.”
In addition, insurers and health care providers are lobbying strenuously against cuts in their Medicare payments that would produce savings of the type they profess to want. Insurers are fighting Mr. Obama’s proposal to cut payments to their private Medicare Advantage plans by a total of $176 billion over 10 years. Doctors are pleading with Congress not to cut costs at their expense, in particular by allowing a 21 percent cut in their Medicare fees scheduled to occur in January. Pharmaceutical companies and makers of medical devices worry that new products might have to pass a cost-benefit test before being approved for coverage under Medicare.
To fulfill Mr. Obama’s campaign promise of offering affordable coverage to all, cost control is a political, as well as an economic, necessity. By their own account, Democrats will have difficulty financing coverage for more than 45 million people who are uninsured. The task would be virtually impossible - - and new social insurance programs would be unsustainable - - if health spending continued to increase at the currently projected rate of 6.2 percent a year for a decade.
The industry says it can shave 1.5 percent off the annual rate of growth through voluntary efforts. But similar efforts to control health costs have been rolled out in the past, without much of a long-term effect.
Henry J. Aaron, a health economist at the Brookings Institution, said that when he heard the industry’s promises on Monday, “I had a Rip van Winkle moment, as if I had fallen asleep in 1977 and woke up again this morning.”
Mr. Aaron served in the administration of President Jimmy Carter, whose proposal for hospital cost controls prompted the industry to undertake a short-lived “voluntary effort.”
After President Bill Clinton proposed a sweeping overhaul of the health care system in 1993-94, the growth of health spending slowed, only to surge again a few years later.
Drew E. Altman, the president of the Kaiser Family Foundation, offered a historical perspective spanning nearly four decades.
“Neither managed care, nor wage and price controls, nor regulation nor voluntary action nor market competition has had a lasting impact on our nation’s health care costs,” Mr. Altman said. “Reformers should not overpromise.”
Industry groups sounded constructive and positive on Monday, but the real test will come in a few weeks when lawmakers unveil detailed legislative proposals. “Will they still be supportive?” Mr. Altman asked. “Or will they revert to form and protect their turf?”
Rather than gambling on the answer, some lawmakers want to establish an enforcement mechanism, which would take effect if the industry’s voluntary steps did not slow health spending by a specified amount.
Such cost-control devices have proved spectacularly ineffective in limiting the growth of Medicare spending on doctors’ services.
More UK swine flu cases confirmed, bringing total to 65
A further 10 patients in England, including three children, have been confirmed with swine flu, bringing the total number of confirmed cases in the UK to 65, the Health Protection Agency said today.
The cases are in the east, the north-west, the south-east and London. Five of the patients had returned from travel abroad, four were in close contact with previously confirmed cases and the last case is under investigation as to the source of the infection. All patients are recovering at home, the HPA said. Some 370 cases are under investigation.
In other developments, four schools closed after pupils contracted swine flu reopened in time for the exam season. The affected schools, two in London and two in south-west England, shut their doors to pupils last week as a precaution but were allowed to open again today.
Three of them – Alleyn's School in Dulwich, south-east London, Paignton Community and Sports College in Devon, and Downend School in South Gloucestershire – are secondary schools with pupils sitting GCSEs and A-levels this summer. The private preparatory Dolphin School in Battersea, south-west London, also returned to normal this morning.
Even as they reopened, another school closed for a week from today after one of its pupils was diagnosed with influenza A. Hampton School, an independent boys' school in south-west London, said the case was not yet confirmed as swine flu but further tests were being carried out and the first year pupil was recovering well at home.
Exams at the school, which has more than 1,000 boys aged 11-18, will continue as normal.
A small number of GCSEs have already taken place, but most of the exams get under way this week.
The private Alleyn's School, which closed on 4 May when five Year 7 pupils were confirmed with the disease, said all staff and pupils who had not developed infections and were symptom-free could return to the £13,437-a-year school.
Senior deputy head Antony Faccinello said the school was in close contact with the exam boards and had already made arrangements to put back some oral and practical exams. Staff put a large amount of teaching material on the school's website last week and teachers are also offering optional extra lessons.
Faccinello said the impact of the closure on students sitting GCSEs and A-levels was expected to be minimal.
"Some people take the view that most courses last two years and this is a week at the end. I think a lot of it is about reassuring people," he said.
Of the cases in the UK, 60 are in England and five are in Scotland.
The cases are in the east, the north-west, the south-east and London. Five of the patients had returned from travel abroad, four were in close contact with previously confirmed cases and the last case is under investigation as to the source of the infection. All patients are recovering at home, the HPA said. Some 370 cases are under investigation.
In other developments, four schools closed after pupils contracted swine flu reopened in time for the exam season. The affected schools, two in London and two in south-west England, shut their doors to pupils last week as a precaution but were allowed to open again today.
Three of them – Alleyn's School in Dulwich, south-east London, Paignton Community and Sports College in Devon, and Downend School in South Gloucestershire – are secondary schools with pupils sitting GCSEs and A-levels this summer. The private preparatory Dolphin School in Battersea, south-west London, also returned to normal this morning.
Even as they reopened, another school closed for a week from today after one of its pupils was diagnosed with influenza A. Hampton School, an independent boys' school in south-west London, said the case was not yet confirmed as swine flu but further tests were being carried out and the first year pupil was recovering well at home.
Exams at the school, which has more than 1,000 boys aged 11-18, will continue as normal.
A small number of GCSEs have already taken place, but most of the exams get under way this week.
The private Alleyn's School, which closed on 4 May when five Year 7 pupils were confirmed with the disease, said all staff and pupils who had not developed infections and were symptom-free could return to the £13,437-a-year school.
Senior deputy head Antony Faccinello said the school was in close contact with the exam boards and had already made arrangements to put back some oral and practical exams. Staff put a large amount of teaching material on the school's website last week and teachers are also offering optional extra lessons.
Faccinello said the impact of the closure on students sitting GCSEs and A-levels was expected to be minimal.
"Some people take the view that most courses last two years and this is a week at the end. I think a lot of it is about reassuring people," he said.
Of the cases in the UK, 60 are in England and five are in Scotland.
Taliban try to spread fighting in Pakistani tribal belt
Taliban militants backed by al-Qaida trainers are stepping up a campaign of violent destabilisation across Pakistan's tribal belt to divert forces from the battle in the Swat valley, a senior Pakistani commander said today.
"They are trying [to spread the fighting], but it's not significant enough for us to divert our attention," said Major General Tariq Khan, the commander of the 50,000-strong Frontier Corps, speaking to the Guardian at his Peshawar headquarters.
The Taliban have launched suicide attacks and heavy assaults on security installations in the tribal belt along the Afghan border in recent days.
On Sunday, 200 militants swarmed an outpost in Mohmand tribal agency, south-east of Swat, triggering a gun battle that killed 25 militants and wounded 11 Frontier Corps soldiers, Khan said.
Moments later, a phone call brought news of another attack: a suicide bomber had just rammed his car into a checkpost at Dara Adam Khel, a tribal town 15 miles away. Two Frontier Corps troops and six civilians, including a six-year-old girl, were killed, police said.
The Taliban were being trained by foreign mercenaries linked to al-Qaida, Khan said. "They are experts in IEDs [roadside bombs], sniper fire and explosives. Mostly Tajiks and Uzbeks, basically. They get paid for their expertise," he said.
Intelligence from the Mohmand gun battle indicated the presence of 100 Mehsud and Wazir fighters from South Waziristan, where the Taliban warlord Baitullah Mehsud holds sway, Khan said. "He has access to people, funds and resources, and [the local groups] want him to dish it out. That's his importance," he said.
Mehsud territory in South Waziristan has become a stronghold of foreign fighters, particularly ethnic Uzbeks from the al-Qaida-affiliated Islamic Movement of Uzbekistan (IMU), led by the radical cleric Tahir Yuldashev. According to Pakistani intelligence officials, Arab fighters, in contrast, are concentrated in an area controlled by a rival commander, Maulvi Nazir Ahmed.
Both groups are the focus of American attention. On Sunday, General David Petraeus, the head of US Central Command, said al-Qaida's leadership was located in Pakistan. Today, the New York Times reported that the US had carried out 16 drone strikes this year and 36 in 2008, the bulk of them in North and South Waziristan.
The latest such strike, on Saturday night, hit Mehsud's network, killing at least six people.
The army is likely to turn its attention to Mehsud in South Waziristan after the Swat operation. Khan said: "We will have to deal with North and South Waziristan if we want to have a lasting effect on the militants."
Khan, a well regarded commander with several years' experience leading the fight in the tribal areas, spoke to the Guardian at Bala Hissar, a redbrick 19th-century British fort that serves as the Frontier Corps headquarters. For the past two weeks, he has commanded operations in Buner, 60 miles north-west of Islamabad, where a Taliban advance sparked American alarm and triggered a concerted Pakistani counteroffensive.
"We were caught by surprise," he admitted, describing how he shifted forces from the tribal belt and conducted rushed reconnaissance of an area where he never imagined having to fight.
Khan described how the Taliban operate in groups of 30 to 40 men, split into groups of five, each with a radio set. As they creep up on security forces' positions, firing rocket-propelled grenades, they try to distract soldiers with surrender negotiations until they swarm the position "like a pack of wolves", he said.
Pakistan's interior minister said today that more than 700 fighters had been killed in Swat, Buner and Dir. The figure could not be independently confirmed.
The operations have sparked a humanitarian crisis. The United Nations said more than 360,000 people had registered for relief aid in Mardan and Swabi districts, south of Swat, and more were expected.
The Frontier Corps is playing a secondary role in the Swat valley, where the fighting is commanded by the regular army. In the main town, Mingora, the Taliban have dug into defensive positions and mined bridges and roads. But Khan said he did not expect to see a major street battle in the town.
"I don't think the Taliban are going to fight once they see a consolidated effort against them. Their effort at getting into Mingora is to melt into the crowd, to move out with the exodus of refugees," he said. He predicted that a hard core of fighters would retreat into remote valleys north of Mingora and try to sue for peace.
"They will get into the caves and seek a means to a negotiated settlement. That's their best bet at the moment. I don't think they are capable of a hardcore fight."
"They are trying [to spread the fighting], but it's not significant enough for us to divert our attention," said Major General Tariq Khan, the commander of the 50,000-strong Frontier Corps, speaking to the Guardian at his Peshawar headquarters.
The Taliban have launched suicide attacks and heavy assaults on security installations in the tribal belt along the Afghan border in recent days.
On Sunday, 200 militants swarmed an outpost in Mohmand tribal agency, south-east of Swat, triggering a gun battle that killed 25 militants and wounded 11 Frontier Corps soldiers, Khan said.
Moments later, a phone call brought news of another attack: a suicide bomber had just rammed his car into a checkpost at Dara Adam Khel, a tribal town 15 miles away. Two Frontier Corps troops and six civilians, including a six-year-old girl, were killed, police said.
The Taliban were being trained by foreign mercenaries linked to al-Qaida, Khan said. "They are experts in IEDs [roadside bombs], sniper fire and explosives. Mostly Tajiks and Uzbeks, basically. They get paid for their expertise," he said.
Intelligence from the Mohmand gun battle indicated the presence of 100 Mehsud and Wazir fighters from South Waziristan, where the Taliban warlord Baitullah Mehsud holds sway, Khan said. "He has access to people, funds and resources, and [the local groups] want him to dish it out. That's his importance," he said.
Mehsud territory in South Waziristan has become a stronghold of foreign fighters, particularly ethnic Uzbeks from the al-Qaida-affiliated Islamic Movement of Uzbekistan (IMU), led by the radical cleric Tahir Yuldashev. According to Pakistani intelligence officials, Arab fighters, in contrast, are concentrated in an area controlled by a rival commander, Maulvi Nazir Ahmed.
Both groups are the focus of American attention. On Sunday, General David Petraeus, the head of US Central Command, said al-Qaida's leadership was located in Pakistan. Today, the New York Times reported that the US had carried out 16 drone strikes this year and 36 in 2008, the bulk of them in North and South Waziristan.
The latest such strike, on Saturday night, hit Mehsud's network, killing at least six people.
The army is likely to turn its attention to Mehsud in South Waziristan after the Swat operation. Khan said: "We will have to deal with North and South Waziristan if we want to have a lasting effect on the militants."
Khan, a well regarded commander with several years' experience leading the fight in the tribal areas, spoke to the Guardian at Bala Hissar, a redbrick 19th-century British fort that serves as the Frontier Corps headquarters. For the past two weeks, he has commanded operations in Buner, 60 miles north-west of Islamabad, where a Taliban advance sparked American alarm and triggered a concerted Pakistani counteroffensive.
"We were caught by surprise," he admitted, describing how he shifted forces from the tribal belt and conducted rushed reconnaissance of an area where he never imagined having to fight.
Khan described how the Taliban operate in groups of 30 to 40 men, split into groups of five, each with a radio set. As they creep up on security forces' positions, firing rocket-propelled grenades, they try to distract soldiers with surrender negotiations until they swarm the position "like a pack of wolves", he said.
Pakistan's interior minister said today that more than 700 fighters had been killed in Swat, Buner and Dir. The figure could not be independently confirmed.
The operations have sparked a humanitarian crisis. The United Nations said more than 360,000 people had registered for relief aid in Mardan and Swabi districts, south of Swat, and more were expected.
The Frontier Corps is playing a secondary role in the Swat valley, where the fighting is commanded by the regular army. In the main town, Mingora, the Taliban have dug into defensive positions and mined bridges and roads. But Khan said he did not expect to see a major street battle in the town.
"I don't think the Taliban are going to fight once they see a consolidated effort against them. Their effort at getting into Mingora is to melt into the crowd, to move out with the exodus of refugees," he said. He predicted that a hard core of fighters would retreat into remote valleys north of Mingora and try to sue for peace.
"They will get into the caves and seek a means to a negotiated settlement. That's their best bet at the moment. I don't think they are capable of a hardcore fight."
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