The class action that has been consolidated in New Orleans is scheduled to be heard in September 2010.  This isn’t good news for either homeowners or construction companies as that date merely marks the beginning of what is going to be a long road.

As of now, there are over one hundred thousand lawsuits consolidated into the one Federal class action complaint.  Florida by itself has filed over thirty five thousand, with more inevitably to come.  It will be the largest construction defect suit in American history and will inevitably take months if not years to process.

This is too long for many.  Homeowners are stuck with houses they can’t live in, rent out or sell.  Construction companies are being held liable for defective work that their own insurers are trying to wriggle out of by citing a combination of the “pollution exclusion” or the “total pollution exclusion”, whichever they can to avoid paying out.

Homeowner Mark Peat had this reaction.

“2010 is too long.  The house stinks, the electrics keep failing, my wife is sick and I simply don’t have the cash to rent somewhere else.  We are going to have to live with family and friends.  The suit is only going to concern itself with the financial cost of this thing, not the emotional one.  Neither of us sleep well at night worrying about stuff, even the dog prefers to sleep outside now, instead of with us.  I poured my life savings into this place, and it’s worth nothing now.  Nobody would buy it for anything near its real value.”

This sentiment is echoed elsewhere in Florida as anger is directed towards insurers.  James Flested, a Tampa resident had this to say about his insurers.

“Our home insurance is a big waste of money.  The whole premise of it is to act as a safety blanket to protect us against something that happens to us that isn’t our fault.  Yet every time you try and make a claim, they state some exclusion or other to avoid paying out.  I don’t want to get rich off them, I just want what I thought I was paying for.”

Construction companies are no better off either.  Ian Hodge, director of a large contractor in the Tampa area also has similar feelings towards his insurer, and the supplier of the drywall.

“This is a sick situation we’re in right now.  The insurer has weaseled out of paying out, again.  I paid my premiums with [deleted] for years thinking they would be there when I needed them.  Should have known that corporate America would let me down again, as usual.  I don’t blame the suppliers, they didn’t know they were supplying poisonous material, but they should have better quality checking at their factories.  I have no choice but to file a lawsuit against them.  I can’t afford to repair the places we worked on out of profit because we don’t have any.  These last couple of years have been hard enough as it is, we’re barely treading water.”

The folks at the The Tax & Regulate Cannabis 2010 here in Oaksterdam California have gathered the 650,000 signatures necessary to put the legalization of marijuana on the November 2010 ballot! This major victory means  Californians will be the first in the nation to decide whether they believe marijuana should be legal…taxed and regulated for all adults over 21.

Richard Lee, the president of Oaksterdam University, owner of the famous Coffeeshop Blue Sky, and major financial supporter of the initiative told Stuff Stoners Like, “California voters believe that our laws criminalizing marijuana have failed! 56% of Californian’s support legalization and the time for reform is now.”

The troubled US insurance giant has bowed to demands to restructure its bonus payments to its employees.

Top level bonuses to its executive staff are to be dramatically cut this year according to a letter sent by Edward Liddy, AIG’s Chairman to the US Treasury Secretary Timothy Geithner.

The letter confirmed that 2008 bonuses would be paid because the company had no choice.  These were legally binding payouts, which were being honored despite being bailed out by the taxpayer.

It is still believed to be the biggest-ever government rescue of a US company.  American International Group (AIG) plays a key role in insuring risk for financial institutions around the world and was seen to be too important to fail.

In the letter, Mr Liddy said he had come under pressure from the Treasury to reduce the firm’s bonus payments.  He said bonuses agreed to in 2008, before the firm’s problems became known, could not legally be blocked.

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“Under the current circumstances, I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.” Said Liddy in his letter.

AIG had promised to pay hundreds of millions of dollars in bonuses to staff for the year 2008.

AIG would do its best to cut bonuses by at least 30% in 2009, Mr Liddy wrote to Mr Geithner.

Additionally US President Barack Obama’s top economic adviser has said “outrageous” conduct at AIG as the bailed-out insurance giant prepared to hand out millions in bonuses to top executives.

Lawrence Summers, director of the White House’s National Economic Council, has said the Obama administration had “scaled back” the bonuses but said its hands were tied by contract law in how far it could go.

“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous, what that company did,” he said on US television.

But Mr Summers added: “We are a country of law. There are contracts. The government cannot just abrogate contracts.

“Every legal step possible to limit those bonuses is being taken by (Treasury) Secretary (Timothy) Geithner and by the Federal Reserve system. And they have, as a result of Secretary Geithner’s efforts, been scaled back.”

A white paper prepared by the company says that AIG is contractually obligated to pay a total of about $165 million of previously awarded “retention pay” to employees in this unit by March 15. The document says that another $55 million in retention pay has already been distributed to about 400 AIG Financial Products employees.

Mr Liddy has reportedly told Mr Geithner the bonuses cannot be cancelled due to a risk of lawsuits for breach of employment contracts, and AIG risks an exodus of senior employees if it does not pay out bonuses.

Mr Summers appeared to lend some credence to that argument.  “There is one other reality we have to recognize, which is that these companies have to be enabled to function, if the government is going to maximize the prospect of getting its money back.”

Massive losses at the division in London have forced the US government to pump about $150 billion into crippled AIG, and it is planning another emergency injection of $30 billion.

Condemnation of the planned bonuses came from both sides of politics.  “It is an outrageous situation,” Senate Republican leader Mitch McConnell said, while accusing the Obama administration of dodging culpability.

GM, Chrysler ask for $21.6 billion more

NEW YORK (CNNMoney.com) — General Motors and Chrysler LLC said Tuesday they could need an additional $21.6 billion in federal loans between them because of worsening demand for their cars and trucks.

The two firms, in documents submitted to the Treasury Department, also detailed plans to cut 50,000 jobs worldwide by the end of the year. GM said it plans to close five more plants in the next few years and confirmed it will drop some of its weaker brands.

When all is said and done,GM (GM, Fortune 500) said that by 2011 it could need a total of $30 billion, which includes the $13.4 billion in Treasury loans it has already received. In the near term, GM will most certainly need $9.1 billion in additional loans and could require another $7.5 billion in the next two years if auto sales don’t improve.

Chrysler said it now needs a total of $9 billion, up from the $4 billion Treasury loan it received in December. Chrysler said it will need that money by March 31.

GM also accelerated its job cut plans, saying that it would eliminate 47,000 jobs over the course of 2009. The company said it would cut about 20,000 jobs in the United States, or about 22% of its remaining U.S. staff.

Previously, GM called for U.S. job cuts of between 20,000 to 30,000 workers, but it had stretched out those reductions through 2012.

The company said it plans to close five additional U.S. plants by 2012 –in addition to the 12 planned closings announced in December. Executives would not identify the plants that would be closed.

“Our plan is significantly more aggressive because it has to be,” said GM Chairman Rick Wagoner.

Experts said that the request for additional dollars are not a surprise, given how bad auto sales have been since the December plea for help.

“The most important issue is not what the automakers are going to do to cut costs, but rather what the government is going to do to stimulate car sales,” stated Jeremy Anwyl, CEO of car sales tracker Edmunds.com. “No automaker is viable under the current market conditions, and so far the spending package appears to spread money too thin to actually make much of a difference in any one area.”

Some economists argued that the problems detailed in the plans show that GM and Chrysler are already failed companies.

“When consumers refuse to buy your product, that’s the economy telling you you’re bankrupt,” said Rich Yamarone, director of research at Argus Research. ”

But Yamarone said it may make sense to give them the money they need, even if it’s good money after bad, because the battered U.S. economy can’t weather the halt of operations at GM and Chrysler right now.

GM added it plans to phase out the Saturn brand by the middle of 2011 if it is unable to sell or spin-off the brand. GM is also looking to sell its Saab brand, and will look for help from the Swedish government to support Saab until a buyer is found.

Chrysler said it plans to cut about 3,000 jobs, or 6% of its workforce, and reduce capacity by another 100,000 vehicles this year as it tries to adjust to reduced demand. It also said it has won the concessions from the United Auto Workers union and its creditors that were demanded under terms of the loan from the Treasury Department.

The companies had a deadline of Tuesday to update the government on the status of their turnaround plans. The new plans highlighted a worsening forecast for sales, and more job cuts at the companies in the coming months.

A newly-appointed auto panel will review both plans and determine by March 31 if GM and Chrysler can be viable in the long run. Specifically, the Treasury Department is looking for details about the progress of negotiations with creditors and the UAW.

White House spokesman Robert Gibbs issued a statement late Tuesday saying that the panel would be reviewing the plans and that “We appreciate the effort that these companies and their stakeholders have made.”

The automakers’ request for a $34 billion federal bailout in December fell short when Senate Republicans blocked passage of the request. The Democratic majorities in both houses of Congress have grown since then.

While both plans are more than 100 pages each, they have only limited details about the latest deals reached with the United Auto Workers union to shed costs, as well as about GM’s efforts to shed much of its unsecured debt, as required under the terms of its existing loans.

GM is struggling under a $35 billion mountain of unsecured debt. It hopes to shed about two-thirds of that debt with a swap of debt for equity with its bond holders.

But the company was not able to reach a deal with the bond holders by Tuesday’s deadline, although it did include a letter from their committee’s financial and legal advisers saying that they are “prepared to recommend that the committee approve and support the bond exchange” proposed by GM.

If the federal panel looking at the plans rules either company is not viable, it could recall the outstanding loans, a move that would likely force them into bankruptcy. In a statement, Chrysler chairman Robert Nardelli said he believes additional federal help is the best course for both Chrysler and the battered U.S. economy.

“We believe the requested working capital loan is the least-costly alternative and will help provide an important stimulus to the U.S. economy and deliver positive results for American taxpayers,” said Nardelli in the statement.

To that end, the companies also submitted an analysis of what would happen if it filed for bankruptcy. In a reorganization scenario, GM said it might need up to $100 billion in additional federal loans to finance their operations during a two-year reorganization. Chrysler said it would need up to $20 billion to $25 billion.

If it was forced to liquidate, Chrysler estimated there would be a loss of 2 million to 3 million jobs, resulting in a $150 billion reduction in federal tax revenue over three years.

Nardelli added that a Chrysler bankruptcy would have a “cataclysmic” impact on the auto parts supplier industry, which would affect operations and production at all automakers.

The other member of Detroit’s so-called Big Three, Ford Motor (F, Fortune 500), requested a credit line of $9 billion from Congress in December.

But Ford said it would not to have to tap the line of credit unless conditions in the auto market and economy deteriorated more than expected.

Since then, demand for cars and trucks has gone from bad to worse, with January sales falling to their lowest level in 26 years. The automakers and industry experts have also slashed sales forecasts for 2009 and beyond.

Chrysler has been among the hardest hit in the industry though. Sales plunged 54% from year-earlier levels in December and January, and the company left most of its 12 North American assembly plants idled throughout January due to weak demand and excess inventory.

In addition to the job and production cuts, the company pledged to further lower costs by eliminating a manufacturing shift and discontinuing three models.

“We fully understand the need to adapt to significantly reduced annual U.S. sales,” said Nardelli in Chrysler’s statement.

The company now expects industrywide U.S. sales this year of only 10.1 million vehicles, which would be a 40-year low. It believes sales from 2010 through 2012 will average only 10.8 million a year.

GM’s U.S. sales forecast for 2009 is close to Chrysler’s estimate - around 10.5 million cars and light trucks. But it is far more optimistic about a rebound in sales from 2010-2012.

Separately, UAW president Ron Gettelfinger said in a statement Tuesday that the union had “reached tentative understandings with Chrysler, Ford and General Motors on modifications to the 2007 national agreements.”

Gettelfinger said “the changes will help these companies face the extraordinarily difficult economic climate in which they operate.” But he declined to disclose specific terms of the tentative agreement and said that discussions were continuing.