It is difficult to see how Paul Ryan will appeal to the independent voter who is in the middle of the political spectrum rather than to the right. Mitt Romney’s decision is bold. The question is—is it wise?
It is a move to energize the base. It is a move to break out in the polls. It is a choice which recognises where the new power in the Republican Party lies. The choice of Paul Ryan, the “Darling of the Right” by Governor Mitt Romney to be his vice-presidential running mate is a move by Governor Romney away from his centrist roots to the right. It is the completion of the transformation of Governor Romney from the Massachusetts moderate to a full-blown conservative. As the Republican moderates have slowly disappeared and the middle of the Republican Party has fallen through. Governor Romney has decided to follow the Republican Party instead of getting the Republican Party to follow him and for that he has chosen Paul Ryan, the young dynamic ideologue, who is the chairman of the House Budget Committee and a thorn in President Obama’s side.
The young representative from the Midwestern state of Wisconsin (representing its first district) will immediately put the key swing state of Wisconsin and possibly the Midwest into play, goes the calculation. But more than that it is a recognition of who the boss in the Republican Party is and that is the right. The small town roots of Paul Ryan, he comes from the Jane’s town in Wisconsin, his amazing rise, his youth, his energy, will all help the Romney ticket to move on and there is already great enthusiasm as Romney and Ryan campaign together.
What got Paul Ryan onto the Republican ticket is undoubtedly his brain power and energy. He has been a foot soldier and a general for the right and the fact that he rose from the Republican ranks working among others with Jack Kemp who served as housing secretary in the administration of President George Bush and was the Republican Party’s nominee for vice-president in the 1996 election where he was the running mate of presidential nominee of Bob Dole. Further he has an appealing back story about life in a small town in Wisconsin, his resilience after his father’s premature death and his allergenic family. His interests are hunting, fishing and noodling (catching catfishes with his bare hand), which he said on CNN, was great fun which all make for an attractive story.
But he comes with a lot of baggage. His proposed budget is highly controversial with a lot of cutbacks and the choice of Paul Ryan enables President Obama and the Democrats to run against Congress, which is deeply unpopular as they can tie more closely to the Romney ticket.
The choice of Paul Ryan does nothing to bolster the Republican vote in two key constituencies where they are lagging behind the Democrats badly—women and minorities. Actually the choice of Paul Ryan is likely to make the female vote gap between the parties sharper as Paul Ryan is socially very conservative and believes that life begins at conception and opposes funding for contraception. This choice is likely to throw more women in the arms of the Democrats and it does nothing to strengthen the Republican Party’s appeal among the minorities and Hispanics who are a key voting block. The choice of Senator Marco Rubio of Florida would have possibly done both. It is particularly difficult to see how Paul Ryan will appeal to the independent voter who is in the middle of the political spectrum rather than to the right. Representative Paul Ryan is particularly known for the attitude on Medicare, the programme that provides health care for seniors, and Representative Ryan’s policies are going to frighten seniors. But what Paul Ryan will do is keep Governor Romney honest i.e. to the core beliefs of the Republican Party and sharpen the debate with the Democrats. They have dubbed themselves as the come back team. Indeed the trillion dollar deficit may take centre stage rather than the 8.2% unemployment rate as will trickle down economics.
David Axelrod, President Obama’s advisor, told Candy Crawly on the State of the Union programme of CNN that Mitt Romney was paying only 13.9% income tax and under Paul Ryan’s budget he would pay only 1% tax.
The debate has been sharpened and at stake is the direction in which America is headed.
Mitt Romney’s decision is bold. The question is—is it wise?
After filing several complaints with various authorities including the Competition Commission, Cama Motors, which raised a stink about Mercedes Benz, asks if there is any authority in India which can take a decision on such matters in customers’ interest
Ahmedabad-based Cama Motors, one of the oldest and most reputed dealers of foreign cars, has written several letters to the Competition Commission of India (CCI) asking it to investigate the dodgy business practices of Mercedes Benz in India. Cama Motors, a former dealer of Mercedes, which fell out with the auto giant, says it has gathered dozens of pieces of hard evidence and is awaiting an appropriate body to take on the job of verifing or rejecting it "in an atmosphere of fairness". So far it has failed to find any such body.
The dealer has also filed complaints with Daimler AG, the German Embassy in India, the ministry of surface transport, ministry of heavy industries, the US Ambassador to India, the Federation of Automobile Dealers Associations of India (FADA), and the Automotive Research Association of India (ARAI). But till today, there is a complete silence from all the authorities concerned on all the grave charges of safety and other issues it has made.
In his complaint to the CCI, Rustom Cama, executive director of Cama Motors alleges “rampant malpractices” by Mercedes Benz regarding its aftermarket services. He says, barely a passing interest has been shown by the authorities, even though the safety issue has led to at least two deaths. In one case, the son of its customer died in a car accident becuase the airbag failed to inflate. When Cama sought the data relating to that episode, he received a letter from the company saying that the data was destroyed. Cama claims that he is in a position to prove that the report on the failed airbag was fake.
Moneylife has all the documents backing the claims made by Cama Motors.
Another issue raised by Mr Cama is that of defective brake transmission. This is a more complicated case, where he says, Mercedes Benz is aware of the “defects in brakes transmissions", but carries out corrective action in secret during “service campaigns” which require the car to be sent to the dealer/workshop. Customers have to leave their vehicles behind for “an unjustified period without explanation”, to allow all this ‘unofficial’ work to be carried out, otherwise they risk missing out on a life saving procedure, he alleges.
Interestingly, several readers have responded to the first report on Mercedes and its quality of service in India. One of them, Deepak Sanchety writes, “The problem is much worse with Mercedes. Their workshops do not have an inventory of common spares even for the current models. For replacement of something like a battery, your car may get stuck for weeks as the “workshop will source it from Pune”. For smallest of problems your car may need more than one visit to workshop as you may find after having paid the bill for repairs, the problem still persists. What is worse is when you send the car back to workshop; you will get other bill for another replacement of part for the same problem.”
“The car manufacturer does not have any control on dealers and workshops. So if you have any complaint against the workshop, there is nobody who would listen to you, be it the Indian Company or their Global HQ,” Mr Sancheti, who has worked with the capital market regulator and the income tax before starting his own corporate practice, added.
Mr Cama alleges that dealers are forced to sign one-sided agreements, which are “totally immoral and unethical” and include “non-disclosure pacts”. This leaves the dealer facing “commercial and reputational suicide”. Illegal activities were forced to be carried out by dealers with the name “additional customer satisfaction campaigns,” he said.
According to Cama Motors, there is a document where cars of the same series of chassis numbers have had their airbags replaced but such documents are maintained secretly by the company and such operations are carried out selectively by dealers.
It said, in 2007, Manish Patel, who was driving an E class Mercedes in Ahmedabad, lost his life when all three airbags in the front row failed to inflate. Similarly, in November 2011, Nirmal Saraf lost his life when travelling in a Mercedes S class as the airbag failed to open. In this accident only one airbag was inflated, unfortunately it was a vacant seat.
According to Cama Motors, in case of Manish Patel’s death, the company sent one engineer, Lothar Shuzzare from Germany to inspect the car. After repeated attempts, Mr Shuzzare and Mercedes Benz gave some incomprehensible technical data on a single sheet and now the company is saying that the data was destroyed since many years have passed. And yet, the same person was dispatched by the company to inspect the S class vehicle in which Nirmal Saraf died.
While in the first case Mr Shuzzare inspected the E Class of the Patel family at the spot, in the second case he demanded the S class vehicle to be handed over the Daimler AG for a report. “His claim was that the technology of Mercedes Benz is analyzable only by their own people. He even mentioned that the police in Europe also have to come to Daimler for investigating accidents,” Cama Motors said.
It added, “This is the stand of a man who has already submitted a report of airbag performance of our customer’s car with fake data! The truth is that Daimler never releases the full code and knowledge of control unit software so that market ready, freely available and legal scanning machines can fully read and analyse the memories and other devices of the car”.
Cama Motors, along with Vimal Saraf and a representative of the Patel family on 19 April 2012 met the Additional Director General of CCI. However, there is not much progress.
The issues Mr Cama raises have deep implications. If a reputed car manufacturer can indulge in questionable business practices but a customer does not have anyone to turn to for redressal, it is high time to have proper checks and balances and more importantly a regulator who understands and can deal with today’s as well as future generations of automobiles.
Mercedes Benz India, however, has refuted all the allegations made by Cama Motors. In an email response, it said, “We strongly refute all the allegations levelled against us. We find these comments highly defamatory, vexatious and frivolous in nature and Cama Motors (our estranged dealer) is trying to tarnish our image; as such Mercedes-Benz India will pursue suitable legal course of action. We would also like to mention that a defamatory suit has already been filed against Cama Motors in Ahmedabad for similar defamatory activities carried on by him.”
Rustom Cama says, “The battle between Cama Motors and Daimler AG is not contingent on anybody’s support or help and we will pursue our duty to its end. However the lack of regulation and the sorry state of this country where even the Monopolies and Restrictive Trade Practices Commission (MRTPC) Act seemed better than its replacement cannot be handled by us. I am sure that the CCI does not even see itself as the relevant body for the range of issues raised by us and the ministries concerned have the impunity to disregard facts in spite of using the RTI act".
The battle may ultimately be fought in court, since Mr Cama has no intention of backing off and has spent considerable time and resources in piecing together information, purchasing testing equipment to prove his point and gathering evidence.
Underperformance of mutual fund schemes is a serious cause of concern for investors. Fund companies opt for mergers while SEBI just looks on
In a recent case, the Bombay High Court has sought an explanation from SBI Mutual Fund about why one of its schemes— SBI One India Fund has yielded no returns— when its other funds are yielding reasonable returns to investors. According to a newspaper report, the court also issued a notice to the Securities and Exchange Board of India (SEBI), directing the market regulator to file an affidavit stating the exact nature of the regulatory framework in place to ensure proper management of mutual funds.
The fact that the Bombay High Court has admitted such a case speaks volumes for the regulatory approach and philosophy that India has adopted and the unintended consequences thereof. Equity funds disclose upfront that these are subject to market risks. Prima facie, it is common for equity funds to underperform over arbitrary start and end periods. But this is an interesting case. In the last thirty three-year rolling periods from 1 January 2007 to 30 June 2012, SBI One India Fund has underperformed the benchmark on as many as 27 occasions.
Very often fund companies merge their poorly performing schemes with others to escape scrutiny. In this case, SBI MF got the nod from the regulator to merge SBI One India Fund with SBI Magnum Equity Fund. There are many such schemes of other fund houses, would this lead to strict action taken by the regulator or would they just keeping merging schemes to hide their pathetic performance?
Moneylife is the only publication that has consistently highlighted underperforming fund houses. (Recent Articles: Equity Mutual Funds to avoid at all costs, Fund Performance: Worst Equity Funds.) What we have noticed is that most of the schemes which are consistently underperforming come from the same set of fund houses. Such gross underperformance over different periods can’t go unnoticed by the AMC and the trustees. But SEBI has not done anything about it. The only thing it could have done is question the trustees.
At a recent mutual fund summit SEBI chief UK Sinha had voiced his concern on the gross underperformance of mutual fund schemes and suggested that remedial actions should be taken. Recently we saw few funds being merged to hide fund underperformance and SBI One India Fund is one of them (Read: Fund mergers: What mutual fund houses do to hide underperformance ). The new scheme—SBI Magnum Equity Fund—has underperformed the benchmark just twice and this would hide the gross under performance of the other scheme, SBI One India.
Fund companies charge a fixed amount of 2.25%-2.5% from investors for managing their money and this is the performance. The least the investor would expect is returns on par with the benchmark. Unless SEBI takes active interest and introduces stricter norms, AMCs would continue their business as usual. Maybe the high court would be able to throw some light on what investors can expect.