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Badly Needed: An Overhaul for Detroit

America needs a new auto industry, where the money is put into making high-reliability cars, not ones designed so that Detroit can sell replacement vehicles ("Autos: A new industry," Cover Story, July 15). Contrast this with the legendary reliability of Japanese cars, and, potentially, Korean cars in a few years. You hit the nail on the head. Only Nissan, Toyota, and Honda are on the list for my next purchase.

Stephen Kay

Severna Park, Md.

No consumer owes loyalty to any vendor. Consumers should make companies that want their money earn it. U.S. auto makers have lost sales because of their attitude. The next car I buy will be foreign, because I can no longer trust the quality, service, or honesty of the U.S. company I've been loyal to. I'm going to divorce them. And, watching their stock tumble recently, it looks like many other customers feel the same way.

Jim Mathis

Detroit, Tex.

Except for pickups and large SUVs, Detroit doesn't make vehicles that people want to buy. If Honda can manufacture cars with jewel-like precision across its model line, why can't Detroit do the same? When the Big Three combine the quality, engineering, and reliability of the "overseas brands," we will beat a path to their doors.

Steven A. Linas

Richmond, Va.

If the U.S. goes to war against a foreign nation one day, the Big Three factories (whatever are left) will be the only ones available to manufacture tanks and armor vehicles for our uniformed men and women.

American consumers may have benefited now from the demise of their domestic brands, but it will be the American domestic manufacturers that could help to save America from a free fall.

Paul C. Lam

Plano, Tex. Pearson Inc. can take criticism. However, your story, "Can Scardino get Pearson out of this pickle?" (International Business, July 22), was one-sided to the point of unfairness. The story quotes Sanford C. Bernstein & Co. as expecting EBITDA in 2002 to be "flat to down" on the $945 million reported in 2001. This is not a like-for-like comparison. In 2001, Pearson owned a 22% stake in the RTL group, which made a $52 million contribution to earnings. This stake was sold earlier this year, reducing EBITDA in 2002 but benefiting earnings after interest (because proceeds of the sale were used to pay down debt).

The article quotes Sanford Bernstein research as saying that Pearson is earning 3.3% on invested capital. A fair point. But for fairness and balance, why not also report what Pearson executives have consistently said about return on capital? Namely, that the process of reshaping Pearson--selling mature, lower-valued assets that have been owned by Pearson for many years (and therefore carrying little goodwill) and buying faster-growth, more highly valued businesses--inevitably reduces return on capital in the short term. One of the ways to judge Pearson is not just to look at return on capital last year but how quickly it grows in the years ahead.

You say that "educational publishing, in which Scardino has invested more than $7.2 billion, is proving far more vulnerable to the economic cycle than she reckoned." Where is the evidence? U.S. college publishing grew by 5% last year and is expected to grow by 8%-plus this year. The U.S. school publishing business grew by 9% last year. At every investor presentation we've made, we have said we expect U.S. school publishing revenues to be flat this year (not because of government cutbacks but because of the way that the five-year school textbook adoption cycle works) and to increase by an average of 6% to 8% through that cycle.

You report that the education software business has disappointed but make no mention of the school testing business. This is a bigger business, and it is exceeding expectations. (It grew 15% last year and is expected to double over the next five years.) Nor do you mention that NCS--the acquisition you report many analysts consider to be a "step too far"--is set to increase its revenues by at least 15% this year.

The article reports on the scaling back of Pearson's ambitions in online education, in particular at Learning Network. Again, no complaints about that. But why no mention of the fact that Pearson also has $1 billion of profitable revenues from education products that are delivered purely online through a seamless text/Web model?

John Fallon


Pearson Inc.

New York Citizens everywhere should be demanding where elected officials stand on voluntary smallpox inoculation ("Smallpox: Who should be immunized?" Science & Technology, July 15). By the fall of 2002, the U.S. will have enough vaccine stockpiled to inoculate the entire population, yet officials dither about whether they should vaccinate willing people beyond the frontline medical and emergency communities. A containment approach could lead to thousands of people being victimized by the disease before it is contained. Assuming it can, in fact, be contained.

While no one can credibly claim that the U.S. government could have saved us from September 11, we all know they can save us from the scourge of smallpox. This time it is within their power.

Meg Clancy

Bedford, Mass.

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