Objects in Mirror Seem More Relevant Than They Appear.
The specifics of Henry Paulson's economic bailout plan elude me -- and according to yesterday's report that the remaining portion is going to be redistributed, it seems as though the specifics might have eluded Paulson as well. One thing that progressive economists like Robert Reich have agreed upon is that trickle-down bailouts aren't going to prime the pump. However, as distasteful as it may seem, a bailout of an entity like GM or Chrysler -- companies that employ over 3 million Americans -- are a hell of a lot closer to Main Street than the bailout of a lending institution.
What should Washington do when the Motor City begs for oil? The question, it seems, is not "to bail out or not to bail out." The question is how to bailout. And Capitol Hill can use as an example the slickest bailout in western history. It wasn't in 1975, 1932, or even 1779. Think 1215. When the King of England had his royal balls in a vice, and that vice was called Magna Carta. Magna Carta is one of those "if you remember one date from your medieval history class, remember this date" sort of dates, and although it seems overwrought, the document is a keystone in the structure of modern democracy and the rule of law.
What the hell does Magna Carta have to do with Motor City? Here's the answer in the form of a question: how do you get a power-hungry despot like King John to sign a document ensuring that he and all forthcoming kings are subject to the rule of law and the oversight of local principates? All together now:
Money!
In 1215 King John was absolutely, positively flat broke. Due to some terrible military and political decisions, by the beginning of the 13th century John lost some major revenue-rich land to France and was forced to ask his principalities for money. But by now his local lords were fed up with the kinds of taxes John was used to levying, and so in exchange for the added revenue they demanded some oversight of John's actions. See where I'm going with this?
Motown wants money. Without an influx of liquidity, the whole car-building apparatus may fall apart. Dire situation, indeed. And yet this is the same Motor City that has been dragging its feet for over a decade, building gigantic gas guzzlers, as Japanese brands working off exactly the same market research information were scaling down their operations and beginning to try alternative energy sources.
I am personally related to one such market research guru, an automotive expert who has been screaming doom into the ears of domestic manufacturers like some sort of Midwestern Cassandra for the last decade, predicting the doom of the SUV and the primacy of the small, fuel efficient car. And instead of evolving, the Kings of Motor City sat on their thrones, gorging themselves with turkey legs and one-dollar gallons of gas.
Now, Detroit has no money to build cars. Americans have no money to buy cars. Even if they did, the reputation of American brands is only slightly better than that of Chinese baby food. Sure, the collapse of a domestic auto industry would be tragic. But the threat of total collapse makes this the perfect time to put the Invisible Hand down the pants of the Big Three and apply some negotiating pressure.
There should be mandates and timetables for an entirely electric plug in car. There should be mandates and timetables for cellulose-based bio fuel on large machines like trucks and planes that can't yet be powered entirely by electricity. There should be realistic renegotiations with the UAW, negotiations that begin with a good, hard look at the business models of Japanese auto plants in the United States.
Let's not hand the Kings of Motor City a blank check. If we do, they'll just go back to their turkey leg dinners and insane proclamations about American supremacy. But let's hand them a check nonetheless. For the first time since the 19th century, America has in its grasp the tender balls of the Auto Industry. Let's give them a squeeze.
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Should the Government Bail Out the Big U.S. Three Automakers? HuffPost Bloggers Weigh In
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See Aemilia Scott's Profile
With regard to the quality of American cars -- I suppose we're all right here. American cars are built with very high quality nowadays. Some cars are even built by Japanese companies anyway (for instance the Pontiac Vibe and the Toyota Matrix are co-produced) so the question of relative quality is more complicated than it might seem at first.
What I wanted to emphasize with the China joke was less about actual quality and more about perception. No, not all Chinese baby food will give you flipper babies, and surely the rate of flipper babies is relatively low, but it only takes one flipper baby to turn Americans into raging Chinaphobes.
With big ticket industries like Automotive, there is a natural lag of brand perception behind brand improvement. Unfortunately, it's the cross to bear for any company trying to rebrand itself. Toyota had to deal with that problem itself in the 70s and 80s.
What I do know is that only 15 years ago, executives at GM would discuss "how much quality they can afford to build into" this car or that. I also know that this sort of idea -- the idea of how much quality you can afford to add -- would never have occured to a Toyota executive. The point was to build the highest quality car possible, and incrementally make it cheaper to produce.
GM may be adopting the Kaizen business model, but it will take some time to recover from a negative brand perception.
Aemilia
Aemilia: Re your comment about the Kaizen business model as applied to manufacturing processes and the captive supplier base, kieretsu (a version of the original "vertical integration" model for GM, Ford and Chrysler) please note the reasons given for eMOTION! REPORTS.com awarding 2004 Ford F-150 it "Truck of The Decade" award; presented at the 2004 Chicago Auto Show:
Please forgive the long post.
‘What inspired this committee to grant Truck of The Decade status to F-150 is the fact that, besides stellar design and engineering attributes, not the least of which is the 3 valve-per-cylinder, variable camshaft Triton 5.4L V-8 powerplant, exclusive to segment outboard rear shock absorbers and new levels of integrated passenger safety systems, it is the first Ford product built utilizing the new simplified Flexible Manufacturing process now in place at five plants. This reality guarantees future F-150 model introductions at much reduced investment than the competition and improves cost competitiveness. Moreover, standardization of flexible tooling and equipment and operating procedures improves manufactured quality and operating cost. These factors will allow F-150 to maintain its leadership throughout this decade and beyond.
‘An in-depth investigation of the system by our team revealed the critical importance of this process.
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‘We are also aware of the role played by several key manufacturing executives, inclusive of Abid Ghuman and John Fleming, who, under the direction of Jim Padilla, pioneered and shepherded the acceptance, assimilation and utilization of a process that stands above and apart from that of presumed similar systems at Toyota, Honda and GM.
‘It can be said that these two Ford corporate components, F-150 and cell-based flexible body shop, are at the epicenter of an emergent, identifiable and sustainable Ford revitalization. And, when joined by Ford 500, will provide unstoppable momentum.
‘It is clear that the implementation of this truly generic process designed for easy conversion to accommodate any product, will impact on Ford's bottom line near, mid and long term. It also seems to have been a bit under sung. This is not to say that there wasn't significant coverage, it's just that it was presented as the latest in a long line of minimally supportable flexible manufacturing claims.
‘Nothing is further from the truth.
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‘According to Ford's own annual report, it expects to save upwards of 2 billion in 8 years. These figures are based on 70 percent implementation at present, and will grow considerably beyond this with total, system wide, usage. It goes without saying that Ford will experience the profitability benefits of improved model frequency through model change affordability.
"The beauty of it is that Ford will never have to truly ‘re-tool’ in the traditional sense; only product specific components have to be changed. Furthermore, the process used existing technology which was subsequently enhanced. Indeed, cost containment was and is the order of the day.
‘The short story is, that by conferring Truck of The Decade accolades on F-150, we are acknowledging its place, and the process that builds it, in Ford's turnaround."
The change in perception that you speak of, Aemilia, should have occurred at least 3 years ago, but has not owing to a constant flow of misinformation relative to the closing of the quality gap by the US Auto Sector from too many of my media colleagues and Wall St. analysts who truly know better.
No, sorry, the question is "to bailout or not to bailout" and the answer is "not to bailout." I CANNOT approve my tax dollars going to a mismanaged, inefficient business like GM. I will write my Congressmen and keep writing just to make sure it doesn't happen.
Huge difference between a "bailout" and a loan guarantee; HUGE DIFFERENCE.
These modest, and I do mean modest loans will have to be paid back, and if the Chrysler loan guarantee arrangement within the 1979-85 timeframe is any indication, you have nothing to fear -- not that you should. That loan was paid back ahead of schedule and with interest.
As far as "my tax dollars" exactly how do you generate your "tax dollars"? Did or do space aliens from Melmac leave a weekly stipend, or did you work somewhere? An economy, my friend, is theoretically a closed loop system, requiring a manufacturing sector surrounded by support enterprises employing people, who use their salaries to support their families and the businesses of their community; i.e., "the butcher, the baker, the candlestick maker".
All industry, and I do mean all, industry and every type of business enterprise, are systemically linked to the core elements -- represented by GM, Ford and Chrysler (although Chrysler is no longer American owned) Boeing, Lockheed-Martin, General Dynamics, Northrop-Grumman and the supply chain -- of the hypercritical industrial base; the means by we which make things of value. Indeed, as a learned colleague said: "The country that produces nothing soon loses its sovereign right to exist, simply because the industrial base and the defense industrial base are one and the same."
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I suspect that you are a component of a well orchestrated smear campaign against the US Auto Sector, bent on destroying it or so structurally weakening it that it makes it ripe for takeover, as the Chinese Ministry responsible for its auto industry, just two days ago, indicated they would like to do.
Your comments are not based on true knowledge or concern for your tax dollars, but genetically induced ideologically self-serving myopia.
Educate yourself a bit with this analysis: http://www.emotionreports.com/downloads/pdfs/GM_ANALYSIS070608.pdf
American efficiency expert Dr. W. Edwards Deming, revered in Japan, advocated "the development, desemination and assimilation of profound knowledge" said a colleague who knew him.
Wise words...
Thursday, October 23, 2008
Ford builds most reliable American cars, Consumer Reports Magazine says
Scott Burgess / The Detroit News
DETROIT -- Ford Motor Co. continues to build the most reliable American cars, edging closer in reliability to its Asian rivals, Honda and Toyota, according to an annual survey released this afternoon by Consumer Reports Magazine.
...The Ford Fusion and the Mercury Milan continued to rank among the most reliable family cars. The freshened Ford Fusion sedan rated above average
http://www.detroitnews.com/apps/pbcs.dll/article?AID=/20081023/AUTO01/810230454
Food for thought... serious thought
"The 15% Solution" to auto crsis
I have a simple approach to the auto crisis -- The federal government should give any one who buys a fuel efficient car from the Big 3 a 15% rebate back on the selling price. This program could have a 1 year time limit.
The total of the rebate dollars might then constitute a loan the auto makers would have to pay back.
If effective, this solution would immediately jump start US auto makers by giving them a huge advantage over the competition while they work on the remaining legacy issues. Auto makers would stay employed and no money would go directly to the car makers.
The feds might also think about underwriting an extended warranty program for this one year period. Again, the total dollars to do so, could constitute a loan to the auto makers
The Idea may be flawed and I am not sure if the numbers above would work, but the conceptual approach might we worth exploring.
Joseph H Hare
23 Del Prete Drive
Hingham, MA 02043
617 755 0898
Why not pass this idea on to the http://www.change.gov/ site?
You know, I think it's great that Ford gets such high marks from CR, I really do. Just please don't FORCE me to buy their cars or invest in their business.
and that my friends is the problem why even if the big three going green still dosen't mean they won't buy it.
Aemelia: As much as I appreciate your grasp of history (make sure you stay at the Ostrich Inn the next time you visit the UK; much history there and linked to the signing the Magna Carta) you really should chill on the quality disparity issues between US and offshore manufacturers: That gap is all but closed.
Links of interest... and perhaps you ought to consider exactly what Sun Tzu meant 2500 years ago when he said in essence "economic war is always waged first".
It is appalling that most Americans are clueless when it comes to acknowledging the realities of economic war waged against a country by offshore rivals completely supported by their governments; which includes subsidization of hybrid vehicle technology for Toyota and Honda.
Short story: GM and Ford compete as companies, Toyota, Honda, Nissan (Japan), South Korea and China compete as countries.
I invite you to consider a rather profound analysis contained by my colleague Alan Tonelson, whose 2002 book "The Race To The Bottom" should be required reading for any analyst, pundit or industry observer.
http://forum.wgbh.org/wgbh/forum.php?lecture_id=1845
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Thursday, October 23, 2008
Ford builds most reliable American cars, Consumer Reports Magazine says
Scott Burgess / The Detroit News
DETROIT -- Ford Motor Co. continues to build the most reliable American cars, edging closer in reliability to its Asian rivals, Honda and Toyota, according to an annual survey released this afternoon by Consumer Reports Magazine.
...The Ford Fusion and the Mercury Milan continued to rank among the most reliable family cars. The freshened Ford Fusion sedan rated above average
http://www.detroitnews.com/apps/pbcs.dll/article?AID=/20081023/AUTO01/810230454
Food for thought... serious thought
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