Markham Lee_

Unemployment Around the World

I don't understand how you can put forth the argument that job loss isn't a big deal? Many of the people who are losing their jobs aren't qualified to work in the tech field (manufacturing workers), and the service jobs they can get don't pay as well.

How is not a big deal if a lot of the new job creation is for lower paying jobs, and (for the moment) the economy is shedding jobs?

I don't get your argument.

User - I think Micro businesses sounds good, and I admit it can help some folks. BUT I don't think it's feasible as a broad band solution for everyone, just think of it: if you had several million competitors with the very same web site you're running, you wouldn't make very much money.

Considering the failure rates of entrepreneurs in general and the competition introduced if "everyone does it", I just don't think it's a broadband solution.

-M

Five Myths About Business Failure in a Downturn

Kelm: at the company in question I was very successful in terms of improving profits, morale within my department, quality of service, etc, but to do so I had to buck the system and almost insulate my group from the larger company. SO it led to a lot of tension between myself and the executives I reported to, ditto for many of peers running other business groups.In other words "serving the religion" was more important than delivering results.

It was an odd situation because I had more incentives to be mediocre via "maintaining the facade" than I did to excel in ways that corrected and/or exposed our problems.

In the end it drove me (and all of my peers at the time) from the company. I.e. maintaining the facade removed the people who could drive change.

Friar - I think the way you reward innovation is to make it priority via sending the message that NOTHING is sacred, your employees have to understand that your mission is to innovate, drive change and constantly find ways to improve the business. Because when you make something sacred employees are afraid to speak-up, and/or feel as if there is no point in trying to fix certain things because management won't support it.

There is a book called "Execution" that puts forth the idea that managers should act like football coaches, in that they should always be looking for ways to improve the organization, raise the playing ability of their talent, etc. It's a good analogy because even though some players, offensive/defensive schemes, etc, stick around too long, in the end the team has to innovate, load up with better talent or die.

-M

Detroit Uses Aid to "Open-Up" Auto Lending: Not Necessarily Good for GM

I don't think these conversations can be constructive if we're attacking each other, or dismissing people unless they're GM fans. At the end of the day this is a mathematical business discussion revolving around dollars and cents, a strategy either makes mathematical sense or it doesn't.

GM was selling cars for a loss during the credit boom, and at present they're dealing with a double edged sword of lower sales volumes and lower revenue per car due to the various incentives they're offering. The company isn't going to recover by selling cars at an even greater loss, especially in the face of lower volumes.

It's not about GM vs. Ford or GM vs. the Germans.

It's about the very simple mathematical fact that you can't get ahead by selling a car for an even greater loss per car, than you were when sales volumes were significantly higher.


-M

Green Stimulus by Nation

Hi Hazel -

The chart comes from the Economist.com so feel free to post it, just credit them when you do. The original link is here: www.economist.com/rese...

-M

The AIG Death Star

I like your hospital idea Mr. Freddo, imagine also if a fraction of that money was used to fund college educations. A nation of college graduates who don't have student loans to pay off would probably generate significant positive benefits for the economy.


-M

GM Needs to Be Leaner and Meaner if It Wants to Survive

It's a combination of being lean and being more responsive to the consumer, and letting of old thinking.

The Ford Mondeo competes very favorably against Accord, Camry and the VW Passat in Europe. But instead of bringing the vehicle over here (designed by Ford of Germany), we get the Detroit designed Fusion on a similar platform.

The reason?

Ford believed that American buyers would like the Fusion better, despite the fact that Mondeo competes (or beats) the same foreign cars in Europe that are sold here.

It's a critical misstep and indicative of the mistakes Detroit has made.

I also think that there is sort of ideological argument going on, where Detroit is determined to win via doing things "their way" and/or some people just want to like the American cars better.

In the end unless your objective and acknowledge your competitor's strengths you can't win, Detroit has to embrace the very valid reasons why some people prefer foreign cars. Going with the attitude of "We're better the consumer won't admit it" isn't going to cut it.

Finally as I said before if Honda can make billions with 7% market share, there is NO reason why GM and Ford can't do the same. It's time to get right sized for marketplace.

Also the fact that Toyota is having issues is all together irrelevant really, all that's relevant is who is better positioned to get their ship on the right course again. Toyota's problems was introducing some inefficient engineering vanity projects into the manufacturing process, once they ditch those items they'll be fine.

GM's road isn't so clear cut.

Thanks for reading everyone.


-Markham

The Latest Bad Idea: Government Sponsored Vouchers for Car Purchases

G. Kahn - people who can afford new cars but are sitting on the sidelines due to the economy, aren't likely to be swayed by further discounts. Saving $3, $5, $7k isn't the issue, the issue is that their current vehicle works just fine and they don't want deal with the larger costs around buying a new car.

I personally put off buying a new car because of the economy and the voucher program wouldn't sway me one bit, it's not an issue of saving $5k it's an issue of saving the rest of the purchase cost.

The other issue is that if this program is co-sponsored by the automakers they would be selling the cars for a loss, something they already do with their big incentives (the boys in Detroit at least) how does that help anyone?

As for 50% off I'm basing that on the prices some local domestic dealers are charging now based on the historical price, it's not advertised that way but between the incentives, employee pricing, etc, it's in the neighborhood.

The local Ford Dealer is offering Explorers at about 1/2 of what they would've cost about 18+ months ago.

-M

Saab's Problems Stem from GM's Brand Mismanagement

optionsgirl: the idea isn't that Subaru would buy Saab to have a higher-end car to sell to their current customers, but to have another brand to sell to customers that aren't especially interested in Subaru.

For instance I'm not interested in Subaru but I would be interested in an upgraded version of the 9-3, as I did test drive the current one.

Fabienhug: to each his own, never been a mustang guy. If I guy a Pony car it's going to be the new Camaro - assuming GM survives long enough to produce it.

In any event the overall idea is that Saab has been losing customers since GM took over, and that the brand's fans are more interested in (mostly) in the company's Pre-GM cars than the post GM ones.

In any event GM mismanaged Pontiac into the ground, so it's no wonder that they couldn't do anything with Saab.


-M

How Did Hyundai Increase Sales in January?

The problem here is that consumers who are attracted to this sort of deal are likely to be lower income/more financially vulnerable, and as a result are more likely to default in a good economy let alone a worsening one.

I don't see how this doesn't bite them in the end, and doesn't turn into a GM-esque quest for market share at any cost.

-M

GM to Report Losses of $31 Billion for '08, $9.6 Billion for Q4

Bondholder -

The way I see it there is a viable car company within GM if you can separate it from the liabilities and debts it cannot pay, however without that separation GM will likely never recover. After all they have lost almost $70B over the last two years, Car sales aren't likely to recover to their prior levels, and the cars that are sold are likely to be less profitable models.

The Volt is still at least 12-18 months away and it's unlikely (due to the price) that they will sell enough of them to return to profitability.

Let's say that via restructuring GM can get its annual losses down to $10 Billion a year, and for some reason the Volt is an extremely profitable car that can be sold with a margin of $4.5k/each (about 3X what Toyota was getting during the height of the credit boom, around that same time GM was losing $2.5k/car)

www.npr.org/news/speci.../

To break even just from Volt sales GM would have to sell $10B/4.5k = 2.2 Million vehicles/yr to compensate for the losses.

Now does that sound realistic to you, especially when the margin is likely to be 1/2 of that and with its current structure GM's margins per car are nowhere near that level?

Right now it would be a dramatic improvement for GM to begin making $500 per car sold, and if they could make just $1k on the Volt or equal Toyota's number of $1.5k - you're pushing total volt sales towards the 7 Million Range or close to 60-70% of the total car sales in the U.S. this YEAR.

The Volt cannot save GM

GM has to implement a drastic restructuring to unlock its valuable parts.

IF the government provides support to the supply chain via supporting GM (and it's suppliers) through the process, you can mitigate a lot of the job losses. Unemployment will not go to 25% and GM can be viable.

We shouldn't let fear of things we can prevent, keep us from doing what we need to do in order to save GM.


-M

Auto Manufacturing: What Does 'Buy American' Even Mean?

Tundra Headquarters: any similarities are coincidental as I've never heard of your blog before. It's just a matter of different people thinking the same way about a particular topic.

On Ross Perot: he joined the board in the early 90s and began going to dealerships, talking to customers, dealers, etc, buying cars, all to gather intelligence on the marketplace and the car buying process. He was ignored by the board and quite out of frustration.

Pricing & Competition: generally speaking Toyotas and Hondas cost more than their Detroit counterparts, especially when you consider that the former don't use anywhere near as many incentives, discounts, etc.

Let's not forget that Detroit was selling many cars for a loss for most of this decade just to get them off the lot.

Perhaps that's the reason they sought out foreign parts, it wasn't so much to remain competitive as it was maintain their business model.

I.e. it's fairly easy to pay $25-$30k for a Camry or an Accord, while it's fairly easy to get a loaded competing model from Detroit for much less.

The idea that Japanese cars are cheaper is based on how the market operated in the 80s, but it hasn't been true for quite some time.

Thanks for reading

-Markham

It's Time for the Government to Rethink It's Relationship with AIG

I agree that it's easier said than done but as a taxpayer I'm not willing to finance 11 figure losses every quarter either, nor do I have much faith that AIG is going to be able to sell off its units and repay the government any time soon either.

At some point those derivatives have to be unwound because it doesn't make sense to leave that much risk within one company, so I think that even despite the cost to bailout AIG we don't have much choice but to unwind the derivatives as well.

Thanks for reading.


-Markham

GM: What's the Point in Being Number One if You Can't Turn a Profit?

Quick Clarification:

1) I don't hate GM or Detroit for that matter, I grew up in a household that only bought GM cars and can probably rebuild one of the 70s era Buick Elektras from scratch if I had to.

My articles are written from the perspective of what they should do to in order to thrive again and/or possibly gain my business.

There is a difference between constructive criticism and pure bashing, my articles are the former.

2) The point of this article is that for the last 10+ years GM has been #1 in market share, and has over the course of that time done nothing but bleed red ink. It's a mathematical fact.

Over that same time period Toyota wasn't #1 yet made more profits as did many smaller car makers, also a mathematical fact.

Therefore profit per car sold can easily trump market share.

3) Toyota (like many automakers) will lose money for a bit as it has to readjust operations to a marketplace that buys fewer cars, and buys lower margin cars. BUT, Toyota will find it's way to profitability relatively quickly, nor does it have the hard road ahead of it that Detroit does.

4) It's not possible to have a productive conversation about the auto industry if we're not going to be objective.

Thanks for reading.


-Markham

GM and Chrysler: Is Avoiding Bankruptcy Avoiding the Inevitable?

One last time….

If you were to go back and read my past writings on Detroit you'd notice that I've been making the efficiency argument for going on two years now. In fact the main thesis of the one you just read is that renegotiating with some of their bondholders isn't enough to give GM the efficiencies it needs to be profitable.

If I'm noting things that I think GM should do in order to be more successful, you can't characterize it as criticism for the sake of criticism. In fact in every article I've ever written critical of Detroit I've always presented my ideas on how they should do things differently, so that they can be successful in the future. It's not about criticizing GM for fun, it's about presenting my view on how they should proceed in order to be successful.

After all didn't I write in a prior article: "There is actually a good car company under the morass that is GM, and a Chapter 11 filing could allow that company to breathe without being crushed by the weight of liabilities and debts the company can't possibly service. "

seekingalpha.com/artic...

I don't advocate bankruptcy to destroy the company, I advocate bankruptcy to save it. GM without its myriad liabilities could be profitable within a short time, while the viability of its constant restructuring plans is a crap shoot at best.

Based on my own personal preferences the Germans (especially the ones from Bavaria) make cars that best suit my needs, and my preferences aren't something that can be argued, especially since I'm not obligated to buy American. In a free market the customer has the right to choose that which they like the best, and companies who would like their business should try and figure out why they're making the choices they're making, as opposed to the view that people are obligated to buy certain products over others.

Better yet I think Toyota is a great car company but I'm not interested in their products because they don't appeal to me, ditto for Honda.

I'm no longer interested in debating this with you because you seem more interested in ad hominem attacks as opposed to having a constructive debate. After all isn't it your view that people who don’t prefer American cars are in fact shallow and/or not intelligent enough to form their own opinions outside of the automotive press? If you're not willing to acknowledge my right to choose which car I spend my money on, or to admit that a foreign car may better suit what I want there is no point in discussing the topic with you.

GM and Chrysler: Is Avoiding Bankruptcy Avoiding the Inevitable?

No nerves hit, and I'm not arguing this point beyond this comment.

This is America a nation where we believe in the free market, Detroit can be strong again by putting itself in the customer's shoes and understanding what leads them to make the decisions they make.

They can also be strong again by fixing their efficiency issues since they already have enough market share to be profitable.

However Detroit cannot fix itself by taking the approach that the customers who buy foreign are just making a misinformed mistake.

My objection to your comment has nothing to do with me, and everything to do with the fact that I believe it's the kind of thinking that got Detroit into this mess in the first place.