Wednesday, November 19, 2008

Post No. 67a: Guess Which Country's Auto Industry May Be Seeking Assistance from its Government

Article of Interest from the New York Times

Check out this article about another country's automobile industry which is experiencing some difficulties.

http://www.nytimes.com/2008/11/19/business/worldbusiness/19chinaauto.html?_r=1&ref=business&pagewanted=print

20 comments:

  1. -snicker- Oh, I shouldn't be happy about someone else's misery. I am not, really. But it shows us something about the economy; it is not "Bush's economy" that 's in trouble, it's the world's economy. We are all so inter-related financially that slowdowns in one country affect all trading partners. There are some die-hard partisans, I know, who will blame the Bush administration for the entire world's problems but it just isn't so. It is a global economy and the problems did not start in the US and they have been brewing around the world for a very long time.

    We'll (the US) will likely weather this better than most, though.

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  2. We're pretty much in agreement with you Douglas. Our view is that this whole process started roughly 30 - 35 years ago, if not before that. (Jimmy Carter actually tried to warn us, but we did not want to hear the negative message, and the placement of responsibility on the electorate.)

    All of us are responsible to some extent, including we citizens as consumers, and through our heightened desires and altered expectations. We're no longer hungry except for cotton candy. We got complacent. Continual sacrifice was no longer part of the deal. All of us.

    We as a society also got collectively greedy. We sought too much of the good life, and bought into the image of the good life presented to us. We stopped relying on hard work, and the best and brightest of our crew engaged in slight of hand and manipulation of things, not the creation of things. It didn't help that they did not respect those who made a living by the sweat of their brows.

    Whatever happened to invention, creation, and economic stimulation? As we mentioned to a group of governmental officials recently, if you do not come into contact with an engineer, scientist, inventor, or entrepreneur in your day to day dealings in life, something is very wrong.

    If the children in your neighborhood do not desire to become scientists, inventors, or entrepreneurs, something is terribly wrong.

    Finally, too many of us sat around waiting for someone else to affirmatively do things, and take charge. Too many of us had a mentality where we were dependent on someone or something else to take care of us. We were not far removed from freeloaders and hobos trying to catch a ride on the train. All of us.

    If one stops to think about it, government should have a very limited role in our lives. Government was not originally designed to take on all of these varied roles. Why should we expect government to replace common sense on the part of the electorate. As its role increases, we effectively become more of a welfare state.

    We were lulled into a state of acquiescence. All of us.

    Let's start teaching the youth of this country to wonder, initiate, create, be curious, and think outside of the box. It has been said that education is the means by which a society can most quickly turn itself around. That particularly applies to the education of the mothers, since they read to their children. Children who have been read to between birth and 3 years supposedly have a 400 word vocabulary advantage at that point, over kids who have not.

    Finally, there were many calls on Tuesday for the heads of the Big Three Auto Companies here in America for "running their businesses into the ground." The same should apply to all of the elected officials at all of our governmental levels, if they have been in office for any period of time. They should all resign accordingly.

    We previously expressed our concerns about the ability of Sen. Obama to turn this ship around. Not about his capabilities, but about the enormity of the job. We're going to need every ounce of "hope" and "yes we can," over the next 10 years, to pull this off.

    It's time for an attitudinal adjustment. On the part of all of us.

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  3. We differ. Not entirely, of course, you've made some good points and expressed a number of things I also believe to be true. I do think we need more people to see those fields as desirable careers and endeavors. Where I disagree is on when it started if you take the lack of those things and the infusion of greed as catalysts. There has always been greed and it has always run economies. It's the nature of man to want more, to amass more, and to look askance at those who toil in service (see feudal systems for a perfect example). Human societies are hierarchical, they are driven from the top. We have replaced barons, earls, dukes, and kings, with governors, senators, representatives, and presidents. In feudal systems, the elite were both government and business. The "small businessman" served at the pleasure of the lord of the manor upon whose lands his shop stood. We have become more democratic, allowing some direct influence over the powerful through the ballot box, but we haven't changed the fundamentals. Rockefeller, Carnegie, Mellon, Kennedy, and the list goes on. Now, we add Soros, Buffet, and several more. If they do not seat in seats of power, the pull the strings from behind them. So long as the rich and powerful are seen as our betters then they will have power.

    Communism was supposed to upend that. It didn't, it just changed who was the elite as any revolution does. Commerce was still commerce, power was still power. Instead of lesser lords, you had commissars. Instead of a king (or tsar, you had a premier. Instead of the royal court, you had a Duma.

    We have agreed, in the past, that education is key. We've also agreed that it is not the proof of intelligence, just a symbol of sufficient brains plus a fair amount of determination and diligence. While reading to a child may help, and it can help the mother (or father) also. I think it's greatest value is in the bonding it provides. It also gives the child a feeling of power in a world where he is usually shown he has none. He is being served, catered to. I think these are more important than the head start on vocabulary.

    I think social scientists often misunderstand the data they collect. Or they squeeze it, manipulate it, and misinterpret it to suit a particular theory in which they believe.

    But I ramble here a bit. Probably because I have been reading two books on the social condition at the same time. First, I am wading through The Bell Curve and taking breaks to read "Lies, Myths, and Legends" and now "Slander" (Ann Coulter). Each has an agenda, each has facts to back them up, each inserts their own bias to tie one to the other.

    I have no answers to the current economical condition and trend. I do see it as worldwide. I do not see any one nation as the place of cause or cure. I am not sure there is one period in the past that laid the foundation for the problems we face in the next several years. We cycle through these things from time to time and the pattern eludes me (as it seems to do for all the new seers [economists] today. We can only remain prepared to ride them out, plan for the period in which the boom returns, and hope for the best. It is why man is greedy and seeks to amass fortune; the more he amasses, the easier he will have it during the downtown. Aesop's Grasshopper and Ant fable actually explains it all.

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  4. Douglas: Always enjoy and appreciate your thoughtful analysis.

    We do not disagree or differ with you on the facts. What we disagree on is the 'degree of management difficulty," and what an "organization" can do to gain more control over its future.

    Here's the bottom line in America with its free market capitalism, which we fully support. We must RECOGNIZE, as a society and culture, that when you give people the freedom to do pretty much whatever they want to do in life, the results are going to often reflect lack of coordination.

    (For example, when folks are permitted the luxury and freedom of pursuing any educational, and resultant vocational, area of interest, they can not have an ultimate expectation that demand, in the form of jobs and the needs and wants of society, will match up neatly with their preparation and expectations. When you permit people to have sex and produce babies, and marry or not marry whoever they want, there are consequences.)

    Management is not that neat and simple.

    Coordination is the issue. You know that from your military experience. You can not manage or run any large number of people without certain restrictions and guidelines from the top. Simply can't do it.

    Some will do just fine. Some will fall in line. Others will not. Some will buy into the goals. Some will look long term. Some will look short term. Some will try to cheat.

    All of this complexity is beautiful when it working for you, and you're faring better than others. Doesn't mean that you have a smoothly running system. Just means that yours is less screwed up than others, or it may be a matter of timing and circumstance.

    In reality, trying to run or manage America is like herding cats.

    This is not to suggest that we would prefer socialism or communism. However, we must recognize that kings, despots, oligarchies, dictators, etc. have a somewhat easier time of it because they dictate conduct and do not allow much freedom, especially when their constituent numbers are small. The larger the organization, the more planning and control is required. Dividing the leadership between many means often conflicted and contradictory effort.

    Just saying that we need to recognize that, instead of playing games with ourselves thinking that we had a fine tuned synchronizeed engine of a country at one point. We were just better and luckier at dealing with our disorganization for a period of time, and had the luxury of great resources. That does not last forever, as we are now seeing.

    That having been said, a good read is "From Third World to First," the story of Singapore's radical transformation. (http://books.google.com/books?id=-Wqq6MFcQrcC&printsec=frontcover&dq=%22From+third+world+to+first%22&ei=fWwlSaPOLpPyMoi4nLAI#PPR7,M1). It came at a cost of personal choices and serious restrictions. (http://books.google.com/books?id=-Wqq6MFcQrcC&dq=%22From+third+world+to+first%22&ei=fWwlSaPOLpPyMoi4nLAI.)

    Not suggesting that is what we should do. Just suggesting that we should recognize that there is no simple formula, no simple explanation, no simple cause. It's extremely complex, beyond our management skills as humans, as long as we allow certain freedoms.

    Americans generally want their cake and to eat it too. Can't do that in management. Just think about the military with that philosophy.

    Individuality and freedom have their complications. We must recognize that. This is not like running a small plant, or a household, or even a corporation.

    Government is about management. We often forget that. Imagine a business with 300 million employees, all with divergent needs and desires, and speaking different languages. That's what we have.

    There's good and bad associated with virtually every concept in the universe, and change is the one constant on which we can depend. The United States had some good times, as have many other empires in the past. There are reasons that empires come and go. You just can't manage the enterprise using the same tools and principles but for only so long.

    If we, as a society, were honest about that, we might be able to create some new approaches to deal with the coming complexities. Not one single one of the old approaches will work. Things and conditions have changed.

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  5. I am going to be as terse as possible. Here's an adage:
    What works today is anathema tomorrow.
    I just now made that up but I think it applies.
    I agree with much of what you are saying here but I must point out that macro-management is not so different than micro-management. You focus on each piece of the puzzle, find where you think it fits and place it. A good manager is lucky or skillful with similar results. A bad manager forces the fit. I am afraid I see things as eternal: what it is today is what it always has been. We cope more than manage since "manage" implies we have conscious control.

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  6. The big three have failed to keep pace let alone be in the forefront of the automotive industry. It may seem easy for me to be cavalier about the collapse of an industry when no one in my family is directly affected by it but it is not insensitivity that cause me to say let them use the means already available to them to reorganize. It is because rescuing those who make bad judgment calls only encourages more bad judgment calls to be made. Anyone who has been in business in the real world knows that if you mess up you pay for it and you must change or die. The problem is certain industries do not operate in the real world. They are protected because they are seen as being so vital to the economy as to be sacrosanct and we have been seeing the results of treating businesses as if they were sacred cows. It is a mess. It is important to protect those who have already retired from these companies. They should not lose their pensions because of the need for the companies to reorganize. Current employees AND executives have got to share in the restructuring pain and in the end it will be for the best for the workers, the company and the nation.

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  7. Big Biz depends upon the emotional impact of a failure. It's their insurance against total meltdown. On one side, you have your position. That position is logical, thoughtful, and probably the right course. On the other, you have millions of people in the auto industry who would be impacted. It's not just the ones directly working for the Big 3 but all those who are employed by businesses who support the big 3; dealerships, parts stores, third party suppliers of parts and accessories, sub-contractors who supply things like upholstery, for example. People who make little plastic parts that are the knobs and gizmos in the car. I think someone said some 13 million would be impacted if the automakers went under. None of these had a hand in running the auto-makers. Now, before I go further. It isn't just the US auto-makers in trouble. Toyota's sales are down some huge number. This is not simply a US recession, it is worldwide. It is not the fault of any one sector, any one country, any one company or any one person. It is simply human to want to find a scapegoat; Big Oil, Big Tobacco, and so on. I wish it was that simple. I really do.

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  8. I hope I didn't give the impression that Ford,Chrysler and General Motors are the cause of our current economic meltdown. They are however the very much the cause of their own failure. Their problems didn't begin in the past 6 month or the past 8 years. The loss of their SHARE of the industry market should not be attributed to abything else but lack of vision and lack of will to step up to the plate

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  9. June, I agree with you. Much of the blame for the Big 3's problems lie at their own feet. Still, there are factors which no one could have foreseen. The credit crunch and the rapid (incredibly rapid) rise in oil prices in the last 2 years. Even if they could have reacted, they did not have the time. It takes years and tons of money to redesign and retool. People, the consumers, clamored for big cars, SUVs, trucks that roared and went off road (where few of them actually did). The Big 3 followed that lead. But the public is fickle and can change its mind in a moment. Usually the moment that the price of gas skyrockets. At that point, the public, not wishing to be blamed at all, starts looking for a scapegoat. They are urged on by those who wish to ride that anger. Let's call them "Congress". Committees hold hearings, speeches are made, threats of regulation fly about, lobbyists are sent out to fill campaign coffers.
    And the wheels of politics are greased. The public is assuaged (or at least misdirected) and the Big 3 usually survive. I was around in the early 60s. My father was a salesman who traveled by car all over the state of Florida. He drove a sedan; lots of room, poor mileage but gas was cheap. All of a sudden, seemingly out of nowhere, small cars, "compacts" were the thing to have. The Big 3 were attacked for not anticipating the public's new mania. They tried to comply; Falcon, Comet, Corvair, Valiant, etc. Hastily brought out, they had their share of problems. Tastes changed again, people wanted more room, more comfort, more safety, screw mileage. The Van became the New Thing. And then there were vans everywhere. We are a consumer driven (no pun intended) economy. That means manufacturers react, not anticipate. I am not excusing the Big 3 but I am not blaming them either. They are scapegoats as have been all of the companies dragged before Congress since this downturn began.

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  10. Douglas, we finally found something on which we will never agree. We strongly disagree with your proposition that macro-management is not so different than micro-management. We will admit that the concept applies perhaps in the range of 1 through 30,000, maybe 80,000, and perhaps even as large as 120,000 folks under one's command/employ/service. However, 300 million is a whole different ball game, especially when the folks at the top are different and have differing goals and philosophies. (In the military, you at least have a top general dictating policy and direction.)

    Upon graduating from high school, I attended a military academy with roughly 4,000 students and saw that operation. I transferred after 2 yrs to another insitution which, if I remember correctly, had roughly 8,000 students. I then attended an institution for graduate studies, which had roughly 36,000 students. In each instance, the management and organizational issues become more complex and difficult.

    I then moved to Los Angeles and saw the different type of "management" required in a large city versus much smaller ones. I joined a firm which had over 600 attorneys, then another which had 45 when I joined, grew to 55, 17 of us left to form another, grew to 55, then I went out on my own, and then joined 13, grew to 30, and then reduced to 19 to gain control, and then grew to 40, and then I joined a 165 attorney firm, and then a 750 attorney firm which grew to 1,000 lawyers.

    Even at those small numbers, it was a far more complex management deal at the higher numbers. It's a whole different set of other problems, because the people who you manage also change as their numbers increase.

    Couple of other things. Physics applies to many things in life. In order to gain control over one aspect of a collection of dynamic forces, to make any changes or assessments, some things have to be held in suspension. You can not effectively change the control environment, focusing on the area which needs addressing, while the other factors continue to change and be in flux. That's multi-tasking of a higher order, especially when everything is interrelated.

    Finally, the things that we do to manage whatever in this country, are interrelated to events and activities in other countries around the globe, over which we do not have control.

    I think that we do ourselves a disservice when we approach management from the perspective of what works at the micro level is also applicable at the macro level. It's somewhat like saying that what exists here on earth, also exists in the galaxy, and therefore we can employ the same principles.

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  11. June: Thanks again for stopping by. I represented Chrysler, Ford, and General Motors for a significant portion of my legal career. I knew them intimately. Managing even the smallest one of them was an incredibly difficult job. Lawyers want to get things right 99% of the time. A business person is happy if they get things correct 51% of the time. Management is educated gambling. You make your best call that you can make at the time you are confronted with the facts, and a multiplicity of circumstances. All of us are able to look back in hindsight and question decisions. It's just not that easy, nor is it simple, to manage a large number of people. We're not saying that we should not be up to the task, just saying that it is a whole different ballgame.

    A cautious businesspeople would never enter into contracts, nor would he or she ever make promises to employees. Circumstances beyond their control appear with too much frequeny, and they can not predict the future. However, prudent businesspeople, like our leaders, do so.

    Why? They need to place people at ease, and have them settle down and get to work. I worked in a couple of organizations where there was a large amount of uncertainty about the future course and survival of the entity, and in those environments, no one got anything done. I don't generally advocate lying to employees, but I understand the concept.

    As a partner in a law firm, we at times had two clients owing us over 1 million dollars at the same time for close to a year. So how do you make payroll? Through a line of credit. But that's not my point. If we shared with the employees that fact that we had money outstanding to that degree, they would have left.

    Businesspeople are gamblers. Just hopefully more prudent gamblers armed with more information and who work harder to ensure survival. The notion that by simplying applying the "correct formula," an entity will succeed is not how it really works.

    I'll tell you this. I've had some pretty significant management experience. I wouldn't even want to venture into the realm of managing 200,000 empolyees, much less 300 million. You'd have to pay me $240 million a year to subject my body and family to that madness, and I'm always up for a challenge.

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  12. Total agreement Douglas on your Big Biz comment.

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  13. June, regarding the auto industry being the cause of their own failure, would you say the same thing if the Big 3 had never achieved the level of huge market share that they once enjoyed? What if they only had a 5% share max previously, let's say 1945, and still had 5% today. Would that be the model of a successful company?

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  14. Beautiful trip back in history Douglas. We here at the Institute for Applied Common Sense often argue that everything in life should be analyzed in the context of a minimum of 5,000 years, and preferably a minimum of 13,000 years. What you pointed out in the 1960s is just a small segment of recent history. This stuff happens all of the time.

    The whole purpose of our bringing up this article (about the difficulties faced by the Chinese auto industry) initially? Folks thought that the Chinese were so smart and doing all of the right things in industry. They could not have done it without us. They could not do it without their government support. They could not do it if the circumstances were not favorable in terms of the consuming purchasers. Any one of those things change, and it's a different ball game.

    There's a story that I love about Andrew Carnegie, the great industrialist. He was born in Scotland. His father was in the textile business and was very skilled with some loom or weaving machine, and reasonably successful. However, the invention of a new machine during the Industrial Revolution changed all that, and he became destitute and effectively drank himself to death. His mother made handmade shoes, if I remember correcty, to survive. I often recall that story to show how much things can change within one's lifetime, over which we have some control, but not all.

    To improve things, we have to be very aware of what's going on around us. It also requires that we recognize our limitations as humans, and take that into consideration.

    As you so correctly pointed out, this economic collapse is bigger than us. All we can do is to change our behavior as citizens, and our expectations. Pointing fingers really does not help. I am so intellectually offended by the questions posed and the statements made by our politicians during these hearing. These folks have never run anything of real consequence in life, and yet they focus on the back end, instead of the middle, or the beginning.

    Our analysis of problems in this world needs to change. We need to "dig deeper" to determine the underlying causes. We need to focus more on the front end. At the back end, there is nothing but blame. We need to be more proactive.

    By the way, my position on health care for example, even though I do not want us to get off subject? Why provide health care benefits to a country where the vast majority of folks do not do everything imaginable themselves, on the front end, to advance their health interests? Folks don't work out, eat fatty and sugar laden foods, smoke, drink, and all sorts of detrimental conduct. How can we expect someone else to respond with health care under those circumstances? It's irresponsible.

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  15. On micro- vs macro- It's simple; you cannot manage a huge complex organization, So you delegate and lead. You concentrate on your particular function. At the top, you set direction, approve policy, oversee the vice-presidents you hired/appointed to manage the departments in the direction you approved. They manage their dept's and no one else's. Each head takes care of its own body. Macro-management is coordinated micro-managements. Divide up the problem into manageable parts and each is run separately. Entrepreneurs do great at startup and fail, most often, as CEOs of large corporations (Bill Gates is the exception). Leaders do not manage, they stand above, delegate, and approve. Leaders run successful businesses, managers run departments. Don't multi-tasking is a misnomer anyway, it is time management, or in computer terms "time slicing"

    Physics is, I thought, a study of (and search for) universal constants. The speed of light, for example, is the same here as it is out by Andromeda.

    BTW, what happened with the auto industry in the early 60s repeated in the early 70s, and again (to a lesser degree) in the early 80s.
    I drive a "full size" car (a Lucerne) which is really what we used to call a "mid-size". That might make me a moderate. But it's just a trade-off between comfort and efficiency.

    Health care. Sticky subject for me. When I was a small boy, the doctor made house calls. He did ok, charging $5 or $10 a visit. Drove a Caddy. The AMA opposed Medicare, called it "socialized medicine". But it was instituted, personal health insurance followed quickly, and medical costs skyrocketed. I may be wrong but I think there is a connection.

    I think too many people have decided (maybe have been taught) that others are responsible for their well being. Many are health conscious, possibly an equal number to those who are indifferent (or worse). Universal healthcare just spreads the cost to the health conscious to support the slacker.

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  16. Douglas: I do not seriously disagree with your analysis of macro vs micro. Sure, the theoretical model employs delegation and selection of competent people. Problem is that when you delegate, you permit someone else to potentially deviate, to some degree, from the game plan. I guarantee you that the individual personalities, goals, motivations, skills, etc. of the sub-leaders to whom you have delegated will contribute to an uncoordinated entity. Some more that others.

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  17. When I was non-retired, I was a troubleshooter. A problem solver. I maintained a large inter-connected autonomous computerized systems. Murphy often ruled supreme. These autonomous systems were, in themselves, individual processor units linked to serve a common task or group of tasks. When things went wrong (and they did, often enough to keep me employed), I was tasked to analyze, diagnose, and develop a resolution. I was good at it, I think, because I use a combination of "hunch" and "logical" problem solving techniques. Over the years, I came to the conclusion that only the machines were dependable regarding behaving in a predictable manner.

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  18. We heard an interesting argument put forth by the Governor of Michigan during Meet the Press earlier today. She said that to allow the Big Three Auto Companies to fail would not only adversely affect business and workers, but also take us out of the game to be energy independent. She suggested that to the extent that a transition to electric cars takes place, if our auto companies are not even in the race, we might find ourselves battery dependent on other nations down the road. Interesting position, eh?

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  19. Now that time has passed, do any of you feel any better about the prospect of survival of any of the Big Three American automobile manufacturers?

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