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Filed under: economy, leadership | Tags: Alan Mulally, bailout, Buick, Cadillac, CEO, Chevy Volt, Chyrsler, Congress, economy, environment, Ford, General Motors, GM, GMC, Hummer, hybrid, Johnson Controls, Keith Wandell, president, Richard Wagoner, Robert Nardelli, Ron Gettelfinger, Saab, Saturn brand, UAW, Volvo
In addition to starring in a singularly scary photograph (Wall Street Journal)—
—executives of the big automakers (and associated groups) outlined a plan for action with their asking for federal funds from Congress (see below):
| General Motors | Ford | Chrysler | |
| Requested Funds | Term loans of up to $12 billion through end-2009; $6 billion line of credit | $9 billion line of credit | $7 billion loan by end-2008 |
| Fuel Efficiency | Will launch predominately high mileage, energy-efficient cars and crossovers | Improve the fuel economy of its fleet an average of 14% for 2009 models, 26% for 2012 models and 36% for 2015 models compared to 2005 models | 73% of the 2009 models will have better fuel efficiency than previous models |
| Green Initiatives | Will invest $2.9 billion in alternative fuels and technologies through 2012; will offer 15 hybrid models by 2012. Chevy Volt scheduled to be produced in 2010 | A battery-powered commercial van due in 2010, a battery powered sedan in 2011, and a plug-in hybrid by 2012; will invest $14 billion on advanced technologies during next seven years | Introduce first full-function electric-drive model in 2010; will produce more than 500,000 electric vehicles by 2013 |
| Brands | Will focus on Chevrolet, Cadillac, Buick and GMC; will consider selling Saab and Hummer; sell or consolidate its Saturn brand | Explore selling Volvo | |
| Operations | Plan plant consolidations | Cut the number of dealers selling its vehicles, and retool plants to make small cars in the U.S. | Further factory rationalization, sharing platforms and components and other technical innovations expected to yield between $3.5 billion to $9 billion annually when fully implemented |
| Staffing/Labor | Wants further changes in labor agreements, including on job security, paid time-off, and health-care | Negotiating with UAW for more cost savings | Plans to cut work force and reduce health-care benefits |
| Financial Restructuring | Trying to cut $30 billion from its debt load; dividend will remain suspended during the life of loans. Expects North America to break even by 2012 | Expects a return to profitability in 2011. | Expects a return to profitability by the end of 2009. |
Source: Wall Street Journal
Not only does Alan Mulally look like the nicest of the bunch, but it also appears that his organization has the most concrete plans for action in this crisis. Specific benchmarks, both in terms of time and result, evidence of current action, and a willingness to scrimp with the rest of us; these steps win out. Mulally is by no means without blame, but he does appear, both in this article and others to be changing his tact in light of the new economy.
We need a lot more “This is what I will do” rather than “This is what I will consider” in times of crisis.
Filed under: economy | Tags: art, Carnegie Mellon, computer human interaction, Johnny Chung Lee, life, PhD, Pittsburgh, Randy Pausch, slingshot, Wii, YouTube
You probably have already seen this video of Johnny Chung Lee and his Wii; if not, you should.
This is someone that has figured out how to do what he loves (and has found an audience that appreciates his work). After seeing one of his new projects today, I took a look at his CV. Turns out that this Carnegie Mellon PhD has not only created a following on YouTube (Top Rated Video, Dec 2007), but he also was the Project Creator on:
A large scale community art project for the City of Pittsburgh for the urban renewal initiative of the East Liberty area. The project involved the construction of a 45 foot tall slingshot to launch paint-filled balloons fired by community to temporarily transform a condemned apartment building into an 18-story tall piece of artwork.
There are a few lessons here—and I wonder if it is a coincidence that another life lover and Internet sensation, Randy Pausch, also claimed this university—in the same department and field of study even?
Is there something we ought to learn more about when we discuss human interaction (the area of study for both these individuals)?
I think so.
Filed under: economy, leadership | Tags: corporate America, economy, layoffs, Montana, Nevada, New York, New York Daily News, New York Times, Sam Gallup, Stillwater
Sam Gallup, New York miner lost his job in August, found a job in Montana, took the few days drive out to the mine, worked one shift, and was laid off as one of the 500 the mine let go.
He now is waiting for his one day check.
It would be different they found out he lied, or he got in a fight, or something else. But to be laid off, after just being hired …
The good news (hopefully) is that he is now interviewing with a company in Nevada and he has received some help along the way. Amid the multitude of calls for greater corporate transparency in times of crisis, this group simply missed it. My wife mentioned to me that she was surprised at the internal miscommunication; the executive team completely failed to mention to the hiring team that there would be some needed cutbacks.
Now they have all this negative press because they thought it would be better to leave everyone in the dark. I suppose this is their subtle introduction to new media.
We understand layoffs, and we understand hiring freezes, and Stillwater, the company he worked one day for, should have understood that these usually go in reverse order. But to do something like this … this is why so many people hate corporate America. What a shame.
Filed under: economy, leadership, politics | Tags: economy, oil, reward, risk
Why is that every time bad investments made by private institutions go belly up, the U.S. taxpayers are called upon to socialize the financial risk?
This is a fair question, but I see a bit of hypocrisy in this discussion (not necessarily from this source, but from public outcry). In May, CNNMoney reports:
Politicians are eyeing oil profits like a fat juicy glazed ham.
The argument for windfall taxes is the reverse of the previous critique. Why should we privatize risk and then socialize profits? Organizations should be accountable and if we deem them “too big or too essential to fail”, they should also be deemed too integral to be lucrative for the shareholders. But we cannot have both. We cannot demand that when companies that have privatized the risk reap major returns that they share those rewards with everyone.
We should not forget the Little Red Hen—even if it is politically popular.
Filed under: economy, leadership, politics | Tags: capitalism, credit crisis, economy, efficiency, Fareed Zakaria, free markets, Newsweek
I spent the better part of last week lying sick in a Marriott room in Washington, D.C. While there, I had the opportunity to watch a lot of news cable and read the complimentary reading material (save the morning that some fellow traveler stole my morning paper). The Newsweek issue that was in my room included an article by Fareed Zakaria that noted (discussing the current economic crisis):
This crisis should put an end to false debates about government versus markets. Governments create markets, and markets can exist only with regulation. If you want to be truly free of regulation, try Haiti or Somalia. The real trick is to craft good regulations that allow markets to work well.
Pundits can argue about the theory of what is a free market and what steps lead us to the slippery-slope of socialism, but the fact is, this “freer-is-better” model has done tremendous damage to the economy, both domestically and internationally (see Fukyyama’s article for more discussion on this damage).
The economist’s goal, and the goal of the market creators, is not a test of how free or constrained is a market, but rather, how efficient. It is disturbing for moral judgments to come into play about market freedom without the discussion of efficiency in that debate.
For example, something as dull as trademark laws allow brands to flourish and brands should be allowed to flourish because they eliminate waste and empower consumers. This is the moral high ground. Trademark laws, sanitary regulations, and safety requirements are not actually tools of a free market. In fact, a totally free market says that the providers of goods will self-govern and therefore those needed requirements will materialize without government coercion because consumers will demand it. But such a position creates such a burden on the consumer that the waste and pain in creating an efficient solution is destructive.
Sure, we could let this market work it’s way out of this mess as we did in 1929. It would eventually happen and therefore we could justify the pedantic expositions concerning free systems and the power of the masses. And in the course to this achieving justification, we would lay waste with thousands of ruin lives and devastated souls as its consequence.
Which course at that point is the morally just?
Filed under: economy, marketing | Tags: cool, Emperor's New Clothes, Eritrea, Foreign Policy, L Report, The Simpsons
In Eritrea, 15% of all people have access to any sort of bathroom. That number changes to 5% in the rural areas. For the sake of dignity and the needs of sanitation, this is a big problem.
It seems like a lot modern marketing advice and/or case studies focus on what is and isn’t “cool.” Coolness can be powerful, but is, as The Simpsons points out, often out-of-reach:
Homer: So, I realized that being with my family is more important than being cool.
Bart: Dad, what you just said was powerfully uncool.
Homer: You know what the song says: “It’s hip to be square”.
Lisa: That song is so lame.
Homer: So lame that it’s… cool?
Bart+Lisa: No.
Marge: Am I cool, kids?
Bart+Lisa: No.
Marge: Good. I’m glad. And that’s what makes me cool, not caring, right?
Bart+Lisa: No.
Marge: Well, how [...] do you be cool?! I feel like we’ve tried everything here!
Homer: Wait, Marge. Maybe if you’re truly cool, you don’t need to be told you’re cool.
Bart: Well, sure you do.
Lisa: How else would you know?
Of course, like the Emperor’s New Clothes, this coolness is often inauthentic and based on the clouded fancies of our peers. It may create success in the short-term and may be appropriate for faddish brands, but pursuing it is likely an ill-conceived and wasteful effort for a sizable number of organizations.
For example, creating a wonderful marketing strategy that can help solve Eritrea’s sanitation problem is not an approach that millions of teens will think is cool. Although such a solution will not make the L Report, it could change the world for millions of people. That’s cool.
Dan Froomkin of the Washington Post commented today about the current farm subsidy bill veto and subsequent process to override:
In Congress, a bill is likely to get a lot of votes if there’s something in it for everyone. While Congress often finds itself caring mostly about the parts, it’s the president’s job to focus on the whole.
So Bush rises above politics to act presidential — and that’s when Congress shows some spine? That’s what it takes for Republicans to leave his side and join forces with Democrats?
In a time of riots because of increasing living costs, not to mention the negative effect that subsidies in domestic agriculture have on developing nations, it is disturbing for our Congress to side with the powerfully popular farming interests. With report after report about rising food prices, it seems that our representatives have not matched what we are willing (as a nation) to sacrifice for the benefit of a few. I agree that a government’s value (and with it legitimacy)* is based on the public policy manager’s ability to satisfy public desires and require sacrifice. As Mark Moore explained,
it is not enough to say that public managers create results that are valued; they must be able to show that the results obtained are worth the cost of private consumption and unrestrained liberty forgone […] Only then can we be sure that some public value has been created.**
Congress has, no doubt, required more sacrifice in the pushing of this subsidy bill, but in doing so, they have not moved far enough away from personal interests to address the sacrificial impact on the nation as a whole. It is a troubling standard to financially benefit the few privileged at the expense of the struggling masses.
*“The legitimacy of government as a whole generally depends on how well it creates value.” Kelly, Gavin; Geoff Mulgan; Stephen Muers; “Creating Public Value: An analytical framework for public service reform,” Strategy Unit, Cabinet Office, United Kingdom, Oct 2002, www.strategy.gov.uk
**Moore, Mark; “Defining Public Value,” Creating Public Value, Harvard University Press, 1995
In the FT article discussing the implications of impending recession, it is interesting to consider the household aspect of this crisis. Though painful, this expected hurt will be helpful as it will bring us back into alignment with an efficient marketplace. Thinking of the rapid increase in home value over the last few years (or decades) and we may note that in selling these homes (among other assets) that perhaps the crashing of value when there is a massive sell off (whether through owners or creditors) is simply a needed correction (as painful as it may be). In that light, as the “dominoes” fall down, it is simply a mechanism that brings about again equilibrium (though government can step to either slow the fall or prevent it completely as long as it is willing to increase control indefinitely). The latter option is appealing in the short-term, but in the long-run, such control is likely to impede markets and progression if not carefully balanced. I would much rather have short-term pain and let the invisible hand guide the markets.
