Sunday, November 23. 2008When The Largest Auto Maker In The World.....John Linton ....can go from 'no problem' to free fall in less than 12 months, have it's shares valued at 'zero' and warn it's government it may have to stop operating because it is running out of cash with no chance of anyone lending it money.....why would anyone responsible for making decisions within a commercial enterprise not view the immediate future with grave concern and their ability to 'manage' it with the same level of concern? OK, General Motors has made ridiculously large and stupidly fuel guzzling cars for two decades after it was obvious that was a truly dumb thing to do and then added the equivalent of Fred Flintstone as a designer to ensure these monsters reached the nadir of butt ugliness - model after model - year after year. But, by no stretch of exaggeration were the people who ran GM over the last 20 years not among the brightest of business school graduates and highly competent in general terms. So it's possible to dismiss whatever happens to GM as being the result of decades of ignoring the obvious for reasons inexplicable to any outsider. Similarly the apparently identical afflictions affecting Ford and Chrysler can follow the same dismissal. But BMW, Mercedes, Toyota? OK - tough times mean decisions not to buy expensive items - cars are at the very top of that list - but all these companies seem to have been caught by surprise. ????? So....think about that.....three of the largest auto manufacturers in the world are on the brink of disappearing and the next three are in serious slow downs...and none of them saw this coming? In the case of the three US makers their collapse would almost certainly put the US into a true depression with 3 million people added to the near current record high number of unemployed and who knows wat the effects in Germany would be. So the two largest economies in the world become crippled for an indeterminate but long time resulting in....what? The concept is so unimaginable that the US government will HAVE to prevent it happening so that will be alright then - OK? It prevented the major US banks from collapsing and then bailed out the mortgage market so no problem to do the same for the auto makers? Something like that will play out I, like most people who bother to think about it, assume. It may well change, forever, the economic conditions that have existed since 1946 and will also tranform th government on the 'free world'. So it's possible for huge companies (not in businesses run by masters of the universe who just play with numbers and have no real 'products') but who have dominated their market sectors to, literally, go from boom to bust in 12 months? I know the list goes on and this scenario has been diminished in seriousness by inventing a term for it and then reducing that term to its acronym/initials (GFT) in a perfect execution of the Orwellian process of deceiving the 'people' coupled with Krudd's never ceasing overseas trips to "address the crisis" but the fact remains, in case its escaped your attention, that businesses around the world are totally screwed and the economies of the countries they operate in are similarly screwed along with large sections of the citizens of those countries. Exetel have completed this past Friday the very painful process of raising our prices (with the objective of reducing our growth plans from aggressive to slightly below 'neutral') and have cancelled every single capital expenditure project we had in place. We didn't do that lightly, in fact we did it with a great deal of anguish but we did it because it appears to us that it is in fact possible for any 'industry sector' to face circumstances which any company within that sector, however well run, may find it impossible to deal with. A prime example occurred this week (which we, as a company, could see coming and did prepare for and some ten days before AFACT lodged their statement of claim we had inside information that it was about to happen and we had some fear that we were the target despite our 'precautions') in the law suit brought against iinet. If that law suit had been brought against Exetel we would have found it very difficult to deal with both in terms of management time that would need to be devoted to it and the sheer amount of money (between $A750,00 and $1 million) it would cost over the coming 9 - 12 months. We could have survived it but we could not have grown in that time and we may well have needed to 'down size' the company. That is an obvious, and unrelated example to the GFC, but it starkly illustrates the point of what happens when a major change occurs in your business. GM faced the situation where, suddenly, the number of people buying their cars dropped by 50% and then fell further - no amount of planning (and there appears to have been none) could deal with that circumstance. I have no concern that Exetel is in better financial and operational 'shape' now than it has been at any time in its existence and has sensibly diversified its service offerings across products and market sectors to an optimum extent and I am very sure there is no competitor to Exetel that has a lower cost of operation. Having said that - I would have no idea how Telstra Retail will deal with whatever effects it will feel over the coming year and, based on their previous actions of their rolling promotions' we have, and can have, no defences against them and their depradations could be quite damaging. So, we have completed all the steps, with the exception of some tidying up, of PLAN A and we have put in place the steps that would allow us to evaluate the benefits, to us, of PLAN B and then there's PLAN C - actually we haven't got a PLAN C. What truly concerns me is that I am having to make decisions that could be completely wrong and the GM/Ford/Chrysler disaster indelibly points out that when in doubt do nothing isn't an option. Then again perhaps it's all a storm in a tea cup and Krudd will save us all. (come to think of it - I'd better give some thought to a PLAN C) Trackbacks
Trackback specific URI for this entry
No Trackbacks
Comments
Display comments as
(Linear | Threaded)
The US "big three" are in strife because in typical American style they refused to adopt trends of other countries car manufacturers (in particular, Japan) in downsizing from 8+ cylinder engines to 4 cylinder and even reasonably efficient 6 cylinder engines. They should have headed in that direction 20+ years ago. Ford and GM in this country have similar issues, only not as pronounced.
Now it's to late for them to retool their plants for smaller engines and vehicles. I also think the American public were never properly "educated" in the benefits of smaller cars. Most likely to be a cultural thing. (everything has to be bigger in the US) Unlike Japan where sub 1000cc engines are the most popular, and Landcruisers are nearly as scarce as hens teeth. The Japanese registration pricing favours these small engines as well. Nothing like an incentive in the back pocket! At least Exetel are able to monitor the bigger picture and not have a "head in the sand" attitude that was likely to be a major cause of the car industry issues. The continued fine tuning of the Exetel business plan is likely to keep Exetel viable. I'm happy to continue my support for a company with that sort of attitude. Comment (1)
I agree that their products are junk and their 'eye appeal' even worse.
However to 'go broke' so quickly was what I was commenting on. Thank you for your support. Comments (2)
In addition the US Big 3 have billions tied up in employee benefits and are extremely union dominated.
Honda, for example is leaner, has more flexible production lines, more automation, pays its workers almost half ($44 p h vs $73 p h for GM). It is expanding with increased sales and just opened a new plant in - can't remember the city ?Greensboro?. So it is not necessarily total gloom for the US automotive industry, just the traditional, union run, inflexible, US owned companies. Honda (eg) in the US are doing fine... Comment (1)
My theory is that they're not really going broke and just manipulating accounts to get government money.
How else could they go broke so fast? Comment (1)
Big Cars and the rising price of fuel doesn't help their financial position.
But mainly (as mentioned above) its the pension and health care plans they have to pay for (hundreds of thousands of them) for retired GM workers. When the pension and health care numbers were worked out 50 years ago, life expectancy wasn't what it is now. Instead of retiring at 60 and dead by 70, people are living to 80-90 years of age and its a very expensive time of their life as soon as their are any health complications. Check youtube or do a news search, but the whole issue is one of the main reason that the government probably will bail them out. Again. Comment (1)
You're mentioned on page 2 in this new SMH article:
http://www.smh.com.au/news/technology/biztech/pirate-downloads-instant-cutoff-alert/2008/11/24/1227491443731.html Comment (1)
|
Calendar
QuicksearchArchivesCategoriesBlog AdministrationExternal PHP Application |