Well, I have worked on a number of projects over the past few years that fit into this category, and in fact I am involved in one now, so I do not want to go into too much detail....

In a couple of cases, they represented product improvements that would allow the suppliers to take weight out of the components (desirable, because of the fuel efficiency issue) while giving them equal performance compared to the current part.

In the case I am working on now, it allows a performance improvement, a decrease in cost, and a potential reduction in emissions....

I am one level upstream from the car companies. I usually have to work with the first tier suppliers on this type of innovation. The way it usually works is, that we do a lot of the background work, product design, prototypes, testing, and that kind of thing, and once the concept is validated technically, we go in with our test data, lay it all out to them by the numbers, and then if promising enough, they do some work to implement it directly into a new model. Typically, they are about two years ahead of the current model, so right now, they will be working on maybe 2011 or 2012 models. It takes at least two years to design, test, validate and adopt a new material, and they do everything they can to limit the number of new materials because it helps them beat on their suppliers if they can use the same component or material on multiple vehicles. The reason it takes so damn long is a complete mystery to me, frankly, we can do the same testing in a number of days, but these guys are concerned about an endless series of requirements, their own fear legal stuff, and a lot of other problems.

There are multiple layers of testing you have to go through, and you have the added problem that right now, unfortunately, everyone is worried about their jobs, so all of the product development on some of these things has ground to a screeching halt.

But at every level, you test the product, there are meetings, presentations, data conversations... more validation, more testing, and it is really difficult to find the one person in these organizations that will stick their neck out and make the decision to change. But, it is easy to find the one person that can kill it. Anybody that wants to can raise some objection, cause enough fear, and you are back to the drawing board having to do yet another round of testing.

There are jerks in these businesses that have built their entire careers on squashing innovation. It is totally risk-free to kill a project. It takes some courage to push one. You have the further difficulty of making it work. I am surprised that we are not still driving Model T-s..Cost is just one issue, the manufacturing scale-up that you have to do to produce any of these products means that you need some commitment by the customer to get it off the ground, and of course, that is the one thing that they will not give you because they like multiple suppliers for the same product so they can beat them up on pricing.

What scares me absolutely to death is that we get into a situation, such as PO such as another war such as some other problem that would cause us to have to develop some new vehicle in a big hurry...We would be completely paralyzed because the lack of innovation leadership, the willingness of some people to assume some risk, and the willingness to test something to 99% certainty, rather than 99.9999% in exchange for about two years less testing. I do not think it used to be that way. Maybe it's because Ford and the true innovators in this business died off and turned the thing over to a load of bean counters. If things had been like this in 1941, the Japanese would have been in Denver before we could design a new fighter to stop the Zero.

When you approach a Chinese manufacturer with the same thing, they take about 90 days to evaluate it and if it is good, they will send you a purchase order, especially if it is a cost reduction. To be sure, a lot of their products are junky for this exact reason, because nothing is tested sufficiently, but it is much easier to find someone in the business who can make a decision.

When you go to a Japanese company with the same innovation, you had better be Japanese or they will not do business with you. You hire an agent, with the contacts in place, and then you might get some respect and you might not. In their case, they want a piece of the action, they expect you to lose money for at least 10 years as their supplier, but they will make it up for you in the following 10. I do not know exactly how their product development works, but I think they mainly find something they like already in the marketplace at the component level and copy it, and do a good job of producing it.

Anyway, this will suffice for the rant of the day. In this case, I know exactly how to make it better....

Another day, another rant....

When I was a young fellow doing this activity, it was a bit simpler. In every organization there was somebody with enough experience, theoretical and practical understanding of the product, experience in the process so that he (yes, it was practically always a he) could understand what you are trying to accomplish and tell you it would either work or it wouldn't. If he thought you had a chance, he would tell this staff of young people around him to do it, and they would usually make it work, with some encouragement.

Typically his motivation in doing this sort of thing was to make his own company better... he knew that by listening to suppliers, and to other sources, he could make a better product, and make it more efficiently.

Nowadays, however, most of these people are gone. The so-called managers that are responsible for process or material development in these places are rather clueless in the intricacies of running their particular operation, but proficient bean counters and/or politicians. Alternately, they are H1B visa cases from India or China that were hired on the basis of their glowing resumes but are actually clueless. The people with the experience and understanding, described above, either retired or were downsized because they had been around so long and were making too much money, and you could get an H1B PhD for thousands less.

How did this situation come about? How could the upper level managers have gotten the idea that you could run a complicated organization or process on the basis of good communication skills and a simple set of goals and values? I think the turning point happened in 1980, when a washed up movie actor was somehow elected President of the United States..... The theory at the time was that if you had the skill of developing an organization around you, it would make up for your lack of intellectual curiousity, and as long as you had the communication ability to make up for your lack of technical knowledge about how the place ran, you would be fine. We all know what happened a few years later, when the progeny of this so-called theory was elected to the presidency..... we said "don't worry be happy" and put off a lot of our long term problems until, say right about now ..... I sincerely hope we have learned our lesson.

Anyway, that brings us to the current time. A whole generation of so-called managers are running these businesses, who, in their adult lifetime, have not seen a recession, have minimal knowledge of the process they are running, and have gotten into their jobs on the basis of their ability to agree with the boss, taking no risk whatsoever, and in the worst case, improving performance by downsizing, a la Al Dunlap. The innovators have been driven completely out of the system. No one remembers how to grow profitability by improving the top line by developing products that work better than the old stuff, and that won't break down.

I do not know what is going to emerge from any of these businesses at the functional level once this shakeout occurs. I am afraid they are going to be populated by the non-wave makers, the H1B cases, and whiners, rather than the old fashioned expediters and innovators, the driving force... the true leaders....most of whom are enjoying their retirement, early or otherwise, and just shaking their heads as the nation and economy that they built comes crashing down around them. Gotta be frustrating. They are in a better place, I guess.

End rant for now.

Great rant Pup. Heh, that description sounds somewhat like my work, where almost everyone is semi-skilled at best! Funny thing is, what you are saying is true in highly specialized fields as well; my boy and a guy I ride with both tell me 'management' treats them like commodities. My boy is very near starting his PhD in some function of pure math or computer science (don't ask me, he has his mom's braincells), and the riding buddy is an electrical engineer working for a satellite manufacturer. How sad is that?

Drew

Rant continues:

For the absolute poster boy for this sort of thing, the Peter Principle personified to the detriment of the entire economy, one need look no farther than Robert L. Nardelli, who up until the start of this rant a couple of days ago was the CEO of Chrysler Corporation.

Nardelli was a graduate of the U of Louisville business school, an institution that ought to be shut down, bulldozed to the ground, and salt sowed into the ground to prevent any more of its spawn from infecting the nation.

Nardelli started out as a young engineer at General Electric, and after 17 years had advanced sufficiently high to pass a job interview in an executive level position with the JI Case Company, a producer of bulldozers. The record on this early career is not available on the internet, it would be interesting to know exactly what he learned and/or accomplished during that era that subsequently qualified him to run anything.
[url]
http://en.wikipedia.org/wiki/Robert_Nardelli[/url]

He returned to GE and fell under the wing of Jack Welch, the legendary CEO...and was placed in charge of a division that made turbines. He became famous for the implementation of the methodology called Six Sigma. For those who are not aware of this method, it is a continuous process improvement methodology that focuses on data gathering, process modification, and ongoing number crunching to arrive at improved product quality. Also he managed to position himself in a business that was benefiting from unprecedented prosperity at the time, the early 90's.

Welch might eventually be the topic of a rant. He took a 100 year old company, founded by Thomas Edison, one of history's great innovators and product developers, and turned it into a TV broadcaster (by buying NBC) and a bank (by running GE Capital). Briefly, in March, the shares of this business had lost 80% of their value from the 2005 era, but it has rebounded slightly in the last month or so.

Anyway, "Little Jack" as he was called, the consummate yes man, one of the top 4 in line to potentially run the whole show.... was then passed up for promotion, and his rival, Jeff Immelt, in the classic tradition pushed/convinced to jump his rival out the door. Our man Nardelli eventually landed the job of CEO Home Depot because of his relationship with one of the handpicked members of the board of directors that were common to both companies (upcoming rant: weak boards of directors hand picked by the CEO). So think of this for a moment: Nardelli had no experience whatsoever running any retail operation bigger than a lemonade stand, but somehow, probably on the basis of glowing articles written about him in the business press, convinced the HD people that he could do it.

What followed, of course, has been called an unmitigated catastrophe.... It is true that during this period Nardelli borrowed a lot of money, and embarked on a massive expansion program, doubling the number of stores, and increasing sales the easy way..... It is also true that he managed to tick off every employee and a lot of the customers and shareholders in the process by focusing on efficiency and cost reduction, which is how he made his reputation at GE, and not by taking care of the customers. For those of you who do not go to the Homely Depot, the company was a true innovator in the hardware business by having knowledgeable people working in the stores who could tell you how to do a project, and then sell you the gear and supplies to do it. Nardelli managed to cut out as much of that as possible and reduce customer service to a carefully measured level somewhere between "annoying" and "infuriating", which is where his operational research said would maximize ROI. Their various competitors in different parts of the country were delighted and they took advantage of this to build an empire. The stock of HD declined during Nardelli's last year, while the stock of Lowe's, their main rival, increased 200 percent. So, the result was that the top line of the company got bigger, Nardelli got the overinflated CEO salaries that were prevalent in that era, and when he was eventually fired, he got an infuriating $210M golden parachute, which further ticked off the shareholders, but at least he was gone. His successor summarily closed a lot of stores and refocused on making the customers happy, and the stock is suggested to be a "buy" and properly positioned to take advantage of the fact that no one can sell their house right now so will spend a bit of money to improve their current one.

http://www.msnbc.msn.com/id/16469224/





When Nardelli was fired in 2007, there was a sigh of relief, but within a short time, he was hired as the CEO of Chrysler Corporation. This is within the realm of the PO.com archive, so perhaps we have some of the articles from that era still around, but here we have a venture capital company, Cerberus, who bought Chrysler when Daimler unloaded it, despite their knowing nothing about running an manufacturing operation, and so it made sense to them, I guess, to hire this incompetent CEO to run it. This was a slightly better fit, since he did have a bit of a manufacturing background, but there was nothing in this character's resume that suggested he knew anything whatsoever about innovation and product development, and had built his entire career on slashing, making things more efficient, and ticking people off. This, in and of itself, was probably part of what Chrysler needed, but it is no substitute for producing products that make people happy and that they like to drive.




Of course, we all know what happened. $4 gas, the collapse of the housing market, the collapse of the credit market, which of course deprived Cerberus of its life blood, and now Nardelli had on his hands one of the biggest bankruptcies in business history. Forced to go to the government for a handout.... a management legend. He is out the door as of this week.

There are plenty of lessons to be learned here, but here we have an example of a guy who built his career slashing, burning, and cutting a business that someone else built, taking advantage of unprecedented economic times, rising to a high level by being a yes man, and finally reaching his level of incompetence when the very thing that got him ahead, slashing and burning, was inappropriate for the job at hand.

Lee Iacocca, who is still around, must have a flat spot from beating his head against the wall in frustration about all of this. he is the father of the Mustang and the Minivan.


I am of course picking on Chrysler, but the same is true in the other companies, plus doubly so in the supply chain upstream from them. At every level in these companies there are a thousand mini-Nardellis who built their career shrinking their way into greatness, squeezing the last bit of innovation out of these places, and ignoring the concept that the way to succeeed in business is to develop and make products that people like.

I will save for a later rant the story of a man who, singlehandedly, could be argued to be responsible for the death of this entire industry.

+1000

Like flapjax, you have a gift: ranting.

I suppose it is easy to write off a family business. Well’s Motor Company was started by my son’s great grandfather in the 1930’s. It started as a gas station. They lived in the back. He and his wife would make trips to Detroit and bring home four cars on the backs of two flat bed trucks. He built the local airport and had the first Cessna dealership in south Florida. They employed people for three generations.

If you have never been in a small business, the blood sweat and tears these people put into these businesses is difficult to understand. The collapse of these businesses is the end of a legacy.

http://www.commercialiq.com/commercialrealestate/southcarolina

I am up for a thought exercise this morning.

What if you wanted to start one of these businesses up right now. You get a piece of land, buy some used cars, and try to make a living selling them.

For the sake of the thought exercise, let us locate our car lot somewhere around the lovely town of Greenville SC. This area has a young population, lotsa jobs around, or at least there were, weather good, people friendly.... nice place.

The first question is: where to put it. If you put it out in the country, say in the nearby thriving metropolis of Boiling Springs, you can get three acres of land for $250K, but it is out in the middle of nowhere. If you put your used car lot in the "west end", which is the local upscale development area, you can expect to pay nearly $1M for a half acre. Keep in mind that obviously, the current owners of these places have not gotten the message that the real estate values are on the brink of collapse and/or have to be priced at some function of their productive value....and if you pay these inflated prices you are quite likely to lose a lot of money as they go down in value, but let us temporarily suspend belief and assume that you paid maybe $250K for an acre in someplace in between.....That's probably big enough to put in a used car lot.

You put a shipping container with holes cut in it for doors and windows for your office, you put gravel down on the whole thing so people can drive in and out, that costs you maybe $10K by the time you hook up some sewer and water, and pay for the zoning stuff, permitting and all of that. So you have $260K into it before you have sold your first car.

Not just anybody has $250K sitting around, so let us imagine that you went to the bank and convinced your local commercial banker that Greenville needs another used car lot, you can do a better job than the locals at running one, and you understand business sufficiently to know what you are getting into, and he agrees to loan you the money to get it started. He gives you a 5 year loan for the current rate of 8% (you will be quite fortunate to get 8% for this loan)...

http://smallbusiness.yahoo.com/r-calculator-loan

You are expected to pay about over $5100/month just to keep the doors open.

So now, how many used cars do you have to sell to bring in $5100/month?

I suppose that if you are a smart business person, you can easily compute this. If you are selling low-end junkers to illegal aliens, you might be trying to sell cars that you buy for $2000 and sell for $2200, a profit of $200 per car (which is a higher margin than GM or Ford make) you need to sell 25 cars per month, which is roughly a car per day, to keep the doors open and pay the banker.

But you have not paid yourself. If you expect to make the average income that an American worker makes, about $60,000, you need to sell another $5000 profit per month worth of cars. That's another 25 per month.

Presumably you are buying your cars at the local auction place, and trying to sell them in your little car lot for whatever you can get. The auction companies bundle these cars in lots, and sell them maybe eight at a time to you and the other local dealers. In order to get the proverbial '05 Accord, you have to take a couple of 98 Explorers that will roll over and explode. A lot of these cars have condition issues because they were taken as trade ins from some dealer somewhere, and perhaps some were registered in 2005 in Louisiana or South Florida, if you know what I mean.....

Oh, and by the way, I hope you did not spend all of your money on gravel and a shipping container...you had better have on hand enough cash to buy these 8 cars for an average of $2000 each.... that's $16K out of your pocket... unless you want to go back to the banker...After all, what's a used car lot without a big enough inventory? That's what we call "working capital" and maybe if you have 20 cars on your lot, you have a total of $40K tied up in inventory. If you borrowed that, you are paying an additional $800/month in payments.... that's four more cars per month that you have to sell....

Maybe you want to move upmarket and buy cars for $4500 and sell them for $5000. Fewer cars, but higher profit, and your out of pocket working capital has to be higher...

So you are there, and running your little business, and everything is going fine until lunchtime, when you need to use the bathroom and go get a burger....You see that you need a helper to watch the place for you when you have to run an errand or two....Perhaps you have to hire a bilingual mechanic/helper to help you clean and shine these cars up, work on the minor mechanical stuff like batteries and electrical, and get ready to get them out the door.

You are not 100% sure that this fellow will not run off with the cash register money, fight you, show up drunk, get hurt, start selling dope out of the back of the store, or any of a dozen things that could happen. In the local area, there are plenty of manufacturing jobs, so you will have to pay a competitive salary to get a decent employee, since most of the ones with teeth are already working in the nearby BMW plant..... In this area, you can expect to pay $15/hr to get someone that you do not have to bail out of jail periodically....That's $2600/month, and that is if you only work him 40 hours per week, which still leaves you two days a week that you have to man the lot yourself....Can you sell another 13 cars/month? You still have not paid his employment tax/social security, which is another 3.5%, any medical insurance, which could be upwards $500/month (you still do not have any medical insurance yourself) so that's another 3 cars/month.

So let's see: You have the land financing, 25 cars/month, you have paying yourself, another 25 cars/month, you have paying your bilingual laborer... another 16 cars per month, and the working capital... we decided that's another 4 cars per month....we are up to 70 cars per month, which is something between 2 and 3 every day, all the time, if you are open 30 days per month.....

How do you get people to stop into your used car lot to buy a car? Do you put an ad in the paper? How about local TV? How about radio? If you sell 3 of your 20 cars per day, do you have enough inventory on hand to make it look like you have a used car lot? How do you compete with the local Carmax, who has a nice, plush office, and attractive sales people?

You have the added problem that if things get bad for BMW you can expect a lot of the local citizens to get laid off, and although you are at the low end of the market, everyone out of a job shrinks your customer base by some little amount.

So you see right away the problems that poor George had.... paying 50 workers a decent salary, paying out of his pocket for inventory.... he was probably paying $20K per car and selling them for $22K, so that helps his calculation a little bit but it is still pretty easy to see that if he is paying for a nice five acre lot in Melbourne, plus has a couple hundred cars, plus something more elaborate for an office than a shipping container with holes cut in it...well, that stuff runs into money. Luckily for George he has been around for decades, so perhaps he paid practically nothing for his land, originally, and is still benefiting from that advantage.... but that obviously was not enough to make it work.

The problem of course is that commercial property is too expensive for anybody to run a small business.... That is why the prices above are unsustainable, and why commercial property values are certain to collapse.....

So, it is true that George is faced with a lot of problems.

Building and owning a small business is more than blood, sweat and tears (as if that weren't enough). It also becomes a huge part of your identity. I have a small business and have owned a small business for most of 20 years.

If I were queen of the world (and it shouldn't be long now), I'd make it a *law* that before anyone could serve as an elected official, they'd have to successfully start, build and manage and grow a small business of their own - from the ground up - and continue to manage that small business for no less than two years. And, in addition to that, they'd have to live off the income generated by that small business without incurring an unsustainable level of debt. And they'd be required to pay estimated taxes (including 15.3% social security), on time, without incurring additional debt.

Try it sometime. It's well-nigh impossible. The reason so many small businesses fail in the first five years is not just income, but the investment of time. The first few years, you're trying not to get pea-green with envy because the high-school dropout at McDonald's is making more money than you are. You long and dream and pine for the future, when all those years of hard work will pay handsome dividends and your earnings will pull ahead of the kid working at the burger joint.

It ain't easy.

So many people become SHEEPLE because they are clueless about life in general and business in particular.

Hope

You are right on that. My youngest daughter just graduated from the local commuter college in Business, and is hard pressed to construct a business plan as complicated as the one above, unfortunately. She actually finished toward the top of the class....so they do not equip you for this kind of thinking at the undergrad level, it does not appear....

Down here in suburbia there is an abundance of strip shops, and in each of these strip shops is a nail place, a dry cleaner, a little gift shop, and a mailbox place, a franchise haircut place, and the whole thing is anchored by a big grocery store... It does not matter which suburb you go into... it's exactly the same.

Who wants to do the calculation as to how many nails you have to do to pay the rent on a 500 square foot building, at $20 per square foot, plus run the lights, taxes, and insurance, plus pay yourself something? That is why these places turn over once a year when people that are trying to live out the American Dream find out too late that it is one thing to set up a retail place, and quite another to put a butt in the chair in front of you...

It seems that the developers and bankers themselves cannot do that calculation.... that's why there are so many of these strip shops, and the banks persist in loaning money to get these things started.

It will be interesting to see how this changes over the next couple of years....the whole thing runs on cheap money....and we know where that is going...

Rant Continues:



http://de.wikipedia.org/wiki/Jos%C3%A9_ ... ort%C3%BAa


Once upon a time, there was a character known as Ignacio Lopez. It is a pity that this fellow is not documented in the English verison of Wikipedia, and also, that the true story of this guy is not well known..... How fitting that the company that he worked for, GM, has done what it did today, causing further misery for the suppliers upstream, as documented by the following article via Savinar's website:

http://allbusiness.washingtonpost.com/government/elections-politics-campaigns/12344120-1.html

Here is the story:

In the olden days, the auto company supply chain was a combination of company-owed operations, and also, outside suppliers. Ford, that is, Henry Ford, was a believer in vertical integration, and his giant factory in River Rouge literally took steel and coal in on one side of the plant, and spewed out completed Model t's out the other end.

However, as the business got to be more complex, it got to the point that the big auto companies were better off farming out some of the detail work to the outside suppliers. In a way, that made sense. If you were a company that made starters, for example, you could do a better job of focusing on making starters than GM could, what with all of the other stuff they had going on in their plants.

So, there got to be a supply chain of suppliers that did a good job on some of these upstream components. They did two important functions: They got really efficient at making the individual components, plus the better ones had product development departments that did a good job of innovation, and creating improved technology components. These companies would develop new products, they would take them into GM or Ford, sell them on the idea, in a way similar to what we described above, and if they were better, which they frequently were, the innovative company was rewarded by a nice contract, and they had a few years of nice profits since it would take some of their competitors a long time to come up with similar/better components to replace them. The innovative company that could come up with a new starter design, for example, had a little bit of exclusivity for awhile that made it profitable to do all of the R and D and product development work.

The system worked. The auto company benefited from innovators specifically focused on the components, they were able to develop better parts, and the suppliers were able to profitably run the new products while at the same time they focused on efficiency of the existing stuff.

Ignacio Lopez had the following theories: a. Reduce the number of suppliers to the absolute minimum, so that he could beat on them for price reductions. A lot of these contracts called for price decreases of 10% or more per year for the first five years. Throw out any suppliers who do not agree. b. Innovation is meaningless. Price is the only thing that matters. c. The supplier is your enemy. You want to get them to fight one another if you can. You want to keep at least 2 suppliers of each part around, but no more than 2 to maximize the size, to make sure that they cut each others' throats d. Ultimately the car company itself is just an assembler and marketer of cars.... ideally the assembler would keep no inventory of parts on hand, had parts delivered literally at the line (just in time) and kept off of the books of the assembler (thus passing the inventory costs upstream).

The immediate effect of this from the supplier's standpoint was as follows: If you were a big supplier, you could go upstream to your basic materials companies (steel, chemicals, etc. ) and beat on them for a better price. You had an advantage over the little guys, and the only way to survive is for you to cut the hell out of costs over the life of your contract..... One need look no farther than the tire business for an example of this....

If you were a little guy, you had no purchasing or efficiency advantage, since you buy your raw materials in small volumes, you could not afford to retool your plant and modernize, and so you either shut your doors, or more likely, sold out to one of your bigger competitors who had an eye on the smaller contracts that you were able to get....

The longer term effect if you were a big guy is that at some point in the day, it did you no good to try to innovate, because you ultimately could not get your little exclusivity period, and it is expensive to have a lot of R and D people around anyway, so one of the things you did to cut your costs, in the face of the annual price decrease that Ignacio Lopez demanded, is lay off all of your engineers.

So there was no more stream of product innovations, the little guys went away, and the bigger the big guys got, the more important the incumbent business was, and the whole system was set up to keep the innovations to a minimum....

But, for awhile, it was a golden age for GM, Lopez' employer. They went from a near bankruptcy state in the early 90's and got to the point of profitability by the billions of dollars that were cut out of the system during this time frame. Of course, this was at the expense of the upstream supply chain..... and that part of the industry contracted at a much faster rate than GM did.

This was so regarded as a brilliant purchasing philosophy that exactly the same thing was adopted by the other competitors, and also, the upstream suppliers, as it applied to the basic materials supply chain. This put further pressure on the R and D efforts of the basic materials companies and stifled innovation in the entire system.

But, guess what? The lack of creative capacity caused by dumbing down and starving out the supply chain was a major factor in these companies producing cars that no one wanted and they could not keep up from a marketing standpoint with their foreign competitors, even though there was a slight advantage in cost, and an improvement in quality that was caused by this effort of improved operational efficiency.....

The Japanese philosophy on this is quite different. You work with a limited number of suppliers, but you have a permanent mutually supportive relationship. You go to your suppliers, and your engineers and theirs work on better starters, or suspension components or electronics or whatever, and when you are finished, you ask that your supplier produce these to lose money in the initial years, so as to make your current costs low, but you allow them to make a fortune in the out years, as their process becomes more efficient. The result of this is that the supplier is compensated (eventually) for his R and D work, you get a low up-front cost, so you can penetrate the market, he and you eventually make a lot of money in the out-years, he does not worry about you cutting him off in the 5th year or whatever, so he can do the innovation, and the system works. It requires trust and a long term relationship by both parties, but it works, partly because a lot of times the car companies have an equity share of the suppliers business and vice versa, so they are all in it together. The Koreans are setting a system like this up from the ground up to produce Kias and Hyundais right now.....

The rest of the story of Ignacio Lopez is bordering on the comically absurd. He was eventually hired by VW as the general manager with a vision of building a massive factory in Brazil using all of his theories about upstream supply chain management and JIT, but GM sued them for industrial espionage because of his liberal taking of internal documents.....it is documented in the articles from the NYT, above....

But, the long term effects of this guy's philosophy live on. The auto companies efforts to develop products upstream are basically zero, at this point both they and the suppliers are in various levels of bankruptcy, the market share of these companies has decreased by 50% during the time period, because they do not make cars that make people happy, and basically in the long term, it was lose-lose for everybody involved.

Side point/possible topic for future rant: Just FYI it is not completely unheard of, in the upstream supply chain, for some of these companies to outsource their actual plant workers.... there is a big business in temp/contract labor....companies do not want to cut the salaries of some of their skilled workers, so they hire "contractors" to come in and empty the garbage and that kind of thing.... with reductions in salaries and benefits. In the extreme case, in essence, the supplier owns the technology, if any, but literally has no employees at all.... they can conceptually "lease" the equipment itself from some company like GE Capital, so the "business", as it were, of one of these suppliers is just to manage the whole thing with no assets, no employees, and only the little bit of know how you need to get the contracts..... what a business, if you can get it...

The impact on the whole society and economy is obvious.....you reduce the number of high paid manufacturing jobs.... which is more efficient but not what you want to do because they are not making enough money to go out and buy your cars, or whatever.... and that in turn causes the overall income of the middle class workers in the country to gradually decline, in real terms, as they have been doing for decades....So, there is a national impact of this whole system and the light has not come on as to how it happened, but this is what happened.


Other side point/rant topic: This concept of working together and a long term non-adversarial relationship with your suppliers is totally foreign to the US companies....totally. Also, from the standpoint of the supplier, to do a lot of work and not see a profit in 10 years is completely foreign because of the short-term needs of the investors, markets, wall street etc. who demand growth and short term quarterly results.....They have a 10-week time horizon, instead of a 10-year one. The whole system is subsidized by long-term, patient investors. Can you imagine?



So, for one, short, shining period, everybody thought they were saving billions of dollars by 100% short term thinking, led by this cretin Ignacio Lopez.

There ought to be a monument to him in Flint on top of the bulldozed remains of one of those big plants.....a hall of infamy..... perhaps Roger Smith, one of his old bosses, will be there with him....a few others that we can think of....

End of rant for now.

Pup, great rants. one day i will read them all.

It is therapeutic to rant them, even if the time and patience of the readers are limited.

Perhaps I will condense them all into a work of literature at some point.

I have a lot of patience, so you write them, I'll read them!

Simple fact of life in a real bankruptcy... everyone associated with the dieing business gets hosed... badly. Ignore all this "senior this, and secured that" they ALL get hosed. It is also normal practice to try to get as much public sympathy and outcry going as possible on your behalf. Apparently it helps get a slightly less horrible scrap tossed your way.

Everyone, including that letter writing Dodge dealer knows this is true; he is just doing what he has to do in order to hopefully get a slightly less horrible scrap tossed his way. The letter has all the hallmarks.. x-odd employees losing jobs, a named bank getting a defaulted upon loan, noted "destruction of value" of physical inventory.. yada yada.. Might as well be a form letter from his lawyers office.

True enough. I have been around a few of the cases mentioned in the rant above, and the people who are hosed particularly heinously are the suppliers. Example: You are GM's supplier. You know they have been dragging out their payment terms longer and longer anyway, maybe it is out to 90 days or longer, and they drop the big one, so you are out all that money.

Furthermore, if you have a lot of inventory on their plant site, you cannot claim it, because once the company declares bankruptcy everything on the rail siding or in the trucks on site is considered part of the assets.

So this will most certainly be enough to tip some of these people over with them.