Almost a self fulfilling prophecy when the 'herd' turns and follows their advice,
then they say: "told you so"...then the lemmings worship them even more so...
Agree with my favorite automotive editor, Angus McKenzie of MotorTrend.
Takes me several pages to 'try' to explain the point that he gets to succinctly
in a one pager. Spot on with my thinking/opinion why Detroit got and continues
to get their lunch eaten by the Japanese & other foreign companies who don't
pay that much attention to their stock price, but to their product and then
let the market take care of their stock price.
For public companies who are managed with bean counter based metrics, it is too
late, as this is a historically proven recipe to lose against product based
management metrics.
Sadly, the Japanese companies are now also hiring MBA/BeanCounter
CEO's who don't know much about their 'products', but knows a heck
of a lot about their 'P/E'.
Article text.............
Who else should be blamed for the decline of America's two remaining automakers?
By Angus MacKenzie
Wall Street hasn't done Detroit any favors over the years. The Street
is supposed to be the hard-nosed arbiter of success for corporate
America, the white-hot cauldron of capitalism that's made this
country's economy the most powerful in the world, the place where the
money talks and you-know-what walks. (Though having allowed Enron to
happen, Wall Street seems no longer to see the difference.) And, yes,
Detroit has hardly covered itself in glory over the past 30 years.
But I can't help wonder whether Wall Street should share some of the
blame for the decline of America's two remaining automakers.
Let's be absolutely clear up front: Few people buy stock in a company
for any reason other than they expect a return on their investment,
and stockholders in auto companies are no exception. But in an era
where screen jockeys zap billions of dollars a day through the ether
at the touch of a computer keyboard, Wall Street's institutionalized
ADD has resulted in a feverish short-term view of a business whose
lengthy product cycles and huge investment costs are just too damned
difficult to deal with.
Maybe that's why many of today's most successful automakers--Toyota,
BMW, Porsche, to name three--are those who've never had to sweat a
quarterly earnings call with a posse of skeptical Wall Street
analysts looking for an opportunity to make a fast buck and ready to
trash the stock price when they can't see one. To these companies,
the concept of shareholder value has a very different meaning: "I
don't watch (the stock price)," Dr. Shoichiro Toyoda once told Toyota
North America president Jim Press. "I'm not going to sell my stock.
If I worried about that, the decisions that I make wouldn't reflect
the fact my name is on the back of every car."
Most Wall Street analysts will tell you Toyota, famously stingy with
dividends, doesn't treat its shareholders well. But its stock is
worth roughly four times that of General Motors. Go figure.
As Pulitzer Prize-winning author and journalist David Halberstam
records in his book, "The Fifties," Bunkie Knudsen, who ran Pontiac
and Chevrolet in the 1950s and 1960s, reckoned it all started to go
wrong for Detroit when Fred Donner became president of GM in 1958.
Knudsen was outraged that Donner would insist on talking about GM's
stock price, and what the analysts on Wall Street thought about it,
at his daily meeting with the heads of GM's divisions. Before Donner,
those meetings were mostly about making cars.
Financial engineering quickly replaced product engineering as
Detroit's primary business. GM and Ford essentially morphed into
highly profitable finance companies with an auto business attached.
That meant you could easily get a great deal on a new car. Only
problem was, that new car wasn't always so great anymore. But the fat
earnings on the loans and lease deals made the business look good and
that kept the stock price pumped.
It's a sign of how entrenched this view of Detroit's business model
has become that GM's decision to unload a majority share of its
finance company, GMAC, earlier this year was treated by many as
something akin to selling the family farm. But the sale is good news,
because it means GM is shifting its focus back to its real business:
designing and engineering cars and trucks. Meanwhile, over at
troubled Ford, there are rumors the company may buy back its stock,
now worth barely 15 percent what it was in 1999, and become privately
owned. I hope the rumors are true, because Ford will then be free to
concentrate on what it needs to do best: make cars and trucks.
Bunkie Knudsen, David Halberstam writes, believed in a simple
concept: The people in Detroit had to make good cars, and if they
did, the people in New York would take care of the stock. If only it
were still true...
-Ben Picture of my rig
1996 GMC SLT Suburban 3/4 ton K3500/7.4L/4:1/+150Kmiles orig owner...
1980 Chevy Silverado C10/long bed/"BUILT" 5.7L/3:73/1 ton helper springs/+329Kmiles, bought it from dad...
1998 Mazda B2500 (1/2 ton) pickup, 2nd owner...
Praise Dyno Brake equiped and all have "nose bleed" braking!
Previous trucks/offroaders: 40's Jeep restored in mid 60's / 69 DuneBuggy (approx +1K lb: VW pan/200hpCorvair: eng, cam, dual carb'w velocity stacks'n 18" runners, 4spd transaxle) made myself from ground up / 1970 Toyota FJ40 / 1973 K5 Blazer (2dr Tahoe, 1 ton axles front/rear, +255K miles when sold it)...
Sold the boat (looking for another): Trophy with twin 150's...
51 cylinders in household, what's yours?...
I am guilty. Here we are shopping for a minivan so we not only can haul the two legged family members but now we have two Golden Retriever pups(Lord they grow quick), our cars are four door sedans, and I ain't letting the hairy beasts in my truck's leather clad interior. Sadly the first minivan I thought of was Honda's, quality and value cannot be beat. Wish the former big three could be included in the decision process.
Capt Skup wrote: snip...
Sadly the first minivan I thought of was Honda's, quality and value cannot be beat. Wish the former big three could be included in the decision process.
Sad, yes and so telling
If Detroit actually paid as much attention to 'quality and value' of
their 'product' as they do to 'P/E', you most likely wouldn't be
'forced' to look at another badge.
They don't get it either, as when Detroit discovered the 'secret' to
how the Japanese ate their lunch, they copied that with a vengeance.
Then went back to paying attention to their 'P/E'
That 'secret' was *JUST IN TIME*. Yes 'part' of their secret, but not
the whole picture. Just a small, small slice taken out of context.
Sure 'just in time' saves a ton of money and is all Detroit and other
domestic corporations 'saw'.
What they missed is that this is just an outcome of their philosophy
that goes to the core of the company and society.
Today's discussion of the new found 'secret' is 'lean' and is going to
be the same all over again...they don't get it...
Well GM is going to have to do what Ford Has been doing for the past few year; Close plants and layoffs. My DS is a Ford UAW worker at the Kansas City(Claycomo) MO. plant and so far has enough time in that the next round of layoffs won't get to him (second shift on F150 line) Ford is going to put those laid off onto a new third shift on the Escape line. Some may get bumpped around to differnt shifts, but they will still have a job.
Good luck to the GM employee's they are going to need it.
BenK you've had some Six Sigma training!
Steve & Linda
Son married (1 DIL, 3 granddaughters 1 grandson)
Daughter in College
Miami CO. Kansas
2004 F350 CC dually 8ft bed 6.0 PSD
2009 Bighorn 3670RL
B&W under bed hitch with 18k companion hitch
Capt Skup wrote: I am guilty. Here we are shopping for a minivan so we not only can haul the two legged family members but now we have two Golden Retriever pups(Lord they grow quick), our cars are four door sedans, and I ain't letting the hairy beasts in my truck's leather clad interior. Sadly the first minivan I thought of was Honda's, quality and value cannot be beat. Wish the former big three could be included in the decision process.
The Honda and Toyota vans are very good, but it might be worth checking out the new redesigned Chrysler vans.
Also, I did read recently that Goldman Sachs said they could see the bottom, expecting a better 3Q and 4Q (sorry no link).
2004 Ford Freestar 4.2 liter
2003 Jayco Qwest 12A
preserve the Second Amendment
sljkansas wrote: snip....
BenK you've had some Six Sigma training!
Almost went that route, but decided against it after seeing who was
getting their 'black belts' and director level paychecks with that
title: "black belt six sigma" in whatever area they were deemed an
expert in.
This is in the SF Bayarea silicone valley. Worked in one of the top
3 computer companies as an M&A manager/BizDevelpmentMgr assigned to
Corporate CTO and his research labs. Saw this in HP/IBM/Intel/Sun/Adobe/
Xerox/Kodak/Ford/GM/GE/etc, as they were all alliance members and I had
them as some of my IP account responsibilities. All of my acquisitions
are successfully integrated into the company, as it is more than a P/E
position, but how they fit (people, culture and product) and who will
own them once they are acquired.
My training is from being a Program Manager in computing, industrial
controls, process controls, automation, etc...aka...hard knock
schooling working for or with these large OEMs and their management.
Most all of these 'black belts' could talk for hours on their topic,
but if asked to actually apply it out of the box, didn't know what to
do.
Also saw this when ISO was the biggie and my product teams went through
hoops to get certified (actually the whole company) only to find out
that ISO is self certifying 'after' the initial certification, so
if the company doesn't continue at that high level, worthless. That
is the weakness in that system and why the toy recalls from Chinese
suppliers...the USA firms no longer follow the rigors of the initial
certification levels.
There is no 'one size fits all' solution, but all of them and more
make up the value system of which domestic vs foreign reign. Or as
in my first post on this, 'product based' vs 'financial based'
management metrics...aka...money vs product based decision making.
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