Jester's Views on the US Auto Industry vs The World

Here are a few quick notes on my thoughts about the automotive and light truck industry here in the US. I have been a "Car Guy (Nut)" for as long as I can remember, starting at the age of 2 when I sat in my first race car at the Savannah International, now called Roebling Road. I have been a racing & car fanatic ever since, for all forms of motor sport racing, both 2 and 4 wheel. I won't and don't claim to have all the answers, but I can see, through my companies efforts in market research for the auto industry, that the US public wants to see some dramatic changes in the design, marketing and quality. I hope you have some interesting counter thoughts on this matter and then maybe some how we can get our beloved US manufacturers to step up and fight back with vengeance.

The US Auto industry is in shambles, over the last couple of years they have continually lost market share and support of the US car buying public. Well at least that is how I see it, and frankly the facts support this broad assumption.

I come from a family with over a 70 year of history in the industry, starting with the sales of the first Oldsmobile sedans to being the #1 Cadillac dealer in the country to then being one of the first Datsun (Nissan for those to young to remember) dealers in the country. Our family had over 65 dealerships at one point through the east coast, and we had the number one Oldsmobile dealership in the world, selling about 1000 cars per month at the pinnacle of the business. The majority of the dealerships were GM or Chrysler related, with the exception of some trials into the Japanese lines. So I do come to this discussion with some history and love for the US Auto industry, not to mention that I worked for General Motors in the mid-1980's, and my current company does product and advertising market research for the auto industry. Enough about me! Let's get into the meat of this little dissertation!!

The reality is that the industry has grown and change many times over the years but the one fixed factor that had always been in place, year after year, was the strength and leadership of GM and Ford. Whether it is due to arrogance or simply stupidity their leadership and strength has fallen to almost a second tier player with Toyota, Honda, Daimler (Chrysler has been sold), Nissan and VW leading the design and technology future of vehicle development. With Toyota poised to eclipse all but GM in production and far exceeds all of the US players in profitability.

The US management teams will try to blame the issues on labor and the unions; personally I believe this to be "Hog Wash" (I was raised by a Southern Mom & Grandmother). All the other manufacturers have labor cost, union contracts, and they all seem to be doing very well. They all have chosen to build cars here in the US, while the "boys" in Detroit seem to believe that all manufacturing needs to be sent over to China or other low cost labor zones in south Asia. As they say "Reality Sucks", for all the good will that has been pontificated about buy American, the US public will buy what they trust and what they like, and frankly both the Asian and European competitors are designing more appealing vehicles and building a much better product, that appears to suit the demand of US consumer's. Although, there have been some very solid attempts to provide interesting production vehicles to the market: Ford GT, Chevrolet HHR, Chevrolet SSR, Chrysler PT Cruiser, Dodge Viper, etc. all of which are impressive design concepts and styling cues, however they are low volume sellers that never translated their design concepts into any of the large scale production models. Yes they generate a marketing buzzzz, but unless they provide a link to the product line and name plate their marketing effectiveness can be greatly limited or even completely diminished.

A key factor in vehicle sales and market penetration is hardcore MARKETING. For years Detroit was the leader in how to market vehicles, more importantly they were the leader in how to target market a vehicle to the middle-market, the bread & butter of the auto buying market. Somehow they have lost their way in reaching out to their core market. Granted their is a tremendous amount of confusion in the marketplace and more competition than ever, but the US Big Three still can gain the upper hand against the majority of the competition, except Toyota.

The good news is that not all is lost. We are finally beginning to see some very good designs coming from GM (Saturn & Chevy), Ford and Chrysler in their primary large scale production line models, and some creative thinking. Quality is still somewhat of an issue, although significantly better, they still need to take a quantum leap forward. There will be some very difficult cost restructuring actions that must take place, and if they do it properly then they will have a huge cost and distribution advantage over the foreign competition. Although some dealerships will need to disappear in order to ease the competitive pricing & support issues, there is still more than enough sales outlets to dwarf virtually all of the competition (except Toyota).

Unions and suppliers will not be happy, but operational & component purchasing restructuring will be the price they have to pay if they want to survive as partners with Big US manufacturers. Pay must be inline with the Japanese competition, and pricing for parts must be inline with the economies of Toyota and Honda. Manufacturing processes will have to significantly change so that they align more with a modified Asian and European model that allows for lower core production cost while ensuring a very high build quality, using physical labor only in specific areas of the building process. Manufacturers must always remember that they are building product for a very discerning customer that now has many choices not just a few.

Finally, design and marketing must step up to a new level and maintain this pressing level to ensure long-term market success. Companies like Hyundai and Kia have proven that a company, perceived to be poor quality, can bounce back from extreme adversity. That being said it will be a very difficult road to drive. Detroit must continue to use market and product research to help them establish product and marketing direction. Most importantly US manufacturers must figure out the best methods to reach their buyers, not just from an emotional level, which Chevy is doing a good job with their current ad campaign, but also from a reason to purchase (Hyundai is using both emotion and key high quality points to convince people to buy their product). Buyers are a very fickle group, and they make initial buying decisions on what they believe and are made aware of through advertising and positive press.

I am and always will be a big fan of the American Auto industry, and truly believe in buying American where it makes since. Unfortunately, US manufacturers have a lot to work on to catch up with the rest of the world, fortunately there is time and skill (I believe) to get this done. It is important to realize that we are now truly living in a world economy, which will continue to be dynamic and robust well into the future. As long as the Big Three can be creative, focused and resourceful there is a very strong chance that they will bounce back and be even stronger than before, positioning themselves to truly be the WORLD leaders in vehicle development and production.

We will continue this discussion looking at the individual company's and their challenges to regain leadership and profitability. I look forward to a fun and robust discussion about this endeavor and many more. Thank you for spending time with me and have a great day.

The Rambling Jester

The Rambling Insights on Energy & Alternative Fuels

After the first series of uplifting and exciting price hikes in the price of gasoline at the pump, gas for heating our homes and what we pay for electricity I felt that it was time to have a discussion on this wonderful and enlightening subject! So do you like my since of amusement with this ever burdening issue we all face?

I felt it my duty to help at least some of us understand the morbid reality of where our country stands with respect to alternative fuels and what is truly available as an alternative. I gues it would be about 12 years ago when I had the opportunity to write a small disertation concerning alternative fuels, and what we could use to address the ever burdening need for a energy alternative that would replace fossil fuels. I am sad to say that over a decade later we are no closer to utilizing or developing, within the US, true alternatives to fossil fuel now than we were then. After that sad fact, it should be noted that there have been significant strides in many other countries to address the reliance on fossil fuels and there is hope that we could tag into these programs with little significant effort. Unfortunately, we are also dealing with a US Presidential administration that has significant ties to the oil industry, regardless of their current postering.

Let's review some simple facts. Although Oil reserves today are not an issue, they are not limitless. Burning of Oil and oil related fossil fuels is the single largest contributor to pollution. Burning of Oil and oil related fossil fuels is the single largest contributor to global warming (I know this is a contentious topic, but many scientist believe this is a very real issue). The price of gasoline has more than tripled in 2 years, which is 12 times that of the level of inflation, and of course now is driving US inflation. These simple realizations have prompted a renewed effort to look at alternative resources, at least on the periphery of a socially concious society.

Finally, the Federal government has begun pushing for the development of at least electric vehicles and biofuel, such as Hybrid (gas/electric vehicles), High-efficiency Electric vehicles, BioEthanol, BioDiesel, BioGas, Biobutanol, Biohydrogen and fossil fuel derivatives like E85 Etanol which is a mixture of roughly 85% ethanol to 15% gasoline (hydrocarbon fuel). It is still somewhat unclear what the financial assistance will be in this development, but at least the statement has been made. As you might be able to imagine there are some enormous hurdles to climb when it comes to utilization, distribution and migration to alternative energy fuels. Additionaly, there are some other critical public opinion hurdles that must be overcome in the process of address alternative fuels, alternative propulsion vehicle. The US has spent the better part of the last 100 years building up a reliance and a sole source infrastructure on fossil fuels as energy for their cars, the production of electricity and for heating their homes. This means that making a change to an alternative fuel source will cost money (huge money) and require a long period of time. More importantly it will be a mindset issue, American, the US imparticular, have a major issue with changing what they know as their vehicle and hate the idea of having a Nuclear or a Hydrogen fired power plant to close to their home. This is the number one reason you see hybrids doing reasonably well, where all electric cars failed to garner acceptance, aside from the fact that they are rediculously priced.

Well, this should be enough rambling for the day. It all comes down to a couple of simple decisions; do we want to continue paying $4.00 or more a gallon for gas, do we care about the environment at least a little and are we willing to sacrifice now so that we can have better future. These are just some of the many questions to think about, and believe me for someone that is a car fanatic, even considering a hybrid or electric car is almost an impossibility, although Hydrogen as a combustible alternative to gasoline could be something to think about, and yes I am writing about myself here.

Happy reading the Rambling Jester

A Ramble on the Rising Cost of Fuel - What the *~*~*?

So I went to the gas station to fillup three weeks ago and the price of gas was $3.36 a gallon, the next week it was $3.49 per gallon, last week I paid a $3.51 and this morning I paid $3.72 per gallon. For those of us that have to buy gas to get to and from work this is at the very least an aggravation at the most an unjustifiable outrage. When hear of record profits from the large oil producers, and growth of income in the oil rich nations, how can this outrageous pricng be justified.

Here is a little Reality
So we are clear on the issue we actually have it realtively easy compared to much of the rest of the world. Below is a brief comparison of Gas prices between the US and some of the major European countries.

As you can see it's not all bad. However, it still hurts when you have to consider that we as a country have a true love affair with our cars, and have chosen not to rely on public or alternative transportation. The US is a country that has built a major part of our lives, social character and work around our cars, and it's quickly becoming a reality that most us will need to change or at the least be decreased our use of the car. What hurts worse is filling up compared to filling up only one year ago, OUCH!!!

One more Reality Slap
The US economy works on a 10 - 12 year cycle. The US economy is currently in one of those downturns after very robust number of years. Of course, the issues are compounded by the mortgage banking problem, but this is no worse than the Savings & Loan collapse in the 1970's. Unfortunately, most Americans are feeling the brunt of the downturn in the US economy. Regardless of what our world famus highly paid Chief Economist may say we are in a "Recession". By the time they come around to calling the cycle what it is the US will be back on it's feet. Most will hate to hear this, but we are in just in one of our adjustment cycles, unfortunately demand is still relatively strong and this is supporting price increases. As demand falls prices will also fall. Guess what this is true of fuel prices as well. Fuel prices may not fall back to the $1.25 per gallon price, but they will come down and the economy will bounce back. The US is the single largest economy in the world and yes China will challenge this, but as long as the communist rule China, they will never have the economic growth the US possess, China will never have the economic flexibility to address a continually dynamic global economy.

So Why the High Prices?

The oil companies realize one thing and that is they have to make their money now while they still have the ability to do so. These profits will provide the future flexibility to modify their business and move in a direction that will allow them to be close to or as profitable as they are today. Given that we are still, as a country, at the low end of the pricing range, and that Americans are still buying gas at close to $4.00 per gallon, with only a minor preceived inconvenience, pricing will stay where it is and will rise until the companies see a drop in demand.

There is one component that appears to be going completely unnoticed as we all move towards a true global economy; the automotive manufacturers. There has been a paradyme shift with the US Auto Manufacturers in that they have finally made the shift to view sustainable growth only if they are able to build and deliver cars on a global basis. This means they must standardize manufacturing and designs so that their productline can be sold cohesively across all countries not country specific. This is the only way they can control manufacturing cost and build their business. This ultimately means no more building gas sucking "Land Yachts" and "Giant Trucks" only for the US market, they must build fuel efficient economical vehicle that can and will be marketed and sold globally with only very minor modification. These higher gas prices will force US auto buyers to think about buying the same or similar vehicle as Europeans, Asian and South African buyer, thus providing more profit to the Auto Manufacturer.

So this is our reality. The good old days of cheap gas are effectively over. Now this is not to say that gas will not come down some in the future, but I truly believe that we are looking at a future where the fuel pricing will become more closely tied to the global economy and demand. Pricing will always be a function of supply and demand, and let's face it when someone can control production supply and proportionately align this production with demand, pricing will stay high. So I guess now may be a time for all of us to begin looking at alternative fuels, and give the oil companies something new to look at for future profits, and probably make the enviromentalist a little happier at the same time. Not a bad thing for all of us to think about, but definately will require some dramatic changes. Those are my thoughts for happy begining to the summer.

What type of fuel matters to you?

Jester's Views on Elections Spending, the War in Iraq and Wasteful Spending

Good Afternoon Fellow Friends,

Welcome to The Rambling Fool. My hope is that I provide topics of discussion that make us think, laugh and ask the questions Why. In some cases you will agree with my rants, other times I am sure you will thoroughly disagree, in either case I hope that you find my thoughts interesting and provoking.

Just some quick little anecdotes to start off your day:

The cumulative funds raised by candidates for the office of President of the United States after only three months of campaigning, is almost $154 Million.

• Never in the history of the presidential electoral process has the money raising happened so rapidly.
• It is believed by some experts that the eventual nominees will need to raise $500 Million apiece.
• Is this number insane or what? So effectively this means that the overall candidate mix will need to raise somewhere over $1.1 Billion to elect the next President of the United States.
• If we took only half of these funds and allocated the money we could feed and cloth the children of most of the poorest African and South American countries for the next 5 years.
• We could retrain every able bodied adult within these countries to support and feed their families.

Are you aware that the United States has already spent more than $500 Billion to fight the war in Iraq and Afghanistan, and some estimates put the ultimate financial cost at more than $1 Trillion.

• Now I support our troops 1000% however, it seems like there is some form of mismanagement happening here.
• If we had simply focused our troops on pure anti-terrorism tactics and not the occupation and rebuild of an entire country, where would we be today? I would bet, that we would have a better handle on managing global terrorism and have a more stable Middle East.

Did you know that the US is in proccess of building 104 acre, 21 building, $1 Billion emabssy complex in the heart of Baghdad, designed to house 5,500 employees?

• First, the US Congress has only authorized appropriation for $592 Million. The construction was begun in mid-2005, so where is the other $408 Million coming from?
• Do we really need an embassy, a monolith to the power of the US, that is 10 times larger than any current embassy, and that will cost 10 times a much to protect and run per year?
• The fortress like facility will have 100% independence from the city of Baghdad utilities, with its own water supply, electrical plant and wastewater treatment plant. Shouldn't the US be spending a significant portion of these funds to addrees the infrastructure demands for the citizens of Baghdad, such as providing them consistent daily water and electricity, before we spend this money to build another symbol to the US presence in Iraq?

Please understand I do and always will support our troops whether in the states, at war or just abroad protecting US interest. Let's face it without these spectacular people on the frontline fighting for us and protecting our right to freedom we would not have the wonderful life we have here in the United States and in many other countries. My goal is to get everyone out there thinking and acting in a way that will force our government and organizations to begin to manage the war , our economy and the overall political process more effectively.

Thank you for taking the time to read through my little diatribe, and I hope that I can continue to provide you food for thought and a little chuckle to brighten your day. My hope with this lovely little blog is to provide some grounded insight into what is happening in our world today and hopefully add something that will make you think, laugh and challenge the world as you know it today.

The Rambling Fool