Henry Phish

I found an interesting video on Yahoo that does a good job of summarizing the current state of the US auto industry. Like a lot of you I’ve been following GM pretty closely in the last few month and have seen a lot of positive and necessary change in their company and we’re beginning to see the turnaround in their product line that they’ve promised now for the last three years.

Still, in days like these, where the economic downturn has affected everyone throughout the automobile industry…as well as just about every other industry…it’s really tough to watch the company struggle. With the US car industry continuing to be one of the largest employers in the country and with so many pensions and retirement plans riding on their continued success, as well as the impact that a folding of the big three would have on consumers and supply chain companies in the industry, it’s a given that the car industry will and should receive some sort of aid, since most of the car makers current woes stem from a lack of proper credit due to bank freezes and the utter lack of consumer spending during a global financial crisis. And while I don’t as a rule recommend bailouts of any kind, I do see companies such as Ford and GM as being viable into the future.

As far as the taxpayer is concerned, if done correctly this aid could reap rewards, though as this financial crisis continues, small investors are looking more and more like victims, with nearly all aid solutions leading to significant losses by unsecured investors for short term investors, and possibly long term investors as well in a bankruptcy like solution. Hopefully in the next few months the government will be able to piece together some idea of what this might look like. As it sits, I’m just glad I’m a spectator and not Rick Wagoner.

Can US Cars Compete?

Unfortunately It’s taking me a while to put together my A Change In the Process articles. As it goes, I’ve gotten busy with job searching these days, so the site has fallen a little by the wayside, but expect a new article by the middle of next week. I’ll keep you posted.

Also, of interest on this Hallows Eve. Honda has a interesting ad campaign running right now for the Honda Fit. There’s online ads, television commercials, a video game, and the site. Kind of fun. Check it out:

Honda Fuelivores Campaign Official Site
Television Commercials

During times of economic hardship, companies tend to take a look at themselves and begin to reassess. Most try to cut costs, reduce labor, and many try to realign their corporate ideals, thinking, and processes. From this reassessment comes the promise of success, since once the company has realigned, and the economy has righted itself, it should be in a better position to take advantage of the market.

That said, I’ve been watching a lot of process evolution in the last few months, and have come across a few key areas that are having a big impact on business and the marketplace at large. Similar to the technology revolution of the eighties and nineties, these changes in thinking and process are leading to some drastic evolutions in technology…so much so that we could be looking at a whole new technological revolution within the next five to ten years.

Over the next few posts, I’ll be talking about specific case examples, including the evolution of the internet with the adoption of cloud computing, the evolution of green technology with advancements in solar cells, the evolution of the automobiles with the creation of the GM Volt, and the current trend in separation between design and manufacturing using AMD and Apple as examples.

Hopefully over the course of these articles, we’ll stumble upon some emerging ideas and get a better grasp of the overarching themes heading into the next generation of business.

According to an article from Yahoo News, GM and Chrystler are in talks over a possible merger of the two companies. Cerberus Capital Management LP, which owns 80.1 percent of Chrystler and 51 percent of GMAC Financial Services has made in roads in recent months to acquire all of Crystlers assets from the German based Daimler Benz AG which it could then turn over to GM for the remaining 49 percent of its stake in GMAC. Essencially merging the two automakers in what could potencially be a cost saving measure on the parts of the two ailing car manufacturers, but more importantly, it would solidify GM’s claim to the top spot in global sales, a position currently held by Toyota.

While GMAC has generally been a cash cow for GM in good times, at a time when GM is just trying to keep their business afloat, spinning off the company removes a lot of the risks involved in dealing with home and auto loans. It also allows all three companies to consolidate their businesses, which should be good for their respective bottom lines.

With Chrystler being 81% privately held, it’s somewhat difficult to gague, especially without a prospectus, what kind of baggage it may come with. Still, while the merger is far from a sure thing at this point, it is an interesting turn of events, and is something worth keeping an eye on.

Chrysler, GM discuss merger, acquisition

GM Plus Chrysler Equals Survival?

Here’s an article that talks about plug-in electric vehicles, including the Camry Hybrid, Volt, and Tesla. While Chevy looks good in specs, the article brings up a lot of good points about adoption of these vehicles. At an entry level price of $30,000, these vehicles aren’t cheap, and I’m suspecting that fuel efficient combustion engines will continue to be the norm for the next five to ten years.

Still, looking back at history, once these trends happen, they happen quickly. The age old Intel axiom that the number of transistors able to be fit on a chip doubles every two years, thus increasing the speed of the computer processor exponentially is a good example. As technology changes and is adopted in other parts of the industry, this technology will gain a wider acceptance and will more than likely have a stronger adoption rate by both consumers and corporations alike.

All things considered, with a shake up in the economy like we’re having right now, there are going to be a lot of changes in processes happening in the corporate workplace. Down turns in the economy always means big changes for corporations, and as technology adapts, we’re going to be seeing a lot of changes happening there as well. It may be that this is the beginning of a new technology boom, and while I’m not saying it’s going to happen tomorrow, there are some big things happening right now that make this look like a possibility. Stay tuned and I’ll see what I can dig up.

Power Outage

According to GM-Volt.com, along with the $700 Billion Wall Street bailout bill, several congressional riders were added which give tax credits to buyers of plug-in electric vehicles.

It provides a base of $2500 plus an additional $417 per kwh for batteries greater than 4 kwh. For the Chevy Volt, that works out to $7500 per car, a number GM had lobbied for.

As a lot of you may know, tax credits were issued when the Prius first came out, and they were very well received by consumers. The incentives on that package officially ran out last year, but the new rider should pick up where that one left off, seeing as both GM and Toyota are planning on releasing plug-in versions of their popular technology in the next few years.

Some interesting facts for comparison:

Volt: ($35,000 - $7,500 in tax credits)
Range / Efficiency - 8 kWh / 40 miles (before gasoline starts, going
to and from work this should be sufficient)
Cost - $0.08 / kWh
Yearly mileage you drive - 20,000 mi (Assume 4000 mi you have the
gasoline engine on @ 25 mpg)
Gasoline Consumption - 160 gallons
Gasoline Cost - $4 / gallon
Total yearly cost - $256 (Electricity) + $640 (Gasoline) = $896 / yr

A person will save $1456 / yr in fuel by driving a volt as opposed to
a toyota hybrid. Assume you keep the car for 100k mi / 5 yrs and your
savings have more than paid for the difference ($7280 in total
savings).

Granted, Toyota will have competing technology with their release of plug-in hybrids, but at $27,500, the Volt does look like a reasonable entry level vehicle for drivers desiring that extra green mile and should do quite well with consumers.

More importantly however, is the support that the government has put behind this technology, since early adoption is key to establishing these types of vehicles in the mainstream, programs such as the tax credit give consumers some incentives to buy. With the higher entry level price of this technology, it’s difficult to believe that just anyone will switch from the lower cost fuel efficient combustion models without some kind of incentives in place. With the government looking to have emmissions cut by 40% by the year 2020, the more early adopters, the better.

Along With Wall Street Bailout, Plug-in Car Tax Credit is Passed: Chevy Volt Now $7500 Less

I saw an article this morning about GM’s suspension of employee stock purchases in their 401k programs. It seems that with the recent dip in the stock price and the renewed excitement about the companies future, a higher number of employees than usual have been enrolling to buy stock from the plan and have bought up all the shares.

It’s really telling of how high expectations at this company are for the future of GM, and it’s also telling of their management. Your workforce generally knows before everyone else what the general disposition of the company is by how much they respect their managements decision making, and while it isn’t always always a good indicator of the overall success of the company, in this case, I think they have a lot to be excited about.

With changes to their product line such as upgrading the Malibu, the Chevy Volt, Cruze, and overseas investments, this company is starting to see signs of life that it hasn’t seen in years.

According to the article, management cannot buy or dispose of any GM equity securities that were acquired in connection with their employment. The Sarbanes-Oxley Act generally prohibits directors and officers from trading in their company’s stock when most participants in the company’s stock plans are not able to purchase or sell stock.

It looks like they’re in this for the long haul.

GM suspends stock purchases in employee plans

Just a couple of notes:

GM announced today that it was issuing 16 million shares of stock in exchange for debt, therein lowering their interest rate. A good move for a company with some liquidity problems. A company with it’s credentials has some leeway in how it manages its assets. In this case it sold part of its own stake to lower its interest rates and gain liquidity. I’m told that GM owns a rather large stake in their company, but I haven’t been able to track down the percentages from a trusted source. I’ll post it when I do. Also, GM has stated it is open to other such deals with creditors as well.

With this move they are banking on their future success, and truth be told, it looks fairly decent. I’ve noticed a few Malibus on the streets this past weekend. The car’s have been getting good reviews, and should build up some steam competing against the Accord and Camry in the next year or so; if it weren’t for the recession they would be doing a lot better. The Cruz debuts next year in Europe and 2010 in America as a 2011 model; the Volt goes into full production in 2011, so they are starting to look pretty good on paper.

A lot of their money is being put into the foreign market right now. With the current strength of the dollar on the rise, it looks good for overseas investment, and a lot of production facilities are going up overseas. Percentage wise, GM is expected to shift a majority of it’s business to foreign markets, which probably makes some amount of sense, at least in the short term. However, it’s another one of those stats that I wouldn’t mind checking my sources on.

Also, GM on Tuesday is set to relaunch it’s GMNext site, which should answer quite a few questions about it’s operations going forward. They’ve been fairly forward thinking in their communications with the media…honestly it’s a little desperate, but they need the transparency in order to maintain trust with creditors and the public alike. Thus far I’ve liked how there management has handled the situation. Check out GMNext.com

Government $25 billion dollar incentive loan for ailing car companies may be approved by Friday of this week. Detroit right now is holding their breath.

Congress to Consider Auto Loans in Spending Bill

The other day on Dispatch Online, I read an article on how Ford wants to wait until hybrids have picked up mass appeal before it brings it’s own models to market.

“We don’t believe in making cars for hundreds of people or thousands of people,” said Finnegan, marketing manager of hybrid vehicles for Ford. “They have to be affordable to our customers and capable of sustaining millions (of vehicles) in sales volume.”

It’s an interesting strategy coming from a company that has made most of it’s money in the flailing truck market, and has steadily dropped in sales the last few years to companies with more eco-friendly product lines. Still, many cars in their lineup have sold reasonably well, including the Ford Focus, which has been a mainstay in their books since inception. While they’re sales aren’t spectacular, no one is talking bankruptcy either. They’ve also done well with updating their current lineup of vehicles…trucks still dragging behind…with existing eco-friendly technology, which means they are still on par or ahead of competitors such as GM.

Playing a waiting game and conserving money until demand picks up may be a smart move for the company. It’s a little bit of a gamble with new cars such as the Volt and Toyota Hybrid plug-ins coming out. It might not win them the first place medal, but it might just pay off in the end.

Ford wants mass appeal before releasing hybrids