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

I’ve been reading in the news as of late that the current number of suicides have risen with the failing of the global economy, bankruptcies, and joblessness. Unfortunately for many people, this is a serious reality. For those feeling the pressure and needing to talk, hot-lines and counseling are highly recommended.

For a list of hot-lines by state, check out: www.suicide.org

According to one article:
Financial stress builds up to the point the person feels they can’t go on, and the person believes their family is better off dead than left without a financial support,” said Kristen Rand, legislative director of the Washington D.C.-based Violence Policy Center.

It’s not yet clear there is a statistical link between suicides and the financial downturn since there is generally a two-year lag in national suicide figures. But historically, suicides increase in times of economic hardship. And the current financial crisis is already being called the worst since the Great Depression.

So about a month or so ago I ordered the IBM Global CEO Study from IBM. It’s an easy, and fairly casual read of 76 pages, but it’s got a lot of good informative studies, and you get a good feel for what CEO’s at the top and bottom of their respective fields are facing in the business world today.

Among the topics covered are:

Hungry For Change

Financial outperformers are making bolder plays. These companies anticipate more change, and manage it better. They are also more global in their business designs, partner more extensively and choose more disruptive forms of business model innovation.

Overall, it’s an interesting report, especially for people in companies going through transition, since it gives a good overview of how companies of various sizes have learned to grow and react to change. It’s also a good reference for this site, since it touches on many of the topics I’ve covered in the past six months, as well as many of the articles I continue to write about on a daily basis. I would encourage you to check it out.

IBM Global CEO Study: The Enterprise of the Future

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

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

I’ve started a second site over at www.theculturemarket.com.

The purpose of the new site is about bringing a topical slant to how big business connects with the culture at large. The site is intended to grow and change over time, and my hope is to form a community there with both common and dissenting opinions.

The origin of the site owes a lot to the growth of this blog in the last few months, and I’m hoping to duplicate that success over their with a series of quick articles that lend themselves to discussion, with the focus of the site being somewhat larger than HenryPhish.

So let me know if you like it…or if you don’t…and we’ll see how it goes.

And commenting on the articles is greatly encouraged…you’ll be required to provide an email address and handle to post a comment, but as always, I don’t use the information except as part of site maintenance.

Conclusion, Restructuring, and Goals

I read an article yesterday dealing with GM’s corporate restructuring plans in liu of the pending government loan program. According to GM President and Chief Operating Officer Fritz Henderson, the loans wouldn’t alter their current plans to restructure the company. The statement is noteworthy in that it brings up a point of argument that I see a lot on the message boards these days: will GM file Chapter 11?

While this site is not specifically intended to be a numbers site, by design, GM is a large company with over $136 billion dollars in assets. They are a Fortune Global 500 company and are ranked 5 on the short list: Fortune 500. That said, this company brings in a lot of money.

As it sits right now, GM has been restructuring the company for the last three years, with white collar layoffs, plant closings and downsizing, new product development initiatives, improved public relations strategy, foreign market expansion, and with the bid to sell Hummer, a $51 billion dollars loss leader in the last three years, they are showing a strong business sense and a forward looking plan.

Further, in the last year and a half, the company has made a great show of its efforts to open its books and establish greater consistency in its accounting practices. Specifically with the discontinuation of its Employee Discount Program, which made GM’s accounting standards less than stellar in the past. Steps such as these show them as a company of good faith, as well as highlight their attempts to get their house in order.

With the current industrial downtrend, they are losing over $4 billion dollars a quarter in operating costs; a lot of money. Compare that to 1.6 billion a quarter the year before and you see the difference.

A company this size, however, with multiple subsidiaries, has a lot of leeway in when and how they restructure. Assets can be moved around or sold. Processes can be consolidated. Loans can be taken out as well…though the recent failure of banks makes this more difficult.

The government loan program that is mentioned above is also a strong option. With the original intent of the loans being to incentive manufacturers to increase the fuel efficiency of their vehicles 40% by the year 2020. The loans themselves were authorized in last year’s energy bill for $25 billion, but have not been funded yet. To that end, these loans will be available to all car companies as long as they meet certain stipulations, GM included, and should go a long way toward helping car companies navigate a difficult depression in the market.

Though, even without these loans, GM insists it has the liquidity to continue to finance it’s operations well into 2009.

That said, the purpose of Chapter 11 is to avoid paying creditors and to give the company some leeway to restructure their operations. If they’ve done their job correctly, and up till this point it looks like they have been, they should be able to continue their rebuilding process well into the end of 2009; just in time for the Chevy Cruze to be released in the US, some new technology, and hopefully a turnaround in the economy.

With management making better decisions and beginning to show results with their restructuring plan, it behooves investors to cut them some slack and give GM the time it requires to turn itself back to profitability in the next two to three years.

In conclusion, I’ll leave you with one last article to round out this series.

GM unveils Volt on company’s 100th anniversary

The fine print on GM these days says “We’re getting better; wait and see.”