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Lee Iacocca’s Unheeded Advice

Posted June 12, 2009 4:17 PM by Steve Melito

"Why does the country that produced Walter Chrylser, Alfred Sloan, and the original Henry Ford have so much trouble making and selling cars competitively?", wondered Lee Iacocca in 1984.

The leader of a then-resurgent Chrysler Corporation, Iacocca wasn't your typical American corporate titan. Credited with saving Chrylser from financial disaster (the first time), the Lehigh graduate was educated in engineering rather than business.

He also had a record of moving products instead of paper, most notably as "Father of the Mustang" at Ford Motor Company.

Hail Caesar

In his conclusion to Iacocca: An Autobiography, this son of Italian immigrants lamented America's position in the industrialized world. Then, as now, the United States faced strong industrial competition from the East. Japan, the Land of the Rising Sun, practiced what Iacocca termed "Veni, Vidi, Vici economics" – a reference to Julius Caesar's famous line, "I came, I saw, I conquered".

In a memorable line of his own - and one which he might now rewrite by changing Japan to China - Lee Iacocca explained that "our dependence on Japan will continue to grow until we establish some practical limits to their enjoyment of our markets". The Japanese government's rebates to Japanese manufacturers - a commodity tax rebate - was legal under the General Agreement on Tarrifs and Trade (GATT).

Protectionism and Policy

Twenty-five years after Lee Iacocca finished his autobiography, Chrysler faces severe financial difficulties and an uncertain future. Today, however, the cries for protectionism aren't as strident as they were during the 1980s. Yet many of issues that Iacocca raised in his Autobiography still apply.

Does America's emphasis on "high technology" come at the expense of "our basic industries" – autos, airplanes, electronics, and steel? Does the United States need an "industrial policy" that, as Iacocca explains, doesn't involve "picking winners and losers", but which involves "restructuring and revitalizing our so-called sunset industries"?

The answers to the second question is, of course, highly political (and therefore beyond the scope of my blog entry). But there is an Iacocca assertion regarding the first question that I'd like to get your opinion about.

Hope and High Tech

In a chapter called "Making America Great Again", the former Chrylser CEO claims that "high tech will never employ the number of people that our basic industries do today." Is Iacocca's claim out-of-date?

The "lesson we should have learned," he explained in 1984, came "from the demise of the textile industry". Between 1957 and 1975, almost 675,000 New England textile workers lost their jobs. Despite the region's "booming high-tech industries" during that same era, only of these displaced workers found new employment in the computer industry.

"In other words, if you lost our job in a textile mill in Massachusetts, you were five times as likely to end up working at K-Mart or McDonald's than at Digital Equipment or Wang", Iacocca explained.

Resources:

Iacocca: An Autobiography (printed copy)

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#1

Re: Lee Iacocca’s Unheeded Advice

06/12/2009 11:25 PM

It's my job to answer the political questions.

Without an International Minimum Wage, in the Global Age of Markets, and Machines, the rush to the bottom is certain.

I remember one guy said, "I hate Rich People."

Another guy said, "If it wasn't for rich people, I wouldn't have anybody to work for."

Mr. Iaccocca's claim that high tech will never employ the number of people that our basic industries do today, is correct.

The US was strong because Workers got paid well, and were well educated, and could buy the cars they made.

If we don't watch out China will recognize that they don't need us as a market.

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#2
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 3:30 AM

Blimey GA, lucid and short, gotta be a first
(Just teasing)
Del

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#7
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 11:28 AM

A minimum wage is merely an artificial number, it really has no real effect because all it does is act as a scale by which all other costs are derived.

if you declare a minimum wage of say $8 an hour, then you are by proxy defining the price of all goods and services. that means that if you make more than the minimum wage before the declaration, then your standard of living goes down because you now must pay more for everything. So you must find a new job that pays more or you have to get used to eating moldy bread and chinese noodles.

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#8
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 12:46 PM

Possibly the "living wage" standard works better, and I make the admission that as an international thing, there are some complex economic and political problems.

Somethings don't work if the powers that be, don't want them to work.

There was a time when the National, Federally mandated minimum wage worked for both the US labor force, and the economy in general.

I recently did a study of "wage slavery".

-Anyway how can an American worker compete with other labor pools of other nations for the sorts of jobs the majority are either suited for, or educated for, when we admit that there are only so many "above the neck" jobs to do?

It was of interest to me that Dick Gephardt came to the same conclusion I have as concerns the need for an International Minimum in a Global economy.

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#9
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 12:52 PM

No, I'm sorry, but you are wrong. all you are doing is defining the price of everything. the value of the currency goes down because what stays the same is the RELATIVE costs. if the price of labor goes up 30%, then everything else goes up 30% too so the end result is that the relative value is unchanged, but the inflation rate has gone up 30%.

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#16
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 6:44 PM

No, I am not wrong.

Let us compare a human being to 100 watt light bulb.

To work the 100 watt light bulb needs 1 amp.

Essentially that 100 watt light bulb needs a "living wage" of one amp.

If you don't give the 100 watt light bulb its Amp, it will not work.

Just like a Light Bulb, a Human being needs what it needs, and that's that.

If the human being doesn't get what it needs it either dies, (no light) or it draws on the entire circuit more than that circuit can sustain, and there is a resistance problem.

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#17
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 8:03 PM

yes but you can call that same 1 amp, 200 whatzits and even though it sounds like more, it is still 1 amp.

It is all semantics, the relative values do not change.

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#25
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 2:45 PM

Actually, I thought that was my point, in real terms.

That saw you've got says it needs 13 amps to operate right on it.

It is known how much food the typical human being needs.

Abraham Lincoln said a nation ought not be dependent on exports for its economic well being.

It is one thing to export value added products, and another to export all your jobs.

If your national leaders, and the people you work for, or with, won't protect you, and are selling you out, and forcing you into "wage slavery", and then gain the ability to plus that, make your dollar, worth less than their dollar they have you like a rat in a corner.

What does it mean for the working classes in a corrupt nation that gets US Foreign Aid in the form of dollars and pay and sell out their workers on the basis of what the national currency is pegged to be as part of a loop of incentives towards corruption?

-And what happens typically to nations that export Oil for Petro Dollars?

Lot of corruption and internal strife seems to flow out of that scenario.

Sometimes I really do wonder if people who say they are Christian remember that Jesus threw the Money Changers out of the Church.

Divine or not, I like that story since it implies that he knew something about the laws of economics and how, some manipulate them.

One can even be an atheistic follower of Jesus since it is obvious that to simply do unto others as you would have done to you, is an ethical guiding principle.

Buying the Amps, Kilowatt hours to run my house is finance.

Economics is another thing.

They say we are all Keynesians now, and the Economic Theory has had some success in the past, however as is the case in all sciences it is not wise to believe in anything too much.

The quality of life in the Netherlands according to my reports is about as good as it gets from what I can tell.

Seems like you don't bother them, and they don't bother you.

Seems like they invented Corporations and Insurance as we know it in the modern age.

They have integrated private and national institutions for the sort of healthcare that overcomes all the objections to the US plans flying about.

-I might have a phone they made, but not much else around the house.

How come I don't hear any reports that the Netherlands is worried about much of anything.

What happened, they said, "Exporting Tulips didn't work out..."

What does a Dutch worker get to make a Smart Car anyway?

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#26
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 2:53 PM

On the jesus and the church thing, you have to keep in mind that a couple thousand years ago the synagogue was the center of the community and served many functions. One of which was a place for business people to congregate and lend money to those who needed it. I guess the kid jesus didn't qualify for a loan and threw a hissy fit.

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#27
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 3:19 PM

Out of work carpenter syndrome aye?

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#28
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 3:31 PM

must have had a housing bubble deflated

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#29
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 6:24 PM

After my post 25 I felt unease, and went looking around for confirmation as concerns some of my assertions concerning the Netherlands.

I am apparently in error for I was under the impression Swatch was Dutch, and made the original Smart Car, but going to the history of Smart Car, it is only Mercedes Benz that is mentioned there.

Anyway in relation to what I wrote in post 25 about the Netherlands, some of it is suspect factually.

This is not a completely detailed correction, but an admission that I suspect some of what I wrote was in error, and though it may not make that much difference, I am now caused to attempt to discover what my error is, for I feel strongly I have made at least one.

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#40
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 2:48 PM

The "Smart Car" is built by Citroen and imported by BMW, as is the Mini Cooper (imported I mean.).

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#42
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 3:29 PM

Thanks for more of the story. Knew I hadn't got all that particularly correct.

Guess Penske is to distribute it in the US, at some point, in some version.

Most interesting thing I did come across was the FNV Union that works making cars at the NedCar Plant in Born Holland, along with the unique Dutch institution that works to balance the interests of all parties concerned.

Apparently that is called the Labour Council.

I am interested in knowing more about the issues we have been discussing, and how they have been addressed in the Netherlands.

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#49
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Re: Lee Iacocca’s Unheeded Advice

07/17/2009 9:49 AM
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#32
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 11:14 AM

Both you guys have good points.

The thing with minimum wage is that if the min number goes up all the goods will cost more which will nullify the effects that increasing the minimum wage had. At the very beginning (just like inflation) its effects are almost entirely good but then it swings back the other way after time sets in. Instead of looking at it as min wage in dollars think about how many hours you have to work to buy something, I bet it hasn't changed much over time.

IMO, the root cause of the whole min wage issue comes down to its misplaced application, the jobs in Mickey D's and Wendy's were meant for teenagers and young adults to have so that they could learn about what it meant to have a job and earn a little money and take on some responsibility. Under the majority of circumstances they lived at home with their parents and their wages paid to have a good time, keep gas in the car, go to the movies etc. They weren't intended to support a family of 4 on 8.00/hr from McDonald's. If McDonald's is forced to pay people 12/hr to flip burgers then a value meal will cost $10 instead of 5 or 6 and they will lose business or they will operate at a loss like GM has been. If someone's time is worth X dollars they will either get paid that in their job or it is their job to find another position where they can earn X. And if no one will pay then X they must come to terms with the cold hard truth that their skills are only worth a fraction of what they thought they were and no govt mandate can fix that whether on a federal level or a world-wide scale. The only person who can fix that is that specific individual.

But then the skilled labor and unskilled jobs (what people consider "dirty" today) have been disappearing and only a fraction of those people could move into the technical fields. People today think right out of the box they are "too good" to get "dirty, even when they aren't. There is stigma about how you must go to college to get a good job and that manufacturing jobs are bad. Manufacturing products that consumers want (value) is the life-blood of an economy and nation, moving forms and pieces of paper back and forth is not.

The idea of a living wage is potentially a very good idea but what people consider a "necessity" is quite inconsistent with reality, take a look at the attached pic to see what I mean. I apologize if it too small, it is a picture of a person taking food from a shelter while taking a picture of the First-Lady with a BlackBerry Cell phone.

Digital Cable, cellphones, Direct TV, cars are not necessities.

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#35
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 11:24 AM

GA, and a large part of that problem is that we have convinced everyone that everyone must go to college and that there is no such think as a trades career path. Face it, some kids are just not cut out to be rocket scientists, but they'll make a helluva plumber or electrician. What we need is a parallel career path where we can train these kids to be plumbers and electricians and mechanics and nurses and stop telling them they are failures if they can't handle college. Because at the end of the day, we need mechanics and electricians and plumbers and Nurses. Those are jobs that cannot be outsourced to India or Pakistan. They have to remain local.

If you are working at Mc D's and expecting to be able to feed a family of 4, I have some very bad news for you..... it ain't gonna happen.

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#39
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 2:39 PM

One of the strong influences on me as far as respect for Unions was that in my field the Union guys I worked with knew what they were doing.

Sure enough the Trades can be good, satisfying jobs, and we've been focused on GM and the UAW, which really is a particular and specific case.

Big Money Professionals in the Trades do not have to hire Union workers, and the Auto Industry isn't the only industry in which non union labor competes with union labor, and in my world even within the international, Locals, compete with Locals.

The Union I was a member of didn't even want me till I was good enough to take some jobs they wanted.

Don't paint every Union, or Guild with the same brush.

Even in North Carolina which is one of the most anti union states in the union, IATSE has work because the Touring Shows, or the Major Producers know around the country and into Canada when they need Labor that has the skills to get the job done, they need professionals.

In the major cities you can always find even here Union, IBEW labor. Some of this stuff you really can't even learn right unless you join the Union.

Would you like it if your daughter went to a rock and roll concert, where thousands of pounds of trusses and lights and speakers where hung over her head by the lowest cost labor?

And what about these E Coli outbreaks flowing out of mostly non unionized food sources?

Last time I had a MacDonalds, or a Wendy's hamburger I felt afterwards as if I'd been poisoned.

The Political factors influencing international economics, as well as management styles and specific corporate cultures as illustrated by the GM story at some point are specific to GM.

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#41
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 3:29 PM

Good points Rorschach. Often our permanent push to find the new growth field, causes us to forget that all aspects of the infrastructure must be built, maintained and rebuilt using well known trades.

I do think that you short sheeted the nursing community's education though. Nursing has gotten a lot more complicated today. Many nurses have a PhD today and are grossly under paid for the knowledge they have. Some believe that more lives have been saved by the nursing staff than by the doctors.

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#43
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 3:41 PM

True enough redfred, my sister is an RN so I hear what you are saying, but we need RN's with 2 year certificates from junior colleges too. There's room for both.

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#50
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Re: Lee Iacocca’s Unheeded Advice

07/19/2009 7:33 AM

Minimum wages put people out of work.

Once upon a time dish-washing in a diner was the oft mentioned activity for desperate people with less than competitive job skills. Flipping burgers at McDonald's has become the more modern descriptor.

One reason for this is that as minimum wages climbed, it became easier for engineers to design competitive automated, high volume dish washing machine, that use water temps no human being could withstand.

This logic is not just limited to dishwashing. The productivity of the average American factory worker is enormous, even when compared to off shore and developing countries where labor rates are just short of abusive. It's advanced machinery that has made this situation possible.

During John McCain's embarrassing effort at the presidency, he made a remarkably candid statement to Michigan auto workers: "Your jobs are not coming back" or words to that effect.

The drive to create efficient plant automation was driven in part by labor costs and while unions may have succeeded in holding Detroit hostage, the cost of such extortion became an obvious factor in the death of the host companies. That's as perfect an example of a Pyrrhic victory as anyone could ask for.

The only difference between a minimum wage and a union contract is the origin of the extortion!

Notice please, that in both cases the workers lost their jobs! What does that tell you?

What I find fascinating, if not entertaining, is that one if the biggest issues for Detroit unions was medical insurance for workers and retired people. Now, with their jobs gone, the President is putting the screws to Congress to enforce the same demand for insurance that helped vanquish our car companies.

l. J.

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#51
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Re: Lee Iacocca’s Unheeded Advice

07/19/2009 11:04 AM

Economics is a messy non-linear mathematical realm. For while raising the minimum wage can been seen as putting some dish washers out of work for the very reasons you state. (I'm just using your example, soon I'll be doing my own dishes. Thank you very much.) Now more skilled labor is required to maintain the mechanical dish washer and the manual dish washers out there will have more funding, at least for the time being. That is until the extra income in the market induces inflation to reduce the value of the increase. Added to this are the myriad of other economic stimuli happening concurrently.

So with the multiple feedback effects in any economy, the lag that many of these effects take to appear in the economy and that change itself is constant, it is difficult to accurately say what the final result of any single stimulus.

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#52
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Re: Lee Iacocca’s Unheeded Advice

07/19/2009 9:34 PM

"Now, with their jobs gone, the President is putting the screws to Congress to enforce the same demand for insurance that helped vanquish our car companies."

Easy position if you already have insurance, have around a half a million dollars available to cover you or are indigent and can walk into any emergency room in the country and get treated for free. The rest are one major medical medical incident away from bankruptcy and having to depend on someone else to put a roof over their head. And it matters not whether they drank themselves to near death or just inherited bad genes. Supposedly that is what America is all about.

So that's the deal we have in the USA right now. No war chest, insurance (or not enough), HMO or Medicare/Medicade government program? Then you and your family better not let a hospital get hold of you for more than a few days for any reason or everything you own is subject to being picked clean.

Oh you say, everyone can buy insurance. Tain't so. Only if you are in a group. If you've seen a doctor anytime in the last few years for anything more than a physical that you passed with flying colors you have a pre-existing condition. No problem; perfect health? Then all you pay is about the same amount as you pay to rent the place where you live. Proud America!!

Bad Obama! Bad Democrats! Bad socialism!

Off topic rant required here.

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#3

Re: Lee Iacocca’s Unheeded Advice

06/13/2009 5:27 AM

Is there any study done on Bench Marking for Automobiles mfd. in Japan and U.S. What is labour cost, raw material cost, mfg. cost, overheads, profits etc., for equivalent models of the cars?. Such study can show why Japanese cars cheap. Also it will suggest where to look into the cost and find out how to match up with Japanese.

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#10
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 12:56 PM

From what I've read, the materials costs are comparable between Toyota and GM. but the labor costs for Toyota are something like $45 an hour whereas GM's labor costs are virtually double at almost $80 an hour. And it takes more hours of labor to build a GM vs a Toyota because so many jobs are automated at Toyota and employees fill multiple roles whereas GM's assembly line is featherbedded to fare thee well.

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#12
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Re: Lee Iaccoca’s Unheeded Advice

06/13/2009 2:39 PM

Why is it always Labor Costs talked about? Remember the Remington Razor story? They had 75 Vice Presidents when Victor Kiam bought the company and fired them. Talk about featherbedding, the company went from losing money to making money just on that one change!

konnichiwa!

http://en.wikipedia.org/wiki/Victor_Kiam

AND they were successfully marketed to Japan! It is something anyone wanting to really know what is wrong with American Business should read about!

Management has a big share of the blame.

Wealth is generated by Manufacturing Jobs! NOT by service jobs, financial instruments, or other soft fields.

http://www.sme.org/cgi-bin/find-articles.pl?&09apm007&ME&20090401&&SME&#article

We won WWII and created the strong U.S. Economy on the backs of those who labored!!

A quote from George Santayana in The Life of Reason : (The last part of which, is quoted various ways)

"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it. "

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#4

Re: Lee Iacocca’s Unheeded Advice

06/13/2009 7:21 AM

I suspect that one of the biggest influences on our rise in the post WW2 economy was the GI Bill which enabled many returning soldiers to get college degrees. The amount of educated and skilled talent we had in the 50's was enormous and, it existed across many widely divergent disciplines.

We don't seem to do that any more as evidenced by the rate at which developing nations are growing. India, China, even Vietnam are the homes of educational systems where students outperform ours in virtually every subject, especially math and science.

We are paying the price for resting on our laurels. We became fat dumb and happy until the economy stumbled. Notice please that those who were first to become unemployed in the current economic downturn are those without advanced technical skills and who were employed in factory jobs. . . union factory jobs.

No amount of money recklessly thrown about by desperate, self-serving politicians will change that. No union can protect you in a competitive Free Market system. The initiative has to start with the individual.

L.J.

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#11
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 1:53 PM

L.J.

Re: your comment "No union can protect you in a competitive Free Market system. The initiative has to start with the individual."

A competitive Free Market system is a figment of imagination. There are always those who will influence the markets to their advantage.

Example:

The Japanese government's rebates to Japanese manufacturers - a commodity tax rebate - was legal under the General Agreement on Tariffs and Trade (GATT).

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#13
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 2:44 PM

Also known as a refundable export tax. Softwood lumber companies tried the same thing to increase their profits on Canadian Lumber, except it sort of backfired on them and they ended up with a non-refundable tax. Most if not all the big central and west softwood companies are American owned, they lobbied for a level playing field and got what they wanted. Considering they cut all their wood on crown land the sort of got bit.

On the east coast Irving corp has a lock on the softwood business, and since they only cut on land they own in Canada, the tax doesn't apply. Irving is the second larges land holder after the Federal government.

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#18
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 8:37 PM

Actually Unions like the Teamsters, or the UAW, IATSE, or IBEW, or whatever the Coal Miners Union is called, have a history of protecting workers in a competitive Free Market system.

The IBEW has less violence in their history of success, since they just go around cutting off power if you bother them too much, and don't pay them a living wage.

The Teamsters in their early years did their own killing.

IATSE threatened to cut Reagan's face up, and he took it out on the Aircraft Controllers.

SAG, makes sure actors get paid, but collude with the producers to get discounts on the people that make them look good.

Everybody at the top with a paycheck that gives them a car, and a house in safe gated Ayn Rand island has been bought off.

You can't even find the right person to kill.

All the Corporate leaders are hiding.

During WWII the Irish actually allied in scary ways with the Germans because it had not been that long ago that the English had starved them and their children to death.

Watch what you do, it will come back to you. P.S. Please don't shoot me Del, I'm only Irish. The Great Hunger is a tough read. Once we get into politics we are getting into all of it. Killing is involved.

Pillars of the Earth is another good book by Follett when people get killed over work.

Why did Japan attack? I've forgotten...

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#19
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 11:21 PM

"Why did Japan attack? I've forgotten..."

Not sure if you are asking tongue in cheek or if your question is sincere. One the assumption you are really asking. . . . .

The Japanese attacked because Roosevelt pushed them up against the wall when he unilaterally initiated an oil embargo on an island nation that has no oil and is entirely dependent on imported oil.

Roosevelt's excuse was to punish Japan for it's attacks on China.

Some argue that Roosevelt's massive spending had failed to end the Depression and turn up the heat on our economy; that he was getting desperate and self conscious over his failure so he provoked a war with Japan as an excuse to drag this country into a war. Nothing puts factories into high gear and people to work like creating war materials.

I've no evidence to support or disprove that assertion.

However, if the claim against Roosevelt is true then we'd better be damn well on a guard because we have a President who fancies himself a modern Roosevelt. If the artificially stimulated economy doesn't last long enough for regular mechanisms to take over, what will he try next?

Last one out, please turn off the lights

L.J.

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#20
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 11:44 PM

It was tongue in cheek.

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#22
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 2:40 AM

Hey I'm with you..
I just cannot believe how many gullible people are still blaming the workers for all our woes...
WAKE UP.... the financiers and bankers and top management are the ones who have just walked off with all our money!(and crippled our industrial base)
And you know what?
We are giving them more and expecting the same experts and advisors to 'make it all better' .

A quick straw poll...
How many of us have lost money by following the advice of a 'financial advisor' ?
How many of us have had our pension pissed up against a wall or snorted by some city guy?
Right...and some people still think it's all the fault of the guy on the shop floor trying to do a fair day's work for a fair day's pay?

People are still railing against some illegal imigrants scaping a meagre living while the fat boys at the top are creaming off a thousand time more.
And guess what?...the more you beat up on the little guy, the less you will notice the snouts in the trough at the top.

<ctrl\R Rant mode off>
Del

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#33
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 11:16 AM

Del, it is not the worker, it is the unions. you can't keep increasing your demands ad infinitum and expect the business to remain solvent, because someone, either in another country, or in a different region where unions do not hold sway, will underbid you. if the costs of moving the operation to a lower overhead location do not outweigh the savings, those jobs will get moved.

Liberals fail to take into account the connectedness of the economy and think that they can alter one aspect and all other aspects will remain the same. They won't. All the variables are connected, altering one alters all of them.

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#34
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 11:21 AM

you can't keep increasing your demands ad infinitum and expect the business to remain solvent....
Unless you are management/CEO
In those 'other counties' are the management paid so much?
Why always focus on the unions and the workers?...they are not the ones holding the purse strings.
What about the ludicous demands of the mangers and incompetent CEOs with their golden parachutes when they screw up?
You still don't see it do you?
Del

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#36
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 11:33 AM

Del, At least here in the states, to a large extent the Unions ARE holding the purse strings. The laws in most of the unionized states are such that it is illegal to hire anyone who is non-union. so the union (in collusion with the government) has employers by the balls. They can either close their doors,, move to a "right to work" state (or offshore) or they can pay what the union demands. Granted GM was stupid to continue to pay the unions what they demanded, but on the flip side, they had a lot of money invested in the assembly plants and it would have cost a lot of money and time to build new plants in non-unionized states. Plus they would have had to deal with the union backlash in those plants that had not been moved yet. How many car companies could afford to shut down operations company wide for a year or more to reconstitute their operations in non-union locations? not many.

Toyota had an advantage in that they were starting form scratch and had no trapped costs, so they could build their plants and parts supplier networks from scratch from non-union workers.

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#37
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 1:17 PM

Hi Rorschach - There's also the cost of health care, a major factor - maybe the major factor - causing Chrysler, Ford and GM products to be so expensive relative to Japanese products. The Japanese spend a fraction, per capita, of what we spend, and cover everyone in their country. We've gotta figure this one out to make our made-in-U.S. products more price-competitive. The days of pitting one low-tax, non-union U.S. state against another are over, I think (hope?). - Larry (Proud New Yorker)

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#38
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 1:33 PM

Larry, you'll note that all of Toyota's assembly plants are here in the south where we are non-union right to work states (the Tundra is assembled in San Antonio, Texas). And the workers get wages, benefits and medical coverage that is better than average for the area. The Toyota workers are well taken care of. And the percentage of US assembled Toyotas that are made with US sourced parts exceeds that percentage of those built by GM.

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#31
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Re: Lee Iacocca’s Unheeded Advice

06/15/2009 11:02 AM

Ra...Ra...people are just now realizing (here in the states) that there is more to the world than the US economy. We are now global and need to be competitive period. Your Daddy can't help you get a pat union job for life any more. Either you know your $#@* or you don't. We are now living in a world of free agency and if do the work you'll get paid. Needles to say, it might not be an American company.

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#5

Re: Lee Iacocca’s Unheeded Advice

06/13/2009 8:36 AM

The reasons our auto manufacturers failed is because of greed.

Lets start with Chrysler since everyone else did. Chrysler was sold to Dailmer because share holders wanted to make an instant large profit on their stocks (Chrysler at that time was in the black). Chrylsler was one of the most profit producing divisions of Dailmer for years. Then Dailmer drained Chrylser of its resources to boost its other divisions and released Chrysler back as an independent, a shell of a company and what it used to be. Thats why Chrysler is in the shape it is in. It has nothing to do with competition, it has everything to do with greed.

General Motors on the other hand is different. It has had unbelievable bad management for years (since 1984). They failed to protect the company, its dealerships and the stock holders, but not before taking millions of dollars in compensation for their ineptness. When the market began to crash it could not sustain its losses, instead of trying to work its way out of debt it was forced into bankruptcy. There are rumors in the market that the major stockholders wanted to drive GM into bankruptcy since they were holding long term short sells and derivatives on their stock. Derivatives are basically insurance policies that pay full value on the stock. Which means they wanted to wreck the company because they could make more money on GM going bankrupt than if it survived.

Neither of these companies were brought down buy foreign competition, they were basically ruined because it made a few people very rich. People who's interest was not in the profitable manufacturing of a product, but simply using it as a stock tool to make money. They had no concern on what it would do to the economy, the people who are now unemployed, legitimate stock investors or anything else ethical which would stand in the way of them making money.

Don't misunderstand me, I am not someone who hates the rich. Many good people like Chrylser, Ford, Sloan and Iacocca made there money by building companies which gave back to the world, and deserve the rewards they received. On the other hand I have no love for those who sole purpose is to accumulate wealth by any means.

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#6
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 11:04 AM

I have to agree completely with what you are saying, GM management has been taking as much as they could out of the company for decades. They were operating under a very interesting culture for years. I had a conversation with a retiree from GM last year, at the SEMA show, in the GM booth. To make a very long story short, we wee talking about a director I had a run in with, his response was; he is a director and therefor untouchable. From what he was saying, they can do more or less what they wanted without any worry about the ramifications. Over sight from the vice-presidents was non-existent, I guess they were to busy counting their bonus money.

Even when GM and Chrysler come out of chapter 11 they have very little chance of surviving, the people who will run the place are not car culture people, they just don't understand that in North America the car is more than just a way to get from A to B .

The world aftermarket industry came into existence because of the American Car Culture and the companies who have recognized this have thrived, North American or not.

This passion for the automobile, that some of us live will not go away any time soon. Ford has been able to take advantage of this, the new Mustang, besides being to only retro muscle car that actually looks like the original, has been a great success. This years f-150 was a fantastic success, extra shifts had to be added to keep up with demand. This demand was crafted in a way that everyone in the auto industry should take note of, hype the product by saturating the media , whoever they did not release the vehicle to the dealers, they stockpiled them by the thousands all over the country. Once the buzz became a roar, and roar it did, dealers had filled order books and pre-sold almost all the stock piled vehicles. An enormous success and during a recession no less.

Without a passion for the automobile neither GM or Chrysler will survive, and neither have any car people on their board.

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#23
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Re: Lee Iacocca’s Unheeded Advice

06/14/2009 7:29 AM

So can it be concluded that American Auto Industry failed because of the bad corporate management?. Only "Ford" who have a trace of family management is able to survive. Is it clearly proved that corporate management can ruin the organisation because it is headed by greedy individuals who have only personal interest in making huge money. I am puzzled..

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#14
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 2:56 PM

"The reasons our auto manufacturers failed is because of greed."

AMEN!

Our Government has also allowed almost unbridled Monopolistic buyouts and subsequent layoff's of large numbers of workers. Creating a few wealthy at the expense of those barely able to eek out a living and creating a drain on our economic resources.

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#15
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Re: Lee Iacocca’s Unheeded Advice

06/13/2009 3:30 PM

Would seem that the multinationals have never looked closely at history, it is only a matter of time until those who have not raise up against those who do, and their gated communities will prove to be of little use. With the economy sinking the crazy folk are already coming out of the wood work, not the abortion doctor who was shot, and the shooting at the Holocaust museum. First of many I am afraid.

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#45
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Re: Lee Iaccoca’s Unheeded Advice

07/03/2009 7:44 PM

Gray Haired Old Goat I gave you a thumbs up rating for an excellent post. I only take issue with one thing you wrote: ". . . bad management for years (since 1984)."

Arthur Stanton was singularly the savior of VW. At the end of WW2 it was virtually impossible to buy heavy equipment for manufacturing. VW's supply of brand new, stamped body had been sold off as scrap and the guy who bought them was Arthur. When he sold them back to VW in 1947, they not only rewarded him with cash but sweetened the pot with an exclusive north American franchise whose value today would be staggering had it not been sold off.

I was privileged to work for Arthur Stanton in the 80's and after having personally watched Detroit's myopic view of imports, I can say with conviction that the GM mismanagement you eluded to began long before 1984 by at least 20 years.

I'm confident that any graph tracking GM's market share and that of the imports will verify this assertion.

Otherwise a great post!

Thanks

L.J.

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#21

Re: Lee Iacocca’s Unheeded Advice

06/14/2009 1:40 AM

I've never read Lee Iococca's; so I'm not sure exactly what he said.

What constitutes success in the making of cars? Is it an enduring image of product greatness? Financial success of the enterprise? How long the brand persists in the marketplace? Numbers of sales or some other exceptional statistic? Or maybe the net contribution to our society? Each group of stakeholders will have his favorite definition. Mine is product greatness.

The automobile industry is not the only one in our country that has fallen victim to the sanctity of maximum financial return without regard to any other consideration. A very large proportion of our fellow americans buy into the idea that the acquisition maximum financial gain is the defining atribute of the United States of America and the foundation of our economic sucess.

My wife who is good at distilling my complex word collections into simple words calls it "greed". She's not the only one.

Perhaps what Iococca was getting at was that the great pioneers of the auto industry were devoted to making the best cars (& trucks, etc). It would appear that today's failures were devoted to making the most money.

I recall an old saying that went something like "wealth sought after directly is seldom achieved." I'm not sure that is so true anymore. There appears to be a formula extant today and taught by some of our "great" business schools that enables wealth to be gained as a direct effort if the seeker has the right combination of intelligence, ethics, personal energy, persistence, focus and a few other attributes. 100+ years ago we called them "robber barrons". 100 years ago they would buy off one or two government leaders. Today they own entire political parties.

Trouble with this line of thinking is that if just a few people are collecting all the wealth we need to consider what we do with everyone else. Is is such a great idea to keep letting them buy assault weapons? Should we be educating them today for highly skilled jobs that may not exist tomorrow? Should we be inviting millions of immigrants who will take away jobs from our current citizens? Should we be promoting lower taxes and less government at the same time we are squeezing people out of gainful employment, a roof over their heads to sleep under and basic health care?

We have lots of small businesses in this country whose owners and managers are primarily oriented toward building a business that is better in some way other than just creating wealth. But in our large corporations that quality is disappearing in favor of imperial CEO's, crony directors and imperative to maximize quarterly financial results and executive compensation.

Today's big business leaders don't give a hoot about the USA and its people. Their focus is on the world, not the USA. As long as they can keep the people entertained, con them into voting the right way and the police can keep them in line everything is fine. Their big interest is in keeping the country militarily and financially powerful so their positions and lifestyles will not be threatened.

Sorry I digress into an OT here. I know a lot of you don't like my line of thinking.

Iacocca probably was right. For whatever that is worth. That was then and this is now. Most of America is living in a dream state of the disease I call afluenza". I seriously doubt if we will ever regain consciousness in my lifetime, our current administration notwithstanding.

Ed Weldon

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#24

Re: Lee Iaccoca’s Unheeded Advice

06/14/2009 12:32 PM

Hey Moose -

I don't think Iacocca's claim is out of date, and think it's just a matter of "Getting the Balance Right" between high-tech and old-tech, to quote Depeche Mode's 80's tune:

I've felt for a while that the term "high-tech" is a bit of a misnomer. 125 years of evolved, cutting-edge U.S. mechanical engineering experience - demonstrated in ASME's old-tech "Codes and Standards" documents - has gone into tweaking production of "low-tech" products like steels, alloys and pressure vessels - products that still feed car production.

The Mechanicville (Halfmoon) Hydroelectric plant - an example of "old-tech" - employed 1,000's of newly-arrived immigrants from Italy (and elsewhere) in the 1800's, during its design and construction, allowing descendants of those workers to fully integrate into the American Dream.

National defense strongly depends on indigenous production of old-tech products during emergencies.

The Japanese, French, German and other governments have played a large role in helping their "private" auto producers - for example, funding R&D - in their countries, mindful to protect jobs and gain marketshare in the U.S. and elsewhere. For example, Volkswagen, a company strongly supported by the German government - having made lots of money in recent years in China, is pushing hard now in the U.S. to gain even more marketshare, and who can blame them, while our car industry is struggling.

To compete, the U.S. needs to do what its competitors have done for their success, and avoid the mistakes - like the mistakes of former East Germany's Trabant brand.

- Larry

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#44
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Re: Lee Iaccoca’s Unheeded Advice

07/03/2009 6:14 PM

In fact Trabant was a sample of German ingenuity in the worst government system, with the materials and means of an depleted economy - remember that most of the German industry was, literally, stolen, dismantled and assembled back in USSR. Trabant was the affordable car in a communist country, with everything reduced to the minimum. Even the motor was easy to replace. The failure was of the communist system.

Now, everybody recognized the drawbacks of the Trabant (as compared with a luxury car), and a lot of jokes were told. But I remember a cartoon showing, at a stop light, under a heavy rain, the driver of the Trabant asking a motorcycle guy aside: Do you know a new joke about Trabant?

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#30

Re: Lee Iacocca’s Unheeded Advice

06/14/2009 7:16 PM

Corrections and Clarifications to my post 25: Swatch is a Swiss company that pulled out of Smart Cars.

Production of Smart Car ForFour ceased at the Dutch Ned Car Plant in 2006.

The Federation Dutch Labour Union, or FNV is the union labor at the Ned Car Plant which is making now for Mitsibushi some Chevy.

Though the FNV is reported to be very left wing, they have accepted in the past reductions in pay, in exchange for job security.

Of further interest may well be a Dutch Institution, Labour Council? how it is composed and operates. Apparently the unions, and the employers, and the government have seats on this institution where deals are hashed out.

P.S. I apologize that this post is not all that detailed either, but I did find my most egregious mistake, which is that Swatch is Swiss.

On the positive side I found that there is a Dutch institution regarding conflicts between labor, employers, and the government, worth a look see.

As to how this Institution benefits all concerned may well provide some lessons for us in the US, if not other nations.

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#46

Re: Lee Iacocca’s Unheeded Advice

07/03/2009 8:26 PM

With all the great responses that I've read here, one of the things that has not been discussed was the ubiquitous Product Life Cycle.

When I started my first job out of school, the design and development cycle took forever compared to today's manufacturing environment. A math major at Leitz with a major in optics is one example. He would take many years to work through a lens design and if he came across an optical aberration, the design and all the work had to be dumped and started over. That same math intensive evaluation process takes hours today. Not only are lenses better but you can do things with today's optics deemed impossible. A sharp 18 to 200mm zoom lens was considered impossible back then.

That's just one example of an industry that rockets new products to market in a blink of an eye. And, as new products bump old ones, the longevity of each new product gets shorter. One result is that product loyalty suffers. If your dad drove a Ford, odds were his dad, his grand dad and you did too. Not any more. And with Europe and Asia offering better handling, fuel efficient cars with better quality and for less money, the jump to something not made in America was fueled.

Bill Weldon made some excellent points. One of them being when he referred to our gluttonous appetite (my choice of words not his) as "Afluenza".

America is wasteful in ways that are staggering! That waste is demonstrated everywhere. Frankly, it embarrasses me! This Country is being forced on a physical and psychological diet and the stress is apparent.

A Frenchman said it best: "A people get the government they deserve!". The spendthrift behavior we are witnessing in Congress and the Whitehouse reflects the population that voted it into office. The people have their hands out and Sam is going to fill them.

The problem is that the product life cycle and manufacturing industry that allowed this in the past, doesn't live here any more. With them gone, the financial cupboard that supported reckless, myopic spending is now empty. "We has met the enemy and he is us"

But what do I know? I actually love my work, take pride in it and wonder why anyone would look forward to retirement.

That makes me weird or at the very least unusual!

L.J.

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#53
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Re: Lee Iacocca’s Unheeded Advice

07/20/2009 10:19 AM

LJ, I would respectfully disagree with your conclusion. In years gone by, your average detroit iron vehicle was considered approaching it's end of life when it hit about 100,000 miles or so. If you got 150K you were extremely lucky, and the rest of the vehicle (seats, interior, accessories, etc.) were probably on their last legs too. Since that was par for the course for ALL manufacturers, there was a built in churn in the market. There was always a turnover from one vehicle to the next, keeping Detroint busy manufacturing replacement vehicles, on top of the new buyers coming along as the population rose. Detroit was fat dumb and happy and there was enough gravy to keep the union happy without putting the companies in danger of imminent collapse. But two things happened on the way to the bank:

Japanese automakers, (and now South Korean automakers, and soon Indian automakers), realized that in order to break into the US market, they had to deliver a vehicle that delivered more value for the money. So they made the vehicles more reliable and that had the added effect of making them last longer. They had to improve the quality of the interior and accessories too to match. They penetrated the market to the point that Toyota is now the number one automaker. But because cars last longer, they don't sell as many replacement vehicles. They rely on new customers to make up the difference, which brings us to the other problem, population.

The population growth in all industrialized nations is flat to falling. Therefore there aren't as many new buyers coming along to buy up the excess production.

Therefore the market for new cars does not have the same upside that it used to, there just aren't as many buyers out there, even assuming they had the money to spend. Which because of all the hamfisted nationalization and socialization that Obama is trying to pull off, nobody does.

The golden days of the automotive manufacturing biz are gone, and they are not coming back. The only place where there is any money left ont he table is in reducing manufacturing costs and since most of those costs are due to labor costs, more and more automotive manufacturing jobs will be going to places with low labor costs. I expect that before too terribly long, you are going to start to see manufacturing happening in places like Nigeria and Congo where the costs of labor are even lower than that of China, but only if something can be done about the governments there. I would not be surprised if China and India end up coming in and their business concerns essentially overthrow the government and make the governments of the area an extension of the corporate management. Nigeria inc, a wholly own subsidiary of Tata Motors inc.

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#54
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Re: Lee Iacocca’s Unheeded Advice

07/20/2009 12:29 PM

Rorschach, I am not able to determine what it is you disagree with in my prior post.

I based my assertions on 30 years in the car industry working in virtually every aspect of the industry from engineering to product failure analysis, from technical training to regional sales manager.

While I am no longer in that industry, I am still active in engineering and can say with absolute certainty that the life cycle of today's products is dramatically shorter than ever before. Modern design tools, automated production equipment and advances in materials and technology have spawned innovation so rapid that it has fostered what can be best described as a Disposable Society.

As for Detroit, the two to three years of face lifts on essentially a stagnent body style were driven by the simple fact that it took almost three years to machine and polish the huge stamping dies needed to build the body parts for the next major change. That all changed when a man by the name of Pat Hanratty invented the idea of servo driven, fully automated 3 axis tool paths.

"I can do in six months what now takes us three years"

The management at GM said he was nuts but gave him the budget and facilities to prove his point, but only after he signed a resignation statement first. If the job wasn't done in six months, he would be canned. He succeeded and is now reverently called the father of CNC (Computerized Numerical Control)

When I first met Pat in the 80's he had his own company (Anvil) and when I asked him why he no longer worked for GM, he responded:

"I got sick and tired of having to leave signed resignations on some jerks desk every time I wanted to advance manufacturing technology."

That remark is just one more validation of the intelectual bankruptcy that corroded GM's upper management and made them a legitimate prey to the foreign car makers. GM's myopic perspective was further demonstrated by the simple fact that they lost market share steadily for 15 years and did nothing! When the Arabs turned off the oil spigot in 1973, all Hell busted loose in Detroit, the dealers selling gas guzzlers went bust; those selling fuel efficient cars couldn't keep them in inventory, a situation not much different from today. The moment oil started flowing again, they went right back to the old way of doing things.

Pat Hanratty was the kind of guy who would have automated Hank Rearden's steel mills and Cisco's copper mines and most certainly been invited by J.G. to move to Colorado.

What drives me Bonkers is that Congress and the White House have saved both GM and Chrysler from their stupidity while ignoring Ford. Ford politely said "No thanks" to bail out money. Now GM and Chrysler have clean sheets, no debt to speak of, brought the unions to their knees and have shed themselves of dealer agreements as well.

Meanwhile, Ford, the responsible firm, must compete with GM and Chrysler under a burden of debt and contracts the others walked away from.

I've never purchased an American car. Now however, I just might buy a Ford if for no other reason than on principle: I'll be damned if I will reward incompetance the way Barack Obama has.

L.J.

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#55
In reply to #54

Re: Lee Iacocca’s Unheeded Advice

07/20/2009 12:40 PM

My point is that your average Toyota will go closer to 200K before it's wheels come off whereas the conventional detroit iron would only go 100K, that has improved somewhat, but it still does not equal the level of reliability and longevity you get from Japan. And that is using the same US labor pool and paying a good wage (but not the same as UAW union wages.).

I agree with your point in other industries, but not when it comes to cars.

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#47

Re: Lee Iacocca’s Unheeded Advice

07/04/2009 7:44 AM

As "VW" car is being discussed, I remember watching a T.V show on "Discovery" channel about "VW". In short what I remember is "VW" was pet child of Hitler. It was developed under guidance of Hitler specificaly to meet WWII military requirements. Even in designing the the basic car views of Hitler were considered. Gearbox was designed so as to meet rugged war time requirements. Compact Engine was designed so that it could be accomodated in rear and it was fuel efficient. So, even to-day Beatle model, which popular through out the world, is being produced in Mexico. Disney made movie "Love Bug" for this model.

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#48
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Re: Lee Iacocca’s Unheeded Advice

07/05/2009 10:37 AM

Hate to burst your bubble but the last version 1 Beetle left the Mexican production floor in 2003.

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