Friday, January 23, 2009

Chrysler and their Magical Mystery Tour...

Anyone with a shred of common sense and who has a basic understanding of supply chains and inventory management can see that Chrysler's latest announcement is a huge indicator that they have no clear strategy for how they plan on reconstructing themselves. This comes on the recent anouncment that Chrysler management that it will tour the country and have 'fireside chats' with their dealers in efforts to get them to order and stock more product. One can just imagine how these chats will go as Chrysler sits on one of the biggest inventory backlogs that is placing a huge cash flow crunch in their operations. When it is all said and done- I'm sure the metophor of 'fireside chats' will be more like 'putting their dealers feet to the fire' as they force the dealers to shift the liability off Chrysler's books and onto theirs.

In their statements, Chrysler management talks about their December plant idlings forcing them to 'burn through cash' as their employees sit still with no cars to build. Yet, UAW contract provisions are what got them there when as "Rome burned" (i.e. Customers stopped buying their cars) they continued to build, and build and build. Why? Because their Union contracts mandated minimum days they needed to work. Chrysler management is equally to blame as they did not look for other ways to renegotiate their situation with the UAW. Instead they built and built cars to the point that their product has been devalued by the basic law of 'supply and demand'.

There is a lot of 'could have beens' and 'should have beens', but what is most amazing to this taxpayer is how our senate leaders did not did harder into their plans for the $4Billion that they received in bailout money within the last 30 days? As we approach the March 31st deadline for their bailout compliance, you can be sure that "Brontosaurus-Chryslericus' will be pressing down hard on any and all dealers to make sure that they help shoulder part of their problems and shift inventory from Detroit to the car lot near you. Their dealer network could use some contraction and this economy will most likely help with that as our recent 'gold rush' economy saw an expansion so that there seems to be one on every run of strip malls. Our myopic government led by the 'veritable' (wink) Nancy Pelosi and Harry Reid, on the other hand, didn't think through the supply chain principles and look at how they could help Chrysler help themselves. Instead they did what they do best, throw taxpayer money at the problem showering the Big Three in an orgasm of dollars if you may. A bold display of their newfound majority status.

A better approach would have been to incent Americans to buy cars. Perhaps in the form of a tax voucher or credit that each person could use to buy the product. Then those banks we just lent a ton of money to? Well, how about we get them in on the deal to help finance these autos? As far as the auto makers? The government should have place a condition on their bailout stating that executive pay for the Big three was to be frozen for a period of five years (to be revisited at that point). On the other end of the spectrum- UAW would agree to a cut in pay and benefits for a period of three years (also to be reviewed on the anniversary date). Automakers would need to agree to these terms Unequivocally or find themselves with 'no cigar'.

You see this does a few things, one- it helps move inventory which is one of the biggest problems that the Big three have in the short-term. Long-term it modifies their overhead so that they can reorganize themselves and have a fighting chance to survive. On the banking contingency, it produces accountability (what a novel concept) for the bailout funds that they were afforded. It prevents hoarding and starts currency flowing.

Now Reality: Why our government didn't do this? Well let's see, the incoming surge of Democrats sought to capitalize on the $400million dollars in campaign contributions they received from organized labor. Far be it from them to 'bite' the proverbial 'hand that feeds them'. So as to not upset the constituents that just helped many of them get into office- they dodged any conversation or contingencies that could be placed on the UAW. After all they are for the 'working people'. So why not let the 'working people' fully FUND the reconstruction of the companies for which they work in the form of increased taxes? You see- accountability is a term that is loosely used, but only when it is convenient, NOT when it makes sense and is the most prudent thing to do.

Tuesday, January 20, 2009

Words of a New ERA

For many Americans, today stood as landmark historical day in the 233 year old history of the United States. As one reads through the written words of Barrack Hussein Obama ,the 44th president of the United States of America, you can see the eloquence of his vision for America. You can feel the 'hope' that exists for a nation on the midst of the most challenging of times. A hope tempered in a long list of things that need to be done. Hope tempered by a world in major turmoil at every corner. No matter where you stand on the political spectrum you can't help but feel proud for our country on this monumental occassion. You can't help but feel like a new era is among us. Enclosed below is the inaugural address in it's entirety.

Inaugural Address by the 44th President of the United States of America


Following is a text of the inaugural address delivered Tuesday after the swearing-in of America's 44th president, Barack Obama.
My fellow citizens:
I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors. I thank President Bush for his service to our nation, as well as the generosity and cooperation he has shown throughout this transition.
Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet every so often the oath is taken amidst gathering clouds and raging storms.
At these moments, America has carried on not simply because of the skill or vision of those in high office, but because we the people have remained faithful to the ideals of our forebearers, and true to our founding documents.
So it has been. So it must be with this generation of Americans.
That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred.
Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.
These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land — a nagging fear that America's decline is inevitable, and that the next generation must lower its sights.
Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America — they will be met.
On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord. On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas, that for far too long have strangled our politics.
We remain a young nation, but in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit, to choose our better history, to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free and all deserve a chance to pursue their full measure of happiness.
In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less. It has not been the path for the fainthearted, for those who prefer leisure over work or seek only the pleasures of riches and fame.
Rather, it has been the risk takers, the doers, the makers of things — some celebrated, but more often men and women obscure in their labor — who have carried us up the long, rugged path toward prosperity and freedom.
For us, they packed up their few worldly possessions and traveled across oceans in search of a new life.
For us, they toiled in sweatshops and settled the West, endured the lash of the whip and plowed the hard earth.
For us, they fought and died, in places like Concord and Gettysburg, Normandy and Khe Sahn.
Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions, greater than all the differences of birth or wealth or faction.
This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished.
But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off and begin again the work of remaking America.
For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act — not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.
We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.
Now, there are some who question the scale of our ambitions — who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done, what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.
What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.
Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account — to spend wisely, reform bad habits and do our business in the light of day — because only then can we restore the vital trust between a people and their government.
Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control — and that a nation cannot prosper long when it favors only the prosperous.
The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity, on our ability to extend opportunity to every willing heart — not out of charity, but because it is the surest route to our common good.
As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience's sake.
And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: Know that America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and that we are ready to lead once more.
Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.
We are the keepers of this legacy. Guided by these principles once more, we can meet those new threats that demand even greater effort — even greater cooperation and understanding between nations. We will begin to responsibly leave Iraq to its people, and forge a hard-earned peace in Afghanistan. With old friends and former foes, we will work tirelessly to lessen the nuclear threat and roll back the specter of a warming planet.
We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you. For we know that our patchwork heritage is a strength, not a weakness.
We are a nation of Christians and Muslims, Jews and Hindus — and nonbelievers. We are shaped by every language and culture, drawn from every end of this Earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass, that the lines of tribe shall soon dissolve, that as the world grows smaller, our common humanity shall reveal itself, and that America must play its role in ushering in a new era of peace.
To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West — know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.
To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow, to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.
As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us today, just as the fallen heroes who lie in Arlington whisper through the ages.
We honor them not only because they are guardians of our liberty, but because they embody the spirit of service: a willingness to find meaning in something greater than themselves. And yet, at this moment — a moment that will define a generation — it is precisely this spirit that must inhabit us all.
For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job, which sees us through our darkest hours. It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child, that finally decides our fate.
Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends — hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism — these things are old. These things are true. They have been the quiet force of progress throughout our history.
What is demanded then is a return to these truths. What is required of us now is a new era of responsibility — a recognition, on the part of every American, that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.
This is the price and the promise of citizenship. This is the source of our confidence — the knowledge that God calls on us to shape an uncertain destiny.
This is the meaning of our liberty and our creed — why men and women and children of every race and every faith can join in celebration across this magnificent mall, and why a man whose father less than 60 years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.
So let us mark this day with remembrance, of who we are and how far we have traveled. In the year of America's birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:
"Let it be told to the future world . . . that in the depth of winter, when nothing but hope and virtue could survive . . . that the city and the country, alarmed at one common danger, came forth to meet [IT]."
In the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children's children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God's grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.
Thank you.
God bless you. And God bless the United States of America.

The First Step of Many We need to take as a country

I've been thinking about this for months. Today, inauguration day and what it means to me. We can get hung up in the cliche's (new start, reason for hope, etc.) but looking at a deeper sense of what the day symbolizes. The conclusion, I've arrived at, is that today is the first step that our country needs to take (of many).

Putting an African-American in the office of president of the United States is a monumental occasion given the history of our country on race relations. It is not the end all though. As I think of what good will come of this. The possibilities are endless. Most importantly, I am hopeful that it allows us to look beyond the obvious differences and focus on the issues that keep people of ALL races (black, brown, pink purple...) from achieving. The lack of education.

You can put money in people's pockets, give them 'jobs', but in the end- the true 'emancipation' is education. It is the ultimate provider of liberties afforded to those who put in the time to improve themselves. It adds a dimension of understanding and communication that you don't see in those that do not challenge themselves to achieve, to feed their minds.

Don't misunderstand me, I'm not being elitist. The education can come in many forms. Interestingly, it sometimes doesn't always translate into getting 'the diploma'. The most beneficial form is the ability to understand differences (and overcome them). To obtain facts and make informed decisions. Looking back on my forty-four years of life- it is the journey that has taught me about as much as I've learned reading books. It is however, the combination of the two that have enrichened me.

So as a proud citizen of this country, what I am most hopeful for on this day is that we move beyond the restraints of race that keep us back. The excuses for why accomplishment is not possible. Be it real or perceived- that is the true bondage. I am hopeful that this provides people everywhere with the hope that they too can achieve regardless of their challenges. Stop the complaining , educate ourselves and live to the potential for which we are all born into.

Be proud and Celebrate America... this is just one step with many more to come.

Friday, January 16, 2009

Darwinism in the Business World

In this day and age- we've become very desensitized to the news of retailers going down. Last night, however, when the newswire came accross my blackberry it triggered a sense of respect in me:

"Retailer Circuit City to Liquidate -Consumer-Electronics Pioneer Closing; 34,000 Workers Will Lose Jobs"

Now don't get me wrong, It wasn't a full out love affair with the retailer. Speaking as a consumer, my trips into many of their stores over the years where wrought with dissapointment. Poor customer service, poorly trained sales employees and bad retailing -period. Their stores always seemed to be arranged in a haphazardly fashion and product assortment was mediocre at best. A true 'also ran' retailer weakly trying to compete in a crowded market. Ultimately, to get their bite of the pie in a booming economy.

What caught my attention the most about the demise of this 60 year old appliance & electronics retailer is that their acting CEO James Marcum looked for an out on his own. They sought to 'reorg' by seeking buyers for the chain or the name. Due to tight financing avenues in our ill economy their opportunities dried up. In the end, when up against the deadline they placed their cards face down on the table and folded. Now, I'm not insensitive to the plight of the 30,000 plus employees effected by this. You have to have respect for their management's resolve in seeking a way out of the mess that previous poor leadership created.

Yes, poor leadership. After all, as the second largest electronics retailer in the U.S, they did very little right to keep that spot. In 2007, they fired over 3,400 experienced salespeople in efforts to curb high payroll costs. They were replaced with poorly trained, lesser experienced staff that furthered their spiral. Their (then) CEO Phillip Schoonover was rewarded for his fiscal prowess. Competing in an age where market differentiation is critical,They failed to do just that- differentiate. They were complacent with their position, while Best Buy (their closest competitor) sought to differentiate themselves on customer service. Budget retailers such as Walmart cut into their market share by focusing on price. The same was true for warehouse stores such as Costco and Sam's Club. Office Supply retailers Office Depot, Office Max and Staples- furthered the bleeding by offering deals on flat panel TVs. Big ticket items that were loss leaders for many electronics retailers- but they served to attract buyers that would purchase other higher profit margin items such as cables and DVDs. Circuit City just idled by as the 'me too' retailer with no significant niche of their own. By the holiday shopping season of 2007, the 'red ink' was everywhere. It became an inevitable issue. Failure was eminent- it was just a matter of when. In November 2008 in the midst of a beaten economy, they went up gasping for air for the last time as they entered bankruptcy protection and announced the closing of 1/4 of their stores nationwide. The writing was on the wall.

So now, almost thirty days after Saint Nick made his annual gift run, comes the announcement of their closing. 30K plus more jobs to add to the unemployment ranks. But all of this is not what added to my sense of respect for this retailer and their interim management team. As I read all of this, I had a sudden sense of deja vu. You see, just over a month ago- the American public was subjected to a huge violin concerto courtesy of the CEOs of the Big Three Auto makers as they stood in front of the Senate finance committee and told their tale of why they needed a bailout.

The ultimate 'sales job' on our illustrious Senate. No where in their tale of woes did they accept responsibility for their failure to differentiate themselves in the ultra competitive automobile industry. No where in their soap drama did they accept that both management and UAW employees were responsible for killing the 'golden goose' by accepting to make concessions that would reign in costs. No where in their melodrama did they admit failing to think progressively and invest in R&D for the future. A future free of our interdependance on oil. Instead, they dressed their story of the thousands that would be effected by their eventual demise in a 'suit of blame'. Blame on the declining credit markets. Blame on the high cost of oil. Never stopping to explain that the 'chicken was there' long before 'the egg' of economic ills and the challenging series of events.

They drove their own business into the ground much like the management team at Circuit City. My respect for CC comes from the premise that at that at no time did they sit back and ask for bailouts. There is some dignity in that. They accepted their failure as self-inflicted. You can compare and contrast: 'But Lou- you see there are so many jobs at stake'. 34,000 is not a paltry number I say. 'But Lou- there are so many more factors in play with the automobile industry'. As there are with retailers. It's dog eat dog. You see business is not as fickle as those who fail paint it out to be. It is pretty basic. 1. Build a product. 2. Select an area to focus on that will be different from your competition. 3. Manage your overhead costs and put initiatives in play to drive sales (profitability). 4. When your profitability improves, review, review and review what got you there. 5. Identify where you want to go to grow your business and pursue it with a series of steps that will build you up to your goals. A cycle that is constantly regenerating itself.

While Darwin's theory of natural selection more aptly applies to the animal kingdom. Simply put, the strong live and the weak die as everything lives out it's purpose in life. It serves as a sort of balance in the animal kingdom. It's application in the business world is never more clear than in the times we live in now. If we can only get our government leaders to understand this most basic of principles, so they can stop pumping money into the dinosaurs known as the 'Big 3'. Our leaders should require that the Big 3 innovate, contain costs and be architects of their own reconstruction. Tough decisions? I know. Why not let nature take its course as even in business there is such a thing as 'the food chain'.