Cronyism

Skip O’Neil points to something I missed:

Two people closely tied to Bush and his family are closely tied to Cerberus, the private equity firm that owns Chrysler, among many businesses, and boasts over $100B in annual revenues on their own site.  

The two people in question are former Bush Treasury Secretary John Snow, current serving as Chairman of Cerberus Capital Management, and former Vice President Dan Quayle, who also(?) serves as a Chairman (perhaps of a division of the company?). 

Before I just thought it was a bad idea motivated by politics and populism.  Not it’s starting to look fishy.

If it looks like a Duck, and quacks like a Duck..

A picture is worth a thousand words

…or at least 2 blog posts.   Pulitzer-prize winning cartoonist Michael Ramirez neatly sums it all up (care of Slate.com)

 

5 reasons the Auto Bailout will fail

1. Reorgs don’t work (especially this late in the game)

Just think about big strategic re-organizations you’ve been through.  The same people are still running the show at the very top.  The top brass’ favorites – the ones who’ve been in the trenches with them in the past and they can trust – get more responsibility or move to take over the troubled areas.  Undoubtedly, these will be folks who weren’t able to curtail these problems in the first place and have been entrenched in the bureaucracy for way too long.  But the bigger issue is that the “Big 3” require more than good management (although that’s needed too. ) This situation requires outside thinkers who can cut through an outdated business model.   More Steve Jobs and less Rick Wagoner.

2. The brands are irreparably damaged 

If you’re buying a truck, Ford and Chevy are good brands.  But relying on trucks for too long is a big part of their current problem. A Chevy or Ford car though?  Forget about it.  Nobody wants to drive a Ford or Chevy car.  You drive a Ford Escort (like I did for 3 years, lime green, by the way) because you have to – because it’s a hand-me-down or cheap.  But certainly not because you think it’s a good car (it wasn’t for me) or because you’ll feel good driving it or because it looks cool.  Sure, some brands in their portfolios, like Cadillac, have had a resurgence.  Spin them off and let someone else run those brands. 

3. Unions

No matter how competitive the unions allow wages to get, they’ll always cause another layer of burecracy, headaches and distraction that takes away from the business of making a good product.  Bottom line.   Unions did a lot of good for workers rights in the wake of the industrial revolution, but their time passed decades ago. 

4. The dealer model is outdated

Did you ever think about why you can’t buy a new car online? Dealers have managed to put laws into every state preventing this.  Sure, buying cars online isn’t for everyone and many will still want a test drive.  But I bet shoe stores never thought Zappos would do so well.  Think about how much better inventory management would be if auto companies could sell direct.  Think about all of the cars sitting in lots now, unsold.  Think about how you could order exactly the car you want, with the options you want, without settling for whatever happens to be on the lot that day.   

5. The government is now a major stockholder

Bush bypassed the legislative branch and authorised dollars slated for financial services companies for the auto industry.  Well, I guess it makes sense since GM is conveniently, now technically a bank.  With luck, they’ll run it as well as the DMV or my local Post Office.  Or FEMA post-Katrina. 

 

Bottom line. Americans love cars and our whole lifestyle is built around driving every day.  Let these dinosaurs fail and I guarantee a hundred companies will spring up to take their place, hiring the skilled auto workers and putting them to better use building truly remarkable cars for this century.