Moving deck chairs on the Titanic

Checkout Wikipedia for the origins of the saying Moving deck chairs on the Titanic - I especially Like Stephen Colbert's analogy.

Whilst the signs are increasingly looking positive for Ford, the same can't be said for GM.

Earlier this month, Chairman Whitacre announced he was taking over as acting chief executive following the resignation of Fritz Henderson as CEO. Henderson had led GM through bankruptcy and in the months following after taking over for Rick Wagoner, who had resigned as part of a government bailout of GM.

Anyone coming into a role after such a profound change i.e. merger, acquisition,... accumulation of more than $80 billion of losses in eight years... is going to have a tough and short tenure.

Apparently, Obama's administration was an advocate for the change by having appointed Whitacre as it's broom. Whilst the situation for Fritz wasn't great with GM in bankruptcy, he didn't exactly do a fantastic job of the Saab sale, UAW negotiations or the attempted sale of Opel to Magna International.

But wait, there's more!

GM has appointed the chief financial officer, Chris Liddell, of Microsoft as its new finance chief, and as it turns out, life isn't too bad working for a government agency: Chris will have a base salary of US$750,000 and also receive stock awards worth US$3.45 million in stock over three years beginning in 2012. That's a step up from his pay at Microsoft but a cut from GM's past CFO salary.

Will replacing Fritz bring about changes at GM? According to the WSJ, changes in leadership account for roughly 10% of the variance in corporate profitability on average. To quote:
As Mr. Buffett likes to say, "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

So, who is likely to replace Fritz? BusinessWeek offers some insights but it's clear that GM's board probably has their eye on someone already - you generally don't let a CEO go without a plan to replace them. I think it would be wise to get someone in from a manufacturing background (as Ford did with Alan) as I can testify that more 'virtual' industries like financial services and, to a degree software, are able to maneuver far quicker than an auto maker will be able to. Whitacre is yet to articulate the long-term strategy and priorities for GM - let's hope he does so soon!

On the positive side, GM did repay some of it's loans recently... that's good, right?

Image by ivan petrov

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posted by Lee Gale @ 1:39 AM, ,

Dead cat bounce?

Checkout Wikipedia for the origins of the saying dead cat bounce.

It's way too early for us to say the car industry has recovered from the GFC, but the signs are looking good for Ford.

Recently they posted a profit - their first in over two years - for their 3rd quarter 2009.

I blogged back in Carmageddon '09 that I thought Ford was going to come out the other side pretty nicely and mostly due to Alan Mullaly's leadership. It seems like many people agree, including Automobile Magazine who named him 2010 Man of the Year. Hopefully this isn't a flash in the pan for Ford and they can manage their debt load in the coming years - continuing actions like the sale of Volvo to Geely will help.

On a lighter note, Jon Stewart takes a look at a sector of the industry that the stimulus packages didn't help:

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posted by Lee Gale @ 2:53 AM, ,

Government Motors

In an overdue blog on the state of the American auto industry (I've not blogged about things since Carmageddon '09), and in the long running saga that is the auto industry's GFC related woes, GM finally went into bankruptcy as long predicted.

Their bankruptcy, as ranked by total assets, is the fourth-largest in U.S. history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.

They are quickly selling off Saab and Hummer as part of the Chapter 11 process, but as you'd expect from an attempt for a rapid Chapter 11 process, there is already concern over flaunting long-standing rules & regulations. Furthermore, American taxpayers should be concerned that in financing the new GM, they may not have saved American jobs as hoped for if plant closures continue in the US whilst investment in China increases.

Recently, GM named Edward Whitacre Jr, a former chairman of the board and chief executive officer of AT&T, as chairman. He is scheduled to take the position when the automaker emerges from bankruptcy proceedings.

Interestingly, Whitacre isn't a "car guy" as Bloomberg reported. To quote:
I don’t know anything about cars,” Whitacre, 67, said yesterday in an interview after his appointment. “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.

I sincerely hope that the news that the Holden built Pontiac G8 might survive as Buick, is true. Holden produce a great car and have done some smart things around their business locally as I blogged in Where all think alike, no one thinks very much, so having this car continue in the US would be great for Australian jobs.

Again, I'll leave Jon Stewart to provide you a laugh:

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posted by Lee Gale @ 2:07 AM, ,

Berkshire’s Munger Favors ‘100% Ban’ on Credit Swaps

Since I blogged The Finance 2.0 Manifesto, no one has been able to adequately and comprehensively explain to me the key reason naked short-selling should not be more heavily regulated, let alone exist at all.

I'll accept the answer "it's beneficial for market liquidity" as a reason for it's existence, but I'd point the recent periods where this practice was suspended in some markets, and we experienced reduced volatility, as evidence for it's need to be regulated.

A product similarly 'suspect' to the practice of naked short-selling, is the Credit Default Swap.

Whilst I'm merely a voting Australian pleb in the scheme of things, Berkshire Hathaway Inc. Vice Chairman Charles Munger said he supports "an outright ban of credit- default swaps"

Time will tell as to whether these instruments are more closely regulated. In Australia, the restrictions have been lifted so I guess we'll find out how useful they are in "ensuring market liquidity". Hopefully we don't see a return to the casino antics as written about in Liar's Poker.

Image by plrang


posted by Lee Gale @ 3:06 AM, ,

Where all think alike, no one thinks very much

At least according to Walter Lippmann, US author & journalist (1889 - 1974).

Without doubt, the current economic cycle requires managers to critically review their sales outlook (demand) and match output to that outlook. If demand has softened fundamentally across their industry and product segments (an example would be luxury car sales), they are going to have to reduce output and costs associated with it. Pretty basic stuff really.

However, the best managers don't simply follow the crowd, they look at what is unique to their business and determine how they can be best setup for the future.

Many companies have chosen to cut costs as if there will be no upturn in the economy i.e. they've cut workers from their workforce (as Adobe did earlier this year) in order to reduce costs and reduce output.

As Stephen Elop (who worked at Adobe and I have respect for) outlined in
Microsoft's Elop: It's 'Time to Double Down' on R&D, "there are companies that don't make that shift, that don't make the big investments, that don't make the hard decisions. But now is the time to double down and actually make those investments, [so that when the recovery starts] we're in a strong position and can take a share and be more successful than we were in the past."

Granted, for some organisations, reducing headcount is an appropriate move, but there are other approaches that are better suited to organisations that will experience that recovery.

As the article Afternoon shift to be cut shows, Holden:

"... is responding to an 80 per cent drop in export sales as well as declining local large car sales, but the company was aiming to retain its workforce as it prepared for the introduction of a second production line at Elizabeth to build a four-cylinder powered small car.
This is a really good workforce, highly talented and highly skilled – the last thing we want to do is lose that," Mr Reuss said."
They've taken, in my mind, a great step to reduce costs, spread that burden across the entire team equally, and ensure there is a skilled team in place to respond to future increases in demand. Let's just hope they don't go and give their management team absurd bonuses at a time like this.

But if all other options have been discounted and headcount reductions are required, responsible managers will ensure they are aligned to those investments in the future and not 'across the board' cuts.

The HBR article How to Market in a Downturn makes a parallel point regarding marketing budgets (another 'cost') succinctly:
"As sales start to drop, businesses typically cut costs, reduce prices, and postpone new investments. Marketing expenditures in areas from communications to research are often slashed across the board—but such indiscriminate cost cutting is a mistake.
Companies that put customer needs under the microscope, take a scalpel rather than a cleaver to the marketing budget, and nimbly adjust strategies, tactics, and product offerings in response to shifting demand are more likely than others to flourish both during and after a recession".
Perhaps I'm being harsh? After all, as the HBR article, The Layoff acknowledges:
Why aren’t layoffs taught as a subject at business school?... Boards expect executives to do them well, but nobody knows how.

Image by Sanja Gjenero

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posted by Lee Gale @ 4:31 AM, ,

The Finance 2.0 Manifesto

This is an interesting read from HBR, The Finance 2.0 Manifesto, that provides some colour to the ongoing topic I blogged in Bailing out the Thieves and 25 People to Blame for the Financial Crisis.

I wish I could approach the world with this level of optimism and altruism... no, seriously! I suspect the reality is that the incumbent leaders, both politically and in business, are driven less by these ideals and more by the power they can accumulate and exert (or have to as a result of the deals people make to scale the ladder). BTW - I'm taking the view that money is a derivative of power.

Granted, the current economic turmoil does make one question if the 'invisible hand' theory still applies. Perhaps we've managed to find an industry (financial services) where self-interest doesn't lead to effective self-regulation? [editor's note: re-reading that sentence made me laugh a lot!] At the very least, I think we can all agree there are some financial services practises that need (and are slowly getting) more regulation - practises such as naked short-selling (see SEC Halts Short Selling of Financial Stocks to Protect Investors and Markets and Australian short selling ban goes further than other bourses).

Image by Asif Akbar

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posted by Lee Gale @ 1:30 AM, ,

Carmageddon '09

When I last looked at the situation with the US car industry in Two flat's and a fast leak, the jury was out on how GM & Chrysler were performing after the first round of government funding.

The update from early April is that GM is racing a 60-day deadline Obama announced on March 30, while Chrysler has 30 days to complete a tie-up with Italy’s Fiat SpA. The article What's Next For GM and Chrysler has a pretty good summary of the individual challenges each company faces in the next 30-60 days.

In this same news, GM's Rick Wagoner became one of the latest members to the GFCRV club (Global Financial Crisis Redundancy Victims). As Deborah Yedlin writes for CBCnews:
"it remains somewhat unsettling that it was his administration, and not the GM board of directors that forced the resignation of the company’s president, Rick Wagoner.

As Obama rightly said, the workers at these companies are not to blame for today’s problems - it’s the lack of leadership on the part of management and the boards of directors that have brought the once proud companies to their respective knees."

As Shikha Dalmia suggests in GM Should Run To Bankruptcy Court, GM needs to run to bankruptcy court and get this stuff over an down with now - especially as the government has now guaranteed warranties:
"...GM should demur and file for bankruptcy now. For starters, waiting 60 days will mean it will be about $8 billion or so more in the hole given that it costs about $ 3 to $4 billion to keep it afloat for a month. Borrowing more money is not a smart move for a company whose debt--not counting its pension obligations--is already more than 24 times its market capitalization. But it's an especially bad idea to get in deeper with the government. Why? Because if GM ends up in bankruptcy anyway, the court will be able to write off its debt to unions and creditors. But Uncle Sam will take its pound of flesh. This means that GM will have less on its back to start anew once it emerges from bankruptcy.

But GM has to fear the government even if it doesn't go into bankruptcy. In that case, the oversight for its restructuring plan will be supervised not by a court but by the Obama auto task force. And the odds that the task force will be guided solely by GM's bottom-line interests rather than Obama's political agenda are about the same as pigs flying."

To round out the perspective on GM's woes, I agree wholeheartedly on the point made in UAW President Should Share Wagoner's Fate, in that the UAW bosses should be crucified for their part in this fiasco - particularly the failure to collaborate to produce a long-term, sustainable industry.

Yet, as I've noted from the get-go, Ford is enjoying the benefits of foresight (in mortgaging everything they had before the excrement hit the fan), the moral high-ground (in not asking for US funds) and making the hard calls on their business needed to emerge out the other end.

The Ford Advantage Plan is a great piece of consumer incentive marketing (if you ignore the basic issue of *should* they be offering people more cheap consequence free credit).
In a nutshell: The Ford Advantage Plan is effective on vehicles delivered from March 31 through June 1. The Plan offers payment protection up to 12 months for up to $700 per month on any new Ford, Lincoln or Mercury vehicle if a customer loses his or her job. Plus, 0 percent financing from Ford Motor Credit is available on select vehicles.

If you think about a key concern for any potential car buyer right now, it's that they may lose their job and be unable to afford the repayments. Great solution !

As usual, Jon Stewart has a humorous take on the situation:

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posted by Lee Gale @ 2:58 AM, ,

25 People to Blame for the Financial Crisis

As I mentioned back in March, the blame game for the GFC is in full swing now.

In this spirit, Time gives us 25 People to Blame for the Financial Crisis.

Of particular note were the acts passed under Bill Clinton - "...the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation". I remember reading the Glass-Steagall Act being repealed and thinking at the time that no good would come from it.

I'm still surprised that under George W. Bush, nothing really came out of the Enron ashes to provide better governance. Much of Sarbanes-Oxley is useful (in fact, most well run companies already employed most of the tactics anyway) but failure to eliminate off-balance sheet entities seems to be the most glaring omission.

It's interesting to see Lew Ranieri make the list - he's a central figure in Liar's Poker.

PS - If you are still interested after reading that, another humorous take on who to blame can be found in the Rolling Stone article The Dirty Dozen and it's closely linked article The Big Takeover. My favourite line is in section V - Repo Men. "...the unpleasant discovery that if Congress didn't like the Fed handing trillions of dollars to banks without any oversight, Congress could apparently go **** itself — or so said the law." :-)


posted by Lee Gale @ 3:00 AM, ,

Bailing out the Thieves

A.K.A. Bringing in the Sheaves (the lyrics can be found here).

Over the last few months, myself and countless others have been providing commentary on the GFC and all the inter-related issues.

One topic that is certain to polarise people at your next dinner gathering is the issue of bank bailouts. Trust me - it's better than religion and politics right now!

One school says we can't afford to let the system crash. That is fair. Thomas L. Friedman makes this point in his article This Is Not a Test. This Is Not a Test: "You need to let failed companies, or homeowners, go bankrupt, unlock their dead capital and reapply it to thriving entities. That is how the dot-com bust ended, and out of that carnage emerged a whole new set of companies. The problem with this crisis is that A.I.G., Citigroup and General Motors — and your neighbor’s subprime mortgage — are not You let the market clear them away, and we could all be wiped out with them. Therefore, the president has to find a way to punish bad financial actors without setting off another Lehman Brothers domino effect."

To further drill-down on this issue, checkout Time's great commentary on How AIG Became Too Big to Fail.

Another school says we shouldn't reward fat cats and criminals for having gamed the system. That is also fair.

Clearly, any actions the authorities apply to move this thing forward needs to cater to both schools of thinking.

Looking at the SEC website, I hope the short list of charges for bankers and brokers is merely the start.

A good start was the news of Bernard Madoff's guilty plea on March 13th. As usual, Jon provides us interesting commentary (about 2min 20secs into the video below):

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posted by Lee Gale @ 5:54 AM, ,

Brawl Street: Jon Stewart v Jim Cramer

It is without doubt, the news topic of the moment - the GFC. Along with the humour (see my past blogs here and here), the sorrow, the pessimism and the optimism, comes the blame.

I've already looked How culture has shaped the GFC but lately I've been watching the Jon Stewart v Jim Cramer saga unfold.

I'll declare my position right now on this one (after joining a healthy Facebook status commentary on the topic): I've worked in the funds management industry and dealt with the press enough to know what they both don't want you to know - nobody is doing the sort of analysis you would expect on every company all the time. They pick one or two to focus on and that's it. Combined with the fact that companies are using things like off-balance sheet entities to hide debt and liabilities, and you realise that even if analysts try to perform their jobs, it is largely irrelevant because they are missing the icebergs altogether anyway. It's like asking a ship's captain to navigate around iceberg's using only google map images from last year. You might by chance make it through (probably statistically more than you'd think) but sooner or later you are going to come unstuck.

Funnily enough, when someone does call it out ahead of the storm, it seems everyone feels safer to stay with the herd and deem it heresy. As both Mr Friedman (Obama’s Ball and Chain ) and Michael Lewis (The End of Wall Street's Boom) state in their articles, Meredith Whitney has become what Bethany McLean was for the Enron saga.

This is the sort of problem the regulators need to focus on. I know everyone is upset with the casino that is the financial markets, but that isn't the problem it really looks like. The issue is trust. If the dealer at a blackjack table can't trust that the $100 put on the table actually is that person's $100 to gamble, the whole thing goes out the window.

The tough part to reconcile is that these people often don't think they are lying. They really have drunk their own cool-aid and believe the lies - I suspect a variant on Joseph Goebbels oft quoted statement "If you repeat a lie often enough, people will believe it."

If you haven't checked it out yet, see the clips below in the order you should watch them. Part 2 below has the real meat and I think Jon really hits the mark about 3mins 30secs in:

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posted by Lee Gale @ 3:34 AM, ,

Shell Global Scenarios to 2025

I can't remember how I was put onto this book, perhaps it was even a recommendation by Amazon? Regardless, Shell Global Scenarios to 2025 was a pretty interesting read.

Now, the first thing to be prepared for, is that this is presented in the style of a companies' annual report or text-book, so if you are hoping to pickup a gripping novel, this book isn't what you are looking for.

Shell Global Scenarios to 2025 provides us with an outlook on future scenarios influenced by the dominant forces of our times. The Shell website provides text from Shell Global Scenarios to 2050 and has a good executive summary available for download of the Scenarios to 2025.

Shell Global Scenarios to 2025 is particularly influenced by Enron and 9/11. In the book, we are taken through three forces at play:
The three core 'scenarios' influenced by those forces, with the associated trade offs between the above 'unachievable utopias', we are presented with are:
I'd love to read the 08-09 reports because the GFC will likely show a hybrid of the Low Trust Globalisation & Flags scenarios to dominate how we operate as a society during the period 2008-2011.

Of particular note has been how Europe and China are following the US lead on stimulus packages and the ensuring regulatory overhauls as forecasted.

Interestingly, little of the impact foreseen from Enron has occurred to date, but I suspect with Obama in office and the GFC still bubbling along, that will change rapidly in 2009.

The Middle East scenario has played out more, as you would expect given the troop levels of past years. This too has played out more along the lines outline in the Flags scenario - "a turbulent Middle East driven by conflict. Low oil prices provide additional incentives to attempt cautious reform, but this is bitterly contested. Groups unite against common enemies rather than for common objectives".

Both the Low Trust Globalisation & Flags scenarios review the cost of compliance and how that is likely to negatively impact trade. I'd argue the GFC definitely puts a dent in much of the Open Doors scenario panning out, and puts a question on how the Global Environmental Movement (GEM) with externalities such as carbon costs priced in via trading schemes will progress - if at all.

An an interesting point in the Flags scenario is the economic growth outlook. Despite the scenario being conceptually driven by security concerns, it is interesting to see how today's economic situation makes much of these hypothesis likely, including:
Conversely, some of the elements they predict will be unlikely, specifically "the reduced mobility of capital ensures emerging markets (BRICs) receive less foreign direct investment". I'd argue with the US domestic market unlikely to experience real growth in the coming 2 years, multi-nationals will look more intently towards emerging markets for growth.

Finally, one of the most fascinating reviews is between India and China. The historical comparisons of manufacturing value add, rural populations, IT&C services exports & numbers of computers per 1000 people was quite eye opening and provided good data for their summary - that India's sustained growth to 2025 will not be as great as China's (4-6%% to China's 6-8%). Regardless, it is clear both India & China will be the dominant growth engines in my lifetime. That is particularly enforced by the views on African futures and the current drain of critical skills they are experiencing.

In all, an interesting but reasonably technical read.

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posted by Lee Gale @ 4:30 AM, ,

Reviewing how culture shaped the GFC

Having blogged about Louis' & Michael's books and discussing my 'culture epiphany', it's interesting to look at the GFC with this lens.

Check out this delightfully hilarious view by Bird & Fortune on the reckless, but not unexpected, behaviour from investment bankers and mortgage brokers alike.

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posted by Lee Gale @ 4:23 PM, ,

Liar's Poker

I ordered Liar's Poker book shortly after having blogged The End of Wall Street's Boom having enjoying Michael Lewis's writing style. I was also intrigued to read his story given how long the boom actually lasted - I guess in an attempted to better understand the booms origins.

Within Liar's Poker, Lewis provides his account of his four years with Salomon Brothers from 1984 through the crash of October 1987. This includes his rather interesting (but not unique) hiring, the training program and years as a bond salesman in London.

It's an hilarious story and it will have you shaking your head in disbelief - unless you've worked in sales or on a trading floor: both of which I've done. If you enjoyed Enron: The Smartest Guys in the Room, you'll love this book for successfully combining history, behavioral science and humour. It also serves to explain the current sub-prime mortgage mess that was the catalyst of the GFC we are living through.

The backdrop to the drama was the economic decisions made by the US Federal Reserve in October 1979, chaired by Paul Volcker, whereby they announced that money supply would no longer fluctuate with the business cycle: money supply would be fixed and interest rates would float. As bond prices move inversely with rates of interest, this set the wheels in motion for the events that created the gold rush Lewis shares with us.

The title of the book refers to the game of deceit that many of the best traders (or "Big Swinging Dick's" as Lewis refers to them) played and the relationship the game had to their success as bond traders. According to Lewis, "In any market, as in any poker game, there is a fool. Warren Buffet is fond of saying that any player unaware of the fool in the market, probably is the fool in the market. Knowing about markets is knowing about other people's weaknesses. And a fool, they would say, was a person who was willing to sell a bond for less or buy a bond for more than it was worth".

To illustrate the "iron testicle, market whipping" behaviour at work, Lewis shares the example (amongst many others) whereby a trader attempts to buy on the money market as prices were rising against him. The trader explains to his boss that "He couldn't buy money as all the sellers were running like chickens". His boss responds "Then you be the seller". The trader then sells a hundred million dollars and the market collapses to the price he was originally trying to buy at. He buys back the hundred million dollars plus the fifty million he wanted, and books a tidy profit on the trades.

Having had it pointed out in the book that "Blackjack is the only nonindependent outcome game in the casino" and knowing that when you have the statistical advantage you need to bet big, I'll be reading up on card counting!

It's worth re-reading (or reading for the first time) Michael Lewis' article titled The End of Wall Street's Boom on from December 2008 - it provides a great footnote to the book. I particularly loved the story about Danny Moses:
When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”. Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.
It also serves to punctuate the point: one man's misfortune is another's opportunity. Whilst most of us were watching our investments plummet, someone was on the other end of the trade enjoying the short sell.

Finally, this book provides an interesting counter-point to Who Says Elephants Can't Dance? in the sense that Liar's Poker shows us the dark side (just as Enron did) to 'culture'.

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posted by Lee Gale @ 5:24 PM, ,

Two flat's and a fast leak

Back in January in my blog titled Fixing a Flat, I looked at the news regarding GM, Chrysler & Ford. In particular, I singled out Ford as being most likely to emerge out the other end of this tunnel.

Looking at the scoreboard, GM & Chrysler aren't doing well at all. On February 19th, they both requested more money from US taxpayers (see MarketWire) - more than US$20bn in fact.

In its restructuring plan submitted to the Treasury late Tuesday, Chrysler suggested that it believes that the “best option for the U.S. auto industry” would be a GM/Chrysler merger. I'm confused as to why neither GM nor Chrysler would do anything different in a merger that they couldn't both do in Chapter 11: namely cut their workforce, restructure debt and put a plan in place for a more basic existence than they are currently on - all aimed at surviving during the period of significantly lower unit sales.

In my view, the government funds might best be used to take over the pension liabilities that both companies would have to get off their balance sheets and avoid 'ownership' of any of these companies.

WSJ highlights that GM & Chrysler bankruptcy fears are already impacting their sales, whether they go into it or not.

Ford on the other hand, seems to be handling itself well given the circumstances. I'd suggest the tough task of negotiating labour costs with unions appears to be something they are handling better than GM & Chrysler (see It appears this is due to a better relationship between Ford and the unions (see

At this stage, Ford is maintaining their position on not requiring government funds. DetNew's assessment seems pretty on the money:
"Amid bleak outlooks for the entire industry, the latest federal submissions by GM and Chrysler depict two companies whose prospects look worse today than they did two days ago. Ford's look pretty much the same -- seriously challenged, but no closer to asking for federal bridge loans than last week or the week before."
Forbes goes on to say:
"Ford looks like a survivor--but it is still a borderline case. Should a couple of other Detroit icons go down--not that anyone wants them to fall--then Ford would be the last American standing, which could be an advantage."

Let's hope they make it through without a handout from taxpayers.

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posted by Lee Gale @ 2:17 AM, ,

One man's misfortune is another's opportunity

Given the current state of the economy, my own employment situation and being on the board of a small business - I am frequently having conversations with people about when things will turn around and what they will look like in the aftermath.

There is no doubt, things will never be the same again. They will be similar, but different... and that's okay.

Occasionally, someone will ask "what if things never get better?"

I have pretty strong views that they will. I guess you would have deduced that from reading my blog on Optimism & Staying focused.

Reading this Business Week article titled For Some Small Businesses, Recession Is Good News sums up nicely why I believe the system might crash, but can be rebooted.

Whilst large corporations who have been consolidating and operating on "hyper growth, massive scale & nimble-as-the-Titanic" operating models are certainly going to be hurting during this cycle, the invisible hand ensures individuals, then small groups and then larger groups will find ways to adapt and profit in the new environment. This in turn helps reboot the system: slowly but surely.

Another example: as most industries were hurting as oil prices went up, Exxon Mobil reported a profit of $45.2 billion for 2008, breaking its own record for a U.S. company, and even as its fourth-quarter earnings fell 33 percent from a year ago. A good example that when someone is losing, someone else is winning... and a good example that fortunes can change rapidly.

There will be light at the end of the tunnel... we just have to do all the right things to survive in the tunnel for a while.

Image by Giuseppe Crimeni

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posted by Lee Gale @ 5:53 PM, ,

Optimism & Staying focused

Back on the 31st of Jan, I wrote about in Everyone has a plan until they get punched in the face and promised I'd elaborate on optimism and staying focused on finding the next challenge.

How can you do this when you feel like you've been punched in the gut? In a nut-shell as Winston Churchill said "For myself I am an optimist - it does not seem to be much use being anything else."


Okay, easier for me to say that in February - two weeks after I've left, two months after I was told, three months after I was part of the process to review cost containment in our region (so no surprises) and after a severance hand shake that affords me time to look for the next challenge.

I learned the hard way during the merger process between Adobe & Macromedia back in 2006 (and subsequent counseling in early 2008) to focus on what you can do vs being caught up lamenting what has changed or what you have lost.

That seems particularly hard these days as with the current global financial crisis, the media (predictably) is focusing on the negative. Negative stories sell newspapers, but they do nothing for people's confidence. Negativity creates a sense of resistance, and while resistance to unpleasant conditions is an expected human condition, it also stymies your capacity to act and focus. The reality is that in tough times there are just as many opportunities as there are in good times - maybe even more.

Some great resources worth referencing:
Before spending time on a stress-inducing question, big or otherwise, ensure that the answer is "yes" to the following two questions:
  1. Have I decided on a single meaning for each term in this question?
  2. Can an answer to this question be acted upon to improve things?
If you can't define it or act upon it, forget it.

Now that we're out of the negative mindset, we can focus on picking ourselves up and getting on with the job of finding the next job.

Author & coach Meiron Lees, made a good point when we met last: put your energy into the outcome you want in order to avoid distractions.

Now get going!

Image by LittleMan

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posted by Lee Gale @ 7:02 PM, ,

Australian Government's stimulus package

On the 3rd of February, the Australian Government announced a A$42bn stimulus package.

Key measures funded by the announcements Nation Building and Jobs Plan include:
In all, I think a much better package than the cash handouts done in the $10.4 billion Economic Security Strategy announced in October 2008. My belief is that cash bonuses rarely get used for the purposes intended... all they do is prolong bad habits.

I was particularly happy to see the business investment tax break as I believe this is much better spending for our economy that individual consumer spending due to the fact it goes towards creating income. I'm happy to have someone with economics study debate and correct me on that point.

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posted by Lee Gale @ 7:21 PM, ,

Fixing a Flat

Since having blogged about The World is Flat, I came across Thomas Friedman's comments on the Detroit bailout in his NY Times op-ed piece titled Fixing a Flat as well as the follow up titled While Detroit Slept.

It's really interesting to talk to people about the issue of the bailout (I've posted some of my views previously) - it's a really polarising topic. And as with most polarising topics, it's not nearly as simple as everyone wants it to be.

Yes, GM & Chrysler are terribly run businesses and need a kick in the butt more than they need taxpayer's dollars. But I suspect if you do the economic modelling (and I haven't), you'll find the ripple effect on the US economy (and therefore the global economy) would be pretty bad. Even worse would be the impact to confidence - a key underlying driver to the global economy - a point Friedman makes in an article on the GFC.

Another counterpoint (and an argument that also makes more than a little sense) is Jack Welch's article How to Save Detroit.

But rather than debate this more than already done around the world, let's take a look at Ford.

I think Ford and the work Alan Mulally has lead there (and no, I'm not suggesting Alan by himself did all the work) is what we should all be focusing on.

Just Google "ford alan mulally" and you can see some of the highlights:
Ford has renegotiated credit terms in advance of the GFC, started the painful process of downsizing, critically reviewed it's business, taken steps to increase the return on capital and focused on the product pipeline.

Alan himself was bought in from outside the industry to bring a fresh but experienced take on things. This is exactly what GM & Chrysler need to be doing now. I guess it's fair to say that Chrysler have bought in Bob Nardelli to do exactly that... but in my mind, the jury is still out of whether Bob can do that job in the time needed.

I'll end this blog with an interview with Alan on YouTube:

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posted by Lee Gale @ 2:33 AM, ,

The End of Wall Street's Boom

A great read that I cam across whilst researching other blogs is this article titled The End of Wall Street's Boom.

What is so interesting is the dramatic illustration of herd mentality that was adopted.

If you are crying after reading this article, go back to my blog in November to try to find the humour in this. Trust me, laughing is all you can really do about it now. That, combined with applying the lessons learned to anything you participate in the future.

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posted by Lee Gale @ 2:24 AM, ,

Clusterf#@k to the Poor House - Dude, Where's My Car Industry?

More hilarious commentary from Jon Stewart on the past weeks news from Detroit:

This frames a slew of commentary on weather US taxpayers should or should not save the Detroit Big 3.

Mitt Romney's op-ed piece on NY Times is interesting particularly because he suggests blowing up the management that drove them into this mess whilst attempting to maintain employment for workers and dealers. The Bloomberg piece drives the point home on management needing to absorb significant change whilst this news on Chrysler's management bonuses puts the nail in the coffin... but it's great to see they retained 'talent' with the program. :-)

The Carroll Plan is a little more drastic and I think would suit the industry if you had 2 years to scale up the factories in question, but the US doesn't have that sort of time.

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posted by Lee Gale @ 6:47 AM, ,

Jedi mind trick

Let me take you on a quick flashback to March 2008 with the Jon Stewart's "Broken Arrow" clip. I love the "Jedi mind trick" comment at the very end. Riot.

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posted by Lee Gale @ 10:36 PM, ,