Sunday, December 14, 2008

Automakers woes - A lesson

I've been closely following the bailout discussions for the automakers in the USA. Washington in my opinion, will pass it but with a lot of strings attached. i feel that 'Strings' are definitely needed for the arrogant automakers.

Why do I call them arrogant? I should actually call them foolish and arrogant. They were foolish to sleep when the whole world was talking about fuel economy and saving money, not to forget GLOBAL WARMING. Japanese were smart. They took the lead and crushed the US Automakers to dust via their Hybrid cars.

We all know about the quality of the American cars. If one followed the ratings of the cars in Consumer Reports magazine, it would be easy to notice where the American cars stand in quality and reliability.

I called the automakers arrogant because they didn't budge to the government's request for fuel efficiency standards. They even sued the Govt. on greenhouse emissons (Even the Japanese participated).

Now...they are on their knees begging for money.

** - **

I think about this drama unfolds. Today, India is entirely dependent on its booming IT industry. Well deserved , no arguments. But..! What about the other sectors ? Any action plans if the IT PIE is lost or becomes cheaper ? What will happen to the economy of India if IT starts to fade ? Can it sustain the growth? ( 8% is the claim). Scary thought indeed !

Unless India takes sufficient steps to cement the success and grow wisely will lose to China and other countries pretty soon.

I had a question for Wipro's chairman when he was here. I asked him 'Are you afraid of China?'. He said 'Yes' and that's why they are opening offices in China.

Always stay on the cutting edge is the Mantra here. If you slack....someone will eat your cheese.

In fact this applies to the entire world even to you and me !


Jimmy said...

its a very nice post keep it up ji

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Raaj said...

"Unless India takes sufficient steps to cement the success and grow wisely will lose to China and other countries pretty soon."

So you are saying India is not taking sufficient steps. Fair enough. But please list the steps taken by China and 'other countries' that make you say they will win over India. That will be useful to know.

Ganesh Venkittu said...

This comment is not intended at one specific person..nor is it intended to signal a death for one set of professionals.....

What China is doing (or) if its doing anything is not the fundamental question...

the fundamental question is -- is IT growth in India sustainable...

my answer is -- the BPO (Business process outsourcing) industry, should it continue to be a BPO, and were to think that its existence is "etched in stone", it will not sustain...on the other hand, if it morphs into the KPO industry (knowledge process outsourcing), then it will sustain..

tomorrow's KPO jobs are going to be in - healthcare, legal, high end accounting and retail...there is already talk of USA going towards IAAP (internationally accepted accounting principles) as opposed to its GAAP....when that happens, an auditor in india will be able to write that the books of XYZ company in america is clean. Done in India, and with much lesser payout ratio

Adam Smith said something fundamental in economics -- labour will always move to where its cheaper...the question is which labour is "Easy to move" center - shore programming/support delivery/project delivery - difficult to move at a whim..

Watch the movie "Outsourced"...and at the very end, it has a nice twist....that will happen if you are just a doubts..

I worked in offshore in 1993....thats 16 years existed then, it exists now and will exist in future..but thats core programming, not just "order fulfillment" business....

the one thing that is the bind that made this happen is -- the middle class...Its not the IIT's, not the Tidel parks that paved this success...its the Indian middle class....their relentless sacrifice that paved the way for me/others....their resilience...their determination in seeing insulate their children and provide them a better future.....had they buckled then, there would be none of this humanly possible.....

in that context, what the current middle class does to their offspring is what is going to dictate the future course for India...not so much as an economic policy or IT park or NASSCOM strategy...

Subathra said...

THis is not a spam comment. I am pasting a forward that I received in an email abou the bail out.

Below is an editorial written this morning concerning the
current situation in Washington with the Big Three
Domestic Automakers. I couldn't have said it better myself.
This Ford dealer is from Pittsburgh. Please take the time
to read. Forward to whomever it might make a difference.

As I watched the coverage of the fate of the U.S. auto
industry, one alarming and frustrating fact hits me right
between the eyes. The fate of our nation's economic survival
is in the hands of some congressmen who are completely out
of touch and act without knowledge of an industry that affects
almost every person in our nation. The same lack of knowledge is
shared with many journalists whom are irresponsible when
influencing the opinion of millions of viewers.

Sen. Richard Shelby of Alabama has doomed the industry,
calling it a dinosaur. No Mr. Shelby, you are the dinosaur,
with ideas stuck in the '70s, '80s and '90s. You and the
uninformed journalist and senators that hold onto myths that
are not relevant in today's world.

When you say that the Big Three build vehicles nobody wants to
buy, you must have overlooked that GM outsold Toyota by about
1.2 million vehicles in the U.S. and Ford outsold Honda by 850,000
and Nissan by 1.2 million in the U.S. GM was the world's No. 1
automaker beating Toyota by 3,000 units.

When you claim inferior quality comes from the Big Three, did you
realize that Chevy makes the Malibu and Ford makes the Fusion that
were both rated over the Camry and Accord by J.D. Power independent
survey on initial quality? Did you bother to read the Consumer Report
that rated Ford on par with good Japanese automakers. Did you realize
Big Three's gas guzzlers include the 33 mpg Malibu that beats the
Accord? In '09 Ford introduces the Hybrid Fusion whose 39 mpg is
the best mid size, beating the Camry Hybrid. Ford's Focus beats the
Corolla and Chevy's Cobalt beats the Civic.

When you ask how many times are we going to bail them out
you must be referring to 1980. The only Big Three bailout
was Chrysler, who paid back $1 billion, plus interest. GM and
Ford have never received government aid.

When you criticize the Big Three for building so many pickups,
surely you've noticed the attempts Toyota and Nissan have made
spending billions to try to get a piece of that pie. Perhaps it bothers
you that for 31 straight years Ford's F-Series has been the best
selling vehicle. Ford and GM have dominated this market and
when you see the new '09 F-150 you'll agree this won't change soon.

Did you realize that both GM and Ford offer more hybrid models
than Nissan or Honda? Between 2005 and 2007, Ford alone has
invested more than $22 billion in research and development of
technologies such as Eco Boost, flex fuel, clean diesel, hybrids,
plug in hybrids and hydrogen cars.

It's 2008 and the quality of the vehicles coming out of Detroit are
once again the best in the world. Perhaps Sen. Shelby isn't really
that blind. Maybe he realizes the quality shift to American. Maybe
it's the fact that his state of Alabama has given so much to land
factories from Honda, Hyundai and Mercedes Benz that he is
more concerned about their continued growth than he is about the
people of our country. Sen. Shelby's disdain for "government subsidies"
is very hypocritical. In the early '90s he was the driving force behind
a $253 million incentive package to Mercedes. Plus, Alabama agreed
to purchase 2,500 vehicles from Mercedes. While the bridge loan the Big
Three is requesting will be paid back, Alabama's $180,000-plus per job
was pure incentive. Sen. Shelby, not only are you out of touch, you are
a self-serving hypocrite, who is prepared to ruin our nation because of
lack of knowledge and lack of due diligence in making your opinions
and decisions.

After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus
emergency vehicles to the recovery efforts. What was given to the 9/11
relief effort by the Asian and European Auto Manufactures? $0 Nada. Zip!

We live in a world of free trade, world economy and we have not been
able to produce products as cost efficiently. While the governments
of other auto producing nations subsidize their automakers, our
government may be ready to force its demise. While our automakers
have paid union wages, benefits and legacy debt, our Asian competitors
employ cheap labor. We are at an extreme disadvantage in production cost.
Although many UAW concessions begin in 2010, many lawmakers think
it's not enough.

Some point the blame to corporate management. I would like
to speak of Ford Motor Co. The company has streamlined by
reducing our workforce by 51,000 since 2005, closing 17
plants and cutting expenses. Product and future product is
excellent and the company is focused on one Ford. This is a
company poised for success. Ford product quality and corporate
management have improved light years since the nightmare
of Jacques Nasser. Thank you Alan Mulally and the best auto
company management team in the business.

The financial collapse caused by the secondary mortgage fiasco
and the greed of Wall Street has led to a $700 billion bailout of
the industry that created the problem. AIG spent nearly $1
million on three company excursions to lavish resorts and
hunting destinations. Paulson is saying no to $250 billion
foreclosure relief and the whole thing is a mess. So when the Big
Three ask for 4 percent of that of the $700 billion, $25 billion to
save the country's largest industry, there is obviously oppositions.
But does it make sense to reward the culprits of the problem with
$700 billion unconditionally, and ignore the victims?

As a Ford dealer, I feel our portion of the $25 billion will never
be touched and is not necessary. Ford currently has $29 billion
of liquidity. However, the effect of a bankruptcy by GM will
hurt the suppliers we all do business with. A Chapter 11
bankruptcy by any manufacture would cost retirees their health
care and retirements. Chances are GM would recover from
Chapter 11 with a better business plan with much less expense.
So who foots the bill if GM or all three go Chapter 11? All that
extra health care, unemployment, loss of tax base and some
forgiven debt goes back to the taxpayer, us. With no chance
of repayment, this would be much worse than a loan with the
intent of repayment. So while it is debatable whether a loan or
Chapter 11 is better for the Big Three, a $25 billion loan is
definitely better for the taxpayers and the economy of our country.

So I'll end where I began on the quality of the products of Detroit.
Before you, Mr. or Ms. Journalist continue to misinform the
American public and turn them against one of the great industries
that helped build this nation, I must ask you one question. Before
you, Mr. or Madam Congressman vote to end health care and
retirement benefits for 1 million retirees, eliminate 2.5 million
of our nation's jobs, lose the technology that will lead us in the
future and create an economic disaster including hundreds of
billions of tax dollars lost, I ask this question not in the rhetorical
sense. Have you driven a Ford lately?

Jim Johnson
Ford Dealer
Pittsburg PA