T.J. Prebil

A few thoughts on the auto industry…

Wednesday, December 3rd, 2008

Executives representing The Big 3 were back in Washington yesterday, this time asking for a combined $34 billion in government bailout money. Here’s my take on what’s happening with Detroit and the potential bailout.

• I find it unbelievable that the CEO’s of GM, Ford and Chrysler originally showed up in Washington to request $25 billion in bailout money, they had no plan on how they anticipate using the money. Rightly so, government officials sent them back to Detroit until they had given their request a little more thought. How on earth did these guys get to be CEOs anyway? Not only are they holding they reigns while their companies are falling apart around them, they clearly have real solutions on how to get out of this mess.

• Will the government bailout the auto industry or will they force these companies into bankruptcy? Over the long-term, I believe the only way to help the auto industry is to let the Big 3 fail. Doing so will enable Ford, GM and Chrysler to renegotiate contacts with suppliers and more specifically the UAW union, which may be the single most reason (along with lack of innovation) that these companies are struggling.

• In a recent interview with Bob Schieffer discussing the auto industry, Speaker of the House, Nancy Pelosi, never mentioned the unions as a reason why The Big 3 are failing. Clearly, Pelosi is pandering to a significant voter base here but she’s also being shortsighted. Can she really be taken her seriously if she unable to admit the union’s role in the auto industry’s demise for political reasons? Unfortunately, she’s sitting at the head of the decision table.

• Ultimately, I think the government will cave and provide bailout money to the auto industry. They don’t want the political headache of watching 10′s of thousands of people lose their jobs. Time will tell that this route is a short-term fix. When the government concede, however, I hope they heed Douglas Olin’s advice: “isn’t it time for Detroit to turn out a car that gets at least 100 miles per gallon — and to do it in three years? Couldn’t we demand, in return for public money, that management deliver dramatic new fuel economy standards, with appropriate rewards for success and sanctions for failure?.” Amen!

American Consumerism

Monday, December 1st, 2008

We need not look any further than what happened at a Wal-Mart in Long Island to confirm that things have gotten way out of hand with our consumption habits in the United States. A 34-year-old man was trampled to death shortly after unlocking the doors on Black Friday.

We’re the deals for Miley Cyrus dolls just too good to pass up on? The words absurd and ridiculous don’t even begin to describe what happened a few days ago.

Bottom-Up Economy?

Friday, October 24th, 2008

I enjoyed this post in response to Obama’s bottom-up approach to growing our economy.

Simply put, the greatness of the United States was not built on a bottom-up economy.  Visionaries, pioneers and risk takers are the engines that make the U.S. economy work.  Without their pursuits to improve or to create something, people wouldn’t have jobs, cities wouldn’t have roads and many wouldn’t have dreams (or hope).

One of the greatest things about the U.S. is that there are no limitations to what one can achieve.  Anyone, regardless of his or her race, religion, age or upbringing has the same opportunity to succeed in life. Infringing upon the incentives of pioneers, to improve their own lives and the lives of others, is a slippery slope; it works in contradiction to the fundamental principles that this country was built upon.

There’s no denying that Obama is an incredibly gifted politician.  Occasionally, he even makes a few good points.  However, the bottom line is that is impossible to grow the economy from the bottom-up!  Obama’s failure to understand this causes me to question his ability to make long-term strategic decisions.

10/27/08 Update: the author of this article, published this weekend, seems to share my opinion.

Complete & Total Mismanagement

Monday, September 15th, 2008

You really have to hand it to the management at Lehman Brothers. Some of the best and brightest executives in the country, with MBA degrees from some of the world’s best business schools, managed to drive a 158-year-old bank straight into the ground. A company that withstood the Great Depression, two World Wars and countless ups and downs in the market, could not withstand the short-term greed of its own executives.

At management’s highest level, business is about having a vision and employing a long term strategy that benefits the well being of a company’s shareholders, customers and employees. In blindly chasing quarterly profits and short-term gains, the executives at Lehman Brothers completely lost sight of their primary responsibilities, resulting in one of the most abysmal failures in the history of business.

I feel horrible for the thousands of Lehman Brothers employees who lost their jobs this past weekend. The unfortunate reality, however, is that former employees have only the greed of their own executives to blame.