As previously disclosed I'm a retired accountant and can't help myself. I am always playing with the numbers. Maybe that's why I enjoy the Data Tag Project.

Anyway to the point of this post. According to published figures Chrysler Corp. lost $16.8 billion (16,800,000,000) in 2008. They sold a total of 1,453,122 units in the same period. The simple math is they lost $11,561 for every car and truck they manufactured and sold. Certainly a recipe for a successful company.

Nick

When I was in the steel business, our management, at least the managers from the 'new breed' of executives, made the accountants crunch the numbers to prove whatever the executives wanted to prove. Usually it had to do with incentives, stock options, etc. that only applied to the management. We always 'lost' a lot of money in the period prior to labor negotiations. IMHO, the plight of American business has as much to do with morality as anything else. People who lie, cheat and steal do not run companies very well. And while this may spark a wave of protest, moral values in the United States have corroded over the past 50 years at an alarming rate. I have found that those who struggle the most are generally the most moral. Those who have it made are the least moral. Why? Because the haves don't need to be held accountable to God, because they don't think they need Him. The rest of us know we need Him.

And this goes along with the story of the accountant that was being interviewed for the CFO's position by the Chairman and CEO.

They gave the candidate an accounting problem and ask what the correct answer would be. The candidate looked around, got up and shut the door, and in a whisper asked "What do you want the answer to be?"

And now you know the secrets to a successful accounting career.

Nick

I'm trying not to take offense even though I am the CEO of a company and consider myself an honest, fair and hard working guy.

Who are my villains - anyone who cheats, lies, steals or cuts me off on the highway! Most CEOs, accountants, & corporate lawyers I know follow the federal guidelines pretty darn closely. Why? because it's our skin that gets fitted for pinstripes if we're wrong and caught!

Of course, there will always be a bad egg in the carton. Heck, even God doesn't do that well sorting out bad eggs if you follow the plights of most religions lately.

Why did Chrysler lose $11+K per car? Simply put - overhead. They committed to infrastructure supporting a much larger volume of product than they sold. Then they were trapped in contracts that have no wiggle room (unions). Interestingly, Chrysler expects to be back to a profit of $100M by 2012 if they survive.

If I'm trying to make any point here, it's this - blaming "All" of anything is usually incorrect, insensitive and lacking in detailed knowledge. Today's US businesses are under intense pressures never experienced in the "Golden Days" before Globalization. Some will fail, some will adjust and win, but for the most part they're all just trying to live the American dream.

If you want to read a great book on Globalization, I recommend "The Lexus and the Olive Tree" by Thomas Friedman.

Nuff said,

Corey

Corey, you're absolutely right. A few years ago, the owner of a shoe factory in the northeast, gave every employee their full salary while he rebuilt his factory that burned to the ground. The media asked him (incredulously) why? Benevolence? He said, "No, they are my most valuable asset. I can't afford to lose them". The reason that the steel industry and auto industry failed, or are failing, is exactly what you said. They signed contracts in the 50's and 60's and 70's, thinking that the golden days would last forever. They didn't. My point is that if all CEO's were like you, we wouldn't be in this mess. Instead we have guys like the ones running several Wall Street firms, running some companies and they're all lining up at the trough looking for a handout. Unfortunately, as we have seen, if a dozen major financial and manufacturing firms fail, they bring the whole country down with them and millions of hard working people are screwed.
PS According to census numbers, the income for the middle class, and the median US income is just over $50000, has been flat for over 10 years when adjusted for inflation. The top 10% has seen significant increases.
With that, I'll shut up. Probably have said too much already.

quote:

Some will fail, some will adjust and win

Bingo!......And the federales need to stay out of the fray and just let it happen....Using current federal government logic, I might still be driving a Studebaker and getting S&H Green Stamps with every fill-up!

Although I am also in the camp of "let em fail" versus "bailout", an added complication of a global economy is the unfair practices of some foreign competition. For instance, Airbus is a big time losing corporation that will never show a loss due to Euro wide Gov't support. Not a bailout, a constant handout! Perhaps it is a miracle that US auto makers have made it this long without a bailout and little protectionism.

One company that won't need a bailout is Walmart. People flock there every day to purchase Chinese built goods, many flagrant knockoffs. Here in Florida, there is a big problem developing with Chinese drywall that has corrosive vapors due to organic decomposition.

Caveat emptor!!!

I got out of Chrysler when they hired Nardelli.

Iococca, he is not.

.

Question - how much of a bonus did the CEO for Chrysler get???? Back in my day...if the company did well, then the CEO would do well, it appears that the CEO's are getting their bonus whether or not the company performs.....Gee, I still remember when you could fire someone for not "doing their job", I must really be a relic
Tina

quote:

I'm trying not to take offense even though I am the CEO of a company and consider myself an honest, fair and hard working guy.

Who are my villains - anyone who cheats, lies, steals or cuts me off on the highway! Most CEOs, accountants, & corporate lawyers I know follow the federal guidelines pretty darn closely. Why? because it's our skin that gets fitted for pinstripes if we're wrong and caught!

Not every corporate CEO takes the long view. I was a SVP and Trust Officer for a large bank. Many major corporation CEOs (and other senior management) had parents or facilities in our area, and I had the pleasure of meeting many on more than a brief call. For every sharp guy like Roger Nattans (Reed Drugs), Jack Eckerd (Eckerd Drugs), and George Jenkins (Publix), there were many others who may not have been dishonest but who were amazingly short-sighted or plain dumb.

One factor I think created a problem was the atmosphere in the '70s, '80s, and '90s that all the fresh-caught MBAs (most with no hands-on experience) and others wanted the fast track, and there was no thought of the future impact of the day's decisions. Everything centered on "this quarter's" performance. Do well for a couple of years, get promoted, and let the poor slob who took your job sort it out. That successor, of course, had to do what it took to make himself look good...

Now those folks are in senior positions, and with the interlocking directorships cuddling and coddling each other, lack of accountability, greed, absurd bonuses, and golden parachutes have become the norm. Much would have been rectified if today's bonuses had been tied to performance down the road a couple of years.

Just to let you know how Chrysler's performance compared to GM and Ford.

GM losses for 2008 were $30.9 billion. Unit sales 2,980,677 a loss of $10,367 per unit.

Ford losses for 2008 were $14.6 billion. Unit sales 1,988,376 a loss of only $7,342 per unit.

So a little recap:
Ford lost $7,342 per vehicle
GM lost $10,367 per vehicle
Chrysler lost $11,561 per vehicle

Just in case you want to believe this is all volume related and due to fixed cost, in 2007 GM lost $38.7 billion. Looks to me like the more you sale the more you lose.

All three companies are forecasting slightly smaller losses this year even though unit sales will shrink from about 13.5 million units to about 10.5 million units.

Nick

quote:

Just in case you want to believe this is all volume related and due to fixed cost, in 2007 GM lost $38.7 billion. Looks to me like the more you sale the more you lose.

All three companies are forecasting slightly smaller losses this year even though unit sales will shrink from about 13.5 million units to about 10.5 million units.

I believe this is explained through what Peter Senge (The Fifth Discipline) calls Double Loop Learning. Essentially, he says that effect doesn't follow cause in a complex system. Human brains evolved around simple systems of cause and then effect, we do very poorly understanding a cause, followed by another cause, a delay, then some spurious effect, then later on the actual affect to the original cause.

This theory also warns that often a company (or an administration) will be credited not for what they created, but for what the past leadership set in place. I'll guarantee that if the economy turns around Obama will get the credit, but will it really be his doing, just luck, or the slow evolvement of previous actions???

So back to cars, relating this year's losses to simple per unit analysis would be way too simple and wrong. Much of this year's loss will be do to many past "causes" coming to their eventual "effect".

Corey

Just what I was referring to, and IMHO, Senge's hypothesis is frequently used to attribute failure to "previous" management. CEO's, etc., are paid million$ for that which, when they fail, is attributed to "forces beyond their control", when, in fact, their responsibilities include accounting and planning for, those forces and contingencies. I think Nick's figures are salient, because, as you point out, Senge illuminates the effect of prior incompetence. That may be the cause, but it's no excuse.

I had a pretty high-level job in the Navy/NATO/NCA my last 10 years, and the rule is to plan on adversaries' capabilities, not their intentions. In other words, know in advance that "what can go wrong, will go wrong". Had that not been my mantra, I would rightfully have been unceremoniously sacked, or worse.

Senge's theory is certainly valid because there are ways to delay the 'real effects' of a 'cause'. However, look at Rick Wagoner, former CEO of GM. Wasn't he in that position for 10 years or so? And what happened to their profits, position, and stock value during those years? And why wasn't he sacked long ago?

The last few posts remind me of a flow chart addressing disasters in the workplace.

The box I remember in particular is "Can you blame anyone else?"