Where is the Money?

Where is the Money?

by

The Colonel

September 1, 2008

Copyrighted

Preface

A few years ago at a function held at the former residence of a Canadian auto manufacturer. While visiting the house, the accompanying property as well as enjoying a wonderful dinner.

The thought of where is the money or what happened to the money flashed through the neurons of my brain.

A few days later I exchanged the thought with a collegue that has many years in the automotive industry. I exclaimed…”Its almost incomprehensible what happened to the money”

As usual it turns into a dialogue of change, progress, empowerment, technology, a new perspective, usually accompanied by it will never be the same again. Perhaps at our stage in life we are old school!

The thought gets filed in the recesses of the brain…when I started in this business literally as a kid there was money, why is that there is less money today?

Prior to continuing lets clarify what I mean by money. The real car guys that gravitated to the automotive business had a genuine gut feel for the business, loved cars, played with cars, and made money in the process. You are free to quantify how much money is money….its was fun, you played and made money, and interacted with a wide spectrum of people and customers.

Does it sound exciting? It was…Does it sound like we worked hard? We did…

At some point and time the money started diluting, you would hear all sorts of comments from a myriad of folks…the business is not the same….the money is no longer there.

Looking at this business and although everything has presumably changed, even trying to find the money.

Its still an industry that requires vast sums of money to operate, the automotive industry consumes vast amounts of money and needs to make comparable money.

At one time everyone made money, the manufacturers, the suppliers, the dealers, everyone made money…by varying degrees but they all made money. The automotive industry was a good business that made money, and good profits.

It was easy to comprehend “where is the money”.

At some point under the guise of change, increased competition, more technology, increased volume once we get it all under control wait and see what is going to happen.

Here is an industry that made money all over the place, to an industry that is all over the place and everyone is looking for the money.

As of September 2008 everyone is looking for money!

What Happened?

There must be countless hard drives full of information to rationalise what happened in the quest for change and a better day.

In an industry where you need money to operate and be successful. Someone else wants a piece of the action, then someone else, and then another again.

Its North America the biggest automotive market on the planet, its beyond tempting to try and get a piece of the action.

The money embarked on a voyage of dilution…as time passed the voyage became more interesting…the money was inexorably diluted. We all experienced a time of deregulation, increased competition, innovation, creativity, adoption of technology, empowerment, increased productivity, outsourcing, global perspective.

All these processes evolved, and progressed each in their own direction, and each with a specific agenda while money was being diluted…under the guise that it would get better.

The tried, and proven structure that used to make money was being altered by the industry to arrive at a different structure that would make more money. Its understandable most things change with time, the mantra was that the automotive industry was undergoing dramatic changes. Some aspects of the industry required a fresh perspective, some a tune up, and others a complete overhaul.

Since the industry made money for countless years, it was easy to focus on new projects and agendas made more compelling by technology with a captivating appeal. In the meantime cost savings made it seemingly easy to overlook money.

From all the change that was descending on the industry, accompanied by technology, the Internet, and whatever other flavour of the day was popular.

Everyone knew that the industry is product driven, in an industry that is product driven you need immense sums of money to maintain the long term livelihood, viability of the entire industry. The emphasis should be on long term.

In North America producing the product was a lucrative business with many stakeholders partaking in various degrees in the money that was available in the production process.

The same applied to selling and servicing the product, the image and reputation was at times questionable but is was a good enterprise that made money.

The customers was satisfied within the parameters of the time, they received an acceptable product at a reasonable price.

I could keep on going here and attempt to compete with the hard drives that are full of information…its not my intention.

At one time I read that the human brain was vastly superior to any computer that was or would be developed. Is it safe to say that as technology became increasingly accepted, prevalent and applied in the automotive industry. The application of the human brain was applied towards the technology, and the money was diluted. Just a thought!.

How Did It Happen?

If you gradually raise the temperature of the water you will cook the frog in the pot, it will not jump out.

Did the entire industry embark on a voyage to dilute money under the guise of increased volume? Yes…it’s a strong statement! At one point the industry was glacial in its acceptance of change, and often hostile to even consider change that was obvious. At another point the industry embarks on a mission to adopt all sorts of incremental changes in a multitude of directions.

Is it possible that the industry espoused a vision of an unlimited market for vehicles in North America? It sounds so unrealistic that it might be true…if some manufacturers can increase their market share, everyone can increase their market share.

If you can’t find the money, or lost track of the money, you might as well produce more, and find ways and, means to sell more.

Why Did It Happen?

Many folks lost track of the money, consequently sales volume and an assortment of buzz words and buzz concepts gain in importance to replace the fact that real money is being diluted.

Technology accelerates many processes, dilutes competitive advantages, acts as an equaliser amongst the various stakeholders.

Is it possible that many stake holders and players were lost in the trees, and never saw the forest.

An industry the size of the automotive, does not change overnight, and often is not interested in changing, even if many are talking of change.

Change

Product drives the industry, and changing the product conveys a strong message of change, with the underlying message that it will be better.

Technology progressing and spreading across the industry reinforced that change is good, it will get better.

The product changes, its bigger, its safer, its heavier, it has more power, it has more technology, its has more convenience features. Its also less efficient and economical.

The business of doing business becomes more demanding, the technology empowers in one area, and dilutes in another. It’s a paradox.

From the turn of the century change was ongoing, it was a permanent fixture, which gravitated towards, the bigger, better, more power, the sky is the limit, more of anything and everything.

The product gained safety, weight, power, and inefficiency.

There was only one direction…UP.

As change progresses the structure of the industry is fine tuned, altered, adjusted, improved, to follow the trend of bigger, better, and UP.

Once the industry embarks in one direction, its best to follow the direction, and the ones that could have altered the direction had no desire to do so.

The industry is on a voyage of incremental change, and a voyage of diluting the money.

Is anyone going to talk about diluting the money?

Co Opetition

Although the industry competes on a daily basis, it also cooperates on a daily basis in a myriad of ways.

Many of the components of competing manufacturers, and products come from the same sources, this is just one simple example. Automotive Co Opetition has been active for many years, and has not changed.

Once a few manufacturers adopt a strategic direction which at the surface indicates a competitive advantage…chances are the rest will follow. They are competing and cooperating.

One example: if one manufacturer embarks on a volume strategy to gain additional market share, chances are good that others that compete in the same market segments will follow. This is competition…yes it is. Its also cooperation since they are all espousing the same strategic vector, and give additional credibility to the strategy.

The moment one manufacturer started diluting the money, others followed and substantiated that diluting the money was a good thing.

You could say the same about horsepower, one manufacturer engages in increasing horsepower others follow, it’s a good thing for the enthusiasts to experience a unique “horsepower moment”.

The same with the structure of the industry and the business. Once change is initiated others embark on a change vector, adopt novel concepts, new mantras, and the old is replaced by a “temporary new” while heading for bigger and better things.

Would it make sense to say that there was industry wide Co Opetition to dilute the money out of the industry under the guise of a “temporary new” towards the progression of a permanent UP.

Think

Stop and think about this for a moment, its mind boggling. Here is an industry that needs immense sums of money to function on a long term basis, and the money is diluted.

There are pundits hinting to near term bankruptcies for certain manufacturers. Its not the bankruptcies, it’s the lack of money, and the need for money.

An industry that influenced, altered the economic and social landscape of North America progressively and inexorably talked itself out of money. Probably under the guise of we are too big….its temporary, it will get better.

Its a captivating intellectual exercise to seek out the money, and uncover what happened to the money. Although on the surface it seems simplistic, and almost insignificant.

Its frustrating to see all this money evaporate from an industry, and a little sad too!

Did all the industry stakeholders embark on a mission to dilute money? Or did they embarked on a mission to make more money? You would think that they collectively embarked on a trajectory to sell more vehicles and make more money.

Conventional thought would lead everyone to conclude that all the stakeholders wanted to make more money.

Optimism

The automotive industry has always taken a very optimistic outlook, historically the optimism would always generate an image of tomorrow being a better day. Does it sound familiar with the current public announcements of numerous stakeholders.

Could this industry have endured a bout of optimism pushed too far, and optimism becoming reckless? Its possible...anything is possible.

Clearly if all the stakeholders embark on an optimistic trajectory, and make decisions based on this optimistic vision, at some juncture reality and gravity will exercise a downward force.

At some point with all the signals that were coming from a myriad of sources most stakeholders had to conclude that the prevailing optimism was disconnected from reality. There is a difference between being optimistic, and being recklessly optimistic.

Debris

At some juncture there is so much debris flying around that it gets challenging to get a clear vision. The automotive industry has its share of debris in the atmosphere.

What constitutes debris?

In most instances it’s the stuff that you don’t need, and for some reason seems to be essential, or has taken an existence of its own towards acquiring a status of being indispensable. There is all sorts of debris at different and various levels of the industry, and although everyone has been talking about a myriad of improvements, many of them facilitated and empowered by technology…there is still a lot of debris floating around.

Clearly it does not make sense to have all this debris floating and choking an industry that cannot find the money…or does it? One wonders at times!

Lets just say that there is a lot of debris all over the place(industry), and a lot of “debris jockeys” perpetuating the game. The best part is that few people want to go there…and those that do…well. The best part…there are certain stakeholders that have less debris or hardly any, they are also the ones that find more money.

Where to Start

Its certainly easier to comment than to offer solutions...or is it?

Where does one start to find money? A look in the rear view mirror especially from the turn of the century is an ideal starting point, being certain to take a methodical, and thorough approach and leave no stones unturned.

If its starting to sound like work, it will be...and then some.

Being aware that is not glamorous, and perhaps even unpleasant...its the kind of work that needs to get done to start quantifying the debris, and develop actionable strategies.

Every stakeholder is in a different position, and situation. Its a specific process for each and every stakeholder that wants to engage in the task of finding money for the future. They have been on a voyage of trying to find money for several years.

Is it possible that some folks would not know where to start...its possible.

At some point and time everyone has to start, and at some juncture endure a cold and unpleasant shower...and deal with a few skeletons that come out of the closets. Have the ability, and prescience to read between the lines, of various presentations.

The folks that have found the money, will not tell you how they found it, and will not tell you that they have the money...they will be very discreet in their actions, and decisions.