Punchinello’s Chronicles

December 14, 2008

Where are you now, Lee Iacocca?

I’m old enough to remember when, back in the 1980s, all kinds of businesses were about to go bankrupt. Everyone was coming to the government wanting a bailout. The Leerjet company was one of them, but the Chrysler automotive company was the most famous.

In 1979 Chrysler was on the verge of bankruptcy. They, along with other Detroit car-makers, had been trying to sell traditional American cars, while Japan was entering the industry with small, gas-efficient models. OPEC had just introduced the new concept of energy controls, and we had our first taste of gasoline shortages.

Another aspect of the Detroit automobile industry was that nobody cared about quality. There’s a term that we all knew, back then: “planned obsolescence.” It may have been true, or maybe just an urban myth, but throughout the 60s, we just “knew” that large corporations built their products to fail after a certain, planned amount of time. For cars, it was about 3 years. After that, the car was too expensive to maintain and people would simply buy another car.

Prior to the 80s, gasoline had always been cheap. When I learned to drive and finally had a chance to go out “necking” with high-school girls, I could afford to keep enough gas in my parents’ car to get home. It was 27¢ a gallon, and nobody cared how much it cost to fill the car. We were shocked when gasoline “suddenly” went to 50¢ a gallon!

Cars were huge, often taking the jargon word “boat” or “float.” They were pretty simple, and it was considered part of being a guy that you knew how to fix all the basic things that could go wrong. Most teenage guys would buy some sort of old, beat-up car for a few hundred dollars, then fix it up so it was running. The used-car market wasn’t even really a market; it was just cars that had been around for 3 years and traded in for a better model.

The Honda, Toyota, and Nissan cars appeared and weren’t very good. Even at that point, back in the late 70s, the WWII generation talked about the “junk” the Japanese made. They’d come through the war, witnessed the collapse of the Japanese nation and economy, but not the culture, and seen the cheap copies of American technology. There were many reasons for all that copying, and the Japanese approached it very carefully.

Japan made a national policy decision to copy other technology, but to make it one of two ways better. Either it would be 10% cheaper, or 10% better. They introduced an entire concept of quality management, quality control, and came up with ways to test that quality. One method was the number of returns for failure in manufacturing.

So although Japanese cars were a “joke,” back at the time, the Japanese we continually improving their cars. Each year saw longer-lasting, better-made, higher quality cars. Meanwhile, Detroit couldn’t have cared less. Until OPEC slammed the price of gas, GM, Ford, Chrysler all continued to make and sell gas-guzzling “boats.”

It soon became apparent that Chrysler would go out of business. Lee Iacocca came to Congress and asked for help. But he did NOT ask the US government (and taxpayers) to hand over a pile of money. Instead, he demonstrated a plan to revitalize the company, and showed various bank loans the company would be able to get if they had help with a co-signer.

That was a big deal, back in the 60s and 70s. If you were a teenager and wanted to buy a car, you went for a loan. Parents didn’t simply buy the car outright and hand it over. You had to work, accumulate money, then apply for a loan. In order to get that loan, someone had to guarantee the money would be paid back. So you got a co-signer, someone with credibility and a history of reliable loan repayment. If you, as a teenager, couldn’t pay the loan then the co-signer became responsible.

Congress agreed to guarantee the loans Chrysler took from the banks, and Iacocca turned the company around. Many other companies declared bankruptcy, being unable to get money from the government.

When a business is failing, it’s the result of a single fact: bad business practices and processes. Whomever is running that company, be it a major corporation or a single-owner boutique, the assumptions and premises they’re using are wrong. It’s not a matter of opinion. It isn’t a grudge. It isn’t anything at all excepting being wrong.

There actually is a concept of right and wrong, you know. The two terms associate with actual reality. Something is “wrong” when it contradicts reality. It’s “right” when it doesn’t contradict reality. The moral connotation of right and wrong must first function on a foundation and platform of reality. When we remove reality, calling it all a matter of opinion, then nothing is right or wrong.

And so we’ve reached a point where nobody is wrong. Nobody is right. It’s all relative, based on each person’s feeling of whether or not they’re doing the proper thing, the “correct” thing. Business processes have been totally disconnected from reality, and now rest on nothing at all. If they don’t work, it’s nobody’s fault. It’s just bad luck, bad timing, or an accident of random nothingness.

Sadly, reality is real. The only choice we have at this point in history is whether or not to voluntarily accept reality. If we “allow” the automotive industry to fall into bankruptcy, it will be due to an agreement that the business processes in place are wrong. Not “maybe” wrong, “possibly” wrong, or “a different opinion.” Simply…wrong!

Following a bankruptcy and reorganization, either the car companies (and every other frickin’ company looking for a bailout) will start to take reality into consideration or they’ll go totally out of business. If that happens, then another business will come into existence, founded on the principles of reality. People want cars, and someone will fill that need.

On the other hand, if we, as a nation decide that reality doesn’t exist, we’ll shovel money into the continuing black hole of wishful delusions. The fact is that a majority of us are living in this fantasy world at the moment, so the likelihood is clear that the government will hand over money. Bailouts will continue until there’s no more money. THEN reality will take effect.

A forced bankruptcy is much worse than a voluntary decision to re-think one’s assumptions. With the way things are going, it’s now almost a sure thing that the United States and our population will be forced into bankruptcy. At that point, a lot of pain and heartache will come into play. It’s no different than choosing to visit a dentist when there’s significant pain in the mouth.

We can go see a dentist at the early signs of tooth decay or problems. Or we can ignore it, hoping it’ll go away. Then there’s the option of drugging the pain, or using a topical anesthetic to numb the pain. But while the pain is a warning of underlying body failure, the pain itself can be turned down. Does that mean the underlying failure simply stops? Of course not. Eventually, the problem becomes massive, requiring emergency surgery. If it’s still ignored, then you die.

How many people today die of tooth decay? Not many, right? That’s a funny thing to think about. How silly, what with nobody having to die that way anymore. And yet countless people used to die from just that problem. The human body hasn’t suddenly been redesigned, eliminating the problem of tooth decay. Instead, we used to actually use our minds. We used to think, realizing that mouth pain was a sign of a problem. Then we took care of the problem.

The pain involved in resolving the consumer debt decay will be severe, if it’s dealt with right now. But like tooth decay, that pain will become exponentially more severe if we just ignore the current signals and numb away the pain. Finally, if we continue to treat the problem with magical chants, hopes and wishes, there’s a good possibility the entire economic “body” will become poisoned. At that point, the economy may die. But one thing for sure, it’ll require massive emergency services.


1 Comment »

  1. […] have to wonder what Lee Iacocca thinks of all this.  Share this Email This Auto, Future, Process, Smartphones, […]

    Pingback by Planned Obsolescence | JacAPPS — May 16, 2011 @ 1:35 am | Reply

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