Monday, May 09, 2011

Ford's Turnaround - A Road Map For American Economic Recovery

We have written extensively on here about the auto industry including many of its own self-inflicted problems. Just not much in the last few years. We wrote that bankruptcy was likely coming for the automakers, and specifically the mess that was Chrysler, but we also said we were bullish on the long term prospects of American auto manufacturers before their implosion and restructering.  With all three American auto makers now firmly back in the black, our calls of their demise and eventual rebirth were timely.

When dynamics at Ford were dark and desperate, we wrote a lengthy post as a follow up to our manufacturing and lean methods posts that I was very bullish on Ford. I even laid out the past parallels to Caterpillar when it was left for dead yet arose as a phoenix from the ashes to surprise everyone. I still remember a snide remark re that post from someone who commented that Ford would never be able to compete against Toyota. How the world has changed. Actually Ford has surpassed Toyota in many quality metrics. The impossible has become the probable as we have noted numerous times.  Regardless, Ford is a dominant force again in the auto industry - it has just reported its best profits in thirteen years, is writing down its debt at a relatively fast clip, is delivering great products to the market place for the first time in decades and has outsold GM in North America for the first time in ages.

More importantly, as we highlighted during some of those prior posts, we wrote what Alan Mulally needed to do to turn the company around. That is, transform the bureaucracy where financial idiots used to dictate how a manufacturing, research and design firm was run. And as part of that, to unleash and empower the massive store of incredibly brilliant human capital within the company. And that is exactly what Mulally did.  It was not Mulally that turned around Ford but unlocking its human capital that led to its turn around.  No one person is able to turn around a company or a country and Mulally clearly understands this.

"A leader is best when people barely know he exits. When his work is done, his aim fulfilled, they will say, 'We did it ourselves.'." - Lao Tzu (President Obama and Washington's leaderless culture of political morons could learn more than a few great lessons on leadership from Lao Tzu)

Comparatively, in Japan a finance executive could never run an auto company. Never. That would be like asking a banker to perform open heart surgery.  Or to walk and chew gum.  Yet, most every major industrial company in the U.S. has been hollowed out or destroyed by financial idiots.  GE's CEO, one of President Obama's chief economic advisors has continued the path of financialization of GE that would have taken the company under without taxpayer bailouts for it's CEO's incredible imcompetence.

As Wall Street has gained more and more control over our economy and our politicians, they have demanded financial idiots from Wall Street play a greater and greater role in senior corporate management of corporate America, thus providing a conduit for their own buffoons to land in top corporate jobs.  This has led to a flood of incompetent Wall Street thugs now in senior positions across every industry of our economy.  Senior positions they are completely unqualified to do.  As leaders in industrial powerhouses like Japan and Germany realize, you can't ask someone to do a job they aren't qualified to do  Well, you can.  But look what you get - 50 million lost jobs.  Yes, we have created tens of millions of new jobs as political idiots and Wall Street mobsters like to cite - jobs doing each other's laundry and pushing around financial papers; both of which consume society's wealth rather than create any wealth.  And let's be frank. The educational system in the United States prepares finance students to be qualified to do just about absolutely nothing productive.  (The world would be better off without finance as a university curriculum.  And just as we said would happen years ago, the market is taking care of that one too.  The demand for finance degrees was/is imploding as I type this and it would be very negative without tens of trillions of dollars of government bailouts of financial criminals.)

It's no coincidence scientists dominate the executive management at Japanese auto manufacturers. And as a result of that, it's no coincidence that Japanese auto manufacturers rule the world. In fact, after Toyota's most recent crises a former executive for the company remarked that financial idiots within Toyota were responsible for the crises at the firm. I suspect all of those remarks were directed towards Toyota's American management team which is comprised of a wealth of finance executives.   We also wrote that we were bearish on Toyota's stock before the collapse when every Wall Street carnival barker was bullish on the company and proceeded to watch the company's stock implode.  In the CEO's public rebuke due to shame and dishonor brought upon the company by failed financialization of the company, Toyota learned its lesson by allowing financial management to gain well too much authority within an industrial company.  Fool me once, shame on you.  Fool me twice, shame on me.  Fool me forever and you have the American economy.

For those who seek to use linearity or the rear view mirror to determine the future, let this be an example of the ridiculousness of your notions. Within a few years from the most miserable period in its history, saddled with seemingly insurmountable debt, and without a government bailout, Ford has become what may be the best managed car company in the world. It has definitely reached the upper echelon after decades of mismanagement. And it did so in just a few short years. And similarly, with the right economic model, so too would America's economy become the envy of the world again within a few short years.  Guaranteed.  Proven mathematically.

We don't need to have a debt implosion. We don't need to have a depression. We don't need to increase our savings rate. We don't need to suffer through ten or twenty years of underemployment. We don't need to see the dollar devalue to increase our competitiveness.  We don't need to let the market collapse as many radical theories put forth by financial commenteur's twisted views on Austrian economics and theories of free market dunces. We don't need to cut Social Security. We don't need to inflate our way out of this crisis. We don't need to see housing recover for the economy to recover.  We don't need to bust collective bargaining.  We don't need to destroy social services provided by government.  And most importantly, we don't need to listen to Wall Street idiots and their political stooges. But first we need to get political idiots, economists and financial crooks out of our economic policy decision making.  Unfortunately, just the opposite seems to be happening with the failed Congress and President Obama, both of whom cater to failed Wall Street ridiculousness.

New ideas. New ways of thinking. A return to what made America great. All of these will cure the American economy in a near snap of the fingers just as Ford has done in curing its thirty years of piss poor management.  Just as we wrote years before it actually happened and when no one was willing to entertain any such notion of Ford's return to dominance.

In closing, you might think about how the management initiative we said years ago needed to take place to transform Ford might be a cure to what ails the American economy as it was a cure for Ford. And what economic, banking and political changes would be necessary to accomplish this.

Now that said, I am once again bearish on Ford for a multitude of reasons.  Most of which are a result of its exposure outside of the United States.  From our countless posts on expected global outcomes, I think you can figure those out quite easily.   Yet none of this takes away from the swift and massive turnaround to North American operations.  And just as swiftly, so too could the U.S. economy become the economic engine of the world.
posted by TimingLogic at 10:53 AM