Bad News

I don't know about you, but I've had about enough of the bad news. Every morning I walk out into the darkness to pick up my subscription to the Dallas Morning News. I bring in the paper, take it out of the bag and the first thing I see is some sensationalist, blaring headline of doom and gloom. Moronically, it is often not even something bad that happened --- but rather just some one's prediction that Texas will lose more jobs, bankruptcies will climb, America will get deeper in debt, etc.

Why is it that the newspapers seem to revel in blaring bad news at us? Do they think this is helpful reporting? We are certain that it is not factual reporting. Just what is the purpose of a newspaper? To influence public opinion? To discourage the masses? To entertain? To threaten?

As you might guess, I'm not one that readily settles for status quo. In my old age, I've learned that the truth isn't usually apparent or even readily accessible. Sometimes it takes a little digging to get under the story that's being told to find out what really is.

There is a great deal of talk about the ailing auto industry. The U.S. auto makers are nearly bankrupt. Auto sales have slumped beyond any one's imagination. That could well be the case. But other things are the case as well. And they are relevant to this story.

There are something like 245 million automobiles in America right now. At the current pace of new vehicle sales, it will take more than 27 years to replace that fleet of vehicles. Now seriously, how many of us expect our current vehicle(s) to last until they are more than 27 years old? Common sense would tell you something is going to have to happen in the auto industry. Pent up demand is being created right now!

Then there are the home building and real estate industries. Sales have slumped. Home values have fallen. (Some would say it's simply a correction in what were unrealistically inflated home prices in the first place!) So that market looks soft. But is it really possible that the home builders have no future?

The U.S. Immigration Service projects that, based on current immigration levels, the population of the U.S. will double in the next 42 years. Just where do you suppose all of these people will live? Surely there is not sufficient housing available to them in the U.S. right now. Demand for housing in the U.S. is arriving on our shores every day!

Finally, let's consider the stock market. Yes, it has lost half its value in the past year or two. We've all lost money ... on paper. Those of us who sold our stocks actually realized those losses in hard dollars - with no chance of getting them back. But of course those of us who haven't sold can reap the benefits if and when the stock goes back up.

Right after the Great Depression, the stock market soared 75% in just a year or two. It has been said that what goes down must go up. It would seem that even a bear market will turn bullish somewhere along the line.

My point here is that the sky is certainly not falling. I'll be the first one to admit that things are difficult and we are in the most dire straits many of us have seen in our lifetimes. However, there is reason to be optimistic about the future. General Motors or Chrysler may disappear from the American landscape. Home builders may go out of business. Existing home sales may languish for a while. And the stock market could take a while to recover. But folks, the evidence is clear. America will still need cars - and someone has to build and sell them. America will still need homes - and someone has to build and sell them. And American companies will still need to be owned by someone.

Let's try to overlook the blaring noise from the foolish news media these days. While they may be reporting the news, they are clearly not telling us the whole story!

"Buy A Car"

I've been thinking a lot about the auto industry lately. Quite possibly you have too. One can hardly open a newspaper or read on-line news in America without seeing the story of the potential federal government bailout of the American auto makers. It's a big story. They're big companies. And they're asking Congress for a lot of money.

Part of the story you hear and read is that the auto makers got themselves into this mess. Some think it was the auto workers unions that did them in. Others think it was the U.S. government that was too lax in welcoming foreign auto makers to our market - creating unfair competition for the domestic auto makers. To be honest, I'm not sure I know the truth of the matter. It's evident that the U.S. auto makers (i.e., those headquartered in the U.S.) are in trouble. How they got there I'm not really sure.

As I think about where they're at though, I try to think about what I do know. There are some positives that I see in this mess, which I hope don't get overlooked. Let's take a look:

These companies are building good vehicles. GM, for example, has more cars that get over 30 MPG than any other car maker in the world. So despite the fact that they've sold a lot of big, gas-hungry SUV's, GM has a broad line of fuel-efficient, sensible cars to sell. So do Ford and Chrysler. (The problem has been that this is what's been selling these past few years.) So building more sensible fuel-efficient vehicles shouldn't be a problem. The car makers are ready and able.

Years ago, it was common understanding that if you wanted a well-built car, with precision engineering, you had to buy a foreign car. Mercedes and BMW, maybe even Volvo, got the top of the line and became the premium brands. Toyota, Nissan and Honda seemed to be the every-day brands (though they later competed in the premium brands with Lexus, Infiniti and Acura). I've had experience with both domestic and foreign cars. It is my strong belief that the differences in quality have disappeared over the years. Today I would submit that there is little difference in the quality of a foreign car over an American car. (I'll put my Chevy up against your Toyota or Honda any time!) This has been validated by independent experts as well. So building well-made, finely engineered cars that last shouldn't be a problem. The car makers are already doing that.

Finally, we have an incoming President that seems to have a relationship with the media and the American public beyond belief. It's fair to say that this President will start with approval ratings well above those early ratings of his predecessors. Some have even joked that there's not been anyone people believed in so much or had so much hope in since Jesus Christ Himself. I am pretty certain that Barack Obama is not the resurrected Messiah. But I do agree that he wields incredible influence over the vast majority of the American people right now. It is influence he could leverage right now --- to save the American auto industry.

Picture Barack Obama, maybe even with his wife, Michelle, with a public service announcement asking the American public to buy a new car from an American-based manufacturer. He wouldn't have to endorse any particular brand. "Hi, I'm Barack Obama, and I'm your new President. You know, our government has recently taken the unprecedented step of investing billions of dollars to re-tool our American-based auto manufacturers. Why did we do that? Because they are important to the fabric of our society. They are relevant to our economy. Perhaps more importantly, for you and for me --- they build great cars. And if you're in a position to do so right now, I'd like you to go out and buy a new car from one of these great American car companies. It'll help them. It'll help our national economy. It'll help me as your new President. It will ensure that your government gets a fair payback on our investment. And most importantly, you'll have the pride of owning one of the finest vehicles ever made in America. I'm your President, Barack Obama. I'll see you at the car lot!"

Can you just imagine? How many people do you suppose would be lined up at the Chevy, Ford and Dodge dealers the next morning? I figure we'd run the commercial a few times. The auto companies could play for it. They could have videos of it in their showrooms. We'd go back to Mom, apple pie and Chevrolet. Perhaps Michelle Obama could get a new mini-van to take her kids to school. We'd make sure the President is seen riding around in American limousines and his honchos are seen tooling around in American SUV's and sedans. It would be the biggest "buy American" campaign ever. Most importantly ... I'm pretty sure it would work!

So come on, Mr. Obama. Can you get America to buy a new car?

Economic Mess

So the economic news continues to be frustrating, to say the least. Stock markets are erratic and the losss are sobering. People are defaulting on home mortgages, personal loans, auto loans and credit cards in record numbers. Unemployment is hitting a frightening level and even stable companies are slashing their workforces. It seems every day we read about the federal government spending an obscene amount of money on something else that we don't understand. Our states are also turning in frightening news about their budgets and finances. It just seems the mess goes on and on. Is there an end to this mess?

I am not the smartest man in the world. I'm sure I don't even rank among the smartest men (or women) in the world. But there are things which I believe I do have a pretty good understanding of. I think the economic mess we are in can probably be traced to some fundamental choices we have made. They seemed like good choices at the time. But of course time has proven them to be rather poor choices. Let's examine one of those choices. We'll start today with the auto industry.

The American auto industry has been a model for the world. Heck, the U.S. pretty well created the auto industry and drove it with our consumption. Our government invested in highway infrastructure like no other place on earth and the world wanted to sell cars here. Though the numbers of declined, most analysts agree that the U.S. automakers are directly or indirectly responsible for a large portion of employment in America. Many Americans are employed making auto parts, steel for autos, shipping parts, manufacturing cars, designing cars, and of course selling and repairing cars. (And those are just the domestic brands.)

But many years ago, labor unions got involved. We as a country decided that the American worker needed protection from his employer, and we deployed the labor unions to do so. They negotiated good pay and benefits packages for their members - and everyone celebrated. Unfortunatley, that they wrested from the automakers wasn't sustainable over time. The foreign brands that are manufactured here now have a competitive advantage over the domestic brands because they aren't saddled with the pay and benefits costs that the domestic makers are. And so we strangle our auto industry.

I'm aware that some Americans think the domestic brands (e.g. GM, Ford and Chrysler) somehow "deserve" to go out of business. They figure they've manufactured junk and haven't been competitive in design or quality. Of course those people are entitled to their opinion. It's even possible that they are right. However --- and this is a big however --- choices have consequences.

Did we really believe that we could buy Toyotas and Hondas ... and expect General Motors to be able to continue taking care of our citizens?

Did we really believe we could drive a Suzuki or a Mercedes ... and expect Ford to provide employment for our children?

Were we so sure that Detroit could die as a city .... without consequences to our country?

I have to confess, I was one of those people who maybe didn't think about such things. I got fed up with the quality of two Ford products in a row - and got a Volvo. It turned out not to be such a great car (the air conditioning was crap). So I drove it for the six-year lease and then returned to the domestic brands. I bought a Chevy. It was a great car. Then my company gave me a car, so I ordered a new Buick. It too was a great car. But then was tempted back into foreign land, when my company offered me a Lexus LS400. An amazing car --- the sticker was twice the price of the Buick I had --- but I ignored that fact and just extolled the fact that it was a much better car. (In retrospect, it was not twice the car though.)

Eventually I returned to the domestic brands, and have been driving Chevy's now for years. A few years ago, my wife and I got new vehicles both at the same time. I got a Chevy and she got a Hyundai. It's several years later and we're still driving both. In all honesty, we can tell virtually no difference whatsoever between the quality of these vehicles. Both are SUV's. Both get decent mileage (for their size). Both have run like tops for years. There is no evidence to suggest that one is better than the other. They are both quality vehicles.

So what does this suggest? It suggests to me that the quality argument that may have held up at one time isn't really valid any longer. The domestic manufacturers are turning out just as good a product as the foreign makers. And they do so with a great handicap. So I think I can choose one car over the other.

But perhaps the considerations aren't just about the car. Perhaps I need to think about the impact to my country if I buy one car over another. I can empower the Korean economy - where American manufacturers aren't allowed to sell very many cars at all. Or I can empower the American economy, which is flooded with Korean cars. The thing I need to remember is that all choices have consequences.