The Big Three

Ever since Henry Ford with his freakishly attuned business mind bought out the Model T, America has been the leader in automobile manufacturing and the Big Three viz. GM, Ford and Chrysler have been ruling the roost. They were the automotive equivalent of the mafia; they weeded out or gobbled up all the small players (the Tucker story would substantiate that fact). They decided what to sell and what not to, the customer just played along, ironic, considering these companies are often considered to be the epitomes of capitalism.

Then, along came the Japanese with their small and fragile contraptions, which the Americans would not even honour with the tag ‘car’. To them a car had to have a V8, had to be two football fields long and should handle like fat momma on Viagra. As a twist of fate, they sneered at the small Toyotas and Hondas to their own peril. The oil crisis rolled in the 70’s and the environment crazies came along with their flower-power shit and suddenly these cars made sense to the gobbledygook Americans and boy-oh-boy ,the Japs took real advantage of the situation.

The American markets have always been the largest but they became increasingly served by foreign car makers, notably the Japs. The Big Three has been consistently been losing market share and have become less and less profitable, they tried offsetting their losses by expanding worldwide, mostly by acquisitions and exporting to countries where people are daft enough to buy them (e.g. Saudi Arabia). But still they kept on declining; the recent recession has hammered in the last nails on their coffins.  To make matters worse, Obama has been particularly against any kind of bailout, he has literally told them to go suck a lolly instead.

Well, what went wrong?  Everything actually, they still operated the old way, the push system. They set targets and estimated requirements and then produced and made the dealers to sell them off, it was prehistoric. They have spent millions to develop complex supply chains and organisations to support this business model. Each new product took several years to develop and hundreds of millions of dollars were tied up in massive inventory and working capital throughout the system. These flaws were masked by the huge demand for Trucks and SUVs.

Then there is the labour problem, the UAW (United Auto Workers) union was and is a pain in the ass. Sergio Marchionne, Fiat CEO, was quite eloquent about his concerns about the workforce when negotiating a lifeline deal with Chrysler, being a hard man, he said unless the union decides to accept major cost cuts- no deal.

So can we envision a turnaround? Even if mildly possible, it would require some radical changes in the system. They need to embrace the pull system, as the Japs and Germans have long back done. They should learn and develop new inventory systems; they can glean from lessons from all over the world; do something radical, challenge dominant thought (e.g. Tata Nano). However, their manufacturing facilities are world class and are capable of producing quality products. It just needs to factor in the details and make changes accordingly. It’s always about the little things.

YAMAHA

For those who have a passion for bikes and are old enough to remember Tom Petty and Guns N’ Roses tunes would agree that Yamaha were the bee’s knees. The RXs and RDs were a constant cause of wet dreams.

Yamaha came into our undeserving lives in the 80’s. It came out with the RD350 badged as a Rajdoot and it was brilliant, it was like having a crazy-in-bed high maintenance girl friend. People have gone bankrupt by taking care of it but the sheer exhilaration it gave was better than anything that you could snort up your nose.

Unfortunately it didn’t sell well but Yamaha had another ace up their sleeve, the RX100, and boy-oh-boy was it good. It was a light weight one-cylinder version of the RD. It left every other manufacturer in the dust, in terms of performance. It was frugal too, not as much as the Hondas but not as vulgar as the RDs. It became the choice ride for the young and careless.

As usual the green police spoilt the fun. Environment laws came in and the RX100 died in 1995. The company came out with another bike fortunately crazier than the 100, the RX135, it went through a number of iterations before it created a legend the RX135 5speed, it had the famous seventh port technology which the RD had used and it did fly, the new age bikes like CBZ or Pulsar were no match to this mean beast.

Growing petrol prices and environment consciousness put a stop to its life. Then Yamaha went through a dry phase with a slew of run of the mill models, they were capable but none were class leading and somebody else always did it better than them. Sales dwindled, dealers closed down and everything looked rather bleak. They even tried reviving it with John Abraham, as if that’s going to make a difference.

Yamaha woke up from its slumber and started to do what it did best, excite people. It sought to a flagship strategy; it bought in the cavalry namely the R1, raised brand awareness and bought in an aspirational sub-model the R15 which took the Indian market by storm. It didn’t end there; they bought out the radical FZ16. Sales have been racking up, dealers upgrading and once again children started dreaming about Yamahas. The balance is restored.

 

Seduction

A business which is involved in delivering to human cravings is a sure shot. I am not talking about a dollop of ice cream here; it’s the hard stuff like gambling, narcotics, liquor, tobacco and sex. These were prevalent from times yore. Soma, a concoction of Cannabis, Poppy and Ephedra, was mentioned in the Vedas as a drink much sought after. The Geishas have been satisfying Japanese perversions for centuries. Amsterdam even has a cannabis museum!!!

Ethical and legal issues aside, these segments have been amassing huge amounts of money. Let’s talk about Gambling for a while. Casinos are raking in money by the millions. At the start of the 20th century, Las Vegas was a desert town, where a passerby would not give a second look. Then the Mafia syndicate came in and changed it all. The illusions of making a quick buck and grandeur bought in people like bees to honey. Las Vegas became the city of sin, anything goes, if Satan had a home on earth, it would be there.

Countries seduced by the huge gains of having a Las Vegas of their own, have been seriously thinking of legalising gambling and helping investors to setup Super Casinos. England and Macau has one, Singapore is building one and if Dubai had its way, they would have the largest one in the world. Argument is that it brings in huge tourist inflows and revenues, on the other hand, some argue it would bring with it the lewdness associated with the industry.

Goa has legalised gambling but only on ships moored on the coast though. We are getting there. The seductive tones of the ‘gambling sirens’ are too much for us mere mortals.

The Nano

I always have an opinion on automobiles. If it’s not made out of passion or engineering ingenuity, I usually shun it as a by-product of modern capitalism. I find myself in a quandary as I cheer for the arrival of the Nano. Is it because I am witnessing the birth of something epochal such as the Volkswagen or the Mini or the 500 or the 2CV? Or maybe it’s the implications that the new car would throw up. To a car-owning city dweller, it should provide a good option for trips to areas short on parking space. To others, a lifestyle, environment friendly option. And to the vast majority, simply a chance to own a modern car.

I think India has finally arrived in the world motoring scene, however it did it with a whimper rather than a bang. Motoring gurus are eating their words as they had snickered at Ratan Tata’s dream. Major players are now scampering to introduce their own UCVs (Ultra low Cost Vehicles, yeah, it created its own new market segment too).

I am just waiting to see how it fares in the market and what kind of export responses it gets. Much would depend on how the Nano connects with the buyers.

Business Lesson: The most simple and robust products or ideas would always be the most profitable and the most remembered.

Elections

I really look forward to elections; it puts some fun into the otherwise mundane lives of us villagers. Everybody has their version of conspiracy theories which are debated in tea shops. Political celebrities come out of their cocoons and pose for awkward photographs with filthy looking children and mothers, cartoonists have a riot, scandals, TV shows filled with sketches, SUV sales increase, polls, exit polls, politicians changing allegiances every other day, repercussions of the change, polls on that, lazily worded, often grammatically wrong slogans, election songs - the horrible tunes, the publicity stunts, Laloo, few people getting beaten up by the police, politicians going and seeing them, cheap sentiments, stats, news channels, newspapers, the actual elections, the stubborn stain - which you try to remove even though you know that it is meant to stay, the awkward silence, the results, the winners rally, the looser retaliating with small skirmishes, changing of allegiances again, stats, news channels, newspapers, more discussions at the tea shop, finally somebody gets sworn in.

We then cross our fingers and hope that the idiots we elected to parliament would make our lives a little better. Take charge, vote for a better country. Jaago re!!!

Obama and the Merry Men

2008 proved to be the year of the underdog. Obama won, Slumdog won, Resul Pookutty won and so on. It’s all because the underdog got fucked real hard. It was retaliation by them just to affirm their real power. The middle class defines a country, they drive the economy, and they work like dogs so they can give their earnings to conglomerates (to make/create unnecessary products) and to governments (to spend it on wars and bailouts because somebody fucked up).

Obama, an African- American, at the helm of the most powerful country in the world, means there is some serious ‘change’ happening. His promise to bring the country and in turn the world around seems to be a bit lofty. His policies so far have been quite populist which went about flaying the rich and giving to the needy. CEOs of companies getting bailouts have their salaries capped at half a million a year. Companies outsourcing outside the country would not receive tax sops (bad luck India!). H1B visas limited, possibly even eliminated.

But would this all work. His plan of action (a budget) is to bring the country back to the position it was in before the downturn and not eliminate the root cause altogether (bad asset management and sub-prime lending). Don’t we learn from mistakes? My layman’s opinion would get beaten down by a ton of economic experts. I just hope he realizes that any decision he and his merry men make may cause a family somewhere in remote China to probably resort to poison.

One more thing, I went through this news article recently which stated that Obama is being considered for the Noble Peace Prize. Now what is that all about???

The Oscars

The show was a sham. It no longer signifies the celebration of real art. I know India is celebrating its achievement and I tried real hard to be a part of it, I really did. I even took the pains to watch it live and I applauded every time Slumdog slammed one home but I confess it wasn’t wholehearted. I felt the awards were patronizing and catered to the current economic and political situation.

A. R. Rahman deserves the ‘Best Original Music Score’ award, no doubt about it. However, the best song could have gone to Bruce Springsteen’s ‘Wrestler’, which for some apparent reason did not even get nominated. That is where I smelt something fishy. Usually there are five nominations for each category and again for some reason there were only three - two from Slumdog Millionaire(SM), one from Wall-E.

All the movies were either ‘Oscar-made’ or uplifting and SM’s use of gory or ‘poverty porn’ as some critics put it, leveraged its position to the general public.

Whatever happened to Christopher Nolan’s The Dark Knight? It was by far one of the best movies to be made this year. If I had my way, I would have given it all the awards, except for Best Actor, which would have gone to Mickey Rourke for his brilliant performance in The Wrestler.

So you see the Academy has made the Oscars recession proof. It put on a good show which catered to public opinion and raked in a sizeable moolah from its TV ratings and to top it off, added a new audience (India). Now that is what I call show biz folks!

Business Lesson: Fuck ideals and standards; give the customer what he wants.