December 2008 - Ambassador Solutions

Creatively Destroying and Re-Building The American Auto Industry

Posted on December 12, 2008February 15, 2024 by Brad Lindemann

So who am I to think I have a better plan for saving the American auto industry? Why not? After all, the plan on the table calls for $15 billion dollars (oops, now its down to $14 billion) in taxpayer money to be sent straight down the bail-out rat hole. But it certainly won’t stop there. Recall the original request was for $36 billion. Does any thinking American really believe that that $14 or even $36 billion will do anything other than delay the inevitable bankruptcy of the Big 3? Bankruptcy is the first step towards the creative destruction and re-building of the American auto industry. The sooner this painful, yet unavoidable, step is taken, the sooner the industry returns to viability –albeit at a much reduced size.

So what role should the federal government play in this destruction/re-building process? For starters, Uncle Sam should put his checkbook back in the “last resort” cubbyhole from whence it came. Then, Congress needs to respond to the Big 3’s groveling with a plan of their own –one that might actually work, while putting far fewer taxpayer dollars at risk. It starts with the planned bankruptcy of all three American automakers leading to their subsequent reorganization into one newly capitalized entity. That’s right…from three to one.

Perhaps the “American Motors” (AMC) name could be resurrected for this momentous occasion? How cool it would be to see the name of the maker of my first car back in the limelight. Yep, I still get misty-eyed thinking about my 1960 Rambler American –a gift from my grandfather. With fully-reclining bench seats, my black and white beauty was a veritable love machine. I can still hear Mac Davis singing “baby baby don’t get hooked

on me”, as my now father-in- law peered through the thoroughly fogged over windows in search of his daughter –my lovely bride of 32 plus years. I’ve been hooked on her ever since.

OK, thanks for allowing me that little cruise down Nostalgia Lane. Now let’s get back to saving the auto industry. Obviously, we’re going to need some real leaders to pull it off. And, it should be equally obvious that the current leaders of the Big 3 need not apply. Better yet, no current or past (a.k.a. Lee Iacocca) automotive executive should be considered for the top job. Just as when Lou Gerstner took over the reins of IBM (1993) when nobody but an unaffected outsider could have saved Big Blue from singing the bankruptcy blues, so too the American auto industry needs a mega dose of outsider perspective. Chrysler got it half right when they brought in industry outsider, Bob Nardelli. But, apparently the search committee didn’t notice the $200 million golden parachute that landed Gnarly Bob safely in Detroit after taking Home Depot shares down 20% during his five year flight to nowhere. Maybe GE will oust Jeff Immelt and give Nardelli the top job he thought he deserved before leaving in protest?

Surely Cisco CEO, John Chambers, is tired of wandering in the wilderness far below the peak of Mt. Dot Com? Since reaching the summit in March of 2000, Cisco’s stock has lost 80% of its pre dot com bubble bursting value. Few blame any of this precipitous fall on Chambers. In fact, many believe (me among them) John Chambers to be the most capable CEO in the world today. What could possibly lure him to take the wheel of a born again American Motors? How about a challenge of epic proportions? A payout that could make him a billionaire many times over? Perhaps most importantly, a prominent place in history for having performed miraculous surgery on the backbone of our economy. Moving the executive suites from Detroit to San Jose wouldn’t hurt either. And if that’s not enough, tell John I’m available to carry his bags anywhere his mission of saving the American auto industry takes him.

So, now that we have one reorganized U.S. automaker led by the best CEO in the world, we still have a few challenges. First, we need to capitalize AMC to maximize their odds of long term success and fairly reward those who take the risks to achieve it. As a free market capitalist, I can’t advocate the government taking equity stakes in private enterprises. Under special circumstances, I can support the federal government providing loan/bond guarantees provided there is sufficient equity in the firm to make the risk of such guarantees manageable. That said, why couldn’t AMC go to the equity markets with a debt offering on deck, backed by the feds, but contingent upon raising a specific amount of free market capital? The “Buy American” marketing

possibilities are endless and should make this the most oversubscribed stock offering since the dot com crazy days. Next, we need a plan for re-training several hundred thousand unemployed former auto workers. Did I mention that the UAW no longer exists at this point in the story?

That’s right, if Uncle Sam wants to make a meaningful long term difference, then he should invest in the re-training of the American auto worker. It wasn’t that long ago that our rich uncle thought buying up $700 billion in bad mortgages was a great idea. Why not make the mortgage payments of displaced auto workers for a few years while they get back on their feet? There are currently less than five hundred thousand UAW members. If half of those are displaced while having a mortgage payment of $1,500, then Uncle Sam could cover every former UAW member’s mortgage for two years at a cost of $9 billion. And, for another $6 billion, American taxpayers could pay to retrain every displaced worker, assuming it takes $1,000 per month for two years to get the job done. Well, what do you know? That totals up to $15 billion…the minimum the Big 3 say they need to survive. Hmmm…

These simple ideas are not meant as “end all, be all” solutions. My hope is to offer some perspective on what positive progress could be made toward a brighter future for the American auto industry, provided we first admit that what we currently have is broken beyond repair. The amount of the bailout is really beside the point, as any amount is certain to be too little too late to save the Big 3. There is no pain-free way out of this mess. We either pay now or we pay much more later. And, if it’s too much later and too much more, we won’t just be talking about a bankrupt industry…we’ll be talking about a bankrupt country.

Hello John, have I got an opportunity for you…

Stressed But Blessed?

Posted on December 11, 2008 by Brad Lindemann

I’m trying to break myself of a bad habit I picked up as the current economic malaise came calling upon our company. In response to the proverbial, “how are you?” greeting, I’ve taken to answering, “stressed but blessed”. Sort of like positive self talk with a spiritual twist, I suppose. Sounds better than, “it’s tough, but I’m gonna make it”, don’t you think? Well, I thought so too until I read this from a book recently given to me by a thoughtful friend:

“God sent His Holy Spirit to dwell in you so you could rely on Him. He loves to impress this stressed-out world by moving one of His children into and a through stress-filled environment with perfect peace. That’s His way.” (The Wonderful Spirit-Filled Life by Charles Stanley, p. 149)

Perfect peace? Stressed but blessed? As I read the above passage, it became clear that it had to be one or the other. It couldn’t be both. I realized that at its core, stress is nothing more or less than lack of faith. Ouch! Thank you, Lord, I needed that.

Contrast this to the Zimbabwean pastor I met on my mission trip to Africa last summer. When asked how he was doing, Tatenda would always respond, “strong and blessed”. The difference is quite convicting. As I sit here comfortably ensconced in “Carmel by the Retention Pond”, Tatenda is fighting for the life of his family and the hundreds of AIDS orphans that he and his wife care for. He’s strong…I’m stressed…thank God we’re both blessed.

Feeling more stressed than blessed this holiday season? More than any other, the following Bible passage has helped me get through stressful times. I hope it is a blessing to you as well:

Do not be anxious about anything, but in everything, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus. (Philippians 4:6,7)

Have a blessed Christmas and a strong New Year!

Winter Survival Tips

Posted on December 6, 2008 by Brad Lindemann

I thoroughly enjoyed reading Deep Survival: Who Lives, Who Dies, and Why by Laurence Gonzales over the Thanksgiving break. Within it I discovered many survival tips well worth knowing, including how to survive the current recessionary winter.

“The climb up the edge of the cliff was the hardest and most dangerous thing I’d ever done.” Yates arrived at the top “shaking and so strung out that I had to stop still and calm myself.” But it was that very ability to remain calm that made what they were about to do possible (p. 231). Seasoned British mountaineers, Joe Simpson and Simon Yates, had done many hard and dangerous things prior to attempting the first ever ascent of a perilous mountain face in the Peruvian Andes. However, nothing they’d ever done would compare to their fight for survival, as they descended from that unforgiving mountain in May of 1985.

Laurence Gonzales is contributing editor for National Geographic Adventure magazine and a lifelong student of the art and science of survival. His exhaustive research has revealed twelve attributes that are commonly found in survivors and lacking in those who don’t survive their life or death adventures. His real life survival stories are riveting and inspirational, while his illumination of the science behind the survival skills is truly fascinating. In fact, those same skills can be applied to any difficult situation one might find themselves in –from strained relationships to struggling businesses. I found the book to be highly relevant on both a personal and professional level.

Gonzales has distilled his research down to “twelve points that seemed to stand out concerning how survivors think and behave in the clutch of mortal danger” (p. 287):

Perceive, believe (look, see, believe) – while those who don’t make it often freeze up or freak out, survivors’ perceptions and cognitive functions keep working;
Stay calm (use humor, use fear to focus) – use humor to relieve tension and fear to focus on what needs to be done to alleviate the source of fear;
Think/analyze/plan (get organized; set up small manageable tasks) – don’t focus on how hopeless the situation is but rather upon what you can do to make it better;
Take correct, decisive action (be bold and cautious while carrying out tasks) – don’t be reckless, but do be willing to take bold action when necessary;
Celebrate your successes (take joy in completing tasks) – success breeds success and hope, celebrating small successes also provides much needed stress relief;
Count your blessings (be grateful –you’re alive) – survivors become rescuers instead of victims, helping others helps survivors make it;
Play (sing, play mind games, recite poetry, count anything, do mathematical problems in your head) – engaging the brain in activities not directly related to surviving can actually increase the odds of making it;
See the beauty (remember: it’s a vision quest) – stopping to appreciate the beauty around will relieve stress, increase motivation and improve your ability to absorb new information;
Believe that you will succeed (develop a deep conviction that you will live) – perhaps the most important key to surviving is an unshakable belief that you will;
Surrender (let go of your fear of dying; “put away the pain”) – survivors come to grips with the possibility of dying and then do everything possible to avoid it, including compartmentalizing their pain so it doesn’t over take them;
Do whatever is necessary (be determined; have the will and the skill) – don’t wait to be rescued, accurately assess your situation and skills then do what you have to do;
Never give up (let nothing break your spirit) – don’t be easily frustrated or discouraged by setbacks, see opportunity in adversity

Deep Survival is worth the read for the remarkable rest of the Simpson and Yates mountain climbing story alone. But, as you can see from the twelve points above, this book is chalked full of immensely valuable information for anyone facing tough times…like the current recessionary winter we find ourselves in.