Business Owners Need Fans

The average business owner is not flush with cash. If they still have their best customers, the orders are smaller, and he has to offer lower prices. Half their small customers have gone out of business and the business owner had to at their debt. The average business is hurting for income and profits.

If the owner has any cash, he is waiting for the next crazy idea to come from DC. Taxes will go up next year 4%. Cap and Trade (Tax) will export more manufacturing jobs overseas. Who knows how much health care will cost in a few years.

Look at states that have better economies. Texas, Oklahoma and North Dakota have lower unemployment and generated two thirds of all new jobs created over the last three years. Why? Business friendly regulations, stable taxes, governments within budget, limits on litigation awards, and respect for taxpayers.

Canada is doing well in this global recession. Why? Business friendly regulations, lower taxes, limited government spending, limits on litigation, and lots of legal immigrants. Same thing that built the USA. Canada also avoided the real estate bubble by not allowing very low down payments nor subprime lending. Smart regulations unlike Fannie and Freddie offerings.

If DC wants to improve the economy, the government has to be fans of business owners. Not vilify them. What business needs is stability. Cut government spending and borrowing, don’t add more regulations, and limit tax increases. Then businesses will start investing, expanding and hiring. Until then we are starting down the path of the Japanese lost decades.

Concern - Will America Keep Taking Risks?

Everyone has seen the news about the Deep Horizon oil platform exploding, burning and sinking in the Gulf of Mexico. The large oil spill is very memorable, and the news stories are telling about the people who will be negatively affected by the large oil spill. Very heart wrenching.

In addition British Petroleum is getting ripped in the press as everything from incompetent to evil money makers. BP is responding announcing they are doing everything they can to clean up the problem, and will pay for all the damages. Properly so, I may add.

The real question is what will happen long term? Is this going to be like Three Mile Island accident, where the nuclear industry fell behind the rest of world in developing nuclear energy? Think about it. One accident caused a whole industry to stop in its tracks over 30 years ago. Almost no new plants have been built for three decades.

What is the result? Most of the technology has moved to other countries. Canada and France develop much more nuclear electricity than we do. The other scary side effect is these plants were designed to be replaced after 25 to 30 years and then replaced by modern plants. We have

Will one oil spill stop more drilling and exploration? Will the US be more dependent on imports to provide the gasoline and diesel for our cars and trucks. Most of us drive cars, and all of us buy groceries and goods delivered by trucks. Are we going to stop producing energy we need to complete in a global economy?

There are over 30,000 drilling platforms in the Gulf of Mexico. There are plenty of opportunities for more accidents and oil spills. Are we going to stop driving and eating? No. We can not stop taking reasonable risks.

Our military is trained in taking risks. They professionally get in harms way and fight enemies who would love to kill them. We don't see them hiding in a military base in the US. We see our men and women all over the world in the worst conditions performing admirably. They do it by preparing for the risks and using training to overcome.

The US has to keep drilling for oil as well as developing alternatives. This will take decades to resolve. In the meantime talented men and women will come up with solutions to these problems and improve processes to make them safe. We must continue to develop energy and take risks to succeed.

Meantime our prayers are with the families of the lost and the injured from the accident.
Steve

Top Finance Concerns

These Top Finance Concerns from Cindy Kraft, the CFO Coach. These opinions reflect the view on business conditions we see from talking with business owners and investors, so I wanted to share them.

The CFO Rising conference yesterday morning was right up my alley with sessions on Creating Alignment in the C-Suite, A New Dynamic in the Boardroom, and ... particularly ... Finance Skills for a New Decade. My next few blog posts will talk about what I heard, but I’ll start with some interesting stats that opened the morning.

The CFOs in attendance were polled around critical issues they are facing, and here are some of the results ...
--89% felt the worst was over but do not anticipate a turn around anytime soon
--Only 4% felt growth was likely to happen in the next several months
--70% were concerned and VERY concerned (35%) around the cost effectiveness of proposed government regulations
--When asked about the proposed health care legislation, 69% were very concerned about the tax impacts and 62% were very concerned about the quality of care

Conversely, the attendees felt there was some good that came out of the economic downturn ... it has forced finance to go back to basics.
--32% said they now had a core business focus
--25% were focused on increasing productivity
--3 out of 4 indicated they would be preserving cash as a hedge against economic uncertainty
--77% indicated their focus would be on organic growth ... which means ...
--Only 10% indicated M&A was a core business focus

http://www.cfo-coach.com/ to subscribe to Cindy Kraft's postings.

Toyota Man

Interesting article about the culture at Toyota. Good read.
Steve

http://latimes.com/business/la-fi-toyota-man23-2010mar23,0,7100881.story

Toyota’s Runaway Case Gets Stranger

Poor Toyota. All they wanted to be was the number one automobile manufacturer in the world. They were so close. Good cars, great reputation, worldwide distribution, owners are fans, and the best marketing of any auto manufacturer. The successful launches of the Lexus and Scion lines changed the luxury and first car markets. Nobody was close to Toyota’s momentum.

Now their name is smeared with runaway cars, stuck gas petals and floor mats. Have talked about companies not believing complaints by customers, and over confidence in their product. Complaints are second chances given to you by customers to save the sale. You can look at the Big 3 in the USA ignoring reports by the car rental companies that the Japanese cars were performing better with less maintenance, and they ignored statistics proving them. It was hubris by domestic manufacturers.

Toyota is in a difficult situation. Too many lawsuits by too many opportunistic attorneys looking to make money, and government prosecutors looking to improve their political name by suing Toyota. If you read the previous article I sympathize with Toyota finding intermittent problems with multiple causes. They are difficult to see and harder to analyze than production problems, and a nightmare to resolve.

The San Diego case is strange, very strange. A 61 year old car runs away with him. 94 miles per hour. Police chase him and help slow him down. Makes the national news. Next day we find out he driving a car NOT recalled. It has a brake override system that if he was holding down the brake should have turned off the accelerator. Worse, the “victim” is $700,000 in debt and was about to lose the car along with the other three repossessed. He could be motivated to fake the runaway to make money.

First of all, am not going to assume this was faked. Am going to analyze the situation and ways to investigate this. I am not convinced by investigators who can not make the car do it again. How can you know how to trigger it unless you know all the possible causes and combine them all? Right now that has not been settled.

Would love to see the video if I were investigating. Per Toyota if he is stepping on the brake the acceleration should stop. The police cruiser video should show solid brake lights if he is pushing like he claimed. Were there any highway cameras or news copter pictures of the incident? Did they as for witnesses?

If he was faking, he had to overcome the brake override system that should have turned off the accelerator. There would be evidence of that unless he was a top flight programmer. Most people do not know how to reprogram a car.

First impressions by the police are good evidence. Did they smell the brakes catching up to him? Yes. Did the brake lights stay on the whole time? Maybe not, he was reportedly pumping the brakes until the police had him apply the parking brake and stay on the brakes. That may have finally activated the brake override system. How did the victim act when they stopped? The brakes should have been too hot to touch. The wheels hot too conducting heat away (unless they were aluminum or magnesium. They might conduct heat away too fast, but the hub would be hot.

Physical evidence needs to be checked. They would have had to fade. That may glaze the face of the pads or show other damage on the pads and discs. Experts can tell. The reports are the brakes were worn out.

If the evidence is he let go of the brakes to accelerate, would suspect fraud. If not, Toyota would be well served to assume this is a possible real problem and keep looking for combinations of problems. How likely is a 61 year old to panic when his car acts irrationally. Know a lot of teens through fifty year olds who would panic. My gut feel is this is a real runaway.

Okay, what possible problems are there? Physical, Hardware, Firmware or Software. Physical has been exhausted with petal recall and changing the floor mats. Hardware is what it is. Firmware and Software are really the biggest culprits left. My partner believes it is software. Too much probability with the diversity of runaway cars over so many models and years. Also he is a systems expert unlike any inside the auto industry with too many years of experience to fall for the first good probable answer and would dig deeper.

Toyota would be wise to hire an expert like him, but suspect it would not happen. Mainly for litigation reasons. Toyota is better off with non English speaking help who would be tough to be interviewed on a witness stand. (Especially if the company help was hard to find?). Disclosure rules in the US would eventually flesh this out, but still makes the attorneys’ jobs harder with all the difficulty of translating exactly technical jargon to English. Can’t blame Toyota here, is any country more litigious than the US?

Don’t think Toyota’s problems are over. Cruise control runaways are happening too. Would expect more recalls and finding more causes. Some people are saying a brake override software solution and reprogramming the on/off button to shut off under repeated pushing is all that is needed. I have doubts that covers everything unfortunately. Technology is too complicated and simple solutions often miss part of the problem like the sticking petal and floor mats.

Toyota will recover like Ford did from the Pinto fiasco, and will focus like Ford on making great cars again. May take a few years, but Toyota’s great reputation will return.

Till then I would know how to shift my Toyota into neutral, or hold the start button down for 3 seconds. Yes I would still buy a Toyota before this is resolved, because the odds of it happening are under 0.1% and going down with every improvement.

Drive safe,
Steve

Toyota’s Runaway Acceleration and Prius Brake Problems

All cars have design flaws and quirks. However think Toyota's ego got in the way of fixing these problems.

Am an engineer that understands technology. Toyoda builds high consistency and quality products, and I would buy one in the future.

Have sympathy with trying to find intermittent problems with runaway acceleration. It can take several examples of problem assemblies or complete vehicles to analyze. You need people who can look outside their specialty for other possible causes, and then follow each one to prove they are not the cause. It is also difficult when the rate of failure like this one is under 0.1 percent. Then it is only when multiple causes happen together. It is really tough to find these type problem sources. But this has been reported in various models for over 4 years, enough time to find causes and solutions unless your head is in the sand.

In the acceleration case there are three causes: Floor mats, mechanical sticking of accelerator pedal, and software/hardware programming problems with the drive by wire system. Steve Wozniak reports his Toyoda runs away intermittently on cruise control. I would take his report seriously since he tries to replicate the problem and analyze it. So far Toyota has not taken care of the hardware software problem beyond solving the accelerator pedal problem.

Each source gets blamed and says it can't be us. Then blames the other sources. In a large corporation you have to be determined and persistent looking for true causes in spite of pressure to settle the problem quietly. This is where ego about "we can't be wrong" gets in the way. Finding these causes is dangerous to your career if you are on the wrong side.

Sometimes you need outside consultants to take the heat and you need a willingness to admit problems. Toyota has lost the willingness to admit problems. It may be cultural as taking the blame in Japan is a cause for great shame leading to resigning or even committing suicide. If Toyota is smart they will honor the group that resolves these problems within the company. You have to want to always improve.

Thought Toyoda would have jumped on possible brake flaws with the Prius which are also in the news. Brakes not working are a major liability and would kill sales. This is a major flaw with the Prius have been hearing about for a couple years. Toyota will take another big hit if this is not resolved.

Mechanics tell me they think Toyota brakes calipers and pads are smaller than the competitors. They question stopping power because of this. You need extra stopping power when conditions are less than ideal due to weather, dirt, etc.

Toyota will take a hit on sales, and resale’s for about 2 years. Hear used Toyota's are now $3,000 cheaper wholesale than they were a few weeks ago. Think runaway acceleration will extend to more vehicles.

Remember if your company is involved in repetitive complaints, take the customer’s seriously if you want to keep them buying again.
Steve

Business Predictions for 2010

It is time for the annual predictions of what the year will bring. So let’s look at my past predictions first.

• In 2009 I predicted the recession would continue, but not be a worldwide disaster.
[Partially Correct, not a worldwide disaster, but now is expanding worldwide]
• Jobs would be very hard to find, and would start recovering near the end of 2009.
[Correct, but the jobs recovery is barely starting]
• The stock market would bottom and start back up within 6 months.
[Correct bottoming in March]
• Housing predicted no bottom and prices would fall another 5% – 15%.
[Correct]
• Oil prices, thought we may have a correction where prices hit the $30’s per barrel, the stabilize around the $40’s to $60’s range.
[Partially Correct, did drop into the thirties, and spend most of the year in range. Then the dollar devaluation and worldwide usage pushed oil into the $70’s - $80’s range.]

Yes, I had good years predicting in 2008 and 2009, but there are no crystal ball that work all the time. This is based on experience, observation, and reading other peoples predictions. With all predictions, your results are affected by location, driving habits, weather and your mileage will vary…

Recession: We are seeing worldwide signs of recovery. Is it enough? There are other signs that are weaker. The US is not going to lead the recovery. The world has to pull the recovery. My major expectation is for slow growth of about 1% - 2%. There is also a significant chance for a double recession like the Great Depression. I put this at about 20% - 25%. If this happens it will be a tough year.

Interest Rates: Expect bond and borrowing rates to be raised. Creditors are going to demand more money to lend the Federal Government for spending. This is going to slow the economy toward the end of the year.

Stock Market: I suspect we are getting closer to a market top in the first quarter or mid year. We gain significantly since March 2009, and are possibly bubbly. The Fed may try to engineer a break in the rising market to keep interest rates low. Have my stop losses set and am monitoring.

Dollar: The slow down trend of the dollar has ended. There are so many concerns about the Euro and other currencies, believe the dollar will do well early in the year. Later in the year we may see Gold and Silver rising again despite the improvement of the dollar.

China: I expect the China boom to end late this year. They have a real estate bubble forming, and their leadership wants to slow down lending. They are trying to stimulate internal markets and keep their people employed.

Jobs: If you have a job, hang on to it until you find another. Unemployment is not improving, and may have bottomed. But the recovery for the job market will be slow.

Housing: Suspect the bottom to the real estate market to be closer, in 2011 or 2012. The over supply of home still has to be worked off the market. I expect prices to fall another 5% - 10% in 2010. Commercial real estate is falling and I don’t see the bottom yet.

Oil prices: There are a lot of possible scenarios for trouble this year, including a good possibly of needing to stop Iran from building nuclear bombs. If that happens or Iran grabs Iraqi oil fields, expect a short term spike. My major expectation is prices to stay in the $70’s - $80’s early in the year, and then increase into the $80 - $100 range by the end of the year.

Remember, we have lived through recessions before, and will survive. My prediction may be no more accurate than yours. But if these predictions happen, how will it affect your business?
Steve

Steve Jobs: How to live before you die | Video on TED.com

How to Live before You Die. 2005 Graduation speech at Sanford University. One of the better messages about your career and life.

Steve Jobs: How to live before you die | Video on TED.com

Securing Our Airports

Our current airport security is inadequate. It is not possible with current technology to catch all weapons and explosive. There are too many ways to orient weapons to confuse human viewers. Also we humans often tire too quickly for 100% inspections. We need to make improvements in equipment and methods.

We need to admit to passengers there are risks, and to get their help spotting unusual behavior. It does not make us comfortable, but makes us alert and safer.

Explosives are the biggest threat now we have locked the door to the pilots. Between the Christmas Eve Detroit flight and the shoe bomber we have seen the possibility one terrorist makes.

The best method currently available is interviewing people before they board like Israel does. Supplement this with bomb sniffing dogs. Will passengers like it? No, but they will cooperate to be safe.

Long term we must invest in putting bomb sniffers on computer chips. Some false alerts will cause passengers to change colognes or perfumes. When I had to pass a bomb sniffer in the early 80’s, everyone working there knew not to wear ‘Hi Karate’ cologne since it could cause false alerts. In fact I gave up wearing colognes then. Not sure I recommend that as I did not get married until my forties, but you get the idea I adjusted my behavior to avoid problems.

The advantage of putting sniffers on chips is we can put these bomb sniffing chips almost everywhere due to the low cost of operation. Every pinch point like entrances, check in lines, tunnels, parking garages, and baggage conveyors could have a network. In fact exhaust systems could be an ideal pre-alert warning. These would be networked to alert humans to investigate and intervene. These are area where the dogs would still be necessary.

Baggage and people scanners need artificial intelligence build in to spot potential weapons. Humans are too imperfect to spot them reliably. Research needs to be focused here. There are inspection technologies that are close to ready. The added benefit is this technology would speed up scanning.

Can we make it a priority to recruit National Guard members or retired military for the TSA? We need people with experience and who know what the risks are. Field soldiers are already experience looking for terrorist and bombs. Ideal people to recruit and hire.

In addition we need to profile young men in their 20’s to 50’s. It is not politically correct, but over 90 percent of terrorist are young Muslim men in their 20’s to 40’s. Being safe is more important than politically correct.

Steve