Professor Elam

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  • Professor Elam

    Toyota Lean Production Method

    We will be studying managerial accounting this summer. Toyota Lean Production Methods now constitutes an advanced cost course in many universities. I ran across these posts from readers at 

    In an effort to slow the crash, Toyota Motor Corp. is undertaking a massive overhaul and management reorganization next month when Akio Toyoda takes over as president. Toyoda, the grandson of Toyota's founder, will be officially appointed on June 23 at the annual shareholder's meeting. With the new president in place, the Financial Times is reporting that the company will replace 40% of its senior managers and bring back Yoshimi Inaba, a former senior executive, to lead U.S. operations.

    While the Japanese automaker is reportedly working on slashing costs by $8.22 billion, it reported the first operating cost in its 71-year history last week. As further evidence of the company's struggle in today's marketplace, Toyota's net loss of $7.87 billion in the latest quarter exceeding even GM's net loss of $5.97 billion during the same period.   
    ===================


    While everyone loves to blast Detroit, Toyota has been managing more in the bad stereotype of Detroit than most imagine. Toyota over the last few years has really been pushing for market share and growth, having less concern for good product and quality. I know QC personnel who worked for Toyota suppliers, and actually it was the Americans knocking down unacceptable shipments, and the Upper Management shipping to meet deadlines. Some of these problems resulted in the recall of Toyota vehicles.  Toyota pushed into the larger Truck and SUV market letting some of their smaller bread and butter vehicles such as the Toyota Corolla languish. The last iteration of the Toyota Camry was released with many quality problems. Toyota aggressivly expanded the Truck Plants, and when the demand did not materialize, they were left with a lot of over capacity. The Tundra also had its share of teething problems. The Greenies go on about how green the Prius is, but that vehicle was subsidized by the gas guzzlers. Mary Ann Keller, an auto analyst stated that the Prius was a losing proposition and Toyota was making it at a loss. My brother in law is a Toyota fan, and even he has noticed the quality of the vehicles declining. It was always said," That when Toyota became as large as GM, it would be like GM in more ways than one." Toyota needs to get back to basics, just like the "infamous" Detroit auto manufacturers need to do. I always heard that prior to 1958, GM Management used to talk about building better cars. After 1959, GM Management concentrated on financial performance to appease Wall Street. This took about 10 years to filter down to the shop floor, and sure enough GM started making junk about 1970 and just kept it up. John Rock and Bob Lutz helped turn the tide, but GM is a big ship. While the Titanic is turning, it may be too little, too late.   
    There seems to be something wrong with our bloody ships today, and something wrong with our bloody system as well.

    Professor Elam

    Do companies become clones of who they never wanted to be?  Consider  discount chains 

    Gibsons in Texas gave way to Woolco, then K Mart, Sears just plain got lost, then Wal Mart and hey where did Mervyn's go, and perhaps Target and now Wal Mart is in trouble,

    My opinion is that the Tundra and the commitment to it, was a strategic mistake. Toyota
    was a green company famous for economy cars. Now the Camry is a full sized vehicle,
    this pave the way for KIA Hyundai to come in and re invent themselves as the new toyota, notice how
    many Sephias and Spectras you see running around?

    Such is the real stuff of Total Quality Management, Six Sigma, and managerial accounting

  • Professor Elam

    Finally a Realistic Assessment

    The New Drug Czar has echoed my concerns for many years. THat is a link to a WSJ article so it may or may not work. The upshot is that the White House Office of National Drug Control Policy, Gil Kerlikowske beleives we have a War on People, not on things.  And that is the perception of people.  Indeed we lock up people, not drugs. As the former Police chief of Seattle, he experimented with treatment as opposed to programs that criminalized behavior. We may finally be seeing some rational thought in an out of control program.  We teach Theory of Organizations, and for good reason. 


    But be on guard. The head of the Fraternal Order of Police said that's fine but he does not want to see it done the expense of law enforcement. What does that mean?  It means that he does not want to see the endless stream of money to bolster departments in a war that will never be won which of course insures a continuing supply of money to expand police departments. 

    It will probably take a couple of generations to begin to defuse this madness. More likely Obama has concluded the same thing about marijuana et al that FDR did about alcohol, it would be much easier to regulate it than outlaw it. And with a lot less loss of life. 

  • Professor Elam

    Black Swans Ahead

    Black Swans Ahead

     

    We
    recommend Malcolm Gladwell's Tipping Point as well as Outliers,
    add Nassim Taleb's  Black Swan.  The reader will be on
    the  way to understanding just how dangerous  this environment can
    become. For centuries it was believed no Black Swan existed, then one was
    discovered in Australia. 

     

    The
    point of these best sellers is that CHANGE, as the administration likes to say,
    can start from seemingly insignificant events. 

     

    The
    Titanic does not allow for lifeboats as the ship will not sink, on the maiden
    voyage a speed record is attempted, the ship scrapes an iceberg, well you know
    the rest. Lean the cookie tray one degree too far and the cookies fall to the
    floor. Deny the existence of black swans, and whaddya know, the earth revolves
    round the sun not the reverse. The earth is round not flat. What is good for GM
    is good for America, should we all go bankrupt and  presumably come out better for the experience?  Indeed
    this last bit of syllogistic logic is apparently where we are now. 

     

    Unions
    support losing Presidential candidates for decades and finally hit gold with
    Obama. 

    Now
    as George Will points out, the Federal Government
    demands that a bankrupt California pay high wages on a union contract, no
    matter the money is not available. 

     

    In
    a similar vein

     

    Phil
    Gramm, as he leaves office,  sponsors the Commodity Modernization Act as a
    pay off to the finance industry. It repeals Glass Stegall that prohibits banks
    from engaging in the securities business. This 1930s legislation was one of the
    remedies to prevent risking depositor money in risky financial markets. 

    Republicans
    and Democrats benefit from contributions from Fannie Mae and Freddie Mac.
     

    Believing
    all mortgage paper is insured, the entire financial community begins leveraging
    'guaranteed government paper to reap even greater returns, why not borrow to
    buy a  'can't fail investment?' 

    Community
    organizers and the Attorney General lean on banks to make more loans in
    'marginal' read disenfranchised communities, forget the down payment 

    Markets
    go into an upward parabolic swoon, Wall Street types are making millions for
    shuffling paper, real estate appraisers get the wink and nod to inflate values,
    the value of the paper shuffled rises accordingly as does everyone's take 

    Where
    to get the money, borrow short term in the commercial paper market, previously
    reserved for inventory of hard assets, short term debt becomes the  ATM
    financing long term promises of mortgage re payment. 

    The
    Tipping Point is reached.  Richard Fuld, a Governor of the regional New
    York Federal Reserve Bank collects $300 M as Chairman at Lehman, Lehman
    collapses the next year, Fuld resigns both jobs, FNM and FRE collapse as well.
     

     Numerous
    Tipping Points await.  California is  our largest state, perhaps
    number eight or ten in the world, were it a country. Alas, California  is
    not North Dakota. A failure to pay by California will ripple the municipal bond
    market in a way the Administration has not imagined.  CA already is
    issuing script, play money, for state income tax refunds. 

     

    Chrysler
    bond holders are not assured of repayment, will anyone invest in Michigan again
    as actor Jeff Daniels pleads just that on television?

     

    Ten
    states account for 75% of all mortgage foreclosures. Required bank capital is
    3% not 10%. Borrow ten to one  to
    buy leveraged paper and three percent is a flash, not a tipping, point. 

     

    The
    government leans on GM which leans on the solvent dealers and suppliers
     who lean on, well, gee, who is next?

     

    The
    seeds of the New Civil War are being sown, the solvent states versus the
    insolvent. Here in San Antonio Minnesota based Medtronic is opening its newest
    medical operation, hiring 1400. Is there any question why it is in Open Shop
    Texas rather than Union Shop Minnesota?

     

    Lots
    of White Swans on our lake  could turn Black. This column  is all about preparing you for the next
    sighting of Black Swans posing as icebergs. 

     

    We
    invite your comments. 

     

    Connect
    with Dennis Elam at

    www.professorelam.typepad.com/markets

     

     

     

  • Professor Elam

    Chavez Naitonalizes More Oil, Foreign Investment Wanes

    As Hugo Chavez continues to blame his problems on foreign investors, his expropriation of their property continues. Jim Rogers predicted it would end this way, when others were worried about the rise of socialist governments in South America he remarked that none of those programs would work anyway, sure enough, here we are.

    I suspect oil will peak this summer in the $60 range. Then oil and stocks sink again, that will be the real test of whether the Chavez types can stay in office.

  • Professor Elam

    Broadway Reflects the Mixed Mood

    ON the markets blog, http://www.professorelam.typepad.com/markets

    I called this a Socionomic Stroll Down Broadway. 

    I have written about mood and am trying to get you more focused on it. We are in the midst of a Wave Two up in the stock market, mood is up from last fall. It won't last long. Grasping this down up and next, down again, of the social mood will be important in your ability to navigate what will happen the next few years. Right now the Administration is riding a typical Wave 2 up in popularity after the disastrous fall, easy enough to blame that on Bush. But what to do when the markets turn down again by fall? 
    Plan your future based on the overall mood swing now. Here is an example of how a musical is 'in tune ' with the times. 

    Socionomics is a social theory postulating that social mood drives markets. The mood changes then the markets change. Indeed how else could we have seen such a dramatic reveral March 10?

    Social mood is on display in things that entertain people such as movies, music, and drama.  To be successful an art form must collide with the prevailing social mood at the time. A full page ad for WICKED, A New Musical, in the San Antonio Express News caught my attention of such an intersection of art with mood in time and place. 

    We suggest you read the timeline at the site WICKED.  
    It traces the early failures and final success of Frank Baum in finally hitting gold with the Oz story after numerous life failures. 

    but our focus is more current. A new novel re invented the story line in a manner politically correct for the 1990s. 

    Picture 7 

    The novel was early.  Animal rights was in tune but fascist figures would have to wait a bit. 
    The story hit Broadway at precisely the right time to resonate with the mixed emotions of the stock market in late 2003. 

    Picture 8 
    The DOW was picking itself up off its post 9/11 low below 7500.  It had fallen from the all time high in March of 2000 at 11,500. A this point the story has been written to describe the actual origin of both Good Witch Glinda and Bad Witch of the West. Both start out as young girls but are affected by,  as George Lucas put it in Star Wars, different versions of The Force. And so the story becomes the perfect metaphor for the time. The Good Bad stock market have finally crashed and along with it hopes of the Baby Boomers.  Which will prevail the good or bad witch?  The musical is now touring the USA, and again the market is, you guessed it, coming off market lows.  Presenting two versions of the same story it reflects the social mood.  The mood is now upbeat, favoring musicals in general, but not Oklahoma, rather a Witches' brew. This is the stuff of all classic good and evil stories from Beowulf to Sherlock Homes (Holmes versus Moriarity) to Star Wars to Harry Potter. Dorothy in the story is essentially orphaned for her time in Oz just as Luke Skywalker and Harry Potter are orphaned. 

    How well did the producers connect with mood, well this clip says it all. 

    Picture 9 

    Now on national tour, appearing in major cities, if the run completes before the corrective Wave Two up completes this fall, the producers will have timed it perfectly. 

  • Professor Elam

    Ethical Games

    In ethics class I handed out an article detailing how the chair of the New York FED and former Goldman CEO had made over $2,7 M  buying Goldman, now a bank, shares while the government was indeed trying to save his former firm. He has now resigned, my post from the investment blog as follows. 

    It is important to read globally, here is an interesting article from the UK.

    Just last evening Saturday Night Live was lampooning the Stress Test of US Banks.  The fact taht mood could change so quickly from panic in October November to hilarity in May shows just how emotional market mind sets can be.   Certainly the situation has had its hilarious moments among them

    • Tsy Secretary nominee to be in charge of the IRS has not paid his own employment taxes
    • Numerous, and we emphasis numerous, other nominees are in the same boat, where is Joe Biden to remark that paying taxes is patriotic
    • Both parties blaming each other for the sub prime mortgage crisis
    • Jeff Skilling of Enron fame sits in jail while Franklin Raines who made $160 M at Fannnie Mae prior to its meltdown is as free as is  Fuld who made $300 M at Lehman, where is the justice, Skilling no doubt wants to know!
    • Did you know that NY  Fed Chairman Stephen Friedman, former Goldman CEO, observing the efforts to save the banking system managed to purchase enough Goldman shares to now have a $3 M paper profit on one of our newest 'banks?' He is now stepping down to be replaced at the FED by, are you ready, an AFL CIO exec, an organization famous for its private sector vigilance…but as Stephen says, he saw nothing wrong with what he did and was going to step down anyway, did we mention he was a Bush adviser….  

      

  • Professor Elam

    Another Semester, What Did you Learn?

    Success is doing fifty small things well. 

    Failure is doing fifty small things poorly.

    Chrysler which should have married Mitsubishi, now begs Fiat for the courtesy of purchase. 
    Circuit City is kaput. 
    Fifty small things done  poorly.

    We are told that group exercises are the way to go and so there are more and more of them. 
    Yet it is known that both the giraffe and the zebra were committee products. 

    Picture 1 Faberge designed his own eggs for the Czar and Michelangelo painted the ceiling of the  Sistine Chapel without the benefit of a second opinion.  Most people have never seen an actual Ferrari much less driven one yet  a unique creation of one visionary in 1947 remains the standard by which gran turisimo is indeed grand. 

    So, what have you accomplished?  Did you set some specific goals for the semester?  Are you progressing toward a measurable goal in your learning?  Have you set a Vision, Mission, Outcome for your self?  Indeed we worked on just that for the College of Business his past friday. 

    Only you can advance you, none of us can do that for you. 

    And so, what did you write this semester? Great papers or just good enough?  Did you nail down Chicago Style referencing?  Did you use the same book report for all your classes?  Did you read the blog, hit the hyperlinks, look up those obscure references from class, just wondered. 

     Your life is a canvas, you are the painting. 
    As Omar Kayyham observed 'the writing hand, having writ, moves on.'

  • Professor Elam

    Internal Auditing

    Your accounting professors are now focused on a particular niche for our University. This niche should be unique to our Mission, providing opportunities for an underserved portion of San Antonio. In addition it should provide realistic dynamic opportunities leading to significant career opportunities. 

    We believe that opportunity is Internal Auditing. 

    Texas A & M College Station has a specific Internal Audit Specialization. 

    UT Dallas has an even more extensive course listing in a similar Internal Audit Program. 

    Take a look at those links, examine the course offerings, and look at the internship possibilities. 

    I will be joining the local SA Internal Audit Association.  In fact I will deliver the program  at their noon meeting Wednesday July 8. 

    Internal audit is perhaps the fastest growing segment of the accounting profession. Internal audit is all about identifying risk and putting controls in place to minimize that risk. 

    Learn more about the Certified Internal Audit CIA exam by clicking on this link. It is number two in participation behind CPA.  

    Frankly we see many more of our students becoming internal auditors than joining an external CPA firm. 

    Let any of us, Professor Green or Vasill, know what you think or what concerns you may have. 

    We may have to gain independent status before we can add courses to satisfy the requirements. We are on our way to the 1500 FTEs, it won't be long now. 

  • Professor Elam

    What Me Worry, Stress Test?

    Stress tests on the banks will be revealed thursday afternoon after the stock market closes. 

    On the one hand the govt says none of the 19 big banks will be allowed to fail, so what's the point?

    As George Will points out this is a violation of the 1866 law against publishing bank audit results, the reason is that it raises fear of bank failures and might start a run on the bank. 

    Meanwhile the WSJ reports Bank of America migt need to raise $34 B, hmm. Friday morning should be interesting in the markets.  

  • Professor Elam

    The Recession is Over?

    Two economists apparently think verything is hunky dorey again.  

    I think they are confusing a bounce with a recovery. But the way the govt is playing fast and loose with numbers it is a b it difficult to tell.