The point I am trying to make in the last few blogs about for example VW’s fall is that when someone, something , some trend seems never ending and invincible, that is about the time the trend turns

Consider these changes in my lifetime

Sears-Where America Shops
Woolco, K Mart, Gibson’s in Texas, now WMT mid life crisis, JCP back from the dead
TGT looks good now but can they keep up this torrid pace of expansion, by the way, what happened to Mervyns?
Polaroid-had the entire instant picture business, lost it all in a few years
Kodak had all the film processing and lost it in a few years
Nikon was and stil is the premier camera maker, did not fail to see digital coming
RCA was the tech wonder of the 1920s and even the 1960s but now just sells tvs made by someone else
Xerox-had the entire copy market, patent runs out, loses out to Japanese
Remington Rand, Smith Corona, Underwood-typewriters and office equipment, all gone now
Lands End was a dot.com aka catalog retailer, now lost in Sears shuffle, Sears does not know what to do with it
Playboy, famous trademark and icon of the 70s, now virtually a non profit
Computers-Univac becomes Sperry Univac becomes Unisys which is still check processing
IBM misses the software issue, stock drops 75%
Wang, Commodore, Epson, Packard Bell, Gateway, Control Data CDC,  This is one tough business
Texaco, Unocal, Gulf, Getty, all gone
Soviet Union, the sun never sets on the British Empire, France, all gone in terms of colonial power Soviets now sustained by high oil prices and mob activity
GM down from 50% market share, is this the end of Chrysler, Ford well who knows
How could we compete with Japan in 1989 then their stock market fell 80%
NASD 800 to 5,000 to 1250 to 2500 all in one generation

Managerial accounting is all about exmaning process to maintain market share and competitiveness
As Paul Samuelson observes most proprietorships do not outlast the proprietor, and that can be true for big business too

Honest, Michigan Gov Jennifer Granholm appears on a video at the Shanghai Auto Show. She is exhorting, ah er ahm, China? to invest in Michigan.  Or I supposed anyone that wants to invest in Michigan. I have mentioned that Michigan now ranks Number One in losing jobs as a state. They have hired Jeff Daniels, Michigan native and actor, to pitch the state on TV commercials.  Winding Road noted that no one was manning the boot, clearly a breakdown in unionized activity….Now this is what I would call globalization, Detroit goes to Shanghai.

Wacey quoted yours truly as saying that VW was trying to make a comeback with its current Yaris type ad.  I did a Google and came up with this chart for Year 2005 sales in the US.  Click to read the results.  VW is 19th of 20, ahead of Saturn. 

I agree with Wacey that all german cars have the great driver feel to them, I owned several Audis back in the late 70s and early 80s before the prices went sky high.  The irony here is that it was VW that was finally successful, after American Motors, Kaiser, Isetta, were not, in selling Americans on the idea of small thrifty autos. They even picked up on the great mini transverse front drive layout in the original rabbit.  But today they are but a shadow of their former selves. I see the current ad campaign as a retro back to where they started.  The GTI was one of the great modern pocket rockets.  And of course the VW micro bus was the original mini van, gee, another great idea they failed to capitalize on.  But the VW bus was the vehicle of the hippie generation, it was Chrysler that convinced those hippie parents to buy Chrysler instead.  The lack of air conditioning and a motor at least half the size needed kept the VW bus from going anywhere, well, so to speak. 

That is the story I am trying to convey to you.  VW got it right

with the bug, owners adored them

With the VW bus, the original minivan before Iococa ever thought about it (and of course vehicle of choice for Arlo Guthrie in Alice’s Restaurant…..)

rear air cooled configuration that led to the Porsche, but failed to offer a really sporty lower cost alternative to Porsche, the Karman Ghia was a no go sorta showboat, never even had a tach

Rabbit, great idea but terrible quality control with the intro model

Missed the entire sports car thing Datsun 240 260 280 Z, Mazda RX 7, Mazda Miata,

Dropped the ball on sports sedan-BMW 1600 now 3 series

All brushes with greatness and now number 19, gee it is tough to stay a leader

Click on Wal Mart to learn the latest about how smiley is now frowny face.  Gee just yesterday everyone was worried about WMT taking over the whole country, now they can’t seem to compete with TAR SHAY!  This is a business in its mature phase, lots of good managerial accounting points in the article, notice how the bottom 100 stores are not doing nearly as well as the top 100, I guess like MCD we can’t endure the indignity of actually closing poor performing stores to raise the results of the rest.  Would you?  For that mater, why are they still opening new stores?

Again success if fleeting, oh WMT is not leaving us but the stock is no only not doubling every few years, it is stagnant, like MSFT.

While this BW article calls it Stupid Accounting Tricks I would say it is emblematic of all the stunts we have seen in the corporate sector. We study managing earnings in accounting. Now candidates are managing everything from contributions to attendance.  For exmaple, knowing how much money was raised the first quarter put the pressure on to show lots of contributions by March 31. And so Obama’s grew from about 650 to over 3,000 in one day, counting postmarks and pushing at the last minute, he said.  I am not picking on Obama, it is across the board in both parties. 

It just goes to show that folks will  strive to make the numbers work for them, statistics don’t lie the saying goes….

Believe it or not, the ‘car’ pictured at left is an Isetta, OK that is the easy part to believe,  Now would you believe that making this ‘car’ kept BMW no less in business while it worked on the fore runner of the BMW 1600?  Yep BMW was in such bad shape after the war and Europe was so poor this worked.   More detailsin this article on Isetta made by various manufacturers before BMW.   By the 1960s VW had an incredibel 10% or the USA car market. I say incredibel because, and again you aren’t going to believe this, instead of gasoline lines, we had gasoline wars.  Occasionally one oil company would try to get more business by lowering prices to or below cost in a ‘gas war.’  While prices were typically 36 cents a gallon, this would take prices to the low 30s.  And if you got a fill up, usually ten gallons or more, they might throw in a set of free steak knives or at least a dollar a set.  My point being that with gas so cheap economy was  tough sell.

American Motors with its Rambler and Jeep and VW were pretty much the small car market.  VW had 10% of the market advertising that its car used pints of oil, not quarts.  Frankly the car was pretty awful, it never offered factory air conditioning and with the windows down, the buffeting at 60 mph was awful. Its popularity peaked in the late 1960s. The extremes of operating temperature of its air cooled engine doomed it to extinction once air quality rules came in.  American Motors was bought by Chrysler which kept Jeep and the factories and junked the rest.  American Motors did not have the funds to re tool for the new compact front wheel design that VW used in its new Rabbit and Chrysler used in its K Cars. 

The best American could do was quirky rear wheel designs featuring its old in line cast iron six like the Gremlin.  Quality problems with the Rabbit introduced in the mid 1970s took VW way back down in the import rankings form which it has never recovered. It is currently trying to trio of cars priced about 15-16K. 

Meanwhile in the 1968-1970 period Toyota brought over its Corolla and as I mentioned  a couple of posts back Nissan had the immensely popular Datsun 510.  Honda had started with a tiny car that actually featured its motorcycle engines.  The big breakthrough for Honda came with its first Accord in 1976 that met US emission standards without a smog pump via clever engineering Honda called CVCC.  This established Honda in the American mind as an innovator and engineering leader.  All three got great gas mileage and were essentially bullet proof designs needing little repair.  Nissan and Toyota did the same thing for small pickups, another market ignored by Detroit, and got a loyal following with again near bullet proof designs and reliable 4 cy engines. 

GM gave VW a go with the Corvair , an illfated rear engined design.  Its rear swing axles became the foder for Ralph Nader’s Unsafe at Any Speed, instead of re design GM famously hired detectives to follow Nader around to ‘get something on him.’  Ford himself in Iacoca’s book derided small cars saying ‘small cars, small profits.’  Its Falcon was simply a small Ford with no real engineering innovation.  All these cars got eclipsed by the muscle car (GTO, Chevelle, GTX, Roadrunner) and pony car (Mustang, Challenger, Camaro) contests which were only possible with the cheap gas of the time.  That 1965-68 phenomenon ended abruptly with the 1971-2 oil embargo and the move to emission standards in 1968.

Which takes us to today. KIA has carved out the low cost leader with its RIO. It’s weight is about 2400 pounds with the 1600 cc (90 cubic inches).  In my 40 years experience with everything automotive that is pretty much minimalist to get both good mileage and enough power to be out on a  highway. Renault trried it again here with a 1400cc engine and finally failed.  Probably the most innovative was the Suzuki made GEO line sold by Chevy here in the late 1990s that featured a 1000 cc three cylinder engine.  Those cars would actually get 35 mpg and up.  As to Matt’s suggestion of 80 mpg, well physics is physics, you kow that mass times velocity thing.  The Logan has a 1400 cc engine. And if you want power robbing air conditioning and power steering, you are either going to have to sacrifice more weight and size, a dicey proposition in a world of 5,000 pound pickups.

I think an alternate solution is different vehicles for different purposes.  This Kawasaki Mule is powered by a 600 cc (36cubic inch) engine and costs $5899.  Kawsaki could certainly put an alternator and turn signals on it as they do with their motorcycles.  Governments run these things around parks and up and down urban streets. Why can’t you and I?  The answer is that the Govt will let itself run these on the street but not you and it. Looks like it would be fine on suburban street going a mile or two to the grocery or cleaners or the golf course. NO it won’t work on I 20 but most short errands are not down I 20 anyway.  One hardly needs a 5,000 pickup to go to HEB but that is what we are doing. 

Isettas, VWs, Corollas, GTO, Buick Electra, Dodge Ram Pickup,  Rabbit, GEO, KIA, Logan, gee goes around comes around.

Jason noticed that NIssan is eyeing the under 10KL car market.  Well boys and girls (here he goes again, sigh) years ago about 1968-69 I wandered into the BMW Nissan dealer on Lamar in Austin Texas. I could not understand why the Datsun 510 with the same basice tech specs was about $2500 and the BMW 1600 was about 3500-4000.  The salesman thought of course I simply did not appreciate German engineering. Well that simple car put Nissan on the map, and later the 240 Z in 1972 really got things going.  A similar Sentra 2.4 L is more like 18-20 grand these days to I expect we will really be going down market for a 10 K car though clearly  the KIA Rio has the inside track at the moment.  This will take everything we have learned in cost accounting and then some.  And so it’s back to the future of the old Model T, the VW Beetle  the Datsun 5140 and the Toyota Corolla, let the games begin, we should all be the winners.

Matt asked a good question in the grad class, here is the exchange from the blog in case you missed it.

I understand the content of delivering a good presentation, but on the note I would like to point out that though she was disappointed in our attire, the presentation was designed for an informal dress, meaning that we could still deliver the same quality presentation, but not have to dress up for the presentation. I think we all know and understand that our appearance is the first selling point and had the presentation been designed from a formal standpoint that we would all have dressed more appropriately for the occurrence. My question is, are we making this next presentation a formal dress or not?

Posted by: Matthew Moore | April 18, 2007 at 09:39 PM

Matt

Good question. And you are quite right, I have certainly not had anything to say about dress. I scheduled the class for Saturday morning hoping that would improve the state of mind versus one of those truly awful weekday 7-10 or 6-9 classes after everyone has been at work all day. One might look better coming from work but it the prospect of another three hours certainly does not make anyone feel better. I nvever expected anyone to dress up and again, have not said so.

My PhD was in a different field than my BBA or MBA. What I really got from that is the existence of multiple views of the same reality. I think therefore it is interesting to have someone totally from the outside with no previous knowledge of the setting for a comment. And, face it, Ariane is female, and manner of appearance ususally carries more importance than with us guys. Though the females in our class have clearly sided with the Fruit of the Loom maxim, the best things in life happen in comfortable clothes, and I agree, that was not Ariane’s view. I don’t think the clothes themsevles matter as much as the preparation and delivery. For example, being a radio DJ requires an excellent voice delivery. But Julie Rich, the best the Permian Basin had to offer, wore sweats to the job and said all her other DJ friends did as well. The listener could not konw the style of radio dress, but one could certainly tell the style of delivery. And I can tel you that I witnessed mothers bringing young girls, under ten, to live remotes that we had just to get Julie’s autograph or meet her. They got their impression from Julie’s delivery and enthusiasm on the radio. (Julie was half the morning drive time show on KFFM radio which fell to my name as a bankruptcy trustee).

I would say my disappointment has not been in the style of dress, OK Jason probably should have taken off the ball cap, but the lackadasical method of delivery. As she said, no one has even bothered to show a single video clip from any movie, we have technicals in the classroom comparable to a modern tv studio compared to what we had when I went throgh. But more than that, only Stephen Davis who reviewed HUD has showed any passion for the presentation. The whole world, like it or not, watches Hollywood, There are entire networks and magazines devoted to what stars are doing. People make a living, indeed are idolzed themselves, as movie critics. The cinema is studied as an art form much as music, literature, sculpture, or painting. Yet we have had reviewers report that they really didn’t care for their selections, so why didn’t they pick another one. Folks get promoted and famous for a passion about what they are doing, not for commenting that thank goodness it is Friday.

Indeed I have heard excuse after excuse that folks don’t have time or the energy or the inclination to do this. Ariane was simply stunned that anyone would say that. And on that point I do agree with Ariane. When the person employing you has what they think is a great idea, you had best jump aboard or hop off the wagon. Indeed, we have a new President at UNT simply because the last chap did not embrace the idea of UNT Dallas. I don’t think many of you would still be around the job if when asked, as Ariane pointed out, you replied that you did not have the time or inclination to be involved with the boss’s project. This is not a matter of appealing to my vanity but a very real world test of attitude and expectation. Which come to think of it, Ariane made a post on the blog. Yet only three or four students out of a couple of dozen have done so this week. What are you thinking? I had the class read How to Win Friends in the Prof Develoment Class. And several of you have read it for this class. Ok, now, thought put into action. How many of you have sent Ariane an e mail either last semster or this? I would bet $1,000 that no one has. What did Carnegie say about influencing people? Again, what are you thinking? Did you think she would ask to see your journal entries from a homework assignement?

Ethics has been a centerpiece of thougth ever since Socrates posed the question, How Shall We Live? Just last week I heard that the operator of an Optimist Day Recreation Facility, in Arilington, presumably for after school kids, had taken the money for personal use. Hundreds of individuals at DISD have used the public trust and money for personal use, yet seek innocence in the defense that everyone did it. The Lancaster ISD cannot balance its books yet seeks over $100 M in bonds to spend. Should we entrust them with eight figures? Is Don Imus worse that all the rappers spewing disgusting lyrics and living the lifestyle of the rich and famous as a result? Was Sandy Wiell worth $200 M he made from Citicorp options? I don’t pretend to know the answers to these quesitons but they certainly define our time more than a debit and credit entry in accounting I thnk and that was the reason for the assignment.

April Young brought an article in the WSJ to my attention. Firms must estimate how much they will pay in income tax to estimate how much net they earn, ie, avaialable to common shareholders. Well, as we have seen in INTERMED II, that depends on the charge for options exercised. Well that depends on how the stock price does. This dog is really chasing its tail.  This is such a good article and if you have the WSJ, Page C1 of April 16, 2007 Tech Titans Tax picture is Clouded by Options. This is another good example that calculating income is a matter of estimation. 

UT Austin has garnered writing and corresondence concerning David Mamet.  Click on the hyperlink to learn what David has written that you have probably seen or read.  Glengarry Glen Ross, on my list of suggested movies is among his writings.  The Harry Ransom Center at UT Austin has been particuarly aggressive in adding to its historical collectin of documents. 

Yes I teach accounting but an appreciation for the cinema that I think has been an uniquely American art form in the 20th century is also something I hope students get from my classes.  A tip of the hat to Jason Raper for bringing this to my attention.