Wednesday, January 28, 2009

One Smart Wife

I am married to one smart wife. LuAnn is one of the smartest people I ever met. We hit it off instantly when we met and just wanted to know more. I couldn't ask for a better mate for life.

We both love our farm forums. For me it's NewAgTalk, for her it's Women in Agriculture. Some of us DH's, that is short for dear husbands like to sneak over there and see what the ladies are talking about. Usually though we try to stay away, that is their space.

She read to me her expose in reply to another farm wife on job lay off's. She never ceases to amaze me even though she is extremely intelligent and perceptive and an English major.

In a response about the Big Three Automakers, lay-offs, and the economy she said "I would like to comment on one of the main reason's that the Big Three is in so much trouble. My non-profit does sub-assembly work for a Class A supplier to two of the Big Three plus Honda and Toyota. At the risk of offending the pro-union folks, the labor overhead for the Big Three due to unrealistic union contracts for both active and retired is $77 per hour. Honda and Toyota's averages $44 per hour.

I remember my parents admonishing us kids to buy American made cars instead of those foreign pieces of junk. I have never owned a foreign made out of loyalty to my country mainly. But I will tell you this, unless those unions make more and deeper concessions, the Big Three will go bankrupt as soon as the govt lets them. The bailout was a mere bandaid where a tournequet was needed. The bailout only delayed the inevitable. The Honda and Toyota plants, as well as their suppliers are virtually union free. They will weather this and when it is all said and done, there will be American made cars (due to the improving value of the dollar) but the companies will be owned by the Japanese.

Until I took this job, I had absolutely NO experience with the auto industry. None. I had no manufacturing experience. I have had to learn a great deal about the industry since our sub-assembly contracts that provide the work component for our participants has been largely automotive. The two suppliers that we work for are Japanese owned. The work ethic is based on a buy in from the top down. The cleanliness of the facilities is second to none. Their view of their environmental responsibiltiy is clear and well-demonstrated through action. I have a whole new respect for Japanese auto companies. It is very likely that, even if the Big Three (or One or Two) is still in existence when I need to buy a vehicle, I will buy a Honda.

With that said, regarding the question about spending habits and consumer attitudes, not much will change. I charge everything and pay it off each month. That way I take advantage of my points earned and I don't have to carry cash. We have always been fairly conservative about our spending, buying pretty much only what we need but buying the absolute best we can afford when we do make a major purchase. I hate to buy junk. I never have been a WalMart (or any other big box retailer) fan due to how they have changed the landscape of so many small towns and villages when they came in and drove out small family owned businesses. We would rather spend our money locally and in privately owned businesses even if it costs a bit more. You tend to see that attitude around here which is very differnt from the suburban areas where the parking lots of the big stores are always full. Perhaps that is due to lack of choice?

We are very conscious that my job, and that of my son who works in the automotive industry, is more vulnerable than health care or education or public service professionals. However, I am also aware that if the mammoth layoffs continue it is going to strain or drain those sectors. Our local hospitals are in danger of bankruptcy due to the increase in the number of hardship cases from the people who lost health insurance with their jobs. The towns and villages are laying off across the board including safety related positions due to the decline in tax revenues. And schools are cutting costs any way they can, including teacher layoffs.
I just have one question.....As a business woman, I have to look one to three down the road (anything longer than that is nothing more than wishful thinking), carefully monitoring cash flow. How is it that these towns and cities, school districts and companies, ALL OF A SUDDEN, (since the early fall 08...what? four months ago?) are going bankrupt.

Were they running so close to the edge that they had no cash reserves, leaving them nothing to weather a 6-12 month recession. If that is the case, then they were top-heavy with labor a long time ago. Shame on them. Either they are paying too much to workers or they have too many workers. Labor is pretty much the only variable that you can manipulate to get into our out of a bad situation. My costs for utilities and occupancy are somewhat volitile but carefully managing labor costs can give you wiggle room when a disaster hits. Why weren't they monitoring cash flow and making adjustments way back in early 2007. I don't know about most places but I have to provide my board with an annual budget and cash flow projections along with an analysis of cash reserves....

I can think of numerous cases where labor costs were just out of control. We have a firechief in our small city making over $100, 000! That is absurd. We have three assistant principals, three principals and a few curriculum developers each making over $80,000 in our small rural school district where, a few years ago, the kids were better educated under an administration of one superintendent, three building principals and a committee of teachers who did curriculum development.

We created this mess. It is greed, it is an entitlement attitude, it is unrealistic expectations of young people who don't want to start in a modest home and work up. It is marketing and media that have convinced us that we need $100 jeans and a baby needs a $1000 crib. I have seen this stupidity up close and personal.

It is our politicians....whatever happened to statesmen?(I have been asking this question for years...)

It is our "I want it all and I want it now" attitude, it is our mistaken belief that we are "paying" for an item with our credit card. Notice the subtle marketing maneuver? It is all catching up to us and I sure don't know anything that is going to stop the bleeding.(I told LuAnn a tourniquet wouldn't stop this knife wound cause d by greed of the exec's and unions)

Unfortunately, we did away with our economy that was based on production (sent that all overseas or to Mexico) and we based our economy on service and consumer spending...well guess what folks, when folks are told long enough that the economy is bad, they stop spending, no economy. It used to be that our production-based economy could weather a recession where people tightened their belts but no longer. If we need consumers spending big to get us out of is going to be a long can you spend when you are unemployed and have no money coming in?

Several of my board members are older experienced manufacturing men who are very knowlegeable about the manufacturing sector and our economic relationship to China and other countries. They are telling me don't look for anything to improve until (at a minimum) second Q 2010.

This is all my not-so-humble opinion of what this mess is all about."

On Market Talk, our well-respected poster Senior Citizen says " GM has a negative net worth & some unfunded pensions. If it were an ag enterprise, the banker would have had it on the auction block months ago & any guarantors would be facing $37 billion deficiency judgments & after the auction those judgments would most likely increase a couple hundred billion. GM is DEAD...Chrysler & also FORD...the new environmental changes will insure such & while they might subsist another year on the gov't is over. Even under the so called Govt salvage...a lot of jobs will soon disappear.....part of the waxed toboggan ride I refered to I might add, some board members similar in thought and appearance to the "Lost Patrol" comic strip which used to be in the newspapers."

Doesn't sound too good for the Big Three. Point is, when everyday citizens are smarter than elected officials, CEO's and Union bosses, what can we expect?

We have met the enemy and he is us!

I will focus on my smart wife and my daily problems of balancing our own budget here on the farm.

I wish others would do the same!

Ed Winkle

PS How do you like my picture of the Big Three Automakers? No one is serving as referee!

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