Why your auto dealer wants your car to break, and that's a bad thing.

"The Saab 9-2x was a huge mistake for Saab. It was not the type of car that a Saab buyer wanted, so it didn't sell. And, it was bad for dealers because it didn't break."
-- Actual quote (paraphrased) from two disparate organizations from within the Saab dealership ranks

I ask you to let that sink in for a moment. Say what you will about the relative merit of the 9-2x (I happen to think that it was a fine automobile), it's the second part of the quote that has my head spinning. Your dealer wants your new, warranted automobile to require repair. Your dealer actually relies on the revenue derived from those repairs for their survival.

I hear you say, "Yes, but most of the repair costs are born by the OEM." True, but do you want your car to spend time in the dealership garage? Do you want your car to fail? Most sane people would answer, "no".

The truth? If an automotive OEM such as our beloved Saab were to build a nearly faultless automobile, dealers would hate the thing.

It is hard reality that automobile dealerships in North America (and elsewhere, I presume) see your malfunctioning vehicle as money in the bank. Many of the large dealers employ highly-paid commissioned sales people as "service writers" that have incentive to sell services that you may or may not need. I've had my share of run-ins with service writers over silly extras that do little but fatten the corporate coffers. Fortunately, none of my bad experiences were with Saab dealers.

Before I'm misunderstood, please hear me out. I'm not saying that our dealers are bad people, nor am I saying that they don't act in the interest of the consumer. Most (nearly all) Saab dealers get very, very high marks for taking care of their customers. Many of our dealers are to be commended for searching high and low for new ways to accommodate Saab owners .

I also don't begrudge any of our technical wizards their payment. The experts assembled at our dealers cost money, and they deserve a profit for timely repairs. Their services are necessary, valuable, and generally worth the premium that they charge.

So what, exactly, am I saying? It's my position that our desires as owners and the wants/needs of our dealers aren't aligned. We, as owners, want to stay out of the dealer garage, but our dealers absolutely need a garage full of cars for revenue and survival. I'd like that to change. I wish that our dealers could profit while keeping our cars on the road rather than in the garage. In fact, I believe that it's a matter of critical importance for the future survival of any brand, including Saab.

Saab and other brands already face more and more competition building better and better cars. Cars that will require fewer repairs. Ads from Japanese OEMs already trumpet their reliability records. At some point, an over-confident or desperate brand (Hyundai?) will begin to compensate owners for trips to the repair shop during the warranty period.

So, how do we manage to align dealers and drivers?

I propose a simple solution in the beginning: have the OEM share portions of the unused warranty reserve to compensate the dealers for lack of reimbursed repair business. It's simple, but it's not sustainable. Over time, the warranty reserves will shrink to make the company more competitive, and, of course, the need for the repair shops will shrink, too.

I'm sure that there are other ways. Let's start thinking about it, at the very least. My two cents.

Counterpoint - Why GM isn't as bad as you think they are.

Well, for the past six or eight weeks, perhaps longer, there has been ample negativity around SaabsUnited aimed at General Motors, or, as they are now officially named, Motors Liquidation. I use that new name for a reason. They have a real problem on their hands -- they don't make a profit. In fact, they've made loses for several quarters in a row. How far back this streak of loses goes it's hard to discern. Corporate entities make sport of accounting at times of reporting and disclosure.

GM is certainly culpable for a lot of things. They've been at best negligent in their handling of Saab from the beginning. The General isn't exactly known for subtleties of design nor marketing, preferring to blast by the other car makers in Corvettes with huge supercharged V-8s, Hummers that weigh 6000 lbs. and Cadillacs dripping in chrome. I still shudder when I remember all of the times I've heard Bob Seger screech "Like a Rock" during Chevrolet truck commercials. It's in the 10,000 range, minimum. I'll never own a Chevrolet truck for that very reason. They are, in a word, fallible.

GM is certainly maladroit at times, too. This week's announcement of a consulting contract to "wind-down" Saab on the day after the prospective owners were to formally submit bids for Saab is a prime example. Commanding Saab to cover the plug-in hybrid capabilities to be built into a Saab concept vehicle was a little over-the-top, too. You'd think that a company would have a coordinated development plan that would have had the Chevy Volt team and the Saab team aligned to work together, wouldn't you? My personal favorite was last month's conference call Q&A on the subject of Saab's wind-down. So many laughable moments, so many cracks in the spackle that it fell over under it's own weight. All topped off by trio of tweeting Twitterers live-blogging the call who misspelled "Sweedish" twice and insulted the intelligence of most who were paying attention.

Believe me, I too, marvel at the train wrecks that GM trots out for us seemingly daily. They are in many ways acting just like the wounded beast that they are.

That's when it usually hits me: These people are doing what they can in this extreme circumstance. That is, Motors Liquidation (nee General Motors) is wounded. They, to some degree, should be expected to act this way. People under pressure make mistakes. Organizations under stress don't always coordinate like they should. And, believe me, they are under serious stress. GM is a wounded beast.

"So what?" I hear you ask. "Am I supposed to feel OK about GM's miscues simply because they're currently mistake prone?" No, I don't expect you (or me) to feel better about the current situation. It's not good. Saab is in dire straits. However, I don't feel that GM is being malicious, nor do I think that they are inherently evil.

Here's my point: I'm weary of wild, flailing accusations about Motors Liquidation/General Motors by Saabisti and car lovers everywhere. Generally, these are the ones to which I refer:

"GM is just a bunch of greedy, money-grubbing stiffs!"

Yes, they certainly are. They must make a profit just as any other company does. For the average person at Motors Liquidation, they are praying that their nest eggs, which are tied up in worthless GM stock, will sustain their families through their retirement years. Their lives hang in the balance just like any worker at the Saab plant in Trollhättan. Yes, they need the money. That's how all car companies roll.

If you want to talk money-grubbing, we can certainly change the subject to talk about the margins on a Porsche or how Daimler abandoned the Chrysler Corporation with a quickie divorce after taking the V-8 know-how from Chrysler and the four-wheel-drive know-how from Jeep. That's classic greed if you ask me.

A sub-plot on this theme is that GM is "playing the market" to get better bids, create urgency to sell, etc. Yes, I, as an American taxpayer, hope that they are. That's what owners of assets do to sell them. Simply put: when Carlos Ghosn does it, he's a master negotiator, but when GM does it, they're the evil con men. It's all in perspective.

This is business, folks. It isn't pretty.

"GM is a bunch of short-sighted idiots!"

Yes, they certainly can be sometimes. However, if you look at their track record, they do some pretty darned smart things. The Chevrolet Corvette beat all comers in the most recent Car & Driver "Lightning Lap" competition. Competition that included Lotus, Audi and Porsche. The GM light trucks dominate several market segments. Their Korean and Chinese subsidiaries are selling huge volume. Oh, and while we're on the subject, Motors Liquidation sells almost as many cars as the largest car maker in the world even though it's wounded. They are not idiots at GM. They simply aren't. They aren't always smart, either, but they are no fools.

"GM just doesn't want to sell Saab."

I take Mr. Whitacre at his word when he says, "Show up with the money and you can have it." Liquidation Motors has to answer to a bankruptcy judge/tribunal/congress/whomever for all transactions! If you are bankrupt, you don't get to keep things or throw them away without a very, very good reason. You are obligated to make the most of the assets that you have.

It makes much less sense to shutter Saab than sell for the right price. Ahh… the mythical "right price". What is the "right price"? I don't know, but it's more than they've been offered to date.

Selling Saab means that Liquidation Motors/GM is yoked with someone else for a long time -- the life span of the upcoming 9-5 at the shortest period and probably beyond. This is much more than a simple sale -- it's more akin to a short-term joint venture with a buy-out clause. There is a risk and a cost associated with this arrangement from GM's perspective.

Finally, there is a certain benefit from closing Saab -- no more loses (at least on paper), other GM divisions can use the designs, some of the best people can be used to bolster Opel/Vauxhall, etc. That possibility is there, so any sale must bring more to Liquidation Motors/GM than those assets would bring if applied elsewhere. Simple math.

"GM's being cruel to Trollhättan and the Swedish people."

Well, since GM's Detroit-area operations axed some tens of thousands of employees, and GM closed 14 factories here in the United States before turning to Saab, I'd say that the folks in Sweden were given a few extra months (perhaps a year) longer than about 30,000 American workers. GM's been much more heartless here in the United States than in Sweden.

The rhetoric around SaabsUnited seems to be: "A job cut that happens to others is unpleasant, but a job cut that happens to me/Sweden/Saab is an outrage." Quite frankly it's unfair to GM/Motor Liquidation and it devalues he thousands of Americans that have lost their jobs, too.

"GM is completely directionless right now, they are adrift!!

Au contraire. Actually, GM's directions have, if anything, become more focused. Prior to the crisis, they had the bandwidth and capital that they were moving more or less in every direction at the same time. Bankruptcy has forced them to eliminate many of the less productive efforts. So, I think that most of the "directionless" claims should rightly be termed GM's simply not "going my way". There's a difference.

I could go on, but I think that you get my drift. GM deserves a heap of blame, but they are not worthy of the vilification they get.

Football time (Chicago style)

Overheard at Starbucks in Des Plaines, Illinois (near Chicago O'Hare airport).

Guy #1:...russian russian russian Wisconsin russian russian russian Green Bay.....
Guy #2:...russian russian?
Guy #1:...russian russian Brett Farve Green Bay russian russian russian russian Minnesota russian russian
Guy #2:...russian russian russian T.O. russian russian?
Guy #2: (Laughing loudly) T.O.? russian russian russian

It's Football time, baby! Everybody loves the NFL!

Gangster Government!

This is outrageous! Open corruption!

Jasmyne Crannick is on the money

In her short essay (really, I guess that it's a post to her blog?) Don't Hate the Player, Hate the Game, Jasmyne Crannick has it right: the entire system of government and finance is to blame for the outrageous behavior that is million-dollar bonuses for executives who have raised business incompetence to new historical heights. It's not that the administration nor AIG executives are to blame per se, but the system in which they play that is corrupt.

"Retention" bonuses of $1 million+? Are there that many jobs out there that pay this kind of jack? Would these people, who've proven to be ineffective and, in fact, contributed to the collapse of a corporate giant, immediately turn elsewhere for a million-dollar payday and find it? If so, I went into the wrong line of work! Even if this is real, how can we, the private investor, keep our money out of the hands of financial organizations that claim to "manage" one's money while doling out millions of it to these dorks?

I'm turning to a old favorite.

USAA. I am a USAA member, and I will be using them for the forseeable future for everything financial. Why? Because while everyone else was wringing their hands and asking for government money while allowing te executives to fatten their wallets despite poor performance, USAA distributed 13.5% bonuses to all of their employees regardless of rank, and returned over $500 million in funds to members like me through rebates on insurance policies and dividends on savings plans. Oh, and they are consistently near the top of the customer service ratings list for the Fortune 500. Come to think of it, I think that these two things are related -- they seem to actually value people and customers and follow through with their actions.

CNN Reports "Bank Presidents Flogged in Washington"

Oh, how I wish this were literally true. Bank presidents. Flogged. I think that you could televise the event and make back a fair amount of the bail out funds in advertising. Wouldn't you want to see John Thain beaten with his $1400 wastebasket?

It simply doesn't stand to reason that:

- Merrill Lynch, a dying bank, entrusted with billions in assets from depositors and due billions in bail-out funds, hands out over $3.6 billion (that's BILLION) in bonuses to their employees, including over $121 million in bonuses for the top four executives alone. Over 700 employees received bonuses of $1 million or more. Is there any believeable scenario that would justify any of these payments? These executives failed in spectacular fashion; why are they so richly rewarded?

- Citigroup, a problem child for the last couple of years at least, was about to take delivery on a $50 million corporate jet just after taking about $45 billion in government bail out cash.

- Morgan Stanley decided to use the $10 billion or so in government aid to gorge itself on aquistitions like the Smith Barney unit of Citigroup rather than use the money as capital for lending and the like.

Meanwhile, their "non-troubled" counterparts in the banking business that didn't need help because they had actually been, well, prudent, in the past are left to plod forward without the benefit of the massive orgy of profit without risk. How is this in any way right? If you were the CEO of FifthThird Bank or Huntingdon Bank, wouldn't you be livid right now? You've worked day and night to compete with these crooks while they played fast and loose with little care about the risk, but you kept things on the straight and narrow to preserve operations for the long term. Now the market hands your rivals their comeuppance and they still have the upper hand due to the government bail out. It isn't fair. It simply isn't.

Shoot, I've worked for companies where even meager bonus plans were suspended because the company made a 5% profit rather than the "planned" 7%. These guys at Merrill Lynch lost more in three months than ConocoPhilips, IBM, HP or General Electric made in one year. That's not some "small difference", it's a staggering, corporation-crushing loss and you are handing out bonuses to the tune of $3.6 billion in government money?

I'm like everyone else on this -- these bankers are scum. Selfish money manipulators, they are no better than Ken Lay and Bernie Ebbers.

Obama is President

And I guess that we now have something to say to Morrissey to convince him that America is just and free.

Other than that, it's been all glittering generalities.

I'm mildly optimistic since he's taken the opportunity to use the "honeymoon" period to break with some of the more parochial liberals on a few minor issues and appointments.

On the other hand, selecting a tax-evader for the Secretary of Treasury isn't exactly a solid pick.

We shall see.