Monday, March 31, 2008

Lacking subsidies, or lacking a competitive niche?

The Aussie car makers, and there used to be plenty of 'em, once made small cars, and small engines. Leyland and its predecessors, for example, made useful if unreliable small fours. GM locally made a version of the Opel Kadett, and similarly adapted another Opel to make the bigger Holden Camira, and exported its 4 cylinder engine to places like - gasp - Korea. Aussie factories made Ford Escorts (or more correctly assembled them, badly) and even Volkswagen Golfs. They assembled Volvos and Nissans, and even plugged Holden engines into small Nissan Pulsars. Chrysler had a go as well with the small-ish Centura before selling out to Mitsubishi who sold up a storm with the 4-cylinder Sigma. There were Mazda-sourced and Ford assembled Lasers. And they too sold well. Completely-knocked-down kits were a common way into the small-four market game, but there were examples of more elaborately transformed vehicles as well. It has been done, and done pretty well.

But for reasons of pragmatism or shortsightedness, coupled with lowering trade barriers and/or the strengthening of the Aussie dollar against the strong car-maker's currencies, making imports increasingly cheap, it all changed. The old guard died off, leaving just old hands Ford and Holden on one side with the blow-ins Toyota and Mitsubishi on the other. Now Mitsubishi has quit as well. Just 3 makers left standing, all making the same sort of big, fat, dull cars. Everything else - everything decent - is imported.

Now you could say that big "family" cars have become the Aussie car maker's core competency. But these dinosaurs don't even sell to families, these are corporate fleet sales vehicles, selling on the back of a flawed tax system that subsidises excess. On the other hand they export small numbers to the car-mad US, South Africa and the who-cares-about-fuel-efficiency Middle East; and fewer still to rich Europeans looking for a powerful car without a BMW or Merc badge. But this is all small beer. Currency fluctuations would kill these markets in an instant, and a big rise in fuel cost would do the same. Or a rise in shipping costs for that matter. After all, you have to ship these dinosaurs all the way from Australia to anywhere else. It's a big distance and an added burden to an already-struggling camel.

But the remaining factories employ thousands of people. They may be building doomed rubbish, or at best a dwindling niche vehicle, but they remain employees, voters and human beings. Nevertheless we can't just dump the truth on 'em, we have to play political games.

So, that's the background. Then you read stuff like this: AUSTRALIAN-based car manufacturers have fewer subsidies and less protection than others overseas and face more difficulties exporting to Asia, two new papers will reveal today. And you think, 'same old, same old'. Let's prop up a basket case - not fix it, mind, just prop it up - and all will be well for a few more months. But no, Victorian Premier Steve Bracks said this, instead: But it would be wrong, he said, to assume his final report would call for more assistance to the industry. Hmmm. If not "more" then does that mean existing subsidies stay?

Well he went on to explain that "The review is likely to lead to an overhaul of how the government allocates its billions of dollars of assistance to the car industry", or words to that effect. To translate that a bit, what is being proposed is that leaner, lighter, more efficient big cars are what we want, and that calling the subsidies "investments in green technology" will make them less of a subsidy and more like good government in action. Oh joy.

OK, so yes, we have accidentally or on purpose found ourselves building only big cars, and yes, you can call that a niche. And yes, plenty of other places make great small cars and we are unlikely to make progress trying to beat Korea, China and India at that game. But plenty of countries make far better big cars, too. In fact we make pretty poor big cars. They are dull and unenlightened beasts that don't sell well now. No amount of dressing up subsidies as 'technological investments in the future' will remove the urgency from the world's shift to smaller vehicles. And not only are we are thousands of kilometres away from key markets, we just don't make cars very well. Our economy has moved into "services" big time and old style manufacturing is just not what Australia does well. So let's (for once) admit it, cut our losses and find real jobs for these people, before they feel the pain of our indecision. These workers deserve better than being strung along endlessly with forlorn hopes that cannot possible pass the barest of reality checks.

Wednesday, March 26, 2008

So you think the world isn't changing?

What can we say about our world today? We are losing species and thus diversity as our human population and allied environmental impact grows day-by-day. Obvious enough, but what are we doing about it? We remain focused on economic wealth at the expense of our own futures. Well, that's probably true, although there is an altruistic side to humanity that will possibly - hopefully - one day get the better of greed.

In the meantime let's reflect on what's happening economically. An iconic powerhouse
like Ford is dumping its prestige brands one by one, raising cash for a last gasp attempt at survival, or just getting rid of failing brands. Does this say anything about the US economy, or US car companies in general, or US car company management vision? Probably a yes in all 3 boxes. From Fairfax: US automaker Ford has agreed to sell its luxury brands Jaguar and Land Rover to India's Tata Motors for more than $US2 billion ($A2.2 billion), a source familiar with the deal says.

So what does this say about India's economy, or the growth of Tata (a company that has fingers in many pies and plans to sell a super-cheap small car around the world)? I'd say India (and China) will be matching - perhaps passing - the US soon enough. 10 years, or 5? What will we make of that?

Meanwhile, again from Fairfax: Chinese cars are coming to Australia, but they won't necessarily undercut Korean cars on price. What does this say about the car market? Hello cheap small cars, goodbye to big, fat cars and luxo-barges, perhaps? Or about China's ambitions as an exporter of elaborately transformed goods? Or of Korea? What indeed do we imagine to be the effect on Japan and its car makers, or more likely, the US car makers? Anyone among the US car makers getting that sinking feeling?

Again from Drive, Fairfax's car section: If Americans take to the Commodore, it will help secure the future of Australia's favourite sedan. Sales of large cars in Australia are at a 14-year low as new-car buyers embrace imported vehicles in record numbers. What do we make of this? US-owned car maker can't adapt fast enough to survive in Australia, looks to export failing fat car to the biggest failing fat car market of them all, the US. Well "desperation" and "short-term solution" come to mind. If the US itself can't keep up with a changing market, how long will Holden survive as it tries to bolster its short-term future with poorly-targeted cars that the Aussie market doesn't want either? Are we getting that sinking feeling again?

Still, Holden sells far more fat cars in Oz than Ford, and it's better at exporting them, too. So Ford in Australia had better adapt, too, and fast. And it could be worse: Mitsubishi will build its last car in Adelaide on Thursday, ahead of the closure of its local assembly operations on Friday. If a Japanese manufacturer, admittedly one with a few problems everywhere, can't make a go of manufacturing in Australia, then what hope has anyone of making a go of it?

As it stands Australia is great at mining and shipping iron ore to Japan, China and Korea, and we buy their products in return. So it's a win-win whilst we have lots of iron ore and they build good cars and other products. But if the Aussie dollar turned around and bit us, and imported goods cost twice what they do now, where would we be? When you think about it we'd be better off as an exporter - and these dinosaurian local car makers would get some relief. And we'd be raking in even more export dollars. But gee inflation would go through the roof. Oh what a tangled web we weave.

Thursday, March 13, 2008

Computing in the clouds: not just a book store

Here's a business case for you. Amazon is the classic example of a new model, but which model is it? What exactly does Amazon do? You could say that Amazon is an online bookstore, which it is, but it also sells just about everything these days. So it's an online retailer, isn't it? Well yes, but wait. It has the front-end of an online retailer but the back-end is a combination of a slick short-term warehousing and despatch service with a massively capable and finely-tuned computing infrastructure. So?

OK, so our online retailer looks like this.
  1. It offers goods at one website, sure, but also keeps track of what you buy and lets you know what other things you may like. It acts a bit like a helpful shop assistant with a fantastic memory
  2. It takes takes your orders, tells you if it's in-stock or not and organizes despatch, all online, again like a helpful small-store guy
  3. It also crawls other loosely affiliated websites and looks for product mentions that are within its scope; if it finds some they get hot-linked to the Amazon site. Search buttons are also provided. This is not so usual in the 'real' world, but possible. In return for doing some of Amazon's work the affiliates get a commission. Now it's not a unique method in and of itself but the way it's applied presents as an innovation. It adapts an old methodology to do new stuff in a new place
  4. So just to recap, it sells, purchases, briefly stores and slickly despatches; and lets you (the customer) know exactly what's happening at each step.
And behind the scenes are web developers writing the code that does all the smart stuff. And hardware that hosts all of the virtual retailing and supply-chain coordination applications. And this is the start of the next Amazon idea.
  1. Amazon realized that it could offer its slick despatch service to other organizations, for a fee. So another provider (of any sort, virtual or not) could use Amazon's physical presence as if it owned it, but only as much as it needed, when it needed it. This was a win-win, providing first-class despatch for anyone and taking up Amazon's slack
  2. But wait, it doesn't end there. Amazon further realized that the computer infrastructure itself could be turned over to other people's tasks, and opened up access to anyone who wants to buy a slice of computing power, no matter how small.
Now it's not a new idea, time-sliced computing has been around for yonks. But offering it to anyone, anywhere, on an as-used basis is an innovation. IBM may have offered shared mainframe time to big business decades ago but it didn't offer it to me personally, and I couldn't have accessed it anyway. But Amazon has offered it, and made it easy to access. Coupled with the Internet and you have frictionless, anyplace scalable computing, when you want it.

So what exactly is Amazon now? An online retailer or a start-up cloud-computing market leader? Well it's certainly not just a book store.

Wednesday, March 12, 2008

Apple Music Event 2001-The First Ever iPod Introduction

I don't necessarily think the iPod was an innovation in and of itself - but I can't argue with the successful launch, the enduring marketing spin and the market dominance. You have to respect a product that dominates the market not by technical excellence but by sleek looks and intuitive ease of use.