Designing a Car Company

Today's top story on MSNBC was about slumping car sales.
Automakers' sales slump continued in Feb.

As we all know by now automakers are in trouble. American auto makers are in BIG trouble. I have to admit, I have a soft spot for the US auto industry. For awhile I was pretty certain I would end up in a career at one of the Big 3. I never did. I did live in southeast Michigan for awhile though. And I've seen first hand how generations of families and entire towns have their livelihood dependent upon the auto giants.

The first car I ever purchased on my own was from a Japanese manufacturer. I believe it will be the last time I ever do that. After seeing the real people impacted by the US auto industry I feel deeply compelled to support them. Buy American. I understand that many cars from foreign manufacturers are actually built in the United States. And that many of their parts are made here. It doesn't change the fact that at the end of the day those profits are put back into the coffers of companies very very far away from my hometown. Companies whose interest in the financial health of the U.S. goes only as deep as how it will impact their bottom lines.

I am torn on the fate of the Big 3. They have made egregious errors in their product and organizational structures. They have had quality issues. And they have allowed their prices to be dictated by the demands of the unions (more on them another day) rather than allowing supply and demand to dictate pricing. In the most conservative part of my being I say let the market do what it will. If that means a collapse of the industry as it exists today with new companies emerging then so be it.
But there is that other part of me. The emotional part that would hate to see an end to such a symbol of our American history. America is a nation of drivers and roads and cars. To lose the brands we have come to know and love would leave a hollow feeling.

Here is the plan I would implement if I were the CEO of General Motors.
First, I would renegotiate union contracts to more accurately reflect today's business environment. That means lots of emphasis on self-managed retirement plans (401k) and a streamlined health system. Pensions would be gone. Mandatory educational seminars on maximizing investments and strategic saving for retirement would be implemented.
Ultimately I'd love to see the unions phased out. But that may not be a reality so you work within the constraints you need to.

I would pare down the cars manufactured to just 6.
* Circle of Life Coupe/Convertible/Sedan - small, practical and, reasonably priced. Something you could buy for your teen or your retiree mom without breaking the bank. Or a convertible version for the young single who can't afford the 'vette.
target customer: teens, retirees, young singles
inspiration - Chevy Cobalt, Pontiac G6
* Mid-Life Sedan - design must be cool enough to attract status-conscious dads and young professionals and the features must be practical enough for the mom with 2 kids
target customer: young professionals, small families
inspiration - Chevy Malibu
* Hard-workin' Truck, maybe two of these, one smaller and one larger
target customer: small business owners and large company fleets
inspiration - GMC Sierra 1500, Ford F-150
* Hip SUV - fuel-efficient, big enough to haul your gear and your friends, small enough to fit in your garage
target customer: moms who refuse the mini-van, outdoorsy young men, well, all men really
inspiration - GMC Envoy
* Comfort Cruising Sedan - something big and cushy
target customer - empty-nester who has done well with their investments
inspiration - Cadillac Deville
* Classic American Sports Car - The Corvette.
target customer - 50 year old men

I'm not saying I would make cars (plural) in each of these categories. I'm saying I would make a car in each of these categories. I would take all the best features of the current line. I would take my best engineers and best mechanics and technicians. And we would build 6 cars of unprecedented quality. Everyone from the first designer to the last bolt turner would be held accountable for the quality of the product. And everyone would be rewarded.

For each car the base package would be what more reasonable consumers want and are willing to pay for. We'd offer 2 or 3 upgrade packages for each.

I would cut management to only the most necessary and relevant levels for each of the 6 divisions. That might just mean on executive manager reporting up to the CEO, a small finance team and a lot of first-line managers overseeing each group (designers, engineers, manufacturing). Salaries would be based on what we could afford, not what we wish we could afford.

There are some pitfalls. I understand this plan would probably mean a lot of layoffs in the short-term. But the current bailout is simply delaying that inevitable result. And with the bailout, when the layoffs finally do hit hardest GM will be in no better position than they are today because they will not have a different plan. They will still be trying to implement today's plan with fewer workers.

Limited choice for consumers would also be an issue. But only for a little while. I truly believe that consumers would rather have one GREAT option than 10 options none of which quite meet their needs and which have questionable quality and staying power.

Once we were back on line making great cars and good prices we would start to think about expanding our offerings. It's only natural. Henry Ford started with just the Model-T. Ford now has 50 offerings including their Volvo and Mazda Brands. And General Motors offers a whopping 95 vehicles! I'm sure Mr. Ford never envisioned that. So it's okay to think about expanding. But we would need to have limits. Maybe our agreement is to never offer more than 3 cars (a low, mid, high level) car in each category. Or at a minimum we'd agree to not offer the SAME VEHICLE under different brand names as they have been known to do.

So, Mr. Wagoner, if by some strange twist of fate you are reading this, please consider this idea. It could very well save the name General Motors so that my grandchildren don't talk about a Chevy they way I remember the Edsel.

And for the rest of, if you are thinking about an new car, please consider buying American.

What kind of mortgage did they offer you?

I am a homeowner. Okay, really I only own about 10% of my home. And when you consider that my husband and I both share that 10% I suppose that I truly only own about 5%. I guess that is about the size of one of the kids' bedroom plus a bathroom - not too bad, I suppose.

I have held this homeowner title for just over 3 years now. And for the most part it's pretty good. We enjoy having a place to ourselves - a place where the walls are not shared with loud neighbors, a place with a backyard for the kids to roam free in, a place that I can paint and repaint and repaint again if I feel so inclined.

As I have told you, my husband and I are both currently gainfully employed. And except for periods of education and one brief foray into full-time commission-only sales for my husband we have been so employed for the entirety of our adult lives. We feel blessed to have found work that sustains us and isn't excrutiatingly painful for our bodies or our minds. And these jobs have allowed us to make our mortgage payment without fail for 36 months so far.

But let me tell you how we got here. Shortly after we were married we decided the time was right to buy a home of our own. I had been going stir-crazy in apartments for several years and was itching to get out and get into someplace I could call "ours." At the time we were ready to apply for mortgages my husband was about 60% through his aforementioned stint in sales. Now many people can make a lot of money in sales. It's a decent living for many folks. But as much as I love my husband and am happy to extol his many virtues to you, salesmanship is not among them. He's just not a natural salesman. He's a nice guy. A nice guy who likes to have direction and structure. Convincing people to buy something that might need and might want just isn't his forte. In other words... he wasn't making a lot of money in the sales world.

The first mortgage lender we met with was not concerned about this fact. I made a good income. And she was glad to inform us that we could just "state" his income. "State" his income? What on earth does that mean? If you haven't read a newspaper in the last 5 years I'll give you the gist - it doesn't matter what you make. You just "state" that you make a certain amount of money - no supporting documentation required. So while his actual income for the year may have been in the 4 digits she was happy to let us state any amount we found reasonable.
Our second problem was that we had no money saved for a downpayment. We might have been better prepared but a sales job requires lots of investment into a salesman's wardrobe (read: suits) and tools (read: laptops). Plus I had only recently finished my Master's degree so I hadn't been back in the working world very long. No matter. They were happy to lend us 100% of the value of the property. We did have a few thousand in savings for an escrow hold and closing costs. But there was even a solution for this non-problem. They would gladly roll the closing costs into the loan amount and let us finance it.

We eventually went to a second lender for comparison. They weren't as keen on stated income but had no issues with 100% financing. And they had one final solution for us to keep our mortgage payment as low as possible - a 40 year loan. 40 years? As in, I'll be at least a decade into retirement before we reach full amortization? Yeppers!

In the end we found a solution with the second lender. A 40-year ARM for 100% of the sale price. We elected to not "state" any incomes and were able to qualify on my income alone. We were smart enough to recognize that we should at least limit what we borrowed to 3x my annual salary.

Our story has a happy ending. One month after closing my husband landed a salaried position in his previous field with a salary approximately equal to mine. In the end loan value was only about 1.8x our combined annual salaries. Very reasonable by almost any standard. And one year after closing we refinanced to a 30 year fixed rate with a small fixed rate 2nd mortgage (no we did not take cash out). Having a 2nd is not ideal but at least we know what we'll be paying next year and the year after that. And we've been fortunate enough to manage to increase our salaries each year making the payment even easier.

And we are working on a plan to be completely debt-free, including our mortgage in the next 15 years.

But not everyone has the same ending. We KNEW we were signing up for a 40 year ARM. And we had a plan to refinance to a fixed rate as soon as possible and wise. Too many others didn't know what they were signing up for. And eventually something in that fine print came to bite them in the rear.

The real question is why did this happen to so many people? I think there are a lot of causes. Lenders, at the behest of Congress and the Community Reinvestment Act of 1977, made it as easy as possible to get into a mortgage. They offered ARMS with low introductory rates. They offered stated income plans. They offered 40 and 50 year loan terms. They offered interest-only loans.
And while I'm sure many of the mortgage brokers and consultants out there are upstanding business people who tried to disclose all the information I'm sure there were others who tried to hide anything unsavory.
And the other reason... people didn't read what they were signing. They were so excited to get into that shiny new (or new-to-them) place with a driveway and a mailbox and a backyard and a playroom for the kids, that they signed without reading.
So while it is certainly an obligation of the lender to disclose pertinent information the truth is that everything was in writing. Everything. All they had to do was read those documents - all 887 (at least it felt like that many) of them.

"But, but.... those documents are so confusing and in such legal-ease how can a person be expected to read them?" you ask. I read them. My husband read them. When we didn't understand something we asked our realtor or our lender to explain. Of course, we have a higher education background. Certainly I am not saying that one must be college educated to own a home. Most certainly not. But I believe one must be aware enough to know their own limitations. Anyone entering into any contract (yes, a mortgage is a contract) should be able to either read and understand the documents themselves or know that their understanding is limited and know to ask someone independent (not the lender who is trying to close the deal) to read and explain it to you in terms you can understand.

In the end, no matter how slimy your lender might be, if you read before signing you would at least know what you are getting into. And you can make an informed choice on whether these are terms you can agree to and maintain. And if they aren't you can walk away until the terms or your situation changes. Making the assumption that your name is not forged on the contract documents, no one gets you into a bad contract without your consent. And so while others may have blame for being less that forthright, we can only control ourselves and our reaction to such people. My reaction to people who I believe are being untruthful is to verify, verify, verify. If I fail to do that and end up with a bad outcome, I have no one to look to but myself.

So tell me... what crazy mortgage variations were you offered? Which did you sign up for?

As an aside... how many congressmen and women do you think actually read all of the stimulus before voting? How many of their aides even read through the whole thing?

How to Build a Stimulus

I don't want to talk about the stimulus package passed by Congress and signed into law by our President. What I want to talk about is how I would create a stimulus package if given the chance.

I have an analytic mind. I am results oriented. I have degrees in math and engineering - it's just how my brain works. I understand that most politicians (on both sides of the aisle) are idea people, not numbers people. And quite honestly, I think we need more people who have BOTH skill sets.

If I were to design a package to stimulate the economy here is how I would go about it:

1. Identify & clearly state the goal (i.e. "stimulate the economy in the short and long term")

2. Define the mechanism to achieve the goal (e.g. XX jobs created, $XX salary increases, etc)

3. Determine my budget for the plan.

4. Brainstorm ideas that would achieve each mechanism (e.g. repairing every bridge on every highway might create short-term jobs)

5. Determine actual impacts of the brainstormed ideas (e.g. If we repair every bridge we will need X workers for X number of years. They will need the following list of skills: A, B, C.).
If an idea doesn't actually achieve one of the mechanisms of the goal it gets nixed. That doesn't mean it's not a good idea, just means it doesn't belong here because it doesn't get me closer to my goal.

6. Determine the cost to implement each brainstormed idea that hasn't been eliminated.

***At this point each idea has impact number (X number of jobs) and a cost number ($x,000) ***

7. Assign each idea a value that is a function of cost and impact.

8. Select the final list of ideas based on those with the highest value. Stop putting things on the list when I have reached my allotted budget.

Is this really that hard?
I feel like the current method has been turned on its head. Our elected officials throw out ideas. Someone says "ooh, that's a good one, let's do that" and give little to no consideration to how much it will cost or whether it will actually stimulate the economy.

Now, about the real stimulus bill...
The plan is projected to create 35 million jobs. At a total cost of around $800,000,000,000 that is a cost of almost $23,000 per job. Is that a good investment? I'm not sure yet. But I have to believe that we could have had that same result with a lower price tag.
I have a few other issues with this as well...
Who determined that job projection?
What methodology was used to come up with those numbers? What calculation did they use to determine how many jobs each program on the bill will create?
It frustrates me that if I were to have to come up with a proposal like this to spend my employer's money I would need real, concrete data and verifiable outcomes. There seems to be no such requirement or even an idea that there should be for our elected officials.

Voice

I have found there to be a dearth of young, female, conservative voices out there in today's media. I have no illusions of becoming the "voice of a generation" or any other such nonsense. But I find myself more and more often having strong opinions on the topics of the day. Putting my words here will help me to better formulate my ideas. And maybe, just maybe give someone else something to think about.

As we go forward I will be candid in my opinions. I will do all I can to be respectful of those who disagree with me. I expect the same kind of response. And just to be safe, all comments will be moderated.

About me:
* I am young - just 33 years old. That makes me the tail-end of Generation X. And looking at the profile of a Gen-Xer and a Gen-Yer I am an appropriate mix of the two with my natural tendencies leaning toward the Gen-X description.
* I am conservative. Yes, I am a registered republican. But more importantly than that, I am conservative. I believe in the power of the individual, the empowerment of self-sufficiency and the careful weighing of options before acting
* I am a mother. I have two young children (currently both under 2 years old) and I view the world through a lens of what the impact will be for these precious children when they are adults.
* I am a Christian. I practice my Christian faith in the Catholic church. Biblical teachings impact all of my views and I prefer to prayerfully consider my decisions in all things. You can decide for yourself if I am a de-facto member of the *gasp* "religious right." It's not a label I would apply to myself but maybe you would.
* I do not work in politics in any way, shape, or form. Maybe someday that will change and I will find myself working in the public sector but not currently.
* I have a full-time, paid position outside the home. My children go to daycare. My husband and I balance working, spending quality and quantity time with our children and having a relationship with one another. It's not always easy but each piece is important.
* I am educated. I hold both a Bachelor's degree (in a science field) and a Master's degree (in an engineering field) from top nationally-ranked universities. I graduated from undergrad cum laud.
* I am surrounded by a family of married couples. I have parents who are still married to one another after 43 years. And in-laws who have been married for 40 years. And siblings and sibling-in-laws who have been married for 19, 14 and 10 years. I believe in marriage.
* Like so many others in America, I have debt. Mortgage debt, student loan debt and credit card debt. We are working on becoming debt-free in the next few years.
* I met my husband after college. We did not grow up together or attend school together. We did not meet on-line or in a bar. Just the old-fashioned way - by happenstance.
* My husband and I are both college-educated professionals with more than 10 years in the workforce. And our compensation is commensurate with that background.
* I live in the suburbs of a major US city.

If there's anything else you'd like to know about me, ask. I know that understanding the background of an author (even a blog author) helps give context to their writings. If what you want to know isn't too personal, I'll be happy to share.

Now.... Let's chat.