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Sixteen
Looking at a Jack
Five
strangers were sitting around the twenty-five dollar
table. It was three in the morning and most of the
tourists had already gone up to their rooms for the
night. We were starting a new shoe and the dealer
offered the Asian lady sitting at the number-four
position to my right the opportunity to cut the cards.
I
had been sitting here at the very last position on the
table for about four hours. Watching the piles of
chips stacked in front of me going up and down. I
estimated I was probably up about fifteen hundred
dollars. It was getting late and I was getting tired
and this was going nowhere. It wasn’t even fun
anymore. I usually do a little better than this when
I’m winning. After all, Blackjack is the only game
in the casino where the player has a slight
mathematical edge over the house…but that’s only
if the player has the skill and the discipline to play
an absolutely mathematically perfect game. Remember,
the dealer always plays a consistently perfect game
but the player has the option to deviate.
I
was ready to call it quits for the night. What the
heck! This was the casino’s money I was playing with
right? At that moment, I knew exactly what I was going
to do. My heart was already racing. I’d done this
before. Adrenaline was pumping so hard my temples were
pulsating with each heartbeat.
Even
the bleary-eyed old man sitting at the number-two
position sat up and whistled when I piled up the chips
on the spot in front of me. He had been drinking
heavily and playing in a coma for about the last two
hours. He was awake now. The entire fifteen hundred
was stacked on the spot plus another seven hundred of
my own money. We’re looking at a twenty-two hundred
dollar bet riding on one hand. The dealer waved to the
pit boss and called out… “Black in Action!”
(Black chips are one hundred dollars each)
Player’s
card up, my first card was a queen. Dealer’s card
was still down. The second card was coming around now.
The Asian lady got a blackjack. She shows no emotion.
They’re all watching my hand. My second card is a
six. The dealer flips up a Jack with one card still
down. I am holding sixteen looking at a Jack.
This
is the worst possible mathematical scenario a
Blackjack player can face. The odds are overwhelmingly
against you. You are probably going to lose no matter
what you do. If you take another card, the odds are
you are going to bust. If you stay at sixteen, chances
are the dealer has a ten-card underneath, making
twenty, or she will draw into at least a seventeen.
Even so, the math says you have a greater statistical
chance of winning if you take a card than if you stay
at sixteen. Odds are you’ll lose either way but
there’s a better chance of winning if you draw a
card. My hand was trembling as I signaled the dealer
to deal me another card.
Those
of you who have followed my columns, in this magazine,
and in the magazine I wrote for previously, couldn’t
deny the accuracy with which I have predicted industry
trends and events for nearly twenty years. There’s
no magic here. Like Blackjack, it’s all mathematics.
In
the book “Think and Grow Rich” by Napoleon Hill,
he writes about an interview he had with Thomas
Edison. The fact Edison had invented literally
thousands of light bulbs that didn’t work was the
main reason he was finally successful. Edison
theorized he had tried every possible thing that
didn’t work. Success was all that left.
The
only reason I have been able to call it so accurately
is because I am acutely aware of everything that
doesn’t work. You might want to call it experience.
Remember
when AutoNation came thundering into the market circa
1995? At the time, I went on record saying their
alleged goofy business plan was flawed, based on false
paradigm. Of course, as usual, I was maligned and
ridiculed. Editorials in the trade “weaklies”
praised Wayne Huizenga as if he was Moses leading us
out of the wilderness into the Promised Land. My 1996
prediction that AutoNation Used Car Superstores would
crash and burn within three years missed the mark by
less than three months. Suddenly, when the wheels came
off of the AutoNation Wall Street Fiasco back in
December of 1999, I was being interviewed and quoted
by 29 daily newspapers, USA Today, Bloomberg Magazine
and the Dow Jones Newswire.
Of
course, I am still disappointed to see CarMax still
operating. My son, Zachary, and I have been patiently
looking forward to the day those lots will become big
outdoor skateboard emporiums. In my opinion, all
CarMax has succeeded in doing so far is to dragging
Circuit City down. CarMax stock value increased nearly
35% over the last twelve months climbing up to
astounding dizzying heights approaching somewhere
slightly above four dollars a share.
I
recently went on record…again. This time, in June
2000, I predicted AutoNation would disintegrate and go
“poof” over the next two years and sell off their
holdings piecemeal back to the original dealers and to
new owners, maybe even to the factories. At just
slightly above five dollars a share, AutoNation stock
is still in the toilet with God’s hand hovering
above the handle. I predict, sooner than later,
we’ll hear the big flushing sound.
After
his definitive contributions to the current state of
affairs at Mercedes, Michael Jackson landed a dream
job with AutoNation. The corporation was already
screwed up so Jackson went in with a head start.
Michael Jackson has successfully dismantled the last
remnants of the original flawed Huizenga business
model and replaced it with what appears to be no
visible semblance of a viable plan.
Even the AutoNation highway sign logo has
disappeared. The good news is AutoNation is rated as
one of the top Internet retailers of automobiles in
the world. The bad news is, as it appears to me,
they’re losing their ass at an accelerating rate,
which is diametrically compounded by volume. Remember,
they’ve just renamed all of the AutoNation
dealerships in South Florida with the Maroone
nameplate. I wonder if anyone is putting themselves in
position to own those stores when the walls come
tumbling down. Now, I am not meaning to imply the rats
are lining up as they prepare to evacuate a sinking
ship, but something does seem a little strange here.
And
the dominoes begin to fall…suddenly I am hearing
reports that AutoNation dealerships are being sold
back to the original owners and there are more
negotiations underway. Look for dealerships in Texas
and Southern California to be sold back to original
dealers and third parties. By now we are all aware
that Steve Kalafer and Byron Brisby just re-acquired
ten AutoNation locations operating twenty-two
franchises in New Jersey.
When
Alex Trotman at Ford announced a five and one-half
billion dollar cost cutting initiative back in the mid
nineties, I was all over it before anyone else even
mentioned it. At the time, I repeatedly predicted the
pressure on suppliers was going to result in
substandard quality parts and assemblies. It never
occurred to me they were also putting pricing pressure
on tire suppliers. Now the story comes out indicating
that Goodyear, the original standard equipment tire
for Explorer, may have opted to allow Firestone to
pick up the contract rather than compromise their
standards.
When
“Jac the Knife” popped onto the scene with even
more aggressive cost-cutting schemes, short-term
profits soared. The board members at Ford were
applauding Nasser’s cost cutting initiatives aimed
at increasing share value of Ford stock. Well big guys
(gals)… “I bet yer chokin’ on your cigars now,
huh fellas” ... Jac the Hero appears to be “Jac
the Zero”.
Predictably,
Ford product quality is now sinking to record lows in
the annuls of automotive history. Current top
executives are pioneers setting new standards for
which they will forever be remembered. Just think Ford
products were the pride of the industry just a few
short years ago. The speed and precision with which
these executives have dragged this great company down
rivals the intellectual capacity of the character
portrayed by Jerome Horowitz. Even as I write these
words, they are recalling another 351,000 Focuses,
some of them for two, possibly three recall actions
each…and the hits just keep on comin’. Can you say
Ford Escape?
Evidentially,
the Firestone tire scandal is being partially laid
squarely on Ford’s doorstep. There seems to be a
proliferation of “smoking gun” evidence surfacing
implicating Ford. Now we’ve also got something like
20,000 Windstars, Crown Victorias and Grand Marquis’
sitting in storage at a plant in Canada because of a
defective module that could spontaneously activate the
airbags…this is on top of the 22,000 they just
recalled because side airbags were going off on the
assembly lines.
Henry
Wallace, Ford’s Chief Financial Officer, was quoted
in the national press as having said that in light of
the fact that Ford has spent
$500 million handling the tire recall that they
will miss their $ 1 billion cost-cutting target for
2000. These are supposed to be educated, intelligent
people. What in the Hell do they suppose it was that
got them into this mess in the first place? Is this
any time to be lamenting about missing your stinking
cost-cutting goals when customers are dying in your
cars? Now (drum roll) Ford is demanding that its
suppliers increase cost cutting targets an additional
50% above 2000 levels. We’re talking about as much
as 9% reduction for some key suppliers. Prediction,
Ford Quality and profits will continue to deteriorate
under the cost-cutting surgeon’s knife.
The
headline read, “AutoByTel looks for cash”.
According to the story I read, AutoByTel hired
Lehman Brothers to approach investors in an attempt to
raise much needed cash. Is this supposed to come as
some kind of a surprise? We’re looking at a stock
price slightly above $5.00 a share. (In the toilet)
The only profit AutoByTel ever made was the money
their investors poured down this apparently bottomless
rat hole when they bought AutoByTel stock for as much
as $20 a share less than a year ago. Now comes General
Motors making noises about teaming up with AutoByTel,
or some other buying service, to launch their new
dealer-partnered online buying service. General Motors
and AutoByTel, now there’s a marriage with a track
record for intelligent management. Have you ever seen
the GM BuyPower website?
Of
course GM is also rumored to be considering teaming up
with AutoWeb.com, Inc. as an alternative. AutoWeb.com
is a bargain at slightly above $2.00 a share, down
from $14 a share less than a year ago.
When
are these people going to get it? The Internet is a
major non-event accounting for less than three or four
per cent of total retail sales. Even Priceline is
struggling and gasping for air. CarOrder.com proved to
be a $100 million black hole before their Internet
presence went poof.
Still,
we are seeing major players like Honda pressuring
their dealers to buy over-priced (my opinion)
“cookie cutter” look-a-like Cobalt Websites.
I’ve heard many stories from dealers about their
quality of service. (Send me your favorite Cobalt
customer service story) The factories are shoving the
Internet down the dealers’ and the consumers’
throats. The race to get there is absurd when you stop
and realize there’s nothing there when you arrive.
I
see where CarBiz.com, another (yawn) Internet software
company saw its losses explode from $468 thousand in
the second quarter of 99 to more than $2.8 million in
the second quarter of 2000.
The reason for the increased loss should be
obvious; they expanded their dealer base from 800 to
5000. Of
course, why didn’t I think of that? All of that
increased business should logically, exponentially and
geometrically accelerate the losses of any Internet
tech company. In other words, as with all of these
tech companies, the more they sell, the more they will
lose, compounded by the variable absurdity of their
asinine business model.
Three
years ago I quipped that Ford and General Motors were
about to discover that those emerging markets in Asia
and South America were going to turn out to be
“Submerging Markets.” Well guess what sports
fans…General Motors just announced a $20 million
dollar seatbelt recall in Brazil as well as settling
fatality-related lawsuits with families for an
additional amount.
Considering
the fact GM’s European operations just took a third
quarter hit for more than $181 million, and
considering they’re getting their butts handed to
them in Asia and South America as well; You might
think they’d concentrate on bringing it all back
home. At least North American operations profited
nearly $60 million for the same quarter.
Back
in April I stated the observation that
Daimler-Chrysler was entering what I called “The Age
of Constipation”. Predictably, those wacky Germans
didn’t let me down. Just for starters, DCX showed a
third quarter loss of $528 million.
Of
course Jim Holden, president and CEO of Chrysler, is
working feverishly at cost-cutting measures designed
to whack $2
billion from the operating budget.
It occurred to me we might give him the
nickname “Jim the Knife” but that might unfairly
imply he was stupid, arrogant or incompetent. Besides,
an executive with another manufacturer who is more
eminently more qualified already holds a similar
title.
I
am taking this thing personally. Let’s not forget,
Chrysler Corporation was already on a roll when Bob
Eaton came flitting in from left field after leaving
General Motors. From day one Eaton missed very few
photo opportunities. Of course, we all know it was Lee
Iacocca and a handful of dedicated executives who
actually were responsible for pulling Chrysler out of
the fire and laying the foundations. Eaton had no
emotional investment in the history of the company. I
believe it was all about the money.
Then
in April of 1995 when Kirk Kerkorian and Iacocca tried
to take the company private, Bob Eaton apparently,
single-handedly, forged a deal with the devil and sold
one of the Crown Jewels of American Industry to a
foreign corporation.
In the book, “Taken for a Ride: How Daimler-Benz
Drove off with Chrysler”
by Bill Vlasic and Bradley A. Stertz, the authors portray Bob Eaton
meekly assuming the role of a cowering wimp dealing
with the predatory, electric personality of Daimler's
Jürgen Schrempp. Billed as a Merger of Equals, the
book describes how Schrempp and the Germans called the
shots as Eaton and Stallkamp cringed.
As
we watched Lutz, Stallkamp, and Eaton ride off into
the sunset...and now, we see the legendary design and
product development genius, Tom Gale, retiring…Schrempp
and company appear to be scratching their heads
wondering what the Hell is going on here. These
erstwhile Aryan juggernauts suddenly seem to resemble
the comic bumbling character stereotypes from old
“Hogan’s Heroes” reruns. You can almost hear
Schultz saying… “Nothing! I see nothing.”
It’s
a Hell of a time to discover that you have great
engineering but no marketing plan and no imagination.
Their answer is to cancel and delay the production of
the great future product they had in the pipeline.
Reportedly, they are dropping the full-size
Dodge SUV that would have competed heads-up with the
Ford Expedition. Of course, if Jeeps weren’t
selling, (which they aren’t) would it make sense to
stick with stale dated product lineup or would you
charge ahead and introduce the new, bigger Jeep grand
Cherokee? Rumor has it the Hemi C Convertible has also
been scratched.
In
a recent report, Daimler-Chrysler was rated the worst
performing car manufacturer worldwide on the stock
market…not one of the worst…the absolute,
undisputed very worst.
Guess
what…I predict we will see Daimler-Chrysler
achieving even lower levels of shareholder equity as
their current non-business plan drags them deeper into
the toilet. Their cost-cutting efforts will have the
same net effect on quality that Ford is experiencing.
Daimler
Chrysler share value has fallen 33% in the previous
twelve months according to an audited report by
AutomotiveNews/PricewaterhouseCoopers Total
Shareholder Return Index. Even rival BMW showed an
increase in shareholder value of nearly 20% during the
same period. Incredibly, Volkswagen was up nearly 21%
in the third quarter alone.
P.S.
Don’t be cheering so loudly for VW quite yet. They
have a documented historical track record for screwing
things up when the goal appears to be in sight. Their
boutique-dealership concept is a miscalculation.
Whack!
The card made a snapping sound as the she turned it
up. The dealer dealt me a three…I’m now holding
nineteen looking at a Jack. Even though the air
conditioning in the casino was blowing hard and cold,
the armpits of my shirt were soaked with sweat. I
sipped at my cognac and waved to the dealer…
“I’ll stand on nineteen.”
The
dealer turned over her down card…
More
Food For Thought
Did he really say that?
Harold Wells, Chairman of the NADA, said that he
doesn’t think Ford will change. Wells told the press
that Ford thinks its dealers are obligated to become
Blue Oval Certified and that’s the way they plan to
leave it.
It’s what he didn’t say that bothers me. I sort of get the impression that your NADA is sort
of sitting this one out. Wells’ statements gave me
the impression that it's all over and that we lost.
Blue
Oval Certification is thinly disguised two-tiered
pricing and should be illegal in every state. That’s
my opinion on this issue. Who’s representing the
dealers’ interests here? If the NADA is going to lie
down, then it is up to the state associations to take
it to the legislatures. Ford is putting up a publicity
campaign trying to convince lawmakers and dealers
associations that most Ford Dealers really love Blue
Oval certification and favor it. I have to see what I
feel is reliable research to the contrary. Are you
going to allow Ford to sell the state associations
bogus mis-information without your voice being heard?
This is about Factory control, and ultimately, about
selected extermination of undesirable dealerships and
the rewarding of favored dealers. This is about
price-fixing and the public will ultimately get
screwed as well.
I believe Blue Oval Certification is about
redistribution of the wealth and breaking covenants
made to honest, hard-working dealers and their
families. If you lie down and let it happen because
they threw you a bone, then you deserve everything
that’s about to happen. Get on the phone with your
state association and let them hear you. Whether you
are a Ford Dealer or not this concerns your
future…and, by the way…you might want to drop a
call into your national organization. There just might
be a few things you’d like to say to them.
To speak with us about
this topic
or any other, give us a call
today!
800.726.0510
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