Well, I must confess, I'm not quite as studious as Thomas Edison, shown to the right, in this dated photograph (of a likewise rather dated Mr. Edison). But after the cookies and milk run out, I do pay some attention in class (Airframe and Powerplant).One of the interesting activities was a field trip to a local repair shop, where there was a demonstration of working with composites, especially repairing them after some ham-fisted damage is done. (The instructor stared at me a lot during this demonstration, for some reason or other). It turns out that, much to my surprise, that composites are really pretty darned easy to repair. The basic technique is to-
1) Identify the area of damage
2) Remove damaged material
3) Glue new stuff in
That all sounds simple, and when performed by someone familiar with the methods, it really IS simple.
A little tap hammer is used to acoustically listen for delaminations and damage, although there are acoustic "scanners" which can do the same thing with ultrasound.
Then material is sanded down until the delamination is removed.
If a honeycomb core is used, even it can be cut out and "plugged" with a honeycomb insert (and lots of glue/resin).
Layers of Carbon Fiber fabric are then laid over the damage, in orientation described dictated by the specific location (and load path at that location) as described in a repair manual. Plies are alternated 0-90 and 45-135 degrees, up to 4 plies thick, and then resin is worked into the fabric and heat cured. Another set of up to 4 plies is laid, and cured. Etc, until the desired strength is obtained.
Lightning strike fiber (copper mesh, or some such) is then laid over the repair- some sort of smoothing jel for a nice finish is applied, and it's cured and painted. Typically a repair takes one to two shifts, I was told. Neat!
One thing we were cautioned about regarded working with the materials. The resins of course, are rather nasty. But fragments/filliments of the carbon fiber itself are pretty bad news too: the work bench was actually a vacuum table, to capture the dust. Wikipedia has a nice article about Carbon Fibers ("Carbon fibers are the closest to asbestos in a number of properties...").
Although discovered in the good ole US of A, it seems our plucky British friends were early adopters of this rather, um, "disruptive" technology:
"The high potential strength of carbon fiber was realized in 1963 in a process developed at the Royal Aircraft Establishment at Farnborough, Hampshire.. The process was patented by the Ministry of Defence and then licensed by the NRDC to three British companies: Rolls-Royce, already making carbon fiber, Morganite and Courtaulds.. They were able to establish industrial carbon fiber production facilities within a few years, and Rolls-Royce took advantage of the new material's properties to break into the American market with its RB-211 aero-engine.
"Even then, though, there was public concern over the ability of British industry to make the best of this breakthrough. In 1969 a House of Commons select committee inquiry into carbon fiber prophetically asked: "How then is the nation to reap the maximum benefit without it becoming yet another British invention to be exploited more successfully overseas?" Ultimately, this concern was justified. One by one the licensees pulled out of carbon-fiber manufacture. Rolls-Royce's interest was in state-of-the-art aero-engine applications. Its own production process was to enable it to be leader in the use of carbon-fiber reinforced plastics. In-house production would typically cease once reliable commercial sources became available.
"Unfortunately, Rolls-Royce pushed the state-of-the-art too far, too quickly, in using carbon fiber in the engine's compressor blades, which proved vulnerable to damage from bird impact. What seemed a great British technological triumph in 1968 quickly became a disaster as Rolls-Royce's ambitious schedule for the RB-211 was endangered. Indeed, Rolls-Royce's problems became so great that the company was eventually nationalized by Edward Heath's Conservative government in 1971 and the carbon-fiber production plant sold off to form Bristol Composites."
Now it doesn't quite date back to Edison's time (February 11, 1847 – October 18, 1931), but some keen eared folks (unfortunately, Mr. Edison was rather deaf) will recall that the RB211 was destined for the Lockheed L1011.
"Because Lockheed was itself in a vulnerable position, the government required that the US government guarantee the bank loans that Lockheed needed to complete the L-1011 project. Despite some opposition, the US government provided these guarantees. In May 1971, a new company called "Rolls-Royce (1971) Ltd." acquired the assets of Rolls-Royce from the Receiver, and shortly afterwards signed a new contract with Lockheed. This revised agreement cancelled penalties for late delivery, and increased the price of each engine by £110,000".
"A major differentiator between the L-1011 and the DC-10 was Lockheed's selection of the Rolls-Royce RB211 engine for the L-1011. As originally designed, the RB211 turbofan was an advanced three-spool design with a carbon fibre fan, which would have better efficiency and power-to-weight than any competing design. This would make the L-1011 more efficient, a major selling point.
"American Airlines opted for the Douglas DC-10, although it had shown considerable interest in the L-1011. American's intent in doing so was to convince Douglas to lower its price for the DC-10, which it did. Without the support of American, the TriStar was launched on orders from TWA and Eastern Air Lines. Although the TriStar's design schedule closely followed that of its competitor, Douglas beat Lockheed to market by a year due to delays in power plant development. In February 1971, after massive development costs associated with the RB211, Rolls-Royce went into receivership. This halted L-1011 final assembly and Lockheed investigated the possibility of a US engine supplier, one option presented would have been the potential outsource of the RB-211 production to Orenda, but by then it was considered too late to change engine suppliers to either General Electric, or Pratt & Whitney.
"The British government agreed to approve a large state subsidy to restart Rolls-Royce operations on condition the U.S. government guarantee the bank loans Lockheed needed to complete the L-1011 project...
"Kenneth Keith, the new chairman who had been appointed to rescue the company (RR), persuaded Stanley Hooker to come out of retirement and return to Rolls. As technical director he led a team of other retirees to fix the remaining problems on the RB211-22. The engine was finally certified on 14 April 1972,[11] about a year later than originally planned, and the first TriStar entered service with Eastern Air Lines on 26 April 1972. Hooker was knighted for his role in 1974."
It is interesting to note that the original Eclipse engine (the Williams EJ-22) was also a three-spool design. Disruptive engine technology is a real pain!
Speaking of that...the name Orenda made MY ears perk up (although this late at night, that's about all). Fellow GA propeller heads (as opposed to turbofan fans), will perhaps recall one of the pseudo urban legands of late, the Orenda V8.
"The Orenda OE600 is a 600 hp-class liquid-cooled 8-cylinder V-block aircraft engine intended to re-introduce piston power to aircraft normally powered by the famous Pratt & Whitney Canada PT6 turboprot. The piston engine offers much better fuel economy, which Orenda Aerospace felt would be attractive for older aircraft whose engines were reaching the end of their lifespan. However, changes in Orenda's business in the post- 9/11 time frame led to the project being canceled.
"Unfortunately, the events of 9/11 required Orenda to re-focus entirely on their military projects, and the OE600 project was canceled. The design was later purchased by a group of investors who intend to sell the engine under the Texas Recip brand, but it is unclear if this project is continuing. On August 29, 2006 the president of Texas Recip, Paul Thorpe was sentenced to 3 years and five months for defrauding investors, telling them the money was being invested in the engine project, or other investments, when it was actually being used to pay off investors in a previous scheme.
"More recently the project has been picked up by TRACE Engines of Midland, Texas. Yorkton Aircraft is handling Canadian installations in agricultural aircraft."
While current VLJ Engines are Candian (PWC-61X), Orenda is also Canadian.
It seems the disruptive engine game can lead to knighthood, a Collier trophy, or a jail sentence- (overall, I'd say Eclipse should be pleased with the Collier! :)
125 comments:
Speaking of engines, and composites- it's interesting to note that some engine cowlings are composite nowadays. I'm told there are high-temp resins that work in such areas.
In case you haven't guessed, I'm as interested in the "P" (Powerplant) as the "A" (Airframe) topics.
But right now, I'm mostly interested in "Z"s: Good night!
Please point out corrections, as:
1) I'm more tired than usual, and
2) I'm stupid- as usual.
Thanks!
.)
Phil,
good morning (or good night looking at my time in NZ) - nice post.
When you continue the DC-10 story -the MD11 - you will learn of engine problems at PW and of a young female project manager - called Peggy B. ...
I always believed that there is a volune decrease if the resin is drying. Which technic isused to get the original shape or form?
Or does all this depend on the type of composites?
Julius
The RB-211 never did get the composite fan blades and neither did the Trent engine, its' successor.
Also the manufacture and repair of composite materialls typically generate very small carbon particles which are very dangerous to inhale, you really need to wear a respirator when dealing with the stuff. Same can be said of the fumes used in working with the resins and chemicals used.
Colgan Crash information summary on what happened
there is an in depth examination being aired next week on the public TV show Frontline. in the midwest it is Tuesday Feb 9 at 9:00 Pm
it is an in depth examination of the Colgan Crash a year ago. it is Titled" Flying Cheap" " Front line explores an aviation system stretched beyond its limits".
Fixing composites is not as easy as it looks.
slapping a composite patch on an airplane is fairly straight forward on most parts of an airplane (if done exactly right) because most of the composite structure is lightly loaded. that part of the structure is there for aerodynamic reasons or to keep the wind out or the people in.
how ever critical structural components like the spars etc will never be field repaired. making a joint that will be as strong as the original is almost impossible in Composites and requires exactly the right technique.
things like cleanliness, humidity, environmental temperature are very important. the epoxy glue line must be exactly right. too thin and it is weak, too thick and it is too weak. the high temperature cure cycle for the epoxy must be exactly right to reach full strength and not over cook.The reinforcement must have exactly the right modulus etc.( carbon that looks exactly the same may have a modulus that varies by a factor of three) The bond line must be prepared exactly right. It must have the right configuration, be perfectly clean, and have the right surface roughness.
I think of composite aircraft patching much like Gadfly described doing a high quality scarf joint. if not done exactly right it will fail. wood is actually more forgiving than composites in general.
thus to patch a hole in the fuselage of a cirrus where the gas truck hit it or the leading edge of a wing suffering from hangar rash will be doable by an expert craftsman because it is not in a critical structural area.
however a hole someone drills in a spar by mistake will require a new wing.
in comparison, most aluminum structures, since they are typically riveted together already, have excess material that allows even riveting on a spar patch if the holes are put in the right locations.
According to my daughter the composites designer,it is very difficult to make a composite patch except, in the factory, that has more than 50 or 60% of the original material's strength. however on most areas of a modern composite airplane there is enough excess strength that that is just fine.
Beedriver,
While it's true that making composites repairs on nostructural compostes has a certain technique to it, your statement of "however a hole someone drills in a spar by mistake will require a new wing" isn't necessarily true. There are many widely used composite repairs for structural composites most of which involve the use of Ti reinforcement (doubler's, etc) in the area of repair.
I done and written these types of repairs for a variety of composite applications in structural composites (EpGr/PMR-15/BMI)
And yes, Phil, there are higher tem composite nmaterials for use in hotter applications (BMI and PMR-15). PMR-15 is used in a lot of exhaust components with GE military engine aplications.
P_P
julius . . . a common misconception is that plastic resins “dry” . . . the same misconception is that concrete cement “dries”. Neither is true. You can pour concrete into a form under water, and it will harden . . . and the presence of water actually promotes the hardening. In a similar sense, “thermo-set” plastics such as epoxy and polyester, “cure” over time. To accelerate the natural process, a catalyst and promoter are added to speed up the process of the molecules “cross-linking”, called “polymerization”. The process creates much heat, “exothermic reaction”, which must be controlled, to prevent distortion or actually setting the material on fire. In thin cross sections, the heat generated usually dissipates.
But there is no “drying” in the process, except for extremely minor amounts of volatile compounds, including minor amounts of water.
You may wish to do a quick study of plastics . . . and consult others, who have a better knowledge of chemistry.
gadfly
This present discussion is excellent.
We’re learning that whether flying a plane (re: Colgan Crash), manufacturing a carbon fiber wing spar, repairing a composite “skin”, machining a piece of “6-4" titanium, repairing a spruce spar, or predicting the weather . . . too much emphasis is placed on computer programs, and not enough on the artistic skill and reasoning of the human brain and “hands on” experience.
Computers have become the “end-all” of development, rather than being a tool, a supplement in the overall development of new technology, and the refinement of the “old”.
There remains the same old, same old, requirement for mentoring . . . the “old” training the “young” in a close relationship to pass on to the next generation the wisdom and skills so hard won over the centuries. Today, we’re giving it all away by the truckload . . . or rather, "shipload", thinking that at any moment it may be “retrieved” from across the Pacific as if it were a commodity. When that delicate thread is broken, there is no immediate recovery . . . at any price.
As we look at something so seemingly simple as building up a composite airframe, there are “secrets” in the process that cannot be found in books, computer programs, or even in the archives of companies like E.I. du Pont, American Cyanamid, or Union Carbide, etc. The critical components are locked in the brains of “hands-on” technicians, etc., that can only be passed on to the next generation over time, and by working with the next generation.
And now back to the discussion in progress . . .
gadfly
gadfly,
thanks for your corrections.
E. g. concrete should be "dry" - but that's only one point!
There are correct terms...I should know and use them!
Julius
Hang in there, julius, you're doing just fine. And your comments show excellent insight.
gadfly
(The part about concrete was first brought to my attention, many years ago. The "Romans" built some structures for ships along the coast of Israel, about two thousand years ago . . . and by that time they had discovered a way of making concrete pilings, underwater . . . and the same program on TV showed their "toilet flushing system" for the entire city . . . flushing all toilets every time the tide came in and out, twice a day. And we thought that Thomas Crapper of London was the inventor of the modern porcelain throne! Sometimes, it's not best to have your name connected with your invention. Another time we might discuss a German inventor (?) by the name of Otto Titzling. But me thinks there is more hard evidence of the Romans having invented hydraulic setting cement.)
“Of what works and doesn’t work and why”
Well Phil:
That composite repair you describe sounds purely aesthetic and very iffy – perhaps why, the instructor was staring at you, knowing you had a discriminate eye. Is he a secret reader of the blog perhaps?
And to back up Airsafetyman’s warning:
I was once poisoned by Polyester resin, by accident, at the decorative arts and sculpture lab at the Getty where I used to work in Malibu. We used polyester resin in small amounts to replicate missing tiny metal elements on clocks or Louis 15th furniture that we then painted to match patina. These treatments were completely removable and reversible never changed the integrity of the original piece -- the conservator’s mantra.
At any rate, a peer and student, at the time, decided to demonstrate the lost wax process of a De Vries bronze sculpture by making a “clear” mold of the process (showing spurs and where the wax would be) through the magic of polyester resin. The student was wearing a respirator and working under a fume hood. Meanwhile, yours truly was sitting at the other end of the lab working on a report – while a few gallons of resin were being poured into a mold. The fumes, while not pungent-smelling filled the lab. I started to scratch my legs and I remember I was wearing black tights…. I started to feel light headed and walked out of the lab saying, I needed air…
As the story goes, I was lost and then found by Security, kissing trees in the lemon grove and dancing naked in the fountains in the main Peristyle gardens of the Roman Villa -- the museum building at Malibu. It was a good story made by my co-workers at the Getty, but I was poisoned, ill, and sick and deemed unable to drive or do anything including being able to eat, drink, or sleep normally for 4-5 days. Polyester resin was my enemy. They say there will be no long term affects – and there are far worse things …. HIV, syphilis, starvation, earth quakes, lousy economy, losing your job...
Another conservator’s mantra—one does not use any adhesive that is more rigid than the original material to consolidate, but that’s for art objects. Are airplanes art objects?
PBS ... it is an in depth examination of the Colgan Crash a year ago. it is Titled" Flying Cheap" " Front line explores an aviation system stretched beyond its limits".
Typical PBS crap - a bad pilot (with a poor history) screws up big time, pulling on the stick on stick-shaker activation, and PBS runs a story on how the "system" is stretched beyond the limits.
Let me guess the conclusions - Pilot Union crap repeat - low salaries, blah, blah, blah...
OR
You can read the final NTSB report.
NTSB "The probable cause of the Colgan Air crash that killed 50 people near Buffalo, N.Y., a year ago was the captain's inappropriate response, characterized as "startle and confusion," after the stick shaker was activated, pulling back when he should have pushed forward, the NTSB reported in a hearing on Tuesday. Contributing factors included the crew's failure to monitor airspeed and their violation of the sterile-cockpit rule "
Folks, if you have the time.... The FAA is starting a series of meetings on the future of part 23 small/light airplane certification.
Public is welcome to voice their opinions on changes and impacts of certification requirements.
The first meetings will be held Feb. 23 and 24 from 8 a.m. to 5 p.m. at the Marriott, 9100 Corporate Hills Drive, Wichita, Kan., 67207. Space is limited, so all interested parties should notify the FAA's Lowell Foster via phone at (816) 329-4125 or by e-mail at lowell.foster@faa.gov
And the obviously incongruent statement award of the week goes to......
Cirrus CEO on the Cirrus Jet....
The Vision jet is the highest priority at Cirrus Aircraft, CEO Brent Wouters said in a webcast on Wednesday, but as of now, there is no timeline for its completion. "When will it be done? We don't know," Wouters said.
I love it. It is the most important thing, but they have no idea when they'll get to it. Priceless.
Wouldn't you know it - just today the ALPA (pilots union) released a statement saying it is disappointed that the NTSB prob cause for Colgan was pilot error. They wanted to the NTSB to say that "low pilot pay" contributed to the pilot error.
So predictable. I'm willing to bet, the PBS "show" will say exactly the same - my bet is that there will be lots of union pilot testimony.
AND NOT ONE OF THEM WILL SAY "Every student pilot know that if you fly too slow and at the indication of a stall you pull back on the stick, you will likely die"
PS Phil your research and writing on this blog are worthy of a PhD! You should look into it...
PPS The polyester resin model of De Vries's "Mercury" of all the Gods, was a success and became part of a later exhibition at the Getty in the Brentwood facilty atop the Santa Monica mountains.
Toyota
Another major corporation stonewalling when they have a defect because it will cost money to fix.
The Toyota stuck throttle problem is getting really interesting. they say it is because of floor mats, the linkage gets wet and sticks.
However, they are retrofitting the Lexus line and several others with brake override systems. apparently this is a feature standard on American cars that have throttle by wire, The brake override system is a system that detects if the brake is being activated and that signal over rides any throttle input. thus no matter what is wrong you can stop the car.
Toyota apparently has some software glitch that causes the problem but they can't find it or will not admit it is the problem. as a result they are secretly retrofitting the automobiles with the brake override system while telling everyone that it is a sticky accelerator or bad rugs.
they have know of this problem for a long while but all along deny that it exists.
Toyota we thought was a good company but it appears that they will deny a problem long past when it should have been fixed because it will cost money to fix. they are like many other capitalist companies that assume making money is more important than anything else.
Based on the evidence I would not drive or buy a Toyota product until it has the brake override system installed.
Phil,
Interesting reading. Is it true that Icarus used composite materials in his attempted flight from Crete? Perhaps Daedalus should have used high-temperature materials in his design.
Bear with the gadfly for another story . . . and guaranteed you’ll learn something new:
The first time I heard about “lost wax casting” was when I was maybe twelve, thirteen years old . . . something in there. I had grown up since age four or five, learning about pattern making (Cushman engines, etc., by my grandfather, and components for aircraft components, my Dad) . . . and the term “lost wax” . . . Who and when was it lost? My Dad explained to me that a “wax” model was made, encapsulated in “Plaster of Paris” or a similar thing (we had made plaques in Daily Vacation Bible School, so I already knew about that sort of thing) . . . and after the plaster had “set” (not dried), the wax was melted out in an oven . . . in other words, “lost”, leaving behind a hollow the exact shape of the original wax model. Then, silver or gold or some other metal . . . lead? . . . tin? . . . copper? . . . bronze? (copper and tin) . . . brass? (copper and zinc) . . . was poured into the hollow cavity, and an exact duplicate of the original (figuring the shrinkage as the molten metal would cool) was produced. The plaster, or clay, was then removed by a slight hammering and/or soaking in water, and a beautiful complete metal casting was the result.
Fast forward to about 1973 . . . somewhere in there: I worked for a small shop, long gone, that did work for GE Jet Engine Division in the old “American Car and Foundry” (ACF) facility . . . left over from building stuff for the first nuclear bombs, etc. Low and behold, GE had a wonderful “Investment Casting Facility” (think “lost wax” method), to cast the Rene metal (high nickel alloy) turbine blades for jet engines. One day, I was given the task of designing and machining a seven piece mold to make a “sprue tree”, to connect about eight “gates” between two rotor sections in a complex mold, to injection mold the “wax” (remember “lost wax casting”), to put two rotor sections in place, fill up a cavity with the proper ceramic media, bake out the wax, and pour two rotor sections with the special refractory (that means, “high temperature”) nickel alloy, know as a Rene alloy (patented by GE).
With “HP” calculator, a simple knowledge of “trig”, an understanding of “shrink rates” (going back to when I was a little geeky kid), my seven piece mold, of 7075 aluminum, machined on a Bridgeport mill, worked exactly correctly, the first time . . . no touch ups, no change in dimensions, and all seven pieces coming together . . . with not a single “90 degree angle intersection” in the lot. My boss, of course, took full credit for the success . . . but I learned much back then, without a computer, on all the intricacies of “Lost Wax Casting”.
Is the process new? . . . Hardly . . . In the times of Job, and Abraham . . . and later in Moses’ day, “lost wax casting” was already a refined art and technology.
gadfly
(Concerning the “Getty Museum” . . . like it if you must! When it opened, they had one very small problem . . . they forgot to include restrooms for the “ladies” . . . talk about “high tech”!)
(Dark Blossom . . . perfect timing, for sure. Daedalus used the right material . . . "Lost Wax" . . . but lost the rest of the recipe.)
"Based on the evidence I would not drive or buy a Toyota product until it has the brake override system installed."
Gross over-reaction! Try to deal with this rationally instead of emotionally. Said to be 8 instances of this documented so far out of maybe 20 million vehicles. Lightning will get you before a Toyota does. Most cars have brakes capable of overiding the engine even at full throttle. Worry about something serious.
WhyTech . . . stay out of this. Our entire family drives either Toyota or Lexus . . . let's keep the price down and a good thing going.
gadfly
(Well, we have a couple in the family that are a bit "messed up" . . . one drives a Honda, and the other has a Ford truck . . . but we figure there is "hope". But none drive an Obamamobile, thank goodness.)
(Whoops! . . . a couple of the grand kids have old New Mexico State Police Fords . . . they seem to last forever . . . and they're much fun, coming up behind the "unsuspecting".)
"let's keep the price down and a good thing going."
Wisdom prevails - I drive a Tundra.
Good show, WhyTech . . . so do a couple of our kids.
gadfly
(And about everything else made by Toyota.)
Wow,
I leave for a few months to tweak my baking receipe and you guys start getting into really important stuff!
A couple of comments:
- BOW/MTOW can be misleading, for instance Hawker 125/750/850/900XP are all the same basic a/c, but they have evolved over time and also can have artifically decreased MTOW
- higher wt derivative a/c should always be more weight efficient (CL-604 vs CL-601R vs CL-600) or (DC-10 vs MD-11 vs MD-11F High wt)
- weight does not scale linearly, so higher wt a/c should be more efficient. ( So A380 should be the best and LJ23 should be one of the worst right?)
- composite repairs
non-structural repairs may be considered easy, but critical loadpath repairs where stiffness, OML, etc must be maintained could be a different story
- composite efficiency
remember there are many different 'qualities' of CFRP, with different resins and curing cycles that also affect the overall efficiency when comparing against metal.
also remember to factor the impact on other systems from the use of composite, which can further decrease the gap between composite and metal structures
Back to the kitchen!
"PBS runs a story on how the "system" is stretched beyond the limits."
Well, the system is stretched beyond limits in that the supply of superbly trained ex-USAF and USN pilots has dried up. In the Vietnam war we had 1st LTs in their mid 20's flying as C-141 aircraft commanders on world-wide routes. What's Delta or United going to teach someone like that? Zip, zilch, nada. Maybe show them how to fly into bankruptcy, but that's about it.
Now do you expect someone with a background of flying F-15s or F-18s to fly a clapped-out commuter for starvation wages? Ain't going to happen, they are going to stay in the military. Do you expect the same clapped-out commuter to have the resources to bring their ex-Piper Cherokee pilots up to any kind of acceptable standard? That ain't going to happen either. There are a whole host of commuters that I will not fly; most of them actually.
The problem has nothing to do with unions other than the fact that unions created a good job that was once highly sought after by already-overqualified individuals. Now the third-world "lets do it cheaper" mentality has gone from slinging bags to working on the airplanes to the cabin crew to the cockpit. Enjoy your non-union flight.
ASM Said... The problem has nothing to do with unions
------------------
You can't possibly be serious. Do you know, for example, about the union-imposed scope clauses that prevents AEagle and the other regionals from operating E190s, etc.
And, per your point about ex-military pilot supply (which has some validity), the situation has hardly changed.
Regional airlines have existed for decades - Beech 1900s and QueenAirs before them NEVER EVER attracted C141 captains.
Just look at the evidence.
1 - Safety reccord is excellent in improving with many years having zero fatalities in US air transport.
2 - The list of qualified applicants for EVERY regional transport pilot opening is *HUGE*.
There is no evidence - other than the odd act of incompetence like pulling on the wheel at the stall warning or taking off from the wrong runway (regionals) or landing on a taxiway at ATL or overflying your destination by an hour+ (majors).
The last two are overcompensated, main line, unionized, top paid captains. The first two, lower paid regional pilots. All 4 crews made odd mistakes.
The issue is pilot odd, individual pilot incompetence - not low pay.
Keep beliving that! The last four fatal US accidents have been commuters. One commuter pilot related that the first time he was ever in a cloud was on a passenger carring flight. One poor co-pilot in a recent accident did not call in sick becasuse she couldn't afford to rent a hotel room. The conditions are a disgrace which is why there are very few qualified applicants.
very interesting discussion. I am a free market guy and believe in capitalism however unruled capitalism is as bad as total socialism. just like football would not be a good sport without rules, business is a rush to the bottom if there are no rules.
personally I want to know that the pilot on my comuter flight had a good nights sleep last night and his family is able to afford food.
A very good young pilot I know who flies for a commuter airline out of Atlanta just bragged to us that after two years he is able to get off food stamps to feed his family.
I have no choice on the pilot who is flying the commuter airline I am on so I at least want him or her to come from excellent pool of recruits that look at commercial flying as at least able to feed his family.
by the way I saw a study that if every pilot and co pilot on the commuters was paid a wage that would keep him and his family off food stamps it would only increase the fare for each passenger $5.00 I would be willing to pay that anytime if I knew that at least the pilots were being selected form a large pool so we would have applicants with the right stuff. if you couple good applicants with good training and tough testing you will have a much higher chance of having a good pilot come out of the process.
To achieve good applicants in this business environment the only way we are going to do it is to make sure the playing field is level for all the companies and force them to do the right thing and start with excellent people. there are too many capitalists out there that will cut any corner to make money. That forces the rest of us businessmen to do the same thing in a competitive environment without base line rules. Depending on the free market to force good quality in a monopolist market like airline transportation will not work.
Baron I dare ask what it is that keeps you so connected with aviation. A reply of "none of your business" would be taken with no offence whatsoever. You have a finger or 10 on the GA pulse. Phil excellent head posts are bringing great replies. Thank you sir. Mr gadfly should I be in the burque I will look you up sir. I used to think your posts were long winded but I now realize what contributions you have kindly given blog followers.
Thanks, BassMaster. I'll try to let you off easy, when we meet.
gadfly
Sure Bass Master... I have had the good fortune of having great experiences with both GA (personal and business piloting) and Airlines (as a multi-million mile passenger).
I also have some in my family even more connected to aviation than I am, but I shall leave them out of the answer.
So I have an interest in seeing US GA and US Airlines be the leaders and be vibrant.
And I am deeply disappointed that the US airlines are decrepit and going down, being surpassed by third world airlines in every measure - fleet age, cabin appointments, profitability, crew attitude, and now even safety.
And now even the owner flown GA industry (from LSAs to light jets), previously dominated by American companies is seeing all the innovation coming from abroad.
It doesn't have to be this way. So that is my interest. Contributing ideas and provocations to see if we can remove the idiocy that is holding these two industries back in the US.
Nothing more, nothing less.
Plus I get a kick out of taking the devil's advocate position.
After all - I don't take myself or this blog *that* serious.
Any more questions?
As to the pilots being tired and overworked...blah, blah, blah...
Do you worry when you enter the E.R. that the young Dr there may be on duty for 36 hours straight?
Do you worry that the guy driving the 18-wheeler tanker full of gasoline down behind you at 65MPH is poor, likely uneducated, and has been driving all night to avoid traffic?
There are stressed (financially and for time) people in every profession.
No high-school level jobs (which is what piloting is) have the level of scrutiny from traning, experience, medical, recurrent training, etc that a scheduled airline pilot have.
And the safety record speaks for itself.
We went from a union-imposed 3 crew (e.g. 707s, 727s) to 2-crew. From strictly regulated to somewhat deregulated.
And what do we see?
A tremendous improvement ins safety record.
I'll tell you what you don't want flying your plane or crewing your cabin.
What you don't want is bitter unionized people that pull out their laptops to argue about how much tougher their archaic route bidding process will be and forget to talk to ATC and shoot their approach.
Those two pilots were not underpaid or tired. They were bitter.
You also don't want a bitter, overweight flight attendant rolling the eyes and tossing drinks at passengers.
That is the problem with the US airlines. Bitter disgruntled unions.
That is why EK, SG, CX will continue to grow, be profitable, have young fleets, motivated and fit and pleasant flight attendants and will attract the best pilots in the world to fly their planes.
And wait until China gets in the game - they are learning.
But hey - what do I know?
The personal GA industry and US airlines are making soooooo much money. They clearly have all the answers.
"Plus I get a kick out of taking the devil's advocate position."
For awhile that technique seems to work, for some. But over the years, I've noticed that sooner or later the "student" gets wise, and the "teacher" is no longer taken seriously, even after seemingly "getting religion", and desperately wishing to be taken at his word.
gadfly
Aesop had a story . . . the boy that cried, "Wolf!" Honesty is a rare and valuable asset, to be preserved at all costs. Treat it as "finest gold".
And I'd hate to claim payment from the devil for my services.
And last time I checked, the Devil doesn't need a public defender. The Devil seems to have an abundance of such advocates . . . living high on public funds.
gadfly
"As to the pilots being tired and overworked...blah, blah, blah..."
Not really much of a comeback there. Too many flights in a given day lead to being dead tired, which is probably why the pilot wasn't hand flying the approach in icing conditions. The copilot should have been in bed recovering from a bad cold. A fresh awake copilot might have made all the difference. A more experienced crew might have made all the difference. Some commuter pilots SLEEP overnight in their airplanes because their cheap-shit management won't spring for a hotel room. US airline service has gone to hell precisely in line with the unions losing their influence.
"Do you worry when you enter the E.R. that the young Dr there may be on duty for 36 hours straight?"
Yes.
"Do you worry that the guy driving the 18-wheeler tanker full of gasoline down behind you at 65MPH is poor, likely uneducated, and has been driving all night to avoid traffic?"
Yes. Only he is probably an unemployed engineer trying to feed his family as his job has gone to India.
"No high-school level jobs (which is what piloting is) have the level of scrutiny from traning, experience, medical, recurrent training, etc that a scheduled airline pilot have."
What were the Colgan crew if not 'scheduled airline pilots', potted plants?
"We went from a union-imposed 3 crew (e.g. 707s, 727s) to 2-crew. From strictly regulated to somewhat deregulated."
This makes no sense at all. the early transoceanic 707s had FOUR crew members-a navigator along with the flight engineer. It was never contemplated that the 727 would have less than three crew when it was designed. The unions had NOTHING to do with the crew requirements of either airplane.
ASM said...The unions had NOTHING to do with the crew requirements of either airplane.
------------------------
Again you have to be kidding - Unions fought tooth and nails - including a 4 month strike - to force 3-crew into their contracts for every plane, that came down the pike.
Just from a quick google....
From B737.org .... "The 3 crew issue had been around since the late 1950's with the Lockheed Electra and some fighting between airlines and the pilots and engineers unions which lead to a high profile four month strike that in the end only deferred a new policy decision. When the 737 was announced ALPA and the FAA were on the case of the 737 from the outset as the 3 crew issue had still not been resolved."
From a very detailed discussion, by people that were there....
(http://www.airliners.net/aviation-forums/tech_ops/read.main/233982/)
" Fact is, some carriers, because of their union contracts did operate the 737 with a crew of three for a while. There was just not much for the third person to do (unlike the 727 where there is nothing for the second person but lots for the third person to do)"
That is not to say that you are not making some valid points ASM.
But this notion that tired professionals can't perform is just silly. In the battle of England, tired RAF pilots went up again and again with with little rest in planes that were maintained by mechanics working around the clock with no sleep, day after day after day.
I never read anything about these crews performing "sub-par".
There is nothing particularly demanding about flying an airliner the same route (or small set of routes) 80 hrs/month, when you get your route, weather and fuel planned by rested dispatchers, have a copilot or two, and have your planes maintained by the book with no pressure to take off.
Its just life. Just a job. And it must be a very good one, given the ratio of applicants to positions available.
Sorry - forgot to mention that American and United union contracts required operating 737s with 3 crew until 1982, when deregulation gave them ammunition to amend their contracts.
Can you imagine? 3 crew to operate a 737. Only unions and guaranteed fares by the govmt can produce such an abomination.
Yet, those 3-crew planes killed a-lot more passengers than the 2-crew, union-free, discount Southwest, which has yet to kill any passenger.
Baron said: "...Yet, those 3-crew planes killed a-lot more passengers than the 2-crew, union-free, discount Southwest, which has yet to kill any passenger..."
According to Wikipedia, SWA is 87% unionized.
Wikipedia - Southwest Airlines
On another note, a Judge today prevented United Technologies from shutting down 2 plants in Connecticut. The Judge said, UTC didn't do enough to prevent jobs from migrating to Georgia (a southern US state), Singapore, and Japan.
P&W plant shutdown stopped
Looks like you predicted, only the southern states are able to provide competition to locales like Japan.
"Lew Wallick once asked a Piedmont captain what the third crew member did,
riding in a jump seat just behind the pilots, unable to reach any controls.
"'He doesn't do much,' the captain admitted. 'He sits back there and
spills coffee in my brainback [nickname for the briefcase holding air-
way maps
and aircraft manuals]. But come next summer, he's gonna mow my
lawn.'
Hi Michael - thanks for the correction on WN - I guess a more accurate statement should have been ALPA-free instead of union free.
Re UT and CT, it is EXACTLY this type of behavior by unions that continues to accelerate the move of jobs from the North to the South and overseas.
The union knows they can't compete on productivity ($$$ output per $$$ of compensation), so they need to resort to strike-threads and law suits.
The facilities will close anyway - either now or when the contract expires in December.
The ONLY appropriate response when presented with this competitive data, should be, "here is a plan on how our union workers will match or beat the other locations on output per labor cost)".
Anything else, just delays the inevitable, and usually causes an over-reaction of more jobs than necessary being lost.
Sad, but predictable.
And now... get ready for the start of domination of Embraer at London City.
The E190 just received its steep approach certification...and...as a result...
British Airways’ CityFlyer, Switzerland’s Geneva-based Baboo Airlines, and Germany’s
Lufthansa Cityline will be the first to operate the EMBRAER 190 out of LCY.
Replacing the mostly old and out of production junk that used to fly into LCY.
Baron said: The ONLY appropriate response when presented with this competitive data, should be, "here is a plan on how our union workers will match or beat the other locations on output per labor cost)".
Ah, yes, the great race to the bottom. Why don't we all just work for free while we're at it? You can go first, Baron.
Michael said:
Looks like you predicted, only the southern states are able to provide competition to locales like Japan.
Too bad Cessna is shutting down our Columbus, GA facility (only 2 miles from Pratt's facility.
Of course, we're not losing out to Japan, but Mexico!
Aye Chihuahua!
P_P
Shadow said...Why don't we all just work for free while we're at it?
---------------
Not free. You just need to be competitive. Produce at least as much, with the same quality and predictability, for the amount you make. That is all. Is that such a novel concept?
It boggles the mind when people try to make the argument that there should be laws or rules forcing employers to pay more for less. Incredible.
Want to make more money? Then be incredibly productive. Else, you can only delay the inevitable.
Look for a new headline Tuesday morning.
(Much research involved- science topic).
747-8F is scheduled for first flight in a couple hours, the Lazy B appears to be on a more positive trajectory as of late.
Congrats to the 747-8F etam.
Baron said: Want to make more money? Then be incredibly productive. Else, you can only delay the inevitable.
This is pure BS, and you know it. Plenty of companies have outsourced jobs to other countries, hiring twice as many people as they did in the U.S. but paying a tenth of the salaries. So the outsourced labor is much less productive per employee, but the overall wages are even lower too. Tell me again how this isn't a race to the bottom.
And you wonder why the U.S. economy can no longer be primarily based on consumer consumption -- all of the well-paying jobs are leaving the country, while the ones that stay continue to have steadily decreasing wages. Pretty soon we'll all have to be living off $1 a day like they do in India. I'm sure Baron will say he'll welcome this outcome since it puts U.S. labor costs in competition with the rest of the world.
shadow...
one strategy to stay away from the "body shop" mentality... do larger/integrted packages of work and move up the value chain. Otherwise, you are right, you are a single unit of productivity and will be baselined against a wage you cannot live by in this country.
"Can you imagine? 3 crew to operate a 737. Only unions and guaranteed fares by the govmt can produce such an abomination."
Baron, your original post concerned the crew member requirements of 707s and 727s.
The 737 was designed as a two-crewmember airplane from the start. Union insistance on three crew members was uncalled for.
Shadow,
The ONLY productivity measure that counts is output per labor cost.
Can you produce as many $$$ of goods/services with the same quality for the labor costs?
The non-unionized industries in America are KICKING ASS.
Intel, Microsoft, Google, Goldman Sachs are incredibly competitive, have extremely high wages and are super profitable.
Now - watch and weep - how the Obaminator will make the Goldman Sachs jobs (which pay about $2M/year on average) leave for Hong Kong, Singapore, etc.... he is so intent on killing the best jobs in America, while paying $60B to save some uncompetitive UAW jobs.
Sad.
Hi ASM - fair point - I crossed some wires - was thinking 737, but wrote 727/707. Apologies.
I still think that the 727 could have been designed for 2-crew operation, at least on the updated later models. It is just that Boeing didn't want to tackle the unions and the FAA until the DC9 lead the way.
Incidentally, I believe some airlines (Air New Zealand comes to mind) also had to bend to their unions and fly 767s with 3 crew (even though the GIB had nothing to do).
Fear not, in time, competition will weed out these practices. The only sad part is that it may take entire airlines with it (like Eastern and Pan Am and Alitalia).
748F Flew Today. Congrats to Boeing.
Great looking freighter. A good complement to the 77F and 767 conversions in the widebody freighter market. Puts even more pressure on Airbus to get the A330-F in volume production.
And puts a nail in the coffin of the A388-F (probably).
Baron, there are only enough $2M/year Goldman-type jobs to employ about 1% of the American workforce. What the heck do the rest of us do? And how is the majority supposed to live off something like $1/day per worker while the 1%-ers each bring home $5,500/day ($2M / 365)? This scenario reminds me pretty much of Brazil, where, in general, people are rich or poor, with little in between. In Brazil, the poor live in tin shack villages while the rich live in mansions -- I've seen it firsthand.
Hi Shadow - it is a tough situation.
But the ONLY answer is that work will migrate where it can be done more effectively (lower cost, higher quality).
The wages in China and India will go up, just like the wages in Brazil went up. The wages in some segments of US workers will HAVE TO come down to match. Yes, it is a tough adjustment. But that WILL happen.
Our job is to have the absolutely best education, transportation, energy, taxation, financial system, defense, etc... in the world, so that for the same skill level, a worker in the US will produce more $$$ than anywhere else in the world. That is the ONLY pay differential you'll be able to keep.
Education, health care, sales, retail, repair, construction, etc... are relatively hard to move offshore, so, those will be relatively isolated from competition. (note that even there, there will be limits - e.g. X-rays and Cat Scans are routinely read in India, and prefab housing modules from China is coming.
So steer yourself and your kids to that.
Final assembly of some products (e.g. autos) is more effective when close to market. So go work for an auto transplant in the South - they are not going anywhere.
So there ARE answers. And they are not easy for sure.
But the answer is NEVER to hold an employer hostage like the UAW did to Chrysler or the air transport unions did to Eastern to the point where they disappeared of cratered taking tens of thousands of jobs away.
That will never be the answer. It is not sustainable. Sure - you can delay. You can make it last for the few that are *in* (the union) at the expense of all the others that would love to work for competitive wages.
Isn't it better that salaries at GM, Ford and Chrysler are now closer in line with the wages of Toyota and Honda and Hyundai and Mercedes and BMW factories in the South? Isn't it better that they are now re-hiring instead of endlessly laying people off, even though salaries are a tad lower? Isn't it better that they have a chance to be around for a few more decades instead of being liquidated trying to continue to overpay by a gross margin?
How about British Airways vs EasyJet? Is it better to keep the artificial wages and work rules of the few until BA collapses like Pan Am, Alitalia and JAL? Or is it better to have competitive wages phased in?
How about Cessna and Beech vs Embraer?
Shouldn't wages be made competitive so Cessna can use its many advantages to shut Embraer down before they become a real threat?
I am not insensitive to the painful adjustments. I am going through them myself.
But think about it. Healthcare, Education, Home PRices (construction), Government (taxes) prices go up and up and up - way above inflation.
Clothing, computers, TVs, furniture, etc, the stuff that is made overseas, when adjusted for content goes down and down and down in price.
I'd say that the American family is having a hard time because they are being gauged by the products and services that are being kept from competition.
And they are being helped by the outsourced goods and services.
So it is not just what you earn. It is what things cost that make "purchasing power" and "quality of life".
And the protected classes are sticking it to the American family.
What do you think would happen to say health care costs if we allowed Indian trained doctors and nurses to move and practice in the US? Would health care costs suddenly start going down by 7%/year as TVs instead of going up 7%/year?
Would your live be better if your co-pays, health contributions were lower and your employer could divert healthcare $$$ to say employee training?
An economy, as a whole, ONLY BENEFITS when lower cost, higher quality goods and services are introduced from outside. It is never ever a net loss.
Any way - enough of that. Good luck on your adjustments. It won't be easy.
"Shouldn't wages be made competitive so Cessna can use its many advantages to shut Embraer down before they become a real threat?"
Why in the world would anyone want to shut Embraer down? They already produce larger and better airplanes than Cessna and provide tens of thousands of jobs in South America. Jobs that generate real wealth and taxes. If Cessna had the business they would just outsource it to China and to hell with quality or reliability. "Skycatcher II" anyone?
Same with Airbus in Europe. Government-supported to a degree but no more so than Boeing. Probably less. The result has been the creation of superb advanced aircraft and tens of thousands of good jobs and real wealth created. The taxes from those jobs go into helping provide quality medical care for most all Europeans, and universal education through college.
The Colgan crash report is on public TV this evening 9:00 central in MN
Great dialogue. Need to interject. SN 24 is for sale <$.5mil. That's the plane with the alleged 'loose stab'. Looked it up and found an interesting SDR. When it came down to the wire out in Albuquerque ultimately QC incompitence, laziness and having a QC manager related in family to the production manager in final assy created odd happenings. Said QC manager ended up at their service center as a signpost doing absolutely nothing. The chief inspector at the service center was the real deal. The only relevance to afformentioned union issues is that former union QC personel contracted by and eventually employed by eac contributed to their bankruptcy. While these claims may look ludicrous in the big picture of Roel and Vern they are exceptionally valid points. I can only assume that Shane knows more about this if he's writing a book.
Well, lets see...
Hawker announced that in 2009 its backlog shrank by 55%. Cessna's did even worse and shrank by 66%. Bombardier announced a net loss of 88 jet orders and got its debt downgraded again.
No big deal.... don't do anything... continue.
Meanwhile, in 2009, Embraer had record delivery of 244 jets, surpassing the previous record of 204 by about 20%, while total revenues and backlog are expected to decline somewhat when they release 4Q and 2009 results on March 18.
So clearly some are losing a bit, some are losing a lot and some are winning.
"Look for a new headline Tuesday morning."
Phil . . . don't worry about us . . . pay attention to those books and learn to do a good job, with "skill" and "understanding" . . . rare attributes these days.
gadfly
(Remember "back when"? . . . it could be that the "goat" found a fondness for "Bondo", and that's why we seldom hear a word about any existing or "flying" Eclipseseses.)
Baron said: But the answer is NEVER to hold an employer hostage like the UAW did to Chrysler…
I know I am late, but I have to chat with you on this, Baron. The #1 logical fallacy is that higher productivity = higher wages. Higher productivity = higher profits for the owners of capital. That does not automatically trickle down to the worker level because wages are generally negotiated well in advance of productivity measures.
The question that keeps me up at nite is why can’t American factories retool to be profitable at producing anything? Say even $10 shoes for kids or $2000 flat-screen TVs? What would it take for an American factory to make $10 shoes at a profit? Ah, but there's the rub, since it is the market that sets the retail price. No matter how good something is, I have a limit. Say I won’t pay more than $200 for a new coffee table. What is the Mexican craftsman to do? Lower his price and hope he can make up the difference via volume. But then we have 25 million unemployed in China. A Chinese craftswoman goes to work tomorrow morning making a table with a retail price of only $100.
Business wants the pool of available labor to be large, not just for hamburger flippers – but even for pilots, A&Ps, doctors, lawyers, anyone! They want a choice, even if that choice is an illusion. But I disagree with the notion that Labor can hold a company hostage under “normal” circumstances. A lot of time I buy crap simply on impulse or because of convenience. I don’t have time or I just don’t feel like cooking. Companies behave in the same manner with their labor force. Either you deal with the costs of constantly training new workers, or for convenience sake you rubber stamp the whims of your labor force IF you can afford to do so. You could go thru the effort, pain, and costs of change or you open up your checkbook and just get it over with.
Even if you have read The Goal 100 times – and you have elevated all the constraints you can – if you or your bosses have decided *to not* make a change to your labor force – that is still a decision to not make a decision. Middle managers are too busy trying to push P&L metrics with the limited resources they have.
The critical change in our world is from centralized production to decentralized production. In the past, the productivity problem was solved with thousands people in large industrial factories. Ford’s River Rogue factory had over 100,000 people working there (per Wikipedia). Today the measure of productivity is $ per worker NOT widgets per worker. This forces people of all ages to learn, retrain, and accept new skills and job roles. The decentralized productivity of 100,000 Americans all starting up their own businesses is powerful. Old dinosaurs like me can’t do it unless we have a Powerball lottery safety net under us. The only thing more powerful may be 100,000 hungry Chinese men and women – if they start their own mini-Capitalist home offices. Our economy benefits when the total value of ALL goods and services as a whole increases; why make it sound pejorative when X makes more money than Y? There are clear “externalities” when a $70k/year person is replaced by a $35k/year person. Would it be any better if a more expensive 50-yr old American doctor is replaced by a younger 27-yr old American intern/resident fresh out of med school? Which one is really more productive?
What has screwed the average American family is: the extreme polarization of the economy, the shift from high-value production to low-value services, the destruction of unions, and the absurd notion that one must invest heavily in post-secondary education (i.e., $100k to graduate med school) in order to obtain one of the few careers today that offers a modest $50k-100k annual income. The careers today that pay decent wages are the next one’s they will try to shift elsewhere. Doctors and nurses are next on the list...
e.d.t
E.D.T said...Today the measure of productivity is $ per worker NOT widgets per worker.
-----------------
Nope, not quite. It is $$$ output per $$$ or labor input (adjusted for other costs like transportation, etc).
If Chrysler can produce a $20K car with 20 workers and Kia can produce the same car with 40 workers, but every Kia worker makes 1/4 what the Chrysler work makes, than Kia has twice the total productivity of Chrysler.
(Note: it is not really worker, is unit of labor cost, which is fully burdened hourly costs adjusted for variable costs).
So, a $10/hr worker in Brazil will have a fully burned cost of about $25/hr, once you add all the benefit mandates, the energy that worker uses, etc.
Plus if a car assembled in Brazil costs $1,000 to transport to the US, you may choose to burdened that hourly cost by the appropriate amount to say $27/hr to account for that.
Also, if the Brazilian worker is 10% less productive than the American worker you bump it up to $29.20, etc.
If further they have more defects/car that causes an extra 5% cost, you bump that up again to account for that.
Then you can compare productivity apples to apples.
Anyway - Fist Americans are not screwed. We have the highest spending power than any other population on earth. Family income divided by cost of living. By far.
The UAW WILL lose grip over the D3 and suppliers due to competition. So will the IAM, but that will take a few decades.
In the meantime, the fully burdened wages in China, Mexico, Brazil are going up much faster than the tiny wage drops that have happened in the US.
If we are smart, that will work out really well for Americans.
If we are dumb, and chase Goldman Sachs et al (the guys that financed Ford, Google, Microsoft, Intel, etc) out of this country because of spite, etc, etc and watch China/Hong-Kong embrace them with open arms (and they are), then we have much to lose.
"If we are dumb, and chase Goldman Sachs et al (the guys that financed Ford, Google, Microsoft, Intel, etc) out of this country because of spite, etc, etc and watch China/Hong-Kong embrace them with open arms (and they are), then we have much to lose."
It would seem that the bankers who drove the economy into the ditch should be gladly working for $1 a year until they straighten the mess out. I agree with you, they should not be chased out of the country; they should be hung by piano wire from lampposts around the Capitol.
Baron:
I was trying to show that productivity profits are 'skimmed' by the upper classes because the workers aren't the one's to hand out the profits. If General Motors as a $1 billion net profit (ha!, when is the last time that happened?) with 100,000 workers, that measure *might* give labor leverage to ask for more money, but they won't literally get $10k each. Even if employees own some stock, net profits -- if any -- of productivity gains go to the owners first.
If I start my own biz and I create a new gadget for Billy Mays to sell, wait, he's dead now. If I get that Slap Chop/Shamwow guy to do the marketing ....well, say I sell $1,000,000 worth of crap in 12 months. And its just me and my wife that did the product design, with manufacturing in China, combined with American marketing. That is still $1,000,000 of revenue per worker = $500k to me and my wife. Say expenses are $200k (manufacturing and marketing) that would leave a NET PROFIT of $400k to me and $400k to my wife. This is the new paradigm: how much revenue and net profit did I directly generate?
That is how the American engine of business is making "average" people wealthy. I'm saying that it is not **sustainable** as #1, most Americans just don't have those skills, and #2, the market won't buy all the crap that comes out of Chinese factories. This skill set is more like that of a movie producer putting all the various pieces together and getting them to work towards a common goal. Is that really a skill taught in American K-12 schools? In our Universities?
I think it is totally disingenuous when our American politicans wax poetic about the great "American entrepreneur" and small biz. Its a sham because most people don't want that lifestyle: my honey's best friend owns a new Rio Rancho, NM restaurant, sucking up 60hrs/week of her time for ZERO salary (she has to put all the $$$ back into the biz). Most, like me, are willing to compromise since we KNOW that we can't snap our fingers and have instant success. I'd rather put in my 40hrs a week so I can go the hell home and spend time with my friends / family.
I'm not talking about Brazil or elsewhere. From a productivity measure Baron, what is in store for all the white-collar chumps that PAID $100k or more for their college degee, people who are unemployed and UNproductive today? They can't *easily* change their skill set to beceome a machinist or restaurant owner if Goldman Sachs isn't hiring. And since our Universities don't really prepare people for the real world, these chumps likley won't be all that successful trying to parlay their talents into infomercial sales. America has to be good at something more than just marketing and sales...
e.d.t.
“e.d.t” . . . As what many would say a successful businessman and manufacturer . . . and successful third generation inventor to boot . . . let me speak about that super gadget for a moment or two:
The inventor is doing “well”, if the royalty is over 2% of the wholesale price of the product. In some very rare instances the royalty may be as high as 5% of the wholesale price, for a brief period or limited quantity of sales, based on possible anticipated minimums.
Note: I said “wholesale price” . . . actually, to tie it to reality, to “price of the original manufacturer” . . . a step lower, in most cases, than the “wholesaler”.
For an item that sells for $1.00, the cost of manufacture must not exceed ten cents . . . and the ten cents is the basis for the one or two percent royalty. Larger items can go as high as maybe twenty or possibly thirty percent manufacturing cost compared to retail price . . . but those are the top of a very limited group of products . . . Unless you’re talking about “machine tools”,airplanes, cars, etc., in the tens of thousands of dollars, and higher. Then, and only then, are you talking about high percentages of the “list price”.
Bottom line: To earn a dollar in royalty, a "dollar gadget" has to sell 500 items at one dollar each, wholesale, to equal a dollar in earned royalty, at the 2% rate . . . or 5,000 items at $1.00 retail, in your local Walmart, etc. Now you know why they can mark down the price by fifty percent, and still walk away with a profit.
But again, I remind you, a 2% royalty is most rare . . . less than 1% is more common . . . doubling the above numbers of items sold . . . if you once achieve that dreamed level of excitement for your "invention".
Now, to be the sole manufacturer of a product is sometimes desirable . . . but not always . . . inventories and promised sales by the wholesaler can destroy a small business . . . re: Target, Walmart, etc. And, Walmart and Target will destroy you in a "hear beat", given the opportunity . . . and you'll see your own product "Made in China" by the time you have tomorrow's morning coffee . . . and the bank discussing how to sell off your assets.
There’s no point of going further with this discussion . . . because it would take a book to even write the introduction for the actual costs and profits possible for the inventor of the thing that “makes the big bucks”.
Our lawmakers have made patent laws even more difficult for “inventors”, copying the foreign regulations, with more and more requirements . . . making invention on our “home turf” more and more difficult, and less rewarding. The “Mom and Pop” entrepreneur enterprise had better have a “recipe”, such as “Coca Cola”, kept in a vault . . . the competition doesn’t have a clue “forever” . . . than to spend the money on the “right to sue” with expensive legal costs, etc., . . . and/or a limited market, undiscovered as yet my the Walmart/China connection . . . and/or able to hit the market hard and fast in a few months . . . and walk away to try something else.
Don’t look for a friendly lawyer, or distributor . . . they only exist in fairy tales. And patent scams are out there like “blow flies” over a five-day-old “road kill” in the ditch after a summer rain storm.
gadfly
(With our last invention, we fell in with some honest folks . . . allowed the “not so honest” work against each other, and came out on top for a few years. It was an interesting and expensive education of what it means to be an inventor . . . and learning “up close and personal” the intricacies of the system. The days of when my grandpa invented his early engines and his variable pitch marine propeller are over [Patent number: 803,560 . . . one of many]. And manufacturing the earlier mentioned invention? Forget it.)
And the "not so honest" at the top of the ladder . . . in the medical/surgical device list?
You figure it out . . . start at the very top, and work your way down.
You'll get there in the very first heart beat.
gadfly
(The battle was fun while it lasted. And note, we're not talking about the medical drug industry . . . this is not about that. No way! I continue to live and breath because of the "latter" . . . have no dog in any fight on that side of the fence . . . and owe my continuing life to the advances being done with "statins", being a willing "Guinea pig" before any were on the market . . . as in "zero".
To have been a "test subject" in those early days brings its own satisfaction . . . for at least two reasons. One of which, I am alive to enjoy nineteen grandkids, and a married life that just gets better and better.
There was another reason around here somewhere . . . but at my age, I forgot where I put it.
Oh yeh . . . I remember . . . and come to think of it, it's none of your business. Some things about married life just get better and better. Like I meant to say, "Buzz off!" . . . three more hours to go and I get to go home and play with the grandkids' "Grandma".)
Hi E.D.T, are you aware that Ford assembly line workers will be receiving (on average) a profit sharing check for $7,500, because of Ford's 2009 results?
Are you aware that companies ranging from Southwest to Fedex to Intel have stock and profit sharing arrangements?
Sure it is not much, sometimes, but employees do routinely share in a company's profit.
Not because it is a "nice thing to do", but because having employees invested in business results is smart practice.
You point about your business, is EXCELLENT.
As a matter of fact, my kids, that go to public school, are being taught public speaking and presentation skills, concept presentation, costing of projects, etc (they are in 6th and 7th grades). Most of their homework is assigned electronically via another American mom-and-pop created technology (Blackboard) and are turned in in Powerpoint presentations many times.
So YES, it is very sustainable. And YES, American schools are ahead of the game.
Let the Koreans and Japanese feel good that they score better in math and the Germans feel good that they score higher in physics. This generation of American kids will be laughing all the way to the bank with their creative, analytical and presentation skills.
If we don't screw it up, Americans will continue to dominate Finance, Internet, Software, Music, Film, Avionics, Chip design, Agriculture, Healthcare, higher education, fast food, soft drinks, and be competitive in aerospace, automotive, Telecom, aluminum, steel, oil, pharma, etc.
I see nothing, other than some of the misguided bankers and profits are bad policies of the moment, that can stop that.
We have an awesome country with an awesome system that generates and awesome amount of wealth and innovation. If we don't totally f%$# it up, it will roll right past this recession and right past the rest of the world.
China is making a lot of smart and pragmatic moves to be as much like America as it can. If we align with the Chinese, the US-China duet can be a game changer to the world economy. The comparatively stale systems in Japan and Europe can be left behind very, very fast.
China (and Brazil, Mexico, India at the edges), in a sense, is the best thing that ever happened to the US economy. We learned very fast to adjust our uncompetitive practices (e.g. UAW $78/hr all-in labor costs) and be symbiotic with them - your mom-and-pop gadget marketing story is a perfect illustration.
It is un-stoppable unless it gets Obamanized and Pelozicised.
Fortunately, that looks like it will not happen.
I have to say, I am VERY IMPRESSED with the sophistication of the American electorate.
Rats, even in the most liberal, most Democratic state in America, with voters being promised by a popular president a bag of goodies and skillfully placement of blame and hate on the previous administration and bankers, the voters on MA, saw right through it, and elected a guy that said he'd work hard to stop all that.
If you think of it, it is quite amazing.
Forget about if you agree with the results or not, think Obama/Pelozi is right or wrong. The point is that voters in MA did not pull the "obvious, safe, customary" lever. They thought and deliberated and chose a remarkably unexpected way.
This is very sophisticated and critical thinking. It is awesome. They didn't vote for the guys that were making all the cool promises, had all the answers, were popular.
I love this country!!!
Truly, this kind of stuff only happens in America.
Monogamy . . . isn’t that a type of wood that comes from Central and South America that’s used to make “fine furniture”? I’ll tell you what it makes, for sure . . . a wonderful relationship, life, and family . . . provided it’s built on good foundations.
As usual, the “gadfly” is off on some flight . . . but I’ll use every opportunity to bring our attention back to things of value . . . because of a couple things: I like to teach . . . to help folks use their God given brain to bring the vast resources of creation into their own understanding, and apply that knowledge to their own relationship to the primary purpose of their existence, and relationship in that vast expanse of creation.
For the moment, Phil is off somewhere, studying for another of many “quizzes” . . . or possibly a test of some sort. ‘Maybe like the times I remember, when we sat on the floor, holding an oxy-acetylene torch in one hand, and a “4130" clad rod in the other, and had to make a clean “bead” around a ninety degree “tee” connection, between two “chrome-moly” steel tubes, as if to repair a small aircraft in the back jungles of “Dutch New Guinea”, or the “Yucatan” of Mexico . . . but then, who today would even contemplate such things.
gadfly
(Watch for continuing attractions . . . or distractions, choose your choices, according to whatever ignites your taste buds. Personally, I choose "green" as opposed to "red")
A last comment from the "gadfly" (age 72), as I prepare to go home at the close of another full and rewarding work-day:
The best things in life are not decided by emotion . . . included is the love for the girl by the man whom she marries:
Tonight, I go home to a girl that I decided to love "forever": If that decision were based on "emotions", the marriage would have failed long ago. But the decision was made to love this girl, regardless of circumstances.
Emotions are good . . . but great things are built on better things, even aircraft.
"Looks" get old, real fast. But better things, built on firm foundations last . . . long after the fashion of the day has been forgotten.
Sometimes, a man gets "both" . . . and the response from the other side reflects that good foundation.
Who knows but that the "both" is the result of sticking "firm" to the original decision . . . and when the eyesight begins to fail, and the body no longer responds as in former days, the former commitments continue, stronger than ever . . . and the things that count become far more valuable than the finest gold.
gadfly
('Attempting to keep you young folks "up to date", lest you miss the best that God has to offer in this life . . . prior to even better things for His own. Those little "rug lizzards" and "ankle biters" will respond to the love between grand parents, and wish above all else, to someday be of the most blessed of the elite. When I was only about four years old, one of my many dreams was to be a "Grandpa", because of what I observed with my own "grandpa". 'Looking back, all of my dreams were fulfilled. Inventor, machinist, pilot, submariner, missionary (of sorts), teacher, husband, father, grandfather, . . . and a much longer list . . . all complete . . . no complaints.)
(Did I make any money today? . . . Actually, no! . . . not a cent!)
Cessna just delivered Mustang number 300. That is 200 Mustangs in 3 years. Not bad.
Congrats are in order. The only meaningful, sub-10,000-lbs MTOW commercial fan jet being delivered in the world today.
Mr. Chekov, fire phasers.
Congrats to the ABL Team, they have successfully engaged a ballistic missile in boost phase and destroyed the target, using the ABL airframe, high energy weapon, and fire control system.
Wow!
"Congrats are in order. The only meaningful, sub-10,000-lbs MTOW commercial fan jet being delivered in the world today."
Can I interet you in a gasoline powered turtle neck sweater?
I meant 300 mustangs delivered in 3 years. Not 200.
"Its a sham because most people don't want that lifestyle"
Right. Most people just want the kind of rewards that some entrepreneurs produce, risk free and with modest effort. The world doesnt work this way ... yet.
whytech,
strange aspect of human nature...
people strive for ociety where they have a real shot, not one that guarantees results.
Basic element of fairness pervades, not "gimme, deserve"
Despite what some think...
Folks look for a fai society... one which grants opportunity not deliverables.
Baron said: ?Are you aware that companies ranging from Southwest to Fedex to Intel have stock and profit sharing arrangements?
I was trying to make a rather nuanced point that the worker bees of any org don't get 100% of the profit no matter what they call it. Someone decides that X is for the workers and Y is for the owners (where Y is ALWAYS > X). Does Jerry Jones hand out 100% of net profits to all the Cowboys players? Have you read some of the press lately with GOLDMAN SACHS stockholders having a hissy fit because they *don't* apparently have the rights to have any say on Executive compensation!
At some point, major industrial orgs made a choice to pay their workers more **when they didn't have to.** Instead of paying $5/day, Henry Ford could have just said, 'where else are they going to go, back to the farms?' I agree that it went way too far with GM, Ford, and Chrysler promising the unions a totally risk-free lifestyle that was not rational. If someone promised you $75/hr in cash + benefits + retirement, would you really turn that down? GM's Management has been dysfunctional for 30+ years. I don't blame Labor for taking what they could get while GM brass spent more time discussing the color of John DeLorean's suit or throwing money at Ross Perot to get him to go away. My mother had a POS 1986 Chevy Chevette b/c it was all she could get. Remember the Cadillac Cimmaron? It's smart for Labor to get guaranteed $$$ when Management is pissing away market share by making crap and they don't really care what you think. Hmmmm, whatever happened to Saturn?
I wish your kids luck. Before my divorce (ha!), my marriage counselor made a point that what I went thru is common: most parents tell their kids "you can be anything you want" but not really telling them what they have to do to OVER-prepare like an Olympic athlete. Do you tell your kids that high school diploma is all they need to get a loan from a bank? A snazzy presentation on Shark Tank won't cut it. Do you lie to them and tell them the world is a perfect meritocracy? Hmmm, what happens to all those NFL wanna be's that don't make the team? Hopefully someone made sure they didn't skate thru college on a football scholarship so that IF they didn't make the team, they could still take care of themselves. What a concept!! An education that prepares kids for NOT making it as the next Miley Cyrus or A Rod.
What's wrong with having a Plan B? Is that cynical or pragmatic? Can your kids really depend on your connections to open doors for them? Should they? Well, you've made it sound like you have some way to 'help' them later...
WhyTech said most people 'want the rewards of an entrepreneur without accepting the risk.' No, most people *need* the guarantee that if we put in time at work, that we get paid for our time no matter what. This change was necessary because our time had to be worth SOMETHING when the work changed from industrial brawn to post-industrial brain work. What workers resent is when they are told to compete on a Global stage because it means they have to lower their price since no one is forcing China to float its currency like normal.
John Stossel just reminded me of Ayn Rand's 1957 book Atlas Shrugged. But instead of the intellectuals going on strike, we have globalized connections that appropriates the value of all the players ....so they are all forced to work as meaningless wage-laborers. No one can AFFORD to strike because there is an ample supply of grunts desperate for a $10/hr job. Even doctors and nurses can't strike! But I'm sure Baron's kids won't have to face that; I'm sure it won't happen to them. In Baron's world, worker's don't deserve the 'right' to strike in the first place. How dare they disrupt the Perfect Order of the Universe as designed by the all-knowing, never wrong Plutocrats. Get the F**K back to work!!
e.d.t.
"No, most people *need* the guarantee"
This is life we are talking about here. No guarantees of anything except change. Get over it and manage your life so that guaranteees are not necessary. Would we all like to have guarantees of a full, rewarding career and life. Sure, but it isnt going to happen, so, as you say, get to work!
"Folks look for a fai society... one which grants opportunity "
We have that in this country to an almost unimaginable degree. The poster boys for this are the founders of Google. Of course, not everyone who tries will achieve this level of success, but that this is possible is what is important. Many who try will achieve far above average life styles even if they dont become multi-billionaires. One of our problems is that so many prople have gotten so used to entitlements that the vast majority will not make the effort to do more than muddle through.
"How dare they disrupt the Perfect Order of the Universe as designed by the all-knowing, never wrong Plutocrats.'
So, become a plutocrat.
Hi E.D.T, you make some very valid points mixed in with some rants of frustration. I got the nuance of the points you make on profits.
The shareholders of Goldman elect (by ballot), every year, the members of the board of directors. The board of directors votes and approves the compensation package. Just like you vote for Obama and Pelosi and they decide how much your taxes and social security payments will be.
Do you have a different system to propose?
As to sharing more profits with employees vs owners/investors, the issue is that employees that think like you, want to share the profits but not share the losses. Are you aware that EVERY shareholder at GM had their entire investment amount wiped out? They lost everything. Meanwhile, *ALL* employees of GM - a failed company that lost $60B in the past few years - either took a voluntary package ($100K+voucher for car on average + Pension+ Medical for life) or continue to receive full salaries.
Would you, as an employee, be prepared to share both profits and losses of your employer? I.e. if Ford makes money you get 50% of the profits (proportional to your salary), but if they lose money you get 50% of the losses (proportional to your salary) returned to the company?
That is what investors and owners do. They put their investment at full risk. They can lose a lot for an opportunity to make a lot.
If you want to have a guaranteed salary, then by definition your participation in the profits has to be much lower than those of investors that are fully at risk, right?
(continued below...)
Sure - I understand your point. It is comforting to people to know that they just need to show up at GM, put the time, and get paid, and get medical and get a pension, no matter what kind of crap their employer puts out and no matter that Koreans across the world work harder than they do.
It was nice while it lasted. Real nice. But that was a bubble. The wage/job security bubble was just that. A temporary, unsustainable bubble. Just like the .com bubble, the housing bubble. The US emerged out of WWI/WWII as the only intact economy in a devastated world.
GM, Ford and Chrysler, could rightfully pretend that they just needed to compete amongst them. If all three paid about the same and produced cars at about the same price and quality, they could go on for decade after decade.
But then Germany rebuilt and started to pump up BMWs and Mercedes. And Japan rebuilt and started pumping out Hondas and Toyotas.
And the UAW-labor costs become uncompetitive. And the D3 had less money to invest and they couldn't close factories so they had to pump volume with little investment, and so on and so forth, until it came crashing down.
Ford had the good fortune of bringing an outside guy that said - "this s%#$ is crazy - lets do a 180". Chrysler and GM had the good fortune of having a union-elected president and congress to write a $70B (if you include GMAC) check to keep them operating.
But make no mistake - their model was not and is not sustainable.
The Koreans will continue to take share from GM and Toyota and when the Chinese learn to build better cars they will take share also.
The UAW wages are heading for a 50%+ haircut over time. Guaranteed.
They can delay it at the expense of less and less jobs. But they can't stop it.
Yes - that is stressful for workers. Very stressful. I get it.
But human beings have been on this planet for tens of thousands of years. For 99.9% of that time, we lived with the stress of starvation, being eaten by predators, dieing of simple wounds and diseases with no medical help, being enslaved and killed in wars. Humans beings evolved EXACTLY because of those stresses.
The US is better prepared to get through the stresses of the global economy than any other developed country. Why? Because we have been facing these for longer than anyone and in more open and diverse manner than anyone.
Our steel industry already went through bankruptcy of the unionized giants and rebirth of the micro-mills.
Our auto-industry and banking is going through it now.
We created entirely new industries - e.g. Internet, and revolutionized some - e.g. derivatives.
Now, what will happen to a Japanese or French worker, that has worked for a paycheck for decades when their industries start to be invaded by Chinese competition?
Will it be deer in the headlights?
Hang in there buddy. It is stressful. It will be more stressful in the future. Vote for policies that will help you handle and benefit from the stress and dislocations rather than promises that the clock can be turned back and you will get a "guaranteed good job at a good wage".
Good luck, man.
"Ford had the good fortune of bringing an outside guy that said..."
not true, buddy.. all he really did was arrange for a few $Billion in financing before the crash...
lucky timing
The "stockholders" of GM who got wiped out were, to a large degree, the same UAW union members whose 401Ks and other retirement and savings was tied up in mutual funds that held on to GM stock until it turned to ashes. The smart money was looooooong gone from GM stock.
KnotMPH:
WOW! Those were the best written posts I have read in a long, long time. Scary beyond belief and truly a sad statement about the current economy. Wouldn't surprise me if the company in question was trying to make the 2010 version of a pet rock. Seriously, it's very easy for me to picture Roel as one of the VC types you describe, but I'm sure deep down, he has a heart.
Baron:
I know my chances of convincing you of anything are about zero. My 'perception of reality' is colored by my experiences and those of my parents and close friends. My best friend's brother-in-law was laid off by Intel. He got a job at Eclipse only to be laid off from them too. My mother lost her job from Smithkline Beecham (GlaxoSmithkline today) in 1991. The first time I lost my job in Albuquerque was back in 1997 working a lame telephone sales job, making a paltry $7.50/hour. Christ, if a company will shut down a friggin' call center boiler room, no job is safe. But it motivated me to finish my biz degree.
If you are familiar with Albuquerque, call center jobs are a dime a dozen (I vomit each time I hear about the HP call center, Fidelity Investments, and the GOBs of $$$ they got from the State). I quit my job with John Hancock in August 2002 because THAT time, I decided to quit on my own, on my terms; they closed in March 2003. Moving to Nashville, TN didn't solve anything ...but it did teach me that the grass is not really greener anywhere else.
I truly believe it is a self-confidence issue; those that have it can get almost any job, salary, spouse, etc. no matter what. Talent, education, and skill are incidental. If I could just create it from thin air, perhaps I could be successful at a sales job and "Always Be Closing." Surviving some of the crap I went thru as a kid also colored the way I look at the world. I landed on a book called "Healing the Shame that Binds You." It is written at (I think) a PhD level. The author described one person who was being shat upon while in med school. The guy said 'if I can just tough it out and become a doctor, no one will ever look down on me again.'
Well, that is perhaps the worst reason to become a doctor. But doesn't that sentiment describe a lot of "professionals" today? We could fill-in-the-blank for MBA, CEO, lawyer, any position that has some kind of status in our society. So I may have to take it up the a** when someone looks down on me for being a Govt grunt now. But I simply refuse to buy in to the myth that if only I do XYZ, no one will shit on me ever again. Somehow, my coping skills got me thru the crap after Eclipse, but that doesn't mean I forgot what really happened there; nor can I give Big Biz a pass when they laugh all the way to the bank after layoffs, M&As, or 'structured' Ch11s that screw the grunts.
I can deal with being a generalist and face more layoffs. Or I can bide my time and find ways to specialize in what I'm doing. However, I am VERY skeptical that "voting for policies" that help CNM or UNM get more money are good ideas. How can more socialized education solve the problems that (over) supply-side socialized education caused? It may retrain a dislocated worker from one $16/hr job to a different $16/hr job, but I am not convinced it offers a lasting solution or "career."
For anyone interested, there is an intersting cover story in the Feb 15th issue of Newsweek, "Layoffs Are Bad for Business."
e.d.t.
If you work 16 hours a day your company is a loser for keeping someone so obscenely inefficient, you should be fired.
--------------------------
Ha, Ha, Ha.
Most of us that work 16 hrs a day, work on commission or performance or for ourselves buddy.
From the family-owned farmer, to the small business owner, to the independent taxi driver, to the on-commission sales person, to the Goldman trader, to pizza-delivery guy, to the guy cutting the lawn.
Show me a guy who's earnings are exclusively based on his/her own results and I'll show you a guy working hard.
You have a very distorted view of work. What you described, only happens in union jobs and government positions. Which are one and the same, since as of last year, the majority of union workers are government jobs and only 7% of the private workforce is now unionized.
E.D.T said....I know my chances of convincing you of anything are about zero.
--------------------
I don't know what you are trying to convince me off, but, if it is that people are stressed out because of job/work dislocations, then no need to try to convince me. I've been saying the same thing.
The difference may be that you may think that they is some "system" or "policy" that can guarantee no stress for workers. While I focus on adapting to the stress level, dealing with it and benefiting from it.
It seems like you have a propensity to assign ill-intent to your employers, like Eclipse. You are not perfect. I am not perfect. Your employer will never be perfect. They'll make bad decisions, make mistakes. Not because they are bad people, but because they are human beings.
Tell us E.D.T. How much money did you get from Eclipse? Add up all the pay you received, all the medical insurance, all the social security that Eclipse paid to your SSA account on your behalf, all the unemployment you got because of your job at Eclipse, etc. Then add the value of the training and experience you received in a new field.
Now tell us, honestly, wasn't it good to get all that money and value, even from a business that failed?
ATM said... airtaximan said...
not true, buddy.. all he really did was arrange for a few $Billion in financing before the crash...
-----------------------
Really???!!!! And ***WHY*** did he arrange for a much financing as he could possibly get when he got there????!!!???
He did it because he wanted to retool the entire business. And that what he did. He didn't get the money to put it in the bank. He got it with a purpose, a vision, a turn around.
The cars that you are seeing now - for the first time a global line up - are a result of that.
Like BMW, Mercedes, Toyota, Honda, for the first time *EVER* a Detroit manufacturer will have the same car-platforms across the line up from sub-compact (Fiesta) to compact (Focus) to mid-size (Fusion/Mondeo) sold in Europe, US, Brazil, etc. ****AND**** it looks like they will be best in class.
It is quite amazing how you guys dismiss the CEO-led turn around in direction at Ford or the fact that in 2006/2007 Goldman Sacks changed to short on real estate to luck.
Those and many other examples (e.g. Apple understanding that phones would become personal/portable internet devices) were pure leadership and management brilliance.
Every Ford stockholder (particularly the Ford family) should line up to give Alan a bl$#job.
"my distorted view in the post about raising capital for a start-up "
Yep!
"Funny how you have never complained about a CEO's labor contract,"
Remember that there are two sides to any contract - the contract has to work for both. Rather than bitch about how life is not fair, do what it takes to become a highly paid CEO and enjoy the rewards.
Baron, you make it up as you go along... I fear you are not as well-informed as yu try to appear to be...
"ut you know what? That's enough to also make me think the folks at Ford have got some seriously good karma on their side. Ford's relative success, at least compared to GM and Chrysler, has been based just as much on luck as on anything else, starting with the Blue Oval being able to address its cash-flow problems in the pre-meltdown market.
Or have people forgotten how Ford raised some $18 billion at the end of 2006 by mortgaging just about every asset it had? The economic collapse prevented GM and Chrysler from doing the same kind of thing on the open market, and they had to get their money from the government, and, well, you know the rest.
With the MKT, Ford gets lucky again. It may not be the perfect vehicle for today's market, but the lack of competition from GM and Chrysler will likely mean just enough sales to keep Ford moving ahead. Ford's luck will run out sometime, but as long as it happens after its new global vehicles hit the U.S., it probably won't need as much of it to survive." Autotropolis
and
"Automotive News [sub] forgets to mention that the post-Cash-for-Clunkers sales result are on the catastrophic side of dire; they’re due to clock-in at an 8.5 million-ish Seasonally Adjusted Sales Rate. Absent another round of taxpayer-funded federal stimulus/subsidy action, Mulally’s [ongoing] prediction of a late 2009 uplift may be off by a good million sales...."
Ford's balance sheet is a disaster
Ford still loses money on every car it sells...
I am not blaming the guy, just stating he's not really responsible for much, over there... bad or good. Economic times are tough, and he got lucky with pre-meltdown financing. Otherwise, they would be in the exact same spot of GM, Chrysler...
"Since arriving he has left most of the team he inherited in place and quieted talk that an aerospace guy couldn't run an automaker.
Of course, Ford remains a very sick company. It lost $14.8 billion in 2008, the most in its 105-year history, and burned through $21.2 billion, or 61%, of its cash hoard. Tanking car sales have made scrap metal of Mulally's 2006 vow to make money this year, and he acknowledges that the best he can hope for is to break even in 2011." Business week
"While I focus on adapting to the stress level, dealing with it and benefiting from it."
Bravo! Life is full of challenge and change. This is the only way deal with these stresses.
oh yeah... I forgeot to mention, Ford had a long standing policy of having at least a full 3 months supply of cash on hand as reserve...
Long before AM got there, and this alone kept Ford in a different position that the others...
- more -
"At the time, the consensus among analysts was that GM was in better shape than Ford.
“It was not seen as a positive that Ford needed to leverage itself so dramatically,” said John A. Casesa, a former Merrill Lynch analyst and consultant to auto companies. “It was more of an act of desperation.”
But Ford benefited from the easy credit of the times. The company originally sought to raise $18 billion and ended up with $23.6 billion.
It has needed every bit of it. Mr. Mulally acknowledged that he did not foresee that annual auto sales in the United States would drop to 13.2 million vehicles last year, from 16 million in 2006, and possibly as low as 10 million this year.
He also knows that a continued slump in sales will put even more pressure on Ford’s balance sheet.
“We have sufficient liquidity to handle what the situation is now,” he said.
Ford is betting that its newest products can stabilize its falling revenue. It has high hopes, for example, for the new Taurus midsize sedan that Mr. Mulally pushed for in his early days at the company.
But it is still an uphill climb. Ford’s sales are down 43 percent in the first three months of this year compared with the same period a year earlier. The overall United States market is down 38 percent."
"Been there done it, nothing distorted in my viewpoint. Could it be that you think it is distorted for a reason?"
Been there and done that how many times? Enough to get a representative sample and understanding of how the VC process works? Or, one or two unhappy experiences that have clouded your view of reality?
Yes, I think your view is distorted for some excellent reasons. I have been there and done that for the last 40 years - an entrepreneur and CEO during the first 20 years, and a VC during the last 20 years. Have raised venture capital, and invested venture capital directly in more than 200 companies as a VC, and indirectly in about 2000 more.
Most entrepreneurs/executive teams are woefully naïve when it comes to understanding how the VC process works, and how to select the VC firm they are going to work with. Typically, when you accept VC financing, you are taking on a partner in your business – a partner who often owns a large share of the company, and as a result, rightly expects to have a major say in management decisions. It’s critically important to select a partner you think you can work with and one who brings some added value to your situation. It’s not just about money. Most (but not all) VC’s today are specialists in the industries in which they invest. My background is not atypical of mainstream VC’s today: engineering education, a series of increasingly responsible engineering and marketing jobs in technology companies, leading to CEO of two telecommunications equipment manufacturing companies, and then a VC investing in telecom and software companies for 20 years. Not exactly a history major right out of business school. Most startups need this kind of adult supervision; the founders are very often clever when it comes to product/service innovation, but have little experience in building a successful, profitable business. There are, of course exceptions to this, especially the successful serial entrepreneur who is doing a second or later company.
First time entrepreneurs are terrible at estimating how much time and capital will be needed to get to profitability. It is usually the case that at least three significant rounds of financing will be needed, and in many cases it goes way beyond this. VC’s know this and make more conservative estimates up front, but even these prove to be optimistic fairly often. Entrepreneurs get into trouble with unrealistic business projections, and in underestimating the problems/setbacks that virtually every new venture encounters.
part 2 ...
VC’s are held accountable for their investment results by their limited partners who provide the capital they invest. If management is not delivering, the investors have an obligation to try to correct the problem, and the problem is often the founding CEO. Sounds like you had an unhappy experience with this process. Rather than trying to shift the blame for this to your investors, ask yourself what went wrong and how much you contributed to that with unrealistic commitments and expectations.
“But you know those VC guys....NEVER wrong.”
VC guys are wrong far more often than they are right. Generally speaking, 7 out of 10 investments made by VC’s are losers; it’s the other 3 that make up the difference and then some. If making good investment decisions were easy, everyone would be a wealthy VC. It takes some testicular fortitude (conviction, confidence) to deal with the uncertainties in this process. If a VC focused mostly on what might go wrong, there would be no investments made.
“Simplify the process where all are treated the same”
The (business) world has never worked this way and never will. Wishing will not make it so.
“many, many millions of people do not want to work in a corporate environment or be a CEO.”
I have no problem with this. But, every choice involves tradeoffs, and it remains a fact that the corporate world is mostly where the money is. If you want a high income, or what a high income can provide, it’s most likely going to come from a successful business career.
“the level of absurd duplicity regarding one labor contract versus another”
Not all contracts are created equal. It’s most constructive to recognize this and make choices that get you where you want to be in the real world, whether CEO or assembly line worker.
OK ATM - Alan Mulally is a lucky idiot. OK.
In 2006 virtually all automakers (even the incompetent ones) were making money. Only Ford (chairman) and Mulally, decided that things were seriously broken and would take a ton of cash to turn around. And executed on the plan.
Four years later:
Ford (F) Market Cap: $36.77 Billion
GM (MTLQQ) Market Cap: $0.364B
I.e., by pure luck (according to you), Ford stockholders have 100 times more value than GM stockholders.
Those lucky S.O.Bs.
Back to aviation... Continental Motors (later TCM) was the largest supplier of engines for independent car makers from Hudson, to Studebaker to Checker. It got started by copying a Mercedes 4-cyl engine in the early 1900s. It came to be a leading aviation engine supplier by sharing automotive and aviation engine technology.
Once it stopped being a supplier of automotive engines (last major order shipped in 1972) the aviation technology remained pretty much frozen.
It seems clear that innovation will only come to piston aviation engines from the automotive sector.
Here is the list of Continental automotive customers in the era of great innovation:
Car makes/brands that used Continental (later TCM) engines:
Abbott
Ace
Ambassador
Anderson
Apperson
Auburn
Bantam (Jeep)
Barley
Bay State
Beggs
Benham
Bendix
Birmingham
Blackhawk
Bour-Davis
Bush
Cardway
Case
Checker
Colby
Columbia
Comet
Commerce Motor Truck
Continental
Crawford
Dagmar
Darling
Davis
Detroiter
DeVaux
Diana
Divco
Dodge
DuPont
Durant
Eagle
Economy
Elcar
Empire
Enger
Erskine
Ferris
Flint
Frazer
Ghent
GMC
Graham-Paige
Hanson
Hertz
Hollier
Howard
Hudson
Huffman
Imperial
Indian
Jewett
Jones
Jordan
Kaiser
Keller
Kent
Kenworthy
Kleiber
Kline
Lambert
Leach
Lexington
Liberty
Littlemac
Locomobile
Luverne
Marion-Handley
Martin
Merit
Meteor
Metropolitan
Monitor
Moon
Morris
National
Noma
Ogren
Overland
Owen Magnetic
Paige
Pan-American
Paterson
Pathfinder
Peerless
Piedmont
Playboy
Reo
ReVere
Roamer
Rock Falls
Romer
Ruxton
Saxon
Sayers
Scripps-Booth
Severin
S&M
Stanwood
Star
Thorne
Velie
Vogue
Walker
Washington
Wasp
Westcott
Willys
Windsor
Woods
Wolverine
Yellow
Additional Truck makes/brands that used Continental (later TCM) engines:
Biederman
Brockway
Corbitt
Federal
Indiana
Moreland
Reo
Sterling
Hey MPH - Get a clue... not everyone is as lazy or helpless as you think.
Read one page of this blog - the unglamorous pizza delivery stories blog
Go read how excited the drivers are about the tips they make and working all night delivering pizza to police stations, hospitals, etc at all hours.
You will also find out, probably to your surprise, that, in Jan 2010, independent pizza delivery guys made on average $16.19/hr AFTER expenses.
In Dec 2009 it was $16.69/hr (because of better holiday tips).
At 60 hrs/week, 50 weeks/year, that is $50,070/year, for a job available to *ANYONE in AMERICA*.
Got that? $50K/year delivering pizza is achievable in America with hard work.
So quit bitching, will you?
Oh, and ATM, it is not just Ford that is making money in 2009 and sending employees a $7K bonus check...its dealers are also doing quite well...
Profits for Ford dealers were 15 times higher in 2009 than they were in 2008. Profits at Lincoln-Mercury franchises increased tenfold during the same period.
Luck is great, ain't it?
"Luck is great, ain't it?"
Luck should not be entirely dismissed, but to a great extent, luck is what happens when hard work and a prepared mind come together at the right time.
Meanwhile.... Despite the US Gvmt $86B bailout of GM, Chrysler and the UAW...In an interview with Bloomberg News released late Thursday, President Barack Obama sounded a note of caution on the automakers' fates.
He said GM and Chrysler "aren't out of the woods yet" and praised Ford Motor Co.'s performance. "Ford is doing very well," he said.
Man, those guys at Ford are so incredibly lucky.
And in an extra dose of pure luck, Alan Mulally was named Man of the Year by Automobile Magazine.
"Alan Mulally was, and is, worth whatever Ford is paying him, because he has almost single-handedly saved the automaker. ...For this achievement, and for steering Ford onto a clearly defined road toward success, Alan Mulally is Automobile Magazine's 2010 Man of the Year."
What a lucky guy.
First he lucks out getting the 777 out the door on schedule and FBW and ETOPS180, then he lucks out in preserving $36B in Ford shareholder value compared to ZERO for the other 2 Detroit competitors. Then he lucks out again and is named man of the year.
He should be in Vegas not, Detroit.
"He should be in Vegas not, Detroit."
Actually, I think Boeing could employ him again to great advantage. I have speculated here in sthe past that he might go back to Boeing the conquering hero. Could still happen, but age is working against this.
Baron:
why would you call Mallaly an idiot?
I just said we cannot attribute Ford missing the same fate as the other companies, to just him.
There was luck involved.
You can dismiss it, but doing so just demonstrates you do not understand risk, or good fortune, IMO.
AM left Boeing BECASUE he was not made CEO. Had he been, he would not be the "poor steward" at the helm of the dreamliner.
Unless you think he could have unwound all that he did to set up what is largely the system ad )logic used to create (the problems for) the 787.
Within 6 months, AM found himself begging for capital, and during an environent of easy borrowing, got much more than even he thought he would need.
If you don't think luck has anything to do iwth it, and dismiss the lucky as IDIOTS, I feel for you man.
I suspect you have never really started a company. Probably never been involved in a start up.
Or you were lucky enough to be riding a wave of exhuberance, and recieved money for a stupid deal.
Many a fortune have been made and lost on pure luck - both good and bad.
I know a handful of very welathy folks who were smart enouph to be involved in upswing industries that evaporated... leaving them with a lot of $$. They were also smart enough to remain on the sidelines for the rest of their lives.
Know what they say?
"I got really lucky"
Many folks should say the same thing. They don't, their egos do not permit it.
Baron's method of reasoning:
"And in an extra dose of pure luck, Alan Mulally was named Man of the Year by Automobile Magazine."
And Vern was given the Collier...
And Obama was given the Nobel Peace Prize...
What's wrong with you?
Whytech,
VC's funding is sometimes the cause of problems that create the environment that needs 4 rounds and a longer time to market or profitability.
Sometimes...
The start up can create tremendous avluee, and often, one's that do, avoid VC funding altogether, or at least until much later on.
The VC that looks for really early stage successes, oftentimes, I believe miss the focus required to achieve real success.
I have had good and less good financial partners, at least once in the exact same business... I can tell you, their attitude was directly related to our success, as was some luck... to be truthful.
"The start up can create tremendous avluee, and often, one's that do, avoid VC funding altogether, or at least until much later on."
Yes, no doubt that some have achieved great success without VC funding and advice. A point I intended to make in a previous post is that venture capital is just one alternative for financing a young company. I have often advised companies seeking capital to do it without venture funding if they can make this happen. But, as stated earlier, choices involve tradeoffs. With any form of financing, you get some things and give up others. Its important for entrepreneurs to understand the tradeoffs involved and make the best choice for them.
Like any other form of human endeavor, the VC world includes investors who are world class, and investors who are no class, and everything in between. VC's go to considerable lengths to evaluate the companies they are considering for investment, and typically look at 100 or more companies for each one they invest in. Entrepreneurs need to make a similar effort in selecting the VC(s) they work with if they choose this path.
"I think it's great that you present the business world as this back and white, paint by numbers operation where the same input will always produce the same output."
Where did I say that? A point which several on ths blog have been making in the last 24 hours is that work and life are NOT paint by numbers - things are always changing, and those who realize this and scramble to adapt are more likley (but by no means guaranteed) get what they want.
I didnt say anything about winners or losers - you did. My point: it takes insight, focus and effort to achive significant results. Too many, IMO, want the results without paying their dues.
I can see from your posts that we hold quite different views of the (business) world. Thats OK with me.
WT,
you are obviously a real player... and others here are really not.
your opinions and observations are sage, IMO...
thanks
knot,
it IS amusing to say the least, that one form of leverage is frowned upon, while the other is relished.
Bottom line, all of this is really based on leverage.
If a company seeks a certainceo, he has leverage.
If an entrenched labour base thinks they have the upper hand wants to push... so be it.
Organized lanour, IMO is expesive and inefficient. Its easier to just bargain for your own job.
Just my opinion, in a world of greater transparency and competition...
Folks might actually say "give me ashit job and pay me more...."
My experience is similar to this, where good jobs, with the right mix of all aspects of the job qualities/benefits actually have a greater return on labor.
Any way.... the master slave issue was resolved a long time ago, and is a relic of ego and personal insecurity and failure, IMO.
It actually leads to failure.
knot,
"VC guys never ask for help....that's what makes them such perfect marks"
while I see your point, I recommend...
My current situation has oms eVCs and other such investor types looking at triple monthly revenue growth for some months now.
This business did not look too attractive to them 1 year ago...
Now, there are attractive offers, and most of the VCs hired (at least what they considered) experts. to help them understand.
The experts are sorely lacking... but a necessary evil IMO.
Why waste so much energy bitching about "how bad" things are and wishing there was this magic way to make it all rosy/better/fair/even?
Either do something to change it to your liking or get on with it.
Bitching in frustration or resignation rarely produces positive results.
Fact is there are a couple of billion people in the world today that would do anything to get a $0.25 to $1.00/hr job. So if you or your kids want to make more than $1/hr long term, you better have a very compelling value and be in a "protected" field (by geography, regulation, law, etc).
The unskilled wage bubble is bursting, and the air is coming out faster and faster.
Your only choice is to ride the jet of air coming out or be pummeled by it.
New headline post is up!
Sorry I've missed the last few days- glad to see the discussion has been lively.
The financial aspects of aviation (technology, public policy and economics) are one of the things I find most interesting.
Do you need a loan? Email: LupafinaceFLH@gmail.com to get a reliable and affordable loan at a low interest rate of 2% (serious inquires only)
Post a Comment