Sunday, October 26, 2008

Sunday Odds & Ends

Here's the YouTube video of some 10 minutes of Alan Greenspan's testimony in front of a House committee on Thursday of last week. I wrote about his appearance here.

Of particular note is Greenspan's self-defense at minutes 3:45 and 9.

What's missing was Greenspan's ridiculous response to a question regarding his public support of ARM mortgages.

When asked about his public remarks, in the Q&A on Thursday, Greenspan actually said that, to understand his real feelings about ARMs, one should note that he personally has only ever held 30-year fixed rate mortgages. Thus, despite his public backing of ARMs as having the potential to lower borrowing costs for millions of other borrowers, the former Fed Chairman now claims you'd have to 'do as he did,' not 'do as he said.'

What's next? Will we learn that Fed board meetings were run like an 'Alan says' game?

In this weekend's Wall Street Journal, former senior Dow Jones executive and Pulitzer Prize winning author Paul Ingrassia wrote an extensive piece on the Detroit-based US auto maker's current straits.

Perhaps nothing conveys the trouble they are in as these two passages,

"It wasn't that American auto executives were always malicious and stupid while the Japanese were always enlightened and smart. Japanese car companies have made plenty of mistakes, most recently Toyota's ill-timed move into full-sized pickup trucks and SUVs. But just as America didn't understand the depth of ethnic and religious divisions in Iraq, Detroit failed to grasp -- or at least to address -- the fundamental nature of its Japanese competition. Japan's car companies, and more recently the Germans and Koreans, gained a competitive advantage largely by forging an alliance with American workers.

Detroit, meanwhile, has remained mired in mutual mistrust with the United Auto Workers union. While the suspicion has abated somewhat in recent years, it never has disappeared -- which is why Detroit's factories remain vastly more cumbersome to manage than the factories of foreign car companies in the U.S.

But to thrive, instead of just survive, Detroit will have to use the brains of its workers instead of just their bodies, and the UAW will have to allow it. Two weeks ago some automation equipment broke down at the Honda factory in Marysville, Ohio, but employees rushed to the scene and devised a temporary solution. There were no negotiations with shop stewards, no parsing of job descriptions. Instead of losing an entire shift of production, Honda lost just 150 cars. The person overseeing Marysville's assembly operations is Brad Alty, still with Honda after nearly 30 years. These days, instead of a Gremlin, he's driving a Honda Pilot -- made at a Honda factory in Alabama."

Paul makes a caustic remark about how crisis often breeds mistakes, which explains GM's pursuing a merger with the remnants of Chrysler. I think he's right on target.

Instead, he favors what I have suggested, which is the dismantling of the better GM brands into pieces which more successful car companies can absorb.

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