THE FALLACY OF REASON!

THE FALLACY OF REASON

© December 19, 2008

“We think so because other people all think so, or because, after all, we do think so; or because we were told so and think we must think so; or because we once thought so, and think we still think so; or because, having thought so, we think we will think so. “

Henry Sidgwick (1838 – 1900), English philosopher


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A WRITER WRITES:

Jim,

I am copying a piece I think might interest you. I think this guy does a fairly eloquent if sometimes passionate job of expressing his side of the issue, and I agree with several of his points.

My wife and I have had at least a dozen Fords over the last few decades, and they’ve all been great. They have been really good values to us.

Up until the last gas crunch, the market wanted SUVs and that’s what they built. Even after the gas crunch, I remain with the bigger vehicle because it’s a safety issue for me (safety for my wife and daughter). Engineering can optimize safety of small cars to a point, but make still matters. Even at $10 per gallon, I’ll keep them and cut somewhere else.

Alan Mulally came up through Boeing, and was actually my customer at one point. I can vouch for his savvy as a businessman, and the choice between him and a politician running any company is for me, a no-brainer. In fact, given the Senatorial appointment processes underway in New York and Illinois, I told my wife this morning, “we might as well just send SpongeBob (a local radio disc jockey of the most obnoxious kind: JRF) to Washington, DC and be done with it.

Be good.

E

E’s REFERENCE: Letter-to-the-editor from a Ford Dealer (edited with comments by me: JRF)

To the Editor:

As I watch the coverage of the fate of the US auto industry, one alarming frustrating fact hits me right between the eyes. The fate of our nation’s economic survival is in the hands of some Congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation (so was the view of the horse and buggy industry when we went from it to automobiles one hundred years ago: JRF).

Senator Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No, Mr. Shelby, you are the dinosaur with ideas stuck in the ‘70s, ‘80s, and ‘90s. You and the uninformed journalists and senators hold unto myths that are not relevant in today’s world.

When you say that the BIG THREE build vehicles nobody wants to buy, you must have overlooked GM outsold Toyota by about 1.2 million vehicles in the US and Ford outsold Honda by 850,000 and Nissan by 1.2 million in the US. GM was the world’s Number One automaker beating Toyota by 3,000 units.

When you claim inferior quality comes from the BIG THREE, did you realize Chevy makes the Malibu and Ford makes the Fusion, both rated over Toyota’s Camry? Consumer Report rated Ford on par with good Japanese automakers.

Did you realize BIG THREE’s gas-guzzlers include 33 mpg Malibu that beats the Accord? For ’09 Ford introduces the Hybrid Fusion whose 39 mpg is the best midsize, beating the Camry Hybrid?

When you ask how many times are we going to bail them out, you must be referring to 1980 (actually, it was 1979: JRF). The only BIG THREE bailout was Chrysler, who paid back $1 billion, plus interest (which is true: JRF).

Regarding pickups, perhaps it bothers you that 31 straight yeas Ford’s F-Series has been the best selling vehicle. Ford and GM have dominated this market, and when you see the new ’09 F-150 you’ll agree this won’t change.

Did you realize both GM and Ford offer more hybrid models than Nissan or Honda? Between 2005 and 2007, Ford has invested more than $22 billion in R&D such as Eco Boost, flex fuel, clean diesel, hybrids, plug in hybrids and hydrogen cars.

Perhaps Senator Shelby isn’t really that blind. Maybe he realizes the quality shift to American. Maybe it’s the fact that his state of Alabama has given so much to land factories (for foreign automakers) that he is more concerned about their continued growth than he is about the people of our country.

Senator Shelby’s disdain for “government subsidies” is very hypocritical. In the early ‘90s, he was the driving force behind a $253 million incentive package to Mercedes. While the bridge loan the BIG THREE is requesting will be paid back, Alabama’s $180,000 plus per job was pure incentive.

Senator Shelby, not only are you out of touch, you are a self-serving hypocrite, who is prepared to ruin our nation because of lack of knowledge and lack of due diligence in making your opinions and decisions (such hyperbole dilutes his argument: JRF).

We live in a world of free trade; world economy and we have not been able to produce products as cost effectively. While the governments of other auto producing nations subsidize their automakers, our government may be ready to force its demise.

While our automakers have paid union wages, benefits and legacy debt (average wage for BIG THREE autoworker is $55 per hour including benefits: JRF), our Asian competitors employ cheap labor (these autoworkers earn $45 including benefits in the US, hardly "cheap": JRF). We are at an extreme disadvantage in production costs (true, each car rolling off the assembly line costs on average $1,500 more than the same vehicle on an Asian assembly line in the US because of autoworker legacy costs and worker benefits: JRF).

Some point the blame to corporate management. I would like to speak of Ford Motor Company. The company has streamlined by reducing our workforce by 51,000 since 2005. Closing 17 plants and cutting expenses. Product and future product are excellent and the company is focused on one Ford. Quality and corporate management have improved light years since the nightmare of Jacques Nasser. Thank you Alan Mulally and the best auto company management team in business.

As a Ford dealer, I feel our portion of the $25 billion will never be touched and is not necessary (Ford is not asking for a bailout but a bridge loan of $9 billion that it plans not to touch unless necessary: JRF). Ford currently has $29 billion in liquidity.

The effect of a bankruptcy by GM would hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacturer would cost retirees their health care and retirements (not true; future retirees, yes, but not current status retirees: JRF).

Chances are GM will recover from Chapter 11 with a better business plan with much less expense (that is the plan, past history is problematical suggesting otherwise: JRF). So, who foots the bill if GM or all three go Chapter 11? All that extra health care, unemployment, loss of tax base and some forgiven debt goes back to the taxpayer, us (now who is using scare tactics; also not completely true; obviously there would be a correction of some economic discomfort, but those automotive business that would rise like a Sphinx from the ashes of the BIG THREE would be leaner, meaner, and more competitive: JRF).

Before you, Mr. And Mrs. Journalist continue to misinform the American public (investigative journalist, a dying breed as newspapers and trade journals are also dying, have had an exemplary history of informing, not misinforming: JRF) and turn them against one of the great industries that helped build this nation (but which has been coasting for forty years: JRF), I must ask you one question: before you (Congressmen and Congress women) vote to end health care and retirement benefits for one million retirees (not true, there is no intention in any bill proposed to do this: JRF), eliminate 2.5 million of our nation’s jobs (if Congress and the president wanted to preserve these jobs against the reality of the times, it couldn’t: JRF), lose the technology that will lead us in the future (it is not technology that has failed but those who control that technology who have; how will that change: JRF), I ask this question, have you driven a Ford lately?

Ford Dealer



DR. FISHER RESPONDS:

E,

President-elect Barak Obama might wish he were a chicken farmer after a month in the White House. His campaign slogan was correct, this is a transformational age of change. The only problem is what we know and expect we want to remain the same; what effects everyone else we want to see changed.

I sense the passion of this writer to whom you refer, but not the logic of his argument. He is angry, emotional, and collects his facts to cajole and scare the reader who likely does not have the same access to his data, although it is readily available.

We are creatures of impulse, emotions and of actions based on these emotions rather than reason. Reason is a late development. Most of us in fact get along admirably well in our daily life without it.

Now, when it comes to the automobile, which is a little like the Catholic Church in Galileo’s time seeing the earth as the center of the universe, the BIG THREE see themselves as the center of American industry and business, when this is a fallacy of reason. Detroit is a dying manufacturing state, and the car industry there is dying with it.

William Saroyan once wrote a short story (“My Name is Ahab”) about a boy who believed because he was American he could drive an automobile. It was natural to a five-year-old as it was in his genes. Most American men have such a love affair with these machines that it is impossible for flesh and blood women to compete. Most women give up and play second fiddle to steel, glass and plastic. Alas, the automobile is a phallic symbol and the bigger it is the more virile the driver of it feels himself to be. It is, of course, a myth like size in all myths has proven, yet myths persist another fallacy of reason.

The automotive industry is, in fact, a dinosaur. By that I mean its greatest days are behind not ahead of it. Mass transit, or some form of conveyance is going to replace these billions of little steel buckets puffing away across the globe.

I drive a 2000 Taurus. BB drives a 2004 Toyota Camry. She will be getting a new one in 2009. We have not had one problem with any of our Toyotas since returning to the States from Brussels in 1989. We take all our trips in BB’s Camry, the last trip to Minnesota in September 2008, driving over 3,600 miles and getting, on average, 35 mpg, but sometimes paying $4 per gallon and never less than $3.74.

Neither of us is what you could call “in love with cars,” as we have always purchased them in terms of economics and durability. We are, however, both pack rats and record keepers of virtually everything we do. Toyota, over the years or since the late 1980s, has lived up to its reputation with never a problem during that period.

I was out and about today listening to NPR radio. A GM tool and die maker was being interviewed. He was a credit to himself, a credit to his company, a credit to his coworkers, whom he described as honorable and conscientious workers, and a credit to his industry. When the interviewer thanked him for the interview, he answered, "I have been honored."

Now, that is an impossible situation to assault and yet I will. You see this fine man is not the problem. It is the system. He is in a dying system, and even if it corrects itself, its glory days are behind it.

Yes, Ford makes quality cars. In 1990, I made a trip to the International Headquarters of Ford in Dearborn, Michigan for Honeywell. I spent the day interviewing executives, union officials, workers, security personnel, and my counterpart, a man who is something of a legend in the discipline of organization development (OD).

My report of that trip was long and comprehensive. I sent Ford's OD consultant a copy to which he was stunned, writing. "You never took notes. Did you have a recorder?"

I replied with a short note: "No, I didn't take notes, but yes, I had a recorder. It was my brain. It needed no accessory equipment." I never heard from him again.

This is not the first time, incidentally, that a person after the fact wondered if I was doing something surreptitiously. I have trained myself since a salesman early in my career to take extensive notes after a call. At that point, I think I have close to verbatim total recall, yes, as if I had a recorder. I have my mother’s memory.

This OD psychologist went across the globe where Ford made and sold cars, gave infomercials, collected psychometrics, and promoted "The Ford's Resurrection." Forbes, The Wall Street Journal, Business Week, and other publications carried the story of Ford's revival after a recession in the mid-1980s. I mentioned in my 1990 report that rising from the dead was apparently a common occurrence at Ford.

All the signs were up for Ford, then, but one, which has haunted the company since, trust.

It is that terrible word, TRUST. Once trust is broken, in a marriage, in a friendship, by a car manufacturer, or by an investment broker, it takes a long time to get that trust back, and it is never the same trust again. The hubris of the BIG THREE killed that trust a long time ago, and they continue to pay for it to this day.

No question, the BIG THREE make quality automobiles, but with the same rationale that you use, which I can understand: SAFETY. My own daughter drives one of those SUV's that costs as much as some homes, and gets about 8 mpg, and she likes the protection of the tank, too, just like you do.

I respect your view, and hers as well, but SUVs, too, are dinosaurs.

On the BBC news tonight, a reporter interviewed a Chrysler worker, who was not so nice as the young man mentioned earlier that NPR interviewed. This Chrysler worker is to be laid off a month or through January 2009 as Chrysler is shutting down production.

This worker was complaining about having a family, putting food on the table, and being able to survive without a full paycheck. Asked how much he will receive, he said, "Only 80 percent of my regular paycheck."

At $55/hr (including benefits) reduced by 20 percent he will only be receiving $44/hr or $528 a day, or $2,640 per week, or $10,560 (including benefits) to make ends meet during his month of forced leisure. Remember, some hourly workers make as much as $74/hr (including benefits).

I'm sorry. This guy doesn't have a clue as to what is going on around him in this recession. If that BBC audience actually understood the extent of this worker's sacrifice, the shock might have produced more anger than sympathy.

Besides, the argument about how many more units the BIG THREE have sold compared to these foreign car manufacturers, well, the BIG THREE have been in business in this country for a hundred years. Asian car producers have been in business here since the 1970s. Come on now!

No, I think this man who esteems the Ford CEO Mulally so flatteringly is thinking mush, even more so when he attempts to defend the industry.

Automakers went to sleep at the switch and now suffers unintended consequences, consequences that will not go away. There is good reason to have serious doubt that a bailout would not be mismanaged as the automotive industry has not led but followed trends for forty years. It has ignored its own technology when it could produce a vehicle getting 80 mpg. I have no more faith in CEO Mulally, fine a man as he might be, than any of the others, as the aerospace industry in which he worked for Boeing has fallen prey to similar pitfalls.

The marketing scheme of car manufacturers has been like two adolescents out gaming each other. One wants to please and profit from the pleasing the other loves the suspense created by changing its pleasure.

NPR radio told of a car dealership that loaded its lot with hybrids when gas was $4/gal. Now that gasoline is closer to $1.60/gal, it has to eat the steel, as no one wants to buy hybrids. Guess what? The dealer has paid for all of these hybrids. Detroit is not out a dime.

Irrational truths may be more harmful than reasoned errors. This comes to mind as I ponder this "letter-to-the-editor." I confess to having little sympathy and much anger for the lack of leadership in this industry. In fact, I’ve written several books on what I am saying here, commencing with WORK WITHOUT MANAGERS in 1990. I feel a bit like Nostradamus, and it is not a comfortable feeling at all.

And yes, there will be a correction, a necessary correction, and many of those auto dealers will become showrooms for other businesses, many of those still existing manufacturing plants will close and become eyesores to match those already in the graveyard of changing times.

We went through similar trauma when the automobile replaced the horse and buggy. For thousands of years horses had been the way to go; automobiles have been so but for a hundred years. Whether buggies or royal coaches, whether pulling trolleys in the cities, or plows on the farms, people identified with horses with a record of success and, yes, emotionally, too.

Think of all the people who supplied horses with harnesses, saddles, horseshoes, buggies, and oats as well. All the industries allied to horses dried up with the automobile. There was no compassionate government then to step in and assuage their economic demise. Who would have thought a hundred years later the automobile industry would experience a similar crisis.

Society is moving on, and away from Detroit, away from little steel buggies. Sorry, but I don't see it any other way.

Be always well,

Jim