Thursday, November 20, 2008

American Legacy Businesses Need to Learn a Hard Lesson

I fly a lot. When I say I fly a lot, I mean 80,000-100,000 miles a year. Some years a great deal of it is international. Some years, like 2008, it is primarily domestic. Most of my flights are on American Airlines where I hold elite status. But, this year I have flown Continental and United a few times. Overall, all legacy United States airlines suck. The planes are old. The employees are angry. Bags are lost. Nobody answers the phone. It is a miserable experience.

Recently, I flew Richard Branson's Virgin America between LAS (Las Vegas) and SFO (San Francisco). What a wonderful change. The new Airbus was clean and looked like the inside of a Lexus. The seats were leather and each had satellite television and games. The flight attendants and pilots wore simple black shirts and pants. The pilots walked into the cabin and gave the introductory talk instead of using the speaker system. There were flowers in the lavatories. Even the required flight instructions were fun. The recording said, "If you are one of the 0.001% of the population who have never used a seat belt, please watch the following..." The trip was actually fun.

I have flown on quality airlines like Cathay PacificQantasAir Tahiti Nui and others and actually been pampered. But, to be treated like a human being and a paying customer on a domestic airline was truly a treat. Why can't American and the others adapt? All have suffered the ill effects of fuel costs. It probably comes down to the unions.

Yesterday, the news was about the bailout of the United States auto industry. Ford, General Motors (GM) and Chrysler all want billions of dollars in loans from the government. Interestingly, Toyota, Honda, Mercedes, and Nissan have not asked for anything. Then, an interesting graphic appeared on television. The average cost of health care insurance for employees accounted for approximately $1,600.00 of new car costs for GM and Ford. The same costs for American-made Toyotas is approximately $300.00. Is it the unions?

I was recently in Mexico and passed numerous US-owned factories (e.g., GM, Westinghouse). They are solely there because of labor costs. I feel everybody deserves a fair wage and unions have made life easier for most. But, have unions outlived their usefulness? Are they killing American business?

I own 4 cars (Lexus, Acura, Chevrolet and Nissan). The Lexus and Acura have never required anything but service. The Nissan has 128,000 miles and runs well. The Chevrolet has 30,000 miles and has been to the shop for warranty work 5 times. Several years ago I had a GM Chevrolet Tahoe. I kept hearing a noise and took the car to the dealer 4 times. Finally, they took ff the driver's door panel and found a golf ball. Evidently the factory workers were playing with the golf ball and lost it in my car. In Japan, an auto worker would commit Hari Kariover such an event. Here, they get a raise.

Perhaps the government should let nature take its course. I say we give GM, Ford and Chrysler a "do not resuscitate" order. In the overall scheme of things, Darwinian logic would say only the strong will survive. Likewise, let Northwest airlines and some of the legacy carriers go as well. It is time to think outside the box. If they are going to bailout the auto industry, then they should bailout health care as well. But, it is only wishful thinking...

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