Is a Hyundai Really Comparable to a BMW or Mercedes?

Hyundai has a new car that many analysts believe is equal to BMW, Mercedes and Lexus. It is a real tribute to Hyundai that they have been able to develop such a high quality car.

Hyundai has bought KIA, its Korean rival and seems intent on making KIA the low-price car and Hyundai the higher priced car. Problem is, Hyundai has earned a reputation as a low priced, decent quality car. They have been on the market long enough that this reputation has become crystalized in people's minds. In fact, Hyundai owned the low price-quality category.

To take a car from that category and now convince us that it should be considered a highly differentiated, high price car is a big stretch. Toyota faced this challenge and decided to create Lexus since the Toyota brand could not stretch enough to be considered in the high priced, luxury category. Honda created the Acura and Nissan created the Infiniti for that same reason. Audi, BMW, Mercedes have all expanded their lines downward.

Hyundai is taking a real gamble by trying to stretch so far. It would be far better, in my opinion, for them to create a new brand for the luxury market. However, if they are taking a long-term view (up to 5-years) perhaps they are content to slowly reposition themselves. It seems to be an expensive proposition that could be leap-froged by creating a new brand to go along with the new, highly refined car they have developed.

GM, Ford, Chrysler, Toyota, Oh My!!

GM announced this week that they were paying back the government's load early. It almost sounded like they have made so much money lately that they have enough cash on hand to give back the money. Problem is, this was just a major public relations stunt by the company. The money given back is our money that was never used. It was kept in reserves. One has to wonder whether or not GM really was that desperate for money or that they did not know how to operate without the money for all the luxuries they were used to in their executive suit. I still think this is a loser company with limited brand value and no credibility. Their recent move to try to scam the public proves it. Senator Durbin even said that this was tantamount to a shell game. GM claims to be making a profit, which is likely is. They have cut so much cost from their system that any sales now will add profits.

Ford, on the other hand, seems to be doing well. Their sales are up in real terms and they are gaining market share--not just getting back what they had. Ford took a gamble several years ago to move toward environmentally friendly cars. William Ford was the CEO at the time and the board actually threatened him to back off the "environmental nonsense". Detroit has never really understood or appreciated more environmentally friendly cars. They always seem to serve the market and never try to lead or hit the leading edge of change--they have left that to the Japanese and Germans.

Ford has well designed cars, they are operating efficiently and they are also the only US car company that did not take government money, which I believe has endeared them to many consumers.

Chrysler is done--stick a fork in it. This is a company with no focus, no brand value and no strategy. They are sucking up cash and losing market share while the other companies have their best months in years. When you loose 8% share while others are increasing sales by 15-18% in a given month, something is very wrong. Say goodbye to our loan. Chrysler will be a footnote in history, alongside Studabaker, DeSota, and other companies that have failed in the past.

Toyota is having great sales, thanks to 0% interest for 5-years. They have to move 2010 inventory and also stimulate the 2011 sales since inventory has started piling up on the dealer lots. Some people have joked that we now know what it takes to convince someone to drive a "death trap". I don't see it that way. The sales incentives were expected, given the situation and the need to clear inventory. I think what we are seeing is deep loyalty and belief in Toyota. The company has lead for so long in price-quality that it has build some inertia in its brand. If there are new problems in new cars being bought, then we will see real brand erosion and long-term problems for the company

Phillies Prove that CEOs are Not Overpaid

This past week, the Philadelphia Phillies baseball team rewarded Ryan Howard with a new contract worth $25 million per year. That's right, $25 million a year to play baseball. Whether they wanted to or not, the Phillies proved that corporate CEOs are not overpaid. Perhaps, if judged by sports salaries, they are actually underpaid.

I recently wrote about the ridiculousness of so-called "Main Street" hysteria over CEO salaries when newly minted football players make CEOs look like low-paid hourly workers. Now, we have another example in Ryan Howard.

Now, don't get me wrong. I am a Phillies fan. I love Ryan Howard, but I do not believe in my wildest dreams that he is worth $25 million. Also, to bring everyone into the world of baseball, let's understand that a year ago--just one year ago, Howard was making $10 million and asking for $14 million, which he got. Now, a year later he gets a $10 million raise. If this were a story about a CEO there would likely be public outcry and a Senate hearing. But, fans pat each other on the back and thank the Phillies for signing Howard for life.

If Ryan Howard is worth $25 million, what are people like Albert Pujols of St. Louis worth? What is Derek Jeter worth? Name any future Hall of Famer. This is ridiculous and just proves that we have lost our collective minds in this country.

To all the fans out there who applaud baseball executives paying this high salaries, I ask you to promise me that you will never, ever complain again about the high salaries of top executives who actually attempt to create real value for society.

Is US Airways Trying to Ape Southwest Airlines' Style?

I recently flew two US Airways flight segments, two/from Philadelphia to Ft. Lauderdale, Florida. On both of them, the flight attendants and the pilot tried to be humorous, almost in what might be called "Southwest Airlines" style? I wonder if this is a new trend?

As those who fly Southwest know, the pilot and flight attendants often crack jokes and try to maintain a "light air" (no pun intended) on the flights. It is all supposed to make the customers enjoy the flight a bit more. It has been an unusual style, juxtaposed against the normal from the major airlines where flight attendants hardly smile or look as if they are enjoying themselves.

If US Airways is trying to lighten things up, I applaud them. They could be learning that part of the Southwest appeal is fairly free--smile and enjoy oneself and maybe it will start to become a bit more enjoyable for the passenger who is trapped in a small box at 30,000 feet.

I am not sure that my experience is a real sign of change or an anomaly. While it involved two different flight crews, it might not be a pattern. However, I would urge US Airways to try to move this throughout their system. Southwest has taken a low cost strategy into a high priced market. But rather than just maintaining the low cost approach, they added in other changes to really provide points of differentiation against the major carriers. Most of the low cost airlines in the world keep their fees low but charge for bags. Not Southwest. Most low cost airlines feel like they are low cost--the equivalent of a flying Costco (everything almost seems to be on pallets). Southwest has offered a different approach. Cut costs to lower fares, but also offer value--no baggage fees, drinks and snacks (remember snacks on the major airlines? The airlines actually once gave us peanuts and for free!!). But, Southwest really offered differentiation when it made us feel as if they were happy to have us on board and that they were happy to be working for us. This was such a radical change that it actually became a differentiator.

USAirways is stuck. It has a high cost structure that is difficult to change, unless they chose to "blow up" the airline and start over. They have union contracts and hubs and lots of different types of planes--all of the things that Southwest does not have to live with. These things add costs and inefficiencies, while Southwest flies only one type of plane and has much less stringent contracts.

What I am hoping is that the people at US Airways decided that they could be different from the other major airlines and more like Southwest in areas in which they still had control--like smiling and being customer oriented. If that is happening, I am delighted. I live in Philadelphia, and while I can fly Southwest, it is hard to avoid US Airways. If they are changing, I say thank you. If this was an anomaly, I ask them to consider extending these "experiments" to all of their flights. If they were spontaneous expressions by the crews on those flights, then find those people and get them involved in helping others at the airline to change. They have something positive brewing. While they may not beat Southwest, they can carve out clear differentiation from United, Delta, American, and all the other large, impersonal carriers.

The More We Hear About Goldman, the Worse it Sounds

We now are seeing e-mails from Goldman Sachs executives in which they bragged about their smarts in shorting the housing market--the same market they and their colleagues on Wall Street helped fuel with their financial incentives.

Is there any wonder that people are worried about a "double dip" in the current economic recovery? Does anyone doubt that there are some investors trying to drive down the economic recovery so that they can make money?

One really has to wonder about the moral compass of most of the financial market executives. If all they are concerned about is making money, we are all in trouble. These are money managers. They have not made anything of tangible value for society. They have not bettered our lives in any way. They simply manage money--actually paper. They have no connection in their minds between that paper and a real person who is impacted by their decisions. It is all about bragging rights, the next yacht, the next house in the Hamptons.

This is an industry operating by a set of values and morals that are separate from the rest of the society. We should stop coupling Wall Street with the rest of corporate America. People often talk about the "sharks" in the business world. Most companies are not comprised of sharks, but rather large wales. Wall Street contains some sharks, but we have seen that they can be worse. Some can be can pyranha. They will attack and eat anything they see. They seem motivated only by their own hunger for more and not by any sense of contribution to the larger society.

CEOs Take Heat on Salaries While Athletes Are Applauded

The NFL is having it college draft this week. It is interesting that while the public seems overly focused on CEO pay, the amount of money paid to 22-year old college kids seems to keep escalating with no qualms.

The Wall Street Journal did a ranking this week of the salaries of the top draft picks compared to the top salaries of CEOs. Ray Irani of Occidental Petroleum leads all in take home pay at $52 million, including salary, bonuses and stock options. However, after Irani, the next highest paid CEO, Bob Iger of Disney, is paid less than the top 8 draft picks. That's right. Iger, who runs a global enterprise with thousands of employees makes less than 8 college kids whose primary skill is their ability to play football. They have never been in the pros, no one is absolutely certain how they will do, but the money is paid nonetheless. Interestingly as well, only one banking CEO appears on the top 20 list (John Stumpf of Wells Fargo) and he falls in at number 20 overall and well behind the 10 top draft picks.

There seems to be so much concern with the pay of CEOs. These concerns are heightened during a recession with so many people out of work. So many people seem to be concerned with how much CEOs make, and the difference between their salaries and that of the average worker. Somehow, we believe, that if these CEOs were not paid so much there would be a bit more justice in the world.

I worked most of my career in the corporate world. I was paid well and the CEO was paid infinitely better. I saw the jobs they had to do. I would not want to do it. They were under constant pressure from the board, from employees, from the press, from the community, from investors, from everyone. Every move has consequences in real terms. People's livelihoods rest in their hands. They create wealth, they create jobs, they move the economy.

Compare this pressure with the lives of 22-year old athletes. A football player runs plays, makes tackles and entertains us. Whether their teams win or loose has zero consequence in the lives of people around the world. Certainly, they have to perform, but they are guaranteed their salaries even if they break their leg the first day of practice and do not get into a game. How do we justify athlete salary but raise concerns over the salaries of CEOs?

I have rarely heard the business community compare the salaries of athletes and executives. Somehow they have deemed this an inappropriate comparison. I think it is very relevant. We pay people to entertain us better than those who are vested with running our economy. These salaries result in higher ticket prices and higher costs of everything at the stadium to pay these salaries. If the cost of goods escalated as quickly as the cost of sporting events in the past few decades we likely would have a consumer revolution.

Somehow this seems to me to be totally out of wack. If we are to be concerned with the salaries of those who run major companies, let's at least start to question what we pay those who entertain us, and what this says about us as a society.

Goldman-Sachs is Learning that Expectations Influence Reputation

Goldman-Sachs is now defending its reputation against accusations that it mislead clients about the risk in some of its derivative programs. First, they argued that the investors--other companies--were sophisticated and should have understood the risks. Second, they argued that they would never knowingly defraud a client. Finally, they argued that it was perhaps and individual who might have been involved, although they are now claiming that the individual was not the final decision-maker in the offering.

Goldman may or may not have done anything wrong in its opinion, but the perceptions of regulators and the public are quite different. Expectations have now been reinforced that Wall Street cared only for itself and its own sense of right and wrong. In fact, an editorial cartoon in the Philadelphia Inquirer of April 21 showed a ship entitled Wall Street bombarding a coast line entitled Main Street with canon shells, destroying the city. That is the view that most people have today. That a bunch of people with over-the-top salaries did whatever they wanted to do to fatten those salaries even more.

What is lost on all of this is what is not being denied. Goldman made its money, whether or not they duped anyone or did anything illegal, by coming up with a plan to short the housing market. In other words, to bet that housing would collapse. They made billions on the misfortune of those who lost their housing values. This was also a company that made money by floating some of the money to inflate the housing market. Sounds like Catch 22. They could not loose. Sell the airplanes and then sell the anti-aircraft guns. We all thought this was a novel. We are now learning that this was standard operating procedure for Wall Street. This is an industry with no soul and no real conscience. It cares only for money and nothing else. Let the public judge them for what they really are.