Lane's Blog - Looking out from the garage

Rebuilding GM, Ford and Chrysler... My plan

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Fri, 21 Nov 2008 13:39:35 -0600

I'm opinionated... all of my regular readers know that. And I am a car guy... all of my regular readers know that. So, it isn't a leap to think I would have an opinion about what is going on with the American auto companies.

Here it is...

All three of the American companies are in trouble. I think that Chryselr is in the least trouble... and it still isn't good. GM is in the most trouble, and for them it could be catastrophic.

To start with, the auto executives... and Congress need to examine the root causes for why the Big 3 (B3) are in trouble. This needs to be done honestly, and not through partisan glasses... or through politically correct glasses. I think this is going to be harder for Congress than it will be for the auto executives. Democrats in Congress don't want to admit that the unions could be part of the problem, and they also don't actually know what the facts are, just perceptions.

Labor costs at the B3 are out of hand. They range from $70 to $76 per hour. Honda, Nissan and Toyota in the US are between $42 and $48. Average in the manufacturing sector is $25.36. When times are fat for the auto industry, they are pushed to "share the wealth" with labor. When times are lean, labor doesn't wish to give any concessions. The UAW needs to give up some money. Or the B3 are going to go away and the UAW will give up all of their jobs. Here is my offer:
- Increase profit sharing. When times are fat, the workers get more money... not as salary or wage, but as profit sharing. When times are lean, workers don't.
- Decrease wages. The B3 are paying 50% more than the companies that are eating their lunch... labor costs need to drop to $50/hour for the B3. When they are profitable, some of this would be made up with profit sharing.
- Automate. Sorry, but robots don't whine about making only $100,000/year. They don't get overtime.
Leadership at the B3 HAS to change. Sorry, but these guys drove the bus off of the bridge. Tossing them the keys to a new bus is a bad idea. Would they be standing there on the tarmac next to the corporate jet with their hat in hand and their tin cups if they knew that their jobs would go away if they were successful at getting the cash?
- Rick Wagoner at GM has an MBA and a BA in Economics. He has been CEO since 1998 and Chairman since 2003. But, he comes from the finance area... not the sales or engineering area. That is a problem.
- Alan Mulally at Ford has a background in aeronautics and aerospace engineering. He has only been the CEO of Ford since 2006. At least he comes from an engineering background, but he isn't from a car background, he is from Boeing. That is a problem.
- Robert Nardelli at Chrysler has a management background... but he is also not a car focused guy, having come from GE by way of Home Depot (where he screwed up pretty good according to a lot of accounts). Again, he is a problem.
A car company should be run by a car parson. It should be someone that can talk to a race car driver and not look like an idiot. It should be someone that could actually talk with a consumer on the floor of a dealership and not look like an idiot. And it should be someone that can complete a sentence without saying: synergistic, economies of scale, product or Jeeves get my private jet warmed up.
Products are NOT coming out fast enough. I love knowing that Chrysler will have a category busting hybrid minivan coming out in a year and a half, GM will have the Volt out at the same time and Ford will have their hybrid offerings expanded at the same time. But that stuff needs to be in the dealers NOW. In a year or a year and a half, Toyota and Honda could design and roll out their competing products. You've been walking towards this goal for as long as I can remember.

Now, all is not gloom. Some is perception that isn't in line with reality.

Quality at the B3 is on par with... and in many cases exceeding the European and Japanese makes. In general they are wasting the Korean and other makes.
The B3 ARE making fuel efficient cars... and selling them at pretty good prices.
Despite the constant whine from Congress that the B3 weren't making cars that people wanted... they were busy making SUVs... they were making SUVs because THAT IS WHAT CONSUMERS WANTED! The market changed. But look around. EVERYBODY wanted to have more SUVs in their line-up.
Ford and GM actually have some cars that they could roll out VERY fast if the government let them. Chrysler doesn't have the foreign operations of the other two... but they are in the least trouble.

So, here is what I would do.

UAW, we are going to renegotiate your contracts. We will do it now, or we will do it after we go into bankruptcy. You will accept $50/hour in total labor costs or we will replace your workers with people that will. If you try to shut down the factories, we will have your members arrested. Blackwater Security (that earned such a bad name in Iraq) won't have as much to do under an Obama administration... they will be running our security.
Those cars that we said would be out in 18 months or so... will be out next spring. That's right... SPRING. We have had the things driving around for the magazines to test for a year. It is time to put them out on the street.
We are going to spend some time actually telling consumers that we DO have cool products that people want. We have fuel efficient cars. We have hybrids. We have diesels that get 40mpg.
GM and Ford will be pressuring the government to streamline bringing in some of our international vehicles. In Europe we are going head to head with all comers with high mileage and smaller cars... we have them ready to go RIGHT NOW. They will be on the shores by spring. This spring.
Bonuses and performance based pay is actually going to be based on long term profitability... not on tweaking the books to make it look good for a moment.

The American car companies are making some really cool cars and trucks both here and overseas. They have some cool stuff on the drawing board and more that is actually almost ready to hit the dealers. But they also have legacy costs that are killing them and terribly inefficient dealer networks and other structures. All of that needs to be addressed.

It isn't something that can be knocked out in the next season... this isn't a reality TV show. It is actual reality. And these are GIANT companies and take a little time to turn. But the basic fact is that they have ALL strayed from their purpose. They have ceased being car companies and become "product manufacturers."

There should be car people at the helm. The people that become leaders of a category aren't those that come out of business school with a generic degree... they are people with a passion for something specific. There are a few exceptions, but look at the people that have been the most successful at building companies... Bill Gates, Henry Ford, Michael Dell, Lee Iacocca... these weren't business school wonks. They were people that loved something.

And for God's sake... Congress has NO business running a company. They can't run their own business. We don't need them doing more broad based damage.

A survey of Lilburn Area Deals, part IV

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Thu, 20 Nov 2008 14:35:47 -0600

This is the final part of this grouping. We started with an entry level fixer-upper, priced at just under $100k. We moved up a little to a property in the mid-high $100s. The third property was priced in the low $200s. This final property is the one that may actually be the best deal… and it is the most expensive, listed in the low $300s.

The reason it is the best deal comes down to the numbers. It is priced at least easily $50k below the current market. How can I say that? There is a house with a very similar floor plan that sold in the last two weeks for $40k more. Except that house didn’t have the basement. Basement lots add around $25k-$35k to these house. So, even with a distressed sale, this house is well below market. Other homes in the subdivision have sold in the high $300k to the low-mid $400s. In fact, this very home sold for $410k just 18 months ago. Now it is almost $100k less!

This house is just about ready to go. It does need paint in some places (entry area and upstairs bedrooms). The carpet looks excellent (it is only 2years old!). The appliances are VERY nice… except for the fridge which isn’t in the house. Granite counter tops, beautiful cabinetry, tile backsplashes, wood flooring… These are the right upgrades, and they are there and in great shape.

The back yard is a little smaller than I’d like, but it isn’t terrible. At least there is a privacy fence at the back property line.

The final little extra here that I really like (being a garage guy) is that the garage is HUGE. It is listed as a two car, but it is seriously deep. At the very least, a car could be turned sideways in the rear of the garage and there would still be storage for tools and two other cars. It is possible that the carage could hold four cars (2 wide by 2 deep) depending on the cars.

If the real estate market was more solid right now (in the sales realm) I would buy this house myself. I see it as an EXCELLENT deal even at full list price.

A survey of Lilburn Area Deals, part III

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Wed, 19 Nov 2008 20:43:42 -0600

The second to last stop on the survey is a house in the low $200k range. Comps are varied for the neighborhood, but the most recent sale was over $300k… but it was a bigger house. Other recent sales were in the low to mid $200k range. This home is priced at the bottom end of the range. More interestingly is the sales price history for this home. It sold for over $300k just this summer. Previously it sold in the very high $200s and the mid $200s in 2002 and 1999. In the current market I would say that this property has between $10k and $15k in equity.

The property is in pretty good condition, and is very close to move-in ready. That isn’t to say that it couldn’t use some updating, but all of the appliances are there and appear serviceable. It could use painting, but that is more because of decorator issues rather than condition. The carpets should be cleaned as well, but don’t look like they need to be replaced.

Another big plus is that this house has a full and finished basement. There is a LOT of space down there, and there could be additional bedrooms added or other value adding space like a home theater. One of the rooms would make a very nice workshop.

There is a full width deck on the back of the house that is accessible from the kitchen, living room and master suite. Speaking of the master suite, it has a wonderful bathroom with a jetted tub and separate shower. A couple of the bedrooms, including the master, feature window seats.

Vaulted ceiling and fireplace in the living room, kitchen island and giant pantry in the kitchen and a three season breakfast room are also here.

Overall, this is a nice house, although I would like to see the price a bit closer to $200k for an investor. For a primary residence, it isn’t a bad price… not a great price, but better than average.

A survey of Lilburn Area Deals, part II

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Wed, 19 Nov 2008 09:56:36 -0600

The next stop on the Deal Train was at a slightly bigger and more expensive home. Instead of a 3 bedroom, 2 bath ranch, this is a 4 bedroom, 2½ bath traditional with a front porch. If you didn’t hit part I, you might want to check it out.

It has a giant yard, coming in around 2/3 acre. There is even an outbuilding for the inevitable yard tools. The exterior is in pretty good shape, but as with most vacant properties that haven’t been occupied for a while, there are some items that could use attention.

In this property, the stove and the fridge are both missing, but everything else looks to be in reasonable shape. In fact, the main level is pretty serviceable as it is… carpet could use a cleaning, but may not need replacement. While a little dated, the treatments aren’t too bad. Upstairs is a different story. The paint is seriously in need. Of course, that is cheap and easy. The carpet is marginal at best. But again, the bones are good. There is a lot of natural wood on the lower level, including very nice built-ins around the brick fireplace.

This property is far from being a “handyman special” or fixer-upper. In fact, aside from a few small things, it is renter-ready, or could be a great primary residence. It is priced accordingly. The ARV (After Repair Value) in the current market is likely in the $180k-$190k range. In a strong market, I would look toward the low $200k range. But on the flip side, we are talking about a property that is ready to roll with a couple of gallons of paint and a carpet cleaning.

To be a deal, this property needs to drop another $10k. With the current price of $170k, it is just not screaming “deal” yet. However, as time goes on, that price will need to drop as the condition deteriorates. Condition of vacant properties almost always deteriorates over time. Of course, don’t think that means that it would go down $10k/month or something. But, by the time spring rolls around if it is unsold, this will be a $150k property unless the market is showing serious recovery signs.

A survey of Lilburn Area Deals, part I

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Tue, 18 Nov 2008 23:51:19 -0600

I took the opportunity to visit a couple of area deals. Before I talk about the properties, I should take a moment to describe how I got here...

Currently there are a bit over 450 properties on the market in the area. From this, I looked for those that were most likely to be at an exceptional price for the value. I narrowed it down to 4 candidates that looked really promising. None of these are my listings. If you are interested in one of these properties, feel free to contact me.

The first property is a "handyman special." It is priced well, but I think needs to drop just a little bit more to be where it really needs to be. On paper, it looks good, priced slightly below $100k. Neighborhood comps point to ARV (After Repair Value) in the $140k-$150k range, with the appropriate upgrades and changes. And that would be in the current market, not the fantasy land of 2005. If the market were to come back to those levels, the value should be in the $170k-$180k range.

What the property needs to be top notch would be carpet, interior paint, some gutter repair and handy type work and possibly returning the garage to garage usage (it had been converted to a family room). It could also use some exterior maintenance. Most of it is deferred maintenance and the issues that come from foreclosure and being vacant. If one were doing all of the work themselves, it would take about $10k... if it was hired out, it might be $15k.

The appliances are dated and some of the previous work is less than adequate. The paint had been done sloppily in the past. But as real estate agents like to say... It has good bones. There is a partially unfinished basement, and the yard is fairly generous, especially for the price. There is already a slab laid next to the house if one were to want to build a detached garage in the back yard. There is also a nice little stream on one side of the property.

All in all, it could be a pretty good investment for someone looking for an entry level property. It would take a month to get ready, but should be able to cashflow immediately, as well as provide long-term appreciation opportunities.

Break my leg? Break a window? Break down and call the cops? hhhmmm

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Tue, 18 Nov 2008 17:29:02 -0600

So, I was standing there looking at a 20 foot drop. I might be able to make it... or I might end up breaking my leg. If I landed on y phone, I would have to drag my self to the street... with a broken leg. And of course I drive a stick... I need to use both legs.

But there was the window option... I could kick one in and that might get the job done. Of course I would need to pay for the window... I wouldn't just walk away. And I'd probably end up cutting a major artery... back to that stick, need both hands, too.

Can you imagine the embarrassment of calling the police... "Hello, non-emergency, how can I help you?"

"I'm locked on a deck at a foreclosed house."

As the laughing subsides... "Come again? You say that you locked yourself out of a house on the deck?"

"That's right. I stepped out and the door swung closed... locked... behind me. If I jump off of the deck, I will likely break my leg. If I wait for my wife to show up I might end up with hypothermia. Trust me, you were not my first idea."

"So, you can't jump down?"

"No. It's like 20 feet."

"You don't have the key?"

"I don't have the RIGHT key... I have the key to the front door."

"Did you try it?"

"Um... yes?"

No, I didn't really want to call the police to have them send a cruiser by to rescue the idiot on the deck.

So I learned a new skill...

That is right. A Bass Pro Shops gift card sacrificed itself to help me get back in. I learned how to jimmy a lock. And I suck at it... but I got it done. I was actually hoping that someone would yell "Hey, what are you doing there?"... but no such luck.

It took about 15 minutes... after 40 minutes of standing around... calling a bunch of geographically inconvenient friends... calling my wife (for those of you that have MET my wife, you can probably guess at the abuse and sarcasm I endured... and will continue to endure. I was desperate)... looking at the ground down there. Could I jump? At one point I thought about shimmying down a tree... no, that wasn't happening either.

Moral of the story...

Have a back up plan. I didn't. I had the key in my hand, but it was the wrong one. I didn't pay attention to the lock... it was one of those that lets you open it from the inside but not the outside. I didn't pay attention to the auto-closer for the door. I did have my phone... and I could have made a call no matter what.

Have a plan.

The truth about car quality...

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Sun, 16 Nov 2008 22:38:51 -0600

And it isn't what you think.

There were a couple of things that ganged up today that made me write this post.

Patricia Kennedy wrote this post.
Fox News had some "man (and woman) on the street" interviews with truly uninformed people.
I still like underdogs.
We are teetering on the edge of "bailing out" GM and probably Ford and Chrysler, too.

So, I knew that I had read the JD Power quality ratings and that Toyota wasn't "all that and a bag of chips", nor was Honda... but that everyone thinks they are at the very top. So, I went searching.

Let's start with overall corporate ratings...

5 stars: Lexus
4 stars: Mercury, Cadillac, Toyota, Acura, Buick, BMW, Lincoln, Honda, Jaguar
3 stars: Porsche, Mitsubishi, Hyundai, Ford, Infiniti, Audi, Mercedes-Benz, Nissan, Pontiac, GMC, Mazda, Subaru, Chrysler, MINI, Dodge, Chevrolet, HUMMER, Scion, Volvo, Saturn
2 stars: Jeep, Volkswagen, SAAB, Isuzu, Kia, Suzuki, Land Rover

Now, there are a couple of things that should stick out to you. The first is that Mercury and Cadillac both outscored Toyota, and Buick and Lincoln are right there... above Honda. All of them, and Ford scored above Mercedes-Benz.

Let's sample some cars and trucks...

In the Midsize Car category, the Chevy Malibu and the Ford Fusion both beat the Toyota Camry. All of those, as well as the Buick LaCrosse, Mercury Milan and Pontiac G6 beat the Honda Accord.
In the Compact Car category, Honda and Toyota led the way... but everyone smoked the Mini.
In the Large Car category, the Chevy Impala and Buick Lucerne were right there with the Toyota Avalon... and all of them were behind the Pontiac Gran Prix, Mercury Sable, Grand Marquis and Ford Taurus.
In the Large Pickup category, The Chevy Silverado wins... Toyota Tundra is second and the Chevy Avalanche was third. Nissan's Titan came in dead last.
In the Compact Multi-Activity Vehicle category, Honda's CR-V is in front, followed by the Chrysler PT Cruiser, Ford Escape and Toyota RAV4. And those were above the Honda Element and Toyota FJ Cruiser.

There is a point to all of this. People keep saying that the US automakers can't compete with the quality of the imports. Obviously, this isn't the case. The imports are in some cases better, other cases worse than the American makes. And I am running into some groups that are saying that the difference might actually come down to the mindset of the owners. There are a couple of groups pushing for a study of maintenance habits of owners of different makes of vehicles...

But what I wanted to address is this...

As real estate agents we are harping about the media and perceptions. In this case, most people are feeding the perceptions in regards to American cars and their quality. Also, GM and Ford have both been building hybrids for a couple of years. Chrysler has been building ultra high efficiency diesels in small vehicles for a few years. A great example is the Jeep Liberty CRD... which gets 22/27mpg, can tow 5,000 pounds and acts like the V6 which only gets 17/22mpg.

The bottom line is that while people are saying that the American car companies are dying because they don't have the quality of the imports, and aren't building hybrids and high efficiency vehicles, that simply isn't the case. Sure, they aren't really doing anything like the Yaris and Fit, but then Toyota and Honda aren't moving as many of those as they are Camrys and Accords. And GM, Ford and Chrysler can take those on easily... when people give them a chance.

As a side note, I will admit that I have a Ford and Chrysler in my stable, and I'm stewing for a Pontiac. However, I have owned foreign cars as well as domestics. I don't believe in the "Buy American" mantra... I just think that people should make their decisions based on reality (real estate or automotive) rather than flawed perceptions.

And this is a GREAT time to buy an American made car... and property.

Blog Anthology, Posts dated 10/5-10/11

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Sat, 15 Nov 2008 21:45:10 -0600

Slow, Sloppy and Dirty... Video Sunday.One of the few times each year when I plan on leaving the realm of cell phones and internet access is for the SFWDA Dixie Run. I get to camp for a few days and help keep the area open to 4wheeling. I grabbed a few 4wheeling videos to celebrate.

Oh just short sell it... At least that seemed to be the advice that one person at the grocery store was giving another. It isn't that simple... don't think it is.

Now that we have had a little time to digest all of the financial meltdown talk, Have you been left wondering how we've gotten here? I know that I wanted to know more about why we were suddenly on the hook for $700,000,000,000... and now apparently that isn't enough.

Apparently I just can't help but sneak out a little of my market report. Here is the Sneak Preview of my October Market Report for Gwinnett County.

We all know the statistics. We know the state of the market... all of the various business statistics. But that doesn't mean that they are set in stone. That's why we play the game...

Want a kicking deal on a piece of property? I answered the question So, how does one get property at a deal price? It isn't that hard... except for finding the one piece of property that the deal is to be had on. And then understanding the depth of the deal.

If the Sheriff won't do his job, he needs to lose it. I understand the point, but law enforement can't just tell the people whom they are protecting that they are on their own. Chicago Sheriff Refusing to do Foreclosure Evictions.

Time to start thinking about REtechSouth 2009

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Sat, 15 Nov 2008 20:23:52 -0600

It is still six months away, but that doesn't mean it isn't time to start thinking about it. Time has a way of creeping up on us. The date for the 2009 event is March 20th.

The inaguaral event was put together in just a couple of weeks, mostly by Brad Nix and Matt Fagioli. In those few weeks they managed to put together the coolest collection of technology sessions in the area. THE heavy hitters of technology in real estate made the trip. The people whose blogs you read and who you work to glean bits of information from were right there... up close and personal.

Last year's event included (this is NOT an exhaustive list...)

Pat Kitano
Mary McKnight
Bob Stewart
Tony Grey
Tara Jones
Jon Washburn
David Carroll
Dustin Luther
Michael Simonsen
David Harris
Rudy Bachraty
Jason Benesch
Kevin Boer
Kevin Tomlinson

As I said, the list isn't exhaustive, there were many other speakers.

This time, with almost a year of planning, Matt and Brad will be putting on a show. Instead of a hotel ballroom, this time we will beholding the event at the Cobb Galleria to allow more elbow room. There is space for as many as 500 attending agents. In the southeast, this is THE conference to attend. I'm not just saying that because I work for Diamond Dwellings Realty... a presenting sponsor. I went to last year's event on my own, before joining one of the most progressive brokerages in the region.

I'll be excited to find out who will be making it to the event to speak. I know that Matt talked with a few people at Inman, and a few more at NAR... he'll likely hit some more at Inman in NYC. Expect to see even more presenters this year.

One other VERY important thing... If you are reading this, you are likely already an agent that is using web 2.0 and technology more than the average agent. We really need to get the word out to those that WANT to be on the leading edge of technology. Don't worry... Atlanta and the southeast won't be overrun with butt-kickin' agents. We only have room for 500 agents, and there are close to 40,000 agents in Atlanta alone. Frankly, we can all help each other out, and still dominate our markets.

Mark your calendar for March 20th, 2009. Get ready to learn... get ready to teach... get ready to break the mold.

Forget to add the website... Here it is... GO. Now. Seriously. There is a registration special RIGHT NOW.

Oh Garbage!...

Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) — Sat, 15 Nov 2008 15:17:10 -0600

Look for changes in unincorporated Gwinnett County beginning January 1st... at least for your garbage and recyclables.

Gwinnett County has been looking at their waste management plan. Details were supposed to be made public in December, but the Gwinnett Clean & Beautiful website is showing that the plan is done.

A few highlights of the plan are as follows:

For the first six months it will cost $20.45/mo. paid directly to the vendor.
For the remainder of 2009, it will cost $17.86/mo. paid to the county as a line item on property taxes.
The price is fixed until 12/31/2010, and the contract runs through 12/31/2015.
Companies are required to pick up garbage, recyclables, old appliances (no hazardous materials) and old furniture (as well as other bulky items).

More information is available at Gwinnett Clean & Beautiful Services, Inc.

Keep in mind that this only applies to unincorporated areas of the county, not to the cities that are incorporated within the county.

One thing that I am excited about is the increase in items that are allowed to be recycled. Currently we are limited to just 7 items... I don't know why, if there is a market for the other items the haulers aren't allowed to recycle them... and under the new plan there will be 35 items that will be recycled. Probably the best news is that old phone books will be able to go into the recycle bin by July 1st. I think that we get about 15 phone books a year from different companies... and we don't use ANY of them. The internet is faster and more accurate.