More Economic Theory

I'm not an economist by any stretch of the imagination, but I enjoy reading and hearing what people think about our current economic situation. It's all part of my ongoing education.

Since most respondents to our current survey don't believe the U.S. Government should bail out the Big Three Carmakers, I thought you might be interested in this viewpoint from the Misess Economics Blog (can be found at http://blog.mises.org/blog) (I thought this was an Austrian economic think tank, but it's actually located in Auburn, AL., it merely works to "advance the scholarship of liberty in the tradition of the Austrian School" and honestly - I'm not really sure what that means..... But I still found the entire article interesting.

Best Explanation in One Sentence
November 25, 2008 3:08 PM by Jeffrey Tucker

From Llewellyn Rockwell in this piece: "If the money is used to prop up failing companies, that's particularly bad since it is an attempt to override market realities, an attempt that is about as successful as trying to repeal gravity by throwing things up in the air."

For me, reducing economic theory to a one-sentence anology is overly simplistic, yet sometimes quite effective. For a more in-depth analysis, go to the blog. One reader's response was interesting, he said, it's like giving heroin to a heroin addict and expecting him to change.

Thanksgiving Travel - The driving decline continues

Our friends at AAA have forecast a small decline in the number of Americans traveling during the Thanksgiving holiday weekend. This would be the first decline in Thanksgiving holiday travel since 2002 and the fourth consecutive holiday this year with a year-over-year decline.

Some 41 million Americans are expected to travel 50 miles or more from their homes for Thanksgiving weekend — a decrease of 600,000 travelers, or 1.4 percent, from last year’s total of 41.6 million travelers. (but really, who counts them once you're past the 40 million mark?)

More than 33.2 million Americans, or 81 percent of all holiday travelers, are expected to travel by automobile. That’s a 1.2-percent decrease from the 33.6 million people who drove a year ago. Even with the recent decline in gas prices, people are still reporting they're going to stay home.

Who will travel and where will they be?

• Southeast: 8.8 million
• West: 6.9 million
• Midwest: 6.5
• Great Lakes: 6.1 million - I think most of these 6.1 million people will be on I-71 along with me and my family.
• Northeast: 4.8 million

Whether you're going over the river and through the woods to Grandmother's house, or staying home, best wishes for a Happy Thanksgiving. Safe travels wherever this week takes you!

Our New English Language

I have two teenage sons, so I have become quite proficient at how to spell now (the close of 2008, the dawn of 2009). You remember the old, "if you can read this, thank a teacher"? It's now, "f u cn red ths, thnk a tchr." Yes, it gets a little under my English graduate skin to even type that out but, if it saves money while texting, I'm all for it. I'm not lol.

Where I have to draw the line though, is when I see, read about, or hear adults making up new words. One of my least favorite is "incentivize" or "incent". Neither are real words. The word, incentive, is a noun meaning to "incite some type of change or behavior". Let's leave it alone, please. Find a real adjective to suit your subject matter.

But what got me going on this topic today was an article I saw recently in Ad Age magazine. The article presents a review of a recent discussion amongst ad agency personnel at a CMO Roundtable a the Association of National Advertisers annual conference in Orlando, FL. Apparently, they expressed concern that many of their clients are increasingly bypassing their usual media and creative agencies and instead, turning to media companies (perhaps like Babcox?) for creative marketing ideas. So far, the topic doesn't bother me too much. But then, this:

"If I were an agency, I would be really worried about being disintermediated," said Becky Saeger, CMO of Charles Schwab and new chairman of the ANA. "more and more, agencies are almost in the way sometimes."

Now, I know as a Publisher I should consider the content (which I find very interesting actually). But as a person with an English degree and a lifelong interest in language, the fake word, DISINTERMEDIATED, really ticks me off. For clarity's sake, say what you mean and mean what you say. Did she mean to use the word, disinter (to dig up) or maybe disintegrate (to separate into components) or disjoin (to disconnect) - which is probably close to what she meant. Or, perhaps she meant to say, "If I were an agency, I would be really worried about being FIRED."

Please - don't send me any e-mails with made up words... Or if you're going to make up a word, at least use a little creativity! Just because you add a prefix, a suffix, or an -ly at the end doesn't make it a word!

And don't think this is a rant against ad agencies - because it is not. We work with some excellent agencies that are very creative and bring a lot of great ideas to our clients. I like the idea of working with an agency and a client together. That triumvirate can generate a lot of new ideas and can move in directions that neither one individually may have considered.

Just........I'm able to handle the text-spell, just QUIT MAKING WORDS UP!

If you really feel the need to use new words, then check out the Chambers Dictionary online. I think I'll stick with Websters.

And don't even get me started on all the new names for people that seem to have come into being over the past decade or two. K?

thx. TTFN

Profile of Today's Technician

We recently conducted a survey of the readers of our TechGroup magazines, specifically skipping over the shop owner and going directly to the technician. Today, I'm going to outline the "lifestyle" of today's U.S. automotive technician. Check back later for an overview of their tools and equipment purchasing trends.

Our methodology: We mailed and collected the responses to our survey from mid-September to mid-October, 2008. Our objective was to gather informaton on the demographics and lifestyles of professional auto repair technicians. We have a professional research team on staff here, so it was not just me and couple of local auto techs sitting around shooting the breeze. We're serious about research..... (though I realize you may be wondering why there's a picture of Mickey Mouse in an article about research. more to come on MM.)

In order to keep this a quick read, I'm just going to list some of the highlights of our research:

• Our respondents have been technicians for an average of 20.9 years, with 33% being in the business for 26 years or more.


• The majority of our respondents have been working at their current location for over 5 years, with the average being 11 years.
  
• 46% of these technicians began working in the business by the time they were 18 years old. The next largest category (10%) began at the age of 19. (Good reason for you to consider advertising to student technicians today - they start young and stay in the business for a looooooong time.)
  
• 63% hold ASE certifications, with an average of 5 certifications each.
  
• For those technicians paid hourly, 32% have an hourly rate of $16 or less, while 21% cite an hourly rate of $25 or more.
  
• The average number of hours worked per week is 44.4
  
• The average age of our technicians is 41.8 years old. 68% are married. When asked how many more years do you expect to remain an automotive technician, the average answer was 13.1 years.
  
• 38% are HS graduates and 30% went to technical or a trade school.
  
• Our technicians own or lease an average of 3.9 vehicles, with cars/light trucks/SUVs making up 88% of their vehicles. Others are motorcycles, RV, motor homes, snowmobiles, ATVs.
  
• What do you think technicians like to do in their spare time? Well, according to the survey, their favorite passtime is fishing (46%), followed by boating (32%) and travel (28%). Surprisingly, just 22.5% enjoyed motorsports as a leisure activity (why do so many manufacturers spend so much money to support motorsports then?) Only 11% enjoy golf. (of course, perhaps a lot more of them golf, but only 11% enjoy golf.)
  
• Internet use - 93% have access to the internet (70% have access both at home and at work).

Then we asked them some broader industry questions and asked if they agree or disagree.

Here are the areas where they strongly agree: The shop where they work is a decent place to work (that explains the length of time.); There is a shortage of trained technicians.; It is difficult to keep up.

They were more neutral about their opportunity to advance in the industry and some apparently feel the public doesn't respect their skills (something we all need to keep in mind as we work to promote our industry both within and outside of our business networks.)

Finally, 53% indicated they might change careers. Of those, 42% would remain in automotive, but not as a tech, 26% want to become a shop owner, and 32% would seek something outside the automotive field.

One final note: Happy Belated Birthday Mickey Mouse! Yesterday was the 80th anniversary of Mickey Mouse's appearance in Steamboat Willie. 80 years, several modifications, and solid marketing........ today Mickey Mouse is one of the most recognizable brands/images on the planet. Even though his primary target market is children, people of all ages, income levels, lifestyles, and education recognize the black mouse with white gloves (and MM is rarely if ever confused with Michael Jackson, who is a person (not a cartoon character) known to wear one white glove from time to time.) That is great branding - no matter how you analyze it.

Coach: a private instructor; to train

Coach Ernie Pantuso - who didn't love him? I guess you could say the same about Knute Rockne, but I never saw him in action. Never even saw the movie about him. But, I saw Cheers plenty of times with Coach at the bar, always ready to give someone a boost, a pat on the back, a shoulder to cry on, or just a good friend to listen to. Slow as he could be at times, everyone liked Coach, and he liked everyone back. Even Carla Torelli never had a bad thing to say about him.

At any given time in our careers, we may have the opportunity to be a coach to someone in our industry. That person may be older or younger. May have a little or a lot of experience. May have a different viewpoint. May not be a good fit for the business at all, but you're stuck with them. Coaching is tough - whether you do it for pay or for more personal reasons - being a good coach can be very difficult, and also very rewarding. And unlike the Coach from Cheers, not everyone may like you as a coach.

Here are some observations I've made of good coaches I've experienced in my own career:

A good coach should look for ways to develop their people. Once you've recognized a potential for leadership and determined the skills and abilities necessary for growth in a position, help that person develop those skills. You should work with that person on an appropriate development plan that includes constructive feedback. Always hold people accountable. A deadline is a deadline, not an option. Reward and recognize success, analyze and improve on failure.

A good coach should be able to delegate responsibilities. Your people can't grow and develop if you give them a project then look over their shoulder 99% of the time. Believe in your employee's ability, and then give them the leeway to be successful. Provide a guideline, but use one without a garrot at the end.

Excellent communication skills are really critical for a good coach. You have to be a good listener because you have to teach your people to listen well. Another important aspect of a coach's communication skill is the ability to stay positive. Without being a "pollyanna" a good coach can stay positive under pressure and lead a team to success. Even in times like these.

Can you be a good coach if you're not a good decision maker? Simply, no. Make a decision, set a course of action with appropriate timelines, and accept responsibility. Anticipate needs and any changes and take action when necessary. Be prepared to change. Keep the right people in your organization in the loop! One coach I had liked to say, "I can take bad news, but I don't like surprises."

The hardest thing about being a good coach is - many times you have to coach a person without them knowing it. Sometimes you will have a formal coaching session, but usually you won't want to sit down with someone and begin a conversation with, "so, today let's talk about goal-setting....." Pretty obvious eh? So - practice your coaching skills. A good coach is a good leader, and leads to a good organization. If you're better than good, it won't be long before the performance of your company improves as the people you coach improve.

And my favorite Coach quote (though not for business use):

COACH: Can I draw you a beer, Norm?

NORM: No, I know what they look like. Just pour me one.

Wal-Mart Gets Healthy and Goes Green!

Interesting news from Wal-Mart (if true, and if they hold their suppliers to these standards). No other single retailer could pull this off - if they do manage to make these changes, it could affect the way China does business with all countries, across all types of manufacturing. It would definitely be good for the consumer, and better (than now) for the environment. Considering the magnitude of their supplier base, a 2-year roll-out seems aggressive. They have already pressured their suppliers into certain environmental improvements (well, they've turned out to be good for the environment, but the driver was cost savings.) For example, the smaller bottles of laundry detergent that you're seeing on store shelves, thank Wal-Mart. They needed to reduce the cost of overseas freight per piece, so they directed their suppliers to concentrate their liquid and package it in something smaller..... The power of Wal-Mart....

Wal-Mart Imposes New Safety, Environmental Standards on China Suppliers
The world's biggest retailer, Wal-Mart, last week announced strict new corporate social responsibility guidelines for the Chinese companies that produce the products that it sells. The new guidelines, which will raise quality control standards and adherence requirements for national environmental laws for suppliers, were implemented in the wake of ongoing quality and consumer-safety concerns with Chinese-produced goods.

Wal-Mart is viewing these measures as a way to allay consumer fears over the safety of Chinese products on their shelves. The company stated that they will not buy from companies that do not comply with the new practice standards. Companies dealing with Wal-Mart will also be required to list the names and addresses of all subcontractors – the small factories where quality and safety concerns can often originate.

The new process will begin on Jan. 1 and will be phased in over two years. Additionally, Wal-Mart is holding suppliers to increased energy efficiency measures in hopes of improving energy efficiency by 2012.

Highlights from Snap-on's 3rd Quarter Results

Here's the detail you won't find on the wire services:

Snap-on Announces Record Third Quarter 2008 Earnings
Diluted EPS of $0.94 increases 34.3% over $0.70 earned last year; Sales increase of 2.5%; Expects continued year-over-year earnings improvement for balance of 2008
Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, diagnostics, equipment, software and service solutions for professional users, today announced operating results for the third quarter of 2008.

"We are very encouraged by our third quarter results, especially given the current global economic challenges," said Nick Pinchuk, Snap-on's president and chief executive officer. "We continue to focus on fortifying our already strong business models, pursuing geographic and customer diversification, and driving our value creating processes, including innovation and rapid continuous improvement. These are the activities that have created the string of encouraging results over the last few years and we're confident they will serve us well going forward.
"The global economic challenges have made forecasting uncertain," said Pinchuk. "Snap-on, however, remains positive looking forward and believes that continued execution of our core strategies will support improved year-over-year earnings again in the fourth quarter. Finally, as we report these results, it's clear that the progress would not be possible without the dedication and support of our franchisees and associates. I thank them for their extraordinary contributions."

Highlights of Snap-on's third quarter 2008 operating results are as follows:

Net sales of $697.8 million increased $17.1 million, or 2.5%, over prior year, including $12.1 million from currency translation.
Gross profit improved to 44.7% of net sales in 2008 from 44.2% in 2007;
Operating expenses improved to 33.0% of net sales in 2008 from 34.4% in 2007.
Operating earnings of $86.4 million increased 19.3%, or $14.0 million, over prior year; currency translation contributed $0.3 million of the increase. As a percentage of revenues, operating earnings improved to 12.1% in 2008 from 10.4% in 2007. For the nine months ended September 27, 2008, operating earnings improved to 13.0% of revenues, as compared to 10.7% in the year-ago period.
Net earnings of $54.6 million increased 32.8% from $41.1 million in 2007; diluted earnings of $0.94 per share increased 34.3% from $0.70 per diluted share in 2007.
For the twelve month period ended September 2008, pretax return on invested capital was 22.0% as compared to 18.4% for the comparable 2007 period. Pretax return on invested capital is defined as earnings before interest and taxes divided by the quarter-end average of shareholders' equity and net debt.
Commercial & Industrial Group segment sales of $338.1 million were up $10.2 million, or 3.1%, from prior year.
Excluding $12.4 million of currency translation, sales declined $2.2 million year over year as continued growth in emerging markets, contributions from increased sales of power tools, higher sales of tools, kits and tool storage products to industrial customers, and continuing strong sales in our innovative, imaging aligner units were more than offset by lower sales of professional tools in Europe and by sales declines in other wheel service equipment worldwide.

Operating earnings of $40.7 million increased $8.0 million, or 24.5%, from prior year as contributions from higher pricing and savings from ongoing Rapid Continuous Improvement (RCI) initiatives were partially offset by the lower level of organic sales and commodity cost increases. As a percentage of sales, operating earnings in the quarter improved to 12.0%, as compared with 10.0% a year ago.

Snap-on Tools Group segment sales of $269.5 million increased $7.5 million, or 2.9%, from prior-year levels; currency translation contributed $0.4 million of the sales increase. Higher year-over-year sales in the company's international franchise operations were partially offset by a 0.3% decline in U.S. sales.

Operating earnings of $28.2 million were up $3.6 million from prior-year levels. Contributing to this increase were higher international sales, benefits from RCI initiatives and lower franchisee termination costs in the United States. These increases were partially offset by the impacts of a less favorable sales mix and $5.0 million of higher material and freight costs. As a percentage of sales, operating earnings in the quarter improved to 10.5%, as compared with 9.4% a year ago.
Diagnostics & Information Group segment sales of $155.1 million were up $3.1 million from prior-year levels primarily due to higher OEM program sales as a result of a new essential tool program in North America, increased sales of diagnostics products in Europe and higher sales of Mitchell1(TM) information products. These sales increases were partially offset by lower sales of diagnostics products in the United States and by lower sales at Snap-on Business Solutions, including expected lower sales from the planned exit of certain non-core product lines.
Operating earnings of $27.2 million were up $5.0 million from prior-year levels primarily due to benefits from RCI initiatives and contributions from the higher sales. As a percentage of sales, operating earnings in the quarter improved to 17.5%, as compared with 14.6% a year ago.
Financial Services operating income was $4.8 million on $18.0 million of revenue, as compared with $5.6 million of operating income on $15.8 million of revenue a year ago. Contributions from higher revenues in 2008, primarily as a result of lower market discount rates, were more than offset by higher year-over-year operating expenses, including $1.4 million of one-time, project-related costs.
Outlook
Snap-on intends to continue investing in its strategic growth initiatives aimed at expanding value provided to its traditional customers, penetrating new and adjacent segments, and extending its presence in the emerging markets of Asia/Pacific and Eastern Europe. Snap-on also expects to continue implementing its RCI and low-cost sourcing initiatives intended to provide higher levels of profitability.
Based on current expectations, Snap-on expects that its earnings for the balance of 2008 will continue to exceed 2007 levels. Additional detail about Snap-on is also available on the Snap-on Web site.

Overall, Snap-on has posted decent numbers for this tough U.S. economy. And it appears they plan to maintain current initiatives to continue their growth plans.