Monday, June 18, 2018

Installment 7.2: Influence

Calls were made between administrative assistants.  After several such calls from the offices of senior Senators, mid-level administrators at the IRS ruled that vehicles that fell under certain classifications were eligible for favorable “write-down” treatment.  The EPA also ruled that those trucks would count toward CAFE standards and other onerous regulations.

Prior-year models, base 'work trucks' were sold by dealerships back to the factory.  Dealerships were glad to get the showroom floor space back.  Nothing drags down customer enthusiasm more than having too many old, undesirable models on the floor.

The trucks had single cabs, big cargo beds, base engines and very few amenities.  Selling these vehicles usually involved a negative profit margin.  

There are several reasons why factories make vehicles that would never be profitable.  One reason is to meet regulatory requirements like corporate fuel economy standards.  

Another reason is that vehicles that are "maxed out" with options are hugely profitable but take longer than "standard" to build.  The model-mix planners address that by always scheduling a plain-vanilla to chase the maxed-out down the line so workers can recover their position.  In scheduling lingo that is called "working the takt and pitch".

A final reason to build plain-vanilla vehicles is to manage risk.  Plain-vanilla is easy to build so model-mix planners schedule lots of them when there is a large movement of workers and after new, unproven equipment is installed.  Consequently, many of the plain-vanillas are among the very oldest of any given model year and dealerships are doubly eager to get them off the lot.

Regardless of the reasons, factories build more plain-vanillas than they can profitably sell.  They run plain-vanillas because shutting down the line is more expensive than building some vehicles they will have to deeply discount to sell.

Incidentally, a very large number of those "plain-vanilla" are painted white since white paint does the best job hiding minor dents, dings and dirt-in-paint.  That is good to know when you are arm-wrestling with a car salesman and trying to get a new ride for the lowest possible cost.  He/she is probably desperate to get rid of that white, low-option, built-early-in-the-model year vehicle and is willing to accept low-ball bids.

The plain-vanilla trucks were not shipped back to the factories or to auction yards.  They were shipped to western Arizona.  Later in the day the beds of those trucks were filled with bags of fertilizer and pesticides or oil-field equipment.

Oddly enough, the marshalling lots in western Arizona never filled up.  NASA’s night-time satellite coverage of the Mojave desert inexplicably became low resolution and glitch-filled as unscheduled “maintenance” occurred night-after-night.

In a similar way, Auxilliary Power Generation Units for off-shore drilling platforms became eligible for favorable write-down treatment.  They too were loaded on trains and shipped to Arizona where they were stored in the beds of trucks.

There was no way to export weapons to SD-LA as it was still considered a non-state by the State Department.  However, weapons purchasers for northern Cali suddenly encountered delivery times stretching out.  Munitions that had been purchased earlier were not being shipped with the excuse, “Inventory issues.”

Weapons suppliers often produce sub-systems for competitors.  Many times they engage in joint ventures with foreign companies.  Delivery times of weapon systems from Asia to northern Cali also started running into snags.  Sometimes it involve port authorities.  Sometimes the systems were delivered missing critical components.  Sometimes the system performance was degraded by something as simple as a couple of ferrite beads being crimped around sensor wires to slow system response times.

Producers of weapon systems in Asia had fewer inhibitions of selling arms to SD-LA.  In some cases, invoices were changed on ships while at sea.  Ships, after all, have computers and printers just like the home office.

Ships sailing for San Francisco were diverted to Long Beach.  The orders stayed on the books until the systems were delivered.  The producers saw this as good business.  They sold more systems and had the satisfaction of sticking their thumb in the holier-than-thou northern Cali eye.

Most of these shenanigans were invisible to the Cali officials.  All business dealings were opaque to them.  They were proud of being unable to understand transactions that were driven by profit motives.

On the other hand, the businessmen and engineers were very aware of the sudden stretching of delivery times and had a pretty good idea of the causal chain that caused said stretching.  They were acutely aware of what those delayed deliveries were going to do to their bottom lines.  Money is math and math has no politics.

Next Installment

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