Category: Business

FMTV Production Contract Award Protested

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Remember when I said that Oshkosh had won the FMTV military truck production competition, and so would be replacing BAE subsidiary Stewart and Stevenson?*

Well, BAE has filed a protest on the FMTV award, which means that there stop work order in effect.

Thankfully, production does not start for about year, so it should not have much of an effect, unless, of course, Oshkosh is using the time to redo the drawing package, which is likely.

*Full disclosure I worked at Stewart & Stevenson, Tactical Vehicle Systems, in Sealy, TX on the FMTV in 1992 and 1993.†
†Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.

The Gun Market Likes Obama

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2009 Sales (not shown) Even Bigger

But not in the way that you thing.

There has been much written about how Barack Obama inspired paranoia is boosting gun sales.

Well, we are now seeing some indications that this string is playing out in the handgun market. On June 22, Smith and Wesson was talking about a huge backlog:

Our firearms backlog continued to increase dramatically during the quarter, and reached its peak at $268 million dollars by the end of April. That level is $218 million dollars higher than the same quarter one year ago.

(emphasis mine)

That’s a 436% increase in backlog.

But on September 9, the news is not quite so rosy:

Our firearms backlog was $177.5 million at the end of the first quarter. Cancellations reduced backlog by approximately 10% during the quarter. It is important to note that our backlog always represents product that has been ordered but not yet shipped. As a result, it is possible that portions of the backlog could be canceled if demand should suddenly drop.

(emphasis mine)

As John Hempton notes, speaking from an investors perspective:

The backlog dropped from $268 million to $178 million – a drop of 90 million. Ten percent of that (say $27 million) was order cancellation – but a net $63 million of sales came from the backlog. Total sales were 102 million – and less than 100 million in firearms. The rate at which Americans are placing orders for new Smith and Wesson handguns is collapsing.

The company did not tell us the current forward order book. At that rate of collapse what they are facing is a disaster.

(emphasis original)

It appears that the right wing is running out of hate.

I’m shocked, I thought that it was an inexhaustible commodity.

The Problem With Higher Education in the United States

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This picture really says it all

Felix Salmon uses this chart to suggest that colleges are using these prices increases to become dropout factories, since it’s cheaper to educate a freshman than a senior, but you get the same tuition.

I think that problem comes down to a number of things:

  • Federal aid for college education, particularly the guaranteed student loan program, has been subsidizing increases in tuition and fees for years.
  • The program was introduced in the Higher Education Act of 1965, at the height of the Vietnam war, so the alternative to going to college was to go to the ‘Nam and get shot.
    • When your product is competing against going to war, people will buy your product.
  • The top end schools have been colluding on tuition and fees, along with student aid awards for decades, and this monopolistic behavior is inherently inflationary.
    • In the interest, my step-mother, a former college president, has always maintained that this is not an issue, it’s just a way of “freeing” students from making the choice on anything but quality, and that colleges supply a lot more than they did in, say, 1960.
      • I have always responded that this is classic monopoly theory.  It’s not that competition ends, it’s that price competition ends, so you end up with gold plating.  It’s one of the reasons that professors’ salaries have skyrocketed: Without financial constraints, you get bidding wars.

The real solution is to implement cost growth containment measures in order to show price increases, to require with excessive endowments (Harvard, Yale, etc.), and to keep government aid flat until inflation catches up.

Of course, this won’t happen, because the Ivy league has a death grip on governance in Washington, DC, and because business likes to have its employees in debt peonage.

Oshkosh Wins FMTV Contract

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It beat out BAE subsidiary Stewart and Stevenson* to win the contract for the FMTV Family of Medium Tactical Vehicles, a bunch of cab-over 4×4 2½ ton and 6×6 5 ton transport vehicles.

I am surprised that they beat out Stewart and Stevenson.

This is not because of any great knowledge of capability in S&S, but because in the various attempts to compete this deal, competitors have always been leery making of a bid because of the low quality of the drawing package…..Talk about screwing up in reverse.

I guess that the DoD finally got around to insisting that a proper drawing package be produced, and once there was a drawing package that allowed other manufacturers to compete, it was inevitable that the award would go to a company with actual experience in making trucks.

The background of the original contract award is a bit “colorful,” BTW.

*Full disclosure I worked at Stewart & Stevenson, Tactical Vehicle Systems, in Sealy, TX on the FMTV in 1992 and 1993.†
†Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.

Yeah, Deregulation Works…..

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The most deregulated telecommunications in the market is in the United States, and so is the most expensive cell phone market, and Finland, Netherlands and Sweden have the lowest rates. (OECD report here)

Surprise, surprise, surprise, when you deregulate companies that profit from making it difficult for consumers to switch services, and use the leverage to keep prices high, use this as their business model.

The problem in many areas of our economy is not too much regulation, but too little.

Just When You Thought that Wal-Mart Could Not Get Any More Evil…..

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They have made a corporate decision to attempt to destroy Girl Scout cookie sales:

What could Wal-mart possibly do to harm Girl Scouts?
Wal-mart has copied the Girl Scouts’ two best selling cookie types, Thin Mints and Tagalongs.

Wal-mart is selling Fake Girl Scout Cookies.
Wal-mart has fake Girl Scout cookies in ‘beta’ distribution, on their way to a national rollout. Because the cookies are ‘reasonable facsimiles’ of the authentic Girl Scout cookies (I sampled them myself at BlogHer ‘09 last week) and are being sold at an everyday low price, these cookies are poised to snatch cookie sales right out of the hands of the Girl Scouts themselves.

Remember, the funds from girl scout cookie sales go to their programs, things like camping trips, etc.

It must be the uniforms….It reminds Mal-Mart management of unions, so this organization must be crushed.

This Has Fail Written All Over It

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Apple is working with the four largest record distributors to create a format that will force people buy albums, rather than singles. (see also here)

The theory is that people will shell out $20 for

People don’t buy albums because they don’t want to buy albums.

In most cases, they never wanted to buy albums, they bought “b-sides” on old 45’s because you had to put something on the other side of the vinyl, and they bought albums because they were offered no other choice, particularly with CD’s where CD “singles” were about 25¢ cheaper than the complete album.

As Greg Sandoval (2nd link) notes:

Perhaps Apple and the labels can come up with content combos that people will find valuable. But the danger here is in trying to force the packages on consumers and possibly alienating them even more, which could send them sailing into new piracy waters.

I will make two points about album sales:

  1. The record companies put out crap, and frequently put forward no-talent photogenic “artists” who can’t even manage one good song per album.
  2. Most of the so-called drop in album sales over the past few years that has the record companies asking for the death penalty for Bit Torrent users is actually more efficient sales…Fewer albums are shipped, because they better model sales, and get fewer returns.
  3. The record companies put out crap, and frequently put forward no-talent photogenic “artists” who can’t even manage one good song per album. (Yes I know, but item 1 bears repeating)

There are a lot of people who have lost a lot of money betting against Steve Jobs, but I don’t see how this is a win….iTunes downloads are about 99¢, so a full album comes to about $12.00, and the record distributors want to bundle up those 12 songs with some liner notes, and go back to charging $19.99 for it.

Not gonna happen.

There Can Only Be One

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It appears that someone idiot at AT&T’s ISP division decided to block the anarcho-absurdist site 4chan from their customers.

Within hours a fictitious report of the death of AT&T’s CEO from a cocaine overdose following a gay prostitution binge (it implies that he was a “bottom”) appeared on CNN’s “citizen journalism” site iReport.

Seriously, while the folks at 4chan are nice people, much like Bruce Banner, you really don’t want to make them angry, because if they put their minds to it, it can get ugly.

Postscript: ATT has apparently removed the block.

Disclaimer: I have only visited 4chan briefly, and my experience was that everyone there was swell, totally righteous, and that under no circumstances should anyone, ever, frack with them.

Furthermore, nothing in this post should be construed as a criticism of 4chan. I am criticizing AT&T, and the “stupid” and “wanker” tags are directed at the telecommunications company.

The Ezra Klein Dead Pool

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Bummer of a birth mark, Ezra

WaPo blogger Ezra Klein tore Sarah Palin, and the Washington Post editorial page, a new one with regards to her editorial.

It’s well deserved, but he works for the Washington Post, and the only people who get to criticize the paper are conservatives and people like Howard Kurtz, whose right-wing consultant wife has, over the years, literally received a paycheck from the Republican party, and then only because the paper does not give conservatives a fair shake.

I figure that he will be out by the beginning of November.

The model here is Dan Froomkin, who was, IMNSHO, fired because he called out the most egregious of the Washington Post editorial page hacks, his exchange with the dishonest and insane Charles Krauthammer comes to mind, on their dishonesty and hacktacular behavior.

Boeing’s Looks at Re- Winging 777

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It appears that Boeing is concerned about the threat that the Airbus A350 might be in the market.

It’s larger than the 787, but is following Boeing’s lead on propulsion and structural technologies to lower operational costs, and so the Seattle (Chicago) based manufacturer is worried that they might be facing a repeat of the 767/A330 fight that they had over a decade ago, which the A330 won decisively.

So, Boeing is looking at a significant stretch to the 787, and at re-winging the 777 with a lighter weight composite structure. (paid subscription required)

I’m not clear if this is just some blue-sky thinking, or if Boeing is really spooked by the repeated delays, and the cancellation of orders, on its 787 Dreamliner.