Akkam’s Razor

In October 2008, there was a moving article in the Philadelphia Inquirer about Scott Eckenhoff’s dealership’s valiant yet futile attempt to save his family business through individual sacrifice by the entirety of the dealership’s employees:

Eckenhoff’s business [link], a General Motors dealership that had been relatively healthy just months earlier, was suddenly a credit-squeezed enterprise holding on for dear life.

So two weeks ago, after praying with his family and pulling an all-nighter in front of his computer, Eckenhoff drew up a rescue plan. Half his employees, including a stepbrother, would have to be let go. It was awful.

The day of the layoffs, though, something unexpected happened: The mechanics who had not been fired marched into Eckenhoff’s office. “What can we do to help?” asked the men in grimy work gear.

With that, the lines that had long separated manager from minions, khaki-clad salesmen from grease-smeared mechanics, vanished. The survivors - the salesmen, associates and receptionists spared the ax - had become a single crew trying to save their ship.

At the time, I instinctively knew he was only delaying the inevitable. 

Back during my car dealer days as a finance manager in a Philadelphia Saturn dealership, I accepted the title of this post as the mantra for ‘getting done’ good people with less than stellar credit histories.

The gist of the tactic was to assume that the credit analyst and/or loan officer at the lending institution, with whom you had hopefully built a good relationship, had no information about the borrower other than the loan application and the credit bureau profile.

Typically, the reports were a nightmare.

Charge-offs. liens. Bankruptcies. Civil Judgments. Foreclosures. Repossessions.

In short, these people likely had no business looking for a car that couldn’t be bought in cash. But there were other people who fell on hard times, were taken advantage-of, or were just unlucky. Maybe it was a sickness, a layoff, or some other life changing event that financially handicapped the applicant. During the course of my conversation with the applicant, I’d tease out their story.

“What happened, what changed, and why won’t it happen again?”

At the same time, I’d make sure we had the applicant in the right car, gotten a sufficient down payment to provide equity and investment, and then I’d share that story with the credit analyst. If the analyst trusted me, and knew I had put together a loan that made sense, they’d stretch, but I had to convince them as to what changed and why it won’t happen again. Without the person’s narrative, they would be no more than a credit score, just a numerical summation of ‘what happened’.

In looking at General Motor’s Annual Report (and by extension the auto industry as a whole) especially with regard to any potential bailout, I think the same tactics should be employed.

I have no idea whether they will be successful or not, but Carbon Motors has an interesting take and re-imagining of the business model for sales to law enforcement.

Federal, state, local, and private security and law enforcement entities had for generations been solid and steady consumers of Detroit’s legacy body-on-frame automobiles, up until recently purchasing rear-wheel drive Ford Crown Victorias and Dodge Chargers.  Other models included Chevrolet Tahoes, Dodge Magnums, and a handful of front-wheel drive Chevrolet Impalas.  The imminent demise of the Crown Vic, the only model with no relevant consumer market, leaves a quandary for the  institutional consumer but an opportunity for entrepreneurism.

Enter Carbon Motors.

Long story short?

photo credit: Mike Licht, NotionsCapital.com

Yes, bail them out.

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