Reborn in America: Starting as a California Resident

"Entering the automotive industry?"

Are you sure you didn't misspoke?

Upon hearing Henry's plan, Bruce's eyes widened instantly, his face filled with disbelief. His voice unconsciously rose, carrying his usual straightforwardness.

In his view, the current situation in the automotive industry is absolutely terrible, like a den of dragons and tigers.

Do you know what Wall Street calls Detroit these days?

A steel tomb covered in rust!

"Bruce is right, Henry!"

Jerry looked equally astonished and quickly chimed in.

As the son of Costco's founder, his family background has endowed him with extremely keen market insight, enabling him to accurately grasp both market supply and demand and consumer psychology.

"The oil crisis has put the United States in a passive position in the global energy landscape, which has had a huge impact on the energy-dependent automotive industry."

Moreover, in China, the automotive industry has always been a sector where labor unions wield significant power, which severely restricts the operating costs and management flexibility of car companies.

In the first half of this year alone, U.S. auto sales plummeted by 21% year-on-year, and dealer inventory turnover days reached a record 83 days.

All of this indicates that the supply and demand relationship in the automotive market is severely imbalanced, with significant inventory backlogs and weak market demand.

"Even more deadly was the impact of Japanese cars."

The Toyota Corolla can travel 32 miles per gallon and is $1200 cheaper than a Ford!

They invest four times more in CNC machine tools than we do. Toyota's welding robots have a precision of 0.02 millimeters, while our factories are still using conveyor belts from World War II!

By the time we build the production line, the Japanese will have already used lean manufacturing to cut costs by another 30%!

From both a technological and cost perspective, the American auto industry has fallen far behind.

"What's even more frightening is the inertia of the industry!"

With the keen intuition typical of political families, Bruce voiced a deeper concern: "The Big Three automakers control 78% of the dealer network across the United States, and they have locked up the channels with franchise agreements."

Unless you can offer an enormous benefit to get the existing manufacturers to agree to terminate their contracts, they'd rather burn their inventory than sign!

Article 14-B of the Automobile Dealers Association in 1977 explicitly prohibited dealers from representing new car brands. This unreasonable rule created an industry monopoly, severely hindering new companies from entering the market and forming extremely high market barriers.

Henry's fingers traced lightly along the rim of the glass, the crisp sound of ice cubes colliding seeming to keep time for this intense brainstorming session.

He glanced at his two partners: "You're both right, but what you see is only the surface—what I see is the industrial fault line for the next thirty years."

"Let's start with Japanese cars."

He took out a pen and drew three curves on a napkin. "Toyota's lean production is essentially a victory of systems engineering, but their weaknesses are equally fatal—"

The pen tip slammed heavily onto the paper: "Over-reliance on a single market!"

In 1978, Japan's exports to the US accounted for 62% of its total automobile production. If we were to push for voluntary export restrictions in Washington, their cost advantage would immediately shrink by 30%.

Bruce's pupils contracted sharply; the Reagan family's political DNA allowed him to grasp the key point instantly: "Next year is an election year, and my grandfather's campaign team definitely needs to develop some industrial revitalization plans..."

Look!

This is our admission ticket.

Henry pulled a stack of documents from his briefcase. "Detroit's failure lay in its mechanical thinking against a systems revolution, and we must reconstruct the auto industry using three dimensions—"

"First, the production dimension."

He unfolded the blueprints, as if he could see the blue light of the laser cutter penetrating the paper. "Toyota's welding robot has a precision of 0.02mm? We'll go straight for 0.005mm laser welding, which is the manufacturing standard for Boeing 707 wings."

Bruce, do you remember the laser technology company that the California consortium invested in when NASA was bidding last year?

"cost!

Such equipment...

"Each unit costs eight times more than traditional equipment, but the yield rate can be increased by 40%, and the total life cycle cost is reduced by 22%."

Henry pulled out another report. "This is Caltech's latest total factor productivity model. With modular production lines, we can switch between production models within 12 hours."

Bruce suddenly stood up excitedly, spilling expensive red wine on his Armani suit, but he seemed oblivious: "But what about the dealer network? Those old relics..."

"This is the second dimension—the channel revolution."

Henry drew a tree diagram on a napkin, saying, "The traditional 4S store model will become a burden in twenty years."

Jerry, your father's Costco tried out direct sales of home appliances last year, and its inventory turnover days were 17 days less than Best Buy's.

If we set up our showroom in a shopping mall and use your logistics network to establish regional distribution centers...

"But the monopoly clauses of the Automobile Dealers Association..."

"Do you remember the McKesson-Ferguson Act of 1925?"

Henry's smile carried a hint of coldness. "Once it can be proven that existing channels constitute trade restrictions, the Department of Justice's antitrust investigation can find a way in."

Bruce, whose grandfather's chief of staff just wrote an article in the Wall Street Journal last month criticizing the auto industry's monopoly...

Bruce's fingers began to tap unconsciously on the table, a habitual action he took when contemplating important decisions.

"The third dimension is the real trump card."

Henry suddenly lowered his voice, "Have you ever heard of in-vehicle computers?"

Delco just developed its first microprocessor control system this year, but the old guard in Detroit considers it a useless fancy contraption.

He unfolded the last document, where alarming figures were marked amidst densely packed circuit diagrams: "Integrating the vehicle's computer with the fuel injection system can reduce fuel consumption by another 18%, which will be the nuclear weapon to overcome the oil crisis!"

"But the research and development cycle..."

"Chrysler is struggling with the electronic systems for the K-Car project, and we can exchange their testing platform for patent cross-licensing."

Henry looked down at the roaring crowd below, and saw Akuba seize the opportunity, leaping forward and slashing Raphael's cheek hard with his spiked gauntlet.

Instantly, blood splattered, landing on the faces and bodies of the audience in the front rows.

A wealthy man from the Middle East in the front row wiped the blood splattered on his face. Instead of showing any disgust, he stuck out his tongue and licked the blood off his face, revealing a satisfied smile.

Do you know why I came to see you tonight?

Tomorrow morning, Chrysler's CTO will be attending an SAE seminar—his son owes our family seven million dollars.