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| A miner using a hydraulic jet to mine for gold in California, from The Century Magazine January 1883 |
And then there is the airliner business. Used to be that companies built airplanes and sold them to people who ran airlines, but then the business got big and weird. A few years ago Rolls-Royce had a billion dollar backlog of orders for their giant fan-jet engines. A year later they were in trouble because their customers found they could get the required maintenance done elsewhere at a much lower cost. If you thought Rolls-Royce was in the business of making and selling engines, you'd be wrong. That whole business was a just a marketing ploy to sell overpriced maintenance contracts. People are so stupid.
Then we have the Boeing 737-Max disaster. Some people blame the cut-throat business people from McDonnell-Douglas who apparently infected Boeing. I blame the cut-throat nature of the airliner business. And it really is cut-throat, as this story about the pirate ship Airbus shows.
Lastly, let me mention my suspicions about the automobile insurance industry. I thought the insurance companies might have a valid reason for declaring a car to be a total loss even though the apparent damage could be repaired relatively cheaply. Then Iaman made a comment and I realized that these decisions might be made to support some kind of accounting sleight of hand. You see, insurance companies have huge amounts of assets, I would not be surprised if the value of their combined assets was larger than the national debt. Now insurance companies do need to have large piles of assets (they're called reserves) in case a disaster strikes and they have to pay out large sums on a huge number of claims. There are probably a bunch of laws governing this. Meanwhile cars are getting safer and the number and size of claims are going down (pure conjecture on my part) and so using some sort of magical, mathematical formula, the insurance companies can no longer justify holding such large reserves, so they start looking for ways they can start paying out more money. Yes, weird, and contrary to everything you've ever heard about insurance companies, but I suspect most people won't argue about the insurance company totalling their car, so this is a technique that doesn't draw a lot of attention that they can use to increase their payouts and so continue to justify their enormous reserves, which often earn them more money than they collect in premiums from their customers. Yes, that last sentence was a little long, but it's early and I need to get going, so that's what we have.
Monday Evening got me started.
P.S. Link to the transcript of a speech by Boeing's general counsel at a Boeing "leadership meeting" in 2006.
I don't think cars are cheaper to fix, not since the eliminated bumpers that bump.
ReplyDeletePlastic fascias run a grand or more. Airbags are at least a grand with some cars there are as many as eight. Model specific headlights as much as two grand... each.
It’s because the states passed damage disclosure laws and people got car fax to learn about the damage.
ReplyDeleteA car with a damage title is worth half what the same car is worth in damaged, so the car owner would have a diminished value claim against the insurance company, but those kind of claims are specifically excluded in the insurance policy.
So,like everything else, an initial law requiring damage disclosure had the unexpected consequence of totaling minimally damaged cars.
But all is not lost the cars are sold at auction, and shady mechanics do,cut rate repairs and scrub the titles to remove the damage disclosure and make a bunch of money the easy way.
:=)