When Politics Trumps Business: The Case For Carmaker Corporate JetsS

One of the conditions the government stipulated in agreeing to loan money for GM and Chrysler was both companies must eliminate their corporate jets. Sounds good until you know how important they really are.

Corporate jets have somehow morphed into the symbol of executive decadence in the circus side show of politics and posturing surrounding the bailout of both AIG and the automakers. We guess we shouldn't be surprised given the deliciously salacious populist auto exec coverage of the Michigan mainstream media. This morning President Bush announced money would be made available from the leftovers of the TARP program under several stipulations (which ironically was set aside with no stipulations), one of which was the immediate canning of all corporate jets.

If you're a politician pandering to your populist base, many never having been on a plane let along a corporate one, this is a political gold mine. You seem to be cutting through the corporate waste and fighting for the workers! Only, that's not really the result. Yes, executives take jets to meetings and if you aren't part of that world it seems a bourgeoisie lifestyle, but at the end of the day the jets are tools (ha ha, take that New York fans).

Let's say you have a final assembly line in Genericville, building trucks at a rate of fifteen an hour, the complete assembly line employs 3,000 line workers and another 1,000 engineers, managers, and plant executives. The line moves with just in time delivery so all the parts coming in are sequenced to their truck before they even come in the door and there's only storage for an hours worth of parts. Everything in this system is paid for when the truck leaves the door and is sold to a dealer.

Let's say a critical flaw is discovered in the programming of a body control module. This effects the testing cells on the line, the function in the truck, the units in the lot already built, the process at the supplier.

In a world without corporate jets, you call a travel agency to arrange for a triage team of 30 product engineers, manufacturing engineers, and subject matter experts to fly out to Genericville as soon as possible. It's the holidays, so most flights are booked and while a quarter of the team makes it though the hours long security lines and delayed flights, some remain on standby, some have gotten in their personal cars to drive (which places the company at risk from a liability perspective) and some have given up and gone home in frustration. Because FAA regulations limit the kinds of things which can be carried on a commercial flight, critical diagnostic equipment and spare parts must be shipped via FedEx or UPS where some of the equipment may arrive late or damaged.

In this whole time, the entire line has been idle, all of the workers are being paid, and every minute the line is stopped, the plant is losing money. The suppliers upstream have stopped their operations as well, and penalties will have to be remitted for the stoppage. In case you hadn't figured it out, time really is money in this case.

But let's imagine a world where where a company has a leased private jet at the ready, at a private airfield. One phone call to the airport and the plane is gassed up and made ready. All thirty team members drive to the airport at two in the morning, park their cars and step onto the plane with their equipment in hand. Three hours later the entire team is in-plant, diagnosing the problem, interfacing with the supplier, quarantining suspect parts and vehicles, reprogramming line operations and diagnosing things gone wrong.

Thousands of man hours are saved and the plant loses a quarter million dollars instead of ten million. I wish I could say this is speculation, but I've done this before. Flying private is sometimes an instance where spending a little saves a lot. But what would auto executives know anyway, they're just wasteful and incompetent.