kanabco
Banned
- Joined
- May 10, 2016
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This is a question about manufacturing and cost.
I'll begin with a very general overview of how a capitalist manufacturer like General Motors approaches the introduction of a new car model.
GM has to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new car model.
They then must go into production and sell say one million of these over say three years so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.
Boeing on the other hand does not work the same way for military aircraft.
They too have to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new fighter jet.
They also must go into production and sell enough (?) of these over some time so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.
The main difference is the banks will loan GM the money they need to make the new model but the banks will not fund a full blown new fighter program. Therefore the only source of funds for the new jet fighter is the Pentagon who happens to be the only buyer too (initially).
I think most people can understand how GM and the banks work together for hopeful success of a new product simply (very simply) by adding up all the costs over time and dividing that by the number of cars built times the margin. ROI is a simple concept.
However when a new jet fighter is being built the public does not see it the same way and the whole thing gets very political very quick and we get 100 different "proofs" that the fighter is (or is not) worth the dollars spent. The entire process of explaining monetary things just right (or just wrong) to be on the right side (or wrong side) has not changed during my life in the business simply because we are not banks... we are taxpayers.
I'll begin with a very general overview of how a capitalist manufacturer like General Motors approaches the introduction of a new car model.
GM has to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new car model.
They then must go into production and sell say one million of these over say three years so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.
Boeing on the other hand does not work the same way for military aircraft.
They too have to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new fighter jet.
They also must go into production and sell enough (?) of these over some time so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.
The main difference is the banks will loan GM the money they need to make the new model but the banks will not fund a full blown new fighter program. Therefore the only source of funds for the new jet fighter is the Pentagon who happens to be the only buyer too (initially).
I think most people can understand how GM and the banks work together for hopeful success of a new product simply (very simply) by adding up all the costs over time and dividing that by the number of cars built times the margin. ROI is a simple concept.
However when a new jet fighter is being built the public does not see it the same way and the whole thing gets very political very quick and we get 100 different "proofs" that the fighter is (or is not) worth the dollars spent. The entire process of explaining monetary things just right (or just wrong) to be on the right side (or wrong side) has not changed during my life in the business simply because we are not banks... we are taxpayers.