Lowell's

Taxes, Taxes, Taxes

I'm quite a bit different than my business-owning peers -- I actually don't mind paying taxes. I get a lot of benefit from those taxes: providing for our common defense, local police and fire protection, and a pretty great infrastructure (by world standards), among many other services that our governments provide.  It is my duty as a citizen to financially support the governments that protect and enable our freedoms.

I feel this way even though those services and those governments should be much more efficient and much less bureaucratic than they are.  So I'm not a typical all-taxes-are-evil type of business owner...

But I hate dealing with taxes.

When I bought this business, I knew that I was going to have to deal more with taxes and payroll issues than when I was an individual employee of a corporation. (Unlike many businesses, we don't send our payroll or most of our taxes out to other professionals. Yet.)

But I totally underestimated the crushing administrative burden of the variety, frequency, and complexity of tax payments.  Besides dealing with federal, state, and local governments (which I expected), I quickly learned that each entity had many different types of taxes, each with different weekly, monthly, and quarterly schedules, and each out-of-sync with the others.  There were many taxes which we paid and documented on a regular basis which had to be re-documented periodically.  Then, in January, the schedule gets jumbled from every other tax period.  It is needlessly complicated and time-consuming. 

Again, I'm a willing taxpayer (although I'd always welcome paying less).  But I don't want to be a tax expert.  And I don't want to be forced to hire one.  And I don't want to spend so much time managing our taxes when it should be spent managing our business... 

There must be a simpler way for businesses to contribute to their governments. 

A scar upon our city?

I have to admit I wasn't engaged in the discussions surrounding "the Dame block" and the CentrePointe development in downtown Lexington last year.  I didn't frequent the places on the block, and I didn't follow the day-to-day developments as the debate raged about what to do with the block.  I don't have a sentimental attachment to the issue.

But, today, two aspects of the CentrePointe project have struck me:

1. The rapidity with which the the Webb Companies razed the buildings, leaving behind a crater of rubble.
2. The complete lack of any visible activity since.

Only one thing is now missing from the CentrePointe development: Actual development...

The Webbs promised Lexington that CentrePointe construction was to begin in December.  Now, a month later, activity is yet to begin.

The company asserts that it is waiting for various state approvals in order to begin construction.  Apparently, some of that includes permission to begin blasting an even-deeper pit for the complex's parking garage.  (Blasting...  Sets a nice ambiance for downtown businesses like ours.)

This is an extremely poor economic and financial environment for initiating a major real estate development project.  One has to wonder: As the financial system has crumbled faster than the Dame block was demolished, do the Webbs really have the financial horsepower (or backing - they haven't named their "private backers") to pull off a project of this magnitude?

One also has to wonder...  Why did they proceed with razing the block if they were (and are) awaiting basic approvals to begin construction?  Prudence would dictate waiting until approvals were in hand.

Finally, one wonders...  Who is accountable for this scar upon our city if, perchance, the unnamed Webb financers do back out?  CentrePit, indeed.

Update, 1/24:  CentrePointe is supposed to house a J.W. Marriott hotel.  This morning, this bit of sunshine from NPR, including the following:

Still, it's hard for many businesses and people who don't have the very best credit ratings to get loans.

Arne Sorenson is the chief financial officer of the hotel corporation Marriott International.

"There are clear signs of improvement, I think," he says, "not withstanding that there is an abhorrence of risk."

Sorenson says it's still almost impossible to get funding for new hotels, even for low-risk projects that he says make sense right now. He says banks just aren't lending enough money. And that hurts the economy.

At Marriott alone, he said, "there are thousands of jobs that are not being created that normally would be created. And that's entirely due to the lack of credit available to fund new hotel projects."

[where: E Main St & N Limestone St, Lexington, KY 40507]

Hard times (for criminals)

The Baltimore Sun reports that the economic slump has dried up the market for stolen vehicles and parts (especially when coupled with more sophisticated ignition systems).  As a result, car theft in Baltimore has dropped some 25% in the past two years.

Business is tough.  Even for the criminals.

[where: Baltimore, MD]

Toyota is #1. And will stay there.

In 2008, Toyota became the largest carmaker in the world, producing nearly 9 million vehicles.  Toyota surpassed General Motors, who had held that title for 77 years, by over 600,000 vehicles.

As Toyota specialists, we're pleased.  As lifelong fans of GM, we're also a little sad.

Both manufacturers downplayed the significance of Toyota's ascension to the top of the sales charts, which is the culmination of a decades-long steady climb by Toyota and a precipitous drops by GM, especially in the past year.

While GM executives are optimistic about a return to the top spot, the Lowell's Corporate Office of Fearless Predictions says that won't happen.  Toyota will remain #1 for the next 20 years or more.

As we've noted before, GM and the other Detroit automakers have structural disadvantages in their business design relative to Japanese automakers which their executives have been either unwilling or unable to decisively address.

Meanwhile, Toyota has historically invested in new technologies and new capabilities long before the market demanded them, and stood ready to take advantage of sudden shifts in market demand.

Toyota isn't always right -- they released their huge 2008 Tundra and Sequoia models right into the teeth of $4 gas -- but they almost always put themselves in position to be right.  With gas prices lower, their big models may get some traction, especially against similar GM, Ford, and Dodge models.  When gas prices shoot back up, they can rely on the Prius and their other hybrid models to continue their market gains.

Toyota consistently makes collections of bets which advantage the company relative to its competitors.  When those bets don't work out (witness the Tundra), the Detroit 3 suffers more than Toyota (witness the sudden implosion of Detroit's truck-heavy business).  And the other bets Toyota makes (like hybrid, solar, and electric vehicle techologies) more than compensate for the ones that don't succeed.

That's why Toyota will stay in the top spot.

Lowell's is underwriting WUKY

Once in a while, we get a chance to do something which does good for our community while also doing well for ourselves. 

We've found such an opportunity with public radio.  We've long admired the quality reporting and programming of National Public Radio and our local public radio stations. 

So we are pleased to announce that Lowell's is the newest underwriter for WUKY 91.3 FM, public radio at the University of Kentucky.  Our first of many underwriting announcements (kind of like an ad spot) will run at 7:09 AM on Morning Edition.  Other announcements will run on All Things Considered, Marketplace, and (a personal favorite) Car Talk.  (You might remember our post a few weeks ago about Lowell's on Car Talk.)

We are also proud to announce that Lowell's is the first underwriter of WUKY's HD Radio programming.  WUKY is the first station in Lexington to offer HD programming, and has 3 separate HD broadcasts which you can hear with an HD radio, or via webstream:

• WUKY Main: WUKY's usual mix of news and adult rock, which can also be heard at 91.3 FM on standard radios or over an internet connection here.
• WUKY HD-2 ("Wookie 2"): Adult rock 24/7, with a webstream here.
• WUKY HD-3 ("Wookie 3"): All news all the time, including many NPR and BBC programs not formerly available in Lexington: Talk of the Nation, Day to Day, Diane Rehm, and other news, with a webstream here.  (As a news junkie, I'm often camped out at the WUKY 3 webstream...)

We are proud to sponsor listener-supported public radio.  Please listen with us!

When markets don't work

Michael Lewis and David Einhorn have written the best summary I've seen of why the recent financial meltdown happened, in an amazing editorial in the New York Times.  Their very long, very well-done article (Part I and Part II) details both how regulation failed and how it is integral to smoothly functioning markets. 

Einhorn is one of the real heroes of this meltdown.  As a brilliant and wrongly-maligned hedge fund manager, he was one of the first and most articulate critics who chronicled the outright fraud, misconduct, willful ignorance, and inbred conspiracy perpetrated by financial companies (like Allied Capital and Lehman Brothers), bond insurers (AMBAC and MBIA), ratings agencies (S&P and Moody's), and government regulators (SEC, Treasury, and the Fed). 

This meltdown (and the hundreds of billions we're throwing at it) are the results of an unfettered, unregulated, so-called "free" market.  Einhorn and Lewis demonstrate why regulation is necessary to a healthy, functioning marketplace.

Dealership Economics: Wall Street Journal Edition

Here at Under the Hood, we've spent a lot of time analyzing the automotive industry.  You might remember the three-part series about the economics of dealerships (Click here for Part I: Car sales, Part II: Service, and Part III: Toyota) or the entries about the problems of the Big 3. 

Today, The Wall Street Journal has Page 1 profiles of two car dealerships in London, Kentucky (about 75 miles away from us here at Lowell's).  The profiles echo a lot of the themes you've heard here:

• How the financial fundamentals of dealerships have been deteriorating.
• How the Big 3 have too many dealerships (look closely at the WSJ "Dealership Decline" chart).
• The relative strength of Toyota and the Japanese carmakers versus those from Detroit.

My guess: In 2009, we're going to hear a lot more Johnny Watkins-type stories of dealerships going out of business, especially in smaller towns.

[where: London, KY 40507]

Discovery tale: Do you have a Bugatti in the garage?

The recent discovery of a classic, rare, and dusty 1937 Bugatti in an old English garage got me thinking.

The Bugatti fits neatly into the popular imagination as a kind of "discovery tale".  Discovery tales are those romantic, hopeful stories about finding some valuable piece of treasure in an unexpected place.

The discovery tale permeates our culture:

• The Rembrandt (or Picasso) in the attic
• The winning Lotto ticket
• The mid-19th-century stock certificate left by a long-lost aunt
• The pot of gold at the end of the rainbow
• The gambler who wins the big jackpot in Vegas
• The starlet discovered in the drugstore
• The search for El Dorado
• Cinderella
• The Antiques Roadshow

These are all stories built around the discovery tale.  Usually, the tales result in untold millions for the "discoverers": the family who found the Bugatti will be getting nearly $4.5 million.

It is a compelling story.  Except that it is totally unrealistic.

Don't get me wrong -- I really like these stories, too.  As long as they are treated as fun, fantastical tales.

When the discovery tale becomes a personal strategy for wealth or success, it is a problem.  It is deadly when it becomes a build-it-and-they-will-come business strategy.

It is a problem in two ways.  First, it promotes faith in a highly unlikely outcome.  What do I mean?  Let's be generous and suppose that there are 100,000 Bugattis (or Rembrandts or jackpots or stock certificates) in the world.  Only a fraction of those Lotto tickets are going to be found in any one year (it took nearly 50 years for the family to find the Bugatti - there's a reason that such discoveries are so rare and notable).  Again, let's be generous and assume that 5% of these (5,000 or so) are discovered per year.

At this point, there is literally a one-in-a-million chance that you will be the discoverer of the next Bugatti in 2009.  And that's after being generous with our assumptions.

If you are now tinkering with the assumptions -- "Maybe there are really a million Bugattis and there's really a 20% chance of finding one..." -- please STOP.  It is nice to hope, but it is destructive to manipulate the odds in order to justify hoping.

The second big problem with discovery tale strategies is that they are passive.  Discovery tales encourage waiting and hoping as a substitute for industry and ingenuity.  People put off getting a better job or starting their own business while they wait for "things" to get better or for their lottery ticket to come in. 

So am I a total cynic?  No.

Everyone has undiscovered treasure.  But you don't find it.  You use it.  Your treasure lies in your hands and between your ears.  You are the garage -- go make your rare Bugatti.

[where: United Kingdom]

Toyota developing a solar car?

In another example of Toyota's consistent ability to anticipate the future and develop for it, the Nikkei is reporting that Toyota has a completely solar-powered car in the works. 

This follows similar reports in July showing spy photos of a next-generation 2010 Prius which would help power its hybrid engine with solar panels.

Toyota already exemplifies how a relentlessly innovative company can come to dominate its industry.  It appears poised to continue that domination for a while.

Looking forward

What will we be doing at Lowell's in 2009?  In no particular order, here's some of what we'll be working on:

• Being the best.  We will continue to try to be the best place for automotive service in Kentucky.  We know we won't always be perfect, but we will keep striving...
• Reaching out to customers.  We want to know what we are doing that works and doesn't work for our customers.  We'll be developing little ways for you to help us get better.  (Feel free to give us feedback in the comments section below!)
• Blogging.  We're going to continue to talk about cars, business, and life here at the Under the Hood blog.  We've gotten good feedback -- not as much as we'd like, but good nonetheless -- about our posts, and we'll continue to use the blog as a platform to keep you updated about Lowell's.
• Raising our profile.  Surprisingly, much of Lexington still doesn't know about Lowell's yet.  We'll be trying some creative ways to get the word out.  You'll hear more about them soon.
• Improving the website.  We redesigned the Lowell's website in November, but still have a lot of improvements we'd like to make.  Look for those over the next few months.
• A community project.  We've had an idea for a big community project brewing for a while.  We'll keep it under wraps for now, but keep an eye out for it in February.
  

[where: 111 Mechanic St, Lexington, KY 40507]