Auto industry cost cutting

April 4th, 2006 at 05:11am David Bush - Iasta

Spend Matters … and Jason Busch is Right again …

In today’s spend management post, Jason pointed out that a great way for GM and Delphi executives to save money is to take the bus. What a great idea! And it’s universally applicable. Need to get to that important business meeting across town? Forget the $100 limo – most cities have a $2 bus or subway. Need to get to your hotel from the airport? Forget the $100 limo – most major cities have a shared ride service at under $20. Consider a single executive who has to go to two meetings a day in the city two weeks of the month. That’s 20 meetings or at least $2000 of limo time. Let’s assume this executive also has to take 4 trips to other cities the other two weeks of the month. That’s probably another 10 hours of limo time at another $1000 when the executive could instead take 8 shared ride trips at under $160. In other words, instead of spending at least $3000 on limo rides, said executive could spend at most $200 on shared ride services, for a savings of at least 93%. Now multiply this savings of almost $3000 per month by the number of executives and managers traveling in that month and we have a good start. (At least a few million.)

But we could do more! We could sell the private jets, put a corporate ban on special charters, first class, and full fare tickets and only allow business class for international flights when that is the only option. We could also force a best fare policy where a preferred provider was only selected if it was within 10% of the lowest cost flight on Travelocity. We could replace the 5 star hotels with 3 star hotels and institute a Priceline or Expedia policy (the current Iasta executive policy). Considering that this is expected to save at least 50% to 60% on travel arrangements, this should save tens of millions.

Now, we will concede that it’s probably still not enough to completely bail GM and Delphi out of trouble, but it’s a damn good start since health insurers will not be lowering premiums to $1. But somehow, I do not think I will be running into any of them at the Holiday Inn Select or Courtyard any time soon.

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Entry Filed under: General