BUSINESSWEEK ONLINE: JULY 10, 2000 ISSUE

Readers Report

Marketing Is Not What Ails GM

General Motors Corp.'s problem with market share is not one of marketing (''Consumers to GM: You talking to me?'' Marketing, June 19). The company is just not building cars that an increasing percentage of the population wants to buy. The measure of quality has changed. It is no longer just an absence of defects but a level of refinement.

Honda Motor Co. and Toyota Motor Corp. have demonstrated this for years--in products with smooth, durable engines, interiors with good ergonomics, and controls that feel good. Volkswagen has made strides in this area and built its brand not only around marketing but around a better, fun-to-drive product. More and more people are learning how good a car can feel to operate, right down to the switches.

Why does GM find it so hard to make cars that people want to buy? How many years has GM had to dissect cars from other makers? How many times has GM said: ''Just wait until you see the cars we have coming?''

Marketing may get you to buy one brand of toothpaste over another, but it can't get people out of cars they love.

Gary Gehrke
San Jose, Calif.



It's Time for Standards on Internet Privacy

I wholeheartedly agree with ''Net privacy: Fix the problems now'' (Editorials, June 12). Internet privacy is becoming a serious political issue that needs to be resolved.

Think about the issues at stake: the authority to create standards concerning the use of personal data, the right of consumers to decide how information is used, people's right to review collected data, and security measures to protect individual's privacy.

Setting standards for these issues will determine crucial rights for all online consumers for decades to come. Clear-cut policies will make consumers feel more secure using the Internet to manage everyday, critical tasks--from banking and investing to buying books, postage, and compact disks online. I welcome Federal Trade Commission Chairman Robert Pitofsky's next steps in establishing a code of conduct for better consumer protection.

Anand Jagannathan
Palo Alto, Calif.



Stop Dumping on PVCs

''Is your office killing you?'' (Cover Story, June 5) said that one of the stagnant-air problems in offices is the possible emission of dioxin from carpeting backed with polyvinyl chloride (PVC). No analytical data have ever shown such a statement to be true. And ''Are old PCs poisoning us?'' (Environment, June 12) lumped PVCs with heavy metals such as lead, mercury, and cadmium as toxic problems resulting from disposal of old PCs.

This is way out of line. First of all, landfills have been lined with PVC, so it's hardly a problem there. As for incineration, dioxin emissions from municipal incinerators in the U.S. are extremely low.

In any case, dioxin is created from burning garbage, wood, paper, food, and a continuing long list of materials. The two articles did an enormous disservice to the second-largest-selling plastic in the world, used in everything from blood bags and tubing to safety insulation on electrical wires to pipes delivering fresh water.

Tim Burns
President & CEO
Vinyl Institute
Arlington, Va.



A Few Good Mergers Could Help Air Travelers

As a frequent flier on international and domestic carriers, I say let the companies merge (''How many airlines will stay aloft?'' News: Analysis & Commentary, June 19). The system now is an obstacle course for travelers, and the defenders of the status quo are not very convincing.

Broad global partnerships, such as Star Alliance, are big steps in the right direction when it comes to rationalizing the maze of rules, fares, and frequent-flier perks. Sensibly merged airlines could provide more extensive route structures that serve passengers well. Currently, airfares can become prohibitive when a passenger tries to plan a trip combining more than one carrier.

Let several 1,100-pound gorillas compete--and use information technology to ensure that they play fair. The electronic pricing and reservation systems now in use provide exceptionally rich records that electronic software agents could monitor for uncompetitive behavior. The smaller airline upstarts would still be able to seize unserved economic opportunities.

Brad Wheeler
Bloomington, Ind.



Public Investing: Conscience vs. Profit

California State Treasurer Philip Angelides' ''do-good'' investment plans are inappropriate, given the fact that he is investing taxpayers' dollars (''CalPERS may not do as well by doing good,'' Management, June 19). The California Public Employees' Retirement System exists not as a tool for the politicos to further their careers or to make social statements. Instead, it is a system to provide defined benefits to public employees who, along with their employers, have made substantial contributions to fund the system.

The contributions made by public agencies come, for the most part, from various taxes paid by residents of California. If Angelides and the CalPERS board are willing to accept less than market returns to make social statements, how about reducing the rates taxpayers are forced to pay to fund the system.

Bruce Moe
Los Alamitos, Calif.

While Phil Angelides championed divestment of tobacco company stocks by the board of the California State Teachers' Retirement System (CalSTRS), the idea originally came from public-health advocates and teachers, including the United Teachers of Los Angeles, the California Federation of Teachers, and the California Teachers Assn.--the very beneficiaries of the CalSTRS fund.

The teachers in California felt it was hypocritical for them to speak out against tobacco use in the classroom but then profit from the same industry that addicts their students. A recent poll found that 78% of Californians disapproved of investing public pension money in tobacco industry stock. CalPERS is ultimately funded by tax dollars. Why does Christopher Palmeri think it's so wrong for CalPERS to listen to its funders?

Mary L. Wells
Director
Council for Responsible
Public Investment
Oakland, Calif.



An Odd Case for Monopolies

In ''Uncle Sam has no business busting up Microsoft'' (Economic Viewpoint, June 19), Gary S. Becker offers a somewhat perplexing argument in favor of monopolies. According to him, the protection of the market that the monopolist enjoys is an incentive for innovation, because monopolists can reap all the profits from their innovations.

The argument is perplexing, first because Becker is a well-known neoclassical economist--and neoclassical economics traces its lineage back to Adam Smith and the idea of laissez-faire. One of the foundational premises of laissez-faire economics is that free competition will drive profits eventually down to zero and thus will eliminate any monopoly rents. It was believed, contrary to Becker's claim, that the elimination of monopoly rents would force incumbent firms to innovate.

Even more perplexing is Becker's idea to invoke Joseph A. Schumpeter's theory of creative destruction in defense of market monopoly. Schumpeter argued that entrepreneurs enjoy temporary monopolies when they first introduce new products to markets. He argued against government intervention, on the grounds that market competition would eliminate these temporary monopolies.

What Becker omitted in his argument, however, is that Schumpeter later revised his theory and argued that the consolidation of industries would create very powerful enterprises--and that the entrepreneur would not be able to compete against them. His sad conclusion was that the entrepreneur would disappear from the economic scene, and that property would lose its meaning. Moreover, once entrepreneurs become unable to create wealth through innovation and creation of new enterprises, the very foundations of capitalism will be undermined.

Rado Kotorov
Morristown, N.J.

The starting point for Becker's argument is whether the Microsoft breakup will spur innovation. But the relevant issue is whether Microsoft's business practices were sufficiently anticompetitive--before and after it established its monopoly--to warrant the severest of reprimands. There is no question that fair play during the maturation of a new technology gives more people a chance to bring their ideas to fruition. This is the essence of the free market system, the greatest incubator of innovation now known.

Richard Geist
Grosse Ile, Mich.



Xerox Needs a Real Leader: Carbon Copies Need Not Apply

We often invoke concepts and principles without understanding them or believing in them (''If I were running Xerox....'' The Corporation, June 19). We talk about the importance of people and leadership, but what do we really mean?

What is clinging to an outdated product identity, if not a failure of leadership? What is reorganizing for the sake of reorganization? Bringing in a new CEO with no track record in designing and implementing strategic and cultural change? Failing to communicate and implement the change strategy? Failing to change the internal habits of a rigid culture?

Leadership cannot be borrowed from the past. It is not about having the best and brightest people: Xerox Corp. is blessed with some of the most talented people in the industry. Leadership is about creating the future: channeling the strengths and competencies of a once great company into an exciting venture that anticipates the future. Leadership is the courage to establish audacious goals, clearly communicating the strategies for achieving them, and managing the implementation process. And one of the most important and difficult strategies involves changing the mentality--the habits and rituals that comprise a culture that preserves the past and diminishes the future. Only the strongest of leaders can do that.

What Xerox needs is somebody with the wisdom and skill to reach deeply into the great pool of talent that is already there to imagine the future, and then to empower them to lead the way.

Terrence Overholser
Greenwich, Conn.



''Visteon: What's that funny noise?'' (Business Week Investor, July 3, 2000)

''Visteon: What's that funny noise?'' (Business Week Investor, July 3) reported that Visteon did not expect to be included in the Standard & Poor's 500-stock index when it was spun off by Ford Motor Co. on June 28. After the story went to the printer, S&P announced it would include Visteon in the index.





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LETTERS:
Marketing Is Not What Ails GM

It's Time for Standards on Internet Privacy

Stop Dumping on PVCs

A Few Good Mergers Could Help Air Travelers

Public Investing: Conscience vs. Profit

An Odd Case for Monopolies

Xerox Needs a Real Leader: Carbon Copies Need Not Apply

CORRECTIONS & CLARIFICATIONS:
''Visteon: What's that funny noise?'' (Business Week Investor, July 3, 2000)

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