Right one way, wrong the other way
Via the $TSLAQ crowd:

BUFFETT, ON ELON MUSK'S SUGGESTION THAT TESLA MIGHT GET INTO INSURANCE, SAYS AUTOMAKERS GETTING INTO INSURANCE WOULD BE AS SUCCESSFUL AS INSURERS GETTING INTO AUTO INDUSTRY

Most of what Buffett says is simply calculated to improve his own share value. Recommending buys so he can sell and vice versa. His comparison doesn't work. Automakers have successfully sold insurance, but insurers have failed at selling cars.

Insurer selling cars: The Allstate. A slightly altered version of Kaiser's unsuccessful Henry J compact car.

The Henry J was doomed from the start by bad niche planning. Like many other "everyman cars", it was aimed at poor people. This never works because poor people can't afford a new car. Everyman's car is a used car.

The Henry J wasn't an awful car; it used the economical and lively Willys 4 (same engine as Jeep), and had a fairly comfortable interior. Sears customized its version with better** upholstery and Sears tires and batteries. Sears sold about 2300 of them, then gave up.

** Trivia footnote: The regular Henry J was optionally available with full leather upholstery in various colors, which would have pulled it out of the 'Everyman' category and placed it in the 'Euro sporty' category, competing with cars like the MG Magnette. As always, Kaiser failed to take advantage of its own advantages.


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The other half is perfectly false. GM has been running its own finance service for exactly 100 years, and GMAC started selling car insurance in 1925. After the 2008 bankruptcy, GMAC became Ally Bank, and the insurance part became National General. So a carmaker selling insurance was undoubtedly successful.

Trivia footnote 2: Joe Frazer was involved in both sides of this comparison. Joe organized GMAC in 1919, and Joe tried to market the Henry J properly in 1951. ("I would have brought her out dressed up, and stripped her down later.") His first effort was successful, and his second was frustrated by Henry Kaiser's bullheaded stupidity.

Labels: $TSLAQ

  ¶ 5:14 PM