How to Fix the U.S. Auto Industry
I own a marketing business. In many ways, we're all marketers. As marketers, the goal is to create products and services that consumers will want to buy. And therein lies the number-one problem with U.S. automakers: no one wants the cars they're manufacturing. The problem isn't the cost of labor, which many would like us to believe, though it's easy to play the union straw-man game here.
True, on first glance, car-manufacturing costs here in America appear much higher than the foreign competition. There's this myth that American autoworkers are paid $70/hour in wages and benefits (for health care and retirement) versus an average of $48/hour for employees of Toyota, for example. But what this $70/hour statistic doesn't tell you is that it also includes retirement and health-care benefits for current retirees, unlike Toyota's figure, and when that's backed out, the hourly cash compensation and benefits cost drops to below $40/hour for companies like General Motors. There's the strong argument to be made, therefore, that U.S. autoworkers work as cost-efficiently, or even more so, as their foreign counterparts.
To be sure, Detroit's problem is not the autoworker, and it's not the unions. I've been driving Fords for years and they are built solidly and run great. I'll stack up a Ford Focus to any similarly priced foreign car any day. The autoworkers have done their jobs. It's the executives who have failed miserably. Disappearing ingenuity, poor design and dreadful marketing is to blame, not the poor schlep who toils on the assembly-line for eight hours a day. Fix these problems and you'll have a much healthier, more competitive, and more profitable U.S. auto industry.
Easier said than done, right? Granted, I do not profess to have all the answers. It's taken GM, Chrysler and Ford decades to screw things up, so it's safe to say that (a) identifying the underlying problems and (b) finding the cures will take some time as well. But there are some things that truly appear to be low-hanging fruit:
1. Go Retro: what happens every time Detroit rolls out a slick, sexy throwback like the Mustang, T-Bird or PT Cruiser for example? Consumers love it. The problem with cars today is that they all look the same. Big boxy things, medium size boxy things, and small boxy things. I think back to the 60's and 70's, and how each model had its own style, design and individuality. They had curves and contour and were sleek and sexy. So sexy, some of them, that you'd just slowly walk along the side and run your hand along body. Who the hell wants to do that today with any of these homely boxes? Back in the day, you could easily identify any make and model from a block away. Today they're all indistinguishable from each other. They've become commodities.
What should Ford's Mustang success tell us? That perhaps it's time to give consumers more exciting, nostalgic options. Perhaps a retro '72 Lemans. Or how about a '64 Corvette, '68 Corvair, '72 Gran Torino or '69 Camaro? I bet these models would fly out of the showroom. And as a marketing ploy they could roll out just one or two new retro models per year, built around a massive, attention-grabbing PR and ad campaign. They could do the same with retro pick-up trucks and other specialty vehicles like the classic "country-squire" station-wagons (complete with wood-paneling) and the El Camino.
2. Make U.S. Luxury Cars Status Symbols Again: when I was a kid, rich folks bought Cadillacs and Lincoln Continentals. If you owned a "Caddy" everyone knew you had made it. What Cadillac needs to do today is embark on a branding campaign that can achieve for its luxury sedans what it has done for its Escalade, which has become the uber-chic vehicle for rappers, playboys, rich businessmen and limo fleets. If you can succeed in making one Cadillac brand sexy and desirable and a true status symbol, it can be done for the others.
3. Create a Major Product Placement Campaign: let's get "hot" American cars all over Hollywood and the music business. Put these new, sexy U.S.-made cars in films, TV shows and music videos to create buzz, branding and status.
4. Give the Hot New Vehicles to A-List Celebrities: Wanna sell thousands of a sexy new model? Identify pop-culture's trend-setters, across all demographics (i.e Britany Spears, Jennifer Aniston, Leo DiCaprio, Beyonce, Angelina Jolie, Jay-Z, Carrie Underwood), and give them free cars to drive around Hollywood ... and then make sure they get photographed in them.
5. Create a Massive "Buy American" Campaign: for Pete's sake, Americans are the most patriotic people in the world. Give 'em a reason to raise the flag and they will. Detroit has been woefully impotent in rallying consumers to its "made in the USA" vehicles.
6. Create a Hot American-Made Hybrid: Why has Detroit let Toyota dominate this market with its Prius? Americans buy hybrids to be "green" and energy efficient and, quite frankly, because it's hip and cool to have one. These same people I'm sure would love to buy American as well.
It's time to truly shake things up in Detroit if the U.S. auto industry is going to survive and thrive going forward.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
Detroit's biggest handicap is NASCAR. The rules about engines, transmission, differential, etc. allowed on the track guarantee that Innovation will NOT happen. Too many customers buy the "500 Winner" for any automaker to ignore NASCAR. The last time a Non Piston engine was allowed on a NASCAR Track was the original Mazda Rotary. It won a few races. NASCAR responded by Banning the engine.
That might have something to do with the fact that, except for a bit of tinkering with various Valve layouts and fuel mixing tricks, the Engine hasn't changed in 40 years. And any honest engineer will tell you that the current generation Piston engine is as close to it's theoretical "Best" performance as it is possible to get.
The Prius gets it's improvements by using an Electric motor to "boost" the piston engine through the worst parts of the Fuel Efficiency curve.
The Volt is smarter, using the 90% Efficient Electric motor to drive the car all the time while the 35% (Max) efficient Piston engine runs at its "Sweet Spot" all the time while charging the battery. Even there, it gets most of its advantages by not using the Gasoline Engine at all for the first 40 miles.
Want to see Hybrid & Electric technology REALLY get taken seriously at the automakers?
Change NASCAR's rules: Open up all future 500 Mile races to Any Drive Train. Then, sit back, pop a beer and watch the Innovations.
This would make sense if the underlying premise was correct.. The idea that we can continue -- under a greenish umbrella -- as we have in the past is a fallacy.
The massive success of the clunker program is an eerie indication that truth is not getting through.
Our recession will only recur if we do not: move from o0ur concept of metrosprawl to the creation of human settlements based on principles articulated by Christopher Alexander in A Pattern Language.
See http://stephencrose.wordpress.com/pattern-language/
Settlements dense enough to enable flourishing businesses, car-free enough to get pre-diabetics back on their feet.
The era of a growth (sic) economy is over. Henceforth growth needs to be measured by increases in the value of services to human beings in the form of enhanced living options, expanding educational opportunities and a move away from a culture of celebritization and conspicuous consumption.
Much of the logic of what we need was articulated by Thorstein Veblen a century ago.
See http://stephencrose.wordpress.com/2006/09/24/thorstein-veblen-on-the-web/
It is appealing to think we can market our way to renewed prosperity. Sadly our prosperity for many decades has been built on the elements like the acceptance of a legal and extralegal pharmaculture, the growth of a prison industrial complex, and a callous disregard for elementary education.
The answer is still blowing in the wind.
http://stephencrose.wordpress.com
While I look forward to the communities envisioned in "Pattern Language", & hope to see the beginning in my lifetime, I realize that it is going to take time. We have to educate and construct these villages. These things both take time & ib the meantime, we still need to get to work, shops, & schools. Many of us do not live in an area with bus service that works or even have bus service available.
Patience is the order of the day
You are absolutely right. But at the moment the number of communicators willing to put the dots together is shockingly sparse. So one person banging the drum with sincere impatience is hardly too much. And since my days on the planet at 73 are numbered, I shall continue to yell and scream until the end. If you check my bio you will see just how right you are in terms of the general non-reception of these ideas. Cheers. S
One thing's missing:
"Think D-I-F-F-E-R-E-N-T."
American companies went on a buying-spree of well-known European brands and then promptly turned every single one of them into a Ford Taurus. They bought the Hummer and promptly hung boxy accouterments onto a Chevy Suburban and merely CALLED it a "Hummer." Lift the hood on your sexy new "Mercedes-Benz" and I defy you tell it from the egregious hunk-a-junk that they today call a "Ford Mustang." They're the same car.
Maybe you can't, I guarantee you I can tell the difference, and so can hundreds of thousands of others.
Here's a concept for you to pound, why not make a standard hybrid frame/chassis that can be ordered with different bodies? Make the greenhouse/roll cage standard and change the front end or rear end when desired? Discuss....
You are exactly right! I just bought a Caddy CTS and it is the best car I have ever driven. It is beautiful, fast and has a 40 meg computer, iPod hookup and I feel like I am riding in something different. It is not like all the other luxury cars. Let's get aggressive with our product marketing and our problems will go away. Thanks for you blog. Paul David Walker
Errr... I don't want to disappoint you, but pretty much every car worth mentioning today comes with an iPod connector. Total manufacturing cost is approx. $1.50. So if you define "luxury" by having an almost standard feature that costs next to nothing to install, the CTS is definitely the car for you.
As for the computer... every car today is equipped with about half a dozen (or more) microcontrollers that can easily beat the computer used to land the lunar module on the moon by a factor of ten to hundred. Cost per chip... 75 cents to two dollars.
Actually... the part with probably the highest computing power in the whole car is the mpeg-4 decoder in your kid's backseat DVD player. And the screen of that thing is by far the most expensive electronics component in the vehicle.
Enjoy.
:-)
Detroit cars are "big boxy?" Have you seen any Honda or Scion lately? - Talk about a bread box on wheels. I am sorry but I COMPLETELY DISAGREE with your take on the "design" element. Put a PT Cruiser against a Scion side by side and tell me the Scion looks better! The real problem in Detroit is "QUALITY CONTROL" at some plants, GAS MILEAGE & MANAGEMENT. I say some plants because Ford seems to have found it groove in the quality control department. Detroit has been fighting against gas mileage increases since Jimmy Carter took office. FIRE THE CEO"S (enough said here on that point).
The right answer in this competition of ugliness is that neither vehicle earns a price for its looks. Why either would earn a price for anything is a mystery to me, but then, the managers of these lines must have found out, probably by asking potential buyers, whether they liked these shapes and the surprising answer must have been affirmative. And if the customer wants ugly, best served decorated in shades of brown-purple, he shall have it.
:-)
One doesn't buy a Honda for its design. It's dependability and value for money that the Japanese have claimed for themselves and that people obviously believe in. If you're looking for uncompromised design, you'll probably buy a European car. Now tell me, what modern, desirable value does American motoring stand for? And I'm sorry, the PT Cruiser is not well designed. I'd buy the Honda because personally, I think no design is better than bad design.
Sorry, but the PT Cruiser still "looks" cool. Design is everything. If we drive around in our cars a majority of our lives, I want to drive in something that does not look like a bread box.
I could see the PT Cruizer with 20s on the back, 18s on the front, a V6 or supercharged 4 cylinder, and dressed up like a 40s fat fender in maroon with black fenders and running boards. But it really doesn't have a good mechanical track record. My friend loves them and just bought his third one. My wife hates them.
please tell me why tesla has not bought out gm? or partnered or somthing?
it only takes a few dollars to convert a gm gas car to a gm electric car.
hundreds of drive way mechanic tinkerers have proven that.
that seems like a win/win/win to me...........or is that way too simple.
Tesla is essentially a small scale customizer. They do not have the expertise to build millions of cars a year. Neither do they have the money to buy the corpse of GM.
Flip the question and ask why doesn't GM go in with Tesla instead of putting all their eggs in the Volt basket?
The biggest problem is not trying to get the consumers to buy what you make, it is making something the consumers want to buy!
In the 80's, Ford, GM, and Crysler decided to build bigger cars because the profit margins were higher. Toyota and Honda asked Americans what we wanted, and we said small, dependable cars. Whose market share and profits went up, and whose went down?
Personally I think California should impose a tax on fuel inefficiency, say $200 per MPG below 30. Doing this would remove the car companies incentive to push gas guzzlers, and take care of their budget problem!
"Toyota and Honda asked Americans what we wanted, and we said small, dependable cars.'
So Honda and Toyota responded with the Tundra, the Tacoma, the Highlander, the Ridgeline, the Pilot, the FJCruiser, the Landcruiser, the LX Series SUV, the RX Series SUV, the GX Series SUV, the MDX, and by doubling the siz eand weight of the RAV4.
Seriously., do you even know what reality is?
Toyota also gave the customer a choice... a choice many are glad to have. With GM you only had the choice between big and ugly and bigger and uglier.
Do you see any of the successful auto makers going retro? And if so, what do they go retro on? Gas-guzzling monsters? The Fiat 500, more like. Do you seriously believe that the PT-Cruiser is a well-designed car? If you're looking for good design, you'll want to look to Germany, Italy or France, all of which produce little to no retro, and lots of good, modern design. If you're thinking technical perfection and dependability you'll want to look to Japan. Which in both cases is what customers are doing. What you're proclaiming is precisely the reason why the American car industry is in such a shambles. You're thinking up cars nobody wants to buy!
no amount of marketing can help the average joe get a loan
maybe average joe SHOULD NOT be driving new cars until he can save up a great downpayment.
maybe used car is a great deal for average joe. ever think about that ?
actually... yeah
i have thought about that
i think that our debt based monetary system is unsustainable
we will keep growing like cancer, until we kill the host
i don't like our debt based financial system
and i don't like endless growth on a ball
i'm not a green cornucopian
i'm neomalthusian
and a Peakist
re-selling gas guzzling 60s and 70s cars will not work.
one of the biggest problems is that people can't get a
loan anymore to buy a new car.
next problem is PEAK OIL
the only thing Detroit can do to save itself in the short
run is to make smaller cars
they use less energy because they are less massive
also, they need to crank out hybrids
hybrids take some of the energy tht would usually be
lost breaking to generate electricity for slow speeds
(nice idea)
but building smaller cars nd hybrids do not solve the
problem people are having getting a loan to buy a car or house for that matter.
Mr. Ostroy, with the exception of reference to hybrids, your marketing campaign sounds right out of 1955. Marketing is the PROBLEM, not the solution. I worked for Chrysler for 14 years and it is in selling and marketing of the cars that the consumer is lost. Take the PT Cruiser. Came out to rave reviews (like the Plymouth Prowler a decade before, talk about retro!) Then the dealers got involved. They put bump stickers on the cars, the consumer got sticker shock and went elsewhere. Proof? The second yeat of PT Cruiser required rebates to move the iron.
The auto dealership is biggest impediment to a healthy auto industry, bloated, inefficient, corrupt to the point customers would rather go to an IRS audit than a showroom.
Since 1975 the US auto industry has rebated 55 billion to consumers. When Daimler took over Chrysler in 1998, the German executives asked "why do you pay the customer to buy the car?"
Today, after all the help Chrysler has received it is still managed like it is 1955. GM would not exist right now if Wagoner was not forced out. Daimler paid 36 billion for Chrysler in 1998, Cerberus paid 6 billion for it 10 years later and Fiat paid ZERO 2 1/2 years later. How's that for marketing expertise.
Chrysler paid hundreds of millions to voluntarily retire non union workers then immediately hired tham back as contract workers.
No marketing plan in the world can save this kind of stupidity.
Thanks! You are so right on!
Bush refused to meet with auto execs. Instead he was in bed with big oil and Wall Street. They manipulated the price of oil so high gas suddenly went above $4 a gallon and sometimes above $5 a gallon. This eliminated buyers for most US cars. Then lack of Wall Street regulation caused the credit freeze. This shut down car sales. Buyers could not get loans. GM could no longer offer leases (20% of vehicles). The auto industry's woes were mainly caused by Wall Street, Big Oil, and an Administration that was owned by Wall Street & Big Oil.
Detroit makes cars that most people in the US want over foreign cars. Just look at the sales numbers most people were buying American. The US auto industry responds to the market but needs time to retool when public sentiment shifts. They built fuel efficient cars after the oil embargo in the 1970s but by then people wanted to switch back to the comfort, safety and usefullness of big cars. The auto industry wanted to work with the government but were kneecaped by Wall Street and big oil in cahoots with the Administration. This is a big part of the story being left untold.
GM hasn't been profitable in years. They simply ran up a giant tab and kept operating until they ran out of creditors. The problems began years before Bush even took office with losses in the billions in the 1990s. And peak oil was predicted in 1956. Maybe you want to blame Mr. Hubbert for the failures of GM management, too?
:-)
As I recall, the Detroit cars of the 70s (hastily rushed into production) weren't all that fuel efficient, comfortable or all that safe. When the automakers went to Washington, they just wanted a handout, not expecting to make any changes to anything they do and knowing full well that the money wouldn't accomplish much.
Mr. Ostroy is pretty much spot-on as far as marketing goes (although I'm more like KTM when it comes to marketing) but both management and employees need to become more cooperative rather than adverserial, and we don't end up with the "Monday" or "Friday" -built cars. Detroit has plenty of opportunities to reinvent itself.
Obama put a Wall Street takeover artist in charge of the auto bail out. Rattner (aka the DNC's ATM Machine and Bloomberg's financial investor) is an example of how Wall Street is destroying America through their self serving control over our politicians.
As car czar, Rattner forced GM and Chrysler to abandon many of their loyal customers. Millions of them will now switch to foreign imports making the trade imbalance worse. Rattner performed a classic corporate coup by beheading GM's CEO and replacing him and the board with loyalists. Rattner then forced massive destruction of both GM and Chrysler's capacity both in manufacturing and design/development. He butchered Chysler and forced its marrage with FIAT where Fiat got a large chunk of Chrysler for free but employees, retirees, bondholders, all take a big hit. (distress sale). He said it was necessary because butchered Chrysler needed economy of scale to survive. Then he forced GM to abandon thousands of dealerships, Saturn and Pontiac saying GM needed to shrink to be profitable. The logic Rattner used to justify his actions is contradictory (forced shrinkage versus economy of scale).
The result of Rattner's destructive actions caused Detroit's unemployment to jump from 14.9 to 17.1 percent from May to June. Obama is protecting the paper charletans on Wall Street and sacrificing Main Street and America's ability to manufacture instead of importing. Trade will never balance because Wall Street controls all our politicians at the expense of Main Street
Yawn... America has bankrupted itself by living on credit. And now it's all the fault of the people who are cleaning up this mess. Will we ever be able to look at ourselves in the mirror...
:-)
man I would personally be ashamed to use "economies of scale" and chrysler in same sentence.
Chrysler should be thankful to Obama that at least they will be getting the crumbs in the auto market. thats what they frankly deserve.
You must be logged in to comment. Log in or connect with
