THE BLOG

Detroit: Obama Gets it Right

05/01/2009 05:12 am ET | Updated May 25, 2011

Why can't U.S. auto companies compete with cars from Asian and European companies?
It seems to me that it comes down to one thing: the product. Not having the right products at the right time, mediocre execution and lack of innovation. As one who writes about and lives products and technology, I find that it's rare that cars from the Big Three automotive companies can compete effectively.

The industry says it can't compete because it costs $2,000 more to build a car that's encumbered with the extra costs of union wages and health benefits that the other car companies don't need to pay. That seems like a lame excuse. I don't hear the Japanese, Korean or European automakers complaining that they have to pay more to ship some of their cars and parts much greater distances.

And I can't fault the engineers. Those I've spoken with are as bright and creative as those in Asia and Europe. The problem is due more to management who limit what the engineers can do and who discourage risk-taking. There's a huge bureaucracy with endless layers of approval that stifles creativity. That takes a toll over the years and wears down the engineers who try to innovate. The ones that get along stay and the innovators leave.

When it comes to appearance, small things add up. For example, instrumentation, interior trim, coin and cup holders and storage compartments are cruder and not as well finished. While a Japanese or German car may add rubber bumpers or dampening to silence the little doors closing, the U.S. counterpart clinks, sounding like a cheap toy. Parts that make up the dashboard have bigger gaps and adjacent parts don't match in color or texture. Radio controls seem more confusing and the electronic displays have a lower resolution and a more crude appearance. And these are just the things that you can see.

Much of this comes from the industry's focus on removing pennies rather than adding smart touches that bring delight to the owner, and delaying improvements that benefit the customer. GM continued to make cars that required two different keys, one for the doors and another for the trunk, years after imported cars went to a single key.

Instead of this penny pinching, U.S. auto companies should have figured out by now that many of us are willing to pay more for a product that is better made and that offers special features. Yet time after time, when we see both small and large design improvements, they come from Toyota or BMW, and not from GM, Ford or Chrysler. Why would anyone buy a Chrysler product when none of their cars are recommended by Consumer Reports because of design and reliability issues?

Even when they do offer new improvements, the companies seem shy about talking about them, focusing more on abstract issues. Did you know that GM and Ford both produce hybrid cars, some based on Toyota hybrid technology, and that some Ford cars are as reliable as those from Japan?

To sell more cars our auto companies should be making sure that you do know this. This is where their advertising dollars need to be spent, not on lobbying Congress to give tax breaks so people will buy the gas guzzling models such as their super-sized SUVs and Hummers. The auto industry spends $6 billion a year in advertising, but gets little value from it.

There are some bright spots. Cadillac has excelled with some of its designs and beautifully finished interiors, but not its absurd new Escalade Hybrid that has the worst mileage of any Hybrid with a payback of 218,000 miles. And Ford was the first to offer the Microsoft Sync system that linked your phone and music player to the car. GM developed the OnStar system using a cell phone built into your car. But it never was promoted as that and there's no easy way to dial directly.

The companies need new management and a total reorganization, and thanks to Obama, they will be getting it. They need to move from inefficient bureaucracies to nimble and creative organizations, much like IBM did when it set out to invent the personal computer.

Companies should be led by product people with vision, much like Honda has been. It understands the importance of the product and the need for constant innovation and reinvention.

Customers want to have a relationship with a company they can take pride in. Can you take pride in companies that fight mileage standards and who have opposed every safety innovation from the seatbelt on?

Despite all these shortcomings, we need our automobile industry to survive. We need the infrastructure that includes the skilled workers, the subcontractors that build the seats, mold the parts and forge the engine parts. If we abandon the industry, the infrastructure will never come back.

The Shenzhen area in China has become the manufacturing center to the world for consumer products. That didn't happen by accident. The Chinese government invested and encouraged companies to locate there. It built industrial parks and provided incentives. In short, China invested for its future.

There's no reason why Detroit can't once again become the center of automotive technology and manufacturing. But it will only work with new, enlightened and entrepreneurial management, a total restructuring of the companies that reward innovation, and an entirely new business plan based on building the vehicles people want to buy, not what the companies have pushed them to take.

This change will not come by bailing out the current management teams that have had their chance and failed many times over. Their most recent proposals still show they don't get it. With the exception of the Hummer, GM's "restructuring plan" wanted to retain those brands that are the ones that guzzle the most gas and shed the higher mileage brands, Saab and Saturn. These companies need some of the best innovators in the business, they need to shed the bureaucracies and begin the long rebuilding process and they need to respect the consumer and the environment. Only then will their bailout be worth our tax dollars.

Based on Baker's column in The San Diego Transcript, December 8, 2008