Detroit: Obama Gets it Right
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
Even though American cars have improved dramatically, imported cars seized the opportunity of the 1970's and have consistently stolen market share for decades.
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I agree it is management not the workers. For decades the business school ideal has been to teach it's graduates that year end / bottom line is the most important aspect of their performance. I call that the "penny wise, pound foolish" theory of management.
It foolishly lets things go that aren't counted in that bottom line as advantageous to record profits but which impact future profitability and performance. This is occurring in government at all levels too. I want a management theory that takes into consideration many more factors than does this years report looking good.
In the 70s when gas prices went from 25 cents a gallon to nearly 2 dollars, the management at car companies should have doubled down on research into increasing gas mileage ... instead they spent money like crazy trying to DENY that there was a problem. It is here and it is biting their a$$es.
I am so pleased that President Obama is doing what he thinks is correct rather than what is ideological pleasing to any one group or person. WE own the car companies, we can end their managements self enriching, self-aggrandizing and shortsighted plans. I say GO FOR IT. He is working for all Americans.
"For decades the business school ideal has been to teach it's graduates that year end / bottom line is the most important aspect of their performance."
Harvard, for one thing, isn't teaching that. At least not in their executive education classes. Instead they teach that carefully considered hard changes are sometimes necessary to turn companies around. So obviously GM was not working by the teachings of Harvard. On the other hand, it wasn't working by those alleged business school standard, either, or it would not have engaged in lot clearing at all cost action every quarter. Those are plain foolish. To buy sales volume at the cost of per item loss is a safe way to bankrupt any company.
It's much more simple than that. GM leadership had no business acumen whatsoever. They were flying by the seams of their pants... and they were flying it right into a mountain of debt.
I wonder if Phil Baker is as Anal retentive about all goods and services he comes in contact with as he is about cars. Does the front door of his house shut with a reassuring thump, walls are plumb and square, perhaps his espresso machine has a fine quality feel and great slurpy sound. People get real! Its just a car, you'll ditch it for another one in five years. I seriously doubt that the quality of his workmanship matches that of foreign counter parts, perhaps that's why all written media in America is going belly up.
I just wish that somehow, a car lover could be put in charge of one of these companies. I know what I'd do to fix them. If Chrysler, take advantage of Honda and Toyota's not having enough sales, and pull off what they did in the 80s, buying surplus Toyota/Hondas and rebadge them. Gives some breathing room while the company develops the products it needs on it's own. Fiat would be, of course, an option as well. Bring back Plymouth, the "no-frills" brand name, to compete against the Scion. Baseline chasis easily modified by 3rd parties. There is no reason why the US cannot produce a sub-$7k car, and yes, I am taking into account the costs involved. Push Diesel or serial hybreds, cheaper to produce than the Toyota model, and produce similar results. Shoot, Chrysler is sitting on fuel efficient turbine technology which, if paired up to a serial hybred would make the Volt look like an overpriced tinkertoy, if put in an efficient chasis. Bring back the pentastar concept, 5 series, 5 chasis, 5 engines...
That is what I'd do, both stop-gap to turn around, then longer turn.
This is baloney; GM and its buddies are simply too big for their market share and they need bankruptcy. However, the foreign companies are not big enough to fill the void that would be left by the absence of the American companies and for that reason I have confidence that sleek, more efficient companies (if not gm & ford) would emerge.
Of course that will never happen b/c Obama and the democrats would never leave the UAW’s fate at the hands of a bankruptcy judge.
Also, many foreign companies don't comply with the cumbersome CAFE standards, they just pay the fines.
GM's market share is not worth a thing because they are losing money on each sale. You are mistaking sales for earnings.
Foreign car manufacturers violate the CAFE standard with cars that are not classified as light trucks (a Porsche is just too light to be classified as a truck...). If you applied the same standards for GM products that are being used for the more efficient foreign cars, GM would owe billions to the government. And in 2011 it will do just that when the exceptions for SUVs run out. Bummer.
Excellent article, Philip. The Big Three have been stalling for decades. When Toyota and Honda arrived in the late 70s, Detroit laughed. Now who's laughing. When Lexus arrived in the late 80s, people laughed at the idea of a luxury Toyota. Now Lexus is king. The Big Three have had 3 decades to get their act together and instead of doing so, they fight mileage standards and lobby for tariffs on imports. I agree that the engineers at these companies are just as capable as the ones in Japan. And the folks who assemble these cars are just as hard-working as the workers overseas. The problem has always been management who make excuses, who stifle innovation, and you try to block their competition instead of actually competing. In a way, this economic crisis was a good thing. It's forced The Big Three to finally do what they've avoided doing for decades. Thank you for this article. I agree with it 100%.
I've long been a purchaser of foreign cars: Honda and Toyota primarily, but in the wake of my most recent purchase, a 2006 Toyota Sienna, I will give uUS vehicles another look (I do own a GMC pickup for my farm, which has been less trouble than my Toyota). I've had to replace 14 run flat tires on my Sienna in approximately 2 years. Toyota has given me nothing but a run around. In addition, the Sienna has been in the shop for 3 product recalls. So, the notion that Toyota has a stellar record, in terms of reliability, is bogus. All automobile companies will occasionally produce a lemon, that I could forgive, but jerking a loyal customer around is unacceptable. I'm done with Toyota. Perhaps the revamped US automakers will be able to recapture some market share if they provide world beating customer service. It's a hope...
Run flat tires? Dude... that's because you have nails on the road, not because the vehicle is defective. Goodness...
:-)
Yes, its basically about product. The U.S. has the best designers, great engineers, good workmen, good suppliers. What has been lacking is good management.
The auto industry has done the same thing as so many other US manufacturing industries : taken the easy route of what it says in marketing and business manuals. To be a leader youve got to be able to see in the invisible and have confidence in your vision and intuition. This has to be done by people with talent, not bean counters.
The U.S. has to move out of being a paper-shuffling economy to a productive economy like Germany. We need, for this purpose, public health care and retirement, and industrial policy.
I have a 20 year old Jag with bad paint. But the fit is still excellent and even thought the paint is bad, there isn't a speck of rust anywhere. And Jag was not known quality at the time. I contrast it with the 2007 PT Cruiser my company bought me for use. The fit stinks, its been in the shop for major repairs twice and the paint on the hood is flaking. I use the Jag as my daily driver while I let the Cruiser sit for now.
I remember when Ford was fighting backseat belts, they said it would add $165 to the cost of new which at the time could be had for around $3000. When eventually they were forced to do it it came out that actual cost was under $2! They could have used it as selling point for being concerned about customer safety but fought it and ended up being shown for the greed uncaring company they were and they never did learn from it.
ah, Philip, if you only knew what you were talking about; this looks like an essay from the 1970's.
as I take my Nissan Tttan pickup in for the seventh time since I bought it new last July (on a tow truck), I'll peruse your "quality" comments. this is the first Japanese vehicle I've had in 25 years, and it will be my last.
quality? please! all the plastics inside are spray-dyed, not color-impregrated like those dreadfully "inferior" domestics. the doors look like a spotted leopard. three of the door handles have snapped off...in less than 12,000 miles the black plastic trim on the cowl in front of the windshield is now solid white...not black. and this is a 2008 model.
in the meantime, my 2006 Dodge Ram pickup has passed 200,000 trouble free miles, and hasn't been back to the dealer since I bought it.
where were those bad textures and ill-fitting panels? oh, that was the Nissan, not the Dodge.
anyone who bothers to believe naysayers like you are truly missing out on the best vehicles by far.
Well a Nissan is not the same as a Toyota or a Honda, I've had both, never had a problem... Wouldn't have any other brand of car....
you might want to check that the very same suppliers that provide the parts for my Nissan also provide the same parts for your beloved Hondas and Toyotas.
I sell collector car parts for a living, and spend many days every week in wrecking yards here in Arizona. it's really interesting to see seven to ten year old Japanese cars; the interior plastics are broken into many pieces, and the seat fabrics (let's not even talk about leather) are badly ripped from sun exposure.
now let's compare that late 90's Japanese car to a mid eighties "inferior" domestic, like a 1985 Olds Cutlass. not only is the plastic interior trim uncracked and unfaded, but the upholstery looks like the day it left the factory.
i've learned over time that by and large, import owners don't have much knowledge of cars at all. they base their decisions on the small timer's bible (Consumer Reports), and PERCEIVE themselves as being more intelligent than those knuckle-dragging domestic buyers like myself. perhaps you should Google either "Toyota engine sludge" or "Toyota transmission failure" to see how your perfect cars are faring in the real world.
Also... as someone who used to work for a supplier to GM and Ford, let me tell you - they suck! Any issue with products flowing from us (the supplier) to them is a supplier issue. GM very, very rarely owns up to it's own mistakes. Ford is even worse! Everything is the supplier's fault!
Nor does either even acknowledge the problems caused by their own big, cumbersome bureacracies. Any idea how many people I have to try to contact at Ford to settle a problem with shipping containers? Me either, I've lost count! This is simple stuff. We work this kind of stuff out with our own suppliers in one or two emails / calls!
Goodness! It takes weeks, sometimes months, to work thru even the simplest of problems with those two companies - it's like dealing with the Federal Government!
Well, in case of GM now you are dealing with the federal government! I bet that will help speed things up... not.
:-)
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