Posts Tagged ‘automobile industry’

Bailing out Ford, GM, and Chrysler

I work in the automotive industry in a marketing capacity: about 60% of the writing I’ve done over the past four years has been for two major Japanese automakers, and that figure for this year would be about 95%. I care about the industry, so here is my take on the plight of the American Big Three.

As the MSM and blogosphere have noted, the problem isn’t that the Big Three make poor cars any more: quality is as good as or better than what Europe makes, and about as good as what Japan makes. Nor is the problem sales per se: regardless of the fact that the Big Three have lost market share bigtime to foreign brands since, well, a long time ago, their combined and separate market shares are still huge. Nevertheless, the numbers don’t add up and they are bleeding cash.

And that’s really the essence of the problem: there is no one thing that needs fixing, no two things, nor any group of things that one could change to make things right. Operations, marketing, finances. Nothing particularly stellar, yet nothing standing out as fixable for salvation. This state of holistic malaise is what makes the future of these companies look so grim.

The reason why it has gotten to this point, I surmise, is the same reason why Nissan was nearly bankrupt a decade or so ago: there are too many “stakeholders” with incentives not to change. The parasitic execs and deadwood middle management just want to hold onto their jobs, the union is playing its own game, the dealers want things to be as easy as they were in the good old days, and so on. The change that is required to make any these companies viable will be not pleasant for the majority of people in them. How much easier, then, to cross one’s fingers, beg the government for bailout money, and pray that the same system can produce different results.

I don’t know how easy it would be to implement either legally or culturally, but my plan is, indeed, to change everything:

  1. Put all three companies into whatever kind of receivership is legally possible so that the execs no longer have control. My general impression of “public” companies in the United States (and Japan, for that matter), is that management runs the company for itself, not the shareholders. The cuts must be deep: symbolically canning a few C-levelers will only invite new parasites to take their place.
  2. Give the workers a fair contract paying them what the Japanese companies pay their employees. Use this opportunity to axe mercilessly any deadwood here, too.
  3. Send in the ops people to make manufacturing perfect. Shut down every facility and get rid of every asset that is not performing as needed.
  4. Cut out every brand and every model that is not doing well in the market and does not show potential for success. If this causes dealers to fold, do something for them that is fair.
  5. Let the government enact universal health care and assume the pension debt of the automakers. Let them start from scratch, without excuses.
  6. Let the government subsidize and otherwise support every intelligent green technology the companies are working on.
  7. Install new management from the ground up that is incentivized to make cars of revolutionary greatness.

I’m not talking about cleaning house here; I’m talking about gutting the building.

If this were done, the American auto industry really would have a chance to compete with Europe, Japan, and Korea. I say this because I have seen the Japanese auto industry from the inside: I know the language, I know the culture, I know the thought patterns. Japan does a pretty good job of creating good cars, but the vast majority of its cars are (like those of the Europe and US) boring and uninspired. US companies light on their feet and ready to make bold moves could leave the ponderous Japanese business culture in the dust if they so chose.

The American auto industry is, of course, a lot, lot more than Ford, GM, and Chrysler. It’s the huge RV industry, it’s Mack and Peterbilt and other truck and specialty automotive companies, it’s Harley-Davidson, it’s all the American suppliers to the foreign and domestic automakers producing here, and, yes, it’s also the foreign automakers and their many US plants employing many US workers. That said, automobile design and brands born and bred in the US have an important role to play both here and around the world, so my hope is that the Big Three (or some surviving subset thereof) can get their act together and create a purposeful and exciting future for themselves.

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