Friday, November 07, 2008

Car Makers

Recent press reports indicate that the "Big Three" car makers (GM, Ford and Chrysler) are all in trouble. Sales are way down, they are burning through cash like mad, and without a government bailout it is possible that one or two of them will go under.

I could comment on a situation where unions consider the company they work for to be the enemy, and believe with every fiber of their being that the company will always be around to milk. However this blog entry is going to focus on something different, and that is the fact that successful car makers must also be successful at selling cars. If you don't have a product that people want, you close up shop. If you do have a product people want, then you can usually make it through bad economic times into the next boom.

As for the "Big Three" they have been ignoring what customers want for a long time. Remember when Japanese cars were pathetic? Remember when "Made in Japan" meant cheap and poor quality? Yes, it is hard to imagine today, but such a time existed. But the Japanese car makers improved quality, and now set the gold standard. But Detroit never learned. Detroit's attitude was "add more chrome, add more styling, change to performance tires." And so they lost market share.

But what has really killed Detroit was the fact that the Japanese, having mastered quality, did start to pay attention to styling. Detroit rejoiced, thinking that the Japanese were now playing their game. But Detroit forgot that the Japanese took quality and added styling, while Detroit took styling and added more styling. Without a foundation of quality, nobody cares about styling.

So what should Detroit do? First of all, fire anyone who uses the word "chrome". And demote anyone who uses the word "styling". Close every production line that is producing low quality cars, and concentrate only on those lines that have a reasonable reputation for quality. Offer considerable bonuses to anyone in the company who can come up with ideas for improving quality.

But of course they won't. They'll try to keep doing what they've done in the past, with more energy. The unions will continue to think that there is a secret gold mine that can be tapped at contract time. And style will always take the place of substance in the minds of the automakers of Detroit. Wish it was different, but...


Blogger Rileysowner said...

I don't know about Ford and Chrysler, but GM has some vehicles that are very good quality. The problem is that they often discontinue those lines because people don't replace them as frequently and hence it reduces sales. The other problem is that unlike the imports, GMC and others have no sense of what they need to make for the future. The writing was on the wall for an upsurge in demand for fuel efficient or alternative fuel vehicles years back, but they kept making bigger and bigger SUVs while discontinuing the EV1.

5:40 p.m.  
Blogger Shawn Abigail said...

Thanks for the thoughts Jim. But I need to question the idea that GM discontinues high quality product lines because people don't replace them frequently. If this was so the Japanese automakers would be hurting.

9:16 p.m.  
Blogger ROGER TRUCKER said...

The problem lies also on that "the big three" have relied a long time in people buying from them because they want to buy "American built", or "union built".
But this generation of buyers is now ending, and no resurrection of old pretty toys will be enough to fix the losses. Neither will the marketing of non-existent electric vehicles yet to be produced.

1:20 a.m.  
Anonymous jgriffin316 said...


By and large, quality is no longer an issue for big three "family" cars. Fuel efficiency is much less of an issue to. The real difference is cost per employee. The cost for an employee in Honda and Toyota is approximately $93K. The cost for a unionized employee in the big three is approximately $150K. There are also certain efficiencies gained from reducing the levels overhead that unions inevitably introduce.

Please don't think that I am anti-union. I feel that union-type organizations can do a company tremendous good when they remember not to bite the hand that feeds them.

10:30 p.m.  

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