I am a car nut, an enthusiast even and for the car industry to turn to the very establishment that helped put them in this predicament is truly a situation that will create many a business school doctorate thesis for years to come. What possible good can come from this?
I could be saying I told you so, but I had a hard time finding anyone to tell. No one was listening. The American car makers have had major problems for several decades now, not just the last couple of quarters. They have been given their wake up calls on more than one occasion.
Sure some within the industry heard and heeded the call and some were able to come up with some really good and compelling products. Strides were made in quality improvement but not across the board and not enough to convince consumers that they had caught up with or passed the competition. There were glimmers of hope interspersed with packets of ‘more of the same’.
I feel sorry for anyone that has to turn to the government for a handout or subsidy. Sad to say we all are in that boat now and there doesn’t seem to be any turning back. As those who have had their hands outstretched for a gimme have recently found out, these government handouts come with strings attached. Some are o.k. with that while others prefer their independence. Some are beginning to have regrets.
So what do I make of the current state of affairs for the three? First Chrysler, which lost its way once and found it only to lose it, again, is perhaps in the weakest position of all. It is not currently being run by car guys though it seems to have many car guys within its workings. The shotgun wedding to Fiat seems inevitable if those holding the shotguns have their way, but I think it would be a mistake. Chrysler would do better to maintain its independence and build from its strengths. In order to do that it would need capital, true business management, and leadership with vision. These three components it lacks and therefore I see Chrysler fading away into oblivion even if a merger with Fiat is accomplished.
Second is General Motors, a company that is too big to know which way it is headed and too big to change the direction it is headed even if it wanted to. GM is the prime example of why mergers and acquisitions do not always work in the auto industry. Companies are created for a variety of reason but they all tend to try and differentiate themselves somehow, in other words, not all hamburger joints are McDonalds. Each company in order to do business will come up with its own solution to a consumer need and present it to the buying public. If successful it thrives but if not it goes back to the drawing board or goes away. Some companies will have a few outstanding ideas but will be lacking the rest of the components such as marketing, production, administration and such that make up a well rounded business. These are the companies that become prime targets for a takeover, not to obtain the company but to obtain the patents on the great ideas and incorporate them into your own product line. Many a merger has been done to obtain legal rights rather than finding synergies.
The problem in a merger comes when you try to combine two different cultures, as eventually they will also merge and become one and the same. As this happens, the setting that was the perfect ground to cultivate that great idea slowly fades into the mother company, the same company that was unable to create the idea in the first place and had to buy the other company to acquire. This is very evident in the GM of the 80’s when you the term ‘cookie cutter car’ was coined to describe the fact that all too many cars looked and acted exactly the same. The fact was they were exactly the same with exception of the name badgeing and a few accent trim pieces. You could find the same vehicle at Chevrolet, Pontiac, Buick, Oldsmobile, and on occasion Cadillac. Take a look at the pickup offerings from Chevrolet and GMC to see the most obvious example of sameness.
So what does this mean exactly? It means that the accountants and management took control of decision making for future product and decided that it would be less expensive and more profitable to develop one car and put several different labels on it thereby getting two (or three or four) items for the price of one. Sounds good on paper right? It doesn’t work out that way and here is why. Instead of developing and providing to the consumer two (or three or four) solutions to their needs, you have presented one solution and just changed the packaging. This is not an alternative solution to their needs; therefore competition can come in and offer a true difference. Consumers eventually will become savvy enough to know that when they are comparing solutions, they need only look at one of GMs offerings (rather than each one individually) and compare it to what the rest have to offer. And they wonder why their market share has dropped off.
GM has already killed off some of its brands, Oldsmobile is no longer for example. Is it missed, yes and no. If Oldsmobile were still here today wouldn’t it look just like Chevrolet, Pontiac, and Buick? Other than the slight visual clues for demographics they are one and the same. If they close Pontiac or Buick will they really be giving up that much? When Chrysler shut down the Plymouth name was there really much of an impact? They all have histories and we have fond memories of special cars from the past but was there any guarantee of recreating the magic of those one or two items?
So what is GM proposing to do to salvage itself but cut off some of the acquisition lines that gave it some distinction, namely Saturn, Hummer, Saab. Rather than working to make these somewhat independent lines profitable (and not being an insider it is hard to tell if they were or were not profitable) they have decide to cut them loose. This will create a very shallow corporation with dwindling product line with which to compete going forward. And as the product line going forward will now be determined by divine government intervention which will make decision not based on sound business doctrine but by political correctness, it is hard to say if there will even be a GM 5 to 10 years from now. Do you think the fun cars like Corvette and Camaro will even stand a chance of seeing a next generation under these conditions?
So that leaves us with Ford, the only hold out to the handout. I have to admire that and for that alone give them a standing ovation. I am sure there was a lot of pressure to bow. So Ford becomes the last hope for an American original. It is facing the same problems and constraints that the others are of underfunded pension plans, bureaucratic red tape, poor management, conformist and homogenized product line but it at least seems to be working from a plan and fighting for its continued independence. For this there is hope.
Fords product line is sufficiently diverse in the near term though they have the same problem of cross teaming between their Ford/Lincoln/Mercury lines. They have worldwide ties that should help enormously with product development if used prudently, the future 2011 Ford Fiesta is a prime example. (Ford if you are listening, please don’t over Americanize this car for our country. The European version sounds like the one I would want to own and drive.) The company still has a unique identity and some products still retain character such as the Mustang.
I do not understand the current design direction though. What is it with the 3 big flat chrome piece grill work? It is pathetic and reminiscent of the creased line loot the Art and Technology boys did that made me lose all interest in a Cadillac. I hope it is a short lived fade. They also added it to the full size vans as you can see. This is what being hit with an ugly stick does to you.
Why do I always think of the station wagon in National Lampoons Vacation movie when I see these multi-level light treatments? Please run these design changes past someone that has taste before putting them out there?Will Ford make it? It is hard to say for the same reasons it is hard to say if the other two will or not. The only reason Ford held out is that they had more cash on hand to allow them to stay in the game a little longer. How long it can last is anyone’s guess. I hope they all survive, because I don’t like to see anyone fail for one thing and because I think the open competition is good for the industry and the consumer. We all benefit from the raised bar.
The final note that should be made is that these are not the only American car makers today even if they get all the attention as if they were. Cars made in America include Toyota, Honda, Nissan, BMW, Mercedes, Tesla and others. Are they entitled to equal consideration, or are some ‘animals more equal than others’ in this Obama Nation? Will the rules apply equally to all and apply to all equally? And will those rules be the rules of business with the freedom to succeed and the freedom to fail based on the dictates of the marketplace or will the rules change yet again to fuel the fancy of a few? Time will tell as we wait and watch.
This is Ed Nef with a view from the Farr West.
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