Auto Industry due Change

Although our commentary has predicted the pathetic decline of the automotive industry for more than 20 years, it is sad to witness it unfolding before Congress.
In 1954, a GM vice president warned automobile designers on their first day at work, “Remember, General Motors is NOT in business to make automobiles. GM is in business to make MONEY.”
We responded, “A company focused solely on profits will likely lose its market to a company focused on products,” and that is precisely what happened.
In 1989, when bloated inventories on dealer lots reached 2 million cars, it was not seen as a result of overproduction, but of “overpricing,” as noted by The American Automobile Dealers Association Newsletter. When Japanese imports were forced to raise prices due to a 50 percent increase in yen/dollar value, Detroit “gleefully” (the newsletter’s word) followed along, raising prices for fatter profits rather than gain a price advantage, which would have given Detroit products a competitive edge for years to come.
No wonder the oft-quoted phrase, “Detroit has seldom missed an opportunity to miss an opportunity” has become a clich√? in the media.
Latest sales statistics show a loss of 3 million sales in 2008 – a 50 percent increase over Detroit’s record-breaking sales drop in 1989.
In fairness, the fault is not entirely due to auto industry mismanagement. The chaotic state of the banking business, sharing similarly flawed management, brought the economy down and limited buyer financing possibilities, contributing significantly to the loss. Import sales are also down, but not as much.
The greatest fault of motor city management is a bean-counter mentality. One Far East auto executive observed, “We look 20 years ahead in product planning; Detroit sees two or three.” Detroit’s financial vice presidents typically clamor for profits to be realized within two years of funding new developments.
The management Detroit needs is there, today. The experienced automotive professionals who have seen the mistakes made from the inside are there, but they have not had the authority to make decisions to override the financial managers. A realignment of corporate power, responsibility and authority is mandatory.
A new management of young, inexperienced academics would likely repeat the same mistakes, costing billions more in losses and only delaying the inevitable demise of the industry.
Detroit needs to give experienced designers and engineers the authority to implement development of superior products that will meet the needs of a motoring nation.



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