The US automotive industry is famously miss-managed. According to the Associate Press, General Motors (GM) posted $2.5 billion in losses just in the third quarter of this year. They have already announced they could run out of capital by the end of 2008!
GM's management (much like the other 'Big 3' automakers) has resorted to tactics of old like trying to boost liquidity, slashing production, boosting sales, and suspending their 401K matching program. All of these are business band-aids and a Public Relations nightmare.
Everyone's talking about the problem; few offer solutions that don't amount to huge government subsidies.
I've given it a lot of thought and here are two things JDM would do if we were in charge of the Auto Industry, or at least GM.
:: "On-Demand" Sales and Production
Imagine keeping an inventory of only about 20 cars for test drives and curb appeal. Now imagine a kiosk-based sales process similar to Dell's custom computer purchasing model.
Besides simplifying the purchasing/financing process, this would also greatly reduce GM's cash-flow problems as they try to predict future consumer spending and market trends during design and manufacturing. Imagine test driving a car you’re really interested in and then custom-designing your actual car with all the options, colors, extras you want and none that you don’t.
They need to be thinking Dell, not Henry Ford. We’ve come a long way since the Model T. It's time their business model caught up.
:: Less Innovation; More Renovation
Why does a "new" automobile model have to come out every year? Imagine the huge savings in research, design and manufacturing if truly "new" model cars and trucks only hit the market once every three years.
If car manufacturers shifted their focus from developing automobiles on such a limited time-frame and spent that extra time and money on developing really great, recall-free cars with extended warranties, they would go a long way to digging themselves out of this hole.
Of course, they could offer models equipped with the latest technology yearly or even quarterly, but we don’t need their best attempts at a new model each and every year. The costs are far higher than the opportunity yields—especially in this market.
That's our two cents. What do you think?
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Tuesday, November 18, 2008
Retooling the Automotive Industry
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NPR Topics: Technology
I think the answer is bankruptcy.
ReplyDeleteWhy is GM asking for handouts from the government when it's their miss-management that's the issue?
Chapter 11 would allow them to bring their financial issues before the court and give them the freedom to reorganize themselves. If that means exiting the market, so be it.
There is a real possibility that reorganizing under Chapter 11 protection is exactly what they need to make it through.
Interesting comment.
ReplyDeleteFrom a marketing perspective, people buy specific cars because of what that car says about them.
What does a car whose manufacturer has filed for bankruptcy say about its owner?
There is no simple solution.
ReplyDeleteThe U.S. auto industry is in trouble, not Asia's (think Korea and Japan). Having the U.S. auto industry put out cars every three years, would do nothing to the foreign manufacturers other than boost their revenue during those "off years" of U.S. production.
Bankruptcy is not an alternative either, on many fronts. First, from an employment perspective- a significant reduction in U.S. work force will take place. Knowledge and innovation will be set back years. From a national security standpoint, it is those car manufactures that produce manufactured machinery during times of war. What would happen- God forbid- if a large-scale conflict broke out that required the use of those skilled people at those factories but Toyota does not agree?
Whatever the solution, it will be very painful. We need a structured reorganization of the U.S. auto-industry. We need to be innovative, and not redundant. We need to lead in quality, but not quantity. We need to be leader once more, because we know where following has led us.
There is someone we all know that has either worked for an American car company or a company associated with them. I think a national commitment to American Cars, on behalf of each other, would be a good step. I currently drive a Lexus, maybe in the next few months when I trade-in I will consider an American brand.
Imagine test driving a car you’re really interested in and then custom-designing your actual car with all the options, colors, extras you want and none that you don’t.
ReplyDelete