The Gentlemen Revolutionaries

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Location: Philadelphia, Pennsylvania, United States

Wednesday, December 07, 2005

If you build it, they will come

The blue collar sector of the American economy appears on the verge of another hit thanks to the American Automobile industry. Just weeks after GM announced massive layoffs, Ford Motor Company has taken the similar steps. Current reports show layoffs in the range of 30,000 hourly workers in the United States. Though this is not official this estimate seems to be fairly accurate. The American automakers are hemorrhaging, this is not a slow gradual death, this is screeching tires and flaming exhausts, this is a Pinto being hit by a truck and bursting into flames.

Streamlining production and updating plants will certainly help with cost savings but it will not help to increase sales. Just when the Japanese model appeared to be taking hold in the American motor companies, the game, predictably so, changed and American companies are again dropping the ball. GM has missed the mark ever since appointing Bob Lutz head of the American Motor Group division and Ford has been in trouble for just as long. The key to success are the fundamentals that the American Manufactures started ignoring in 1980s. In my opinion those fundamentals are styling, reliability, and quality. They must all be present in order for a car company to be successful. I have intentionally left one thing out that should draw your eye. Price. Price is not a fundamental with which auto manufactures need concern themselves. I promise I will explain later.

So that leads the discussion to styling, reliability and quality. (Note: I am defining quality and reliability as two different things. Quality refers to the quality of the materials used to build a car, the leather, how quite it is, the stereo etc. Reliability however refers to just that, how reliable a car is.) Reliability is the only one of the three where Ford and GM have made any sort of significant improvement in recent history. If anything was learned from the Japanese model that will remain it is that a crappy car is a crappy car and consumers will see it as such. The old statements such as Found On Road Dead and Guaranteed Malfunction are generally no longer true. However simply having a car that will last as long as something that you pay tens of thousands of dollars for should last is not enough; it also must be a car that people want to buy in the first place. Reliability is a cost of entry, without it, you can’t play the game.
Quality and styling seem to go hand in hand. When was the last time you saw a car with leathers and plastics as nice as those in a comparable Japanese or European car? American cars tend just to look cheap, even when they may be more expensive than their counterparts (price, its getting closer!). Speaking of looks, when was the last time you saw a good looking American car that was not a full-size truck or a Cadillac? The Mustang is the only one that comes to mind but everything else looks like it was drawn on the back of a Wendy’s bag after a hard night of drinking.

So what do they do? Well first step; unfortunately they must continue with the layoffs. Without profitability they will never make a car that is profitable. Make sense? Probably not. BUT they need capital to undertake new projects so profitability is a must. Second they must not take the lead of what is “cool” at the time. The Focus is a perfect example of this. This car was based upon popular Japanese designs and therefore was ultra hot for about two years, but now its sales are plummeting along with its popularity. They must blaze their own path, do their research, determine what people want and go for it. Be unconventional, be exciting. Lastly they must diversify. American car companies are wonderful at doing one thing for a period of time when it seems profitable then moving on to the next. But in that movement phase they get screwed. First muscle cars, then trucks, then SUVs they focused on one of those at a time and were burnt in between. They do those three types better than anyone else and the key is to do them all at the same time. Instead of having 14 SUVs, 5 trucks and a muscle car they should have 6 or 7 of each. If they balance their lines, do it with a flare and do it well, they will be back in the game.

Why Price doesn’t matter.

Price should not be a driving point for the manufactures. Obviously they cannot price exorbitantly but if they prove they have a comparable product they can use comparable pricing. I do not know when American manufactures took over the job of producing low priced cars but it is not a job they are suited for. Other companies (Kia, scion etc.) will always do it better, let them do it and do your own thing. Otherwise you will sink and not swim.




Why not to say you have a bomb and run from the police in an airport.
http://www.washingtonpost.com/wp-dyn/content/article/2005/12/07/AR2005120701578.html

Why to be careful BEFORE you start advertising. People do not usually get mad if you don’t do something, they do get mad if you change your mind.
http://www.washingtonpost.com/wp-dyn/content/article/2005/12/06/AR2005120601733.html

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