Study: Product Woes Hobble GM by Joseph
Despite talk of change, new products aren’t swift enough, say analysts.
Witz: How GM Should Fix Itself by Gary
There’s no quick and easy solution, but perceptions could help greatly.
Everyone knows how
Japanese automakers invaded
The Japanese makers (especially
the best two) continued improving until the now-impenetrable notion of Japanese
superiority, regardless of brand, became widely perceived as fact despite tardy
but truly impressive improvement by the domestics that today sees them fully
competitive. But there was another element of that story that I don’t recall
anyone addressing: the substantial difference in the cost of doing business in
Primarily because the Japanese
government (unlike our own) correctly views its automotive and other
manufacturers as hugely important to Japan’s economy and the livelihoods of its
people, those companies enjoy substantially lower business costs compared to
ours…not just wages, benefits, materials, and services but the total cost of doing business. In these
Most importantly, lower-cost automakers can market comparable vehicles at lower prices and/or or better-equipped vehicles at comparable prices and earn more profit on them. Does anyone not understand that enormous competitive advantage?
Yet that is the elephant in the room that no one, at least outside the industry, wants to acknowledge or address.
Falling behind the world
Critics consistently blame GM,
Ford, and (until recently) Chrysler leadership almost entirely for falling
behind. “Bad decisions,” “bland styling,” “inferior quality,” “uncompetitive
products,” they chorus. They believe our
Most refuse to recognize, or simply don’t want to address, the multi-thousand-dollar per car U.S. cost disadvantage that is driving U.S. automakers, and other businesses, out of business.
If that is so, you ask, why is
DCX’s Chrysler Group in much better shape today than GM or Ford? Because it
suffered through a very painful major “right-sizing” after being absorbed by
Mercedes-Benz a few years back, and it has some nicely profitable products at
the moment. Its
Then came the Korean makers, with
lower costs than the Japanese. Like the Japanese, their products were
uncompetitive at first but have greatly improved in recent years. Witness the
accelerating growth in sales and profits,
No. The Korean makers and their managers, like their competitors, are certainly smart and hard-working, and their products in general are good and getting better. But even a casual look at their major selling points — the content they can load onto their vehicles while undercutting all competitors’ prices and long (expensive) warranties — clearly show that the primary reason for their rapid growth in today’s cutthroat U.S. and global markets is their substantial cost advantage over everyone else, including the Japanese.
Kia’s impressive new Sedona minivan, for example, claims $4000 more feature content than its segment-leading domestic target, Chrysler’s Town & Country, at a comparable price. Could Kia do that if its costs were comparable? Not for long. Considering that nearly all remaining media criticisms of domestic cars — “needs more standard safety features,” “needs more transmission gears,” “needs richer interior materials” — center on items that inevitably would add cost to improve, what domestic (or Japanese, or European for that matter) vehicle team would not sell its collective soul for another four grand to invest per vehicle?
And behind them, coming soon to a market near you, are the still-lower-cost Chinese.
With so much of today’s excessive business costs outside of the companies’ control, U.S. business (not just our auto business) needs help, not bailouts, from labor and government at all levels or will have no choice but to continue out-sourcing more parts and services and moving more operations to lower-cost countries to survive and compete with lower-cost rivals.
Next time, let’s examine major