Driving Forces: Product is King

Zero Percent Stays at GM, Ford by Joseph Szczesny (11/18/2001)
GM Riding a Wave? by Joseph Szczesny (11/12/2001)

In recent weeks, we’ve seen senior level shake-ups at General Motors and Ford Motor Co. That’s on top of the boardroom coup that ousted Chrysler’s top U.S. managers in late 2000.

What went wrong? Consider the situation at Ford, where former CEO Jac Nasser embarked on an ambitious campaign to expand into a variety of new business ventures, ranging from e-commerce to recycling. The problem says Ford chairman and namesake Bill Ford, is that “we lost our focus,” and forgot the basics of what the car business is all about.

That’s the same thing customers have been demanding for more than 100 years: solid, innovative product that provides customers with a sense of quality, reliability and value for their money.

The story was much the same at General Motors, where one-time brand management guru Ron Zarrella packed his bags and headed for a new job at eye care company Bausch & Lomb. In his seven-year term, Zarrella had tried to market sedans like soap, a strategy that resulted in a steady loss of market share.

Bob Lutz SEMA 2001The man who moved in as Zarrella moved out is Bob Lutz, considered by many the most savvy “car guy” in the U.S. auto industry today. Even before the 69-year-old former Marine pilot had formally gone onto the payroll, he was rooting around GM’s product design studios, making notes and offering suggestions. A hint of what he has in mind will be found at the upcoming North American International Auto Show in Detroit, where GM intends to unveil an assortment of new concept vehicles. Lutz has ordered significant changes made to a number of those vehicles, including the Saturn Sky convertible, since TheCarConnection was granted a sneak peek last August.

Fixing GM’s stodgy product lineup “takes enormous effort,” the company’s new vice chairman cautions, and will require General Motors to “get a balance between art and analysis, between the left brain and the right brain.” In layman’s terms, it means being far less dependent on customer research and data, and more focused on trusting gut instincts.

Product is king

The Big Three are certainly not the only ones looking to shift their focus and roll out better product. Once known for its cutting-edge styling and innovative technology, Nissan’s sales plunged as it settled for the staid and boring. Two years ago, as part of a far-reaching turnaround plan, Nissan’s new CEO, Brazilian-born Carlos Ghosn, slashed jobs, closed plants—but emphatically stressed that if anything, Nissan was going to expand its product development budget.

2001 Nissan Z ConceptProduct, Ghosn said, was going to be “at the heart” of the automaker’s comeback. And if anyone needed proof, they simply had to stroll the Nissan exhibit at the Tokyo Motor Show last month. A centerpiece of the exhibit was the ready-for-production version of the long-awaited 350Z sports car. But the automaker lifted the covers on nearly a dozen others, ranging from the near-ready GT-R sportster to the Moco, a show car suggesting the direction Nissan plans to take as it enters the huge Japanese minicar market.

Once the largest import nameplate in the U.S., Volkswagen virtually vanished by the early 1990s, when sales slumped to barely 10 percent of their 600,000-unit peak, during the heydays of the original Beetle. But thanks to a rush of hip and stylish vehicles, such as the latest-generation Passat, as well as the reborn “New” Beetle, VW’s fortunes have soared here in the U.S. And in Europe, it has broken away from a tight pack of competitors to become the unquestionable market share leader.

When it first emerged on the American scene in the mid-1980s, Hyundai bet it could carve out a niche by selling cars on the cheap. That strategy lasted only until consumer’s started spreading the word about Hyundai’s poor quality. Like VW, the Korean carmaker had to seriously consider whether it could hold on in the U.S. Fortunately, it did.

2002 Hyundai Santa FeThe automaker still relies on its price advantage, and a 10-year warranty program aiming to offset concerns about quality—which still lags the industry average. But over the last two years, Hyundai has become one of the market’s fastest-growing brands, largely due to stylish and innovative vehicles like the sleek Santa Fe, a car-based SUV.

Buzzword: innovation

Innovation has become an industry buzzword. GM CEO Rick Wagoner promises that “half of all our new vehicles will be innovative” in some form or another. But that alone isn’t enough, or the Aztek would be the nation’s best-selling vehicle.

On the other hand, Chrysler has learned the hard way what happens when you go conservative. Its mid-1990s renaissance was wrapped around cutting-edge products, such as the Viper, Jeep Grand Cherokee and Dodge Ram pickup. The latest generation of Chrysler’s minivans are virtual look-alikes of the previous models, and despite technical improvements, they’re simply not dominating the market against inventive competitors, such as the Honda Odyssey.

Seriously strained for cash, Chrysler faces a challenge trying to revive the formula that worked so successfully in the past.

Even BMW has missed the mark at times. Its 8-Series coupes never generated much demand. And initial reviews of the unusual “bustle-back” design of the new 7-Series sedan have been harsh. But on the whole, few marques have had a better track record. Its “ultimate driving machines,” such as the 3-Series, the X5 sport-ute and the M-Series performance editions have proved a tough act for competitors to follow.

Indeed, having BMW on your resume has become a hot ticket for job seekers. A range of Bavarian alumni have fanned out far and wide in recent years. Volkswagen’s new CEO, Bernd Pischetsrieder, was BMW’s boss until a boardroom coup several years ago. And Wolfgang Reitzle, head of Ford’s Premier Automotive Group, was Pischetsrieder’s second-in-command.

Reitzle’s got a demanding task ahead of him, overseeing a diverse assortment of luxury brands, including Volvo, Jaguar and Land Rover. But by far the toughest challenge will be Ford’s Lincoln and Mercury brands. With no consistent theme among their aging and dated models, the two U.S. brands are having a hard time winning new customers. Unless Ford can come up with competitive product, analysts warn that Lincoln and Mercury could soon fade away, along with other dust heap brands that forgot what customers were looking for.

story posted 11/18/01

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