Just this past week, I pulled into a gas station and discovered a young, college-age guy filling up a classic 1968 Mercury Cougar XR-7. We spoke of the large V8 engine, the rumble of the dual exhaust, the fact he struggled to pay for gas to get to/from work and school when gas prices were over $4.50 a gallon this past Summer, etc. I told him about my 1968 White Ford Mustang I owned back when I was in college. He expressed amazement that his classic car could put a smile on the face of guys my age even today.
1968 Mercury Cougar XR-7
Back in the 1950’s, ’60’s and ’70’s, the BIG 3 (Ford, GM and Chrysler) were “it” in the U.S. market. They ruled the automotive world. Sure, we may have had Mercedes and a few exotic autos, e.g., Bentley, Rolls, etc., but the U.S. automakers had no foreign competition to speak of.
During that era, the new models created by the U.S. automobile manufacturers each year were a really big deal! The marketing was superb. There was always a huge, exciting build-up each year–America couldn’t wait to see what Detroit had in store for the coming model year. When is the last time you can remember that happening?
Giant search lights were stationed in front of the auto dealerships illuminating the night’s sky trying to attract our attention. I remember my father driving towards those lights so we could see what so important that it warranted a huge search light in the sky.
For months after new cars were announced, I would frequently get in trouble for shouting out “there’s a 1965 Ford Mustang” or a “there’s a Camaro” or other such car. It was exciting to see that people actually owned such captivating vehicles. The U.S. automakers made everyone want a new car every year. We refer to this today as “keeping up with Joneses.”
Contrast the situation 40 years ago with today’s situation. How many auto manufacturers are there today selling cars in the U.S.? Off the top of my head I come up with: Ford, GM, Chrysler, Nissan, Toyota, Honda, Kia, Hyundai, BMW, Volvo, Mazda, Mitsubishi, Mercedes, Porsche, Land Rover, Volkswagen, Suburu. Surely, there are more.
How many brands and models of cars collectively do they produce today? It’s almost unthinkable.
And, what really stands out today when new models are introduced? Nothing!
The only car I can think of that has really created marketplace excitement in recent years is the new electric Tesla Motors car (www.teslamotors.com). At about US$100,000, this high-performance, 2-seater sports car that would be the envy of anyone who likes such cars. Tesla is just ramping up production.
There’s too much choice and it’s not well-differentiated in terms of appearance, features or functions. From a distance, I have a hard time telling the Honda from a BMW from a Lexus. More and more models have resulted in less and less differentiation. There is one key area of differentiation and domination for the foreign automakers: quality.
For years, the foreign automakers have dominated the perception of quality and value when contrasted with the BIG 3’s products. Does this mean it’s true? No. But, perception is everything in branding. If the perception is higher quality and higher resale value, those are differentiators that can close a deal with a prospective buyer.
Does GM really need the Chevrolet, Buick, Pontiac and Cadillac brands? Or, might GM benefit from rationalizing their product offerings into better differentiated, less redundant offerings that create better economies of scale across the entire company?
The BIG 3 auto executives went before Congress seeking an additional $25 billion in bailout money over and above the $25 billion previously committed back at the beginning of November. They had no plan; they offered no strategy. What a horrifically embarrassing moment in the history of a once proud industry. The executives arrived in their corporate jets acting as though they were entitled to this money. They claimed “their businesses are too important to fail.”
Sorry, I don’t buy it. The BIG 3 automakers are not too important to fail. As business entities, the loss of their products in the marketplace would cause no threat to our economy or our well-being. There’s too many suitable alternatives for our economy to be compromised.
However, I do see a huge threat to the economy if the BIG 3 do fail. There are about 3 million people who would be negatively affected and, the negative impact to them, would create a further drag on our already distressed economy.
It is incumbent that the BIG 3 automakers and Congress find a path enabling the U.S. automakers to have viable, relevant, sustainable businesses here in the U.S. The U.S. auto executives must create and share a vision of why it is worth investing nearly $50 billion of taxpayer money to bail them out.
The U.S. automakers must create and execute a strategy that accomplishes the following:
- makes the U.S. automakers part of the solution to America’s job and energy needs
- rapidly develops and produces alternative energy vehicles that consumers crave consistent with reducing America’s dependence on foreign oil
- promote better fleet-wide fuel efficiencies–don’t just try to achieve the minimum government standards–raise the bar
- ensure labor agreements allow the BIG 3 to be cost-competitive with other manufacturers
- replace senior management with executives who know how to create viable, sustainable businesses–including negotiating labor agreements
- ensures the American taxpayers get the bailout money reimbursed
The status quo can’t prevail.
Personal note to the auto executives:
It’s okay to create some excitement again! Make us want to buy your products!!
What do you think?
Dave Gardner Gardner & Associates Consulting www.gardnerandassoc.com