Strategy: The Delta Between Ford And GM/Chrysler
We obviously don't know the internal machinations of these three companies but it has become apparent from what is available for public consumption that Ford has a leader and strategy capable of turning around the company. (Story here.) On the other hand, we are left with more serious doubts as to the approaches at GM and Chrysler. GM has been close for years but unable to pull together the final pieces necessary to turn the corner in its North American operations. The endless arguments blaming this on unions or overburdening retirement responsibilities that are now bubbling up again are ridiculous. And, if unions are intolerant of change, it is because management has continually made promises that were never kept and it has continuously and negatively impacted the company and the rank and file. How many times does someone need to mislead you before you become difficult to deal with? It is and always has been poor management. That said, everyone will fall in line when it comes to survival.
Now GM has joined Chrysler in what appears to be delayed product development to conserve cash. We wrote about this self-fulfilling prophecy at Chrysler some time ago. So, here we are. Were the government to hand GM and Chrysler money, what would the stipulations be? There will likely be many. From the outside looking in, the most obvious is an imcomplete road map and cohesive business plan at GM and Chrysler. That implies new operational management is necessary to run these organizations. Or, in the case of Chrysler, Cerberus needs to assure the government that they will back away and led the current Chrysler management execute on a strategy aimed at a turnaround as they have really not been given that opportunity to date.
It was inevitable that many in Detroit would wish to return to the status quo by arguing that falling gas prices means they can return to making the same product they made before as highlighted in the article link above. A point missed on the falling gas price debate is the cost of acquisition and ownership. With real wages falling for decades in the U.S., Americans are going to be buying cheaper cars in a tight credit environment. This environment is likely to exist for years to come. When credit does become more readily available, it is not going to be allocated to consumer spending. It will be allocated to production. Those continually wanting to prime the consumer pump are wasting valuable time and effort that should be spent revitalizing what can be primed. GM and Chrysler are not only saddled with cars people don't want but with cars people are unable to afford in this new economic environment. But, then again, so is Toyota, Nissan, BMW, Mercedes, Audi and others. This extends to well beyond working class families to aspirational consumers that have historically leaned towards luxury or demi-luxury brands as noted before.
Now GM has joined Chrysler in what appears to be delayed product development to conserve cash. We wrote about this self-fulfilling prophecy at Chrysler some time ago. So, here we are. Were the government to hand GM and Chrysler money, what would the stipulations be? There will likely be many. From the outside looking in, the most obvious is an imcomplete road map and cohesive business plan at GM and Chrysler. That implies new operational management is necessary to run these organizations. Or, in the case of Chrysler, Cerberus needs to assure the government that they will back away and led the current Chrysler management execute on a strategy aimed at a turnaround as they have really not been given that opportunity to date.
It was inevitable that many in Detroit would wish to return to the status quo by arguing that falling gas prices means they can return to making the same product they made before as highlighted in the article link above. A point missed on the falling gas price debate is the cost of acquisition and ownership. With real wages falling for decades in the U.S., Americans are going to be buying cheaper cars in a tight credit environment. This environment is likely to exist for years to come. When credit does become more readily available, it is not going to be allocated to consumer spending. It will be allocated to production. Those continually wanting to prime the consumer pump are wasting valuable time and effort that should be spent revitalizing what can be primed. GM and Chrysler are not only saddled with cars people don't want but with cars people are unable to afford in this new economic environment. But, then again, so is Toyota, Nissan, BMW, Mercedes, Audi and others. This extends to well beyond working class families to aspirational consumers that have historically leaned towards luxury or demi-luxury brands as noted before.
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