Big car-makers ‘nibbled’ to death

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Seeing in the Economist these firms seeking billions in aid recalls a comment years ago by Tom Peters re their long, slow demise. They were not killed by overwhelming force of much stronger rivals – they were ‘nibbled to death’ – by Germans in high-performance saloons, by Japanese in compacts, then SUVs, and now in hybrids. What puzzles me in all this is that they had access to what they needed to win these smaller battles. These same firms have for decades had much more efficient, well-designed models in their European and other subsidiaries. Shows how powerful a force against professional strategic management ‘not-invented-here’ can be.

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  1. Zahed Sheikh  January 1, 2009

    How do you see the role of the labor unions in the US in the way the Big 3 are managing their firms? Their cost structure as dictated by the labor unions makes them non-competitive and as such they cannot invest as much as they should in quality improvement initiatives.

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  2. Kim Warren  January 3, 2009

    There has certainly been plenty of comment from others who know more about the role of the unions than I do, suggesting that they have been less than helpful.
    I would still ask, though, how different the US firms’ situation would be today if they had taken the initiative in leading product innovation in their home market, rather than sacrifice each new segment to others for the last four decades. If better strategic management had left them selling 50% more vehicles today, at stronger prices, then maybe their labour costs would not be quite the killer-issue that it has become.
    Ideally, I guess, the unions would have been involved in making this better alternative history come about, but I am reluctant to comment more on this, given my limited understanding of industrial relations.

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  3. Dr. Fred Flett  January 24, 2009

    As an ex-pat who’s been working on advanced fuel cell electric drive for the last decade in Detroit I would advise temperance in elective outbursts of what the OEM’s should, and should not have done, in the US.
    Views are apposite…..but my take on posturing from academics who ignore the postulates ascribed by Adam Smith and instead highlight MBA crap should seriously consider including some Newtonian principles in their teachings and book writing.
    As a clue to the above – its not about investment but more to do with the maturity of the technology to meet the safety and environmental requirements in a vehicle which resembles what the public in the US desire…please don’t reply and say everyone should drive a Prius !!

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  4. kim warren  January 26, 2009

    Thanks Fred – though I am not quite clear what exactly is incorrect in the original post. I try to offer well-reasoned arguments that are consistent with the evidence. So far as I am aware …
    – the big-3 have lost large fractions of the US market over many years
    – most of that loss has been in emerging niches of the market, rather than in the more traditional core model-types
    – it has been largely lost to Japanese suppliers, who have had no problem with the maturity of their technology to meet safety and environmental needs [presumably due to prior investment?]
    – … so they have managed to produce vehicles that resemble what US consumers want
    – the big-3 [or at least 2 of them] have lost rather less in Europe, where they have successfully developed and marketed vehicles in exactly the categories where they have lost out in the US.
    Whether I think people should drive a Prius is not the issue [I can’t personally understand why anyone would pay more for a product that is no more fuel efficient than high-spec European diesels] but it’s their choice, and sales of the product suggest that Toyota have yet again found a product people want to buy.
    The general point I hope will be useful for other readers is the need to beware of innovative rivals who seem only to be picking up apparently marginal parts of the market.
    Just to clarify – I have 15 years experience of real-world corporate planning, including designing the strategy for what is now a $1.6bn group. Over the last 10 years I estimate I have had over 40 quite senior executives on mature-MBA and exec courses from Ford, GM, BMW, Volvo, Renault and others with whom these issues have frequently arisen, and have supervised many strategy projects that those individuals have done in their own organizations.
    I could well be wrong, though, so am entirely open to other views with supporting evidence. Indeed, I positively want to be corrected on anything that is inaccurate or misinterpreted.
    Kim

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