Throwing More Money At Fickle U.S. Consumers Won't Fix Ford's (or GM's) Problems

Alan Mullaly (Ford’s new CEO) addressed investors Friday morning at the Detroit Auto Show. He reminded investors of the company’s three main priorities:

1) Aggressively adjust cost structure to meet lower demand
2) Accelerate new product development
3) Working together (very regionalized). A lot of opportunity to leverage the company’s resources around the world. Gradually change everything so they think like a global company (like not paying employees for regional performance).

In terms of what Mr. Mulally finds so different about the auto industry versus the airline industry, he feels the life cycles are a lot shorter. He said in the airline industry, every 10 or 15 years you would make a big bet with a new aircraft design. In the auto industry, by 2008 Ford Motor Company (F) looks to have a completely refreshed product offering, and by 2010, a 100% refreshed product offering.

This is actually a topic I briefly addressed in my earlier piece when General Motor’s (GM) was discussing the shortened product life cycle (and therefore the need not to let up on capital expenditures). I said this sounded like a dangerous recipe as cap-x budgets were constantly being raised to meet every shrinking break-even point. A dealer appropriately emailed me and said that the ability to adapt to the ever shortening consumer acceptance cycle is not just wishful thinking, but something that will be required out of successful automakers in the future (that it is almost like the fashion industry).

I agree, the life cycles are shortening to meet the ever fickle and changing demands of the U.S. consumer. BUT, I need to emphasize, throwing more money at the problem (opportunity/challenge whatever you want to call it), is not the solution. I continue to believe automakers need to re-think the notion of the vehicle. I think Scion is really onto something with their almost “mass customization” concept of allowing consumers to accessorize a rather base vehicle in a million different ways. If you ask me, the BASE vehicle needs to become more standard. But the ability to customize and accessorize the vehicle is where the excitement and personalization really come into play. Just my thought, particularly when it comes to the younger generations (gen x and y) at least.

Comments

[Malkiel:]

Jerry, I agree with you here about the longer-lived platform concept. The most successful models from Toyota, Honda, Hyundai, etc. have all been around for a decade now with regular reskinning along the way. GM did this throughout the '70's and '80's but bolted inbred lowbrow styling with poor quality control on top of those platforms. In the '90's the American companies took away the wrong lessons from their competitors, trying to speed up the platform cycle rather than fix the things consumers complained about, style/price/quality. I hope Mulally brings in the exciting things from the Air industry he's talked about, like carbon fiber panels, without getting snookered by his new staff into the same mistaken beliefs about what will fix their problems.

2007 Jan 16 06:38 PM