No one saw the economic devastation that we’re currently seeing, stocks are down to incredible lows and many companies are slashing their forecasts based on current demand. However, the American Auto Industry was in trouble well before this crisis thanks to many terrible decisions, old school management, backwards compensation plans, and pure arrogance -- and now they’re asking for a bail-out of epic proportions.
The bail-out seems to be exceeding 25 billion dollars and yet their CEOs took separate corporate jets to the meeting in which they were all but begging for money. It’s unbelievable really, and thus the topic of this blog. What would I do if I were in charge of auto industry bail-out? Yeah I know it’s not computer related, but let’s face it – technology drives the world – and these guys could learn something from the PC industry which changes on a daily basis.
Now there's nothing wrong with upper management using private jets to get around, the fact is they're busy and flying commercial is a total waste of time. I do believe, however, that the company needs to be healthy and profitable before people start taking advantage of such perks. That said, the first thing I would do is restructure the entire management team of all three companies. I simply cannot believe in management teams who do not deliver value to shareholders and employees. It’s unreal that these guys would not only fly to their government hearing in private jets but even more unreal that they reward themselves with 8 figure packages when their companies are haemorrhaging cash and their employees retirements are at risk.
These guys wore blinders for years, building gas guzzling SUVs without looking at the macro environment and global economic trends. They were not paying attention to their customers or their competition. Henry Ford once said "If I asked my customers what they wanted they'd ask for a faster horse..." That may be the case, but current management seems to be taking that comment way out of context. If you are leading the industry that you're in you can get away with saying and living by that --- however if you're all but getting killed you should probably look up once in awhile.
It would be like HP or Apple selling beige boxes in 2008. This is what happens when you don't use your peripheral vision to help steer your product and business strategy. It's important to pay attention man! That's the first thing I learned in kindergarten.
So after a major restructuring of management I’d figure out a way to get the three companies merged into one (assuming we had to save all three). If I could choose one company I believe Ford has the best chance of a turnaround – but in the case of GM and Chrysler I would say the chances of a turnaround are pretty slim. However GM does have the Cadillac brand, and they do have some emerging hybrid technology that could be of use. Thus, three companies need to merge into one.
I’d call it “The American Car Company”. I would kill the messy portfolio and focus on a few cars with meaningful sub-brands. The branding may seem complex, but the idea of the American flag on a car representing a country on the verge of a monumental change is a pretty powerful thing. Think about it - everyone is expecting big things from this new administration, if all cards fall into place, buying American just may become chic again.
I would insist on energy efficient designs, clean bluetec diesel and electric hybrids. I would also get the American Car Company to create green renewable energy stations, wind and solar farms, and other environmentally friendly energy focussed diversities. I would continue to implement new technologies, like Microsoft’s Sync, improved bidirectional GPS, while continuing to simplify the portfolio.
I would also structure the employee’s compensation to be competitive with the rest of the industry. Perhaps less income and more skin in the game would incentivize the workforce in a new hopeful direction. This is all pie in the sky of course, I know unions are complex – and the automotive unions are among the most complex I’m sure. I am trying to keep this article under 800 words :)
No doubt it would be a major restructuring, but the results would be incredible.
The American Auto Industry is an important part of America from a global perspective. Sure American cars have generated a bad rap, but back in the day they were the King of the World. They once had soul, I’ve written about them over and over again – because I remember a time when owning an American car was once the dream of many, and the envy of many more.
As someone who lives both in the U.S. and Canada I can say that people everywhere are incredibly optimistic about the new President Elect. The idea of creating a car company branded “American” under a new administration focussed on building the reputation of America while balancing trade is an incredible opportunity in my opinion.
Yeah, I'd totally do this - but too bad it's not up to me. It's up to the shareholders and the boards of these companies to demand change, to work on a plan and present it to the government hat in hand. It requires new thinking, someone from the outside needs to make it happen - an insider would be too caught up in the machine.
There has never been a better time to ask for change.
The bail-out seems to be exceeding 25 billion dollars and yet their CEOs took separate corporate jets to the meeting in which they were all but begging for money. It’s unbelievable really, and thus the topic of this blog. What would I do if I were in charge of auto industry bail-out? Yeah I know it’s not computer related, but let’s face it – technology drives the world – and these guys could learn something from the PC industry which changes on a daily basis.
Now there's nothing wrong with upper management using private jets to get around, the fact is they're busy and flying commercial is a total waste of time. I do believe, however, that the company needs to be healthy and profitable before people start taking advantage of such perks. That said, the first thing I would do is restructure the entire management team of all three companies. I simply cannot believe in management teams who do not deliver value to shareholders and employees. It’s unreal that these guys would not only fly to their government hearing in private jets but even more unreal that they reward themselves with 8 figure packages when their companies are haemorrhaging cash and their employees retirements are at risk.
These guys wore blinders for years, building gas guzzling SUVs without looking at the macro environment and global economic trends. They were not paying attention to their customers or their competition. Henry Ford once said "If I asked my customers what they wanted they'd ask for a faster horse..." That may be the case, but current management seems to be taking that comment way out of context. If you are leading the industry that you're in you can get away with saying and living by that --- however if you're all but getting killed you should probably look up once in awhile.
It would be like HP or Apple selling beige boxes in 2008. This is what happens when you don't use your peripheral vision to help steer your product and business strategy. It's important to pay attention man! That's the first thing I learned in kindergarten.
So after a major restructuring of management I’d figure out a way to get the three companies merged into one (assuming we had to save all three). If I could choose one company I believe Ford has the best chance of a turnaround – but in the case of GM and Chrysler I would say the chances of a turnaround are pretty slim. However GM does have the Cadillac brand, and they do have some emerging hybrid technology that could be of use. Thus, three companies need to merge into one.
I’d call it “The American Car Company”. I would kill the messy portfolio and focus on a few cars with meaningful sub-brands. The branding may seem complex, but the idea of the American flag on a car representing a country on the verge of a monumental change is a pretty powerful thing. Think about it - everyone is expecting big things from this new administration, if all cards fall into place, buying American just may become chic again.
I would insist on energy efficient designs, clean bluetec diesel and electric hybrids. I would also get the American Car Company to create green renewable energy stations, wind and solar farms, and other environmentally friendly energy focussed diversities. I would continue to implement new technologies, like Microsoft’s Sync, improved bidirectional GPS, while continuing to simplify the portfolio.
I would also structure the employee’s compensation to be competitive with the rest of the industry. Perhaps less income and more skin in the game would incentivize the workforce in a new hopeful direction. This is all pie in the sky of course, I know unions are complex – and the automotive unions are among the most complex I’m sure. I am trying to keep this article under 800 words :)
No doubt it would be a major restructuring, but the results would be incredible.
The American Auto Industry is an important part of America from a global perspective. Sure American cars have generated a bad rap, but back in the day they were the King of the World. They once had soul, I’ve written about them over and over again – because I remember a time when owning an American car was once the dream of many, and the envy of many more.
As someone who lives both in the U.S. and Canada I can say that people everywhere are incredibly optimistic about the new President Elect. The idea of creating a car company branded “American” under a new administration focussed on building the reputation of America while balancing trade is an incredible opportunity in my opinion.
Yeah, I'd totally do this - but too bad it's not up to me. It's up to the shareholders and the boards of these companies to demand change, to work on a plan and present it to the government hat in hand. It requires new thinking, someone from the outside needs to make it happen - an insider would be too caught up in the machine.
There has never been a better time to ask for change.
4 blogger comments:
Yeah you would think under a capitalist economy they would let them go...
Like with the AIG thing, I think without that, well we wouldn't even have an economy now because loans are what everyone counts on. But cars...not really going to effect us too much.
The high labour costs are a major contributor. One thing I would like to know - what to the big 3 pay their paint booth people compared to what Voodoo pays. Whatever the case is I am sure the Voodo people are much more qualified.
Haha!
Unions are "complex." Nicely tip-toed.
Hi, Rahul!
Are you aware that there was an auto maker in the United States called American Motors? They were pushed to into the dustbin of history by the big three U.S. auto companies. American Motors' remnants was purchased by one of the big three. If you review the history of the U.S. based auto industry, I do not think you will find that unions were the main issue. However, you will certainly find that sleazy practices of the big three U.S. auto makers were a problem. Lack of domestic competition in the U.S. is the problem. U.S. government regulations that favored the large auto makers. Corrupt relations with politicians and union leaders did not help.
Centrally planned economies stifle innovation and progress. It is the lack of the competition of an open market of ideas, and not having to deal with the consequences of bad decisions which limit the ability of central planning over long periods of time. If the planners know that they will not be called to account because they have a captive populous (or market) then they have no incentive to show reasonable care and deference to the true stakeholders. Um, sounds like the corporate executives that have run companies into the ground like Enron... It does not matter whether that central planning takes place in a political bureaucracy or a corporate board room. I charge the big three with a defacto tri-opoly. The U.S. auto industry is in trouble because of the local monopolist behavior of 'the three companies who must not be named' in the U.S. auto market against many smaller past U.S. auto companies in the early through middle 20th century. The chickens are coming home to roost. What goes around, really goes around.
Why is it that there are countries with much smaller populations compared to the U.S., and no natural resources to speak of, yet they have as many are more auto makers than the United States? Why is it that those foreign auto makers are more successful in competitive markets around the world?
Ford, General Motors, and Chrysler should be allowed to fail. Their failure would be a warning to all that everyone will reap what they have sewn.
Just as in the tech industry, new start ups would emerge from the ashes of Chrysler, Ford, and GM. Some would succeed, and some would fail. In the tech industry Intel and AMD are examples of start ups that came out of a floundering Fairchild. If the government had stepped in and prevented the all but collapse of Fairchild, it is possible that the micro computer revolution would not have happened. That process of paying for bad decisions can make for better entrepreneurs and leaders.
The old U.S. auto makers are not critical to the U.S. military defense establishment.
It seems some Americans are against welfare when it is given to the poor, but, love welfare for the republican leaning billionaire set.
Just some thoughts.
Best regards,
It was once called the land of the Free.
Post a Comment