What do you think will happen to the US automakers?

[sweeps]

GM, Chrysler discussing merger -- source - Autos - MSNBC.com

[financestrategy]

I think due to estimated recession, inflation levels and rising fuel prices the overall demand for automobiles will definately go down which will ultimately effect the operating performance of both GM and Ford. Further I had the oppurtunity to look at the financials of Ford. They had some strategy to reduce cost. They succeded to certain extent but then it was further effected by reduction in sales.

Bankruptcy is the near future for these stocks which is evident from Ford selling its units to other players.

Regds

[jIM_Ohio]

GM, Chrysler discussing merger -- source - Autos - MSNBC.com

You can turn the lights off and the girl is still ugly

You can put makeup on the ugliest girl in the world and she becomes ugly when she takes a bath.

You can merge two companies but that does not improve either company, it will simply amplify the bad ideas, combine two difficult corporate cultures and probably prolong the inevitable.

The inevitable is that until the culture of US automakers change, no makeup, merger or lightswitch will improve the situation.

[kork13]

At Ford, the culture is don't change what has worked in the past.

Yet we are often reminded that past performance does not guarantee future results. HMMM.

I don't intend to sound derrogatory toward our "more experienced" generations, but I think many of the problems facing companies today (on just about every level, from base level production such as steel, silicon chips, and food staples to top level products/services such as autos, distribution/transportation, financials, and computers) is a resistance to radically changing their business model to adapt to current market conditions.

Think of it this way--back in 1975, eager business school graduates with ideas galore joined on with companies such as Ford/GM, Lehman, Dell, and so on. These are now your CEOs. Their top advisors? (then-) Eager 1980 business school graduates who joined on with great ideas. Problem? Their ideas are coming from 25-30 years ago. The marketplace changes too quickly for that. I recognize that experience is needed at the top, but I also think that your CEOs, etc. all need to be using young new business-type-people as what you would call their 'top advisors'. Older generations are less adept at adjusting to new technologies, new ways of doing business, and so on. Having younger people advising toward the way forward with a top managment who is willing not only to listen but to act on their advice is the only way that companies anymore are goign to be able to continue to move forward and keep pace with the American culture.

As Jim has brought up, Ford/GM have problems accepting change. Honda/Nissan/Toyota embrace it. I don't know where to back up my theories, but my bets are that they employ far more younger people in higher positions of responsibility/decisionmaking than Forg/GM do.

[jIM_Ohio]

As Jim has brought up, Ford/GM have problems accepting change. Honda/Nissan/Toyota embrace it. I don't know where to back up my theories, but my bets are that they employ far more younger people in higher positions of responsibility/decisionmaking than Forg/GM do.

It's within the culture of the companies. Not so much the age of the employees.

Honda and Toyota both redesign their cars from ground up every 2 or 3 model years. IN the US that is seen as wasted effort.

I have a design background, and from day 1 in college we are told design is maybe 30% of the cost of any given widget, but that 30% locks in close to 95% of all costs.

Meaning if you don't design the widget right, at best you could cut around 5-20% of your costs (shipping, marketing type things).

Design changes allow new materials, new technologies to be used. Plus if some problem came up, it can be identified as a requirement the next time around, so assuming requirements driven design is used, the more recent problems are dealt with early in design cycle and removed from downstream problem areas.
Ford and GM would see "30% of cost" and find ways to reduce that on the bottom line- fewer models, eliminate design steps, less change to manufacturing infrastructure and the list is bigger than even I know.

The culture is to not reinvent the wheel, which means any high cost manufacturing step (a signifcant cost to an automaker) might be built in because the design for that portion of car will not change. If the manufacturing infrastructure is changed, there is no guarantee a redesign preceded the change, meaning the decisions are made more in a vacuum

One analagy we used when I worked at Ford is that Ford is two things
1) it is the largest family owned business in the world (don't let the stock ticker fool you, the Ford family still owns and runs things)
2) Ford is really 6 or 7 business units which work together to assemble a car. Those 6 or 7 business units are under the Ford company name, but power train vs body vs marketing vs financing vs assembly vs manufacturing don't exactly get along or see eye to eye on things. As long as the business units get a car to the customer, the system is believed to be working.

I worked in the training department- we had people from body, powertrain, and manufacturing coming thru our training. When power train decided to go and build their own curriculum (the same way body did), manufacturing came in and said "we want our own too".

Mind you the training is nearly the same, but the cost was duplicated 3X and most other customers we support don't ask for anything nearly that elaborate.

[disneysteve]

Honda and Toyota both redesign their cars from ground up every 2 or 3 model years. IN the US that is seen as wasted effort.

Personally, I wish they would NOT redesign the cars so often. It always seems to me like they do it just to attract buyers rather than to make any fundamental changes to the vehicle.

One of the best selling cars of all times was the VW Beetle, a car that kept the same design for years and years.

I posted not long ago that I've been driving a Camry since 1991. I think they are great cars and I would happily have bought another when I was ready for my next car without a second thought. Then they went and totally redesigned the car and I don't like the new design at all. It is very unlikely, now, that I will consider another Camry. When you've got the best selling car in the country, why mess with it? Bad move IMO.

I think the problem with the domestic cars isn't the design but the dependability. Whether real or perceived, the foreign cars just have a far better reputation. I've been in various US cars and they were very nice and drove well, but even though they are cheaper than their foreign counterparts, I wouldn't consider one due to reputation.

[kork13]

Personally, I wish they would NOT redesign the cars so often. It always seems to me like they do it just to attract buyers rather than to make any fundamental changes to the vehicle.

One of the best selling cars of all times was the VW Beetle, a car that kept the same design for years and years.

I posted not long ago that I've been driving a Camry since 1991. I think they are great cars and I would happily have bought another when I was ready for my next car without a second thought. Then they went and totally redesigned the car and I don't like the new design at all. It is very unlikely, now, that I will consider another Camry. When you've got the best selling car in the country, why mess with it? Bad move IMO.

I think the problem with the domestic cars isn't the design but the dependability. Whether real or perceived, the foreign cars just have a far better reputation. I've been in various US cars and they were very nice and drove well, but even though they are cheaper than their foreign counterparts, I wouldn't consider one due to reputation.

This is EXACTLY the point that some friends made to me recently. They don't like (and won't buy) American cars for primarily this reason, and admittedly, I mostly agree. Audi and BMW in particular (to a lesser but still significant extent the Japanese makers) have relied on long-standing car models. People trust those models because they have a long record of performing in whatever way expected. Perfect examples: Honda Civic, BMW 3-series, Audi A4/A6, and Toyota Corolla. Basic models for each company, but they've been consistent! What are the basic models for the American companies? Have those models been around for more than 10-20 years? In most cases, no. The Mustang and Corvette are exceptions, but again--note their popularity.

Allow me to explain more specifically... I'm more familiar with BMW (given my dream of an M3 someday), so I'll use them. Ask somebody what cars BMW sells. Well, easy. The 3-series, 5-series, 7-series, M-series (sport coupes/sedans), X-series (SUVs) and Z-series (sport convertibles). In each "series", the biggest difference between them is the engine and tuning, along with some minor feature/style differences. Between each series (3-, 5-, 7-, etc.), major body/interior styles change along with the engine. The engine is denoted by the 2nd two digits in the model number, such as a BMW 330 has a 3-series body and a 3.0L engine. All of this translates to a long-standing tradition of SAMENESS, which in people's mind equates to QUALITY and RELIABILITY.

This brings up an interesting thought... Jim, you point out that American companies feel that redesign is wasteful... and yet they are more adept at it than foreign makers! They use a car design for about 5-10 years, then stop making it. Yes, the foreign makers occasionally will make a dramatic change, such as Honda's 2006 redesign of the Civic, but they are still fundamentally the same car. So I'm curious how American makers validate their beliefs with their actions? They need to realize that people just don't trust their cars. Do you know ANYBODY that trusts (for example) a Dodge minivan to last longer than 5 years? That's a perfect example, because they are RENOWNED for suddenly failing UTTERLY right about the 5 year mark.

[disneysteve]

Do you know ANYBODY that trusts (for example) a Dodge minivan to last longer than 5 years? That's a perfect example, because they are RENOWNED for suddenly failing UTTERLY right about the 5 year mark.

We would have been happy with 5 years. Ours suddenly burst into flames in our driveway at 4 years. Investigators determined it was due to a defect in grounding the fuel tank that caused gas vapors to ignite.

[kork13]

We would have been happy with 5 years. Ours suddenly burst into flames in our driveway at 4 years. Investigators determined it was due to a defect in grounding the fuel tank that caused gas vapors to ignite.

.....HAHAHAHAHAHA

I'm very sorry to laugh, and I hope no serious damage/injury and that everything ended up alright, but it really does go to show exactly what I mean... That and I have never heard of a car literally blowing up, much less while simply sitting in the driveway!

[disneysteve]

That and I have never heard of a car literally blowing up, much less while simply sitting in the driveway!

My wife had just come back from food shopping. She unloaded the car and was in the kitchen unpacking everything. I saw smoke out the front window and looked out to see the car on fire. There was probably a shock when she shut the door or whatever. We were just really lucky because the night before we had returned from a trip driving from Florida. Had it happened on the road while the van was fully packed, that would have really sucked. As it was, we had to repave the driveway, replace the garage door, replant part of the lawn, replace a lightpost and replace everything that was in the van (tools, CDs, etc.).

[kork13]

My wife had just come back from food shopping. She unloaded the car and was in the kitchen unpacking everything. I saw smoke out the front window and looked out to see the car on fire. There was probably a shock when she shut the door or whatever. We were just really lucky because the night before we had returned from a trip driving from Florida. Had it happened on the road while the van was fully packed, that would have really sucked. As it was, we had to repave the driveway, replace the garage door, replant part of the lawn, replace a lightpost and replace everything that was in the van (tools, CDs, etc.).

YIKES!! I don't suppose Dodge assumed any responsibility and/or picked up some of the tab? Or maybe your insurance? I hope you didn't have to pay for all that on your own since it was a defect with the car...

[disneysteve]

YIKES!! I don't suppose Dodge assumed any responsibility and/or picked up some of the tab? Or maybe your insurance? I hope you didn't have to pay for all that on your own since it was a defect with the car...

Insurance covered the damages. Dodge did nothing. Our attorney said we didn't have a case since insurance covered monetary losses and there was no bodily injury.

[jIM_Ohio]

Personally, I wish they would NOT redesign the cars so often. It always seems to me like they do it just to attract buyers rather than to make any fundamental changes to the vehicle.

One of the best selling cars of all times was the VW Beetle, a car that kept the same design for years and years.

I posted not long ago that I've been driving a Camry since 1991. I think they are great cars and I would happily have bought another when I was ready for my next car without a second thought. Then they went and totally redesigned the car and I don't like the new design at all. It is very unlikely, now, that I will consider another Camry. When you've got the best selling car in the country, why mess with it? Bad move IMO.

I think the problem with the domestic cars isn't the design but the dependability. Whether real or perceived, the foreign cars just have a far better reputation. I've been in various US cars and they were very nice and drove well, but even though they are cheaper than their foreign counterparts, I wouldn't consider one due to reputation.

DS- the technology to manufacture the components and the technology to assemble the cars changes frequently. These technology changes are among the reasons to need to redesign (incorporate new manufacturing technology into the design). You cannot change manufacturing without looking into the design because the design requirements might have been driven by manufacturing limitations.

The result of the new technology is a cheaper car with higher quality. The parts are built faster and better with lower cost if the new technology can be used.

While I agree some body stylings are things I do not like (I did not like the way Chrysler did it's Dodge ram around 1996 with the sunken head lights. Yet the truck was a best seller- so what do I know. In 2 years the body styling will change again. That should help toyota if they see sales based on body styling level off or go down.

That being said "leaving things alone" is a US automaker trait and would suggest a company could rest on its laurels, right?

[disneysteve]

That being said "leaving things alone" is a US automaker trait and would suggest a company could rest on its laurels, right?

I think change is a double-edged sword. You may attract customers who prefer the new design but may lose customers who prefer the old design. And that doesn't just go for cars. I can think of a number of products that came out with a "new and improved" version that we didn't like as much as the original and we were stuck switching brands. Remember New Coke?

I'm not sure I would call maintaining production of a very popular car resting on one's laurels. Although I'm not opposed to innovation and I recognize that technology changes, I'm not the type who constantly upgrades things just because something new or supposedly better comes along. If I find something that works and is reliable and does the job, I'll stick with it. The car makers, US and foreign, don't give us that option. They force us to upgrade by constantly redesigning the product.

[jIM_Ohio]

DS- if you had a 2002 Camry you like, no reason to worry about 2004, 2006 or 2008 changes because the next Camry you will need is 2012 or 2016, right?

I have seen the level of planning which goes into building car. Because the economies of scale (saving 1/10 of $.01- a tenth of a penny) saves the automaker millions each year, so much planning goes into the design:

1) design for manufacturing- simplify the manufacturing processes needed even if take more time to design or redesign
2) design for assembly- simplify the assembly processes needed even if it takes more time to design or redesign.
3) design for environment- add more resourse to design so when part has reached its max life, it is easy and cheap to dispose of
4) requirements driven design- have a detailed set of requirements prior to starting design, and validate design to these requirements.

These 4 are what make the automotive industry different than aerospace, ship building, copiers and similar.

For example- Boeing and Lockheed would not concern themselves with a manufacturing improvement which saved them a penny or two- when building planes the contract might call for a 100 planes, maybe 200. An automotive company might put that many cars together in an hour.

Another example, when I worked for Xerox in the manufacturing end, they looked at design for assembly, but with only 50 units per week coming off their busiest assembly line, using those techniques cost more than they saved.

Another example- a diskdrive company will need to have a new product every 6-9 months (meaning their technology becomes obsolete around every 6-9 months). Size doubles and cost gets halved around every 6-12 months as well. They cannot concern themselves with things which increase their cycle time (design for xyz), they need to get product to market fast.

My last example would be medical devices. Again they do not get the economies of scale necessary to leverage the design techniques mentioned. The biggest issue is getting through governmental approval (not getting thru design phase), and when approved the units in manufacturing generally do not support economics where a penny saved per unit is seen on bottom line (to same extent of US automakers).

Whereas automotive companies have time- 3 years for Japanease companies and 5 years for US companies- to include these details into their whole process. They will reap the savings the details bring because some parts might be used 2X or 4X on same car, and might be used on different models too.

If Toyota can implement a technique to save itself $.02 per part in 2002, then can further improve it's process to save $.01 in 2004, that savings could be $.03 times a million plus units, maybe 10 million or 100 million units. They cannot pass up something that significant for their bottom line.