5 Things the Big Three American Automakers Can Do Now to Ensure Long Term Survival
Updated December 5, 2014
There was a time in this country when there were more than just three major North American auto manufacturers with names like Studebaker, AMC and Packard…all now gathering dust in our collective memories. Although GM, Ford and Chrysler survived the great automotive sales crash of 2009 (with GM and Chrysler thanking their lucky stars for the Government and Fiat) there is still much work to be done to ensure customers actually want to buy their cars in the future. That “gotta have it” perception is really where the Big Three automakers have found themselves lacking in recent years due to sub-standard quality and uninteresting designs. (Note: In 2005 Ford underwent a restructuring plan that saw its quality ratings improve to the point that they now match Honda and Toyota.)
Although they countered through the lean times with huge cash back offers and 0% financing this still did little to help stem the tide of sales losses. So who gained from The Big Three falling behind in product development? Well, the Germans and Japanese appealed to those who wanted luxury or bank vault reliability while the Koreans seemingly overnight took over the economy end of the market. As a result The Big Three focused on the only market segments where they dominated and that offered them the biggest profit margins-pickup trucks and SUVs. We all know how that short gas price hike and the public SUV backlash affected those sales, now don’t we? Thankfully for now gas prices have steadied and marketing departments realized people would buy SUVs as long as you called them “crossovers.” But dumb luck and clever wording do not a successful car company make.
Ford has really been the only automaker to see sales and profit increases across the board thanks to the fact that it invested a huge amount of money in product development a few years back. Ford also anticipated the whole vehicle downsizing trend. This is evidenced by the luxurious features (like Sync, navigation, premium audio, hybrid powertrains) being made available on mid-level models like the Fusion and the recent 2010 Detroit Auto Show introductions of the all new Focus and Fiesta small cars. (Note: Small cars are expected to be the largest growth segment in North American car sales over the next five years.) In the months and years ahead there are going to be many tough decisions made in the corporate offices of The Big Three.
Many higher-ups blame high union salaries and costs for the fall of the American auto industry but how does that explain the fact that employees who work at Toyota’s North American Camry factory make more money an hour than any union Big Three employee? So taking a cue from their Korean, Japanese and German competitors what can The Big Three do to ensure long term survival? Here are five recommendations.
Do Not Let Final Decisions Be Made by Accountants-One of the most successful (and 100% independent, mind you) carmakers in the world is Honda and its founder Soichiro Honda once said that it was a company “run by engineers.” While cutting costs is important, you can’t let the accountants run a car company. That is when you end up with ugly, inefficient and poor quality vehicles that are cheap to build.
Put Long Term Loyalty Ahead of Short Term Profits-Although small cars do not have the largest profit margins they are usually the entry point to a brand for first time buyers. If you get that first car right the more likely it is that this consumer will return to you when it is time to buy a bigger, fancier model. Honestly, if you force people to drive a Chevy Cobalt for five years do you think they will be influenced in any way by that mediocre car to return for a second Chevy?
People Want Stylish Small Cars with Luxurious Features-Speaking of small, entry level cars here is a concept that at least Ford has finally figured out. After months of letting real people drive their new Fiesta on North American roads, Ford finally decided it was a wise move not to completely cost-cut the interior as they did when they launched the original Focus years ago. Instead they decided to offer all of the upscale features European buyers are afforded but make it all optional. That way a buyer can decide if they want the pimped out Focus with Sync, the cool stereo and ambient lighting or the one that has four wheels and a door. This ability to personalize your automobile was really brought to the forefront by BMW’s Mini and that brand proved small car buyers are not afraid to spend extra money to make their car nicer. I am sorry but I just don’t think there is any way you can pimp out your new Chevy Cruze. I know Chrysler is planning on bringing a number of Fiat based small cars to North America (the quality of the 500 will be pivotal) and I hope they follow the Ford model and not the one GM uses.
Hire a Car Designer Who Will Give Your Entire Line-up a Specific Design Theme-When Kia hired car designer Andrew Schreyer away from Audi (he penned the TT) a few years back, a lot of people thought the man was crazy for going to a manufacturer not exactly know for high style offerings. But the firm pretty much gave him free reign to do what he wanted and in doing so he has created a coherent design language that is continuing to be expressed through each subsequent model. Many other firms like BMW (and the aforementioned Audi) keep a well defined familial look for all of their models. So, what is the Chevy design theme? I didn’t think there was one either.
Regain Public Trust With Dependable Long-Term Warranties-South Korean automakers Kia and Hyundai (which were both quality and sales jokes just ten years ago) were one of the few automakers that actually sold more cars in 2009 than in the year before. They even edged ahead of Ford in total worldwide sales. Kia and Hyundai (which are essentially the same company) turned their fortunes around by performing a sweeping internal quality improvement campaign before they started offering that 10 year/100,000 mile warranty to new car buyers. As a result Kia and Hyundai got increased consumer confidence thanks to those warranties while the quality improvements meant they didn’t wind up paying out all that much in warranty claims. It was really a win/win and this increased consumer confidence has even allowed them enough public credibility to find success selling a luxury sedan (the Hyundai Genesis) that tops out over $40,000.
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