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How Big Three lost their groove
By Wan Lixin |
June 6, 2009, Saturday
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Print Edition
Print Edition
FOR the past week Chinese newspapers have been dominated by stories about General Motors' bankruptcy filing.
One of its smaller rivals, Chrysler LLC, filed for bankruptcy protection in April.
Some Chinese waxed sentimental and nostalgic over the demise of a "hundred-year-old shop," the fall of an icon.
For me, this was a good time to revisit "Death of a Salesman" by Arthur Miller.
The traveling salesman Willy Loman complains that "The street is lined with cars. There's not a breath of fresh air in the neighborhood ... They massacred the neighborhood." He kills himself by crashing his car.
Against this background a Sichuan machinery company's bid to acquire GM's Hummer - a fuel-guzzling monster - has created quite some hum and buzz.
By yesterday, the initial burst of enthusiasm had already given way to skepticism, with some speculating that the acquisition is motivated by considerations that have nothing to do with motor vehicles.
In view of China's soaring auto sales, this is definitely not the time to reflect why human beings need tons of steel and two hundred horsepower to take them, often individually, to small destinations.
So I pick up a copy of Micheline Maynard's "The End of Detroit: How the Big Three Lost Their Grip on the American Car Market" for a review this week.
Published in 2003, the book explains from purely economic perspectives why the "Big Three" Detroit car makers will find it difficult to survive for the next decade.
"There is no longer a single element of the car market where Detroit is clearly the leading player, either in profits, quality or buzz," Maynard writes.
As an auto journalist, the author has all the facts to substantiate his tale of how the Big Three are being replaced by non-US manufacturers.
Just 40 years ago, Detroit-made autos still accounted for 90 percent of the vehicles on US roads.
At the time the book was written, non-US car makers produced 40 percent of the autos purchased in the US.
Detroit began to lose market share in the 1970s when the Japanese entered the small-car market.
In the late 1980s Toyota grabbed the mid-size market, and by the 1990s the South Koreans locked up the lower-priced entry-level market.
Detroit's savior was the luxury SUV, which was hugely profitable, but competition intensified since 2003, even in this category.
Some of Detroit's most serious mistakes include:
Favoring product promotions, rather than quality products, to sell cars.
Confusing size with quality.
Spending billions on non-US auto makers, without getting results worth the expense.
Producing vehicles that infatuate, not serve American drivers.
Forgetting it was in the business of car building, not car financing.
Putting financiers in charge of car companies. Engineers head their competition.
Detroit set up an extensive network of dealerships to sell similar models of cars, while their competitors have less sprawling networks, facilitating better communication between headquarters and the field.
Non-US manufacturers also propel sales through favorable word-of-mouth by consumers.
"Satisfied customers have become the best selling tool foreign manufacturers could ever have," the book says.
The United Auto Workers (UAW) union also made US workers a highly privileged class receiving enormous benefits, thus that significantly undercutting Detroit's efficiency and competitiveness.
In the past 20 years, the UAW has failed to unionize any import auto plants, which solve problems on the manufacturing floor by management techniques.
"The presence of the UAW ... keeps Detroit companies from achieving the efficiency of the transplant factories in 'Detroit South' and elsewhere," the book says.
As a result, American consumers now realize that the cars do not have to be made in Detroit - if they have not realized why cars need to be made at all.
One of its smaller rivals, Chrysler LLC, filed for bankruptcy protection in April.
Some Chinese waxed sentimental and nostalgic over the demise of a "hundred-year-old shop," the fall of an icon.
For me, this was a good time to revisit "Death of a Salesman" by Arthur Miller.
The traveling salesman Willy Loman complains that "The street is lined with cars. There's not a breath of fresh air in the neighborhood ... They massacred the neighborhood." He kills himself by crashing his car.
Against this background a Sichuan machinery company's bid to acquire GM's Hummer - a fuel-guzzling monster - has created quite some hum and buzz.
By yesterday, the initial burst of enthusiasm had already given way to skepticism, with some speculating that the acquisition is motivated by considerations that have nothing to do with motor vehicles.
In view of China's soaring auto sales, this is definitely not the time to reflect why human beings need tons of steel and two hundred horsepower to take them, often individually, to small destinations.
So I pick up a copy of Micheline Maynard's "The End of Detroit: How the Big Three Lost Their Grip on the American Car Market" for a review this week.
Published in 2003, the book explains from purely economic perspectives why the "Big Three" Detroit car makers will find it difficult to survive for the next decade.
"There is no longer a single element of the car market where Detroit is clearly the leading player, either in profits, quality or buzz," Maynard writes.
As an auto journalist, the author has all the facts to substantiate his tale of how the Big Three are being replaced by non-US manufacturers.
Just 40 years ago, Detroit-made autos still accounted for 90 percent of the vehicles on US roads.
At the time the book was written, non-US car makers produced 40 percent of the autos purchased in the US.
Detroit began to lose market share in the 1970s when the Japanese entered the small-car market.
In the late 1980s Toyota grabbed the mid-size market, and by the 1990s the South Koreans locked up the lower-priced entry-level market.
Detroit's savior was the luxury SUV, which was hugely profitable, but competition intensified since 2003, even in this category.
Some of Detroit's most serious mistakes include:
Favoring product promotions, rather than quality products, to sell cars.
Confusing size with quality.
Spending billions on non-US auto makers, without getting results worth the expense.
Producing vehicles that infatuate, not serve American drivers.
Forgetting it was in the business of car building, not car financing.
Putting financiers in charge of car companies. Engineers head their competition.
Detroit set up an extensive network of dealerships to sell similar models of cars, while their competitors have less sprawling networks, facilitating better communication between headquarters and the field.
Non-US manufacturers also propel sales through favorable word-of-mouth by consumers.
"Satisfied customers have become the best selling tool foreign manufacturers could ever have," the book says.
The United Auto Workers (UAW) union also made US workers a highly privileged class receiving enormous benefits, thus that significantly undercutting Detroit's efficiency and competitiveness.
In the past 20 years, the UAW has failed to unionize any import auto plants, which solve problems on the manufacturing floor by management techniques.
"The presence of the UAW ... keeps Detroit companies from achieving the efficiency of the transplant factories in 'Detroit South' and elsewhere," the book says.
As a result, American consumers now realize that the cars do not have to be made in Detroit - if they have not realized why cars need to be made at all.
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