American Automakers: A Cautionary Tale

The American Automobile

America has done so many things well for dozens of decades. Farming, industrial, health, manufacturing and technology are but a few of the practices that have flourished in our fledgling democracy. You name it we have been leaders. It has been said, “They make airplanes in Everett (Boeing’s primary assembly point), every one else is still working on it.” But as is always case, people, cultures and politics eventually catch up, and indeed in many cases we have been surpassed. The idea of the horseless carriage was truly a global desire. Countries across the world came up with early designs and prototypes, trying to solve the same problem of getting someplace faster and easier.

Henry Ford founded his company in 1903 and once he invented the assembly line, the automotive industry was born. After an amazing head start, American car manufacturers lost their way in the late 1990’s into the 21st century, and are just now clawing back the public trust and loyalty.

Growing up I had two uncles who were mechanics plus one who drove race cars on the midwest super modified circuit. I watched these open-wheeled cars dash around a high-banked, dirt quarter mile oval track every Sunday night. When a back injury forced my race driving uncle to retire, guess what he did. He sold cars. First Chevrolet where he would say that Ford meant “found on road dead.” Then he got a better offer from the Ford dealership and suddenly it stood for “first on race day.” Cars are most definitely part of my heritage. As soon as the new car models were in the showroom, my dad would drive me from dealership to dealership looking under the hood, in the trunk, inspecting the interiors. It was sacred annual pilgrimage.

GM Then and Now

General Motors headquarters buildings, then and now

GM was the only way to go in our family. Once my dad bought an MG Roadster for fun and it literally fell apart before our eyes. Needless to say I was influenced by him and was a charter member of the GM fan club when it came time for me to choose a car. He did all the maintenance himself. Oil changes, brakes, timing, tune-ups, mufflers. Whatever it needed he did and I was right there learning from him.

I gravitated to Chevrolet. My first car was a 1969 Nova that I drove to high school before I was properly licensed. Times were different then. This was followed by two Monte Carlos, then a Buick. Ownership of these cars was annoying. Each car had its own peculiar issue. Some place along the way GM changed the trunk mechanism from a simple mechanical hinge to hydraulic mechanism which was bound to fail. Why make that change? The old design worked fine and never needed attention no matter how long you kept the car. I was young and didn’t have the money to repair all these things, so I just bumped my head every time I put something in the trunk. There were many other problems with seals, transmissions, air conditioning, starting in cold or wet weather, flooding, starters and overheating. It was a part time job to keep these contraptions working.

Losing their Way

In the early 1990’s I was on a business trip to Philadelphia and rented a Pontiac. I don’t recall which model. As I approached the car I couldn’t believe what I saw. Where had the styling gone? No stance, no statement at all. It got worse once I sat down behind the wheel. This was the same brand that gave us the GTO? Everything reeked of cheap, cutting corners, absolute bare minimum. Driving it was the absolute worst. Shaky, no power. It did not feel safe.

A few weeks later I was traveling westward, but this time the rental choice was a Toyota Camry. My reaction was just the opposite. Substantial car. Nice interior, lots of features, clean design. Oh yeah, it was a pleasure to drive. That rental (call it a test drive) didn’t necessarily convert me to buy a Japanese car as much as it made it clear I did not want a Pontiac. Within weeks I was driving a brand new 1993 Toyota Camry.

It’s my belief that you can boil down American’s car problems in the early 2000’s to the following:

  • Arrogance
  • Inertia
  • Lack of consumer understanding
  • Ivory tower syndrome

Arrogance is the easiest to understand, ”We make the best cars in the world.” Like the Boeing quote. End of conversation. One of the worst things that can happen to corporate America is success. It fuels a conservative perspective and stifles real innovation. When I say innovation I don’t mean trying nylon seats on a low end model.

Inertia is more subtle. The assembly line to showroom chain was a finely honed process for American car makers. One of my uncles lived in Lansing, Michigan where there was an Oldsmobile plant. As a child he took me on a plant tour and I marveled at how all the parts came together like a well choreographed production number. They got them off the line and onto the dealer lots efficiently. In 2008 GM alone produced 8.35 million cars with 5.37 million of them sold outside the United States. Worldwide today over 165,000 cars are produced everyday. A well oiled machine to say the least.

Even though cars were a significant expense for the average family, they were still relatively affordable for many years. My father didn’t make a lot of money as an electrical engineer, but he paid cash for every car he ever bought, trading up to a new GM model every couple of years. He was a Pontiac man and loved the sedans. Here’s the bill of sale from his purchase of a 1961 Pontiac Tempest Safari station wagon (the first SUV). Total price $3,249.35.

Scan

The boomers were coming of driving age in the late 1970’s and the Eisenhower Interstate Highway system was in place connecting the vast country. The family car was how you saw America, it was the “vacation transportation.” Women began to enter the workforce and so a second family car was needed. The price of gas was under .50 per gallon. American car barons were riding a very tall wave. All these factors that led to meteoric growth also conspired against them as they pushed the supply chain thinking to the max. This has made it very difficult to rethink or re-imagine a complicated business.

America definitely made cars safer and more comfortable, but it’s hard to see how they thought beyond the next model. It’s as if some guy said, “Let’s try this.” And everyone did it at the same time. There was a brief attempt by Preston Tucker of Ypsilanti, Michigan in the late 1940′s to create “The Car of Tomorrow.” It was successfully stopped on trumped up Securities and Exchange Commission charges.

The Japanese were successful in creating electronics. Sony with the walkman and perched to take over the premium television market from Philco and Zenith. The next frontier would be automobiles.

That brings us to lack of consumer understanding. Remember my trunk story? When Japanese automakers found a part or design that worked well, they kept it. As a result the quality of their products improved over the years. They mastered manufacturing excellence and incorporated cumulative learning into the process. This allowed them to focus more on the consumer driving their cars. Honda and Toyota pulled off an amazing marketing feat. They used their management and production methods to raise quality, and their vision and research to gain an amazingly strong foothold in the U.S. They gave boomers the Honda Civic and Toyota Corolla as they entered their 20′s. Reliable, efficient, affordable, low maintenance and long lasting cars. Once the boomers became established in careers and began to accumulate disposable income, they gave us Lexus, Acura and Infiniti, just as we were looking for more luxury and prestige. Brilliant.

Meanwhile American car companies knew they were in trouble and trying to manage brand strategy and find the quality recipe. The boomer’s parents (at least the dads) pretty much stuck to a few brands, but everyone of them ended up in the repair shop with all those annoying problems. Oh by the way, they cost more and didn’t last as long. American car companies were on an internal corporate hamster wheel and it was out of synch with consumer need states. When you give consumers similar choice they will freeze because they can’t see differentiation between them. Offer them distinct choices and you will reshape how they think and widen their consideration set. It didn’t hurt a bit to see all those Japanese cars on the road. It took a while for Toyota, Honda and Nissan to be taken seriously, but once U.S. consumers saw that this different was better, it was all over.

The “Buy American” anthem was hatched to try and hold off the outsiders. How dare you buy a car made outside the good ole U S of A? So the Japanese opened state of the art factories in the states. Buying American is great and people would love to, but it would have been much better if it was “Buy American because it’s better,” and actually true.

Now the oldie, but goodie, the ivory tower syndrome. American car execs drove their own car brands and models to work each day and never had any problems with them. “What are all these people complaining about? These cars are fantastic.” Well first of all they always drive new cars. American cars will get you down the road pretty pain free for the first year (12 month or 12,000 mile are the mystical numbers). Second, when they parked in the headquarters garage a team of mechanics would swarm their vehicles and make sure all was in perfect working order. Hmmm, maybe that had something to do with why the cars were in tip top shape. The execs should have given themselves 3-5 year old models to drive and forced to maintain them the way everyone else had to, by making an appointment with a dealer and finding an alternate means of getting to work.

Consumer Reports Auto RankingsDespite the positive changes by American carmakers over the last several years, a 2013 Consumer Reports survey shows that there is a ways to go. Ford in particular has struggled to satisfy their customers and the culprit seems to be the “synch” technology which has been a cornerstone of recent advertising. Microsoft was hired to do the programming and the interface has baffled a lot of consumers. Ford is searching for a new software platform. GM, Chrysler, Chevrolet, Cadillac and Dodge all faired poorly in the recent rankings. Lexus, Acura and Audi held the top spots among the established manufacturers. The recent troubles with GM’s ignition problems in the Colbalt and other air bag issues will be a challenge for their new CEO Mary T. Barra. Personally I was thrilled that Ms. Barra is the first woman to be elevated to CEO status of a major car maker. Perhaps the most storied one at that. I wish her nothing but good fortune.

I don’t believe that any carmaker is purposefully putting safety aside. The larger problems my lie in the communication and culture of GM to quickly identify and begin to correct problems, even if they seem inconclusive or could pose a risk to profit. For the record, Tesla scored a 99 on this Consumer Reports ranking.

Making a Change

I had my 1993 Toyota Camry for seven years, drove it 118,000 miles and never once opened the hood myself to check the oil or troubleshoot a problem. It never saw the inside of the shop for anything except normal maintenance. It never, ever failed to start, even in the harsh Chicago winters. This experience showed me that car ownership can be better.

The 1970’s oil embargo and eventual energy crisis forced firms to downsize cars and improve mileage. But America quickly forgot about that; longing for bigger and faster. So on came the SUV, the rebirth of the V8 engine and the era of monster cars and trucks. Remember the Hummer? When looking at profit margins on those vehicles vs. other models, it made great business sense to U.S. carmakers to continue to build and promote them. Wall Street liked it too. The quality and styling of American made cars has come up nicely as of late. The dealer experience has also improved as a formal customer satisfaction scorecard has come into play.

I traded my Camry for a new 2003 Acura TL. I would have been happy to trade for another Toyota, but their designs at that time were so boring and not at all fun to drive. The experience I had with my Acura was similar to the Camry. Reliable at a relatively high level. I did have to replace the transmission, but Acura subsidized that repair at an acceptable level. Bottom line, it never failed me.

The success of outsider car manufacturers sharpened the short sightedness of U.S. carmakers. I still think they were in denial and felt no real harm could come to them. The price of oil continued to rise which began to spur more conversation about alternative fuel cars. American car companies have tinkered with alternative fuel cars. The Chevy Volt became the first serious contender to the Toyota Prius. Sill these are hybrid cars that have gasoline engines and need to be maintained with oil changes, tune-ups and other items. the full gain of electric power is not realized.

The Electric Vehicle

Gm-impact

General Motors EV1

From 1996 to 1999 General Motors built 1,117 of an all electric car called the EV1. You couldn’t buy one, you had to lease it. For the 800 or so who did they became instant lovers of the car. Alas, that love did not last as GM put an end to production and repossessed them, eventually crushing them for recycle scrap. Many felt it was borderline conspiracy to keep oil and the current system in place. GM always said it was an experiment. The EV1 was a concept car and no promise was ever made to mass produce it. They built it because of toughening emission laws, especially in California.

The Toyota Prius, a hybrid, has sold over 3 million units and the Nissan Leaf is the bestselling highway capable vehicle of all electric cars to date with over 100,000 of them on the road as of January 2014. There are no less than 18 EV models available globally with more on the drawing board.

The Invention of Tesla Motors

IMG_1589

The Model S

Along came Tesla Motors in the early 2000’s with a mission to advance the adoption of all electric vehicles. It was named for Nikola Tesla, a mad professor of electricity who was Thomas Edison’s contemporary and very much underrated. They built the Roadster, an expensive two seat sports car as their first production model. They needed to start somewhere and so this was their choice. I personally know three people who own them, one for over eight years, and they absolutely love it. But this was not the car for me. I love sports cars, but I wanted something more in the luxury family, larger, but just as fast.

The Model S was announced and I was all over it. After watching the company and car development closely I was beginning to feel this might be the one for me. I drove my neighbor’s last spring and that was it. I configured it online and 32 days later I was driving one home from the Chicago service center. A grey 60kw Model S with tech package and panoramic roof. I have been all smiles ever since.

Imagine a car where you have no engine, no oil, no radiator or starter. No fan blade or belt. No tailpipe, catalytic converter, muffler and therefore no exhaust. No gas tank or fuel line. No drive train, transmission, spark plugs or any scheduled maintenance. All those burdens that come with gas car ownership are absent from the Model S. All that space and expense can be given back to the engineers to start from the ground up. It’s a marvel. The Model S is German elegant, Japanese sleek and American powerful.

The car was designed and is manufactured in Fremont, California. All American. It is clearly the dawning of a new era of car making in the U.S. There was no way GM or Ford or Chrysler could have made this car. That’s like saying Sears could have been Amazon. Not possible to disrupt that much from inside a long standing company with so much owed to the past.

It is an expensive car and not in most people’s price range, but sticker price is no longer how we should measure the cost of a car. When assessing the price of a car it’s important to remember all those things you have to do along the way. Take at look at my post on the total cost of ownership between an Acura TL and a Model S. You will be surprised.

Personal Transportation is the Future

In many ways early adopters of EV’s are funding the research and development needed to take the required steps to cracking the code on new car technology. As I look back on my father’s car ownership record, he owned 41 cars. I prefer to support further EV development. If it comes from GM or Ford or Chrysler then great. But Tesla is pioneering the new way forward. It’s no longer an automobile. It’s now Personal Transportation. Brilliant software integrated into superior hardware, both working together to make the experience the highest level it can be.

It’s the best car I’ve ever driven.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s