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Saturday, September 23, 2006

The Automotive Industry

The automobile industry, once hailed as the mother of all industries is something that few people can choose to overlook in a global scan.As I read this, I just can’t refrain from referring to Seth Godin note on Ford. While the consolidation Buzz was always there for several years, I do read about and see the aggressive expansion plans of Toyota, Hyundai, Honda and the likes around the world. These people besides competing with Detroit are investing heavily in emerging markets where the US carmakers are not lagging far behind. No comong to Seth, he writes,

A couple of decades ago, Ford had everything. Cash, brand, distribution, political influence, a trained workforce...
Then, through nothing but management hubris and arrogance, they destroyed the company. At just about every turn the company ignored the market, alienated their workforce, distanced themselves from their distribution network, vilified their customers and chose short-term expediency ahead of long-term change. They lobbied to keep gas mileage standards high (doing the opposite would have increased the market for cars). They lobbied to keep SUVs unregulated (and got addicted to a short-term high-profit alternative to cars) and they bought remarkable brands and made them average.
There were hard things they could have chosen to do, things that would have meant change. There were short-term hardships they could have endured to fix their dealer network or reinvent the way they designed and built cars. Instead, they stayed inside the Detroit beltway, played the car game, managed the stock price and paid themselves a fortune.

Lovely words from Seth – what’s true for Ford is true for several corporates around the world across industries – so when he says Monday, when you sit down with your organization to plan the next decade, perhaps you could ask, "what would the top people at Ford do?" and then do precisely the opposite, it carries lot of sense.
It’s clear to me that the Asian manufacturers are not in a position to ignore Detroit. A few months back, I was meeting a senior Japanese auto executive, when I casually mentioned over lunch that his and other firms may be actually making the US automakers go down fast – the feisty, aggressive, business savvy executive told me, “NO” and said they won’t disappear – he chose not to elaborate further, but appeared quite convinced about his view. The hope is good brand value, cash at hand and a new proven CEO can make things look better. Proposals like this may help as well.

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