Automotive Crisis Avoidable?

Over the past five years we have heard it all from the three major American automotive manufacturers. We have heard of record profits due mainly to strong SUV sales. And now we are hearing how the economy has shifted their power and they are now on the verge of bankruptcy.

You will hear many pundits debate this and talk about different ratios and how the CEO's mismanaged the company. This is all true, but the solutions they seemingly offer do not help our understanding of what is going on inside the car companies. Not enough of the real world is savvy enough to understand contract law as it relates to unions. Very few of the real world can understand the complex financial structure in which union leaders have their retirement funding.

What we can understand at our level is lack of focus. We all have to deal with this every day. We have to plan for the future. We learned this lesson in the 1980's. If you spend everything you earn, at some point, your earnings will go down and you will be left with nothing but "stuff." After all, how much are those expensive electronics really worth?

This is the same problem that happened at the automotive manufacturers. They were so busy living in the moment, that they forgot to plan for tomorrow. Well, tomorrow arrived last year with sky0high gas prices and no relief in sight. Due to an economic melt down, we did receive some much needed gas price relief, but what will the automotive companies do now? Will they go back to business as usual using the bail out money to "tide them over" until the economy picks up again, or will they finally see the light and change the way they do business.

Every business goes through a cycle and if you rest on your laurels, eventually, you will die as a company. If you want to keep going, you have to innovate; stay ahead of the competition. It is time for American ingenuity to take over and for the "Big Three" to reassert themselves.

How, though, are they supposed to do this. Well, I think they have to look at what the future holds economically. They need to change the way they do business from top to bottom.

First of all, I think that they need to come up with a new way to run the company from the top. There is no reason that the CEO of any company should make $500 million in bonuses, regardless of his success. Unless a CEO is a majority stockholder (greater than 50% of the company's stock), he should be paid a salary plus bonuses based STRICTLY on profits, not sales. These bonuses should have a cap and anything above said cap be paid in stock options.

Second, innovation NEEDS to be "job #1." Without innovation, the company WILL fail. It is not "innovative" to find new concepts for an SUV... or to put more gadgets in an existing SUV. It is lazy and it is not working. What is innovative, changing the way America sees transportation and changing the way they BUY cars.

We are too advanced with information too readily available to be stuck buying cars like the old days. Look, I worked at dealerships, there was a reason for them in the past, the reason for them needs to change. Think about it, why are there hundreds of vehicles on a new car lot? So they can sell them quickly. But this leaves the dealer tied up into the millions and tens of millions, so rather than truly assessing his customers needs, he sells what he has.

Why not assess a customers needs and sell him something that fits those needs. Use innovation to create the ability to do so... as an example, virtual reality can really get a customer to understand a new vehicle, this can be set up fairly easily. Obviously, customers want to know how a car drives, but why have a hundred of the same car on the lot? I say you have one or two of each model on the lot, and let a "distributor" (who cannot sell to anyone but dealers), hold higher inventory selling something more specific to each dealer. If a customer goes in on Saturday and wants a red Ford Ranger, after he has agreed to the purchase, the dealer orders the correct vehicle from the distributor and within 48 hours, the customer still has their car.

From the Corporate perspective, we need to find a way to get cars that are more competitive with Toyota's and Honda's. Stop worrying about bigger and make more competitive cars. Just the other day, I had a customer come in to my shop and say he was going to be glad to get out of the rental. He was in a Malibu and it just didn't compare, in his mind, to his Camry. The difference? It did not have the same ride and feel. It still had all the bells and whistles, but not the same ride.

Also, I believe a dealer should not be limited to selling a specific make, he should be able to order ANY new car from his distributor and sell that car... then a dealer's success will no longer be dependent on the successful innovation of a specific company, but on his ability to service his customers.

These are but a few of the ways to make our car companies better, we need to think of even more.

The most important thing, in my opinion, though, is to rid themselves of the overbearing union which benefits very few at the expense of very many.