I'm opinionated... all of my regular readers know that. And I am a car guy... all of my regular readers know that. So, it isn't a leap to think I would have an opinion about what is going on with the American auto companies.
Here it is...
All three of the American companies are in trouble. I think that Chryselr is in the least trouble... and it still isn't good. GM is in the most trouble, and for them it could be catastrophic.
To start with, the auto executives... and Congress need to examine the root causes for why the Big 3 (B3) are in trouble. This needs to be done honestly, and not through partisan glasses... or through politically correct glasses. I think this is going to be harder for Congress than it will be for the auto executives. Democrats in Congress don't want to admit that the unions could be part of the problem, and they also don't actually know what the facts are, just perceptions.
- Labor costs at the B3 are out of hand. They range from $70 to $76 per hour. Honda, Nissan and Toyota in the US are between $42 and $48. Average in the manufacturing sector is $25.36. When times are fat for the auto industry, they are pushed to "share the wealth" with labor. When times are lean, labor doesn't wish to give any concessions. The UAW needs to give up some money. Or the B3 are going to go away and the UAW will give up all of their jobs. Here is my offer:
- Increase profit sharing. When times are fat, the workers get more money... not as salary or wage, but as profit sharing. When times are lean, workers don't.
- Decrease wages. The B3 are paying 50% more than the companies that are eating their lunch... labor costs need to drop to $50/hour for the B3. When they are profitable, some of this would be made up with profit sharing.
- Automate. Sorry, but robots don't whine about making only $100,000/year. They don't get overtime.
- Increase profit sharing. When times are fat, the workers get more money... not as salary or wage, but as profit sharing. When times are lean, workers don't.
- Leadership at the B3 HAS to change. Sorry, but these guys drove the bus off of the bridge. Tossing them the keys to a new bus is a bad idea. Would they be standing there on the tarmac next to the corporate jet with their hat in hand and their tin cups if they knew that their jobs would go away if they were successful at getting the cash?
- Rick Wagoner at GM has an MBA and a BA in Economics. He has been CEO since 1998 and Chairman since 2003. But, he comes from the finance area... not the sales or engineering area. That is a problem.
- Alan Mulally at Ford has a background in aeronautics and aerospace engineering. He has only been the CEO of Ford since 2006. At least he comes from an engineering background, but he isn't from a car background, he is from Boeing. That is a problem.
- Robert Nardelli at Chrysler has a management background... but he is also not a car focused guy, having come from GE by way of Home Depot (where he screwed up pretty good according to a lot of accounts). Again, he is a problem.
- Rick Wagoner at GM has an MBA and a BA in Economics. He has been CEO since 1998 and Chairman since 2003. But, he comes from the finance area... not the sales or engineering area. That is a problem.
- A car company should be run by a car parson. It should be someone that can talk to a race car driver and not look like an idiot. It should be someone that could actually talk with a consumer on the floor of a dealership and not look like an idiot. And it should be someone that can complete a sentence without saying: synergistic, economies of scale, product or Jeeves get my private jet warmed up.
- Products are NOT coming out fast enough. I love knowing that Chrysler will have a category busting hybrid minivan coming out in a year and a half, GM will have the Volt out at the same time and Ford will have their hybrid offerings expanded at the same time. But that stuff needs to be in the dealers NOW. In a year or a year and a half, Toyota and Honda could design and roll out their competing products. You've been walking towards this goal for as long as I can remember.
Now, all is not gloom. Some is perception that isn't in line with reality.
- Quality at the B3 is on par with... and in many cases exceeding the European and Japanese makes. In general they are wasting the Korean and other makes.
- The B3 ARE making fuel efficient cars... and selling them at pretty good prices.
- Despite the constant whine from Congress that the B3 weren't making cars that people wanted... they were busy making SUVs... they were making SUVs because THAT IS WHAT CONSUMERS WANTED! The market changed. But look around. EVERYBODY wanted to have more SUVs in their line-up.
- Ford and GM actually have some cars that they could roll out VERY fast if the government let them. Chrysler doesn't have the foreign operations of the other two... but they are in the least trouble.
So, here is what I would do.
- UAW, we are going to renegotiate your contracts. We will do it now, or we will do it after we go into bankruptcy. You will accept $50/hour in total labor costs or we will replace your workers with people that will. If you try to shut down the factories, we will have your members arrested. Blackwater Security (that earned such a bad name in Iraq) won't have as much to do under an Obama administration... they will be running our security.
- Those cars that we said would be out in 18 months or so... will be out next spring. That's right... SPRING. We have had the things driving around for the magazines to test for a year. It is time to put them out on the street.
- We are going to spend some time actually telling consumers that we DO have cool products that people want. We have fuel efficient cars. We have hybrids. We have diesels that get 40mpg.
- GM and Ford will be pressuring the government to streamline bringing in some of our international vehicles. In Europe we are going head to head with all comers with high mileage and smaller cars... we have them ready to go RIGHT NOW. They will be on the shores by spring. This spring.
- Bonuses and performance based pay is actually going to be based on long term profitability... not on tweaking the books to make it look good for a moment.
The American car companies are making some really cool cars and trucks both here and overseas. They have some cool stuff on the drawing board and more that is actually almost ready to hit the dealers. But they also have legacy costs that are killing them and terribly inefficient dealer networks and other structures. All of that needs to be addressed.
It isn't something that can be knocked out in the next season... this isn't a reality TV show. It is actual reality. And these are GIANT companies and take a little time to turn. But the basic fact is that they have ALL strayed from their purpose. They have ceased being car companies and become "product manufacturers."
There should be car people at the helm. The people that become leaders of a category aren't those that come out of business school with a generic degree... they are people with a passion for something specific. There are a few exceptions, but look at the people that have been the most successful at building companies... Bill Gates, Henry Ford, Michael Dell, Lee Iacocca... these weren't business school wonks. They were people that loved something.
And for God's sake... Congress has NO business running a company. They can't run their own business. We don't need them doing more broad based damage.
