General Motors and Ford got towed to the Standard & Poor’s “junkyard” early last month for what most said was the failure to compete globally and the inability to manage its employee health care costs.
Global competition is one thing, but who would have thought that offering excellent health care to its employees and retirees would one day be judged a bad thing? In essence, Wall Street put another company against the “Wall” for being so dumb as to take care of its employees.
Yeah, yeah. I know it’s not the 1960s when GM had a 60 percent market share and Wall Street chanted “What’s good for GM is good for the country.” It was a time when ordinary men –– unskilled labor –– could make a middle class living. Now they’re just caught in the middle.
But now with global competition, GM, Ford and other American firms are faced with stripping their workers of benefits that they truly need. They have to compete against competitors that run non-union plants built under the auspices of job hungry communities located in the South. The benefits package for workers is the job itself. Good deal for them –– they think –– but a better deal for the car manufacturers who keep the benefits for themselves.
Not only are GM and Ford playing on the uphill slope of a tilted playing field, they seemingly were taunted a little by Toyota Motor Corp., the world’s second largest automaker. Even before GM hit junk status, Toyota Chairman Hiroshi Okuda smelled blood in the water. In what was one of the most bizarre business moves ever, Okuda offered to raise the prices on Toyota vehicles to help GM be more competitive.
Although GM tried to save face and wrote Toyota’s offer off as “charity,” it should have called Toyota’s price-fixing bluff and said, “That sounds good to me if you would like to assist the world’s No. 1 automaker to remain the No. 1 automaker.”
To add insult to injury, Toyota’s pricing offer had barely been uttered when Toyota announced that it was willing to discuss sharing its hybrid technology with its rivals, including GM.
From a competitive point of view, both of Toyota’s offers were brilliant. Toyota, which has declared it will be the No. 1 automaker in the world, successfully cut consumer confidence in GM by pointing out that GM’s products are overpriced and technologically inferior. A two-fer, as they say.
Considering these recent developments, it would be easy to write GM and Ford off as “has beens” and that the Rising Sun is eclipsing both of them. That, I believe, would be a huge mistake. Both companies have proven that they can produce vehicles every bit as good as Toyota, although they aren’t doing it consistently.
Look at what GM has achieved. It has raised the bar when it comes to initial vehicle quality. It has had several models that have been recognized with the fewest initial defects. Better than everyone else, including Toyota. The problem, of course, has been and still is that their vehicles don’t hold up over time. To be blunt: GM and Ford have to get serious about matching Toyota’s long-term quality. If they are going to be long-term players, quality has to be a priority.
Along with that, both need to introduce new and exciting models. When GM announced that it was going to launch the Buick LaCrosse, the automotive press was frothing at the mouth because of LaCrosse’s cutting-edge design and the promise of Lexus-like quality (which turned out to be true...it’s oh so quiet and solid). However, by the time it was launched, it somehow was morphed into a fancy looking Taurus. What followed was a marketing plan to salvage the launch, i.e., low lease prices just to get them moving off car lots. Not exactly a position of strength and potentially damaging for the life of the model.
Meanwhile, Toyota is selling their vehicles close to or at sticker price, while in the case of its hybrids, demand is such that over sticker is the going rate.
How about on the aftermarket side? It should come as no surprise that niceties are in order here, too. To illustrate the point, we just need to look at Toyota’s participation at the recent Global Automotive Aftermarket Symposium held in Chicago. James Press, executive vice president and COO of Toyota Motor Sales, USA, not only agreed to speak but took questions as well. That’s bold confidence when you’re speaking to a room filled with hundreds of competitors.
Judging from how Toyota has responded to the recent woes of the American automakers, it shouldn’t come as a surprise to hear Press say that Toyota needs the American aftermarket’s help. He said there’s plenty of business to be had by all of the players in the market, both OEM and aftermarket, and that both entities are out to benefit the customer. Who can argue with that?
When questioned about some negative ads that Toyota has directed at the aftermarket, Press handled the complaint skillfully, promising that those ads would have to be “reconsidered.”
Of course, Press is not under any obligation to have his management soften their aftermarket ads. That would be nice of him, but it may be the worst thing that could happen in a market that should be concentrating on competing rather than push for conciliatory actions from a competitor. I bet that’s the last thing GM and Ford would ask for.
