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Decline of U.S. Automakers February 6, 2007

Posted by collage9 in Organizational Design, Technology, transportation.

An article on CNN. com this morning took a look at what was happening to the three major US automakers and their foreign competitiors.  I thought it was interesting to see just how far (and fast) GM, Ford, and Chrysler are beginning to fall behind automakers such as Toyota, Honda, and Nissan.  It’s been no secret the last few years that the US automakers are begnning to lose their market share to their foreign competitors, but I found it interesting to see how they were going about combatting this problem.  With the market share of the foreign makers about to top 50% of US sales, GM spokesman John McDonald had this to say:

“The 50 percent is not a benchmark. It’s an interesting statistical point.  It’s like global sales leadership, it’s nice, and we’ve had it for 76 years. But if you’re not making money, it’s not really relevant. We can’t be chasing market share for the point of chasing market share. We can’t afford to lose money.”

 The Big Three is not concerned about losing its US buyers, but rather with cutting as much costs as possible in an attempt to regain profitability.  I understand McDonald’s point of not being able to afford to lose money, but I don’ think simply cutting costs is going to get the job done, especially in the long run.  I think it’s about time that GM, Ford, and Chrysler consider making some serious changes within their organizations.  If not, the momentum of the foreign automakers will continue to pick up speed (and market share) and the homegrown automakers will be in serious trouble.  I’m not going to pretend that I know what changes need to be made, but I think it’s about time that they take a page out of their foreign competitors book on how to operate an automotive organization, because it obviously seems to be working for them.



1. Charley S - February 6, 2007

These companies have been in trouble for a long time. Over the past few years, Chrysler was the only American company that was profitable, and I think that now they’ve slipped into unprofitability. I’m not sure about GM, but the only thing that has been keeping Ford afloat the last couple years was their financing department which focussed on giving loans to car buyers. Now what American car companies are facing is an enormous credibility problem. They are seen as completely inferior to foreign companies, and I know I really don’t want to buy a car from a company that I’m not sure will be around in a few years. I own a Ford truck, and I love it, but I’m almost certain my next car will be something japanese, unless I win the lottery in which case I’m buying an Aston Martin.

2. Stacey Swift - February 7, 2007

I agree with Charley. I think the biggest problem with US cars is their image of poor quality. I do not think they are going to be able to solve their problems by merely cutting costs. They need to take a more pro-active solution if they want to remain competitive. Like I said last week, I think they need to focus on turning out more fuel efficient cars, with high gas prices and people starting to recognize that we need to be conscious of our environment, I think this would be a smart move on the American Car Industry’s part.

3. silviamocanu07 - February 7, 2007

The main problem with the US auto makers is poor quality control, particularly when compared to Japanese or German car companies. In order for these companies to recover, there is need for profound change within the organization. Cost-cutting is not the only measure that they must take. They must invest in quality control, as well as in improving the overall public opinion, otherwise they stand no chance against companies liek Toyota or Nissan.
An example of a company that was unsucceful and that recover is actually Nissan. Carlos Ghosn became the CEO of the company and through cost-cutting measures (particularly personnel reduction), as well as improvement of the production process, he was able to completely turn around the company. His measures are detailed in his book entitled “Shift”, which I highly recommend.

4. Dubioz Don - July 1, 2007

The problem with American cars was ably demonstrated in F1 when Ford sold off Cosworth to Mecachrome and the Jaguar racing team to Red Bull.

American manufacturers are sacrificing marketability for profitability. That’s the problem with bean counters running a car company. John Mc Donald said it all, “We can’t be chasing market share for the point of chasing market share. We can’t afford to lose money.”

And that, Mr. Mc Donald, is why you are losing money.

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