Around the Bell Curve...

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I have been struggling with what topic to take on this round, as there are many that are very worthy. Will the Chevy Volt be a hit? Will Americans accept clean diesel-powered vehicles as alternative to hybrids? Is anybody as excited as I am that we are about to have three modern pony cars to play with--the Dodge Challenger, all-new Ford Mustang and Chevy Camaro...with the new Nissan 370Z joining the race?

But the subject that has been hanging the heaviest on my heart and ringing the most in my ears has been the recent troubles reported by GM, Chrysler and Ford. A very common question I get asked at dinner parties these days is, "What are they doing about this in Detroit? Are they crazy? Didn't they see these days coming?"

Past

Once and for all, allow me to answer. Yes, they did see these days coming, but thanks to how we reward and/or punish public companies in this marketplace, they really could do very little to prepare. These companies have been required to issue "quarterly reports" that inevitably impact the stock prices of these companies--positively or, more recently, negatively. This 90 day "report card" cycle keeps companies from making long-term commitments that might in any way hurt the next quarterly report. Plus, many of the people at the levels of management that can make such bold decisions are often nearing the sunset of their careers and are not interested in potentially hurting their own personal stock value and pension positions. (The cold irony is that Chrysler has been held privately by Cerberus since last year and therefore is not required to report financial data. But painfully, Chrysler is saddled with perhaps its weakest and most out-of-touch model lineup in many years, so it doesn't take much to imagine that its bottom line ain't pretty.)

Present

So...what is the result? They relied on cash-cow SUVs and pickup trucks to dominate their product planning and engineering departments because that effort helped that quarter's report--until the days when fuel prices went up and such vehicles fell out of general favor as personal day-to-day transportation for many drivers. But since they were behind on development of correct alternatives such as refined small cars, efficient midsize sedans and small crossovers, as well as the all-important for image hybrids, it has been a game of "catch up"...but without the financial support of their cash-cow SUV and truck brethren.

Future?

You will be hearing more about "cash burn rates" and "government loans" in regards to GM, Ford and Chrysler the next few weeks than you will hear about the real and honest closing gap in quality, design, style and efficiency. Thank goodness the auto show season started not long ago in Paris, as it always amazes me how much creativity there is in this industry. The only fear is which companies will be able to deliver these dreams.

Posted on 2008-11-07 | Permalink | |

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