Five Bad Habits the Big Three Need to Dump

General Motors CEO Fritz Henderson announced this week his restructuring plan to save GM from bankruptcy as the June 1st deadline approaches. In this plan he outlined that “The objective is not to survive, the objective is to develop an operating plan that allows us to win.” This is now becoming less and less likely as restructuring plans have lead to the elimination of Pontiac, an uncertain future for Saab, Saturn, and Hummer, 21,000 additional layoffs, and the closing of 2,600 dealerships.

Surviving, despite Henderson’s statement, seems to be the name of the game right now. To do so GM, Chrysler, and Ford need to start shedding the bad habits that lead them to financial disaster. With these bad habits gone, not only will the Detroit automakers survive in a global recession, they will also thrive and finally begin to start competing instead of playing catch up.

Listen to the consumer: The Big Three, Ford especially, were the companies to popularize the SUV and gave Americans a thirst for adventure in the 1990’s. Consumers could not get enough of the off road dream machines and the Big Three couldn’t get enough of seeing profit margins soar to record levels. The introduction of the Ford Explorer and with GM following close behind with its Chevy Trailblazer and Chrysler with its Dodge Durango. However at the turn of the century the market began to change and foreign competitors began to produce smaller cars to fit the demands of Americans. The Big Three failed to follow up on America’s need for the family sedan, a demand heard by its  competitors.

Confidence is good, arrogance is not: In 2000 Toyota spent $1 billion developing their first fully functional hybrid the Prius while General Motors spent the same amount of money developing and building up the Hummer franchise that same year. Once the Prius was released in the United States Rick Wagoner, GM’s CEO at the time, in action boasted the lack of a market for hybrid vehicles. However in 2007 350,000 hybrid vehicles were purchased in the U.S. with roughly 80% of the market controlled by Toyota. GM rushed to put together hybrid alternatives to their vehicles but could only claim 1.5% of the market that year.

Become trendsetters, not followers: In response to the Prius, General Motors produces a hybrid vehicle of their own. The Volt, a conceptualized electric vehicle turned hybrid to compete with the Prius. However, with the release being a decade later it comes as too late. To make things more difficult Honda is releasing a hybrid of their own, the Insight, at the same time. With Honda in control of 10% of the hybrid market GM must think outside the box to compete with a company with an already established hybrid reputation. Ford is fairing a bit better with its Fusion and a 7% control of the hybrid market. Another were GM should have been trendsetting the market instead of following others is an instance which came up recently with Ford and GM’s customer protection plan the Ford Advantage and GM’s Total Confidence plan. The customer protection plans helps the consumer make payments on a recently purchased GM or Ford vehicle in the event the buyer loses their job. If they can’t make payments beyond the payment window they can return the vehicle with no damage to their credit. A bold move but a carbon copy of Hyundai’s successful Hyundai Assurance Plus which was introduced half a year prior.

Shoddy vehicles won’t do, build to compete: Vehicles such as Chrysler’s Sebring, 300 and PT Cruiser or GM’s Astro Van, Trailblazer, and Malibu or even Ford’s Explorer, Edge, and Focus all fell to Detroit’s infamous reputation as producing unreliable, inefficient and mechanically inferior vehicles for the same price as their competitors. This is not a recent development, it has been happening since the prime of the Ford Pinto, Chevrolet Celebrity and Cavalier and as recently as the Ford Edge. Detroit cannot not even begin to compete without eliminating the notion that American cars are unreliable. Much work has to be done before this can change, and the extent of Big Three’s drive for building better cars can be seen on Ford’s press release boasting that Ford’s customer satisfaction is equal to Honda’s and Toyota’s. Being just as good is not the same as being better, the culture of “this will do for now” needs to be replaced with an attitude of ambition to produce the best vehicle they can. A week later Ford celebrated the Fusion making it to the top 10 Green Cars by KBB.com by peaking to the number #3 spot. While this is good it was surpassed by the Toyota Prius at #1 and the Honda Insight at #2.

Look at the immediate future and the long term, learn to survive: According to Fritz Henderson’s restructuring plan by June 1st GM will be owned by the U.S. Government controlling more than 50% of its shares. If not it will face a catastrophic bankruptcy and possible liquidation if it still cannot recover after it declares bankruptcy. Chrysler has until the end of this month to make a deal with Italian automakers Fiat or it too will be swept under the rug. Ford the most financially stable of the three most find a way to stop the hemorrhaging of its sales and regain control to compete. 

Furthermore to build an operating plan for the Big Three to win they must first survive.