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Sunday, November 28, 2010

The Car Crises -

The Car Crises
Jerry Flint, 07.23.01, 12:00 AM ET

At General Motors it's a market share problem. At Ford it's a management issue. At Chrysler it's a strategic quandary.

Detroit is in crisis. At General Motors the crisis is about market share. At Ford, about management. At Chrysler, which is German-owned now, there's a just-what-or-who-are-we-trying-to-save crisis. First, General Motors and market share. Once GM leaders said they wanted only a "profitable" percentage of total auto sales. But after seeing its share fall to 26.4% in April, GM is panicking and is now willing to forget the profits to save the share.

The proof is in its new incentive, which goes beyond the typical rebate of several thousand dollars. GM is telling its lease customers that if their vehicle leases expire anytime between Sept. 1 this year and Mar. 31 next year (the window at Cadillac is September through November of this year), they're off the hook for the remaining monthly payments-excluding charges for excess miles and damages--if they trade now.

That's spectacular for the customer, but a sign of urgency for GM.

People at GM are telling me that the incentive could well steal from next year's sales and create a glut in the used-car market that will depress trade-in values. Despite the denials, I predict this will cost GM hundreds of millions of dollars. The loss will turn up in a little footnote in the GMAC annual report in a few years.

We'll see over the next few months whether this ploy turns GM around--or leads to fresh disaster. The silver lining in this: GM is finally waking up, with company leaders raising the battle ensign and ordering: "Not one step back." Sometimes it's necessary to forget the cost and just fight with everything you've got, even if it's not where or when you would choose.

At Ford the focus of the crisis is on Jacques Nasser and his lone-wolf management style. The Firestone/Explorer tragedy really is not Jac Nasser's fault, but it has spurred broader criticism of him. Among the complaints: He follows fads; he hurts morale by grading 5% of Ford's white-collar employees as losers every year; he emphasizes brand marketing, which has been a huge failure in the auto industry. It's more than likely that Ford will end Nasser's one-man show by bringing Ford's European boss, the British-born Nicholas Scheele, to Dearborn as a No. 2 to share the load.

This is a bad solution. Ford Europe has been in trouble for two decades partly because of swinging-door management (see my Feb. 10, 1997, column in FORBES). Nick Scheele is one of Ford's best, but he belongs in Europe, continuing to save that operation. Nasser, an Australian, needs an American to help out in the U.S.

But with all his problems, Nasser is a leader, and Detroit is sorely lacking in leaders. My criticism of Ford (see my Apr. 16 column, FORBES GLOBAL) is that it is letting General Motors catch up--and maybe even pass it--in the truck category, Ford's only really successful vehicle operation in the U.S. But Ford will recover, and soon, too.

As for Chrysler, I have come to suspect that the Germans sent over to run the company have a secret agenda. They are more interested in saving Jurgen Schrempp's job as chief executive of DaimlerChrysler than in saving Chrysler. Their actions seem to be aimed at cutting short-term costs to help Schrempp with his German stockholders, even if these actions hurt Chrysler over the long term.

Examples: extending the shelf life of Chrysler products from five years to six (Chrysler's success was built on speedy retooling); ending support for the Viper racing program, which helped build Chrysler's reputation worldwide; planning to use a Mitsubishi platform for future Chrysler small cars, one of the weirdest ideas I've ever encountered, given Mitsubishi's terrible record on defects and design.

Chrysler has good products: The pt Cruiser is a hit, and the new Jeep Liberty and the coming Dodge Ram pickup could be hits. But whether Chrysler can survive the Stuttgart managers is another story.

These are serious crises affecting the car industry.

I don't think it frivolous to use the famous words of Tom Paine to describe the situation: "These are the times that try men's souls." But as Paine wrote, "The harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly."

Jerry Flint, a former Forbes senior editor, has covered the automobile industry since 1958. Find past columns at

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