Wednesday, August 5, 2009

Once The Teacher, Now The Student

The New York Times recently ran an article about a visit made by Chrysler executives to a Fiat plant in Tychy, Poland. Their purpose: to learn how to build small cars profitably.

It's one more sign of fading American influence in the global marketplace. Where once this country led and taught, now it follows and tries to learn from others with greater knowledge. How did it get this way?

For every industry, there's a different story, but for the auto industry, it would seem they arrived at this juncture through a combination of hubris, bad product management, misunderstanding consumer expectations and faulty labor policy.

Hubris? "Americans want big American cars," said the industry in the early 1970s, as the first gas crisis sent prices soaring and consumers scurrying to find models that could go further before pulling into another seemingly-endless gas station line. The domestic auto industry disparaged the small-car offerings of overseas makers: "Americans don't want to ride in kiddie cars with their knees in their ears."

Then something happened while those Americans were riding around in those kiddie cars with their knees in their ears. Not only did those cars spend more time on the road and less time in the gas lines, but they spent more time in their owner's driveway than in the repair shop. So when it came time to buy another car, those Americans opted more and more for imports. Better gas mileage, better reliability, better fit-and-finish made for happier owners -- and return customers.

The domestic automakers' share of the American marketplace began shrinking -- in the mid 60s, it was around 95%. By 1986, a little over 10 years after the first gas crisis, it was about 75%, which held roughly stable until 1995. Since then, the share picked up speed -- downhill. In 2007, it was barely 50%. The domestic automakers responded to their shrinking market share with a series of forgettable models and little appreciable improvement in quality. They still had the "slap more chrome on it and they'll buy it" mindset, seemingly unaware that the U.S. auto consumer was looking for quality and reliability along with stylishness. They were finding it "foreign" cars.

Now that the millenials are car buyers, the "buy American" marketing strategy, whether explicit or implicit, falls on deaf ears. To my students, "country-of-origin" means little if anything. Honda, Ford, Toyota, Chevy, Chrysler, Subaru -- they're all "cars" -- and besides, Hondas, Toyotas and Subarus are made in the U.S., anyway.

The domestic automakers claim to be burdened by higher labor costs and legacy health care obligations. While that's certainly true, and the state of the general economy pushed two of the used-to-be "Big Three" into bankruptcy, they're taking steps along with the UAW to bring those costs more in line with the reality of a global marketplace. Now if they would only do the same with the cars they make.

Did the Chrysler executives and engineers learn anything on their trip to Tychy? I guess we'll see -- down the road.

Note: after buying Ford/Mercury cars for 30 years, I crossed the line in 2007 to a Subaru Outback.

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