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Detroit had lousy management -- and other myths that need debunking

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Detroit had lousy management -- and other myths that need debunking

Automotive News | April 6, 2010 - 3:34 pm EST

For the past year, I have listened to speeches, read articles and seen commentaries by industry analysts and consultants giving their opinions on all the causes of the problems and wrongdoings in today's auto world and, in particular, the Detroit 3. Everyone has become an expert.

Most of the criticisms are unfounded, provided by people who never have sold a car or run a plant, let alone one with UAW, CAW or any other unionized workers. Let's begin by dispelling some of the myths why the industry and, in particular, the Detroit 3 got in trouble.

Myth No. 1: It is because of bad management.

This one sounds like a broken record. It's easier to be critical after the fact rather than when one is in the line of fire.

Senior executives such as Rick Wagoner, Jim Press and Tom Lasorda were not "bad management." All of these people have degrees and knew the industry.

Could they have done things differently if they had known the depths of the recession? Sure. But this could be said for almost any senior executive in the past 18 months.

For some reason, General Motors and Chrysler executives are being targeted as incompetent. But even Toyota lost money for the first time in its last fiscal year. In 2008, 28 banks were taken over by the Federal Deposit Insurance Corp. Last year, the total soared to 140.

Few industries were immune to the recession. Take away half of a restaurant's patrons, and you would bring it to its knees. It's just too easy to shoot at the Rick Wagoners of the world.

Myth No. 2: The automakers did not build what the general public wanted and built the wrong vehicles.

The truth is the Detroit 3 and North American manufacturers listened and built vehicles that consumers wanted for more than 10 years.

Because of cheaper gasoline, American consumers loved their pickups and SUVs. When gas prices surged, many kept their vehicles but drove fewer miles. Some tried hybrid vehicles and liked them. But it is forgotten that the Detroit 3 offered them as well.

You can go back to 1990, when GM was the first automaker to introduce an electric car -- the Impact. This is bad management? To build what your customers want?

If the Detroit 3 should have focused on building only small cars, why was it that Toyota opened its Tundra pickup plant at the start of the recession and had to stop production after the auto downturn?

Myth No. 3: Government subsidies are bad.

The reality is that other countries, such as Japan and South Korea, subsidize their industry in some form. At a conference in Los Angeles, Sean McAlinden of the Center for Automotive Research said it best: "We're the only country in the world that expects its auto industry to exist without some government support."

There isn't a country that wouldn't want to have a plant built. Every politician knows the positive impact a plant brings to his community's economy.

One good thing about the auto bailout is politicians are becoming familiar with, and starting to pay attention to, the industry. Maybe they will appreciate that government protection is needed against countries that consider free trade to be selling products in North America but placing restrictive barriers on selling American vehicles in theirs.

For example, last year South Korea exported 476,857 vehicles to the United States. In contrast, American producers exported 7,663 vehicles to South Korea. In good years, the number has been closer to 700,000 vs. 10,000 vehicles.

In Canada last year, more than 126,000 Korean vehicles were imported vs. fewer than than 300 Canadian-produced vehicles being shipped the other way.

Myth No. 4: Too many dealers are bad for an auto manufacturer.

The rationale behind this is "big is better." Bigger dealerships will have larger profits and will be able to invest in fancier dealerships, pay people more, buy larger volumes, be able to get easier financing, etc.

One thing I do not agree with is the termination of many profitable, smaller dealerships in lesser markets. By the time the carnage has stopped, more than 2,000 GM and Chrysler dealerships will be terminated.

The Detroit 3 eliminated some of their best salespeople in many markets that are now ripe for the competition to enter. A number of these dealerships have switched franchise names and have not disappeared. To make matters worse, law firms and Congress have become involved.

Was this really necessary when there are so many other problems? How much will it cost the automakers to settle? Again, taxpayer dollars are being used in this fight. This will be interesting.

Myth No. 5: Unions are the real culprits because of high wage and benefit packages.

One of the advantages of living in America is the opportunity to bargain for wages, whether you are part of a union or not.

Over the past decade, union executives did a better job than management. However, now that GM and Chrysler have gone bankrupt, everyone has had to come to the table to make financial sacrifices. Wage packages had to be adjusted accordingly. What better opportunity than when there is a bankruptcy involved? I pity Ford Motor Co., which did not ask for government money and cannot get comparable concessions.

Consider these myths before you hear your next dosage of the wrongs of the Detroit 3 or the auto industry.

One thing is certain: Over the next several years, there will be countless books, case studies and articles written about the plight of the industry, the restructuring and the lessons learned.

There is no doubt that this is an industry in transition. In the upcoming months, we will see whether the love affair between consumers and Toyota is over, the auto bailout money from taxpayers was a wise investment or just a postponement of the inevitable, and whether North America will be able to support a vibrant and once-prosperous industry that provided a great livelihood for many.

For the sake of the next generation, I hope we can. The future prosperity and the numerous economic benefits for Americans and Canadians are riding on it.



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Industry analysts, consultants, and those that like to give advice on what car to buy, know less then the man on the street. So for those that like to quote what someone said that writes about cars, proves you know less then they do.

Edited by RjION

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