Bruce Benidt
Jon Austin
tcarideo
Ellen Mrja
Mike Keliher
Rhetorical double standard in debate about whether to save oligopic dinos?
So when domestic automakers consistently produce vehicles that are unreliable, uneconomical and unsustainable, they should, on the merits, be allowed to die of natural causes. Survival of the fittest.
But I guess there is such a thing as too big to fail. When we allow companies to get so large that their collapse threatens to crush the entire economy, the government probably can’t afford to allow them to fail. (This is yet another reason why antitrust regulators should be very careful about approving mergers that create over-concentrated oligopic markets.)
So I’m afraid we probably do have to bailout the “big three” domestic automakers. However, I don’t have much faith that the domestic dinos can be completely trusted to manage their own makeover. If public money is to be handed over, public-minded strings should attached, such as strict fuel economy and alternative fuel standards, payback requirements, and anti-self enrichment safety nets. Taxpayers should use their tax dollars to save The Big Three from themselves.
Finally, from a communications standpoint there is more than the normal amount of political hypocrisy surrounding this debate. I find it very curious that conservatives are screaming “creative destruction” in reference to the auto industry, when I didn’t hear the term come up in reference to the much larger financial services industry bailout. Could that be because one industry’s employees have more Democratic and pro-union leanings and the other industry’s employees typically have Republican and anti-union leanings?
- Loveland
Filed under: Communications, Politics | Tagged: automaker bailout, creative destruction, financial services bailout
I have been consistently against bailouts, for precisely the reason that reorganization is left to the people least qualified to make good decisions about true value.
We covered a bubble with a bubble and another bubble. We need to find the floor. And we will NEVER find the floor as long as there’s a whiff of bailout money in the air. Why make hard decisions when you can play possum and let the taxpayers absolve you of any fiduciary responsibility.
http://www.businessandmedia.org/articles/2008/20081117110306.aspx
Ike, I agree with you in theory. I have long owned two foreign-bred hydrids, because the domestic guys are too myopic to meet my needs.
But in a representative democracy, the elected representatives are never going to take the hit for the loss of more than 5 million jobs and all of the collateral pain that would accompany such an economic earthquake. It’s interesting and important to debate it, but politically it’s not going to happen.
Why did no one care as much when blue-collar steel mills shut down en masse in the 90s? Or family farms went into foreclosures in the 80s? And how will we bail out state and local services today, from police to fire to transportation?
As much as we can justifiably blast the automakers for lack of vision, I’m convinced every other vehicle in every parking lot is an SUV or its derivative. The big three gave the people what they wanted, and we kept buying them despite the presence all along of smaller, more economical means of transportation. Can we blame the CEO’s entirely for fulfilling the dmand of the market?
I think so, Dennis, because fulfilling the demand of the market in that immediate sense is, at best, only half of their mission. There’s also the desire, the need, the mission to look to the future. Not for some dreamy, utopian purpose, but for the simple business need to thriving and surviving.
So serving the current market demand isn’t going to also give you a path for future success, you’re failing.
Great point Dennis. Market forces cause the private sector to focus on short-term over long-term, and individual needs over community needs. That’s why the representatives of the community — elected officials — have to establish incentives that cause corporations to do what they wouldn’t otherwise do, focus on long-term community needs such as energy independence and a smaller carbon footprint. They will never do it unless policy nudges them to do it.
Joe. I call bulls#!t.
It’s up to the stockholders to put the pressure on corporations to focus long-term instead of short-term. Some do a crappy job, and they get their just reward.
The universe of areas where “elected officials” ought shape or mold industry is very narrow, because those “elected officials” start instead acting like benevolent dictators at best, and divinely-appointed Priest-Kings at worst.
Government can ALWAYS find the money to hire some “expert” who can tell me what I ought do with my freedom. And a society run by experts is the worst hell you can imagine.
I respectfully disagree. The day may come when there are enough people in this democracy to put individuals desires completely over community needs. At that point, I will be as frustrated as you currently are by the choices voters are making. I feel your pain, but I don’t share your point-of-view.
My personal vote is against putting sole faith in stockholders to regulate business. My vote is to strike a balance between individual, corporate and community needs. Shareholders and their corporate servants put their individual and corporate needs first. That’s their job, and they do a fine job of it. But I want someone to balance business needs against community needs.
Unfettered markets hurt people. Without regulation of business, we’d still have kids with dangerous levels of lead in their blood, a growing hole in the ozone, people and wildife dying from DDT poisoning, three-fourths of our rivers undrinkable and unswimmable, consumer products killing thousands more per year, rampant insider trading of securities and even more wasteful and polluting cars than we currently have. All of those regulations were vehemently opposed by the corporations in question, and all of those regulations were very effective in addressing the community problem they were designed to fix.
One of the primary reasons why the domestic automakers are as messed up as they are is because elected officials have spent many years obeying corporate orders to “let us decide when and how to get efficient and invest in alternatives.” The resulting business decisions have left our national security in peril and our economy vulnerable to outside influence.
In my opinion, there is no way this nation achieves energy independence and this world prevents environmental catastrophe through market forces alone. That is no more likely to happen than market forces bringing us railroads, telephone lines, Interstate highways, environmental protection, human genome learning, or the Internet. There has to be a balance, and the balance is out of wack.
Is it being suggested by some that the auto industry be run by government appointed experts rather than by those who know the industry? However, as JL suggests regulation and incentives seem required. For instance, it’s dubious Corporate Average Fuel Economy would have been achieved when it was without the standard being mandated only in response to the gasoline crisis in the 70’s. The same with the costly implementation of emissions controls. Left to their own devices and motivated by profit rather than any sense of civic responsibilty, it’s unlikely either change would have fit in the stratgic planning model. You really believe Mr. Pigott, the stockholders should have been the ones to forsee the grim future of their corporation’s most profitable products?
EMM raises the question of what industries are deserving of a rescue mission. I remember the personal trajedies of the farm foreclosures in the late 80’s. It was like these families were simply cut adrift–often generations of livelihood lost. I suppose the loss of the auto industry and all the component suppliers–three million jobs (?)– is a calamity beyond experience and somehow, someway must be prevented.
Joe… I merely posit that unfettered government has done way more to create and prolong human misery than unfettered markets ever have.
GM and Ford aren’t reeling because the government let them play footloose and fancy free with greed. They are reeling under the weight of union shackles, and health and pension benefits they cannot possibly support. They are reeling because for DECADES productivity went into the toilet, as the unions killed any innovation that might cost a job.
This isn’t an auto-industry problem, because there are several automakers doing just fine in the south. They’re also non-union. (or at least they will be until Congress crams card-check down our collective throats, and kills the rest of the car manufacturers in America.)
Joe… please tell me: Who is the arbiter of “community needs?” Be very careful how you answer – as that is the most slippery of slopes.
Dennis…. do I believe stockholders ought be held accountable? Hell yes I do.
The majority of people with equity in the markets are there through 401-K index funds, that are strong because of diversification but weak in terms of “ownership attitude.” I simply don’t have enough GM or Ford to make it worth my while to track down proxy statements and financials. Culturally, this is a great fit for withholding taxes – we participate without having to exercise a brain cell. It happens without us noticing. And one day, oops! They’re taking 30% of what I make off the top and I forgot I was even earning that!
Our system is screwy for a number of reasons, but the free market isn’t one of them. We’re screwed because there is virtually no economic education out there. We’re screwed because the incentive/disincentive system is muted by dampers that separate our investment from our intentions (withholding, index funds…) Our tax code is a giant game of special interests. And our political system has been gamed by two parties who honestly don’t give a rat’s ass about helping anyone. It’s all an exercise in getting re-elected and maintaining power.
At least when corporations screw the people, there is a competitive check-and-balance to ensure none will go overboard. There IS NO check-and-balance on government anymore. That’s why states’ rights was so appealing. States had to compete for your business and commerce, and checked each other. Now, in the era of Federal Nannyism, there IS NO alternative.
The arbiter of community needs? Representative democracy.
What is more representative than people voting with their dollars in a market? ‘Representative democracy’ as we practice it today is a snapshot in time from an arbitrary date, that often gets interpreted as a mandate for an action that was neither wanted nor needed by anyone OTHER than the special interest that made the noise.
So… who within ‘representative democracy’ gets to make the call?
The voters. I don’t mean to be flip, but there is a reason we’re called a democracy and not marketocracy. Government by the people, not government by the market forces.
Government ‘by the people’ was never meant to be a tyranny of the majority. “The people” should never have the right to vote themselves advantages at the expense of others.
We’re going to agree to disagree on this one…
I’m seeing government intruding on the market, and you’re seeing market intruding on the job of the government. You worry about an oligarchy, and I posit that the federal government has become a Civil Service Monopoly.
(and I just now caught the DDT reference. Silent Spring has been debunked, and the banning of DDT has allowed for the needless deaths of tens of millions of people worldwide.)
I hereby agree to disagree, with a couple quick clarifications: My worry in this particular post is oligopoly, a market dominated by a small number of companies, not oligarchy.
And beyond almost killing off our national symbol (eagle), the National Toxicology Program classifies DDT as “reasonably anticipated to be a human carcinogen”, and the EPA classifies it as a “probable” human carcinogen. Not the best option we have.
Lively! You’ve gone way over my head but fascinating anyway. My grandfather, a professor of geology in Austria emigrated to the U.S. before WWI. In America he achieved success as a manufacturer. While I was still in highschool he gave me a book to read called “The Robber Barons”. Its thesis of course was that there was a dark side to those we regard as the “princes of industry”, Carnegie, Rockefeller, Hill, and others, while forging the U.S.into an economic force, weren’t always benevolently motivated. Seizing the opportunities of a free market came with price paid by others. Check out Jacob Hines’ turn-of-the-century photos of laborers in New York, or those of child labor in the textile mills for an illustration. Maybe this was just the cost of industrialization–like pollution.
I’m pretty sure my grandfather’s point to me was never to lose a sense of responsibilty to the community if the time came to build my own business, and that sometimes this sense of obligation would have to be encouraged, imposed upon us by those we chose to elect. Do you think his concern for the possibility of greed and corruption when we’re left unchecked to our own devices was unjustified?
I think my grandfather voted for FDR each time. As an employer he also had great empathy for the working class and remained throughout his career a stellar advocate of the unions. He asked only that the request be reasonable.
I don’t think bailout and creative destruction are the only options for the car companies. Assisted suicide or hospice might be others.
Interesting. What would that look like policywise, Charlie?
Management? Policymakers? What the hell about the responsibility of the employees?
This is what kills me about the whole idea of bailing out the Big Three. Where was the UAW and others, challenging management to invest and think ahead? Nowhere. They just fought for a greater piece of the short-term pie and kept building the SUVs. This is case in point why U.S. unions need to seriously rethink their value proposition. And the UAW should acknowledge its culpability in the failure of the Big Three. They all deserve to fail for bad, short-term decisions.
I don’t know anything about how global manufacturing company hierarchy works. Would management have listened to employees if they had suggested that management change their plans and budgets to produce more fuel efficient cars and invest more in alternative fuel technology?
Sure, if the employees offer up solutions v. bitching about problems. It’d challenge the hierarchy – and isn’t that what all of this is about, anyway? Employees need to actively participate in the business, not sit and wait for management to tell them what to do.
plus ca change….
None of this is new, of course, we are just replaying the industrial policy debates of the early 1980’s, when Washington was in awe of the MITI success in Japan…which led to the greatest and most lengthy depression of them all (which japan still hasn’t fully recovered from).
Really, it isn’t a question of regulation or not–there is always regulation (unless you want to go back to England pre 1850, and I doubt that ANY of us really want that). It is a question of what kind of regulation. Because markets are wonderful, amazing, and limited. We need to keep as many of the benefits of markets as we possibly can, as well as the benefits of regulation.
I am all in favor of creative destruction (Viva Schumpeter!!), and we should allow GM to fail. We then need to have a safety net in place for those who work at GM–ensure that the pensions are safe (we have govt bodies for that already), ensure that people have health coverage (need work here), ensure that we can get training, etc., for new jobs (need work here as well). We need educational systems that will get people ready for new jobs, even when we are unable to tell what those jobs are likely to be (as no one, even the best and brightest of government bureaucrats, can predict the future).
Markets are the best means of predicting the future, of telling us where the jobs are likely to be, and what companies are best positioned to grow and expand. No government agency can do that. But markets are terrible at meeting the needs of communities and providing compassion and support for people out of work.
Government is great at fairness, non profits are great at compassion, markets are great at efficiency. A society needs all three things, and we need all three sectors to provide them. Lord help us if we ever start to depend on the government for efficienc or the markets for compassion.
EMM: I had the same thought. This past weekend I spent time with a woman who had made her living working in the mines. Then she lost her job. Had to move from her home and family on The Range to a tiny apartment in Minneapolis as she retrained and became an electrician. While the mine job loss wasn’t three million, it feels the same to this woman.
Just reflecting on Ms. Groehler’s comment concerning employee responsibility. I had a personal experience when, more or less by default, I ended up as president of my family’s apparel manufacturing business in the mid 80’s. There were 150 employees in two small Wisconsin towns dependent on us for their livelihood. I had the noble, egalitarian insight to involve them or selected representatives in formulating strategies or merely offering suggestions, at the very least to keep them informed as the company and the whole industry hit perilous times.
Categorically, no one stepped forward. I discovered that I was expected to lead, and that these really fine, loyal people expected to be led. It was the union head, a tough German named Honneschlager (who scared the hell out of me) who entirely understood our dire circumstances. I presented the concessions necessary to even give us a chance, and it was Honneschlager, without hesitation, who sold the idea to his constituency.
I don’t disagree that leaders are expected to lead. In the automotive case, though, did any employees understand or or care about dire circumstances? I feel horrible, on a personal level, for those who lose or are threatened by this mess. But I’m not convinced that sole accountability on management works anymore. Everyone has access to information, and can be informed if they choose to be. Know thy business, and challenge it.
Ms. G–Yes, I understand your point., but it’s inconceivable to me that the employees, or the stockholders as I believe Mr. Pigott suggested earlier, could remotely begin to sufficiently understand the enormous complexities confronting the operations of a giant corporation, any more than my employees could take the short course and arrive at magical insight that hadn’t already been contemplated by those engaged in management for a lifetime.
Think of the masters of the auto industry at Daimler-Benz who couldn’t achieve viability for Chrysler. The best couldn’t do it.
Dennis, Kelly: You’ve each got great points here.
Employees appoint union leaders whom they expect to understand the complexities of the business as a whole, so they can focus on the complexities of their own areas of the business and come up with ideas to make it better. But are all union leaders as enlightened as Mr. Honneschlager? My instinct and my experience tell me no.
Look at the industries/institutions with heavy union membership in this country – automobiles, airlines, public education, health care, government. I don’t see any of those running well these days.
Plenty of blame to go around on this one – it’s not just union or management, markets or government. But they all need to be a willing part of the solution. And to me, a bailout – by definition – is making government the only solution.
DJ
Joe,
I sort of answered your question here:
http://greatdivide.typepad.com/across_the_great_divide/2008/11/bailout-creativ.html
The notion of a hospice for a sick business would be to help it to a good end, rather than go through heroic measures to save something that is too far gone. I suppose some might call that Chapter 7, but an end of life metaphor might lead to thinking about bankruptcies in different terms.
I’ll probably be writing more on this topic
DJ,
As a former business owner, if my workforce had unionized, I’d see it first as my own management failure. Industries unionize for a reason, and it’s usually not because the companies are being run brilliantly.
Failure can be tragic. Can be painful as hell, especially in the case of a monstrosity like GM or the other Big Two.
But that doesn’t make it bad. I reiterate that because so many people in this discussion (not here, but broadly speaking) seem to forget that.
There is no way to prevent this situation from happening again, so we either let nature run its course and deal with the difficulty now or provide a public crutch for the rest of time (on and off as it may be).
What does that billboard for the Marines say? “Pain is weakness leaving the body.”
my simplistic view ….
magic bullet, universal single payor health care….
special interests be damned…
free up capital, reinvest in more JOBS.
I said it was simplistic.
Kelly: Why do you argue that union leaders and workers are supposed to manage the industries in which they labor? Isn’t that the job of management? We can not let employees fail because their leaders failed to lead them. To do otherwise is heartless and uncaring.
And Ike, I would like to know how you back up your claim that “unfettered government has done way more to create and prolong human misery than unfettered markets ever have.” Assuming you are referring to the story of our country only, what proof do you have of for this statement?
Health care is a relevant part of this discussion. American car companies pay $1500 per car in health coverage costs. Many of their competitors don’t have to buy health coverage because they have a public system. That’s a big honkin’ competitive disadvantage.
Sometimes the simplest solutions are the hardest ones to see.
Creating a universal health care system will not be an easy task (see Hillary Clinton), but it could be a simple solution to a very complex problem.
If the $ that most employers who offer health insurance were put back into those companies, there would be more freedom for innovation. Employees who don’t have to worry about losing their insurance if they lose their jobs might be more motivated. Less bankrupcies due to health care, a stronger financial system, more value placed on work etc, etc.
Magic bullet.
Mr. Quimby: Industries unionize for what reason?
Hey Joe, whatya know? I’m sitting ay the same spot in Dunn Bros in Roseville were we talked about “creative distruction” a couple days ago.
I also did a post on this topic at Minneapolis Metblog, where I am one of the new authors. (sorry, no link)
The Marine’s ad agency came up with a nifty way to sell pain. But it’s worth noting that pain is also not being able to give your kid a legitimate shot at the American dream. A safe neighborhood. A roof and walls. A college education or other training necessary to make your way in a fast-changing world. The kind of emotional pain facing millions of these families hurts just as much as the brand of physical pain doled out at basic training.
This isn’t to say that we bailout every industry every time. It’s just to say that when we are looking at something on this scale, we shouldn’t take the implications of inaction lightly. Creative destruction is a lot easier to embrace when reading Schumpeter’s sterile text than when looking some kid’s parent in the eye.
Yes, credit to Bob for giving me intellectual stimulation to go with my cup of French roast Kenyan.
Joe:
the problem with the “looking some kid’s parent in the eye” approach is that it prevents you from looking at the big picture. Sure, we could save that particular job. B ut if we, as government, do so, then we need to do so for every other kid’s parent’s job–government must be fair, and it must be equal (remember all those nice phrases in the constitution and the bill of rights about equality under the law, etc.) and soon we are doing it for every job and no job can be allowed to fail. This is why government is a poor way to save any particular job–if we save that one, then why not MY job? And, of course, the more jobs we save, the more government intervenes, the weaker the argument against doing it next time.
I think that if you want to make a case for helping the auto industry, you need to also make a case as to why we shouldn’t help the airlines, the retailers, steel, etc., etc. They are all parents as well, and their kids will suffer too. Indeed, are suffering right now. Why would you help some and not others?????????????
I understand PM. But size does matter. Letting Loveland Communications fail is pretty easy to do. But this is a country where one of ten workers has a job related to the domestic auto industry, and this is an economy already in the worst housing and financial crisis since the Great Depression. A collapse of this sector in this fragile environment could really reverberate through the whole economy. That’s why this industry at this time has a legitimate claim.
It’s strange that I’ve become the defender of the domestic auto industry here. I’ve been a Hondaholic for over 20 years because I hate cars that break and guzzle gas. I’m a guy who has had lots of jobs and is pretty adaptable to economic changes. I’m not a guy who is a lifer company man with an entitlement attitude. I’ve never belonged to a union, and agree that lots of unions have become self-defeating. And I certainly don’t have sympathy for CEOs who have been overcompensated to make spectacularly bad management decisions.
But holy moley, if the financial services, housing and auto sectors were allowed to simultaneously dissolve, it would be a catastrophe that would spread far beyond those immediate sectors. I really do worry that the whole economy could implode.
Working to build a “safety net” is something I can support. Working to prevent or postpone the failure of industrial giants, on the other hand, is one tough bastard of a pill to swallow.
It’s probably an unfair stereotype to continue characterizing the domestic product as an inferior gas guzzler, and while I’m not familiar with recent studies I’m reasonably certain quality standards now rank with any in the world. The compensation for many CEO’s remains unconscionable but there is also fabulous talent and expertise in these companies capable of producing and selling state of the art product. Obviously if their future failure were inevitably beyond doubt they should be allowed to go the way of the horse and buggy, and let’s get the agony over with. JL’s got it covered in his last paragraph. I’m thinking the cost of allowing these companies to fail is far greater than any bailout, and the cost is not merely monetary. (Isn’t the Chrysler bailout of thirty years ago an example of government aid that worked?)
Once again, Mr. Lang, our interests and reading lists intersect. I read this just this morning: “6 myths about the Detroit 3.”
http://www.freep.com/article/20081117/COL14/811170379/?imw=Y
In the case of the earlier Chrysler bailout, did it really “work” if they’re back in D.C. now, hat in hand?
Oddly the comment I just posted seems to have evaporated into cyberspace. If it magically reappears please disregard this one. MK–thanks for the link.Good question about Chrysler. I’m too lazy to research their performance over the last three decades but I’m thinking that there were some pretty good years in there: exciting products, lots of jobs, and tens of thousands of cars on the road. So, wouldn’t we say that it worked? We seem to be attributing current circumstances to management failure in meeting market realities. But could management have anticipated that their lines of credit would dry up?
PS: About 50 comments earlier I incoreectly referred to social documentarist Lewis Hine as “Jacob”. He put a human face on the “misery” (Mr. Pigott’s word) of what an unregulated industry used to look like.
EMM – re: “Why do you argue that union leaders and workers are supposed to manage the industries in which they labor? Isn’t that the job of management? We can not let employees fail because their leaders failed to lead them. To do otherwise is heartless and uncaring.”
Respectfully, I think your point of view is based on an antiquated model for running a successful business. Leaving only the top leaders to understand the market, and make decisions, undercuts the innovation and creativity of employees can contribute to growing and sustaining business. And it discounts a natural check and balance for management and its stewardship. That, in my book, is heartless and uncaring. And it’s created the very mess that the industry is dealing with.
Business and people who work in them need to get on the clue train. Seriously:
http://en.wikipedia.org/wiki/Cluetrain_Manifesto
Kelly: Here’s a great quote from Cluetrain one surely could apply to the stupid, lazy, greedy, self-satisfied auto industry executives who should have known their industry was in a downward spiral:
“The clue train stopped there four times a day for ten years and they never took delivery.” — Veteran of a firm now free-falling out of the Fortune 500.
Exactly.
Participatory management involving those whose livilihoods depend on the success of the company is admirable and also pragmatic (I tried it myself). I’m pretty sure though the head of GM didn’t merely launch company directives unilaterally in a vacuum without significant imput from layers of staff and subordinates highly informed and qualified. Do you think the fellow screwing in shock absorbers with a family of four and a mortgage out of control will invariably have a better idea?
Great, innovative ideas aren’t reserved for those with MBAs, Dennis. We had a twentysomething specialist -he works with TVs, not shock absorbers – who figured out we were damaging an unusually high number of flat-panels during home delivery. That’s a cost we end up eating, and a customer we piss off. He came up with a reusable, padded wrap that goes around the TV to better protect it during home delivery. The reduction in damaged inventory has been greater than five fold. His idea was rolled out to every store, and it’s going to save us millions of dollars. But I’d bet he wouldn’t be considered “highly informed” or “qualified” by traditional business standards.
As for GM, that is Nardelli you’re talking about. Not known for taking advice; look at what he did to Home Depot.
Ms. G–thank you. I wasn’t familiar with Mr. Nardelli’s history, but a quick search and he does seem like a jerk. My own experience confirms yours. We manufactured clothing and always listened to imput from the various departments–problems and suggested solutions in speciic areas. I’m thinking though that while the “specialist” in your instance found a solution for a chronic isolated problem, the person on the assembly line couldn’t possibly be sufficiently informed to grasp the infinite nuances and daily challenges of operating a car company, furthermore with a clear vision for its future (nor could the stockholder meticulously studying proxy reports). But I’ve never worked in a large company for a myopic manager. Hopefully, genuine insight and ingenuity won’t be ignored whatever its source.
To go back to my original point, I haven’t heard anyone calling for “creative destruction” when it comes to Citibank. I haven’t heard anyone demanding that they produce a plan for how they are going to change their business. They ask, they get. I’m all for the scrutiny of the auto industry bailout request, but why are they the only one that gets scrutinized?
Well, I don’t presume I meet your standards of “anyone,” but I’m glad to call for “creative destruction” on that one — and in many other cases. So put it on the record: It’s been called for.
To hell with accountability and documented changes in plan; that presumes they’re getting public money. Boo.
I was thinking more about Members of Congress and mass media talking heads.
Like I said, I don’t presume…
Jorg Pierack has a compelling essay on the front-page of the Star/Trib Op-Ed page today on fate of auto industry. He also commented on same subject here at the Crowd some months ago. Anyone know where that is in the archives? Is the industry in trouble primarily because of fundamental errors in marketing?
I liked the essay, but it didn’t have any answers, other than to say that the current system doesn’t work, and more of the same won’t work in the future. He used the Netflix analogy, but then failed to apply it in any meaningful way to the auto industry.
Being somewhat familiar with auto industry marketing efforts, I think that he is basically right in that they need a new model to get them out of this mess, but i do not think that is what got them into this mess. After all, the entire industry is in trouble (including Toyota), and their basic marketing strategies are not that different.
So clearly, they are all suffering from 2 basic problems: those they could possibly foresee, and those they couldn’t.
The ones they couldn’t include those brought on by the recession and the credit crunch, as well as the wild swings in gas/oil prices (which is why they are all in trouble, like almost all manufacturing businesses are right now)
Those they could are basically a failure of products (not watching what their customers wanted), which is why some are in more trouble than others. I suppose you could include their marketing strategies in this arena–I think that a lot of them saw their loss of market share over the years as more of a failure of marketing than a failure of product development.
At least that is my view….
As usual, excellent points PM. I share your sentiment and without analysis rather think the auto companies have been fulfulling market demands. We’ve been devouring SUV’s and their ilk for years. I’m also unconvinced the Netflix analogy holds up. Apparently it’s responding to new technologies and new efficiencies in delivering product but where is this strategy applicable to cars? In contrast, for instance, when the entire photography industry went digital a decade ago, the new technolgies were a perfect adjunct to the explosion of the personal computer market. Nonetheless, Mr. Pierack seems to have a passion for cars. So do I. If he gets the contract to “reposition” the auto industry I’ll be happy to tag along in any way to assist.