US AUTO GIANTS REAPING THE FRUIT OF THEIR OWN INEFFICIENCIES!

One can hear fervent appeals to save the three top US auto manufacturers - GM, Chrysler and Ford - from going under. To lend greater urgency to this, it is being disseminated that if these three American auto giants are not saved, potentially one or all three of them may be purchased by some company in India or China.

Before looking at this China/India angle let us very quickly try to understand why these three companies are in this disastrous situation in the first place!!

Did it ever occur to the top management of these companies as to how the Japanese car manufacturers, like, Toyota and Honda, are making fairly big profits from their plants in North America whereas they (US auto makers) are struggling? Why did it never occur to these three sinking companies that they should look closely and find out the reasons how Toyota and Honda were continually increasing their market share in North America ?

It is not that here is someone trying to be wise with the advantage of hindsight. No, this is not the case. The fact of the matter is that even a novice management graduate also knows that there is no room for complacency or arrogance or aversion to change in 21st century business environment, especially, in an industry like auto industry.

Auto industry typically thrives on innovation - whether it is to do with newer models or new technologies, better features, cost reduction or smarter customer service approaches. The three US giant auto-makers totally failed on this front. Of these the worst performer on the innovation front has been GM who lived in their own world of fantasy thinking like morons that the world will move according to their whims and fancies.

These American auto-makers never bothered to heed customer complaints, or seek customer feedback. They thought they can continue to make giant gas-guzzling monsters and the blinkered north American customers will continue to buy their crap. Yes, this was true till the Japanese came on the scene.

The Japanese were quick to realise that they probably couldn't make their way in to the pick-up truck segment and, therefore, they should adopt innovation, aggressive salesmanship and top-class customer care - both pre-sales and after-sales - in the car segment. And, they went after the car segment with well thought out strategies.

Honda and Toyota diligently worked on customer feedbacks and were nimble footed in bringing out new models, making changes in existing models to meet the public demand and taste, and their budget too. Obviously, they started catching customer attention more and more. Initially the American companies could unsettle the potential customers by letting an undercurrent flow in the market that Japanese cars/vehicles are not reliable, safe etc.

But companies like Honda and Toyota countered this perception by offering still better value for money. They improved their quality to such an extent that the customers started to ignore and then disregard any information about unreliability of Japanese vehicles. Soon Toyota, Nissan and Honda introduced their luxury segment vehicles, namely, Lexus, Infiniti to convey to the market that their products are not only good and reliable, they are capable of bringing upper crust vehicles too to the discerning customers.

Gradually, the situation in US and Canada changed so much so that the pre-owned Japanese cars started commanding better prices as compared to pre-owned GM, Ford or Chrysler cars. Only some selected brands like Escalade or Lincoln carried some reasonable value in the pre-owned auto sale segment. Eventually, the American auto brands fell far behind their Japanese counterparts.

GM or Chrysler didn't bother to change their models nor did they bother to see any virtue in manufacturing fuel efficient vehicles. Nor did they think of innovating and competing in terms of prices. They simply didn't try. Their overheads may be higher as compared to Honda, Toyota but the American auto industry didn't bother to trim overheads or handle inventory as efficiently as the Japanese auto makers do. In fact, the Japanese auto makers took inventory management to a different level altogether.

Of the three, Ford at least tried, albeit much later in the day, to keep in step with Honda, Toyota, Nissan by introducing competing models. Ford Escape, in fact, became one of the most favourite models in Canada. Their another model - Mustang - appealed to the hip crowd and carved a niche for itself. But then Ford made some acquisitions, e.g., Jaguar, Land Rover that didn't work well. They had to eventually let go off them.

So, what is currently facing GM, Chrysler and Ford is no surprise at all. It is so ironic that the country which boasts of top engineering schools, best management institutions should be finding itself in dire economic straits. It clearly goes to show that you don't need Harvard or Stanford to excel in business and beat the competition. What you ACTUALLY need is open mindedness, pragmatic business sense, desire to work hard, non-complacent and unarrogant attitude.

Let us see what plans the three about-to-sink American auto makers bring to their lawmakers so that the US Congress gets convinced about providing financial succour to them. It will indeed be sad to see the demise of American auto industry which was once a proud creation of American Henry Ford!