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| Hot topics, burning questions and 12 months that will shape the industry.
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Hot topics, burning questions and 12 months that will shape the industry.
Detroit. It's usually right around this time of year that various industry publications start weighing in with their "top stories" of the previous 12 months. But the hot topics and burning questions that dominated the headlines this year are here to stay, because they embody the fortunes and the future of an entire industry as we know it. At no time in automotive history has more been on the line than what's shaping up for the coming year. The following questions and issues facing the industry's key players at the end of this year will affect virtually every auto manufacturer of any consequence around the world in 2006. So let's dive in...
Can Dieter Zetsche work his magic at Mercedes-Benz? Speaking of canonization, no auto executive in recent memory has ever been more highly regarded than DaimlerChrysler's Dieter Zetsche. The talented executive with a winning, easy manner with the media charmed his way through Detroit while delivering the goods - with the able assistance of Wolfgang Bernhard, of course. The pair's Good Cop/Bad Cop routine helped turn the Chrysler Group around and fueled a product renaissance in Auburn Hills that is still showing signs of momentum (although there are storm clouds definitely looming). But going back to fix Mercedes-Benz will pose an entirely different challenge for the highly capable Zetsche. For one thing, Juergen Schrempp has left a festering internal corporate culture revolving around political fiefdoms and warring factions, something Zetsche has already made clear that he won't tolerate. But it won't be that easy, because Schrempp's corrosive legacy runs deep throughout Mercedes, and Zetsche will find that he will have to devote too much of his time and energy rooting out the negative factions, when he clearly has more critical things to worry about. Like the Mercedes-Benz image, for instance, which has taken a pummeling around the world (especially here in the U.S.) because of rampant poor quality reports brought on by monumentally bad engineering decisions and miscues. Not to mention the fact that Mercedes' horribly flawed strategy to be "all things to all people" and its subsequent push down-market in the U.S. has sullied what was once one of the greatest automotive brands in the world perhaps irrevocably - and allowed BMW, Lexus and even Cadillac to muscle past in a scant five years. Zetsche is a master at marshalling his troops (particularly dealers) to get on the same page, and he's equally adept at getting the automotive media to believe everything he tells them as he carefully ladles out just enough info to them with a smile and a wink. But a smile, a wink and a twist of the moustache aren't going to cut it for Dieter this time. In some ways, the problems facing Zetsche at Mercedes-Benz are even more complex than those he faced at Chrysler. Chrysler was nowhere when he and Wolfgang arrived, and new great products and a renewed attitude did wonders to get the organization believing again. Mercedes, on the other hand, is a culturally bankrupt corporate entity filled with people who actually still believe that the automotive world revolves around them - and that the rest of the industry will come around to their way of thinking and then everything will be right with the world again. That superior but misguided attitude will prove to be Zetsche's most difficult challenge. Because if he can't change that attitude, he won't be able to get anyone there to realize that Mercedes is no longer the brand at the top of the luxury-performance mountain, but instead a brand that must claw for every tenth of a market share point like its very existence depends upon it, which, come to think of it - it does.
Will Wolfgang Bernhard get Volkswagen back in the game? As tough as Dieter Zetsche's challenge is at Mercedes, Wolfgang Bernhard's task at VW may be even tougher. Reeling from former leader Ferdinand Piech's Reign of Terror, the entire VW organization is floundering with a long list of problems. The highlights? Piech's strategy to take VW up-market crippled the product development function and monopolized resources that would have been better put to use on refining VW's core products. This fundamental mistake set VW's fortunes back for years and is something that Bernhard is struggling mightily to fix. VW's scatter-shot product initiatives under Piech, which covered the gamut from inexpensive urban cars to $1 million-plus Bugatti super-cars, took everyone's eye off of the ball and resulted in dismal quality performance that alienated legions of buyers, particularly in the U.S. And the lingering aftertaste of this still hangs over VW in the U.S. market like a storm cloud. Add to all of this the fact that VW's cost structure was allowed to get totally out of whack under Piech and one wonders why he wasn't run out of town on a rail. Compounding that laundry list of issues (at least in the U.S.) is the fact that VW at one point had the "hip" car imagery locked up over here. It was the cool, alternative brand that clearly wasn't American and wasn't bland vanilla Japanese, either - but rather an affordable German driving machine that delivered a tremendous bang for the buck. And VW turned that formula into marketing gold. But after capturing a growing hard-core group of forward-thinking buyers through quirky, memorable advertising, VW then committed the equivalent of auto industry suicide by delivering vehicles with absolutely atrocious quality, which proceeded to alienate the very buyers they worked so hard to attract. And those disappointed buyers not only abandoned the brand in droves, they bad-mouthed the brand at every opportunity. Consequently, Bernhard is now faced with a brand that's nowhere in the U.S. market. VW's image is in tatters (what's left of it anyway), its pricing strategies (or lack thereof) border on the absurd, and its product lineup is weak and suffers from an oddly Japanese design influence. In short, VW has not only lost its mojo, it has lost its raison d'etre too. Bernhard was a miracle worker at Chrysler, doing much of the heavy lifting for Zetsche while really making the products come together. His task at VW is at least 20 times more difficult. Will he succeed? I wouldn't bet against him having seen him in action, and if he pulls VW out of the frying pan he might just be the auto executive of the year - or any year, for that matter. Unless, of course, Rick Wagoner succeeds in resurrecting GM (see below).
Is Mark Fields really the answer for Ford? Just like the rest of corporate America, the auto industry is marked with "success" stories of executives whose claim to fame had more to do with being in the right place at the right time than because any one set of clear-cut attributes. One could easily make that case when it comes to Bill Ford's selection of Mark Fields to shape the company's destiny. The official word was that Fields' well-rounded experience, particularly with overseas assignments, was the deciding factor in choosing him to run the show. Which brings to mind something that I've been meaning to get off my chest for a while now. It's funny how "overseas" experience has become the seemingly automatic ticket for auto execs to be considered for significant promotions in this country. But I have to ask, where is the toughest automotive market to compete in, bar none? Where do the world's foreign automobile manufacturers come to learn and take stock of what's going on so that they might discover the formula for success? Yes, right here in the U.S. - by far the toughest, most demanding and easily the most lucrative automotive market in the world. Just off of the top of my head, if I'm handing the keys of my family-owned, domestic-based car company to someone, he or she better damn well have demonstrated measurable success in this market. Not Japan, China, India, Korea, Germany or any other world market, for that matter. Because when all is said and done, each of those markets is unique unto themselves. Ask anyone who knows, and they'll tell you that the emerging markets have exactly zero in common with the U.S. And that's as it should be too. What will work in China or India will probably have nothing to do with what will work here and vice versa. So the next time I hear of an auto potentate announcing that so and so is perfect for the job to run North America because of their well-rounded overseas experience, I'm going to yell, "Check, please!" - because it doesn't mean squat. Mark Fields has a boatload of problems facing him, and I don't think he has the chops to deliver what's needed. Ford is in desperate need of a hands-on product mind with a golden gut for the market and a desire to make Ford great again. So far, all I'm hearing in Dearborn is a bunch of apologists for what Ford is today - and a bunch of blue sky dreamers as to what Ford will be tomorrow. For the Ford Motor Company's sake, Mark Fields better be the equivalent of an automotive Messiah. Anything less, and Ford will be right back on the "re-org" train - next stop, Oblivion City.
Will Rick Wagoner survive at General Motors? The short answer? It's too early to tell. Some days, it seems that it wouldn't matter who was at the controls at GM, because whoever is there now won't be able to weather the tumult of the next 12 months - it's just the nature of the game. By any measure, Rick Wagoner is an extremely bright, competent and confident CEO. He is immersed in GM's problems, and he understands completely what the challenges are and what needs to be done. In a recent interview with The Detroit News, Rick was very candid and engaging about the long list of challenges facing GM, so there's no delusional thinking anywhere to be found down at "The Tubes." But then again, Rick has been there for the crucial years leading up to this point in time, so he must be held accountable for GM's predicament. And his actions of late seem to have been too little, too late given the precarious situation the company finds itself in. The fear is that by not acting even more decisively, The Rick may be faced with the prospect of going back for more cuts, which would seriously erode confidence in his leadership. I would say that Rick needs some very big breaks to go his way in order for him to be there to see GM come out of this crisis on the other side. And by breaks I mean that he will need the new GM products to be hits beyond the traditional GM loyalist buyers. And so far, other than the Corvette, the Solstice and some moderate successes at Cadillac and Chevrolet, conquesting hasn't exactly been one of GM's strong suits. In order for The Rick to make it, GM's new products must break that pattern - and demonstrate real, substantive market success. Rick Wagoner is still firmly in control of the GM engine - for now. My best estimation is that he has 12 months from today to get it right, or at least show signs of genuine momentum in the right direction.
Can GM - and Detroit - make it? Let's face it - there is simply no bigger automotive story than the future of GM and Detroit. All other stories pale by comparison, except for the corresponding rise of Toyota, of course. You can't talk about the potential demise or massive restructuring of one of the greatest industrial concerns in history without reeling from the thought and the ramifications involved. I continue to be amazed by the media intelligentsia on both coasts and by certain congressman in Washington (who just happen to have import auto plants in their districts) who dance around this issue, insisting that what's going on at GM will not negatively affect the entire country in some way, shape or form. You have to be kidding me. The core issues facing GM - global competitiveness, U.S. trade imbalances, health care costs and pension funding - are issues that the nation must deal with - right now. This is not some isolated bad tiding that will only affect the Rust Belt in the forlorn "flyover" states. No, this situation spells trauma for the entire country. America as a whole has been getting its ass handed to it by our poor trade policies for decades - and now that the very manufacturing base of the country is under severe attack, people are finally waking up to the issues at hand. GM (and Detroit) is the lightning rod that will put all of these issues on the table. Yes, GM must build hit products, and it must get smaller and smarter to get better (as I've written about relentlessly since Day One of this publication), but without the corresponding serious discussions and actions in Washington, we as a nation will face severe consequences. It can't be a question of GM's survival, because GM must survive for the sake of the country. There's just too much riding on it, too many lives and families at stake and too much of this country's industrial fabric on the line for it to turn out any other way. Detroit and its fortunes will be one of the national topics next year, particularly with the mid-term elections approaching. It will be interesting to see how the political lines are drawn.
Can the UAW survive? In its present form, no. The global economy has destroyed any real chance for the traditional union model of surviving in this country. It is simply a model born in another time and drawn in a different set of circumstances that has become functionally obsolete in a fundamentally altered world. Any attempt by the UAW to cling to hoary notions at this point will only serve to delay the inevitable. It's up to the UAW leadership to come up with a reason for being in the future. And if they can't, then the UAW will be relegated to history.
Will Carlos Ghosn finally meet his Waterloo? After being canonized into corporate sainthood by the Japanese media and being heralded as the auto industry's genius of the moment, a harsh reality is starting to set in for Carlos Ghosn. Though his specialty has been turning around auto companies that are on the ropes - and he has done that to great success with Nissan - it still remains to be seen if he has what it takes to maintain momentum once a ship has been righted. Ghosn is starting to show the classic signs of unchecked arrogance that usually emerge when auto executives start to believe too much in their glowing press reviews. The fact that he believes that he can run Renault and Nissan together says a lot about just how far gone Ghosn's ego really is. And the fact that he would purposely destroy Nissan's cultural foundation in America - and the team of people who were responsible for Nissan's turnaround right along with it by uprooting its North American headquarters to Tennessee - is testament to the fact that his cost-cutting mantra may be the only arrow in his quiver (the massive reluctance by key employees to move is forcing Nissan to up their financial incentive package while trying to keep a lid on negative publicity associated with the move - but it's much too late for that). I am suspicious of Ghosn's ability to maintain real momentum in a company that has completed its turnaround and is ready for the next big step, because I'm not so sure he's capable of delivering what's needed. He talks a good game, but his recent actions suggest otherwise. I am also suspicious of Ghosn's unannounced "Master Plan" that is concealed in the move of Nissan's headquarters to Tennessee, which to me smacks of eliminating Nissan's distinctiveness all together in the interest of asserting Renault's dominance in the conglomerate. And if that happens, Ghosn will seal his doomed fate as not a man of real genius, but rather as an Ignacio Lopez clone in a better suit. 2006 is shaping up to be Carlo Ghosn's Waterloo - and he may just be exposed for the "one-trick pony" that I suspect him to be.
Will Toyota take over the automotive world? Yes. Toyota is the deepest, most talented, most focused car company in the world. From the top of the company to its superb U.S. dealer organization, from its engineering expertise to its relentlessly targeted marketing, from its masterful Public Relations to its savvy political lobbying in Washington - Toyota is simply in a league of its own. Yes, their obsessive quest to surpass GM in world market share threatens to undermine some of its most fundamental principles, and yes, it has been given a free ride in the media as a result of its carefully calculated, "aw shucks, we're just building 'em one at a time" persona, but make no mistake - Toyota will surpass GM in size by the beginning of 2007. And then just as Toyota settles in for its victory lap, they will have to start keeping an eye out over their shoulders for the world's next looming automotive juggernaut - Hyundai.
2006 is shaping up to be the most pivotal year in automotive history. Car companies will survive, thrive or fail. Careers will be made or inexorably tainted. And an entire domestic auto industry, as we know it, is in serious jeopardy. Get ready for a tumultuous 12 months - it's going to be a wild ride.
Thanks for listening, see you next Wednesday.
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11-30-2005, 04:33 PM
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