

You Know Chrysler is Toast Because - fallentimes
http://blogmaverick.com/2008/12/22/

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fallentimes
A nice change of pace given _patio11's_ comments from earlier today:

" _I work in the Nagoya, the Town Toyota Built, though not for Toyota. (Well,
to the extent that anyone in Nagoya can be said not to work for Toyota.)

The great thing about Japanese corporate discipline: when GM has a tough year,
GM blames the year. No way we could have predicted spiraling gas prices, a
down economy, and increased foreign competition. When Toyota has a tough year,
Toyota blames Toyota. You can bet that somewhere in the bowels of that
megacorp is a team of economists reevaluating their currency hedging strategy,
while another team is working 16 hour days coming up with a car that captures
the imagination of the American consumer but is priced to move as compared to
the Prius.

Keep doing this whole "Learn from failure and overcome it" thing for a few
decades and you end up the biggest car company in the world and make the
competition look like sniveling amateurs._"

<http://news.ycombinator.com/item?id=406545>

~~~
patio11
Funny -- my intuition of Japanese business etiquette, which is not always
correct, suggests that the Chryster CEO if anything under-groveled with the
$100,000 ad in the New York Times.

It is a large expenditure to show feelings. Japan is really big on that (as
are most cultures, truth be known, but the forms are different).

If it were a Japanese CEO, I predict they would have taken a page out of the
politicians' book: go to a busy train station, during the morning rush hour.
Stand on a footstool. And shout the following for an hour:

"I am the president of Toyota! I promise you we will not waste your money!
Thank you for giving us the chance to keep these jobs in Japan! With your help
we will proceed together to a beautiful future! I am the president of
Toyota!..."

There is a Japanese politician from the ruling party who is detailed to go to
a large train or subway station, typically in Tokyo, and shout something like
this. Every. Single. Workday. More than one when the government is hurting,
for whatever reason. The point is not to draw a crowd -- most people are busy
on their way to work and pass straight by. The point is not to draw a camera
-- they could have thrown a press conference in a nice heated room with 15
handpicked reporters and been far less embarrassed about things. The point is
to demonstrate that _nothing I could possibly be doing this morning is more
important than demonstrating my commitment to you_. Even the Prime Minister is
occasionally expected to put in an appearance.

Of course, the Toyota CEO won't have to do that groveling because he runs a
business which makes money. But if he didn't, oh boy, there would be an
appropriate level of bowing and scraping.

~~~
tommusic
Wow. This would feel so out-of-place in the US that people would wonder about
the mental health of the shouter.

I like the assertion of importance implied by the shouting; it seems that the
US car corps have enough separation between the performance of a company and
the impact on the exec that it doesn't carry the same weight.

The "down economy" or "lower consumer spending" are too well-established as
escape-goats.

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mattjaynes
lol, the cartoon at the end is the best part. Pretty harsh analysis - but spot
on given how clueless Detroit is.

"For those in Detroit who have never operated a lemonade stand, or any other
business, the way profits are generated is by making products at a price
people want to buy them for, and then producing them, with all costs
allocated, for less than you are selling them for. It’s not apparent that this
is a principle that Detroit understands."

~~~
bbgm
Apparently they've never read their Drucker, or have conveniently chosen to
forget.

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kqr2
Here's the actual ad:

[http://blog.chryslerllc.com/blog.do?id=564&p=entry](http://blog.chryslerllc.com/blog.do?id=564&p=entry)

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mattmaroon
This is actually kind of stupid and poorly thought out. That thank you ad is
just that, an ad. It's an investment. Just because a company's having a hard
time doesn't mean it should never advertise. Sometimes it should advertise
more.

And the American car companies have figured out what cars people want and at
what price range. They were selling SUVs before the rest, for example. The
problem is that the other car companies can quickly copy them, and the price
range is set by the market, which is flooded with Japanese cars of the same
sort. The Japanese can undercut them because of their lower employee salaries.

It's not as if the American car companies can't make a decent car. They just
can't make one that doesn't cost $2k more than the Japanese because of their
cost basis. No amount of innovation can overcome that.

~~~
justindz
No amount of innovation could overcome a labor cost disadvantage? No amount?
Ever?

I'm not disagreeing with your main point. But I think you're either selling
innovation a bit short or you're being too rhetorical.

~~~
mattmaroon
Not in the car industry, because the rest will copy any innovation that
catches on. I have high hopes for the Chevy Volt, for instance, but I also
have no doubt that if demand for it proves significant, Toyota will have a
competitor out in 2 years, and they'll be able to price it $2,000 less.

You can't out innovate someone who can just copy you and sell a product just
as good for less.

~~~
sokoloff
Frankly, Detroit would do well to copy their foreign competitors a bit more
often.

Which American car did the Datsun B210 copy? Which car did Porsche's 911 or
Mercedes' S-class? Or for that matter, Toyota's Prius?

I see plenty of examples of foreign competition innovating successfully, often
at "non-competitive" prices. Detroit's last significant innovation was what?
The 60-month car lease? The UAW job bank?

~~~
mattmaroon
That's silly. All of the auto industry's money is in the middle. Civics,
Corollas, Accords, and their competitors. Americans innovate around the fringe
in sports cars too. And luxury. They had a hell of a run (albeit brief) with
Hummers. Escalades. Mustangs. Etc.

It's just not an innovation problem. It's a cost basis problem.

~~~
sokoloff
OK. When Honda started making the Civic and Toyota the Corolla, what American
car where they competing against, or copying? (I'll give you a hint: it wasn't
a car that was remotely competitive in the small, reliable inexpensive car
segment, and probably not one that you'd recognize today as a direct
competitor to the first Civic, Prelude, or Corolla. Go drive an '84 Omni and
an '84 Rabbit and tell me which is the better car. Or a 70's Chevette and a
70's Civic or Prelude.)

I will grant you that the ur-Mustang was a stroke of genius, reasonbly
innovative in the sense of creating visceral demand for a fun and cheap car.
Right after the pony cars came the muscle cars, which may have represented the
pinnacle of Detroit as measured by getting the country to actually lust after
your products, to care about what engine and trim package was in the latest
chromed sled to roll down Main Street. Even today, I'm proud to own a 65
hardtop and 66 convertible Mustang, both of which are 5+ years older than I
am, and I feel happy to see the smiles of passersby of all ages when they see
a piece of proud American history roll by. And that's exactly the problem, the
pride is in the history, not the present.

The Mustang and Pontiac GTO debuted over FORTY FOUR YEARS AGO! That's a pretty
long drought, and despite their appeal, the C-5 'vette, Fox Mustang, and
Hummer (the H1, not that plasticky rebadged Tahoe they call an H3) haven't
really hit the same chord, have they? Of those 3, I suspect the vette and H1
didn't make significant annual profits, and almost surely not what Porsche
makes on the 911 alone every year, nevermind the significant profits they bank
on the Cayenne. (And all 3 of those together, over their entire production
run, certainly didn't make what Porsche made this year on VW options alone!)

By way of background, my 3 registered and insured cars are all American; I
don't have a huge axe to grind here to justify my own purchases, but as I see
it, Japan and Europe are eating Detroit's lunch, and based on my experience
with my '96 Jeep, Satan will probably be wearing a winter coat before I buy
another new American car. (I do all my own maintenance and help friends
maintain their cars, so I see first-hand how my cars and how the Japanese and
German competition are engineered.)

FTR, I agree with you that the UAW deal stinks for Detroit. I'm just ALSO
unconvinced that if the government paid Detroit $2000 for every car they sold
that Detroit would be remotely competitive. So while they have a cost basis
problem, that's not their only problem, not by a long shot.

~~~
mattmaroon
<http://www.npr.org/news/specials/gmvstoyota/>

In 2005 GM sold about 4.5m cars in the US. At $2k per car, that's $9 billion
in extra revenue. That flips them from a $4b loss to a $5b profit.

QED.

~~~
sokoloff
I upvoted you, because that's a great point on financial solvency.

However, it doesn't address the long-run problem of how to take back market
share from foreign competitors, which is the type of sustainable advantage
that I presume Detroit needs in order to thrive.

(I'll also observe that your QED was to a simple P&L equation, not to the
thrust of my comment.)

~~~
mattmaroon
They have strong market share. GM is still #1 here and in the world overall
(though just barely). Market share isn't their problem, it's that they have to
sell at a loss to maintain it.

The reason Toyota has all but caught up isn't that they're particularly
innovative, it's that the Camry can have $2,000 worth of better build quality
than the Taurus or Malibu. Same with Corolla vs. Focus.

Japan gets to choose to either build the same cars and sell them cheaper, or
build better cars and sell them for the same price. It's hard to win market
share in that scenario.

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anewaccountname
>Just one more example of how poorly run the car companies are. Note to the
Big 3, spend money to make money. These types of ads have as much value as a
Bernie Madoff account statement.

Or maybe even as much value as a broadcast.com earnings projection.

