Hello Everybody!

I just got some notes and comments from Dennis DesRosiers, a great guy and one of the leading automotive experts. This inspired me to bring up some points and I would love to hear your view and feedback.

In a nutshell, Dennis explains the automotive downswing based on three effects that are happening at the same time:

1. the cyclical downturn in the US market
2. the continued move away from the Detroit three to import OEMs
3. the rapid shift in product mix driven by increasing oil prices

These are excellent points and it’s a great summary. However, my question would be why do some automotive OEMs perform exceptional well (most Japanese OEMs) and others (the Detroit OEMs) have a very hard time event staying afloat. All of them operating on the same battle field and serving the same customers.

This leads me to a couple of questions, such as:


Why is it, that the big three did not see the change to more fuel efficient vehicles coming?
Toyota for instance started developing the Hybrid car in the 80th or so. GM has been present in Europe (Vauxhall in UK, Opel in Germany) long before the Japanese even shipped their first car overseas, so they should have known much better and much earlier than anybody out there what to expect on fuel efficient vehicles and where the trend is leading to.

Why do consumers shift to Japanese brands, away from the big three?
Isn't it also because of the price, quality and reliability? As a matter of fact, you get much more car with better quality and better gas mileage for less money when buying a Japanese car. And by the way, consumers did move to Japanese large cards some years ago already. When Toyota came out with the 4Runner and Sequoia, many customers moved away from GM and Ford (you probably have better statistical data than I have). At that time it was not so much the fuel consumption as more the reliability and quality and maybe – but now we are getting into the art of cars - the design.

And the most interesting equations is:
Why can Japanese manufacturer build what customers want, and the big three can't?
A good design for a new model, a fuel efficient engine, the knowledge of how to build a car with high quality and low cost, how many cup holders to put in a van, etc. etc. does not fall from the sky, does it?
So again, WHO is designing the cars at GM, Ford, Chrysler, Toyota, Honda, Hyundai, BMW, Mercedes, .. .you name it?
---> The cars are designed and build by their employees, and nobody else!

Now think about it… Toyota is opening another plant this year in Woodstock, and funny enough the plant is staffed mostly with western people, actually mostly Canadians, God Thanks.
Can we assume that Oshawa has the same mix of people in their plant, Canadians? For sure, yes!

Well, you might say: “Yes, the GM workers can build a GM car the same way the Toyota car is build. Listen, GM has even a joint venture with Toyota since 1984 in Fremont California, the NUMMI plant. So, GM knows how to do it in the same way Toyota does. The assembly process is not the issue, that’s the easy part. It’s the design that sucks! How can I build a nice looking, high efficient car if the car is not designed that way? … “

Well, first of all this statement is not true. I am arguing that even if you would give GM a nice designed Toyota to assemble it, the quality would never been reached and the costs of such a car will go through the roof. Secondly, who is designing the car? Yes, again, their people.


OK, let's go back to the question above:
Why can Japanese manufacturer build what customers want, and the big three can't?

There are simplified only two (2) reasons why Japanese and specifically Toyota are able to build what customers want:

1. Toyota (and other Japanese OEMs) has not only established world class, best practice processes to design, build and assemble cars, they also documented these processes in a unique way which makes it very easy to train people on these processes (just as a side note, GM processes are mainly documented as skill sets in the heads of most of their employees…So, even if GM could replace all Union workers with new non-Union young people, than.., yes, GM would have a real problem not being able for quite some time to figure out how to build a car).
2. Toyota managed to develop a company culture over more than 50 years that support improving and communicating these world class processes even further and constantly, 24/7 – called Kaizen. Even more impressive is that Toyota managed to sustain this culture over such a long time, this alone is absolutely remarkable and hard to believe.

So it’s a combination of Best Processes and People Engagement, that’s what makes the difference. And by the way, this starts at the top management level and nowhere else!

Sorry, but I don’t understand how Mr. Rick Wagoner who has been driving GM totally into the ground for years and years is not only still in power but worse, continues the journey of ruining GM completely. This is totally outside my horizon, but maybe somebody can help me out here. By the way, most of the overaged second level GM management needs to go if hopefully soon a new leader takes over. Look at the NUMMI plant, the 50/50 joint venture GM/Toyota. When the joint venture was started in 1984 and Toyota took over reorganizing the whole location, almost all union employees where kept but only 7 management people. The same think MUST take place at GM, very, very quickly.

Ford in contrast with much higher debts, but with a dynamic and intelligent Mr. Alan Mulally, who is not only on the right track but also moving (as you know, being on the right track is not good enough, if you don’t move you eventually will be ran over by a train) by listening to his people and spending even a day as a car salesman in a car dealership – with $28m for 4 months work maybe slightly overpaid, though ..– will most likely outperform GM on the long run and will make a turn into profitability.


Yes the economy and the three (3) aspect mentioned at the beginning are very important factors, but the true reason for the big three failing lies much deeper. And as long as we are not willing to start digging to find the root causes and start working with our employees instead against them to fix it, no company will ever succeed in being a leader in its field.

I have seen and being involved with numerous companies jumping on the Lean and Toyota (TPS) band wagon as flavor of the month, so to speak, but I only saw very few that really managed to implement sustainable improvement. All of these companies, without a single exception, have a very strong leadership team and an amazing focus on their people and how to engage them.

The recipe for making it happen is simple, the outcome unbelievable and external support available.
To finish my question series:
Why is it that only a few companies go this way?


I am looking forward to your comments.

Thank you!

Juergen Boenisch


Juergen Boenisch, Ph.D., CMC
Executive Management Consulting
2113 Falling Green Drive
Oakville, ON L6M 5B6
Canada
Phone: (905) 847-9298
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Skype: Juergen.Boenisch
Email: Juergen.Boenisch@jbemc.com