December 13, 2005

Will the Last Person Leaving Detroit Please Turn Off the Light on Their Way Out?

There's another good post over at Tom Peters' blog, written by a Mike Neiss, The View From Home.

After reading my colleague John O'Leary's blog about his Shanghai experience, I was struck by the contrasts to what I see from my viewpoint here in the rust belt of the great American Midwest. John saw bright lights and energy! I drove past an empty factory with a sole security light protecting an empty parking lot. Ford announced another restructuring plan—closing ten facilities and eliminating thirty thousand jobs. Add that to the previously announced plans at GM to close nine facilities and eliminate another thirty thousand jobs and you can almost feel the life breath leaving these once proud companies. It is dark and cold here in Michigan this morning. No lights, no energy ...

I will leave it to my more well-read friends to argue the macroeconomic reasons for the sorry state of our auto industry, and offer instead some cut the crap observations:

1) We may have invented capitalism, but we took our eye off the ball. Perhaps it is our complacency, but the truth of the matter is that we are being outworked from the boardroom to the factory floor. In my travels overseas, I have seen a hunger for success far greater than what I see at home. If your counterpart anywhere in the world is willing to work harder then you, they win, you lose. This applies whether you are a CEO or a pipe-fitter.

2) GM is restructuring their executive team, bringing in European talent to save the day. Ford did that. DaimlerChrysler did that. U.S. business schools and grads take note. Where's the homegrown talent? If you can pull your eyes away from your spreadsheets, you might be able to see what we are missing.

3) Ford wants to attract younger buyers. Here's a big clue ... old designers can't design for young taste. Unless talent and performance starts meaning more than seniority and entitlement, it isn't going to work. Put a 25 year old in charge of design. And make it a woman.

4) Throttle back on the cost-cutting mentality. I drive a U.S. nameplate vehicle. Mechanically, it's great. Design ain't bad. But the radio quit, the rear window washer failed, and the latch on the glove box doesn't hold it closed. I am sure they were fashioned with the lowest cost components. Cost does not equal value ... and low cost parts decrease brand equity for a very long time.

5) And suck it up. No one is doing this to you. It is a fate you have created for yourself. While the big three are closing facilities, Toyota is building U.S. capacity with new factories. Apparently, you can make money, and lots of it, building vehicles here in the U.S.

What Neiss wrote about the American auto industry applies not only to that industry, it applies to all American industries. After living in east Asia for four years, one thing I can tell you about Asians is that they will out-compete, out-work, and out-study the average American or Canadian. The economies here are growing very strongly, and will continue to grow strongly as long as they maintain these values. Let me give you an example.

In Busan, South Korea, there are underground shopping centers that lie underneath major streets. I used to walk through one such shopping center that ran from Seomyeon (downtown Busan; pronounced "Suh-myuhn") and the school where I taught, perhaps a kilometer away. And underneath this street were two wide corridors that were lined - on both sides - with numerous small shops. So, imagine, if you will, four long rows of stores, usually 15 feet wide, running for over half a mile. Now there were a number of different types of stores, men's clothing, camera shops, backpack shops, and so on, but 90% of all of the stores sold women's clothing. Literally, about 200 stores selling women's clothes (of all types) within a kilometer's distance of each other (and this didn't count all the other stores, both in that neighborhood and in others, above ground and below ground, that also sold women's clothing). That's competition! And this is just one example of one small industry. I could give other examples (and maybe will, insha'allah, in future posts).

But this is also very representative of Asian competition. Asians compete fiercely, in many aspects of life, and they will gladly take away your business if you are too lazy. And this is why Shanghai is doing so well, along with Singapore, and Korea, and Japan, and...well, you get the picture. This is also why Ford and GM are continuing to have massive layoffs. Believe me, I won't shed a tear for American business. They've earned their problems.

No comments: