Is The American OEM Automotive Industry About To be Reborn As A Service Oriented Industry Building and Maintaining Long Lived High Quality Vehicles?

Implications: The quality of the passenger carrying motor vehicles offered for sale in the USA has improving dramatically during the 30 years since the, predominantly transplanted Japanese, competition forced the industry to address value rather than size and performance as the key to marketing. In fact the main reason that both General Motors and Ford have now, for all purposes, failed, and are operating as undeclared bankrupts supported by thinly disguised subsidies from a national government paralyzed by its inability to comprehend the lessons of globalization, is that both of these companies are still run by 20th century managers who simply do not understand the need to build for, nor what to build for, the 21st century marketplace. Limitations on the production of raw materials and the wasting of the existing ones by needlessly short scrap cycles must now be recognized and taken into account if consumer goods are to be made globally available, it's as simple as that!

Analysis: Everyone in the executive suites of Ford and GM laughed when they first heard that Cerberus, after buying the moribund Chrysler unit of Daimler, had installed a former mass marketing executive, Bob Nardelli, as Chrysler's CEO. To a man, and they were then are still are now all men, they said that Mr. Nardelli would find that running a car maker was quite different from running Home Depot.

What Rick Wagoner, Bob Lutz, William Clay Ford, Jr, and now Alan Mulally clearly did not understand was that Cerberus had reasoned , correctly, that the only possible future for the American owned and operated OEM automotive industry was to reinvent itself as a mass marketer in the Home depot and Best Buy mode making its money, as its dealers already did, by selling parts and service, not cars and trucks.

GM and Ford were in big trouble long before the housing bubble burst and for the same reason; they had artificially boosted the value of their products and borrowed huge amounts of money to maintain the fiction while being forced to sell cars for revenue streams far below their costs and using phoney accounting to make it look as if they were actually trying to make money. It was and is ridiculous to blame the failure of the American OEM car companies on legacy costs if you define those costs as only the excessive wages and benefits given to the UAW. In fact the car companies were miserably poor negotiators, and they overpaid all employees from unionized janitors to clueless top executives assuming they could just raise the prices of their cars forever to compensate. After all they reasoned for the heneration following World War II they had no, and could never have any, competiton in their domestic market. No one they reasoned could ever understand or work within the US domestic market as they did. They built what they liked and the customers had no choice but to buy them. This was the mantra of American OEM marketing until well into the 21st century!

The car company executives first denigrated the skills of and then actually ignored transplanted Japanese competitors who proceeded to penetrate their markets with high quality lower priced vehicles made in the USA without union labor and by workers who were very well paid by anyone's standards other than those of the bureaucratically ridden, politically smarter than the car company managers, UAW.

The traditional business model is now broken and has actually made it impossible for the American owned and operated OEM auto makers to ever recover. There's a new game about to be born, perhaps globally, and I think that Cerberus and a foreign owned car company, or a combination of them, will be the birth parents, and the new new Chrysler may be the only survivor of the so-called and once upon a time Big Three.

The new paradigm will consist of flexible factories able to rapidly produce short runs and even one-offs of multiple vehicles. These will feed directly to 'dealers' who will no longer  stock large numbers of cars but rather will have a few examples and virtual reality showrooms able to create for you an illusion of the car or truck you want with the body colors, interior colors, and accessories you want. Once your selection is finished a nearby or the appropiately equipped factory will produce and deliver the car or if it is a basic model it will be delivered from a manufacturer owned wholesale distribution center.The car will most importantly of all come with an option to purchase one of the 'new' types of warranties already being offered by Chrysler, such as a 'lifetime' warranty on the powertrain so long as the work is done by an authorized shop. All maintainence, repair, and replacement work will be done by the car dealers which will now be reborn as high tech high quality service shops that also sell cars. This is already the model of the most consistently successful and most profitable dealerships today those of Toyota and Lexus. Cars will be expensive and long lived; they will be able to be bought with long term loans, or leases, only because they will actually maintain their residual value.The yearly model change will probably go extinct.. It was originally a marketing scheme implemented by the founder of General Motors, William Crapo Durant, to differentiate Chevrolet from Ford. This is the 1922 Chevrolet that is the Model T. It worked but it had by the 21st century evolved into a usually cosmetic change and a price increase rather than an 'improved' vehicle. The model change has become an extremely wasteful method of trying to increase volume and nothing else at all. It will not surprise me if Renault-Nissan, not GM, ultimately buys the dealer and service parts network of Chrysler, or of Ford, or of Ford and Chrysler and then proceeds to introduce a line of electrified cars for which the battery or fuel cell can be leased from the company and can even be taken from one body style to another. Batteries and fuel cells will be rebuilt not reconditioned and rebuilt batteries and fuel cells will be better than when they were new because they will incorporate any improvements made since their last rebuild. In addition this scheme would mean that none the precious raw materials critical to the construction of the batteries and fuel cells would be wasted or allowed to fall into the hands of cost adding third parties to be bought back again only becasue recycling them is not within the "core competency" of the original builders. This nonsense has got to stop.

As for the gasoline powered vehicles will be the bulk of private passenger cars for at least the next generation they will be small, high quality, and high value. It is even conceivable that as they are turned back by their owners they can also be reconstructed with the latest improvements by the original builders and not have the man hours used to construct and maintain them originally wasted just as a marketing ploy-"We only make new cars with new materials" is the wastrel's mantra. 

If General Motors persists in its 20th century business model I predict it will be gone by 2012. It is difficult to see how any of the existing American owned and operated OEM car makers can survive against global competition unless they use the time they have left to adopt this or another new paradigm. I think that Cerberus had this in mind from the beginning, and are now panicking, but I wish them luck, because change is what is desperately needed by the automotive industry, and if they hold on and make the changes necessary they could wind up on top.