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The Self-Inflicted Collapse of the Auto Industry

The Self-Inflicted Collapse of the Auto Industry

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Published by Dave Livingston
The bankruptcies of GM and Chrysler are the results of many decades of willful neglect of good business practice by the leadership of the auto industry. That both are now making long-deferred strategic changes under government ownership tells us a lot about what happens when internal agendas triumph over creating and delivering value to the marketplace. Transforming the industry means new products that customers want to buy, different manufacturing strategies and operational capabilities and a different approach to the market.
The bankruptcies of GM and Chrysler are the results of many decades of willful neglect of good business practice by the leadership of the auto industry. That both are now making long-deferred strategic changes under government ownership tells us a lot about what happens when internal agendas triumph over creating and delivering value to the marketplace. Transforming the industry means new products that customers want to buy, different manufacturing strategies and operational capabilities and a different approach to the market.

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Categories:Business/Law, Finance
Published by: Dave Livingston on Aug 15, 2009
Copyright:Attribution Non-commercial

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05/11/2014

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Auto Industry: History, Performance, Assessments and Outlooks
The Auto Industry offers a wide range of issues and lessons for understanding and analyzingbusiness performance, starting with the fact the it was, and hopefully still is, critically importantfor its own sake. When you add in the supplier community, the dealer network and theassociated businesses like advertising it is still a huge economic sector in its own right.The American Auto Industry was also the home of modern manufacturing and for decades ledthe world in manufacturing operations, marketing and product developing and go-to-marketoperations. Again analyzing what went wrong is important for its own sake but also offerstremendous lessons for any manufacture; and more broadly for any large-scale industry orenterprise.Finally the failures of the Industry are failures in strategic vision, operational execution,corporate governance and enterprise management. All of which are analyzed using ourproprietary BizzXceleration Framework.This whitepaper is based on a series of blog posting essays looking at various aspects of theIndustry specifically but always trying to put the analysis in a broader context. For each essayyou’ll find the associated URL address, which is important because you’ll find an extensivecollection of reading material excerpts and links to online sources in case you want to digdeeper. If you will, consider the implicit readings as the beginnings of a large industry study.In the essays you’ll find discussions of manufacturing and the strategic implications, productdevelopment and strategy, though that’s more fully covered in our white paper on Innovation:
From Aha to KaChing: Innovation, Business Performance, Challenges and EconomicProsperity
. You’ll also find constructs and analysis on strategic market assessment set in thehistorical context of the Industry. Finally you’ll find extensive evaluations of the performance ofthe Auto Enterprises at both the Company and Industry levels using the BizzX toolkit. In otherwords there is an enormous amount of business analysis and performance assessmentmachinery used here in a specific case that is also reusable for any other industry. Thatmachinery shows the interactions between a deep understanding of functional performance,operational execution and strategic success.Finally you’ll find discussions and examples using broader economic analysis as well as somediscussion of investment strategy implications. At the end of the day we think what we’reproviding is not just a case study of the Automobile Industry but an illustration of howEnterprise Performance Analysis can be done and linked to, and be dependent on,understanding the bigger picture of the Economy and the Markets.At the end of the whitepaper you’ll also find a lengthy set of readings extracted from the onlineposts to serve as evidence for our arguments. We’ve updated those readings with very recentnews and stories on the results of the government rescue along with very recent managementchanges at GM. While much of our assessment was fairly harsh, and also much harsher thanthe general coverage and anticipated the disaster that happened by months, there’s some very
 
Auto Industry: History, Performance, Assessments and Outlooks
Page 2 of 41
sad news. It turns out we under-estimated how badly run these companies were, based on thefindings of the Auto Task Force. In other words the government is actually doing a better job,as pseudo-private equity investors in running Detroit than Detroit has been able to do for itselfin almost four decades. And that continues with the recent management changes at GM.There are major and fundamental changes that all major businesses need to make and Detroitis the exemplar of how not to do while knowing what needs to be done.
Table of Contents 
1. Auto Industry: Pressures, Changes & Outlook - Finding V1 32. Business (Auto Industry): Worsening Outlook, Improving Performers, Key Issues 43. Auto Industry: Boil, Boil, Toil and Trouble 74. Once More Into the Breech: 3 Decades of Auto (Industry) Delusions 95. Back to Bizzness: Escalating Troubles for Auto Industry 136. Legacy, Losing, Resets: a Future for the Auto Industry? 167. Living In Existential Times: Fiatster, Detroit, Autos and Futures 20
Readings Collections 
1. Auto Futures: Re-Thinking the Car Business, or NOT? 252. Auto Industry: Segueing to Disaster 273. Auto Industry: the Rescue Debates 314. Auto Industry: Future Requirements 375. Failures of Adoption, Adaptation and Innovation 386. Lessons From the Rescue 40
 
Auto Industry: History, Performance, Assessments and Outlooks
Page 3 of 41
Auto Industry: Pressures, Changes & Outlook - Finding V1
 
http://llinlithgow.com/bizzX/2008/04/auto_industry_pressures_change.html
 Posted by dblwyo on April 23, 2008When Lee Iaccoa was booted to Chrysler he managed to save them with a combination of aninnovative new product (the Minivan - which Ford had turned down), draconian cost controlsand product manufacturing rationalization on shared platforms. In the process the US gov'tactually made a profit on its' bailout funds. Yet over the next three decades Chrysler hascycled in and out of profitability depending on whether or not it had a hit for a few years. Fromthe auto company known for the sustained excellence of their engineering and product theybecame the boom-n-bust kids. And that's despite several extremely innovative transformationalefforts that deservedly made the Harvard business case files. This includes a revamp of thedesign process using CAD/CAM technology, re-structuring the inbound supply chain andsupplier relationship management processes and similar major innovations. What it didn'tmanage to do was change the fundamental DNA of the company - the processes, culture,decision-making processes.In a way Chrysler's story,suitably modified, is thestory of the Detroit autoindustry - once theexemplar for manufacturingexcellence, product designand development, qualityand customer focus. Howlong has it been since anyof those have been true, atleast generally?
So after "coasting" for those same three decades on its' historical legacies the industry is facing a huge amalgamation of challenges: inefficient and broken processes,cost pressures, lack of manufacturing quality,products that customers,shall we say, don't love and nearly tone-deaf marketing, sales and service. The greatest irony of all is that the Industry knew and knows all this but could't find ways and reasons to change.

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