Complacency: Worse than a flat tire for Detroit
How the 'Big Three' automakers lost control of the US auto market
For years Detroit has been the juggernaut of the auto industry.
Apparently it's a position that's pretty comfortable.
But as comfort bred complacency, it has left the Detroit's Big Three quaking, under attack seemingly from every direction. That's the message of Micheline Maynard, former Detroit UPI correspondent, in her new book, "The End of Detroit: How the Big Three lost their grip on the American car market."
In a way it was inevitable, in a global industry, that American companies couldn't dominate 95 percent of a market, as they did in the 1950s, with 14 global players now on the scene. But of course the other 11 carmakers' market share came right out of Detroit's pockets. And the giants are still reeling.
Worse, says Ms. Maynard, Detroit has lost the best part of the market to the imports - the picky, educated buyers who want better than average cars and are willing and able to pay more for them.
This leaves Detroit companies fighting each other for buyers who care little for cars and are interested in little more than a bargain. And even these buyers are defecting in droves to Hyundai and Kia with greater perceived value and a 100,000-mile warranty.
Some in the auto industry, including legendary GM product czar Bob Lutz argue that Detroit's problem is merely perception; that a tsunami of new products will win buyers back to showrooms.
Maynard counters effectively that new products alone aren't enough to save Detroit. What's needed is a superhuman renewal of management focus and corporate sacrifice. While most import competitors have a laser focus on their markets, Detroit's only focus has been on being the biggest, not necessarily the best, at anything. Decades of new models have been introduced as the equal of imports. But few have been better. Because of their cost structure the Big Three for decades have been unable to take risk. Every new Motown launch needs to strike it big, leaving the Big Three unable to fill small niches in a segmenting market - even with their colossal model lineups.
"The End of Detroit" lays out five examples of import companies ripping away Detroit's market share little by little in all directions by zeroing in on smaller markets: Toyota, Honda, Nissan, BMW, and Hyundai.
While Detroit occasionally scores hits in the heart of these markets, such as with the original Ford Taurus and the original Saturn, management quickly becomes distracted by easy profits, such as those from SUVs. When the easy money slows, Detroit is left pushing Americans to buy its products out of guilt or patriotism, which win few buyers. Or they offer steep discounts. Today, consumers see American brands as almost generic.
The "End of Detroit" is readable enough, but lags and becomes repetitive in places, especially her analysis in the title chapter. Eventually her arguments, while sound and compelling, sound a bit stale, because she virtually ignores the efforts General Motors, for example, has made to stave off the imports. In the end, the drama in this book has only one side. The plight of Detroit sounds hopeless - and it may be.
Maynard lays out three dire scenarios for the future of the Detroit automakers. Either Ford or GM will have to shrink to succeed in more limited markets, will have to merge with another company to survive, or will seek Chapter 11 bankruptcy reorganization.
The big loser, sadly, is Ford, the company more than any other that built Detroit. It lacks the protection of a foreign parent or the deep pockets of the world's largest corporation. In Maynard's words, the American market has never been kind to No. 2 companies in any industry.
But as she emphasizes, Honda, Toyota, Nissan, and now Mercedes and Hyundai plants across the South built quality cars with American labor. Even if profits make their way overseas, these companies have a proven record of reinvesting them in US manufacturing, while Detroit closes factories at home and builds in Asia and South America.