Will Toyota’s Stumble Trigger a GM and Ford Comeback?


The planets GM and Ford may be perfectly aligned for a startling comeback.  Toyota, long considered best in class for quality and manufacturing, is staggering from major product recalls of 8 million vehicles.  Their recent results are bleak; Toyoya has been hit by double-digit declines in market share and profitability not to mention serious reputational damage.

At the same time, GM and Ford have been slowly emerging from the throes of a near-death experience.   GM has been bolstered by government funds, the culling of redundant brands and union concessions.  Ford has benefited from early moves to improve quality, divest weak divisions and raise debt.   Both firms have been handed a once-in-a-generation chance to improve their image and recapture 20 years of lost market share.  Can they pull it off?

Much will depend on if GM and Ford 1) can continue the substantial improvements made over the past 3 years in reliability, design and production efficiency (according to analysts and consumer surveys) while 2) still hoping Toyota continues its rocky ride.

Like Toyota, Detroit has belatedly discovered the religion of reliability.  In the past, passenger car reliability was ignored as GM and Ford relied heavily on highly profitable (albeit gas guzzling) Pick Ups and SUVs.  Reliability only mattered until the warranty period ended. However in 2008, GM and Ford’s vulnerable product portfolios were hit by the double sales whammy of a harsh recession and $140+ per barrel oil pricing.  Consumers either stopped buying altogether or quickly shifted to less expensive, value-driven passenger cars.   As a result, corporate profits and overall market share plummeted, threatening the viability of each producer.

This shock triggered a rapid reassessment of the business from executive management down to the line worker. No longer could they ignore the cost, brand and pricing implications of poor quality.   Detroit’s culture changed because it had to.  The core mission of both firms went back to their roots: build attractive, interesting and reliable cars that address current and emerging consumer needs for the markets that matter. The longer term focus these days are on achieving high ratings on independent benchmarks such as Consumer Reports magazine and J.D. Power Associates.

Once attitudes change, better quality-focused processes and reporting systems must follow.  GM and Ford understand that if they wanted to emulate Toyota, it isn’t good enough talking about quality; you have to develop new design, purchasing and production competencies that built long term reliability into every vehicle.   So far, they are making significant strides.  As an example, at Ford it now takes 72 hours (versus 30 days in the past) for a warranty claim problem to get back to the design engineers and suppliers for troubleshooting. In other case, GM vastly increased the amount of punishment each model is designed to endure.  GM used to build vehicles to a certain mileage requirement. Now, they’re built not to fail.

Because so much of a car’s value is delivered by external suppliers, achieving systematic change would be next to impossible if there were not improvements in the traditional manufacturer-supplier relationship.  Until recently, GM and Ford pursued an adversarial, almost cutthroat relationship with their suppliers, usually purchasing exclusively on price.  In contrast, Toyota views their suppliers as partners in the business and work together in many areas including shared R&D and training. 

Of late, GM and Ford are working hard to redefine the way they works with many suppliers.  For example, they now require collaboration between engineers and parts makers; new, jointly-managed troubleshooting processes have been set up and; both stakeholders now work towards shared long term goals around reliability and innovation.

It is too early to assert that GM and Ford will regain their lost glory.  Toyota’s setback may not be anything more than a clumsy misstep.  The next 12 months will be crucial to see if there will be a paradigm shift in the highly competitive automotive sector.

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4 comments so far

  1. Jeff Wilson on

    How much of this is just market balancing effect though? I mean, it was bound to right itself wasn’t it?

    Comparing Ford and Toyota is a good comparison, but I have never agreed that GM is a quality-driven company by any definition of the term. Ford has made tremendous strides in re-aligning its company to quality in almost every sense – service, customer support, vehicle quality, reliability, and going green. They did a lot of this before the market meltdown; as if they saw the writing on the wall put there by Toyota.

    I think Ford will continue to earn market share and GM will be the beneficiary of other people’s misfortune. I don’t believe that GM could fix itself in 18 months after decades of consuming self interest and arrogance.

    As for Toyota, I look at them like i would look at an Olympic athlete. They have been dominating the gold medal podium for years and they finally had a poor performance and got knocked out of medal standings. Do you think they won’t come back with something to prove, not just to themselves but to the world? I believe that very shortly you won’t be able to buy a more reliable, better supported vehicle than a Toyota.

    Good post though mate.

    Jeff – Sensei

    • mitchellosak on

      Jeff,
      Good comments and thanks for the kind words. My rebuttal if you don’t mind-
      1) Not sure what market balancing is but the market share realignment appears to be the result of some pretty compelling developments (like improved quality, lower costs, and increased agility) at GM/Ford, reduced that should continue in the US domestic industry favour. However, Chrysler is another story and I am not optimistic Fiat can pull off a transformation that eluded Daimler.
      2) Agree with your points on Ford but not on GM. The reality is GM is building (mostly) good cars at a good price. I know, we have owned 3 in the past 5 years. The perception in some circles like yours needs to catch up.
      3) Indeed, GM has had cultural problems but guess what, so has Toyota. I would refer you to an excellent report in The Economist recently on the hubris and cultural disfunction in Toyota. I think this will take quite a while to fix. In the meantime, party on GM, Ford, Volkswagen etc.

      • Jeff Wilson on

        Well said. But what about consumer perception? Who has the tougher fight? The brand that started out great and took a dive or the brand that starts out mediocre and wants to improve?

        I owned 2 GM vehicles in the past 7 years and both were mediocre vehicles back by terrible service. Swore off them after that, but went to Chrysler! Maybe i just blew away my own credibility there…

        Cheers Mitch!

        Jeff – Sensei

      • mitchellosak on

        Good questions, Jeff. The auto business these days reminds me of a UFC cage match. Brand perception may be the least of their worries. The business is challenged by over-capacity, enviromentalist demands and a looming medium term threat: ultra low cost Indian and Chinese brands. Having said that, GM/Ford’s brand image will catch up better product and customer satisfaction at least if you believe what people tell JD Powers, Consumer Reports etc. Toyota and to a lesser extent Honda are hurting but they too will bounce back if they fix some of their issues.


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