Is Detroit Dead as a Dodo? Part 1

Anyone who has watched the U. S. auto industry for the past 50 years has to wonder, “When will Detroit ever wake up?”

Toyota entered the U. S. market in 1957 with its ToyoPet Crown (shown above), which was an ugly but a cute car. "Japanese Quality" was an oxymoron in the U. S. in the 50s and early 60s. Through the 1960s, Japanese car manufacturers kept exporting cheap, gas-efficient, low-end cars. Detroit laughed at the Japanese and said, “They can have the low-end market, we build luxurious, high-end cars.” Then, the energy crisis hit in 1973.

Detroit was caught with its pants down and the Japanese took advantage of it. Having pretty much conquered the low end, Japan slowly started attacking Detroit from the side—mid-sized cars—and eventually from the top—the luxury brands. And, started building cars in the U. S., beating Detroit in its own backyard and, often, front yard. Today, Lexus rules the high end, Toyota Camry and Honda Accord dominate the sedan market, and Japanese manufacturers lead in fuel efficiency and J. D. Power Associates' quality survey and customer satisfaction. (Forget the ‘initial customer survey’ that covers the first 90 days of owning your car, which Ford touts; we think it is a joke. If a car has problems in the first 90 days of its existence, it shouldn't have been manufactured and shipped in the first place!)

Amidst all this turmoil Detroit made even bigger blunders: GM acquiring Saab, Ford buying Land Rover, Volvo, and Jaguar, and Chrysler agreed to be bought by Daimler. In all these cases, instead of the European brand-name qualities trickling down the poorly built American cars, the horrible qualities of Detroit percolated up their respective brands. The result: Daimler got rid of Chrysler in a fire sale; Ford is selling off Land Rover and Jaguar, and wait for it to unload Volvo and GM to follow the suit. The Big Three haven't realized that they can not only NOT make quality cars, but their diversification strategies throughout history have been disastrous. Remember Chrysler/Kelvinator/Ground Systems Division, Ford/Philco/Ford Aerospace, and GM/EDS/Electro-Motive Division/Frigidaire/Hughes/Terex?

By the way, here is a breakdown of profit or loss per car manufactured in North America:

Nissan $1,575
Honda $1,368
Toyota $1,266
Daimler -$1,072
GM -$1,436
Ford -$5,234

Source: Harbour Consulting, as quoted in The Wall Street Journal, June 14, 2007.

Of course, Detroit blames the UAW and retiree-benefits burdens. We believe this is just an excuse. Poor leadership and incompetent management always beat up on demanding workers! Yet, you see these days on TV commercials the Big Three (or 2½) touting their gas-guzzling monsters, or flag-waving, patriotic American Revolution ads—hardly ever about quality (or lack thereof).

All that Detroit executives have to do is stop meeting in their ex-smoke-filled, currently mahogany-furnished boardrooms in Detroit; instead, fly to Silicon Valley and drive through the parking lots of high-tech companies and educational institutions, where they will find over 70% of the cars are imported or have foreign labels! These folks are tomorrow’s leaders in the making. By the way, Toyota's market share—including the Lexus and Scion brands—in Santa Clara County is larger than those of Chrysler, Ford and GM combined.

Detroit is a loser city—The Big 2½, Lions, Tigers, Red Wings, Pistons—having lost more than one-half of its population since 1950, to less than a million now. San Jose has beaten Detroit and is now the tenth largest city in the U. S. with a population of almost 950,000!