The Brave New Automotive World, 2009 Remix

A lot of my old time blog readers have been encouraging me to post my thoughts and analysis more often. I have to admit that I must be the world's worst blogger -- almost one year between posts. It's pathetic, I know.

That being said, I thought I would comment and offer my analysis about all of the changes in the last year in the automotive industry (since 2010 is rapidly approaching). I will also offer my thoughts on how I think things will look in 2020.

So what has changed in 2009? A lot really....

• General Motors -- GM went into bankruptcy and came out sans a lot of cost burdens including several unprofitable union and supplier contracts. The company shed thousands of high cost white and blue collar jobs, old plants, dealership agreements and other legacy costs. GM is also selling Opel, Hummer and Saab. It's shutting down Saturn quickly, unless a last minute suitor comes in to save the day. Bob Lutz has thrown down the gauntlet to GM's advertising agencies to come up with new product oriented advertising campaigns or risk losing their account (see Modernista-Cadillac). The new Chairman Whitacre is in new TV ads asking the American public to trust GM and their products once again. Will it work? Probably not, but I hope it does. The trust that the American public had with GM has been eroded by the sins of the past -- bad quality cars in the 1960's-1980's, recent financial situation and an ever-changing corporate strategy. Where will GM be in 2020? I would predict that GM will finally decide to radically change their game plan for good -- keep their improved quality high, change their name, move out of Detroit to eliminate the stigma of lingering failure, place bets on new technologies (like whatever is beyond plug-in electrics and hybrids) and go with a more non-automotive high tech Silicon Valley management style. With the various tax advantage packages being offered by several states, it wouldn't surprise me to see GM move its headquarters to Texas, Arizona, Nevada, North Carolina, Tennessee or Oklahoma. A more radical move would be overseas. Some large U.S. companies are doing this now believe it or not.
  
  
• Chrysler is quickly becoming Fiat West and is leveraging their new parent company's vehicle platforms and existing European models. A new, aggressive young management team at Chrysler is changing a lot of longstanding and ingrained management practices and is seeking new advertising agencies and innovative ways to cut costs. The old guard at Chrysler is long gone and the new team is settling in. By 2020, I would guess that Chrysler is back to producing products that are brand icons like Jeep products (I love my Jeep Grand Cherokee, by the way), new generation Dodge pickups and performance cars and rebadged Fiat saloons (that's sedans for us Americans) that are sleek, stylish and performance rich.
  
  
• Ford fared the best of the former Big Three by borrowing money at the right time before the economic and lending meltdown, hiring a non-automotive CEO who is slowing tearing away the status quo product development/embedded marketing practices, and not taking any U.S. government help or going the bankruptcy route. Ford is still too set in their ways for my tastes -- Safe cars designs, conservative middle management and a weak Asian presence. Like the other U.S. automakers, Ford has shed a lot of its legacy burdens over the past decade. In 2020, I think Ford will be in the thick of the U.S. market share leadership battle with Toyota, Honda and Hyundai. Hopefully, Alan Mullaly's successor will go the whole way and really push the envelope by implementing a best-in-class product design team, finding more cost effective production locations and continuing the push to grab share.
  
  
• Everyone in the industry is worried about Toyota. I'm not. With billions in the bank, a solid product lineup and great technologies on the ground and in development, Toyota and Honda may be the safest bets of all of the global auto makers. Toyota's long term stealth "winning the hearts and minds" campaign in the U.S. includes production facilities in small Midwest and rural communities, a focused Texas-specific pickup production and marketing strategy (the epicenter for pickup truck ownership in the U.S.) and an Eco-friendly hybrid vehicle platform that has already won over a large following among most environmentally conscious Americans. In 2020, I expect Toyota to be #1 in market share with a minority of its U.S. fleet being comprised of gasoline fueled cars and trucks.
  
  
• Unfortunately, not everyone will be a winner. I have a hard time believing that Mitsubishi, GM's GMC and Buick divisions, Ford's Mercury and Smart will still be around in 2020. I hope Saab is still around then but logic tells me they won't be.
  
  
• We will likely see a much more streamlined U.S. dealer body and more direct online retailing of vehicles by 2020 through online ordering systems and even larger retailers (why not WalMart?).
  
  
• I wouldn't be surprised to see new American car companies emerge, Europeans returning (Peugeot-Citroen) and maybe even a few new players from China and India (Nano?).

2020 isn't that far away, folks. Who will be left, what will happen to the former Big Three and where will technology be in 2020? I would be interested in hearing your predictions for 2020 as well.

Dead Brand Walking

In recent statements to the press, Tracinda's Jerry York quipped on "what he would do" if he were running Ford Motor Company, namely sell off or axe Volvo and Mercury. Tracinda is looking to invest heavily into Ford after failed forays at Chrysler and GM. After some thought, he may be onto something here but these two brands are in different situations. Since my time at Ford in the late 1980's (and even before that), Mercury was always the red-headed stepchild -- product-starved, little advertising or marketing and a revolving door of brand managers passing through the Ford executive training program. Everyone had to do a stint at Mercury, ask Bill Ford. The Mercury situation is little improved twenty years later. So why does Ford keep them around? That's easy -- they don't want to piss off their dealers (no rocket science there). It has little to do with loyal Mercury customers or orphaned product lines. It has everything to do with potential lawsuits, bad press and massive dealer buyouts. GM went through this organizational trauma when it shutdown the ancient Oldsmobile brand earlier this decade -- it was a painful and very expensive bullet to bite.

Volvo is another breed of brand. Volvo has a distinct and loyal fan base, quirky but fun vehicle designs and a premium European cache. For full disclosure, I have to say I am a Volvo owner wannabe -- so I own a Saab instead -- and have been wanting to buy an XC90 for the last four years to no avail. Volvo dealers are also a different set of dealers. Often nestled in tony suburbs of major metro areas, these dealers have pockets of repeat buyers and a cool product to sell. As an organization, Ford has abused Volvo just slightly less than Mercury. In the 1980's and 1990's, Volvo was headquartered in the affluent suburbs of NYC (Northern NJ) before joining their Premium Automotive Group brethren in Irvine, California for a few years. Now Ford is moving Volvo back to NJ to be near its largest buyer base in the Northeast US. Volvo has also been on the low end of the totem pole with marketing and advertising dollars for the past few years.

So what would I do if I were Mr. Mullaly? Shutdown Mercury ASAP, it's been a dead brand walking for twenty years. Keep Volvo but give them some space. Let them design their own vehicles, market and sell to their core base and basically let them be.