Ford plans restructuring: "Ford Motor Co. will soon announce a new restructuring plan to return its key North American vehicle operations to profitability, Chairman and CEO Bill Ford Jr. said Tuesday."
Watch what is announced closely and read between the lines. I predict that it will be a structural/management restructuring, not a marketing, product or customer relationship restructuring.
What has killed Detroit is word of mouth. The only thing that can save it is word-of-mouth marketing.
Not price cuts in the form of "employee discounts." Pathetic.
In 1972, around the time of the oil crisis, I wrote a report to the Detroit car manufacturers saying that they were extremely vulnerable to competition if they were not much more responsive to the desires of consumers for reliable, safe and efficient cars. My focus groups showed that Detroit's image was a disaster and people were furious, but were afraid to buy foreign cars, with the exception of the Volkswagen crowd. (Remember the "Think Small" campaign? Where, oh where, have all the great ads gone?) I said that there here was a gigantic opportunity for a company to build reliable cars that got good milage -- and to show them in comparative crash tests. They thought I was crazy. (Volvo later stunned autoland with a highly successful crash test campaign.)
I couldn't understand why auto makers couldn't see how frustrated and angry people were, until I was driven to lunch by a top executive of GM. His top-of-the-line Buick Park Avenue drove like it was on a cloud. He proudly said that it was brand new, and that he got a new one every three months. He mentioned that ALL the executives got a new car on a similar schedule. I realized that no auto executive drove a car more than a few months old! They never knew what it was like to have a problem! In the meantime, my three-year-old Thunderbird was falling apart! I was charged $90 to get a brake light changed because they had to remove the whole back panel to get to the bulb! I'm not exaggerating.
I thought Detroit was vulnerable to competition from John Deere, Mac Truck or International Harvester if those companies chose to go into car manufacture.
A few years later, Chrysler was rescued from bankruptcy by the government, then bought by Daimler. Now, people are openly discussing whether GM and Ford can survive. But they are wrongly focusing on the cost of American labor, pensions and health care.
NO!! The problems are with the lack of a close relationship with customers that causes extraordinary products that cause positive word of mouth.
Obviously, I was wrong about domestic companies providing the competition. (I'd still like to see a John Deere car: it would be green, run forever but a little slowly.) Now, the situation has reversed: American cars have the well-deserved image of being unreliable, unsafe and gas-guzzlers. Word of mouth has almost totally destroyed the American manufacturers.
Detroit is not going to be saved by lowering wages, restructuring the pension funds, reducing health insurance or getting rid of unions. It's not going to survive by more robotics. (They actually need less robots among their executives!) Just like the airlines, they need a different way of doing business.
There are successful auto makers. There are successful airlines. Two industries that are beset by terrible problems. Their few winners all have one thing in common: customers who rave about them to their friends.
Let me tell you two quick stories to illustrate: A friend just bought a $62,000 Cadillac, after a succession of Lexi (Google says that's the plural of Lexus) and Mercedeses. He hates the Caddy. It has a whole lot of little things wrong with it. When the electric mirror stared working jerkily, he asked the dealer to fix it. The dealer replaced it. It was a $600 repair that my friend was not charged for. It happened again. That this happened again is not the point. The dealer said something that my friend found appalling, "Listen, I can't keep replacing these mirrors." My friend said that he only wanted it fixed, not replaced. The dealer had him come back at a time when he could call a special dealer number and be guided through the repair. It broke again in a few days. Now my friend has a constant reminder of poor quality in a $62,000 car every time he adjusts the mirror.
On the other hand, I bought a Prius hybrid, after getting rid of my Audi A6. (See previous post). I didn't expect to like it that much, but found my wife's Prius surprisingly roomy, agile and peppy. More about the Prius in a future post, but the point here is a remark from my dealer's repair manager. I asked him about the wait for maintenance. He said that routine maintenance could be done while I waited, but that he might have to take a little longer with any actual repairs, because he never sees Priuses!!! (Boy, the plurals of cars are really a problem.) I asked my local private mechanic wiz, who specializes in foreign cars. He said that he's not that good with TOYOTAS across the brand, because he doesn't see that many because they are so reliable. All my friends say the same thing about their Toyotas and Lexi. "It ran forever." "Never had to get a major repair."
By the way, I'm paying $1.30 a gallon for gasoline at the moment when almost everyone else is paying $2.60. How? I'm getting more than twice the milage (45 miles a gallon) with the Prius hybrid than I got with the Audi, and it's more fun to drive (less acceleration but actually better handling) Everybody's upset at the gas station. I'm smirking. Na nana na na.
The lesson here is that word-of-mouth marketing -- indeed survival itself -- starts with the product delighting, surprising, astonishing, wowing the customer.
THAT'S how Ford and GM need to restructure.
Market Navigation, Inc.
Word-of-Mouth Marketing Consultants