The calendar says it’s time to ponder the Great Detroit Comeback – the stuff of MBA case studies and problem-solving seminars in the five years since General Motors and the former Chrysler succumbed to mismanagement and financial crisis.
And before anyone at Ford gets smug, the No. 2 U.S. auto maker would have gone belly-up, too, if not for the gambling spirit of then-new CEO Alan Mulally. Just before financial markets seized in 2009, triggering a borrowing crisis that annihilated GM and Chrysler, Mulally mortgaged everything, including the Blue Oval, to fund a product renaissance.
When Lehman Brothers tanked, Mulally had $23.5-billion (U.S.) in the bank. If he’d waited, Ford would have rolled over, too. Even at that, Ford has benefited from at least $6-billion in low-cost U.S. government loans the past few years. Yes, all of Detroit got a bailout.
Only a fool would argue that the bailout of Detroit’s car companies was a mistake, though. Taxpayers spent $14-billion-plus to stay Detroit’s execution but, in return, saved billions more in avoiding lost tax revenue and various payments. A few million jobs were saved, too.
Nice, but no one in the car business with a brain celebrates success for longer than 24 hours. Ford Motor Co., General Motors Co. and the new Fiat Chrysler Automobiles NV face daunting challenges, profitable as they might be. If any one of them makes more than one or two mistakes in the next few years, the prognosis will be as bleak as it was in 2009.
GM’s recall crisis is well documented and the ignition switch fiasco will long have implications for its safety reputation. GM is recalling millions of cars, and will compensate owners millions, if not billions, of dollars. GM will pay a hefty price for acting improperly in any number of ways.
The bigger issue, however, is GM’s culture, which the 325-page Valukas found lacking in urgency and accountability. Fixing a corporate culture that considered itself “fixed” as recently as last December, as one senior executive told me, falls to chief executive Mary Barra.
She’s saying the right things, but is GM’s former human resources chief, a 33-year veteran at the company, a Level 5 leader – humble, but driven professionally to do what’s best for the company – in the parlance of Jim Collins, author of Good to Great: Why Some Companies Make the Leap … and Others Don’t. Does Barra possess what Collins says is required to effect cultural change in an organization? Good question.
At Ford, Mulally is tossing the keys to Mark Fields, who becomes CEO on July 1. Ford has made an impressive $42.3-billion over the past five years. However, the hardest work is yet to be done.
The company’s products have been slammed for various quality issues – many tied to its infotainment systems – and, this year alone, more than 700,000 Escape SUVs and C-MAX vans were recalled for safety issues. The Lincoln luxury brand remains what it’s been for decades, a work in progress, Europe is barely inching out of a deep hole, South America is unprofitable and, in China, Ford is chasing the competition.
This year, Ford is launching 16 key vehicles, including the 2015 aluminum F-150 pickup, the Lincoln MKC crossover, the Mustang and the Transit commercial van. The botched launch of the 2013 Lincoln MKZ suggests this product blitz presents an enormous challenge for Ford. All this with a new CEO at the helm.
As for Chrysler, CEO Sergio Marchionne last month laid out an ambitious five-year plan to increase sales and market share. A barrage of new models will come as Chrysler is expanding internationally, most importantly in China with the Jeep brand.
Is it reasonable to expect Fiat Chrysler to grow sales to seven million globally (from 4.4 million), increasing profit margins by 71 per cent? To succeed, Marchionne says he needs “near-perfect execution” from a team that must avoid the glitches marring recent product launches.
Five years after Detroit’s greatest crisis, the hardest work lies ahead.
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