It seems like everyday that goes on, more bad news is pouring forth from some sector of our economy. I awoke this morning to the headline that Fannie Mae and Freddie Mac are about to be taken over by the US Government in a bailout of epic proportion. Earlier this year we saw Bear Stearns collapse and again the government stepped in to try to shore up this failing investment firm.
We all have personally felt the effects of oil this year, and although there seems to be signs of a recovery, uneasiness permeates throughout the marketplace. The auto industry has not been immune to the economic upheaval either, with continued bad news or factory slowdowns or worse, shutdowns an almost weekly news event.
Two different things I read this past week really spurred the thought process on this story, and what really struck me was the overwhelming feeling that the manufacturers really are trying to pull one over on us in a desperate attempt to calm the market. It seems as though a bunch of bull crap is being spewed forth by the manufacturers in an attempt to increase sales and settle unsettled consumers and investors.
The question has been tossed around here from time to time, who will survive and who will succumb to bigger companies or simply slide into extinction. I have a feeling that perhaps we are looking at the manufacturers from the wrong perspective. Call me crazy, but I think the best car companies out there should be able to stomach a downturn with little to no effect on the business other than slower sales because plans were laid out in advance to account for a changing economic situation.
But this is not the case; for the most part everyone is hurting right now. Well, not everyone, Honda is doing pretty good, Hyundai is kicking butt and taking names. But there are a lot of big names that are hurting right now. Yeah, we all know Ford and General Motors, but what about Toyota and BMW. News of a massive write down on off lease vehicles by BMW rippled through the headlines this summer, and Toyota, a once unstoppable force is slowing down in almost every segment of the market as very high double digit percentage point sales and profit losses continue to mount.
So what went wrong and which manufacturer is dishing the most crap?
Let’s look at Toyota and GM. These two colossal automakers are a lot more alike than people want to acknowledge. GM has been the biggest in the world for a long time, and Toyota rapidly sped up and looked like it would overtake GM in sales.
But during the build up to overtake GM, look at what Toyota brought to market. SUV’s and pick-up trucks, the lifeblood of GM is exactly the product mix Toyota was rushing to develop and bring to market. Toyota went as far as to challenge the domestically dominated full size pickup market with the Tundra. Their truck met or surpassed the offerings of both Ford and GM, and with a massive investment in a new factory in Texas, Toyota was positioned to take over yet another segment of the market.
And yet that new factory sits almost idle, as production has been scaled back while current inventory lingers on dealer lots with heavy discounts. It could be argued that in the quest to become the biggest Toyota lost focus on what made them successful.
General Motors on the other hand is lucky to still be in business. With so much bad product for so many years, it truly is a miracle to think that the General survived. With the addition of Bob Lutz however a true car guy was in control, and his passion and understanding of what makes a great car great has led to some world-class product including the CTS and Malibu. But the fact of the matter is GM relied too heavily on truck and SUV’s and simply wasn’t prepared to react to a changing market that almost overnight shunned the large truck and SUV in favor of more efficient transportation.
And therein lies the problem, and hence the propaganda coming from both GM and Toyota. Failure and inability to adjust to rapidly changing market conditions is a quick recipe for disaster.
General Motors is fighting back launching a website of Facts versus Myths. The site is informative, but is it truthful? Perhaps it is my own cynical mind, but I can’t help but feel that I am being conned by a company desperate to survive.
And what about Toyota, AutoSpies.com reported a 99% decrease in profit earlier this year, and with very few new models in the pipeline, the declines are almost guaranteed to continue. While Toyota probably won’t fail, the lean mean machine that once dominated the market is struggling to hold on to market share it fought so hard to obtain. Will a smaller product lineup be the solution to regain momentum, or is chasing General Motors with offerings in every market segment the ideal answer.
And to contrast GM and Toyota, Agent 009 wrote an article a couple months ago praising Honda for their continued success even in a market that was sliding in the wrong direction. Honda has never changed course from its mission of selling fuel-efficient cars. The same cannot be said of GM or Toyota. We know that GM recognizes that if it doesn’t change it will fail, but what about Toyota, will they be able to adjust to a market that changed as quickly as it did.
As I said earlier, the best business is the one that can adjust to a changing market without having the changing market bring it to its knees. Both GM and Toyota are learning a valuable lesson that hopefully makes them stronger on the back end.
How much more of their propaganda will we have to endure before the product can speak for itself? Only time can answer the question.
In the meantime what other companies are you tired of hearing news from that you can’t help but think is simply bull crap? And do you think some car companies will simply close up shop, and if so who?