Interview: October 3, 2003
October 3, 2003
Micheline Maynard covers the automobile and airline industries for The New York Times and is a lecturer on the global auto industry at the University of Michigan School of Business. Bookreporter.com Co-Founder Carol Fitzgerald and reviewer Fara Warner talk with Maynard about her latest book THE END OF DETROIT, which details the mistakes and miscalculations of Detroit's Big Three automobile companies. She discusses the lessons that her book offers to executives and managers in various industries and whether or not Detroit will be able to regain "their grip on the American car market."
BRC: What prompted you to write THE END OF DETROIT?
MM: After the September 11th attacks, I watched General Motors and the other car makers roll out zero percent financing plans in an effort to jumpstart the economy. They resulted in a single one-month auto sales record. But when the dust settled, it turned out that import companies had gained market share, even at a time when you would think Americans would be at their most patriotic. That told me something that fundamentally changed in the American market, and I set out to find out what had happened and why.
BRC: In August, Toyota beat Chrysler in sales. You are clear that at least one Detroit company will fail, which sparks the question --- can Toyota fail? From your reporting, it feels that Toyota's domination of the world auto market is inevitable. Are there chinks in the company's armor?
MM: I don't say that one Detroit company will "fail" --- I say that one won't survive in its present form. That means a restructuring, i.e., job cuts, plant closings and streamlining, or at the most extreme, a bankruptcy. But obviously, companies can continue to operate in Chapter 11 bankruptcy while they reorganize. To that end, I don't believe Toyota will experience the rockiness that the Detroit companies have and will experience. Toyota is too well-run. It is the wealthiest and most profitable of the major global companies.
Where Toyota can stumble is if its Japanese managers are too conservative and don't trust managers in the U.S., Canada, Europe and elsewhere to respond to the needs of their markets. Also, Toyota needs to keep its fingers on buyers' tastes and be bolder without losing its traditional conservative market. That's going to be hard to pull off. But these are the smartest people in the car market. I would never underestimate Toyota.
BRC: Much has been written about Carlos Ghosn's turnaround of Nissan, but I still feel that I don't understand what it was about him that made Nissan's Japanese executives support him. When the Renault-Nissan deal was announced, the problem of corporate and national cultures clashing was on everyone's mind. It seemed not to be a problem, yet culture clash was a significant issue in the DaimlerChrysler merger. Can you explain or give your impressions of why that was the case? Was Nissan already in a turnaround phase when Ghosn arrived?
MM: Carlos Ghosn walked into an absolutely horrible situation. Nissan had $30 billion in automotive debt. Managers had tried turnarounds numerous times and nothing was working. Ghosn was lucky, in the sense that minds at Nissan were open to the leadership that a foreigner could provide since obviously Japanese executives couldn't find the solution. What's more, he acted quickly, whereas the German and American managers at Chrysler dawdled. Ghosn had the advantage of having a dynamic personality that he used relentlessly to drive home his points. Everyone got the same message, and the message was simple to understand.
By contrast, managers at Chrysler had no idea what "Germany" was up to and were left in the dark far too much. Also, Ghosn was experienced in living in different cultures before he got to Nissan: he spent his youth in Brazil and Lebanon, went to France for university, went back to Brazil, to the U.S., and back to Europe. Moving to Japan was a stretch for him but not as much as it would have been for a manager who had spent his career on one continent.
BRC: What lessons do you think the book has for executives and managers outside the auto industry?
MM: The key lesson is never assume. You must keep talking to customers and keep responding to their needs. Just because you have been in business for 100 years doesn't mean you know your market now or that your competitors are the same. The second lesson is to put all your heart and soul into producing the best products and services that you can provide. A third lesson is to carefully determine what you offer to buyers. There's so much confusion now in the marketplace that a clear message speaks the loudest. Finally, be cognizant of the fact that American consumers' tastes change rapidly. What worked in 1990 or even 2000 may not work in 2005. And remember that your customers are men, women, Asians, African-Americans, Hispanics and from all kinds of places.
BRC: What other American industries do you think are as vulnerable as The Big Three?
MM: I'm concerned about the airline industry. I think there are direct parallels between these two industries. In the airlines, as with the auto companies, you have major long-time players, like American, Delta, Continental and Northwest, being challenged by smaller, more nimble airlines like JetBlue and Southwest. You also are seeing passengers' behavior change: just as with the auto industry, airline passengers aren't willing to put up with the way they are treated just because that's how the airlines say it will be.
BRC: Do you think that the industry has done a good enough job of creating product for women and marketing to women? How have these efforts improved, or hampered, their performance?
MM: Detroit companies, by and large, do not value the women's market to the degree that they should. A good example is Saturn: its buyers were two-thirds women, and many of them traded imports for their Saturn cars. But GM decided to invest in trying to save Oldsmobile, instead of continuing to support Saturn. It starved Saturn of new vehicles for four years. As a result, all the goodwill it generated with Saturn has virtually evaporated, and Saturn today is just another brand.
On the other hand, many imports have done a good job in appealing to women. All kinds of companies, from Toyota to Volvo, know that women place a premium on safety, reliability and durability. Women buy half of all vehicles purchased in the United States and take part in 80% of buying decisions. I believe women are a big reason why imports have done so well. Not that the foreign companies offer pink cars or maribou interiors --- they simply meet female buyers' overall needs, and that has spilled over to the rest of the market.
BRC: Do you think that Generation Y consumers could be the market for Detroit to tap? Instead of buying Camrys and Accords, could they be the group that brings buyers back to Detroit?
MM: They could --- but they have very high standards. Remember that Generation Y consumers grew up with parents who owned cars that rarely had to be fixed. By contrast, when I was a child on the edge of the baby boom, my dad spent every Saturday afternoon under our Chevrolet Impala, trying to fix the latest thing that had gone wrong. That's one reason why my brother and I now own imports: we don't want to be bothered getting things fixed.
And Generation Y customers have even less time on their hands. They aren't going to be swayed by anything that is a shade less reliable than their parents' Hondas and Toyotas. The first time they take a vehicle in for repairs and are told it will take all day, their answer is going to be, "Dude, I'm out of here!" Plus, what's the message they're getting from Detroit? They see ads featuring nostalgia. That doesn't have a lot of relevance to Generation Y consumers. They relate to NOW, not to yesterday. And they have many other ways to express their personalities than through a car.
BRC: A lot of people have said that Detroit was not killed by management, but rather by the unions that "run" the business. Unions are losing power all over America. How do they continue to rule Detroit, or do they?
MM: In a word: tradition. The UAW's history is intertwined with that of Detroit. I can't foresee a time when the Big Three won't be represented by the UAW. But to blame just the union for Detroit's problems is wrong. Every contract has two signatures --- one from the company side, another from the union side. Detroit executives have had numerous chances over the years to address the issue. At least in the latest round of contract talks, there's a sign that this is changing. But there is still far to go before the Detroit companies' labor structures are as efficient as those at the imports. If you compare the Big Three to the non-union auto companies operating in the United States, it's like two mountain climbers who are racing against each other --- only one is carrying a 50-pound backpack and the other is carrying a purse.
BRC: How can Detroit save itself, or is it too late?
MM: It depends on defining "save." I think it's too late to reverse the market share losses. Today, GM, Ford and Chrysler have roughly the same market share that GM itself controlled in 1960. I think Detroit has a chance at stopping the market share slide and stabilizing its market share IF it can take the same care and concerted effort in developing its cars and trucks that the imports take. They can no longer just fill places in their lineup --- they have to create each new vehicle from scratch. They also need to come to terms with the fact that they no longer dominate the automotive scene. If they are willing to be realistic, to shrink in order to grow sanely, I think Detroit definitely has a chance. But that's a tall order.
BRC: Of the cars on the market right now, which do you think will be the "classics" in the same vein as the Mustang or the T-bird?
MM: I'm assuming you mean the 1964 1/2 Mustang and the original T-bird, not the versions of those cars that are on sale now. The one vehicle that comes to mind is the Volkswagen New Beetle. Having owned one, I know that it sparks the love and joy of driving in its customers as the original Mustang and T-bird did. However --- and this is a unique problem of the new automotive market --- the Beetle also is beset with quality bugs. And that has turned off a number of people who adored their Beetles when they first bought them.
BRC: Do you have a favorite car? Are there others that intrigue you? And what is the one that you do not understand that seems to be popular with consumers?
MM: My favorite car right now is the Mini Cooper. It's fun, fast and very, very cute. I am a big admirer of Lexus's lineup, and I think the RX 330 sport utility and the LS 430 sedan are two of the best vehicles of their kind. The BMW 5-series is another fine car and it will be interesting to see how the new generation looks and handles. For affordable cars, I think the Toyota Matrix is a great deal, versatile and easy to handle. The latest Honda Accord is a fine family car and both the Toyota Sienna and the Honda Odyssey minivans are something that families can enjoy without the minivan stigma. (Imagine 10-week waiting lists for a minivan!) Nissan is coming out with some very hot products, and I'm looking forward to seeing how the big Titan pickup truck does. On the other end of the spectrum, I have never gotten the Corvette. It's the ultimate statement of automotive testosterone. Just not my thing.
BRC: Are you working on another book? If so, can you tell us about it?
MM: Yes, and stay tuned.