Saturday, September 16, 2006

Countdown to meltdown in Motown

The hubris that led to the humiliation of the American auto industry was painfully evident 30 years ago, when I took a brief spin on the beat for the Chicago Daily News.

Even at this late date, my Motor City adventure is worth revisiting, because the complacency and self-deception I witnessed then are alive and well today in other industries facing fundamental, disruptive change. Among those that come to mind are – you guessed it – the media business.

As you read this, kindly bear in mind that I visited Detroit just three years after the Organization of Petroleum Exporting Countries had throttled the world’s oil supply, creating frantic gas lines and introducing a taste of the pain we would come to feel when Shell-ing out $50 for a fill-up. Here goes:

To put the press in the mood to write about its new 1977 gas-guzzlers, one auto maker hired Benny Goodman to play at a banquet featuring a booze-rich reception, a seafood appetizer accompanied by a fine white wine, filet mignon accompanied by a fine red wine and baked Alaska accompanied by vintage cognac and fine cigars.

After dinner, a reporter could head for the hospitality suite, where a complimentary hot buffet and fully hosted bar succored the suckers at the marathon poker games.

Some of the reporters (not me) received first-class airline tickets from one or another of the car makers to travel to Detroit. A few enterprising souls downgraded to coach and pocketed the extra cash.

Several of the reporters (not me) scribbled their bylines on a few press releases and handed them, otherwise untouched, to a Teletype operator who wired them – “Collect, night press rate, Honey” – to the correspondent’s waiting paper.

With the gentlemen of the press sufficiently lubricated and sated, I saw my colleagues rise up angry only twice.

The first time was when the newsmen circulated an angry petition to protest the serving of fish, instead of red meat, at a luncheon hosted by one of the Big Three. The PR guy swore it wouldn’t happen again and was promptly forgiven.

The second time my colleagues erupted was when they hooted me down at a press conference for asking Henry Ford II why his company didn’t make safe and fuel-efficient cars. “We tried it once,” responded Hank the Deuce. “That stuff doesn’t sell.”

With that settled, we went to lunch. My colleagues, unfortunately, did not excuse me as readily as they forgave the flack who served them snapper. But they seemed genuinely happy that no halibut would be harmed in the making of our meal.

While everyone partied hearty in Detroit, Toyota, Datsun and Honda were busy, building tinny little clunkers they often upholstered in grotesque, psychedelic plaids. In the intervening years, as we know full well, the newcomers got smarter and more sophisticated. Now, Toyota, a leader in hybrid technology, is poised to overtake Ford as the second-largest seller of cars in the United States.

What went wrong?

:: The auto makers lost touch with their customers. For all the resources potentially available to research and develop new vehicles for the future, the companies were too smug to imagine the market for their products might change, much less recognize that it already was getting away from them. Too comfortable for their own good, they attempted, when challenged, to emulate their historical successes, instead of embracing the risks and potential rewards associated with innovation.

:: The auto makers competed with the wrong guys. Detroit was such an insular fraternity that executives benchmarked their efforts strictly against their peers across town, each matching the other and none daring to differ. As history soon proved, the American auto market was not a zero-sum game to be dominated by a threesome of self-selected players. While the Big Three cozily conducted business as usual, the initiative was seized by efficient, inventive and bold new competitors who weren’t in the club.

:: The auto makers stuck with a failing strategy for too long. Faced with growing competition, declining share and a marketplace they hadn't taken the pains to understand, Detroit fixated on optimizing a rapidly unraveling business model. The Big Three severed workers and closed plants to cut operating costs and offered ever-escalating incentives to reverse sagging sales. The problem is that their fleets are loaded with cars people don’t want to buy. Worse, Detroit doesn’t have many market-pleasing alternatives readily available in the pipeline. Still worse, they wouldn’t know how to build them efficiently.

For the most part, the auto industry’s woes were self-inflicted by decades of insular and unimaginative senior management. The problems are not the fault of the workers, the customers, the suppliers, OPEC or the competition. They result from management’s lack of vision, objectivity, originality and courage.

If everyone hadn’t been in such a rush to go to lunch 30 years ago, maybe Toyota wouldn’t be eating Ford’s sushi.