Why Detroit Matters to You

The situation involving the American automakers in Detriot, Michigan is astounding, disappointing, and yet predictable. The companies (specifically General Motors and Chrysler) built poor products for too long, and now must live with the consequences. I've spoken to many people who assume their businesses are immune from the issues which brought down GM and Chrysler. But they're wrong - these issues can affect any business in any sector (even the Internet!).

Arrogance
For the longest time, Detroit failed to recognize the inferiority of their own products. "Why wouldn't anyone want gas-guzzling, boring, low-quality, over-priced vehicles?" they reasoned. (Ok, so it went something a little different than that!) The Detroit Three failed to recognize that consumers' needs and wants were changing. Honda, Toyota, and even Nissan snuck onto the scene with well-styled vehicles that were dependable, reliable, and based on un-biased market research. The Japanese automakers did not automatically assume they knew what customers wanted - instead, these companies conducted market research and then produced vehicles that customers specifically asked for.

Stupidity
What word besides stupid could describe Chrysler's botched attempt at its latest Sebring mid-size sedan? Compared to other vehicles in this category, the Sebring is without doubt under-powered, loud, cheap, and gaudy (inside and out!). Stupidity is the only word that could even begin to touch what DaimlerChrysler (as the company was called at the time) executives decided was a fine strategy for introducing a new product in the most competitive segment in the world. In order to cut costs, the company created a hard plastic interior that was neither comfortable nor good looking. All in the name of saving money, Chrysler forever sealed itself out of the mid-size car segment.

Needless redundancy
The Chevrolet Suburban, Cadillac Escalade ESV, and GMC Yukon XL. The Dodge Caravan and Chrysler Town and Country. The Ford Fusion and Mercury Milan. Why waste money marketing two vehicles that are exactly the same? For years, Detroit has insisted that its independent research indicates customers have a loyalty to nameplates and not a manufacturer (in other words, loyalty to Chevrolet and not General Motors). But does it really make sense to make more than one of something that is just different enough to require a completely different series of parts? How about the Ford Expedition and Lincoln Navigator? Or the Jeep Liberty and Dodge Nitro? These companies spent double the required resources to develop, manufacture, and market two of nearly every vehicle they made. And this is not even taking into consideration the ridiculously high number of trim levels many carmakers still offer for each model.

Greed
The automakers' employees could not be satisfied with market wages, insisting instead on being paid at least $15 per hour more than Japanese auto companies operating in the U.S. This level of greed is just mind-blowing. You can even make the case that these autoworkers have in fact put themselves out of a job, by constantly demanding (and receiving!) more and more pay and benefits over the past several decades.

Of course, there are many other problems inherent at each automaker. Perhaps in the coming days, I'll profile the issues specific to each one. Remember, these companies might make automobiles, but the problems they face are problems you could one day face in your business. The problems are not limited to any industry in particular!