Poor Leadership slammed at Ford and GM

January 11, 2007

Leadership at Ford and General Motors has been identified as a key factor in their decline against Toyota and other competitors. As Ford plugs its innovative link with Bill Gates, industry experts predict a further decline in its fortunes. It is possible that the industry has developed mechanisms that are protecting it from acknowledging the extent of its decline.

In a recent post we asked whether Toyotaoism is replacing Fordism. The debate following that post has continued. This week’s news from the US Motor Show is accompanied by further press reports on the competitive challenges facing US car manufacturing, that bell-weather of the economy. The battle for commercial success seems to be favouring the more philosophical arguments for Toyotaoism.

BBC reporter Steve Schifferes was at Detroit for the motor show. He interviewed its North American head Mark Fields, but interestingly, the Company’s new overall leader, Alan Mulally is not giving press interviews at the Show. The company has retained its high profile stance at the show, emphasizing its continued innovation, majoring on a link with Bill Gates and Microsoft which will produce a new in-car audio system (‘Sync’) in an exclusive one-year tie up.

Industry insiders remain unconvinced

Industry insiders remain unconvinced of Ford’s prospects. Ford lost $ 17 Billion last year and its factories are in hock to its $20 Billion bank borrowings. Its voluntary redundancy plans are proceeding apace.

Professor James Levinsohn of the University of Michigan said the US companies have only themselves to blame.

Ford and GM regularly round up the usual suspects when searching for a reason for their troubles but the real culprit is the obvious one. These firms are not making products that people want to buy. The responsibility for that lies with what passes for leadership at these firms.”

Blanking out the bad news

Levinsohn claims that he has been unable to find a placing for his analysis in auto-industry publications. He believes that the publishers are concerned that such the magazines are worried that such bad news stories would put a magazine under pressure from its advertisers.

State of denial

It is not unknown for academics to claim that their work has been rejected on non-academic grounds. Independent evidence to assess such a claim is hard to obtain. However, the brave face of the industry at Detroit is itself some evidence of the industry’s need to talk itself up. Yet, Ford’s main claim for innovation as the Microsoft link seems peripheral to its commercial problems. We may be witnessing what Chris Argyris has called covering up the cover-up. That is to say, a state of denial

Tundra vanilla with cherries?
The show also signalled the continuing advance of the Totota brand. Its Toyota Tundra is marketed as an American pick-up, designed and manufactured in the good ‘ol US of A.

The Asian automakers have cornered the market on vanilla,” says Global Insight automotive analyst Rebecca Lindland “..Now they’re adding the hot fudge chocolate with cherries on top, which is what they have to do to progress in the US market .. They are going after a new segment with its truck – heartland America, NASCAR drivers, who are more patriotic [and] not Toyota drivers typically”

The story is not completely bleak. The Economist has been following the auto-industry for some years, and commented (January 13th 2007) that prospects for GM ‘have dramatically improved’. Even this more positive view suggests that the company seems to have been galvanized by stake holder Kirk Kerkorian’s decision to pull his 10% stake last year, and that recovery and rationalisation if it works ‘will achieve economies of scale that only Toyota can match’, and that GM’s core North American operations are still only ‘heading in the right direction’.

Questions to ponder

In which case there are further questions to ponder. Are we witnessing leaders operating with a clear vision for the future at Ford and GM? Are the companies putting on a brave face? Or are they operating in a state of denial?