November 9, 2011
Toyota becomes a cautionary tale, but are the other manufacturers paying attention?
By Peter M. De Lorenzo
(Posted 11/8, 11:30 a.m.) Detroit. I once wrote a book entitled The United States of Toyota, which documented how Detroit lost its way and how Toyota weaseled its way into the hearts and minds of the American consumer public, becoming “America’s car company.” This came, of course, at the expense of the domestic automobile industry here in the U.S., and especially Chevrolet, which was muscled out of its traditional marketing turf. “USOT” came out just four years ago, but it seems like ten years ago at least given how the automotive landscape has inexorably changed.
Before “USOT” arrived Toyota was the industry juggernaut, an automaker that successfully marketed bland-tastic transportation devices that rarely excited but rarely let people down either, and it became a profit machine that threatened to bury the rest of the industry alive.
And then the wheels came off.
I’m not going to regurgitate the whole unintended acceleration thing, which at the end was proven to be driver error, or the catastrophic natural disasters that struck Japan and severely crippled their industrial might, but I will mention the three things that Toyota contributed on its own to losing its way, which, if the world’s automakers are paying attention, should resonate deeply.
1. The obsession with becoming No. 1 in the world above all else will ultimately result in disaster. A new breed of Toyota managers took over the company and became obsessed with becoming No. 1 in the world. They were tired of hearing about GM, which they viewed with derision and scorn and only a titular “No. 1” that didn’t deserve the title, especially given their serial incompetence. So Toyota embarked on a disastrous strategy to add capacity and churn out more vehicles to settle this “No. 1” business once and for all, and the results were predictable. In the process of churning out more vehicles, Toyota took their eye off of the proverbial ball and completely walked away from their raison d’etre, which was to build competent, bulletproof vehicles with unimpeachable quality. Instead, for the first time in their history they delivered vehicles with glaring quality problems, and in the swirling maelstrom of bad quality reports, and the relentless stories in the media about the facetious unintended acceleration issue, consumers walked away en masse.
What car company should take notice of what happened to Toyota but won’t? Volkswagen. Now I’ve said repeatedly that VW should be careful about this but the German automotive executive mindset is well documented as being one that thrives on not just winning, but on doing it with sheer dominance. It’s an indisputable fact right now that VW has it goin’ on, as they say, and is the No. 1 automotive conglomerate in the world. The company is doing a superb job of not only juggling all of their automotive assets but also enhancing them at every turn, and what they’re doing right now to create brand separation within their automotive empire is indeed impressive.
But one thing VW executives are likely forgetting is that for all of the technology and machinery involved in this business, it’s remarkable how it can all come down to the human factor. And when humans and human nature are involved that means that ego and hubris are never far behind. I have no doubt that VW executives will scoff with glee at the notion that it could ever happen to them, that hubris and ego will take over and blind them into doing something stupid.
But then again Toyota execs scoffed at the very same thing and look how it worked out for them.
2. Everyone talks about the dangers of loss of focus but no one can ever sense when it is happening to them. As I mentioned in Point No. 1, Toyota’s obsession with becoming the biggest, baddest car company on the planet caused them to walk away from what they did best, and they’re still struggling to regain their footing after losing their way. This is a constant battle for car companies, whether they’re huge global conglomerates or cottage industry specialty builders. And the problem is that is very difficult to tell when this downward focus "creep” takes hold.
In some cases it’s obvious, of course, like when you start seeing manufacturers spending too much time on the wrong things instead of focusing on the right thing, which is, has been, and always will be the product. But in other cases it’s a subtle shift in attitude, as in when the key players start to think they’re all that, or they start believing their press clippings a little too much. Then, what starts out as a company-wide cold can quickly become a pneumonia that infests the entire organization.
Companies need to stay focused and hungry for the right reasons. Not just to be profitable and to stay true to their mission and to who they are, but to never be satisfied with “good enough.” Because once the notion of “good enough” takes hold it can bring an organization back to a functional stupor of predictable mediocrity in no time.
The two manufacturers that I believe have to be most mindful of not letting this happen? BMW and Ford. BMW, because no company can stay that hot for that long without veering off of the road for a bit, and Ford, because now that they’re on consumer radar screens the attention they’re being given is ramping up, and the glaring hot light of scrutiny can be intense. Both of these manufacturers have to stay focused and stay hungry, or else.
3. When all is said and done this is still the car business. Seems silly, right? A giant “duh,” no? But you’d be surprised. In Toyota’s case they executed their particular brand of transportation devices exceptionally well, until they started focusing on being No. 1 and this idea of being the “biggest.” Once they went down that path everything went out the window, including their focus on quality and incremental improvement, and lo and behold things went south in a hurry. And after going on 30 months of bad juju, much of it self-inflicted, the company that dominated for so long is scrambling – literally and figuratively – to regain its footing. And it’s not going well.
Does any other company need to be reminded that this is the car business, after all? Absolutely. They all do, in fact. It seems obvious, but I would argue that these companies need to be reminded that when all is said and done they’re designing and engineering vehicles that should be fun to drive and easy to own and take care of. And nothing can go wrong with these vehicles ever, because with the Short Attention Span Nation we’ve devolved to, and the instantaneous vote available with social media 24/7, word of mouth negativity can be devastating to a brand and a car company.
Add in the hysteria over driver connectivity and infotainment, which when difficult or problematic to operate can negatively impact a company (just ask Ford), and there is a stack of reasons for these companies to remain vigilant.
Let me get back to this notion of this being the car business, because it begs the obvious conclusion.
A car company that focuses on the wrong things like profitability and bigness above all else will ultimately run into trouble. As an automaker you simply can’t conduct yourself in this new global arena if those are the only two things that consume your waking hours.
Is there something wrong with profitability? Absolutely not. It’s why companies are in it, ultimately. That and winning, of course.
But there are two ways to arrive at that profitability. The right way, and the wrong way.
The wrong way is to lose your focus, churn out products that lack integrity and aren’t true to your mission, and push for short-term profits above everything else. The companies that choose that path – as Toyota has so painfully found out – suffer deep consequences for their shortsightedness and loss of focus.
The right way is to build outstanding machines, first and foremost. Vehicles that bristle with leading-edge design and exceptional, innovative engineering that are built with integrity and just the right amount of connectivity. Vehicles attuned to customers’ needs and wants yet imbued with the manufacturer’s personality and above all else are flat-out fun to drive.
The companies that do it the right way will win and make boatloads of cash.
As it should be.
And that’s the High-Octane Truth for this week.
See another live episode of "Autoline After Hours" with hosts John McElroy, from Autoline Detroit, and Peter De Lorenzo, The Autoextremist, and guests this Thursday evening, at 7:00PM EDT at www.autolinedetroit.tv.
By the way, if you'd like to subscribe to the Autoline After Hours podcasts, click on the following links:
Subscribe via iTunes:
http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=311421319
Subscribe via RSS:
http://www.autolinedetroit.tv/podcasts/feeds/afterhours-audio.xml
If you would like to read previous Autoextremist issues, click on "Next Entry" below.