THE AUTOEXTREMIST

June 1, 2011

Enduring High-Octane Truths, twelve years on.

By Peter M. De Lorenzo

Detroit. It seems like it was only yesterday that we posted the very first issue of this publication online, but it most definitely wasn’t. June 1, 1999 was eons ago, and everything has changed. Well, not everything, but certainly enough in our world has been thrown for a loop that most of us can safely say “I never thought I’d see that happening” about something, someone, somewhere over the last twelve years. And if you can’t, then you’ve been living under a rock. And no, I’m not going to regurgitate the obvious Sturm und Drang that has transformed and embroiled the global reality we live with today, but I can safely comment on four fundamental High-Octane Truths that have endured in this business over the last decade plus two...

Truth No. 1: Hubris, complacency and taking your collective eye off of the ball translates exceedingly well in any language. With the Asian automakers smugly watching from the sidelines as the domestic manufacturers did their pirouette into mediocrity ­– with two of the three even impaling themselves so badly on their own serial incompetence that they ended-up filing for bankruptcy – they talked themselves into believing that it could never happen to them. Less than a year later Toyota was sent reeling from so much recall-itis that their heretofore impenetrable reputation for quality – which was won over decades by building bulletproof vanilla mobiles that never broke – was torn asunder. And in less than 18 months the Japanese automaker formerly known as The Juggernaut watched as its market share here took a tumble and at least 25 percent of their customer base started to consider alternative brands for the first time in their lives. “It couldn’t possibly happen to us,” Toyota management probably thought while the domestic automakers took their turn in the dumper, yet here they are now scrambling to not only hold on to the customers they have, but trying to convince the rest of the consumers “out there” that they still have it together. Toyota will find out the hard way – just like the domestic automakers did ­– that no one screws up continuously in this business without paying the piper down the road. And Toyota has just pulled up to the Toll Booth from Hell.

And Honda? Once the darling of fuel-conscious happy consumers as well as driving enthusiasts on a budget, the “little motor company that could” got so far off the reservation that it lost sight of the roadway altogether. How could this once magnificent little car company get it so horribly wrong? See Truth No. 1. But then again I view Honda’s fall as even more catastrophic than Toyota’s. Why? Toyota was always the corporate monolith that was so close to the “old” (and bad) GM that you could almost hear them teetering toward complacency by the minute. Honda’s fall was even more egregious because they lost sight of what made them great and what their founder believed in. They got so far away from building elegant little motors and beautiful little suspension bits that they forgot who they were and what they were supposed to be about. In my book that is simply unforgivable. Now Honda is trying to convince old loyalists who don’t care anymore and new consumers who never fell in love with the brand in the first place to seriously consider their wares, and it’s not going to be easy. Honda has found out the hard way, when you lose your mojo, it’s hell getting it back.

And it's even exponentially harder now. Why?

Because the business has changed, and that quaint old battle pitting Toyota and Honda vs. the old Detroit Three is so obsolete now that it has been relegated to the scrap heap of history. There’s a new player in town that has shaken the Japanese and the domestic automakers to their core, and now that massive Korean automotive conglomerate called Hyundai-KIA is breathing down everyone’s neck and stepping on the gas hard. The Korean automaker that not too long ago used to look at Toyota and Honda with envy has now blown right by them into the collective American consumer consciousness, and there’s no turning back. If the last 30 years were Toyota and Honda’s time in this market, then for the foreseeable future Hyundai-KIA will be the dominant Asian auto manufacturer in the U.S. Let me put a finer point to that statement. Hyundai-KIA will be the dominant import manufacturer in the U.S. market for the next 10 to 20 years. And yes, that’s even with a rejuvenated VW Group flexing its muscles in this market.

See what I mean? If someone had told me when we started this publication that in little over a decade GM and Chrysler would file for bankruptcy only to emerge to fight again, or that Ford would emerge as the new No. 1 American automaker, or that Toyota and Honda would see their fortunes and reputations fade due to their own arrogance and complacency, or that a Korean car company would position itself to be one of the dominant players in the global automotive market, I would have said no frickin’ way.

Truth No. 2: Image wrangling and marketing can only take you so far in this business. Last week I laid waste to the notion that social media will be the be-all and end-all for every single marketing problem facing automakers from here on out. It’s an important tool and it can be used wisely and effectively, but you better have more in your bag than that. Yes, it is the instantaneous communication phenomenon and we’ve all been sucked into it, but no car – or car launch – will be sustained by social media alone. But that’s just one dimension of the whole automotive marketing “thing.” The fact of the matter is that as an industry veteran I’m happy to say that marketing and image wrangling have come a long way in this business in twelve years. It’s more sophisticated and nuanced, and automotive marketers have, at least to some degree, even discovered the notion of subtlety in their approaches and it’s refreshing to see, because believe me that wasn’t the case in the not-too-distant past. But as good as automotive image wrangling has become and however great and effective an automotive marketing and advertising campaign can be, it can only take you so far in this business. Why? Because no marketing campaign can ever compensate for a less than competitive product, which brings me to Truth No. 3.

Truth No. 3: This business still comes down to a battle between the True Believers vs. the Perpetually Clueless. I will tell you right now that this business is still rife with people who show up at work at these car companies not having a clue as to what they should be doing and not really caring what they’re actually doing either. The “vast, gray middle” at these car companies is still the place where energy is sapped, innovation is derailed, creativity is blunted, and dreams are crushed. When the vast middle at these car companies stays hunkered down in their bunkers and out of the way, good things happen. But when they’re allowed to rise up and swallow product programs whole, the calculated mediocrity creeps in and that’s when everything turns to shit. I’ve seen it for myself up close and personal and it’s not pretty. Even with these so-called “transformed” companies here in the Motor City, the vast middle still stands ready to paralyze momentum at the drop of a hat. Just this week, Mark Reuss, President of GM North America, alluded to the lingering problems while describing the “old” GM and the problems still facing the “new” GM in an interview that appeared in Automotive News: “I think the company was very siloed, and you could argue that it is still somewhat that way in terms of approach culturally,” Reuss said. “When I go into a product meeting and talk to the engineers or into plants to manufacturing folks for instance, I say, ‘We have competitors that are running 75 percent cars at 10 percent margins.’ And so I say, ‘We are around 7 percent-ish on a margin basis with trucks. Does everybody get that?’ What does that mean? It means that we have got to become a full-service automaker again. We have to be able to really value every portfolio entry in this company again. We did this through history at some different points, and we have to be able to do that. I don't think people really get that.”

Let’s repeat Mark’s last statement: I don’t think people really get that. Really? After all that company has been through including suffering the humiliation of bankruptcy, there are still people there who don’t get it? Yes, indeed there are. That’s the vast gray middle for you, the Land of the Perpetually Clueless, where people pride themselves on never getting with the program and dumbing-down everything they come in contact with.

Needless to say, this fight continues.

Truth No. 4: It is the efficacy and fundamental desirability of the product that counts above all else. This next point will be no surprise to anyone who has read this publication from the beginning, but as I’ve said repeatedly over the last twelve years this business is, has been, and always will be about the product. This High-Octane Truth has never wavered since Day One of this publication and it’s even more mission critical today. Technology alone will never carry a car company, and a tremendous service experience can’t get it done by itself either. Great marketing, safety and fuel efficiency? All crucial and essential and they must be present and accounted for in order for a manufacturer to compete in the automotive market these days. It’s simply the price of admission.

But having the required ingredients is one thing, however. If you don’t have emotionally compelling design –  which remains the Ultimate Initial Product Differentiator in this business – then you, as a manufacturer, are nowhere. And even beyond that, if you can’t give your customers a definitive reason for being behind the wheel, in other words, if you can’t make the act of driving engaging and involving and most important, fun, then you will fall even further behind from where you need to be.

One thing that remains crystal clear to me after doing this publication for a dozen years is that the successful manufacturers are those who never lose sight of the fact that the freedom of personal mobility is a powerful thing, in fact it’s one of the most compelling lures that exists for most human beings.

And as long as manufacturers understand that and understand that it’s the essence of these machines that resonates, and that they can indeed be mechanical conduits of our hopes and dreams, then they’ll have a shot at succeeding for the next decade plus two.

Oh and by the way, lest you think that I believe Hyundai-KIA’s march to Juggernaut status is a foregone conclusion, all you have to do is go back and study Truth No. 1. The history of this business is littered with car companies and car company executives who got too smug, too complacent, and too caught-up in their press clippings and who took their collective eyes off of the ball. It has happened before and it will most definitely happen again. Just remember, no car company stays that hot for that long without losing focus, and trust me, it will happen to Hyundai-KIA as sure as I’m writing this.

And that’s the High-Octane Truth for this week, and another decade plus two.

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