Excuses For Why The US Auto Industry Failed, And Then The REAL Reasons

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GM icon Bob Lutz has a deserved reputation in the auto industry for being a visionary and an innovator. Lutz is a former Marine Corp aviator, a successful businessman, and he’s had a hand in developing a long and distinguished list of vehicles including the Dodge Viper, Ford Explorer, BMW 3-series, Cadillac CTS, the new Camaro…the list goes on.

In an interview at last week’s New York Auto Show, Lutz listed off fiveĀ reasonsĀ for the failure of the US auto industry between the late 60’s and the last couple of years. These reasons are:

  1. Government fuel economy regulations
  2. Unfair Japanese exchange rates propped up by government subsidies
  3. Auto execs who were too focused on the bottom line
  4. The UAW (with the caveat that this was also partially a management failure)
  5. The media

You can read all of Lutz’s interview comments here (subscription req’d), but let me save you the trouble. Lutz just repeated the tired old excuses US car companies have used for decades. Here’s a break down:

Excuse Number 1: The government’s fuel economy regulations favored Japan. Government fuel economy regulations were a response to a 73-74 oil embargo. The government’s decision to force automakers to build fuel-efficient cars was made in 1975, and it didn’t gain any teeth until 1978. If GM, Ford, and Chrysler didn’t see the need for fuel efficiency coming by late 1973 or early 1974 – and started designing new products to be more efficient – they should have.

Excuse Number 2: Japan had an unfair exchange rate. This is a tired old excuse to be sure, as US automakers have been complaining about exchange rates since imports began to grab share. The fact is, the US economy enjoyed a very strong dollar for decades, and as any economics 101 student will tell you a strong dollar is both good and bad. Good because it means that imports (like clothes and electronics) are cheap, bad because it means U.S. made goods are more expensive than imports. While it’s true that Japan’s government definitely manipulated exchange rates to boost exports to the USA, so have Canada, Mexico, and every other country on the planet. It’s par for the course when you have the world’s largest economy.

Excuse Number 3: Auto execs were too focused on profits. Really? If all their decisions were profit-driven, why didn’t they crack down on excessive UAW compensation in the 70’s? Why didn’t they implement a just-in-time inventory system, or give workers incentives to eliminate waste and improve processes? The fact is, many US auto execs were simply inadequate. They stopped innovating.

Excuse Number 4: The UAW got too greedy. Did the UAW abuse their power over the automakers for most of the 70’s, 80’s, and 90’s? Absolutely. Does that make them responsible for the decline of the US auto industry? Yes and no. Yes in that some UAW leadership suffered from incompetence, but no in that UAW contracts were signed by incompetent auto execs. It takes two to tango.

Excuse Number 5: The media never gave us a fair shake. Really? The media “had it out” for the US auto industry? Does Lutz really think that all the stories of piss-poor reliability from the 70’s, 80’s, and 90’s were all made up? Does Lutz really think Consumer Reports and JD Power cooked the books on all their reliability studies for the last 40+ years? Stop the madness.

Why Some of The US Auto Industry Failed

I say “some” because Ford isn’t a failure. They’re back on track. GM and Chrysler, however, needed a big damn check to stay solvent. Here’s why:

1. The Wrong Culture. The US automakers had a culture of entitlement, from the lowest factory worker to the most extravagant board room. This is as much leadership as it is a symptom of America’s biggest problem: I can’t walk out my front door without hearing someone say “[America] is the greatest country in the world,” and it’s that tendency to pat ourselves on the back that hurts us the most.

2. Incompetence. This is by no means a slam on veterans of the US auto industry, as I have met many and I will tell you that most of them are smart, competent, and hard-working. However, when you look at the leaders at Ford, GM, and Chrysler since the late 60’s, the number that you would regard as ‘competent’ can be counted on one hand.

3. Product. Do you know why the Japanese ate everyone’s lunch for most of the 80’s and 90’s? It’s the exact same reason that Hyundai is starting to eat everyone’s lunch right now: great-looking, inexpensive products with excellent quality.

4. Bad Process. American designers and engineers are just as talented as designers and engineers anywhere in the world. However, the typical design process at US automakers was poorly managed for most of the last 40+ years. Ford corrected their process in 2003, and since that time they’ve been growing. GM? Look no further than the new Impala: It’s a 20 year old platform with a V6 that makes less power than some newer 4cylinders…and it’s not going to be updated until 2014! How does this happen?

5. Too Many Excuses. I think it speaks volumes when Bob Lutz, one of the superstars of the US auto industry in the last 40 years, is willing to offer excuses for the industry’s failures. When Toyota was wrongfully accused of having runaway vehicles, I don’t recall Akio Toyoda blaming anyone but himself for the company’s problems.

What do you think – did I get it right?

Filed Under: Auto News

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  1. Daniel says:

    45,453 F150’s sold this month VS 8,312 Tundra’s.

  2. Jason (Admin) says:

    Daniel – And??? If you read the article, you’ll see that I’m actually quite complimentary to Ford.

    Besides, this isn’t an F150 vs Tundra argument…because if it was, I’d ask you how your airbag was LOL.

  3. mk says:

    daniel, a big reason why ford outsells the other trucks is because of the huge rebates offered and a few more more cab configs. they have along with, and I think a huge reason why, is because loyal ford and chevy fans stick are very brand loyal like I was to chevy before 2007 when the tundras came out. If ford and chevy and dodge truck owners actually drove a tundra, they would be more inclined to jump ship like I did.
    Back on subject, can’t speak for dodge or ford but assume they are the same, for chevy, they have way too many upper mgmt. people that are worthless and do nothing but collect a big check. Plus, they had, for way too many years, too many divisions building basically the same car just in a slightly different body. I still do not know why GM does not scrap GMC truck when Chevy is the identical truck except front grill and emblems.

  4. Daniel says:

    Its much easier for Ford to swap out an airbag than an entire frame. LOL

  5. Dead on Jason.

  6. Mickey says:

    Daniel 45,453 F-150’s sold this month. Now next month tell me how much they are worth? Anyone can sell cheap vehicles with no returns.

  7. Hayzee says:

    As a person that has spent the last month shopping for a new truck I have a few things to say. First from what I have seen in the 1/2 ton pick-up market Ford and Toyota have been the innovators of all the latest improvements. Each company sets out beat the other and everyone else catches up.(Dodge/GMC)
    I have been a Ford man most of my life and I am very impressed the 2011 F-150 and I would almost say it’s better. What concerns me is I had many problems with my Triton 5.4 V-8(it liked to shoot out the spark plugs right of the head) and now they all new motors again. In addition My local dealer has a level of arrogance I not expirenced before.
    With all this mind I am purchasing a 2011 Tundra, its nearly the same truck as a F-150 but it is a better value and the dealer has great service. And A final note, the reason I have to buy the truck NOW! is that my F-250 caught on fire and burnt to the ground for no known reason.

  8. Mickey says:

    Sorry to hear that Hayzee. All automakers have those type of dealerships. Glad your experience at the Toyota dealership was good. We do have some that aren’t up to par too. Wish you the best of luck in your 11 Tundra. What model you get? I have an 07 Crewmax Limited with 109,356 miles on it.

  9. TXTee says:

    Wow, that’s a good bit of news to hear for someone that’s coming over to the Tundra.

  10. Hayzee says:

    Mickey, glad to hear that you are happy with you Tundra. I put a deposit down on a 2011 Tundra Dbl Cab TRD, I’m waiting for the insurance co. to issue a check. I recently meet someone with a 2000? Tundra with over 150,000 and no complaints.

  11. Jason (Admin) says:

    Toby – Thanks!

    Mickey – Agreed. 45k, and how many of them commercial fleet? How many of them will lose their shirts at trade-in time? I’m not saying Fords are bad – they’re not – but sales numbers are meaningless.

    Hayzee – I agree that the newest F150 is a great truck, and Ford deserves a lot of credit for being so innovative. However, I also understand your hesitation to trust a whole new family of engines. I think that Ford probably got it right, but who knows…that stupid spark plug problem in the old Tritons was a big issue for a lot of people. The fact that the Tundra – which is safe, reliable, and has better resale value – is fairly priced is a bonus. Congrats!

  12. Mickey says:

    Well looks like Ford has more worries with the worst designed truck they built:

  13. Mickey says:

    Daniel as I was stating before read my story I put up just for you.

  14. Sak says:

    Jason, you are right on. Just rented a new 2011 impala for two weeks. I thought I was driving a 20 yr old vehicle. It was so bad, I vowed not to rent a gm product again. ps. Love my 2008 tundra trd,ltd, 70,000 miles. Drives like new, zero problems.

  15. Gordich says:

    Hey, I’ve enjoyed reading this article/blog and how pickup truck owners get so puffed up about their rigs. Seems to be quite a few big three owners who read and respond to Tundra Headquarters articles. LOL!
    I am (was) a “Ford Guy” and have owned Chevys. I puchased a new 2010 Tundra DC 4×4 work truck. I have put 20,000 hard miles on it and have had zero issues/problems. Can’t say that about any Ford or GM product I’ve owned. The F150 was a close second but for me, living in rural Alaska, reliability is #1. That leaves two choices, Toyota and Honda. Sorry big three!

  16. Jason (Admin) says:

    Mickey – Rust is a problem for more than just Toyota I guess…

    Sak – Thanks! Glad to hear your Tundra has been great…thanks for commenting.

    Gordich – Cool man! I was a Ford guy too (and I still like their products), but it’s hard to argue with Toyota’s combination of quality, reliability, price, features, safety, and resale.

  17. Justin says:

    mk: You may want to check with your local Toyota dealers. I’ve seen very little rebates on F150’s over the past few years, while the rebates on Tundra’s have slowly been rising. But I appreciate the attempt. But yes, Ford does offer more combinations in the F150, than the Tundra offers. Which gives people more options, which is a selling point. And the loyal F150 fan base is because they know the F150 is a quality truck, not just because it has a blue oval on it. I’ve driven a few Gen II Tundra’s and will tell you I’d opt for a new F150 right now before jumping to a Tundra. The Tundra isn’t a bad truck, just from my experiences with the 07+ Tundra and the ’10/’11 F150, the F150 is the better choice, especially now with the new motors.

    Mickey: I’ve done this too many times with you, and on NADA & KBB. When I option out similarly equipped trucks, on the average the Tundra came out to roughly $1.5K more than the F150 when new. But resale value has always been in the ballpark of $1K. So if there is any truth in KBB & NADA figures, which I know it’s not an exact science, their sites show the Tundra lost more value over the years than the F150, by roughly $500. So it may look like it has better resale because it’s resale is $1K higher, but the fact is when purchase it cost 1.5K more.

    Jason: I bet even after excluding fleet sales, the F150 sales still double if not triple the sales of the Tundra. I haven’t lost my shirt on any of the previous F150’s I’ve traded in, actually have gotten more than KBB & NADA offered.

    Sak: The Impala is a 20yr old vehicle. From my understanding it’s built off the same platform that the old Chevy Lumina’s were built off of. And of course, GM products still have their early 90’s interiors.

    Gordich: Have a few mates up in Alaska with 04-11 F150’s that are running practically flawless. I can always point you their way and they can provide some insight on reliability up there.

  18. Jason (Admin) says:

    Justin – A quick check of Ford’s website shows 0% for 60 or $3500 back. Toyota? $1000 back or 1.9% for 60. While Toyota’s numbers are admittedly low (they were running $3000 back or 0% for 60 earlier this year prior to the earthquake), I think mk’s point is legit. *Especially* during Ford truck month, where rebates as high as $7500 were available last year.

    For what it’s worth, I concur the F-150’s new motors take the cake. The 5.7 and 4.6 are powerful, but they don’t match the F150 in terms of fuel economy.

    The resale value argument is subject to a lot of speculation, but the independent analysts usually give the Tundra the edge. I did a little back of the envelope analysis here that might be interesting to you: https://www.tundraheadquarters.com/blog/2011/03/14/2011-truck-depreciation-data/

    Finally, I’m sure that F-150 sales are greater than the Tundra’s sales…also sure that I don’t care. Sales figures are meaningless.

  19. Justin says:

    Jason: You are correct, at the current time Ford is offering higher incentives. But this has fluctuated over the last couple years. Ford has greatly reduced their incentive programs, and have implemented many more restrictions to qualify for all. And you are most likely correct, that the recent events in Japan have impacted the incentives and dealer vehicle stock.

    And the $7500 rebate, was extremely difficult to get. Examples include the military rebate, recent grad rebate, agriculture industry rebate, specific model equipped in a particular manner, etc. So maybe only 1 in a million people would even qualify for 1/2 the rebates available, let alone the full $7500. It’s a marketing ploy to get people in the door. A little misleading yes, but a typical marketing tactic used in the industry.

    And I’m not overly impressed with the fuel economy numbers Ford is releasing, I was hoping for more. I’m sure the Tundra 5.7L would get higher figures if they offered it with some higher (lower numerical) gears. The 4.30 gears in that model Tundra I’m sure greatly impacts the hwy mpgs it brings home.

    I know you want to discard sales, as your typical McDonald statement goes. But sales figures are quite different for a $1-$10 burger and a vehicle running $25K+. Vehicles are typically a persons 2nd largest investment, and people don’t buy vehicles like they do burgers. When people look to invest in a vehicle, it’s not always the cheapest, otherwise those people wouldn’t be buying a full-size truck, they’d get a Kia. So your statement is true, that sales figures for burgers are meaningless. But when it comes to a vehicles, they surely are not meaningless.

    And while I respect your research and analysis, with most these types of items, I have to see more. An SR5 surely doesn’t compare to an XL model. And as you provided in your disclaimer “This is a best-effort guess”. Which is similar to my research, it’s not an exact science, just an base line foir understanding. So these figures can practically be swayed any which way for any of the trucks listed, other than maybe the Titan that is.

  20. Jason (Admin) says:

    Justin – I know that Ford’s truck incentives are better than ever (I remember the days of being able to take $12k off the sticker on a new truck, and those days are gone), but that doesn’t mean that they’re not aggressively trying to protect their sales leadership streak.

    Don’t take my word for it – ask your Ford dealer. I have yet to meet a dealer who says Ford’s incentives on F-series are lower than all the competition.

    Again, sales figures are proof of nothing more than sales. The flaw in your argument is that you assume everyone buys a vehicle using the same analytical process that you do. However, if that were really the case, how did Chrysler survive the last 35+ years? Few of Chrysler’s products earned a good review for quality or reliability between the years of 1970 and 2008. Yet somehow, they kept selling vehicles…they even had some growth at different points during this time. How do you explain this phenomenon? There’s absolutely no logic to it that I can see.

    My explanation? Consumers buy the cars they want to buy regardless of things like quality, cost, reliability, etc. Many consumers make purely *emotional* decisions…which is why sales volumes have to be discounted (at least somewhat). People buy Fords or Toyotas or whatever cause’ that’s what they’ve always bought. Combined with Ford’s wide variety of configurations, large dealer base, and large owner base, it’s no wonder they sell more trucks than Toyota. Does that mean Fords are better? No. Sales figures are proof of nothing more than sales.

    Trust me man – I worked in dealerships for nearly 10 years. There wasn’t a day that went by – not one day – where people made incredibly illogical purchases based on pure emotion. It’s shocking, but it’s life.

  21. Gordich says:

    Justin, So you are saying your buddies F150’s have been almost flawless? Flawless is flawless, not nearly flawless. My Tundra has been flawless, totally! That being said, it was a tough choice. I test drove both the Ford and the Toyota twice, extensivley, and made my choice. I do still like the Fords, but this Tundra is the nicest/best truck I’ve owned. Thanks for your comments. Do any Toyota owners read Ford blogs?

  22. Justin says:

    Gordich: Yes, almost flawless. But were talking about trucks as old as 2003 (2004 model year), ranging to 2011. Every vehicle over time is going to develop a problem here or there, no matter how major or minor it may be.

    Yours being a 2010, I’d hope it’d be flawless so far. Heck, when my 2006 F150 was 2yrs old, it had not one issue either. And since then, only 2 very minor issues (message center bulb & emblem). But your truck (2010 model), based on Toyota announcements, has had some recalls. If you’ve had a recall, based on others opinions, you can’t say your truck is “totally” flawless. Then again, a recall may not directly impact your particular truck. Example being the F150 Air Bag recall, which covered 2004/2005 and some 2006 models. My truck was not impacted, as it has the latest designed CC harness.

    Now I do visit some Ford forums, and we do have some current and former Tundra owners, as well as Toyota owners in general. Just because a person owns an F150, doesn’t mean they don’t own a Camry or other model Toyota. Heck, I have an F150, but we also have 3 Nissans (’04 Altima, ’96 Sentra & ’86 Pulsar) in the driveway. I have nothing personal against imports or Toyota’s in general. Just know what I like and what I’ve had good experience with. These sites I visit have former Gen I & Gen II Tundra owners, who’ve expressed some of their likes/dislikes in regards to both model Tundra’s. One site in particular, an owner actually owns a Gen II Tundra and a newer F150. And of course, we have a few people come on here and there that simply want to stir the pot.

  23. Gordich says:

    Justin, Congrats!…

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