Forget No. 1; go for profit
Forget No. 1; go for profit
GM must focus on quality, not corporate ego
October 28, 2007
Who’s No. 1? Who cares.
The sigh of relief around Detroit when sales figures this week showed General Motors is once again the world’s largest automaker wasn’t just premature. It was dangerous.
Keep the champagne on ice. GM’s 10,000-vehicle lead over Toyota is paper thin, and focusing on sales leadership could distract it from what really matters: getting back to making the best vehicles, not the most.
Either company could be No. 1 at the end of the year, and who’s on top is immaterial compared with who’s best, and who’s getting better.
Reality check
Talking way off the record, GM executives have told me the shock of slipping to second could do the company some good.
"There’s still a few people here who don’t realize just how serious our situation is," one said. "They buy the idea of our being too big to fail. If losing leadership after more than 70 years doesn’t slap some sense into them, nothing will."
GM has spent a generation in the United States chasing short-term sales goals at the expense of long-term excellence. The result: a long, steady decline in its share of the U.S. market and millions of alienated customers.
Toyota took the opposite tack, with long-term planning that lifted it from a lightly regarded, little family owned company to No. 1 or No. 1a.
Who leads depends on what day you ask. Literally. GM’s 10,000-vehicle advantage through nine months amounts to less than one shift’s production for either company.
Unless GM or Toyota screws up, we’re in for a long seesaw ride. They could easily trade leadership back and forth for years.
Chasing the top spot for short-term bragging rights or an executive ego boost would be a mistake for either company. Leadership in this race is a result, not a goal.
Tortoise gaining fast
If GM hangs onto No. 1 this year, it will be thanks to impressive growth in new markets like China and India, its decision to launch the Chevrolet brand in Europe and a number of other strategic moves it laid the groundwork for years ago.
If Toyota finishes ahead, it will be a tribute to a slow-but-steady approach that saw it nurture the market for hybrid cars when other automakers dismissed them and to a decades-long march into the market for big pickups.
A fascinating aspect of the race is that Toyota and GM both face significant challenges in their home markets.
Vehicle sales in Japan are in a long-term decline, largely due to an aging population and the reality of doing business in a small, crowded country where traffic jams and parking problems can make a car a hindrance as much as a help.
Toyota already dominates Japanese car sales. There’s not much room for it to pick up market share or sales in a shrinking home market.
GM is up against a throng of strong competitors in North America, and it earned buyers’ skepticism with the cars it built in the ’80s and ’90s.
But the vehicles it has introduced lately — the Saturn Aura and Outlook, Buick Enclave and Cadillac CTS, for instance — are good enough to earn a test drive from anyone.
They came from a new mind-set at GM: that each new vehicle the company introduces should be the best in its class when it goes on sale.
That’s the key to making money on the vehicles you sell, rather than simply selling more than the next guy.
That’s also where GM must keep its focus. If it hangs onto No. 1, bully for Chairman Rick Wagoner and his team, but only if the company turns that leadership into profits that keep the investors happy and jobs secure. Pumping up the volume to grab the headlines today means nothing if it detracts from developing cars people will want tomorrow.
Keep in mind that Toyota made $14 billion while finishing No. 2 last year. If that’s the prize for second place, sign me up for the silver medal.
