GM and Ford
Much ink has been spilled about the current travails of General Motors and Ford. It's ironic that Nissan and Renault, until a few years ago seen as second-rate auto companies, should be (perhaps) called in to help fix GM. And Ford, which has dipped from #2 in the world, has perhaps even more serious problems. Both companies are bleeding money. Toyota may surpass GM as the top carmaker, both in the US and in the world, next year.
How can this be? Shouldn't the oligopoly power of the world's two biggest automakers have saved them? They haven't been shy about using it. After all, both companies were expert at deterring unfavorable government regulations. Both expanded globally, buying (wither in part of outright) companies with superior European technologies (Saab, Volvo) or with Japanese manufacturing expertise (Subaru, Mazda). And they still sit on piles of money accumulated over the years.
Both companies are declining fast, as rivals like Toyota and Honda, even Daimler Chrysler, are gaining market share. Both GM and Ford are locked into long-term union contracts that severely limit their operations. Both are getting killed in the US by health insurance. Both are dependent on the sales of trucks and SUVs, and they are getting strong competition in that area. (Strangely, overall sales of such vehicles is not yet declining in the US in spite of high gas prices.)
But the killer problem has been paralysis. Both companies have long since stopped being innovators, the Achilles' heal of industry leaders. While the companies did manage to survive earlier challenges from the Japanese companies, in part by adapting Japanese manufacturing techniques during the 70's and 80's, they never really matched their rivals' concern for quality and their continuous improvement of every part of the design, from small things like knobs and displays to big things like response and mileage. Even when the companies headed in promising new directions (Saturn for GM, the Taurus for Ford), there was no follow-up, and the efforts just wilted away. Nor did either company find a way to work better with unions or to work around them.
Big companies, in spite of the great advantages of oligopoly, can be easily be victims to rapid disruption. Why bother to innovate when second-rate management and second-rate products still bring in first-rate profits? At least, until the effect of all that begins to catch up with you. Why risk failure in innovation when keeping on with pretty much the same thing looks like a safe bet? And even the innovation from the companies they purchased from Sweden and Japan had little impact.
Ford and GM are still giants, but they look like pitiful, helpless giants. Remember that the auto industry in the US, at least, is less an oligopoly than it was 30 years ago. If we still had just GM, Ford, and Chrysler, there's be no pressure on these companies and they'd be even less responsive to customers and the market than they are now. Toyota and Honda, especially, have given these big two the kind of challenge that they seem no longer equipped to respond to.
The big question now is will the crisis cause true restructuring in the companies and get them back on track on innovation, or will a continual series of management reshufflings and cutbacks start a death spiral?
11:49:16 AM 
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