Friday, March 02, 2012

986 Would You Buy a New Car From These Guys?

986 Would You Buy a New Car From These Guys?

Little things that topple big corporations.  Like when IBM outsourced its PC operating system to that kid from the west.  What’s his name again?  Oh, yeah.  Bill Gates.  With one stroke of cheapness and carelessness, IBM nearly put itself under.  And it built a monster, Microsoft.

Then, there was Kodak.  They didn’t see the digital age coming, or the near-end of film and look where they are today.

Or when early internet darlings like Yahoo! and AOL rested on their laurels as Google came along and ate their lunches.

Or GM.  They’ve been carefully shepherding their reputation for building, shall we say, limited reliability machinery for 50 years and are about to take another leap into an abyss.

Perhaps you recall a recent “shrapnel” item in which we reminded GM of the howling failure it made of Saab, which built decent cars in Sweden, and whose buyer pool here was largely aging college professors and former hippies.

The prospective “affiliation” with Peugeot -  Citroen, mentioned in the same breath, now is a done deal, with GM becoming the second largest shareholder in the French company, right behind the Peugeot family which has owned the brand for two centuries.  (They made steel rods, bikes, coffee grinders and such before entering the auto business.)

P-C is Europe’s second largest car company, behind Volkswagen and last year lost more than half a billion dollars on sales of three-plus million cars.  Not baguette crumbs by anyone’s measure.

For now, the two automotive “giants” are going to continue competing for customers in Europe, but they’re also going to “develop” things together and do back office work together and buying parts... stuff like that.

Who was it said you can’t combine two losers into one winner?

Yes, GM made a healthy profit in 2011.  Healthy if you don’t count its reorganization, its government bailout and heaven-only-knows what other fancy financial creativity it came up with as it passed from bankruptcy to government entity to whatever it is today.

GM doesn’t have the one billion dollars it will spend to buy into Peugeot.  But they’ve agreed to do it, anyway.  

What’s wrong with Peugeot?  Well, for one thing, it’s a French car company.  They just plain ain’t good enough.  And GM?  Great ads.  So-so cars and trucks.

And all of this goes back to one of the Grand Lions of American Business, Alfred Sloan.  Sloan is so important that MIT named its business school for him (that founding grant from the Sloan Foundation didn’t hurt.)

What was Sloan’s problem at GM?  Well, it was one of those giant corporate blunders.  Except that it hasn’t yet been recognized as such, as in the cases of IBM, Yahoo!, AOL, Kodak (and Xerox, Apple during the non-Steve Jobs years, Knight-Ridder newspapers, Kmart and on and on.)

Sloan’s Big Idea was the annual model change.  And in fairness, it seemed like a good idea at a time.  Planned obsolescence, they call it now.  Cars weren’t selling. Sloan said “let’s make ‘em want to buy new ones by changing the look every year.”

That’s still Standard Operating Procedure for most of the auto industry, even those that didn’t start that way.  (Like Peugeot or VW or Ford.)

Peugeot won’t sink GM, which needs no help doing it all by its little self.  But the affiliation is not going to do either of them any good.  Nor will it help you when car shopping.

I’m Wes Richards.  My opinions are my own but you’re welcome to them. ®
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© WJR 2012
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