American carmakers and fleet rentals - an unfortunate relationship

Rich Karlgaard, writing a recent piece in Forbes made an observation that expresses something I have long believed.  American carmakers have done themselves a nasty disservice by sending car rental companies their ‘fleet sales’ versions of their products.  Why?  Because those often low-frills, underpowered and difficult to manage autos are often the only time you’ll ever get much of the population behind the wheel of an American car.

When I was growing up, my family owned American cars.  The logic at the time was that it was good to have an American car because then you wouldn’t have to wait for spare parts to be shipped in from all over the place.  Then the Japanese and Germans started offering cars that were not only more fuel-efficient, but guess what?  They undercut the American carmakers contention that local spare parts were a good thing by providing autos of such high quality that they didn’t need spare parts!  Now that’s a concept.  In my own, grown-up car-buying life, I’ll confess to not even being tempted by an American car (unless you count our Volvo as an “American” car because it’s owned by an American firm). 

So when do I drive American?  When I rent a car, and the experience has almost always been disappointing.  Cars like the Ford Taurus sort of ‘fit’ me all wrong - I feel as though I can’t see over the dashboard.  My husband, daughter and I ended up having to drive a HUGE American car on a visit to California last year, which we absolutely hated.  It was the only one left at the car rental place -  not the one we ordered.  To add insult to injury, our hotel charged us extra for parking such a huge vehicle.  Needless to say, our rental experiences have not encouraged us to go spend some time in a showroom. 

It certainly seems to be a short-sighted strategy if the goal is to tempt people into giving your product another chance. 

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• Posted Rita McGrath on December 08, 2008

The Big Three and Symbolic Chernobyls - will they never Learn?

Today’s headlines in most major newspapers have detailed the sad story of the CEO’s of the Big Three American automakers slinking off back to their offices—well, actually traveling back to their offices in private jets—after being turned down in a massive bailout request that would allow them to continue to operate, business as usual, courtesy of the American taxpayer.  I am not a fan of this idea at all (for my views on this, see this post at Columbia Business School’s web site - Public Offering).  Indeed, it was gratifying to note that Jack Welch isn’t a fan of this either (see his column in Business Week.  But this post isn’t about that issue.  It’s about the jets.  It seems that the leaders of these companies really need to get out of those out of date buildings and get some external perspective.

One of the points I always emphasize in leadership seminars is that symbolism is one of the most powerful allies - or enemies - you can have as a leader.  The old illustration of this was the contrasting behavior of Lee Iacocca then CEO of Chrysler, and Roger Smith, then of GM.  Iacocca, in trying to reach agreement with the unions, famously said that he would work for $1 a year until things turned around.  The union leaders felt this showed important solidarity with the troops and with their help and some government assistance, Chrysler was able to recover (for a while at least).  Smith, on the other hand, saw what Iacocca had done and said to his folks, “guys, I feel your pain - so much that I’m going to cut my salary by 25%.”  The amount he was cutting was more than a typical auto worker saw in a lifetime.  Symbolic blowout.

My colleague, Don Hambrick, always reminds us that a symbol is an artifact that has meaning beyond its inherent substance.  And that executives simply cannot escape from ‘symbolic fallout’ - the meaning that others attach to their actions, whatever their intentions were.  Which brings me back to the auto-makers.  For goodness sake, isn’t anybody in their organizations plugged in enough to what is going on in the economy to realize that flying around in corporate jets—particularly to ask for taxpayer assistance—is a symbolic disaster???  That cluelessness alone suggests they shouldn’t get the money.  What if instead, all three of them took the best and nicest cars they make and drove them to Washington?  You know, on roads.  You know, like the rest of us?  At least the symbolism would suggest that they like, enjoy and are proud of their products. 

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• Posted Rita McGrath on November 21, 2008

Management Techniques actually work!

If you didn’t catch the article by Scott Thurm in today’s Wall Street Journal, you should check it out.

He reports that researchers from Stanford University, the London School of Economics and the consulting firm McKinsey & Co. found that solid management techniques, yes, the kind we teach in business schools, actually make a difference to the performance of manufacturing plants.  They found that better managed facilities employed management tools that helped them achieve better performance.  It’s comforting to know that the research we do and the resulting tools and techniques can have a good performance effect.

Among the studies’ more intersting finding is that (for now) factories in the US are better managed than those in other countries.  But - that gap could soon close, they warn. 

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• Posted Rita McGrath on September 08, 2008

So now CEO’s have to create value? How novel!

It was fascinating to read in this week’s Business Week that as easy money has evaporated in the world of private equity, that the CEO’s of these firms have to resort to the traditional practice of management - “making the companies they control more profitable” as the magazine says (November 5, 2007 issue, page 40).  Astonishing.  And perhaps gratifying, as we see evidence that the folks with purely financial know-how have come a cropper, to think that perhaps knowing how to actually run a company has value. 

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• Posted Rita McGrath on October 29, 2007

Will a weaker dollar change outsourcing habits?

I was recently asked to consider how a weaker dollar might influence outsourcing / nearshoring decisions. 

Well, obviously, exchange rate fluctuations change the ousourcing/near-sourcing equation considerably.  The work that will be most immediately affected by the declining dollar is the stuff that is pretty much plug-and-play, and that doesn’t require training, systems transfers or complex data conversion.  With more complex work, a weak dollar definitely reduces the attractiveness of certain locations versus others as they become more expensive for American companies. 

A larger, and more interesting question to me, is that the nature of a lot of outsourcing work has shifted from having a cost-reduction focus to having instead a focus on acquiring skills and accessing talent.  Microsoft and other large organizations are farming work overseas not necessarily to decrease their costs but to capture the talents of highly skilled workers who either can’t get a visa to come to the US or don’t wish to relocate here.  Although the dollar’s drop makes them more expensive, since the reason for hiring them is strategic, not operational, it won’t be that much of a deterrent. 

Companies aren’t usually able to shift their operations quickly, so unless the dollar’s slump is looking to be a long-term situation, I don’t expect that much will change in most companies’ attitudes towards Canada and other locations.

On the bright side, the slumping dollar means that American firms can be much more aggressive in their competition for overseas contracts – in comparison with foreign players, our companies are going to be at an advantage.  They can bid at local rates for less than their equivalent competitors in the area. 

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• Posted Admin on September 21, 2007

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