For the Love of the Game – Car People Should Run Car Companies

By Alex Ricciuti

08.26.2007

Most German automakers are run by engineers. Executives make their way up the corporate ladder by first building cars and then learning the business of selling them. In other European countries, the tradition varies, but most automakers are run by people who have lived and breathed the car business their whole careers. These are people who have a passion for the products they make. They don’t see them just as a means to make money. There is a lot of pride (and even more vanity) that goes into the models built by some of the world’s most identifiable brands and each automaker tries to build the best-performing, most-stylish and desirable car they can in order to out-do their competitors and not just simply outsell them. Winning the sales crown in a segment or a region is important, but it is one reason out of a universe of many reasons that drive auto companies to make the cars that they produce and sell.

US automakers are not all that different, although there has been more flexibility in bringing in CEOs and other top management from the general corporate world, whereas in most European automakers top management is cultivated within the company. Take the newly-independent Chrysler. Recently freed from its marriage to the foreign charmer from Stuttgart, Chrysler is ready to date a guy who means business – and that would be the guy who runs Cerberus Capital Management.

This article here at Portfolio magazine is a must-read for anyone trying to guess as to what Cerberus will do with Chrysler. It’s an extensive and informative piece that includes a profile of the man at the helm of the firm and leaves plenty of hints as to his intentions for Chrysler. Here’s one: In Greek mythology Cerberus was a three-headed hound who guarded the gate to Hades, making sure that once the spirits of the dead entered, they could not escape.It’s pretty clear from this article that Cerberus means business in returning Chrysler to profitability. Whether that means they’ll strip it down, increase it’s value and then sell is an open question. What seems fairly clear is that they have little romance in them for rekindling the glory of an American brand. They want to build cost-effective cars that they can sell at a profit – period. Just look at who they’ve appointed CEO. Not Wolfgang Bernhard, a car guy to the bone. But Bob Nardelli, hard-nosed former CEO of Home Depot, of all companies, known for his talent in wielding a scalpel.

The problem here is that auto companies that come to be run by business purists will not fare well. You need a little passion, even a little nuttiness, to make cars that consumers want to buy.
Purchasing a car is one of the least rational decisions consumers ever make. So much of the decision process is tied up with the image of the car and the self-image of the buyer and the coolness and desirability of the model. We’d all be driving Toyotas if that weren’t true. They people making the cars not only have to understand this in an intellectual way but also feel it themselves in an emotional sense. If you look at automobiles as if they are just another commodity then you are missing the point about the car business and what it takes to sell cars.

Ford’s CEO Mullaly doesn’t make any business sense when he muses about bringing Ford’s products from Europe to North America. GM bringing the Opel/Vauxhall Astra to the US badged as a Saturn will lose them a ton of money, especially at the current euro/dollar exchange rate. But, as Mullaly said, I’d rather lose money selling good cars than lose money selling bad ones. That’s the crux of it. You have to want to make and sell great vehicles because eventually auto journalists and consumers will catch on and then one day one of your models will catch fire. This is something no actuary can ever predict, but it happens when a designer or carmaker or irrational CEO decide to take a wild concept car to production.

I’ve been working on several stories recently which involves surveying dealers whose brands are about to be or might be sold. Jaguar, Volvo, etc. They all tell me they want the new buyers to be an established automotive company or group. They want someone who understands the car business and can maintain the appeal and mystique of the brand. This is understandable, because although dealers are all about moving the iron, it just so happens that almost all of them also love the iron, too. Just like most of the people that run the both the successful and the struggling car companies.

Alex Ricciuti is a freelance writer and automotive journalist based in Zurich, Switzerland. He writes frequently for Automotive News Europe.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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5 Comments

  1. AGREED

    AGREED

    AGREED

    AGREED

    AGREED

    Have I said it enough?

  2. I’d call it common sense that any business should be run by someone with a long background and more-than-professional passion for that industry.

    However, I’m also reminded that common sense is not always right.

    Car buyers are not irrational for looking beyond the measureables of a car. It simply makes them unpredictable. And just because a CEO is a car guy doesn’t give him a crystal ball.

    In fact, I’d argue a CEO who is a devout enthusiast will actually have a harder time trying to predict what the ‘unwashed masses’ will want in a vehicle in their price range. Building a great car is not the problem. Building a great car at a great value for both the consumer and manufacturer – now that’s the trick.

    Michael Karesh actually had a pretty good blog on this very subject:
    http://www.truedelta.com/pieces/mulally.php?session_code=

  3. All sensible points, IMHO. One comment re Mullaly, however. I believe, though of course cannot prove, that he was hired “to do a Boeing” at Ford. That is, simplistically, at Boeing, he told the workforce “Take huge headcount and wage cuts BUT I will deliver a new product (Dreamliner) which will turn Boeing around and allow me to rehire you all.” This is, very simplistically, what happened. So as Ford staggers into the UAW negotiations now I think Mullaly is desperately searching for “Ford’s Dreamliner.” The unfortunate problem, I am afraid, is that no one car will turn Ford around, the way one plane can turn Airbus or Boeing. The era of the million-unit seller is over in the uSA, for better or worse.

  4. Glenn: As the article below this one points out, what you’re supposing is what has been Ford’s MO since WWII. One huge product that saves the company’s ass from years of staggering losses.

    1949 Ford
    1965 Mustang
    1986 Taurus

    And here we are in 2007, with Ford in need of a breakout car (or two). Nothing on the horizon, though. Does Mulally have something up his sleeve right now, or is he waiting for someone to run breathless into his office from design or engineering screaming “I got it, I got it!”?

  5. Fiat was in worse shape than Ford, and they have made a brilliant comeback, so I think Ford can do it as well.

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