Competitive Connection

March 26, 2007

A look at the competition
Holidays similar among U.S. Manufacturers

BMW	13	Mercedes-Benz	14
DCX	16	Mitsubishi	16
Ford	16	Nissan	14
GM	16	NUMMI	13
Honda –Ohio	13	Subaru	12
Honda - Alabama	12	Toyota	16

Data does not include plant shutdowns or personal paid days off.
Source: GM
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What Others are Saying . . .
GM Declares No Victories Yet
In an interview, GM Vice Chairman Frederick "Fritz" Henderson said some rival car makers such as Toyota Motor Corp. earn a return on sales of 5% or more. At the 5% level, GM's 2006 profit would have been more than $10 billion, instead of the actual $2 billion loss
"While an improvement, our results still are not at an acceptable level," Mr. Henderson said. GM, he said, has much more cost cutting to do, both in North America and Europe. –Source: Wall Street Journal, March 15, 2007
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What Others are Saying . . .
Cash flow shows all is not well
Many finance wizards contend that operating cash flow -- not net profit, stock price or revenue -- is the best metric for assessing the sustainable, long-term health of a company. That's because cash flow is a pretty simple math calculation -- money in the door minus money out the door -- that's not subject to many accounting gimmicks.

Chief Financial Officer Fritz Henderson expects the cash burn to slow further in 2007, but the sober truth is this: GM still expects to bring in less cash than it shells out.

GM executives need to remember that if they think for even a fleeting second they can let up on the pressure to get leaner and faster, because Toyota and other rivals still enjoy a competitive cost edge.

Despite all the hard work of GM's top brass and the sacrifices of GM hourly and salaried workers and retirees so far, this remains a sick company. Negative cash flow tells us so. It would be dangerous to think or act otherwise. –Source: Detroit Free Press, Tom Walsh, March 15, 2007
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What others are saying . . .
New realities resulting from globalization
Americans have become comfortable with the notion that call centers will be staffed in India, software programs coded in Russia, and car parts manufactured in China. Ultimately, outsourcing is accepted because, while it sometimes takes work out of this country, it's generally in service of low-value commodity products. In the end, that means lower prices for companies and consumers.

We're okay with that, because we believe America's competitive advantage--unbridled innovative energy and smarts--can't be outsourced. Rising nations may have cost advantages, conventional wisdom has it, but they can't match America's creativity. Certainly, that's how Detroit saw the world not so long ago.

Now, GM executives understand that they can no longer depend solely on Detroit talent. To compete with the best products, and to serve a global market, they have to tap creativity in new places and in new ways. GM Design Chief Ed Welburn and GM Vice Chairman of Global Product Development Bob Lutz decided that competition--the bare-knuckled, no-holds-barred sort--would expose the best ideas, wherever they came from.

Their plan, unprecedented within GM, was to pit teams of designers from around the world against each other. The new ruling assumption: Just because a car was going to be sold in the United States didn't mean it had to be designed stateside. From Los Angeles to Russelsheim, Germany, designers at GM's 11 design centers began revving up their CAD software to compete for various new models. –Source: Fast Company, April 2007
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What Others are Saying
GM trucks are homeruns
Seems like every new truck rolled out by GM is a home run these days. From the Chevrolet Suburban to Silverado, from the GMC Denali to Acadia, GM’s trucks look good, perform well and would, all things considered, appear to be good value for the money.

Acadia is a solid piece, built on a chassis built specifically for crossovers (it is shared with the Buick Enclave and Saturn Outlook). Give GM credit here; it could have cobbled up some other chassis – say an old minivan platform – and slapped a new body on it and saved some bucks. It didn’t do that, and the Acadia is much better for it.–Source: AutoWeek, March 17, 2007
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A look at the competition
Toyota Yaris
In the U.S., the world's largest car market, Toyota's sales rose an astonishing 12.5 percent in 2006. To meet the demand, the company is putting down factories and expanding facilities in this country like it was playing automotive Monopoly. So is this the company that can do no wrong? Not really.

I give you the Toyota Yaris, a surprisingly routine and summarily undelightful B-class subcompact that feels as mailed-in as if it had a stamp on it. Cheap? Oh yes, to a fault. The $11,530 MSRP (with delivery) can't make room for things like a radio/CD/MP3, anti-lock brakes, rear-window wiper or rear fogger, or split-folding rear seat. Excellence has become so routine that, when one of Toyota's cars goes so far amiss, you have to wonder if this is the first thread of an unraveling Toyota mystique.

It isn't about Toyota bashing. Toyota is not immune to the same forces that affect any large and successful organization, or nation, at the top of its game. Do you think Toyota's execs, engineers and workers are somehow smarter than those of GM? They aren't.

The irony is, of course, that Toyota made its bones in the U.S. market making cheap, superlative compacts. But the Yaris, after the Echo, suggests the company is losing its common touch.—The Los Angeles Times, March 21, 2007