June 18, 2007

Competitive Connection June 18, 2007

What others are saying . . .
“Matching or exceeding the competition's quality is the starting point, not the finish line.” –Source: Detroit Free Press, June 11, 2007
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Then and Now
Since 2000, the number of nameplates being offered to American consumers has jumped to 289 from 253. By 2011, the number is expected to be 345, a 36 percent increase over a decade -- and evidence that the U.S. market will continue to fragment, placing an even higher premium on manufacturing flexibility and quality. –Source: Detroit News, June 13, 2007
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A look at the competition
Ford’s plan for survival
To raise cash to fund a North American turnaround, Ford CEO Alan Mulally essentially has mortgaged all of the automaker's U.S. assets, including the Blue Oval. He sold Aston Martin. He is exploring "strategic options" for Jaguar and Land Rover, meaning these businesses are being shopped around by investment bankers.

The clear messages: Ford needs all the cash it can get to weather what is likely to be a very dangerous storm over the next few years, and that survival of the 103-year-old company is not assured.

Despite Ford and the UAW reaching a deal on retiree health care, ratifying dozens of competitive operating agreements at local plants, agreeing to plant idlings and green-lighting a national buyout offer for hourly workers, the automaker's intertwined manufacturing-and-labor empire remains uncompetitive.

Excluding plants scheduled to be closed this year, Ford's plant utilization is the worst in Detroit -- 77 percent -- compared to 88 percent at Chrysler and 93 percent at General Motors Corp. Toyota, by comparison, utilizes 103 percent of its plant capacity (through extra shifts) and augments its sales with imports.

Even break times at Ford trail the competition. On average, Ford's hourly workers get 46 minutes of break time per shift, compared to 30 minutes in most foreign-owned plants operating in the United States. The 16-minute difference amounts to a cost disadvantage of roughly $70 per vehicle.

"They've got tough choices," says David Cole, chairman of the Center for Automotive Research in Ann Arbor. "Ford is the most vulnerable. If you run out of cash, you're gone. It's a bet. The risk of saying, 'I'm not going to do it' is you might lose it all." –Source: Detroit News, June 13, 2007
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What others are saying . . .
Truck business a challenge
The popularity of pickups is in decline. A reason sales have dropped: a growing sense of environmental responsibility that has flared along with gas prices. That, and an uncertain housing market, which is prompting many contractors to delay buying new trucks.

 “The people who are buying trucks are buying them because they have to, not because they want to,” said Steve Magers, general manager of Elmhurst Ford in Elmhurst, Ill., about 20 miles west of Chicago. Gone are the customers who purchased big trucks because they were “a status symbol thing.”

Six years ago, 28 percent of consumers nationwide who bought pickups did so because they liked the way they looked, according to data from CNW Marketing Research. This year, only 16 percent of customers purchased big trucks primarily for their appearance.–Source: New York Times, June 9, 2007
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What others are saying . . .
Happy customers don’t switch
When Ford did research to compare the Fusion mid-sized car with its Japanese competitors, it uncovered something scary.

Although many who drove the Fusion against the other cars in hood-to-hood tests liked the Ford's styling, performance and handling better, they still wouldn't buy one because they had such good experiences with their Honda Accords and Toyota Camrys.

General Motors  found similar results in its research, showing both automakers that they have a long way to go in cracking the Japanese dominance of the all-important mid-sized car market. Both Ford and GM have responded with far more aggressive advertising and marketing campaigns in an almost desperate attempt to pull import buyers back into their showrooms.

"When there's a perception gap, marketing becomes much more important and has a tougher job," Georgia State University marketing professor Ken Bernhardt said. "You have to do something that grabs the attention of the consumer in a highly cluttered environment where it's difficult to do that."–Source: Associated Press, June 8, 2007
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A look at the competition
Global investment
 Japanese manufacturers, which have been eager to shift production to low-cost countries like China or major markets like the U.S., are racing to build factories back home, in a change of strategy among some of the world's industrial heavyweights.

Toyota and Honda  both sell more cars in the U.S. than in Japan, but Toyota has invested three times as much in Japan as in North America over the past three years. Honda is building its first auto factory in Japan in nearly three decades.

The reason: Japanese executives say they have discovered that having factories close to home is the most effective way to manufacture products requiring advanced technology.  Japanese manufacturers are finding it is important to keep factories physically close to their engineers, parts suppliers, decision makers and Japan's large pool of highly trained workers. --Source: Wall Street Journal, June 12, 2007
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To read previous editions of the Competitive Connection or to access other information about manufacturing and labor at GM, visit http://www.gmmanufacturing.info