My Thoughts on GM and Chrysler

This past Saturday there was an article in The New York Times about the merger talks between GM and Chrysler.

I am both amused and skeptical about a merger of these two auto giants and, from my perspective; two wrongs do not make a right. It speaks volumes about trying to fix a systemic problem (products that don’t resonate with the American consumer) with outdated solutions (assuming that manufacturing efficiency is the magic bullet to change things). In an industrial economy that was the US was during the 1950s, and even until late in the 20th century, economies of scale could be gained by combining operations.

This is not to say that economies of scale are not still possible, but what would be the result of two merged auto giants that are both out of touch with what their customers want? An efficient and streamlined auto behemoth that makes vehicles that its customers do not want.

I say all of this to point out the fact that the successful companies of today and tomorrow maintain a razor share focus on the customer needs and keep improving what they deliver and how they deliver it. By way of contrast, take Toyota for example. It focuses on a few models and it does so very well. They make two of the best selling sedans in the country, the Camry and the Corolla; they obtain continuous feedback from customers about how to keep improving it, and then implement many of these improvements to keep the customer interested in buying.

Until the American auto manufacturers learn the lessons that this time in history provides, I suspect that a merger may do little to position them for the long term. The financial services industry can learn by the example of the auto industry woes that cost cutting and operational efficiency will only get them so far. Only a sustained commitment to planning and positioning itself for the future, understanding the needs of current and future customers and balancing out short term and long term needs will keep customers coming back.