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Motor and GM: Where to from Here?
Auto on Info September 2006
Ford Motor and GM: Where to from Here?
By James B. Bleeker
In this article, site manager offers his assessment on what Ford Motor Company's and General Motors Corporation's reliability standing and U.S. market share will be like in 2016.
Ford Motor Company
We begin with charts depicting Ford's U.S. market share history and its reliability history. For reference, the first chart includes Toyota Motor Corporation's U.S. market share history and the second chart includes the reliability histories of Toyota and the Big Three.
We note that Ford's reliability standing peaked in 1997 and has since fallen back to a more historic Big Three mean.
Next, we factor in some quotes of Alan Mullaly, succeeding CEO of Ford, and William Clay Ford, Jr., departing CEO and descendant of the company's founder.
By Mullaly:
"The reason I have a Lexus is that it's the finest car in the world. I studied all the cars."
"And this is also the reason why I'm here ..., what was compelling to me was that Bill Ford, when he called me, Bill wanted to focus on making the best auto company in the world..."
"The reason he called was not to restructure, not to get rid of stuff, not to sell it off. He called because he wanted to make the finest automobiles in the world. And that's why I am here. Because I think the U.S. can compete. I know they can compete. ... There's no reason why we can't be the best in the world."
By Ford:
"One of the things Alan talked to me about is that this is a patriotic decision. He left a career at Boeing .... Boeing's a great American icon. Ford's a great American icon. If I can help Ford get back to where it ought to be, I'll feel like I've done my part not just for Ford, but for the country."
Taking account of all this, site manager's assessment is this:
1. Likely, Mr. Mullaly will seek some improvement in Ford's reliability stature. My guess is that he will target an improvement in vehicle quality that would yield a corporate Reliability Percentrank average of about .57 circa 2016 and will hope for an improvement that would yield an average of about .62 in 2016. If he has talent, leadership, and an iron will, he may achieve an average of .55 by 2016. This, by itself, will not be sufficient to meaningfully slow Ford's declining market share.
2. Given what is realistically attainable,
a. Ford Motor Company's advertising will likely become replete with references of the nature "best cars and trucks made in America."
b. Ford Motor will likely more earnestly seek to portray buying a Ford product as an act of patriotism.
3. The end result of the combination of quality improvement and communications ploy will likely leave Ford with a U.S. market share of about .11 in 2016, barring a catastrophic strike. This will be down from a current market share of .17.
General Motors Corporation
Again, we begin with charts depicting GM's U.S. market share history, its reliability history, and an extrapolation of its reliability history to 2016. For reference, the first chart includes Toyota market shares, the second chart includes Toyota and Big Three reliability histories, and the third chart includes extrapolations of Toyota and Big Three reliability histories. The extrapolations are linear regressions of degree one.
Site manager's assessment is this:
1. GM board members likely have little or next-to-no interest in improving quality. If they had, they would likely have fired the fellow in charge of North American operations in the second half of the 1990s, not have promoted him to CEO, or alternatively, they would have promoted him and then fired him, in the Byzantine ways of big institutions.
2. However, to the credit, or maybe infamy, of GM's CEO, he "cajoled Steve Harris [former GM communications vice president] out of retirement" in order to "quiet, if not reverse, the relentless drumbeat of negative press."1 It is interesting to note that the title of one of AP's earlier articles on GM's August sales had them rising, while a later title had them jumping, when in fact they had dropped a tad on a daily-selling-rate basis. While Mr. Harris may or may not have had anything to do with the latter, headlines of a similar sort may well be the fare for some time to come. However, such may eventually breed a hostile retributive response by the U.S. consumer.
3. On balance, site manager estimates GM's 2016 Reliability Percentrank average to be in the vicinity of .37, up from .32 for 2-to-3-year-old 2003 vehicles, partly in response to Ford's unseemly push, and its 2016 U.S. market share to be about .12, down from .24 for the first nine months of 2006. This assumes that GM manages to stay afloat to 2016 (see Auto Manufacturer Financial Stature).
1 "Tom Walsh: GM, Ford CEOs strapped in for a Long Bumpy Ride," Tom Walsh, Detroit Free Press, September 10, 2006, at http://www.freep.com/apps/pbcs.dll/article?AID=/20060910/BUSINESS01/609100676
Sources: "In the U.S. in August 2006, Toyota Sales Soar Again, Honda's Dip, as do Chrysler's, Ford's Plunge, and GM's Fall a Bit of a Bit and Its Market Share Drops a Notch," Auto on Info, September 2006, Table II-MVRP, "Tom Walsh: GM, Ford CEOs strapped in for a Long Bumpy Ride," Tom Walsh, Detroit Free Press, September 10, 2006, at http://www.freep.com/apps/pbcs.dll/article?AID=/20060910/BUSINESS01/609100676
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