Fact is, if the quality is rising, it will eventually bear itself out in the marketplace. If the quality is falling, that too will bear itself out eventually.

There was a time when Mercedes Benz had a sterling reputation. Now, ask all the Lexus owners that used to ONLY own Mercedes Benzes which is the more reliable vehicle. Mercedes HAD a reputation, rested on their laurels, let their quality slip, and are suffering now in the marketplace because of it. This slippage began LONG before Chrysler got involved with Mercedes, so it had nothing to do with any anti-American bias.

I do agree that there is a general opinion that the American manufacturers' autos are lagging in quality. I own a Mazda Tribute (made by Ford in Kansas City alongside the Ford Escape). The engine is a V6 Duratec (Ford) and the tranny is also Ford. In 55,000 miles, we've had exactly ZERO issues with this vehicle and would not hesitate to buy another. Maybe the American manufacturers are increasing their quality. It will take time before the marketplace acknowledges and trusts it - if indeed it is so.

The bottom-line is this: let quality slip for a time and eventually you will suffer for it, and likely long after you get back on track. Once bitten, twice shy. It's that simple.

 

I studied the quality issues a bit while in school. The American cars are improving fast, however the Japanese's and to a lesser degree the Korean cars are improving faster. For example the body gaps on a Honda civic are much tighter than those seen in American cars. They are now on par or better than high end European luxury cars. Probably better as I studies the issues a couple vehicle generations ago. The cars that are about to start coming from China are expected to introduce with the quality we currently see in Korean cars and quickly improve.

To Gumby: I support your claim that Mercedes has an undeserved reputation for quality. They have a great deal of electrical problems. This defiantly started far before the Daimler Benz merger. Another I would add to the list of undeserved reputations is the BMW. These cars are also much less reliable than perceived.

If you can get the defects per vehicle stats and return to dealer under warranty stats you can get a pretty good picture of the reliability.
Much of the widening gap can be contributed to a couple primary issues. The Japanese owned companies have a philosophy of continuous improvement and also of zero defects. So while GM and Ford are striving for tolerable levels of defects the Japanese are striving for 0 defects. While GM and ford are living fiscal quarter to fiscal quarter the Japanese have plans in place for current year, next year, 5 years, 10 years and in some areas 50 years. The long look into the future keeps the from bending to the flavor of the week at the detriment of the long term viability of the product and business.

Bottom line; the culture of the executives at the big 3 are making it far too easy for the Japanese to incrementally take thier market from them. You will start seeing them attack the profit centers in the near future as they introduce viable heavy duty trucks. This will wreck the big 3 as this is where they are making their money.

 

That's a very funny point. They're the inverse of Toyota - they're an American company but their money goes overseas... .

Admittedly, my Toyota was not assembled by Americans - you can see it in Toyota's VINs, there's a "J" leading the VIN number for Japan or "U" for USA. Tacomas for example are made here, while Priuses are made there, which is fitting if you think about it. Nonetheless, Toyota still manages to keep more US employees than Ford.

My step-dad has worked in R&D for a long time, and at one job the company he worked for was bought-out by a Japanese company. He said the most positive change from the Japanese buyout was the way the Japanese executives valued research. Not that they valued it - many American companies recognize research is important - but that they valued it accurately, rather than overvaluing or undervaluing it as many companies do. They looked at research tasks in terms of potential outcome, and profit, rather than simply as tasks that hurt the budget. It legitimized the R&D department to executives and ultimately expanded the R&D budget beyond anything it had been prior.

Business practices like that do tend to be cultural, and the popular car market has shown the effects of such a seemingly minor but ultimately powerful difference in approach.

But it's not like no US company gets how to accurately value research - Ford and the like obviously don't, but you could easily say Google does. And anyone hoping that US company gets into the car market - you're in luck, with their Tesla Motors venture.

 

In regards to the American companies managment style, I would say that has more to due with stockholders and the board members than the actual executives. Lets take Ford for example, Bill Ford tried to set the company on a new course and had placed 5, 10, etc year goals in place, but what happened? The stockholders did not see enough IMMEDIATE change and decided to enact their own change. Now the new CEO will set forth their own 5, 10, etc year plans, but the stockholders will again not see immediate change and look to replace him. They are in a vicious cycle, and ALL the american auto manufactures share this same problem They can't figure out that when you dig a deep hole, you won't be able to just walk right out, and it will take even more time to get yourself out than it did to get in there to begin with.

The benifit for the Japanese autos is their culture where they are raised to not look for the imediate benifit, but to look for the long term benifit. If you can spend $10 today and get $1000 in ten years or spend the $10 today and get $20 in one year, the japanese will go for the long term investment while the american will go for the short investment.

I also love how people spew out how they are american so they only buy american and then go right into the Wal-Mart. If they knew how many americans Wal-Mart has bankrupted just so they could say $0.05 on their shirt, they would be ashamed. Actually they won't since all a Wal-Mart customer cares about is getting the cheapest product for the cheapest price. I can proudly say I have not bought anything from them in 2 years, and will never buy from them EVER!

 

The problem that domestic automakers have had for 20 years straight is that they are much more concerned with funnelling billions of dollars into executive bonuses than spending billions in upgrading production facilities, R&D, hybrids, or in designing generally interesting (and reliable) cars and trucks.

Toyota has the deep pockets for building factories and heavy R&D because their executives aren't billionaires. Sure, they're RICH, but they're not fiscal vampires that leech the lifeblood out of that company.

GM could balance the books by firing Lutz, Waggoner, and about a dozen guys at the top and replacing them with NO ONE. They should try letting engineers and modeling designers run the company for a decade or so. The engineers could make the quality and the designers could make the looks. The overpaid execs can go retire to Costa Rica.

But draping an American flag over a truck with a 10-year-old design that falls apart before the payments are up just doesn't cut it with the American people anymore. That's why the GM swill depreciates so fast.

 

That's an interesting point - can you expand on that?

It's interesting partly because Google specifically rejected this policy in going public. As they went public they formed 2 types of shareholder: ones who could decide the company's fate and ones who could not. They pointed to Enron rather than Ford as to the standing example of why, but the reasoning matches what you describe: That shareholders ultimate control of a company's fate sets that company on a track that demands short-term gain every year - never a loss, never a long-term gain - and that that ensures the death of every company, but especially technology companies.

It's further interesting to see some of Google's biggest shareholders, hoping to tie the company down and ensure consistent short-term gains, attempt to generate bad press about Google periodically, specifically about its management with claims they're unruly, unpredictable, etc, in a jealous attempt to seize the kind of control over Google that you describe Ford having done, and Google notices Enron had done.

It's an interesting American problem and maybe someday one Congress will address.

 

The problem with stokholders, whether they are voting members or not, is the fact that they provide the money for the company to expand. If I am not getting a good return of investment, I will sell my stocks and go to a company that will give me a good return on investment. I have NO loyalty with the first company if they have a bad year, so all companies that sell stocks are ultimatly concerned with keeping their stock prices up today and not primarily concerned with long term startagies (especially if those stratagies require short term losses).

There are two types of companies that make it long term:

1. privatly owned compaines

2. government protected companies

If you are a publicly owned company, you might have a good run, but I personally feel you are eventually doomed. (A publicly owned company just can not react fast enough to market shifts in almost all cases, and only survive if they have enough resources to take them thru the market shift when they can finally change.)

 

The only way companies get money for stock is by releasing new shares into the (stock) market. This is why IPO are done but companies can also sell parts of themselves later. Once the shares are in the market place, the buying/selling of these shares does not provide mony to the company whose little pieces the stocks represent.

(I think we are agreeing here.) People certainly have that right but it's a crappy way to build a business. People want fast appreciation of their stocks but strong businesses typically take long to develop. People's interest in the current quarter led to things like Enron and the "internet bubble" in companies whose "value" was was fake. The stock market is "advertised" as a way to build strong/stable businesses and economies but it is treated as a "get rich quick" scheme. Over paid CEO, etc, contribute to the treatment as a "get rich quick" scheme.

 

Yet few companies really care if you do. The money to expand a company rarely comes from stockholders. In privately held businesses, rounds of venture funding accomplish this - but in public companies this money usually comes from deals with other companies, loans, and sales of major divisions to other businesses. The money to expand problem is generally limited to just once in a public company's life: IPO. And the amount of money made there has more to do with PR and little to do with the problems that lead Ford into the ground.

Public companies are primarily beholden to stockholders for 2 reasons:
1) Many stockholders are themselves employees, and rewarding or baiting employees with stock is useless with a low or shrinking stock value.
2) Most companies go IPO with the same templated approach to stockholders which basically states that major stockholders have final say in the company's direction.

Interestingly, Google beat #1 by separating stockholders into 2 groups: a privileged group composed of employees, and a silenced group of non-employees, whose only function is to fund the company, or not, as they see fit. In the past, companies have been scared to try smarter approaches like this for fear no one would buy their stock. Google's soaring price is clear evidence these fears have been in error. Article after article is written by major investors about how upset they are they can't dictate Google's direction, <b>yet their money stays</b> in Google because it remains a good stock. Hopefully this example leads other US companies to follow in their footsteps.

They beat #2 by running a great PR campaign, then auctioning their stock rather than the usual set-a-price approach.

I generally agree but am interested to see if Google's approach leads to their outlasting Microsoft. Google's "Don't be evil" motto has lead to working closely with several of the communities their customers are part of and have benefited greatly from those communities giving back to Google. Their organic approach to innovation through "Google 20% time" may mean they in fact dictate the changing face of the Web rather than react to it, and their good relationship with many communities may mean they're tied in early with a community that drives change in the industry rather than fought by the community as Microsoft tends to endure.

In the car industry, it's a remarkable event (a first?) that Toyota took the time to speak with Plug-in Prius Modders, then made a 180-turn on their stated decision to never put a plug on a Prius. This step forward in reaction to an arguably niche community may be viewed as a reason Toyota dominates the car industry now while companies like Ford ignored a larger customer community asking for cleaner cars for decades. In short, the key to being a long-lived, publicly-traded company may be good stewardship of the communities you sell to. Maybe Toyota and Ford's relative success already tell that story.

It's easy to argue that "good stewardship costs money." It does. But it just may be the cost of lasting more than one cycle.

 

"It's easy to argue that "good stewardship costs money." It does. But it just may be the cost of lasting more than one cycle."

I agree 100% with this statement. There are way too many industries that feel the extra burden and cost for being an environmentaly aware person is not worth it. I am in construction, and we are one of the worst offending industries. We consume way too much to produce as little as we do. We have weekly trips to the landfill with multiple 40 yard dumpsters. While Toyota has a factory that has 0% landfill waste. That is right, the Georgetown plant does not produce any waste that goes to a landfill, they recycle everything in some form or fashon. They are able to do this with out huge cost impacts. If they can be a leader in this aspect, which does not immediatly help them with their #1 goal (producing cars) then all industries could strive for this.

In my industry, there is a new movement call Green Buildings. One of the problems I had with this was the amount of extra paperwork and management it requiered. This increased the cost of the project and thus made it less desirable for most owners. It also created more actual paper-paperwork. They have since changed the program so that now it actually reduces the paper consumed, and most things are electronic, but it still requires a lot of extra management which brings the cost up.