US Auto Manufacturers And The Dodo Bird – Birds Of A Feather?

I posted on my blog a couple of days ago a fake car advertisement I found on the net which mocked the notion that public taxpayers should bail out the so-called “Big Three” US auto manufacturers. In that post, I mentioned that I wanted to share my perspective on this whole idea regarding public funds being used to bailout corporations who are falling under hard times. But before I do that, I want to discuss why exactly these “Big Three” car manufacturers are in need of help in the first place since I think that’s an important factor to consider in any discussion on whether these corporations deserve such aid from the public. And as the title and corresponding image for this post suggests, we’ll see by the end of this piece whether or not these “Big Three” corporations share a common fate to that of the Dodo bird.

Essentially, the fundamental reasons why these three manufacturers are now teetering of the brink of extinction is because of their lack of brand loyalty and an extremely myopic view of who their customer base should be (I’m omitting the outrageously over-inflated wage costs since that’s more a result of union demands than a choice made by the companies themselves. I’m also disregarding the large salaries and benefits top executives have granted themselves since that situation is hardly unique to these three companies). Now that we have these parameters defined, let’s take a look at each one individually to see how these factors have led to the current situation.

Brand Loyalty

A key factor to the success of any company product is how their brand is perceived by their customer base. Obviously, a great deal of this is created by the consumers themselves; however, the viability of a brand is also dependent on how the manufacturers/owners present and maintain that brand. Two good examples of this in the car industry would be the Honda Accord and the Toyota Corolla. Although both model lines have undergone numerous improvements and aesthetic changes over the years, their respective car manufacturers have maintained the use of the brand names, relying on the past performance and satisfaction ratings as a means to encourage consumers to continue buying these products.

Compare this approach to the one taken by General Motors over the last couple of years. Instead of investing in the development and maintenance of a select number of model lines, GM opted instead for putting out models with quick turn-overs, replacing newly created model lines after just a few years of use. This approach naturally makes it difficult for brands to develop a following as they not only have limited lifespans, but any improvements are marketed under a new brand name, thereby proving the existing one obsolete. It’s obvious that what the GM executives were counting on was that people who owned GM cars would come back in a few years to buy a similar make of car under a different model name because of the new features it provides. Instead, what they demonstrated to car buyers was a lack of brand integrity and endurance. It also didn’t help GM to have self-competing product lines under different car brands like Chevrolet and Pontiac in their quest to grow and foster brand loyalty. The same issue also plagues Chrysler with their use of both a Chrysler and Plymouth product line where often the differences between the two makes are almost indistinguishable.

Know Your Customer Base

Obviously, the biggest problem the “Big Three” are facing is a decline in demand – or interest even – among North American consumers for buying their cars. One of the key reasons for this is because of a complete failure on the part of these auto manufacturers to adapt to the changing needs/demands of car buyers. At a time when gas prices have been on a continual rise to unforeseen levels, GM kept putting its resources into the production of more gas-guzzling SUV models, Ford remained focused on pushing its line of full size pickup trucks, and Chrysler tried to gain ground with its new line of luxury cars. And now, as the global economy worsens, the “Big Three” car manufacturers have no alternative, cost-effective reputable model lines to fall back on to keep their companies moving forward. What’s even more unforgivable is their continued inability to develop model lines geared specifically for consumer markets outside of the United States and Canada. Sure, attempts have been made to sell their cars overseas, but as they’ve demonstrated in the North American market, they clearly lacked an understanding of what their customer base is looking for in a car. Had the “Big Three” paid more attention to the old adage of not putting all of one’s eggs in one basket, they certainly wouldn’t be on the brink simply because the American economy is faring worse than others.

So how does this approach taken by the “Big Three” measure up against the nature of the Dodo bird? Well, let’s take a look – the Dodo bird was a flightless bird that was indigenous only to the small island of Mauritius found in the Indian Ocean. As it existed in an isolated environment and due to its inability to fly, they were never exposed to such dangers as predation or the necessity of adapting a more varied diet. The Dodo bird was first sighted by Portuguese sailors at the start of the 16th century and within about 100 years, they were virtually extinct due to a combination of a loss of their natural habitat and the introduction of foreign animals like cats, dogs and rats which destroyed the Dodo bird’s nests. The fact that these birds were incapable of migrating to new territories and their inability to adapt to these new threats that arrived on their shore is what ultimately led to their rapid extinction.

Looking at the history of the Dodo bird’s demise, some compelling and striking similarities can be found – the arrival of the Portuguese sailors causing a biological shift in the Dodo bird’s ecosystem can be easily equated with the introduction of European and Asian car brands into the North American market. Also, the inability of the “Big Three” to either develop new markets abroad or to compete with European and Asian car manufacturers on their home turf is very similar to the Dodo bird’s failure to adapt to new food sources and survival traits as a result of changes in its ecosystem, as well as its incapacity to fly which prevented the birds from migrating to new territories so its chances for survival could be improved.

So, does that infer that the “Big Three” will go the way of the Dodo? It’s certainly possible given the complete lack of vision and long-term planning on the part of the car manufacturers of how they will re-brand/re-invent themselves to regain both consumer confidence and interest for their products. However, there still exists at the moment a sufficient market that might be able to sustain one North American car manufacturer, though whichever one does end up as the last one standing would have to be downsized to carrying a small fraction of the model lines that currently exists and will obviously be a pale version of its former self.

Last November, president-elect Barack Obama was voted into power on the wings and promise of change. And in Detroit, change is now inevitable. Whether it’s the change North Americans want or need is another issue altogether.

In the follow-up post to this entry, “Why Bailing Out The Detroit Big Three Automakers Is A Bad Idea“, I offer my thoughts on why we shouldn’t be putting any public funds into a bailout of the “Big Three” car manufacturers.

Some other posts you may enjoy:

1. Why Bailing Out The Detroit Big Three Automakers Is A Bad Idea
2. The Fall of GM – Have the Lessons Been Learned?
3. Is This The End of Mass Consumption?
4. This Picture Says It All
5. Changing our Behaviours – A Lesson From the Birds
6. Social-Networking Sites MySpace and Facebook – It’s Time For Some Change

posted on January 15th, 2009 | 2 Comments » | Tags: automakers, bailout, Big Three, car manufacturers, Chrysler, Dodo bird, economy, Ford, GM |