A comment on Seth Godin's blog entry on what to do about Detroit...
I think the reverse will probably happen - GM and Chrysler will merge and
weather the storm against the Japanese and European car makers. There
is tons of innovation already in the marketplace -- the problem really
is that people aren't willing to pay premiums any more for crappy
product. Splitting up into hundreds of brands will only confuse an
already confused market place.
You don't get innovation for free -- Blueray players are still $299 a pop, although they were thousands of dollars a few years ago.
The dealer part of Seth's argument, though, is bang on -- you should be able
to chip away quite a bit of the hassle of buying a car by shopping online, getting a great deal and then picking up your vehicle at a local
lot, AutoShare style. Financing should be doable this way too. There
are too many middle men in the car industry, and it's about time it
became disintermediated piece by piece.
The Detroit car makers could do themselves a favour by revolutionizing
their sales channels. That could do wonders for the price of cars.
One approach to making this happen is to split the R&D and Sales/Marketing functions of the companies.
Leave R&D from GM, Chrysler and Ford as separate companies, and
create 1 corresponding sales/marketing organization that sells cars in
a modern way on behalf of all the car companies. I bet if you chopped
off the sales/marketing side of the big 3 you'd find that they'd be
cash flow positive all of the sudden. This is the dirty little secret
of the Big 3 -- it's not about how much the line workers make -- it's
about how awful the sales and marketing strategies haven't evolved
since the Model T.
UPDATE: Lewis Green offers this little liability tidbit to consider. Obviously this has to be thought through before dealers start being cut off at the knees. I think natural evolution will make the dealers close on their own without forcing them to be shut down.
"General Motors, for example, currently manufactures and markets
automobiles under eight brands in the U.S., including Chevrolet,
Saturn, Pontiac, and Buick, in a market where few customers perceive
any significant difference among them. When the company did shut down
one under-performing and duplicative brand (Oldsmobile) in 2004, it had
to pay dealerships over $1 billion in "financial assistance" to avoid
lawsuits, and four years later, it is still embroiled in litigation
from former Oldsmobile dealers who declined to accept assistance or
settle their claims. Their antiquated dealership structures also
prevent the Big Three from instituting modern and more flexible
inventory-management practices and selling cars over the Internet."