Ford, GM and flippin’ burgers

Great morning for a run here in Northeast Ohio. Mild, clear and low humidity. And for some reason while I was running I was thinking of John Nevin. Nevin, who died recently, was the former CEO of Firestone. He was a manufacturing guy. And he argued more than 20 years ago that America was not going to maintain its economic prosperity by becoming a nation of burger flippers. We may be on the verge of seeing if he was correct.

Why? Well one reason is that it looks like Ford is about to join GM as a whale on the beach. That’s both sad and a crisis. And full disclosure here not that it matters to anyone. I bought Ford common stock two years ago because I believed the company could reinvent (great business cliche) itself. Not so sure now — with gasoline at $4 a gallon and buyers racing to mini-cars and scooters.

And my confidence in Ford even went up a bit when Alan R. Mulally joined the company from Boeing as CEO about two years ago. He’s done an OK job so far cutting staff, closing plants, etc. Unfortunately this is about the only strategy available these days to Ford, GM and a host of other large manufacturing companies that John Nevin used to believe was the foundation of our economy. Here’s from an article by Bill Vlasic in The New York Times yesterday:

DEARBORN, Mich. — In recent months, as Ford Motor Company executives watched $4 a gallon gas and a softening economy take a growing toll on sales and market share, the chief executive, Alan R. Mulally, prodded his management team for answers.


Jeff Kowalsky/Bloomberg News

“Everybody says cut and cut some more, but how are we going to sustain this company?” Mr. Mulally said in one meeting in his office on the 12th floor of Ford headquarters, according to people in attendance. “What does a sustainable Ford look like, gentlemen?”

In less than two years since he arrived as an outsider from Boeing to run Ford, Mr. Mulally had already mortgaged the company to raise cash, sold off three brands and cut truck production in the face of rising gas prices.

I don’t have any problem with any of that as long as Mulally knows what he is doing. Sort of like the old mission and vision statements. You know. You’ve all read at least one and chuckled. I digress. Here’s the key point — for me at least — in the article:

“Why are we in business?” he repeatedly asked the group. “We are in business to create value. And we can’t create value if we go out of business.”

OMG. Mulally thinks Ford is in business to create value. (Another great business cliche.) Almost everyone else things Ford is in business to build and sell cars and trucks.

Better alert the shore patrol: whale heading toward beach.

And by the way, John Nevin did create value for Firestone shareholders. He sold the company at a premium to Bridgestone.

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4 responses to “Ford, GM and flippin’ burgers

  1. Allow me to introduce myself. My name is Hilary Raine and I am a senior at Towson University majoring in public relations and advertising. As a self-proclaimed “gear head” this topic about where the automobile industry is headed in the near future has been something on my mind for quite awhile. Your comment about “whale heading toward beach” may be jumping the gun just a little bit on this issue!

    I have been doing research about the latest technological advancements that are coming to the forefront in the automobile industry. The big question that arises from my research is will we see more hydrogen based cars or electric based cars manufactured. We already have the capabilities to produce both, it is just a matter of which will be manufactured first and will be readily available for consumers to purchase. Another reason it may be too soon to say major car manufacturers like GM and Ford are approaching a disaster is that these companies are restructuring their existing plants to fit the needs of consumers today.

    I agree with your statement that buyers are racing to mini-cars and scooters and believe this is the reason why many of the big players in the automobile industry are converting their plants. GM has already started the process of converting three of their plants that produce their gas-guzzling SUVs and trucks into ones that produce more gas efficient cars that Americans stopped buying when the “big car” craze came about. One in particular in Flint, Michigan will produce the new electric based Chevrolet Volt. Many other automobile manufacturers will produce their electric based concept cars for consumers to buy. I know that we will not see the effects of this change for a few years, but it is a step in the right direction. Until then, the biggest issue is the transition period.

    Just this weekend I came across a local Chevrolet dealer advertising a “2 for 1” deal; if you bought a gas-guzzler you would receive a fuel-efficient car free. Is this really what the car industry has succumbed to? It will be a major dilemma for the car industry and its marketers, advertisers, and public relations practitioners to figure out how to get people to buy cars during this transition period so that the car industry won’t become a “beached whale.”

  2. Hilary,

    Thanks for your very thoughtful comment. I hope you are correct. We don’t need any more “beached whales” in this country.

    And I expect that Ford, GM and Chrysler will make the move to smaller and more energy-efficient cars. But that is only going to happen if they have the time — and financial resources — to make the transition. Clearly these companies have cut costs by eliminating jobs, closing factories, etc. Now they have to hope that we don’t have any more shocks to the price of crude oil, more problems with home mortgages, big bank failures, you name it. And I hate to say this, but at some point I believe we will be talking about a government bailout for at least one of these firms. Too bad. John Nevin, who I mentioned in my original post, knew what he was talking about when he argued decades ago that we couldn’t prosper as a nation without manufacturing and manufacturing jobs.

    And I assume you are getting ready to head back to classes. Best wishes as you complete your education. Public relations is a good major — and I believe we need professionals in this business that can take a look at the big issues facing us and then help to do something about them.

  3. You expect Ford, GM, and Chrysler to move to smaller more energy efficient cars when they have the time and financial resources to make that transition. As a headstrong, bigger is better, wasteful American, I believe that myself and the rest of America is not ready to make that transition to smaller cars. As a public relations practitioner how would you address this problem?

  4. John,

    Thanks for the comment. I expect that car buyers will decide what happens to Ford, GM and Chrysler — not public relations. If they can’t sell enough cars and trucks — big or small — at prices that keep them in business then I guess they are on the beach or standing in the government bailout line next to Freddie, Fannie, AIG, Bear Stearns, et al. And that will be a crisis.

    Rob

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