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Prediction of U.S. auto firms demise is premature (?)

March 26, 2009

The International Auto Show took place at McCormick Place. One of the noteworthy opening events was a luncheon hosted by the Chicago Economics Club. The luncheon featured a speech by Jim Press, the vice chairman of Chrysler Corp. Jim is a veteran of the global automotive industry. He worked for Toyota for 37 years before Bob Nardelli, Chrysler's chairman, recruited him to that company.

Because Chrysler is privately owned, not a lot of public numbers are available for them, as is the case with Ford and General Motors. Nevertheless, Jim Press opened his speech with enough information to suggest that the automotive industry was in the midst of a historically difficult market contraction.

Auto industry sales rate in North America is at a rate not seen in the last decade or perhaps longer. Jim Press obliquely referred to Chrysler's aggressive moves to reduce capacity. They have already reduced their work force by one third while working to transition their products to meet new consumer requirements. In short, Chrysler is fighting for its commercial life.

Looking for rebirth

What impressed me about Jim's speech was not as a somber prediction of doom for this critical industry. Instead, he described the lessons that could point to the rebirth and renovation of auto making in North America. It was an invigorating and challenging speech. By the end of his remarks, you could see that Chrysler was a long way from surrendering. They have already made compelling progress towards global competitiveness. The conclusions that I took away from that luncheon speech could be useful in any industry that is facing into the stiff headwinds of our new market environment.

Jim Press quoted Yogi Berra's remark that "The future is not what it used to be." He said that any automotive executive that thought that the industry could wait out this down turn is fooling themselves. He said, "We may look back on this lean time as the good old days. No one can say that the auto industry will ever bounce back to where it once was. As leaders we have to be ready for the challenges of the future."

From the top

This kind of candid, combative enthusiasm for change comes right from the top of the Chrysler organization. I knew Bob Nardelli when he was a GE. I remember when he and his team turned around the giant and moribund GE Power Systems business at a time when every one else thought it was dead. GE's corporate planners had all but decided that these giant generating machines would be made better and cheaper by Japanese and German competitors. They predicted that the big GE Power Systems manufacturing plants in Schenectady would soon be permanently shuttered.

Nardelli understood the dire industry situation, but he just did not accept the forecasts. He and his team turned these traditional businesses into some of GE's strongest performers and in the process, kept these crucial technologies in the US. Instead of closing the doors, GE Power Systems became the feared global competitor, selling electrical generating equipment from renovated US rust belt factories to utilities around the world.

I sensed from Jim Press's speech that the same tough turnaround moves are afoot at Chrysler. It would be easy to turn the automotive industry over to foreign competitors and to give into the doom and gloom of the current market. As long as leaders like Press and Nardelli are fighting for the investors, customers, and employees of companies like Chrysler, I think that predictions of demise and surrender of the American auto companies are a bit premature.

LINK:Prediction of U.S. auto firms demise is premature :: News :: PIONEER PRESS :: Lake Forester
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