How The Mighty Have Fallen

Toy who da?

Yesterday, The Telegraph reported that the Ford Motor Company is declaring losses of $8.7 billion for the quarter.

$8.7 billion

On the same day, Toyota passed GM as the number one auto maker in the world.

How the mighty have fallen.

Ironically, last week, while Detroit was headed toward Lagosland, we had a number of meetings with some major broadcasters on the east coast.

Why, they asked, if this VJ thing is such a good idea, don’t the networks do it?

Well, it’s a valid question.

“We can accept that The BBC has done this. And German TV. And Dutch TV. And Japanese TV….. But why haven’t the American networks really embraced this.

One might ask the same about small cars or hybrids and the US automakers.

Once at the top of the heap, you often find that old established companies are often the last to take a risk They get fat. They get lazy. They lose their edge.

This year is the 100th anniversary of the Model T.

In those days, Ford was willing to take a risk. Henry Ford was the Steve Jobs of another era. Automobiles were the web. Risk was the name of the game. And Ford’s success was that he made a product that was cheap, simple, fast and easy to use.

With success came complacency. Just like the networks.

Why don’t the three networks adapt the VJ system?

Why didn’t Ford and GM and Chrysler adapt hybrids and electric cars?

If you’re looking for the future and the cutting edge in the automobile business, look to Europe or Asia.

If you’re looking for the future and the cutting edge in the television business…. guess what? Same answer.

11 responses to “How The Mighty Have Fallen

  1. $8.7 billion — http://www.nytimes.com/2008/07/25/business/25ford.html

    I’m not arguing your point, just noting that it may be lost because you didn’t a) provide a link and b) were a little off with the number.

    As for why Ford and GM didn’t do hybrids or just more fuel efficient cars, it was margins. My mom drove a Ford Festiva until she traded it for an Escort. The Festiva got nearly 50 mph. The Escort was over 40 on the highway. Name one auto maker — any nationality — producing such cars (gasoline motor averaging over 40 mph) for the US market today.

    It seems, according to a business friend, that Ford had a profit margin of less than $1,000 on those cars. On an Expedition the margin was closer to $8,500. In the mind of Ford execs, that meant it didn’t matter if there was an audience to be served with fuel-efficient cars. They would have to sell them at an almost 10-1 clip over the SUVs in order to make the same money. So they, along with virtually everyone else in the US market, abandoned that market segment. Honda and Toyota were just didn’t go over-board with SUVs and then came up with a high-margin alternative for the greenies. That Escort and Festiva get better average gas mileage than the Civic Hybrid and Prius respectively and cost less than half their sticker in today’s dollars.

    Perhaps it is neither adaptation or nimbleness that is benefitting Toyota and Honda. Maybe it’s just good spin doctors.

  2. Sorry.
    This is what I get for doing this stuff at 4 am,

  3. Not to mention the Japanese government subsidizes and protects their auto industry much more than our own her in the US.

  4. To “Paul Evans” (love your website name by the way) – I kept waiting for you to drop the other irony shoe.
    “It seems, according to a business friend, that Ford had a profit margin of less than $1,000 on those cars. On an Expedition the margin was closer to $8,500. In the mind of Ford execs, that meant it didn’t matter if there was an audience to be served with fuel-efficient cars.”
    Look at “Black and White and Red All Over” I’m sure you’re familiar with Clayton Christensen and his theory of disruptive innovation – the behaviour you’re describing by the auto makers is classic – and it’s the very reason Japanese (and now Korean and soon to be Indian) auto makers have been able to succeed here in North America – meeting unmet needs with a ‘good enough’ product that reaches the market outside of existing channels. Whether their Prius – a version 1.0 of a green car is better than a Fiesta or Focus (both European products, please note) isn’t a matter of spin – it’s the next phase of that disruptive innovation: cutting the ties to hydrocarbons.
    And with respect Michael – the failure to adapt new ways of doing things (a la VJ’s) is not truly about being fat and lazy, but a failure to truly understand our economy and innovation. As your other commenter pointed out – it (seems) to make good business sense to keep serving that high end, high paying market. That’s a critical error, but a very, very common one.
    Bill

  5. a couple of years back Ford made a “real-life” series of videos about the “bold moves” they were taking to reverse the company’s fortunes.

    They made it with a 2 man crew and a broadcast camera. If they had gone VJ they could have saved $50,000

    so instead of looking at losses of

    $87,348,075,000

    they would only have losses of

    $87,348,025,000

    networks trying to save money by switching to VJs is like NASA cutting the space shuttle budget by switching to single-ply kleenex.

  6. just to be clear – maybe VJs will reverse the fortunes of newsrooms – but if they do it will be because they are more talented not because they are cheaper

  7. Dear $,
    Oh come on. If you think that governmant subsidies are the only reason GM is getting its ass kicked, then I think you’re getting your talking points from Detroit. Have you driven a chevy lately? How about a BMW? Notice a difference?

  8. heck, have you driven a 40 year old beetle lately?

    there are some shown in the background of your shot. (hippie bus and ‘the thing’, too).

    i do believe it’s a corvair parked directly behind that green heap of iron.

  9. Clayton Christensen and his disciples have a lot to say about disruptive innovation and how it has affected the newspaper industry. They launched a huge study a few years back. I got slapped down at my work place for even mentioning some of their preliminary findings.

    Much of their research is apt. Newspapers initially failed to recognize the internet as a disruptive technology. When they recognized the threat to their core business, newspapers did not attempt to adapt, instead they tried to force the innovative product into the mold of their old product.

    What those researchers don’t mention is that another plague for newspapers — and I suspect broadcaster as well — is now that those early failures are coming home to roost, the abject greed of these firms is making the problem even worse. Many of the publicly-traded newspaper companies can’t seem to see past their profit margins. Much of their supposed innovation at the moment is at least as much about cutting costs as it is about new ways of doing things. It seems maintaining a 29 percent profit margin — Gannett’s target of choice — is pretty hard to do when your revenue sources are disappearing faster than a puddle in the Gobi. So you cashier lots of your long-time people, create things like mo-jos (mobile journalists) and suddenly start acknowledging bloggers (cause they are cheaper, often, than interns).

    So Ford is now shifting back to little cars that go lots further on a gallon. That’s their plan to get back into the black. Maybe it will work for them. I’m a big believer that if you build a good product then profits are more likely to find you. Conversely, if your primary target is profit, you may have already hamstrung your effort to make a good product.

    Don’t know if that has anything to do with disruptive innovation, but it does seem to be an issue shared by US automakers and many American newspaper companies.

  10. No, it’s not the only reason, but it is a big reason if you are comparing the two companies, big picture to big picture.

    How many cars does BMW make?

    I’m actually a big fan of Japanese cars and trucks.

    Their management does think the right way in my book. They build them the best they can. Not to fall apart in seven years with the idea the owner will run back to them to buy another like GM and Ford.

    But the government support, as well as the international trade games Japan plays to keep the competition out of their own country can’t be ignored.

  11. Its getting to be a little unsettling… The news is full of all the usual great innovations and scientific breakthroughs, yet allot of them now seem to be happening in other countries.

    I fear America is losing its competitive edge in so many ways; we just keep clinging to past, hoping that life will return to those bygones times.

    But alas….

    Keep up the great blog, Mike. I know… Sometimes it has that proverbial tree that falls in the woods and no one hears feel to it. But believe me, you’re making a difference.

    Tom
    http://www.dare2believe.com

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