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A friend of mine, who is a retired career military man and a keen observer of things in a pragmatic way, explained to me that the military has determined that when conditions change in a substantive, marked manner-as in going from one type of war to another-the policy is, as he put it, to "fire the generals."
The idea is really simple. Generals who are familiar with fighting a conflict with opponents that are wearing the uniform of another country (think World War II) are not going to be well suited to fight a guerilla war (think Vietnam). This isn't necessarily a reflection on the generals who are moved elsewhere. It is, rather, a thorough understanding by the military that if you need to get a particular job done, then you need to do it with people who understand it.
Or, said in another way, you don't use a hammer to put in a screw.
This discussion of generals was provoked by my friend's questions about the leadership of the Detroit Three. He was wondering whether they are the right people to be in charge now that conditions have changed so radically from the times when they first achieved rank. This is not only a question related to GM's Rick Wagoner (CEO in 2000; chairman in 2003), but also applies to Ford's Alan Mulally (president and CEO, 2006) and Chrysler's Robert Nardelli (chairman and CEO, 2007).
Clearly, each of these men has a different background. And each has a different strategy and objective. But while they probably started out thinking that their objective was to grow their businesses, today the more immediate battle is for the very survival of their companies. While Messrs Mulally and Nardelli come from outside the automobile industry (Mulally after nearly 40 years with Boeing; Nardelli from Home Depot, where he'd been for seven years, and GE, for 17 years before that), it is undoubtedly the case that when they were hired, the idea that there would be the current conditions were either unthinkable or only thought by people who others called "Cassandra."
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During a keynote speech heard not only by members of the press but executives from other vehicle manufacturers at the recent Chicago Auto Show, John Krafcik (pictured), president and CEO of Hyundai Motor America (a position he attained in 2009), said some things that require extensive quoting, not only because it is astounding that he had the bravery or audacity to say them, but because I believe he is right:
"Let's face it, the burden on our industry is especially great-particularly in this country. And while no other industrial sector has a greater impact on the health of our economy, there is no other business with a bigger perception problem. Let's face it-our reputation as an industry is horrible.
"In the U.S., we are viewed for the most part as a slow, dim-witted industry that is typically unresponsive to consumer and environmental needs. If that weren't bad enough, our executives are criticized for lavish compensation, abundant perks and unnecessary entitlements.
"Our retail partners and their sales force have an immense image problem with their consumer base. Thanks in great part to manufacturer programs that put more focus on moving the iron than consistently delighting our customers, we have reached the point where, frankly, Americans would rather go to the dentist than visit a car dealer.
"Getting a cavity filled shouldn't be more palatable than setting a foot in a showroom floor.
"For the most part, our industry has a history of opposing environmental and safety legislation-sometimes with the force of science and good sense behind us, such as the early California EV mandate, but other times with a much weaker platform of defense. Many Americans believe that our fighting these issues is done strictly for our own best interests, which run contrary to those of our country's, and our society's. As a result, we are painted with a broad brush as bad guys who care little about our own customers and the world we live in.
"Add to this fact that we consistently resort to costly discounts, rebates, and desperate sales tactics to keep our plants running and to cover our fixed costs.
"No wonder our industry is viewed with contempt."
Krafcik didn't simply hector the industry (though that's not entirely bad, as the word hector comes from the name of a Trojan warrior who became one of the Nine Worthies for his courage and nobility), but rolled out with some recommendations about how to fix the problems.
But Krafcik cautioned: "Turning our industry around will require some revolutionary thinking." And in an industry that seems to be desperate to defend the status quo, revolution is anathema.
Krafcik, who, incidentally, is one of the world's leading experts on lean manufacturing, so know that he isn't some empty suit (he holds a mechanical engineering degree from Stanford and a graduate degree in management from the MIT Sloan School), didn't enumerate wild-eyed, tossled-hair ideas. Instead, they were the sorts of things that would seem to be common sense. Like:
"First and foremost, we need to build the highest quality vehicles possible, and in doing so, prove that we listen to our customers and respond to their needs. Our cars should be gorgeous. They need to be rewarding to drive. And the care we put into designing the car should be clearly reflected in the workmanship the consumer perceives inside of it."
Not so radical. But then he provided a kicker, one that would be like one of those shots to the solar plexus that doubles you over like the kick came from a mule:
"Skimping on quality to hit a cost target is a mistake, in my opinion. Any car company can hit a cost target and deliver a terrible vehicle-there is no skill in that. We'd all be better off as an industry if every manufacturer missed every cost target on every new vehicle launch by $100. If we each took that money and sunk it into terrific interiors with soft touch points and great vehicle dynamics, I promise you, we'd all get that money back through customer satisfaction, loyalty and goodwill."
Meanwhile, how many people in Detroit, Dearborn and Auburn Hills are busy nickel-diming their next and current programs?
He called for "embracing fuel economy as an indisputable social good," adding, "There's really no point in arguing about the veracity of climate change when you stop to consider the finite supply of oil, and the turmoil that our present consumption habit is fueling in the Middle East." He asked, "What if our industry was the first to exercise a more inclusive form of capitalism that voluntarily restrained executive compensation to a reasonable multiple of average employee salary?" He called for a greater focus on vehicular safety-"every vehicle can always be made safer"-and he hailed Volvo for its leadership in this area: "They have embraced safety as a rallying cry for their entire company, more recently with a bold public proclamation to achieve zero occupant fatalities by 2020. This is the kind of visionary thinking that can change perceptions of our industry."
My friend, the ex-military man, turned to me after Krafcik's remarkable presentation and said, "He can say those things. Hyundai only has a 3% share of the U.S. market." Exactly. He's like a new general, not only in tenure, but thinking. He's working on growing the market, not defending something. He's on offense. And he is not just talking about what needs to be done, but is doing them, as is reflected in the remarkable quality of the cars that the company has been introducing, but also its early commitment to deploying ESC in its vehicles (before the government mandate) and it more-recent commitment to an average fleet fuel economy of 35 mpg by 2015, again earlier than the mandates (and to be accomplished, Krafcik said, not by some exotic technology-although they are going to roll out a hybrid with lithium-polymer batteries-but by incremental engineering improvements: remember his expertise in lean and, consequently, continuous improvement?).
By the way: Hyundai, according to the January '09 sales numbers, actually has a 3.7% share of the market. It may not be much, but that's up from 2.1% from January '08.