02 May 2008

Profits or Market Share?

The oddest thing about living in Michigan is the way the big three automakers grip everyone's attention. It's a rare day that both of Detroit's newspapers don't have a front-page, above -the-fold article about the auto industry (and around here, the phrase "the auto industry" means only GM, Ford, and Chrysler).

But oddest of all is the way the journalists who write about them focus so obsessively on market share. For two years now there's been a sort of death-watch as Toyota comes ever close to selling more vehicles throughout the world than GM. But apparently it's not just the journalists--it appears that the auto industry execs themselves have been more concerned about market share than actually making money on each unit sold. They seem to have convinced themselves that if they just sell more vehicles, they'll end up in the black--a strange idea, particularly at GM, which takes a loss on almost every vehicle it sells.

But an article today (sorry, I can't find it in the online edition, so no link, at least for now) suggests that Chrysler's new owners are focused on being smaller, rather than bigger, and looking for non-traditional ways of being more profitable. Such as building minivans for VW in Canada, and trucks for Nissan in Mexico, and having Nissan build a small car for Chrysler. Apparently this is happening because Chrysler's new owners, Cerberus, isn't familiar with the auto industry.

And a little child shall lead them, it seems.

It's amazing that after two decades of full-bore competition from "foreign" cars, auto execs still don't get the basics of how to run a business.

1 comment:

James K said...

Oh well, in market settings that sort of stupidity tends to be self-correcting, at least in the long run.