5 Dollar Gasoline: Automotive Crunch Mix

What is an Automotive leader to do?

You are a senior leader of a once great automotive giant. A company that has been an icon of the american experience. Brand equity that goes beyond the obvious to the iconic. But now 5 dollar gasoline threatens all that. It was bad enough that the vehicles are for another time maybe it will come again, large vehicles with status and bling. Vehicles that command respect, vehicles that people notice. But the consumer is fickle they want hybrids and smaller economical vehicles now. It is a kind of deja vu to the days of the early 80’s after OPEC flexed its muscles. Houston we have a problem!

What is a leader to do?

The problem is fundamental it cannot be solved with superficial restructuring and plant closings. It cannot be solved with a handout from the government, it requires courageous leadership.

Discover your core competency

Does a company that off shores sub-assemblies and engine production have a manufacturing core competency? Well it certainly could have once but does it still? I think not. Perhaps industrial engineering and manufacturing design I will concede that point. What else design and marketing? Please… How about those brands? Though world renown brands some of which have customers so loyal as to be insensitive to the price of fuel. The brands yes they may not be a core competency per se but they definitely form the basis of a strategy to pull an automotive manufacturer out of its nose dive.


What about the people? Well that is the next challenge do you have the right people to take this organization into the future? Do they have the right skills do they have the right interpersonal abilities? Do they value the customer and have the ability to heal wounded supplier relationships? If so we have a starting point.

What is the culture is it one of arrogance, high performance, bureaucracy, innovation? One that cannot accept the current financial disaster that looms? If so again it is time for courageous leadership. Creating a sense of urgency for change is hyper critical they must get it and be willing to move with you.

Stop the Bleeding

You must get control of the costs and ensure the viability of your cashflow. Sell off some of the less profitable and less viable strategic fit brands. Work deals with large organizations or governments to convert non-moving vehicles into fleet cars and trucks. Sell to order not to stock ensure each vehicle off the line is generating income.

Steer your own Future

Most of all sell off or cut those divisions or support services that cause your manufacturing costs or SGA costs to be a drag on profitability. Outsource those to India if you have to. Funnel all available resources and your brightest people to design and build a series of new vehicles built for the people that meet their demands. Heck have some off the street folk participate in the design process. Most of all get these vehicles to the customer with Japanese quality levels in record time.

Lead well automotive boys and girls…


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One comment on “5 Dollar Gasoline: Automotive Crunch Mix
  1. Well Ron,

    You’ve summed it up pretty well, but do the leaders have what it takes to pull it off?

    It seems that automotive leaders are in the same panic mode that most consumers are in.

    Hopefully, clear heads will prevail and we’ll see quality products that will have a lot less dependency on the impending 5 dollar gasoline!


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