Can Gm and Ford Make It Alone?

Can GM and Ford Make it Alone?

When deciding on what to write for my final in regards to the International Management Behavior course, I took a long hard look at my prior work experience and how it related to the subject at hand and came up empty. I am sure, given that, in today's global climate, almost everything we do or every product we use has global influences and those products were developed, marketed and influenced using those behaviors that are described in detail in the Lane text. But what does that mean to me? What do I take away from this course? How are my purchasing decisions and future management decisions going to be impacted by this course? What are the odds that I will one day be managing a project in some far away country with co-workers with whom I share no known shared traits with? How will they respond to me? How will I respond to them? While I am positive that my days at Target Corporation were shaped and influenced by people with direct hands on experiences in this type of atmosphere my duties at store level were not. Given these unknowns and my absolute lack of experience in these situations lead me to look at my other interests and what influences today's global atmosphere has on my personal fascination with the automotive industry. Being 35 years of age and intrigued by this industry and cars in general since I was a child, I am amazed at just how global the automotive industry has become and will remain in the future. I can still recall when it was very much an us vs. them industry and Buy American was on tips of everyone's tongues. But today that has changed and it is my opinion that GM and Ford will need to continue to evolve and train its management teams to better operate globally in order to remain viable in the future or they will need to partner or be bought out by stronger multinational partners, such as Toyota or Nissan, who seem to possess the managerial skills necessary to operate in a global atmosphere.

Why? As recently as last week both GM and Ford are again awash in red ink, "GM posted a second quarter loss of $286 million" (yahoo.com, 2005) and Ford just "lost $907 million dollars in North America (ford.com, 2005) during the same period. Meanwhile in the "merger of so-called equals", Daimler-Chrysler has just posted "a profit of $2.0 billion" (autochannel.com, 2005) and it's CEO Juergen Schrempp, announced on Thursday, July 28, 2005 that he will be stepping down at the end of the year (Plain Dealer). Why'll GM and Ford remain American, Chrysler's merger with Daimler-Benz in 1998, has been anything but smooth. When originally announced to the world, the merger was said to be that of equals, but eventually Daimler-Benz came forward and to the dismay of thousands of US workers and the ousted Chrysler executives, this was not the case. It was merely a front for the eventual takeover of this once proud US company. Today Chrysler's world headquarters reside not in Michigan but in Stuttgart, Germany. While for all practical purposes DaimlerChrysler is a multinational company it has been an unfortunate example of what happens when two companies merge and there is a clear lack of understanding and information sharing done by the two and a bad example of what happens when one company's, Daimler-Benz's in this case, management style is not integrated with the other but is instead is forced upon them. "Schrempp has frequently come under fire as his vision of transforming the parent company of Mercedes-Benz into a robust global automaker has never fully clicked since the 1998 merger of Daimler-Benz and Chrysler. As Chrysler recovered in recent years, Mercedes began to struggle with quality problems and falling profits'. Given these facts DaimlerChrysler has at least chosen, in the opinion of many a more "affable executive who largely won over American employees initially skeptical of a German at the top of Chrysler in 2000' with their decision to name Dieter Zetsche as their new Chief Operating Officer'. Perhaps this decision along with a statement from Zetsche stating 'clearly, DaimlerChrysler is not yet where it needs to be or where I know it will certainly arrive in the foreseeable future (but) nevertheless, we have created the preconditions for success and I am confident we are heading in the right direction" (Hakim, pp. C-1, C-2). On the day of the announcement shareholder's obviously agreed and supported this decision as shares rose as much as 11% in Frankfurt and 9.8% on the New York Stock Exchange.

Perhaps DaimlerChrysler is finally learning from early and ongoing missteps that began in 1998 (and continue to this day), and is beginning to take "social responsibility, or a reactive approach to other organizational stakeholders (for example, customers, employees, suppliers)" (Lane, DiStefano & Maznevski, p.424, 2000), with the removal of Schrempp and the placement of Zetsche.

But what about the other two? What are GM and Ford doing today that is going to make them viable in the future? In 2003, "Toyota overtook Ford to become the world's number-two automaker'. Then Toyota's Chairman, Hiroshi Okuda, stated 'his company's next target was 15 percent of the world automarket...that means Toyota fully expects to end GM's near 80-year reign as the world's number-one automaker sometime soon'. GM's response, not plan, by chairman Rick Wagoner was 'we've been ahead 73 years in a row, and I think the betting odds are we'll be ahead for the next 73 years.' How? Based on share prices alone Toyota's assets are worth more than GM, Ford and DaimlerChrysler's combined. It has been speculated that with Toyota's $16 billion operating profit from 2004 that it could and has seriously considered buying GM" (Mackenzie, p.13, 2005). Perhaps GM should listen. Or at least pay attention. While Toyota is actually raising the prices on its cars and trucks, the domestics had to go as far as to introduce "Employee Pricing Plans" for everyone this summer in order to drive down inventories and generate some excitement and much needed traffic into their showrooms. The Street.com stated that while "GM's sales were up 44% over the same period last year they actually lost $286 million for the same period" (gminsidenews.com, 2005). Ford and Chrysler got on the bandwagon late so their respective numbers will not be available for some time. Again, why the large losses? It comes down to operating margins in many cases, while