Ford’s Wrong Turn

Mr. Ford’s Wrong Turn, Why U.S. Automakers Can’t Blame Japan by James P. Womack:

What makes this claim so extraordinary is that Japanese companies, led by Toyota Motor Corp., are thrashing Ford by building vehicles in North American factories with North American-made parts and North American workers, who receive American-style wages and health benefits. And increasingly, these Japanese brand vehicles are engineered in America by Americans.

Consider a few facts about Toyota. About 65 percent of the vehicles the firm sells in North America it assembles in North America, and it would assemble a much higher proportion here if it could only keep up with its rapid sales growth. Toyota will open its seventh North American assembly line in Texas next summer… By the end of the decade, Toyota will be able to assemble about as many cars as Chrysler does in North America, and it is closing in on the capacity Ford will have after plant closings that are widely expected to be announced in January.

In fact, thanks to hiring by Japanese, Korean and German auto makers, total employment in the U.S. motor vehicle industry over the past decade has held steady at about 1.1 million.

The problem for American car companies is pretty clearly poor management. Toyota, and others, builds cars in America profitably.

Paying for health care, as Womack mentions, is a significant problem. The high cost of the existing health care system has been known to be a burden on the American economy for decades but politically it has been preferable to delay taking action. At some point that will change and the systemic problems will be addressed. Knowing this, the US auto companies still overpromised in the last few decades and now must cope with the decisions they made.

In addition, they have been more eager to lobby for short term profit boosts than for reform of the health care system. They could have used their power to encourage health care reform. That they failed to do so effectively is partially responsible for the fix they find themselves in. They seem to be much more effective at lobbying to greatly reduce environmental regulation.

The global competition in manufacturing is intense. But America is still the largest manufacturer in the world and managers should not be allowed escape responsibility for their failure to manage effectively with claims that manufacturing in the USA cannot compete. The biggest change needed is an improvement in management. Other things would also help greatly, such as improving the health care system.

When Toyota talks about a future in manufactured housing and bio-engineering it seems reasonable they will move into those fields effectively. If Ford or GM did I would not have such confidence. It is a matter of the confidence in management to make good decisions and execute well on those decisions.

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