January 05, 2007

The folly of being the world's biggest

Yesterday General Motor’s CEO, Rick Wagoner, announced GM has no intention of ceding the title of “biggest car maker in the world” to Toyota.

Real dumb move.

Fighting Toyota is a good idea. But “who is the biggest” is the wrong battlefield.

You get to be Number 1 in the auto business by selling more cars than anyone else. This does not necessarily mean these are profitable sales (usually a good indicator that you are making the things people value). GM, like other Detroit automakers, has been hooked on discounts and incentives to move vehicles off dealer’s lots. Toyota, Honda, et al rely on eager customers to do the job.

Wagoneer says he likes being Number 1. But he’s dangerously deluding himself. GM lost that position with the car-buying public long ago. It’s just taking the numbers a while to catch up with realities – realities GM risks missing as it clings to bigness as a source of pride.

In Bigger Isn't Always Better I told the story of how Kellogg’s economic performance was badly damaged by executives and systems that focused on tons of cereal produced, not on customer tastes. At Kellogg it took a new smart-growth-oriented CEO, Carlos Gutierrez, to dig the company out of this mess and focus it on what really matters. Wonder if he’d be available to take over a once-great American car maker?


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