Last year Toyota overtook GM to become the number one automaker in US. It ended GM 77 year history at the pole position. GM was the Number one carmaker in the world from 1932 when it took the position from Ford motors. Ford is currently ranked number 4 car maker in the world after Toyota, GM, Volkswagan.
There were more than 7 million cars recalled by Toyota in last three months due to faulty accelerator pedals and floor mats. In the latest setback for Toyota, there have been more than 100 complained filed against Toyota Prius in US with Federal Transport Authority. All this brings us to the question what is it in becoming number one that companies stop caring about the very customers who brought them to the number one position
In 1908, Henry Ford transformed the world with Ford’s Model A. For the first time the concept of assembly lines were introduced. Companies were able to manufacture larger number of cars at cheaper rates so that car buying became affordable for the common man. Ford instantaneously became the number car manufacturer in the world because of the technology. Ford had a simple concept; we will make what people what at the cheapest price possible.
Then in 1930’s GM started posing a challenge to Ford’s long time dominance. Ford was very efficient in manufacturing their cars but with what Ford failed to realize that as times change people needs change. Ford was very efficient in manufacturing the same car again and again at the cheapest price. However people wanted to be different from everyone else. GM overtook Ford in 1932 with again a very simple concept; GM started producing a new model of a car at a rate that was unheard of. What made it possible and why was Ford not able to that. The answer is again simple; Ford got stuck in what is known as a belief that manufacturing everything right from a bolt to a window panel on their own is the way to produce the cheapest cars. They did not realize how the world had changed and how GM was able to produce large variety of cars since it did not have to manufacture each and every component of the car. Hence was born the concept of what we call today outsourcing.
For the next 50 years GM did this more successfully than anyone else and became bigger and bigger. However the 1980’s was when it started getting the first signs of competition. It ignored it because it believed they would not be able to introduce as many new car models in a year as GM did. That was true for a while when most people wanted to replace their cars every year. As times changed the time for constantly changing your car also went by. People started needing much more durable and reliable cars. GM tried techniques like 5 year warranty and 10 year warranty.
Toyota logic was simple. Our is lifetime guarantee and you know it. We build only quality cars and quality is never compromised. We make quality cheap because unlike like BMW or Mercedes we believe quality can be achieved by constantly improving one step at a time. Hence in 2009 Toyota displaced GM to become the largest car manufacturer in the world.
Within one year why people passion is going down at Toyota being at the current number one. Does that mean that Toyota is set to spiral downwards from here? The company that was known for its quality; why have people suddenly started questioning it’s quality and reliability. Some say that this was because of the current CEO of Toyota moved away from the core principle of Toyota that was to produce cars that people want. Others say it is just a backlash of Americans since Toyota took away a lot of American jobs.
Analyzing the auto industry for the last 30 years my experience has taught me that it is neither. The problem lies in something much more fundamental. People these days just do not want the number one car. Sounds foolish? Think over it again. As soon as a car model becomes number one, it means every person every corner of the world is driving it. Then how is your experience unique. Why spend so much just to be like everyone else.
So what is the answer ? Is GM’s multiple branding again going to be the answer. VW is currently doing the same but more efficiently. Or is Alan Mullay (current Ford CEO) “Multiple cars Single platform” going to be the answer to this question. If I knew I would be the next millionaire. The truth is only time will tell. I can only say the next five years are going to be interesting to see the new developments of the auto industry. There are multiple stars who are lining up their brands to be number one. Therefore I again ask the question; “Do you really want to be number one?”
Definitely a neat idea to keep Toyota on the watch list for now. Here is their stock movement for past one month:
Toyota Stock Price Movement
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