Harvard Business Publishing

What about the extreme possibility - that you don't save Detroit, that you don't turn it around. The business example would be a sale of the companies assets and then a full dividend of those proceeds to the shareholders.

Maybe the reason for companies and communities to sustain themselves no longer exists. It is popular and prideful to be the savior that turns around something - but maybe there are times when it is better for society (and shareholder value) to just walk away.

Just tossing an idea around: http://www.theoscarproject.org/ - instead of managing the whole process companies could 'rent' their production facilities to the consumers who would design their cars themselves.

Create and sell "open" car components. Create a series of standard chassis and publish the specs. Create open standard bodies that will mate with these chassis + "open" instrument panels with published standards + "open" safety features (air bags, seat belts, anti-lock brakes etc.). Allow other companies to design and create bodies to fit on the standard chassis and use the standard engines and interior components.

When a car was old, the body could be replaced or if the body was OK but the mechanics were bad, they could be replaced. This would create an exciting dynamic by allowing creative people to participate in the design process. It would be "good" because more components could be recycled and there would be less environmental impact. Cars could be designed or retrofitted for increased fuel economy or for other uses such as changing an automobile into a pickup truck, or SUV.

Over the years, the Detroit auto industry has continually failed to respond to the needs of the market. IMO, part of this has to do with the fact that the people who build these products don't have to sell them.

My suggestion for Detroit - start leveraging one of your most important assets -- your dealer network. Transform your dealers from being strictly sales and repair facilities....to becoming a network of mini assembly operations whereby standardized automotive 'platforms' would be customized for the consumer on the spot.

And, while you are at it.....you might consider equipping your dealerships with alternative (and efficient) energy pumps (ie hybrid fuels). Make it easy for your customers to want to come back.

DOH! Start off by examining the external variables that effect the industry they are a part of.

Problem 1 = Rising Oil Prices
Problem 2 = Credit Crunch

Solution: energy efficient cars that cost less.

Do you any of you remember that episode of Simpsons where Homer designs a car for his rich half brother? Well did not know that half brother was named William Clay Ford.

I like the idea of "car as a service" ...but expanded from leasing into a national Zipcar-esque program.

- subscription revenues are high margin and predictable
- huge economies of scale for repair/maintenance
- massive market power enables the car service provider to negotiate on fuel costs [near term]
- massive market power solves the "chicken/egg" problem, enabling the car service to force a faster transition to hydrogen power [or some other sustainable energy source]
- massive social pressures incentivize "good" behavior among users; also for the service provider b/c users will share info about service/car problems/service problems easily with each other (a web/mobile based reservation/logistics system)

Plus, parking is much easier with less total cars on the road ;-)

Sign me up

Any of the big car companies could:

1. Create a platform a la Zipcar
2. Open the platform in the way I suggested back in February (see http://www.sotirov.com/2008/02/one-more-thing-internet-could-disrupt.htm) so that car ownership is transformed into something economically meaningful
3. Become the global Google/AdSense of cars

I would like to throw a couple of pennies on this discussion.

Detroit's economic strengths are its industrial base and location. I think that in order to re-establish itself as a premier manufacturing city, it needs to have a secondary industry base to supplement the automotive industry. To that fact, I would be looking to turn the "Rust Belt" into the "Green Belt".

This revitalization effort would center around Detroit and its sister cities to the east, and would have to be spearheaded by political initiative. The federal government would first have to embrace and lead the environmental movement. By making the US a leader in a green revolution, we would be in a position to set environmental standards that we could not only adhere to, but exploit from an manufacturing perspective. There could be environmental taxes/tariffs that could be directly linked to manufacturing emissions. From there we would be able to leverage our efficiencies, innovation and access to capital as competitive advantage in the global market place. This new industrial base would become the catalyst that takes the heat off the reliance of the automotive industry. It would be very profitable both from a corporate and individual's perspective. Finally, it would help restore world opinion in the US as a leader in solving complex problems that require the co-operation of nation states.

I am oversimplifying this, but I think it is vital that we as a nation restore some of our industrial base, and a movement to toward this type of solution would benefit both Detroit and the rest of the country.

One of the businesses that the Detroit companies seem to be succeeding at is financial services, so a transition to a car-as-a-service would be a good way to leverage their current competencies.

I like the idea of a return to the pre mass production days of auto makers and coachbuilders, allowing the car maker to turn every model into a platform that can be customized and redesigned through an open system. It would allow the carmakers to keep a strong industrial base: manufacturing engines, transmissions, and some of the more generic/scalable car parts and drastically lower the barriers to entry for new car companies to enter the marketplace. The car interior seems ready for a 21st century overhaul, and I don't think any single company is up to the task. Changes to the drivetrain (hybrids, EVs, hydrogen) would be best accomplished by a company that wasn't spending so much time telling consumers what they will want next year, and more time innovating around the fundamentals.

I don't know about "Google/AdSense of cars" but I could certainly imagine GM and Ford becoming the AWS of cars - providing the building blocks of production in a granular and elastic fashion. It would allow for an explosion of new, innovative, car (design) companies.

Woah!

[For the record, my original comment was inspired by Emil's earlier work]

But I love Nicholas Molnar's thought...specialization! Holy "The Only Sustainable Edge", Batman!

Outsource everything that they have a comparative disadvantage at...like interacting with customers.

Nicholas Molnar, that was brilliant.

If its in the terminal stage - and the alternatives are just band aids then they is exactly what they are...let the industry die peacefully. Use the asset base to rethink personal transportation.

In terms of challenging management, re-thining strategy and finding advantage, my initial gut reaction is to point a shaking, scolding finger at continued planned obsolescence and the perpetual output of inefficient redundant engineering that results in wasted resources. Detroit exemplifies locked-in and out-dated (evil) beliefs that “job number one” is to feed ego versus produce efficiency.

The problem with industrial decay, lies in the genesis of sustaining an evil culture reliant on psychological manipulation used for customer motivation. Sheep-like consumers of our society are pulled, drawn and bred to depend on the behavioral compass needle of whimsical engineering, which essentially is driven by the wavering winds of fashion. This ol'fashioned hypnotic jaunty of style is a collective social dream born from a bypassed age of dirt cheap oil, dirt cheap labor and romantic nonchalance.

Paradoxically, modern inefficiency is encapsulated within easy plastic disposability and consolidated modularity which apparently results in faster instant gratification. A century ago, efficiency had clarity in the notion that, "You can paint it any color, so long as it's black". Mr. Ford sold a car that was designed to be simple and cheap versus the modern day representation of a dynamic simulation model based on mass surveys, correlated with screened and filtered data sets that connect and integrate thousands of engineers to a chaotic sequence where the devil is in the evil details. Furthermore, the concept that the customer is always right, may be the reason that Detroit is lost in a society of fragmented entropy, which is expanding to a virtual point, where Detroit doesn't matter a bit to anyone.

My bottom line is to suggest that Detroit lay off more and more engineers (as many as possible) and then stop playing catch-up in the catch-22 mentality engineered to a point of utter stupidity! Instead of working on annualized fender twists, colo combos, upholstry nuances, more buttons, more this, sleeker that’s and a wider range of nothing efficient -- get real and re-invent the auto and go back to essential efficient basics. Provide commonality versus narrow field abnormal niches that cater to smaller and smaller groups!

The fact that Detroit is under presure brings the topic that has not adapated to evolve itself neither the people that manage the industry nor the goverment.

Being the World capital of automobile its a fact to be reduced and then remembered as the Rome Empire of automobile when Henry Ford (Romulus to Rome) set the ground and now it is falling due to common human behaivors of economic entropy that in fact as any other industry has to evolve when opportunities (adversities) are present.

It is worth to remeber a Harvad Business Book from John Kotter: Our Iceber is Melting; and adapt it to a name that would be as: Our Vehicles are devastating Detroit.

It's time to evolve, adapt and break the paradigm that Detroit still a Car City. Better yet if evolving and set a new challenged to benchmark other US cities with public transportation this could ideed bring an Economic opportunity.

Developing a Train to reduce oil consuption for example; there lies the Silverdome in Pontiac, once the house of the Detroit Lions. An opportunity with a potential to be set as a train station as the magnitude as the Gran Central in NYC. The belly bottom of an Economic boom tranforming in a new Economic challenge that brings people offering a viable proposal to commute to any point: Flint to the North, Lansing to the west, Detroit to the South and a beutiful posible station at Lake St Clair at East.

It is time to evolve and transform by adapting to new forms of performing new investing bring entrepreneurs, so Goverment and other industries can redically perform changes in current management by bringing a new set of business model, and strategic innovation that can bring Detroit to flourish into a Renaissance era.

I agree with Jaime.

The word "car" should be stricken from Detroit's vocabulary. It's by far one of the most unproductive ways one can spend his/her time.

What's evil? Trying to constantly convince me how happy and average I will be if I buy a new Tahoe. Seriously? We know this ridiculous because every year the designs look more and more like living rooms on wheels. Obviously, to detract from the dismal experience of driving.

We know what's good. Make the car irrelevant. Make my time and attention as productive as possible while traveling from point A to B.

On a deeper note, what's Detroit's DNA? If there's anything left, it has to do with Ford's and Sloan's brilliant insight and legacy. And that is not so much about cars, but the organization and commoditization of labor. That may seem ridiculous in the 21st century, and it is ridiculous if your plan is to pack people into a plant downriver doing repetitive mindless tasks. But just imagine a world where it were relatively easy for "anyone" to carry out a project using "anyone's" labor. There's a swath of "modest" novel projects that could then be accomplished. As commented beforehand, this would rest on the design of manufacturing components that are open, modular, reusable and interchangeable.

Maybe, just maybe, instead of driving by abandoned wastelands in Detroit, I would see people building houses, neighborhoods, businesses, futures, etc...

I would first start with something like the electric commuter cars (www.commutercars.com). With their size, they can double the bandwidth available in every street/highway (i.e., you can have 2 cars/lane).

Then, I would offer it as a service, much like zipcar does it. That is, you can reserve it through the web and pick it up/drop it off when you need it. Or maybe just lease it and subsidize it with other means (see below)

I would promote personalization like infectious (http://www.techcrunch.com/2008/05/22/infectious-to-bring-custom-car-art-to-the-masses/), but also a way for users to add services, like a supped-up iphone (e.g., check out "s Your Car the Ultimate 'Mobile Computer'?" http://www.pcworld.com/article/id,145718-pg,1/article.html )

I would put something like Dash (www.dash.net) on them, that way the whole mass of cars can be managed like a fleet and provide a unique service to each driver: tell them which way to go to avoid traffic.

Instrument the dashboard so that you can suggest what is near, like a location-based ad-sense. Maybe this can subsidize part of the cost.

What about making modular plastic component upgraded available at Wal-mart. Essentially a person could buy a low end economy car and then upgrade in stages. This is the lego model.

As a business owner in the city of Detroit, I look at this a little differently - this isn't academia to me, it's daily life. Are we talking about Detroit as a city - Detroit as a region - or Detroit as a euphemism for the auto industry?

Let's take the last one first.

To lay the blame of the current situation at any one particular parties' feet is to ignore the truth of the situation - you don't get into the issues all three layers I speak of above are facing without multiple causalities.

But I think the biggest thing that could be said to rethink Detroit is to embrace change. There are those of us who are; there are those of us who want to but feel that they can't (a victim of corporate structure, which, by the way, isn't unique to autos); or a prisoner of their personal circumstance. After all, it is very difficult to convince someone of something they perceive will hurt their personal pocketbook, even if long-term it is the right thing to do.

With that said, I look at success stories like BorgWarner, an auto supplier who embraced change and creates parts for hybrids and conversion kits to take developing nations' vehicles from manual shifts to automatics.

I also look at where Detroit didn't embrace change. GM talks of the Volt today (an electric car) but they had the EV1 which if they had embraced instead of running away from (it wasn't perfect, but a darn good beta product) could of been their game-changer today if they had stuck with the technology instead of refusing to embrace the possibility that the future could look different than yesterday did.

The american automakers en masse missed their opportunity to stay leaders in alternative energy transportation, and meanwhile, scared their competition into eating their lunch because they decided to pursue that line of work.

You then have Detroit as a region. Let me tell you, doing business in a cutting edge field that relies little on automotive raises some eyebrows.

Diversity in business, which you are truly starting to see now due to necessity, is the key - but it's a heck of a change. Before autos, it was stoves. Before stoves, it was cigars. Either way, Detroit has been a virtual one-horse town for most of it's history and it's deep in it's culture.

When Detroit as a region decides there are other things to do than build cars, we've got some of the best robotics, technology, advertising and engineering talent in the world - that could be easily re-applied to something else, with the investment and will. We've been hurt as we in the good times, instead of using that money to diversify, doubled-down on more automotive and when things got bad sat around thinking that jobs are going to come back in sectors that have become redundant, outdated or uncompetitive due to the realities, mostly, of technology and globalization.

Thirdly, drilling down to Detroit as a city - it's been on the rebound, because it's embraced change for the past 15+ years. It needs to embrace it more, because the status quo doesn't cut it. It needs to rethink how it operates; and heal some of the wounds it still nurses from a hundred years of racial strife (which admittedly, it can't do alone nor it should). We're still the most segregated region in the country; and we need to embrace the change that some other areas have where we come together on common ground to move forward.

That said; I love Detroit. It holds so much promise; it doesn't do everything wrong, and in fact does a lot right. We'll one day reclaim our title of "Paris of the Midwest" and "The city where life is worth living."

But it'll take the embracing of that one constant...

Change.

if the assumption is regional innovation then this is difficult. esp for detroit which has deeply embedded issues wrt industrial mind-set. interestingly, detroit could be metaphor for the rest of the US. If detroit can be turned around - so can anywhere else

okay for fun value only:

- turn the detroit demise story into a into a positive. Best value/growth/Innovation can come from desperation situation

- strong leader w/ strategy/Purpose/vision. eg transport for the future..with a focus on cluster/"silicon valley' equivalent for the future of transport. Incentivise elon musk types to re-locate.

- Move away from orthodox mind-set of making the basis of value focused on building a car and selling. service innovation, experience focus, customization/personalize, take advantage of intelligent products and ubiquitious sensors, ipod of cars Zzzzz etc.

- One interesting trend i'm noticing with car the industry is carefully crafted contrived authenticity and heritage (e.g. mini, fiat500-Cinquecento). Take this to its natural extreme and make it 100% authentic.

Ford says a lotta things to a lotta people and half the time I see their name, they're breaking their word or trying to spin something. They are also constantly saying "We can't do that."

I would take an absurd bath: lay off something like 50% of the entire company (management in particular), shut down half the factories (keep the space and tools), stop saying "No" to challenges and start keeping promises.

Build a workforce that genuinely believes. Kill Mercury; leave Volvo mostly alone. Stop going for short cons, like the mortgage crisis. Set design and manufacturing benchmarks on the edge of possibility and beat those benchmarks.

They also need to tell us about that process.

The hits to the wallet and in the media would be considerable, but it'd let them get back to what they're supposed to do: build a better car than their competitors. Toyota's been beating them in their own house for years now; efficient market theory my ass.

With the assumption that individual ownership and use of cars will soon be in terminal decline as a result of:

+ fuel prices now inevitably and inexorably rising much faster than household incomes
+ a structural inability of most cities to deal efficiently with constantly increasing traffic volumes resulting in more and more time spent in traffic snarls
+ climate change necessitating reduced use of fossil fuels, and;
+ a lack of viable car/fuel alternatives on the time horizon being discussed here

It would seem that 'Detroit' is well placed to solve the problem of how people will continue to travel - for work each day; for holidays or just to socialise - when they can no longer afford to run their car. Or how businesses will continue to ship their goods without transport costs making their prices our of reach.

Public transport - or business models and products(vehicles and infrastructure) that allow people and businesses to more evenly share the cost of transportation among themselves - seems the natural option. Perhaps the challenge that could lead to Detroit's resurgence is to provide sustainable public transport alternatives that make people want to give up their cars.

Detroit, used to be one of the most glamour industrial town in America, now stars to fall down with recession, which hurting the automotive industry so brutally. Why? Don’t blame oil price or credit crunch. It’s about globalization. You might want take following point as your reference:

1) Outsourcing: both raw material and advanced technique, either in third world country, or countries that is developing so fast in term of labor quality and technical expertise. For example, there is one little city in China called Dalian. It's the birth place for VW's most advanced engine, 1.8TFSI series. Can Detroit compete with this little town? No! The average salary there is 300 US$/month except few German specialists and foreign educated Chinese mangers. Many other major auto manufacturers have similar set up in China, India, and any country that possess such super competitive advantages.

2)Management: I do have to agree that this is one of the major advantage for a highly industrialized town like Detroit, however, with ever increasing number of highly experienced, foreign educated local managers, countries like India and China are no longer afraid of Detroit.

3) Quality of Product: Please, stop laughing at those automotive products with made-in-China label on it, because tomorrow, they might just pass your highest quality standards, and start to decorate their own dealership right beside your door (Brand name like Cherry, Zhonghua, and Tata)! I would not buy them now, but in 10 years, who knows!

Solution: innovation! I mean real innovation.

I assume for purposes on discussion that the focus is not really Detroit, but the auto industry.

With that in mind, I have to ask is it an industry problem or a company problem. Last time I looked, Toyota seemed to be doing just fine, while Ford, GM and Chrysler are in chronic terminal conditions.

So if we focus on Ford, GM and Chrysler what do they have in common that keeps them in this painful state, aside from their origins in Detroit.

1) A DNA that heavily discounts the economics of vehicle ownership from a consumer's perspective. Cars and trucks are the single largest/fastest depreciation asset (or should I say liability) for any car owner. After home maintenance, car operations/maintenance is probably one of the biggest costs to consumers.

Toyota and Honda get this. You just have to look at resale values of used cars compared to new car prices. Toyota and Honda have vastly superior total cost of ownership economics.

2) Over dependence on the US market and the price of gas in the US vs Europe or Japan. Gasoline prices in the US have been substantially lower than other major markets. The result the former big three have had little market incentive to innovate in ways that matter as it relates to efficiency. Toyota et al have many more market driven constraints and as a result have innovated in ways that really matter when oil is $125 per barrel.

3) US health care policy is also a factor which cannot be avoided. The nature and history of our employer paid health care system concentrates costs into the industry as compared to government paid health care which disperses the costs to the overall community. Structural advantage to companies with less exposure to retiree health care costs, resulting in a major advantage to Toyota over the medium term.

The solutions to these problems are not simple. While thoughts of AWS like strategies or completely open modular strategies seem really interesting, they are just not practical given the regulatory constraints. Cars, like operating systems, are complex non-linear systems. That means lots of stuff can go wrong and unlike operating systems when cars crash people get hurt. This means that there is significant scale in the system engineering that is not going away.

Open modular engineering back into the supply chain has been a project the industry has worked on for two decades and will continue to be a major part the strategy.

There is hope for them however, if they are willing change their 'dna' so that they learn and act on what they learn. Nissan was the Ford of Japan with the same type of dna problems. Leadership, innovation, teamwork and accountability all factored into the change.

These companies need to innovate in ways that fundamentally change the economics of car ownership. Figure out ways to make cars that enhance owner economics not bankrupt them the day they drive the car off the lot. Or on a more radical note think like Google - figure out a way to make money by giving cars away for free.

Michael SUi, Toyota's been kicking Detroit's ass for a few years now with cars made in America with American workers.

Moving the same old factories and same old management practices elsewhere is not going to solve Ford or Chevy's problems.

Just make good cars that people want to buy. GM is getting it right with the Malibu, CTS, G8 etc and Chrysler had it with the 300C.

Ford is in the dumps now and Chrysler's Sebring, a bread and butter product, is a flop. Why? Because they're not good enough.

People will pay more for a superior product (see: Japan, Europe), but now they can pay less for one too (see: Hyundai). For too long Detroit has rested on the fact that people will "buy Ammurrican", and they were content to build a car thats only 70% of what it should be. Now that GM has finally stopped cutting corners, its fortunes have reversed, and the other 2 companies can learn from that, or perish.

I think that instead of trying to run their own car-use-service, they should build in the technology to get people form their own co-op clusters. That can spread better out in the lower-density Suburbs.

And their huge financing arms could probably be a big lever here.

They can start by abandoning their persistence to convergence and DIVERGE. For example: does the world really need a Ford Fusion AND a Mercury Milan or a Saturn Sky AND and Pontiac Solstice?

There's only one way to save this industry, or to save any financial firm for that matter:

increase revenue, decrease costs

1. How to increase revenue? They need to offer different products. Their competitors are beating them at their own game: better products, and the products are cheaper. There's only way for the industry to make their products cheaper: they have to cut costs and increase efficiencies.

2. The answer is in new products that meet the new demands of the market: Focus on a new, lower priced car. All cars in the market are priced between 10-30,000 dollars. Create the energy saving smart car: $4,995.

3. They need a vision: once they have trimmed their costs by focusing production solely only on where they make the most money, they need to create a vision that matches the current and future demands of the market.

What are the future demands of the market? Currently, they are the small blimps they see in the market today.

If their industry is dying, it's only because they fail to change their production model to match the demands of the market. And if they're not focused on efficiency and reducing costs, it doesn't matter if they make a mint, they won't survive.