60 years ago the phrase “What’s good for General Motors is good for America” was coined by the head of GM and later carried on by president Eisenhower and the media of the day. General Motors was one of, if not, the largest employers in the US economy. Trickle through analysis shows that the largest amount steel, glass, carpet, paint and of course, gasoline, are manufactured to support the “mobility” of Americans.
The advent of the electronics age has changed that to a large degree. GM, Ford and Chrysler are still mainstays of the US economy. But Apple, HP, IBM and Dell are a whole lot bigger part of the picture. These companies did not exist 60 years ago.
It’s hard to make level comparisons. If you look at total revenue, GM, Ford and Chrysler earned revenues of $318 billion in 2011 and Apple, HP, IBM and Dell earned $355 billion. The electronics giants are a much larger generator of revenue. The comparison between cars and computers is not exact in this case since Apple makes Iphones. So what happens if we take all automotive companies and compare the revenue to all electronics. If you narrowly define electronics as mobile phones, computers (all types) and flat screen displays, I suspect you will come up with sales of electronics being double the sales of cars.
Is anybody worried about bailing out Apple? Don’t be ridiculous, they have more cash reserves than the entire Federal Government. HP, IBM and Dell aren’t asking for any help either. The electronics industry grows faster and improves itself faster than any other sector of the economy. A lesson that automotive manufacturers don’t seem to be able to replicate. And it’s not for lack of available technology. There are plenty of options to the piston engine that are based on gasoline, in addition to the electric and hybrid products that are being explored.
So what is the difference? There are lots of different opinions on this subject. Mine is probably a little more controversial, and harder to prove.
The car companies have been engaged in defending their “way of life”, not in delivering value to the consumer. GM management in the past has refused to make smaller, high mileage cars because “they could not make them cost-effectively”, which led to the importation of the Japanese made Geo Storm. Now GM is building the new Cruze which is rated 42 mpg. Could this car have been built 20 years ago? I think so. They just didn’t want to.
American electronics companies concentrate on excellence in all aspects of design and product development. The customer experience has to be outstanding in order for that company to survive. The price of the product has to be competitive and profitable at the same time.
Are the automotive companies there yet? Not quite. But the industry is changing. And probably for the better. Recent internal shakeups, some mandated by government, are probably long past due. But if American automakers can learn some lessons from the electronics companies, what’s good for America will be a better GM, Ford and Chrysler.