Inside Detroit’s OODA loops (again)

A couple of quotes from recent articles about the auto industry. The first is from the US, and the second from the UK, but I think you’ll get the idea.

In 2017, for example, there were 11 models available on the U.S. market for less than $20,000, according to Cox data. By the end of 2022, there were four. Then, by March 2023, only 2.

Among the cars discontinued last year was the Chevy Spark, the cheapest of which started at $13,600. Chevy sold more than 24,400 of those cars in 2021 — more than most luxury models can claim. Now, Chevy’s cheapest models cost more than $20,000.

“New cars, once part of the American Dream, now out of reach for many,” Rachel Siegel and Jeanne Whalen, Washington Post, May 7, 2023

And then,

European makers, prominently Ford, abandoning their entry-level models gifts a huge opportunity to predatory Chinese companies.

“Early Chinese cars were like the early efforts from Japanese and Korean makers: bad. No more,” Gavin Green – Car Magazine (UK), June 2023

About 18 months ago, we bought a Volvo XC60, the only car on the lot. It has the Inscription trim package — top of the line at the time — the B5 mild hybrid engine, and the advanced tech package with SAE Level 2 driver automation (same level as Tesla), and several other options. We were a little embarrassed because we really didn’t want anything so fancy, but now, it turns out to be right about the average price for a new car. And yeah, I know, Volvo is owned by Geely, a Chinese auto company (from 1999 – 2010, it was owned by Ford).

3 thoughts on “Inside Detroit’s OODA loops (again)

  1. I’ve sure I’ve posted this here before ….

    In 1990, US auto industry had “C4 taskforce” to look at completely remaking themselves. Since they were planning on making extensive use of IT, they invite representatives from major IT vendors to participate (and I was one of people selected). They presented detailed account of history and circumstances

    In the 70s, cheap foreign imports was starting to take over the US market, lots of competition and downward price pressure. Congress then puts in import quotas, to drastically reduce competition and price pressure … assuming the huge profits would be used to completely remake themselves. However, they just continued business as usual and pocketed the money. The foreign competition analysis was at the quota set limit, they could sell that many high-end cars (as low price cars). At the time industry standard took 7-8yrs to come out with new product, from inception to rolling off the line; because foreign competition was doing complete makeover of their product, they also cut development from 7-8yrs to 3-4yrs … further reducing price pressure and the US industry was able to nearly double the price of card over a years. From the law of unintended consequences, the drastic increase in auto prices required the industry to move from 36month loans to 60-72month loans. Lenders wouldn’t provide the money w/o a corresponding increase in warranties … and the industry started being killed by repair and warranty costs (because of poor quality). Early 80s, there was (washington post?) article calling for 100% unearned profits tax on the auto industry.

    At the time of the task force meetings, foreign competition was in the process of cutting the product development elapsed time in half again to 18-24months (able to more quickly respond to changes in technology and customer preferences). Offline, I would chide the rep from IBM mainframe/POK rep, how was he going to contribute, since mainframes had a similar elapsed time to roll out new product (auto industry typically had two efforts going on concurrently offset 3-4yrs, so it looked like they were able to do something new, more timely) … aka foreign auto industry significantly more nimble and agile, able to quickly adapt to changes.

    Disclaimer: In Jan1999 I was asked to help try to prevent the coming economic mess (we failed). Note at the time of using TARP funds for the US auto industry … it was clear that numerous stake holders continued to inhibit the makeovers.

    I’ve also periodically used this related to Boyd&OODA … “How Toyota Turns Workers Into Problem Solvers”
    http://hbswk.hbs.edu/item/how-toyota-turns-workers-into-problem-solvers
    We’ve observed that Toyota, its best suppliers, and other companies that have learned well from Toyota can confidently distribute a tremendous amount of responsibility to the people who actually do the work, from the most senior, experienced member of the organization to the most junior. This is accomplished because of the tremendous emphasis on teaching everyone how to be a skillful problem solver.

    We’ve observed that Toyota, its best suppliers, and other companies that have learned well from Toyota can confidently distribute a tremendous amount of responsibility to the people who actually do the work, from the most senior, experienced member of the organization to the most junior. This is accomplished because of the tremendous emphasis on teaching everyone how to be a skillful problem solver.

    • Lynn — thanks — I’ve long wondered if somebody at Toyota had a copy of Patterns of Conflict. Of course, the creation of the TPS greatly predates Boyd’s (Ohno puts the bulk of it at 1945 – 1975). But the fact that they’ve continued to operate inside Detroit’s OODA loops suggests that they might have found some interesting ideas in John’s work.

    • oops, left off 1st paragraph from TPF quote and duplicated the 2nd

      To paraphrase one of our contacts, he said, “It’s not that we don’t want to tell you what TPS is, it’s that we can’t. We don’t have adequate words for it. But, we can show you what TPS is.”

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