16 Sep 2006 1328H

While reading up on Jared Spool

I ran into this paragraph from him on another blog talking about American cars. My friends on another blog have noticed my newfound interest in cars, mostly because I want to buy one and because I think it speaks volumes about the state of American design and manufacturing. Anyway, it reads,

Most businesses don’t have this luxury. Instead, they have to make costly investments into activities that only pay off in the long-term, such as quality. In the 1950’s through 1970’s, American car manufacturers actively decided not to invest in quality. It was too expensive, for several reasons:

1. Quality people have expensive salaries that are just overhead.
2. When quality people found a problem with a car, it was usually after the car was assembled. That car couldn’t be sold, therefore making production yields go down and lowering profits.
3. Dealers made tons of money from servicing cars. If cars were better quality, their service revenues would take a huge hit.
4. Because service bays were often attached to new car showrooms, dealers would regularly sell new cars to people who wanted to be rid of the service headaches from their existing car. Quality cars would mean less sales.

So, in those years, the American car manufacturers focused on present-customer-value, not lifetime-customer-value. They were just like the ballpark hotdog vendor, believing they had a captured market.

Of course, everything changed when Japan’s car manufacturers made a huge investment (with government assistance) in vehicle quality.

It sure did. Just look at yesterday’s headline about Ford hoping to shed 30,000 jobs and close 16 plants by 2008. With this headline, Toyota is almost guaranteed to become the world’s second largest automaker.

There are those who will say, well, duh, so what? I’m going to buy Japanese or American and that’s the end of that. It’s not. There’s the issue of choosing to invest in quality to design better cars, and people voting with their feet to do so, and that also, countless people’s lives are really affected by these types of decisions. When I think about all this, I think about poor Vincent Chin, who was murdered by two disgruntled auto workers, who have never been jailed for this crime, and in fact, one of whom fled to another state and placed his assets in his wife’s name in order to avoid paying civil penalties. He was killed, indirectly, by executive management decisions to not invest in quality. Lee Iacocca really only had himself to blame, not the Japanese.

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