Now that the employee pricing deals have become a thing of the past and now that gas prices have shot through the roof, GM, Ford and to a much lesser extent Chrysler find themselves in a familiar spot: sales declining and loosing money. So what is the reason, why can’t GM and Ford seem to get their act together? The reasons for the Detroit’s problems make for a laundry list and hearken back to the 1970s. During the 70s Detroit developed a reputation for producing gas guzzling vehicles that were poorly constructed and unreliable. To an extent this reputation was well deserved. Since the late 1990s, Detroit has corrected this problem, but the perception of the Detroit quality gap persists. How then can Detroit overcome the perceptions of a quality gap with Japan? The same way Korean automakers did. First they corrected the problem and then they provided incentives for customers to come back. These incentives did not entail radical price cuts, which serve only to further the perception inferior quality. They provided incentives that enhanced the perception of quality, such as expanded warranties. Detroit must also deal with the problems posed by organized labor. Labor unions have stifled innovation and modernization in Detroit for years. Because of union resistance, GM and Ford have been unable to reduce cost and increase productivity, like their Japanese counterparts who rely far more heavily on mechanization. GM and Ford must also fully embrace innovation, Detroit is so laden with bureaucracy that innovation is significantly stifled. Rival auto-makers like Honda develop new engines which find their way to market within months. GM innovations take years (if not decades). While Ford has finally managed to produce a couple of hybrid vehicles, we are still waiting for GM hybrids, to say nothing of hydrogen-powered vehicles. Perhaps the threat of bankruptcy will force Detroit to change.
http://www.breitbart.com/news/2005/11/01/051101214945.t2l4fd5a.html