Bill Ford and Bob Lutz are two of my favorite car guys. Ford gets the environment and Lutz gets design. But I’m wondering if either one really gets innovation. Ford just reported a huge $284 million loss for the third quarter and will now embark on yet another round of plant closings and firings. Ditto for GM. At the same time Toyota is building capacity in the US like crazy. It’s a tragedy of immense proportions.
It’s all about SUVs and hybrids of course (yes, it is also about legacy health care costs to pensioners as well). Both Ford and GM made so much money on gas-guzzling SUVs—because consumers loved them when gas was cheap—that it lulled them into falling behind in innovating new gas-saving engines. Toyota took some old battery and engine technology, souped it up and started producing real cars with hybrids. Ford and GM didn’t because, as Bob Lutz put it, he didn’t see a “business model” in the hybrids.
Sure, but business models for innovative products and technologies don’t always present themselves at first. Selling books on the internet was the breakthrough application for Amazon. Who knew? Selling ads on search engines? Google just announced that its third quarter profits zoomed sevenfold. Old fashioned mainstream media on Yahoo and other portals? That’s what’s happening.
The Detroit car companies are failing at product innovation in a big way. Yes, there are some great cars coming out of Detroit (the Pontiac Solstice is terrific). And there is innovation in services—GM’s OnStar makes millions for the car company. But the mindset is clearly not one of taking chances on new technology or radically new products. Business models are never clear at the start of something new. They evolve in the process of innovating. But you first must take reasoned and resonable chances—and have some forward-looking ideas. Oil prices have bounced up and down over the past four decades. It was reasonable to assume, as Toyota and Honda did, that gas prices would one day bounce up sharply. And they prepared. Toyota is on its third generation hybrid. Ford is on its first. The Prius is the hottest car off the lot these days, according to J.D. Power.
One tip for Detroit. If you want to try innovating hybrids now, trying plugging in the engines. You might be able to extend the range and increase the mileage by plugging in the electric motor. There’s a whole little industry sprouting up in California trying to reconfigure the Prius. I hear there’s even a built-in plug somewhere on the dash that Toyota doesn’t mention. Is that true?
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