Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 31, 1995                   TAG: 9503310031
SECTION: EDITORIAL                    PAGE: A-11   EDITION: METRO 
SOURCE: CARL H. TONG
DATELINE:                                 LENGTH: Long

AUTOMAKERS DID WELL, BUT MARKET SHARE WENT DOWN

There was both good and bad news from Detroit in 1994. The good news: The United States once again became the world's No. 1 producer of automotive vehicles - a title held by Japan from 1980 through 1993. Each of the Big Three reported record 1994 profits: Ford, $5.3 billion; General Motors, $4.9 billion; and Chrysler, $3.7 billion.

Major factors include strengthening of the American economy, improved quality and style of Detroit's products, continuous streamlining of Detroit's operations, U.S. popularity of light trucks (including minivans and sport-utility vehicles), and the rising value of the Japanese yen against the U.S. dollar.

The bad news: Measured in unit market-share, Detroit lost ground to both European and Japanese competitors. On a percentage basis, VW/Audi of Germany and Nissan/Infiniti of Japan had the world's highest sales increases from 1993 to 1994.

In general, market-share statistics indicate the competitiveness of different companies in the same industry. When Detroit's market share goes up, it means Detroit is doing better relative to its foreign competitors. When Detroit's market share goes down, it means Detroit is not doing as well as its foreign rivals. Sometimes a company may decide to engineer a market-share decline, by dropping unprofitable or less profitable products, to increase profits.

Will Detroit's success last? It depends. The U.S. auto-business environment is determined primarily by the health of the U.S. economy, the preferences of American auto buyers, the intensity of the competition, regulatory changes and the price of oil. But what Detroit decides and actually does is a crucial factor in determining its own future.

To become more competitive in the future and be prepared for the next downturn in sales, Detroit should objectively and periodically compare itself with its leading foreign competitors, in order to identify its own strengths and weaknesses. Then, Detroit should creatively use its strengths to compete, and take systematic steps to eliminate its weaknesses. The factors most important to the auto industry today include but are not limited to: customer focus, product quality, price, company reputation, customer service, human-resource management, organization development and national policy.

The U.S. auto industry must pay constant attention to the needs, wants, likes, dislikes and the economic conditions of American consumers. The late Sam Walton, founder of Wal-Mart and a great American business hero, succinctly said, "There is only one boss. And he/she can fire everybody in the company, from the chairman on down, simply by spending his/her money somewhere else."

Under the free-market system, customers logically try to make the best buy - to get the best product at the lowest price. Detroit should continuously research the marketplace to understand its customers fully, pay close attention to details, formulate intelligent competitive strategies, develop the right types of cars and trucks, produce quality products, increase production and physical distribution efficiency, create attractive brand images, stress real customer benefits in promotion, build up a high company reputation, provide friendly and reliable customer services, and charge a competitive price.

U.S. automakers need to remain alert all the time, must never underestimate the ability of their foreign competitors, and strive to do all the things right the first time.

Because the business environment is becoming more and more complex and the market competition is intensifying, Detroit needs to adjust to the new reality by developing a new corporate culture. This new corporate culture should cultivate basic respect to all individuals and emphasize honesty, fairness, open-mindedness, team spirit, employee involvement, loyalty, dedication, working hard, frank and full communication, putting quality in everything, creative design, technological innovativeness, lifelong learning, and constant improvement.

U.S. automakers and their suppliers and dealers ought to form close, long-term relationships, share strategic plans with each other, and cooperate in developing new technologies and in training workers.

Detroit as well as U.S. auto-parts makers should bodily go to the U.S. government and demand fast, concrete and appropriate actions whenever a foreign country or foreign automaker is not competing fairly. The U.S. government has the responsibility to make sure that the business environment under which U.S. companies compete with foreign companies is a fair one.

In his 1990 book "Agents of Influence," Pat Choate reported, "Japan has long kept foreign cars out of its market. ... A maze of Japanese protectionist nontariff 'standards' and vehicle inspections greet would-be auto exporters. Insurance rates on a foreign car, for instance, are kept three times higher than those on domestic vehicles."

The U.S.-Japan trade pact that was concluded in September failed to broadly open the Japanese auto market. The two countries disagreed about whether the current Japanese auto-inspection system was used unfairly to keep out foreign imports or justifiably to save the lives of Japanese drivers.

Detroit's major foreign competitors are based in either Japan or Germany. The Japanese automakers have firmly established themselves in the U.S. market. Their products have developed a reputation for high quality and great value. Two German automakers, BMW and Mercedes, are likely to compete aggressively in the U.S. market in the near future. BMW has started producing cars in South Carolina, and Mercedes is in the process of setting up a production facility in Alabama.

Because of the close linkage between Detroit's competitiveness and American economic performance, Americans like to see that GM, Ford and Chrysler are successful. The building and maintaining of Detroit's competitiveness in today's rapidly changing world is the responsibility of all the people working in the U.S. auto industry - particularly of the top-level executives of the Big 3, because they are in the driver's seat.

Detroit's executives should always remember the following insightful words of Dr. W. Edwards Deming: "The biggest problem that most any company in the Western world faces is not its competitors, nor the Japanese. The biggest problems are self-inflicted, created right at home by management that are off course in the competitive world of today ... management have walked off the job of management, striving instead for dividends and good performance of the price of the company's stock. A better way to serve stockholders would be to stay in business with constant improvement of quality of product and of service, thus to decrease costs, capture markets, provide jobs and increase dividends."

Carl H. Tong is a professor of marketing and international business at Radford University.