business

On A Collision Course With The Future

COLLISION: GM, TOYOTA, VOLKSWAGEN AND THE RACE TO OWN THE 21st CENTURY

By Maryann Keller

Doubleday x 287pp x $25

Contrary to its hyped-up title, Maryann Keller's Collision: GM, Toyota, Volkswagen and the Race to Own the 21st Century isn't really about the rivalry among three car companies. Rather, it is an anecdote-packed analysis of the crises simultaneously confronting the largest auto maker in each of three economies--the U.S., Japan, and Germany. The book examines the faulty judgments that got these companies into such messes and sizes up the men who, for better or worse, are now fated to steer them out. Each corporation "is standing at a critical moment--a crossroads between the past and future where daring actions will be required," Keller writes. The collision, then, is not so much with one another as with the future.

Keller, automotive analyst for the New York brokerage firm Furman Selz Inc., breaks with conventional, nationalistic thinking to define a new Global Big Three: GM, Toyota, and Volkswagen. Each dominates its home market yet suffers problems born of size and complexity. Each has served as an innovator for the industry: GM created cars for every income, taste, and need; VW's Beetle rattled American complacency and proved small cars can sell; and Toyota's lean production system created a new global standard. Yet each now must remake itself to survive and prosper in an unfamiliar world of saturated markets and borderless competition, where sheer growth can no longer mask

inefficiencies.

The bulk of Collision briskly details how corporate culture and nationality have shaped each company's woes. Toyota felt so invincible with its flexible production system, which allowed hundreds of options per car, that it didn't notice until the market tanked just how costly that system had grown. GM executives, isolated as they were on the corporate headquarters' 14th floor, blamed the Japanese and the soft economy for hemorrhaging cash flows until the board of directors mutinied in 1992. Volkswagen, strapped by soaring German labor costs and trapped in the mentality of volume production throughout the '80s, tilted so sharply toward financial chaos that it became the scene of another reputation-shattering boardroom brawl, resulting in the ouster of CEO Carl H. Hahn in early 1993.

While you might be tempted to skip ahead, it's worth wading through the lengthy description of the 1991 Tokyo Motor Show that opens the book, as well as the accounts of other auto shows later on. At first, they seem to be observations that could have been recorded by any of the thousands present, but they quickly shift into the insider's analysis that Keller weaves through her book with clear prose and biting, sometimes brutal, honesty.

She reports the rumors that then-Audi President Ferdinand Pi ch was absent from the Tokyo show because VW's Hahn wanted the spotlight to himself and the Audi division was outperforming the rest of VW. Describing the Detroit Auto Show of January, 1993, she shows us ex-GM Chairman Robert C. Stempel, ashen-faced, posing at a display booth as if he still ran the company, apparently unable to accept the loss of his power.

In fact, the book's great strength is Keller's depiction of the players. And she calls it like she sees it. While she has only praise for GM President Jack Smith, the first industry source credited in the book's acknowledgements, she slams ex-Chairman Roger Smith for botching his restructuring of the company. Stempel she depicts as a decent man but a wimpy leader in a constant state of denial and fingerpointing. Pi ch, though perhaps the best choice to lead VW out of its financial crisis, comes across as a conniving power-grabber with no social graces. And Keller barely sugarcoats the consensus in Japan about Toyota President Tatsuro Toyoda: that he simply inherited the post and lacks both the charisma and the brainpower of his predecessors.

Keller clearly has command of the intricate goings on at GM, and the sections dealing with the American giant are imbued with the same fly-on-the-wall perspective that marked her first book, Rude Awakening: The Rise, Fall and Recovery of General Motors. GM's boardroom coup and the agonized flip-flop of purchasing whiz Jos Ignacio L pez de Arriortua between GM and VW make for a gripping tale. While Keller has boned up on the histories of Toyota and VW and conveys them authoritatively, she is less penetrating in detailing the views of the key participants. Her misspelling of several Japanese words reinforces the impression that she's a relative neophyte in this area.

Which auto maker will win "the race to own the 21st century"? Keller outlines four criteria to judge how well her Global Big Three are preparing: awareness of problems, strong company vision, adaptability, and understanding of the product and consumer. Her conclusion: GM is best poised to prosper because "it experienced a near-fatal crisis that shocked every fiber of its corporate being, and it is using that crisis to transform itself." All GM has to do now, she posits, is use its resources to create cars and trucks that people want to buy. No small matter.

It's hard to tell how much Keller's conclusion--that GM will triumph--depends on her intimate knowledge of that company. While she does make a convincing argument that VW lacks flexibility, she's relatively superficial in her section on understanding the product and consumer, an area where the Japanese have long excelled. Her discussion of Toyota, also embroiled in a shocking crisis as it girds for an operating loss this year, doesn't mention the company's radical realignment of product teams to eliminate duplication. Nor does it point out what has happened at its newest factory, in Kyushu: There, Toyota recognized that it was wasting money on unnecessary automation and scaled back to be more cost-effective.

Has Keller correctly picked the winner? It will be another decade or so before we know. What counts is that she is asking the right questions and has analyzed what the world's top auto makers must do to compete in the coming century. Collision is an eye-opener for anyone who cares about the fate of car companies.

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