10/21/2005

Have You Driven a Ford Lately?

Ford's CEO, William Clay Ford Jr., just announced a $284 million loss in the third quarter. He also announced a plan that will become active in January to close many American plants and make significant job cuts. Ford made this announcement shortly after GM announced a huge loss in the third quarter as well. What is wrong with our American auto industry? Ford is the founder of the assembly line, a novel system adopted world-wide to increase production speed and efficiency, yet they are losing money everyday and on the brink of losing it all if drastic changes aren't made! Where did they go wrong? I know that in economics we talk about trade-offs and opportunity costs, and we discard buzz-words like downsizing and out sourcing, but I truly feel as if "Total Quality Management," buzz-word or not, is where the American auto industry missed the boat. Of course, they are actively practicing it now, just 30 years to late! As Japanese auto companies continue to steal away greater portions of the market, Ford and General Motors will continue to feel the heavy hand of defeat and the disgrace of not acting sooner when the world began to expect QUALITY.
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1 comment:

Dr. Tufte said...

I think Logan's viewpoint is essentially correct.

I would like to add though, that the problems in our auto industry have a lot to do with costs that were contracted in the past (like retiree benefits). I don't want to appear harsh, but I think we should realize that what a lot of those contracts did was increase the benefits to some parties in the past at the expense of the ability of Ford to continue to pay them in the future. I'm not claiming that this is right or wrong, just that the difficulties that unskilled laborers have in industry today are not independent of the lack of difficulties that other unskilled laborers had in the past.

3:37 PM

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