Location is less important when said location is *secondary or tertiary* to the location, resources and characteristics that inform and infuse a company’s actionable worldview. Honda or any other company with strong leadership can transfer that to reasonably equipped locations and find adequate talent to train, indoctrinate and prosper.

The situation is quite different for location as influencer of the primary executing team. When the auto industry was consolidating in southeast Michigan, it could easily draw upon the best new business talent coming up in America because it was the exciting place to be and much of that talent was already conditioned to life in the upper midwest and northeast. By mid-century, aeronautics and electronics became more interesting to new talent, and those industries were dispersed, but the pull of California intensified. After 1960, California and Texas began to drain managerial talent from the industrial heartland. Aerospace and the moonshot programs accelerated this. By 1970, the best new talent coming out of B-schools was not looking to live in Detroit, nor seeing auto manufacturing as their ticket. By 1980, the defense and computer economies of Massachusetts, California, Texas and Seattle further diverted the attention of the best new business talent away from the old school calcified cultures of Detroit business, and away from the weather, the parochialism, the lack of currency. After 1982, the financial boom drew many of the better business minds to New York, San Francisco or overseas assignments in London, Hong Kong and Singapore.

Honda plunked an established mindset down in Marysville, OH and started fresh. I don’t think anyone believes they succeeded by attracting the very best and brightest of American executive talent. They got good people and transplanted a system for relevant engineering, production quality and limited their catalog to what they did well. The real leadership was / is in Japan.

Today, some pistonhead B-school graduates are thankfully interested in the auto business. But the best executive talent emerging from the younger generations aren’t hankering to live in southeast Michigan nor Ohio for that matter, and bending metal for 4-wheeled transportation isn’t a top-of-mind career option for them either. Perhaps this can change as the auto business becomes once again more innovation and technology driven to remove the car from the environmental equation.

Honda America only proves that you can transplant a system that’s been well-thought-out elsewhere. Honda Japan personnel were assigned to transfer the culture. But originating executive talent isn’t hankering for a career in Detroit. The Steve Jobs and Eric Schmidt types of my generation, and the Larry Pages and Marc Zuckerbergs of the emerging generation are in California and perhaps Boston. Detroit never entered their minds. Imagine what GM or Ford could have been had they been able to attract and retain Larry Ellison, Bill Gates and Steve Jobs, for example, circa 1975. Hell, Scott McNealy and Steve Ballmer both had Dads in the auto business and it didn’t even occur to them to stay. If the central idea of the car is informed primarily by the experience of the upper midwest, a company holding that mindset will fail. If these companies are going to try to maintain their relevance from that spot, they will have to build the executive collaboration infrastructure to attract talent where it lives, give such leaders a free hand, and remove the headquarters advantage to decision-making. No company is going to attract to Detroit the best executive talent America has to offer. The area has many engaging characteristics, but not enough business diversity makes it professionally parochial. And no, flying Mark Fields in from Florida isn’t the answer.

Phil

Well, relative to the moon, yes. Anywhere Pennsylvania would have put them closer to both steel and coal, and shipping would have been better, since the bulk of the market in the early years was in the NE. But aside from Philly – possibly, there just weren’t enough machine shops to support a fledgling auto industry. Detroit didn’t become the motor city due to location – the location isn’t very good. NYC had a better mix of advantages, as did Chicago. Buffalo was probably at least as good.

Honda had already established its paradigm for what constituted a good car well before they ever arrived in Ohio. Their operating practices and products simply enabled them to attract the better executive talent interested in and willing to work in the auto industry. Plus, Soichiro Honda’s stamp so thoroughly imbued the company with his business, engineering and product ethic that any incoming management was / is powerfully oriented by the company’s prevailing conceptual framework.

The location may not attract the very best managerial and executive talent in the US, but Honda’s culture is strong enough to channel success from the available executive talent and is magnetic to the best available in automaking. Still, Honda is headquartered in Japan.

Thanks for proving my point – location has little to do with being able to attract top talent, or designing and building good cars.

Laws that allow one group of people to hold a company at ransom for as long as they are able to will inevitably end this way. All the actors are so many lemmings walking along a destined path after that.

PS. I am not subscribing to QOTD anymore, so I won’t be responding on this thread.

In relative terms, southeast Michigan was close to both coal and steel producing regions, and centrally-located for shipping product. Sure, in the infant days of automaking, entrepreneurs were dispersed and activity was atomized throughout the northeast where population density was greatest. But inevitably, the industry consolidated around a location with the best mix of advantages.

The auto industry sprang up in Detroit, NYC, Chicago, Toledo, Buffalo, Kenosha, etc. because these were already industrial cities where metal working activities were taking place. Industrial activity begets industrial activity. Nice as it might be to have an auto industry located at the foot of the Rockies, there just wasn’t enough industry there to supply the sundry needs of the auto producers.

Yes, and for similar reasons that automaking consolidated there.

The second reason your thesis doesn’t fly is because Ohio is at least as flat and boring and dull as Michigan, if not more so, yet Honda is doing wonderfully in this “dull” location. Somehow they are able to attract executives to live there – not just execs, but execs who can actually make good decisions. Execs who are presiding over increased market share and high profits. If there were something wrong with the location, we’d expect to see Honda failing.

Honda had already established its paradigm for what constituted a good car well before they ever arrived in Ohio. Their operating practices and products simply enabled them to attract the better executive talent interested in and willing to work in the auto industry. Plus, Soichiro Honda’s stamp so thoroughly imbued the company with his business, engineering and product ethic that any incoming management was / is powerfully oriented by the company’s prevailing conceptual framework.

The location may not attract the very best managerial and executive talent in the US, but Honda’s culture is strong enough to channel success from the available executive talent and is magnetic to the best available in automaking. Still, Honda is headquartered in Japan.

Phil

Nobody in those companies sees the irony of it all.

Respectfully, this idea doesn’t get off the ground.

First, Detroit isn’t a particularly convenient place to locate the auto industry. It’s not near the natural resources, and it was far from the markets in the early period of the industry. In fact, in the first several years of the 1900s, NYC produced more cars than Detroit.

The auto industry sprang up in Detroit, NYC, Chicago, Toledo, Buffalo, Kenosha, etc. because these were already industrial cities where metal working activities were taking place. Industrial activity begets industrial activity. Nice as it might be to have an auto industry located at the foot of the Rockies, there just wasn’t enough industry there to supply the sundry needs of the auto producers.

The second reason your thesis doesn’t fly is because Ohio is at least as flat and boring and dull as Michigan, if not more so, yet Honda is doing wonderfully in this “dull” location. Somehow they are able to attract executives to live there – not just execs, but execs who can actually make good decissions. Execs who are presiding over increased market share and high profits. If there were something wrong with the location, we’d expect to see Honda failing.

As the old muscle cars died out in the early 1970s, the pony cars hung in there, selling on style and the look of sportiness. When interest in performance revived in the early 1980s, the Mustang and Camaro/Firebird were the only domestic cars that had a “sporty” image, were affordable and not available as a family sedan or wagon, so it was natural that they would receive the hot engines and tighter suspensions.

Over the years, the Mustang has developed a schizophrenic personality. The Mustang GT has come to fill the slot once held by the original GTO and its competitors, while the base Mustang is the direct descendant of the original Mustang.

The Mustang is well-suited to its purpose and target audience…yes, it would be nice if Ford had installed an independent rear suspension on the car, but the bottom line is that the car is very good at what it does. Ford’s problem is NOT the Mustang.

Here’s the bottom line…

It’s the marketing destroying GM

It’s Red Ink Rick’s fault for allowing it to happen and continue (ie 72 Hour)

It’s the Board of Bystanders to blame for their ongoing support of Red Ink Rick.

It’s the shareholders who are ultimately responsible for the composition of GM’s Board and therefore derserving of the massive loss in valuation of their investment.

The capitalist system works and water seeks it’s own level. In this case the water has flowed out of the stock as it has become quite clear GM’s management is clueless and the Board and shareholders are passive and non performing.

Return to Greatness still stands as the answer. It would immediately save over $1 Billion in marketing costs and regain 5 points of share within 6 months. Yet GM couldn’t care less. Wonder why?

The US government, for restricting imports in the 70s/80s and therefore making sure the Big 3 was given the market instead of having to compete for it and therefore taking away all incentive to make the best car they could but instead paving the way to produce ‘just good enough’ cars to ‘just not make the consumer so angry to not buy a car anymore’.

The consumers, for keeping buying the rubbish cars that they were offered and not collectively demanding better products (eventhough they had little choice).

But mainly–>The big three themselves, for taking advantage of their ‘monopoly’ in the wrong way, not by giving the people something back in return for what they gave them (via the government) but instead angering them by giving them really bad products, and not forseeing (or not caring) that in the longer term, someday that would inevitably come back to hurt them.

Obviously, Detroit makes cars, people still buy cars in great numbers, greater numbers than ever, so if Detroit can’t sell cars in that environment, in the end it’s their own fault.

Looks like the tide has gone out for good this time and very rapidly, too rapidly for Detroit to even act like they are temporarily interested.

But even a mountain-proximate US industry would have had to accommodate the peculiar preferences of a market spanning a continental country. Europeans come to the US and still barely grasp how much our continental dimension affects our life and worldview, today’s EU pseudo-country notwithstanding. And Japanese barely relate to it, but they obviously chose to adapt to us more than we adapted to them, given the expanding waistline, porky mass and marshmallow dynamics of modern Toyota vehicles.

The very same companies that brought you Escort, Chevette, Omni and their successors also made some great cars coincident to their shameful models. While many folks here testify to serial disappointment with failed D3 products, in the same span of time I owned and drove so far a quarter century’s worth of American vehicles with anvil-like dependability and low ownership costs. But I didn’t own any of the models people commonly complain about. Why the delta?

Executives like Don Petersen showed how much difference leadership makes, and we even have to give credit to Bob Lutz for the same. Soichiro Honda was another example of a defining leader who massively influenced his company’s output, making Honda as close to being American as a foreign manufacturer can be. So the lapses in quality, and failures to act on market changes that were clearly warned traces to two liabilities intrinsic to the Detroit 3: First, by circa 1960, the best new executive talent began to be progressively less available to an industry headquartered in Michigan. Some of our automotive CEOs (you know who) would be laughably unemployable in more innovative competitive sectors. Second, the quarterly imperatives of the US public markets favoring real-time financial performance encouraged boards to “professionalize” the executive layer of the D3 by placing process and financial experts in control, who were frequently unschooled in and unenthusiastic about, cars. And then there’s been Ford and the family’s disproportionate control of the company’s governance, resulting in failure to isolate and insulate the CEO from the politics of a legendarily dysfunctional family.

So, not who, but what. What’s to blame for Detroit is the betting parlor called the New York Stock Exchange, the continent, and the holdover 19th century convenience of locating a steel-intensive heavy-goods manufacturing business at a confluence of Great Lake, rail, a major city, and proximate natural resources where it happens to be flat for miles and miles and miles….

Phil

GM went from a market share around 50% in 1980 to around 25% in 2000 despite the ultra-cheap gas of the 80s and 90s. Even as small cars became a less and less important part of the market during those years, nearly half of GM’s customers deserted it.

Now, maybe unrealistic executive decisions were part of the problem but Detroit has a long history of putting poorly engineered, not properly tested, not properly debugged cars into production.

I think several decades of not properly debugged car launches has hurt them far more than design and marketing issues.

Fat people need bigger cars. They are more comfortable, easier to get into and out of, and frustrated people, peeking out under rolls of lard, tried to soothe their frustrations stemming from their lack of physical prowess and mobility by burning gas in a big engined pig car.

Detroit gave the fat asses what they wanted and needed. If people would have had to fit into a miata, they would have realized they needed to diet.

Big fat people in big fat cars using lots of gas. That is what killed Detroit, and America as well.

They and the Feds also deserve some blame for making hostile takeovers of companies difficult so that boards and senior management of very large corporations can be hard to remove. Imagine if all directors faced annual elections by shareholders? And their and senior exec compensation required annual stockholder approval? They’d jump a lot quicker when problems occurred. The sheer size of the US Big 2.8 has rendered them nearly immobile when it comes to making real changes.

It’s a pity, the US Steel industry makes more steel than it ever did. It just does it with a vastly reduced workforce through modern mini-mills. I don’t see something similar happening to the domestic auto companies.

When the profits were rolling in they (mostly Ford) used the excess cash to purchase other failing companies (i.e. Jaguar), blinded by their desires and the hubris that they could do no wrong. Like most Americans today they did not have a proper “emergency fund”. They blew all their extra income.

One last item: Why does a focus group have to approve every little detail of new vehicles, and be taken as gospel? We end up with front end “A”, side profile “C”, and rear end “B”. The focus groups are fickle, the engineers and designer are skilled in their trades, all that does is undermine their efforts.

I whole-heartedly agree. It’s not the whole answer, but it is a major part of it. I found myself in the corporate world, in and near the upper echelons, and it…reminded me of a high school locker room. Which is a place I avoided (in high school). And which is why I dropped out of the corporate game.

My conclusion: the problem is that even profits aren’t the top priority. They’re second. Cars are, maybe, third.

The top priority: the executive career game. These companies are essentially extremely expensive variations of Survivor. Far more effort goes into developing senior executives (i.e. players) then into developing experts in design, engineering, and marketing–or into developing true teams of such experts.

The executive summary of the report I gave to GM back in 2001:

http://www.truedelta.com/execsum.php

Some people acted on pieces of this report. But I didn’t expect the company to switch from a culture of careers to a culture of experts. After all, you’d be creating a place where the current execs wouldn’t fit. And they haven’t.

I am not a Porsche elitist. The 25-year-old 911 track car that I own is an amusing piece of crap,and our Boxster is an overpriced but also amusing daily ride. I hold no brief for the Germans, other than the fact that my uncle was the youngest member of Hitler’s German staff. But that’s a long story.