Yoshikami: Detroit in Crisis
As word spreads about Rick Wagoner's resignation from GM , and Obama's autos task force rejecting the turnaround plans of both GM and Chrysler and warning of bankruptcy, the auto industry enters its next phase of retooling. Clearly the government is looking to abandon old practices and seeking new ways of doing business.
The Big Three -- GM, Ford and Chrysler -- are struggling under an old business model that simply does not work. Though gas prices in the U.S. have dropped significantly from 2008 highs, the business strategy based on high-margin, fuel thirsty vehicles and redundant model offerings is not the path the Obama administration is looking to embrace as they pump billions of dollars into the struggling automakers.
Instead they see a great opportunity to retool and seize the opportunity to remake one of America's oldest and most entrenched industries.
While it is true that automakers have faced incredible headwinds given the spike in oil prices and the collapse in the credit markets, it is also true that the depth of the problem reflects something greater -- a need to refocus on producing core goods and services that meet buyers expectations. Products for the future that meet global standards and demands.
Detroit In Crisis
- Autos Task Force Rejects GM, Chrysler Plans
- GM's CEO Wagoner Is Forced Out
- The Road to Saving GM & Chrysler
- BEHIND THE WHEEL with Phil LeBeau
Moving away from past strategies and embracing the new world is not a challenge that only automakers face. It's a mantra we hear from the Obama administration as they call for a fundamental shift in the American economy.
The leadership at automakers did not intend for the outcome we are experiencing today. Instead, they worked to make Detroit successful in the global marketplace. It's clear that the path chosen, coupled with a massive global economic contraction, has turned out to be the wrong one.
Wagoner's resignation perhaps is yet another line in the sand crossed towards a new Detroit. Time will tell if this is the case. The next 90 days will be pivotal as the future of Detroit automakers is recast. In business it's a very simple equation. Produce what consumers want to buy, factor in the prevailing environment, add visionary leadership and work harder than anyone else.
This, coupled with a plan to succeed that embraces change, is the recipe for business success. Let's hope Detroit gets back on that path to win.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at email@example.com.