Up until recently the prevailing wisdom has been that GM’s turnaround started earlier and was progressing faster than Ford’s. I’ve questioned that presumption for a couple years, and even wrote about it way back in January.
A couple pertinent points from back then, beginning with an analyst promoting the prevailing wisdom:
[Ford] doesn’t have the momentum that GM has, said Rebecca Lindland, an auto analyst at Global Insight, an economic research and consulting company. "The biggest difference is GM is on track. They have a mission. When I talk to the people there, when you see the products, you get a feeling of confidence and empowerment," she said. "With Ford, all we hear about is conflict, turmoil, uncertainty. Internally this is at all levels."
I had a slightly different take.
Ford is "conflict, turmoil, uncertainty." Is that necessarily a bad thing? I would be more concerned with a company that was "complacent, steady, overconfident" to use just one set of antonyms. In fact, we’ve written before about the Toyota culture, which has a presumption of imperfection. That type of stress can be good, and the fear of a cataclysmic industry or market disruption is often what drives the most successful lean manufacturing efforts.
And now you know why you read Evolving Excellence… we were right. And modest. At least so far. The Wall Street Journal had an article on Friday where the title says it all, Ford’s Narrower Loss Hints at Faster Recovery Than GM. That’s a narrower loss even after removing the $38.6 billion writedown GM took, basically eliminating carry-forward losses that could be netted against future profits. Basically GM’s auditors decided that since there was no probability of profits in the near future, it is not possible to carry forward losses to net against them. That in itself says something.
The article also points to some of the reasons why Ford’s turnaround has outpaced GM’s.
Ford got a later start in restructuring than GM but appears to be realizing improvements faster than expected. A linchpin of Ford’s improved performance is discount discipline. By reigning in production, Ford was able to raise prices on it’s vehicles.
In an interview, Mr. Mullaly said he has shunned the "wait for a better day" attitude of the auto industry’s past, where companies continued to build vehicles and keep plants humming to account for massive health-care costs without regard for actual demand.
It’s amazing how analysts can change on a dime. Perhaps that’s a rare positive side benefit of focusing on the short-term instead of the long-term. As we noted earlier, a few months ago analysts claimed GM was ahead. And now?
Peter Nesvold, auto analyst for Bear Stearns: "Beyond that, though the rate of improvement is accelerating at Ford, while GM is at its product peak and their improvements are slowing."
Ahhh… isn’t hindsight a wonderful thing? But the bottom line is that both companies still have a long ways to go.