Wall Street Mentality Poisons Detroit

Certainly the mess on Wall Street is causing the current crisis for Detroit.  As banks failed, credit dried up, consumer confidence plummeted, and people stopped buying cars.  But the Wall Street influence on Detroit has been bringing it down for years.  Ford and Chrysler in particular have tried to become Wall Street Darlings.  In the years of the dot com boom, these companies tried to become light and fast moving.  The auto CEO's tried to transform their business into the model so loved by investors; five guys sitting around a rented, converted-loft office space on Aeron chairs, making a website that sold goods designed by someone else, manufactured by a third party, and packed and shipped by a fourth.  Brick and mortar was dead.  And what were the car guys to do?   They were, and are, the definition of brick and mortar.  The idea of transforming nearly 100 year old vertically integrated companies into fly-by-night, change direction on a dime businesses was absurd.  But they tried. 

Ford made a finance man, Jac Nasser its CEO in 1999. He sold off or spun off every piece of the company he could.  Plastics molding, transmission manufacturing, all of the small components that make up a car.  He probably would have sold the vehicle assembly plants if he could have.  The idea was Ford as a brand, not a manufacturer.  He expanded that notion of the brand, creating a brand portfolio by adding Volvo, Land Rover, Aston Martin and the likes to the Ford line-up.  Imagine the website, with all of those brands tabbed across the top.  Just make your pick and order one up online.   It wouldn't have been so bad had Ford not lost their focus on the product.  I used to shake my head listening to Nasser's motivational speeches to the company.  He would never use the words like car, vehicle, automobile;  the actual product was never mentioned.  It was all share holder value, profit, loss, earnings and business initiatives.

This attempt at transformation didn't work for Ford.  Trying to run a company to please the quarterly report analysts on Wall Street just doesn't work for a company with three year product development cycles and product lives of 10 or more years. Not to mention infrastructure, capital investments, union contracts, and hundreds of thousands of employees.  Jac was ousted in 2001, Bill Ford Jr. put in charge, indicating that Ford, the company, wanted to get back to the values of Ford, the family.  The damage had been done, and it's taking a real product guy and engineer, current CEO Alan Mulally,  to get Ford back on track.

Chrysler took a different path, falling victim to Wall Street's merger mania.  They trimmed the company down, propped it up , made it enticing as possible and in 1998 sold it off to Daimler-Benz.  The "merger of equals" as is was called was no merger, the Germans were in control, and Chrysler, at least as an American car company, one of the Big Three, ceased to exist.  Still suffering from its role as a merger tool, Chrysler's current owner, private equity investment firm Cerberus, had hoped to turn them for a profit, and now just wants to get out of the car business.

In trying to please Wall Street, Detroit took its focus off the product.  It was more concerned with quarterly financial improvements, share holder value, stock price and P/E ratios than the cars in its showrooms.   It forgot that its reason for being is designing, building and selling cars.  The passion was for results on Wall Street, not for rubber and steel.