2010-01-28 / Community
Despite fuel costs, Americans love big cars
The automotive industry constantly changes to satisfy government regulations and the changing preferences of consumers, according to two industry specialists.
Two executives with more than 100 years combined experience in the auto industry recently spoke and answered questions at a recent California Lutheran University Corporate Leaders Breakfast.
The series brings business and civic leaders together to share ideas and listen to corporate leaders. Last week’s meeting featured James D. Power III, founder and former chief executive officer of J.D. Power and Associates, and Donald E. Petersen, former chair of the board and chief executive officer of Ford Motor Co.
Power, who’s spent more than 40 years as a pioneer in monitoring customer satisfaction and who founded a worldwide marketing information firm more than 35 years ago, offered his insight first.
“We can talk about the future, but we’ve learned a lot by watching the past,” Power said.
Petersen, who rarely speaks publicly, expressed concerns for the automotive industry.
It’s a dog-eat-dog world in vehicle manufacturing, he said.
What helped Petersen when he was working as an auto executive was comparative data from consumers, he said.
Some of the most important information was how buyers felt years after they bought a new vehicle—data that was provided by Power, Petersen said.
“If you can’t measure it, you can’t define it. You’re going to have problems,” Power said.
Before manufacturers had the data they needed, auto and truck companies just made vehicles, sold them and then built more. There was no government intervention.
Henry Ford didn’t believe in college graduates, so the firm was a “trade-school company,” Petersen said, adding that he was one of the first college graduates hired by Ford.
“We didn’t have a clue” about crash tests, he said. Then government regulations came along and they were “chaos,” according to Petersen.
And it will continue.
“Things are going to change in the future, and you have to be flexible,” Power said.
It takes a different type of person to succeed today because things were a lot slower and more settled in the past, Power said. “Those who were the most successful in the industrial age are having the hardest time changing,” he said.
The year 1973 brought the first energy crisis. Domestic manufacturers tried to make smaller cars, but the industry’s method of change was using a five-year-plan, Power said. Toyota looked ahead and already produced the right kind of vehicles.
The leader in the Japanese market made design changes from the ground up, as did domestic companies, Power said.
Petersen said he sympathizes with executives running the automotive industry in today’s recession. He recalled a very sharp recession back in the 1980s after President Jimmy Carter.
“We didn’t think about bankruptcy then, but we were on the border,” Petersen said.
The retired auto executive added that people don’t understand the difficulties that are caused by new energy requirements, which are set by the government. “It’s a mess. It’s an all-out mess. It’s hard to describe what an all-out screwed up mess it is,” Petersen said.
Back in his day there was “no motivation to make a high-quality product,” he said.
The government required manufacturers to build cars with an average fuel efficiency number.
In response, companies like Ford would produce small cars, such as the Escort, with high fuel efficiency that did not make the companies money. This balanced the sales of bigger cars that Americans actually wanted—and bigger models also produced higher profit margins.
“Congress would not pass a tax on gasoline, and we’re still suffering from it,” Power said.
Consumers in other countries are heavily taxed on gasoline.
Domestic manufacturers continued to build vehicles that weren’t especially efficient because American customers were still buying them.
More than 250 guests packed last Thursday’s breakfast meeting at the Lundring Events Center.