Why Ford looses US jobs and Toyota makes them up?

Ever since the announcement of Ford’s 30,000  job losses  and closure of 14 plants, I have been feeling intrigued. No one can argue that health costs per American car are high at $1500 per car. No one can also argue that net jobs in the Auto industry in the US are probably unchanged as Toyota etc. open plants paraphrasing auto industry guru and scholar Womack  from the NY Times.

What is inexplicable is the unwillingness of Detroit to see the underlying innovation problem. Scholars have been studying the auto industry in Japan and US for over 20 years and have been repeatedly emphasizing the differences. For example Japanese automakers outsource components and not knowledge of machine making as do American automakers. Japanese auto engineers know more about the domain than their suppliers while the reverse is true of US automakers. US executives love to commoditize parts and love reverse auctions and don’t stay loyal to suppliers. Consequently suppliers are unable to invest in money, time and effort for US Auto industry buyers.

The world has changed from Henry Ford’s time when everything was in-house starting from iron ore. Today when Japanese and Korean companies enter foreign markets they bring their supplier teams to set up factories of components, if necessary. Agility which Bill Ford seeks for Ford motors today is not simply a function of internal operations at Ford. It is how well it can mobilize its suppliers and partners. The sad fact is that even if Ford cars were $1500 cheaper ( equal to the so called medical cost per car) customers will not make a beeline for its product. More customer focused new products are needed and with much less cycle time if the US auto industry is to avoid extinction. The supplier equation has to change – but that is something scholars have been saying for over 20 years.

Leave a Reply

%d bloggers like this: