USA: Land of Adventure – and Cars

The USA: Land of Adventure

Commentary by Michael Kuntz

No matter whether it’s un-sellable gas guzzlers like those from General Motors or a careless leasing policy like that of BMW, car manufacturers can make or lose a lot of money in America.

The third-worst quarter in General Motors’ history and a profit warning from the Bavarian manufacturer BMW – that’s how brutal it can get in America. Daimler (Mercedes-Benz) was similarly caught out the previous week. High gasoline prices, expensive steel and the real estate crisis: those are the painful external influences all managers have to deal with.

It’s not only GM’s bumbled policy of sticking with gas-guzzling SUV’s and pick-up trucks causing the pain. After the terrorist attacks in September 2001, GM began a policy of extending their employee discount to all customers. That was something they quickly took for granted.

BMW boss Norbert Reithofer also can’t escape the ghosts of his predecessors. BMW’s relatively careless leasing policies in the USA have come home to roost. They ensured growth and jobs for years, but now has come back like a boomerang to strike at their bottom line: the used vehicles aren’t worth enough to cover the total cost of the program.

America is a country full of adventure. The current US-President once answered the auto industry’s call for government help in typical gruff Texas style. Bush unceremoniously commented that if Detroit’s Big Three, General Motors, Ford and Chrysler, simply built more “relevant” vehicles, the problems would solve themselves.

The challenge of new offerings

There’s a core of truth in what Bush said, but it’s not that simple. In the final analysis, it depends on offering the right customer the right vehicle at the right price at the right time in the right location. That’s something that seems to have caught on at BMW. Reithofer and his friends made a quick change from their X7 SUV, a gigantic vehicle that even car-crazy Americans quit buying. Customers didn’t stop buying them because they all suddenly became environmentalists; they simply couldn’t afford them any longer.

New models are in demand. Great hopes rest now with the BMW task force charged with coming up with imaginative solutions for mobility in big cities by the end of this year. Something might well come of that. With its successfully upgraded Mini, BMW has already shown that groundbreaking innovation can grab the auto-buying public’s interest.