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Automakers hope to take page from Apple renaissance
Sunday, January 14, 2007

Tom Krisher

"I admire their pure understanding of the brand and the type of customer they’re going after." MARK FIELDS Ford executive on Apple Inc.

DETROIT — It’s a long way from Henry Ford’s gritty factory complex on the banks of the Rouge to the light-filled atrium of Apple Inc.’s corporate headquarters in sunny Silicon Valley.

But events last week have leaders of Detroit’s Big Three automakers thinking less about differences and more about similarities between themselves and the once troubled company that brought the world iPods, Macintosh computers and, starting in June, iPhones.

Apple’s problems, circa 1997, are familiar: red ink, falling market share, tumbling stock price and persistent doubts about its future. Analysts questioned whether it could find someone to permanently replace ousted CEO Gil Amelio, who had been hired to turn the company around.
The key to the turnaround, engineered by returning co founder Steve Jobs, was in ideas as old as capitalism itself: Make something new, something people want to buy.

Detroit is watching.

"I admire their pure understanding of the brand and the type of customer they’re going after, and married to that, a product and a design strategy that they do not veer off of," said Mark Fields, Ford Motor Co.’s president of the Americas.

Last week, Jobs introduced the iPhone, a cross between the cellular telephone, a computer and the company’s wildly successful personal music players. In Detroit, automakers unveiled multiple new models, each carrying the hope that people will buy enough of them to change red ink to black.
For the Big Three, the problem in recent years has been product. They made boatloads of cash on trucks and sport utility vehicles when gas was cheap and the economy was booming, but were late in changing when petroleum costs spiked and people wanted something more efficient.

Now, they’re all losing billions and scrambling to catch up with customers who are increasingly being drawn to cars made by foreign-based automakers, particularly Toyota Motor Corp. and Honda Motor Co.

Auto executives know they can learn a lot from how Jobs used a new product and clever marketing to raise his company from the grave.
"We’re really trying to be more like companies like Apple, where we can innovate and move faster," said Mark LaNeve, vice president of sales, service and marketing for General Motors Corp.

Before October 2001, when the first iPod was introduced, digital music players were clunky and had limited storage capacity. They were fueled by tunes torn from CDs or pirated via Napster. Syncing with a PC was difficult, and even navigating through songs was a chore.
Apple saw an opportunity and jumped on it, introducing a sleek player with a hard drive large enough for thousands of songs, a click wheel for quick navigation and, within months, an on line store that offered a legal means for filling up the iPod.

Jobs, who is fond of car analogies, had tried the same approach with the original 1998 iMac: Introducing a sleek machine that made other computers look like a gray 1983 Oldsmobile Cutlass Ciera.

There are differences, of course, between a 3,600- pound car and an egg-shaped iMac or a featherweight iPod Shuffle, chief among them the time it takes to design and build them.

The new iPhone, for example, took about 2 1 /2 years to bring to market and even that’s a long time in the consumer electronics world, where many products live in six- or 12-month development cycles. The average car takes four or five years.

Also, Apple contracts out virtually all of its manufacturing, while the Big Three have billions invested in plants and machinery and must bear the health-care, pension and salary costs of a huge and expensive unionized labor force.

Still, Apple’s core focus on consumer appeal can serve as a model.
"I think a fresh, creative mind is something that you can appreciate and focus simply on some complicated things," said Eric Ridenour, chief operating officer of DaimlerChrysler AG’s Chrysler Group.

Ridenour sees Chrysler’s 300 sedan and the 1980s invention of the minivan as products similar to the iPod in their effect in the marketplace. The 300’s striking silhouette brought the company big profits when it came out in 2004, quickly becoming the large car sales leader. The minivan created a market segment.

GM expects the Chevrolet Volt to be a breakthrough product. The electric car plugs into a home outlet and has a small gas engine that together give the small car a range of more than 600 miles on a tank of gas.
It’s just a prototype, but LaNeve said it’s within reach in the short term, and that products like the Volt could help reduce or eliminate America’s dependence on fossil fuels.

"We think this has a chance to be a game-changing technology for our company and our industry," he said.

But gone are the days where one product can carry a company.
"Product is the be-all, end all of any recovery," said Efraim Levy, an auto industry analyst for Standard & Poor’s. "One home run won’t be enough to bail out these companies."

Levy said Chrysler’s 300 and Charger were hit products that carried the company, but now that their popularity is waning, Chrysler is again struggling.

"The key is not just periodic hits, but a steady succession of appealing products," Levy said.

"That’s what you see in the Toyota's or the Honda's." Apple showed last week it has learned that lesson, bringing out products that cement its metamorphosis from a computer company into a consumer-electronics powerhouse. On Tuesday, it dropped the word computer from its name to reflect the shift. Investors cheered, sending shares of Apple Inc. to an all time high.

LINK: The Columbus Dispatch
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