Obsession of Automobile Players with Cost

In order to survive in the market, players like GM, Ford feel that cost is the only factor. It seems that their knowledge about Marketing is very poor.

Marketing says how to demand premium over your competitors’ products by creating brand equity.

Instead of creating equity of their brands, their full focus is only to sell their products cheap and thus counter the competition. And let us see the results – GM, Ford plants are getting closed whereas Toyota and Honda are opening new plants even in the sluggish market of North America.

To sell products cheaply, they are squeezing their suppliers to sell cheaply. GM and Ford are fond of changing their suppliers for even slightest of cost reduction. Further they show the carrot of global volumes coming to suppliers and asking for discounts over the future supplies.

Just consider the cost of Japanese players like Honda or Toyota. They have the policy of single supplier i.e. single supplier for one product. Thus no more competitive pressures on the suppliers. The supplier will not be replaced for the sake of price alone.

The results are obvious. The stocks of GM and Ford have been regarded as “JUNK” by the rating agencies. Their market shares are falling. Their customers are highly dissatisfied.

On the lighter side, Ford has recently thrown out their brand ambassador Abhishek Bachchan, whereas Toyota is still going ahead with Aamir Khan even in the wake of Aamir’s controversy.