Ford, GM Need to Attack Weakened Toyota

Last Updated Mar 3, 2010 9:28 AM EST

The Big Suits at GM and Ford had to be cheered on Tuesday when auto sales for February showed the Detroit Duo putting weakened Toyota further in their rear view mirrors.
With a 43% sales gain in February, Ford passed GM (up 12%) as the biggest auto seller in the country, with Toyota (down 9%) sliding to third place. But now comes a crucial time for Ford and GM.

Toyota is likely to jump back into the market with aggressive incentives. The American carmakers not only have to cement their gains, but put pedal to the metal to capitalize on the Japanese company's weakness.

How to do it? Harvard Business School professor Bill George forwards this strategy in HBS Working Knowledge. Short-term profits are nice, but the real opportunity is for the companies to take their windfall profits and invest in the future, says he.

"That means introducing new designs that offer attractive features, improved fuel efficiency, and better customer value along with superior quality. This will take enormous effort, ingenuity, and discipline along with massive investments."
He believes both Ford and GM are well along on this process (he is less enthusiastic about Chrysler). For me, I think Ford is showing us something, but GM's progress seems halting and they are losing valuable time in constant management shuffles, the latest of which came yesterday.

What do you think are the next steps for Ford and Toyota? What types of vehicles should they be building? What kind of service enhancements do their customers need? Although dealers have been offering customers special deals if they trade in their Toyotas, neither Ford nor GM have offered such programs on a national scale. Do you think it's time to take off the kid gloves?

BTW, Ford's share price was $1.65 a year ago, and is now over $12. That's a remarkable comeback for CEO Alan Mulally and his employees.

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.