SAVING HUMMER

There was a title I never thought I would write. Full disclosure, I really like Hummers. My Dad has one and I love it. I even offered to buy it from him once and he turned me down flat (that looked like a good move for me when gas hit its highs in Summer 2008 and my Dad stopped driving the Hummer all together. It's back in operation now with gas at $2). Despite their terribly wasteful gas mileage, Hummer's are a great car. However, in a world where we will shortly be returning to $5 gas, at 10-12 MPG, and with GM desperately trying to save itself, the Hummer brand is on the chopping block. But there is a way to save the Hummer, and maybe GM along with it.

While studying for my MBA at UM, we did more analysis and reading about the automotive industry than almost any other industry. We studied everything from Porsche to Ford to Saturn, and I hated every minute of it. I wanted to study the companies of the future, not a legacy manufacturing business that was headed for the dustbin. Talk about a broken business model. I think of the automotive industry the same way I think about the newspaper industry - it's a business forever stuck in the early 20th century, with no hope of redoing itself for the 21st century. In fairness to the automotive industry, my last MBA class was a Marketing class where our class was broken up into respective groups to start and run an online simulation of our very own automotive company. We spend 6-7 hours each week deciding on how many dealerships to open, how to set up our factory and product lines, which kind of cars to produce, at what quantity, and how to arrange our financing. All in all the simulation was fascinating, but regardless, the automotive industry is still fucked. I still hated the business and I still don't see how they can make any money. My thought was the only way the automotive industry would ever survive is to be bought out by Boeing or EADS and who would convert cars into mini-airplanes for consumer use to ease traffic congestion(I know, my Back To The Future pipe dream).

"You never know who's swimming naked until the tide goes out." - Warren Buffett said it best. And with the financial crisis, it was perfectly obvious that the GM and Chrysler left their speedos on the beach a while ago and had been swimming naked for so long, that their skin was all wrinkled. (Bad metaphor, I know, but you get the point). I admire the Obama Administration for attempting a rescue, but the automotive industry needs a full teardown, instead of a modest remodeling.

So, here's my idea to save the auto industry. The genesis has to start with changing American and worldwide consumer behavior - no easy task. The auto industry has to eliminate dealerships and all the costs associated with it and move the entire automotive industry to the BTO (Build To Order) model. Americans need to get used to the idea that the dealerships of the 21st century will have a total of 10 cars on it. That's it. You go to the dealership, drive as many of the 10 cars you want and then you order your vehicle, personalized to your exact specifications. You chose the interior and exterior color, audio, video, options, and here's the kicker - what type of fuel you want - hybrid, hydrogen, ethanol, vegetable oil, or electric. And now here's the rub, then you wait a month for your car to be delivered. I know, you wait, but it's OK to wait for a $30,000 purchase. The auto dealer send the car order to the factory and they build it for you. That way the factory line isn't producing cars that no one has said they want. The overhead and costs cut with the BTO model will save the automotive industry.

Same thing with Hummer. If GM wants to save Hummer, they should immediately shut it down, save one factory and convert Hummer into a BTO order only, and make it green. I can think of no better press release than to turn the Hummer, the ultimate in gas consumption into the first BTO vehicle with great gas mileage based on green automotive technology. Hey, you got a better idea? I'd love to hear it.

The NY Times has an interesting article on the Hummer: http://www.nytimes.com/2009/03/31/business/31hummer.html?scp=1&sq=hummer&st=cse