Competitive Challenges: Leadership Lagging

Laurie Harbour-Felax, Managing Director, Operational Strategy & Performance Improvement Group, Stout Risius Ross It used to be that leaders in the auto industry jumped from one of the Big Three to the next without much concern because wherever they landed, a good job was there for them.

Laurie Harbour-Felax, Managing Director, Operational Strategy & Performance Improvement Group, Stout Risius Ross It used to be that leaders in the auto industry jumped from one of the Big Three to the next without much concern because wherever they landed, a good job was there for them. In fact, oftentimes the CEO of the company that was hiring the executive would call the other company to tell them they were hiring a team member away. This doesn't happen anymore because many of the good leaders are no longer available to jump around. Instead, they have taken early retirement or have transitioned to another industry. Or worse yet, they are not interested in moving to one of the domestic manufacturers for fear of job security.

Unfortunately, this is an ever-growing problem within an industry that used to flourish with available people clamoring to get a job within it, whether as an assembly line worker, engineer or executive. And don't think this is a problem for the just the Big Three, because the profitable and growing Japanese firms in North America are also suffering from talent drain. They have lost some of their best executives, including Jim Press, Jim Farley and Deborah Wahl Meyer, to competitors at the Detroit Three, and many other people to different industries. Interestingly, these executives are being lured to Detroit by some of the highest salaries in the industry: like Alan Mulally going from Boeing to Ford for millions or Robert Ostrov going to Arvin Meritor from Fed Ex. The domestic companies have recognized that they need talent and that they need it now so they are willing to pay high prices for it. And this is not entirely something they've necessarily wanted to do: the Detroit Three have had to offer large salaries and incentives to bring these people to Detroit. The current state of the Michigan economy is poor, the automotive industry is continuing in a downturn, and with very few other new industries moving to the state, it is an extremely tough sell to a good executive.

The other deterrent to attracting people to the automotive industry is that it has become one of the most difficult businesses in the country. Small businesses are struggling to stay alive and many have perished in recent years with the expectation that more will go as the industry continues to slide. Recent discussions point to many upcoming troubles due to one of the largest Tier 1 suppliers, American Axle, in battle with the UAW, which has shut down most of the GM assembly plants, and even if this is resolved, the length of the strike shows how difficult things have become. Banks are cutting off loans and lines of credit almost daily in the fear that companies will extend themselves more. Cost cuts by the OEMs have been a regular and brutal occurrence. Relationships are strained, employee pay is not competitive and margins are scarce. Social events with leaders in the industry today show a very unexcited and grim atmosphere.

Why in the world would anyone go into the automotive industry, particularly if they are a strong leader with skills that are applicable to other businesses? Many people are not only asking themselves this question and choosing to retire early or move to other states and industries, but they are also encouraging their children to go to universities outside of Michigan and into other more attractive professions such as biomedical, finance and others. Leaders of today and young people growing up are looking at the future and want to be in industries that are thriving and growing.

With an increasing number of young people going to college or moving outside of traditional automotive states means there are fewer people to take on the assembly line jobs and skilled trades work. In the very near future, the lack of these employees at the plant level will be significant and will force companies to be creative at finding good talented people to build cars. Some sources estimate several hundred thousand people will be lacking in the skilled trades and manufacturing jobs of the automotive industry within the next 10 years. It isn't much better in the engineering ranks, as fewer people are going to engineering school, and there are very few kids coming out of school today that are passionate about cars. Something has been lost in the last several years with design and engineering that has made it less exciting to be a "car geek".

Female leaders have left the automotive industry in droves. Minority suppliers are being rationalized due to lack of resources. Baby boomers are retiring. All this means fewer great leaders to help these struggling companies survive and thrive and less diversity among the workforce. The best leadership team is a strong, diverse group of men, women and minorities, but these are becoming a commodity in the auto industry. Less diversity means less creative thinking and new ideas. In an industry that is struggling like never before, and not just with losses in market share or revenue, this is a recipe for disaster. The people and leaders of the industry are the most important asset to turning the automotive OEMs and suppliers in this country around. The ability to weather a recession and come out strong on the other side takes "good to great" leaders. The long standing culture is catching up to the automotive industry. It is time to wake up and smell the future or we will be buying more vehicles than expected designed and built by global leaders from outside the U.S.