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Intense competition among the major
car companies—the largest multi-national corporations of the world—is
nothing new. What is truly remarkable today is that this fierce tug-of-war
over global market share increasingly focuses on the competing “green” attributes
of new motor vehicle launches. In essence, the winning car companies are
betting on the “moral advantage” of their greener cars, a new
twist to the standard lexicon of business-speak that typically involves
terms such as “terrain” or “technological” advantage.
We are clearly entering a brave new world in which purchase decisions increasingly
go beyond price and quality, as well as beyond blame. The car companies that
have some valid claim to serving a higher purpose than pure economics now hold
the competitive advantage.
In our prior column, we outlined the challenges—as well as opportunities—facing
General Motors (GM) as it trims its workforce and implements a radical restructuring.
Ford Motor Company faces many of the same challenges, as its unionized workforce
struggles to adjust to today’s brutal global marketplace. Like GM, sustained
high fossil fuel prices have rendered Ford’s once lucrative profit margins
on SUV sales as obsolete. Ford and GM’s historic technological advantages
on key customer preferences have eroded as pressing moral concerns such as climate
change factor into purchase decisions. While Ford has not made the same bold
promises on hydrogen as has GM, it has jumped on the hybrid bandwagon in a big
way.
Ford was the first U.S. auto manufacturer to bring a hybrid vehicle to the U.S.
consumer market: the Ford Escape. This “greener” SUV featured a 75-percent
improvement in fuel economy over its predecessor. Instead of emitting 105 pounds
of pollutants for every 15,000 miles driven, the hybrid Escape emits a single
pound. Ford did not set any numerical marketing sales targets for the Escape
(as did Toyota in all of its hybrid product launches), but insiders acknowledge
Ford’s dream scenario is to reach the same annual sales penetration as
Toyota’s Prius: 25,000 units moved in 2005.
Ford then introduced the 2006 Mercury Mariner Hybrid, a compact SUV. This shapely
hybrid is relying upon a highly unusual online marketing program targeting the
Web-savvy generation. The Sierra Club, one of the nation’s oldest environmental
nonprofits, is helping out on this experimental online marketing campaign that
also includes one-of-a-kind “personal sales” consultants. “We
hope that helping to make the Mercury Mariner Hybrid a success will encourage
Ford to invest in better technology to increase the fuel economy of its entire
fleet,” said Dan Becker, director of the Sierra Club’s Global Warming
Program, underscoring how times of changed. Who would have thought that environmentalists
would go to bat for Ford?
Honda, in contrast, was first to market with hybrids, beating even Toyota to
the task. The two-seated Insight remains the most fuel-efficient car on the road
today. This focus on efficiency is nothing new, as Honda boasts the best overall
fleet fuel efficiency of any major automaker. And the firm is hardly standing
still. In fact, at the recently concluded 2006 North American International Auto
Show, Honda was showing off its own hydrogen fuel cell car, the FCX concept vehicle.
This sleek sedan won’t be sold here in the United States for four or five
years. Nonetheless, this FCX vehicle does address the prime obstacle to widespread
adoption of hydrogen fuel cell technology by incorporating a “Home Energy
Station” that turns natural gas into hydrogen, providing the equivalent
of 5 kilowatts of power to a home, or enough fuel for the FCX to travel 350 miles.
In essence, this car begins to fulfill Amory Lovins’ vision of the “Hyper-Car”:
motor vehicles that can serve as micro-electricity generators to (eventually)
power our homes. At the same 2006 show, Honda also won the prestigious “Car
and Truck of The Year awards” for its Civic and Ridgeline Brands, proving
that its products are living up to some of our highest social and moral expectations.
The contrasting profiles of Ford and Honda underscore a broader development of
great consequence. Asian car manufacturers such as Honda and Toyota currently
produce 43 percent of the world’s motor vehicles, but the investment community
values these firms’ market capitalization at 72 percent of the total value
of auto manufacturing. Clearly, companies such as Honda have won the value game
this decade. Consumers want cars that address today’s social concerns of
high fossil fuel prices and global climate change. The lingering repercussions
of this value shift from the United States to Asia remains to be seen.
The greening of Ford
Corporate Watch, a Web-based group dedicated to corporate accountability, once
awarded the Ford Motor Company its grand prize “Greenwash Award” because
of the gap between the eco-image it was projecting and the environmental performance
of its past SUVs. Long considered by consumer groups to be among the most secretive,
obstructionist and compliance-driven car companies, Ford has changed its tune
in the 21st century, thanks to its chairman of the board, William Clay Ford,
Jr. Once he became chairman, the company abandoned the Global Climate Coalition,
a cross-sector corporate entity that discredits the global climate change threat.
Ford even made the startling admission that its sales of gas-guzzling SUVs were
contributing to global climate change and were a safety concern to smaller vehicles
on the road.
One of Ford Jr.’s top priorities is transforming The Rouge Plant, a primary
source of pollution in Michigan’s Rouge River, into a model of sustainable
design, a factory that cranks out cars that can be completely taken apart and
recycled. “His great-grandfather gave us the assembly line,” said
world-renowned green architect William McDonough, “and Bill Ford is going
to give us the disassembly line.” In general, Ford’s vision of the
future of auto making moves from the selling of products, to the providing of
a transportation service. “We’re not in the car business or the truck
business. We’re committed to the personal-mobility business,” Ford
said.
Like GM, Ford, too, has recently announced a major restructuring of the company
that will idle 14 existing manufacturing facilities and lay off as many as 30,000
employees, a large blow to organized labor and a clear sign that job stability
and the social safety net that the auto industry had so long been associated
with is now merely nostalgia. This is a particularly bitter pill to swallow for
CEO Ford, Jr., as it was this company that broke ground in improving labor relations
way back in 1914, when Ford introduced a minimum wage of $5 per day—pay
that was roughly twice that of any other U.S. competitor.
Despite its loss of jobs, market share and profit, Ford somehow continues to
rack up some impressive accomplishments in the environmental arena. For example,
Ford is the first corporation to win the “Recycling Leadership Award” from
the National Recycling Coalition. Many of us forget that Ford was the first firm
to issue global recycling guidelines to its engineers and suppliers 20 years
ago.
Perhaps the firm’s ability to deliver innovative green products has been
underestimated. At this year’s North American International Auto Show,
Ford was showing off its Reflex, a sporty concept vehicle that is not only a
hybrid, but features a solar photovoltaic panel and purportedly gets 65 miles
per gallon. Of course, these cars will not be on our freeways anytime soon.
Honda’s path forward
It does pay to measure one’s prospects, and adjust corporate strategy,
to respond to evolving “near future” market patterns. For this, Honda
wins some points.
Honda takes the business of sustainable transit very seriously, and has been
a pioneer in integrating personal and mass transit modalities through pilot projects
with universities and local transit authorities that encourage participants to
use hybrid vehicles together with bicycles, buses and trains. Other European-based
auto makers are doing the same.
Honda sees itself as No. 1 when it comes to the environment. The company backs
up this claim by ticking off a list of how Honda was the first in delivering
ultra-low-emission vehicles, the nickel-metal hydride battery and the Insight
gas/electric hybrid to the U.S. market. “Our decision to be environmental
leaders was not customer-driven back then, and still is not customer-driven today,” said
Art Garner, public relations manager for Honda. Despite its efforts in hydrogen
and hybrids, Honda has also defended the internal combustion engine. Just a few
years ago, Garner proclaimed, “There will be no radical design changes
in the next 10 years. The cars of the future will be cleaner, but they will still
run on gas-fired internal combustion engines.”
Perhaps these statements underscore how Honda is willing to compete in many emerging
markets simultaneously. For example, the Honda Jazz—a car sold outside
of North America until just recently—is an inexpensive, top-selling four-door
subcompact whose gas mileage and emissions profile matches the Toyota Prius.
And like the Prius, it seats five adults, and thanks to clever design, offers
plenty of cargo room. The price tag for this car (under $15,000) with a traditional
internal combustion engine is far below that of the trendy and ever-popular Prius
(more than $20,000).
At the recent 2006 North American International Auto Show, Honda Motor Co. President
and CEO Takeo Fukui emphasized several new corporate social responsibility initiatives.
On the safety front, Honda will build upon its industry-leading “Safety
For Everyone” initiative by equipping its 2006 Acura RL with the world’s
most advanced system for accident avoidance, which relies on wave radar to detect
a collision before it happens and alerts the driver with audible and visual signals.
The system applies braking force to reduce the severity of the crash if an accident
appears unavoidable.
On the environmental front, Honda will continue to advance fuel efficiency and
new hybrid technologies by incorporating them into more models. For example,
the firm’s Variable Cylinder Management (VCM) system, first introduced
into the United States in 2004, will be integrated into the 2006 Honda Pilot
SUV. Here’s how VCM works: Three of the engine’s six cylinders are
deactivated during cruising, deceleration and other low-load engine conditions.
The 2006 Civic will feature the most advanced reiteration of Honda’s i-VTEC
engine technology, the industry leader on efficiency. The Civic Hybrid will feature
a new and improved hybrid drive train. And the natural-gas-powered Civic GX—powered
by the cleanest internal combustion engine in the world—will also be available
to consumers looking to purchase a “green” car.
A glimpse of the near future
It is clear from the actions of both Honda and Ford that embedding solutions
to social problems in new products pays. Corporate strategies placing a higher
value on attributes such as cleaner air, reductions in fuel use and passenger
safety are being taken very seriously by today’s auto giants. And this “moral
advantage” corporate strategy is now cascading throughout business lines
and consumer markets.
Ford is making a painful and laborious transition, but showing some signs of
promise. Sales in March have given Ford a ray of hope. Sales for its F-Series
truck—the best-selling vehicle in the United States—rose for the
third straight month. Despite a drop in sales of 2 percent for the first quarter
of the year, Ford officials claimed their goal of slowing its U.S. market share
decline seemed within reach.
In many ways, Honda seems to be the best technologist, introducing an array of
options to collectively meet our new social expectations. While Toyota’s
march toward becoming the world’s largest automaker was reinforced with
March 2006 being its best sales month ever, Honda remains a worthy competitor,
perhaps keeping Toyota honest, ensuring the image and reality of “green” cars
merge into something that truly betters the world.
Bruce Piasecki is the author of six books on corporate strategy, including the
forthcoming Better Products, Better World: How Large Firms Shape Your Future.
Visit www.ahcgroup.com for more details on this book and the AHC Group, Inc.
In Search of Environmental Excellence co-author Peter Asmus is a corporate social
responsibility specialist. |
