Why GM, Ford Can't Catch Toyota

Try as they might, General Motors and Ford will not catch up to Toyota's level of profitability before 2020 — if then.

Both of the American auto makers are scrambling to put as many of their vehicles on common platforms as possible, sharing as many components as they can. Yes, even in the 21st Century, economy of scale still is the key to making money in this business.

But with all the brands and with all the global products they have, it's going to take them at least three to four full design cycles to pull it off. I'm defining a design cycle as four years, not the 18 to 24 months it takes to tool up a car once the design is done. And that puts us into 2020.

One of the problems they face is they have too many brands. GM has 11 different brands it has to manage (not counting its affiliate partners), and Ford has nine. That doesn't even count the product variability within brands from continent to continent. Not only do they have to get as many of these products as possible to share platforms and powertrains, they have to ensure they have a nice rolling cadence to refresh these product lines once they're commonized. That's going to take a long time and a ton of money.

Compare that to Toyota, which only has three brands to deal with: Lexus, Scion and Toyota. It's a whole lot easier and cheaper for Toyota to refresh its product lines on a continuing basis. And since fresh product is the key to growing market share, it should come as no surprise that Toyota is gaining while the other two are losing. Quite literally, they can't compete.

As recently as five years ago, GM and Ford were touting their grand portfolio of brands as a strength, not a weakness. But the care and feeding of those brands is eating up billions of dollars every year that a company like Toyota doesn't have to spend.

Now, if they could hit the point where brand differentiation became a negligible part of total vehicle cost, maybe having so many brands could become a competitive advantage. And I mean true differentiation, not the grille and taillight treatment that supposedly makes a Ford different from Mercury, or a Chevy different from a Pontiac. But that hasn't happened.

GM actually has done a great job of commonizing its fullsize pickups and SUVs, and Ford is well on the way toward commonizing its midsize cars. But those are just the first steps in a long journey.

We hear a lot about GM and Ford's legacy costs in pensions and health care. I think you can add their brand portfolios to that list. And while I don't expect them to drop any of those brands, it's going to take them a decade and a half before they can manage them properly.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit, and Speed Channel.