The potential cultural gap is almost always evident in the obligatory photos of the participants in these deals, with is essentially a photo op of auto execs with their Silicon Valley counterparts. The former — rocking jeans and no ties — look like parochial school kids playing hooky. Don’t worry: The regimental outfits will be back in place once they get back in the Eastern time zone.
Consider what happened back in 1998 when Daimler bought Chrysler. First of all, there was a denial in Detroit that it happened. It was positioned as a “merger of equals.” Which it wasn’t. In any corporate situation, when one has more than 50 percent of the business, it owns the whole thing. And the German company was in the proverbial driver’s seat. People who were around Auburn Hills back then kept their heads down and their German Made Simple books at hand.
Things did not go well. Daimler had had enough by 2007, when it offloaded Chrysler to Cerberus Capital Management — which brought ex-Home Depot CEO Bob Nardelli into the picture, which is a story onto itself.
But when you think about the Daimler-Chrysler situation, realize that these were two car companies (at least the Mercedes part of the Daimler organization), so they had that in common, and the language of engineers is something of an Esperanto based on math, so there was that, too. Yet it simply didn’t work.
It doesn’t take too many viewings of HBO’s Silicon Valley to know that the business people in that part of the world are far more aggressive than people who ordinarily head and control car companies in Detroit.
About 20 years ago, a book came out about the founder of Oracle titled The Difference Between God and Larry Ellison* – and the asterisk on the book jacket leads to: God Doesn’t Think He’s Larry Ellison. It would be hard to imagine a book about a Detroit executive, even a book that had the decided bias that the tome about Ellison evinces, that would be quite so searing. Sure, there are egos. But they are still perceived to be, overall, “nice” people.
Think of the differences in the fundamentals of the operations. In Detroit, the business has been running, with a lazy sinusoidal wave of ups and downs, for more than 100 years. Even with the changes in ownership of Chrysler through the years and the changes of management at the other two companies at varying paces, the status quo has been in place with few upsets. When is the last time a car company — not a brand, but a company — went out of business?
Meanwhile, out in the Valley, there are the venture capitalists who are fiercely trying to find the Next New Thing and engineers and developers trying to create it. And those VCs aren’t shy about killing their young, either, knowing that otherwise it is nothing but a cash burn that they’re not interested in feeding.
But back in Detroit, if there is a vehicle that is all but dead-on-arrival, then it doesn’t go away but gets a new trim package with false hopes that will make things all right. Excess inventory is a bonfire where the flames are only visible on the asset books.
With the exception of FCA, the Detroit companies are investing hundreds of millions of dollars in companies that they hope will bring them closer and faster to autonomy than they otherwise would get on their own. (Sergio is cleverly waiting for it to be developed — sure, selling Pacificas at a discount and probably providing some engineers — so he can simply buy it the same way the company gets steering wheels and audio head units.)
It is worth noting, however, that this approach is somewhat uncharacteristic of car companies, which have historically tried to do everything themselves, as they were the quintessential purveyors of vertical integration. Had Henry Ford not been pals with Harvey Firestone, there would probably be Blue Oval Tires.
Still, there is that matter of culture. It is one thing to show up onstage at CES with a Shure WH20 and a multimedia widescreen backdrop, and another entirely to try to understand why those people in Sunnyvale or Santa Clara just don’t seem to be working the way they do in Warren or Allen Park.
One could make the argument that with Jim Hackett as Ford president and CEO, things might work more smoothly. This would be predicated on the fact that Hackett (1) was executive director of Ford Smart Mobility and (2) worked with people in the Valley when he was CEO of Steelcase.
But (1) that was only since March 2016, or a little over a year, so while there were undoubtedly discussions of sensor fusion and deep learning that he participated in, didn’t he also have to learn something about, well, automotive technology? And (2) presumably it is a different thing to be talking about lidar than promoting ergonomically engineered Leap office chairs.
Consider: When Google wanted someone to head up their self-driving car initiative, Larry and Sergey knew that (1) they have an incredible number of really, really smart people on their campus, and (2) lots of them drive cars. A case could be made that any number of them could have done the job.
Instead, they went out and recruited John Krafcik, who had a solid career in the auto industry.
I’m guessing that Google is going to be way more successful in creating autonomous systems for vehicles than the conventional car companies simply because of an understanding of and appreciation for culture.
There are 1,940,000,000 results for that word on Google, by the way. Perhaps some of them need to be consulted.