Strategic Planning Failure by Legacy Auto: From Disrupters to the Disrupted – CleanTechnica

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From conversations between Dr Paul Wildman and CleanTechnica’s David Waterworth on Strategic Planning.

Paul and I have had and will continue to have in-depth conversations about the industry transition to electric cars and its broader and deeper implications. This article is a result of our most recent conversations. Can we make VW or Toyota great again?

How is it that Europe and Japan (both parts of the West) are failing so comprehensively in the EV race?

In this article, we suggest that strategic planning is incompetent here for the German and Japanese auto giants. Strategic planning in this industry seems unable to address actual literal disruption. Something else is needed, something beyond strategic planning — and we submit this is Futures Research. And I would add, a willingness to believe the possible can be better than today’s more of the same (MOTS).

With strategic planning, a business looks 3–5 years out into the immediate future. Large companies need to go out further and thus need to use iterative futures methods including environmental sensing, emerging issues analysis, and scenario development. This can take them over reasonably clear territory 10 years out. This is a minimum, as new car models take 3–5 years to go from drawing board to factory floor, so staying 5 years minimum ahead of the market is absolutely essential for survival. From what we see and read, no legacy car company has done this. They are in effect 5 years behind China’s best and at least 3 years behind Tesla.

This lag is increasing, as now many Japanese and European EVs are based on Chinese platforms, plus, as of this month, Australia now has standards for EV bi-directional charging!

Quo vadis (whither goest thou) VW and Toyota — previously ginormous, now two of the world’s most evanescent brands?

In this article we use VW as an exemplar and representative of German carmakers, and Toyota for Japan’s automotive industry failure in strategic planning and unwillingness to embrace a disrupted automotive landscape.

We often wonder about the opportunities for survival that VW has squandered since losing strategic initiative by firing Herbert Diess (who saw the writing on the wall) two years ago. All the problems that VW now faces are a direct line result of that decision. They then went backwards, paused EVs, and reinforced their ICE plans in July 2024.

My worry is that in futures terms it is already too late to save the ship. VW is talking about closing factories — in Germany — and at the end of 2024, the company is immersed in a dire industrial relations furore, with all its union member workers on strike. VW is struggling for its very survival. Having lost three years of strategic opportunity, VW is now paying the consequences.

If Diess had not been fired, would things be turning out differently? Over the past three years, could Herbert Diess have saved VW? We wonder about this a lot. Diess had the vision. VW’s issues are cultural and deep seated. Diess could have brought these to the surface sooner. Both Diess and Ghosn recognised the time had come for transport to help address climate change. EVs have a part to play in this. Ghosn tried at Nissan with the Leaf. That didn’t end well for him, as he was criminalised by Japan over 6 years ago.

In the past two years, the global baton for EVs has passed to the Chinese, especially BYD. We think the West’s inability to grasp what is going on with EVs in China has more to do with hubris, complicated by a lack of belief that the Chinese could produce really good cost-effective stuff. They now can and they now do. David saw this on his recent trip to China.

Chinese products are better quality wise, range wise, warranty wise, software wise, and accoutrement wise than Western offerings.  This video contains a good day-to-day analysis of what is behind Europe’s car industry crisis, including some excellent graphs. Ed Conway explains at 5 minutes.

It looks like legacy carmakers looked at what China was producing 20 years ago, dismissed it, and didn’t check back until very recently. They took their eye off the ball and are now facing the consequences.

Further, Toyota once led the world with genuine commitment to Kaizen, Muda (waste or inefficiency) reduction, innovation from the bottom, and just-in-time manufacturing. Once transformational for yesterday, they are now technological laggards. This is even more bewildering since, strategically, Toyota, Nissan and VW were superbly positioned prior to the present resurgence in EVs as led by Tesla, yet have failed to translate any of this momentum into BEV development. Furthermore, they are promulgators of the plethora of ICE FUD we find everywhere today. Toyota is the third biggest lobbyist against EVs. Simply put, if a company fails to plan, it plans to fail.

We listen to the mind-numbingly dumb, even idiotic, statements by Toyota — or any Japanese car manufacturer — and think, where did he get this ‘More of the Same’ crap? Is he just making it up on the run “as his mouth runneth over?” “Is the mouth in gear, but the mind is in neutral?” Does it come from their ‘yes sir’ strategic planning departments? No one with a serious commitment to, and understanding of, futures or strategic planning would ever make these statements. Just like the Boeing CEO saying after the two tragic crashes that Boeing was fundamentally committed to air craft safety.

Strategic Planning, and Futures Research, Revisited

In futures research, we often see scenarios, generally four viz: More of the Same (Toyota), Business as Usual (VW), Crash and Burn (Nissan), and Up Up and Away (transformative — Tesla, BYD, Xpeng, Zeekr, etc.). Surely, the OEMs had strategic planning sections or outsourced the work. Such groups need to be more independent than even skunk works and report directly and only to the CEO! As such, it is best if they are not line departments, as the risk of “good news only” and “tell the boss what he wants to hear” disease is ever present.

More so, we point out the financialisation, including indebtedness, of the West and hollowing out of manufacturing and the middle-class. In my opinion, this points to an almost malignant trait of decoupling from the “real economy” and can be seen in the abstractionism of financial derivatives (now many times the size of “real” GDP) and the move from real economy to off-shoring from the West into China and Asia (Vietnam, Malaysia, Indonesia).

China as part of the “Confucian Commonwealth” evidences a deep belief (ontology) that values and their practical side of life, including filial respect, are crucial to industrial development. Something that seems bizarre to us. Things the West has lost for the past three generations and yet in extremis matter competitively.

Intriguingly, the West, or Pax Americana, has for over 50 years, since the suspension by President Nixon of the convertibility of the US$ into gold, pursued the path of abstractionism and financialism to its present extreme end as we see with Kodak, Blackberry, more recently Boeing, and of course US legacy auto.

China has no such change in worldview and retains a very strong physicalism in its economic tropes. Possibly, we suggest, we are seeing flashes of the flat-lining of the Western Enlightenment ontology and its inability to contend, or compete, with the real world of a resurgent China. Except maybe for the billionaire escape route to Mars! We submit this “re-balancing” of East and West will be largely completed in China, including BRICS, favour by the early 2030’s. Trust me, the US will likely go out with a “bang bang tariff.” See also: Mario Innecco at 24 minutes & Survival Lilly at 17 minutes.

Today, Toyota has been caught gaslighting us about airbags, emissions, wheels and brakes falling off, vehicle safety, EV FUD, etc. In all, the company is squandering, even betraying, its best possible future for its worst. In doing this it, and the whole Japanese auto industry, is misleading the Japanese government and public. We submit this is how the Yakuza works.

Paul and I have covered the future of Toyota in these articles at CleanTechnica, here and here. Perhaps it is time to do a similar article on VW and Germany? Readers, please add your thoughts below.

Both Europe and Japan have made a mockery of the relatively well-developed social technologies of strategic planning and futures research. Toyota was supposed to have a 100 year plan? Just bizarre, as incredibly, once upon a time in the 1970’s, they were the disrupters. Now, they are the disrupted and they seem to have forgotten to learn from those days, maybe because they were the victor! They are unable to grasp what is actually happening to the market or to their companies. You can’t see if you don’t believe.

In the 1970’s, it took US manufacturers about 2–3 years from innovation to showroom whereas the Japanese halved that, and China and Tesla have, with OTA updates, reduced that further to under 12 months. Now it’s the Japanese manufacturers’ turn to be caught in the response time loop and they seem increasingly unable to even realise they are caught, let alone respond in a timely fashion.

What to do with genuine disruption?

What started as a small innovation in a subset of the global automotive industry has become an actual disrupter of the entire global automotive industry now. Disruption, e.g. Tesla, is a force that comes from outside and literally breaks apart the existing systems. Conversely, innovation is kept within the existing systems, and this, we suspect, is where EVs and hybrids would have stayed if the existing automotive industry had been allowed to continue — effectively stifling innovation in order to protect their profit shares. Incredibly, once the existing system is broken apart, as is now the case, the legacy players and manufacturers seem paralysed, by their own strategic incompetence, and unable to react creatively or efficaciously.

All these Japanese and European companies have bucket loads of MBAs. What use are they now? What is the corporate design to engage new, what-if, strategic scenario thinking? In turn, are the universities letting their, and our, side down. They give out qualifications, sure. Yet their graduates seem to have little ability to undertake futures research and to deal with a corporate hierarchy that has “selective hearing.” Are they all stupidly locked in the past and literally can’t comprehend what is happening, let alone what is about to happen or what to do about it?

Clearly, the Germans and Japanese had years — decades, literally decades — to see/know this was coming. And even worse, they had leading technologies deployed into the marketplace prior to this resurgence, including BEV, hybrid, Kaizen, disruption, etc. So why did they do nothing efficacious about it other than blather on about the past? It seems their strategic incompetence encouraged, or may have even hardwired, their own demise.

Conclusion

For us, the above also points to a structural flaw in the Anglo West’s, especially Germany’s and Japan’s, automotive business models, as well as their use of the institutions of higher education that train their planners. What’s worse, these models are held up as examplars for other countries and industries. The current crisis shines light on a glaring deeper issue, a major flaw in the West’s business models. Hubris against China, a head-in-the-sand approach to quality and innovation, and business-as-usual approaches all have to go — and quickly. All this does not augur well for our children’s near-term future (5–7 years). And that is not good news for our planet.

Paul is a retired economist and futurist who lives in Brisbane with his wife and fox terrier. He has lectured, published, and worked in futures methodologies, critical futures praxis, and strategic planning for the past 30 years. He has written several books, published podcasts, and contributed chapters on these topics. See below. With his wife Annette, Paul worked extensively to advocate for our grandchildren’s future, especially through critical futures praxis, early childhood education, the reimagining of hands-on craft.

He tells us: “For Australia, my wife and I are early adopters, buying a Tesla Model 3 Long Range in October 2020. Today we see many EVs on the road. We kept waiting for the Leaf (15 years ago) and Prius (nearly 30 years ago) to be ‘updated,’ even ‘recreated’ and ‘transformed’.”

Associated References

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Wildman, P. (1982). Integrated Public Administration: Developing a Socio-economic Planning and Design Algorithm, Northern Territory Dept. of Community Development in conjunction with the Queensland Dept. of Welfare Services. 15 pgs.

Wildman, P. and G. Baker (1985). The Social Impact Assessment Handbook. Sydney, Social Impacts Publications. 150 pgs.

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Wildman, P. (2002). Futures Praxis: Consulting and Teaching Futures Studies through the World Wide Web. Advancing Futures: Futures Studies in Higher Education. J. Dator ed. Westport, Praeger: Ch 22, 309-320.

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