By Steven Pearlstein
Wednesday, January 25, 2006

Closing plants, laying off tens of thousands of assembly-line workers, thinning out the white-collar ranks, consolidating the supplier base, wringing out another round of wage or benefit concessions from the union. Sorry, but we've heard it all before -- from Chrysler, General Motors, and even from Ford as recently as 2001, when young Bill Ford booted out Jacques Nasser and returned the automaker to family control.

The problem with such "bold" steps is that they are the result of the failure of past "turnarounds" and "transformations," not the foundation for new ones. They are right-sizings that simply acknowledge lost market share.

The fact that all three companies have embarked on quite similar "restructurings" is a pretty good indication that very little that has fundamentally changed at the Not-So-Big Three.

These companies have always designed, produced, marketed and distributed their products in the same way, according to the same business model. Because of "pattern bargaining," they all had the same work rules and labor-cost structure. When one offered price incentives, they all did. When one hit it big with minivans or SUVs or crossovers, they all piled in. Their executives live in the same communities, belong to the same clubs, followed the same career paths and drank the same management Kool-Aid, creating one of the more inbred cultures in American business.

For years they've all had consultants' reports on their shelves showing that their labor costs, and those of their captive U.S. parts suppliers, were unsustainable. They all were aware of the dangers of over-reliance on gas-guzzling SUVs. They all understood the problem of global overcapacity, the urgency of moving toward flexible manufacturing and the need to cut development times for new products.

But rather than tackle those difficult problems, they kept coming up with seemingly clever "work-arounds" that in the long run only made things worse.

Lowering wages today in exchange for no-layoff clauses and more generous retirement benefits.

Squeezing parts suppliers so hard they lost the ability to innovate or attract new capital.

Keeping plants operating only through the use of deep discounts that eventually eroded profit margins and convinced consumers that they were suckers ever to pay full price.

Over drinks at the Grosse Point country club, auto executives consoled themselves that it wasn't their fault. The unions had them by the throat. Government policies favored foreign imports and transplants. State franchise laws gave dealers the upper hand.

But while the car guys whined, Jack Welch tore apart and rebuilt a General Electric as old and unionized as the auto industry. Caterpillar executives held tough through seven years of strikes and labor strife with the United Auto Workers, emerging with a company that still dominates its global industry segment. And Lou Gerstner smashed IBM's insular culture and reinvented the company.

In his remarks Monday to reporters and Wall Street analysts, Mark Fields, the man charged with remaking Ford's U.S. business, seemed to acknowledge all that, promising that this time, things will be different. He warned that the glory days of the Big Three were gone forever, and said the challenge was not to fix the old Ford, but build a new one from the ground up. He said all the right things about focusing on customers, ignoring unwinnable market segments, designing exciting products, partnering with suppliers and creating a culture of risk-taking and accountability.

You listen to Fields and you want to believe him -- at least I do. He is Harvard Business School smart, more New York than Detroit, having cut his teeth not in the car business but at IBM. In recent years, he turned around Ford's Mazda division, and re-energized Volvo and Range Rover. Now with Bill Ford running interference, he could be just the guy to create a viable new business model for the domestic auto industry.

But to know that this is for real, we'll need to hear more.

We'll need to hear that the goal isn't to cut the product development cycles to 36 months from 44, but to cut them in half.

Fields will have to explain that instead of tying up money and metal in dealer parking lots, Ford will custom-build your car and deliver it to your house two weeks after you push the order button on your dealer's computer.

He'll have to conjure up visions of flexible factories that can produce any car Ford makes.

And he'll have to tell union leaders what they already know but refuse to admit: that the days of no-layoff clauses, skilled pay for unskilled work and retirement after 30 years are over, and the era of pay for performance has arrived.

Steven Pearlstein can be reached atpearlsteins@washpost.com.