The new Detroit isn’t Detroit

GM says it is reinventing itself. And what makes them or the government think they can do that on top of old infrastructure and old ways even with our billions? Good fucking luck.

Last week, I met the man who is really reinventing the car industry, Jay Rogers, founder of Local Motors. He is creating the platform and API for new cars that are designed collaboratively by communities and built in microfactories across the country by staffs of only 41 using almost entirely off-the-shelf parts. He says he will be profitable selling only 500 cars. He plans to build 3-5,000 of each model and he’s months away from delivering his first.

When I first looked at Local-Motors, I didn’t think it was for me. Its first model is a muscle car being built in and for the Arizona market. In a video, Rogers talks about being able to come into the microfactory to help build your own car. I try everything I can to avoid ever opening a hood or picking up a wrench. That’s why I buy Toyota.

But over lunch, Rogers made clear that he is building a company and cars in harmony with the vision for a new car company I suggested in What Would Google Do?.

It’s collaborative. Rogers set the broad goal for the first car but then the community designed and voted on designs for it. What’s fascinating is that (as I predicted could happen) they make economic decisions and trade-offs. Some really wanted an incredible taillight and Rogers said, fine, that’d cost a fortune to tool up to make and would raise the price of every car by $1,000. Nevermind, the community said; they took a $99 Honda lens and designed around it so you’d never know where it came from. This also means that Local Motors does what it does best and links to the rest, a key precept of WWGD?

The community takes ownership. And the company hands much – but not all – control to them. I wondered how the community defines itself and manages to settle its disputes. The company has to get involved and listen. Rogers said the most important hire a company can make today is a CCO, chief community officer. This isn’t anarchy or democracy. Rogers coins a rather high-fallutin’ phrase for what he advocated: bimodal intelligence. That is, everyone has a voice but at the end of the day, the company has a role to guide the process and product; that is the value the company adds but that works only if the company listens well.

It’s small. And small is the new big. That is precisely why GM and Chrysler are at a disadvantage against him, like newspapers against online entrepreneurs: The incumbents are saddled with huge infrastructure costs and have to do everything in big ways, including fail. And this means…

The mass market is dead, replaced by the mass of niches.
I don’t want the same care you want. I want choice. Hundreds of microfactories can give it to me.

It’s a platform. I saw this more than Rogers did, but it’s clear that because Local Motors publishes its design data openly, I could start a company to provide parts and products for its cars. It enables others to build business on top of its platform. This means that…

Business is public. The more openly and collaboratively Local Motors does its business, the better it is for its products, customers, and relationships.

It’s local. I also didn’t understand this at first. But seeing the car being made for Arizona drivers, I get it. A car for New Yorkers will surely be different.

Middlemen are doomed. Local Motors has no dealers. The factory is the showroom. The customers are the salesmen.

And on and on….

I plan to visit Local Motors’ Boston headquarters to learn more. No, I’m not suggesting that this small company with its microfactory will replace GM, not yet. But this car company can innovate and invent and listen to customers far better than GM can. This car company can become profitable far faster.

  • invitedmedia

    remember the lowly round headlight that fit everything from a beetle to a XKE?

    that’s the sort of back-to-basics gm should be looking at, but i overheard a chevy sales guy today say they’re taking delivery of “30″ vettes next week.

    yeah, one for every f#cking billion dollars we just lent you guys yesterday, i thought to myself.

  • http://industry.bnet.com/technology Erik Sherman

    It’s a nice thought, but off-the-shelf parts are only possible because of non-off-the-shelf engineering. A big company had to devote the resources to design cars that use the parts so an economy of scale could occur. Once again, this is calling something a new vision without acknowledging the infrastructure and previous work that makes it possible. So, in the future when you want far higher gas mileage, how does such a company product products that can do what they need to do? They hope that some big company spends the enormous amounts of money it can take to do the necessary engineering and development. The raw materials always come from someplace, and someone has to pay to make them available. To ignore that step is to ignore the actual systemic problem and, as a result, suggest things that may sound good, but that ultimately will be ineffectual.

    • http://wyman.us Bob Wyman

      Erik Sherman writes: “off-the-shelf parts are only possible because of non-off-the-shelf engineering”
      Correct. However, that doesn’t have anything to do with the potential success of Local Motors or similar efforts since the “big companies” who do parts design aren’t always GM, Chrysler, Ford, etc. Often, they are Lear, Borg Warner, Magna, etc… If you want drive train components (turbo chargers, oil pumps, etc.) Borg Warner will be happy to design and build what you need. Or Lear designs, manufactures, and markets automotive seat systems, electrical distribution systems, and electronic products for the automotive industry. Other companies have other specialties.
      This is where folk like Chrysler, GM, Ford, etc. get their parts. If a company like Local Motor can demonstrate an ability to generate sales, we shouldn’t doubt that the parts suppliers will be very happy to gain new customers and broaden their market.

      bob wyman

      • http://industry.bnet.com/technology Erik Sherman

        Bob Wyman writes, “However, that doesn’t have anything to do with the potential success of Local Motors or similar efforts since the “big companies” who do parts design aren’t always GM, Chrysler, Ford, etc. Often, they are Lear, Borg Warner, Magna, etc…”

        Correct that different companies make the parts. But they only engineer and manufacture them because someone has created the demand for the parts, so they can make them at a cost-effetive level. Those parts are made to what were originally big auto manufacutrer specs. No parts manufacturer is going to bother with taking your order unless you can write a honking big check. And to do that, you can’t base your business model on being able to get the off-the-shelf parts that haven’t been designed yet. It becomes a circular argument, and one that does not work economically.

  • Jimmy

    This is more effort than I ever want to put into buying a car. I may shop around, but I want to go to a showroom (even if that’s an online showroom), find the car I want, buy it, and drive it. The most I ever want to special order is a different paint color.

  • http://www.JoeMescher.com Joe Mescher

    I really want to believe in GM.

    I want to see an American car company succeed.

    I love Mom and Apple Pie.

    But I’m a worried shareholder. GM needs more than talk about how they ‘made mistakes’ and are ‘ready to reinvent’.

    Get managers to listen to the public at community forums (and ACT on their findings).

    Get the VOLT into the hands of EVERY hot Social Media native possible.

    Get a Guerrilla Marketing Mindset. Be Nimble. Move Quick.

    That’s just one Detroit natives two cents…

  • http://chuckwarnock.com Chuck Warnock

    Local Motors is a great concept! Things used to work that way, didn’t they? Each town had it’s own Coca Cola bottling plant and you could tell where the Coke you were drinking came from by looking at the imprint on the bottom of the glass bottle. Why not local everything? Which is what the locavore food movement is about, among other things. Every community had its own telephone company, power plant, grist mill, cotton gin, local railroad, and so on. But after WWII, we went big and centralized. Fewer companies in more places. Now drive from one city to another and all the restaurants are the same, all the retail stores are the same, and the choices are neither local nor imaginative. Oh, and Erik is incorrect — it doesn’t cost much to design and manufacture parts. You don’t have to make a million headlights to make a profit. Great example, Jeff!

  • Laid Off Too

    Mr. Sherman, I respectfully think you’re missing the point. Local Motors’ taillight or engine supplier could be Honda, GM, Chrysler or any of the other auto parts suppliers. In fact, if Local Motors takes off, it could save those companies.
    Jimmy, I respectfully think you’re missing the point as well. If you live in Arizona, your neighbours are helping design a car specific to your state, including paint colour. Your ‘designers’ may want the state flag on the hood. If you live in New York, your ‘designers’ may want Yankee pinstripes on it. They’d be online or in the factory showroom for you to look at and purchase. And you don’t have to be involved in the design at all.
    I think Jeff and Local Motors are onto something. Maybe this Google isn’t a flash in the pan. I’m going to examine how this platform would impact my areas of interest.

    • http://industry.bnet.com/technology Erik Sherman

      >> In fact, if Local Motors takes off, it could save those companies. <<

      I must disagree. It’s a nice thought. but if their business model depends on having off-the shelf parts and then putting together “custom” autos, they need the parrts in the first place. Unless they’re going to have such demand that they can afford to get parts makers to do the very expensive engineering, tooling, and manufacturing investment to start making those parts. At which point it’s another big auto comapny and needs a lot of volume of those parts to swing the deals economically.

      That’s not to say that a company couldn’t figure out how to use standard parts and then somehow build a “custom” machine. But then the labor going into putting together the custom vehicle needs to be paid for as well. Sorry, but I don’t see how this works without being enabled by the large volume of parts that the big car manufacturers made possible in the first place.

      • Laid Off Too

        Eric, you’re probably right. GM and Chrysler may need big orders from Local Motors and others to survive as parts suppliers. However, if they put together an entire engine, etc, from their current specs, then they’d be adding value to Local Motors. They’d be able to charge something with a big profit margin, especially if it’s a small volume order. Anyway, since GM and Chrysler’s problems are now solved with our bailout money, they’re be no need for them to try to create additional revenue streams.

  • http://derekkreindler.blogspot.com Derek Kreindler

    The component-jacking isn’t new to the rest of the world; Morgan Cars in England uses Mini Cooper headlights for their sports cars. Funnily enough, the CEO of Honda once said that there would only be three major car companies left in the future – and Morgan.

    How is LM getting around the massive regulatory hurdles most new cars face?

    • http://www.local-motors.com Ariel Ferreira

      Derek, I apologize for the delay in answering this question – there were so many things to respond to in this thread!

      I take issue with the reference to “component-jacking”, not because you are incorrect, but because it is a standard industry practice. New United Motors Manufacturing, Inc (aka, NUMMI) is a joint venture of Toyota & GM – sharing parts agogo. The Pontiac Vibe was one of the best-selling Pontiacs and featured a Toyota engine, and if I’m not mistaking, a Corolla platform.

      This is simply good use of a mutually beneficial relationship. The use of external components is different than NUMMI (as far as I know), and perhaps Morgan is the closest comparison for this. But at least we are designing unique chassis :)

      LM vehicles will meet all safety requirements. We are not planning to get around the hurdles, we are planning to jump them in the same manner as other car makers.

      Ariel

      aferreira@local-motors.com
      @LM_Ari

      • http://www.buzzmachine.com Jeff Jarvis

        well done.

  • John Cole

    Granted, this isn’t quite the same concept, but the user-designed automobile has been done:

    http://tinyurl.com/pp69ml

    • http://www.local-motors.com Ariel Ferreira

      At Local Motors we hear references to “The Homer” car all the time. This is where bimodal intelligence comes into play – find LM a region of “Homers” and this car will make sense. Otherwise, the capability of the local-motors.com community is too passionate and set on bringing exciting cars to life to let this happen. Plus, Local Motors is not challenging the community to design or collaborate on solutions for Springfield or Homer (sadly) – though it would be funny to do a spoof on this. If LM designers & engineers were to create an “everything mobile” it would probably look more sci-fi than Simpsons. Could be an interesting concept (though not buildable/practical).

      Local Motors is not the first company to crowdsource car design and engineering ideas. OScar and c,mm,n are two recent examples. Now Caterham is aiming to crowdsource the design of their next project.

      Part of the beauty of LM’s model is the ability to bring desirable cars to market – WHERE people want them, and WHEN people want them.

      So far, LM is the first company to do this.

      Ariel

      aferreira@local-motors.com

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  • Eric Gauvin

    Jeff says, “Eric,
    I don’t know why you don’t like me and not that I care but it’s well-established and this is quite tiresome now. You’re on the record. Enough. Please talk about issues of substance, not personal attacks. The former is welcome, the latter is not. You’ve had your say a million times. Enough.”

    Jeff,

    You must not be paying attention if you don’t know why I (and others) don’t like you. It’s because you represent the internet as a breeding ground for BS artists and twisted, over-hyped crap.

    That said, here’s an interesting book you should read to continue your cause:

    http://andrewkeen.typepad.com/the_great_seduction/2009/05/whats-the-connection-between-michael-moritz-silicon-valleys-leading-venture-capitalist-and-hizballah-the-middle-e.html

    (Note: I tried leaving this comment under the “A newspaper publisher lies” post, but it wasn’t working.)

    • Mike Manitoba

      I think Jeff’s well aware of Andrew Keen. If I’m not mistaken, he declined an opportunity to debate him a few years ago.

    • Eric Gauvin

      not andrew keen, the book in the blog post looks interesting (The Age of the Unthinkable)

  • Rob Levine

    Let’s not forget, Jeff: A “Googley” car would also keep track of everywhere you went, how fast your drove and who else was in the car with you.

    But that’s OK: Most of the people who bought it wouldn’t realize that!

  • Laid Off Too

    Jeff, may I suggest this new ‘ism’ you mention in your Google DC talk that will replace socialism, capitalism, etc is ‘collaboratism’? Just a thought.

    PS Forgot to mention it in my earlier post, but I share your opinion of the ‘new’ Detroit. I also thought you phrased your opinion quite eloquently. Thanks for capturing the feelings of many.

  • http://robertdfeinman.com/society robertdfeinman

    Great minds….

    I just posted an essay proposing what I’m calling the “slow work” movement, by analogy to the slow food movement. My suggestions have to do with a return to small workshops at some cost to “efficiency”, but with the side benefits of putting more people to work and making suppliers closer to their customers. This is not about localism, per se, but the ability to give customers what they want, instead of forcing them to buy what you make.

    I mentioned that it could even be stretched to autos, as the Volvo team assembly model showed. As for customization, modern automated machine tools make it feasible to produce customized parts in small batches.

    For the curious, here’s the link:
    http://robertdfeinman.com/society/slow_work.html

    The standard of “efficiency” does not take into account any of the costs and benefits outside the bottom line, such as the social benefits for workers in having meaningful jobs, or the ecological benefits from not having to sell so much unnecessary “stuff” to keep a broken economic model going.

    • Andy Freeman

      > My suggestions have to do with a return to small workshops at some cost to “efficiency”, but with the side benefits of putting more people to work and making suppliers closer to their customers. This is not about localism, per se, but the ability to give customers what they want, instead of forcing them to buy what you make.

      That’s nice, but customers don’t much care how many people worked on the products that they want or whether they had “meaningful jobs”. That’s an instance of a more general rule; customers don’t much care about their supplier’s problems. Customers really care about the products themselves and their cost.

      THis is important because businesses that are arranged around their needs/desires lose to biz that work on satisfying their customers.

      Outside of niches, people won’t pay much more for a perfect match. (Look at how few people wear custom clothes or even have off-the-rack stuff altered – the latter is pretty cheap.)

      > the ecological benefits from not having to sell so much unnecessary “stuff” to keep a broken economic model going.

      No one buys anything “to keep a broken economic model going”.

      • Mike Manitoba

        Man, you make customers sound like assholes.

      • Andy Freeman

        Perhaps thinking that customers are assholes is part of why said customers don’t think much of journalists.

        Another reason why customers don’t think much of journalists may be that many journalists act as if they’re entitled to get paid to do what they want to do. No one else has that entitlement, so why should journalists be any different? (The answer shouldn’t include anything that journalists promise but don’t actually deliver.)

        You’re free to try to deal with customers on whatever terms you’d like, but they’re not obligated to accept said terms. The fact that each party is free to set its own “walk away” conditions doesn’t make either one of them assholes.

    • http://industry.bnet.com/technology Erik Sherman

      >> My suggestions have to do with a return to small workshops at some cost to “efficiency”, but with the side benefits of putting more people to work and making suppliers closer to their customers. <<

      Again, nice if it works out, and there are plenty of things that I do like to get locally, even if it costs a bit more. But remember that it wasn’t until the production line that autos could come down in cost enough that average people could start to afford them.

  • http://www.local-motors.com Ariel Ferreira

    This is so exciting, Jeff. Thank you for this post. Local Motors is very much focused on fulfilling the desires of car ENTHUSIASTS by enabling them to participate in the design, engineering and build processes. As you mention, this creates ownership and vested interest in the outcome of each vehicle.

    The focus on enthusiasts is important, especially at the beginning as we begin to put cars on the roads.

    As Jimmy pointed out, not everyone wants to build their own car or participate in every aspect of the process (or ANY aspect of the process, for that matter). But at the beginning, if you want an LM car you will have to make it happen – the community and customers are not invited out of courtesy, they are absolutely vital to Local Motors and to making Local cars happen.

    And the community, both local and virtual, knows this. This drives them.

    In the future the format may change so that people who are less interested in the entire process can simply visit an LM micro-factory and pick up the car they love.

    For now, if you want to see the car you desire come to life – it’s up to you (car enthusiasts) to make it happen.

    Ariel

    aferreira@local-motors.com

  • http://unifiedstudies.typepad.com matt schulte

    Two points that I want to….uh…point out. First, Jay says they will be profitable at 500 cars. To say that for a lot of people it’s too much work to go the Local Motors route, misses the fact that that is irrelevant. It’s a super-niche product. And also. The whole “customers don’t care” about how something was made, or if it generated meaningful jobs, misses one of the huge trends in business…lots of people DO care. Robert Feinman’s example of slow food is a perfect example. And, OK, 3 points…..”outside of niches”…..again, missing the point….as Jeff even highlights in his articel…The mass market is dead, replaced by the mass of niches. And one more….the “platform” idea Jeff mentions, that’s the next new, for sure….I think the DIYcity Open 311 project…http://tinyurl.com/pzxo27 opening up city data in order for innovation to happen in the wild, is a similar take, and we’ll see many many businesses built on the backs of this kind of data.

    • Andy Freeman

      > The whole “customers don’t care” about how something was made, or if it generated meaningful jobs, misses one of the huge trends in business…lots of people DO care. Robert Feinman’s example of slow food is a perfect example.

      Yes, slow food is the perfect example. There are a couple of slow food restaurants and several more that attempt to brand themselves that way, but the total market is smaller than what Denny’s spends on napkins. (Ordinary restaurants are significant and holding their own.)

      Slow food is an extremely small niche that isn’t growing – even the smug has plateaued. Is that really your model for journalism going forward?

      People will say that they care about a lot of things. However, the difference between what they say and what they do is important if you’re trying to sell them things.

  • http://www.scottmonty.com Scott Monty

    Hey Jeff,

    Thanks for continuing to push the envelope on the automotive industry. As I’ve said before (and we never got to catch up at SXSW as we initially discussed), I’d like to have you come to Dearborn to see what’s going on at Ford. As you know, we’re in a different place than most of the other major auto manufacturers, and I’d like you to kick the tires and lift the hood, so to speak, on what we’re doing to innovate, from communications to product development and more.

    Scott Monty
    Global Digital Communications
    Ford Motor Company
    @ScottMonty (best way to reach me)

    • http://www.local-motors.com Ariel Ferreira

      Scott,

      I’m continually impressed by Ford’s media strategy and clarity of communications. Even under pressure you guys are forthright & accessible.

      This is huge, especially for a company of Ford’s scale.

      Ford & Michigan are lucky to have you!

      Ariel

  • Foobarista

    The “locality” idea is a great one. One of my biggest pet peeves against Detroit types is the “if it can’t work in 40 below, it sux” mentality. There’s tons of car designs that would be perfectly fine for CA and AZ, but aren’t workable in Fairbanks or Detroit for that matter.

    So, let’s have ‘em. Who knows? We may yet get Tuk Tuks here in Silicon Valley.

  • http://www.thrivediver.blogspot.org Arash Robinson

    Jeff,

    I like this and I need a car. Ready to buy….

    shane

  • Thinker

    I agree that local small companies are poised to make a comeback in all fields. One of the causes of our current predicament was the acquisition fever that raged in the 90s, erasing many successful, targeted family businesses. Though I think this may indeed be a viable, exciting option for some car buyers, I really like the reliablity, gracious nationwide service, parts availability, and wind-tunnel design that allows my 6-year-old Honda Civic (not a tiny car or a hybrid) to get 40 mpg on the highway and 35 in town. This is my second Civic, and, in a couple of years, my next car will be a new Honda, too.

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  • http://www.cityslick.net/ Henal

    It would be great if local companies could make a come back but I think we are already too far gone to the big business world and the reliance on offshore manufacture of many many items, including but not limited to various car parts and accessories. Pick and search local companies on line to see if you can get information on whether they actually manufacture their goods and I think you will find that almost all of them, the little bigger ones of course, are manufacturing elsewhere!

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  • http://www.mikeyspinstriping.com Mikey

    Seems like they have a good idea if demand is there. What they are doing is nothing new. Hot rodders and customizers have been doing this for decades, only Local Motors are doing it on a larger scale.

    I’ve been in the car business as a customizer, restorer, hot rodder all my life and now as a consultant to smaller comapnies in the aftermarket looking for the next big thing. I know where where the market is going (as it has been since cars were introduced)- creating a vehicle that reflects the owners’ personality.

    That’s why customizing and hot rod shops stay busy because there’s a market for improving what the car makers start. And in the car business big words and high tech terms are not even on most car buyers mind. They just want to know what it will do for them, how they look in it, is there a cool factor and how much it will cost.

    I own a 1956 Chevy 2-door wagon, equipped with an LS-4 engine, overdrive transmission, A/C, ultra leather int., and all the creature comforts I want. It looks cool, turns heads, runs and drives better than a new car, is very dependable and gets close to 30MPG at 75MPH and it will go up in value. There’was no rocket science to building it and it cost under 30K to do most of it myself. Of course if you had it built, it would be twice that price but the point is, the personal factor with cars is old school and will never go away as long as we have entrepreneurs and innovators willing to give the consumer what they want. Now all the car makers needs to do is focus on that characterisitic and maybe they’ll ride the money train.