by: Michael Hoexter
Now as the Big Three American automakers are teetering on the brink, is the time for the government to provide direction to an industry that has lacked a decisive winning strategy and forward-looking product plans over the past decade, if not decades.
The Renaissance Center, GM’s headquarters, has come to symbolize the modern Detroit skyline. Detroit and much of the industrial Midwest has been in decline for four decades (the "Rust Belt") but would experience a dramatic blow with the sudden collapse of one of Detroit’s Big Three automakers.
Currently, the Big Three and the UAW are looking for stopgap measures to keep substantial pension and healthcare obligations from upending their business as well as shore up their overall financial picture. If one of these companies were to close its doors, millions of jobs would be lost and the retiree benefits system for tens of thousands would be endangered. We will leave to one side here, the problems of a health care system that links benefits with employment status.
Yet the troubles of the car industry are largely of its own making. For years, engineering and design prowess, whether in creating exciting cars that lead the industry in aesthetic appeal and useful features or leading in alternative fuels and energy efficiency, has taken a backseat in Detroit to playing to a limited set of consumer interests that positioned the Big Three in few narrow market segments. Most troublingly, Detroit has, despite 35 years of experience with them, no workable plan to deal with oil shocks, let alone climate change and sustainability; the commitment to highly profitable SUVs was a brief party built on the unusually low oil prices of the 1990’s. Wall Street’s expectations for ever growing profits and increased quarterly earnings also combined lethally with Detroit’s scorn for fuel efficiency and less optimistic views of oil supplies.
Now, again, Detroit is seeking respite from the federal government from its lack of foresight and leadership in the automotive industry since the 1973 oil shock. As part of this deal, despite the lamentable example of the bank and Wall Street bailout, Detroit cannot simply be a recipient of aid without a change in strategic direction. Too late for the current immediate crisis, GM’s Volt project and the E-flex platform are future-looking projects with bottom line impacts at the earliest in 2010. So this is a teachable moment for these industrial behemoths, one where deep insight into the future of energy and our civilization can inform the creation of new technologies.
A Bridge between the Present and the Future
Postal delivery vehicles with their bulky form factor and limited range requirements are perfect for introducing battery electric vehicle technology on a mass scale. In the late 1990’s Baker Electromotive cooperated with Ford on this electric postal delivery van.
Automakers will not make money if they cannot deliver vehicles. Short and medium-range battery electric vehicles for the post office and other fleets can be built very rapidly as conversions of existing vehicles. If Detroit were to retool quickly, the first of these vehicles, using lead acid batteries, could be ready for delivery within a year.
How can Industry “outsiders” know better than industry “insiders”?
How can government officials and analysts tell the leaders of private companies what to do? Well, since 1973, in between the profitable years, the Detroit automakers have returned to Washington again and again for special consideration from “outsiders” as well as to defeat reasonable laws to increase the fuel efficiency of vehicles. Now they must regret at least some of their actions, especially with the sudden collapse of demand for large, fuel-inefficient vehicles. “Insiders” can often lose sight of the big picture, especially in an industry in which large commitments of time and money are made with very long product cycles (group think can take over as a form of self-justification). Aesthetic decisions are melded with technological decisions leading to difficulties in disambiguating problems with one or the other aspect of a product or product line. Furthermore, the auto industry’s power center in Michigan is at some remove from other centers of power, requiring steady infusions of creativity from outside. Of course, insiders will have a more granular knowledge of their industry but, it seems with the American car manufacturers, seeing the forest for the trees is a major challenge.
Will Detroit and the automakers listen?
Detroit once led the world in industrial assembly technology and industrial relations. Ford’s Model T Assembly Plant was notable not only for the techniques it used to make autos but also for the high wages paid its workers.
The US automakers have been largely beaten at their own game by foreign manufacturers with the financial crisis providing the final push. Given their current position, they now should take seriously input from any well-intentioned and well-informed party. They have in the last few years taken some small strides towards improving the quality of their products and GM has, with the Volt, come up with a genuinely good idea with an interesting design and promise for the 2nd decade of the 21st century. More importantly now they are asking the American people and the government for support despite having largely failed as profit-making businesses. In exchange for that support, they should take the interests of the American people to heart and move beyond their traditional point of view to one that sees the shape of things to come. Just because the TARP plan has in its initial form been a giveaway program doesn’t mean that a stimulus package for Detroit, nor future stimuli for banking, not come with strings attached.
Furthermore, in this plan, the federal government and state and city governments will be the industry’s paying customers for new technologies and vehicles. The Big Three would be foolish not to listen to their customers because, as these plans should be structured, the resulting products will need to fulfill functional and quality requirements, even with the guarantee that eventually the government agencies will take delivery of these products. These orders are not acts of charity but a commitment to America’s and, we hope, the American auto industry’s, future.
Beyond Detroit…(how about San Jose?)
While a bailout of Detroit is a form of special consideration for the three still-giant American automakers, they should be reminded that beyond this crisis that other companies may well take their places in the pantheon of great American companies. Tesla Motors, for instance, has laid off workers and is delaying the production timeline for its second model (to be built in San Jose) because of the credit crisis. In a bailout of Detroit, other American vehicle makers impacted by the financial crisis should recieve consideration as they may well represent the future of the American auto industry. So with aid, the Big Three automakers should also receive a message that this may very well be the last time that they receive special consideration from government, as newer kids on the block may be able to do the job better in the future.
Original Post: http://terraverde.wordpress.com/2008/11/09/detroit/
