Detroit’s Troubles Shall Pass

Even if the American domestic auto industry gets their twenty five billion dollars tomorrow these companies are far from being guaranteed a future.  The management of these companies has truly screwed these companies into the ground.  For the longest time these companies have operated with a sense of complacency and arrogance that prevented them from taking a serious, honest look at the automobile market with an analytical eye and doing whatever it took to create the best automotive products in the world.

Yes the domestic automotive industry is saddled with union contracts and legacy labor cost that foreign car manufacturers don’t have to take issue with.  But these are the deals the management of these companies struck when they were fat and happy.  Now that times are lean management now realizes the error of striking deals with devils to keep the assembly lines rolling.  These days, the deals that worked so well to keep the assembly lines rolling are now working their magic in the reverse to help shut those same lines down.  Union contracts provided uneducated assembly line workers with pay rates upwards of thirty dollars an hour and fully paid health benefits with absolutely zero co-pays until the end of time.  The only people in the auto industry that appears to be making any money are the assembly line workers.

When flush with cash the automobile companies went on a huge buying spree.  General Motors bought Saab, Daihatsu, Isuzu, and Subaru.  Chrysler bought American Motors and inherited the Jeep brand.  Ford’s shopping list included Mazda, Jaguar, Land Rover, Volvo, and Aston Martin, James Bond’s favorite car company.  Instead of using all that cash to improve their products and work environments and their business model, they squandered all that money to become even bigger and more inefficient.

While just about every other carmaker in the world was building more efficient smaller automobiles and light trucks, Ford, GM, and Chrysler were building Excursions, Hummers, and hemi V8 powered Jeep Commanders.  While Honda, Toyota, and Nissan were working hard to design small, efficient, and profitable small cars and trucks, the domestics decided it would make more business sense to abandon that segment of the car market to its rivals from Japan, South Korea, and various parts of Europe.

When automobile company Hyundai started selling its cheap, poorly designed and woefully inadequate cars here in America the company developed a reputation for shoddy products.  But instead of following the Detroit practice of throwing half assed products at the car buying public, Hyundai worked to change its reputation.  The company went on a crusade to improve its quality and its reputation.  And with better products, it offered better and longer warranties.  Today, years after its Excel compact, Hyundai is one of the most successful car companies in the market.

The same time frame that made Hyundai a success saw the domestic car companies continue to shrink their share of the automobile market.  In fact, the only thing the domestic car companies do with any reliability is lose market share.  The big three are rarely innovative or on the cutting edge of automobile development when it comes to making the car ride better or move more efficiently.  Instead of making anything more than tepid investments in engine, chassis, or anything else that could lead to a better car, the domestics are more likely to offer voice activated horns or new panoramic sunroofs or upgraded memory storage for better MP3 player connectivity.  Buy the new Ford!  We give you better stereos to listen to while you wait for a tow truck!

Instead of constantly giving the car buying public competitive products the big three are more apt to give us a fresh design that can compete with its automotive peers one year and then rest on laurels as they do little to keep that product competitive for subsequent years.  Sure they’ll be gadgets to give people the impression that they are buying automotive state of the art.  But voice activation isn’t really all that helpful when I need my car to go and to stop and to deliver those two in relative comfort and with reliability.

For years the domestic automobile industry has been collapsing on itself.  It is the victim of its success.  Fifty years ago the idea of a Japanese car manufacturer being the number one car builder in the world was an absolutely absurd thought.  But few people outside of those Japanese manufacturers are laughing now.

Like clock work Japanese manufacturers will deliver new products regardless of how well their products are selling.  The Toyota Camry will be redesigned and replaced with a new version regardless of the fact that it is a perennial competitor for anybody’s best car of the year list or the number of units that are being sold.  Three hundred thousand Camry cars sold this year!  That’s great!  When do we replace it?

Compare this to Detroit thinking where they do their best to eek out every dime of a design to their own detriment.  Seventy thousand Impalas sold last year off our high of one hundred fifty thousand!  Well, let’s let it ride one more year!  The public may not buy it but we can still sell a ton through fleet sales to government agencies.  By the time a domestic car manufacturer replaces a design they have squandered any positive prestige they may have once had to become the epitome of the term has been.

Like some kind of variation of the Chinese water torture we see the vigor of the domestic automobile companies dripping away little by little.  Back in the seventies the car companies were strong and invincible.  The eighties saw the strength of the domestic car companies diminish somewhat.  The nineties saw the car companies struggling somewhat.  But cheap gas and a relatively strong economy made the purchase of large, thirsty Detroit vehicles painless.  That all changed with the new century.  Gas prices and shrinking wallets have made buying domestic automobile products so unattractive it’s only a matter of time before they permanently shutter their doors.

Even if the big three get the money to make new products Americans don’t have the money or credit to buy them.  The economy is so bad few people can even think of buying a new car.  It wouldn’t matter if a new car was foreign or domestic.  Used cars are a far more attractive and affordable option.

Giving the domestic car companies twenty five billion dollars is a bad idea.  Everything these companies have done for the past forty years has done nothing to halt their downward spiral.  Their business model is so poor that they can’t make money at a time where a virtual newbie like Hyundai is making money and expanding.  This mess that the domestic carmakers made for themselves wasn’t created overnight.  It started well over half a century ago.  It won’t be solved overnight either.  And twenty five billion won’t be enough to pull them through until the economy recovers.

It is unfortunate, and I really do hope I’m wrong, but it looks the General Motors, Ford, and Chrysler will go the way of Studebaker, Tucker, American Motors, Plymouth, Oldsmobile, LaSalle, and so many others.  The vision necessary to make better products is not part of domestic carmakers genetic makeup.  These companies fought against government regulation that made automobiles better products.  They resisted seat belts, air bags, safety glass, tougher crash protection, pollution restrictions, and fuel economy standards.  The standard refrain was that the government should stay out of the car business.  It looks like the American carmakers need to stay out of the car business as well.