There is much debate about WTF happened to the US auto industry and who is responsible for it. Some blame the workers, some the union, some the legislators and some the companies. I’d like to take a few minutes of your time to offer my own thoughts on this calamity and who’s responsible for it. It’s a real shame what has happened and knowing it didn’t need to end this way leaves me speechless (almost).
The root and cause of this is management. They market the cars, they make the design decisions, they make the R&D and investment decisions, they make the financial decisions, they negotiate agreements with the unions for compensation and benefits and they negotiate dealer franchise agreements.
They have spent 100’s of millions of dollars lobbying legislators federally and in each state to defer or water down legislation which would have forced them to change the environmental impact of the product, the national security impact of the resources those products consume and the safety of those products to the users. They fought seat belts, they fought air bags, they fought anti-lock brakes, they fought collision safety standards, they fought fuel economy standards and they fought pollution standards tooth and nail and continue to do so even today. They invented none of it.
They have fought every change of attitude of the consumers of their products and countered them with hundreds of millions of dollars in advertising and promotion selling the big car, big truck lifestyle and how their big cars enable it. When the scream of the market for smaller, more economical and more sustainable vehicles couldn’t be silenced they took their big trucks and made them smaller big trucks and called them “crossovers”. That is their response.
Now, out of nowhere, GM says they have an electric vehicle they can release within 2 years. That they get the message and they have changed their ways. Really? Does anyone really believe that Detroit couldn’t have done this 10 or 20 years ago? Does anyone really believe that?
This crisis isn’t new and it didn’t start in 2008. The business plans of the Big 3 haven’t been viable for over 40 years. Detroit is fixed on a course of pushing the boundaries of sustainability until they they break. In the ’50s they made cars bigger and bigger until the bubble finally burst and they were forced to come out with smaller more sustainable cars. In the early ’60s they got away with it because there was no one to compete with them. The post WWII economies of Japan and Germany were not fully restored.
How did they respond? Sure they made cars smaller but year after year they got bigger and bigger again. The engines got bigger, the cars got bigger and their environmental impact became bigger and bigger. Then, again, in the mid-70’s, we had the oil crisis and the US industry became unsustainable and they did the same time they did over a decade earlier: they made smaller cars. This time however the new economies of Japan and Germany were there to take a shot. Since that time the US auto industry has been eroding one 1% of market share at a time. You would think that with this threat from overseas they would have finally got their acts together but nooo.
As soon as the oil crisis passed and Reagan came into office in the early 80’s they went right back to what they were doing building bigger and bigger cars each year. When they could get away with bigger cars they switched to selling trucks tailored for consumers: the SUV. For the last decade or more all 3 of the major Detroit automakers have incrementally super-sized their vehicle line-up; think Ford Explorer, Expedition, Excursion for a vivid example of this incremental bloat. The final results of this push to the edge can be seen in any one of the Big 3’s final 2008 model line-up.
They’ve made zero investment in improving production technology to make selling small cars profitable while the Japanese were investing in building smaller cars more cheaply, more efficiently and with fewer workers. When the competition were investing in robotics, flexible production lines and basically eating Detroit’s lunch, the Big 3 spent millions, perhaps billions promoting an unsustainable and obviously doomed business plan.
Europe for its part spent that time inventing new technology and pushing the boundaries in materials science, passenger safety, fuel economy and just plain making cars better.
The US auto industry failed and failed miserably on every count to the point of complete and total incompetence. They saw this coming more than 40 years ago and despite repeated warning and opportunity to change course they chose to plow headlong into a giant iceberg of unsustainable and inferior products.
The only ones who can be reasonably blamed for this catastrophe are those at the helm. They are grossly negligent, incompetent and just plain stupid. They have wilfully and knowingly run this ship aground and now threaten to sink the entire US manufacturing sector and take some 3 million passengers down with them and leave another 40 million stranded.
If that isn’t criminal I don’t know how else to describe it. What do you think?
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on Dec 14th, 2008 at 2:08 pm
You spoke the truth.
But I find it even more amazing that the Wall Street CEO’s were able to buy in to an unsustainable business plan, based on a premise (infinite appreciation of house prices) that any junior-high school student could see was flawed, and put century-old companies in the same straits as the Big Three in only a decade or so.
on Dec 14th, 2008 at 3:07 pm
i completely agree, it is their own fault for not being more efficient in their products
on Dec 14th, 2008 at 5:14 pm
Interesting subject… I drive a Honda, and love Honda’s to death along with mostly every Japanese make.. I agree that I would more likely buy a Japanese, or European vehicle for most of the better part.. But if I’m gonna buy a truck, it would definitely be American.. Regardless through many years of driving and over 14 years in the auto industry the U.S. will and cannot survive without an Auto Industry. The fact that we do have American Toyota, and American Honda and others to rely on, this nation relies more on the U.S. Automakers to do 65% of the transportational duties of our government, industrial, and business fleet. The States Law enforcement agencies throughout the country uses these same vehicles, the entire rental, and personal transportation profiles such as limos, and taxi’s uses 89% of the American makes.
Now keep in mind, Ford and Mazda have had there share of joint ventures for many years, same goes for Chrysler and Mitsubishi, Mercedes etc. GM and Toyota have done the same, even recently to bring the Toyota Matrix/Vibe this platform shares parts from both companies. The parts used in today’s vehicles are sourced from many American companies that were started by the American Automobile, matter of fact you can build your own car by sourcing individual parts from these companies. If you think that the high-performance parts you buy are a 100% Japanese or European you are wrong. These countries buy our metals, alloy extrusions of all sorts, and textiles because we have for the longest time have the tooling, and innovative assemblies that many manufacturers have used and copied. We started the assembly line!!! Of course second to China to provide metals for not only the U.S. but the entire world.
The Big 3 are also the only ones that have for many years provided assistance for disabled people. Most of the plants and companies that are under the BIG 3 provide more employment, and economical structure than any company in there hometowns, matter of fact if the BIG 3 don’t get bailed-out then it would also effect the thousands of workers in these states, therefore decreasing the enitire state’s financial portfolio. These will not only lead to another nationwide depression, and recession, but possibly a bankruptcy rating that will fly to the roof..
So if you really think about it, even if you have no love for the BIG 3’s vehicles, that shouldn’t be your only reason. Yes I have to admit, we in this day in age, have some idiots that run the game, bringing a $25-million dollar private jet to get bailed out is stupidity. But if you look at the BIG picture, the same companies like Nissan were in the same shoes before, and could again be lucked out in the future if you don’t choose the right words to agree or disagree with what could effect an even greater recession in history, that we Americans are trying to survive and get through. We all know that we don’t live long enough to live the life we choose, but it would be a shame if we can’t live well to enjoy what life has to offer.
So all in all, let’s not dig a deeper hole for ourselves, the Bank’s got bailed out, and they asked for more! When these companies were the ones that got us in this economical trouble in the first place? HELLO? We invented the AUTOMOBILE!!!! We will, we can, and we will survive. The BIG 3 will get BAILED-OUT guaranteed!!!! =)
on Dec 14th, 2008 at 8:28 pm
Nice article. It really gives insight in this dilemma and can make someone who hasn’t been following the news understand what really is going on behind the Big Three’s publicly open doors (not that I haven’t been attentively following the stories; just stating a fact). Good job with the article!
on Dec 14th, 2008 at 9:03 pm
^^^I certainly hope not. We didn’t invent the automobile, Henry Ford popularized the assembly line process to give us the first mass-produced vehicle. But since then, we haven’t had too many great ideas. It seems to me that the root problem is the American philosophy of “I have to have it the way I want and it has to be right now.” We are a nation of spoiled brats and it shows in most areas of our culture. That’s why noone has complained until now. As long as some yahoo in an office is turning a profit, why should he care if his workers are losing their retirement packages? And yes, the Big 3 do make better trucks, and we need them. But just because they go bankrupt and don’t get a government hand-out doesn’t mean the vehicles won’t be made. Look at Aston Martin. Ford was one of a dozen different owners of that company. Every time it went under, someone bought it and kept it going. Of course, at a time when they were offering the best cars in the company’s history, the retard management still couldn’t turn a profit. How do you even do that!? I say they get what’s coming to them. It’s just a shame the employees have to pay for the mistakes of a few. I deffinitely don’t want to hear about any more of my tax dollars paying for some $3000 suit-wearing dipsh!t to clean up his mistakes. If I open a restaurant and run it into the ground, the FED won’t pay my loan. Just because their debts are bigger doesn’t make it any different.
on Dec 14th, 2008 at 9:20 pm
^^^I agree to the fact the head honchos on top fucced up BIG time, but that doesn’t mean they are getting away with it. When they approve the BAIL-OUT the conditions will follow based on “NO-MORE” get out of jail free cards, and the infrastructure will change. The portfolio’s will have to be cut, so these idiots up top will get what they deserve. Yes Karl Benz was probally the soul-creator of the true first design of the automobile, but if it wasn’t for the U.S. you wouldn’t be here typing about this for one, and second the car you drive wouldn’t exist. Where not the only Country that relies on our BIG 3, China sells more Buicks than any other country including the U.S. alone!! Do you really think that Japan will never BAIL-OUT Toyota or Honda if they ever were to go down? Knock on wood that I hope that never happens, but the same goes for any other country that has an auto industry…
on Dec 14th, 2008 at 11:30 pm
I have a 2003 Chevy truck that they sold me just last year as a “new Vehicle”. It’s full or rust from top to bottom and inside the dash. This is their idea of selling trucks to make a quick sale. It is now on the GM buyback list….next time I’m buying Toyota!~
on Dec 15th, 2008 at 6:02 am
Ultimately the auto industry is unsustainable whether it be Japanese,USA, etc.. I see this auto company Bail out as a great opportunity for “we the People” to send an important message and finally have a say in what happens. They do not necessarilly need to be building cars. Mass transit is not that big of stretch for them. During WW2 they switched to building bombers with in months. Obviously leaving these auto CEO’s to their own devices will only get us more of the same wastefulness. Being from Detroit (many years ago) I know that there is a wealth of engineering skill and creativity just itching to be brought forth. Give these folks something other than the same old, same old to work on and they could come up with all kinds of new and more efficient ways of transporting, building, running a company.etc.. I see hope if only we are willing to tap into it.
on Dec 15th, 2008 at 6:16 am
It is human nature to find a person to blame for every problem or catastrophe. It only makes sense to find and understand the cause of failure. Perhaps in the future, some smart person will learn from the mistake and not repeat it. Unlikely, I know, but hope springs eternal.
In my experience, there is no one person or group that shoulders all the blame for any problem, just the group that is left holding the bag. That managemnt is in that position is just part of the job, so I have no sympathy for them. They had the power and ability to change circumstances, but chose what I will call “the safe route.” The trouble is, the safe route does not always lead to where you think it will. The cautious driver can get in an accident on the federally funded super-highway just as easily as she can on the county road. In this case, managment got inot a high speed head-on by making and selling more of the products that had generated huge profits just a year or two prior to the collapse. In hind sight, it seems a huge mistake, but at the time, building more big luxury SUVs and trucks seemed to be the safe move.
I’ll disagree with a few points in c-three’s editorial. First, the idea that the big three led the American people into what I will call the SUV debacle overstates their power and undeservedly excuses the American public. I’ve been against SUVs for years and in my experience, it is the American consumer whose love affair with the ever larger, more luxurious vehicle drove the market. Passenger cars and Minivans met the needs of 95% of Americans. But the “soccer-mom” image that accompanied the lighter, more aerodynamic, and more fuel efficient Minivan drove consumers to the bold styling and design of the big SUV. I find that most consumers will defend their ownership of a four door truck or SUV to the death and remain unrepentant even in the face of $4.50/gal gas prices. The only bright spot, so far, is that the current low gas and vehicle prices do not seem to be encouraging renewed interest in the SUV/Truck market. But let’s reserve judgment on that until we have seen six consecutive months of regular unleaded under $2.00 a gallon.
Second, the Asian makers, in my opinion, owe their success as much to a superior business model as superior products. Their business model results in total cost of goods sold that, on average, are $2000 per unit less than the American product. This, in my view, is the key to their success. And most of that difference is the result of labor and benefits costs. Again, managment’s responsibility, so I still concur with the original conclusion.
Third, what “small” foreign cars? Oh sure, the major foreign brands have some entry level products and lines, like Fits and Versas and the Scion line, but take a look at the meat and potatos. Civics, Accords, Camrys, Passats … you name it, they all get bigger and bigger with every redesign. And for good reason. See point one. Americans like “bigger” vehicles. Let’s keep in mind that sales of the foreign brands are down just as much, if not more that those of the big three. They have an advantage, but are suffering mightly too. Plant closings for the big foreign manufacturers are on all the news stations too.
Fourth, let’s not forget that one of the big three was owned by one of the very smart foreign brands for years. Mercedes didn’t really do much to change the Chrysler/Jeep business model, and in the end, just sold it. Maybe the problem isn’t as easy for managment to solve as we would all like to believe.
on Dec 15th, 2008 at 9:42 am
^^ $2000 per unit makes sense, but consider that we have to ship in a large percentage of our goods because we can either not afford to make it for ourselves or places like China have most of the worlds steel.
GM and Ford relied too much on their truck market, the least profitable vehicle any auto manufacturer makes are trucks.
on Dec 15th, 2008 at 3:19 pm
^^^How can you make a statement like that! “The least profitable vehicle any auto manufacturer makes are trucks.” lol
Bill, I agree with you 100%.
What many people here are not paying attention to is the fact that all manufacturers sales are down right now. Not just the Big 3. This isn’t so much about not having the right vehicles right now as the cash flow to make it through the current financial downturn.
And many people are conveniently forgetting that they are making the vehicles consumers want. SUV’s were a hot ticket right up until $4.00/gallon fuel…the sales figures support this. And unfortunately, with lower gas prices we are starting to see a return in this market segment! Unbelievable but American’s like their big vehicles.
Also with regards to the original article (above ) we are all responding to:
GM developed the airbag system. An American car company was the first to use anti-lock brakes in a car…Get your facts straight. Yes they fought against many of the collision requirements but go weigh your car and before you cry about it’s fuel economy, compare it’s weight to a similar sized car in the early 70’s.
I remember back in the 70’s when the Japanese first began importing cars here and everyone thought they were too small so they didn’t sell well. Remember the CVCC hatchback? An average size American could hardly fit in the front seats let alone the back. Compare the size of that car to todays Corolla and Civic. Now go look at a Cobalt or Focus.
I think one of the biggest problems facing the American car companies today is perception. They could build (and do) some of the best small cars, with the best in class mileage and still some people would not consider them.
on Dec 15th, 2008 at 10:16 pm
^^ Because two years ago Ford’s truck line up sold twice as much as Toyota sold in camry’s and made a marginal less profit, billions less. Ford and Chevy have admitted there is more money in building cars than trucks. But I havent seen hard data from them, I have seen the hard data from Toyota. But who you can believe is the hardest part of that whole argument.
on Dec 20th, 2008 at 6:08 am
Heres my $.02, give us another stimulous package that consists of the $15 billion these three are asking for. Make the money only good towards a product these companies produce. That should stimulate more than enough revenue for them to bounce back. Even if they do recieve this bail out I can’t afford a new vehicle anyways, and sure won’t be buying one anytime soon either. It doesn’t matter which companies are in this situation (there are what seems like hundreds of companies filing chapter 11 each month now), if consumers don’t have money to buy the product why give the company money to stay afloat.
consumers with money = non failing economy
on Dec 22nd, 2008 at 12:06 pm
Good article, Erik. I think that in addition to the acknowledged management issues, one of the reasons the American automakers have failed to remain competitive against the Japanese and even European makers is that they have too many brands and products. Why do we need the “twin” cars like Ford/Mercury, Chevy/GMC, etc.? Although Honda has started adding more and more SKUs to their lineup, for decades their business thrived on the basic offering of Civic and Accord (small and medium cars with 3 very simple option levels). The introduction of the luxury lines Lexus and Acura seem to contradict this idea, but I think they did a much better job of differentiating those brands. The American brands are too much alike, creating enormous waste supporting so many different models.
I think the idea of a “managed bankruptcy,” or even straight bankruptcy, might help them understand that they need to get leaner and more simple. Just like the defense industry had to learn that their jobs were not guaranteed, nor were those pensions they felt entitled to … or those of us in high-tech who suffered the tech bust and many had to relocate all over the country in order to stay working. Not to mention that we NEVER had the luxury of pensions – we were expected to bank our own earnings into 401(k)s with minimal matching contributions from our employers. And guess what – tech has survived and gotten more innovative. The unions are not doing anyone a favor now. Management needs to wake up and make smarter product decisions and workers need to start accepting less in exchange for having jobs.