Automotive Intelligence – Detroit’s Critics Just Don’t Get It

Automotive Intelligence

The article caught below my attention in the Washington Post – which I thought was a very profound statement regarding the industry.

Detroit’s Critics Just Don’t Get It

By Warren Brown

Sunday, March 1, 2009

The nation that invented the automobile has no intention of walking away from it.  That nation is Germany, which gave the world its first carriage powered by an internal combustion engine in 1885.

But the nation that popularized the automobile via assembly-line production, the United States, seems less certain of its continued commitment to the car – that is, to the car wearing a GM, Ford, or Chrysler badge.

It’s fundamentally unfair.

Detroit is getting a bum rap.

And if President Obama does not understand that, just as he clearly does not understand some basic facts of automotive history, as indicated by his misstatement last week about which country invented the automobile, he is likely to do Detroit more harm than good.

“And I believe the nation that invented the automobile cannot walk away from it,” Obama told a joint session of Congress, delineating his administration’s plans to revive the nation’s economy.

The comment represented more than a simple historical error.  It bespoke an attitude, the idea that the federal government, carrying bags of taxpayer money, must now ride to the rescue of a recalcitrant Detroit that finds itself on the brink of bankruptcy after “years of bad decision making.”

Here’s one more attempt to set the record straight.

The Detroit that Washington loves to hate, the one that policy wonks and politicians think they can run better than industry professionals, stopped existing at least 15 years ago.  It faded because executives at GM, Ford and Chrysler reached a consensus not fully embraced by Congress or the American consumer.  To wit: Oil will not last forever.

Detroit’s executives aren’t stupid.  Nor are they arrogant fools who care more for their own paychecks than they do for their industry’s or their country’s future.  They know that the care of the future will have to be powered by something other than gasoline or diesel – or else there is no future.

Thus, it would behoove Obama’s automotive task force to take a close look at the billions of dollars Detroit already has poured into the development of alternative fuels and drive systems.  The truth is that Detroit has been working hard to develop cars that consumers will need.  But that research and development largely has been financed by selling cars and trucks that consumers want now.

That brings up a second point – the nonsense that Detroit no longer makes cars that Americans want to buy, as evidenced by Detroit’s consistent loss of share of its home market.

The United States is the world’s most lucrative, most open, most competitive automotive retail market.  Gone are the 1950’s and 60’s when the term “the Big Three” had meaning backed by dominant, unchallenged home market share.  Nearly every company that can mate an engine with a transmission has opened shop here.

It is reasonable, under these circumstances, that the “Big Three” that had more than 90 percent of U.S. market share in 1950 is now fighting to hold onto a 48 percent share of that market.  Doesn’t a 48-percent share mean that somebody out there is taking what Detroit is making?

Also, it’s time to stop blaming Detroit for being a good employer – one that has assumed the enormous financial burden of providing its workers better-than-adequate health care and compensating them in a way that allows them and their families to embrace middle-class dreams.

Conventional wisdom says that Detroit’s automobile executives have given the United Automobile Workers too much in a mutual ceremony of greed.  It is a belief with a built-in bias – the idea that people who work with their hands should be allowed to earn only so much, dream only so much.   Thus, we have pressure on Detroit’s unionized companies to lower their compensation packages to levels offered by nonunion competitors.  Success in that endeavor should put all autoworkers in the United States in their place, because pay at the nonunion plants largely has been pegged to compensation packages won by the UAW.

Finally, let’s stop pretending that we are giving Detroit a “bailout” or a handout.  We are making taxpayer loans to an industry that once was successful enough to pull several generations into the American middle class.

That industry is in trouble today for causes considerably beyond its control: wildly fluctuating fuel prices, the result of a government absent a commercially and environmentally effective energy policy; and a collapsed financial system that has put consumer credit on ice.

The Obama administration’s automotive team needs to concentrate on repairing those things.  What isn’t needed is federal oversight, or interference, in the design and development of the kind of Detroit cars and trucks that “Americans want to buy.”

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