The United States auto industry has fallen down and it can't get up. Well, maybe that's not true for Ford, but General Motors and Chrysler are certainly on death's bed.
Today President Barack Obama announced he has rejected both GM's and Chrysler's reorganization plans. Together they were seeking an additional $20 billion in taxpayer financing. Instead, GM CEO Rick Wagoner was shown the door by the White House. The fact that this caused shock in some circles is puzzling because Wagoner should have been fired long ago by his feckless board.
Wagoner has been at GM since 1977, and in charge of the company since 2000. He comes out of finance, not product design, sales or marketing. The first thing he did when taking over GM was to emphasize the light truck and SUV markets at the expense of innovations like hybrids. Under his tenure GM bled money and lost market share. Strike one. He flew to Washington on a corporate jet late last year to beg Congress for money, and was skewered by critics for his insensitivity. Strike two. Wagoner submitted a restructuring plan to Washington in which he requested an additional $16.6 billion in government loans. GM has already received $9.4 billion in loans from Washington. But the President's Task Force on the Auto Industry concluded that GM had not met its promises and its new plan would fail. Strike three.
The President represents the taxpayers who have stepped up to the plate on behalf of numerous failing companies. I applaud his firm action with GM. Now a stronger board must be put in place and further management changes are likely. GM will then sell or discontinue product lines like Saab, Saturn, Hummer and maybe Buick. The company will focus on Chevy, Cadillac and GMC. To remain viable under any scenario GM must get contract concessions from the UAW and address significant legacy costs.
The President's Task Force was harsher on Chrysler, concluding that that the nation's number three auto company could never be a viable company. It urged them to merge with a partner. Chrysler has announced there is a "framework" for a deal with the Italian auto maker Fiat, though details have to be worked out. Chrysler's biggest problem was market appeal, as every one of their brands rated in the bottom quarter of customer preference. If the Fiat deal actually goes through Chrysler CEO Robert Nardelli is likely to become a short termer. The alternative is Chrysler goes bankrupt and sells off assets.
How did the U.S. auto industry get so out of whack? Today few Detroit brands have strong market appeal. The industry is burdened by inefficient operations, costly production, onerous labor contracts, and enormous costs associated with employee health plans and other benefits. Detroit has gone from industry leader to global laggard in three decades.
Nothing will change unless the Detroit culture changes back to what it once was, entrepreneurial, creative, innovative, market savvy and cost effective. This calls for visionary and strong leadership, as well as a smart and experienced board.
Where is the Lee Iacocca of the 21st century? I know, I can do a search on Facebook!
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It will be interesting to see how Chevy's new Camaro will sell, if it's made well and gets decent gas mileage in a sporty car. Not everyone wants a 4 door Camry.
Magnetic generators are expected to replace the need to plug-in a plug-in hybrid. A 2 kW generator is on the horizon. It will eventually demonstrate a compact, inexpensive, capability to end the need to plug-in.
It may be possible to provide 100 kW systems that will fit in the space of an engine and gas tank, on a prototype basis within two years. If that occurs, since no fuel or battery recharge is required, automobile manufacturers may conclude that engines are likely to become obsolete. Consumer purchasing patterns could begin to reflect a new reality, with the market deciding most future cars must be totally electric, since they will never need any variety of fuel.
When a substantial number of vehicles powered by magnetic generators fill a parking garage, it will have become a multi-megawatt power plant.
The cost of many vehicles might be paid for by utilities, as they purchase power whenever needed. The parked cars, trucks and buses, each become decentralized power plants - a rapid, cost-effective alternative to the many tough and costly challenges of constructing new coal burning and nuclear power generation facilities.
Auto makers will have no trouble selling fuel free cars that need no batteries or recharge, and can pay for themselves.
Imagine the impact on the world economy.
Auto makers have a unique opportunity to lead the nation and the world.
I'm from Detroit and can confirm that you are spot on!
As far as "American companies don't build the cars people want to buy" this is complete BS. The Ford F-Series truck has lead the sales charts for over 25 years! For many of those years F-Series was selling DOUBLE what the Camry was selling. For 2008, despite the rise in gas prices causing people to flee from trucks and SUVs, 4 of the top 10 sellers, including #1 and #2 were AMERICAN MADE!
The ill of Detroit is that over the past 40 years, the market for cars has become more and more fragmented into different segments and the Big 3 owned older less flexible plants. This makes it more expensive for them to compete in all these segments. Throw in higher labor, legacy costs and the inability to match production to demand to to unfavorable labor contracts and you have the state of the current auto market.
Even if Detroit makers had the reputation of Honda and Toyota, it is still unlikely that they would be profitable due to lack of manufacturing flexibility and the fragmentation of the market place, plus all the new players. Today you have to try to make a profit from more models that sell in fewer numbers.
Oh brave new world, that has such people in it...