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By Glen Smale
December 1, 2008
It is no secret that the death of the America’s motor manufacturers is about to become (almost) complete – unless some hugely innovative and effective rescue plan can be put in place very quickly.
What is good for the goose is good for the gander as they say, and if the US government can bail out the banks and mortgage lenders, then why can they not bail out the Big Three car manufacturers? After all, it is these three motor manufacturers that have driven much of America’s economic growth and development over the last century.
Many will remember the rise of General Motors under the strong leadership of Alfred P. Sloan, where growth and development was measured and under control. However, that was then and this is now. So what has changed you might ask? Basically everything, would be a fair answer.
Back in the 1970/80s, America opened its doors to imports in a way that sent a message to the Far East (and, in particular, to Japan) that they could export cars to the USA with little or no restrictions while the reverse could not be said of American exports to Japan. There is far more to this statement than we have time for in this article, but the US approach gave the Japanese motor manufacturers the freedom to plan their expansion well into the future, and in somebody else’s back garden.
In a nutshell, this development of foreign markets by Japanese manufacturers led to cheaper cars that were better engineered, and all the while, the American motor manufacturers continued producing huge vehicles powered by huge engines, with little attention to engineering quality and even less attention to innovation.
Lee Iacocca, the so-called ‘father’ of the Ford Mustang, warned the US government repeatedly, long after he had left Ford and Chrysler, that they were digging a hole for themselves that they would not be able to escape from. How right he was. It was not long after, that the traditional north-east corner of America where the Big Three were located in the Detroit area, became known as the Rust Belt, due to the number of moth-balled steel mills and manufacturing plants that were forced to close during the 1990s.
Add to this the insistence that the US motor industry has doggedly stuck to its belief that Americans would always remain loyal and buy domestically manufactured cars. Wrong again. The unfortunate fact of the matter – for those in North America – is that American designers have for decades only built cars that they thought appealed to the US and Canadian markets, so ruling out the strong export markets of other car-buying nations, such as the Europeans and the Japanese, where car buyers were not drawn to the boxy American designs. So with their own domestic market shrinking in the 1980/90s, did the US automotive designers learn any lessons? Again, sadly not.
Thanks to the quality, reliability and innovative designs of foreign imports, such as the Toyota, Honda, Nissan, Lexus and Infiniti brands, North American buyers switched loyalty in their droves. Imported cars offered better quality of engineering, better designs, far more reliability and above all, that imported ‘stand out’ factor. The result of this trend in the market was a falling demand for domestic brands matched by a growing demand for imported brands. This growth was at such a fast pace that American politicians thought it best to allow foreign manufacturers to build plants on their soil and to offer jobs and employment to replace the loss of similar jobs experienced as a result of slower domestic demand for vehicles made in the Detroit area of Michigan. Did the American motor manufacturers see the big bold writing on the wall at this point? Sadly, still no.
When the influx of foreign manufacturers really gathered pace, seen by the establishment of design offices for Hyundai/Kia, Porsche, BMW, Toyota and many more, the domestic American motor manufacturers were left reeling from the shock. The Big Three tried everything they could to stay alive and bought into European brands such as Saab (by GM), Jaguar, Land Rover, Aston Martin (all by then Ford-owned) and many more. Chrysler got into bed with Daimler-Benz, but after a short, troubled marriage, divorce followed.
Where are these European brands today? Most have been sold on because differences in manufacturing cultures and foreign markets are not things that are easily papered over in the boardrooms where such ideas have their roots.
Hastily cobbled together campaigns to sell American iconic brands into Europe were rushed into place, but sadly the quantities were so small and so insignificant that they made no real differences to the sales ledger. Added to this, the large and traditionally boxy American designs just did not cut it in Europe where stylish, sophisticated and highly engineered cars were the norm then, and still are today.
Unfortunately the Americans just did not learn the lessons that were there for all to see. American automotive culture had become so in-bred and so inward looking, because the domestic industry believed that nothing would ever change and that foreign import volumes stateside would never become a significant factor. When you offer a customer an attractive alternative, that is a stylish foreign import, then some hard buying decisions had to be made. Once you have then lost those customers, it is harder to win them back again than it was to win them in the first place. Gone are the days of ‘once a Ford owner, always a Ford owner’. It is just that Chrysler, Ford and GM did not see the changes coming.
The American motor manufacturers’ insistence on churning out hundreds of thousands of trucks was a good thing while it lasted, but did the manufacturers not see the oil price climbing to record levels almost daily? They built their hopes on one market, the truck market. Now was that good planning, or just gambling? Surely there is life beyond trucks. One wonders what all the motor industry executives could have been thinking.
Unfortunately, the American motor manufacturers can blame no-one but themselves. If those highly paid self-styled mainly men in their ivory towers (Saturn was the exception, though GM-owned it was run by a woman) could not observe and analyse the global trends, or even try to expand their businesses into growing markets outside their own borders, then they have done their companies a grave disservice. Those in upper management should be held to account for this because, in a major way, they have themselves contributed to the dire state of the US motor industry.
So where to in the future? The American auto industry is a very difficult place to be in right now, because it is quite conceivable that some rich Chinese, Indian or Russian trillionaire might come along and write a cheque to buy out GM altogether, or Chrysler for that matter. But if the American government can bail out the financial sector, then they should also bail out their motor manufacturers because the alternative is too frightening. So many other companies and economies around the world are dependent on the Big Three in some way, that their blinkered attitude over the last few decades could have consequences so dire, that the aftershocks would be felt right round the globe by our children and grandchildren for many years to come.
President-elect Obama talks about creating two-million new jobs. Perhaps Barack Obama should consider the estimated three million jobs that could potentially be lost should the auto industry bail-out not be dealt with effectively, efficiently and speedily. But one cannot only point a finger at the top executives of these US companies, for governments have failed dismally in its attempts to keep their respective economies on track, to plough money back into research and development or new technology. It should be the responsibility of all large motor manufacturers to contribute to finding an alternative fuel source to replace oil, which will run out one day. If we are not ready, there will be pandemonium.
Big business and governments have let down the people and the workers of what was once a justly proud industry in America. Where once pride and confidence was carried by each and every auto worker, this is now a distant memory. Never again will the pioneering attitudes of the Henry Fords, Alfred Sloans, Louis Chevrolets and the many great automotive pioneers whose names decorate the walls of the American Automotive Hall of Fame be equalled. The American auto industry today is but a poor shadow of itself, racked by poor decision making, the bonus culture and union threats.
The future?
In order to balance the writer’s opinion, it is important to mention that I have always liked the American cars of old which were very reliable, well made, stylish and affordable. This was however true during the 1950/60s, after which the Big Three began to lose their way on most fronts, including the all-important area of engineering quality.
This is borne out by the well-known and highly respected automotive marketing commentator, Jim Wangers who said, “…. [customers have had an] incredibly good experience with the dependability and the reliability of the Toyota [and other Japanese makes], where Toyota and Honda have in this country replaced, image-wise, the momentum that used to belong exclusively to Chevrolet and Ford.”
This feature has been written with a great deal of sadness and is intended to take a constructive look at why the American auto industry has gone into free-fall over the last few decades. Recent developments forced on the global economies by the fall-out in the American sub-prime markets have just made the situation that much worse, but if truth be told, the imminent collapse of the US auto makers was probably unavoidable. But this problem goes deeper than that, as it is the Western governments who have sought to increase the money supply, who have themselves embarked on free-spending campaigns and who have encouraged the public to spend what they didn’t have. How can these senators and politicians in the US, UK and mainland Europe, stand up and report that bail-outs have historically not helped, when the US government handed out in the region of $700-billion to the banks and mortgage lenders to help them. If we should listen to these senators and congressmen, then the banking bail-out is doomed to failure.
So unfortunately, the problems facing the Big Three American automakers are two-fold. The first is one which is of their own making, that is, poor design, poor engineering quality and short-sighted marketing. The second is the crippling effects of the current global financial crisis which will probably be the final nail in the coffin for them. This scenario would make a horrifying plot for a best-selling novel, the fact that it is for real, is almost unthinkable.
Sadly though, the industry is today not run by motor men, but instead by suits who are more title conscious and concerned about their holiday homes and retirement plans than they are about pushing the boundaries of the technological envelope, like their forebears.
They are no longer hungry for progress – and therein lies the danger.
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