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Looking over the recent history of America's automakers, one theme seems to stand out. Regardless of their situation, the economy, or the issue at hand, the Big Three have an almost preternatural ability to determine the most foolish course of action and pursue it with amazing vigor. Regardless of whether we're talking about the Ford Motor Company's (NYSE: F) decision to focus its attention on cars (to the detriment of its truck lines), Chrysler's decision to channel stuff its dealerships, or General Motors' (NYSE: GM) decision to sit on its fuel cell cars, Detroit seems determined to misjudge the economy and the customers.
At their best, the three have minimized innovation while milking their successes. At their worst, they have spent time and money on expensive acquisitions or dead-end technologies, to the detriment of their bottom line.
Of all Detroit's forays into monumental ineptitude, their biggest mistake has probably been the companies' absolute unwillingness to heed the move toward more fuel efficient cars. From overinvesting in SUVs to blowing cash on gas-guzzling premium brands like Hummer and Land Rover, America's automakers have managed to ignore the rising price of gas, the industry trend toward efficiency, and the demands of their own customers. Recently, the big three entered a brave new world of idiocy, managing to combine their biggest problem with their recent (and highly controversial) bailout in a public relations fiasco of elephantine proportions.
Following President Bush's last-minute decision to give them a huge chunk of cash, the Detroit companies have now resolved to continue suing individual states for setting emissions standards that they consider too stringent. As many officials have noted, this basically amounts to using taxpayer money to finance legal battles against laws that the taxpayers' representatives have enacted. On the up side, Detroit has yet to win any of these lawsuits; on the down side, the repeated failures don't seem to have dampened the Big Three's desire to throw away their money on legal fees.
The beauty part of this whole situation lies in the fact that America's automakers have already pledged to meet the stricter guidelines called for by many of the proposed state laws. In other words, they are spending money to fight against laws that mandate limitations that they have already agreed to, and which many of them recognize are vital to their survival. This policy seems particularly disconnected given President Obama's aggressive pursuit of cleaner, more efficient cars.
On Monday, the new president directed federal regulators to reconsider California's application to set stronger emissions standards. While this will not automatically translate into higher efficiency across the board, it sends a very strong signal that the battle over state-mandated emissions is in the endgame. Even so, America's automakers are soldiering on with their costly, hopeless legal battle.
As anybody with a hint of prescience has long since figured out, the cars of the future will use a lot less gas and have far fewer emissions than the cars of today. The only question that remains is where those cars will be built. If the Big Three have their way, the smart money is on Japan...
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Reader Comments (Page 1 of 1)
1-29-2009 @ 1:33PM
Chief said...
"America's automakers have managed to ignore the rising price of gas, the industry trend toward efficiency, and the demands of their own customers"
Last I checked, pickups were the number 1 and 2 best selling vehicles in the USA. GM and Ford are constantly updating their wares in those departments, keeping up with what their customers are apparently demanding.
In fact, not one of the top 10 best sellers would be considered among the most fuel efficient out there today. Apparently while fuel efficiency is an important factor, it isn't the only factor.
The Top 10 Best-Selling Cars of 2008
* Ford F-Series: 515,513
* Chevy Silverado: 465,065
* Toyota Camry: 436,617
* Honda Accord: 372,789
* Toyota Corolla: 351,007
* Honda Civic: 339,289
* Nissan Altima: 269,668
* Chevy Impala: 265,840
* Dodge Ram: 245,840
* Honda CR-V: 197,279
1-29-2009 @ 5:30PM
KellySorice@GeneralMotors said...
I'm amazed. Really. The domestic automakers have truly had their share of challenges lately. No doubt about that. But, there is so much wrong with this blog entry that I'm not sure where to start in correcting the misperceptions. Let me give it a shot anyway...
First, on the "rising" cost of gas and the decisions made by the domestic automakers. I'm sure you realize that gas prices are relatively low right now, and that does impact buying habits, but let's put that aside for a moment. The real point is about fuel efficiency, right? Speaking for GM, fuel efficiency is a top priority, and that's more than rhetoric. It's reflected in all of our new products... like the Chevy Malibu, the Cobalt XFE, our 8 hybrid models, and yes, even our full-size trucks. As pointed out in Chief's response, trucks still make up a large percentage of the market. Yes, GM still sells them. And, yes, they lead the segment in fuel economy.
Even more fuel efficient products are on the way ... and they weren't dreamed up yesterday.
By the way, it's interesting that you only find blame with the domestics for missing the trend of higher fuel costs. (The real issue is volatility, but let's also put that aside.) You neglect to mention that our foreign competitors were busy building (and then idling) full-size truck plants during this time as well. Guess they missed it too.
On the issue of us spending money on dead-end technologies and missing innovation... again, I'm amazed. We're in total agreement that fuel efficient and advanced technology is important - in fact, it's key to our future - which is why we're reinventing the automobile with the Chevy Volt. This extended-range electric car comes out next year and will go 40 miles without using a drop of gas. We also still have the largest test fleet of fuel cell vehicles in the world.
Finally, on fuel economy standards, we totally agreet that the products of the future will use less gasoline. In that regard, we're working around the clock. As we've already publicly stated, we're ready to engage the Obama administration and the Congress on policies that support meaningful and workable solutions and targets that benefit consumers from coast to coast.
Bottom line is that you may call our actions foolish, but I'd argue that we're very appreciative of taxpayer dollars, and we're working very hard to make our home country proud of the products and technologies that we develop with it.
1-30-2009 @ 1:41PM
Bruce Watson said...
Kelly-
Just so we're clear here: you're playing up Detroit's move toward greater fuel efficiency as a means of defending their choice to sue state governments over efficiency/emissions guidelines? Really?
And, for that matter, while you are right about gas prices currently being very low, it's hard to imagine anyone could possibly think that they will stay low. Frankly, in this regard, automakers seem to be a lot like Charlie Brown: no matter how many times they have the football pulled away, they keep thinking that THIS time Lucy will let them go. Let me clue you in on a little secret: while gas prices may fluctuate, worldwide demand and speculation pretty much guarantee that they will continue to rise.
Finally, I know that GM and Ford have fuel cell cars; the fact that Honda's FCX Clarity is on the road when GM's aren't is a source of national embarrassment. It's great that you have the largest test fleet in the world; why are you waiting for the Japanese to get theirs out first?
2-02-2009 @ 5:47PM
KellySorice@GeneralMotors said...
Hi Bruce,
My point is mainly that you can't claim the domestics haven't been taking fuel economy seriously. To paint a broad-brush stroke to say that we overinvested in SUVs at the expense of fuel-efficient vehicles is just incorrect. And, the issue of fuel economy standards - particularly CAFE - is much more complex than you elude to in your blog. It isn't a simple matter of not wanting to produce fuel-efficient cars. We do and we are.
And, yes, of course fuel costs will likely rise again. And, then, small cars and hybrids will become popular again. It's not about whether or not gas prices will rise ... it's about what level they need to rise to in order for consumers to want a 35mpg (or better) vehicle. It's a fact that hybrid sales rally with high fuel prices and fall off just as immediately when gas prices go down. (By the way, even during $4/gallon gas, hybrid sales were only about 4% of the market.)
My point here: while gas prices are volatile (as are consumer preferences), GM is making serious fuel economy improvements across its entire line-up. We'd like to be able to sell that line-up from coast to coast. (Heck, we offer more 30mpg cars than anybody, have more hybrids than anybody, etc.)
On fuel cells, I'm not sure I get your point. You're saying that since the Honda Clarity is available to lease for a very, very limited group of consumers, GM should be embarrassed? So, to be clear, you believe that Honda's plan for 200 of those vehicles to be in the hands of the public over the next 3 years is a commercial success? If that's the case, I won't bother arguing.
2-02-2009 @ 5:56PM
Bruce Watson said...
Kelly-
It's interesting, given your position, that you seem to have missed the symbolic importance of the Honda Clarity. No, it isn't a game changer. Yet. However, the very fact of those 200 cars, and the fact that they are tooling around in America is a slap in the face for our domestic automobile manufacturers. Commercial success or no, it is a very visible sign of what many people perceive as an intangible problem. If you don't get that, then GM's current financial issues are the least of its problems.
Regarding fuel efficiency, I'm not going to rehash the last 30 years with you. Clearly, fuel prices have fluctuated; just as clearly, our latest fluctuations (in both directions) were hugely influential. However, if GM has the kind of narrow perspective that you are showing, then I'm not too surprised to see that it's in trouble. Bottom line, higher efficiency isn't a question of if; it's a question of when, and if you're going to wait for Japan to lead the way, then you're going to lose. I hope that you, and America's other automobile manufacturers, will try to reclaim your place at the head of the pack. Right now, though, I'm not too optimistic.
3-23-2009 @ 5:25AM
nimitz said...
Kelly -
I was just wondering but other than advertising for GM, what would your response be to the ACTUAL subject of the blog? You know, the part where they're using tax payers' money to sue the states and flushing money down the drain. The fuel thing is a whole other subject but I'd like to hear your thoughts on the lawsuits.
3-23-2009 @ 5:37AM
nimitz said...
Chief -
"The Top 10 Best-Selling Cars of 2008
* Ford F-Series: 515,513
* Chevy Silverado: 465,065
* Toyota Camry: 436,617
* Honda Accord: 372,789
* Toyota Corolla: 351,007
* Honda Civic: 339,289
* Nissan Altima: 269,668
* Chevy Impala: 265,840
* Dodge Ram: 245,840
* Honda CR-V: 197,279"
Yes they might have the #1 and #2 spots but if you add up the total sales, they clearly don't move the most units. Just by adding up the totals for the Top 10 that you listed:
*Honda - 372,789 + 339,289 + 197,279 = 909357
*Toyota - 436,617 + 351,007 = 787624
*Chevy - 465,065 + 265,840 = 730905
*Ford - 515,513
*Nissan - 269,668
*Dodge - 245,840
What's the use of being 1 and 2 if a single competitor holds more than 1 or 2 of the other spots?
3-23-2009 @ 5:41AM
nimitz said...
and yes i know this is an old post... just followed it here from the Detroit post on the main page today =P haha