The mantra of the day is frugality and cutback. Rightsize and hunker-down, as tougher economic times are ahead.
But graft hunkering-down on to a U.S. auto sector that has accounted for a disproportionate share of lateral innovation, and you have the makings of an U.S. innovation slump, if not a drought.
The Wall Street Journal points out that the U.S. auto sector has had a kind of dual personality with regard to innovation. The Big 3 have failed to roll-out technologies that would have made their cars more competitive on the global stage, while at the same time pushed their suppliers -- including steel makers and auto parts suppliers -- to improve their parts supplied in order to retain the Big 3's business. Further, that high-performance-bar for suppliers has benefited other industries: one example -- metal parts in cars that last longer has led to metal parts in other applications, and for other industries, that do the same.
The danger now, some analysts fear, however, is that if General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler disappear, or downsize radically during the recession, all of the aforementioned innovation ripple-effects will disappear as well, The Journal reported.
Is an innovation slump ahead?
Economist Peter Dawson told BloggingStocks that the innovation void mentioned above is yet another, major reason why Congress and President Obama have to be ready infuse the Big 3 with more capital -- properly structured to protect/benefit the taxpayer -- if need be. What's more, Dawson argues the nation can turn a sad chapter into a new beginning. Detroit, Dawson said, earlier this decade somehow saw fit to abandon the car market to Japan (and other nations), and concentrate on low-mpg SUVs and light trucks. The fruits of the tactic were self-evident when gasoline topped first $3, then $4 per gallon in 2008. Detroit will end its drought, Dawson argued, when it deploys innovative car technologies that re-grab market share. "We can turn a potential innovation drought into a period when innovation will be deployed at an unprecedented pace," Dawson said.
Or in other words, now is the time for Detroit to get the weight out of its cars, deploy more-efficient engines, better transmissions, and more aerodynamic designs, all accompanied by solid craftsmanship and forward-looking styles that Americans will buy.
Auto Sector Analysis: The innovation benefit is another reason the Big 3's assets must never be idled. Economic conservatives, market absolutists, and others are frequently quick to mouth slogans like, "pure capitalism requires that those that underperform be allowed to fail." That is a woefully inadequate and simplistic industrial policy that's anti-GDP growth and anti-innovation. And investors should keep in mind that GDP growth and innovation are a big part of what the American economic system is all about.
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Reader Comments (Page 1 of 1)
2-09-2009 @ 8:32AM
TX CHL Instructor said...
Or maybe there will be MORE innovation. Innovation is not some monopoly of Big Corporations. Most, if not substantially all, innovation comes from individuals in small businesses. Most of what comes from Big Business is copying of other's ideas, touted as 'innovation'.
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www.chl-tx.com
2-15-2009 @ 8:43AM
jimbersani said...
I find it to be a disgrace that our government will ignore the problems of the Big Three, even after they played the biggest part in the Allies victories in WW2. If it weren't for the Big Three, our national language would be German and Japanese.
Now is the time that our government has to repay our largest industries by giving them the loans that they so desperately need.
I realize that GM, Ford and Chrysler were short sighted when it came to making large profits from manufacturing SUV's and light trucks, realizing that OPEC would raise the price of fuel, but I also realize that in order to pay the employees that were members of the UAW, it was necessary to make as much profit as possible, since the UAW put so much pressure on the companies to pay their members full pay during re-tooling, and to have to pay their benefits for the rest of their lives. This was rediculous on the part of the Big Three to agree to being extorted by the union, and now the UAW still won't give back to the companies that gave in to all of the unions demands. We must remember that the UAW was formed by the Communists, and only Henry Ford wouldn't agree to have a union in his company. He was the only captin of industry that paid all of his employees what they were worth, and even paid his minority employees the same salary that the other employees were making. He was hated by the rich and greedy presidents of GM and Chrylser for running his company the way that he wanted to, but if the other companies had the hind-sight that Henry had, there would not be a union to destroy our great car companies.
Now, the UAW is kissing the asses of the foreign companies so they could get half of what they get from our American companies, and the union would rather see lay offs and early retirments in our companies rather than seeing them have to beg for money to stay afloat.
Toyota is larger than GM now, and all of you people that drive a rice burner should be ashamed for buying the Japanese cars. As a Country, we are going through an economical crisis that hasen't been seen since the great depression, and you are all quick to put all of the blame on our government, but you must realize that you have to take some of the blame for not buying American, and I'm not only talking about cars, I am talking about clothes, shoes and everyday things that we use. Take a look at where all of these things are made, and when you see made in China, India and Viet Nam, hang your heads in shame along with the greedy companies that moved all of our manufacturing companies to these countries just so they could raise their bottom lines with cheap labor. Also blame our political leaders since they sold us out many years ago, and they are still lining their pockets with money from foreign lobbyists then vote to sell our Country to the highest bidder.
Wake up people, this problem will not get better until we as citizens of the great Country say we had enough. I don't know if voting is enough to turn this thing around, since both parties are doing the same thing, screwing the people that elected them, and looking out for only themselves.
If we all join together and say enough is enough, then maybe the D' and R's will wake up and give us better choices when we vote every November.
For the sake of the people of the US, it is time for us to buy American, and force the manufacturers to bring manufacturing back to our country and that is the only way out of this economic situation that we are in right now and for the forseeable future.