Three Little Pigs

Each one built their house out of straw. They saw they wolves had torches.
(Image Credits: www.thetorquereport.com, August 2, 2007)

I had originally planned on my next blog post being of a slightly less venomous, more educational and helpful nature. However, this article on The Economist ratcheted me up a notch or two. Nothing--and I mean absolutely nothing else-- on this Earth (except perhaps poor man-to-man coverage in obvious passing down situations... you're a cornerback, it's your job to jam!) riles me up like the appalling ineptitude of the American automotive industry. One particular gem is worth repeating:

Sales at GM and Chrysler have fallen by 18% and 25% respectively this year and both companies will run out of cash some time next year if they continue to use it up at the current rate. The massive losses GM and Ford reported on Friday show that the prospects are bleak for America's carmakers. - The Economist

Why? How in the name of Lee Iacocca was this possible? The following well-crafted, though biased, opinions may shock and mortify you.

Firstly, America's car companies (like American government) are short-sighted and complacent.

From 1992-1996, Ford had a slam-dunk with the Taurus. The blue oval had been teetering on the edge of oblivion (funny how history cycles like that isn't it?) and, like a golden chariot from heaven, the Taurus became the best-selling car in America. Ford was spared and had, inadvertently, created the midsized family car segment; the largest automobile class (by sales to private consumers) in the country.
So what was Ford's grand plan given their newfound perch atop the automotive heap? Keep innovating? Plan for the next big thing in the event that the (at the time) rapidly improving Japanese competitors actually caught up?

Nope, you're wrong. They kept selling the same damn thing. In fact, the Taurus was sold, with superficial modification, straight for the next decade. What had at one point in time been a massive commercial success and example of American engineering became a rental lot punchline. The saddest thing about this, of course, is that Ford did not learn its lesson. It again had a home run with the much vaunted, though terribly flawed, Explorer. Again, Ford had created a new market segment within the span of a few years. The Explorer was the granddaddy of the entire SUV boom that swept the country, and then dragged it sadly and uncontrollably down the path to irrelevancy.

I have appeared to pick on Ford a great deal in this, but GM and Chrysler are no better. GM did its best to pick up where Ford left off; to 'out Ford' Ford, if you will. Throughout the time period when the Explorer/Taurus hegemony was in full swing, GM contributed little of any real innovative value. Instead, GM took Ford's ideas and perfected them; or, perhaps, beat them to death. By the year 2000, GM's portfolio consisted of at least 10 new or recently updated trucks (Yukon, Yukon XL, Suburban, Tahoe, Sierra, Silverado, Escalade, S10, Blazer, Trailblazer, etc.). GM developed its extensive range of SUVs at the expense of its car product line. Many of the cars, particularly the Pontiac Grand Am/Oldsmobile Alero, were based on engine and chassis architecture developed in the late 1980s, or earlier. Chrysler, which had immense success when it created the minivan, did not have another success story until the 300/Dodge Magnum twins. Those, however, were just late-model Mercedes E-classes dressed up like a couple of teutonic 'yankees.' By and large, the American automakers over the past 10 years demonstrated a complete lack of foresight coupled dangerously to an adolescent and hubritic complacency.

The terrible thing about this is that the car makers acted as if the party would always last. Up until 2005, GM was developing new and 'better' versions of its SUV range, even as gas prices were precipitously beginning to rise. Not one, not a single one, of the high paid, highly-educated executive types at these car firms realized that the market that they had created was eventually going to do them in. Rather than taking their windfall success and using it to drive future development, the companies were dragged into financial disputes over union benefits and limp wristed, positively insulting attempts at rebadging the same product and foisting it upon the American public. As if this all was not crass enough, the 'big three' failed to see that their Asian and European competitors had not only caught them, but surpassed them; all while they continued believe in their own self-importance.

Which brings me to my second and final point: you do not see these other companies asking for handouts, do you?

Granted, some competing automakers are partly nationalized (a la Volkswagen; the state of Lower Saxony owns 20% of its shares) or fully so (a la Nissan, a wholly-owned subsidiary of Renault). However, this has always been viewed as a weakness by the American auto industry; bolstered by the arguably unfounded belief that socialists make for lazy workers. However, the Japanese automakers are not nationalized and are some of the most efficient and hardest working companies in the world. Toyota made headlines around the world when it surpassed GM in sales volume in the beginning of 2007. Honda, though somewhat of a rogue, consistently dominates the important midsized family car market. Both Toyota and Honda first gained popularity in the United States during the OPEC oil crisis of the early 1980's. Now, with a more lasting fuel crisis knocking on the door, they once again have seen increase after increase in sales at the expense of their elephantine US competitors.
A large measure of the supposed bailout for the American car companies is predicated on the fact that producing fuel efficient cars for the American market will require massive retooling and redistribution of resources that the giants simply do not have the cash flow for. Riddle me this, Batman, why do Toyota, Honda, VW, and Nissan not have these problems? Because they already produce fuel efficient cars that they are already selling in the US! See the Honda Fit, Toyota Yaris, VW Jetta TDI, amongst others; though, I admit that I would not want to buy a Fit given that ghastly commercial. The Jetta TDI, along with the Nissan Versa (a late-model, rebodied Renault Mégane), beg a question that has itched in the back of every gear-headed mind in the United States:

Why don't the American automakers sell their European market cars in America?!

All sorts of excuses are given and have been given by the companies. What it comes down to is power. Ford America and Ford of Europe are largely distinct companies. In fact, Ford of Europe has a completely different design office. While the two companies may draw from one parts bin, the cars that they build are strikingly different. Take, for example, the Ford Focus. See also, the European Ford Focus. These cars are not the same. The talking heads at Ford America will tell you that hatchbacks don't sell; yet Ford had a slam-dunk hit with the Mazda 3 hatch and, trust me, Volkswagen and MINI have proven that hatchbacks will sell in an America that is concerned with saving money, gas, and having a little fun.
GM sells thousands of cars under the Opel/Vauxhall brand structure in Europe that they do not sell in the United States. Take for example the Vectra, Astra, and Corsa. The Astra has since come over in the guise of a Saturn, but really, a Saturn? Furthermore, GM's woeful, badge-engineering driven product planning is what is responsible for the company's current state. Period. Who at GM thinks that positioning Pontiac against BMW, Saturn against Honda, and Buick against Lexus, makes good business sense? Who in the brain trust at Ford thinks it is a good idea to build two different cars that respond to the exact same sector of the market? Because the answer to both of those questions is, someone.

As the Economist rightly states, the state of American automakers will pose an early challenge for the President-elect. How he responds to this will be an early indication of where he will stand with respect to his promises of increasing average fuel economy in the near-term, and how serious he is with respect to improving America's global image with respect to climate change. However, throwing money at people who have demonstrated a complete and utter dearth of knowing what to do with it when they had it in the first place can lead only back around the circle. Accountability will, ultimately, rest with American consumers. To whom much has been given, much is expected. Will the American automotive industry finally do as much?

On a lighter note, there are going to fire sale prices at your area Ford, GM, and Chrysler dealers this time next year.