Thursday, December 11, 2008

Is Detroit worth saving?

I drive a typical American-made car. It's old (14) and it's developing skin cancer (rust). While it's had relatively few hugely inconvenient problems, I am less than impressed by the more current offerings of the American auto makers.

It's not that I'm some wine-sipping elitist. I don't buy a car because I'm compensating for something. I am more swayed by a combination of style, reliability, performance, cost and fuel economy.

Sure, American-made cars have some pretty impressive syles coming down the assembly lines but where is the 40 miles per gallon that they promised us 15 years ago? For far too long, American auto makers realized that the models selling for the highest prices would net them more money. That got the Big Three auto makers into a rut of churning out huge, inefficient SUVs. If you don't believe me, take a spin through your local Chevy, Chrysler or Ford dealer's lot. The majority of vehicles will be SUVs, mini-vans and full-size trucks.

There is a purpose for each and every one of these vehicles. My dad owns two full-size Ford trucks. Many of my friends own a truck or an SUV and they have legitimate uses for them. The problem lies with those who realized over this past summer that they could do without their trucks or SUVs. Those who could do without were what made Detroit's Big Three auto makers large, bloated and unable to change their ways. They bought out of wants, not needs. When gas hit 4 bucks per gallon, more and more people traded their guzzlers in favor of more economical choices.

The past few years were the ultimate undoing of Detroit.

In a free market, those unable to adapt to changes quickly have make large cuts. Some re-emerge more nimble and competitive. Others don't re-emerge. Suddenly buying American doesn't mean choosing between Ford, Chevy or Chrysler. The imports of the previous decades are mainly made in America. These companies didn't put all their eggs in the SUV basket. They maintained their core fuel-efficient models and added a full mix of vehicles. Now they have simply scaled back production of the latter and ramped up the production of their core models. Detroit isn't that flexible and simply won't be able to compete until they are.

Oh, and when it comes to bailing out Chrysler for the second time in 30 years, let's consider the rather impressive wealth of its corporate parent - private equity firm Cereberus. Rather than trying to save jobs, they are more concerned about their investment in Chrysler when they have billions, possibly hundreds of billions, (or more) or dollars in capital in which to invest. They aren't worried about jobs, they want to save their wallets. Maybe this is a case where a company would be better off in the hands of the government than under private ownership.


BradDoenges said...

Speaking specifically of
Ford, they have produced micro cars and diesels and other more fuel efficient models that have sold well overseas but the American consumer simply wouldn't buy them. It is true that they have been "in a rut" so to speak but it was a rut due to the demand of the American consumer. Ford has been moving towards smaller more effiecent cars for the domestic market for a few years now which is actually made it possible for them to, most likely, weather the economic storm without accepting federal monies.

Memarie Lane said...

I was working at an exclusive hotel in Palm Springs when the SUV bug hit. It seemed like overnight the parking lot went from being filled with Z3's to Escalades and Navigators. I thought it was ridiculous then, because it was obviously the new status symbol.

My car was built in 1985, and it was a luxury vehicle at the time, with velour seats, power windows, talking computer, etc. Now people like to joke that they think it's a junkpile, but our car runs better, and will continue to run for far longer than any of theirs.

And it's a Nissan.

Jacki said...

I always thought it was stupid of auto makers to continuously make new models of cars every year. Especially when the "differences" between...say the 2004 Impala and the 2005 Impala ....were minute details. I am no MBA, but even I could figure out that eventually turn into a problem.

I currently have a 2003 Impala that runs just fine and I am going to keep it until it dies. I don't see a reason to go out and replace a perfectly good car.