Opinion
Barry Artiste, Now Public Contributor
If this is the wave of the future, I don’t want to go surfing.
I love my big honking Texas Made Suv, can’t see driving anything else.
http://finance.sympatico.msn.ca/investing/stocks/article.aspx?cp-documentid=9401855
End of the road for North American automakers?
When times were good, Detroit’s Big Three minted cash with big gas guzzlers and protested fuel-efficiency mandates.
Now gas prices are soaring, customers are turning their backs and efforts to retool may be too little, too late. By Ernest Beck The news from Detroit just gets grimmer.
With gas prices soaring, sales of fuel-guzzling SUVs and trucks are plummeting. The Big Three that once ruled the industry — General Motors (GM.N), Ford (F.N) and Chrysler — are cutting costs, shuttering plants and laying off workers.
GM’s share price is hovering near its lowest point in half a century; the company announced a whopping $15.5 billion loss in the second quarter of 2008.
But at GM’s Advanced Design Center in Warren, Mich., Bob Boniface is surprisingly optimistic about the future as he shows off a clay mock-up of the company’s Chevy Volt, a mass-market, electrically propelled vehicle that his crew is developing.
“Business as usual just doesn’t work for us and our customers anymore,” says Boniface, design director for the Volt.
“Our natural resources are limited, so we have to stay ahead of the technological curve.” Set to debut in 2010, the Volt is a bid by industry bellwether GM to restructure its line-up with advanced technology that is less dependent on fossil fuels.
Along with hybrids being developed by Ford, these cars are a clear signal that U.S. automakers are starting to move away from vehicles like the gas-hogging Hummer, which captured consumers’ lust for big, eye-catching vehicles and contributed mightily to the bottom line.
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But Detroit — once the world’s industry leader and an example of America’s economic might — has already lost much of its luster.
Now the question is whether the automakers’ retooling is too little, too late. “Clearly, product and strategic planning have failed miserably,” Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich., says about the Detroit automakers.
Noting that the Honda Civic is now the best-selling car in America and that Toyota is chasing GM’s leading market share, aiming to take over as No. 1, McAlinden bluntly adds, “Management flubbed it.” How North American automakers got into this mess Detroit’s troubles can be attributed to several factors.
One is the new energy environment: The surge in gas prices seems to have taken domestic automakers by complete surprise.
Another was a cultural resistance to change: Unlike their more nimble Japanese rivals, managers at the American auto giants have traditionally required a strong business and financial case even to consider new vehicle development. (Stronger fuel-efficiency mandates might have made such a case, but domestic automakers also lobbied loudly, and successfully, against them.)
Finally, the Big Three were hobbled by a focus on the short term: While Toyota began in the 1990s to develop a car for the 21st century (it eventually became the Prius), companies like GM were happily building highly profitable trucks and monster-size SUVs and ignoring the smaller-car market.
As a result, foreign carmakers were able to infiltrate the market. Today, 40% of cars “made in America” are assembled by foreign companies.
It was tough for the Big Three to quit the habit.
Selling SUVs in the ’80s and ’90s, says George Maglione, an analyst at Global Insight who covers the North American car market, “was a license to print money — a gravy train, and they rode it.”
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