Comments on: How to save Detroit

By: Amy

Amy — Mon, 16 Feb 2009 07:41:58 +0000

I agree with what you wrote & I think the sentiment has been echoed in various degrees by many economists & a number of op-eds for the nyt (Thomas Friedman, for one).

In my humble layperson opinion-we didn't bail them out because we thought we should-we bailed them out because we simply didn't feel we had any other choice-given the rather horrific timing of their demise & the number of people they employed. If your prediction is right, they won't have the proper incentive to innovate better products (despite or because of their enormous crutch) & the govt will invest poorly in a gigantic company that will eventually fail anyway...& this will ultimately be for the best...assuming it happens when our economy is in a healthy mend & we can actually sustain the impact of their collapse..

By: David O.

David O. — Mon, 26 Jan 2009 06:52:45 +0000

Regarding "American automotive industry is a brand disaster."

I think Ford, Dodge(Chrysler), Chevy(GM), all had an image of building tough trucks, muscle cars and super cars. But they did not focus on those niches and wanted to compete in the arena of compact cars, family cars (and family vans), etc. They failed and their branding became a disaster. I think Ford, Dodge and Chevy could have had a strong brand image if they just focus on building trucks, muscle cars and sports car. Sure they will sell less cars, but in the long run they would have been more profitable
if they focus on their niche.

To illustrate Ferrari and Ashton Martins are gas guzzlers, they are expensive. Yet these companies know their market and they know how to excite their consumer base and keep them coming back for more.

In fact one of the few cars dodge is actually selling in this recession is their resurrected Challenger muscle car.
But it's only recently these three companies have returned to building muscle cars, perhaps it's a to little, to late. Moreover Dodge plans on discounting its viper sport cars in 2011.

By: Jim Hopkinson

Jim Hopkinson — Sat, 24 Jan 2009 18:30:39 +0000

Great points. I heard Joe Francis (yes, of Girls Gone Wild fame... bear with me here) on the Adam Carolla show and he actually had some great commentary on the bailout. Why does the auto industry get money? What about every other industry? What makes their business so important that THEY get money, and no one else does? Well, except banks.

But if GM can't turn a profit, that means they're not doing well enough in business. Toyota has five manufacturing plants in the US. Are they getting a bailout too? Why not?

After a trip to Japan, I wrote a blog post called "What Japanese toilets taught me about the US Auto Industry"
http://tinyurl.com/6wrr9r
Enjoy.

By: Web Designer

Web Designer — Tue, 20 Jan 2009 09:00:54 +0000

I like the way you have written the article. All the qualities of a good writer.

By: Walt Hucks

Walt Hucks — Wed, 07 Jan 2009 07:39:55 +0000

Your post inspired me to write my own: http://blogs.webconnectconsulting.com/nukeblogs/ombblog.php?itemid=391

By: Christine Flanagan

Christine Flanagan — Tue, 06 Jan 2009 20:16:09 +0000

I like what Joseph Stiglitz of Columbia University said in a recent NY Times article:

"Bailouts…are aimed at correcting the mistakes of the past, so they are backward-looking. We would be much better off spending our money forward-looking. If we spend $700 billion on new technology and innovation, we’d have a stronger, new, real economy. Up to now, the discussion has focused on the sectors that have been mismanaged rather than the sectors that are creating our future."

I'm not a total pessimist. I do believe the automakers can and should play a role in creating our future. An op-ed piece from a couple of months ago by Robert Goodman aptly argued that as a condition of financial assistance, Congress should insist that automakers shift from manufacturing just cars to becoming innovative "transportmakers."

"As transportmakers, the companies could produce vehicles for high-speed train and bus systems that would improve our travel options, reduce global warming, conserve energy, minimize accidents and generally improve the way we live."

There is precedent for this suggestion. For instance, if you go back in time to the turn of the century when the automobile industry was just emerging, the carriage industry was plummeting. Studebaker, founded in 1852, was the world's largest producer of horse-drawn vehicles. They managed to turn the automotive disruption to their advantage. (For meatier details, I blogged about it a while back. http://tinyurl.com/63d9pj )

I think we're living in a most interesting time. All of the automakers won't survive but near-death experiences have a tendency to catalyze big time transformation. Who will make the cut? Only time will tell.

By: Joao Carvalhinho

Joao Carvalhinho — Tue, 06 Jan 2009 17:17:38 +0000

I see your point But I don't think it would work. Not because of it's validity, but because the one's that would be chosen to manage these firms would be "friends" of the ones that sunk the existing ones just because they have this right, because now they own the companies. None of them would come out of the brand/history itself, so the passion you mention all too well would simple be nonexistent. But it's a good exercise. I say "kill" the worst one, sell it's assets to the other two, for the highest bidding. The dissappearing of one of them would make the supply and demand adjust. If none of the existant ones would like to buy the falling one, the state should do it and distribute it's "Intelectual property" to the public domain (University netwoks for instance). That would be better than just to inject funds on them to be wasted exactly the same way they have been. It would hurt... but it will hurt anyway!

By: Matt K

Matt K — Mon, 05 Jan 2009 18:28:39 +0000

It's the Auto industry of England all over again....
But nevertheless - I thought something was on with the new Mustang. The Camaro, even the GTO. I've never owned an American car, being an European, but will never own a car built in India, Japan or Germany - or a SUV for that matter. And it has got nothing to do with how they run their store, how environmentally thoughtful they are, how they look, what is considered hip, cool or modern. It's a matter of how I choose with my heart and personal preferences - just like I choose other products. And since Americans stopped buying American cars, just like the British stopped buying their own, the industry will fall flat on its face no matter what. And Toyota will to, when the flavor changes. No, a Volkswagen doesn't drive great. It's like a brick. A Toyota is Dull, and there are tech issues with those as well. A Prius is a bull**** way of pretentious driving in denial of the environment. The new Mini is a nightmare of tech errors. The new Beetle is a Golf (Rabbit to the U.S) in disguise. A Volvo was a luxury in the US when every burger-flipper had one here cause it was so cheap. IMO, its about trends and marketing. And there's nothing that can change it until the trend turns. No matter how many bailouts are forked out and in...
Hmm maybe sliding out of T here...

By: Jay Godse

Jay Godse — Sat, 03 Jan 2009 04:00:50 +0000

Eric, I disagree. The bailout will work. Here's how. American people and politicians need to learn 2 lessons:

1 - If the automakers go bankrupt, everybody in the auto industry will not lose their jobs. I need my car fueled and serviced as do most of my neighbours. I need spare parts to keep my cars running. In a few years I'll need a new car, though probably a Canadian or American built Toyota. Ditto for my neighbours. There's money to be made in cars.

2 - Keeping auto workers working building products that nobody's buying (just like in the former Soviet Union) serves nobody, but that's not what they believe.

The bailout will teach them that doing the same old thing (all indications point that way) will get the same old results. Once the bailout fails, but the auto industry continues to thrive, they'll realize that the big three automakers are not the car industry, and that Toyota, Honda, Hyundai, and others can satisfy the demand, as could anybody who buys up assets of the big 3.

The bailout will teach them that they didn't need a bailout. That is good lesson even if expensive.

On another note, consolidation is not of itself a bad thing. With consolidation, you get standardization, commoditization, and price reductions. These are all good things for consumers. The bad behaviour occurs when consolidation results in monopolies. Price gouging, poor customer service, bad business practices are forms of monopoly rent collection. Think back to the 1900-1960 where we had a plethora of communication protocols. The phone industry didn't take off until we standardized on ideas such as 64 kilobit PCM, tip & ring, T1, etc. In the 1980s we had a plethora of computer communicatino protocols, but the internet didn't take off until we consolidated with HTTP and TCP/IP and ditched the rest. With the internet, innovation still took place, but at a different level. Innovation was also possible because no company had the ability to lock other companies out of innovating at higher layers. Unfortunately, the consolidation in the phone industry also granted the phone company a monopoly which allowed them to lock out other innovators until the legislation of 1984 and 1996 allowed other companies to innovate on the standard platforms of the phone service providers. The bad behaviour in the auto industry is more because of monopolies than consolidation.

By: Kevin Crawford

Kevin Crawford — Tue, 30 Dec 2008 20:37:47 +0000

I have to agree: it's unfortunate, and it will be painful, but the only way this industry's problems will be solved is when the companies are facing death.