Automakers being driven toward cliff

President Barack Obama said in early February, “I don’t care if you’re driving a hybrid or SUV. If you’re driving toward a cliff, you have to change direction.”
He was talking about the economy, but in a sense, he also was talking about the beleaguered auto industry.
And the auto industry includes the foreign automakers, not just the Detroit Three. The companies are intertwined, with GM, Ford and Chrysler sharing many of the same suppliers as Toyota, Honda and Nissan. Japanese automakers have said they are concerned about their American counterparts, and they should be.
There is no doubt that the Detroit Three have brought about much of their own pain. During the heyday of SUVs and large trucks, they were making plenty of money. But they were caught flat-footed when gas prices jumped and the demand for smaller cars rose. They also continue to be saddled by huge labor costs and obligations.
And Detroit has had to battle the perception that its cars are not as well-built and dependable as Japanese cars.
Alan Mulally, Ford’s CEO, told Time magazine “in the past we have not always had the consistency in quality because we focused on larger vehicles.”
He was talking about Ford, but his comments could apply to his Detroit comrades.
The quality of most U.S. made cars has improved, equaling, if not surpassing, foreign vehicles. The Detroit Three are probably making the best cars they’ve ever made – but it comes in a middle of a deep recession.
But even with the quality improvements, the Detroit Three are bleeding cash. While Ford hasn’t taken bailout money, GM and Chrysler have, and will need more.
The Obama administration, however, has put the automakers on a short leash, hinting that a “controlled” bankruptcy may be the best course for GM, and that Chrysler must complete a deal with Italian automaker Fiat.
Chrysler, having worked so well with Europeans before in Daimler, is hoping that the Italian job will work this time. But experts say that even if a deal is reached, it could take a couple of years before Fiat’s smaller cars can be integrated into the market here. And time is not a luxury Chrysler has.
For GM, splitting the company is the proposed plan, but there are doubts aplenty whether this is a viable plan.
The Obama administration is right about heading toward a cliff, but if it’s not steering the wheel, it at least has its foot on the pedal.
Dangling the carrot over the edge is no way to instill confidence. Nor is putting together an auto task force that has little industry knowledge and expertise. It needs car people who know what they’re talking about.
Bankruptcy isn’t a simple solution, so the administration needs to find a way to save GM and Chrysler, not push them over the edge and drag the rest of the industry along with it.
Contact Dennis Seid at (662) 678-1578 or at dennis.seid@djournal.com

 

Dennis Seid