Jerry Flint in his latest Forbes columm:
Layoffs, product cancellations and product postponements in America’s once great auto industry are way beyond cutting into fat. ‘Amputation’ is a better description. Even as the government spends billions to save the American manufacturers—with billions more aid to come—it is fair to ask if there will be anything left to save.
Despite generously admitting that “Chrysler may survive,” Flint believes the Pentastar has far better chances under Marchionne’s Fiat than under Feinberg’s Cerberus. Not because Americans will fall madly in love with Italian cars, but because “Chrysler has thinned its employee ranks so severely that it probably cannot create new cars on its own.” And it’s a trend that Flint is seeing across the industry.
Ford’s Euro-model revival, GM’s Euro-Asian Cruze and LaCrosse, and Saturn lots packed with rebadged Opels, all point to a hollowing out of American development capacity. This impression is reinforced by the disproportionate impact recent product and replacement delays and cancellations have had on American designed and built vehicles.
Detroit is stronger in the truck business. This does not seem like much of advantage, because future mileage requirements being developed by the U.S. government and for California and will destroy this business.
His final line is a damning condemnation from a man who has covered the auto industry since 1958:
Even with government aid, Detroit will not be anything close to what it once was—not in our lifetime.
“Detroit will not be anything close to what it once was–not in our lifetime.”
And why should our lifetime be any different then our predecessors..? What’s so special about this period in time?
God, he sounds just like my dad – upset to this very day that time, knowledge, economics, etc, etc. didn’t get frozen back in 1955. Really.
I would agree that the Detroit 3 have been hollowed-out so much that they cannot develop products. For example, GM could not do a 6-speed front drive transmission by itself. It needed to partner with Ford to accomplish the job. GM is the company that essentially invented the automatic transmission and was a world leader until maybe 20 years ago. I assume they don’t have enough staff to support transmission development let alone the rest of the car.
Keep the union protected jobs and state franchise law protected dealers. Lay off the engineers and designers.
Sure, we could do something else, but it would be risky. The British have done this before so they have a safe model for us to follow.
Using Chapter 11 to get rid of the union workers and parasite dealers, while keeping the engineers and designers, would not work.
I know because the managers that would be replaced in Chapter 11s have told me so.
Here, let me fix this quote:
“Even with Because of government aid, Detroit will not be anything close to what it once was–not in our lifetime.”
Remember the early 80’s ? US cars were kinda bogus, while european product had a reason for being.
Welcome back
I’m perfectly happy purchasing Texan-built Toyotas. Screw Detroit!
His whole point is bogus. You don’t *need* a large staff, just the bureaucracy demands it. Once this little phase has passed and the “New and Improved” corps have settled down we’ll see as much innovation and design strength as we’ve always seen. Just not spread over 20 variations of a theme.
By the way, current US employee counts according to this article:
GM: 91,500
Ford: 75,200 (including Canada and Mexico)
Chrysler: 38,257
I’m pretty sure Chrysler is far from too big to fail. Even counting all the gas station employees, road maintenance/construction workers, PepBoys employees, etc. that will lose their jobs if Chrysler fails.*
*According to automaker and UAW funded unbiased research.
I was writing the other day, trying to put a short phrase to GM’s woes, and this is what I came up with:
It’s probably been years since any leading car maker bothered with sending industrial spies to GM.
“Ford’s Euro-model revival, GM’s Euro-Asian Cruze and LaCrosse, and Saturn lots packed with rebadged Opels, all point to a hollowing out of American development capacity.”
By this logic, Honda has hollowed out its Japanese development capability by having all its US offerings save the Fit designed in the US by Americans. It is an interconnected world, and all auto manufacturers use world-wide talent in designing their cars. Nothing wrong with that.
I agree with Jerry, Chrysler is too short staffed to produce any new cars. The whole process of car development requires a LOT of people to meet all the legal, environmental, and customer expectations. Having said that, the auto companies, all of them, especially D3, have done a horrible job of hiring people that are enthusiastic of their job and product. And there are still way too many big headed people that believe they are the are and have the answer to everything. It boggles my mind that a VP or even an exec VP needs to make a decision on something as stupid as how an antenna looks. I could go on for days and weeks with the stupid things I saw :(
Toyota succeeds because it works hard at maintaining its reputation for quality and integrity.
GM should pick its best car in each segment and concentrate on infusing them with superior quality, reliability and durability. Train staff at every level to treat customers with honesty and respect.
Start by including and honoring superior warranties.
God, he sounds just like my dad – upset to this very day that time, knowledge, economics, etc, etc. didn’t get frozen back in 1955. Really.
A lot of automotive enthusiasts are like this. De Lorenzo gets picked on for it, but he’s far, far from the only one: pick any name from the masthead of a major buff book and you’ll find someone who genuinely thinks the world was inhabited by a better class of person in the two decades post-war, and actively resents later generations, blaming them for the fall from greatness.**
There’s a lot of good work, not just in automotive, but in many modern businesses. The problem that people of this bent fail to recognize is that it isn’t happening in Detroit
** Of course, I’m Gen-X, and thusly pretty cynical about the Boomers.
The “not in our lifetime” bit is worth a chuckle. Specifically the “our” bit. Some of us might live another 70+ years. Mr. Flint, probably not.
psarhjinian
I’m 49 and MAN do I hate all that “greatest generation” bullshit. People are no different now than they were “back then.” They did what they had to do. Period. They had no more belief in ideals than the current generation.
Which is to say some do, some don’t.
By the same token, Detroit’s hey day was a time when The Big Three had a monopoly on the American auto make. They didn’t achieve that lock on the market by being nice guys. And once they had it, they treated their customers pretty much as you’d expect for an industry that didn’t have to provide top notch customer service to survive.
Which is to say some did and some didn’t.
As several of our B&B have pointed out, the biggest change has been the internet. We tend to forget the impact of Edmunds and KBB publishing invoice prices. Or the power TTAC holds to expose hypocrisy and, thus, influence the industry.
Well, we’re working on that last bit. Every day.
The biggest problem is probably that in order to cut costs and make their financials look better (in the past) is that they probably cut development teams and money to R&D when they could have cut a few hundred jobs here or there or better yet cut executive salaries and bonuses and needless bureaucracy and I wouldn’t be surprised if there was a lot of spending on what you might call “pork” if you were McCain.
At the same time I can’t simply buy the idea that they can’t come up with new products without billions of dollars. If that was a problem they should have been cutting money from other divisions that DON’T develop products…
Forbes pays Jerry. We talk about his column here. Good plan.
What was the last hit CAR that Ford’s US engineers designed? Focus? That’s Mazda. Taurus? That’s a Volvo. Fusion? a semi-Mazda. Mustang? a 1990’s Lincoln LS dummied down with a live-axle suspension.
What has Chrysler designed from scratch lately? The Sebring/Avenger came from a basic platform shared with Mitsubishi, and they pretty much botched it. (Although, to be fair, the problem with the Sebrenger is mostly not because of the chassis. It’s the ugly exterior combined with sub-par interior bits, an out-dated 4-speed automatic and behind the curve engines.)
tced2 wrote “For example, GM could not do a 6-speed front drive transmission by itself. It needed to partner with Ford to accomplish the job. GM is the company that essentially invented the automatic transmission and was a world leader until maybe 20 years ago. I assume they don’t have enough staff to support transmission development let alone the rest of the car.”
You know what they say about “assume”. How about instead that both F and GM realised they need a 6 speed, and were presented with a way of halving the development costs?
For those of you that don’t think North America to develop great product, I counter your argument with:
– CTS
– Traverse
– Corvette
All three developed in the U.S. GM and Ford both have full development capability in the U. S.
I have seem Lexus models with 98% Japanese content, but I have not seem an American car with over 90% US content in a long time. In the global economy the US industry is getting the short end of the stick.
I am glad Obama mentioned the volt using Korean batteries in his speech tonight.
GM, Ford, and Chrysler have absolutely no shame.
To be honest I enjoy watching Saturns rebadge Opels flop.
Why pay for the brains in the United States when you can pay less for it from someplace else?
It is the same story everywhere – it is a race to the bottom, and when you were on top, you have farther to fall.
With our bloated socialist government bureaucracy, our govt and economy is too slow and lethargic to compete with other, more free economies.
Like every great country, they have a peak, and then rot sets in socially, morally, financially, etc., and they fall.
Not the first time. The ’70’s were a disaster and then along came Reagan and the ’80’s boomed. The integration of the computer into all areas of our lives had much to do with allowing a much greater productivity. This time there is no Reagan and no breakthrough technology.
I guess we are going to try the old discarded socialist approach.
Amputation Is Not “Slimming Down”
It is if your this guy.
@ bluecon
There is a technology; renewal energy.
If the USA switched to a massive renewable energy program, national productivity (dollars input vs dollars out) would climb. You’d also protect industry that adopts renewable energy from the highly likely climbing future costs of fuels.
You can; i) built it yourselves within US boarders as the USA has the know-how, ii) implement it cheaply as part of stimulus work programmes and iii) amortize the costs over a longer time-frame than conventional electric power plants.
Think of it this way; every future dollar saved, not spent on increases in energy costs, improves productivity or is invested in growth, either by business or individuals.
Germany and parts of Europe have a huge head start, but the USA can overtake any nation should it choose to do it.
PeteMoran –
Renewable energy is like having a few Kruggerrands buried in the backyard – emotionally satisfying and even prudent if the SHTF – but not something you’d put all your net worth into. People have been flogging renewable energy since the 70’s – only 20 years less time than they’ve been flogging fusion power. Big fusion is still an out and out failure in terms of process and renewable energy generally isn’t a commercial success. I’m rooting for both, thanks, but I’m a realist. The US has had 20% of its energy provided by upscaled, beached Navy reactors, for fifty years now. Build some more and keep investing in the renewables and fusion too. Sooner or later, hopefully sooner, somebody will have a breakthrough that makes it unambiguously clear that the technology has arrived. Fun fact. Did you know there is only one company in the world that can forge a reactor vessel in one piece? They built the barbettes for the Yamato and Musashi. They are fully contracted through 2012-2013, IIRC. Not for barbettes.
@ chuckR
You miss my point and make a ridiculous comparison at the same time. Fusion claims and renewable deliverables aren’t really comparable are they now… please.
If you hook yourself to a fuel cost (nuclear or otherwise), you pay for the ongoing cost of fuel AND the variability of the fuel price. The advantage renewable gives you is you pay a capital cost (pretty similar if not cheaper than conventional power generation) and that’s it.
The result? As near-as-damn-it fixed price energy, without a fuel input cost. It should be possible to deliver cheaper and cheaper and cheaper. Just as the Germans are already doing.
Allow some lateral thinking, otherwise the USA is finished.
pete – fusion isn’t feasible at all, while renewables merely aren’t economically feasible. You can throw money at R&D for either (I hope we do), but neither is a reasonable economic option. I will gladly hook myself to the fuel cost of fission nukes in exchange for reliable and plentiful energy. Cheaper and cheaper renewable energy is nice, let me know when its actually cheap and reliable. And not subsidized.
@ chuckR
There are subsides for almost every form of energy that you can think of, even ones that ‘claim’ to stand on their own economics. Coal, nuclear, gas…anything, they’ve received money or are receiving money.
It would probably be helpful if you took the time to take a look at what Germany is doing. The energy input costs of that economy have been falling for 10 years while the USA’s has been rising. China is more efficient with energy than the USA, so too Thailand, India, Russia, France, Norway, Philipines even Fiji!
USA, laughing stock in more ways than one….