Car Wars?

For seventy years what was good for Detroit was good for America.  The major auto makers could sell as many cars as they could make.  And Americans were enthusiastic about the freedom offered by relatively inexpensive personal transportation.  Since Henry Ford’s introduction of the mass produced Model T and John D. Rockefeller’s agreement to provide gasoline at cheap prices, the gasoline powered automobile has dominated the landscape. Great fortunes were made.  And lost.

The steam and electric cars of the early 20th century were swept away by the low cost gasoline powered Model T.  The true cost of technology in action.

Since the first oil embargo in the 1970’s (under the Carter administration) energy costs have been fluctuating.  And how have the automaker’s responded?  With the same vehicles they have been making for decades.  American car makers have had problems with low cost, high mileage cars for a long time.

As people have progressively become more environmentally aware, the by-products of combustion have become an attribute that people would like to change in large measure.  This could come about by increased efficiency or alternative technology.  In the last few years, all the hybrid vehicles sold in the US have been imports.  The current sales rate puts imported hybrids at 300,000 vehicles a year in the US.  That’s a lot of cars we didn’t build.

The Environmental Protection Agency has been trying to get American automakers to improve vehicle efficiency for 30 years or more.  The response from Detroit has always been reluctant.  Change will be costly and take a long time.  And even when mileage target agreements were made, they never seem to be met.

In most businesses, when you stop meeting the customer’s needs, you stop selling product.   That’s exactly what has happened.  American car buying has dropped from 13 million units/year to 8 million units a year.  Big change.  Regardless if you blame it on the car companies or economic conditions, or both.  And a lot of harmful consequences to the economy since cars consume more steel, glass, carpet and just about anything you can think of, than any other sector of the economy.

Foreign manufacturers have settled into the US market and established themselves taking a share of market away from Detroit.  I didn’t hear anyone calling for reorganization of the industry during the last two decades while Japan set up shop on our soil.

So it seems a little strange to have government, which doesn’t actually know how to produce anything, dictating how the automakers need to produce cars.  One aspect that concerns me about the current plan from Washington is that it is based on projections of sales volumes ‘returning to normal’.  At sales volumes of 12 to 13 million the current plan will restore the automakers to financial health.   Does anyone believe that the American car makers can sell that many cars per year any time soon?