The rhetoric around the Big Three bailout is virulent. The finger pointing is intense. And most of it is total poppycock.
The New York Times had an article this morning about the Chevy Volt electric car. One car is all GM, a global auto manufacturer, is betting the whole company on one car. An overpriced one at that- 10 years late to market. Read:
The Chevrolet Volt, a plug-in hybrid, will not arrive in showrooms until late 2010. But it is already straining under the weight of an entire company.
The Volt is expected to go on sale in late 2010. G.M. plans to sell about 10,000, priced at about $40,000, in the first year.
Executives at General Motors, the largest and apparently the most imperiled of the three American car companies, are using the Volt as the centerpiece of their case to a skeptical Congress that their business plan for a turnaround is strong, and that a federal bailout would be a good investment in G.M.’s future.
In ads that ran this week, the company said of the Volt: “This is not just a car. It’s a vision of our future.” Another claimed that the vehicle would “completely reinvent the automotive industry.”
There is a long tradition in Detroit of relying on a single new model or technology as a silver bullet to quickly solve bigger problems. Sometimes it works — the Chevrolet Corvette, the Ford Mustang and Ford Taurus, and Chrysler’s K-car lineup of compact, fuel-efficient cars in the early 1980s all gave their companies an enormous boost.
But whether the Volt can live up to its billing is already a matter of debate. And some industry analysts note that General Motors has a poor track record of introducing green technology to the market.
The Volt is a big long-term bet. New vehicles typically cost $1 billion to develop, and the Volt requires new technology that probably inflated that price tag even more.
G.M. says the car, which is scheduled to arrive in showrooms two years from now, will be able to travel 40 miles on a charge, but it will also have a small gas engine to extend the range to as much as 640 miles using both the battery and gasoline the 1.4 liter, four-cylinder engine is intended to run a generator that will power the car and recharge the batteries once they are depleted. It is expected to cost about $40,000.
It’s not the UAW, or health care costs, or even quality that is at issue here- it’s that GM lost its way as a car company over the last 40 years. Instead of building cars- they built “brands” and spent a lot of money trying to tell us there was a difference between a Camaro and a Firebird. They became a finance company- GMAC, financing everything from cars to homes. They introduced new model after new model that ignored lessons from history- like the 1973 oil embargo, where people were lined up at gas pumps, and were looking to more fuel efficient cars. All while GM kept paying the “Leadership” more and more, and delivering less and less market share.
At some point, the market, was supposed to correct bad companies – according to the wisdom of the now fully naked and deposed emperor, Alan Greenspan.
Reality: while everything else changed faster, the American auto giants became the proverbial Goliath- and a simple slingshot has now taken them down.
Change wasn’t in their vocabulary. An “American Revolution” was actually a call back to the glory days when there was no global competition and little innovation.
We should wonder how our country was able to turn on a dime after the Pearl Harbor attack of December 7, 1941. America switched from building cars to building tanks and bombers to win the war in under 4 years, while GM has been unable to respond to a hybrid car in ten. Read what Ross Perot had to say about GM’s culture – and you begin to understand.
In the eight years that the Toyota Prius has been on the market, the Big Three automakers have probably spent more money on lobbying Congress not to increase the CAFE standards than on developing a more fuel efficient product line. No, it wasn’t the UAW’s fault this happened- it’s our nation’s belief that Government is something we buy- instead of something we already own. It’s our belief that we need to spend money to micro-manage decisions by the “representatives” of the people- instead of just worrying about how to win in a global economy.
When the Big 3 whined about the cost of health care– they didn’t try to solve it by having a showdown with the insurance companies- they lobbied Congress. When Hillary Clinton was talking about a national health care program- they didn’t step up in support, but stood on the sidelines. We’ve become a nation of lawyers and legislators instead of a nation of innovators and competitors.
How hard would it have been for the Big 3 to get together and pool their resources to back an Automotive Industry Health Care buying collaborative, where they used their scale to go direct to health-care providers to buy health care (instead of insurance) for their employees? We’re talking a pool of millions of workers, giving them the same economies of scale that make them so “invaluable” to the American economy that supposedly warrants a bailout.
Instead, GM had five corporate jets to ferry executives around.
GM has fought against efficient transportation initiatives for years. Now, it’s asking for a free lunch after decades of planting the wrong crops. Maybe the American automobile manufacturing days should be over- with the US switching to fast light trains and clean energy (see the Apollo Alliance) – maybe cars aren’t the answer.
Either way- right now, it’s not GM, Ford or Chrysler in the driver’s seat- and for good reason. Any company that takes ten years to respond to competition in today’s economy, isn’t ready for the next ten years. Congress isn’t much better- reactive legislation has become their standard operating procedure.
We won WWII in 4 years. Will Barack Obama be a leader who can turn us around in four years? The war is against the loss of our entrepreneurial spirit, the loss of our understanding of reap what we sow. Economic strength does not come from lobbyists but from innovators. It’s time to end our system of buying legislation- and start investing in innovation again. Time is the enemy in both innovation and in compound interest on the national debt.
It’s time to stop rewarding stumbling- and to start rewarding speed to innovation. We don’t need giants to jumpstart the economy- we need speedy sprinters. If Congress is looking for answers, fallen giants aren’t the answer to our problems. Bigger isn’t the answer. Smarter and faster is.