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Wednesday, November 19, 2008

Bridge loan to these jokers?

The Detroit CEOs are really stupid when it comes to P.R. So the Ford CEO drives to Capitol Hill to beg for money in a Ford Hybrid – yeah, cool move – but, um, like his GM and Chrysler cohorts, he flies to D.C. in his own carbon-spewing private jet. Not so cool.

The fundamental problem with Detroit these days is not the cars they build. Toyota, Honda, Nissan, Hyundai, Volvo, VW and BMW make the same line-up including the same big gas-guzzling SUVs that Detroit makes, and Detroit seems to have actually pulled ahead on offering more fuel-efficient models in the mid-size category. The quality gap is long gone. It was far more complicated than most understood even when it supposedly existed – in the beginning a significaant part of it was a simple car vs. more complex car comparison, buttressed by delayed introduction of Japanese cars in the U.S. market until after the initial engineering bugs had been ironed out. They are all basically world class manufacturers who all make incredibly good products. That’s not to say, however, that we do not as a society have to keep pushing the envelope as fast as possible, and all the manufacturers just have to deal with it.

The problem for Detroit is that I have to preface my remarks with such statements in the first place. GM, Ford and Chrysler long ago conceded the impression of better quality and fuel efficiency to the Japanese, and have made virtually zero effort to begin changing that zeitgeist. A huge part of it was not grasping the long-term blow-back from loudly opposing fuel-efficiency restraints on Capitol Hill. No doubt an in-depth advertising study would find that in addition to lumping the Big 3 together, such that a bad act by one is attributable to all (but not necessarily the opposite), consumers easily make a mental leap from fuel-efficiency to efficiency in general – as in manufacturing efficiency, i.e., quality. Those short-sighted, continuous and highly publicized efforts to oppose any restraints, with the Japanese properly remaining lurking in the background of an American issue -- was a hugely negative two-fer for the Big 3: anti-environment, not as high quality.

The result: Detroit has lost the young adult demographic and without Herculean efforts will never get it back. Today’s young adults become tomorrow’s old farts, as I should know, the ones who buy Detroit cars today. It is a losing business model if there ever was one. Taking the leadership on green development – and really, really meaning it this time – will be the only way to recover. That’s not a short-term proposition, however.

Obama has floated the term “bridge loan” to describe what he would approve for Detroit, but he also has said it can’t be a “bridge loan to nowhere.” (Good play, I thought – and another two-fer: besides a way to conceptualize the questionable idea of helping Detroit, it reminds us again of one of Palin’s biggest fibs without breaking a sweat.) Becoming green, modern and with-it will take those companies a longer time than any bridge loan can last. Possibly making more sense, even politically, is a bridge to a time when the massive weight of ever-exploding healthcare costs have been lifted from their shoulders and allowed them to massively improve their cost-competitiveness. That might be the next bridge to somewhere.


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