This Big 3 sequel is scary

This Big 3 sequel is scary

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Twenty-seven years ago -- when oil breached an inflation-adjusted $100 a barrel, lines formed at gas stations and the Japanese began a generation-long march into the American car market -- Detroit and its hometown automakers faced an existential crisis.

Chrysler Corp., teetering on bankruptcy, wrested loan guarantees from the federal government and concessions from the United Auto Workers. Ford Motor Co. drafted bankruptcy papers it never filed, and General Motors Corp. waited to exploit the weaknesses of its rivals.

Twenty-seven years later, what's changed? Everything, and not much of anything.

Oil again is at historic highs, this time driven by surging global demand instead of interruptions in supply. Detroit is, again, still too financially dependent on gas-guzzling engines powering heavy, rear-wheel drive vehicles ill-suited for greener times.

Japanese and even Korean rivals are, again, poised to claim more of the rich, if softening, American market. Meanwhile, Detroit's 2007 sales signal that this year is shaping up to be yet another poor one for companies that have become synonymous with the term "industrial decline."

The American political landscape has shifted sharply left, deeply green and fuel-economy conscious -- the product of rising oil prices, instability in the Middle East and growing (if debatable) concerns with climate change. Yet Detroit, no stranger to the economic forces behind the shift, has too often acted as if the change was temporary.

Much of it is not, unless the developing world's economic maturation is a temporary phenomenon likely to reverse. Short of a worldwide depression, don't count on it. Deja vu all over again

Santayana had it right when he said, "Those who cannot remember the past are condemned to repeat it." And, I would add, they -- union and management, employees and investors -- risk paying an even steeper price for greedily disregarding it.

The outline of this reckoning, shaped by more than oil prices and Toyota overtaking Ford as America's No. 2 automaker, has been clear for much of this decade. Why does it take $100-a-barrel oil, a housing-led recession and the terrifyingly low market values of GM ($13.5 billion) and Ford ($13.09 billion) to punctuate the painful point: Detroit still hasn't learned its lesson.

Consumers have steadily abandoned big pickups and SUVs for cars, "crossovers" and gas-electric hybrids, a move that benefits Detroit's rivals more than it does GM, Ford and Chrysler. As gas prices hover near $3 a gallon or more, the migration quickens and Detroit's lagging is obvious.

Declining market share for GM, Ford and Chrysler forced each to close plants to reduce capacity even as foreigners added production. The process hastened Detroit's exodus from states like New York, New Jersey, Maryland, Oklahoma, Georgia and Virginia, further weakening their political clout. Changing? Yes, but slowly

This is not to suggest that GM, Ford and Chrysler aren't different, smarter, more efficient and more global companies than they were in

1980. They are, to varying degrees. GM, especially, is a savvy player in developing markets like China, Russia and India, using scale and common processes to its advantage.

But it's proving to be not enough fast enough, for GM or its crosstown competition. It's been nearly 30 years, the working tenure of a modern Detroit autoworker, since oil set its first high-water mark and pushed a bellwether American industry to the brink, yet we're back to 1980 all over again.

Time is not the problem. The problems are competition, culture, bureaucracy, arrogance, denial and a nostalgic embrace of the days when Detroit ruled American roads.

It's tempting, in a prevailing find-someone-to-blame culture, to heap derision on the men and women running Detroit's three automakers today. With a few exceptions, they -- Ford's Alan Mulally and Chrysler's Bob Nardelli -- aren't the creators of their respective messes.

They're the janitors who are expected to clean it all up before it's too late. Pricey oil, softening sales and not enough of the right cars and trucks for the times intensify the pressure -- and serve as a reminder that we've seen this movie before.

It's a scary one that should have been destroyed, but wasn't.

Reply to
Jim Higgins
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scary

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You can place bets on who, of the three, goes first into bankruptcy.

Another is to bet on which (if any) of them will survive 2010

Reply to
Gosi

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