This Big 3 sequel is scary
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
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
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
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
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.