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Are big three automakers overestimating future demand?
I've been watching the congressional hearings and listening to the Detroit CEOs project demand for their cars, not just next year, but years beyond. As I understand it, sales are expected to flatten a bit in the short term, drop by a few million at some point, and then reach and maintain or even exceed last year's sales.
Really? One of them intends to continue manufacturing 40 of their 48 models. Are people going to just go back to buying the same big cars but with minimal improvement in fuel efficiency?
I don't think so. I think the day of the mega-auto-manufacturers are over. Too many better alternatives up and coming. The auto industry, often defined as "the big three", will be more like "the small to medium independent 10". Internationally. (See emerging companies like India's Tata motors, or MDI in France.)
Whether they get the big bailout or not, this whole thing is being positioned as either they're infused with over 35 billion, up to a potential 120 billion, or they go under.
The situation might be more inevitable and irreparable than they would lead you to believe.
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I just want to add a thought to the post.
There might be a difference between saving the big three, and investing in the future of the American auto industry.
Suppose the 34 to 120 billion was used to help usher in the newer more viable electric car companies in America. Companies like Tesla and Velozzi have the technology and just need to scale up.
Suppose we decided to reward and foster America's ingenuity, not mega-company failures--we could more quickly and competitively create an automotive "silicon valley".
December 5, 2008 5:11 PM | Reply | Permalink
If the auto companies do go under it seems as though it would prolong the extent and length of the recession. I hope this matter isn't thought of in terms of being an "either/or" decision.
What you're suggesting of course gets tagged by some as "government picking winners and losers". It isn't just that people who are more moderate or conservative say this, but it's legitimate to question whether the federal government has the ability to make good decisions of this sort.
I'm still intrigued by the prospect of directing at least some stimulus money that way anyway, given the specific context where the importance of getting asap to advanced, far greener technologies in auto transport is obvious as a very high national and global priority.
Would you just give it to these two newbies outright? Require them to submit business development plans? To whom? What criteria would they be evaluated against?
December 5, 2008 5:34 PM | Reply | Permalink
good questions. I wouldn't give it to just anyone outright. I only mention Tesla and Velozzi as examples. Velozzi is actually a non-profit research and development laboratory--world class team, some NASA engineers, acclaimed automotive designers and scientists. One of their clients is in fact, the US government.
Congress should not be evaluating the viability of business plans.
It's absurd that they're evaluating those of the big three.
Their role should only be funding.
Priorities should be identified--and no one should make the mistake of thinking this is only about cars. It's so much more.
There needs to be a sweeping plan that includes infrastructure, battery recharging stations, entirely green mass transit, (maglev trains, for example) and personal transportation.
Look, they're talking about up to 125 billion. My point is that our competitiveness with the rest of the world, our long term future job market, our breakthroughs in energy tech are all connected and much much larger in potential and scope than three companies in Detroit who once ruled the world.
December 5, 2008 7:06 PM | Reply | Permalink
You're thinking big, tpmgary. I like it! Big is what we need right now, on multiple fronts. There's not likely to be a better chance any time soon to hurdle barriers to several major changes in policy orientation which have seemed insurmountable, totally out of the realm of political possibility, for a long, long time now.
December 5, 2008 8:18 PM | Reply | Permalink
If only politics would get out of the way of ingenuity.
December 5, 2008 10:52 PM | Reply | Permalink