In a recent appearance on the television news program Meet the Press, U.S. President-elect Barack Obama accused Detroit's auto executives of a persistent "head-in-the sand approach" to long-festering problems.
He also said the U.S. Congress should "hold the auto industry's feet to the fire" for its mistakes.
Being a supporter of government assistance to prevent Detroit's demise, Obama can be expected to do just that himself when he becomes president on Jan. 20.
As for the current White House, spokeswoman Dana Perino has told reporters that assistance for Detroit's car companies is based on the premise that the companies getting help are "willing to make the difficult decisions across the scope of their businesses to be viable and competitive."
In Canada, federal Industry Minister Tony Clement has said about government help: "Before committing taxpayer dollars, we need to review the plans to ensure that they have met our requirements and contain a long-term solution that sustains the industry in Canada."The underlying assumption in these and other criticisms of Detroit's auto makers is that they have done little or nothing to fix their troubled businesses over these past few years.
That's not true and a long list of current and coming new models from Detroit suggests making good products does matter in Detroit, though Ford, General Motors and Chrysler have made different commitments to their product future.
Unfortunately, the turnaround efforts in Detroit have been aimed at a festering litany of old problems, most of them the result of poor decision-making and a failure to commit to making the painful changes required to be competitive in the global auto industry.
For decades, critics, shareholders, employees, analysts and many government officials have tried in vain to get Detroit to prepare for a world of international competition.
But through the 1990s and into the early part of this decade, Detroit fought change. Ford, GM and Chrysler enjoyed booming sales of highly profitable SUVs and pickups, but as it turned out, Detroit's success there was based on a boom-and-bust vehicle segment that has largely gone bust.
Today, Detroit is on the very brink, the last straw being a global financial crisis linked to bad mortgages and even worse decision-making by financial firms around the world.
But any fair and close examination of what's been going on in Detroit for the past few years would have to conclude that, while there has plenty of kicking and screaming, the Motor City companies have at least been trying to change, to become globally competitive.
And, unlike what happened in Japan during the 1970s and 1980s, the Detroit car business has not been driven to change by an interventionist government — at least not yet, though that appears to be in the works.
It is, indeed, easy to forget that three decades ago the Japanese Ministry of International Trade and Industry helped push forward the Japanese car industry when it was still in its relative infancy. The successes now enjoyed by such global powerhouses as Toyota and Honda are no accident.
The Japanese trade ministry nudged Japanese companies toward consolidation, and even tried to mandate which parts of the market each could go into — to the point where Honda was told — unsuccessfully it turns out — to limit its business to making only motorcycles. Japan's industrial policy for the auto industry was one of the reasons Canada and the United States fought for and ultimately got voluntary import limits on Japanese vehicles.
There is an argument to be made that Detroit's auto makers — Ford and General Motors in particular — have spent the past few years sowing the seeds for what could be a successful long-term turnaround.
Of course, there is no guarantee that the turnaround plans at the Detroit Three, plans which have been in the works for some time, will prove successful. But each of these companies has a plan.
FORD
Ford has spent the past two years focused on better co-ordinating its far-flung global operations, which for decades operated like independent regional companies with their own engineering, marketing and product plans.
By integrating Ford into one global enterprise, the company expects to achieve large savings while improving quality and delivering products buyers want and are willing to pay for.
"Our biggest opportunity is to make sure we integrate Ford," said Mark Fields, president of Ford's Americas division at the launch of the company's new F-150 pickup. "Merging Ford is our Job 1."
The products that come out of this reorganization are what matter most. Ford is gearing up for a new-product blitz that will replace 40 per cent of its lineup with fresh models by next year.
"I know how we're spending our time — on launching products," said Jim Farley, Ford's global vice-president for sales and communications.
Ford does have problems, as outlined in its most recent results. Ford's cash-burn rate increased to $7.7-billion (U.S.) in the third quarter or nearly $2-billion a month.
Still, Ford ended the quarter with available credit lines totalling $10.7-billion and overall liquidity totals of $29.6-billion. Ford says it has enough money to carry on without government help for now, though it continues to cut its North American salaried payroll and eliminate some white-collar benefits — including executive bonuses — to conserve cash.
Under former Boeing executive Alan Mulally, who became chief executive two years ago, Ford has streamlined its operations by selling luxury-vehicle divisions Jaguar, Land Rover and Aston Martin, as well as selling its controlling interesting in Mazda. Ford says its Volvo operation in Sweden is also up for sale now.
Ford is counting on a wave of product introductions to increase its revenue even during the downturn. In addition to the 2009 F-150, Ford is bringing out new versions of its Taurus and Mustang passenger cars next year and accelerating development of a series of new smaller, more fuel-efficient vehicles such as the Ford Fiesta from Europe.
A substantially improved version of the Fusion mid-size car is also coming next year, along with a hybrid version that Ford claims gets better fuel economy than the Toyota Camry Hybrid.
The new 2009 F-150, which went on sale in October, appears to be doing relatively well, thanks in part to a sharp drop in gas prices, but also a result of better engineering and design.
In the tough sales month of November, when Ford's overall U.S. sales plunged 32.6 per cent, the pickup posted the narrowest drop — 18.6 per cent — of any Ford-brand vehicle line. Increased demand has forced Ford to restore two shifts and overtime production of the F-150.
Finally, quality. In the most recent Consumer Reports look at quality, Ford emerged on top among the Detroit Three and Ford says its own internal quality studies indicate the company is in a dead heat with industry leader Toyota.
Ford's quality "has been getting better and better," said David Champion, head of auto testing at Consumer Reports, in releasing his association's latest vehicle research. Ford "is extremely close to Honda and Toyota in reliability." The company's problem is it needs to make its models "a little more exciting," he said.
GENERAL MOTORS
The biggest of the Detroit Three looked to be on track for growth until the global credit crisis sank its teeth into GM's plans in the summer and the bleeding has not stopped.
But as recently as the late spring of this year, Merrill Lynch auto analyst John Murphy said GM's market share losses would slow over the next four years and profits would rise as GM replaced 70 per cent of its models by volume with new versions and new entries.
By early November of this year, everything had changed at GM. The company reported a loss of $2.5-billion and said it had $6.9-billion in negative cash flow and could run out of cash early in 2009. If anything, that position has grown worse in the past month.
The story those numbers cannot tell has to do with the work GM has done globally, consolidating its product development, engineering and design operations into centres of excellence responsible for specific types of vehicles and platforms.
For instance, GM's South Korean operation, GM Daewoo Automotive, has global responsibility for small cars and GM's Australian subsidiary, Holden, did virtually all the development of a new generation of rear-wheel-drive cars, including the new Pontiac G8.
Like Ford, GM has been working hard to largely eliminate regional fiefdoms in Asia, Europe, the Middle East and South America. GM vice-chairman Bob Lutz says this is perhaps the least visible and most important initiative undertaken by embattled CEO Rick Wagoner.
For instance, where once the head of GM Asia operated much like the head of an independent car company, now that operation is part of a larger global product development system. Lutz says this change in product development alone has shaved at least $6-billion to $8-billion out of GM's cost structure.
GM's sinking market share is now far too small to support its many North American brands, but in its presentation to the U.S. Congress, GM envisaged a future with only Chevrolet, Cadillac, GMC and Buick.
However, no amount of streamlining and cost-cutting will restore GM if the coming products aren't popular and profitable. The Chevrolet Volt extended-range electric car has become the poster child for change at GM, but more than the Volt is coming to jolt GM ahead.
GM is cutting its lineup of trucks and their thirsty V-8s to make room for smaller cars and crossovers with leaner engines. Gone are big V-8s and coming are turbocharged tiny engines with displacements of nearly 75 per cent less than the 6.0-litre monsters in some SUVs. The Chevrolet Cruze, the Cadillac CTS wagon and new mid-size cars will, say GM types, lure back customers. In all instances, fuel efficiency is critical.
"We've said it before, but our goal on all future products is to have class-leading fuel efficiency," says Lutz.
GM also has plans for a new engine next year in the Chevrolet Equinox: A 2.3-litre, direct-injection, four-cylinder engine that promises high fuel economy.
More hybrids and improved transmissions will bolster fuel economy, too. In fact, GM recently became the first car maker to mate a four-cylinder engine with six-speed automatic transmission on its new Malibu, boosting fuel economy.
GM also has plans to grow Cadillac in a much faster way than in past. The successful CTS sedan will grow to a lineup that includes a long-overdue CTS Wagon and CTS Coupe. GM also plans to build a new mid-size crossover for Cadillac.
Other introductions planned are the Chevy Camaro, Pontiac Solstice hardtop and G8 sport truck, which could prove to be the fuel-efficient pickup of tomorrow. CEO Wagoner has said that 18 of the next 19 major GM launches will be cars and crossovers.
CHRYSLER
Of the Detroit Three, privately owned Chrysler clearly is in the worst shape.
Both Ford and GM have successful overseas operations that can be tapped for new products, new ideas and greater efficiencies. Chrysler is essentially a North American car company laden with a lineup overly reliant on unpopular, fuel-swilling trucks.
Chrysler was dealt a big blow last week when it was announced that a planned small car project with Chinese auto maker Chery would not go ahead.
A bright spot for Chrysler is the new 2009 Dodge Ram pickup, which has been well received. It has more aerodynamic styling, an improved suspension and novel features such as storage bins built into the sides of the box, above the rear wheels.
Chrysler's other new model for 2009 is the Challenger coupe, but it is a niche product with very limited sales potential.
The Dodge Journey crossover is a successful story, particularly in Canada, and the Jeep Patriot/Compass/Dodge Caliber has done reasonably well.
Like its Detroit rivals, Chrysler has undergone sweeping changes in the last year, including new ownership and thousands of job cuts.
On the product side, Chrysler hopes that its thin resources can be made to go farther by striking alliances with other auto makers. Nissan, for instance, will build small cars for Chrysler to sell in North America, and Chrysler will make pickups for Nissan.
In past discussions about its product lineup, Chrysler officials have said they could cut a lineup of 11 SUVs in half and also make changes to the auto maker's minivans. With the demise of the small car project with Chery, Chrysler is again looking for a way to build a cheap subcompact car — sorely needed in a time of greater fuel economy demands and tight budgets.
Chrysler officials say their situation is dire now, but as the first privately held major U.S. auto maker in more than 50 years, Chrysler is not required to provide details about its finances. Chrysler executives now say that, without government assistance, the company will not survive.
But even with assistance, Chrysler's future product plan has troubling holes in it, unlike Ford and GM.
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