President Obama tells two of North America’s automakers – General Motors and Chrysler their restructuring plans were not good enough and gave them one last chance to get it right or suffer the consequences. This stance towards the automakers hit the markets like a brick and sent the entire auto industry into a spin. However, one must ask the question is the auto industry worth saving?
Sure, the auto industry contributes hundreds of thousands of jobs to the North American economy through direct and indirect employment, but at what cost? The North American auto industry has been in trouble for years. Threatened by better products from companies such as Toyota and Honda, the North American auto industry was unable to compete both on quality and service. Not only that, the Big Three as they have been called (Ford, Chrysler and General Motors) were top heavy with large executive salaries, bonuses and perks. Employees were also well compensated for their efforts on the assembly lines - all factors which put the North American auto industry on a crash course with failure.
The auto industry here in North America have always been demanding. It does provide hundreds of thousands, if not millions of jobs throughout the United States and Canada, but at what cost? It has grown accustomed to government handouts and expects to be treated differently than any other company. It perceives itself as the “Holy Grail” of the North American economy but it has done nothing but produce fat executives and inferior automobiles.
What would happen if the North American auto industry crashed and burned in bankruptcy?
Personally, I don’t think that the economy would collapse because of this. I think the economy would be that much stronger because out of the ashes of this failure would rise a much better industry, one capable of innovating and meeting the changing demands in the market place. It would be a much leaner industry, producing much better automobiles, offering better service and for a much cheaper price. It would be capable of competing head to head with the likes of Toyota and Honda.
Toyota and Honda did not suddenly jump to the top of the automobile industry. Both companies have operated better, have produced superior products that consumed less fuel, at a price point perceived by the market as being a value. People throughout the world have shown that they will pay more for better product, regardless of where it was produced. Customer loyalty for Ford, Chrysler and GM fell wayside because customers were sick of being expected to buy North American crap to support North American jobs. Customers flexed their pocket book muscles and the North American auto industry failed to respond. It’s that simple.
What is worth saving in the current North American auto industry? Given the opportunity to reach out and obtain a life raft from both the United States and Canadian governments, what did Chrysler and General Motors accomplish when handed the oars? Absolutely nothing. Well, nothing is a stretch, General Motors did manage to piss-off the President of the United States so much that its CEO was forced to resign. However, President Obama didn’t go far enough. He should have said, ”Sorry, you had your chance.”, and then pulled all financial support from the table.
As it stands right now, the North American auto industry is not worth saving – in my humble opinion. Regardless of the number of people employed directly by this industry, or the number of indirect jobs the North American auto industry is a burden in today’s economy. It lacks the ingenuity, innovation and ability to compete. Let it fail and it will eventual emerge from the rubble a better company. Call it Auto Industry 2.0 – revitalized in a similar fashion as the web.
Will it happen? Unlikely. Even with President Obama’s tough stand, the lobbying efforts are probably underway behind the scenes to save the day. It is more likely that the North American auto industry will receive massive government bailouts even when it doesn’t deserve such a life-line. The North American auto industry has failed to listen to its customers for years. It failed to recongize that it was producing products that nobody wanted. It failed when given an opportunity to safe itself. How pathetic is that?
The next 30 days will definitely be interesting in the North American auto industry.
