Is America trying hard enough?

"We need to encourage American innovation... We need more production, more efficiency, more incentives... We need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America... We have to seek new markets aggressively."

President Obama in his State Of The Union, Jan. 27, 2010

The crisis in the car industry seemed to have fueled, literally, new automotive developments. We almost tend to forget the economic aspects. Let's put them in perspective. First of all, a lot of jobs are involved - providing stability and income for hundreds of thousands of families. Between 5 and 10 jobs are related to each job in the car industry. Typically, the purchase of a new car is only second to buying a new house, in terms of cash value. Americans drive greater distances than any other people on the planet. They cherish the freedom to go places individually, rather than taking the bus. And then there is the nation's economic position to consider. The U.S. became the world's largest debtor.

Ironically, the #1 capitalist country in the world now owes still communist China 1.3 trillion dollars (that's one thousand-three hundred billion). Coincidentally, that is about the same amount that has been spent by the U.S. on the wars in Iraq and Afghanistan so far. One way to do something about debts and trade deficits is to boost exports. President Obama is presently pushing a $50 billion plan for revamping America’s crumbling transportation infrastructure. Basically, more roads comes down to making investments just for the sake of it, with poor economic spin-off. You simply cannot sell your infrastructure to other countries. But you can export automobiles.

Former Packard plant

What is the status? In the year (2000) the European common currency was introduced, the U.S. dollar was slightly more worth than the euro. That changed dramatically to a 1 Euro to 1.30-1.40 USD exchange rate over the past years. That should have made German cars expensive to a point that they were no longer that desirable, and vice versa, should have made America export more cars. But it didn't. In fact, Germany is experiencing unexpected high growth at the moment,  its car makers in particular doing exceptionally well in the U.S. and China, despite the economic crisis. Between January and June 2010 exports were up 44 percent! In many respects, German automobile exports can be called remarkable. Although German labor wages are the highest in the world, German automakers managed to sell 1.7 car to other countries for every car they sold at home, culminating in a staggering 3,3 million car sales abroad in 2009.

According to the latest figures, America is now importing 2.3 car for every car made in the U.S. Yes, GM has reportedly made a tidy profit over the second quarter, but it can hardly be labeled "in the same league". We all know that German cars are more expensive (more profit margin) than cars made in the U.S. Yet it did not stop Americans from buying large numbers of VW's, Mercs and Bimmers. German cars are identified as top brands by Americans according to Market Research. Americans give a less favorable rating to cars produced in their own country. Ever seen a Buick or Mustang on the German Autobahn? Don't think so. I know that "America - not in the position to export" had its reasons, cheap gasoline and GM and Ford having their own European subsidiaries being the most important, but it is no longer an excuse. GM's European main brand Opel almost had to close shop. Volvo (Ford) was sold to the Chinese.

It's what happens if you don't operate at the forefront nor export: eroding domestic market share...

Foreigners already barely buy American, now Americans rather buy foreign if they can afford to. In the 1970's Detroit controlled more than 80 percent of the U.S. market, with GM selling more than half the cars. Over time American consumers seem to have grown indifferent as far as what Detroit is making or should be doing. Many Republicans voted against the Detroit bailout. It has now become a matter of image and lifestyle almost NOT to buy 'American', particularly among young people. Ever noticed how cars are used as a statement in portraying people in movies, music videos and MTV programs? If you are successful, you likely drive something German or Italian. If drive-by shootings is your thing, you use 'Detroit iron'... Here are the really disturbing statistics over the last decade I found on the internet.

Production of the GM Volt - 15 years after the first Prius was launched. Will it turn the tide?

Cars produced globally
2009: 60,987,900
2005: 66,482,400
2000: 58,374,200

United States
2009: 5,711,800
2005: 11,946,700
2000: 12,799,900

2009: 5,209,900
2005: 5,757,700
2000: 5,526,600

2009: 7,934,500
2005: 10,799,700
2000: 10,140,800

Question is: are U.S. automakers really trying hard enough, to begin with, in reconquering lost domestic market share? Yes, the Camaro turned out to be successful. Yes, sales in the fast-growing Chinese car market went up spectacularly, largely compensating for the hardship of falling sales in the U.S. But that is no reason for complacency. Oil prices -will- rise, no doubt. Now VAG (Volkswagen, Audi, Porsche) and BMW in particular are planning a new generation of small eco-cars. Asian countries already proved to be a big threat in the regular and sub-premium car market. The comeback of American automakers lost momentum in July, as Asian rivals outsold GM, Ford and Chrysler. Detroit's U.S. market share in July dwindled down to 44 percent, Asian car makers taking 48 percent of the sales, according to Business Week, August 4th, 2010.

Year GM -- Ford -- Chrysler Total
1965 49.6% 26.8% 14.3% 90.6%
1970 38.9% 28.3% 14.9% 82.2%
1980 44.2% 20.5% 09.1% 73.7%
1990 35.2% 23.8% 12.0% 71.0%
2000 28.0% 22.6% 14.2% 64.7%
2009 19.6% 15.3% 08.8% 43.7%

Source: Ward’s Automotive, U.S. Total Vehicle Sales Market Share by Company, 1961-2009

You can't blame the Germans and the Japanese for making great automobiles. They are a daily joy to their owners. What U.S. automakers can and should do, is become more competitive globally, and therefore start targeting export markets. You simply cannot keep exporting automotive jobs, rather than exporting cars, without losing the drive and ability to innovate. The Big Three will end up being American merely on the basis of their shareholders and management, no longer because their products are "Made in the USA". So far their response has been that they tried to do things differently, but that no one is buying their smaller cars, and that they rather invest in what Detroit is still recognized for: building SUV's, pickups and midsize sedans. There are two downsides to this. One: fuel prices -will- go up. Two: U.S. exports of gas-guzzling SUV's and pickups are already practically negligible. These are exceptional times in the industry - they require extraordinary new ideas and initiatives! What about the smaller U.S. car companies outside the Big Three?  

It's getting crowded out there. Why not throw in more space efficiency in the equation?   

Personally, I don't think that putting electric motors in expensive high-end sports cars, like American companies Tesla and Fisker are doing, makes that much sense. Seen from an  ecological perspective the positive effects will be marginal because of the very limited number of cars sold (Tesla sold approx. 1000; Fisker still needs to start production). And to most people sports cars are all about thundering engines and snarling exhausts any way. It does make sense to put more fuel-efficient propulsion in cars people use for their daily commute, to run errands, etc. and in cars they will right away perceive as eco-friendly - cars such as the Toyota Prius, the Nissan Leaf, the Honda Insight and... the Chevy Volt.  

Ahead of its time: GM's EV1

Has cheap gasoline ruined America's ability to compete in the global automotive industry?

President Obama has made funds available for Detroit to make the necessary transformation, stating that America should become less dependent on oil imports. Cheap gas prices are like drugs: they form an easy fix, but they ruin people's perspectives. Detroit should pay more attention to developing and producing the type of smaller, more refined and more energy-efficient cars it has been ridiculing for far too long, in order to propel itself into the next automotive decade. Better: it should broaden its scope and seek ways to leap passed the foreign competition. 'Automotive' can be about so much more than merely rolling cars off the production line...

Ralph Panhuyzen, September 20th 2010

MIT's city car project
'Automotive' can be about so much more... 
More on the subject of space efficiency

Also read: "Never let a good crisis go to waste"