U.S. auto crisis

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Permalink Reply by Lucia Panini on November 19, 2008 at 9:27am

I wish to add comments from Marchionne, as reported by La Stampa

http://www.lastampa.it/redazione/cmsSezioni/economia/200811articoli...

Lucia

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Permalink Reply by Massimo Arrigoni on November 23, 2008 at 2:09pm

Lucia, nice post. Thanks for starting this thread. I've also been extremely interested in the US car industry crisis, and I agree with everything you said. A couple of additional thoughts:

- The short-sightedness of the US auto executives has been absolutely staggering. I say "US" because the crazy thing is that many of the European branches of the SAME companies are selling much, much better vehicles (better looking, way more fuel efficient, better selling). How can they not take advantage in the US market of technology they have available within their own organizations?? Ford, for example, has some awesome cars in Europe (the Mondeo, for instance), including a Fiesta that does 65 miles per gallon. Here's an interesting Business Week article on why they can't sell it in the US. But is it really just a matter of lack of diesel gas pumps and buyer aversion to diesel in the US? I doubt it.

- There seems to be a common denominator in the current US crisis, which really is astonishing in my view. Enormous mistakes at the executive level across different industries. The Big Three (e.g. HEMI engines vs. clean cars?), home builders (how many people do really want to move to Las Vegas??), financial companies (interest only mortgages with negative amortization: nice!), and so on. Sure, over-spending at the consumer level has been a big driver of many of the economic dynamics that are happening today, but isn't what we are looking at a huge failure at the management level, across many industries, where lots of decisions were made going against the most basic common sense?

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Permalink Reply by Donato Mangialardo on December 5, 2008 at 1:34pm

US car companies not only are "several decades behind the "clean car revolution" " as Lucia mentions. Forget the fuel price and the CO2 emissions for a moment. The "big" three simply build cars people don't want to buy. That simple. The essence of success or failure for any product company. Because most of them are perceived as ugly, expensive to maintain and unreliable. Not in an absolute scale, but rather relatively to their competition, mostly Japanese cars.
Look at the resale value for Toyota's and Honda's. Why would I even buy a car that loses say 30% of its value in one year? (I am trowing a number, but you can check actual resale values online). I would rather buy one that only loses 10%. In fact I own a Toyota Sienna and a Corolla -- but I am missing the Openl Vectra SW turbodiesel I used when I was in Italy. Wait: isn't Opel a GM company? I have to read the article posted by Massimo I guess.

-Donato

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Permalink Reply by Lucia Panini on December 8, 2008 at 9:51pm

Thank you, Massimo and Donato, for your comments. I agree that the business logic behind some strategic choices appears far less than strategic. And I am noticing the same "big" three that are scrambling for mere survival still air commercials for big 'ol, fat, gas-guzzling trucks, instead of pushing for clean vehicles which would also be so much more stylish in an urban setting! (I respect the use of pick up trucks in rural areas where I suppose they are truly needed).

Still on the car theme, I heard rumors on KCBS radio that the NUMMI Toyota plant in Fremont CA may also be at risk of cuts. Too bad, NUMMI used to be a state-of-the-art facility, and it probably still is; I recall writing a short paper about it during college; it was the time when JIT (Just-In-Time) was all the rave, and NUMMI was a model of efficiency.

Also, Marchionne foresees consolidation in auto sector globally; for the full article, please see: http://www.lastampa.it/redazione/cmsSezioni/economia/200812articoli...

Lucia

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