Sidney Hill, Jr.: It will take more than a financial bailout to recharge the U.S. auto industry
by Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 2/1/2009 12:00:00 AM
On a business trip several years ago, I realized exactly what was ailing American car manufacturers. I was driving from the airport to my hotel in a rental car, and suddenly found myself able to sum up the auto industry's troubles in three words: Mercury Grand Marquis.
That's what I was driving—a gas-guzzling, distinctly un-stylish box of a vehicle that only a police department procurement agent could love.
No one had yet mentioned $4-a-gallon-gas, and there were only faint whispers about global warming, but it was already clear that the rest of the world had left the U.S. auto industry behind. And your great grandfather's Grand Marquis symbolized what was holding the industry back.
The Grand Marquis is an almost exact replica of the Ford Crown Victoria. It wasn't until the 2008 model year—when 95 percent of all Crown Vic sales were to fleet operators, primarily police departments and taxi companies—that Ford stopped offering that car to consumers. Until then, Ford was consistently producing two versions of a car that not many people wanted to buy.
Not the best business strategy for a company desperately needing to cut overhead.
And Ford wasn't alone in this madness. General Motors (GM) took far too long to jettison the Oldsmobile, and it's questionable whether anyone would mourn the demise of the Buick.
Of course, when they went to Congress seeking a $15-billion bridge loan—aka the bailout—the auto industry executives said they had seen the errors of their ways, and they would emerge from this current down cycle as stronger, more efficient companies offering more relevant products.
I'm not sure we can believe them.
Much of my skepticism centers on the news emanating from the recent North American Auto Show. All of the buzz from the U.S. auto makers was about electric cars like the Chevy Volt. The Volt can travel up to 40 miles on a single battery charge. The thinking is most people travel less than 40 miles going to and from work and running errands on a given day. So those folks will burn zero gas and release zero emissions by driving a Volt, as long as it's plugged in every night.
For people with longer commutes, or simply the desire to go longer distances, the Volt switches over to a small internal combustion engine that can run on gasoline or E85 ethanol—or any combination of the two fuels—for an additional 300 miles.
For those interested in technical specifications, it should be noted that the internal combustion engine does not power the Volt's wheels directly. Instead it acts as a generator to deliver additional power to the electric motor, which continues to propel the car.
As for performance, GM claims the Volt can go from 0 to 60 mph in less than nine seconds with a top speed of 100 mph, and the electric motor delivers the equivalent of 150 horsepower.
All this sounds nice, but there are two facts about the Volt that make me wonder if GM truly understands the realities of today's car market. First, the Volt won't be in dealer showrooms until November 2010. How many of the Toyota Prius will have been sold by then?
Second, the sticker price for the Volt is expected to be roughly $40,000. At that price, I don't see the masses lining up to buy it.
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08/09/2009
