June 23, 2024


Mad about real estate

Into The Sunset – The Past, Present, And Future Of The American Auto Industry

Once upon a time, American automobiles were the pinnacle of excellence. Whether one was seeking performance, luxury or convenience, the best choice was to buy domestic.

An example of such innovation was the 1957 Cadillac Eldorado Brougham: a 345 horsepower luxury sedan with air ride suspension, automatic transmission, power windows, power doors, six-way power seats, power brakes, air conditioning, radio, cruise control, memory seats and electric clocks in the back seats. Its industry-first quad headlights were capable of automatically dimming so they wouldn’t blind passerbys on a mountain incline as well as automatically turning on at night. All this in 1957.

Today, however, the domestic options are far inferior. As evidenced by the Big Three pathetically pleading for taxpayer bailouts, the American automotive industry is largely in shambles. Faced with sagging profits, spiraling costs and cutthroat foreign competition, American car companies seem to face a very dark future.

Why the dim outlook? American car companies face the unfortunately predicament of peddling a product that most people just don’t want. In contrast to their glorious past, U.S. automakers now excrete a soulless amalgam of inferior-quality vehicles, and in most relevant categories are currently being flogged by Japanese and European competition.

For that reason, American buyers have demonstrated a strong inclination toward foreign automakers, whose cars happen to provide more useful technologies. This competition, while it certainly causes some heartburn in Motor City, gives fantastic options to the consumer: from the reliability and usability of Honda Accords and Toyota Camrys, to the unmatched performance capabilities of the Nissan GT-R or BMW M5, just to name a few.

But there are glimmers of hope in the landscape of American engineering. The Corvette Z06, Cadillac CTS-V, and the Saleen S7 are some examples of dominant American vehicles that remain not only competitive, but actually turn heads. These shining examples arose, as one might expect, not because of protectionist support, but rather competitive Yankee innovation.

For example, Cadillac’s new CTS-V was developed and tuned on the Nurburgring, a German race track. The Nurburgring had long been the home testing ground for BMW’s M-division sports cars, a fact which BMW smugly argued, contributed to the Bavarian company’s competitive advantage. But Cadillac wised up and went to Germany to engage in extensive testing and modification of their new sports sedan on the ‘Ring. After it was released, the CTS-V achieved a Nurburgring lap time that beat BMW’s iconic sports car, the (much more expensive) M5.

If the Big Three want to stay in the game, they need to step up their performance. It’s time to demolish the Studebaker factories in Flint, Michigan, and replace them with factories capable of building twenty-first century vehicles. Of course 1950s-era factories are boarded up. That’s like complaining about the lack of demand for a telegraph repair business.

Nostalgia is understandable, but it’s not cause for inaction or conscious stagnation. In Downtown Los Angeles, an area experiencing the type of urban renaissance that defines American federalism at its best, its once-common ghost towns are slowly disappearing. One can still visit the 1930s-era hotels and factories that once stood here. But only the buildings remain, for in them are gorgeous renovated luxury lofts, housing lawyers and artists alike, generating millions for the local economy and revitalizing the downtown neighborhood.

As the Big Three undergo distress-induced restructuring, their few profitable technologies will find buyers. The few glimmers of hope in Detroit-the aforementioned CTS-V, or the concept plug-in Chevy Volt-do not justify the rescue of the entire corporate behemoth.

For example, my personal bank, Washington Mutual, was a casualty of the credit crunch of 2008, thanks to its toxic mortgage portfolio. But since WaMu has above-average customer service, free checking and other convenient banking features, it was quickly purchased by the well-capitalized JPMorgan Chase. As a customer, I didn’t notice a single change except for a letter telling me I’d be receiving a new JPMorgan Chase-branded debit card in the mail; even my account numbers and online banking logins stayed the same.

Just as JP Morgan’s bank customers preserved their WaMu account features after bankruptcy, the Big Three’s corporate successors have every incentive to preserve the great ideas (if any) that are left in the Detroit Rust Belt.

For an example of automotive innovation to which Detroit should aspire, the Indian firm Tata Motors has produced the world’s cheapest car, costing a mere $2,500. Tata did not achieve that feat with government subsidies, but rather by utilizing cutting-edge virtual design technology and global teams to harness the most innovative ideas in the industry. If an Indian firm can arise from nowhere to build the world’s cheapest car, then certainly Detroit can use its decades of experience to build quality vehicles again.

Despite the attempt of the American car lobby to convince us otherwise, the laws of the universe apply to them as much as everyone else. The evolutionary selection process of the marketplace must be heeded. To survive, Detroit doesn’t need the sympathy of patriotic Americans or the fiscal coddling of Congress. They just need to make good cars again.