Maybe this auto problem is all wrong?

The big three auto makers saunter down to the Capitol today to beg for money from the American people via our elected "representatives"! Last time around, these CEO's caught a lot of flak for flying to Washington in private jets. The implication was that it was bad taste to beg after taking your private jet ... never mind that the jets belong to the companies. So, the talking heads and the politicians were pontificating on the use of these jets. Well, I don't normally come to the defense of the CEO's, but the trip was not about their use of jets, it was to get money from the people. The CEO's use the jets so that they can travel from smaller airports. This avoids delays, masks their trip routes to some extent (good when you want a deal to be kept from your competitors), and increase their personal safety (they are well paid and famous ...). All in all, this is a time, and, at their salaries, a cost savings especially since they have to pay for the jet even if it is not used (they could sell it, though). Anyway, so this time they are DRIVING from Detroit to Washington. That is a great use of their time.

So, the talking heads all say that the problem is that the car companies are mis-managed. They don't make the right products and their labor costs are too high, especially for retirees. I am looking at it a bit differently. They do make the right product mix. SUV's, that bad word, are not all gas guzzlers ... the hybrids were relatively fuel efficient, just not quite enough in production when we hit the skyrocketing gas prices over the past summer. They have small cars, but nobody normally wants them except as a starter car for a teenager. Only with the wierd market did we see a shift, and, again, the product mix was wrong. By the way, it was also wrong for the foreign cars (I don't call them imports since they are made in Texas, Tennessee, South Carolina, etc). Toyota heavily advertises its huge truck, the Tundra, and nobody seems upset by that (maybe the Sierra Club). So, timing may be bad, but they do have the right cars ... small, luxury, SUV, minivan, truck, etc.

They do have too many models. For General Motors, we have Chevrolet, Pontiac, Buick, Cadillac, Saturn, etc. The Chevy is always the basic model, the Pontiac the sporty one, the Buick the luxury one ... all for the same basic car. Scale up a Chevy with options and you have a Buick with a slightly different paint scheme. Compare with Honda where you have Honda and Acura or with Toyota where you have Toyota and Lexus (I think) or BMW where all you get is a BMW. So, Detroit may have too many brands. Time to sink this concept.

Detroit also has a fast follower mentality. They want their cars to look like the Asian or European style, with a few notable exceptions (Mustang, Corvette). Without a unique style, they are just a "me too" offering, up against the still stinging reputation for having quality inferior to the Asian cars (whether true or not ... perception is truth to consumers).

Detroit has higher costs due to large distribution networks, labor costs, and retiree costs. If one generates a value curve for a business, if you have higher costs (that is you are not the low cost producer), you must bring more value to achieve preference. The value can be quality, safety, leading-edge technology, green philosophy, style, market leader for new concepts, etc. The big three are none of these and therein lies their demise.