While the collapse of the U.S. auto industry is a disaster of global proportions, it is a great opportunity for companies and countries.
It is an opportunity to redefine the rules and make them global, reset the boundaries and work with energy and alternative transportation companies, and redesign the ground transportation system, rethinking everything from the fuel stations on the street corner to the size of parking spaces at the train station.
There exist today the cost-effective technology and widespread public concern to make it possible to develop cars that are low-cost, energy-efficient, and practical for everyday use—to make real progress on environmental issues while contributing to global prosperity rather than dampening it.
The automobile makers and governments around the world have a unique chance to create an effective model for trans-national-industrial partnerships.This type of collaboration is uncharted. Rather than operating on their own, Toyota, Honda, Tata, Tesla, Geely, Ford, and General Motors could find common ground with Exxon, CSX, Aichi Kokuki, Indianrail, and academics to design a standard for energy-efficient and environmentally sound transportation. Imagine the global automotive industry embracing this standard rapidly without putting consumers through years of confusion and skepticism—will it be hydrogen, solar, hybrid? Will I be able to refuel on the highway? It would be like skipping over eight-track tape music players, cassettes, and CDs, and going right to MP3 players.
Imagine governments collaborating to fund global development of that new transportation standard while individually investing in the local infrastructure—for example, modified fueling stations in a format common around the world. At the same time governments can create financial incentives for consumers to replace conventional vehicles with the new green cars. Imagine 400 million of the world’s 800 million vehicles being replaced with green cars by 2025. It is possible, if we respond to the decline of GM and its American counterparts as the very real opportunity it is.
Handling the current crisis means rethinking the way industry operates and becoming collaborative, innovative, and strategic—thinking big with a long time horizon. Autoworkers and taxpayers would agree that we haven’t gotten very far in the past two decades by being insular, conventional, and tactical.
Auto manufacturers are expected to sell 9 million vehicles in the U.S. this year, down 50 percent from 2007. The Big Three have about 44 percent of that market, an all-time low. Yes, GM has updated many of its plants and made them more flexible, but it has a long way to go to match Hyundai’s Alabama plant. Yes, Ford’s cars were recently ranked third in reliability by Consumer Reports, the first time in over 5 years that a U.S. company made the top three, but their website section on quality doesn’t even discuss the reliability of the engine.
GM is now asking for help one nation at a time. Toyota views itself as a Japanese company and is seeking support solely from Japan’s government. Consumers are also insular. In Korea, 95 percent of the cars purchased are domestic. In America, where the auto industry drives about 1 in 10 jobs in the U.S., consumers view this as a “Detroit problem.”
As GM goes, so goes Chrysler, and possibly Ford. By the playbook of traditional strategy, the day GM declares bankruptcy, Toyota, Honda, and the others will unload the docks and cut prices on their vehicles by $3,000 to $8,000, offering unprecedented discounts. They may have more than 1 million vehicles on docks already—enough to boost their combined market share more than 10 percent, sending U.S. companies’ share to a new low that may make the Big Three unsustainable no matter what kind of bailout Washington offers.
Even if global competitors step up and do what is right—give The Big Three some breathing room so that they can recover—will the American companies and unions learn from this disaster and re-engineer the entire business? They better. If not, they will die a slow and painful death that all of us will feel.
Institutional courage, bold thought, respectful collaboration, and a collective belief in tomorrow are required.