Ford Discovers the Fiesta

John Cole notices this article in the NYT–announcing Ford’s decision to refocus its production on smaller, more efficient cars, and asks a few questions. My answers to his questions–speaking as someone who used to consult in this industry–follow.

1.) Isn’t this long overdue? Wouldn’t a responsible company that was actually concerned with the long-term health of the organization have made a shift like this a long, long time ago? If companies were concerned with long-term stability and profitability, rather than focusing on the rather short-term earnings reports, it would seem to me they would have, but as they are beholden to the shareholders who demand a dividend every quarter, they probably produced their cash cow trucks and SUV’s for far longer than they should have. Possibly a situation where capitalism works against itself.

Yes, this is long overdue, and not just a long overdue addiction to the American SUV. Remember, both GM and Ford have what success they have had recently because they are competitive in Europe and because they have significant chunks of the hugely growing markets in China and India, respectfully. That is, their global success has depended in recent years on staving their losses in the US, but also on building competitive cars for Europe and Asia.

But the decision is also belated because of some real short-sightedness on the part of company management that–I have long suspected–resulted from a relative lack of diversity at higher levels of management (that is, they’ve got really diverse staffs on a global basis, but the really smart people in India or Brazil aren’t getting mainstreamed into global, as opposed to local, management quickly enough). Take one example. A number of years ago, I was meeting with a VP of one of these companies in a region of the world that was experiencing huge growth. However, that same week, three of the high-population, growing middle class countries in the region had just announced they were going to end subsidies for auto fuel. The VP, ignoring the fact that in these three countries the end of subsidies would severely limit the ability of the middle class in the country to own and operate their own car, told me about the growth he expected in the region–he basically predicted the same astronomical growth the auto industry has experienced in the region in recent years. I sat there, knowing of the end of subsidies, knowing that expanding Chinese and Indian economies coupled with diminishing supplies were going to send oil prices sky high, and knowing that Bush’s monetary policies and his little Iraq debacle were going to further destabilize the world economy, and I couldn’t believe my ears. This guy wanted to sell SUVs to this growing region, rather than adapting the company’s successful subcompact to the region ahead of what was certain to be decelerating growth in the market. Dumb. Very dumb. Nevertheless, last I checked this guy is one of the guys that has survived the turmoil of recent years.

2.) If Congress had acted responsibly over the past few decades and raised CAFE standards appropriately, rather than modest changes pushed off for decades in to the future, would this change have come earlier and left Ford in a much better position on the global market?

On the global market, only to a limited degree. Remember, a lot of what US car makers are selling–or at least ought to sell but aren’t–on the global market are based on their more efficient, smaller European models. That said, even in Europe they have not always prioritized efficiency as much as some of their European or Japanese competitors.

Where it matters, though, is in the US. Domestically, cars have almost no margin, and in the absence of anything forcing auto companies to invest more in something, it’s not going to happen. So no CAFE standards, no design commitment to fuel efficiency in most classes. (That said, did you know that the Ford Focus–which was of course adapted from a European model–is close to the top of its class in both fuel efficiency and quality? I didn’t think so, but Ford’s marketing failures are a completely different issue entirely.)

Incidentally, what I think should have been done is a trade–some plan for the government to help out on legacy costs (preferably by crafting a business/government partnership that took the first steps towards government-provided universal healthcare), in exchange for radical changes in CAFE standards. If auto companies didn’t have to pay $1,500 and more in legacy costs for each car their build, they wouldn’t be pushing higher priced SUVs so much and they would be more willing to invest in efficient technologies.

That said, I recently challenged a MI politician about what pains MI politicians are for others nationally trying to push efficiency. I said, our intransigence on CAFE standards make us terrible coalition partners. And the MI politician said, "CAFE standards are moot. Consumers are spoken." So hopefully MI’s stupid intransigence on CAFE standards is over once and for all.

3.) Is it too late for Ford? Have they spent so much money marketing SUV’s and big trucks, creating an artificial “need” for giant vehicle penises so ingrained in the American public that the consumer is not going to be willing to make the shift to smaller vehicles as readily as they might have been otherwise? Or are gas prices enough to get people to shift quite quickly and happily?

I live in MI. Several months ago, I drove my Honda Fit to the mecca of vehicle penises, a big box home improvement store. When I came out two men were ogling my car. They wanted to know about my gas mileage, about how much space the Fit has (the answer, incidentally, is a lot). That was several months ago, when I had one of the few Fits in Ann Arbor. But now I’m seeing them everywhere, and not just in Ann Arbor anymore (damnit, now I feel like I’m driving that most generic of cars, a Camry, except that my Fit is purple). If union-loving Michiganders are buying Fits in large numbers, then I can assure you, those who can buy such cars across the country are going to certainly consider doing so.

That said, it’s one thing to say Michiganders are going to buy Fits and another thing to say they’re going to buy Ford subcompacts–and here’s the other area where the US automakers are hurting. First, the Japanese auto makers are much better at packaging their cars. Buy a Fit, and you’ve got two choices: Standard or Sport, and color. That simplicity of model line allows Honda to sell Fits relatively cheaply–you get a Honda with front and side airbags, a decent radio, and electric windows for $17,000. Compare that to a Ford Focus, which starts out much cheaper, but by the time you throw in all the things adults with some cash might want–like airbags–you’re up around $19,000. Also, American auto makers have a real psychological block to building cars that adults who like small cars would want. For a long time, they assumed if you bought a hatchback, that must have meant you were a college kid who didn’t want to pay for electric windows. Which was fine if all you wanted to do was sell to college kids, but not if you wanted adults to buy your car.

All of which–all of it–still comes down to an inability to understand the market, both as it exists now, and as it’s going to exist in about 3 years (because that’s how much lead time you really need to tweak model lines to meet market need–and on that lead time, too, the Japanese are still better than the Americans). Mind you, both GM and Ford are getting better. In particular, they’re slowly realizing they should be selling their European models not just in Asia, but in the US too. They’ve got good, efficient small cars in Europe which could be–relatively quickly–adapted to the US.

They’re getting much better than they were at anticipating market trends. The question is, have they gotten better too late to make the difference?

  1. MarieRoget says:

    That was several months ago, when I had one of the few Fits in Ann Arbor. But now I’m seeing them everywhere, and not just in Ann Arbor anymore (damnit, now I feel like I’m driving that most generic of cars, a Camry, except that my Fit is purple).

    Now you know what it’s become like to drive a Prius in L.A. Plus we’ve got decals that allow hybrids in the carpool lanes *g*

    A new Honda Fit popped up in a driveway around the block just a while ago. While walking the dogs I asked owner & heard nothing but praise. Great cargo space, great mileage, great, great, great. Haven’t seen any others around these parts yet, though.

    • Mauimom says:

      Now you know what it’s become like to drive a Prius in L.A. Plus we’ve got decals that allow hybrids in the carpool lanes *g*

      No more stickers. They ran out and are not issuing any more. So no carpool lane for Prii without stickers.

  2. techmom says:

    I got a Scion xB (yes the box) 2 years ago when my station wagon died. I looked at hybrids but the nicest most affordable one was the Civic – too small for kids and camping gear etc.
    The box gets 30-40 mpg depending on season and type and length of trip and it hauls tall people, big stuff and it looks OK w/ a canoe on it.
    But Toyota aims these at the younger hip set even though they are great for older folks. My kids love it.

    Then Scion/Toyota changed to model – to a bigger cooler hunk w/ a bigger engine and worse mileage. The people looking for hip like it but they lost all the fuddy duddy sales.

    • emptywheel says:

      I actually think Toyota’s losing its marketing sense, as well. Perhaps they traded sensibility for reaching a truly huge AMerican market.

  3. bmaz says:

    With Ford, it is yet to be determined. If history is a marker, it may, sadly, turn out that “Ford Discovers The Pinto”.

  4. JamesJoyce says:

    1973′…… the first oil embargo. The issues today are the same as then. As with alcoholics, denial is hard to overcome. What we have witnessed over the past 1/4 of a century plus is “protectionism!” Protection of US auto and US oil corporate interests in collusion, to the detriment of America and the governed. No Natural Selection here, just protectionism to protect corporations’ bottom line…….

    Notice all the “OIL COMPANY” ads of late. Pure lip service in the hope that America will again vote in a manner inconsistent with it’s self interest as a nation, for the benefit of corporate America and its stockholders while your brother looses his job, your sister in law gets a pinks slip and politicians bailout the corporations. Meanwhile opportunities once available to Americans are decimated while people on fixed income are raped by energy costs, the great inflater! DEJA VU!!

    Star Trek’s “communicator” in the form of a cell phone and we still pump gas as we did 70 years ago…. Something is wrong here folk?? Dead wrong!

    • rteolis says:

      This is something that troubles me. So many of these small cars don’t get mileage that’s much better than larger cars. I just checked for a 2008 Chevy Aveo LT: 26 city, 35 hwy. What’s the point of investing in a new sub-compact for such a relatively small improvement in mileage? Shouldn’t there be a bigger payback for switching to a smaller vehicle? I’m surprised that the 2009 Fiesta is reportedly getting 50mpg.

      • bmaz says:

        Crap, I got a reasonably comfy, and well performing, BMW that gets about 22 city and 28 highway (might be higher if I didn’t live in the wide open west and drive 85 miles an hour on the highway). That just isn’t worth the pain of an itty bitty sub-compact.

  5. Jim Clausen says:

    Finally a topic upon which I can comment.

    I left Bmaz and the rest of the ASU Law class of 1984 to become a district sales manager with Oldsmobile as they tried to bring in more diversity.

    I left after 6 months. Why? 1950’s corporate culture, no awareness of international trends, shitty products, and the DIESEL engine built with a gasoline block. We were under an FTC ruling to make it right and I played Santa Claus with GM’s $$$ as we tried to salvage the Oldsmobile brand. We all know how that went!

    I have never hated a job as much. Intellectually stifling, ripe with jealousy, and the bigwigs knew it was easier to buy Congressmen(MR. Dingle anyone) rather than meet Carter’s CAFE standards.

    Here we sit, 35 years later.

  6. stryder says:

    My father, a great depression child,was the most frugal person you’d ever want to know and abhored waste.During the 60s while evryone was driving the muscle cars he drove a dodge dart.An old machinist I knew recently built a small steam engine with an instant,flash, propane fired, steam boiler and recycled the water.A 2 banger with as many power strokes per revol;ution as a v8 and produced 400ft lbs of torque at 0 rpms.No transmission and no brakes.You could reverse the rotation of the engine to stop or slow down.I told him once that if he didn’t keep a lid on this that someday I was going to find in back with a bullet in his head.He was always bitching about the patent boards and how they control, stifle and impede innovation.
    I’m convinced there are alot of ideas and innovation that are bought up and shelved in order to exploit the markets.
    Another bitch was how the diesel destroyed the steam engine because of the petroleum industry.I’ve considered trying to adapt a standard gasoline 4 banger into a steam engine but let it go.Steam turbines are also a possiblity except they won’t reverse rotation.Water expands at 10 times the rate of gas.

  7. bell says:

    we got a fit about a year ago… great car, but we don’t have a purple one! nice choice on the colour too! i think ford and the american companies have been operating on the ‘bigger is better’ theory, at least that has been my simplistic view of it as a canuck.. here in canada we have albertans who seem to have a similiar view, as my stereotype of albertans is they all drive around in big honkin pickup trucks.. at any rate the us automakers are in a similiar situation to freddie mac and fannie mae.. if they don’t need a bailout now, they will sometime soon.. they are too little too late..

  8. JamesJoyce says:

    “….but the really smart people in India or Brazil aren’t getting mainstreamed into global, as opposed to local,…”

    In 1979 a comprehensive national energy policy was developed by myself and four other students while at a major university. We received great congrats from academia and politicians. The plan was predicated on the use of ethanol and methanol fuels and the assistance of the oil companies. The reason(s) for adopting the plan are the issues which are killing our growth and opportunity in America today. Drunks as policy makers for sure!!!!

    This plan was adopted by Brazil. “..Smart people in Brazil…” self serving idiots in America!! Concerning Cafe Standards, a bleeping joke!!!! My Volvo 142E 4 speed w/ Overdrive on steering column got 37 mpg in 1976!!!!!

    Took the time to contact one reviewing Professor who was very tough on us at the time. Not only did he recall the project……. he stated I was 100% correct in all my predictions. Kind of like putting your hand into a meat grinder………. “handsburger.” Our self serving corporate and political leaders quite frankly suck….. big time!!!!

    • bmaz says:

      Isn’t there now a growing issue, especially with the global warming impact, with biofuels like you describe as to the biomass for fuel versus food? And also that the conversion process renders the the real net gain almost moot?

      • JamesJoyce says:

        Heard all the argument against ethanol. 35 years ago going forward many modifications could have been made. This was to be a transition. We did nothing but import more oil! Even back then the game was to produce ethanol via cellulosic methods. One prospect of the plan was to utilize solar power, to power the cellulosic process. Corn is not the product to distill ethanol from using fossil fuels to power the process. Cellulosic ethanol derived from industrial grade hemp and waste biomass, America’s trash…. are suitable products. Take all farming subsidies away and grow grow grow…

        On demand hydrogen production from water was the ultimate goal. Unfortunately corporation are more concerned with profit via commodities than really addressing energy needs….

        Lots of “liberty,”lost here to the tune of 700 billion $$$ a year going through the hands of domestic corporate middlemen before finding its way into the coffers of Mideast oil kingdoms who might be terroristic in nature. Ten again maybe Americans are getting the same hot poker up the pie hole that these countries and native peoples have experienced at the hands of western oil interests since the end of WWII. Talking with some WWII vets today on fixed income!! They are fucking pissed off and realize the future for their grandchildren and great grandchildren is being decimated and eviscerated. Minimum wage @ 8.00 p/h national average and gasoline is 4.06 p/g. As a percentage of hourly wages, these people are screwed and have no chance. If you need 20 gallons of fuel to get to work a week, and you work 40 hours, 20 of those 40 hours you work for $3.96 per hour. Point is 35 years ago something could have been started. Instead like the Titanic, we already have hit the iceberg, the compromised corporate rivets have popped and the bilge pumps cannot keep up with the flooding water. Close the bulkheads and let the lower fare passengers drown.

  9. Arbusto says:

    Marcy, thanks for your insight on Detroit. I’ve been trying to figure their rational for years. Tying in the international market makes sense, though it’s like trading C02 with third world countries i.e. a zero sum/ponzi scheme.

    Why does Detroit need a $1500 legacy cost factor? Isn’t that just an accounting ploy?

    • emptywheel says:

      No, it quite honestly isn’t.

      Think about it. How long have Ford and GM been around? How many retirees do they have?

      Now think about how long Honda and Toyota have been in the US. And think about how much of that time they’ve been actually building in the US–basically a few decades, at most, and a lot of their cars are still built in countries where central governments pay retirement benefits and health care. That’s where the difference in legacy costs come from, and it’s only going to get better–competitively–slowly, bc Honda and Toyota are not, for the most part, unionized in the US.

      • earlofhuntingdon says:

        I think there’s also been a classic grasshopper vs. the ant problem, a systemic reluctance for decades to deal with legacy costs. It hurt short-term numbers on which the all-important management bonuses — 25% to 250% times base salary — depended.

        Pensions are just deferred wages. Agreeing to them lowered current costs and increased current financial performance. See first paragraph. Big Auto fought against recognizing those deferred costs in today’s accounts. See first paragraph. When they lost that battle and had to save real money today to meet tomorrow’s costs, they argued and spilled virtual blood over such things as how many employees would ever collect their pensions and the difference between the rate of growth in the savings pot vs. the growth in the cost of pensions obligations.

        Notwithstanding that the money set aside in pension funds was earmarked — already spent, so to speak — companies claimed the right to raid those savings when necessary. They “borrowed” or otherwise use that money, and thereby recreated the unfunded pension problems that the savings were meant to solve. Moreover, they sought to avoid booking those loans because they were using “their own money”. See first paragraph.

        Yes, Big Auto’s current costs for pensions and healthcare, amortized per car sold, are quite high. But there’s a history of greed and mismanagement and corrupted government oversight behind it. Universal healthcare is a civil right and a public good. Minimum state pensions I would put in the same basket. But as with the current financial industry crisis, let’s not do a Big Auto and just throw taxpayer money at it. Let’s throw the right solutions at it.

      • Arbusto says:

        So Detroit should be recruitable in the fight for universal health care to reduce their contribution to retiree/legacy costs? Nah, to smart for ‘em.

        • emptywheel says:

          Not as much now, since they’ve given UAW the job of benes for the line worker retirees and the white collar Medicare-eligible just lost theirs. Five years ago, maybe.

    • BooRadley says:

      Why does Detroit need a $1500 legacy cost factor? Isn’t that just an accounting ploy?

      I think part of it is for health care and retirement costs. Most international competitors don’t carry that level of burden.

  10. earlofhuntingdon says:

    Victims of their own success in many ways, the Big Three are indeed battleships in an ocean of submarines and aircraft carriers. New missiles and electronic defenses, even greater speed and maneuverability, only protect them so much. They remain a bulky metal target that takes three miles to turn 180 degrees. Their many improvements don’t change their on board rules and class structure that make them what they are. Unlike in submarines, saluting and dress whites are not optional.

    The Big Three’s short-term fixation on financial performance is legendary and I think accurately criticized, as is the creative techniques used to smooth out the inherently uneven performance in heavy manufacturing-cum-consumer marketing organization. Where I think that’s most hurt these companies is in their reluctance to accept that short term hits are necessary for long-term survivability. Plant closings and model changes are one thing. But the competitive disadvantage from that reluctance expresses itself throughout their decision-making process. For example, in not revising a process that might lose three weeks’ production now, but improve production rates overall at significant future cost savings. If those savings can’t be booked today, odds are the improvements won’t happen.

    The Big Three also suffer from the behavior socialized into their top ranks. Anti-labor attitudes, for example. They are a dysfunctional growth in managers from Europe, say, but they have metastasized among American managers into something far less benign.

    The vaunted international experience among many top managers, extensive on paper, is often only on paper and in their frequent flyer accounts. Americans, in particular, remain isolated in their foreign assignments, especially when posted to the increasingly different societies in China, South Asia and Eastern Europe, the must-have markets for survival. Expensive and talented HR managers who ought to devise entry, assimilation and exit strategies for this top-notch talent often fall into the solution trap common to Big Auto: throw money at it. Thoughtful solutions that might buck the system rarely get implemented; those who suggest them often plateau early or leave.

    Over-achieving workaholics or end-of-career specialists remain encased in their company cocoons, using strategies that worked earlier in their careers, but which are often ill-adapted to these new markets. That leads to ignoring information. American notions of time are also easily manipulated or lead to confusion, whether in China, Latin America or Ireland — where the outdated mythology has it that there is no concept as urgent as the Mexican notion of “manana”.

    Being trapped in a cocoon means being more dependent on stereotypes, which can be manipulated, too. That has its most profound affect in the widespread reluctance to consider that the interests of foreign partners, suppliers and host governments may not be consistent with their own. Top managers who would never assume, for example, that the house seller’s real estate agent in Chicago is “working for them”, fail to consider, in fact often assume way, the greater conflicts they meet abroad. The problems inherent in the resulting conflicts go unstrategized, unprepared for, unresolved. Opportunities are lost.

    As EW has said about the Dems in Congress, that leads the Big Three — notwithstanding that [because?] they employ thousands from the top ten B Schools — to play checkers instead of chess. Or baseball instead of cricket, where it’s not just the rules that are different — you’re in when you’re not out, there are two innings instead of nine, and “the pitcher” purposely bounces the ball bounces before it gets to “home plate” — the game is played on an oval, not a diamond.

    • emptywheel says:

      Yup. And I’d add one bit about diversity.

      US recruiting tends to focus on the same khaki and polo wearing nice boys throughout. It wouldn’t be so bad if people weren’t the same Big 3 clone at recruitment in the US, but they are.

      GM and Ford woudl do so much better if they had their top young recruits from around the world injected into the management structure in the US and Europe. Those people are incredibly talented. And they would radically change the culture and sensibility of these companies with little effort.

      • earlofhuntingdon says:

        I think you’ve identified a significant tension that detracts from Big Auto’s long term competitiveness, and which has wider ramifications. We can also see it in the tension between nativists and Obama over the need for Americans to learn a second language. Ford and GM, like the Army and Navy, want a narrow set of characteristics among the few who will lead and guide their organization, who will make their big decisions, who will be hailed when right or be worth protecting when wrong.

        The kind of multi-cultural, on the ground experience you’re suggesting threatens that preference for a narrow skill set. On the one hand, it would simply create a larger, more diverse talent pool from which top managers would emerge. On the other, it dramatically changes the social and economic expectations among those managers. I’ve worked with top managers in Europe, for example, who routinely consider issues affecting their workers and who accept costs and limits on their decision-making that would leave an American gobsmacked. It only got hard when the American was the superior and insisted on doing it the American way — even in Europe. The resulting toing, froing and delays often resulted in going back to the European solution and in devoting a lot of resources to saving the American’s face. The Europeans learned to do things their way, without talking to their American counterparts. The Americans learned that Europeans were wimps and wouldn’t talk to them anymore.

        A few of Ernest Hemingway’s First World War ambulance driver colleagues returned from the carnage of that war determined to help prevent another one. They sponsored a program of international exchanges of youths, young adults and teachers. Their idea was that it’s harder to go to war with someone whose language you speak, and whose religion and daily life you once shared. A premise whose value Doug Feith inadvertently verified when he rejected trained Arabic-speaking operatives for his DoD intelligence shoppe [sic] in favor of culturally illiterate neophytes and followers.

        The same idea works just as well in promoting business as in avoiding war. The Brits did it, admittedly within the confines of empire. The Japanese do it within the confines of their international mega-companies. Creatively, they employ inter-departmental assignments, too. In auto, that means engineering, finance, manufacturing and marketing. Why build what you can’t pay for or sell? Even the Mormons do it, to their considerable economic and networking advantage.

        When it comes to economic competition, cooperating peacefully over resources rather than taking them by armed might not only works better, it’s much cheaper. But then neither Roger Smith nor George Bush, in their different worlds, has ever really paid much of a price for being wrong.

  11. BayStateLibrul says:

    I chug-a-long in a 2000 Honda Accord….
    My company gives me .37, yes .37… per mile as reimbursement
    Isn’t the IRS rate now over .50?
    Should I trade it in, or quit my capitalistic business endeavors
    for greener pastures?

    • emptywheel says:

      Wait two years, and you’ll be able to get a much better car in replacement.

      I was driving a 91 Honda Civic until November. I wish I could have waited just a bit longer.

      • freepatriot says:

        once you’ve driven a big LE class Mercedes, everything else is a dissapointment

        we blew a bunny off the road once …

        literaly BLOW OFF THE ROAD, we didn’t hit the bunny. It rolled away like a tumbleweed before we got to where it was at

  12. JTMinIA says:

    I thought that Fiestas were never built in North America (only sold here) and are still being built in a variety of places (maybe under a different name).

    Or am I missing the point (again)?

    • emptywheel says:

      Actually, I didn’t explain my title.

      Fiesta is the name of the crappy old subcompact Ford made, which we barely remember. It’s also the name of the new cool subcompact that Ford should already be making here, but will be in a year. So the Fiesta is coming back, it’s a good car, but unfortunately, has a name associated with a crappy car. Kind of like renaming the 500 the Taurus.

        • emptywheel says:

          I actually did a training once, using the new Fiesta’s data as a basis for my simulation. So the participants had to–among other things–name the damn thing. No one came up with Fiesta, I can tell you that.

          • earlofhuntingdon says:

            Reminds me of the Chevy “Nova”, the name for a mediocre 1960’s compact that GM wanted to reinvent for use in Latin America. The Spanish speakers among you can tell how well that went. About as well as the Latin American Spanish phrase Parker Pen once chose, to the effect that their fountain pens wouldn’t blot ink in the wrong places and “embarrass” you. The colloquial meaning was that their pens wouldn’t make you pregnant. The Freudian imagery was amusing, but not good for sales.

            There are some excellent training materials on international marketing, but I think they’re often ignored by Big Auto, which for a long time held to the classic three B’s of automotive marketing: boats, booze and babes. Auto show and magazine covers suggest they’ve never really moved on. Nor have their cars.

            • emptywheel says:

              Of course, sometimes that’s unavoidable. The name “Skoda” took on such negative connotations in Czechoslovakia, the term “To je Skoda” means “that’s a shame.”

              • earlofhuntingdon says:

                My point was that that for decades, Detroit never did it’s homework — it sold what it was cheap to make, not what consumers wanted or what would last — not that cross-cultural marketing hasn’t unavoidable problems.

                • bmaz says:

                  There was actually more consideration of that than most realize. But by the time there was serious discussion, the trashing of Glass- Stegall was in the formation and shareholder value was starting to become the all consuming be all to end all. It cost too much to rejig their machinery and production facilities, so they just kept slow bleeding themselves to the near death state they are in now.

                  • earlofhuntingdon says:

                    The costs to “rejig” GM’s lines may have been politically unacceptable, may have dismayed the market and blunted bonuses for a few years, but it was possible. Detroit simply did a Bush, put their head in the sand, and said we’ll “grow” out of this. Rather like when one of GM’s senior finance execs, after musing about losing money on each car sold, said GM could make it up in volume. He didn’t mean higher volumes would reverse the loss per car. He must meant more revenue would imply growth and obscure the losses.

                    GM and its peers suffered from a loss of vision and commitment to their home market. Obsessed with de-unionizing, they found money to spend in China and Europe and Italy and Sweden, but decided they wouldn’t reinvest the funds necessary to remake the US manufacturing arm. All while the Japanese, Koreans and Germans were investing in the US. Detroit was simply convinced that foreign markets were easier and more profitable. The grass is always greener….

                    • bmaz says:

                      Exactly. This is the same crappy result we are encountering in every nook and cranny of corporate existence, tha almighty shareholder value.

                      Earl, I am putting together a group discussion/working thread some time in the somewhat near future to talk about reform of corporate structure, alteration of corporate personage, corporate tax structuring etc. There was a time when even big business had something for not just themselves, but for their employees, communities and country as well. I want to discuss how we can get back to that. I will give everybody here fair notice ahead of time, but I very much hope that you and all the other regulars will start giving this some thought and will bring your wisdom to the discussion when we have it. This is a critical subject that never gets mentioned, and it is time to start the discussion on it.

            • bmaz says:

              Hey now. Boats, babes and booze still sell just fine why move on; why fix what ain’t broke. You do need a decent product though, that is the real issue.

              • earlofhuntingdon says:

                Their cars are supposed to work fine on their own, no little blue pills should be required to get momma or junior to work or school.

                I would add that Detroit’s effective, decades-long battle against public transport has helped create a big part of the mess it now wants taxpayers to help it out of.

      • brendanx says:

        The mention of crappy old cars reminds me of a recent local story in the Washington Post that made me chuckle: Man sprays Interstate 64 with gunfire, makes mistake of being seen in…an AMC Gremlin.

      • JTMinIA says:

        OK, I guess I get it. But it more a case of Ford (re-)discovering that the Fiesta would sell in North America, as opposed to (re-)discovering the Fiesta in general. My understanding, again, is that the Fiesta was never built here and has never stopped being built elsewhere. It was only (briefly) sold here but all Fiestas sold here were built elsewhere.

        (I’ve actually raced a Fiesta in a winter rallycross … no, not against one … that would be too easy … I mean: I drove one in the event. On the bright side, the standard rule of “you wreck it, you bought it” didn’t worry me much. On the down side, it had no power, understeered like a manatee, and the tiny wheels were hard to control on ice and packed snow.)

  13. BooRadley says:


    Thanks ew.

    I think the same principles apply to a lot of oligarchies. It’s easier to buy specific legislation than it is to actually compete in a sustainable way.

  14. bobschacht says:

    “it’s one thing to say Michiganders are going to buy Fits and another thing to say they’re going to buy Ford subcompacts”

    Ford was producing the best small station wagon on the market, the Ford Focus. I drive a 2004 Ford Focus. But, to illustrate your point, the Big Domes in Detroit decided not to make Focus wagons anymore. So, when I need a new car some time in the future, I won’t be looking at Ford.

    Bob in HI

  15. joejoejoe says:

    emptywheel – Is there any move in the auto industry or Congress to standardize safety and emissions standards with Europe and Japan? There are a lot of effienct cars and mini-work vans that are sold overseas that I’m sure would have a market here in the US but they don’t make it to this market.

    Politicians talk about “fair trade” safety and environmental standards provisions in trade agreements but we also seem to think Europeans and Japanese don’t care if their children die in fiery wrecks so we need our own safety standards. Wouldn’t unified safety standards would produce more choices and ease transition costs for domestic manufacturers in the US?

  16. timbo says:

    Hey, Ford made the Ford Escort…which, while it was the best selling car in the world, Ford cut its gas mileage and then killed the line when it didn’t seem to be as much of a hit with lower gas mileage. I owned one and it was a great car. In fact, the old Escorts from the early to mid-1990s are going for a premium now because their 88-hp motors got 40+mpg. Yeah, Ford, remember in 1994 when you had the most popular car in the world…and then you blew it?! Ask yourself why and then do the right thing next time. Don’t be such doofs next time…um, if there is a next time.

  17. Minnesotachuck says:

    Marcy, didn’t Ford have a foreign born and bred CEO 10 or so years ago? Egyptian as I vaguely recall? Was he the exception that proves the rule?

    Also, it has long seemed to me that in a rational world we wouldn’t have had CAFE standards; instead we’d put in place a gradually increasing fuel tax: no increase for the first year or two or three, then a nickel or so a year for ten or fifteen years at least. That way you wouldn’t have the industry playing lobbying games to excempt pick-ups and SUVs. I know, I know! Politically DOA. Not to mention the likelihood of the industry dragging their feet as they bet they can bribe Congress to rescinding the legislation before more than a year or two of the increases go into effect.

    • emptywheel says:

      Jacques Nasser, who was Lebanese born, but who came in through Australia. That’s actually pretty good experience NOW, since Australia is becoming more closely integrated into Asia. Not as much then. But he did have a thoroughly international career.

    • earlofhuntingdon says:

      The art of the possible meets lobbying in Metro DC. Detroit waged war on regulation rather than incur short-term costs that might have increased their long-term profitability – or even their survival. I think that derived, and still does, from a bonus-driven mentality that puts executive compensation and self-interest above the much-touted and abused slogan, “shareholder value”. A phrase as empty of meaning as, “People are our most important asset”.

      I think it’s comparable to the behavior of today’s energy giants, which spend hundreds of millions (a few weeks’ profits) on lobbying to avoid mandatory emissions restrictions, and to keep their own subsidies while preventing the alternative energy industry’s access to them. Apart from avoiding short-term costs, it’s a strategy designed to characterize government regulation itself as ineffective and illegitimate. A theme used by big oil since J.D. Rockefeller monopolized the oil industry and then tried to fight off Teddy Roosevelt’s trust busters.

      TR, no stranger to rank and privilege, knew better. He may have regarded regulating business in the public’s interest as an aspect of noblesse oblige, the obligations of a nobility toward its people. But he respected the oblige part. Bush and colleagues only recognize the noblesse part.

  18. Gerald says:

    Well first I have to confess that I still have a very old heavy duty 2nd hand Ford truck, that over the years I have used for everything from hauling boats, and trailers, to hauling my personal gear from one coast to another, etc. Once it had one of those camper bodies that you could ride under, position just right, and then lower down with the jacks and you were ready to go to the wilds or even to a Sam’s parking lot.

    Still back to our current problems and my own current search for a new small (smaller) car.

    A new model Honda Fit is due this fall. What I love about the Honda Fit is the layout where you can get flatten the back and even the passenger seat.
    The Honda Element also has some good seat configurations, but it has a lousy load capacity that they don’t even publish. You have to check inside the doorwell, where the law says they have to post it. Also, it is only a 4 seater which is rather stupid. It is also fairly heavy and doesn’t get that good a mileage.

    I have tried to find a Toyota Yaris Hatchback, a little larger than the Fit, to study it’s loading configurations, but the local Toyota place can’t even keep them. They come in, are loaded off the trailer, and driven off by a 5 month backlog of customers usually within 24 hours.
    I have been thinking about the Toyota Matrix as a compromise which the dealers still have, but the person who said that next year even the good little cars will be better is correct. I will wait til next summer.

    As for gas mileage. Look in the back of the (CR) Consumer Reports magazines at the newsstands. They will have their own CR mileage tests which are better and more honest than the manufacturers. It usually gives a highway mileage better than the manufacturer and a city mileage that is much worse. Also it will give an average. (i.e., 3 numbers) Also in the magazine, it will have the manufacturers’ numbers as well.

    As for the old line American cars, I don’t know whose fault it is, but anymore I don’t care. Bedsides the foreign companies manufacture many of their cars in the US. An announcement just this last week said VW is going to build a new plant in Tenn.

  19. dopeyo says:

    the average profit on an SUV is approximately $10,000, I believe. The profit on a Fiesta? Not so much.

    Foresight (or looking over your shoulder at the Japanese as they moved into hybrids in the mid-90’s)? Priceless.

    Unfortunately, too late for Ford / GM / Chrysler. I’ll tell my grandkids about the days when dinosaurs with chrome tailfins ruled the earth, but I doubt they’ll believe me.

  20. JohnLopresti says:

    I wonder how Detroit is doing in sales of war machines. I used to drive to silicon valley daily in the Nova, and pass the FMC testing ground for the Bradley vehicle, which was kind of FMC’s boondoggle until debugged. I looked up the full name of the company. Turns out to be unrelated to Ford; its background was Food Machinery Corp. These will be the folks who resist world population control, too. Sell more food machines. I would expect the Detroit leading manufacturers to have foreseen the vitiating effect that making war in the oil producing middle east would have upon the global economy, with consequent squeeze on middleClass budgets. But the whole global warming juggernaut still is taking boardrooms by surprise. Part of the problem with telco dereg in most countries, last decade, was most of those entities were akin to utilities with stultified corporate culture and cozy relationships with respective governments, which had an inertial effect on their reactions to the dawn of internet. They simply used buckets of liquid cash to control markets. Having observed the state of CA lead the way in air pollution regulation especially with respect to car engine design, it is little surprise Ford is ready for rerollout of its Fiesta. In a way the Detroit manufacturers of vehicles seem stodgy or foolish, but I think they have a better sense of their history periodicities measured by profits and the ten year plans, and now simply have recognized likely time for a change is approaching.

  21. Rayne says:

    I’m wondering whether the current composition of the Big Three and their apparent blindness isn’t a bug but a feature.

    What if they went bankrupt — could they get out from under union contracts?

    They can’t bail their vessels fast enough, cannot sell enough assets, close enough plants, layoff enough workers fast enough to staunch the hemorrhaging. Why cling to illusions so publicly, unless there were a reason for it?

  22. earlofhuntingdon says:

    As Delphi has proven, auto companies (and corporations) can use bankruptcy rules to force through otherwise unacceptable reorganizations of their companies. That includes the ability to terminate contracts. The threat of doing that alone is often enough to force the other side into renegotiating them.

    It’s not a strategy without costs and risks, but it’s a powerful tool, especially in Big Auto, which claims its labor costs are a significant drag on its ability to regain longterm profitability.

    I’ve always been amazed how leadership that performed so poorly that it took its company into bankruptcy as a “solution”, should then be incentivized with bankruptcy court-approved compensation plans to keep and reward those same managers, while rank and file were being tossed on their ear and company lenders were being assured that they would get theirs.

  23. randiego says:

    the average profit on an SUV is approximately $10,000, I believe. The profit on a Fiesta? Not so much.

    I find it hard to believe that either GM or Ford makes anywhere near that much margin. I think they’re lucky to make ANY profit (see the sale of Chrysler last year).

    Bmaz, my 2002 4-door VW Golf gets 23/28, so you’re doing pretty well. It has a lot more interior room than Marcy’s Fit – but she’s got way better mileage.

    Jenny drives an 07 Nissan Versa. 27/33, very disappointing fuel performance.