The Auto Biz: Finally Facing Reality
Carmakers sold nearly 17 million cars and light trucks in the U.S. in 2005. As of September 2009, reported figures are 9.2 million.
If you think sales are ever going to come back to that earlier level, I’ve got a used Pontiac Aztek I’d like to sell you. Americans are buying fewer cars for a number of potent reasons, and the NY Times recently traced some of these: Younger buyers have less cash, older buyers are moving back to the city; all groups seem to be downsizing (in both vehicle size and number of cars per family); environmental concerns are growing; and, not insignificantly, the emotional charge of buying/owning/driving a car seems definitely on the wane. These trends, I think, are only going to continue.
For manufacturers, it’s the most difficult of times. How are they going to anticipate demand in such a fluid environment? Figure out what kind of vehicles to build? Determine whether, as the Times said, they are in the car business or the transportation business—and not end up like the cigarette companies?
Comes the government into the picture, and many are still trying to figure out whether it is savior to the auto industry or inoculator of a new form of social disease. For many Americans, the man of the hour is Kenneth R. Feinberg, the Treasury’s pay czar. He told reporters Wednesday that there would be big, big cuts in cash and stock compensation for execs at the seven companies—including AIG, Citigroup, Bank of America, GM and Chrysler—that have together received a total of $300 billion in taxpayer (TARP) funds. Details, particularly concerning the auto firms, are here, and a lot of people are cheering, even though it is still generally business as usual on Wall Street.
To get some handle on where things are headed, it’s necessary to know how we as a nation got here. Steven Rattner, who headed the Obama auto task force, has written for Fortune a short history of how his team came to terms with the crisis that unfolded last winter in the industry. It is fascinating reading and offers a few unforgettable insights into the key players, like Rick Wagoner and the President himself, as they reacted to the course of events.
Both GM and Chrysler, says Rattner, were in a state of denial.
At GM’s Renaissance Center headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors (no mixing with the drones).
This isn’t Michael Moore-type commentary, since most of it has to do with the financial rescue and the decisions that led to it. For car gurus, this should be required reading.
If GM, Chrysler and Ford (not to mention the transplants) are facing much-lowered expectations, how will they execute in the coming years? Do you see major successes or failures ahead?
—jgoods
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