Despite harsh criticism, the President and Congress seem poised to throw a lifeline to America’s struggling auto industry. Critics say Detroit’s problems stem from 30 years of short-sightedness and poor decision-making. Failure to recognize future trends toward smaller, more fuel-efficient vehicles compounded by failure to aggressively address budget-busting labor demands head critics’ lists of the poor management practices that have led to the U.S. auto industry’s financial woes (see our Nov. 12 post). Today, the auto industry defends itself.
U.S. auto industry representatives dispute their critics, saying critics oversimplify the issues and don’t credit automakers for the significant progress made in recent years. “In the last five years, there’s been more restructuring done in the automotive business than any other business in the history of the United States,” said Tony Cervone, General Motors VP of communications.
Auto industry spokesmen cite a decade’s worth of tough cost cutting measures, improved productivity and their switch to the production of more competitive, fuel-efficient cars as indications that Detroit has been working hard to reverse course and increase its competitiveness with popular foreign imports. They point out that their ability to compete is severely hampered by the demands of powerful labor unions and the strictures of multiple government regulations.
The recessionary economy and tight credit have placed additional burdens on automakers. New car sales are down, in part, because consumers aren’t spending. Across the economic board, consumers are harboring their financial resources and taking a wait and see attitude about the nation’s economic future. Adding insult to injury, the tight credit market has made it nearly impossible for people who want to buy a new car to get financing. Burned by the mortgage meltdown, banks have reined in lending practices and raised loan requirements.
The news isn’t all doom and gloom, however. Capitalizing on fuel-efficient designs initiated in 2000, Detroit is finally rolling out cheaper, competitive alternatives to the Asian-designed vehicles that dominate that sector of the market. Financial pressure is forcing the industry to consolidate and streamline production practices. President-elect Obama’s reminder to the American people that we will all have to sacrifice if the country is to weather the current economic crisis could play out in more reasonable labor contracts. And that Congressional lifeline is likely to come with lots of strings attached that should give Detroit the needed incentive to redefine itself more competitively.
Next time: Lessons to be learned from the auto industry meltdown