I've written before about the US auto industry. In a previous post I spoke of Toyota being a company the US auto companies should emulate. Today, we see that even Toyota is not immune to the recession. I still think they're in a much better position to weather this storm than any US company but when a well run shop like Toyota loses $7.7 billion in a quarter, that can't be good.
The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said.
You never want to relish when someone gets fired. But don't cry for Rick Wagoner. He made over $63 million during his career at GM, most of which came during his years as CEO (a little under $39 million). When you realize that GM lost approximately $82 billion in the last four years of his tenure, it was obvious that new leadership was needed. Interim chairman, Kent Kresa, also stated that most of the GM board of directors would be changed at the annual meeting in August. Another good move seeing as how they kept on supporting Wagoner year after year while he presided over the meltdown of an American icon. I don't know if the US auto industry can be saved, but it couldn't hurt to have some new blood running things. I want to desparately support American made automobiles and if the stars are aligned, my next car will be American made.
Techcrunch has a guest post from Todd Dagres of Spark Capital. In it, he suggests that President Obama should get Steve Jobs to run a joint government bailed-out GM-Chrysler. Though I agree with the overall strategy of the article (firing the current auto execs and streamlining the product line), I don't think Steve Jobs is the best person to actually execute this. His other choices (should Steve not be available), John Chambers or Craig Barrett are somewhat more plausible, though not quite there.
It's a little simplistic to think that Steve can make everything he touches into gold. Though Steve has had great success at Apple and Pixar, the shear size of the auto companies dwarf even those two industry leaders. I think Steve could be a great product strategist for the auto industry, but I think it'll take someone with big industrial operational experience to execute on a new product vision. Maybe it's a tag team effort - Steve leading product development and someone like say, Jack Welch to run operations? I know Nardelli was a GE alum but I don't have much confidence in his ability to lead given his lackluster results at both Home Depot and Chrysler. Perhaps the master can do better than the student.
News came out today that GM and Chrysler seek an additional $22 billion in aid from the government. That's in addition to the $17.4 billion already committed. I just can't see throwing good money at a poorly run business. It's one thing to bail out banks because credit markets affect a lot of people. However, bailing out an automaker that continually makes poor decisions and even poorer cars is crazy. As a condition of any bailout money, I would request that all the CEOs and upper management be fired. I applaud what Ford has done in not requesting bailout money. Of the three US auto manufacturers, I'd most likely buy a car from them. Isn't it telling that the car maker that churns out the better products is the one that least needs help?
Was reading the Times Online article that the flying car from Massachusetts based Terrafugia is getting close to reality. The wings of the car fold up so that it's about the same size as a big SUV - all in about 15 seconds! An amazing feat of engineering and inventiveness.
My only concern would be safety. If this vehicle was treated as a plane, then I'm ok with it. I think airplane safety regulations are pretty strict so if any person who owned one of these needed to have a full pilot's license, that would be a must. As the old saying goes, nobody ever died when their car ran out of gas.
News came out last week from the Detroit Auto Show that Toyota and Ford will be looking to release pure electric vehicles (not range extending fakers like the Chevy Volt) in the near future - about 2012. It seems to be a theme at this year's show, as all other automakers were releasing some sort of hybrid version of something. The big question is whether next year's show will still have the same focus. As oil prices decline (I paid $1.89 per gallon the other day!), there will be less pressure for consumers to buy fuel efficient cars thus less incentive for automakers to develop new technologies. Do you think a company like Tesla Motors could have been built and funded in an era where gasoline costs $1.25 per gallon? Perhaps, but it wouldn't get as much attention as it does (and deservedly so, the Tesla Roadster is amazing). When you think about it rationally, there are many reasons to want to get a fuel efficient car, the least of which should be to save money. The environment and national security should be the top reasons but often times we only see what's directly affecting our wallets.
UPDATE: As a point of clarification, I don't mean to say that people shouldn't be cost conscious in these difficult times. My point is that not buying a hybrid because it may cost more initially is not a good argument. The cost of buying a hybrid versus a non-hybrid compact or mid-size car is not that great plus the savings in gas over time will minimize that gap even further. If you don't want to buy a hybrid because you need to haul kids, groceries, lumber, etc. that's fine. However, if you're waffling over whether to get a Corolla, Focus, or Jetta, buying a Prius or a Civic Hybrid isn't much of a stretch. Trust me, you'll make that money back in about 4-5 years.
I woke up this morning to the radio airing the news that the auto bailout has passed. I'm glad a lot of people won't be losing their jobs but I think we're only delaying the inevitable. The $17.4 billion bailout has provisions that require, among other things, the automakers to "prove they can restructure sufficiently" or those loans would be called back. My question is, can the automakers really turn it around? It's like a gambling addict who just needs some seed money to win back all the losses his accumulated over the years. Chances are, it's just not going to happen. And what if they don't sufficiently restructure? Would they really care if the loans are called back? They'd be in the same position they were before the bailout except now with three months of salaries paid. And actually, I don't think Congress would have the guts to actually do it. The old cry of "we can't let the US auto industry fail" will be heard again.
If the government really wanted to make a difference, they should have asked for the resignation of all top level executives from any company that asked for a loan. The way it's setup now, these automakers will come back to Congress in March and either ask for more money or time to prove they are restructuring (probably both). Why would anyone give money to a group of people who have a history of failure? This is in stark contrast to a company like Toyota who hasn't had an annual corporate loss in 71 years (they expect to end the current fiscal year with a loss). In fact their profits in 2007 alone were $14.9 billion - almost the same size as the current bailout. With a cushion like that, who needs a handout?
News came just a few hours ago that the proposed government bailout of the three major US automakers had failed. The speculation is that at least one or maybe all three may file for bankruptcy in the near future. At stake is not only up to 350,000 jobs but the future of the US auto industry. Will we see any or all of the big three being sold off to foreign companies? Or will they just go away and the only cars available in the US will be from Asia or Europe?
For those who may think the worst during this time, I actually think a "correction" in the US auto industry might be good in the long run. Of course in the short term many people will lose their jobs - never a good thing. However, my hope is that this wake up call will jolt the US auto industry into action. That could mean cleaning out obviously ineffective executives, restructuring to become leaner/meaner, focusing on quality and designer, or hopefully all of the above. America has invented a lot of great products like the automobile, television, and microprocessor. The microprocessor is probably the only one of those three which the US still can be considered a leader in terms of innovation and quality. Let's hope this shake out is the first step towards regaining that stature in the global automobile industry.