General Motors Death Watch 4: Thanks I needed That!
When Toyota Chairman Hiroshi Okuda proposed raising the price of his company's products to help floundering US automakers, industry insiders didn't know whether to laugh or cry. The idea that inflating Toyota sticker prices would lead US consumers back into GM or Ford showrooms is so ludicrous that Okuda's comment struck many as a malicious joke. Either that or the head of the world's second largest carmaker hasn't driven a Ford, lately. To get a consumer to choose a Ford or GM product over a similarly priced Toyota, the Japanese would have to tack on a couple of grand. At least.
Although Okuda quickly recanted, the brouhaha focused yet more unwanted attention on Ford and GM's lackluster products. It's one thing for your bond status to head for the junk pile, it's another for potential customers to hear that the Japanese feel sorry for you. Of course, from a marketing point of view, Okuda's offer was a masterstroke; potential car buyers now have good reason to believe that Toyotas are underpriced. From an industry point of view, Okuda placed not one but two elephants in the room.
The first pachyderm is a media fantasy: import tariffs. Yes, there was once a time when Detroit covered its ass by taxing Japan's. Those days are gone. The Big Three are now importing an enormous amount of parts and products from abroad (e.g. Korean cars re-badged as Chevy's and Chrysler's plans to sell Chinese-made cars). An import tax would hurt the domestics as much as the Japanese. And now that Toyota, Honda and Nissan ARE domestics, an anti-import tax would be, well, silly.
The second elephant, another media invention, is that Okuda's comments indicate that he's worried about the potentially crippling impact of a GM or Ford collapse on the US economy. The reasoning is as simple as it is stupid: if GM or Ford go under, their extinction would damage the US economy so severely that fewer American consumers would be able to buy Toyotas. In other words, Okuda will do anything (including increasing his company's profit margins) to save the wounded domestics, to ensure his company's long-term success.
This logic assumes that corporate chieftains like Okuda have a deeper insight into "how things really are" than your local shopkeeper. Maybe, but I doubt it– especially when you consider the wisdom of Okuda's executive counterparts at Mitsubishi. In any case, it's laughable to paint Okuda as an altruist. Show me a shopkeeper who doesn't want his competition to F-off and die.
The Revelations theory also assumes that when General Motors sneezes, America catches a cold. Again, those days are gone. The US economy is far more broadly-based than it was when GM supposedly called the tune. If GM or Ford bought the farm, there'd be a lot of hand-wringing and the stock market would plummet, but the vast majority of the US population would go right on buying food, videos, houses and… cars. In fact, the chances are excellent that a stricken domestic carmaker would quickly re-organize itself and survive, significantly leaner and meaner (did I hear someone say crippling health care costs?) than before.
Of course, no one would want to see tens of thousands of workers join the welfare rolls (especially regional politicians). But let's face facts: propping up a terminally ill multi-national corporation just to protect jobs is the worst type of socialism. And the last time I looked, the US economy is a capitalist system. If GM or Ford dies because they take in less money than they spend, it will– eventually– strengthen the US economy. In fact, protecting GM or Ford would play straight into Okuda's hands; insulating the domestics from market forces would allow them to continue to producing unpopular cars, trucks and SUV's.
Hmmm. Maybe THAT was Okuda's cunning plan: to help GM and Ford stay afloat so that Toyota could continue to compete against a couple of paper tigers. Oh well. Never mind. The most important thing about Okuda's offer is that it's completely unimportant. It's a distraction from the main game: building vehicles that kick Toyota's butt. If Okuda's taunts energize complacent executives at Ford and GM into doing just that, then they're a blessing in disguise. If not, the US execs deserve Okuda's abuse, and worse.
Personally, I think Bob Lutz and Bill Ford missed a golden opportunity. They should have responded to Okuda's statement by announcing that their dealers would offer an extra 10% on all Toyotas trade-ins. But if they thought that way, and had the products to back it up, they wouldn't be in this mess in the first place.
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