Jerry Flint's Plan B for Detroit
I haven't had an email from my favorite ascot-wearing automotive journalist in quite some time. Yesterday, I held off pinging Jerry– i.e. blogging his Forbes' rant " What Auto Recession?" In this well-timed work, the automotive essayist argued that healthy sales abroad are a suitable salve for domestic doyennes depressed by Black Tuesday. I let it be, because it's so not true. On any level. Today, Mr. Flint has a prescription for Detroit. " Time for Plan B" reads a bit like Plan 9 From Outer Space. Step 1: luxury cars. "Instead of milking big SUVs for profits, Detroit needs to build more cars rich folks will pay big money to own." Step 2: export. "The U.S. is turning into a lower-cost production base… If Detroit can build a serious export business, it will expand the variety of cars it can profitably build." Step 3: build $30k economy cars. "Look at the Prius hybrid-electric vehicle: Without the fancy powertrain, it’s a $16,000 Toyota. Yet buyers wait in line to pay $26,000 for it." As I pointed out in yesterday's GM Death Watch, it's at least three years too late for Detroit to do anything but suffer. Still, it's nice to know our man Flint's thinking outside [s]reality[/s] the box.
NickR: Liddell has no belt :) Well, unless you mean the leather one he wears to hold up his pants.
I agree with the basic premise though. If your business costs are relatively high, you shouldn't be competing in the value market. You should sell more for more, the way BMW does. In other industries hurt by the lower production costs abroad, the surviving US companies are basically specialty guys now (like 'environmentally friendly' ceramic household items and stuff).
Well, I agree that there's not a chance in hell that the domestics can build their way out of the hole they've gotten themselves into, but Flint's ideas really aren't too far off the mark: Step 1: luxury cars. Face it -- if we continue to head towards ten-dollar or fifteen-dollar gas prices, "average citizens" will be out of the car market, entirely. The top five percenters will have all the money, so there's no reason to build anything but top of the line luxury cars, period. Step 2: export. Well, again, just incredibly unlikely, but as the US heads towards becoming a third-world country, perhaps indeed we could start building cars to sell to first-tier countries, like China. Step 3: build $30k economy cars. Actually, this is the most reasonable argument here. About the only reason that people haven't gone full-tilt into truly fuel-efficient cars is because they have been insufferable, cheap-ass tin cans. Put Camry/Accord-style comfort into truly efficient, smaller vehicles, and I think you'll be able to sell all of those vehicles you can produce. Look at the extraordinarily high new-generation Corolla sales as relative proof of this. Civic is also well up now, isn't it? Bottom line, these are much more comfortable cars than the little penalty boxes, and they get better mileage than most of those little tin cans, too. Though, I suppose that's the whole story already told, eh? These cars are on sale NOW. As usual, the domestics are standing there with their pants down, while the imports are SELLING CARS.