We Are Living Automotive History
The years 2008 and 2009 will no doubt go down in history books as periods of significant change in automotive history. The interesting part to me is the influence of politics and world events in this metamorphosis. Let’s take a look from the inside out.
To understand the issues facing the automotive industry, it’s important to understand a few of the forces external to automobiles that set the stage. First, the general United States’ economy such as inflation, cost of living, unemployment, interest rates and energy costs all indicate we are in an unhealthy economic environment. The result is a situation which is making it difficult to borrow money, increasing the cost of living, causing a decline in property values and widening the trade balance gap – clear signals that define tough times for an industrial nation! When we add the 2008 virtual collapse of the financial industry to a recession that is already under way, consumer confidence becomes almost non-existent; especially, for big ticket items such as automobile purchases. Oh, I almost forgot (good one!) let’s further complicate this environment with oil prices….the highest in history! Any one of these factors as stand alone events would have a noticeable impact on the automotive industry, but when you have everything happening simultaneously, the result literally defines the “worst case scenario”. Yes, a good executive team has projections, strategies and recovery plans defined to mitigate these factors for continued business competitiveness and viability; however, today’s executive is challenged to define a plan which manages the domino effect of all these factors occurring simultaneously and virtually over night.
Enter “Big Brother”! (No need to worry, I don’t intend to use this publication to promote a political conspiracy theory; however, I do believe it’s important to understand the Washington events as background.) Washington (the Clinton Administration to be more precise) blew it when they did not define an “end date” for the economic stimulus package. The “package” I am referencing REQUIRED lending institutions to provide money on risky loans intended to keep money flowing into the economy and keeping consumers buy big ticket items such as houses, cars etc and it worked! This plan deferred the US economy from slowing. The problem is that this system created a false economy and the longer you feed a false economy, the worse the problem becomes. If this economic stimulus program had been limited to a few years, we would have had a slower economy 8 to 10 years ago and potentially could have prevented a collapse of the banking system. Yes, the Bush administration should have ended the “economic stimulus” package as well. The bottom line is: Washington did not run their business appropriately and we are all suffering. The housing and automobile industries are being hit pretty hard - not because the products are bad or even inappropriate - but because consumers do not have access to money (loans or lease programs) to purchase these items.
Ok, here’s the insider look and someone has to say it: the US automobile industry is not Satan!!!! The US auto industry is one of the critical pillars to the entire United States economy and many of the world economies. So when politicians step in and proclaim it is time for “Detroit Automakers” to prove they are worthy of getting a secured loan I have to pause. Yes, this request is appropriate as a means to demonstrate a level of credit worthiness or provide collateral to secure a loan; but I think the line on appropriateness is crossed when businesses are asked to divulge strategic product plans, marketing strategies and competitive business initiatives in a public way that could under mine their strategies and possibly drive these Companies out of business. Think about this request for a second. A bunch of politicians (who are not typically trained or successful in business and free trade but rather control trade, print money and have no real product to produce) declare themselves as judge and jury over assessing the viability of a free enterprise industry. Well, this approach sounds a bit socialist to me.
The final act of this play will certainly occur in a short period of time and in 2009 impact each and every one of us for the rest of our lives….If you are an American Citizen, you do have a way to “help” in these times….contact your congress men/women and be heard! Mean while, let the automobile experts continue to design new vehicles, launch new products, define new technologies and find new ways to compete in the free enterprise, after all, this is the “American Way”!
- Scott Hoag
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