Sunday, December 14, 2008

Perceptions of Detroit Are Miles From Reality

Washington Post

Perceptions of Detroit Are Miles From Reality

By Warren Brown
Sunday, December 14, 2008; G02

Perception is everything, or almost everything.

If anything is to be learned from Detroit's beg-fest on Capitol Hill, it's at least that much.

Perception influences reality.

Thus we have the General Motors "confession," its "commitment to the American people" published on the second page of the Dec. 8 edition of Automotive News, an industry trade journal. It presents an object lesson in perception versus reality.

Reality: The "confession" is a rehash of sins committed by a GM that existed 20 years ago, stupidities so enormous -- pathetic product quality, dismal marketing techniques, all trumped by corporate arrogance -- they opened the ports to foreign competition and paved the way for defections of generations of American consumers to Toyota, Nissan and Honda.

* * *

Perception: It is that the GM of 20 years ago is the same GM today -- the same insular corporate culture, a Midwest car company wedded to the belief that the only good horsepower is more horsepower, a corporation unalterably opposed to even the most reasonable fuel economy and clean air regulations.

That is the GM and, by implication, the Detroit that Washington loves to hate -- the one whose corporate heads lawmakers were eager to decapitate when U.S. car executives came to Capitol Hill in recent weeks seeking billions of dollars in federal emergency loans.

Reality: That old GM disappeared in the early 1990s. It was replaced by a company that continued to make mistakes -- for example, initially establishing its Saturn group as a stand-alone company and wasting money on the horrid Pontiac Aztek crossover utility vehicle. But the new GM at least recognized its errors and moved with reasonable dispatch to correct them.

* * *

Perception: GM has refused to undertake a needed, major restructuring.

Reality: That's baloney. But seemingly intelligent politicians such as President-elect Barack Obama have been swallowing it. Even a cursory review of GM's corporate actions over the past decade shows that GM has invested much energy and enormous sums of money into integrating its once-too-far-flung global operations into one global unit; increasing product development, design and manufacturing efficiencies; and greatly improving product quality and innovation. But based on comments from Obama and House Speaker Nancy Pelosi (D-Calif.), to the effect that GM must stop resisting change, one wonders whether either of them has bothered reading Harbour Consulting, J.D. Power, or any other available, objective reports detailing GM's recent progress.

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Perception: GM is opposed to making fuel-efficient vehicles. It is wedded to big trucks.

Reality: GM is no different from Toyota or Nissan -- or Suzuki. It is wedded to making money. Until a few years ago in a United States awash in cheap gasoline, that meant making as many trucks as possible, because light trucks, powered by U.S. consumer demand, were more than 50 percent of new-vehicle sales. Small, fuel-efficient cars barely constituted 4.5 percent of the market.

The problem there involved a U.S. Congress that refused to exercise leadership and tamp down consumer demand for petroleum by raising federal fuel taxes, as much as it did Detroit's alleged resistance to fuel economy.

* * *

Perception: GM was alone in pursuing truck dollars.

Reality: That's more baloney. Nearly all car companies doing business in the United States went after that money. But here's the kicker: An amalgam of Southern states gave hundreds of millions of dollars in tax incentives to GM's foreign rivals to build nonunion assembly plants in their region. Beneficiaries of those states' "business-friendly" policies included BMW, Nissan, Mercedes-Benz, Toyota -- all of which used taxpayer dollars to set up nonunion truck plants to go after the truck business dominated by union-represented GM, Ford and Chrysler manufacturing facilities.

They went after the truck money. Toyota launched and re-launched its Tundra pickup. Heck, even Suzuki has cobbled together a full-size Equator pickup.

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Perception: GM does not know how to make small cars.

Reality: GM knows darn well how to make small cars. It's been doing so for decades in Europe, South America and Asia. The problem is, absent high fuel prices, GM has no earthly idea how to get Americans to buy small cars -- at a profit to GM.

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Perception: Americans have been demanding the small cars that GM and Detroit refuse to build.

Reality: That's more perceptual junk. The reality is that most American consumers seek fuel economy only when pump prices are high. Take a look at what is happening now in the U.S. market for new vehicles. With average pump prices below $2 a gallon for regular unleaded, sales of small, fuel-efficient cars such as the Honda Civic, Toyota Corolla and Ford Focus have plummeted farther and more quickly than those in the general vehicle market.

The Civic that was hot in May 2008 with 53,299 sales was not in November with 17,690 sales, according to the Automotive News Data Center. Ditto the Corolla, 52,826 sold in May 2008 versus 21,807 sold in November; and the Focus, 32,579 sold in May versus 8,194 sold in November.

But Ford has been forced to restore two shifts and overtime work to meet demand for its re-engineered 2009 F-150 pickup truck . . . and Nissan is retooling its taxpayer-assisted, nonunion plant in Canton, Miss., to take on Detroit in the commercial truck arena.

* * *

Perception: All Detroit needs is deep restructuring and federal bailout money for long-term viability.

Reality: Wrong. Detroit needs what America sorely needs -- a Congress with the leadership chutzpah to devise and implement industrial and energy policies that will help to keep native manufacturing industries alive. Detroit's problem isn't poor products or lack of products. It's a national government still wedded to the debilitating siren song of cheap gasoline. It's a nationally collapsed financial system. And it's governmental hypocrisy -- our willingness to pour tax dollars into foreign enterprises, most of them not unionized, while griping about doing the same for homegrown, unionized manufacturers largely responsible for building America's middle class.

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