This is the second post examining the political-media establishment claim that the Detroit auto companies are in financial trouble because they don’t manufacture more of the tiny vehicles politicians and the green lobby favor. The first is here
On Main Street success is measured in satisfied customers and profits.
In the Washington establishment success is measured in contributions from special interests, accumulated political power, and media attention.
To achieve success in the automobile business the first step is to offer products that lots of customers are willing to pay for.
To achieve success in the Washington establishment the first step is to offer political results that special interest constituencies are willing to pay for.
The Wall Street Journal reports that Congress may authorize the government to buy equity shares in GM and Chrysler. Apparently, the goal is to give politicians authority over company operations through an appointed “auto czar.” Some in Congress want to force these companies to discontinue SUVs, full size pickups, and all but the smallest, highest mileage cars. On Meet the Press, President-elect Obama echoed the mindless, political-media opinion:
…U.S. automakers have made repeated strategic mistakes. They have not managed that industry the way they should have, and I’ve been a strong critic of the auto industry’s failure to adapt to changing times–building small cars and energy efficient cars that are going to adapt to a new market.
The data in this table, and the facts below demonstrate the foolishness of the opinions coming from Congress, Barack Obama and media commentators.
- Ten of the twenty top selling vehicles, adding up to 49% of total units sold, are made by the GM, Ford and Chrysler. The Detroit Three are making vehicles that plenty of we the people want to buy, even if politicians and the green lobby don’t like those vehicles.
- Even though ten different models are available in America with EPA ratings of 30 MPG or higher, only one of those has unit sales high enough to make this top 20 list. The Detroit Three would not, as Barack Obama claims, be in better financial condition today if they they had years ago abandoned larger vehicles to make even more small ones to compete with the ten that already saturate that market segment.
- Twelve of the top twenty, including five Japanese models, representing more than half of unit sales, are EPA rated 24 MPG or less. Almost 97% of unit sales, including nine Japanese models are rated at less than 30 MPG. In the real world, we the people base our buying decisions on several considerations, only one of which is gas mileage. Only in surreal Washington politics is it assumed that all of us should drive virtually identical, small sized, high gas mileage cars.
- Only four of the top selling twenty, representing 21% of unit sales, meet or exceed the government’s arbitrary fuel consumption standard, based on political rather than engineering considerations.
- Seventeen of the top selling 20, including seven made by Japanese companies, consume more fuel than the government standard. Called Corporate Average Fuel Economy, or CAFE, the standard is 27.5 miles per gallon. For the models that don’t meet the standard manufacturers must pay penalties to the government of $82 – $633 for each vehicle sold.
The political-media establishment scorns Detroit’s “business model,” because it isn’t consistent with the political goals of the elite. They call it “mismanagement” and “strategic mistakes” when these companies build cars that customers want and are willing to buy, including larger sedans, full sized pickups and SUVs.
Following politially motivated advice from Washington, to abandon top selling vehicles and try to compete in the already saturated small car segment, would destroy rather than revive the Detroit Three.