06 May 2008

Obama Appointed CEO of General Motors

OK, not really, but he seems to be convinced he's a better businessman than anyone in Detroit, as he criticizes them for the "mistake" of building SUVs instead of more fuel-efficient compact cars."
"I think it was a mistake for them not to plan earlier, and now we're seeing a huge growth in fuel-efficient cars that is benefiting the Japanese automakers and Detroit is getting pounded some more."

OK, except for two things:

  1. The Big Three (GM, Ford, Chrysler) haven't been able to hold onto market share in compact cars. Toyota, Honda and Nissan have consistently built cars that are less expensive and better quality. Although the Big Three's quality has dramatically improved, they haven't been able to price their cars competitively without losing money on each unit sold.
  2. Every year for the past three decades, truck models (SUVs, pickups, minivans) have outsold car models in the U.S.

So you're an auto exec, you know high gas prices will be coming--sometime--but right now you can sell far more trucks than cars, and make a profit on each truck, while you lose money on most cars. What do you do?

Obviously Obama didn't say this to Detroit 10 years ago--he's so smart that he can see what's wrong now that it's actually happening.

Granted, a number of people have been saying for years that the Big Three need to get more competitive in fuel-efficient cars. But they're not the ones who have had to try to keep the company in business. Staying in business today takes priority over being in business 10 years from now, because the first is a prerequisite for the second.

And does anyone really think the Detroit automakers haven't looked ahead and known this was coming? Does anyone think they really needed Barack Obama to point it out to them? After all, they have a little more at stake than their critics do, so they just might have spent a little time thinking about it. Yes, once again they're behind their Japanese competition, but they have been investing in alternative fuel vehicles, hybrids, etc.

In a nutshell, they were in a tough spot. They could successfully compete in a market that they probably knew was somewhat limited in its duration, but could not (yet) succesfully compete in the market that will probably dominate in the future. They've made plenty of mistakes along the way, as any industry analyst can point out, but their options were never as simple as Obama seems to think.

Odd, isn't it, how people who've spent their whole life in politics, who've never had to meet the bottom line, who've never had to worry about containing costs, increasing efficiency, keeping up with a changing market, always feel qualified to tell us how things should be run?

4 comments:

Paul said...

Your point is not unique to GM or the car industry or politicians. It is as if convincing any group of people to stand in a line and vote for you transfers magical powers upon you. Everyday elected officials tell me what to not watch on TV. They tell me what cars I can't drive, and what lanes I can't drive them in. Do I really want a President of United States who cares deeply about every facet of my life. My phone service, the pennies to my gallons? What I smoke and why it costs five times as much as it did when I was 14? What makes people I can't trust to run to McD's and bring back change, trust worthy to regulate the bond market, car tires, wood siding, emergency lighting, scales, phones, oil production, endangered frogs, and McD's delicious menu? I can't begrudge politicians from acting like ego-maniacal politicians, but damn--leave my fries alone.

James Hanley said...

Obviously, I agree with Paul.

Scott Hanley said...

I feel Obama is just as qualified to run GM as I am - as far as I know, he's never run a company into bankruptcy, either!

James K said...

I think it was C S Lewis who said that rule by enthusiastic do-gooders would be worse than a rule by outright tyrants. A tyrant might be lazy, or get bored or distracted, but a do-gooder will hound you 24/7 because their conscience drives them on.

The problem is that people don't think when they say this stuff. Its not that people are stupid as such, they can think they just choose not to. And the voters don't think either, they just take the first-order thinking of politicians at face value, and never think what will happen in response to their grand designs.

The refusal of perfectly intelligent people to think about the policies of their would-be rulers is very annoying to me, far more so than if they were genuinely stupid. Incapacity can be excused, indolence cannot.