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?

Profits or Market Share?

The oddest thing about living in Michigan is the way the big three automakers grip everyone's attention. It's a rare day that both of Detroit's newspapers don't have a front-page, above -the-fold article about the auto industry (and around here, the phrase "the auto industry" means only GM, Ford, and Chrysler).

But oddest of all is the way the journalists who write about them focus so obsessively on market share. For two years now there's been a sort of death-watch as Toyota comes ever close to selling more vehicles throughout the world than GM. But apparently it's not just the journalists--it appears that the auto industry execs themselves have been more concerned about market share than actually making money on each unit sold. They seem to have convinced themselves that if they just sell more vehicles, they'll end up in the black--a strange idea, particularly at GM, which takes a loss on almost every vehicle it sells.

But an article today (sorry, I can't find it in the online edition, so no link, at least for now) suggests that Chrysler's new owners are focused on being smaller, rather than bigger, and looking for non-traditional ways of being more profitable. Such as building minivans for VW in Canada, and trucks for Nissan in Mexico, and having Nissan build a small car for Chrysler. Apparently this is happening because Chrysler's new owners, Cerberus, isn't familiar with the auto industry.

And a little child shall lead them, it seems.

It's amazing that after two decades of full-bore competition from "foreign" cars, auto execs still don't get the basics of how to run a business.