Opportunity for Michigan in GM‘s blunder

May 18, 2005

You see the gas gauge on the pump whirling around to astronomical figures you never dreamed of paying before -- $30! -- and it reminds you that prices are also up at the grocery store, the balance has risen on your credit card bill, and there are bills relating to kids, health and vacations... Your blood pressure seems to rise with the gas pump figures.
And like in the old Talking Heads song, you hear a verse in your head, “What is this large automobile? And how did I get here? Same as it ever was... same as it ever was...”
How did we get here?
Since we‘re unlikely to blame ourselves, perhaps we can point the finger at short-sighted American carmakers who are cryin‘ in their beer over losing profits this spring like gas through a sieve.
In April, GM reported losing $1.1 billion in its first quarter. And, according to an article on Salon.com, its share of the auto market has fallen to an 80-year low.
By contrast, Toyota and Nissan had record sales in April. Toyota had the biggest sales gain in its history with a 21.3% leap in April.
As has been widely reported, the reason for the slip of American carmakers is because people are passing up gas-hog SUV’s in favor of the smaller, fuel-efficient cars offered by the Japanese.
And although sales of hybrid gas/electric-powered cars are less than one percent in America, the market for them is growing. The Michigan auto research firm of R.L. Polk & Co. reports that sales of hybrid cars grew by 81% last year.
But the hybrid vehicle market is dominated by Honda and Toyota. Ford has a hybrid SUV called the Escape which gets 35-40 mpg, but automotive writers seem to agree that the Big Three will be playing catch-up for the new few years.
It makes you wonder, how could the brightest automotive minds in America be so blind to such an obvious trend? Why didn‘t they put more effort into hybrid SUVs like the Escape, instead of the obscene Hummer?
Back in another lifetime, I had a chance to peer over the shoulders of the top brass at General Motors as a reporter covering the creation of what was then the biggest auto assembly plant in the world.
GM was building its Orion Township plant in the early ‘80s -- a robot-filled factory that was 75 acres under one roof with its own railroad system inside. There was the usual controversy involving residents who wanted to ditch the plant to preserve the area‘s country charm (soon to be carpet-bombed with strip malls and chain stores), pitted against those who wanted the new jobs with a desperate sense of rage and anxiety.
As the editor of a small town weekly, I found myself sharing helicopter rides over the site with the likes of Robert Stempel, who went on to become president of GM in the late ‘80s, and Robert Lutz, the head of product development.
Stempel was a memorable person with a hearty, booming outlook spring-coiled into a 6’4” frame. He had been a garage mechanic and a college football player before becoming a GM auto engineer, and his development of front-wheel drive was an innovation that shot him up the corporate ladder. Despite his expensive corporate suit, he seemed like a down-to-earth guy who’d fit in just as well hoisting brewskis down at the union hall.
But it wasn’t hard to see that the heads of GM lived in an insulated world of their own creation -- a suffocating corporate culture where it was easy to believe they couldn’t see the forest for the trees.
CEO Roger Smith had a level of status slightly above that of Pope John Paul II. His name was uttered in hushed, reverential tones and when he arrived to deliver a few words at the groundbreaking it was in a swirl of limosines attended by a Praetorian Guard of guys in suits & sunglasses with walkie-talkies who looked like Secret Service men. One of the top brass confided to me that if Roger was ever kidnapped, half the U.S. economy would fall apart, creating havoc throughout the western world.
Whatever, it seemed delusional.
Hearing of the company’s problems this spring made me wonder if that delusional, insulated, corporate culture had finally caught up with GM.
Perhaps those auto execs are simply so well-to-do and so far removed in their corporate ivory tower that they failed to grasp how much a rise in the price of gas affects us little people.
Consider that the average person drives 12,000 miles per year. At an average of 20 mpg at $2.30 per gallon, you’ll spend $1,380 in 2005 for fuel. Of course, if you’re driving a Lincoln Navigator or something similar which gets only 14 mpg, you’re going to spend much more.
And you‘re going to look dumb in that big old brontosaurus once everyone moves on to smart cars.
For what it‘s worth, the decline of the SUV and a rise in gas prices could mean good news for Michigan down the road. We’re at the brink of an automotive revolution; someone has to make all of those new fuel-efficient cars and hybrid SUVs. Why not us?
Michigan has huge automotive assembly plants in Sterling Heights, Orion Township, Lansing, Poletown and Dearborn. We also have a highly-motivated workforce that has received a brutal lesson in global economics over the past few years as jobs have flown south and to the Far East.
We are in short, lean and mean in Michigan, and what looks like a spring disaster for our auto companies is actually the birth of a vast new market in smart cars. Let’s seize the day.