"How the US fell out of love with its cars"

The article by Paul Harris in The Observer. (January 29, 2006)

Tail fins and chrome grilles were once the symbols of a superpower. Now, with 36,000 jobs cut in a week and foreign vehicles filling the highways, Paul Harris in New York surveys the collapse of an industry.

Harris' article illustrates a point that has been bothering me. Clearly Ford and General Motors are having grave business problems, while Chrysler is just holding its own after drops in market share from 1998 to 2002. But look at the total vehicle sales in the United States, (see figure below). While the rise in gas prices after Katrina hit vehicle sales, the long term trend is upward. I don't know, but I would suppose that since cars are better built these days and can last longer, the total stock of autos in the United States may be increasing.

Source: Morgan @ Company
I suggest that it is not that "the US has fell out of love with its cars" but that "the US seems to be falling out of love with General Motors and Ford brand cars".

As far as I can see, the auto industry is dominated by multinational firms, with the Big Three having huge international interests and many "foreign" firms having huge interests in U.S. industry. Cars are assembled in the U.S. by the "Big Three" but also by "foreign" manufacturers. Parts are manufactured in an increasingly global system, and I don't know whether a greater portion of the parts of Hondas or Toyotas are manufactured abroad than for Fords and Chryslers.

I further suspect and hope that worker productivity in the auto industry is increasing, and that a decreasing workforce can produce the increasing supply of vehicles that we want and need. Increasing worker productivity is a good thing, which should eventually help consumers get more for their money. Of course society should be sure that other jobs and other careers are available for those who can't get auto manufacturing jobs due to workforce reductions due to increasing productivity. But that is not the problem that is generating headlines.

I gather that Ford and General Motors are closing plants in the rust belt because other companies, with plants further south, are taking away their customers -- not because the automotive workforce in the United States is shrinking that fast.

My point is that we need to understand what the information we receive means! Saying that the recent announcement of financial losses, plant closings, and layoffs by Ford and General Motors means that "the U.S. is falling out of love with its cars" is not helpful. The U.S. does not seem to be falling out of love with cars owned by U.S. citizens. The U.S. does not seem to be falling out of love with cars made in the U.S. The U.S. does seem to be falling out of love with General Motors and Ford brand cars, and with the factory workers who make those cars.

Could it be that other firms are manufacturing cars that the U.S. prefers for reasons such as cost, reliability, covenience, or beauty? Could it be that Ford and General Motors, and the unions of their workers, have created labor conditions that make it hard for themselves to compete with other manufacturers? If so, our approach should not be to subsidize Ford and General Motors, but to encourage them to be more competitive.

Maybe one place we should look for savings is in the executive salaries paid by Ford, General Motors and the automotive unions?