Thursday, December 08, 2005


Why the U.S. automobile industry is slumping...

Some people are wondering why the U.S. auto industry is having a hard time. Even after layoffs, quality improvements, and fresh designs, they still seem to have difficulty making ends meet...

I'll give a couple factors:
Quality Perception

Part of this problem is a holdover from the 1980's. Wage pressures caused U.S. automakers to skimp on materials and cut costs on the vendor side. Automation used to reduce other production costs also caused engineers to design things that robots could stamp together quickly, rather than something that would hold up well under use. Even if the fit and finish was rather nice at the beginning, it would tend to degrade rapidly as fasteners would loosen and inferior plastics would stretch or become brittle making things rattle. The other part is that competitors are working hard to stay ahead, even as "american" companies are improving. The sting of inferior quality remains with consumers for a long time, and it doesn't help even as the manufacturers are actually doing their part to remedy the problem.

Lack of Innovation

There used to some strict government standards and consumer demands that created strong technical innovation from U.S. makers. With the rollback of higher standards such as Z.E.V. and stagnation of EPA C.A.F.E. requirements, U.S. manufacturers are failing to innovate as they once did. Meanwhile foreign competitors are already moving on to implementing actual hybrid technology and not just talking about it. Opportunities exist to make 40MPG the standard rather than what is currently considered good at 30MPG. Cylinder deactivation technology being tauted as "new" is actually a fallback to an older attempt at an idea once tried in the early 1980's. It is a good thing, as modern engine management systems now succeed where past ones have failed. But it's still not moving the technology forward as fast as it could go. Also, there is a fear of trusting fully electric systems for propulsion. They're simple, reliable (maintenance on powertrain is virtually nil compared to internal combustion), and produce no emissions. Batteries, although they are a potential hazmat issue, often can be recycled in full which neutralizes that negative environmental aspect. The concern about displaced emissions in power production for such vehicles can be eliminated entirely by using "green" generation sources such as wind turbines or solar. Range is not the issue american manufacturers make it out to be, as many people often commute less than 100mi per day. Consumer education about daily recharging of such electric vehicles should make it clear that they are suitable for regular commuting. U.S. automotive companies had the opportunity to be the leader in electric commuter vehicles, but disposed of it completely with California's withdrawal of Z.E.V. requirements. Unfortunately, this is likely an opportunity to give foreign makers an opportunity to get ahead as Z.E.V. will likely become mandatory in places like China or India where population and environmental pressures demand it. (Once they fully realize what pollution sources limit productivity in dense population areas, you can bet cars will be near the the top of the list in being regulated.) When full electric vehicles are reintroduced to the U.S. market, the U.S. auto companies will once again be behind.

"McJobbing" of U.S.A.

The U.S. auto industry is suffering from a pinch point of economic pressures in the United States. Productivity is absolutely not the issue, as productivity can be outsourced, but existing U.S. automobile factories are more than capable of meeting production demands. Frankly, consumers are demanding a quality level that cannot be outsourced. Disposable goods can easily be outsourced, but long-term items require quality control that cannot be easily achieved by such methods. Getting over the quality perception hump is a big enough issue that cannot be risked against the introduction of real defects.
With quality manufacturing comes wage pressures such as union labor, pensions, and cost of living adjustments. Workers can and have made concessions to some degree, but it is still not possible to achieve marketable quality below a certain price point.
Unfortunately there's the price pinch from the sales end that comes with this demand for quality. The american job market has gone into the shitter as some would say. Sure, employment supposedly has made some gains - but guess what? It means doodly-squat if the per-capita income level is going downward. People may be working, but they have less disposable income available. It's funny how economists are confused by this even as they say that the stock market is doing well. It might be good for makers of short lived items that can be bought at Wallmart, but industries producing products producing high value or long term items are going to be hit hard by this economic trend. This is probably the same reason why the housing market may be overdue to bust in some areas. People can only work so hard to make ends meet before certain quality of life issues rear their head. Anyhow to balance the U.S. economy and maintain manufacturing and technical ability in the U.S. there will need to be a shift of perception from productivity to quality. Until that is done, the absurd market trend will continue and the U.S. will lose competency in what might be considered core strategic and economic capabilities.

And you've heard it here folks. Some average guy. Not an economist or anything like that, but a graphic artist. Just saying it how I see it.

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