Automakers at a crossroad

Posted Nov. 19, 2008, at 6:28 p.m.
Last modified March 20, 2011, at 3:28 a.m.

With prospects of financial handout to American automakers fading, Congress and the car companies must look for alternatives that will preserve needed jobs but not sustain imprudent business decisions. Sen. Olympia Snowe, a member of the Senate Finance Committee, articulated the conflicted feelings of many lawmakers. “It is regrettable our auto industry — and especially industry workers — is even in this predicament. I … met with auto company executives as far back as 2000 advocating that they must boldly alter their market strategy and build vehicles that consumers want, and to work with us to develop new, more aggressive CAFE [corporate average fuel economy] standards. Unfortunately, they fought us every inch of the way, and continued to design and construct cars better suited to the 1970s than 2008.”

Many lawmakers are sympathetic to the need to protect the millions of jobs around the country associated with the auto industry, but they are frustrated that the country’s Big Three carmakers have resisted changes that have allowed their Japanese counterparts to gobble up large shares of the market.

A look at a British car company could be instructive. British Leyland, maker of the Austin brand and high-end lines like Jaguar and MG, controlled more than a third of the United Kingdom’s auto market in the 1970s. Increasing competition from German and Japanese automakers, coupled with quality problems and labor strife, pushed the company into financial distress. Nineteen factories were closed and nearly 100,000 jobs eliminated, and the company sought government help. Despite a large infusion of taxpayer funds, the company continued to shrink and disappeared in 2005.

“Throwing money at them isn’t enough,” Michael Edwards, British Leyland’s former CEO told the New York Times. “They need money and they need new management. They need both, not one or the other.”

That new management should focus not just on building more fuel-efficient vehicles, although that is important, but on remaking entire companies. General Motors, for example, manufacturers eight brands of cars, each with numerous models. Reducing the number of brands, and the inefficiency that comes with it, would save billions of dollars annually. So, too, would reducing the company’s generous benefits and pay, for executives and assembly-line workers.

“Clearly, the bottom line is that the American automotive industry must be overhauled and reconfigured if it is to turn the corner and succeed,” Sen. Snowe said this week.

The task for Congress is to find the best way to get around that corner, even when it is likely that many more corners will have to be turned in the future.

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