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Oracle of Delphi

End of the road for US automakers?

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When times were good, Detroit's Big Three minted cash with big gas guzzlers and protested fuel-efficiency mandates. Now gas prices are soaring, customers are turning their backs and efforts to retool may be too little, too late.

By Ernest Beck, MSN Money

The news from Detroit just gets grimmer. With gas prices soaring, sales of fuel-guzzling SUVs and trucks are plummeting. The Big Three that once ruled the industry -- General Motors, Ford and Chrysler -- are cutting costs, shuttering plants and laying off workers. GM's share price is hovering near its lowest point in half a century; the company announced a whopping $15.5 billion loss in the second quarter of 2008.

How can US automakers survive?

But at GM's Advanced Design Center in Warren, Mich., Bob Boniface is surprisingly optimistic about the future as he shows off a clay mockup of the company's Chevy Volt, a mass-market, electrically propelled vehicle that his crew is developing. "Business as usual just doesn't work for us and our customers anymore," says Boniface, design director for the Volt. "Our natural resources are limited, so we have to stay ahead of the technological curve."

Behind the scenes: GM's Volt

Set to debut in 2010, the Volt is a bid by industry bellwether GM to restructure its lineup with advanced technology that is less dependent on fossil fuels. Along with hybrids being developed by Ford, these cars are a clear signal that U.S. automakers are starting to move away from vehicles like the gas-hogging Hummer, which captured consumers' lust for big, eye-catching vehicles and contributed mightily to the bottom line.

See Ford's new plug-in hybrid

But Detroit -- once the world's industry leader and an example of America's economic might -- has already lost much of its luster. Now the question is whether the automakers' retooling is too little, too late.

"Clearly, product and strategic planning have failed miserably," Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich., says about the Detroit automakers.

Noting that the Honda Civic is now the best-selling car in America and that Toyota is chasing GM's leading market share, aiming to take over as No. 1, McAlinden bluntly adds, "Management flubbed it."

How U.S. automakers got into this mess

Detroit's troubles can be attributed to several factors. One is the new energy environment: The surge in gas prices seems to have taken the U.S. automakers by complete surprise. Another was a cultural resistance to change: Unlike their more nimble Japanese rivals, managers at the American auto giants have traditionally required a strong business and financial case even to consider new vehicle development. (Stronger fuel-efficiency mandates might have made such a case, but U.S. automakers also lobbied loudly, and successfully, against them.)

Finally, the U.S. giants were hobbled by a focus on the short term: While Toyota began in the 1990s to develop a car for the 21st century (it eventually became the Prius), companies like GM were happily building highly profitable trucks and monster-size SUVs and ignoring the smaller-car market. As a result, foreign ...

Article continues: http://articles.moneycentral.msn.com/Inves...Automakers.aspx

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Toyota spent $1.2 Billion dollars to build that truck plant in Texas to open just at the start of gas prices spiking....... they weren't caught off guard at all..

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I saw the article today, read about 1 paragraph and then just skipped it.

It's become so boring. I have had it up to my nipples with analysts and their boring rants about what Detroit should or should not have done.

We are either going to become 3rd world countries in the next 20 years or we are not. Only time will tell. We have the power (but maybe not the will, or the brains) to change our destiny.

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Nothing new here. Just the same regurgitated info that has been circulated before. I think most people on this forum are well aware of the domestics' shortcomings and wrong turns. It's time to stop dwelling on the missteps of the past and look toward the solutions for the future. For the domestics to survive, they will need to start thinking outside the box like they never have before. It seems Ford and GM are already doing this. I'm not quite as sure about Chrysler; they seem to be much more quiet about their recovery plans than GM or Ford. This could be because Chysler is now privately owned or that GM and Ford have simply been much more vocal about their plans. I have faith that with a little ingenuity, all three can survive and become healthy again.

Like Oldsmoboi pointed out, it's not like the foreign companies haven't committed their own share of blunders. Both Toyota and Nissan were aggressively trying to grab a share of that hallowed truck/SUV market that was dominated by the domestic companies at the height of truck/SUV mania. His example of Toyota's recently built Texas truck plant perfectly illustrates the kind of planning errors that foreign companies are capable of committing. The recently introduced Kia Borrego would be another excellent example of poor product planning. The Borrego's late arrival in the market is like Kia arriving to a party after it's over and everyone else is nursing their hangovers.

The domestics may not have been as prepared for the sudden shift in the market as some of their foreign counterparts, but that doesn't mean that they can't quickly rectify the situation and still emerge healthy and competitive. All the gloom and doom reports are getting ridiculously repetitive and extremely tiresome.

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I saw the article today, read about 1 paragraph and then just skipped it.

It's become so boring. I have had it up to my nipples with analysts and their boring rants about what Detroit should or should not have done.

We are either going to become 3rd world countries in the next 20 years or we are not. Only time will tell. We have the power (but maybe not the will, or the brains) to change our destiny.

More troubling to me is the state of our educational system. My wife works for a local University, and from what I can see and tell we seem to be loosing our ability to think about things as a society.

Chris

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More troubling to me is the state of our educational system. My wife works for a local University, and from what I can see and tell we seem to be loosing our ability to think about things as a society.

Chris

It doesn't help that the professors at universities are becoming increasingly incompitent. Of all of the professors I had, I would say 3 or 4 were any good, as in they knew their subject (showed mastery of it), explained things clearly, set reasonable due dates, were open to ideas and questions, was enthusiastic and didn't bore the crap out of you, and planned/used the time effectively, and didn't use heir power to try and rule with fear.

Edited by Dodgefan
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It doesn't help that the professors at universities are becoming increasingly incompitent. Of all of the professors I had, I would say 3 or 4 were any good, as in they knew their subject (showed mastery of it), explained things clearly, set reasonable due dates, were open to ideas and questions, was enthusiastic and didn't bore the crap out of you, and planned/used the time effectively, and didn't use heir power to try and rule with fear.

Well, when you're tenured and can't be fired, why should you try? Put performance bonuses on them and end of the year customer satisfaction surveys (you are, after all, the customer!) and see what a world of difference that would make.

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What's this? American automakers in trouble?? This is the first I've heard of this!

Thank you Ernest Beck, if it weren't for your article I would have had no idea. I am so glad you decided to take time out of your writings in art, design and architecture, to write an automotive piece such as this.

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