My Solution for the Auto Industry (and the Economy In General): Smaller, Faster, Leaner
Ok, this post is on a controversial issue, and I’m entitled to my own ridiculous opinion. Therefore …
The fact that we have 3 major automakers in the US that our economy apparently hinges upon is a problem. From the news, the talk is that a failure of any of them is disaster.
The problem with that is stuff fails. It just does.
It sounds like each of the Big Three has become a single point of failure. We try to avoid these in the technology world - we plan for failure in hardware and software.
def oversimplification(): try: return make_cars() except ForeignCompetition: return make_better_cars()
We’re human. We make stuff that breaks. We are flawed and fail a lot. It seems we have some economic single points of failure.
So now we are in a bad place. It reminds me of a monopoly situation. I realize these companies are three separate entities, but it seems like the public is in a position similar to a monopoly - the entities in question are so large and all encompassing that we need them whether or not we want them.
I want a US auto industry.
But why, oh why, OH WHY does everything in America have to be so BIG?
Grow, grow, grow. More, more, more. I’m tired of it.
So here’s my solution (the culmination of my own ridiculous opinion) - many smaller automakers that adhere to open standards. I don’t know how something like that gets regulated or started or anything, but I think that would be a much healthier situation for our nation. Lean companies that are making cars that they would like to drive for people like them.
There would need to be some sort of growth-cap or production-cap too. Think of it as a salary cap for the auto industry. You can only get so big.
Man, that doesn’t sound very capitalist-like. I’m so back and forth on that sort of thing. I guess for that to be fair there would need to be caps on all industries. Moving on …
Come on now! - we regulate against monopolies - we should regulate against (loaded language alert) cancerous big-business that entraps our children and furry woodland friends! I kid … sort of.
Cancerous cells grow out of control until they form a mass that harms the vital functioning of the body, right? Isn’t this a real-life economic cancer? Companies that have grown out of control and are now threatening harm to the vital functioning of the economy?
I’ve been picking on the auto industry because they are the ones in deep doo right now and are getting the headlines. Know that I was even more incensed at the Wall Street situation, and even wrote my representatives in Congress, rather than just idly blogging about it.
So there you have it. My solution for the life, the universe and everything, or at least the economy. Stop trying to get so big. You’re only going to crash harder.
So, now, in the words of Captain Jean Luc Picard: “Make it so” (because everything that gets blogged about magically happens).
cw
December 20th, 2008 at 4:50 pm
You’re in good company with this angle. Robert Reich (Clinton’s labor secretary) made a remark like any institution that is too big to fail is just too big, period.
December 21st, 2008 at 6:24 pm
Scaling confers efficiency, if done properly. And efficiency means more time with children and furry woodland friends, if managed properly. What I see is that the Japanese companies are scaling better than the American companies. Scaling well means thinking long-term, taking care of your people, etc.
So then why is the US border a magic boundary? The Japanese are humans too, you know. If they’re scaling well then let’s celebrate that success and “do more of that!”
Managing efficiency is a personal issue. Santa Claus is driving by. I’m going to manage some efficiency. :^)
December 22nd, 2008 at 9:05 pm
Hey, you sound like an Open Source programmer or something
The main problem with the auto makers is their adversarial relationship with labor. The Labor unions have no vested interest in making things more efficient and they regard corporate management as the “enemy.” Historically there were good reasons for this, but having such a poisonous relationship between the companies and their workers is absolutely disastrous in an economy where you have to compete with companies where labor and management see themselves as part of the same team.
This isn’t the union’s fault. It’s ultimately a failure of corporate governance.
In the case of the auto industry, yes, there is efficiency in scale. A larger company can buy material at a much lower per unit cost than small boutique manufacturers, and they can pass those savings on to consumers.
And, in a sense, there are open standards that the auto industry has to conform to- the National Highway Safety Standards. If your car doesn’t meet the engineering specifications, you can’t sell it commercially in the US. Which also makes it harder for a small company to compete - you have to be able to afford the engineers and the rigorous design testing. You can’t just drop a “beta” release on the market and let the users test it for you! And it isn’t easy, which is one of the only reasons why the market hasn’t been flooded with cheap Chinese knock offs.
Open Source works in software, but the same principles don’t necessarily directly translate to other industries. I don’t think anyone has ever died from software crashing, but you can’t say the same thing about a car hurdling down the road at 60 mph.
January 3rd, 2009 at 8:21 pm
Good thoughts Chris, here’s what I think which I’m sure isn’t original and certainly is debatable:
In America we call competition everyone’s right to succeed and when we’re down and out we plead for competition to cease. Our healthcare system reflects that sentiment and many of our economic problems reflect that as well. In my opinion, it won’t be terrorism or the “right’s” notion of moral decay that will be our downfall. No, the downfall of the United States will simply be because of our neglect of the “least of these” and our constant greed that seems to drive every aspect of our existence from the beginning of our short history. And for the record, I love this Country and would hate to see that happen, but I fear the train is on a steep slope and no one thought about a braking system.
And now we are trying to figure out what braking system is fair and right…I just don’t know at this point, but I liked your idea of a leaner system
March 29th, 2009 at 7:20 pm
Johnny come lately here, but I came across your idea as I was searching for reasons why smaller, flexible, innovative companies seem to be unable to compete in the auto industry. My gut feeling is that a major reason is that these companies are so protected by the government via regulations, trade agreements, interest free loans, etc. that the barriers of entry for new firms is virtually insurmountable. I don’t think you need caps on revenue size, really, just allow competition to thrive by encouraging entry into the market rather than the converse. I would rather see, for example, these billions of dollars going to entrepreneurs and small businesses with new ideas than to these old oligopolies that have not really done a great job of innovating. My two cents.