By Peter M. DeLorenzo
Detroit. I will admit that at times it seems like the auto business operates in a dimension that defies comprehension. Powered by its relentless, cyclical nature, this business careens from crisis to crisis on a roller-coaster ride marked by euphoric highs and devastating lows.
The highs are so seductive that the players involved start believing that the good times will never end. They’re the, “We’re finally going to buy that vacation house up north” or, “It’s time to finally get that Shelby Mustang GT500” kind of highs. Big sales, plus big bonuses equal bigger dreams and big spending because, after all, this is how the people immersed in this business 24/7 get to enjoy the ride. And there’s nothing wrong with that when it comes right down to it.
But predictably – and inevitably – those soaring highs are balanced out by crushing lows. The kind of lows that alter people’s thinking and affect their perspective long after the next upswing has started. Then again, the auto industry as practiced here in the Motor City has lived with this for more than a century, through world wars and economic calamities. Boom times are always followed by busts, and just when people start to believe there’s no hope, somehow a new trend emerges, and a new wave of prosperity starts all over again.
Today, we’re heading for another slowdown, one that can’t be predicted as to its severity but one that threatens the auto industry once again. The sugar high brought on by the public’s insatiable desire for trucks and SUVs is already showing signs of coming to an end. The softening sales can be propped up by massive incentives and long-term financing for only so long, and then the industry engine will go from a gallop to a leisurely trot in an instant.
To its credit, the collective Motor City has actually been trying to get ahead of this imminent slow down by slashing inventories and closing plants in an effort to control the scope of the inevitable bleeding. This was anathema to Detroit not long ago, so even though it may seem illogical now, this is a highly positive step. Except, it’s always something, as this “get out in front of it” plan hasn’t come without its controversies. Example? GM and CEO Mary Barra have been repeatedly pummeled by Unifor – the Canadian trade union – for the plans to shut down its plant in Oshawa, Ontario. And the fight continues.
There are other complications too. The auto manufacturers’ impetuous desire to become Tech/Autonomous companies overnight is having a hugely negative effect. They’re making deals and throwing money at everything that moves with the hopes that something will stick long enough to give them a leg up on the competition. So, even though the whole “getting out front” of the looming slowdown is commendable, they’re already operating at a distinct disadvantage because their “new mobility” efforts are sucking up cash in massive quantities, leaving them on the edge of extinction.
Much of this has to do with the most virulent strain of “not invented here” thinking on the planet. Too many in this business think that they know better, no matter what the subject is, especially when it comes to advanced mobility technology. Unfortunately, this thinking isn’t based on fact or any reservoir of capabilities that these companies may possess. Instead it is based on pure, unadulterated hubris and the unfounded notion that “we can do it better and cheaper.” When in fact the complete opposite is closer to the truth.
But the other complication compounding the situation may be the most dangerous of all, and that’s the looming tariffs thrust upon the industry by a current administration that’s relentlessly clueless as to the way things really work in this business. And make no mistake, the financial havoc and devastation that these idiotic trade policies could unleash are incalculable. This is a giant bowl of Not Good that not only could but will cripple this business for years to come. Everyone in this business – both domestic and import auto executives alike – are holding their collective breath that somehow cooler heads will prevail in Washington so that the imbecilic tariffs will not be put in place. But given the current chaos in the nation’s capital, the fear of the wrong move being made is palpable.
I’ve dubbed the overriding pulse of this industry as the “swirling maelstrom” for a reason, because it has careened in fits and starts marked by a two-steps forward, five-back cadence of mediocrity for as long as I can remember. Prosperity can’t be sustained for very long without the pendulum swinging back with devastating effect. It’s just the way this business rolls.
The business is also populated by executives who cover the spectrum of capability, from the brilliant visionaries to the maliciously clueless, and everything in between, which may have something to do with this perpetually frenzied state. That isn’t even counting the hordes of spineless weasels and recalcitrant twerps who occupy the vast middles of these companies. Far from being the switched-on, engaged people that the company PR machines would have you believe, they’re still blatantly stubborn obstacles camouflaged in new, touchy-feely wrappers.
If it weren’t for the fact that these hordes are, for the most part, balanced out by the actions of the hard-core True Believers at these companies, then where would we be?
And that’s the High-Octane Truth for this week.