The problem with bitching out the Big 3 and Detroit...

Through the financial crisis I have seen one and only one article that seems to fairly represent what is reality in Detroit. Unfortunately I have no idea where it went, all I know was that it was a Yahoo opinion piece.

The bulk of the argument was that Congress and the public has been slamming the big three for their lack of viable, profitable small cars, yet Detroit has never ever had a small car anchor their company profits. The cars they sell are cheap and costs less than there Japanese counterparts but that is because they have never had a highly profitable small car. Honda and Toyota not only do well with small cars but typically are making $2k-$3k more in profit per small car than the GM, Ford, or Chrysler counterpart.

That being said all three could produce such a car, but it is an uphill battle. Think of an alternate universe where the Japanese government chastises Honda and Toyota for not building vehicles that compete with Suburban XL's and Expeditions (okay Toyota has one, but the idea is the same). It would be difficult for an auto company to turn that niche in the market their direction. First, they would have to build an vehicle that truly convinced the public that their vehicle is the best. Oh and it would need to be at a price point to convince the population to purchase said car. Think about that for a second. This requires a great investment of engineering, production, and advertising on a vehicle that may not really turn a profit in its first 4 years. Meanwhile you will have to change the perception of the auto media and the car buyer that a company known for making questionable quality small cars now makes great small cars. Don't forget your competitors which already are good at making its auto equivalent can release a new, better vehicle a year after which can wipe your products advantages off the map and is known as a quality vehicle (good example is the Chevy Colorado/GM Canyon and then Toyota's release of a new Tacoma a year later). It is a difficult hill to climb.

That hill can be so great that it leads to companies having an easier time creating new niche vehicles than over fighting in a saturated market. These CEO's are not dummies, they are doing what makes sense. What makes the most sense is continuing the success the niche markets that they are strong in (see trucks and large cars), draw a line in the sand on markets they can compete in (see midsized sedans) and create new vehicles when they have been kicked out of a market (see minivans to crossover vehicles). It is really like telling JA Henckel's (the knife maker) to make hand tools. It can be done, it might turn a profit at some point, but it will take a lot of money to make it happen.

To me it was funny, they ripped the CEO's, which rightfully so when they all show up asking for money in posh jets, but beyond that it was nothing more than impressive political sound bites. Believe it or not, automotive production is one of the two last great manufacturing industries that remain in the US (the other being airplane), congress should do everything they can to protect the industry. It is fragile, it did need a scolding, but after that do what is right and save the companies. At least they make a product, a real product.

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