Consumers to Auto Makers: Go Green or Go Broke

The Problem

The markets delivered grim news.  On November 7, 2008, General Motors’ shares fell by 13 percent and Ford’s 2.5 percent.  In other words, the two companies lost 14.6 billion dollars.  In response, President-elect Obama said in his news conference on the same day that “[t]he auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.”  A statement that strongly implies some sort of rescue package for the auto industry.

But Ford’s and General Motor’s problems are unlikely to be solved by government intervention; to solve their problems these American car manufacturers need to change their attitude about green technology.  For even while all car manufacturers are hurting overall, hybrid cars are making record profits.  In July, for example, Honda posted an 8.1 percent profit on its fuel efficient fleet even as Detroit was recording losses in the billions. 

The Technology

The ironic thing is that General Motors and Ford have had this best-selling green technology for a long time.  Both companies have invested in developing plug-in hybrids and in cars powered by fuel cells.  But, unlike Honda and Toyota, Ford and GM have not (as of November 2008) been willing to take the risk to mass produce their green cars.  Contrast this with the approach adopted by Japanese auto manufacturers: Honda, Toyota and Mazda are teaming up to produce new models of hybrid and fuel-efficient cars so as to cut on the cost of producing each vehicle, lower the costs of the cars, and increase the profit per car.  General Motors and Ford are trying to follow suit but their first hybrid cars are not expected to be mass produced until 2009.  (The first generation Toyota Prius came out in 1999–even though Mrs. Ford drove an electric car.)

So why has it taken record losses to force GM and Ford to begin mass producing hybrid vehicles that have so obviously been enjoying market success for some time?  Why (for example) did GM announce that “there is little demand for gas-electric cars in Europe” while Ford simply said they will not sell hybrids in Europe?  Why, when the bottom dropped out of the SUV market, Ford’s and General Motor’s first response was to call on the federal government to subsidize them to mass produce the green technology they already have?  Green technology these two companies could have been mass producing long before the first Prius hit the show-room floor?  What’s the problem?

The Attitude

The problem, I think, is attitude.  Corporations, like people, have cultures and the culture in Detroit, it seems to me, has been to view hybrids and other green technologies as good public relations at best and gimmicks at worst.  How else to explain that GM is still hesitant about mass-producing its eagerly anticipated Volt?  This attitude could only have been reinforced by the massive failure of General Motor’s electric EV1.  GM simply could not sell this mass produced green car, destroyed hundreds of vehicles, and reinforced Detroit’s already ingrained bias against green technology.

And until this bias eliminated, no government subsidy will be able to rescue American auto makers.  They will simply be outsold on the (semi) free market.  And they will continue to be outsold until they learn that they must go green or go broke.

And they must go green whether or not Uncle Sam is paying them to do so.