Why Ford deserves to fail.

There's a lot of talk about the Wall Street bail-outs.  $700+ billion dollars to rescue financial institutions from a crisis they created themselves. And that probably won't be the end of it.

But there's another bail-out that people aren't talking about much - but probably should. 

Not long ago, while flying home from Germany, I read a small article buried in USA Today about how American automakers are begging Congress for a bail-out of their own.  They want $25 billion in loans to upgrade their plants for production of more fuel-efficient vehicles.

Recently, the House authorized this loan, and it will go into effect soon.  And automakers are already talking about wanting another $25 billion next year.

Ford's CEO has been saying it's not a "bailout", but a lot of analysts believe that things could be touch and go for US automakers without the $25 billion.  So, you can draw your own conclusion there.

When I read that article, and when I looked up more information about the bailout, I had a strong reaction.  "Let the US automakers go down," I thought.  "They certainly deserve it!"

(I know they're an essential industry in the US, but hear me out.)

US Automakers have been digging their own graves for years.

They have absolutely refused to innovate and come up with new ideas to stay competitive - all the while spending millions on lobbyists who whine to Congress that if automakers are forced to meet new standards, it will destroy them (and their workers.)

US automakers have been so successful at resisting change that their vehicles get barely better gas mileage than in the 1970s.  In fact, the average mpgs have been going down in the last few years!

Please don't even try to tell me that it's impossible for them to make significant improvements.  Other industries have made huge strides in the same amount of time.

The laptop I'm writing on right now (which hasn't been new for a while) has more computing power than the giant room-sized computer that sent Apollo 11 to the moon in 1969.  My phone is a lot smaller than the monstrosity my parents made me carry "just in case" in high school.  As for my music collection, I can now carry it in my pocket.

Maybe it's true that the internal combustion engine has reached its limit, but that is no excuse. 

If innovators had simply focused on breeding a faster horse, the car never would have been invented.  It's about figuring out a better way to accomplish the same purpose - not giving up and letting the world pass by.

Honestly, what has Ford done lately?  Everyone knows of their innovative assembly line--but that was nearly 100 years ago.

What have they done in the last 10 years that is remarkable?  What about the last 20?  Simply supersizing their vehicles does not count as innovation.  Anyone can make something bigger.  That doesn't take fresh thinking.

In fact, all I ever hear from Ford and the other US automakers is their whining about the market being tough.  And how buying American is the patriotic thing to do (for people who love our country.)

Who else isn't impressed?

The fact is, Ford has chosen not to be innovative. 

And by doing so, they've dug a big hole that they're now scrambling desperately to get out of.  And they expect us to help them - which we will mostly likely continue to do because their (well-deserved) failure would hurt a lot of people.  Apparently 1 in 10 workers in the US depend on the automakers.  (Can we say hostages?)

If Ford came out tomorrow with a strong call to innovation, saying,

We are going to use this loan to really do something remarkable.  We are going to exceed the new MPG standards by 2015, instead of 2020.  By 2020, we will have done even more. We're going to do this because we want to be a world-leader again.

Then I'd feel a lot better about the US government loaning them the money.

But we all know what is going to happen. 

Ford will beg for this hand-out and then proceed to make incremental improvements only after their competitors have paved the way and Ford is forced to do so by law. 

They'll continue insisting that new regulations will ruin them, and threatening to destroy the lives of their workers if they don't get more hand-outs. 

Then next year, they'll get another emergency "loan" and the cycle will repeat itself.

I really want to be more optimistic about Ford, and I'd love to feel confident that they (and the other US automakers) are going to lead automobile innovation into the future.

But unless they radically change from seeing themselves as victims to being proactive innovators... I don't think that's going to happen. 

It drives me crazy that we keep giving US Automakers a life-raft every time they dig themselves in over their heads.

Companies should be rewarded for being innovators, and should have to face the consequences if they choose not to create the future. They shouldn't entrench themselves in the past, while holding the lives of their workers as hostages.  It makes me furious that the US automakers do this.

In my opinion, there are so many more effective ways to use this money. 

• What if we spent $25 billion to retrain autoworkers and invest in education?  Then, when the Big 3 threaten to cut jobs, workers will be able to get better ones and help the US economy in the process.  (And the Big 3 would lose their hostages.)
• Or what if we offered a series of big prizes for innovators who come up with drastic improvements for automobile technology?  First challenge: $100 million for whoever can come up with a 100+ mpg car that can be mass produced.  Contests can do a ton for innovation.
• What if the US government created a Manhattan-style project with the money and recruited the top engineers in the field to create the automobiles of the future.  Ford, GM and Chrysler could send their top inventors over in return for use of the technology.

But instead, we're handing over an obscene amount of money over to an industry that has done nothing to deserve it, and who will only squander the funds.

Absolutely infuriating!

Comments

[Gregg Fraley]

Couldn't agree more with you. I've got a few years on you Katie and the story is, if anything, worse than you portray in here.

In my lifetime I've seen the Japanese and the Germans simply outclass the American auto industry, year after year. When I graduated from college in 1975 I said to anyone who would listen after the first fuel shock "watch, we'll create the world's best small car." It never happened. There was a crying need for it, and, Honda, Nissan, Toyota, and Volkswagen filled the void. I owned a Honda Accord for 15 years and took it up to 200,000 miles because the darn thing just refused to go bad.

American car manufacturer's have improved but only incrementally. They've forgotten how to take risks, how to create something truly new, with rare exceptions. The exceptions, like the PT Cruiser, and the motorcycle company Harley-Davidson, only prove they can do it when they have the right leadership. The biggest problem it seems to me is the whole idea of design by committee. Brilliant design is rarely done by a group. Look at the iPod, essentially designed by one person, Jonathan Ives. The classic cars, the Great American car's like the Sting Ray and the Mustang were conceived of by very small teams, with one key leader. Harley Earl was the key guy behind most of GM's "dream cars" of the 50's.

American manufacturing in general has been in decline for years, not because we can't make things, but because most companies don't disruptively innovate. In fact, many leap frog innovations in the auto industry have been suppressed because of the current investment in the system. When you couple big auto with big oil, you've got big money, and they've effectively stifled innovation for many years. They've not only stifled innovation in auto's but also mass transit. Many USA cities had electric street cars that were replaced by smelly buses. Our train system is useless for passengers for the most part, compared to Europe we're 50 years behind.

I like your ideas for how to spend the 25 billion, especially the second and third bullets.

[Tad Dunville]

I agree with certain points set forth here because it's not the government's job to bail out every failure in the marketplace. But there's a flip-side to this coin. When we point a finger there is three fingers pointing back at us. Ford built products that were profitable - large trucks, SUV's, and full size cars. Americans don't like small cars. Ford didn't innovate in small cars because the marketplace didn't demand them. Further, a big three bankruptcy will send more shock waves through our already listing economic ship. In all, there are some good points made here but it's important to examine both sides and compare the forest to the trees.

[Chris M Chance]

FORD has sold cars that catch on fire, Tires explode, Motors blown out under 100,000 miles with regular care & caution, Transmission fail.... A call to FORD with your problem will have them making you feel like your the only one with this issue & its your own problem no matter how many Other owners post the same complaints online. FORD has forgot that we are REAL PEOPLE not just a Number in their POCKETBOOK. I called FORD to ask them "What am I to do about my lincoln with 89,000 miles dead in the driveway" they told me "JUNK IT & BUY A NEW ONE". Sounds like they are more interested in their profits & NOT the ECONOMY or the ENVIRONMENT.