Insider: The Curse of the Short Term

The malaise that continues to pervade in the U.S. domestic auto industry can be traced back to one thing: short-term thinking.

The malaise that continues to pervade in the U.S. domestic auto industry can be traced back to one thing: short-term thinking. Why’s that? Simply put, if it weren’t for the need to squeeze every nickel to make quarterly profits look better or losses less bad to appease Wall Street, we’d probably have better cars and trucks chock-full of the latest technology to make driving safer and more efficient.

I know a number of people will probably counter that it’s also the fault of the unions and regulations, but that’s sheer malarkey. Sure, unions and regulations add costs onto vehicles, there’s no doubt about that, but what about the scrimping and penny pinching that happens every day to boost the bottom-line? That can be even more detrimental than the costs piled on by the union and regulators. A supplier I was talking with recently told me about some new materials his firm developed to make engines more efficient, reliable and reduce fuel consumption. It sounded like something the industry should be embracing. This same supplier told me that European manufacturers have showed keen interest in the new materials and are studying how to incorporate these into future powertrain programs. “What about Detroit’s automakers?” I asked. “Oh, it’s too expensive right now for them,” he said. Too expensive? Talk about cutting off your nose to spite your face.

For far too long Detroit has forgotten about one thing: it takes money to make money. How else do you think BMW continues to succeed, or Toyota makes gains in the marketplace? Companies like these know that if they want to stay ahead of the competition they have to invest in new technologies and those investments may require higher initial out of pocket costs, but the payoffs can be huge. They take risks and invest in new technology, while Detroit has a tendency to be a “fast follower” and not a leader. It’s time for Detroit to lead and take a backseat to no one. But, that requires a shift in mindset that goes beyond the borders of Detroit, which many folks in the domestic auto industry cannot even fathom. Instead, Detroit’s Big Two continue to plod along on the path of least resistance when they should be breaking out ahead of the pack trying to find new and innovative ways to attract new customers via new vehicle features and equipment, instead of trying to pile cash on the hood to bribe people to take their cars and trucks.

Imagine if one of Detroit’s Big Two actually had the willingness to say to suppliers, “Show me your latest technology and I’ll be more than willing to pay for it,” and then actually followed through. Hard to imagine, but that’s what needs to happen in order for Detroit to develop the “gotta-have product” they’ve been promising for years. It’s time for Detroit automakers to look at suppliers as part of the solution, not the problem. They also have to be willing to subsidize the cost of R&D for the supply base, since there’s a strong likelihood future breakthroughs will be incubated outside of the confines of Detroit. Everyone has been talking about collaboration, now time to shift those words into deeds.