Like American cars? I do. (Well…at least Jeeps.) Like American car makers? Me neither. To find a bigger bunch of clowns in charge, you’d have to look at…at…Congress. Of course, the question on everybody’s lips should be, why do American automobile makers make so many models that nobody wants, models that they couldn’t make money on, even if they DID sell well?

There’s a reason, a believe it or not, it’s not “executive incompetence.”

It’s Congress.

Yup. That’s right. Congress. Just like in the mortgage crisis, where the same guys (Frank, Dodd, et all) who were responsible for creating the mess were charged with fixing it (rather like putting a rapist in charge of the sexual crime suicide hotline), Congress is now in charge of saving the auto industry it screwed up. Doubt me? Read on…

No matter what you think of American automobiles – or the Big Three automakers – you gotta admit that they do one thing really well – build big vehicles that can haul a lot of people or stuff, and do it with a relatively large amount of style. But they also make a bunch of wanna-be econo-boxes that few people are lining up to buy – cars that do not compete with their Asian and European import cousins. Why? Congress.

Here’s the deal – the capitalist, free-market system has built-in checks and balances that automatically encourage car makers to make more of the vehicles people want, and make fewer of the ones that are not in demand. (Hint: it’s called the “Law of Supply and Demand.”) Make a hot vehicle (like the Wrangler Unlimited)? You do your best to ramp up production to meet demand. You make more, you sell more, and everybody’s happy. Make a dog (like the Jeep Commander)? Don’t make too many, or you’ll have them stacked up on dealer lots, forcing them to deeply discount them to move them out – which devalues your brand.

Problem is, when you have a group – any group – essentially put their finger on one side of the scales the represent supply and demand, you gunk up the system and prevent it from responding to consumer demand. Case in point: CAFE standards.

Some time back, ecology-minded activists successfully persuaded the Feds to mandate fuel economy levels. Realizing that what they were asking for (all vehicles sold to meet fuel standards) would mean that the Big Three would not be able to make vehicles that were in demand (trucks, SUVs, big sedans), the U.S. automakers got the law jiggered so that they could make the stuff they could sell as long as they would offset those fuel-inefficient vehicles with others that were fuel-efficient. The result has been an unmitigated disaster. Here’s why. Let’s say I make a truck, an SUV, a big land-yacht, a sports car, and a coupe. I sell a lot of trucks, SUVs, and land-yachts, a fair number of sports cars, and a couple of coupes. The Feds come in and tell me that I have to meet fuel standards. Based on current technology, there’s no way I can do that. So I make a deal – I’ll create an econo-box and promised to build one of those for every two fuel-inefficient vehicles I build. That way, I’m effectively raising my overall fuel efficiency ratings, while still making it possible to sell vehicles that people want to buy.

First problem, the Feds don’t want me to import these econo-boxes, so I can’t simply make a deal with a competitor to re-badge one of their big-sellers. No, the Feds want me to make the econo-boxes domestically, and they insist I do it in one of my union factories – which adds $1,500 to the total of every one I sell. I have no experience building cheap rides, so frankly, my econo-boxes are not well-designed, well-made, or, well…desirable. So they sit on lots, rusting, while I sell trucks, SUVs and land-yachts. SInce they don’t sell, they become an albatross around my neck, driving up my operating costs, and making it much more expensive for me to sell my trucks and SUVs.

Now, some argue that the Big Three would never agree to make fuel-efficient vehicles. Not so. If they sell, they’ll build them. In fact, when the last gas crunch happened, Detroit moved to make smaller vehicles. On their own. That’s the solution – let the companies respond to demand. Problem is, the Eco-Nazis saw that public wouldn’t voluntarily buy the small cars (when gas was at $1.25 a gallon, why bother?), so they needed to force them to do so. The only way to accomplish that socialistic goal, is to force manufacturers to build what they saw as the way to “save the world.” So the next time you see a tree-hugger, thank them for bringing our economy to it’s knees. (Sadly, they’ll probably think that’s a good thing.)

While the Big Three management has been clueless, unresponsive, and downright boneheaded, they had a lot of help. From the very people now trying to “save” the industry (read: “Nationalize it”).

Be afraid. Be very afraid. For the industry is littered with the names of brands who were run by the government: Yugo. Lada. Gaz. And if you’ve never heard of these brands, trust me in that there’s a good reason. In order to save the U.S. auto industry, the only thing that will work is to do the one thing that the government will never do – take off the handcuffs, drop the CAFE standards, and let them build the vehicles that people actually want to buy.

This entry was posted on Wednesday, December 10th, 2008 at 10:55 am and is filed under marketing.You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.