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The sooner the storm, the quicker the recovery

In consideration of last week’s rearview-mirror examination of some automotive developments during the year now departing, it would seem that a bit of forecasting about cars’ and drivers’ prospects for 2006 is in order.
In consideration of last week’s rearview-mirror examination of some automotive developments during the year now departing, it would seem that a bit of forecasting about cars’ and drivers’ prospects for 2006 is in order. It’s a fool’s errand, of course: If you’re right, you’re a Cassandra doomed to disregard. But if you’re wrong, you’re a goat—a fitting enough reward, I suppose, for this Capricorn. In any event, the compulsion to muse upon future outcomes is what distinguishes us from the lesser orders; and auto aficionados are nothing if not wretchedly human in many visceral if not feral ways. We are also particularly concerned that the state of the automotive art not advance toward a future of decline and fall. So if the ruminations of a week ago in this space were tinged with a touch of the foreboding that attends a calm before the storm, it must be inferred, then, that our storm lies predictably in wait. Humpty-Dumpty in the driver’s seat We can lament the broken eggs that will slime across the faces of the nation’s preeminent auto-industry chiefs next year, particularly at General Motors and Ford Motor Co. But the resulting omelet may well be worth the mess and embarrassment. The undisputed fact is that the eggs must be broken before they go all rotten and consign not only a stinking auto industry but also the national economy to a sulphurous purgatory. When respected industry watcher Paul Ingrassia can argue, in the pages of The Wall Street Journal (Dec. 22), that the world’s largest automaker (by production volume) should contemplate bankruptcy, storm clouds are closer than we may have thought: “The real not whether GM will file for bankruptcy, but whether it should file....Bankruptcy proceedings may be the fastest way to force the truly tough decisions that could fundamentally change—and save—the company.” Bankruptcy, by Ingrassia’s reasoning, comprises GM’s nuclear option; and as with all things nuclear, things will get very political very quickly and very vocally. Whether this warhead detonates or not, inevitable changes will occur in 2006 among U.S. automakers, and one can only hope for the brightest prospects. To some, these prospects will have all the charm of self-amputation. For the majority of us, on the other hand (oo! pardon the pun), there may well appear new reasons not to pity domestic automakers but to praise them once more. Following is a Cliff Notes version of what’s likely to happen in 2006: Either through bankruptcy or bold brinksmanship, GM management and UAW labor will enter into a new entente cordiale which reforms the anti-competitive burden of current benefits, pensions and wages. Particularly in the latter instance, for example, it is simply unsustainable for laid-off autoworkers in GM’s “Job Bank” limbo to receive nearly full wages and benefits while not working. One can argue that GM long ago spent its seed corn by crafting deleterious compensation packages in order to buy labor peace. But the corn is gone, and the peace is deteriorating in any case. Something has to be done. In with new, out with old If this something is done right, labor leaders who negotiate concessions on workers’ compensations will demand that automakers set aside offsetting (if not greater) funds for endowing direct research into new, competitive products and technologies. Labor may even demand a role in overseeing the proper application of these funds. That these funds must appear is no mere wishful thinking. Competitive new products and technologies are the only thing that will attract future customers to domestic autos and shore up a domestic defense against the onslaught of import gimcrackery—particularly from Asia. When—not if—this re-calibration of competitive reality takes place in 2006, two things are likely to happen right away. First, deadwood will be cleared out of the understory. Several GM nameplates will disappear. Some are already fading from view, in fact. GM bailed out of Subaru last month by selling its interest to Toyota. Just last week, GM virtually assured Isuzu’s slow strangulation by discontinuing the brand’s seven-passenger Ascender SUV (based on the Chevy Trailblazer). Saab is very likely next; and the dysfunctional triumvirate of Pontiac-Buick-GMC will somehow be streamlined if not eliminated. Creative destruction What, midst this rubble, can we customers and enthusiasts expect in return? Since new-product design cycles require two-and-a-half to three years’ lead time, don’t expect new injections of R&D cash to spawn definitive announcements of revolutionary new vehicle designs in 2006. But there will be teases, even as the Big Three try to repair breaches in the levies of demand with mere evolutionary improvements to their biggest trucks and SUVs. The Asians and the Europeans, on their own accounts, will likewise persist in flogging competitive wares. But for the sake of maximum symbolic impact, the bolder are the previews of new technologies from U.S. companies, the more heartening will be their eventual appearance in new models. One innovation that may earn consideration in 2006 is a new twist on diesel technology called urea-injection. Diesel’s inherent energy efficiency makes it an ideal counterfoil to hybrid powertrains at the levels of both cost and practicality. With urea injection, diesel undergoes a green revolution: by injecting ammonia-like urea as a reagent into the exhaust stream, smog-making NOx is converted into water, nitrogen and carbon dioxide. It’s the automotive equivalent, perhaps, of incorporating a Whizzinator into existing diesel technology whose proven mechanical superiority compares especially well with untested, complicated hybrid schemes. But in any case, the outlandish-sounding “diesel-urea” concept is but one example of the kind of new-product approach that U.S. automakers will have to embrace and exclaim—as early as 2006—to forestall annihilation by foreign manufacturing rivals from without and unreformed management conditions from within.


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