Tuesday, 29 July 2008

America’s Love Affair With The Gas-Guzzler

They have been through it many times but they never seem to learn. 2008: General Motors, Ford and Chrysler have to close factories and lay out thousands of workers. The reason is still the same as back in 1973, 1985 and 1992 – their cars are crap. They are too big, they eat too much gas. You’d think having been through so many petrol price hikes last 35 years would have taught you something. Well it has not and there is a good reason for it.

Japanese companies have been betting on fuel-efficient cars ever since they put out their Toyopets and Datsuns on the international market. The reasoning was logical and straightforward: in the long run, everybody wants a smaller gas bill – never mind short-lived fads when SUVs and muscle cars suddenly become hip best-sellers. The keyword here is “the long run”. American CEO’s can ill afford laying out long-term strategies that don’t bring immediate short-terms – or they get a quick sack from their shareholders at the next annual meeting.

Japanese car-makers are accountable only to their investors: mother companies who are most of time huge semi-governmental banking corporations all too familiar with the concepts of long-term gains. They are, to put it modestly, rich enough to brush off temporary losses when a promise of long-terms gains is in sight. Their portfolios are so diversified that one way or another they make profits anyway.

American share-holders are hedge funds and holdings. Their objective is to squeeze more money out whatever they invest in - the quicker the better. They need immediate profit every year to support their lavish lifestyles. They are more concerned if their wives’ custom convertibles and their children’s private prep school fees are paid for rather with what will become of the automotive industry in a 10-years’ time because by then they may have sold their Chrysler or Ford shares and invested in something else – as long as it keep paying their bills.

Thus, year in year out, American automotive CEO’s have to please their investors instead of developing sustainable development strategies for their companies. And, year in year out, Pontiac, Mercury and Dodge are losing ground in their home market. Thousands upon thousands conveyor belt operators keep getting sacked to make sure that rich men’s investment portfolios stay profitable. And one after another, packs of failed top managers leave with super fat severance packages to keep running havoc in the automotive industry.

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