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2008 Issues Archive
26 November 2008
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Commentary
There was a chance, albeit a fleeting one, that this comment might be about something else, such as energy policy or green issues. But you can’t get away from the enveloping and developing story that is the global automotive industry. This could be, probably is, the biggest engineering-related event in the 35 years since the oil shocks of 1973. It’s that big.
What we have, a couple of months after this hopeful and forward-looking picture above was taken, is the prospect of one or more of three huge global car corporations hitting the wall. And there is agonising debate over whether this can be allowed to happen.
Well, of course it can. In market terms, the industry worldwide has had severe overcapacity for many years. Let’s qualify that a bit: the mismatch between supply and demand is less in overall global numbers than in what is produced and where it is produced. The Detroit Three were culpably slow to realise this, slower even than US consumers. So they’ve been caught. And if they were now to pay for it...
This is where it gets difficult, of course. You can argue with some reason that, were capacity for US-style gas guzzlers to disappear with the demise of one or other of the Big Three, it wouldn’t in present market circumstances be much missed. But these are global companies, and how you stop their European arms from suffering the consequences of North American mistakes is not clear.
How you stop, as well, hard-pressed supplier firms from collapsing as their perennially squeezed margins are compounded by a sudden loss of orders is also uncertain. Like it or not, it’s complex interlocked infrastructure.
There have been comparisons of present US woes with the long, slow decline of the Rover group. But there’s a difference: suddenness. Rover took 30 years to die, and worthwhile businesses were spun off before the end. This time it’s 30 days or 30 weeks.
So yes, the politicians can be brave and wave goodbye to Detroit. But it’s a thin line between brave and foolhardy. And which side of the line would that decision be?
John Pullin, Editor
© PE Publishing, 26 November 2008
