Big Three Stuck in the Last Century

The fate of the automakers that once made up Detroit's Big Three (General Motors, Ford and Chrysler) leads the discussion on the effects the global crisis is causing in the industry. It is a very dramatic and confused debate on the state of the accounts of the large US groups. Both GM and Chrysler have reported finding themselves in an unsustainable financial situation if they do not receive help from the government.

Whatever their short-term future, it is clear that in the medium- and long-term the condition of the American industrial ex-giants will be indefensible. The acceleration of the global crisis has also accelerated a deterioration that has been going on for some time. In fact, back in 2003, in a prescient book about the "end of Detroit," journalist Micheline Maynard was already able to explain how this now imminent predicament is due to the US automakers failing to meet the challenge of the Asian producers, led by Toyota, who can effectively attack the North American market.

This is why a long-term bailout is not possible for GM, Ford and Chrysler. The three groups cannot survive in the new international organization of the auto market. They belong to the 1900s, but certainly not to the Twenty-First Century. Like Fiat's CEO Sergio Marchionne pointed out, it is unthinkable to believe that the sector's current division can perpetuate. There is clearly no room for the three distinct American producers to go on, encumbered by a large number of brands that they do not know how to manage.

The automakers are therefore necessarily called upon to merge. This is the only way to take advantage of the resources, know-how and technological and organizational skills that they still hold. To avoid a loss fo the repository of industrial experience that they have accumulated, it is important to think of a radical remodelling of the ex-Big Three. As they are, they will only squander and destroy resources; reorganized in a new business configuration they will be able to make the best use of the considerable set of equipment that they still possess and thus be structured for the expansive phase that will open up at the end of the crisis.

There is no product today that appears to be as problematic on the markets as the automobile. But today's fall does not jeopardize the expansion possibilities that are outlined for the future. 700 million automobiles circulate the world today; there are seemingly hyperbolic forecasts that estimate 3 billion by mid-century. This goal, however, calls for the radical redesign of the product of the auto. It is necessary to imagine basic and simple vehicles that are, as Marchionne says, low-cost, that in a certain sense subvert the market parameters that have been in place in recent years. We need vehicles that reflect above all the needs and requirements of emerging markets, decisive in fixing new operative and technological paradigms. And it is also necessary to turn to a kind of vehicle that pollutes much less, exploring more sustainable ways of mobility. This is why a bailout policy is wholly unrealistic. Any intervention measure must be part of an effort to completely reset the auto sector, which is already on its way toward a change of reference paradigm.