Tom Peters points to Consumer Reports picking automotive winners in ten out of ten categories all from Japanese manufacturers. Ironically this was the first thing I read when I got back into the office. I had just picked up my wife after she had to drop the minivan off for an unexpected $600 in repairs. Seems the heater wasn’t working so she took it in to find four other things that needed to be addressed including a transmission leak. Our Ford Windstar has 65k miles. She drove me back to work in my Toyota Camry which has performed reliably for 130,000 miles.
Of course my anecdote doesn’t mean much in the big picture but I think that the U.S. automakers don’t have an image problem as much as they have a perception problem. Namely many U.S. consumers perceive that there is a tangible reason to “buy American” and may be causing more harm than good. A customer market defined by dogmatic allegiance gives us today’s General Motors in the same way it gives us the Chicago Bears. Both perennial underperformers who can sell to the faithful with the fear of what might happen if they don’t buy. A season ticket holder in football country (Chicago, Green Bay, etc.) doesn’t want to give up a coveted spot after a string of losing seasons because he then won’t have it when they start winning. The Buy American crowd won’t buy a Toyota made in Kentucky by American workers because they fear the profit is going overseas and taking jobs with it. So they buy a Ford with a Mazda engine. Or a Cadillac made in Canada.
The essence of a car being American or not is really about jobs. American buyers want to use the power of the wallet in a way they feel is best for the U.S. economy in terms of supporting American jobs. To the extent those buyers view cars as a tangible object that’s bought fully-formed, that image problem is causing tremendous economic waste. Here’s why. Cars are of course a physical object but also are the end result of a long design and development process, a complex global supply chain, and a massive distribution network. At every step of every one of those processes there are jobs. We can easily picture the auto-worker on the assembly line and we may have a strong union orientation, but the bulk of the jobs created by the automotive industry are outside of the manufacturing plant. Americans are employed in car dealerships, advertising agencies, repair shops, and car washes. And those jobs are the same whether the car is a Ford or a Honda or a Pontiac or a BMW.
Truly efficient markets with frictionless substitution will deliver better products at better value. When personal bias or politics props up an inferior product or manufacturer it masks the competitive threat until it is too late for that manufacturer to adapt. It’s like the tectonic plates under an earthquake fault trying to slide but building up pressure. The result can be devastating. The industry suffered one massive quake in the 1970s – are American consumers building up the friction to cause another one?