That's the conclusion I came to when observing these things in the last week:
- In the last week, after ultimately rejecting the first house we put an offer in, Rachel and I have been looking at a lot of satellite photos of Tucson, to see the houses we were considering, and what the neighborhoods had in store.
- At the beginning of the week, GM declared bankruptcy, and I am now a part-owner in a very large car company.
- The notion of differentiating obsolescence and planned obsolescence came up when considering how best to decorate, customize, furnish, and otherwise improve the house I plan on buying.
- The economy was estimated to be less in free-fall than it was, but a primary concern remained all of the inactive GM dealerships and factories.
The satellite photos of neighborhoods in Tucson were striking. While ClearChannel says that there are "only" almost
2 cars per household in Tucson, but I suspect that only includes registered vehicles. When you add up all the non-functioning cars in Tucson, I'd bet that the number doubles at minimum. Dive in on Google, go ahead. The nice neighborhoods have 2-car garages (with a car parked outside), and the rest have a car or two parked outside. Then there's always a few houses that have an unbelievable number of cars. They're not always trashy, even, or a problem to the neighborhood because they're in the back yard. But they're there. I found one cute little house with just one car in the car port, and
sixteen in the back yard.
(ClearChannel also includes the statistic that 86% of all adults go outdoors everyday, and touts it as a high number; I understand why a Minnesotan wouldn't go outside but ... how does everyone get to work? Or does that not count?)
So that already was making me think that Tucson has more cars than it needs. Then GM went bankrupt, and naturally I wanted to know why. So I've
read (or
listened)
quite a few stories and it boils down to:
- Promoting financial wizards instead of people who understood cars. At the beginning of this trend, De Lorean left; Now, after 30 years of this, they actually had to hire outside consultants like Robert Lutz.
- Not understanding cars or what people want from them led to a stagnation of innovation: Stockholders were happy they were making money, so the brass did their best to maintain the status quo, not realizing that that's the surest way to kill a company based on technology.
- Not making cars people wanted gave foreign manufacturers an opportunity to take up market shares. In 1954, GM had an astounding 54 percent of the total market. They bought into the planned obsolecense strategy, but failed to recognize that that only works when people don't or can't go to other choices. Once Toyota and its peers had worn GM's market share to a mere 19%, Americans made the obvious choice not to spend huge amounts of money on things that broke!
- That status quo also relied almost entirely on selling the same number of cars every year, and only to the North American continent. GM never seriously competed in foreign markets because they weren't reliable. So when they lost the American market, but kept building the cars, their factories became albatrosses of overspending.
- Finally, the people in charge were so obsessed with that stockholder-pleasing status quo that they continued until they were bankrupt in 2006. Why did they only actually declare bankruptcy in 2009? Basically, they and the financial industry around them stuck their fingers in their ears. Isn't that terrifying?
Anyway, so finally I've been hearing a lot about the economy lately (really? yeah!). In particular, the biggest problem seems to be
unemployment (although I admit I'm not an expert). It was particularly problematic for GM, which has a whole lot of factories that are idle.
That's the situation. Like so many things in economics, to me it comes down to supply and demand: GM is making a
ton of cars, and there's no demand.
I expect most of the chatter from the news, GM's new bosses, and the President himself will address the demand side: GM must make good cars to survive. Actually, it must start putting out some
great cars, if it ever hopes to win back the confidence of the market. It has spent the last 20 years making sure nobody trusted a GM car and all those expensive mechanic bills will not fade from the U.S. collective memory quickly.
However, even if all of the cars to come out of GM really were groundbreaking, affordable, and reliable (and I don't expect that, frankly, because I had more than my share of those mechanic bills myself), the demand side problem remains. Toyota's powertrain warranty lasts half a decade or more (my Prius has a 7-year/100,000-mile warranty). People just don't need to buy cars every two or three years and right now can't afford to. The U.S. has by far the highest number of
cars per capita (765 per 1000). Even if they weren't crappy cars, the U.S. just doesn't need to buy as many cars as it used to.
So GM needs to do three things:
- Design and market good cars. Give the car-buying world a reason to believe that a GM car is better by any standard than a Toyota.
- Sell them not just domestically but export them. China is working furiously on their highway system and yet have just 10 cars per thousant people. India has 12 per thousand. As time goes on, those nations will want to buy cars and if they do a good job, GM might make those sales.
- Realize that some of those factories are redundant and find something else to do with them besides let them become icons of remote corporate idiocy and local unemployment. Do something else with those factories.
But do what? Well.
Several on the left want to convert them to make green technologies and infrastructure of various sorts. I'm wary of that, in that while I'm sure they'd be fine for manufacture, I don't know how good they'd be at designing. I'd say lease 'em. But all three things have to happen.
