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Davis, California

Friday, June 21, 2024

What Detroit must do

President Obama has begun our first sustained effort to rescue our automobile industry. As The New York Times reported, his recent signature of a law that allows certain states to “begin producing and selling cars and trucks that get higher mileage than the national standard” is a step to reshape the contour of our national automobile industry.

This change has been long overdue, but the impact will be positive. In the short-term, higher mileage standards in new automobiles guarantee less fuel consumption and hence greater efficiency. For users such as college students, this implies greater affordability and overall, better economic value. In the long term, it might revitalize the Big Three automakers. And that is exactly what this law, in part, intends: to solve a crisis of identity and lost direction that has plagued the automakers, and, by extension, Detroit.

Detroit is in a transitional period. Its sales are dwindling, its reputation crumbling and its products unsold. At this moment, acceptance is necessary – they need to recognize the unforgiving realities of competition. To survive, even thrive, Detroit ultimately needs reinvention.

The Big Three must reorient their production model. For years, while their rivals developed more efficient, streamlined cars, Detroit ignored calls for improving performance. Instead, it persisted with creating large, gas-guzzling cars and trucks. Not only were these models more costly, it was logically counterintuitive and counterproductive. In a world where efficiency is power, sales unsurprisingly suffered.

To re-elevate Detroit, moreover, creating revolutionary business models is necessary. For too long, Detroit was a story about a series of missed opportunities. In the early ’90s, Ford’s research team originated the hybrid concept and prototype before it became popular. But, concerned more with earning maximal short-term returns, they didn’t pursue the presumably lower-margin hybrid. They chose to concentrate on the bottom line when they had the opportunity to reshape the industry and change history.

Thus, Detroit makers need to realign their corporate culture. They must pioneer and unearth the next frontier rather than continually persisting with old models. As The New York Times columnist Thomas Friedman suggested, incorporation of the Better Place model – a system that models upon Apple’s iTunes – enables users to lease electric cars and then replenish them at the battery-exchange stations. “The whole system is then coordinated by a service control center that integrates and does the billing.” Nobody knows the success potential of this model – but changes are occurring. Detroit must adapt and find the ultimate cost-efficient, environment-friendly balance.

While Detroit must remain true to its essential values – its philosophy mirrors America’s, that of creative destruction, the displacement and dismantlement of worn-out, unconvincing ideas by superior ideas – it must also learn from the best. And that means studying the traits of the current Japanese automobiles.

For Toyota, currently the largest automobile seller in the world, the employee-focus perspective, commitment to employee welfare and continuous leadership development has lifted them to the very top. Furthermore, in the Toyota Way, for instance, their introduction of the just-in-time practice – the process of maintaining almost no final products, but instead executing the process once orders are received, all with systematic coordination – significantly cut down costs. This lesson is one Detroit must learn from.

Cars began in the imagination – when visionaries dared to accept radical challenges, to invent and to innovate, to conceive what was previously inconceivable. With the proliferation of automobiles today, imagination is more critical than ever. If Detroit wants to succeed again, it must improve. Most importantly, it must renew its imagination.

ZACH HAN welcomes a brand new or used Toyota Camry. All gifts can be sent to zklhan@ucdavis.edu.


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