Monday, February 26, 2007

Lee Iacocca: A Mustang or Donkey?

I thought Lee Iacocca had a brain, but I guess I over estimated another auto exec (former). In his upcoming book, Where Have All the Leaders Gone?, he assails everyone that did not get on the band wagon and reward American auto with another round of subsidies. He has particular bitterness for President Bush as he states that, “We’ve got a bunch of bozos steering our ship of state right over the cliff.” It seems Mr. Bush had the audacity to delay a meeting with the Detroit execs in 2006.

Mr. Iacocca is due a wake-up call-the auto industry is no longer in the “economic driver’s seat.” The two companies he guided over the past three decades, Ford and Chrysler, have serious structural problems that a mere visit from the President will not fix. American auto should not turn to Washington for solutions. Instead, the two troubled giants must look to the marketplace for hints to economic viability. They must: 1) Abandon high costs environs in the U.S., 2) Undertake serious negotiations with the UAW to reduce uncompetitive wage and benefit packages, 3) Embrace the global economy instead of hiding behind trade restrictions, 4) Produce automobiles that can compete effectively with their Japanese counterparts in terms of quality and design.

Once American auto looks to the marketplace instead of Washington for solutions, they will once again produce automobiles that the GLOBAL consumer wants. Competition is painful for the truly inept. American auto is truly fortunate that Mr. Iacocca is 82 and is likely to remain on the sidelines as they move ahead.

Ernie Goss


Anonymous said...


I agree with comments no. 2 and 3 with regards to US Auto's ability to compete but your off on points No 1 and 4. Though 1 is inherently linked to no. 2 on benefit structures.

US Automakers don't need to completely off-shore all car making and parts manufacturing - that is certainly part of the solution but it is a complete fallacy that US cars should be made in China since most foriegn automakers are expanding their US manufacturing presence like Toyota, Honda and BMW - they just don't have the overlying retiree benefits that the Big 3 do.

As for quality - survey after survey demonstrates that US brands are just as reliable and dependable as foreign ones in relationship to companies (though individual car lines are better than others). It is a misconception that there wide difference. It really is the dessgn of US car (not the SUV classes) that hurts US car makers on top of the lack of a true sedan hybrid. I can't think of a single US sedan design outside of a Cadilliac that would entice me to buy a us car. SUV is an entirely different matter.

Ernie Goss said...

Thanks for your comment. I agree with much of what you say. I was not encouraging the off-shoring of U.S. automakers unless it makes economic sense. However, we must think of the markets, both input and output, for autos, corn, and computers, as global.

Regarding being saddled with the high costs of retiree pensions and health insurace costs, U.S. auto executives and UAW officials negotiated the deals. They must now deal with their overly generous and myopic contractual agreements---no bailouts from the federal government.