No Motor Madness In Detroit

It’s been a long time since American automakers had something to rev their engines about, but that could be changing with some recent announcements by the Big Three.

General Motors and Chrysler plan to renovate plants and restore jobs in efforts aimed at building a new generation of automobiles. Even Ford will invest nearly a billion dollars in four plants in a bet that the nation’s slow recovery will eventually mean more demand by consumers.

These ambitious plans demonstrate the Big Three have shifted gears in an attempt to move forward and leave the dismal sales of the recession years in the rear view mirror.

After years of downsizing and reorganizations, Detroit’s moves have buoyed hopes that the upper Midwest can reverse years of high employment and economic decline. Here’s the latest from the automakers:

Chrysler

The smallest automaker of the Big Three is now controlled by Fiat. The firm said it will invest $600 million in its Belvidere, Ill., plant to prepare for building new vehicles there in 2012. This spending and new vehicle production will spare 2,349 local workers whose jobs are scheduled to end soon with the product lines.

The plant now makes Dodge Caliber compact sedans and Jeep Compass as well as Patriot small crossovers. Chrysler did not say what new vehicles it will make, but speculation has centered on Chrysler-branded products based on Fiat and Alfa Romeo vehicles from Italy.

General Motors Corp.

The Lansing Grand River plant will add 600 jobs and a second shift following GM’s investment of $150 million to produce a new small Cadillac. This car will be a compact and less expensive than the CTS line already made at that plant in Michigan’s capital city.

Ford Motor Co.

The only one of Detroit’s Big Three not to go through bankruptcy court and take government money says it will invest $850 million into Michigan plants through 2013. This will add an additional 1,200 jobs, according to a Ford spokesman.

The spending will be spread over several plants including Van Dyke Transmission, Dearborn Truck, Sterling Axle and Livonia Transmission.

In September, Michigan’s unemployment rate was 13 percent, second only to Nevada. Ohio’s employment also was particularly high because of the downturn in auto manufacturing. America’s Rust Belt has felt a larger sting from the Great Recession than many other areas.

As part of their expansion, the Big Three are investing more into making small cars in the United States rather than in South Korea or Mexico, a reversal of previous trends.

The reasons are based on wage and benefits concessions, bringing down labor costs significantly. However, it also means new jobs will pay less than jobs that have been lost.

“They are at the point where they can profitably produce a smaller vehicle,” says Dave Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich. “A lot of assets scrubbed from the books aren’t a liability anymore.”

GM, in particular, dumped unprofitable product lines including Pontiac (after 80-plus years, including a great run in sports/muscle cars), Hummer, Saab and Saturn.

The updated plants will be able to produce a wider variety of vehicles, so if sales fall in one category, the plants can raise production in others.

WMB believes the jury is still out on these latest moves.

Although they are to be commended for their efforts, the Big Three’s modernization may be too late for market conditions when compared to Japanese, German, and yes, upcoming Chinese rivals.

It’s not only about production efficiency but technology as well. Moves to migrate from the internal combustion engine to hybrid fuel cells will increasingly be driven by consumers. Function, price and design must be part of the successful equation.

Politicians also need to get on-board to better position the Big Three to battle in a global market. American automakers lost their edge to foreign competition before, so it’s essential that mistake not be repeated.


We do have the chance to get it right this time if there is a coordinated, well-thought effort combined with creativity – a driving force behind some of the best and innovative auto designs from Detroit auto engineers in the 1950s and 1960s.

This post is from TechMan, WMB co-author who blogs about trends, issues and ideas affecting business, industry, technology and consumers. Please share this post!