Oversimplification

There is an editorial in today's New York Times concerning General Motors and the UAW Strike. It acknowledges that there are trying financial waters ahead for US unionized auto manufacturers. But it proceeds to lay the blame at the feet of a scapegoat I have heard repeatedly.

"The straits G.M. finds itself in are in part of its own making. Its inability to make cars that American drivers want to buy and its reliance on gas-guzzling S.U.V.’s have made it particularly vulnerable as rising gas prices have driven consumers toward more energy-efficient automobiles."

I don't know why people like to talk about "making cars that American drivers want to buy" so much, but I have heard it independently before. The paper waves its finger at the Big 3 for their reliance on SUVs without asking why there is so much emphasis placed on such vehicles. There are a couple of reasons why this is important.

1) Looking at any road will tell you that, to some extent, Americans want to buy SUVs. Glancing out my window at the street, I watched 10-15 passenger trucks and other SUVs drive by to 2 sedans.

2) Why do auto manufacturers push the SUVs? Because they are more profitable. In passenger cars, there is a lot more competition on price, and with a heavily unionized workforce the Big 3 simply cannot compete there. In the $10,000 economy car market, a $1,000 higher cost is 10% of the retail sales price. In the $50,000 SUV market, it's 2%.

Finally, there's the implied assertion that the Big 3 aren't currently making cars Americans want to buy. Their market share is indeed slipping, but as of January:

GM had 22.4% Market Share
Ford had 15.2%
Chrysler had 15.9%
Toyota (the only foreign manufacturer with more than 10%) had 16.1%
Subaru, for what it's worth, is 1.1%

Judging by this measure, GM is the best at making cars Americans want to buy. The fact of the matter is, there is only one thing that can be said about what Americans "want to buy." They want options, choices, and diversity that no single manufacturer can provide. How do I know? Because I see the diversity in the choices they make. I chose a Subaru because it offered a unique set of features that match my needs (reasonably fuel-efficient, 4WD or AWD, enough cargo space to go camping, low price).

Does the NYT seriously believe that if GM is sitting in the dark, trying hard not to believe what Americans really want? If so, their stockholders should replace the entire board. It is FOOLISHNESS to think that a multi-billion-dollar multinational corporation isn't doing everything it can to make EXACTLY the cars Americans will buy. Trying to tie an environmental agenda (gas-guzzling SUVs = evil) to the struggles of GM is just a jab with no basis in reality.

The truth is that GM's problems are structural, and one of the biggest problems GM faces is a much more expensive labor force than its competitors. If it cannot compete on the superior quality of its unionized workers (and Toyota shows that it cannot), a unionized workforce is nothing but bad news for GM. And platitudes like "make cars Americans want" will not help in the least.