Detroit's dinosaur complex
When General Motor's Charles Wilson became Eisenhower's Secretary of Defense, he started off on the wrong foot by reportedly telling the Senate Armed Services Committee that "what's good for General Motors is good for the country." Later, he maintained that the quote got turned around and what he really said was that "what's good for the country is good for General Motors."Skip to next paragraph
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In any event, the automobile industry lately has been acting as though it is determined to confirm the reverse of the first version of Wilson's remark -- that is, that what is bad for General Motors, or Ford, or Chrysler, is bad for the country.
Given the massive role which the automobile industry plays in the economy, one has to concede a certain validity to that point of view. But it is time to raise some serious questions about it.
The most basic question has to do with how far the American government -- and American taxpayers -- should go in rescuing supposedly free private enterprise from the consequences of its own bad business judgment.
In the case of the Chrysler bail-out, Congress decided that we should go pretty far. Now comes Douglas Fraser, the president of the United Automobile Workers, suggesting that we should go even further and limit the imports of foreign, especially Japanese, cars. Or in the alternative, force the Japanese to build their cars in the United States.
The latter would alleviate Mr. Fraser's problem in that it would provide jobs for his laid-off union members, but it would not necessarily help their erstwhile American employers who are so multinationalized that they themselves import a substantial component of their parts.
The main reason it would not help American automobile manufacturers, however, is that these people have a dinosaur complex. They persist in making cars that Americans don't want to buy; and, in order to sell these cars, they want to limit the consumer's freedom of choice.
The Wall Street Journal quotes Chrysler's Lee Iacocca as explaining that "the imports are having a field day because the market changed faster than anyone could anticipate." What he means is faster than he and his counterparts at Ford and General Motors could anticipate. The Japanese anticipated it. So did the German in Volkswagen.
It has -- or should have been -- clear to everybody since the Arab oil embargo and the OPEC price rises of 1973 that American driving habits were going to have to change. (It was clear to some farsighted people in the oil business even before that.)
All of us were al little slow to catch on to this, but car buyers were faster than carmakers. In 1979 almost one in four American car buyers opted for an import, and more than two-thirds of the imports were Japanese. It is no coincidence that the major Japanese imports give one-fourth to one-half better gas mileage than their American competitors.
Are we supposed to forgo these economies because Detroit had its head in the sand and the Japanese and Germans did not? While Detroit has been lobbying Congress to postpone and stretch out better fuel economy standards, the Japanese and Germans have been meeting those standards. (One wonders how we ever defeated them in World War II.)
The American economy is supposed to be based on a system of rewards for the enterprising and of penalties for those who get left behind. The automobile industry is about to be left behind, but it is acting as though it ought still to be reaping the rewards for inventing mass production and the Model T.
Implicit in this is the idea that the industry has become so big and so important to the economy that it cannot be allowed to fail. Maybe. But does that mean that the rest of us have to keep on paying for bad business judgment in Detroit?
The more we subsidize in one way or another the continued procuction of Cadillacs, Imperials, and Continentals, the more we put ourselves in bondage to the Arabs. Maybe we could cut our dependence on both Detroit and the Arabs by a massive shift of resources from automobile production to the development of mass transit systems. Mr. Fraser's UAW members could just as well build subway cars and buses as Cadillacs. And it might even make it easier to breathe in Washington, New York, and Los Angeles.