Saturday, April 3, 2010

The wrong way to a good end.

Earlier this week, I was listening to last weeks's "This American Life", a story about a joint project between Toyota and GM called NUMMI that was established in California in 1984 to allow both companies to learn from each other. Toyota wanted to learn about how to deal with American workers, and GM wanted to learn how to build cars better and cheaper. Toyota got what they wanted, but GM managed through arrogance, short-sightedness, stupidity, and inertia, to learn nothing. It is a great story, and you can listen to it HERE.

About the time I was listening, President Obama was announcing higher fleet-wide MPG requirements for auto manufacturers. I have always thought that this is is an ass-backwards way to achieve a good goal, that of reducing our use of petroleum products in this country. It struck me that one of the problems with using fleet-wide MPG ratings is that it causes manufacturers to do things they are not good at. In relation to the NUMMI story above, one of the things GM might have gained from Toyota is to learn how to make small cars. They didn't. In fact, all the US car makers are bad at it, and don't make any money on producing small cars, because the people who buy small cars don't trust them.

GM is good at making big cars, SUV's and trucks. They have never liked small cars, never made a good one, and don't sell any. It would make business sense for them to drop this part of their business and specialize in their strength......hell, that's what they taught us in B-school, and I went to Michigan where the auto industry is just down the road. But they can't do that, because they need to sell some small cars in order to meet the fleet requirements. We don't make Dell make mainframe computers, or make ESPN cover the opera, so why make GM make small cars. No one wants to buy them!

What should we do instead? Easy. Tax the hell out of gasoline, like they do in Europe and Japan. That would move us automatically to more fuel-efficient cars, and force manufacturers to compete on that basis. Simple, easy to understand, easy to enforce.

Of course, this kind of sane policy will never happen, because no politician has the guts to vote for a tax on something everyone needs. So instead, we get a backward tax, as the price of cars goes up to achieve the same goals, and we have a convoluted formula that is difficult to understand. And this way, it looks like those evil car companies are being forced to improve their cars to help out us hard working consumers.

Well, as they say in advertising, perception is reality!

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