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Hey Detroit: Collaborate or Evaporate
What we need is a regional strategy with much more cooperation, not just amongst automakers and suppliers, but with the UAW and government entities, both elected and regulatory.
3 Min Read
Automatic transmissions among past Ford-GM collaborations.Getty Images
Everybody in Detroit is nervous these days. In the auto industry, that is. No one knows for sure where this industry is headed, and without the auto industry Detroit is dead. There’s too much change going on, too much uncertainty about the future. It’s disconcerting. You can feel it in the pit of your stomach.
What Detroit needs is a plan to deal with these threats, but nobody’s got one. Not a plan for the entire region, that is. So, I’m going to throw some ideas out here just to get the discussion going.
But first, the threats:
The big EV push is a disaster. The OEMs and their suppliers over-invested and sunk tens of billions of dollars into EV capacity that’s not going to provide a positive return for years to come. The EV market will develop in time, but not in time to fix this financial catastrophe.
The big push into software-defined cars running on centralized computer platforms is one big heaping mess of never-ending problems. Everyone is tripping over themselves running into software glitches, cost overruns and production delays. Eventually, they’ll get it figured out, but the delays will be felt for years.
As the OEMs bring more software in-house and move to become more vertically integrated, the major Tier-1 and Tier-2 supplier companiesfret about a future where their margins are only going to shrink. They’re going to have to drastically rethink their business plans—and their headcount.
Existing corporate structures, which are products of the 20th century, are too slow and cumbersome to deal with the lightning technological pace and market swings of the 21st century. The legacies can’t keep pace with the startups, and the legacy executive suites know it. But they also know it will take gut-wrenching changes to streamline their structures, with no guarantee the pain will pay off.
The Chinese auto industry is like a tsunami, flooding global car markets and picking up momentum as it rolls around the world. In their arsenal, the Chinese have good-looking cars bristling with the latest technology and boasting of at least a 30% cost advantage that no one else can touch.
None of the companies in Detroit is going to solve these issues on their own. Especially against the Chinese monolith. The challenge is too vast, too complicated and it’s already at our doorstep, right here, right now. What we need is a regional strategy with a lot more cooperation, not just amongst automakers and suppliers, but with the UAW and government entities, both elected and regulatory.
Let’s start with the automakers. General Motors and Ford do a lot of things that overlap. They duplicate a lot of engineering, manufacturing and capital investment. And they do it in a lot of areas that are not important to their customers. So, there’s an opportunity to sit down, talk about ways to split duties that minimize the overlap and take out a ton of time and cost.
The same goes for suppliers. Collectively, they have even more overlap, which means there could be even more opportunity for collaboration – maybe even to the point of jointly developing systems and subsystems.
The UAW’s leadership needs to drop its anti-automaker mentality and recognize that if GM and Ford fail, it’s the end of the union as we know it. The UAW can be a productive part of this plan without relinquishing its collective bargaining power.
And then there’s the government and regulatory agencies. The government needs to be involved to hammer out a long-term strategy that brings policy and legislation in line to help the auto industry move faster and be more competitive. It also has to be involved to avoid accusations of collusion and to bring public resources to bear where needed.
I’ll be coming back to this theme, because one op-ed piece isn’t enough to kick off a movement. And I’ll be coming back to it because, to me, the alternative is obvious: Go it alone, and you sink like a stone. Work together and at least you’ve got a fighting chance.
Like the headline says, collaborate or evaporate.
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