Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Op-Ed: Paradigm Shift Only Way to Save Auto Industry?

By

Standardizing components, developing alternatives crucial.

PrintPRINT
Editor's Note: Eric Von Baranov writes and speaks extensively about economic, geopolitical, technological and social trends, and now writes about the coming renaissance in America.

Robert McNamara, the legendary Ford (F) president, once came to the startling conclusion that Ford would eventually run out of people to sell cars to (quaintly assuming that each family would need only 1 car). The only way to keep sales high, therefore, was to inspire people to trade up. Still, they only did so once every 3 years.

Radical style changes in the late 1950s did little to disrupt this pattern. McNamara then came up with the brilliant concept of "planned obsolescence." In other words, deliberately make a car that would deteriorate almost immediately. This would force people to buy new cars more often. In addition, by using cheaper, essentially disposable materials, the auto company would make bigger profits.

In addition to the dubious business model of planned obsolescence, the auto industry never implemented interchangeable parts between makes and models. As a result, the auto-parts market has grown into the billions.

When a car has a functional life of 100,000 miles, or 5 years, a strain is placed on the system. The cost of retooling propietary components contributes to the auto industry's slowness in incorporating technological innovation.

Concentrating only on mileage standards and outsourcing won't revive the US auto industry. Only a paradigm shift can save it.

First, all US-made cars should share common parts. Why should a wheel from a Ford not fit a Chevy? Failure to follow common standards makes it difficult and costly for third-party manufacturers to provide add-on and custom products, particularly for short-run product lines.Government regulations and antitrust laws could encourage auto companies to catalog and build from standard components as much as possible.

Standardizing common components, moreover, increases competition; adds longevity to model lines; increases reliability; allows for the elimination of poorly designed components, diminishes legal liability; and allows third parties a standard from which to build competitive replacement parts. Furthermore, it reconfigures the industry along horizontal, rather than vertical lines, which allows for more stability, and is both green and sustainable.

As more components become standardized, there's less of a need for large manufacturing facilities for frames, engines, running gear and many other parts. Such a move allows more small auto companies to proliferate. A few common chassis designs could also accelerate the conversion of cars to automated drivers.

But the future of the auto-manufacturing industry requires a much greater transportation revolution. Ford, General Motors (GM) and Chrysler should be looking for alternatives to cars, not just alternatives to oil.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE