We all know the doldrums in the U.S. economy are likely to negatively impact auto sales through at least the first half of this year, according to those who love to pontificate about our beloved auto business. Some predictions call for sales to fall below the 15 million-unit mark, a level not seen in more than a decade. Sluggish sales will lead to higher incentives in order to keep things humming along at a somewhat respectable pace, which means bad things for the bottom line of the companies who have to resort to money on the hood.
Still, there may be even more ominous clouds forming that could cast a shadow in November, when the U.S. elects its next president. Some will say it's too early to make predictions about the outcome of the general election, and that's very true. But one thing is for sure: no matter who will take the oath on the steps of the U.S. Capitol in Washington D.C. on January 20, 2009, the auto industry is going to be in the crosshairs. Senators Barack Obama, Hillary Clinton and John McCain all have it out for Detroit. Democrat Clinton has proposed a 55-mpg Corporate Average Fuel Economy (CAFE) standard by 2030—which just went up to 35 mpg by 2020 after Detroit automakers and their unions begged and pleaded with Congress to show mercy—and increased focus on biodiesel and hydrogen-powered vehicles. She also plans to develop a fund to help automakers advance some of these technologies through low-interest loans totaling $20 billion. Obama stood up at the powerful Detroit Economic Club in May 2007 and put Detroit on notice: "Today, there are two kinds on car companies—those that mass produce fuel-efficient cars and those that will. The American auto industry can no longer afford to be the one of those that will. America can't afford it," he brazenly said with executive from Detroit's Three automakers sitting in the room. Obama wants fuel economy standards to increase 4% (or 1 mpg) a year, with the government providing "generous" tax incentives to retool plants to make these more efficient automobiles.
Then there's the Republican Party—which Detroit has always leaned on for sympathy, with much success. But even their nominee, McCain, told Detroit he's not going to sit idly by and let the industry continue to produce profit-rich, fuel-guzzling SUVs ad nauseum. McCain has stated publicly he believes global warming is a major issue for the U.S. to combat in the future, and has proposed modest fuel economy changes that he would negotiate with the industry.
No matter who wins in November, Detroit may be persona non grata at 1600 Pennsylvania Avenue.
This brings about the obvious question: What should the automakers do? It's imperative for the domestic industry to realize it can't sit idly by while the politicians pile on. That's why those who lead the product development and engineering teams across the industry need to develop more aggressive plans to adopt new technologies that will help them cope with the changes ahead. The second thing the industry needs to do is build a charm defense to counter the negative rhetoric being spouted on the campaign trail. Why not tell the story of how important the industry is as a collective voice, not competing brands? Admittedly, this is the worst time to expect the industry to invest in new technologies and savvy publicity initiatives as the market tanks, but reality is reality.
Automakers must also reach out to all of the candidates and see exactly what's expected of them when the new President takes over. What's more, they should seek a summit with the new president, like the one held after Bill Clinton took office in '92, and the vehicle manufacturers thought they were going to get hammered. The industry needs to have its future included in the debate of the vision for America's future.
There's no doubt the auto industry is vital to the economic survival of the U.S., but that message seems to have been lost on both parties and there's no one to blame but the industry itself. We need to demand answers from those who will take over in the future and those answers need to be concrete. The industry also needs to convey the dire straits it faces and dispel the notion that America can survive economically by having citizens serve each other food and cut each others' hair. That scenario will not be sustainable as every successful economy has been built on a manufacturing backbone.