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Smart is the New Big

We've been beaten, battered and all but given up for dead by everyone from Washington to Los Angeles.

We've been beaten, battered and all but given up for dead by everyone from Washington to Los Angeles. We've been treated like the pariah of our nation's economy…told that we couldn't produce a product that the American people would want even if we were given detailed CAD drawings and a fully functional factory to build it in. The auto industry was a thing of the past and it was time for America to embrace something else, many people said.

Now, with the negative baggage of bankruptcy behind the industry, it's time for us to prove the naysayers wrong. Unlike what seems to be a majority of the American people, I believe that the American automotive industry will rise again...not to return to the wasteful, inefficient ways of the past, but to a more disciplined way of doing business, one where the future cannot always be seen as being better, but one where the future can be seen as challenging, volatile and even filled with potholes.

This doesn't mean Detroit has to hunker down. Quite the contrary. This is the ideal time for Detroit to look out beyond the immediate horizon and to see—and create—the future. This is not about being Pollyanna optimists. Detroit is a gritty town built by realists. So the domestic automakers need to take on that sense of realism and pragmatism while developing the future.

It wasn't all that long ago that some in Detroit predicted that the peak in terms of demand would not be reached for many years to come. "We could easy surpass 18 million units," one well-respected sales executive had said on more than one occasion last year. Sad thing is, he's still in the driver's seat at one of the car companies. Sure, some day the annual sales rate will hit 18 million. But the more realistic among us know that's not going to be anytime soon. Cars and trucks aren't going to go out of style. People are not going to start walking to all of their destinations.. Yes, people still need automobiles. But do they need 3.5 per household? No. Do they need to have a truck in the driveway, just in case? No. The market will change and will be based more on need, not want.

A few months ago while I was visiting Europe, I saw a Mercedes-Benz E-Class wagon go by pulling a camper. "You'd never catch an American doing that. Pulling a camper with their Mercedes," I said with a chuckle to a group of German friends who weren't as taken aback by the sight as I was. Then, one turned to me and said, "That's because Americans are wasteful." He went on to say that unlike Europeans, who commonly only have one car in their garage, Americans think they need a car for commuting and an SUV or truck for those once-a-year moments when we may pull a trailer or get lumber. "We use our cars," he said.

Now that our nation has been rocked to its core by this economic crisis, with millions in the unemployment line and millions more wondering if they will soon join them, we may find ourselves adopting the European philosophy: get what you need and rent what you want. If you need a truck or SUV for that one-time adventure, go rent one. There's no need to buy one.

These new realities are what Detroit needs to think about. How can the industry get ahead of potential changes in the average personal fleet size in the U.S.? What can be done to help build a business model based off increased rental business or car-sharing? What sort of partnerships can be developed that will help promote public transportation and other modes of transportation that are more affordable and environmentally-friendly? Finding the answers won't be easy.

Those who are able to find the right solutions at the right cost will win the race to market supremacy, no matter how big or small the total market size is. It's no longer about who can be the biggest, it's about who can be the smartest. This thinking will have to impact every facet of the business, from research to manufacturing. Smart is the new big.

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