There’s no question in my mind that we’re going to see an auto industry bail-out, either as the last act of the lame-duck 110th Congress or the first act of the new 111th. Why? Because President-Elect Barrack Obama wants it, and so do House Majority Leader Nancy Pelosi and Senate Majority Leader Harry Reid – all Democrats, if you haven’t noticed, and all commanding a majority of the votes available in their respective political spheres.
This is a good thing. At this point in time, a bail-out is what we need. But this bail-out is a stop-gap measure at best. Don’t count on it to solve the U.S. auto industry’s problems – or the problems of the small businesses that form its supply chain. That could be impossible. And my advice to any company belonging to the automotive supply chain is simple: Get out as soon as you can.
Right now, at this very moment, a car that seats five, gets 50 mile per gallon and offers optional air conditioning and air bags can be had in India for about $2,000. It’s the Nano, manufactured by the Tata Group, until recently better known as a source of offshore information technology.
On the other end of the scale, up-market customers will soon be able to buy a Tesla Roadster, which offers 0 to 60 mph acceleration in 3.9 seconds, the fastest top gear acceleration of any production car tested by Car & Driver magazine in 2007 (according to a press release) and an EPA rating of 135 miles per gallon.
I don’t see how any of the Detroit 3 can get near these parameters. And, because we operate in an economy based on Darwin’s first principle – survival of the fittest – if I’m right, the Detroit 3 will soon be extinct, or, perhaps more likely, evolve to smaller, nimbler versions of their former selves. (They’re already smaller – it’s the nimble part that’s yet to come.)
What a bail-out will do is give smaller companies a chance to re-adjust and prepare for the inevitable. Those that don’t will fall victim to Darwin’s ruthless law.
What, specifically, should you do if you’re part of the automotive supply chain? Here are my suggestions:
1. Don’t make any plans based on the status quo. Things are going to change dramatically within the next five years.
2. Do make finding new, non-automotive customers a priority, by focusing not on your products, but on your capabilities.
3. Green your business. Green suppliers will find favor in the current market, so learn what’s involved, take action, and make sure that your customers hear about what you’re doing.
4. Track new legislation. You can’t take advantage of money that’s appropriated if you don’t know it’s there or what it’s for.
5. Prepare to fill out a lot of forms. If soon-to-be President Obama really gets what he wants, like programs that reward hiring and R&D programs with tax, learn how to take advantage of them, re-define some of your efforts so that qualify as R&D, and get your money!