Saturday, December 13, 2008

Yes, They Could

Contrary to Republican beliefs, the cost of a unionized labor force was not the primary cause for the trouble the Big Three automakers find themselves in. The executives made some incredible stupid decisions when it came to product lines. The sad part is that they didn't have to, and they didn't when it came to other markets. During my weekly visit to Watching America, I found an intriguing article about General Motor's success in Brazil. It was published December 5, 2008 in that nation's Gazeta Mercantil and shows how the company gauged the market correctly.

...GM is doing badly in the U.S., but not in other countries like Brazil. The parent corporation may not have modernized itself sufficiently to keep up with the evolving demands of the U.S. market, and it may even have to shoulder great burdens due to its pension fund. Nonetheless, GM here in Brazil is faring well among the other three giants, Fiat, Volkswagen and Ford. According to the latest numbers, GM sold 444,000 automobiles in Brazil from January to November. This is a 10.4% increase from the same time period last year. In the light commercial segment, which saw 76,000 units sold, there was an impressive growth of 60% again in the same period. Here, Chevrolet continues to be a respectful brand. Also, like other assembly plants installed in Brazil, flex cars already dominate a substantial part of production at GM.

"Flex cars" are those vehicles designed to run on ethanol, alcohol, or both. Brazil determined years ago to be more energy independent and developed its own version of ethanol, one that is based on sugar beets rather than corn. All they needed to take advantage of that new energy source were vehicles designed to run on that fuel. GM stepped up with the right technology and found a solid and burgeoning market. It showed the kind of nimbleness that it hasn't seen fit to use in the United States where it offered instead the Tahoe and Suburban behemoths.

Now, ethanol is certainly not the ideal solution, especially since Brazil is bulldozing rain forests to make room for more beet fields, but it has proven to be a pretty good transitional alternative to petroleum. GM tells us it has an electric car in the works, but it's several years from introduction and it will be priced out of the range of most car buyers. That is not helpful.

If GM, Ford, and Chrysler really want to make it, they're going to have to show the foresight and the commitment that their foreign divisions have shown. If they don't do some serious and quick retooling, they will deserve to go the way of those other behemoths.

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