Howes: Self-driving ‘Wild West’ tests century-old autos
Just eight years ago, a Detroit auto industry on its knees scrambled to field politically correct hybrid vehicles deemed environmentally acceptable by its de facto bankers in Obama-era Washington.
Survival seemed so much simpler then. Now, the relentless forward march of self-driving technology, the steady encroachment of Silicon Valley’s largest, most heavily capitalized powerhouses and the awakening of regulatory powers from Europe to China are forcing the likes of General Motors Co. and Ford Motor Co. to be many things to a whole lot of people.
That’s not easy for century-old companies. Not when they’re trying to match the speed and innovation of the high-tech business culture epitomized by such names as Apple and Google, Tesla and Intel. Or even the latest iterations of old industry brands like Visteon and Delphi — now very far removed from their days as captive, commodity-parts suppliers to former parents Ford and GM, respectively.
“The 100-year-old auto industry business model is facing unprecedented technological disruption,” Morgan Stanley wrote in a note published this week, “starting with the very definition of the market itself — moving from ‘millions of units sold’ to ‘trillions of miles traveled’ annually by the global car parc.”
The challenge is existential. And a lot of the conventional wisdom issuing from allegedly smart people paid to make winning bets on the automotive future already has reached a conclusion: Detroit’s automakers, despite historic restructuring amid the global financial meltdown, are less likely to emerge the victors.
Not because they don’t have the smarts, engineering prowess or manufacturing chops. But because neither Detroit’s automakers nor their conservative shareholders have cultures that favor speed over methodical execution, risk taking over risk aversion, winning over simply being competitive.
And the competition is expanding far beyond the usual suspects — Toyota, Honda and Nissan in Japan, BMW, Daimler and Volkswagen in Germany. In California, Morgan Stanley says, 42 companies hold permits to test self-driving cars, evoking an image the auto industry hasn’t seen since the days of Henry Ford and Billy Durant: the Wild, Wild West.
Based on recent moves at GM (exiting Europe and India, acquiring Silicon Valley assets) and Ford (replacing its CEO, seeking foreign partners, off-shoring small-car production), that caricature looks increasingly outdated, share prices notwithstanding. But it’s way too soon to say so definitively because unwinding decades of mediocrity takes time.
Want to know why management teams at both GM and Ford are scrambling to share their electrification plans and capital allocation strategies with investors amid near-record profits? It’s all a Detroit cry for relevance, with Ford leading the way because, well, it has to. It’s lagging the competition.
Ford this week said it would shift capital investment from traditional cars into its increasingly popular (and expanding) array of pickups and SUVs, even as it reduces spending on internal combustion engines and ups spending on electric vehicles. It is, in essence, pledging to serve two masters:
First, the paying consumers who want more utility, representing more revenue and profit for the Blue Oval. And, second, foreign government regulators whose decision-making increasingly favors zero-emissions electric powertrains financed by someone else’s dollar, even at a price of higher costs and lower returns on investment.
Not exactly a winning business strategy, near-term, anyway, for a Detroit-based industry criticized for insufficient profit margins and poor deployment of capital. Unless Ford can quicken substantially its pace of change, innovation and quest for financial “fitness,” to borrow CEO Jim Hackett’s phrase, toughening conditions are likely to prove harder to overcome.
In clear anticipation of Hackett’s long-scheduled briefing to Wall Street Tuesday, GM tried to trump the Blue Oval Monday by detailing its own plans to introduce 20 new electric vehicles by 2023. That includes two in the next 18 months based on its new Chevrolet Bolt electric car.
Good to once again get a taste of good ol’ Detroit one-upsmanship, but the audience has changed. No longer is it the legion of Big Three employees centered here, or stalwart customers devoted to their Ford F-150s or Chevy Tahoe SUVs, or thousands of dealers grown richer still by the seven-year sales boom.
It’s the smart money trying to bet right on the biggest thing to hit personal transportation since Henry Ford’s Model T began rolling off the moving assembly line: self-driving vehicles powered by zero-emissions electric motors, not internal combustion engines fueled by gasoline.
If that doesn’t portend profound change for Detroit and its defining industry, nothing does.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.