Tuesday, June 9, 2009

Counterpoints to a James Howard Kunstler blog post on Amerca's auto obsession

I was sent this editorial by James Howard Kunstler and had a few thoughts on it.    

1) Throughout history, there has been no greater driver for technological change and innovation than personal mobility.  Vickie will laugh because I had a fun argument with myself about this on our first date.  I think that entrepreneurs and innovative companies will produce cars that meet the needs of people factoring in fuel costs, tighter budgets and shifting demographics.

2) High quality infrastructure (or at least "good enough" quality) is essential for economic prosperity.  It's an investment that may fade temporarily, but it will be recognized as essential.

3) One point I agree on is that the car industry will itself continue to be a largely unattractive one to be in, with strong global competition and virtually no sustainable competitive advantage other than reputation and quality of service (both areas where US car makers have dug themselves a ridiculously large hole).  

4) However, car makers who are dynamic and innovate, both on the product and cost-cutting side will find growing markets in emerging economies.  Flexibility is one area where car production could really use more innovation.  But the following things are bad for corporate flexibility: in-sourced production at large capital intensive plants, union labor, 3 to 5 year product development cycles.  Sound like any companies that have been in the news?

5) Cars are a durable good and there will be pent-up demand when and if prosperity returns.  I still believe this is a when.

6) America has thrived because of the dynamism of its companies.  We have to allow them to fail, or at least completely reinvent themselves on a consistent basis.  Let's hope Chrysler and GM emerge with this flexibility and get to live or die on their own merits.

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