Competition on Auto Pilot

Campus Report ^ | June 23, 2009 | Mytheos Holt

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Competition on Auto Pilot

by: Mytheos Holt, June 23, 2009

At the Hudson Institute recently, two economists and a business reporter discussed ways in which General Motors could avoid turning the lights off on the U.S. Auto Industry. The discussion was moderated by Christopher Sands, a fellow at Hudson

Sands introduced the key question of the morning when he asked his audience (and the panelists), “Are these company troubles more lasting?” The answer was unanimously in the affirmative. Thomas Klier, senior economist at the Federal Reserve Bank of Chicago, warned his audience that “we’ve got to keep our eyes on the underlying structural changes” which made GM, Ford and Chrysler’s business model fail, to the extent that their capacity utilization, according to Klier, “has never dropped as low as it has recently.” This stark news, however, was but the tip of the proverbial iceberg, as Klier used numerous graphs to paint an increasingly gloomy picture of the decline of GM, Ford and Chrysler.

“A large industry is shrinking,” Klier said, adding that uniquely American brands had never recovered from the advent of the VW Beetle, and had since gone into “free fall” after Japanese cars such as the Honda Civic had entered the market. Moreover, Klier argued, the expansion of the automotive market from four to 13 carmakers placed the geographically monomaniacal Big Three at a disadvantage. “This is one concentrated industry,” Klier said. “Michigan’s taken the hardest hit…almost two-thirds of what they have.”...

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So the Hudson Institute is concerned about auto company failures? What about the Rambler Institute? Packard Institute? Studebaker Institute? Willys Institute? Stanley Institute? Oldmobile Institute? Plymouth Institute?