All the world is abuzz about the “Big Three” American automakers begging for low-interest government loans. Governmental life support for these companies in their current state of affairs would be, in my humble opinion, a huge waste of taxpayer money better spent elsewhere. U.S. car ownership is rapidly approaching a saturation point. If you don’t believe me, just drive around some weekend and take note of all the overflowing car lots and ask yourself who is going to buy those endless rows of shiny new vehicles. According to the Bureau of Transportation Statistics, there were 243,023,485 registered vehicles on the road in 2004 (that’s the latest data I could find). The total U.S. population in 2003, according to the U.S. Census Bureau was estimated at 291 million people. Of those, 61 million were younger than15, meaning that only about 230 million people (including the 17 million who were over 75 years of age) could legally drive those cars. If there were more cars than legal drivers, then we can assume either that we had a bunch of six-year-olds behind the wheels or, more likely, that almost every legal driver had one or more cars available to them. I suspect the second case, making me believe that most car purchases these days are probably made to replace existing vehicles. If you were an automaker wanting to increase sales in light of these statistics…would you be willing to build vehicles that operate efficiently for years and years…or would you be more inclined to engineer a few built-in flaws that would shorten a vehicle’s life expectancy? Hmmm…. Unfortunately, your competitors may decide to build better cars in order to cut into your market share…kind of like what Toyota and Honda did to the “Big Three.” Those rascals! So, in order to meet your quotas, you have to engineer vehicles to break down even faster…sending even more customers away in search of quality. It’s a nasty downward spiral for sure and, to make matters worse, the current recession has driven sales right off a cliff (pun intended). Automakers can’t lower prices enough to entice nervous buyers, and buyers can’t get loans from banks anyway. Is there any way out of this mess? I believe there is a win/win solution for both manufacturers and customers.
Turn the automakers into “transportation service” providers, similar to what is described in the book, “Natural Capitalism.” Think what it would be like if you were in the business of selling “transportation services” instead of cars. I suspect you would immediate retool your factories and retrain your workers to build the best cars possible, reducing long-term maintenance and replacement costs. Because customers are no longer buyers, they wouldn’t have to come up with large down-payments or have to qualify for loans. Yes, it does make perfect business sense. As transportation service providers, the “Big Three” should build the most durable, maintenance-free, environmentally-friendly vehicles they can muster. Although cost per unit will initially be much higher than that for current models, it can easily be recouped through long-term service subscription plans…think telephone or cable services. If most people are like me, all they really want is a vehicle that is safe and dependable, easy to maintain and doesn’t cost a fortune to run. An automaker that can guarantee these criteria at low-cost will win many long-term customers…including me. Once a customer is satisfied with a service provider, they will be reluctant to change to another company. How often do you change telephone providers? In other words, the early adopter will develop a large loyal customer base and basically guarantee long-term viability…something the “Big Three” could really use at this point. If the “Big Three” wish to remain competitive against rapidly-growing Asia manufacturers, their plan for survival seems pretty clear: become quality transportation service providers.
Visit Amazon.com to see the book: Natural Capitalism: Creating the Next Industrial Revolution
Tags: U.S. automaker bailout
December 29th, 2008 at 1:54 am
Changing from owning to sharing is like stepping back into childhood. Owning is a primal motivation, especially for tools that give us freedom and power! Your concept is good. I just wonder how we could change the mental mindset beyond what public transportation has already dealt with.
Good ideas! Keep thinking this way, we need solutions!
Carolyn
January 9th, 2009 at 12:16 pm
Thank you for your comments. Are people really interested in owning the trappings of success, or would they be satisfied with the appearance of success? If you were given a set amount of monthly income and told that you could purchase a used 2005 Toyota sedan, or contract transportation services for something like a 2009 Toyota Prius Hybrid, which would you choose? I haven’t conducted a survey, but my gut says most people would chose the Hybrid, even if they never get to own the thing…I know I would. Is the change in mental mindset really that great a leap? I don’t believe so. I think it has already happened for most people. Just consider how rare it is to find someone in the U.S. who actually owns their vehicle outright. If a person is still making loan payments, they don’t really own the vehicle until the very last dollar is sent to the lender. Until then, the vehicle can be repossessed at any missed payment. Under a transportation service, customers would most likely have access to well-maintained, durable vehicles, much higher quality than anything they could afford through an outright purchase or loan. Which would provide the user more freedom and power? I suspect it would be the transportation service.