TOKYO, Aug. 4 - Toyota Motor Company said its income jumped 39.2 percent to $3.2 billion during the second quarter, boosted by strong sales of fuel-efficient vehicles in the United States, where it passed Ford Motor Company in July sales to rank as the second-biggest automaker behind General Motors.From New York Times
While the knee-jerk reaction might be a snide remark about Detroit only being profitiable when gas is cheep and the demand for giant cars is high, but I see another set of problems here.
First, the fact that Honda and Toyota can make cars in the US better than GM or Ford shows that there is a problem with management and not with the workers. Second, part of this problem is that Honda and Toyota have a much lower legacy cost. A large part of the GM sticker price is the cost of paying pensions and health care benefits for retired workers. By making health care and pensions backed by companies rather than the state, brand new US subsidiaries of foreign companies have an advantage over US firms. Lastly, the lack of a national energy policy that would put pressure on Detroit has lead to complacency. You would think that they might have learned a thing or two from the 1970s and wouldn’t be caught by surprise by the same geo-political surprise again. And you would be wrong.
So what can be done about this? First, a new energy policy targeting an overall improvement in fuel economy. Second, a national health care and pension plan overhaul to eliminate; or at least mitigate, the disadvantages of legacy costs. Lastly, there needs to be a policy of promoting long term planning so managers will be less likely to sabotage a firms future for a few good quarters.