Wednesday, December 03, 2008

Automobiles And Demand

MSNBC's Chris Matthews gets a lot of grief, some of it deserved, among liberal bloggers but he also conducts some interviews that are unparallelled on commercial network television. One such exchange took place on December 2 with General Motors President and Chief Operation Officer Frederick "Fritz" Henderson, which included the following (video below the narrative):

MATTHEWS: So the auto industry has made the right decisions. It's followed the consumer. It hasn't advertised its way to heavy vehicles, it's just followed consumer taste. It's not your fault, what's happened. Is that your point?

HENDERSON: Well, actually, no...

MATTHEWS: You're going to make (ph) the Congress-it was simply economic conditions, or was-you know, were the Japanese smarter than us? Were the Germans smarter than us? Do they understand the need for smaller, lighter vehicles that are better on mileage per ton? Have we gone too heavy with our vehicles? Have we really made a big mistake here going with big cars? Is that-you say it's up to the consumer, but advertising is relentless on television, car advertising. You encourage people to buy certain cars, don't you?

HENDERSON: Yes. We promote our vehicles when we develop them and launch them. As I look at it, first of all, we do make mistakes. I think all manufacturers do. We certainly have made mistakes in the past. I think it's-looking forward, it's about how do we get our cars and crossovers, get the right level of fuel efficiency and win in the marketplace? I would say that our competitors-all of our global competitors also launched larger vehicles and pick-up trucks and SUVs because the consumers had a demand for those. And frankly, the products-even our SUVs have segment-leading fuel economy. But they're bigger. And so therefore, we're going to focus our resources on smaller, more fuel-efficient vehicles going forward.


The auto industry, as with virtually every other industry in the United States, will tell us: we make (design/service/sell) what the consumer is demanding, and only what the consumer demands. And conservatives parody this fiction. So Matthews asks this executive: "but advertising is relentless on television, car advertising. You encourage people to buy certain cars, don't you?" This elicits the admission "we promote our vehicles when we develop them and launch them" and the charge "all of our global competitors also launched larger vehicles and pick-up trucks and SUVs because the consumers had a demand for those."

The latter remark should remind us of this: when those of us on the left (and much of the center) talk about the "failed business model" of GM, Ford, and Chrysler, we generally mean that the automakers have not met the demand of American citizens and the need of the nation for vehicles with higher gas mileage. But the automakers (domestic and foreign) will claim that the vehicles they have manufactured- including those with lower gas mileage produced even by the Japanese- have risen to meet the demand of the consumer.

When adherents to economic conservatism (or "fiscal moderates," as the press likes to celebrate them), to whom this kind of thinking is an article of faith, complain about the business model of the domestic automakers, they are not thinking of the need for smaller vehicles with greater gas mileage. Rather, they are exercised that workers can bargain collectively for a middle-class wage and health and other benefits. They appreciate greater demand for oil and the greater profits to which it avails the energy industry and they can tolerate the empowerment of foreign (even Arab) oil producers, including possible veto power over American foreign policy. But strengthening the middle class and the resultant reduction of tensions between it and the lower class, and between whites and minorities, strains even their sense of fair play.

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