Cars

There's an old saying, although I have no idea what it came from: "give 'em what they want."

For most of this decade, Americans wanted oversized SUVs, trucks and minivans that on good days got 15 miles per gallon on the highway. Why did we want them? Because our neighbors had them, because they looked nice, and because fiscal irresponsibility was a far more virulent problem than swine flu.

So, the Big 3 American car companies gave the public what they wanted. And they made a lot of money doing it.

GM's financial results from 2001-2007:
2001: $601 million profit
2002: $1.7 billion profit
2003: $3.8 billion profit
2004: $3.6 billion profit
2005: $3.4 billion loss (mostly related to non-operational items)
2006: $2.2 billion profit
2007: $2.3 billion loss (mostly related to non-operational items. The company generated record revenue of $178 billion that year)

Ford's financial results from 2001-2007:
2001: $1,5 billion profit
2002: $3 billion profit
2003: $1.2 billion profit
2004: $2.4 billion profit
2005: $1.9 billion loss (mostly related to non-operational items)
2006: $2.8 billion loss
2007: $2.7 billion loss

As for Chrysler, they have been a private company for quite some time and their results are not available. That said, they were not nearly as financially strong as the other two.

So despite all of the publicity surrounding the bankruptcies of GM and Chrysler, the Big 3's profits were in the BILLIONS as recently as 2006. Not bad. And then, of course, the bottom fell out. Why?

Lots of reasons, but I don't believe the common misconception about inferior quality is one of them. I recently had a conversation with someone I consider to be very knowledgeable about the industry, as he previously worked for one of the Big 3. This person adamantly believes that the quality of American cars is at minimum, equal to that of their Japanese rivals. I tend to agree, if only because logically, his position make sense.

Technology has advanced to the point now where most cars will go 5 years before any problems develop and easily last 10 years with proper maintenance. Besides, with so much competition from foreign car companies, if the Big 3 produced lousy cars, they would have gone out of business long ago.

So where did GM, Ford and Chrysler go wrong? As a completely uninformed, naive and generally clueless schmuck, I offer up the following:

• Out of control labor costs. And while you might jump to blame the unions, I don't. It is up to the manufacturers to draw the line, not the unions. What person wouldn't want more money and stronger benefits?
  

• Uninspiring cars. Let's be honest - if you want a good-looking car, you don't typically buy a Ford, Chevy or Chrysler. That would prove to be a big problem after gas prices went through the roof.

• Repetition. What is the difference between a Ford Explorer and Mercury Mariner? Nothing. What is the difference between the Chrysler Town and Country Minivan and the Dodge Grand Caravan? Nothing. And why exactly does GM have 293 different brands?

• An incomplete product portfolio. I think this is what really did in the Big 3. Earlier this decade, American car companies devoted their resources to producing oversized vehicles, while the Japanese continued to focus on normal-size cars (although they also made SUVs, trucks, minivans, etc). When the price of oil skyrocketed, the American public quickly adapted, abandoning their behemoths and downsizing to well, normal-size cars - such as the Accord, Civic, Corolla, Camry, Altima, etc. Unfortunately for the Big 3, they couldn't adapt nearly as quickly, and instantly fell behind the foreign competition. American car companies could no longer "give em what they want."
  

Worse, I believe the Big 3 had 2 gigantic holes in their product lines:

• Cheap, economical and fuel efficient cars (i.e., Toyota Prius, Honda Insight, etc).
  
• The entry-level luxury car (i.e., Lexus, Acura, Infiniti, etc)

For the most part, American car companies had little to offer in these categories. I can say that with some frame of reference, as I purchased a new car last October: an Infiniti G35.

The car is, well, it's freaking awesome: sleek, sporty, powerful, luxurious and it has lots of buttons and knobs. I like buttons and knobs.

I had the better part of all last year to research cars and make my purchasing decision. And when I decided that I wanted to take the plunge and spurge on a "luxury car," I spent months researching all of the options. My criteria was simple: I wanted something sleek, sporty, powerful, luxurious with lots of buttons and knobs - a car that critics universally approved of....and I wanted it at a certain price range.

Not surprisingly, all 3 major Japanese car companies have exclusive luxury divisions that made models meeting all of my criteria, including price:

• Toyota makes Lexus
• Honda makes Acura
• Nissan makes Infiniti

As for the Big 3, here were my options:

• Lincoln MKZ (from Ford) - not especially sporty, not reviewed all that highly and outside of my price
  
• Cadillac CTS (from GM) - Wayyyy outside my price, and to be honest, I think they are kind of ugly. Not sleek at all.
  

For me, the decision between Japanese and American was easy - in fact, it was not even close. I chose the Infiniti because I felt that was the best car for my money. Well, that and the fact that I paid close to 25% less than the sticker price, as I was one of about 4 people to buy a car in the month of October.

Next time you are out, look around: you will be astounded as to how many "entry-level" luxury cars you will see on the road: Lexus, Infiniti and Acura. They will be all over the place. Keep your eye out for an MKZ or CTS. You will be lucky to spot 1 or 2.

The same can be said for the economy cars - Hondas, Toyotas and Nissans rule the road.

As for the Big 3, they have received a new life, which is a good thing. Despite being a conservative, I think the bailout was necessary - the American auto industry is too big to fail in this tough economic environment. I have high hopes that all 3 companies will get their collective heads screwed on straight and catch up to their Japanese counterparts. And let's be honest: it's now or never.