Who Makes the Dough in Detroit?
Nov 19, 2008
Now that we don’t have the elections to focus on, it’s all about the economy, stupid. And in particular, the sour economic news has been dominated by the plight of the Big 3 automakers. The CEOs of Chrysler, Ford and GM were in Washington this week, hats in hand, looking for at least another $25 billion in handouts (or bailouts, or a lifeline, or whatever you want to term it – but it’s a helluva lotta dough). It was a scene that I once wrote about some years ago, although I underestimated how bad things would turn out to be.
In the early 1990s, I was working for fellow AgWeb blogger John Block, who was head of the National American Wholesale Grocers at the time. One thing I would do is help prepare a monthly column for the NAWGA member magazine.
One month, I chose to reflect on how the shift in the U.S. from a manufacturing-based, smokestack economy to an information-based, service economy was playing out in Detroit. I mentioned how interesting it was that two of the leading progenitors of the service economy were started in Detroit: Dominos Pizza, and Little Caesars. I thought it ironic that while the Motor City was (and still is) defined by its long history as the hub of the automotive industry, in fact it also spawned two of the leading carryout and delivery pizza brands. I closed the article by mentioning that when such pizzas are increasingly delivered in a Honda, not a Chevy, you know times are changing, and not for the better if you’re a car maker. Back in 1993, GM’s share of the U.S. market was more than 33%. Today, it’s less than 20%.
That column brought a harsh response from one of the other staff executives at NAWGA. He called my comparison between the automakers and the pizza makers “odious,” and said he had every confidence that General Motors and its cousins would one day reassert themselves in the market and recapture their glory days of the mid-20th century. He owned stock in GM, and thought it would prove to be a good long-term investment (right now, of course, the company’s share price is practically zilch).
Well, who’s to say what will happen in the coming days and years for the Motown crowd. Congress is probably going to do something big to help them, although greasing the skids for bankruptcy is at least as likely as an option as funneling more cash into them to prevent insolvency. Regardless of whether they avoid bankruptcy or not, it’s a safe bet that GM’s, Ford’s, and Chrysler’s collective market share is not likely to be in the future even what GM’s share was by itself after WWII, when its brands represented more than half of all U.S. auto sales. The world is too competitive, the auto market too diverse, and the economic structure of the U.S. auto sector too troubled to keep pizzas only in American-branded cars.
This is relevant to the AgWeb world in that, apart from who makes the pickup trucks driven by farmers and ranchers, the food that our farmers and ranchers produce is also in a global market today. That’s good when global demand surges and prices rise; not so good when we are really competing with Brazil, China, Poland, and other new players. But there’s no turning back to when Michigan-made motors were the only ones running.
Two disclosures: I have strong ties to Michigan. My Mom was born in Detroit, and two of her brothers still live there. One of them worked his whole life for Chrysler, while another brother has lived nearly 30 years in Tennessee, where he works for Nissan. My family resembles the heterogeneity of the U.S. auto sector today.
Second, my family currently owns two Fords. In the past we have owned Japanese and German cars, and a U.S.-branded car made in America identical to a Japanese-branded car made in the same U.S. plant but sold by the world’s now-largest auto maker. That Japanese company makes the dough now, and its U.S. partner does not.