Ford fumbles the future

Stupidity, not foreign competition, is Detroit's real problem.

Published January 24, 2006 8:15PM (EST)

In 1999, Ford posted a net income of $7.2 billion. In 2001, it reported losses of $5.5 billion. What happened in the meantime? Well, for one thing, sales of SUVs peaked in 2000. And then there is the host of other ills that have been widely reported in the wake of yesterday's announcement of mass layoffs and plant closings. The chief culprits: surging healthcare costs and foreign competition.

Ford's dilemma is intriguing to look at through the lens of globalization. As noted here before, back in the mid-'90s, both Ford and G.M. would have been well advised to prepare for the obviously imminent era of high oil prices by bringing to market stylish, fuel-efficient vehicles instead of rolling out ever more humongous SUVs. But Wall Street doesn't reward companies for long-term thinking -- it always puts the premium on what-is-your-stock-price-doing-for-me-now?

Still, there's little doubt that for a Ford or G.M., competing against companies that have a lower healthcare overhead and employ non-union labor is challenging. Which makes this a classic global economy conundrum: Yet another American industry is not proving up to the task of surviving in an era in which globalization has eviscerated union power and brought relentless price pressure to bear. (We'll ignore for now that Ford actually earned a profit last year, worldwide, but still plans to slash 34,000 jobs and close 14 plants.)

The challenge, as always, is what do about it? Would a "customs union" for North America, as outlined by "The Global Class War" author Jeff Faux have cushioned Ford from the blow? It's hard to see how, given how many foreign car companies have established factories in the U.S., and the clear unpopularity of so many of Ford's current car and SUV models.

What if government had taken a stronger role, requiring, for example, significantly higher fuel economy in new cars, or mandating that some percent of Ford's sales be hybrids? Would that have pushed Ford in the right direction? Or, more promisingly, what if the Bush administration had taken a leading role in solving the healthcare crisis, either by assuming a larger burden of costs, or fundamentally fixing a clearly broken system?

Maybe. But looking at those enormous profits from 1999, one is doubtful. Ford and G.M. bet on greed and wasteful extravagance when the going was good, and failed to prepare for the future. Many thousands of workers will pay the price. But don't blame high oil prices or healthcare or foreign competition. Blame stupid decisions by Ford executives. The company is making cars that Americans don't want to buy. That's not China's fault, it's not free trade's fault, and it's certainly not Toyota's fault.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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