The Detroit 3 Must Make the Case and Win the PR Battle

In the next round of Congressional hearings on the $25 billion auto industry bridge loan (a.k.a. bailout) coming up this week, the Detroit 3 must focus on making their argument simple and winning the PR battle. We have become a nation that has less and less expertise in making things. Making a product like an automobile is a complex business. Public reaction to the first round of Congressional hearings has highlighted that the industry is not well known outside of Detroit. Media interviews with luminaries such as Tom Friedman, Seth Godin, Ted Turner and Mitt Romney suggest that, while they may be leaders in their respective fields, their arguments are outdated and they do not understand the complexities of today's global automotive industry today.

The Detroit 3s' arguments this week should emphasize that they:

1. ... Are in dire straights because of the credit crisis. The US automobile market (the largest auto market in the world) is down significantly, not just the market for US-made automobiles. And, approximately 70% of consumers rely on credit for vehicle purchases or leases.

2. ... Are requesting a loan (not a bailout) to cover working capital needs during this unprecedented down-turn

3. ... Focused on trucks and SUVs earlier in the decade because cheap gas and consumer preferences demanded this. Toyota and Nissan spent over $3 billion to design and build full-size trucks and SUVs, but were late to market and not successful. One way to sell a higher percentage of cars is to have unsuccessful truck offerings.

4. ... Have an extensive portfolio of hybrids and small fuel-efficient cars that consumers did not start buying until the price of gasoline spiked this year. In a capital-intensive business like automobiles, it takes time and cash to shift production capacity (from trucks and SUVs to more cars) to align with such a fast and radical shift in consumer preferences. The shift in capacity from cars to trucks in the '90s, again to meet consumer demand, took more than 5 years to occur.

5. ... Have taken several aggressive steps toward restructuring - closing plants, laying of employees, discontinuing products, consolidating dealerships - and there are more to be taken, but the credit crisis has taken "time (and cash) off of the game clock".

6. ... Are performing well in fast-growing emerging markets outside of the US, e.g. GM's #2 market position in China, ahead of Toyota and Honda. Isn't selling American products in China a good thing?

7. ... Contribute significantly to the US Treasury through corporate and income taxes

8. ... Would support an energy policy that encourages the consumer to conserve. Gasoline below $2 / gallon (as it is today) does not encourage consumers to pay a premium for a hybrid or compromise their desire for a larger or more powerful vehicle.

Keep the debate focused on the facts and the benefits to the country and the US economy. Avoid letting it get distracted by issues such as private planes... but fly commercial just in case. Or, maybe they should drive to DC in hybrid Cadillac Escalades, Saturn Vues, Chevrolet Malibus, Ford Escapes and Mercury Mariners. It's only 9 hours from Detroit, and imagine the free publicity that they (and the vehicles) would get. I guarantee at least one news helicopter would follow them on I-70.