October 3, 2006
More on Ford Posted by Joshua Zeitz at 10:20 AM EST John Steele Gordon never misses an opportunity to take a cheap shot, though he is tremendously thin-skinned at even the slightest criticism of his own writing.
According to Mr. Gordon: “Joshua Zeitz is a good deal more certain of the future than I am (perhaps he’s seen a study, so he knows what it will be). While the American legacy automobile industry must surely change fundamentally, that will require a new business model on the part of the UAW as well as GM, Ford, and Chrysler. As for what cars should be manufactured, I’d prefer to let the American people decide what cars they want.”
Let’s leave aside for the moment Mr. Gordon’s habitual flair for over-dramatization and biting sarcasm. Instead, let’s focus on substance.
In August the Ford Motor Company announced plans to cut new production by 21 percent in its fourth quarter; this decision followed the announcement of a plan earlier in the year to close seven plants, eliminate between 25,000 and 30,000 workers, and reduce its annual production capacity by 1.2 million vehicles. Why the cuts? According to the Los Angeles Times, “Soaring fuel prices have hit hard at Ford and its Big Three rivals General Motors Corp. and Chrysler Group, all heavily dependent on trucks, as buyers have begun shifting to smaller, lighter and more fuel-efficient cars and car-based crossover vehicles.” Accordingly, Ford has decided to cut the production of pick-up trucks—not passenger cars.
A few points are worth highlighting.
First, Mr. Gordon, in his continuing love affair with those two great abstractions the free market and its invisible hand, writes, “I’d prefer to let the American people decide what cars they want.” Well, they have. They want smaller, lighter, more fuel-efficient models, and the American government can do Ford, GM and Chrysler a favor by mandating tougher fuel-efficiency standards and by generously funding R&D for hybrid models and alternative energy sources. Some challenges are sufficiently difficult and integral to national security that they demand public-sector and private-sector cooperation.
Second, Mr. Gordon snidely writes, “Joshua Zeitz is a good deal more certain of the future than I am (perhaps he’s seen a study, so he knows what it will be).” But it doesn’t take a study or a crystal ball to make informed prognostications about the future.
The International Energy Agency predicts that the global demand for energy will increase between 37 percent and 50 percent by 2030. Even in the past five years, the global price of oil, adjusted for inflation, has jumped fourfold. With the Chinese and Indian economies experiencing rapid acceleration, the United States will find itself competing for a finite reserve. In 2004 China accounted for 30 percent of the world’s oil consumption, and experts believe it will soon overtake the U.S. as the world’s largest energy consumer. Equally if not more problematic, oil and gas production are increasingly concentrated in autocratic countries with little or no love for America—for example Venezuela, Russia, and Iran. Gone are the days when Americans could count on an infinite supply of affordable crude oil from friendly dictatorships, like Saudi Arabia, whose reserves are currently under much strain, or Western democracies like Norway, where oil output has been on the decline for 20 years.
I know that it’s unfashionable these days to live in the reality-based world. One sleeps better at night if he entrusts our collective fate to religious gods (like, well, God) or secular gods (like Adam Smith). But one day the oil will run out. Before that day arrives, we’re likely to be faced with soaring prices and resource wars. Ford needs to adjust itself to this new age, because change is good for business, and it’s good for our long-term national security.
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