
Detroit fears of losing carmaking to Silicon Valley - prostoalex
http://www.usatoday.com/story/money/cars/2014/09/21/detroit-silicon-valley-auto-industry/16001191/
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Htsthbjig
Wow, it is "scary stuff"!

They had the opportunity to help Tesla(or be Tesla), and they made everything
on their power to destroy it, remember the GM first electric car. Now it is
scary because it survived and it is the future, not them.

This people is frightened by the future so they try to delay it as much as
they can.

They are worried about themselves, rent seekers trying not to lose what they
have instead of caring about their customers.

In business you have to care(genuinely)for your customers or you are dead.
Like dinosaurs.

~~~
D_Alex
This part:

>Now we have Silicon Valley challenging Detroit's leadership in the auto
industry's most promising growth areas — autonomous cars, connected vehicles,
eco-friendly powertrains

made me snigger. "Detroit's leadership" \- and this applies to many of the
overseas subsidiaries of Detroit's companies also - has been mainly in rent-
seeking behaviour for years. Since 1970's the only trend they have kept up
with is the move to SUVs, missing just about everything else: downsized
engines, turbocharging, diesel, reliability engineering, interior design and
of course the electric car.

I had a little glimpse through my job at the inside workings of one of the
"Big Three" US carmakers. I got the impression that far too few people working
there actually, you know, _liked cars_. The employees were generic
dispassionate corporate managers, engineers, accountants etc. They really
needed an injection of car enthusiasts.

~~~
hackuser
> I got the impression that far too few people working there actually, you
> know, liked cars.

These aren't startups. Are most IBM or HP employees so passionate about
information technology?

------
armenarmen
While other cities and regions may poach auto manufacturing jobs and plants
from Detroit, the idea that any significant amount of manufacturing will be
done in the SV is unlikely, based on real estate prices alone. Not to say that
a large part of research and innovation cannot be done here rather than in
Detroit.

~~~
Zigurd
If the Silicon Valley mindset wins, cars will be made by contract
manufacturers, not by vertically integrated manufacturers. As others have
pointed out, there is a lot of expertise in Detroit. That expertise will have
to go obsolete. Self-driving "cars" could mark their obsolesce. A self-driving
"car" is going to be nothing like current cars, and 100 new business models
will bloom alongside their new forms.

~~~
rstupek
Nothing like current cars. Except they'll have wheels, suspensions, door,
bodies, propulsion systems, etc. Don't believe that a self driving car changes
much beyond who is driving the car

~~~
Zigurd
So do buses. Busses differ from cars by all these components being
significantly different. Self-driving cars will be at least as different.

> _Don 't believe that a self driving car changes much beyond who is driving
> the car_

Except everything. Current cars have one occupant a high percentage of the
time. That occupant drives the car. Change that and every design parameter
changes.

~~~
potatolicious
> _" Current cars have one occupant a high percentage of the time. That
> occupant drives the car. Change that and every design parameter changes."_

I doubt this. The American car (distinct from cars in general) is not only a
utilitarian tool but a cultural artifact. For huge portions of the country it
is the manifestation of freedom - especially now that we've demolished all of
our urban areas in favor of freeways and strip malls. Look at American culture
and you'll see that personal car ownership is intrinsically associated with
freedom, coming-of-age, and a huge host of cultural values that Americans take
very seriously.

If you think making driverless cars is going to suddenly tilt us away from
single-occupant SUVs and into little self-driving pods (Minority Report
style), IMO you're sorely mistaken. At best we're going to get SUVs without a
steering wheel. Cars will not get substantially smaller without regulatory
intervention, people will continue to own personal automobiles, and they will
still have more seats than are needed 99% of the time.

Driverless cars will be great, but I think you're severely overestimating
their impact on car design/ownership/usage patterns. I know it's popular to
imagine a society where people stopped owning cars, where cars are always
right-sized for the situation, where cars show up on demand and parking lots
made obsolete, etc etc, but that's a 1950s Popular Mechanics style of sci-fi
pipe dream.

~~~
nl
It's wrong to talk about "American culture" as though it is a monolithic
thing.

For example, more than 50% of NY households don't own a car[1]. It's easy to
argue that NY is a special case, but with 8 million people it's a very large
special case. The thing is, there are a lot of special cases[2] that aren't as
extreme as NY but in aggregate add up.

[1]
[http://en.wikipedia.org/wiki/Transportation_in_New_York_City...](http://en.wikipedia.org/wiki/Transportation_in_New_York_City#Mass_transit_use_and_car_ownership)

[2]
[http://en.wikipedia.org/wiki/List_of_U.S._cities_with_most_h...](http://en.wikipedia.org/wiki/List_of_U.S._cities_with_most_households_without_a_car)

------
jostmey
Detroit already lost carmaking - manufacturing was outsourced outside the city
long ago. Now all that is left are a bunch of offices. So yeah, they are at
risk, especially so because they have failed to innovate from their offices.

~~~
hackuser
> Detroit already lost carmaking - manufacturing was outsourced outside the
> city long ago. Now all that is left are a bunch of offices. So yeah, they
> are at risk, especially so because they have failed to innovate from their
> offices.

Detroit may not be as dominant as it once was, but it is the center of the
American car industry. There are many manufacturing plants for cars as well as
for components, as well as major R&D facilities, etc. Also, there are the
world headquarters of GM, Ford, Chrysler (now a Fiat division, but I think
still hq'd in Detroit), major suppliers (which are Fortune 500 companies
themselves, I believe), as well as the US headquarters of some foreign
manufacturers.

------
zenocon
this article is dumb, but what do you expect from usa today? i work and live
in the detroit area, and have lived here most of my life (also lived in
silicon valley, fwiw). there's no doubt there's some great innovation being
done on the west coast, and these local guys could use a kick in the pants - a
literal kick in the pants (i mean i would love to kick some of them...i worked
for some of these pricks). but it takes a good deal more than some
infotainment radios, and interesting r&d project to displace a major sector of
the economy. it's much harder than you think. as the article already points
out -- manufacturing is long gone. competition is good -- viva competition.

------
NoMoreNicksLeft
Yes. It's that "Polaroid in 1998" moment for them.

------
tw04
I'd rather they lose it to Silicon Valley than Shanghai or Tokyo.

~~~
eru
What's wrong with the people in those places?

~~~
AustinG08
I would also rather those jobs, companies, and opportunities stay in America
and benefit the American economy, the one that I also contribute to and
benefit from. Is it wrong to want that? I don't think so.

~~~
golemotron
I think it mis-understands money. When you buy something, it's like taking a
drop of ink and putting it in a swimming pool - the money diffuses completely.

You can look only as far as stockholders to see how diverse a corporation's
ownership is, or you can take the next step and see how it changes hands at
three or four levels. You'd be surprised.

~~~
tw04
There are a LOT of middle-class jobs that go along with a company the size of
an auto manufacturer. From middle management to accounting to HR. I'd rather
those jobs be in the US than somewhere else, given they're the lifeblood of
almost all economies.

The money dispersal you speak of goes to things like parts - most of which
don't originate from the US. Which is EXACTLY why we need corporate
headquarters here.

------
hawkice
> "The future of the car is in Silicon Valley," a vice president of the San
> Francisco-based Bay Area Council Economic Institute boldly predicted

I think I'll go ahead and challenge the boldness of making that prediction
when that's your job title. He might end up being wrong, but even if, for
instance, California law prohibits all automobiles or pictures of automobiles
within 100 miles of SF for any use, no one would really blame him (and I think
it's almost certain he won't be _that_ wrong).

------
fnordfnordfnord
People have been pitching electric cars in Detroit for a long time. The Big
Three aborted every opportunity.

~~~
Jupe
Huh? Ever hear of the Chevy Volt?

~~~
fnordfnordfnord
Yes. It was introduced in 2010, also the popular EV1 from the 1990's.

------
chaostheory
I guess they forgot about Tennessee.

It's really anywhere that's better than Detroit.

I vaguely remember reading that $3000 of the cost or producing a car in
Detroit went to the union (pensions I believe) due to agreements made in the
60's to keep salaries down. That's a huge competitive disadvantage.

~~~
hackuser
> I vaguely remember reading that $3000 of the cost or producing a car in
> Detroit went to the union (pensions I believe) due to agreements made in the
> 60's to keep salaries down. That's a huge competitive disadvantage.

It's a point that is often made, but a few considerations:

1) How much do labor costs impact overall profitability?

2) There may be advantages to paying workers well in salary and benefits.

3) You weren't addressing this aspect, but certainly there are advantages to
the workers, who I have no reason to be less sympathetic with than management,
and in some ways to society.

~~~
chaostheory
> 1) How much do labor costs impact overall profitability?

Well in this case a lot. Competitors were able to produce better quality cars
at the same price point, since they didn't have approximately $3000 in extra
overhead.

> 2) There may be advantages to paying workers well in salary and benefits.

There are advantages and there are good examples for this, but it depends on
the industry, the culture, the location as well and a lot of other factors.

> 3) You weren't addressing this aspect, but certainly there are advantages to
> the workers, who I have no reason to be less sympathetic with than
> management, and in some ways to society.

Then why did Detroit fail?

~~~
hackuser
>> 1) How much do labor costs impact overall profitability?

> Well in this case a lot. Competitors were able to produce better quality
> cars at the same price point, since they didn't have approximately $3000 in
> extra overhead.

Many factors determine quality and costs. Nothing you say indicates that labor
was a decisive or major factor. For example, people assume much manufacturing
is in China due to labor costs, but many businesses will tell you it's because
of manufacturing capabilities and resources, and labor costs are a minor
factor.

>> 3) You weren't addressing this aspect, but certainly there are advantages
to the workers, who I have no reason to be less sympathetic with than
management, and in some ways to society.

> Then why did Detroit fail?

I don't know what exactly you mean by 'fail', or if you mean the city or the
car industry. As far as the city 'failing', structural racism played a big
role as did the related flight of the tax base to the suburbs, which are doing
well. A race to the bottom for workers' welfare didn't help, as factories
moved to non-union locations.

For the industry, from what I know bad management was a major contributor, as
well as poor engineering. I think labor was too.

~~~
chaostheory
> Many factors determine quality and costs. Nothing you say indicates that
> labor was a decisive or major factor.

When labor costs adds an extra $3000 to your own costs that your competitors
don't have to deal with, how is this not a major factor in both quality and
costs (either lower quality to meet price points, raise the price, or a mix of
both)?

[http://www.npr.org/templates/story/story.php?storyId=9864323...](http://www.npr.org/templates/story/story.php?storyId=98643230)

[http://archive.fortune.com/2007/01/26/news/companies/plugged...](http://archive.fortune.com/2007/01/26/news/companies/pluggedin_taylor_ford.fortune/index.htm)

Since we're on the subject, you haven't provided much meat to your argument
either: being that labor was a major factor in US car companies' competitive
disadvantage.

> For example, people assume much manufacturing is in China due to labor costs

Low cost, skilled labor was initially one of the major reasons how Chinese
manufacturing became dominant.

> but many businesses will tell you it's because of manufacturing capabilities
> and resources

It's only recently that Chinese manufacturing capabilities got better and it
was due to rising labor costs.

As for natural resources, it is not a Chinese competitive advantage. That's
why they're very keen on striking a lot of agreements with foreign countries
for access to natural resources.

> I don't know what exactly you mean by 'fail', or if you mean the city or the
> car industry.

I meant the car industry.

> For the industry, from what I know bad management was a major contributor,
> as well as poor engineering.

Yes to be specific for bad management, it was short sightedness that led
management to offer rich pensions in return for lower salaries in 60's. This
in turn led to bad quality. How? When you have an extra $3000 of extra costs
from pensions for a product that your Japanese competitors don't have, what
does management do when they want to be competitive price wise? They lower
quality of parts and materials, which led to poorer overall reliability and
quality of the entire vehicle. Detroit engineering was not 'poor'; they just
had to work at a disadvantage. (A lot of those engineers now work for Telsa
and other non-Detroit companies.)

> I think labor was too.

I'm confused. I thought your main argument was that labor wasn't a factor?

