Years ago it was every high schooler's fallback position. If college wasn't a shot in your bag, you could either sling brake pads at one of the car factories or sling hot bricks in the steel furnaces of Armco Steel. It didn't take a college education to do either and the pay was good. Then Japan got into the car business. In order to build cars they needed steel, so they got into the steel business too. Soon the modern Japanese steel plants began outproducing and underpricing American steel. And soon the big names like Sheffield, Pittsburgh and Armco were out of business.
The days of the behemoth steel plant are long gone. There comes a point were economies of scale give declining returns. But in the 90's, a new business model emerged. The mini-mill began to do what even cheap Japanese steel couldn't do. Produce a high quality product, cheaply and save the cost of shipping by locating near the customer. These mini-mills used modern technology, required fewer employees and had much lower operating costs. American steel was back, but with an entirely different look.
I think what we're seeing with the Big 3 automakers is a repeat of the collapse of the steel industry. Sure we can prop it up for a while, just like we did for domestic steel companies with high tariffs on imported steel. But a free market abhors a vacuum and in the end a dead business model is just that... Dead.
New automakers are emerging with business models similar to the steel mini-mills. Small, fast and reflexive, they do not have the vast bureaucracy that prevents traditional automakers from bringing a car to market in a matter of months instead of years. Companies like Phoenix Motorcar, Tesla and Fisker are American manufacturers who may soon become the norm instead of the exception. In business, like in gunfighting there are two kinds of players; the quick and the dead. We've already seen that Detroit is not quick. My only hope is that some of these new players in the automotive field will Consider Kansas City. |
