Clunkers

August 17, 2009 — 13 Comments

On my way from Chicago O’Hare airport to our office in Evanston today I saw powerful evidence of the state of the auto industry in this part of the world. As we drove along Dempster Street we passed a large auto dealer for Chevrolet and Toyota. The forecourt looked pretty deserted and there were relatively few new vehicles on the lot. What there were, however, were about a hundred old SUV’s and minivans, parked inches apart, all with the same word scrawled in large yellow letters on the them – CLUNKER. It was a surprisingly powerful site. On the one hand it was evidence of a shift in allegiance from the old gas guzzlers to new, presumably, more economical vehicles. On the other hand it was a sad image of what was once an all powerful industry that just got it wrong. As far as I could see almost every one of those clunkers had a Ford, GM or Chrysler badge on it. (Apparently the Ford Explorer was the top trade in during the first two weeks of the program.)

No doubt the cash for clunkers scheme has tipped thousands of people towards new, more sustainable cars but it as also served to underline how poorly the US auto industry has been managed for the last couple of decades.

Tim Brown

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13 comments on “Clunkers

  1. Similar sight at the Honda dealer up the road from me. I wonder what percentage of the new cars bought were from the big three…

    I’ve been enjoying your writing for a while and didn’t know you were in the Chicago!

  2. It is but a small step to eliminating the internal combustion engine altogether. With all the new vehicles running on all electric power units and the spread of telecommuting, it would to the Big three’s best interest to reconsider their next step to be not only more efficient cars but also a step ahead of the european and Japanese auto manufacturers. Think Tesla Motors.

  3. On that last comment – “it as also served to underline how poorly the US auto industry has been managed for the last couple of decades.”

    This made me think of a recent keynote given by Umair Haque on Constructive Capitalism where he talks about “thin vs. thick” value…this line came to mind when I read your post…

    “[Organizations like Ford etc.] know that they have to behave differently to create real value, but they don’t know how to do that, because they haven’t been organized and built in a way to do it.”

    Here’s the keynote if you’d like to check it out..

    http://vimeo.com/5733976

    …I wonder if this would make Shai Agassi smile.

  4. Tim Rewa,

    I think Chevrolet is trying to do just that with the Volt. I’ve never been a fan of American cars but the Volt has got me really excited (misleading advertising or not). That said, we’re going to need several more rounds of cash-for-clunkers if we’re going to go all plug-in in the near future. And climate science obviously suggest we need to do just that. I’ve written about this over at my own blog, in case you’re interested: http://www.buildingtothink.com/2009/08/push-for-plug-ins. Cheers,

  5. I think its too easy to place the entirety of blame on the automakers for this situation. The floor fell out of the US auto market – worldwide, in fact – and it hit all automakers (Toyota is facing huge losses too). Clearly, the US automakers have the ability to produce competitive and interesting small vehicles – just look at their European and Asian operations. In fact, they are now bringing those models stateside.

    The larger problem is systemic, and that’s why its so hard for people to identify. Government policy has favored artificially low energy prices, which drives a consumption-based economy. On the financial side of the equation, cheap credit and lax oversight fueled the housing bubble and easy capital let people buy cars on the inflated equity of their homes. The government also has favored road-building over mass transit and rural interests over urban, pushing people to keep building new stuff further out. The hidden social costs of this will keep social scientists busy for years (not to mention the effect on our health and democracy).

    Greed did drive the US automakers to resist killing the golden goose of SUVs by pushing for a different set of standards for truck-based vehicles. The US automakers also signed incredibly stupid agreements with autoworkers for pay and long-term benefits. The US automakers should have had a strategy to remain competitive, but they abandoned a huge portion of the market (small and medium-sized cars) to foreign automakers.

    I think the situation of the automakers is more of a canary in the coalmine. What we can look forward to is hopefully a smaller overall market that is no longer dominated by any single automaker, and smaller, higher-quality cars are again desired by consumers.

  6. Consider the automaker’s role in the US healthcare delivery process.
    For most of the country, doctors and their families drive big/heavy expensive cars and trucks based on their ability to afford personal transportation of which they have empirical evidence from their close contact with emergency rooms and trauma centers. They want reliable means to get to the hospital fast and safe. They want their family to be safe. Look at the doctor’s parking deck at hospitals. Look at the vehicles they buy for their family. Look at hospital executive vehicles. Nurses cannot afford expensive vehicles. They drive mid-sized cars. The orderlies, who do the dirty work, drive old junkers because they cannot afford even the lowest cost new car. The money pecking order is very much a part of what we encounter when we get sick or injured. We do not want the doctor to have to jump-start an old heap to get to the hospital. We can wait on the cleaning crew. Congress does not have a clue or the clunker bill would have allowed the lowest wage earners who cannot afford even the cheapest new car, to become a participant in the trading process and trade an old junker for a clunker. Instead, we see the poor driving old cars and trucks, going by dealers with lots full of clunker vehicles which are in better condition than the poor can afford to purchase. The clunkers will get crushed, and the poor old junkers will still be with us. The bankers who got billions of bail-out money to cover their stupidity love to loan money to doctors. Hobknob and greed!
    They could care less about nurses much less any other wage earner.

    This is not innovation leadership at work.
    The government will not become the catalyst for good medical or automotive design. Designers must take the lead and become the loud voices of town hall meetings, calling for change in the socio-economic and cultural-aesthetic factors that drive the underlying structures of innovation processes. We don’t have time to educate lawyers who run the political structure of our nation. If we want the politicians to learn about design and innovation, we must be willing to stop working, i.e., stop designing for a period of time, in mass, across the design professions, and make the rest of the world understand the value designers bring to the table of life solutions. I’m not saying we should start a union and ask for more money. That in its self is an old world failure. The world needs change in processes designers have been talking about at conferences since before I began design studies in the sixties. We need to speak with a voice of action.

  7. Hey Tim-

    I pass that dealership everyday on my way to/from Evanston as well. Like you, I noticed how striking the contrast was between new vehicles and the “clunkers” they are replacing

    My personal opinion is such that I don’t necessarily agree or disagree with the whole CARS program. On the surface, it does appear to help get many vehicles off the road that are not doing any favors financially or environmentally.

    However, I cant help but wonder if the CARS program has inadvertently caused larger repercussions due to shortsightedness. For example, all vehicles under this program are to be send to the crusher/scrap heap. Many of these vehicles are in need of some mechanical repairs, however are not completely disabled. In my opinion, this program could be sending otherwise operable vehicles the grave, when that in and of itself is a long term, major form of pollution.

    I realize that many new vehicles were sold, thus gaining MPG and polluting less, however in my opinion there is a fine line between helping the environment through MPG vs. other long term pollution.

    In addition, at this dealership I counted 4 vehicles that were less than 5 years old lined up with all the clunkers. 2 Jeeps, 1 Land Rover, and one Chrysler Town and Country. To me, they are not even old enough to be dilapidated, thus making it even more wasteful and troublesome to scrap them.

  8. I’d love to get some real answers regarding what happens to these “clunkers”. Seems like an absolute waste to me. Surely it makes more sense (economic and ecological) to refurbish and upgrade existing vehicles before scrapping them? I believe there is a real opportunity here to pull some “OverHaulin” tricks on many older vehicles – making them look and run better. I’m seriously considering setting something up along these lines here in South Africa.

  9. It is but a small step to eliminating the internal combustion engine altogether. What??? This is about the lamest comment I have seen regarding replacing the ICE. #1 Gasoline has 10 times the energy density of the latest (lab, not commercial) battery technology. 10 times. Do you understand what that means? Are you willing to invest in 10 times the number of power plants than we curently have? Are you willing to pay 10 times the cost for your energy to go the same distance. #2 Pay $3K-$5K for replacement batteries after 30,000 miles, or dump that burden on the second owner when your lease is up? #3 Are you willing to dump those highly toxic batteries in your backyard? I can go on, but it is stunning to me how duped we are into this gasoline is bad, electric is good mentality… It makes no sense, economically, enviromentally, engineering wise, etc…. Solar power is only 18%-20% efficient, Hydroelectric is 95%. Do the math. It is pretty simple.

    Cash for clunkers was not about getting clunkers off the road, it was about stimulating sales for the dealerships. Those clunkers are not going to be crushed, they will be re-sold somewhere…… Mexico, South America, wherever they will get top dollar. “The great mass of people… will more easily fall victim to a big lie than to a small one” Adolf Hitler, Mein Kampf, V1 Ch3 1925

    ca

  10. Ah yes, Clay

    You hit it on the head as to what I was thinking, I think most of these comments are just opinions because what I see here is nothing that could possibly be backed by research lol
    How could a company make billions in profits over 20 years of mismanagement? ……I mean, come on……Im sorry I even read that lol

    “A far as the poor driving clunkers” because they cant afford to drive anything else is because of the fact that they choose to be that way.
    People make choices in life which results in the way they live and if a nurse is driving a clunker it isnt because she/he cant afford a newer car its probably because of the choices they have made with their life to which may have had an adverse effect on their quality of life, like bad credit, money management, addictions, or maybe they just dont want to.
    I come from a poor background and because of the choices I have made in my life I now have a quality of life that I am comfortable with and can afford to drive what ever I want, (well most anything lol) but I have to agree with Clay on this and….
    Steven….. I’ll bet if you made the right phone calls and contacts you could make your idea happen even if it were through an incentive of a charitable organization

    I love the quote from Mein Kampf everyone should read this.book….if you didnt know it was Hitler most would call it……. brlliant…….scarey but true…

  11. Neil said: Greed did drive the US automakers to resist killing the golden goose of SUVs by pushing for a different set of standards for truck-based vehicles. The US automakers also signed incredibly stupid agreements with autoworkers for pay and long-term benefits.

    Right, probably the worst problem that the U. S. big 3 have had for many years is the difference between what it costs them for labor vs the non-union plants. It’s not that Detroit can’t compete with Japanese workers, but that they can’t compete with American workers who are willing to take a little less in pay and guaranteed jobs and early retirement and workstations with 4 people doing the work of two. Once we get past the ideological anti-American attitude that we can’t do anything right, it’s fairly clear that there is a way to get by, if it is not too late. Unfortunately, probably the only thing that would really help is a real bankruptcy – as with some of the airlines – that would re-open the union contracts and give the companies some hope of reducing their operating cost.

    Does anyone remember where the boom in SUV sales started (and, BTW, there are plenty of Toyota 4Runners out there, too, made with Japanese quality just like the small cars)? We used to enjoy driving big cars. My ‘60 Chevy weighed about 3900 LB, and my ‘70 Delta 88 with its 350 V8 might be even bigger. Then the government in their great wisdom made big cars illegal, but they let us have big pickup trucks (like my ‘88 Ford which, with its 7.3 liter International diesel, could carry over 3000 LB and drive over mountains as if they were molehills); and, SUV’s are supposedly trucks, so if we want big cars, that is what we have to buy. This is a typical big-government SNAFU, just like when Barney Frank and Chris Dodd told the banks that they had to loan money to people who couldn’t pay, and filibustered every attempt to impose some sweet reason on Fannie and Freddie (Yes, Virginia, there is a way that the minority party can have some power, as long as all they need to do is say no – whether the majority wants to fix the home loan meltdown before it gets started, or, today, when they are taking control of health care so we will need a federal license to go to the doctor).

    I am really tired of hearing that Detroit didn’t build enough min-cars and hybrids. Last I heard, nobody was making money selling hybrids; even at the outrageous prices they charge, they are not covering their cost. What Detroit did was let Deming get away, so that when nobody would listen to how to build quality into products, here in his home country, he went to Japan and talked to people who understood him. Detroit may have pretty well closed the gap in quality, now that it is just about too late, but even if they have, it will take years before we can tell, and then more years before we really trust them enough to buy anything they make. Meanwhile, are we really sure that what we need is an infinite number of leftist politicians who hate private industry and think we should be punished for driving cars and heating our homes, to micro-manage GM and Chrysler and make sure they don’t do anything that the market wants them to do?

  12. Steven said:

    I’d love to get some real answers regarding what happens to these “clunkers”. Seems like an absolute waste to me. Surely it makes more sense (economic and ecological) to refurbish and upgrade existing vehicles before scrapping them? I believe there is a real opportunity here to pull some “OverHaulin” tricks on many older vehicles – making them look and run better. I’m seriously considering setting something up along these lines here in South Africa.

    Well, Steven, I wish you more luck in South Africa than we have had here. Here is a real answer. I listened to LPR, Liberal Public Radio one day as the reporter discussed the clunkers with someone at one of the dealerships. As we listened, he drained the oil out of the engine and added a sodium silicate solution (used to call it water glass) to the engine. He then turned on the engine and ran it until it stopped (forever). Took about a minute. The government was really into creating business by destroying property. This is the old “broken window” theory – that if I go throw a brick through one of those big store windows, that will be good for the economy because the owner will have to pay to fix it. But, along with the work that we can see, there is whatever the owner would have done with that money instead, which we don’t know and can’t see, because it never happened; they didn’t have the money to do that. The broken window theory has been pretty well discredited among economists, but not, apparently, among politicians. They won the election and we are all going to do things their way, whether it works or not. At least until 2010.

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