Detroit’s not-too-distant record of failure weighs on investor perception
These days, Detroit is all about showing it’s new. It’s different. That it’s learned from the past.
Then what happened at the New York Auto Show this week? Markets collided, and the winners are buyers of trucks, SUVs and even muscle cars, not investors hot for all things electric.
Major players transformed the Big Apple into a shameless celebration of size and horsepower. It’s more evidence that the emissions-free future touted by the industry and rewarded by traders is trumped by reality, that is: consumer demand, low interest rates and cheap gas.
I’m shocked. Look, automakers are in the business to make money. And right now the biggest bucks are in pickups, SUVs and lots of horsepower, not electrified compacts. Yes, that 707-horsepower Jeep Grand Cherokee conjures Detroit’s past. So do a longer Lincoln Navigator and a monster 840-horsepower Dodge Demon. But they’re also steel and rubber confirmation that automakers ignore the present at their peril.
Here’s the dilemma: pitching size and horsepower surfaces the fraught legacy of Detroit’s past. For much of the past week, tiny Tesla vied with General Motors to become the most valuable American automaker with investors. In the battle between the future and the present, the small Silicon Valley automaker periodically pushed beyond GM, defying any rational explanation except one word: belief.
Investors have memories, too.
It seems like only yesterday that the bosses of GM, Ford Motor and Chrysler were begging Congress and the Bush administration for help to avoid an uncontrolled collapse. One that would have devastated the industrial Midwest.
Only eight years ago did Barack Obama order GM and Chrysler into Chapter 11 bankruptcy in exchange for a financial lifeline from American taxpayers.
Only then did the incumbent Masters of Detroit begin to reckon with the industry’s long history of destroying capital, of paying union members not to work, of presiding over corporate cultures that avoided risk instead of embracing it.
No, blame the weight of history on Detroit’s automakers. It’s a legacy none of them can escape anytime soon – no matter how much money they make selling pickups and SUVs.
The century-old players are fighting back. They’re joining the mobility and self-driving car game because it threatens their business model not to. They need the promised growth to change both perception and reality. But judging by their stalled stock prices, their weighty cyclical past is winning.
Detroit’s burden is to prove its reform is for real because its history of failure is long and legendary. You wonder why investors are so leery? Because it’s their money. And the point is not to buy GM shares in 2010 at 33 bucks and see them appreciate a whole 97 cents in seven years. Talk about disappointing.
The hesitancy to accept the narrative that Detroit has changed because conditions have changed may not be “fair,” as they say in middle school. But it is rational because it’s grounded in historical fact. Face it: skepticism will continue until a reformed Detroit is undeniable.
Daniel Howes is a columnist with the Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.