There has been a lot of press on the state of the Big Three automakers, before and after the Federal Government decided to offer load guarantees. The press has not been shy about coming up with reasons why the automakers are in the predicament they are in. I can’t help but think that many of these journalists have never run a business.
An often mentioned theory, repeated too many times to count, is that the Big Three should have invested in and built more fuel efficient vehicles. This theory has made it to the committee hearings, where legislators want the loans guarantees to be met with requirements to invest in the new technology.
Sorry, but this isn’t the reason why the automakers are failing and it won’t be the salvation for them, at least in the short to medium term. They are failing because they don’t make a profit on the vehicles they sell today. It’s that simple. Currently, new technology vehicles powered by hybrid technology or natural gas still make up a very small percentage of vehicle sales today. Toyota is the leader in this area, and they invested in this technology using the profits of vehicles based on the existing technology; yes, even from the gas guzzling trucks.