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A transforming auto industry has Detroit in the hotseat

May 20, 2017

Another week in the Motor City and you get buyouts at Ford Motor and news of General Motors bolting yet two more foreign markets. What’s going on here?

Credit Daniel Howes / Detroit News

Simple: this ain’t your father’s auto industry anymore.

These are pillars of the American industrial economy. They're companies worth rescuing with taxpayer money and the biggest home improvement loan ever. And they're vying for relevance.

With customers? Nope, with investors.

Without investor cash, publicly traded automakers slip behind. Without investor confidence, management gets sweated. Headlines get negative. Men with names like Ford and a woman called Barra get pushed to explain themselves and to articulate a clear vision for making the transition from today to a mobility future.

It’s too soon to know whether any of the latest moves might work. GM shares remain stuck in neutral. Ford shares are down 40 percent since CEO Mark Fields replaced superstar Alan Mulally nearly three years ago. Blistering performance it’s not.

Times change, quickly. There’s a fundamental difference between the challenges facing Mulally then and Fields now. Mulally engineered a rebuild of Ford’s core car and truck business to produce an earnings machine at the top of the auto cycle.

Fields is charged with maintaining that momentum amid a downshifting market and pushing the automaker into unknown territory labeled autonomy, mobility and electrification. That’s easier said than done, especially when a muddy strategy is complicated by an even muddier communications strategy — if there is one.

Traditional automakers like GM and Ford aren’t just contemplating a future informed by their century of experience. They’re betting on an evolving, unfamiliar future they mostly don’t know and cannot predict. And they’re expecting investors to trust them to get it right.

Based on what?

The next big chapter in transportation is coming, and Detroit is not guaranteed a top spot. Who gets there first in any meaningful way will be shaped by their respective starting points, risk tolerance and guts to make tough calls.

Modeling and forecasting, the restructuring Mulally began engineering nearly a decade ago, is work Ford deeply understood, even if it didn’t always execute it consistently. Modeling and forecasting a future choked with new high-tech competitors accustomed to moving faster and sometimes failing is all-new territory.

In Silicon Valley, failure is the price for a high-risk, high-reward landscape. In Dearborn, failure is still just that — failure. And it’s marked by the usual zero-sum score-keeping that Old Economy Detroit knows all too well.

GM and Ford, as well as their foreign-owned rivals, are negotiating a fraught transition from the century-old auto industry they know into a broader transportation ecosystem they’re learning by doing. That means more hard decisions -- like making job cuts in a year that are expected to book nine billion in profits, or bolting established markets, or leaving entire vehicle segments.

Why? Because a car company isn’t in business to make cars and trucks or to provide jobs, health care or pensions. It’s in business to make money for investors. Without investors, eventually there is no company.

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.