Pi-Consulting

You remember the movie. The two plucky heroines, pursued by the consequences of their profligate, kick-ass cross-America spree (they’ve blown up a tanker-load of gasoline, just to see it burn), and faced with living in a world that no longer understands them, choose instead to drive their car over the edge of the Grand Canyon, whooping triumphantly as they crash to a glorious death.

Rather like the ‘big two’ American car manufacturers, perhaps. A January cartoon in the Atlanta Journal, also titled “Thelma and Louise”, shows two grinning old maniacs driving their giant gas-guzzling SUV (sport utility vehicle) over a cliff. One of the occupants is cheerily waving a “Ford” banner, while the other brandishes his “GM” flag.

Until recently, these two corporate automotive giants could still pretend they had reason to be cheerful. They were riding that most American of things, a winning idea. The big, butch 4×4 SUV format epitomized by the Jeep Grand Cherokee and the Commander had caught the nation’s imagination, and sales of sport-utilities were looking unstoppable. As sometimes happens in the USA, the idea began to subsist on itself. Americans love a winner, and appear to have a bigger appetite than other nationalities for domestic consensus on what constitutes the “must-haves” of life. SUVs were suddenly the thing that every American seemed to want.

The rush for these high-off-the-road gas-guzzlers, with their macho-looking radiator grilles, pointed up something beyond simple bandwagon-jumping. In America, “my car is me” to a surprisingly meaningful degree. Compared to Europeans, nearly twice as many Americans feel that “you can judge someone by the car they drive”.

There was also the apparent conviction that cheap gasoline was a perpetual right, almost guaranteed by the US Constitution. The thirsty conventional petrol engine still owns the road in America, representing 97% of all car sales even today. By contrast, 50% of Europe’s cars are already propelled by other fuel types, including diesels, petrol-electric hybrids and the new ethanol-burning engines. In the USA, however, the average fuel-economy of new vehicles has actually fallen in 15 years, from 22.1 to only 20.7 miles per gallon. Thanks, SUVs.

If all this added up to a car-driving nation in denial, there were plenty of other signs of the mounting sense of unreality. The average American motorist only drives 30 miles (50km) per day, and these powerful SUV engines with their 4-wheel-drive capability spend virtually all their time idling along in 2-wheel-drive mode. Most SUVs never go off-road into the rugged terrain they were designed for. Instead, soccer moms park them in leafy suburbs while they cheer on their kids at Little League practice, (and of course cross their fingers that their offspring will be on the winning team). So why exactly did they spend all that money on an SUV? Oh, it’s all in the reassurance factors, they would tell you, such as “It’ll hold the road better if it’s icy”, “I can drive across a muddy field if I have to”, and “Safety” — a quality which in itself turned out to be somewhat illusory, since poor results in collision tests have already forced widespread SUV re-designs. Nonetheless, there is nothing is quite as persuasive as the inner voice of unreason, it seems.

The trouble is, winning ideas don’t stay winning ideas for ever. Recent gas-price jitters have sent American drivers a warning toot on the horn, and SUV sales, the erstwhile backbone of the market leaders’ business, have slumped by hundreds of thousands in response, dragging GM and Ford into huge financial losses. In 2002, General Motors Corporation was promising to rout its foreign competitors, and restore its erstwhile status as King of the Road in America. In January 2006, GM posted its biggest loss in 14 years, $8.6 billion, while its market share fell to an 80-year low. The same week, Ford Motor was forced into a “turnaround plan” that calls for closing 14 plants and dumping 30,000 workers, a similar job-cut level to that already forced on GM.

Interestingly, this gives the lie to President Bush’s pretext for rejecting the Kyoto protocol on harmful emissions, i.e. that “it would cost American jobs”. There is now a visible line that connects over-production of gas-guzzling cars to wholesale job losses. Not that the new realities seem likely to be addressed by the Bush administration, whose death-row conversion to ‘alternative’ fuels seems little more than a new way of feeding the addictions of the gasoholic culture they know and love.

Unlike Washington, American consumers and many state governments are already turning their backs on conspicuous petrol consumption, following a year of gasoline at two bucks a gallon, with worse perhaps to come. National nerves about climate change and oil-supply security have already prompted Americans to switch to thirst-controlled alternatives. Many have already joined an 18-month waiting list for petrol-electric hybrid cars like Toyota’s Prius. Toyota’s hopes for annual sales of their successful hybrid are climbing fast towards the half-million mark. Incidentally, with a stock-market value 14 times the size of worldwide market-leader General Motors, Toyota is already being tipped by some to take over that Detroit-based “wounded giant” within a year or two.

The point seems to be that, at least in the world of automobiles, the very idea of a long-term “winning idea” is on the way out. Industry observer Autodata Corporation collects and analyses automotive market statistics. Its president, Ron Pinelli, explains the shift. “You can’t just develop a killer new car or truck line any more. You have to develop one hit after the other”. Future success — indeed survival — will no longer depend on megahits like the SUV, but on a carefully-nurtured series of smaller successes, which continually gets winnowed out and re-aligned. “The whole large-company culture is a burden”, he says, especially with the ‘Big Two’ now losing billions of dollars worldwide. The ‘Next Four’ (Toyota, Nissan, Honda and the born-again Chrysler) between them made over $20 billion in profits last year. This provides a handy war-chest for a “small-is-beautiful” offensive, and an active quest for the kinds of cars people will really want to buy in an energy-anxious world.

The time is come for Thelma and Louise to get real, it seems, or end up in a tangled heap at the bottom of the ravine.