Automakers Prosper. But….
The good news—the remarkable news, even—is that U.S. automakers are thriving. Just five years ago, some stood at the edge of collapse. That sure has changed. “Since 2009, car production has nearly doubled, accounting for between 15 and 20 percent of our whole recovery,” writes Derek Thompson in The Atlantic.
But—yes, there’s a “but”—it’s the old and the rich who are buying, while young people are pretty much priced out. Sean McAlinden, chief economist at the Center for Automotive Research, tells Thompson that just quarter of Americans purchase new cars. Says McAlinden: “Seventy-five percent of households here are relying on used cars, thinking ‘I hope that rich guy is done.’”
Another wrinkle: The recovery isn’t creating lots of jobs. “Whereas the motor industry has accounted for 15 to 20 percent of economic growth, it’s accounted for just 2 to 3 percent of job growth,” Thompson writes. According to certain measurements, “total motor vehicle output has grown 75 percent faster than total industry employment.” Reasons for this include overtime, outsourcing and importing. The once-bright story of a middle class sustained by a thriving auto industry is, in Thompson’s view, “over.”
Peter Drucker, whose prominence was in no small part thanks to his early writing on General Motors, would have had a great deal to say about all of this. Two things in particular about Thompson’s article jump out.
First, it describes a major demographic change—and therefore a major opportunity. If 75 percent of Americans no longer buy new cars, then those with keen vision will look for news ways to meet their needs. “Of all external changes, demographics—defined as changes in population, its size, age structure, composition, employment, educational status, and income—are the clearest,” Drucker wrote in Innovation and Entrepreneurship. “They have a major impact on what will be bought, by whom, and in what quantities.” They were therefore also one of the most dependable sources of innovation.
Second, it’s a reminder that there’s nothing necessarily incongruous about a comeback of manufacturing and a decline in manufacturing jobs. Drucker pointed out U.S. manufacturing production rose by almost 40 percent between 1973 and 1985, even as manufacturing employment declined. “No increase in manufacturing production, no matter how large, is likely to reverse the decline in the number of blue-collar jobs in manufacturing or in their proportion of the labor force,” Drucker wrote in The Frontiers of Management. On the contrary, manufacturing jobs, like farming jobs, should go down in number even as productivity rises. “But,” Drucker noted, “that is not a conclusion that politicians, labor leaders, or indeed the general public can easily understand or accept.”
What do you think we can learn from the recovery of the auto industry?