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A Different Take On Detroit's Predicament

The International Motor Vehicle Program (IMVP) is an international consortium of scholars--among them Wharton's John Paul MacDuffie and Case Western's Susan Helper, who collaborated on an article about the auto industry for TNR a few months ago.

The consortium held its annual meeting earlier this month in Tokyo. There, the members hashed out a formal statement on the industry's predicament and what to do about it. And at least some of the recommendations confound what is becoming conventional wisdom.

For one thing, you often hear people suggesting the auto industry needs to do whatever it can to slash costs. But the consortium advises a more cautious approach:

When cutting costs, do not overshoot, lest future gains be shortchanged: for example, Nissan's cutting back in hybrid technology investment durings its (very successful) turn-around program of the early 2000s has put it in a distinctly trailing position in this powertrain race.

IMVP also warns that forcing car companies to more fuel-efficient vehicles won't help them financially if demand doesn't improve. Right now, consumers just aren't that interested in buying them--at least at the price for which those cars sell. To be clear, IMVP isn't against the push for environmentally friendly cars. But the group also thinks it's essential that government address the demand problem, as well, by passing regulations and laws that would make buying fuel efficient cars more attractive.

The consortium does get financial support from the auto industry, among other places. But these scholars do know an awful lot about the car industry--more, I dare say, than the majority of people who write about it. (Including me!) So if you care about the industry--or how the Obama administration plans to treat it--you could far worse than to read the recommendations.

--Jonathan Cohn